Unit 7 Business Law: UK Legal Framework and Business Impact

This report provides a comprehensive overview of the UK legal system and its implications for businesses. It begins by outlining the legal system, including its sources and the roles of civil and criminal law, as well as the government's role in law-making. The report then delves into the organization of the judiciary and explores key legislation and regulations relevant to new businesses, such as contract law, competition law, and data protection. It examines the impact of these laws on businesses, particularly in areas like employment and health and safety. Different types of business organizations and legal structures are discussed, including sole traders, partnerships, and companies, along with their classifications, management, and funding. The report also includes case studies to illustrate the practical application of legal principles and concludes with a comparison of alternative legal advice.

Unit 7: Business Law
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Table of Contents
Introduction......................................................................................................................................3
Part 1...............................................................................................................................................3
Legal system and the purpose of law...............................................................................................3
Different sources of law...................................................................................................................3
Civil and criminal law.....................................................................................................................4
Role of government in law-making.................................................................................................4
Organisation of the judiciary...........................................................................................................5
Key legislation, regulations and standards for new businesses.......................................................6
Impact of laws on businesses...........................................................................................................6
Types of business organisations and legal structures......................................................................7
Classification of companies.............................................................................................................8
Management and funding of a company.........................................................................................8
Part 2...............................................................................................................................................9
Overview of different laws..............................................................................................................9
Case 1...............................................................................................................................................9
Case 2...............................................................................................................................................9
Case 3.............................................................................................................................................10
Effectiveness of suggested recommendations...............................................................................10
Comparison with alternative legal advice......................................................................................10
Conclusion.....................................................................................................................................11
Bibliography..................................................................................................................................12
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Introduction
The legal ecosystem in the UK has significantly developed on the basis of robust judicial
interventions and public policies. While the country does not have a written, codified
constitution, there are numerous statutes that govern businesses in the country along with
precedents and case laws. The study discusses the different sources of law and how different
regulations impact businesses in terms of the legal strcuture, management and funding. Different
types of businesses, their advantages and disadvantages have also been discussed along with the
role of the government in the law making process.
Part 1
Legal system and the purpose of law
The legal system refers to the overall set of laws and regulations that govern the operations of a
society, where the objective is to maintain order. According to the works of Slapper and Kelly
(2014), the British legal systems can be classified into sections inclusive of common law,
statutory law and administrative law. Customs and conventions governed majority of societal
systems prior to the established of enacted laws, which predominantly began from the era of
mercantile law in England. In terms of the purpose, the objective is to ensure that there is a
standardisation in the delivery of justice, where people can entrust the government based on the
values of righteousness and moral correctness. Modern legal systems including that of the UK
have developed largely based on systematic processes, where historical experiences, commercial
regulations and judicial discretion (Oxford LibGuides, 2021). The royal power and its
centralisation has also played an important role, with the Queen’s assent still being a key
requisite for Bills to become Acts of the Parliament in the United Kingdom.
Different sources of law
Discussing the different sources of law, the different elements can be classified into either
primary sources or secondary sources. The primary sources include the various statutory
enactments of the Parliament of the United Kingdom along with adjudicated case laws. Several
EU regulations have also come to be embedded into domestic legislations, thus being considered
as a primary source (SOAS, 2021). Secondary sources include parliamentary documents,
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encyclopaedias, commentaries, law journals and other authoritative documents. Statutes are
generally considered to be the highest legal authority in terms of the legal sources. An example
of a primary source is the Companies Act 2006, which is the key source of legislation for
companies and businesses operating in the UK (UK Public General Acts, 2021). Similarly,
Halsbury’s Laws of England, which is essentially a legal encyclopaedia, has widely been
considered to be one of the most credible sources of law in the UK. Smith & Hogan’s Criminal
Law are also examples of texts that are authoritative secondary sources of law in the UK.
Civil and criminal law
The law can also be classified in terms of civil and criminal sections, where criminal law is
predominantly associated with wrongs committed against the society at large. Common
examples include stealing from another person, taking the life of an individual, assault, battery
and others. Most criminal offences find coverage in statutory enactments, with the most
prominent example being the Offences against the Person Act 1861 (UK Public General Acts,
2021). In order to establish liability within criminal law, two key components are required. One
is actus reus, or the act of crime, while the other is mens rea, or the motive that led to the act of
crime being committed.
