Karen Boyd FCCA, Senior Lecturer at Northumbria University Law for Business Students FIFTH EDITION ALIX ADAMS Law for Business Students provides an approachable introduction to the law for those new to the subject or studying law as part of a non-law degree Alix Adams’ writing style brings the subject to life and encourages you to apply the law to your own experiences and the world around you The new edition supports your learning and engagement with this area through a new colour design and a number of learning features that include: ❉ Learning objectives, chapter introductions and summaries to help structure your reading, aid navigation and ensure you understand the key points ❉ Real life examples to highlight how the law works in everyday situations ❉ In the news features that focus on topical and recent cases or issues and address how the law is relevant today ❉ End of chapter key terms to provide clear definitions for technical or legal terms ❉ Quizzes to allow you to test your knowledge on the key points in each chapter while web activities encourage further exploration of relevant law as it relates to you Visit www.mylawchamber.co.uk/adams to access interactive exercises and flashcards designed so that you can test yourself on topics covered in the book There are also legal updates and live weblinks to help you impress examiners and lecturers with knowledge of the latest developments Lecturers: use the site to access resources to help you teach the subject, including a testbank of multiple choice questions which can be used to assess students’ progress ALIX ADAMS Worried about getting to grips with cases? Case Navigator offers unique online support that helps you improve your case reading and analysis skills in Business Law Cases contained within this resource are highlighted throughout this book The LexisNexis element of Case Navigator is only available to those who currently subscribe to LexisNexis Butterworths online FIFTH EDITION C AS E N A R POWERED BY ALIX ADAMS has over thirty years’ experience of teaching Law for Business Students V I G AT O law from GCSE to degree and postgraduate level and is a qualified Barrister ADAMS ❉ Assignments, Worth thinking about?, and Take a closer look features which all encourage you to think in more detail about the law and discuss some more complex issues Do you want to give yourself a head start come exam time? FIFTH EDITION C AS E N A www.pearson-books.com Cover image © Getty Images CVR_ADAM8885_05_SE_CVR.indd R ideal seminar activities.’ Law for Business Students ‘Alix Adams really knows business students She concentrates on explaining the principles and application of law, without the complex details of loads of cases Simple, easy to understand explanations are throughout the book, making it enjoyable for the students The new activities and assignments at the end of each chapter make V I G AT O POWERED BY 3/3/08 14:25:41 A01.QXD 12/16/08 5:14 PM Page i Law for Business Students A01.QXD 12/16/08 5:14 PM Page ii We work with leading authors to develop the strongest educational materials in business and law, bringing cutting-edge thinking and best learning practice to a global market Under a range of well-known imprints, including Longman, we craft high quality print and electronic publications which help readers to understand and apply their content, whether studying or at work To find out more about the complete range of our publishing, please visit us on the World Wide Web at: www.pearsoned.co.uk A01.QXD 12/16/08 5:14 PM Page iii Law for Business Students Fifth edition Alix Adams LLB (Bristol), LLM (Cardiff), Barrister, Cert Ed A01.QXD 12/16/08 5:14 PM Page iv For Cherry, who helped to make it happen Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk First published under the Pitman Publishing imprint in Great Britain in 1996 Second edition published 2000 Third edition published 2003 Fourth edition published 2006 Fifth edition published 2008 © Pearson Professional Limited 1996 © Pearson Education Limited 2000, 2008 The right of Alix Adams to be identified as author of this work has been asserted by her in accordance with the Copyright, Designs and Patents Act 1988 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, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS All trademarks used herein are the property of their respective owners The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners Crown Copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland Law Commission Reports are reproduced under the terms of the Click-Use Licence ISBN: 978-1-4058-5888-5 British Library Cataloguing-in-Publication Data A catalogue record for this book is available from the British Library Library of Congress Cataloging-in-Publication Data Adams, Alix Law for business students / Alix Adams.