Business Law Summary Notes PDF

1. Criminal vs. Civil Law Criminal Law: Deals with offenses against society (e.g., murder, theft). The standard of proof is "beyond reasonable doubt." Civil Law: Deals with disputes between individuals or organizations (e.g., breach of contract, personal injury). The standard of proof is "on the b...

1. Criminal vs. Civil Law Criminal Law: Deals with offenses against society (e.g., murder, theft). The standard of proof is "beyond reasonable doubt." Civil Law: Deals with disputes between individuals or organizations (e.g., breach of contract, personal injury). The standard of proof is "on the balance of probabilities." 2. Common Law and Equity Common Law: Law made by judges based on previous cases (judicial precedent). Courts must follow decisions from higher courts on similar cases. Binding Precedent: Decisions from higher courts must be followed. Persuasive Precedent: Lower courts may follow decisions from lower courts but are not bound. Equity: A system developed to provide fair outcomes, allowing remedies like injunctions and specific performance (instead of just monetary compensation). Equity focuses on fairness and is more flexible than common law. 3. Legislation (Law Making Process) Primary Legislation: Laws made directly by Parliament (Acts of Parliament). It goes through several stages: House of Commons: First reading, second reading, committee stage, report stage, final vote. House of Lords: Same stages. Royal Assent: The King gives approval to make the law official. Secondary (Delegated) Legislation: Laws made by other bodies under powers granted by Parliament. Types include: Statutory Instruments (SI): Used for more detailed laws. Bye-Laws: Local laws made by local authorities. Orders in Council: Emergency laws made by the Privy Council. 4. Court Structures Civil Courts: Handle disputes like contracts, torts, and family matters. County Court: Handles smaller civil cases. High Court: Deals with complex or higher-value cases (over £100,000) and appeals from lower courts. Supreme Court: The highest court, handling major appeals. Criminal Courts: Handle criminal offenses. Magistrates Court: Deals with minor criminal offenses and preliminary hearings for more serious crimes. Crown Court: Handles serious criminal cases (e.g., murder, robbery), with a judge and jury. Court of Appeal: Hears appeals from both civil and criminal cases. Supreme Court: The final court of appeal for both civil and criminal cases. 5. Key Legal Principles Judicial Precedent: Courts follow previous case decisions (especially higher courts) to ensure consistency in the law. Equitable Remedies: These are remedies provided by equity, such as injunctions or specific performance, which are not available under common law. 1. Money Laundering (POCA - Proceeds of Crime Act) Definition: Money laundering is the process of making criminal property appear legitimate by disguising its source and ownership. The goal is to make the illegally obtained money look like it comes from legal activities. Three Offences Under POCA: Laundering (Section 327 POCA): It’s an offence to conceal, disguise, convert, transfer, or remove criminal property from the UK. Criminal property is defined as any property the offender knows or suspects is obtained through criminal conduct. Failure to Report (Section 330 POCA): Relevant businesses (e.g., banks, lawyers, accountants) must report suspicions of money laundering. They must report the suspicion to their Money Laundering Reporting Officer (MLRO) or the National Crime Agency (NCA). Tipping Off (Section 333 POCA): It’s an offence to disclose to a suspect that a Suspicious Activity Report (SAR) has been filed, potentially prejudicing a money laundering investigation. Three Phases of Money Laundering: Placement: The initial phase where criminal money is introduced into the financial system, often through businesses like restaurants or shops. Layering: The process of transferring money between different accounts or businesses to hide its original source, often by using complex transactions. Integration: The final phase, where the laundered money appears legitimate and can be used without suspicion, e.g., withdrawing the money as a salary. 