Analyzing Criminal and Civil Law in Business Transactions

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LEGAL ASPECTS OF BUSINESS
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Table of Contents
Introduction..............................................................................................................................3
LO1..........................................................................................................................................4
The criminal law...................................................................................................................4
The civil law..........................................................................................................................4
LO2..........................................................................................................................................6
Legal principles of contract..................................................................................................6
LO3..........................................................................................................................................8
Legal structure of business in United Kingdom....................................................................8
LO4........................................................................................................................................12
Conclusion.............................................................................................................................13
References.............................................................................................................................15
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Introduction
The presented report depicts the analysis of the application of criminal and civil legal
framework in business transactions. It describes the application of the extent of both civil and
criminal law in the United Kingdom. The repost further analyses the formation of a valid
contract and the essentials required to make the contract enforceable in the court of law. It
also analyses the difference between offer and invitation to offer under the English contract
law. The report in the third part describes the types of business which can be set up in the
United Kingdom and also the benefits which the business owners can avail under each
business structure. The report also provides for the liabilities and obligations the owners
have to undergo in each business structure. At last the report explains the process which
may arise under the corporate law and also provides the solutions for the same.
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LO1
The criminal law
The English civil and criminal laws do not have the same effect in any fact or circumstances
as there is a vast difference between these laws. the effect of the criminal law is on the
society as a whole but the application of the civil law is on particular individual on whom
injury or loss is inflicted. The criminal law outlines the acts which acts are accepted in the
society and which acts are punishable. The person accused of breaching any law by doing
an act prohibited by the state shall be prosecuted by the state.
In the United Kingdoms the Crown Prosecution Services (CPS) is the body for prosecuting
the accused. These cases are heard by the Magistrate’s court or the Crown court. The
parliament of the United Kingdom is also responsible for the framing of the laws which shall
contain punishments and sentences to be given to the accused which may be in form of
fines, imprisonment or prison. Unless proven guilty the offender is considered innocent
hence it is required under the English criminal law that the offence committed by the offender
shall be proven beyond reasonable doubt (Lewis and Morris, 2012).
The civil law
The application of the civil law is different from that of the criminal law as it is concerned with
the rights and liabilities of the individual. the civil law is formulated for the settlement of the
disputes between individual and organisations. There is no provision of punishment in form
of imprisonment under the civil law and this law involves the payment of the compensation.
Under the English civil law prevailing in the United Kingdom the liability is proved by the
proving of the legal duty which existed and also that the defendant has breached his duty.
The existence of a legal duty shall give rise to the application of the civil law in the United
Kingdom and the plaintiff has to prove the breach of duty by the defendant. The breach
should be directly connected to the injury sustained by the plaintiff and shall not be too
remote.
Civil and criminal liability in the given case
In the given case where Andrew is driving his car and has met with an accident with a
pedestrian named Bianca has met with serious injuries and also not able to be regular in her
work for many weeks. In this case Andrew is seen negligent while driving his car and for this
he is liable under the law of tort in the United Kingdom. Negligence under the law of tort was
first time defined in the case of Donoghue v. Stevenson [1932] UKHL 100 [1932] SC (HL)
31 [1932] AC 562 [1932] All ER Rep 1. During this case the concept of negligence was
explained by Lord Atkin as a reasonable person is required to act in such way so as to avoid
acts or omissions which can be reasonably foreseen and which is likely to cause injury and
damage to people around (Van Dam, 2013).
Hence, in the given case the negligent act of Andrew has proved that he has failed to take
reasonable care and caution while driving which has cause injury to a pedestrian Bianca.
Further, under the criminal law the act of negligent driving by Andrew is covered under
Section 3 of the Road Traffic Act, 1988 which provides penalty for careless driving. This
section imposes fine on the person whose driving has fall below the standard prescribed for
a careful and competent driver. But this section only imposes monetary penalty on the driver.
Further, Section 1A of the same Act covers the person who causes serious injuries to
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another person by driving a vehicle dangerously on road or other public areas (Road Traffic
Act, 1988 s 3).
Hence the negligent Act of Andrew is covered under the Road Traffic Act, 1988 as a crime
under the criminal law of the United Kingdom.
The difference between civil and criminal law in the United Kingdom
1. Sir William Geldart has provided the key difference between the civil and criminal
law in his book an Introduction to English Law by providing the difference between
both the laws as centred on two different objects which law pursues that is “either to
redress or to punish.”
a. Hence, it is stated that the civil law aims at redressing the injured party
Bianca in this case for her losses and damages and the criminal law aims at
punishing the offender Andrew for his wrongful and negligent act.