—5th ed p cm Includes index ISBN 978-1-4058-5888-5 (pbk.) Business law–England I Title KD661 A33 2008 346.4207—dc22 2008006019 10 12 11 10 09 08 Typeset in 9.5/13 pt Stone Sans by 30 Printed and bound by Rotolito Lombarda, Italy The publisher’s policy is to use paper manufactured from sustainable forests A01.QXD 12/16/08 5:14 PM Page v Brief contents Contents Guided tour Acknowledgements Preface Table of cases Table of statutes Table of statutory instruments Table of European and international legislation vii xviii xxii xxiii xxiv xxxiii xxxvii xxxix Part 1: Introduction Getting started: an introduction to studying law How the law is made Resolving legal disputes Part 2: Law of contract, agency and sale of goods The law of contract: offer and acceptance The law of contract: consideration, intention and privity The terms of the contract Defects in the contract: misrepresentation, mistake, duress and undue influence More defects: illegality and incapacity 16 40 61 62 82 100 126 154 v A01.QXD 12/16/08 5:14 PM Page vi BRIEF CONTENTS 10 11 12 Discharge of the contract and remedies for breach The law of agency Sale of goods: the contract and its terms Sale of goods: transfer of ownership, performance and remedies for breach of contract Part 3: The law of tort 13 14 15 Tort liability for defective goods Tort liability for defective services Tort liability for premises Part 4: Elements of employment law 16 17 18 Rights at work: the contract of employment and health and safety at work Rights at work: protection against discrimination Rights at work: protection against dismissal and redundancy Part 5: An introduction to company law 19 20 21 22 23 Part 6: 24 25 Business organisation Forming a registered company Running the company: raising and maintaining capital Daily management of the company: functions of directors, secretary and auditors Company meetings and shareholder participation General principles of intellectual property law Statutory intellectual property protection: copyright, designs, patents and trade marks Common law protection of intellectual property: passing off, malicious falsehood and breach of confidence Part 7: Study skills 26 vi 170 202 220 238 259 260 278 312 341 342 360 386 407 408 430 444 456 476 491 492 514 531 Study skills, and revision and examination hints 532 Appendix Appendix Index 541 545 558 A01.QXD 12/16/08 5:14 PM Page vii Contents Guided tour Acknowledgements Preface Table of cases Table of statutes Table of statutory instruments Table of European and international legislation Part 1: Introduction Getting started: an introduction to studying law xviii xxii xxiii xxiv xxxiii xxxvii xxxix Introduction What is law? The characteristics of English law Why we need law? The differences between criminal and civil law Changing the law Essential legal terms Introductory study tips Chapter summary Key terms 6 10 11 12 14 14 Quiz 15 vii A01.QXD 12/16/08 5:14 PM Page viii A HEADING CONTENTS How the law is made 16 Introduction European law Parliament The courts The Human Rights Act 1998 (HRA 1998) Chapter summary Key terms 17 18 21 24 32 36 37 Quiz Take a closer look Web activity Assignment 38 38 39 39 Resolving legal disputes 40 Introduction The court system Bringing a case in the civil courts The Woolf reforms 1999 Settlement out of court Payment into court and offers to settle Civil litigation procedures The trial of the case Executing the judgment Alternative dispute resolution (ADR) The tribunal system Chapter summary Key terms 41 42 47 47 47 48 49 51 51 52 54 57 58 Quiz Web activity Assignment 59 59 59 Part 2: Law of contract, agency and sale of goods viii 61 The law of contract: offer and acceptance 62 Introduction The essentials of a binding contract The offer The acceptance Chapter summary Key terms 63 64 64 73 78 79 A01.QXD 12/16/08 5:14 PM Page ix A CONTENTS HEADING Quiz Take a closer look Web activity Assignment 80 80 81 81 The law of contract: consideration, intention and privity 82 Introduction Consideration Intention to create legal relations Privity of contract Chapter summary Key terms 83 84 92 94 97 97 Quiz Take a closer look Web activity Assignment 98 98 99 99 The terms of the contract 100 Introduction Express and implied terms The relative importance of contractual terms Limitation and exclusion of liability Chapter summary Key terms 101 102 103 106 121 122 Quiz Take a closer look Web activity Assignment 122 123 123 124 Defects in the contract: misrepresentation, mistake, duress and undue influence 126 Introduction Misrepresentation Mistake Duress and undue influence Chapter summary Key terms 