2. Bribery (Bribery Act 2010) Definition: Bribery involves offering, giving, receiving, or soliciting something of value to influence the actions of an official or a person in power. Four Offences Under the Bribery Act: Bribing (Section 1): Offering or giving a bribe to induce or reward improper performance of a function. Being Bribed (Section 2): Requesting, accepting, or receiving a bribe in exchange for performing a function improperly. Bribing a Foreign Official (Section 6): Offering a bribe to a foreign official to gain a business advantage. Failure to Prevent Bribery (Section 7): A company can be held liable if it fails to prevent bribery by employees or associated persons. Companies can defend themselves by showing they have adequate anti-bribery procedures in place. 3. Insider Dealing (Criminal Justice Act 1993) Definition: Insider dealing involves buying or selling securities based on non-public, price-sensitive information about a company or its securities. Categories of Insider Dealing: Dealing (Section 52): Using inside information to buy or sell securities (e.g., stocks, shares). Encouraging Others (Section 52): Encouraging others to trade based on inside information. Disclosing Information (Section 57): Disclosing inside information to someone who might use it for insider trading. Inside Information Information that: Relates to a specific company or security. Has not been made public. If disclosed, is likely to affect the price of the company’s securities. Defences to Insider Dealing: No knowledge or expectation that the information would lead to profit. Belief that the information was already public. The individual would have made the same trade without the insider information. Penalties for Insider Dealing: Summary conviction: Up to 6 months imprisonment or a fine. Indictable offence: Up to 10 years imprisonment or an unlimited fine. Share Capital Issuing Shares at a Discount vs. Issuing Shares at a Premium Issuing Shares at a Discount: Selling shares for less than their nominal value. Forbidden under section 580 of the Companies Act 2006. Example: Selling £1 shares for 40p each is illegal. In case of issuance at a discount, the shareholder must pay back the discount plus interest. Issuing Shares at a Premium: Selling shares for a higher price than their nominal value. Permitted by law. The premium amount is credited to the Share Premium Reserve, which is part of undistributable reserves. Dividends (Private and Public Companies) General Rule: Dividends can only be paid from distributable profits, not from capital or undistributable reserves. Distributable profits: Accumulated, realised profits minus accumulated, realised losses. Public Companies: Can only pay dividends if net assets are greater than or equal to the value of called-up share capital and undistributable reserves (e.g., Share Premium Reserve, Revaluation Reserve). Consequences of Unlawful Dividend: If dividends are paid unlawfully: The company must recover payments from: Shareholders (unless they had no reason to know it was unlawful). Directors (unless they exercised reasonable care in reliance on audited accounts). Auditors (if they provided incorrect financials on which the dividend was paid). Case Study: Abacus Ltd (Steven’s Liability) Facts: Steven bought 10,000 shares in Abacus Ltd at £1 nominal value each. He was told to pay only 75p per share, with the remainder potentially due later. In 2014, Steven bought another 5,000 shares at 50p each, with no further payment required. Analysis: Partly Paid Shares (February 2014 purchase): Steven is liable for the remaining 25p per share on 10,000 shares, i.e., £2,500. Discounted Shares (June 2014 purchase): This is illegal under s.580 CA06 since the shares were issued at a discount. Steven is liable to pay the £2,500 discount plus any interest on it. Class Rights Variation (Longton Court Lodge) Class Rights Variation: A special resolution (75%) or class consent is required to vary class rights. The courts will only cancel the variation if it involves a change to the rights themselves (e.g., change in voting rights, dividends, etc.), not just a reduction in value. Example Case: Greenhalgh v Aderne Cinemas Ltd: Variation of rights (e.g., splitting shares) that did not change the rights themselves was not invalid. Loan Capital and Debentures Debentures: Debenture: A document acknowledging the company’s debt to a creditor. Types of debentures: Single debentures: A single document. Multiple debentures: Multiple documents to different creditors. Series debentures: Issued as part of a series. Secured vs Unsecured Debentures: Secured: Has a charge against specific assets. Unsecured (or "bare" debentures): No charge, general creditor. Redeemable vs Irredeemable Debentures: Redeemable: Repayable on a fixed date. Irredeemable: Perpetual, cannot be redeemed until dissolution. Advantages of Debentures over Equity: Advantages: No dilution of control (no voting rights). Lower cost than equity (interest payments are tax-deductible). Can be issued at a discount. No requirement for shareholder approval (unlike shares). Not subject to capital maintenance rules. Disadvantages: Interest payments are mandatory, even if there are no profits. Risk of default (may lead to liquidation). Restrictive covenants (e.g., secured loans often come with restrictions on the company). High debt can impact the company's stock price. Charges (Fixed and Floating) Fixed Charge: Security over specific assets (e.g., property or machinery). Company cannot sell the asset without the creditor's consent. Ranks higher in priority than floating charges in case of liquidation. Lower risk for lenders, so often comes with a lower interest rate. Floating Charge: Security over a class of assets (e.g., stock or receivables). The company can sell or trade these assets freely until the charge crystallizes. Crystallization occurs when certain events (e.g., liquidation) turn the floating charge into a fixed charge over the assets. Higher risk for creditors, so higher interest rates are usually charged. Ranks lower than fixed charges in liquidation priority. Order of Repayment in Liquidation: Liquidator’s Costs Fixed Charge Holders Preferential Creditors (Employees, HMRC for VAT/PAYE) Floating Charge Holders Unsecured Creditors (e.g., suppliers) Shareholders Registration of Charges All charges must be registered with Companies House within 21 days of their creation. Failure to register means the charge is void in liquidation and loses its priority. Northern Industries PLC - Order of Priority in Debt Repayment: Fixed Charges rank higher than floating charges, even if created later. Negative Pledge Clauses can prevent future charges from taking priority over a floating charge. Unregistered charges have no priority over registered charges.. Director and Types of Directors Definition of "Director" (Companies Act 2006): The term "director" includes any person occupying the position of director, regardless of the title. This is determined by their function rather than the title they hold. Legal consequences apply to someone who is deemed a director, so it's important to understand this definition. De Jure Director: A person who is formally and legally appointed to the board of directors according to the company's Articles of Association. De Facto Director: A person who functions as a director but has not been formally appointed. This person still carries out the role and duties of a director. 2. Company Directors (Disqualification) Act 1986 Purpose of the Act: The Company Directors (Disqualification) Act 1986 aims to prevent individuals from being directors who are unfit for the role. It helps stop people who have caused substantial mismanagement (e.g., through unpaid debts) from starting new companies and repeating their mistakes. Grounds for Disqualification: General Misconduct: Includes serious criminal offences related to company management, persistent breaches of company law (such as failing to file returns), and failure to keep proper records. Unfitness: Directors can be disqualified if an investigation by liquidators or the Department for Business & Trade shows they are unfit to manage a company. Fraudulent or Wrongful Trading: Directors involved in fraudulent activities or wrongful trading can be disqualified, as can undischarged bankrupts. Consequences of Breaching a Disqualification Order: A director breaching a disqualification order by continuing to act as a director or manager faces criminal penalties, including fines or imprisonment. The company’s veil of incorporation is lifted, meaning the director becomes personally liable for any debts incurred by the company during the breach. 