2. In addition to this the criminal law aims at deterring the individual from committing
crimes in the future by providing punishment to the wrongdoers. The criminal law
also aims at maintaining the stability in the state and the society. Whereas the civil
law aims resolving disputes between individual and corporations and also paying
compensation to the aggrieved party who has suffer loses and injuries (Fulbrook,
2017).
3. The criminal cases and the application of the criminal law is approached by the state
or the government but the civil law application and civil cases are brought by the
individuals or parties. The decision in the criminal cases in whether the offender is
guilty or not guilty whereas in the civil cases the decision is whether the defendant is
liable or not liable. In matters of appeal both the parties are at an option of making an
appeal in civil cases but in criminal cases only the offender may move to the court for
appeal against the decision of the lower court.
4. It is also a provision under law in the United Kingdom that a person may face civil as
well as criminal actions for his acts.
a. For example, a person may be prosecuted by the CPS and at the same time
the aggrieved person who has sustained injuries bring a civil case for the
payment of compensation. The accused may prove innocent in the criminal
court but may be held liable to pay damages and compensation in the civil
suit.
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LO2
Legal principles of contract
The principles of the formation of valid contract in the United Kingdom provides for the
essentials which are to be fulfilled in order to make the contract enforceable in the court.
These essentials include the offer which is to be made expressly by the offeror, an
acceptance in the same sense by the offeree either in express terms or impliedly, a legal
consideration and certainty (McKendrick, 2014).
The following are the essentials of a valid contract in any business transaction under the
United Kingdom contract law:
 Offer:
 In any contract an offer is the first thing is made by the offeror with an
intention to enter in a contract.
 The person making the offer is the offeror.
 The offer shall be made in express terms stating the terms of the offer clearly.
 Acceptance:
 The acceptance is required to be given in express terms but in some cases, it
is construed by the conduct of the party.
 The person giving the acceptance is the offeree.
 The acceptance shall be given in the same sense in which the offer is made.
 Consideration:
 Every contract requires a valid consideration for which the contract is
intended to be entered upon.
 The consideration may be in form of money, interest, benefit, etc.
 The consideration shall be legal and adequate for every contract.
 Certainty:
 The agreement requires to be certain in its terms.
 There shall be no ambiguous and vague terms in the agreement in order to
make the terms difficult to interpret for the offeree.
 The terms of the agreement shall be so clear and certain that the offeree
while accepting the offer shall understand the terms in the same way as that if
the offeror (Chen-Wishart, 2012).
Under the United Kingdom contract law there is also a difference between an offer and an
invitation to treat. An offer is made with the intention of forming an agreement but an
invitation to treat is given in order to call offer.
The following is the difference between an offer and an invitation to treat:
Offer Invitation to treat
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Definition  When one person
approaches another
person to do or from
omitting to do in
order to take his
consent is called the
giving of offer.
 When one person
approaches another
person in order to
invite him to make
an offer in called the
making of an
invitation to treat.
Intention  An offer is made with
an intention to enter
in a legal contract.
 An invitation to treat
is given to tempt
more offers from the
other parties.
Essentiality  An essential element
to form a contract.
 Not an essential
element to form a
contract.
Consequence  When the offer is
accepted, it
becomes an
agreement.
 When the invitation
is accepted, it
becomes an offer
(Cartwright, 2016).
In the given case where Carol tries to sell a bicycle puts an advertisement on a website. The
price for the bicycle mentioned in the advertisement is £200. David a customer mails stating
his intention to buy the bicycle in £150 to which Carol refused. Here there is no formation of
contract as the offer made by David is merely an invitation to treat to which Carol expressly
denied.
Later the offer made by Carol in selling the bicycle in £150 is again an invitation to treat to
which another offer was made by David to buy the bicycle in £120. In this case there is a
series of offers which are made from both the parties and these offers are treated as
invitation to treat. Neither of the offer is accepted by any of the parties as an express
acceptance is missing. In the case of Stevenson, Jacques & Co v. McLean (1880) 5 QBD
346 it was held by the court that an offer stands over and is killed if an counter offer is made
by the other party except for a purpose of merely inquiring or getting information (Smits,
2017).
Hence in this case the offer made by Carol stands over when the counter offer is made by
David for buying the bicycle in a lesser amount. The next offer made by Carol for selling the
bicycle in £150 is again an invitation to treat to which another offer is made for buying in
£120. Hence there is no acceptance of the invitations made by the parties. There was only a
series of offers made as invitations to treat between both the parties and neither of the offer
was accepted. Hence there is no formation of a contract between the parties.