127 128 136 144 148 149 Quiz Take a closer look Web activity Assignment 150 151 151 151 ix Z01.QXD 23/2/08 11:37 Page 554 WORTH THINKING ABOUT? AND QUIZ SOLUTIONS Quiz 13 Duty, breach, consequent damage Reasonable foreseeability, proximity, justice and reason Lapse of time, third-party interference Basil has rights in contract against Tarragon Basil and Rosemary also have rights in negligence and under the Consumer Protection Act against Marjoram Liability: Negligence; fault: CPA 1987 Strict: Defendant: Negligence: manufacturer; CPA 1987: producer/marker/importer/supplier Property damage: limited to claims over £275 under CPA 1987, no limitations in negligence Quiz 14 (a) Yes: negligent statement (Hedley Byrne v Heller) (b) No: pure economic loss (Muirhead v Industrial Tank Specialities) (c) Yes: nervous shock (Alcock v Wright) (d) No: damage caused by the third party (Smith v Littlewoods Organisation) Reasonable care An exception to the remoteness of damage rule, which makes a defendant liable in a personal injuries case for all the injuries flowing from the negligent act if they are due to some illness or condition suffered by the claimant, even if not reasonably foreseeable Quiz 15 (a) Public nuisance affecting the highway: non-delegable duty (b) Under the Occupiers’ Liability Act 1957, no liability if notice sufficient to discharge duty (c) Lymeswold is a trespasser (Occupiers’ Liability Act 1984) Red likely to be liable, as he could easily have prevented a child from obtaining access to his storeroom and should have foreseen Lymeswold’s likely presence if children regularly visit his shop (d) Private nuisance Contributory negligence if Wensleydale suffered head injuries Employers are vicariously liable for torts committed by an employee if incidental to the job Generally there is no liability for independent contractors unless the employer’s personal duty is non-delegable Quiz 16 Employer is responsible for paying employees’ NI contributions and sick pay and deduction of income tax No such responsibilities for contractors, who also have no rights to claim for unfair dismissal or redundancy Lesser duty to contractors under the HSAWA 1974 than that owed to employees (a) Good faith: conflict with Juniper’s interests (b) Lack of reasonable care and skill (c) Good faith: failure to account for profits Common law duties: competent staff, safe work systems Criminal liability under the HSAWA 1974 Prosecution, improvement/prohibition notices 554 Z01.QXD 23/2/08 11:37 Page 555 WORTH THINKING ABOUT? AND QUIZ SOLUTIONS Quiz 17 (a) Work may be of equal value under EPA 1970 (b) May be sex discrimination under the SDA 1975 unless genuine occupational qualification applicable Direct: overt restriction of employment opportunity to members of one sex or racial group Indirect: conditions imposed which are more likely to be fulfilled by members of one sex or racial group rather than another If race or sex is deemed a genuine occupational qualification Appointment, terms of employment contract, promotion, training, facilities But not pay and pensions Quiz 18 Quiz 19 Royal charter, Act of Parliament, registration (a) Financial liability of corporation members may be limited to their investment (b) Once incorporated, corporation continues to exist until extinguished by relevant legal process (c) At least two members A partnership is formed to make profits (a) Partners jointly bound if T had apparent authority (b) All partners personally liable for partnership debts A company is public if: specified in the memorandum, limited liability, plc suffix, and it has at least £50 000 authorised capital, 25 per cent of which is paid up Any other company is private Quiz 20 Memorandum and articles, details of directors and secretary, domicile of registered office, authorised share capital, whether/how liability is limited, statutory declaration Company may be bound by a contract which exceeds its objects clause This resolution must go to a meeting of the company: 75 per cent majority Reregistration required Memorandum is merely evidence of the intention of the promoters to set the company up It is no longer part of the company’s constitution By a vote at a company meeting passed by a 75 per cent majority 555 Worth thinking about? and quiz solutions Wrongful dismissal: breach of contract; no qualifying period of employment; common law action in the courts; remedy – damages determined by the court Unfair dismissal: employer has not necessarily breached the contract One year’s continuous employment; statutory rights, hearing: employment tribunal, compensation regulated by statute, reinstatement/redeployment possible (a) Lack of qualification (b) Misconduct (c) Negligence/incapability (d) Conduct, but only if it reflects on Rhino’s suitability for the job (a) No: he was not dismissed (b) If a contract term requires acceptance of relocation, not redundant; otherwise distance is likely to be too great to be reasonable Fair selection procedures, warnings, consultation procedures, redeployment offers Z01.QXD 23/2/08 11:37 Page 556 WORTH THINKING ABOUT? AND QUIZ SOLUTIONS Quiz 21 Issued capital: potential profit raised so far by the shares issued Called-up capital: money actually raised by calls on issued shares As a short-term measure to raise capital No valuable consideration/court-approved reduction of capital/court order/shares forfeited (a) Company has no obligation to issue dividends (b) Company’s articles define voting rights: not all shareholders necessarily entitled Preference shareholders enjoy no privileges in this respect: their preferential rights may compensate for lack of voting rights (c) Any shareholder may lose all/some of investment on winding up: rank below the company’s creditors Preference shareholders may be paid before the equity shareholders if the articles so require (d) Brass has made a loan to the company which is secured against its assets and should recover his investment Quiz 22 Bombazine has rights in agency law: CA 2006, s 39 (a) Insolvency Act 1986, s 214 (b) CA 2006, s 172(1) Cotton: in breach of his duty under CA 2006, s 177 to declare an interest in a proposed transaction: contract voidable Tweed is disqualified Denim is disqualified unless he has permission Twist’s ill health entitles the company to remove him from office Quiz 23 General meeting: all members (a) AGM (b) Serious reduction of capital (c) Shareholder requisition (d) Court order (e) Retiring auditor requisition Resolution requires special notice to the company 21 days prior to meeting Titan may address meeting/circulate defence to members Resolution must pass (ordinary majority) (a) Section 98: petition to court if at least 50 shareholders/those who hold per cent of shares agree (b) Chapter 11 proceedings, s 994: if he can prove unfair prejudice, Department for Business, Enterprise and Regulatory Reform intervention Derivative: shareholder acts in the company’s interests Right to sue is derived from the company’s rights Quiz 24 (a) Yes: if written (b) No: not a tangible form (c) Employer owns the copyright (d) If format sufficiently original If created incidentally to her work, employer owns it Copyright: design drawings and figures (if works of art) Design right under CDPA 1988 Possibly design registrable: Registered Designs Act 1949 (a) New, inventive step, capable of industrial application (b) Owned by Fulmar Puffin may get compensation (a) If sufficiently distinctive it is registrable: capable of graphical representation (b) Not if too similar (c) Not if it unjustifiably suggests royal family endorsement 556 Z01.QXD 23/2/08 11:37 Page 557 WORTH THINKING ABOUT? AND QUIZ SOLUTIONS Quiz 25 (a) Breach of confidence (b) Passing off (c) Malicious falsehood (i) Confidential revelation (ii) Relationship of trust between the parties (iii) Information used by confidant/third party (iv) Resulting damage Damages, injunction, surrender of profits Greater protection: goodwill need not yet exist Simpler to prove Worth thinking about? and quiz solutions 557 Z01.QXD 23/2/08 11:37 Page 558 Z02.QXD 23/2/08 11:37 Page 559 Index acceptance, 73–9 accord and satisfaction, 174–5 accounting for profits, 211, 461–2, 508, 526 accounts, 414, 470–1 Acts of Parliament, creation of 21–2 ADR (alternative dispute resolution), 52–4 adversarial system, advertisements, offers in 66, 68, 69, 72 advocates-general, 19 age discrimination, 379–80 agency, 204–18, 412–13, 469–70 account of profits, 211 auctioneers, 215 authority of agents, 205–7, 214 brokers, 215 care and skill, duty to show reasonable, 210–11 commercial agents, 212–13 commission, 212 conflicts of interest, 211–12 damages, 213 death, 213 directors, 458, 459–60 disclosed or undisclosed principal, 208–9 estate agents, 214–15 estoppel, 206–7 factors, 215 fiduciary duties, 210, 212 frustration, 213 gratuitous agents, 205 implied agency agreements, 205 indemnities, 209–10 informal agreements, 205 irrevocable agency, 213–14 liens, 209 mental incapacity, 213 necessity, agency of, 207–8 performance, 210, 213 powers of attorney, 205, 214 privity of contract, 95 ratification, agency by, 208 remuneration, 209 termination, 212–14 tort liability, 212 allocation to track, 49–50 alternative dispute resolution (ADR), 52–4, 65, 374 annual returns, 468, 469 appeals, 30–1, 43–5, 55, 395 arbitration, 52–3, 65 articles of association, 433–8 attachment of earnings, 51 auctioneers, 215 audits