BUSINESS LAW AND ETHICS EXAM:
I) The contract
A contract: A voluntary, deliberate, and legally binding agreement between two or more competent parties. Contracts are usually written but may be spoken or implied, and generally have to do with employment, sale or lease, or tenancy.
Moreover, if we want that the contract is made, there must be the offeree and the offeror.
The offeror: A person or a group of people that present something (that he/she wants to sell) to somebody, for acceptance or rejection.
The offeree: A person to whom an offer is made.
OFFER + ACCEPTANCE = AGREEMENT
Case: Gunthing vs Lynn (1831): In this case, the offeror promised to pay a further sum of money for a horse. But the offeror was too vague concerning the offer that he made to sell his horse. So the contract can’t be done.
If we want that an offer is valid, we must be clear, certain and complete.
Requirements for a valid contract:
- Intention to create legal relations
You have to sign the contract if you want to create legal relations. You have to be agree with the other party. If the other party don’t want, then you will be able to sue the other party if that party does not fulfil the contractual provisions, and vice versa.
A party that is acting “subject to contract” (mot qu’on peut retrouver) can withdraw (se retirer) from the negotiation at any time before the contract is concluded. In case of dispute, the burden of proof that the intention was to create a binding contract rests on the person who wishes to rely on the contract. (la personne qui souhaite se fonder sur le contrat à la personne qui à proposer le contrat).
You may also come across the words “without prejudice“. These two words are used to indicate that nothing that is written in the relevant document is legally binding. (contraignant)
- Offer
An offer is an expression of readiness to do something which, if followed by the unconditional acceptance of another person, results in a contract. If no time limit is specified, an offer is valid for a reasonable length of time before the offeror can revoke or cancel it. To avoid potential disputes, however, the offeror should specify the deadline for the acceptance of an offer.
It is also important to note that the offeror can’t take silence as a form of acceptance. This means the offeror cannot say “If I do not hear from you within 10 days, then I will assume that you have accepted my offer and will pay for the product”.
An offer must be distinguished from an “invitation to treat“, which invites other people to make offers. Examples of invitations to treat include: invitations to tender (appels d’offre), displaying goods on the shelves of a shop sur étagères d’un magasin), and the advertisement of goods or services in newspapers or on television.
- Acceptance
There is no contract until the offer is accepted by the offeree. Acceptance is normally made orally or in writing, but if the contract allows that the acceptance and performance of contractual duties have to be simultaneously, then acceptance can also be made by conduct (conduit). For example, when a supplier receives your cheque, that supplier may immediately deliver the goods to you without saying or writing anything. (c’est basé sur la confiance en quelque sorte).
Postal Rule – If it is reasonable to use the post for the offer and acceptance process, then the contract is formed at the time of posting the letter of acceptance, even if the letter is lost in the post.
Receipt Rule – When an acceptance is sent by fax, it is considerate to be valid when the message is received, even if the offeror doesn’t read the fax immediately. This rule also applies to e-mail messages.
Another important point to note is that a conditional (or partial) acceptance is only a “counter-offer” (contre offre) and doesn’t constitute a valid contract. In other words, if the person to whom the offer is addressed only accepts some of the terms or proposes some new terms, then that person is not accepting the offer but is making a new offer to the other party. In the business world, there may be a series of counter-offers before the final acceptance).
- Consideration
Consideration is the foundation of every contract. The law enforces only those promises which are made for consideration. Where one party promises to do something, it must get something in return. This ‘something in return’ is called consideration.
Consideration has been defined in many ways.
According to Pollock “Consideration is the price for which the promise of some other is brought and the promise thus given for value is enforceable.”
To be valid, it must:
- Have some value
- Be something the party isn’t already obliged to do
- Not be made after the contract is made
- Capacitiy
Persons under the age of 18 (minors) and lunatics (mentally disordered) don’t have the capacity to enter into contracts. Any contracts that are made by persons who are lacking in legal capacity can be cancelled.
