Diploma in Business Administration Study Manual PRINCIPLES OF BUSINESS LAW The Association of Business Executives William House • 14 Worple Road • Wimbledon • London • SW19 4DD • United Kingdom Tel: + 44(0)20 8879 1973 • Fax: + 44(0)20 8946 7153 E-mail: [email protected] • www.abeuk.com © Copyright RRC Business Training abc © Copyright under licence to ABE from RRC Business Training All rights reserved No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form, or by any means, electronic, electrostatic, mechanical, photocopied or otherwise, without the express permission in writing from The Association of Business Executives. ABE Diploma in Business Administration Study Manual PRINCIPLES OF BUSINESS LAW Contents Study Title Page Unit Syllabus i 1 Nature and Sources of Law 1 Nature of Law 3 Historical Origins 6 Sources of Law 9 The European Community and UK Law: An Overview 13 2 Common Law, Equity and Statute Law 23 Custom 25 Case Law 26 Nature of Equity 32 Application of Principles of Equity 34 Equity and Common Law 36 Classification of Equity 37 Legal and Equitable Rights 38 Nature of Statute Law 39 Interpretation of Statutes 41 Codification and Consolidation 44 Appraisal of Statute Law 45 Delegated Legislation 46 3 The Administration of Justice 49 Organisation of the Courts 50 Administrative Justice 61 Public International Law 64 Judges and Juries 65 Organisation and Role of the Legal Profession 67 4 The Law Relating to Associations 75 The Concept of Corporations 77 Corporations in Law 79 Companies 81 Companies in Law 86 Unincorporated Associations 95 Partnerships 96 Contents (Continued) Study Title Page Unit 5 Contract Law 1: Fundamentals of Contracts and their Creation 103 What is a Contract? 105 The Agreement 109 Classification of Statements and Terms 116 Consideration 119 The Intention to Create Legal Relations 127 Capacity to Contract 129 6 Contract Law 2: Contract Regulations 133 Privity of Contract 135 Joint Obligations 140 Assignment 141 Mistake 144 Misrepresentation 151 Undue Influence 153 Void and Illegal Contracts 157 7 Contract Law 3: Performance and Discharge 167 Performance 169 Discharge by Agreement 172 Discharge by Breach 174 Discharge by Frustration 176 Remedies for Breach of Contract 182 8 The Sale of Goods 1: The Contract, Property and Title 191 Sale of Goods 193 Distinction between Sale and Other Supply Contracts 196 Formation of Contract of Sale 198 Passing of Property 201 Transfer of Title by Non-Owners 213 9 The Sale of Goods 2: Terms and Conditions 217 Risk 219 Frustration 221 Delivery 223 Acceptance and Payment 227 Statements Relating to Goods 229 Statutory Implied Terms as to Description and Quality 232 Exemption Clauses 239 Contents (Continued) Study Title Page Unit 10 The Sales of Goods 3: Disputes and Remedies 247 Remedies of the Seller 249 Remedies of the Buyer 257 Supply of Goods and Services Act 1982 259 Role of the Commercial Court 260 Resolution by Arbitration 261 Rules for the Conduct of Arbitration 263 Arbitration Proceedings 266 Rights and Duties of Arbitrator 266 Arbitration Awards 269 11 Law of Agency 1: Agency Agreements and Agents 271 General Nature of Agency 273 How Agency Arises 275 Ratification 278 Categories of Agents 281 Duties of Agents to their Principals 284 Rights of Agents against Principals 290 Commercial Agents (Council Directive) Regulations 1993 294 12 Law of Agency 2: Authority, Liability and Termination 297 Authority of Agents 299 Delegation of Authority 303 Rights and Liabilities of Principal to Third Parties 304 Liability of Principal for Wrongs of Agent 305 Relations between Agents and Third Parties 307 Termination of Agency 311 13 Employment Law 1: The Contract of Employment 315 Distinction between Independent Contractor and Employee 317 Other Categories 320 The Need to Distinguish between Categories 322 Contract of Employment 323 Equal Pay 327 Other Terms and Conditions 329 Contents (Continued) Study Title Page Unit 14 Employment Law 2: Termination of the Contract, Discrimination and 335 Tribunals Notice 337 Written Statement of Reasons for Dismissal 338 Constructive Dismissal 338 Redundancy 339 Unfair Dismissal 341 Employment Tribunals 344 Race Relations Act 1976 347 Sex Discrimination Acts 1975 & 1986 351 Disability Discrimination Act 1995 355 Health and Safety at Work Act 1974 358 15 Principles of Consumer Credit 363 Hire Purchase 364 Consumer Credit Act 1974 364 The Consumer Credit Agreement 371 Withdrawal and Cancellation 373 Rights during the Currency of the Agreement 375 Obligations of the Creditor in relation to the Quality (etc.) of the Goods 378 16 Consumer Protection 381 Introduction 382 Trade Descriptions Act 1968 382 Fair Trading Act 1973 386 Consumer Safety 389 The Role of Local Government 393 Manufacturers and