and auditors, 470–1, 479–80 bailment, 243 bankruptcy, 213, 468 barter, 223 battle of the forms, 73 bills, 22 blood products, 268, 273 Bolam test, 300 breach of confidence, 348, 521–6 breach of contract, 183–7 anticipatory breach, 183–4 companies, 420 conditions, innominate terms and warranties, 103–4, 106, 183 damages, 187–94 fundamental breach, 109–10 mitigation of loss, 185 repudiation, 104, 106, 183–6 rescission, 195 sale of goods, 249–54 unfair contract terms, exclusion of liability and, 111–12 breach of duty, 296–301 breach of statutory duty, 317, 352–4 brokers, 215 business transfers, 400–2 but for rule, 301–2 capacity, 163–6, 438–9 care and skill, 210–11, 299, 460–1, 463–4 case law, 12, 24 causation, 270, 301–7 changing the law, 10–11 characteristics of English law, 6–7 charges, 243, 451–3 charging orders, 51 children, 163–5, 316–17, 318–20 civil proceedings, 47–52 allocation to track, 49–50 Civil Procedure Rules 1998, 47 criminal courts and civil courts, distinction between, 9–10 disclosure, 50 issue of claims, 49 letters of claim, 49 payments into court and offers to settle, 48 pre-action protocols, 59 responses to claim, 49 settlements out of court, 47–8 starting actions, 49–51 time limits, 49 collective agreements, 345 commission, 212 commissioned works, 496, 500 559 Z02.QXD 23/2/08 11:37 Page 560 INDEX common law, 12 companies see also directors, formation of registered companies, general meetings, share capital breach of contract, 420 capital, raising, 422 company secretaries, 468–70 corporate veil, lifting the, 417–19 criminal liability, 420, deregulation, 414 fraudulent trading, 419 guarantee, companies limited by, 420, holding companies, 417 insolvency, 419, 421 inspection of records 420–1 investigations, 421 legal personality, 410 limited liability, 411, 417–20, 421 operation of law, creation by, 410 ownership, 420 partnerships compared with companies, 424–5 private and public companies, 415–16, 421–2, 481 property rights, 422 publicity, 420–1 quasi-partnerships, 416 registration, 415–23 separate legal entity from members, as, 417–19 shareholders, 414, 417, 419–20, 449–50, 466, 481–5 shares, companies limited by, 420, single member companies, 416 small businesses, 414 succession, 421 tax, 419, 422 tortious liability, 420 unlimited companies, 420 vicarious liability, 420 company secretaries, 468–970 compensation 301, 304, 317, 396–7 see also damages conciliation, 54, 374 conditions, 103, 104, 183, 224 confidentiality, 348, 521–6 conflicts of interest, 211–12, 329–32, 458, 461–2, 464, 467 560 consideration, 84–92 constructive dismissal, 390 consumer credit, 64, 118 contra proferentem rule, 109 contracts 95, 212, 471, 524 see also breach of contract, employment contracts, implied terms, sale of goods contracts, terms of the contract acceptance, 73–9 capacity, 163–6, 438–9 collateral contracts, 95 companies, 432, 438–9 discharge of contracts, 175–83 formation of contracts, 64–79, 92–4 group, contracts for benefit of, 95–6 illegality, 156–7 minors, capacity of, 163–6 offer, 64–79 performance, 248–50 privity of contract, 94–6 restraint of trade, 157–63 writing, 64 contributory negligence, 194, 332–3 copyright, 494–8, 509 commissioned photographs and films, 496 design rights, 498–9 duration of protection, 495, 509 employees, 495 Internet, 498 licensing, 497 literary, dramatic, artistic or musical works, 494–5 originality, 494 ownership, 495–6 performing rights, 495, 497–8 treaties, 509 typographical arrangements of published works, 494 corporate veil, lifting the, 417–19 Council of Ministers, 18, 19 county courts, 43–4 Court of First Instance, 20 courts, 9–10, 19–20, 24–33, 42–6 criminal offences and proceedings civil proceedings and, differences between, 9–10 classification of offences, 42 companies, 420 contracts to commit crimes, 156 courts, 9–10, 29–30, 42–3 directors, 465, 468 health and safety, 354–6 insider dealing, 471–2 intellectual property, 501, 505 nuisance, 327 custom and practice, 102, 345 damages see also compensation agency, 213 breach of confidence, 526 breach of contract, 187–94 contributory negligence, 194, 332–3 delivery, 252–3 dismissal, 189–90, 388, 393, 395 health and safety, 353 intellectual property, 508, 526 loss of profits, 189 malicious falsehood, 526 mental distress, 189, 190–1 misrepresentation, 132–6 mitigation, 194 nuisance, 328 penalties, 192–3 quantum of damages, 188–9 race discrimination, 374 reliance losses, 189 remoteness, 187–8 repudiation, 189, 190–1 sale of goods, 250, 252–3 stigma damages, 189 debentures, 450–3 deceit, 132, 133–5 deeds, 64, 205, 411–12 defective products, 262–76 blood products, 268, 273 breach of duty, 266–7 causation, 270 duty of care, 262–7 economic loss, 265–6, 