An exception to this rule arises when the parties enter into a contract for “necessaries”. A legal term for “necessities”, which means the goods or services that are suitable to the condition of life of a minor and to that minor’s actual requirements at the time of the sale and delivery, such as clothes or food (biens necessaires à la vie du mineur). A minor who fails to pay for “necessaries” can be sued by the seller (peut être poursuivit par le vendeur).
II) The employment law
The formation of the employment law is done by :
- Names of employer and employee
- Date of employment
- Pay scale
- Hours of work
- Holiday and sick pay
- Pension scheme
- Length of notice
- Job title
Implied terms are:
- Pay and sick pay
- Working hours
- Pay slips
- Indemnity
- References
- Health and safety
Employee duties:
- Fundamental service
- Reasonable competence to perform in the job
- Obedience
- Ottoman bank vs chakarian (1930)
- Duty to account for all money
Statutory implied terms:
- Wages
- Maternity leave
- Time of work
- Health and safety
Distinction between employed and self-employed:
Factors pointing towards employee status
Common terms that point you being an employee are:
- you do not risk your own money and there is no possibility that you could lose money on the job
- you are paid by the hour, day, week or month
- you have no business organisation, such as a yard, materials or workers
- you supply only your own small tools
- the person you are working for has the right to tell you what to do, and where and when, even if this rarely happens in practice
Factors pointing towards self-employed status
Common terms that point to you being genuinely self-employed are:
- you provide materials or plant for the job
- you bid for the job and carry the cost if your price is too low
- you have the right to hire others who answer to you and are paid by you
- you are paid an agreed sum no matter how long the job takes
- you can decide how and when the job is done within an overall deadline
- you work for a large number of different people during the course of a year
Case Cassidy vs Ministry of Health:
Mr Cassidy went to hospital for a routine operation on his hand, but came away with stiff fingers because of the negligence of one of the doctors. He attempted to sue the Ministry of Health in its capacity as employer. The Ministry argued it could not be held responsible and had no vicarious liability.
The Court of Appeal held that the doctor was indeed a servant of the hospital and the Ministry was vicariously liable, because the doctor was integrated into the health organisation. Denning said,
He also noted that where a patient selects the doctor, then the doctor will not be employed by a hospital.
III) Discharge of contract à Frustration
Definition: A contract may be discharged by frustration. A contract may be frustrated where there exists a change in circumstances, after the contract was made, which is not the fault of either of the parties, which renders the contract either impossible to perform or deprives the contract of its commercial purpose.
- Frustration can appear in those situations:
1° Destruction of the subject matter
Taylor vs Caldwell (1863):
The claimant hired out a music hall in Surrey for the purpose of holding four concerts. The claimant went to great expenses and efforts in organising the concerts. However, a week before the first concert was due to take place, the music hall was destroyed by an accidental fire. The claimant sought to bring an action for breach(rupture) of contract for failing to provide the hall and claiming damages for the expenses incurred.
Held: The claimant’s action for breach of contract failed. The contract had been frustrated as the fire meant the contract was impossible to perform.
2° Personal incapacity
Condor vs Barron Knights (1966):
A 16 year old agreed by contract to play the drums for the defendant band for 7 nights per week during 5 years. The claimant was told by his doctor that he could not perform more than 4 nights per week. The band dismissed him. He brought a claim for wrongful dismissal.
Held:The claimant’s action was unsuccessful as his medical condition made it impossible for him to perform his contractual obligations and the contract was thus frustrated.
3° Government Intervention
Met Water Board vs Dick Kerr (1918):
Kerr agreed to build a reservoir for the Water Board within six years. After two years, Kerr were required by a wartime statute to cease work on the contract and to sell their plant.
Held: The contract was held to be frustrated because the interruption was of such a nature as to make the contract, if resumed, a different contract.
4° Supervening illegality
Re Shipton Anderson & Harrison Brothers (1915)
A contract was concluded for the sale of wheat lying in a warehouse. The Government requisitioned the wheat, in pursuance of wartime emergency regulations for the control of food supplies, before it had been delivered, and also before ownership in the goods had passed to the buyer under the terms of the contract.
Held: It was held that the seller was excused from further performance of the contract as it was now impossible to deliver the goods due to the Government’s lawful requisition.