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LO3
Legal structure of business in United Kingdom
In United Kingdom there are three main types of business structure which can be adopted by
individuals in order to organise their business. Edvard, Farah and Georgi who have planned
to set up a business for selling pizzas at a summer festival may also opt for the formation of
the most appropriate business structure suiting their needs. The business structures in UK
which are available to the partners Edvard, Farah and Georgi are as follows:
 Sole proprietorship or sole trader
 Partnership
 Limited liability company (Talbot, 2015).
Sole proprietorship:
 This is the most commonly used business structure as it requires only one individual.
Under this structure the business and its owner are seen as one entity under the
eyes of law. In this structure the owner has complete control over the business and
he is also entitled to make every decision on his own.
 This structure is very popular as it is quick and easy and not a complex process for
starting. It also requires minimal cost compared to other structures. The only
requirement in this business is the registration of the trade name for the starting of
the business.
 Many business owners change their structure in due time and expand their business
and grow as they attain success in very less time adopting this structure.
 The owner in this structure keep all the profits as income but he shall be liable to pay
the tax through self-assessment tax return (Taylor and Emir, 2015).
Partnership:
 A partnership structure is the expansion and development of the sole trader
business.
 This structure is considered to be best suited for two or more partners who shall
share responsibility of the business.
 Under this structure the liability and obligations may vary depending on the values of
shares the partners are owning.
 Also, the profit sharing is as per the shares of the partners.
 Under this structure all the partners are held liable and responsible if any one of the
partners has incurred debt.
 Under this structure the partners have to incur joint and several liability in their
business.
 In this business structure the tax is paid by the partners on their income and profits
(Haldane, 2015).
Limited liability company:
 This structure is very different from the other two structure as this business has the
establishment of a company which has a separate legal entity from its owners.
 The corporation formed is a legal person having perpetual succession and also a
common seal to be used as signature.
 This structure has limited liability and the members are only liable up to the extent of
their investment and no member is held personally responsible for the debts of the
company.
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 The limited liabilities companies are further classified as:
 Limited by shares- This company is of such structure where the liability of the
shareholder for company’s financial liabilities is only up to the value of the
shares which he has agreed to pay.
 Limited by guarantee- Under this structure there is no shareholders or have
share capitals but there are certain members who act as guarantors
(Williams, 2012).
The business of selling pizza in summer festivals as planned by Edvard, Farah and Georgi
can be set up under any business structure depending upon the needs of business activities.
The structures have certain advantages and disadvantages which the owner may avail or
face respectively.
The following is the comparison of the advantages and the disadvantages of the structures
which the three partners Edvard, Farah, and Georgi can avail and face in the setting up their
business:
Business structure Advantages Disadvantages
Sole proprietorship or
sole trader
 This is the easiest
business structure to
set up a new
business.
 It requires less paper
work as compared to
others.
 This structure is cost
effective and cheap
as compared to
others which
requires heavy fees
and fillings.
 Sole traders can
employ other
employees and
enjoy the benefits of
the tax and get
exemptions.
 The owner has direct
control over the
business activities
and is the sole
decision maker.
 The owners are fully
liable for the debts
which shall impact
the personal finance
of the owners.
 Taxes are made
applicable which the
owner have to incur.
 There is no
perpetual succession
and the business
comes to an end on
the death or
incapacitation of the
owner.
 The raising of the
capital is difficult and
hence the owner
himself has to incur
these finances.
 Loans are also
difficultly approved
as it depends on the
availability of enough
credit.
Partnership firm  Two or more person
can start this
business.
 If the partners are of
high calibre, it shall
result in more profit.
 The borrowing
capacity is higher in
this structure.
 This business
structure covers
unlimited
partnership.
 There is joint and
several liability for
the debts of the
business.
 There is risk of
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 There is no external
interference or
regulation.
 The start-up is low
cost and can be
borne easily by the
partners.
friction and dispute
of opinion among
partners.
 The partners are
liable for the actions
of the other partners.
Limited liability company  The liability of the
members for the
debt is limited to
their investment.
 The income is
treated as a personal
income and
therefore not
subjected to taxes as
corporations.
 The amount of
investment from the
side of owners need
not to be equal to
their share in the
company.
 This structure does
not require board of
directors, annual
meetings and strict
paper work and
requirements.