270 fault and strict liability, difference between, 267 instructions, 263, 267, 269 negligence, 262–7 packaging, 263 precautions, 264–5 property damage, 270 Z02.QXD 23/2/08 11:37 Page 561 INDEX remoteness, 267 replacement or repair, 270 state of the art/development risks defence, 270, 273 strict liability, 267, 270 time limits 270–1 warnings, 267, 269 delegated legislation, 21, 23–4 delivery, 175, 247–53 description, sale by, 225–7, 232 design rights, 498–501 directives, 20–1, 23 directors, 458–68 accounts of profits, 461–2 agents, 458, 459–60 annual returns, persistent failure to file, 468 appointment of, 458 articles of association, 458 bankrupts, 468 bind company, power to, 439 care and skill, 460–1, 463–4 Chapter II proceedings, 483 conflict of interests, 458, 461–2, 464, 467 contracts of service, 458, 466 creditors, duty to, 466 criminal offences, 465, 468 declaration of interests in transactions, 464, 465, 467 disqualification orders, 468 duty of care, 460–1 executive or managing directors, 458–9, 467 fees and expenses, 466 fiduciaries, as, 461–3 fraudulent trading, 468 golden handshakes, 466 good faith, 462 insider dealing, 471–2 judgment, exercise of independent, 463 loans to directors, 466 meetings, 458–9 minority shareholders, protection of, 483 non-executive directors, 458 property transactions, substantial and material, 466 register of directors, 458 removal, 467, 480 remuneration, 458 resolutions, 480–1 shadow directors, 458 small companies, 458 success of company, promote the, 463 third parties, 459–60, 464 ultra vires, 462 unfit conduct by directors of insolvent companies, 468 wrongful trading, 468 disability discrimination, 375–7 discharge of contracts 175–83 see also breach of contract discrimination see also race discrimination, sex discrimination age discrimination, 379–80 Commission for Equality and Human Rights, 381 disability discrimination, 375–7 equal pay, 362–5 harassment, 335, 366, 368–9, 373, 375, 377–80 recommendations and declarations, 381 religion or belief, 379 sexual orientation discrimination, 377–8 dismissal, 388 see also unfair dismissal Divisional Courts, 30, 44–5 domain names, 435 domestic or social agreements, 92–3, 283 dress codes, 374–5 duress, 144 duty of care breach of duty, 296–301 defective products, 262–7 directors, 460–1 economic loss, 265–6 emergency services, 294–6 negligence, 262–7 occupiers’ liability, 317–21 omissions, 292 psychiatric harm, 286, 288, 290–1 public authorities, 294–6 EC law, 6, 18–21 agency, 212–14 defective products, 267, 270, 272–3 discrimination, 366, 367–70, 373, 377, 379–80 equal pay, 362–4 European Court of Justice and Court of First Instance, 18–20, 33 formation of registered companies, 439 health and safety, 356 insider dealing, 471 institutions, 18–20 intellectual property rights, 498–500, 505, 508–9 Internet, 398 legislation, 20–1, 23 Pregnant Workers Directive, 369 sources of law, 20–1 supremacy of EC law, 18 Unfair Commercial Practices Directive, 225–6 unfair contract terms, exclusion of liability and, 115–16 economic duress, 87, 144 economic loss, 265–6, 270, 280–2, 328, 525 egg shell skull rule, 307 electronic communications, 67, 69, 76 emergency services, duty of care of, 294–6 employment see also employment contracts, health and safety, unfair dismissal copyright, 495 employment tribunal claims, 55, 364, 374–5 patents, 502–3 summary dismissal, 388 transfer of undertakings, 400–2 vicarious liability, 333–6 wrongful dismissal, 388 employment contracts, 344–9 account for profits, 348 breach of confidence, 524–5 care and skill, duty to work with reasonable, 346 collective agreements, 345 confidentiality, 348 conflicts with employers’ business, 348 contracts of service, 344 custom and practice, 345 561 Z02.QXD 23/2/08 11:37 Page 562 INDEX employment contracts continued directors, 458, 466 employees’ and employers’ duties, 348–9 frustration, 175–6 good faith, 347–8, 349 implied terms, 345, 346 independent contractors, 344 injunctions, 197 minors, 164 national minimum wage, 348 orders, duty to obey reasonable, 346–7 performance, discharge by, 172 remuneration, 348 restraint of trade, 157, 158–62 safe working conditions, 349 services, contracts for, 344 specific performance, 195 terms, 345–6 transfer of undertakings, continuance of existing terms on, 401 trust and confidence, duty of mutual, 349 work and staff rules, 345 written statement of employment particulars, contents of, 344–5 equal pay, 362–5 equipment, 350–1, 354 equity, 12, 194–7 estate agents, 214–15 estoppel, 91–2, 206–7, 240 European Commission, 19 European Convention on Human Rights Convention rights, list of, 32 European Court of Human Rights, 32–4 fair trials, 296 Human Rights Act 1998, 32, 33 