5° Non-occurrence of the event if it’s the sole purpose of the contract
6° Contrast
Krell vs Henry (1903)
Henry hired a room from Krell for two days, to be used as a position from which to view the coronation procession of Edward VII, but the contract itself made no reference to that intended use. The King’s illness caused a postponement of the procession.
Held: It was held that Henry was excused from paying the rent for the room. The holding of the procession on the dates planned was regarded by both parties as basic to enforcement of the contract.
Herne Bay Steamboat Co vs Hutton (1903)
Herne Bay agreed to hire a steamboat to Hutton for a period of two days for the purpose of taking passengers to Spithead to cruise round the fleet and see the naval review on the occasion of Edward VII’s coronation. The review was cancelled, but the boat could have been used to cruise round the assembled fleet.
Held: It was held that the contract was not frustrated. The holding of the naval review was not the only event upon which the intended use of the boat was dependent. The other object of the contract was to cruise round the fleet, and this remained capable of fulfilment.
7° Interruption
Jackson vs Union Marine Insurance (1873)
A ship was chartered in November 1871 to proceed with all possible despatch, danger and accidents of navigation excepted, from Liverpool to Newport where it was to load a cargo of iron rails for carriage to San Francisco. She sailed on 2 January, but the next day ran aground in Caernarvon Bay. She was refloated by 18 February and taken to Liverpool, where she underwent extensive repairs, which lasted till August. On 15 February, the charterers repudiated the contract.
Held: The court held that such time was so long as to put an end in a commercial sense to the commercial speculation entered upon by the shipowner and the charterers. The express exceptions were not intended to cover an accident causing such extensive damage. The contract was to be considered frustrated.
- The following will not frustrate a contract:
1° If an alternative mode of performance is possible
Tsakiroglou & Co Ltd v Noblee Thorl (1962)
The defendant agreed to ship some Sudanese peanuts during November or December 1956 to Hamburg for a certain price. On 2nd of Nov the Suez canal was closed to shipping. The defendant could still have transported the peanuts within the contractually agreed time but this would mean going via the Cape of Good Hope which would have taken four times as long and increased the cost of transport considerably. The defendant did not carry the goods and argued that the contract had been frustrated.
Held: The contract was not frustrated. It was still possible to perform the contract without any damage to the peanuts. The fact that it was more difficult or costly to perform is not sufficient to amount to frustration.
2° If the contract become more expensive to perform
Davis Contractors v Fareham (1956)
The plaintiff agreed to build 78 houses in eight months at a fixed price. Due to bad weather, and labour shortages, the work took 22 months and cost £17,000 more than anticipated. The builders said that the weather and labour shortages, which were unforeseen, had frustrated the contract, and that they were entitled to recover £17,000 by way of a quantum meruit.
Held: The House of Lords held that the fact that unforeseen events made a contract more onerous than was anticipated did not frustrate it.
3° If one party has accepted and is unable to perform
Maritime National Fish v Ocean Trawlers (1935)
Maritime chartered from Ocean a vessel which could only operate with an otter trawl. Both parties realised that it was an offence to use such a trawl without a government licence. Maritime was granted three such licences, but chose to use them in respect of three other vessels, with the result that Ocean’s vessels could not be used.
Held: It was held that the charter party had not been frustrated. Consequently Maritime was liable to pay the charter fee. Maritime freely elected not to licence Ocean’s vessel, consequently their inability to use it was a direct result of their own deliberate act.
4° Law reform(1949)
- Any money paid is repayable, any money due ceases to be payable
- A party may be able to offset expenses incurred
5° Valuable benefit other than money
If one party has received valuable benefit other than money the court may order all or part of the value of the benefit be repaid.
Exclusion clauses (2013, 2014, 2015)
Misrepresentation (2015 – 2013)
Stackeholders (2014 – 2015)
Robinson…model of organisation
IV) Exclusion clauses
Exclusion clauses are clauses, usually written down, that say that one party to the contract will not be responsible for certain happenings.