Civil law, contradictorily, relates to regulations that strive to protect individuals from one
another as well as from the state. Some of the important elements include the rights of
individuals, their duties, civil rights and others, where the key objective is the protection from
and prevention of civil wrongs. Civil law is covered by both statutory enactments as well as case
laws adjudicated in the courts of the UK.
Role of government in law-making
The government arguably has the most important role in the context of the process of law
making, with the primary facilitator being the Parliament of the UK. It is broken down into two
houses – the House of Lords and the House of Commons. Any law that is enacted to become an
Act of the Parliament must obtain a majority from both the houses. Proposed laws and
regulations are integrated into a bill, which is then heard publicly in the house in a session called
reading. Most bills that are converted into Acts are generally heard over three sessions to
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determine the relevance and the need of the laws (UK Parliament, 2021). Having received
majority support from both the houses, the Bill must now receive a Royal Assent from the Queen
of England as it is mandatory for the Act to be applicable in all the territories in the United
Kingdom.
Organisation of the judiciary
The Supreme Court is at the helm of the judiciary in the United Kingdom. The system is
integrated vertically, where the Supreme Court acts as the absolute court of appeal for every case
irrespective of whether it relates to criminal or civil law. The Courts of Appeal come in next,
which can be further categorised into the Civil Division and the Criminal Division.
Figure 1: Organisation of the judiciary in the UK
(Source: UK Parliament, 2021)
This is followed by the High Court and the Divisional Court. It also includes the Queen’s Bench
Division, the Chancery Division and the Administrative Court. Cumulatively, the
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aforementioned courts form the upper layers of the British judiciary. The lower layers are
constituted by the different county courts, the Crown Court, magistrates’ courts and the different
tribunals (UK Parliament, 2021). Her Majesty’s Court Services is the executive agency
responsible for overseeing and governing the operations in most of the courts and tribunals with
the exception of the Supreme Court, which acts as an independent body in itself.
Key legislation, regulations and standards for new businesses
New businesses need to be aware of different aspects of law in order to continue operations in
adherence to the necessary regulations (Adams, 2016). These include contract law, competition
law, data protection, tort law and others. Contract law, for example, is based on lex mercatoria,
which translates into merchant law. The Contracts (Applicable Law) Act 1990 is the major
statute, while several precedents govern the operations of contracts under common law (UK
Public General Acts, 2021). Five key elements are required for a valid contract that includes an
offer, an acceptance, a consideration, an obligation and the legal capacity. Written instruments
are also required for certain agreements.
Competition law relates to regulations that ensure healthy continuity of business within
marketplaces. Most of the laws are aligned with prohibition or prevention, where the key
objective is to prevent the occurrence of unethical practices and anti-competition policies by
corporations in the UK. The Competition Act 1998 is the primary Act of Parliament in this
regard (UK Public General Acts, 2021).
Data protection relates to protecting the confidentiality of data and is critical for new businesses.
The statute in this context is the Data Protection Act 2018, where the guidelines direct how
businesses collect and use data. Safeguarding the consumer and the rights of the consumer is
imperative within data protection laws in the UK. Tort law is also an important part and comes
under the common law provisions in the country. Various aspects such as negligence, certain
aspects of consumer rights and contracts are covered under torts. Consumer protection is also
crucial along with ensuring the health and safety of the customers (Elliott and Quinn, 2015).
Impact of laws on businesses
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The impact of the laws has led to the establishment of several rights and responsibilities for
businesses as employers. The Health and Safety at Work Act 1974 is a prime example of how
legislation affects businesses in its practices and policies. The statue is primarily associated with
ensuring that the workplace is safe and does not comprise imminent risk factors that could
potentially threaten the lives of the employees. Similarly, the Employment Act 2002 is also an
example of how laws affect businesses (UK Public General Acts, 2021). All the specifications
including remedies for employees and the different obligations are covered within the statute.
The Equality Act 2010 is also relevant in this regard, where the objective is to prevent
discrimination within employment. The Employment Rights Act 1996 contains different rights
and obligations that employees can benefit from in cases of disputes with employers. Protection
of the employer as well as the employee is a key fundamental within employment law in the UK.