 This structure
requires harder work
to find investors for
capital as it cannot
issue stocks like
other companies.
 The fees of
registration for this
structure is higher as
compared to other
structures.
 As per government
regulations some of
the corporations are
barred to get
registered under this
structure.
 There is lack of
judicial precedents
as this is a new
concept and due to
this it becomes
difficult to resolve
disputes if any
arises.
 The rules regarding
this structure vary as
per states and hence
it becomes difficult if
the business is to be
started in more than
one state.
Hence the three partners Edvard, Farah and Georgi are at an option for opting any of the
business structure which is in practice in the United Kingdom. Keeping in mind their
business needs, advantages and disadvantages they are at a freedom of choosing and set
up their business as per any structure for selling pizzas.
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LO4
The laws relating to employment in the United Kingdom has its source from the enacted laws
of the legislature. The rights of the employees agreed nationally are brought into action
through the legislations enacted at a national level. Apart from this there are also rights
which are included in the terms of the contract of employment. But there is differentiation in
the status of the employees and independent contractors. The Employment Rights Act of
1996 under Section 230(1) provides for the definition of the employee as:
“an individual who is working under a contract of employment or who has
entered a contract of employment” (Employment Rights Act, 1996 s 230).
Further there has been attempts by the courts to determine the status of the employment as
an employee or as an independent contractor. It becomes difficult to determine the status of
the individual as employee or a worker or an independent contractor and hence the court
has laid down a four-stage test in the case of Ready Mixed Concrete (South East) Ltd v.
The Minister of Pensions and National Insurance [1968] 2 QB 467, to determine the
status of an individual. The test is as follows:
1. The presence of the obligation to work and get paid: The court here considers
the right of the individual to work and to get a minimum amount of payment. The
court also determines whether the individual can refuse to pay or can be denied the
work once the ongoing project ends.
2. Right to substitute: The right to substitute another worker shall indicate the status
of an independent contractor.
3. Control of the party assigning work: The court shall view whether the employer
has sufficient control over the individual working under him. This shall determine the
employment status on considering the following factors:
a. The extent of subordination of the individual to the employer.
b. The individual’s integration into business for example whether the individual is
given own desk, card and email address.
c. It is also seen whether the individual is using their own tools and equipment.
d. It is also seen by the court and the tribunal whether the individual has a right
to take other work.
e. The post for which the individual is assigned is also seen for determining the
status of the employment as the senior the post is the less control the
employer have over the individual (Ecchia, et. al., 2012).
4. Other considerations: Control shall not alone determine the status of the
employment. There are other factors as well which needs consideration. These are:
a. The extent of risk which the individual is adopting for example, losses on
contract, termination without getting compensation, redressing defective work
at own expenses, etc.
b. The court also see whether the individuals are covering their own insurance.
c. The investment of the individual in the management of the work is also
considered while determining his status of employment as an employee or
independent contractor (Busby and McDermont, 2012).
d. The court also reviews whether the profits are gained from their own
performance.
e. It is also seen whether the individual is given the benefits of paid leaves,
holidays and sick leaves.
f. The payment and mode of salary is also seen whether the payment of salary
on annual basis or fixed hourly rates or a fixed set for the entire job.
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The legislation of the United Kingdom has also enacted the definition of an additional
category of labours who are known as ‘workers.’ The same test is done in order to
determine the status of the employment of workers as well as independent contractors. The
factors mentioned above are seen by the court or the tribunal in order to determine whether
the individual is working as an employee or worker or an independent contractor (Fudge,
2017).
Hence, the situation and facts of the given case where Luciana works as a visiting faculty of
law in Fen Chester University and is serving 4 days a week is under the category of
independent contractor as she is not working as a full time employee and she is also not
entitled to the benefits of leaves and holidays.
Further in the case of Yewens v Noakes (1881) 6 QBD 530, Lordship Bramwell B.
determined the control test and the other factors which are responsible in determining the
status of the employment as employee or independent contractor (Collins, et. al., 2012).
He held that:
“An employee is under the control of the employer regarding the carrying of the work.
Further the control is not confined to what is to be done but it also extends to how it
is to be done. The integration test which can also be called the organisational test is
also seen in order to determine the role and integration of the individual in the
functions of the organisation.”
Hence, it can be settled that Luciana who is a visiting faculty in the Fen Chester University is
an independent contractor as the decision of the courts in various cases determines the
factors to be considered while determining the status of the employment and such test prove
that Luciana is not covered within the definition of the employee as provided in the
Employment Rights Act of 1996.
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