These clauses are valid only if:
- It has been properly included in the contract
To be properly included in the contract, the clause cannot be tacked on after the contract has been made. If there is a signed contract containing the clause, this will usually have the effect of including it. If there is no signed contract, but there are printed documents or signs posted stating the terms, these can be included in the contract if they are brought to your attention before the contract is made.
- It is possible to have included clauses, but it may be written in the contract before it is signed by all parties, and if there is not written contract, it is possible only before the exchange is done.
Olley vs Marlborough court (1949):
The plaintiff booked for a week in the defendants’ hotel. A stranger access to her room and stole her coat. There was a notice on the back of the bedroom door which stated that “the proprietors will not hold themselves responsible for articles lost or stolen unless handed to the manager for safe”
Held: The Court of Appeal held that the notice was not incorporated in the contract between the proprietors and the guest. The contract was made in the hall of the hotel before the plaintiff entered in her bedroom and before she had the opportunity to see the notice, which is on the back of the bedroom door.
- Then the manager of the hotel has to pay the coat stole by the stranger in the bedroom.
Park vs South eastern railway (1877)
The plaintiff deposited a bag in a cloak-room at the defendants’ railway station. He received a paper ticket which read ‘See back’. On the other side were printed several clauses including “The company will not be responsible for any package exceeding the value of £10.” The plaintiff presented his ticket on the same day, but his bag could not be found. He claimed £24 the price of his bag and the company pleaded the limitation clause in defence. In the Court of Appeal, it was gave the following opinion:
If the person receiving the ticket did not see or know that there was any writing on the ticket, he is not bound by the conditions.
If he knew there was writing, and knew or believed that the writing contained conditions, then he is bound by the conditions.
Thornton v Shoe Lane Parking [1971]
The claimant was injured in a car park. There is conditions but in the car park. So when the guy buy the ticket, he can’t see the conditions. As we said, the contract was done when the guy put the money inside the machine. So the car park is in wrong.
- It is not contrary to law
The exclusion also has to be legal. There are some important obligations to a consumer that are placed on a trader and these are implied by statute into consumer contracts and cannot be excluded.
V) Invitation to treat
An invitation to treat is a tool to get negotiations going and show the terms which one party may be willing to accept, as opposed to an offer in which one party is prepared to be legally bound by upon acceptance.
Auction: Where an auction takes place with reserve, each bid is an offer which is then accepted by the auctioneer. Where the auction takes place without reserve, the auctioneer makes a unilateral offer which is accepted by the placing of the highest bid:
Heathcote Ball v Barry (2000):
The claimant had submitted the highest bids. The claimant had submitted bids of £200 each. The auctioneer refused to sell them at that price. The claimant does an action for breach of contract claiming damages.
Held: The claimant was entitled to damages. Where an auction takes place without reserve the auctioneer makes a unilateral offer which is accepted by submitting the highest bid. There was thus a binding contract and the claimant entitled to damages covering the loss of bargain.
Advertisement:
Invitation to treat :
Patridge vs Crittenden (1968):
An advert in a special section of a magazine was done to sell birds. But there is an act of the law in 1954 which said that it is an offence to offer such birds for sale. He was charged and convicted of the offence and appealed against his conviction.
Held: The defendant’s conviction was quashed. The advert was an invitation to treat not an offer. The literal rule of statutory interpretation was applied.
However some adverts can amount to an offer :
carlill vs the carbolic smoke ball (1893) (test on smoke ball, but the seller told that if there is some problems with the test, he engage himself to refund)
Goods in shop: Goods on display in shops are generally not offers but an invitation to treat. The customer makes an offer to purchase the goods. The trader will decide whether to accept the offer:
- Fisher v Bell (1961)
A guy had a flick knife displayed in his shop window with a price tag on it. There were at the beginning a criminal offence to offer thoses knifes, in contrary to the law. But, it is not an offer, but an invitation to treat because it is the customer who makes the offer when he wants to buy that product, so the court decided at the end that his conviction was quashed because It was an invitation to treat.
when you pay, the contract is done ! Every shop is invitation treat ! si sur internet y a pas le prix, c’est à l’autre de faire offre ! et à ce moment la ca donne une offre, avantinvitation to treat. fisher vs bell 1961 àwindow shop à invitation to treat
Machine : The machine represents the offer, the acceptance is inserting the money.