3. Authority of Directors to Bind the Company in Contract Directors can only bind the company to contracts if they have the proper authority, which can be granted in one of three ways: Express/Actual Authority: A director has explicit permission to act in a certain way. All decisions made within this authority are binding on the company. Implied/Usual Authority: Some authority comes with the title of a director. For example, a Managing Director typically has implied authority to bind the company in all commercial contracts. For other directors, it depends on the specific situation and what can reasonably be expected from their role. Apparent/Ostensible Authority: This arises when the company or other board members present a director as having authority. If a third party relies on this representation and enters into a contract, the company may be estopped (prevented) from denying the authority existed. Exceeding Authority: If a director acts outside of their authority, the company is not automatically bound by the contract. However, the board can choose to ratify (approve) the contract. A director who acts outside their authority may be personally liable for losses resulting from the breach of contract if the third party suffers harm. If a director misrepresents their authority and causes harm, they may also be liable under the tort of deceit. 4. Fixed and Floating Charges Fixed Charges: A fixed charge is a form of security over a specific asset (e.g., land or property), preventing the company from selling or dealing with the asset without the lender’s approval. This is similar to a mortgage. Advantages: Higher security for lenders, a lower interest rate, and priority over floating charges in liquidation. Disadvantages: The company has less flexibility in dealing with the asset, and the lender is at risk if the asset’s value decreases or is destroyed. Floating Charges: A floating charge is a form of security over a class of assets (e.g., inventory, receivables), allowing the company to deal with the assets in the ordinary course of business (buying and selling). Advantages: The company has more flexibility in managing assets and can deal with them freely. Disadvantages: The value of the security is uncertain until the charge "crystallizes" into a fixed charge. Floating charges rank lower in priority than fixed charges in liquidation, and they are usually riskier for lenders, resulting in higher interest rates. 5. Debt vs. Equity (Loan Capital vs. Share Capital) Loan Capital (Debentures): Debentures are forms of debt and do not carry voting rights for creditors. Creditors are entitled to interest payments, but the company does not give up control by issuing debentures. Advantages for Borrowing Company: No dilution of control, no need for shareholder approval to issue debentures, and they are not subject to capital maintenance rules. Disadvantages for Borrowing Company: Interest payments must be made regardless of profits, failure to repay interest can lead to liquidation, and high levels of debt can affect the company’s share price. Share Capital: Shareholders receive voting rights and may influence the company’s management. However, they only receive dividends if the company has profits. Advantages: No obligation to pay dividends if profits are not available, and shareholders can influence management decisions. Disadvantages: Shareholders rank lowest in liquidation, so they may not receive payments in the event of company failure. 6. Priority of Charges in Liquidation Fixed charges take priority over floating charges in liquidation. Floating charges can become fixed charges if they "crystallize" (turn into fixed charges due to specific conditions). The priority of charges is based on the registration and creation dates. Unregistered charges rank lower and are placed last in the order of priority in liquidation. Key Concepts of Insolvency: Insolvency Tests: Cash Flow Test: Can the company pay its debts when due? Balance Sheet Test: Are liabilities greater than assets? If a company fails either of these tests, it is considered insolvent. Conditions of Financial Distress: Inability to pay debts or liabilities exceeding assets signals financial distress. Quick action is necessary to avoid penalties or personal liability for directors. Types of Insolvency Procedures: Members Voluntary Winding Up (MVL): For solvent companies that want to wind up (e.g., no future purpose, tax reasons, directors retiring). The process involves passing a special resolution, declaring solvency, and appointing a liquidator. Creditors Voluntary Liquidation (CVL): For insolvent companies where liquidation is necessary to distribute assets to creditors. Compulsory Liquidation: Court-ordered liquidation typically initiated by creditors. Administration: Aimed at rescuing the company as a going concern. The administrator takes over company management to maximize creditor returns or restructure. Corporate Voluntary Arrangement (CVA): A method to rescue a company in distress by negotiating a payment arrangement with creditors. The company