Notesale: Turn your study into money

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Additional Reading Notes
Differences between company & partnership
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Each form of running a business
is going to have different benefits & restrictions but they each provide options for running a business that may benefit some
more than others
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2 of the choices are to organize a
partnership / a corporation
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i
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The corporation can be sued & sue others as it sees fit
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So the people who are listed in the partnership agreement
can be sued for the actions, or negligence of the business
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Each of the partners will
have a designated percentage of control and receive that
percentage of the profits
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A partnership exists for an established amount of time
determined by the partnership agreement
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Flexibility & Liability

As stated before the liability that one can face as a
stockholder / officer of a corporation is going to be
nonexistent
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Each of the general
partners have a liability for the things that happen due to
the actions / inactions of the entity
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The issues involved
in a partnership can’t be renegotiated or transferred to
another usually without starting a whole new partnership
agreement
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Raising Money

One of the most important things that a legal entity can do
is to raise money to run businesses
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A
corporation is allowed to raise money by selling new

stock / selling bonds / other securities
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This has some limits but it also
allows for partners to maintain control of decisions &
profits of their business ventures
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Limited Liability

Owner liability is limited to the loss of the value of shares
held
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The most
an owner can lose is the value of the investment from
buying shares of the corporation
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v
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Exchanges, such as the New York Stock
Exchange, are markets created for the purpose of selling
shares of corporations
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vi
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Corporations are far more flexible in
their ability to take on debt
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Income made by corporation is taxed twice
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Then, the income gained through ownership of
corporation is taxed as personal income in owners’ income tax
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Essentially, corporations must get a greater return on
investments to cover corporation’s taxes while still maintaining profitability to shareholders
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Difference between condition, warranties and innominate terms
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Parties to a contract will normally be bound to perform any
promise that they have agreed to & failure to perform will lead to an action for breach of contract, although the precise nature
of the remedy will depend upon the nature of the promise broken
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Some statements do not form part of a contract, even though they might have induced the other party to enter into the
contract
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It is important, therefore, to decide precisely what promises are
included in the contract
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Terms can be classified as one of three types
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Breach
of a condition gives the injured party the right either to
terminate the contract and refuse to perform their part of
it, or to go through with the agreement and sue for
damages
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Due to illness she was
unable to appear on the first night, or for some nights
thereafter
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It was held
that her failure to appear on the opening night had been a
breach of a condition, and the defendants were at liberty
to treat the contract as discharged
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Breach of a warranty does not give the right to
terminate the agreement
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As regards warranties, the classic case is Bettini
v Gye (1876) in which the plaintiff had contracted with
the defendants to complete a number of engagements
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Due to illness, however,
he only arrived three days before the opening night, and
the defendants refused his services
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The
defendants were entitled to damages, but could not treat
the contract as discharged
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11 Sale of Goods Act 1893 (now SGA
1979)
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This simple classification has subsequently
been rejected by the courts as too restrictive, and a third
type of term has emerged: the innominate term
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In this situation, the remedy is not
prescribed in advance simply by whether the term
breached is a condition or a warranty, but depends on the
consequence of the breach
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If, however, the innocent party does not lose
‘substantially the whole benefit of the contract’, then they
will not be permitted to repudiate but must settle for
damages, even if the term might otherwise appear to be a
condition
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In this case a contract for the sale of a
cargo of citrus pulp pellets, to be used as animal feed,
provided that they were to be delivered in good condition
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Subsequently the same
buyers obtained the pellets, when the cargo was sold off,
and used them for their original purpose
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It is a promise to be bound on
particular terms, which is capable of acceptance
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The person who makes the offer is
the offeror; the person who receives the offer is the
offeree
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Offers, once accepted, may be legally enforced but not all
statements will amount to an offer
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An offer must be capable
of acceptance
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In Carlill v Carbolic Smoke

(ii) A mere supply of information – As in Harvey v Facey
(1893) where it was held that the defendant’s telegram, in
which he stated a minimum price he would accept for
property, was simply a statement of information, and was
not an offer capable of being accepted by the plaintiff
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Invitation to Treat
Invitations to treat are distinct from offers in that rather than being offers to others, they are in fact invitations to others to
make offers
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An essential consequence of this distinction is that, in line with the ordinary rules of offer and
acceptance, the person extending the invitation to treat is not bound to accept any offers subsequently made to them
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It was held that the shopkeeper was not guilty as
the display in the shop window was not an offer for sale
but only an invitation to treat
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The defendants were charged with
breaking a law which provided that certain drugs could
only be sold under the supervision of a qualified
pharmacist
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It was held that Boots
were not guilty
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In law, the customer offered to
buy the goods at the cash desk where the pharmacist was
stationed
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This can be seen from Partridge v
Crittenden (1968) in which a person was charged with
‘offering’ a wild bird for sale contrary to the Protection of
Birds Act 1954, after he had placed an advert relating to
the sale of such birds in a magazine
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(iv) A share prospectus – Contrary to common
understanding such a document is not an offer
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Differences between Redundancy & Unfair Dismissal
Redundancy
Redundancy is defined as being: ‘dismissal attributable wholly or mainly to:
(a) the fact that his employer has ceased / intends to cease,
to carry on the business for the purposes of which the
employee was employed by him, or has ceased / intends
to cease to carry on that business in the place where the
employee was so employed, or