Types of business organisations and legal structures
Businesses can be classified into either incorporated or unincorporated structures.
Unincorporated structures include sole trader formats or partnerships, where the founder or the
founders do not need to incorporate the business entity. Incorporated structures include a
separate legal entity and operate in the form of registered companies.
The sole trader structure or sole proprietorships include individually owned businesses that are
not separate from the owner. While it leads to higher control and complete retention of profits,
the degree of liability is unlimited. Additionally, it also leads to poor investor confidence as the
risks involved in a sole trader are comparatively higher than a company. Partnerships can be
registered or unregistered, and are mostly governed by the Partnership Act 1980 except for the
limited partnership structure (UK Public General Acts, 2021). Partnerships benefit from greater
resources and shared liabilities, but suffer from a potential of conflict as well as lack of
continuity. Limited partnerships are considered as registered businesses and different from the
partners, and are mostly structured as limited by guarantee. The Limited Partnerships Act 1907
is the governing statute in this regard.
The registered company is the most transparent business structure in the UK. Governed by the
Companies Act 2006, companies can be limited, unlimited or public limited entities. Companies
suffer from larger formalities and operational costs owing to compliance (UK Public General
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Acts, 2021). However, they lead to high confidence within investors as well as customers due to
need of publishing details and financial information publicly. The availability of resources is
also much greater as compared to a sole trader or a partnership.
Classification of companies
Registered companies can be classified in different ways in terms of the UK business ecosystem.
Private companies refer to businesses that are privately owned. Comparatively, public companies
refer to publicly listed businesses whose shares are sold and bought freely on stock exchanges.
Companies can also be classified as either limited or unlimited companies (Harris, 2020).
Limited companies are those that entail a limited degree of liability based on either guarantee or
the investment. One of the most important benefits of limited companies is that the personal
assets of the shareholders are protected in cases of company liquidation or bankruptcy. Unlimited
companies, however, refer to business entities that have unlimited liability. The personal assets
of the owners and the shareholders are liable to be attached with the company in the case of
bankruptcy.
Management and funding of a company
The management of a company in the context of businesses in the UK is primarily governed by
the Companies Act 2006, where various guidelines and directive provisions are contained that
govern the roles and responsibilities of directors. The fundamental idea is to prevent the
unethical operations of businesses and ensure that there is transparency within reporting. While
the formation process for sole traders and partnerships is fairly simple, companies are more
complex and require registration with the Companies House. In addition, Her Majesty’s Revenue
and Customs bust also be notified in case employees are hired (PAYE program).
Discussing the funding of a company, both equity and debt financing measures are covered by
the company law statute in the country. While public limited companies can collect finances
through stock exchange offers, privately held companies can rely on debt or private equity
financing. Creditor protection, determining the valuation of shares, rightful use of a company’s
capital and preventing the buying out of one’s own shares are key aspects covered in the
financial regulation sections of company law in the UK.
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Part 2
Overview of different laws
Different laws govern different aspects of a business. For instance, contract law governs the
formation, performance and termination of contracts (Andrews, 2011). Similarly, company law
governs the formation, operation and winding up of companies. Insolvency and liquidation are
also key elements. Employment law, on the other hand, relates to provisions that govern the
rights and responsibilities of employers as well as employees. The laws cover prohibitions as
well as remedial measures, where penalties, impositions of liabilities and imprisonment are
mandated based on the nature of the offence and the degree of wrongdoing.
Case 1
The case scenario involves Gordon foregoing his wages for 2015 and 2016 due to the poor
circumstances of the businesses. However, the rightful wage of an employee cannot be withheld
irrespective of the circumstances of the business. Since Gordon had agreed to accept the
commissions for 2015 and 2016, the wages for these 2 years would not stand merit in terms of a
contractual claim in court. However, considering the improvement in the business, Gordon could
claim his wages based on employment law. The case of “H.V. McKay (1907) 2 CAR 1” is
relevant in this context, where the decision cemented how it is the right of the employer to pay
outstanding wages to an employee (Aph.gov.au, 2021). Gordon could file a claim at the
Employment Tribunal citing how his wages were being unfairly held due to a circumstantial
contract despite the business doing well, and this would ideally hold merit upon hearing.