continues to operate under this agreement. Directors' Duties in Insolvency: Directors must avoid taking further credit when the company is insolvent. They must ensure that no preferential payments are made to creditors. Assets must be safeguarded for creditors. Failure to comply with these duties can lead to personal liability for company debts. Case Example: Freshco: Situation: Freshco, a supermarket chain, is insolvent due to declining sales and losses, nable to pay wages. Options: Administration: Attempt to save the company as a going concern. Creditors Voluntary Liquidation: If recovery is impossible, this procedure will wind down the business. Creditors' Payment Priority in Liquidation: Liquidators' costs Fixed charge holders (e.g., secured creditors) Preferential creditors (e.g., employees, HMRC for VAT) Floating charge holders (e.g., creditors with security over fluctuating assets) Unsecured creditors (e.g., suppliers) Shareholders Key Points for Directors in Insolvency: Directors must be cautious about paying bills and taking credit during financial distress. Wrongful trading, including favoring one creditor over others, can lead to personal liability. Additional Notes: CVA allows a company to continue operating while paying back creditors under a new arrangement, usually involving a reduction in debt. Pre-pack Administration: Involves selling assets to external buyers or directors in advance of formal proceedings to preserve business value and jobs. Elements of a Negligence Claim To bring a successful negligence claim, the claimant must prove all three elements: Duty of Care – The defendant owed a legal duty to act with reasonable care. Breach of Duty – The defendant failed to meet that standard. Causation & Loss – The claimant suffered harm directly due to the defendant’s breach. If any one element is missing, the claim fails. 🔹 2. Duty of Care Definition: A legal obligation to avoid acts or omissions that could foreseeably harm others. Based on the Neighbour Principle (Donoghue v Stevenson). A person owes a duty to those who are closely and directly affected by their actions. 📘 Key Concept: Foreseeability Only foreseeable victims can claim. The law limits who can sue to prevent endless liability. ✅ Example: Donoghue v Stevenson (1932): Mrs Donoghue found a snail in a bottle of ginger beer and became ill. ➤ The manufacturer owed her a duty of care, even though there was no contract. ❌ Example: Bourhill v Young (1943): A pregnant woman heard a crash, saw the aftermath, and miscarried. ➤ Not a foreseeable victim – no duty owed. 🔹 3. Breach of Duty Definition: The defendant failed to meet the required standard of care. 🔍 The Objective Test: What would a reasonable person have done? No excuse for inexperience – everyone is judged by the same standard. 📘 Case: Nettleship v Weston (1971) A learner driver caused an accident. ➤ Held to the same standard as a qualified driver. ⚠️Higher standard applies: Where vulnerable people are at risk (e.g. children, disabled). When the defendant has special skills or qualifications (e.g. doctor, architect). 📘 Case: Hayley v London Electricity Board (1965) A blind man fell into an unguarded hole. ➤ The company should have considered vulnerable pedestrians – breach occurred. 🔹 4. Causation The claimant must show that the breach caused the harm. This is the "but for" test: Would the injury have occurred but for the defendant’s actions? 📘 Case: Barnett v Chelsea & Kensington Hospital (1969) A man poisoned by arsenic was sent home untreated. ➤ He would have died anyway, so the hospital was not liable – no causation. 🔹 5. Remoteness of Damage The type of damage must be reasonably foreseeable at the time of the act. 📘 Case: The Wagon Mound (1961) Oil spill caused a fire. ➤ Fire was not foreseeable from an oil spill – no liability for that type of damage. ⚠️Egg Shell Skull Rule: Take your victim as you find them. If the type of injury is foreseeable, the defendant is liable even if the extent is unusual. 🔹 6. Defences to Negligence ✅ (a) Contributory Negligence If the claimant partly caused their injury, damages are reduced. 📘 Sayers v Harlow DC (1958) A woman was injured climbing out of a locked toilet. ➤ 25% reduction in damages. ✅ (b) Volenti Non Fit Injuria “To a willing person, no harm is done.” If the claimant knowingly accepts a risk, they cannot claim damages. 