Thornton v Shoe Lane Parking [1971]
The claimant was injured in a car park. There is conditions but in the car park. So when the guy buy the ticket, he can’t see the conditions. As we said, the contract was done when the guy put the money inside the machine. So the car park is in wrong.
Tenders: To present payment to another to enter into a contract but it is an invitation to treat.
Spencer v Harding:
The advertisement specified where the goods could be viewed, the time of opening for tenders and that the goods must be paid for in cash. No reserve was stated. The claimant submitted the highest tender but the defendant refused to sell to him.
Held: Unless the advertisement specifies that the highest tender would be accepted there was no obligation to sell to the person submitting the highest tender. The advert amounted to an invitation to treat, the tender was an offer, and the defendant could choose whether to accept the offer or not.
Unilateral offer
(advertisement, auction)
BUT Carlill v The Carbolic Smoke Ball Co (1893)
When a unilateral offer is made to many people, everyone can take it by performing. In this case the woman accepted the offer by taking the smoke balls, this is an unilateral contract.
Goods in shops
Customers who buy goods in shops make the contract while buying them.
Fisher v Bell (1961)
Goods in a shop window or a self-service shop are not an offer to sell the goods. They are an invitation to treat.
Termination of offers:
- Death of offeror or offeree:
Bradbury v Morgan (1862)
When someone of your family dies, you still have to pay for him. In this case, the brother has to pay for his brother.
- Lapse of time (An offer will terminate after a reasonable lapse of time. What amounts to a reasonable period will depend on the circumstances.)
Ramsgate Victoria Hotel v Montefiore (1866)
A guy would like to buy some actions of a company, and six month later, the society answer to the offer but the price of actions fall down. The guy had not withdrawn the offer but refused to go through with the sale.
Held: The offer was no longer open as due to the nature of the subject matter of the contract the offer lapsed after a reasonable period of time. Therefore there was no contract and the claimant’s action for specific performance was unsuccessful.
- Revocation (An offeror may revoke an offer at any time before acceptance takes place) Dickinson v Dodds (1876)
A guy would like to sell his house and promise to the claimant that the offer is valid until Friday. Thursday, the guy accepts an offer from another one, so he tell to one of his friend to call the claimant to tell him that the offer is over.
Held:
The offer had been effectively revoked. Therefore no contract existed between the parties. There was no obligation to keep the offer open until Friday since the claimant had provided no consideration in exchange for the promise.
The offeror is free to withdraw the offer at any time before acceptance takes place unless a deposit has been paid.
- Counter offer (A counter offer is where an offeree responds to an offer by making an offer on different terms. This has the effect of destroying the original offer so that it is no longer open for the offeree to accept.)
Hyde v Wrench (1840): It happened with its farm, he offered 1000£ but the claimant offered 950£, too late because counter-offer, you cannot go back to the original one, it was a refusal of the first offer.
VI) Stakeholders
The theory of stakeholders is not only a single model to resolve the problem of identifying the proper objective of corporations, but also considers economics and ethics issues that make companies take social responsibilities, and to presents fairness to everyone involved in business, with the result that directors will run corporations for benefiting all stakeholders.
Profit-seeking à la recherché du profit
Definitions:
- A stakeholderis an individual or group that has a legitimate interest in a company.
- A corporate stakeholder is a person or group who can affect or be affected by the actions of a business.
- Internal stakeholdersare groups within a business or people who work directly within the business, such as employees, owners, and investors. Employees want to earn high wages and keep their jobs. Owners are interested in maximizing the profit the business makes. Investors are concerned about earning income from their investment.
- External stakeholder: are groups outside a business or people who are not directly working within the business but are affected in some way from the decisions of the business, such as customers, suppliers, creditors, community, trade unions, and the government. The government wants the business to pay taxes, employ more people, follow laws, and truthfully report its financial conditions. Customers want the business to produce quality products at reasonable prices. Suppliers want the business to continue to buy their products. Creditors want to be repaid on time and in full. The community has a stake in the business as employers of local people.