Case 2
The case involves Janet, a Virgin Media customer who was unfairly charged for services even
when her lines were inactive. The installation did not take place for over 3 weeks, and the
company billed her for the entire month including the 3 weeks of absence of service due to the
company’s faults. Consumers can legally not pay for services they did not receive, and Janet
could file a complaint with the consumer tribunal and pursue the matter. The decision passed in
“Hufford v Samsung Electronics (UK) Ltd (2014) EWHC 2956” is important in this context,
where the liability of a product that was faulty could not be imposed on the customer. Virgin
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Media representatives had failed to install the services and the billing was unethical as well as in
contravention to consumer laws in the UK.
Case 3
The case scenario depicts Blackhorse Limited exploring options to prevent a winding up. Several
measures could be resorted to in order to prevent the closure, with the most important being
requesting time for adjournment. A company voluntary engagement or CVA could also be
suitable, where the creditors and the shareholders come to a mutual agreement regarding the
payment of the outstanding dues. Furthermore, the company could also look to establish an
informal agreement, albeit having taken consent and permission from the creditors for the same.
The case of “Mann v Goldstein [1968] 1 WLR 1091” is relevant here, as it stated how
companies can look for adjournments or agreements in situations of winding up (Swarb, 2021).
Effectiveness of suggested recommendations
Discussing the effectiveness of the recommendations, the litigation process can tend to be
cumbersome as well as time consuming. According to Honeyball (2016), employment disputes
can be extremely complicated to prove in the court of law, which makes it suitable for alternate
dispute resolution methods. Furthermore, the litigation process can also be resource intensive,
which would not be suitable when considering the example of Blackhorse Limited. In addition,
the litigation process can often prove to entail higher costs as compared to the claim. This is
evident in the case of Janet, whose billing amount would arguably be lesser than the sum
required in filing the claim in a court of law. Judgements are also subject to appeal, and all the
examples discussed include the possibility of the defendants appealing in a higher court of law. It
would further delay the process and make it inconvenient for the claimants. The possibility of
attracting negative public attention and dents to professional relationships are other threats that
are associated with litigation of disputes as compared to alternate methods like arbitration or
mediation.
Comparison with alternative legal advice
Comparing conventional methods of litigation to alternate dispute resolution methods, the time
and cost factors gain prominence. Arbitration is a more formal approach, where the decisions are
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binding and the arbitrators are individuals of repute and with previous experience in law.
However, mediation is a comparatively informal approach, where the decisions are not binding
but given independently by external third parties. It allows for a neutral ground where the parties
are judged fairly and ethically. In addition, tribunals have gained prominence in enhancing the
speed of litigation, which is the best possible course for minor or trivial incidents.
Citizen’s Advice Bureau is also another plausible option, which is essentially a network of
independently operating charities spread out across the UK. Legal terminologies and procedures
can often be complex, and individuals can rely on the services of Citizen’s advice in this regard.
Employee unions can also be beneficial in this regard, as evident in the case of Gordon. While
alternative dispute resolution methods are effective, certain disputes may require conventional
litigation in order to arrive at a fair and ethical judgment. It is largely dependent on the degree of
judicial discretion, as the system is intricately layered and the complexities have hindered
Conclusion
In conclusion, it was identified that the English legal system does not have a written constitution
but operates on the basis of case laws, statues and judicial discretion. Different legal structures
and types of companies were discussed, where the company structure was determined to be the
most transparent as compared to a sole trader or partnership. Several areas of law were also
found relevant to the operations of a business with the most important being contract law,
employment law, company law and consumer law. Alternate dispute resolution methods were
also discussed including examples of arbitration, mediation and the Citizens Advice Bureau.
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Bibliography
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theoretical reframing. Journal of Institutional Economics, 16(5), pp.643-664.
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University Press.
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https://swarb.co.uk/hufford-v-samsung-electronics-uk-ltd-tcc-8-sep-2014/ (Accessed: 9 April
2020).
Swarb, 2021. Mann v Goldstein: ChD 1968. Available at: https://swarb.co.uk/mann-v-goldstein-
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