📘 ICI v Shatwell (1964) Two brothers tested explosives without safety procedures. ➤ They accepted the risk – no liability. ✅ (c) Exclusion Clauses If a valid contract clause limits liability, it may be used as a defence — but: Must be reasonable under the Unfair Contract Terms Act 1977 Cannot exclude liability for death or personal injury 📘 Hedley Byrne v Heller & Partners: Bank avoided liability due to a “without responsibility” disclaimer. 👨‍⚖️PROFESSIONAL NEGLIGENCE – DETAILED SUMMARY Applies to professionals giving advice or services that others rely on. 🔹 Additional Requirement: To recover pure economic loss, the claimant must prove a special relationship. 🔹 “Special Relationship” Test (Hedley Byrne Principle) A duty of care arises when: Advice is given by a professional, To a known person or business, For a known purpose, The advisor knows it will be relied on. 📘 Hedley Byrne v Heller (1964) A bank gave a bad credit reference. Claim failed due to a disclaimer – but the court created the principle. 🔹 Caparo v Dickman (1990) Auditors were not liable to investors because: No special relationship (auditors didn’t know Caparo would rely on accounts) It’s not fair or reasonable to owe a duty to the public at large 🔹 Bannerman v RBS (2003) Auditors were liable to a bank that lent money based on audited accounts, because: Bannerman knew RBS would rely on their audit. No disclaimer was used. All elements of the special relationship were present. 🔹 Example: Sweet Treats v Bumbles Banken Bumbles Banken gave a favourable reference about a company’s finances. Sweet Treats relied on it and suffered economic loss when the company went bust. Bumbles knew the advice would be relied upon – this creates a special relationship. ✅ They may be liable for professional negligence. 🔹 Defences in Professional Negligence Contributory Negligence: Sweet Treats might have been too generous in their credit. Volenti: Less likely, as they acted based on professional advice. Disclaimer: No exclusion clause was used – so Bumbles could be liable. 📌 REMEMBER: To prove negligence (professional or general), you must always show: Duty of care Breach of duty Loss caused by breach For pure economic loss – must add: special relationship Contract Offer: A clear statement of willingness to be bound on specific terms. Acceptance: The unqualified acceptance of all terms of the offer. Consideration: A benefit exchanged between the parties. Intention to Create Legal Relations: The intention to be legally bound by the contract. Capacity and Legality: Parties must have the legal capacity to contract and the contract must be legal. Termination of Offers: Offers can be terminated by: Revocation: The offeror withdraws the offer, communicated to the offeree. Rejection: The offeree rejects the offer, or a counteroffer is made. Death or Lapse of Time: The offer expires due to a fixed time limit or the death of the offeror. Key Case Examples: Harvey v Facey: A mere statement of a price is not an offer. Hyde v Wrench: A counteroffer rejects the original offer. Acceptance: It can be oral, written, or by conduct. It is not valid until communicated to the offeror. 8.1.2 Example Scenarios Scenario 1: Hillary and Eleanor No Contract with Eleanor: Hillary’s advertisement is an invitation to treat (Partridge v Crittenden). Eleanor’s offer was rejected by Hillary’s counteroffer of £13,000, and Hillary’s later attempt to accept Eleanor’s £10,000 offer is a new offer. Contract with Amy: Amy’s acceptance of Hillary’s offer is valid under the postal rule, creating a binding contract. Amy later tries to withdraw, but this is a breach of contract. 8.1.3 Alice, Brian, Charlie, and Diane Facts: Alice advertises a vase for sale. Brian agrees to buy it for £500 but it’s considered an offer, not acceptance. Charlie makes a counteroffer, but eventually agrees to Alice’s £450 price. Diane agrees to pay £400 and takes the vase. Conclusion: No contract with Brian (his offer was never accepted). No contract with Charlie (his counteroffer invalidates the original offer). A contract is formed with Diane when Alice accepts her offer of £400. 8.2.1 Consideration Consideration is the value exchanged in a contract. It can be: Executed: Completed at the time of agreement. Executory: To be completed in the future. Past Consideration is not valid (Re McArdle). However, if the act was performed with an expectation of payment, it might be valid. 