(b) fact that requirements of that business for employees
to carry out work of a particular kind, or for employees to
carry out work of a particular kind in the place where they
were so employed, have ceased / diminished or are
expected to cease / diminish
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At the outset of redundancy proceedings the onus is placed on employee to show
that they have been dismissed, which provides four types of dismissal
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Once dismissal has been established a presumption in favor of redundancy operates and the onus shifts to the employer to
show that redundancy was not the reason for the dismissal
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Under Employment Act the actual figures are calculated
on basis of the person's age, length of continuous service and weekly rate of pay subject to statutory maxima
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Max number of years service that can be claimed is:?

Unfair Dismissal
Employees have a right not to be unfairly dismissed
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Following are situations where dismissal is automatically unfair:
(i) Dismissal for trade union reasons
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It also applies where an
individual has refused to join a trade union
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(ii) Dismissal on grounds of pregnancy or childbirth or
other reason connected to her pregnancy or following her
maternity leave period
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This action, otherwise known as
’whistle blowing’, covers criminal activity, breach of
legal obligations, breach of health and safety provisions,
and activity damaging to the environment on the part of
the employer
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In relation to a successful claim for unfair dismissal, an Employment Tribunal may award any one of following remedies:
 reinstatement

 re-engagement or

 compensation
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Re-engagement means that the dismissed employee is re-employed under a new contract of employment
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The main provisions derive from the Sale of Goods Act 1979
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12)
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13)
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14)
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15)
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This implies
the identical provisions as the Sale of Goods Act in relation to the goods supplied
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13), that the service will be carried out within a reasonable
time (s
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15)
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S
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12 applies to all contracts for sale of goods so it will cover private sales in addition to where goods have been purchased
from a shop or other business
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12(1) implies a term that the seller has the right to sell the goods
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This term is a condition in all sales
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Rowland v Divall [1923] 2 KB 500 (Case summary)  Facts: Claimant, a car dealer, bought a car from defendant for £334
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Two months later the car was impounded by
police as it had been stolen
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Both claimant & defendant were unaware that the car
had been stolen
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Held: Defendant did not have the right to sell the goods as he did not obtain good title from the thief
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Defendant had 2 months use of the car which he did not have to pay for & claimant was not
entitled to any compensation for the work carried out on the car
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12(1) also applies where the seller does not have the right to sell the goods where to
do so would be breach of trademark, patent or copyright:
Niblett v Confectioners' Material [1921] 3 KB 387 (Case summary)  Facts: Claimant purchased 1,000 tins of condensed
milk from defendant
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Nestle told the claimant that if they attempted to sell these on, they
would apply for an injunction to prevent the sale as the label was very similar to Nestle's labels for their condensed milk
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Held: The sellers did not have the right to sell the
goods and therefore the buyers were entitled to repudiate the contract
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12(2)(a) implies a term that the goods are free from any undisclosed charge or encumbrance
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This term is only a warranty so whilst the purchaser can claim
for any loss caused by the charge or encumbrance they cannot end the contract
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12 (2)(b) implies a term that the purchaser will enjoy quiet possession of the goods
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This term is a warranty
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After the purchase a 3rd party was granted a patent right in the machines
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There was no breach of S
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However, there was a breach of S
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2
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13 sale by description (Sales of Goods Act 1979)