private life, right to respect for, 329, 423, 526 property rights, 422 public authorities, 526 sexual orientation discrimination, 377 European Council, 19 European Court of Justice, 19–20, 33 European Parliament, 19 562 European Union see EC law exclusion clauses 106–10 see also unfair contract terms, exclusion of liability and contra proferentem rule, 109 fundamental breach, 109–10 implied terms, 109 incorporation, 107–9 notices, 107–9 tickets, 107 execution of judgments, 51 factors, 215, 244–5 fair trials, 296, 424 Family Proceedings Court, 42 fast track claims, 50 fiduciaries, 130, 145–8, 210, 212, 412, 461–3, 522 fire service, duty of care of, 294 fixed and floating charges, 452 force majeure clauses, 178–9 formation of contracts 64–79, 92–4 see also consideration formation of registered companies, 432–40 articles and memorandum, 433–8 certificates of incorporation, 433 constitution of company, 433 contractual capacity, 438–9 directors’ powers to bind company, 439 off-the-shelf companies, 440 pre-incorporation contracts, promoters’ liability for, 432 public companies, conversion to, 440 registration process, 433, 440 single member companies, 432 ultra vires, 439 fraud, 64, 69, 129, 132, 133, 136, 156, 419, 468 freedom of speech, 424 freezing injunctions, 50 frustration, 175–83, 213 death or illness of contracting party, 175–6 delayed performance, 177 destruction or unavailability of subject matter, 175 employment contracts, 175–6 event fails to occur, 176–7 expenses, 181–2 force majeure clauses, 178–9 foreseeability, 177 government intervention, 176 illegal contracts, 176 inconvenience and expense, 177–8 mistake, 180 self-induced frustration, 179–80 supervening events, 175–6 trading with the enemy, 176 valuable benefit, right to cost of, 182–3 garnishee orders, 51 gender reassignment, 370 general meetings additional meetings, 478 annual general meetings, 478 auditors, requisition by retiring, 479 directors, 358–9 extraordinary general meetings, 478 notice, 479 proxies, right to appoint, 482 quorum, 480 resolutions, 478, 480–2 voting, 482 gifts, 223–4 golden handshakes, 466 grievance procedures for employees, compliance with, 390 guarantees, 64, 69, 165, 420 harassment, 335, 366, 368–9, 373, 375, 377–80 health and safety, 349–56 breach of statutory duty, 352–4 competent fellow employees, duty to provide, 350, 351 criminal offences, 354–6 damages, 353 employers’ and employees’ statutory duties, 355 equipment, 350–1, 354 Health and Safety Executive (HSE), 354, 355–6 improvement and prohibition notices, 356 Z02.QXD 23/2/08 11:37 Page 563 INDEX independent contractors, 349–50, 355 industrial injuries, civil liability for, 349–54 precautions, 355 safe premises, plant and equipment, 350–1, 354 stress, 351–2 third parties, 349–50, 355 visitors to premises, 355 High Court, 30, 44 hire and hire-purchase agreements, 223 House of Lords, 29–31, 45–6 Human Rights Act 1998, 32–36 breach of confidence, 526 Convention rights, list of, 32 declarations of incompatibility, 33 European Convention on Human Rights, 6, 32–3 fair trials, 424 freedom of speech, 424 nuisance, 328–9 privacy, 423 property rights, 423 proportionality, 34 public authorities, 33, 296 remedies, 33 illegality, 156–63, 176, 414 implied terms see also implied terms in sale of goods contracts business efficacy, 102–3 custom, 102 employment contracts, 345, 346 exclusion clauses, 109, 112, 121 offer, 65 sources of implied terms, 102–6 supply of goods and services, 233 trade, custom and practice, 102 unfair contract terms, 112, 121, 234 implied terms in sale of goods contracts, 224–32 conditions, 224 descriptions, 225–7, 232 examination, 227, 229–30, 232 instructions, 229–30 limitation of liability, 229–30 packaging, 229 precautions, 230 quality, relation of description to, 226–7 rejection, 226–7, 232–3 reliance, 227, 231–2 sample, sale by, 226 232 satisfactory quality, 102, 227–30, 249–51 strict liability, 224 suitable for purpose, goods must be, 231–2 title, 225, 234 Unfair Commercial Practices Directive, 225–6 improvement and prohibition notices, 356 independent contractors, 333, 336, 344, 349–50, 355 industrial action, 347, 396 industrial designs, 496 injunctions, 50–1, 197, 324, 327, 508, 526 innominate terms, 104–6 inquisitorial system, insider dealing, 471–2 insolvency, 51, 402, 419, 421, 450, 468 insurance, 95, 130–1 intellectual property rights 508–9 see also particular rights (eg patents) intention to create legal relations, 92–4 Internet, 76, 435, 498, 509, 519 interpretation see statutory interpretation intervening acts, 306–7 invitation to treat, 66, 67 law reporting system, importance of, 31 legal personality, 410, 411 legislation, 6, 12, 21–4 liens, 209, 253, 254 