8.2.2 Valid Consideration Consideration must be sufficient, but not necessarily adequate. The value does not need to be equal, just recognizable. Chappell v Nestle: Even insignificant value can be sufficient consideration. Collins v Godefroy: Existing legal duties are not valid consideration unless exceeded (Hartley v Ponsonby). Williams v Roffey Bros: Performing an existing duty with extra benefits can be valid consideration. 8.2.3 Intention to Create Legal Relations Commercial Agreements: Presumed to be legally binding. Social/Domestic Agreements: Presumed not to be legally binding unless evidence proves otherwise (Balfour v Balfour, Merritt v Merritt). 8.2.4 Charles and Adrian’s Contract Adrian promises to pay Charles an additional £2,000 for early completion of work. Under normal circumstances (Stilk v Myrick), no extra payment is due unless Charles exceeded his original duties, which he did not. The extra payment was not supported by valid consideration. Conclusion: Charles is not entitled to the additional £2,000. 8.3.1 Contract Terms vs. Representations Contract Terms: Legally binding and form part of the contract (express or implied terms). Representations: Statements made outside the contract that are not legally binding (can lead to misrepresentation if false). Misrepresentation Types: Fraudulent: Made knowingly false or recklessly. Negligent: Made without a reasonable basis. Innocent: Made with reasonable belief in truth. 8.3.3 Types of Contract Terms Conditions: Essential terms that go to the root of the contract (e.g., Poussard v Spiers & Pond). Breach allows for contract repudiation. Warranties: Lesser terms not crucial to the contract’s core (e.g., Bettini v Gye). Breach allows for damages but not repudiation. Innominate Terms: Terms whose effect depends on the severity of the breach (e.g., The Hansa Nord case). Exclusion Clauses (Limiting Liability in Contracts) An exclusion clause is a term in a contract that tries to remove or limit one party’s liability if something goes wrong. For it to be valid: ✅ A. Incorporation of Clause The clause must be part of the contract by one of the following methods: Signature Case: L’Estrange v Graucob Once you sign a contract, you're bound by all terms in it, even if you haven’t read them. Key idea: Signature = Acceptance. Reasonable Notice Case: Thornton v Shoe Lane Parking -Terms must be communicated before or at the time of making the contract. You can’t add extra terms after the contract is formed (e.g., after inserting a parking ticket). Previous Dealings- If two parties have consistently dealt on the same terms before, a clause can be included automatically even if it wasn’t explicitly mentioned this time. ✅ B. The Clause Must Cover the Type of Loss The wording must clearly apply to the specific kind of damage or loss being excluded. Example: A clause saying “no liability for personal injury” won't cover property damage unless it's clearly written. ✅ C. Conventional Status of the Clause The clause must not contradict the main purpose of the contract. It must be seen as a natural part of a commercial agreement, not something unusual or unfair. ✅ D. Unusual/Harsh Clauses Case: Interfoto v Stiletto If a term is extremely harsh or unusual, the party relying on it must clearly bring it to the other party’s attention. Otherwise, it may not be enforceable. 📌 2. Penalty Clauses vs. Liquidated Damages ⚖️Liquidated Damages: A genuine pre-estimate of what the loss will be if the contract is breached. Liquidated damages are a fixed or pre-agreed amount of money written into a contract, to be paid if one party breaches the contract. Courts allow these because they help avoid disputes over damages. ❌ Penalty Clauses: Clauses that punish the breaching party rather than compensating for real loss. Usually unenforceable if the amount is excessive compared to the actual loss. Your insight: "It will be used more favourably to the less suffered party because it was excessive… that was not the real damage cost… mostly for profit- making… to return the parties to where they were before the contract." Key Principle: Damages are about compensation, not punishment. 📌 3. Liability Exemption Even with an exclusion clause, liability can’t always be removed: “The corporation must take responsibility for the liability exempted…” If the clause contradicts core duties, is not clear, or violates public policy, it won't be enforceable. It must follow the conventional status of a fair contract. 