Product Liability under the Law of Tort 394 17 Negotiable Instruments 1: Bills of Exchange 399 Introduction 401 Characteristics of a Bill of Exchange 401 Acceptance 404 Transfer of Bills of Exchange 407 Inland and Foreign Bills 410 Methods of Discharge 411 Liability of Parties on the Bill 412 Release from Liability 416 Liability “outside” the Bill 417 Forgeries 417 Dishonour of a Bill 419 Consequences of Dishonour 421 Incomplete Bills and Alterations 423 Contents (Continued) Study Title Page Unit 18 Negotiable Instruments 2: Cheques 427 Introduction 429 The Nature of a Cheque 429 Banker/Customer Relationship 431 Crossing a Cheque 434 Special Protection of Paying Banker 436 Special Protection of Collecting Banker 439 Promissory Notes 440 i Diploma in Business Administration – Part 2 Principles of Business Law Syllabus Aims 1. Acquire an understanding of the principles of Common Law system within the students’ own legal system and how it affects their business life. 2. Acquire a knowledge of the legal environment in which businesses operate in the domestic and international market place. 3. Acquire an understanding and practical application of the principles and concepts of the system of justice within the business community. 4. Acquire an understanding of the principles and practical implications of the law of business. 5. Acquire an understanding and practical application of the principles and concepts of the law of contract. 6. Acquire an understanding and practical application of the principles and concepts of the law for the protection of the customer and final consumer. 7. Acquire an understanding and practical application of the principles and concepts of the law of employment and industrial relations. 8. Acquire an understanding and practical application of the principles and concepts of the law of tort as it applies to the world of business. Programme Content and Learning Objectives After completing the programme, the student should be able to: 1. Comment on the basic elements of the Common Law system and the language it uses within a domestic and international market ! sources of law – common law and equity; statutes and delegated legislation and statutory interpretation ! recognise the differences between civil (in the Common Law sense) and criminal law; comment on the differences between contract and tort 2. Comment on the administration of the law ! the court system ! alternative dispute resolution ! discuss the personnel of the law – judges, barristers, solicitors, legal executives, para- legals 3. Comment on the application of the courts’ decisions ! apply case law ! able to cite facts and ratios and where possible contrasting cases ! extrapolate from decisions into hypothetical situations © Copyright ABE ii 4. Comment on the law of associations; the separate legal concept and its implications for the business and the customer and the final consumer ! recognition of the sole trader – definition, creation, trading position, legal liability ! a partnership – essential elements, the partnership contract, relations with the partners between themselves and to outside world, fiduciary obligations ! companies – classification of registered companies; formulation, memorandum of association and articles of association, the doctrine of ultra vires and the recent changes in the law; the nature and form of the company securities; the management of the company, company meetings; the regulations governing and the powers and duties of directors and shareholders 5. Recognise, give guidance of and discuss the rules of contract ! the basic law of contract ! offer – acceptance ! intention to create legal relations ! consideration ! formality of contract ! capacity ! terms and conditions, conditions and warranties, exclusion clauses, the battle of the forms ! vitiating factors, mistake and misrepresentation, undue influence; contracts in restraint of trade ! discharge of the contract ! remedies in common law and equity for breach of contract 6. Recognise and give evidence of Consumer Protection ! special contracts – sale and supply of goods and hire purchase; definition and nature ! conditions and warranties, transfer of title of goods and risks associated with such a transfer, delivery and acceptance of goods ! remedies ! loans, hire purchase and other credit and consumer credit agreements 7. Recognise and be able to discuss the law with regard to agency ! agency – definition; creation ! authority of the agent; rights and duties of the principal and agent; types of agency ! termination of the agency contract 8. Recognise, give evidence of, discuss and examine the principles relating to consumer law ! common law ! statutory legal principles ! case law © Copyright ABE iii 9. Recognise and explain the