S
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This section applies where the sale is solely by description
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13 can
not be relied upon:
Harlington & Leinster v Christopher Hull Fine Art [1991] 1 QB 564 (Case summary)  Facts: Claimant purchased a
painting from defendant for £6,000
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Both buyers & sellers were London art dealers
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The purchasers sent their experts to inspect the painting before agreeing to
purchase
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They brought an action
based on S
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Held: By sending their experts to inspect the painting this meant the
sale was no longer by description
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13 only applies to goods sold by description and therefore the buyers had no protection
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13 is simply concerned with description and not quality as was made clear in:
Arcos v Ranaason [1933] AC 470 (Case summary)  Facts: A contract for the sale of a quantity of wooden staves for
making barrels described the staves as being 1/2 an inch thick
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There was nothing wrong with the quality of the wood & they could still be used for the intended purpose
of making barrels
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Held: The purchasers were entitled to reject the goods under S
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Re Moore & Landauer [1921] 2 KB 519  Facts: A contract for the sale of 3,100 tins of peaches described the tins as being
packed in cases of 30
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Held: The purchaser was entitled to reject the goods as they were not as described
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13 is a condition in relation to consumer sales but an innominate term in relation to non-consumer sales
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S
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14 only applies where the seller sells goods in the course of a business
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The question of whether goods were sold in the course of a business was considered in:
Stevenson v Rogers [1999] 1 All ER 613 (Case summary)  Facts: Defendant was a fisherman
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Claimant brought an action against defendant based on breach of S
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S
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Defendant argued that the sale of the boat wasn’t in the
course of his business
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Held: The sale
was in the course of the business & therefore defendant did have to ensure the boat was of satisfactory quality
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14 is strict and not dependent of proof of fault on the part of the seller
The relevant parts of S
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 (2A) For the purposes of this Act, goods are of satisfactory quality if they meet the standard that a reasonable
person would regard as satisfactory, taking account of any description of the goods, the price (if relevant) and all the
other relevant circumstances
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Looking at fitness for purpose, the judge,
will consider whether the goods are fit for the purpose the goods are commonly supplied so for example if you purchase a
hairdryer & use it to dry your clothes, the judge is unlikely to conclude there has been a breach as the goods weren’t used for
their common purpose
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In addition to the statutory guidance a court applies the acceptability and usability tests to help determine if the goods in
question are of satisfactory quality:
i
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The car gave him constant problems & he then discovered that the car had previously been in an accident & had been totally
submerged in water
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14(2)
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This asks would a reasonable purchaser have accepted the goods at the stated price knowing of the
fault
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ii
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This test requires the court to consider if a reasonable purchaser
could have used the goods for purposes for which the goods were commonly supplied:
Aswan
Aswan Engineering v Lupdine [1987] 1 All ER 135 (Case summary)  Facts: Claimants purchased some liquid
waterproofing from defendant which was contained in some heavy duty plastic pails
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Claimant stored the pails outside, but they were in Kuwait & the pails were left out
in the sun in temperatures of up to 70%c
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Held: The
court applied the usability test as it was a business to business contract
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Consequently there was no breach of S
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A reasonable user could have used the goods without incurring damage
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14 (2C) provides certain limitations to the application of S
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Defendant told claimant that the clutch was defective & that this was a minor repair costing around £23
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Buyer chose to take it with the fault & get the discount
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Buyer sought to bring a claim based on what is now S
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Held: Seller had brought the defect to the attention of buyer &
therefore buyer couldn’t assert any rights under S
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142C
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(b) where the buyer examines the goods before the contract is made, which that examination ought to reveal, or
(c) in the case of a contract for sale by sample, which would have been apparent on a reasonable examination of the sample
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S
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15 applies to all sales by sample irrespective of whether it is a private sale, consumer sale or business to business sale
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15 (2) provides that in a contract for sale by sample there is an implied term:
(a) that the bulk will correspond with the sample in quality;
(b) that the goods will be free from any defect, making their quality unsatisfactory, which would not be apparent on
reasonable examination of the sample
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15 only relates to quality and not to other matters such as color
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15 is a condition in a consumer sale and an
innominate term in non- consumer sales
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To make a binding contract the acceptance must
exactly match the offer
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The general rule is that an acceptance must be
communicated to the offeror
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The
acceptance must be communicated by the offeree or someone authorised by the offeree
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However the exception is
postal rule
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The contract is concluded, even if the
letter subsequently fails to reach the offeror
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Due to misdirection, the letter was delayed
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On 8 September, Lindsell sold the merchandise to a third party
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It was held that a valid acceptance took place when Adams posted the letter
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The postal rule applies equally to telegrams (Byrne v Van Tienhoven (1880)), but it does not apply when means of
instantaneous communication are used (Entores v Far East Corp (1955))
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If the parties have negotiated either faceto-face, for example in a shop, or over the telephone, then it might not be reasonable for the offeree to use the post as a means
of communicating their acceptance and they would not gain the benefit of the postal rule
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Where the agreement is conducted on the Internet, regulation 11 of the Electronic Commerce (EC
Directive) Regulations 2002 indicates that the contract is concluded when the service provider’s acknowledgment of receipt
of acceptance is received by electronic means

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