👩‍⚖️EMPLOYMENT LAW – DETAILED SUMMARY 📌 4. Rights of Employees Employees are entitled to: Maternity / Paternity Leave Sick Leave Remuneration (Pay) Safe Working System To be treated fairly and lawfully To be given reasonable instructions Mutual cooperation from the employer Your input: "Able and right to receive benefits such as maternity or paternity leave, sick leave, remuneration, say in working system, obliged to lawful and reasonable order of the employers, mutual cooperation." 📌 5. Duties of Employees Employees must: Follow lawful and reasonable orders from the employer Stick to working hours Exercise skill and care Work cooperatively with others Your input: “The workers are employees. They represent the organisation and enforceable to follow the order of the employers and stick to the working hours.” 📌 6. Difference: Employee vs Self-Employed Aspect Employee Self-Employed Supervision Under employer’s control Work independently Working Hours Fixed hours set by employer Decide own hours Legal Status Covered by employment law Not covered in same way Benefits Entitled to leave/pay rights No automatic benefits Representation Represents the company Represents self or own business Your words: “Self-employed decide their working hours, own their boss, company or client… it’s all on their own.” ⚖️CASE STUDIES L’Estrange v Graucob – Signature binds, even if unread. Thornton v Shoe Lane Parking – Must give notice of terms before the contract is formed. Interfoto v Stiletto – Harsh terms must be clearly shown, or they won’t be enforced. Types of Dismissal 1.1 Wrongful Dismissal Definition: Employer terminates the employment contract without giving required notice, or breaches contract terms. Law: Contract law; no need for 2 years’ service. Remedy: Compensation = wages & benefits the employee would have earned during the notice period. Example: Employee fired on the spot with no disciplinary process or notice. 1.2 Unfair Dismissal Definition: Dismissal without a fair reason or without following a fair process. Law: Employment Rights Act (ERA) 1996. Eligibility: Must be an employee 2 years' continuous service (unless automatically unfair) Must file a claim within 3 months of dismissal Must attempt to resolve the issue internally (grievance procedure) a) Fair Reasons for Dismissal (s.98 ERA 1996): Capability or qualifications – Poor performance, failing training/tests. Conduct – Misbehaviour, theft, repeated lateness. Redundancy – Job no longer needed. Statutory restriction – E.g. driver loses license. Some other substantial reason – Business restructuring, conflicts of interest. b) Employers must act reasonably: Reasonableness is judged by: Was the reason serious enough? Did the employer follow a fair procedure (ACAS Code)? Investigations Warnings Hearings Right to appeal 1.3 Automatically Unfair Dismissal Some reasons for dismissal are so serious they are always considered unfair: Health & Safety complaints / Whistleblowing Pregnancy and family leave Trade union involvement Asserting statutory rights (e.g. pay, sick leave) Unfair redundancy selection (e.g. based on age, gender) No minimum service needed,Leads to higher compensation 1.4 Remedies for Unfair Dismissal Reinstatement – Same job as before Re-engagement – Different but suitable role Compensation: Basic Award (like redundancy pay) Compensatory Award (loss of income, emotional distress) Additional Award (for automatic unfair dismissal or failure to comply) 🔹 2. Constructive Dismissal Definition: Employee resigns due to employer’s serious breach of contract (e.g. unsafe work, abuse, forced demotion). Legal Basis: ERA 1996, s.95(1)(c): Contract ends because employee feels they have no choice but to resign. Test: Employer breached a fundamental term Employee resigned promptly Resignation directly linked to the breach Case Law: Western Excavating v Sharp (1978) – Must be a serious breach of contract. Isle of Wight Tourist Board v Coombes (1976) – Verbal abuse = breach of mutual respect. Donovan v Invicta Airways – Forced unsafe flying = breach. Keegan v Newcastle United – Club undermined manager's authority. Simmonds v Dowty Seals – Change to work schedule without consent = breach. 🔹 3. Redundancy Definition: An employee is dismissed due to: Closure of business Closure of place of work Reduction in workforce (need for work has diminished) Fairness: Must consult employees properly (especially if 20+ redundancies) Follow fair selection criteria (not discriminatory) Redundancy Pay (if 2+ years of service): 18–21 years → ½ week’s pay per year 22–40 years → 1 week’s pay per year 41+ years → 1½ week’s pay per year Capped weekly pay (e.g. £700) No Redundancy Pay If: Employee unreasonably refuses a suitable alternative