limitation of liability, 106, 229–30, 411, 413–14, 417–21 loan capital, 450–3 magistrates, 42, 43 malicious falsehood, 519–20, 526 marital status, discrimination on grounds of, 367 maternity rights, 369, 390, 396 meetings see general meetings memorandum of association, 432–3, 438 mental capacity, 166, 213 minority shareholders, protection of, 482–5 minors, 163–5, 316–17, 318–20 misrepresentation, 128–36, 245 careless misrepresentation, 132–3 change of circumstances, 130 deceit, 132, 133–5 facts or law, statements of, 128–31 failure to disclose information, 130–1 fiduciary relationships, 130 fraudulent misrepresentation, 129, 132, 133, 136, 138–42 future performance, estimates of, 129 half-truths, 130 inducement to enter contract, 128 innocent misrepresentation, remedies for, 133–4 insurance contracts, 130–1 negligent misrepresentation,133 opinions, 128–9 remedies, 131–6 rescission, 132, 133, 134, 135–6 mistake, 136–44 common mistake, 137 frustration, 180 identity of other contracting party, 138–42 mutual mistake, 138 non est factum, 143–4 quality, 136 rectification, 143 terms, 142 unilateral mistake, 138–42 multi-track claims, 50 names, 412, 414, 435, 505–6 national minimum wage, 348 necessaries, 165, 166 563 Z02.QXD 23/2/08 11:37 Page 564 INDEX negligence see also duty of care consent, 331 contributory negligence, 194, 332–3 defective products, 262–7 exclusion of liability, 111, 120 foreseeability, 263, 264, 266–7 neighbour principle, 262 occupiers’ liability, 314 proximity, 263, 264 unfair contract terms,111, 120 unfair dismissal, 391 negligent misstatements, 133, 282–6 nemo dat rule, 244 nervous shock see psychiatric harm non est factum, 143–4 nuisance see private nuisance, public nuisance obiter dicta, 31 occupiers’ liability, 314–27 children, 316–17, 318–20 foreseeability, 314, 316 identity of occupier, 315 negligence, 314 precautions, 315, 317–18 roam, right to, 318 standard of care, 315–17 trespassers, 318–21 visitors, 314 warning notices, 317, 320 offer, 64–79 offers to settle, 48 ombudsmen, 53 omissions, 292 Orders in Council, 23 parliament, 21–4 partnerships, 411–15 see also limited liability partnerships (LLPs) accounts, 414 agency, 412–13 agreements, 412 companies compared with, 424–5 deeds, 411–12 dissolution, 414–15 564 fiduciaries, 412 illegal partnerships, 414 legal personality, 411 names, 412, 414 publicity, 414 quasi-partnerships, 416 part-time workers, discrimination against, 367, 389 passing of risk, 246, 247 passing off, 505, 507, 516–20, 526 patents, 501–5, 509 payments into court and offers to settle, 48 penalties, 192–3 pensions, 369–70 performance of contracts, 172–4, 177, 210, 213, 247–50 performing rights, 495, 497–8 per incuriam, 29 police, duty of care of, 295–6 postal rule, 76–7 powers of attorney, 205, 214 pre-action protocols, 58 precautions, 230, 264–5, 298–300, 315, 317–18, 355 precedent, 7, 29–33 pregnancy and parental responsibility, 369, 390, 396 prescription, defence of, 326–7 private life, right to respect for, 329, 423, 526 private nuisance, 321–7 foreseeability, 324, 325 injunctions, 324 landlords, 326 locality, 323 motive, 323 prescription, defence of, 326–7 public benefit, 324 sensitivity of claimant, 324 timing, level, duration and frequency of nuisance, 323 tree roots, encroachment of 322 privity of contract, 94–6 Privy Council, 31 product liability see defective products prohibition notices, 356 promissory estoppel, 91–2 property rights, 422, 423 prospectuses, 448 proxies, 482 proximity, 263–4, 280–3, 289–92 psychiatric harm, 286–96 damages, 189, 190–1 foreseeability, 287–90, 292 love and affection, close bond, 290, 292 primary and secondary victims, 286–92 proximity, 289–92 rescuers, 288 sudden and shocking event, 290–1 witnesses, 287, 289, 292 public authorities, 33, 294–6, 370–1, 526 public nuisance, 327–9 criminal offences, 327 damages, 328 economic loss, 328 foreseeability, 328 highways, 336 Human Rights Act 1998, 328–9 injunctions, 327 private life, right to respect for, 329 vicarious liability, 336 public and private law, quality and quantity, 102, 136, 226–30, 248–51 race discrimination, 370–5 damages, 374 direct or indirect discrimination, 370–3 dress codes, 374–5 genuine occupational qualifications, 373 harassment, 373, 375 instructions to discriminate, obeying, 372 public authorities, duties on, 371 racial grounds and racial groups, meaning of, 371–2 vicarious liability, 374 victimisation, 373 ratio decidendi, 30 redundancy, 394, 396–400 registered designs, 498, 499–501 Z02.QXD 23/2/08 11:37 Page 565 INDEX regulations, 20 reinstatement or re–engagement, 390 religion or belief discrimination, 379 remoteness, 187–8, 367, 304–7 remuneration, 209, 348, 362–5, 458 replacement or repair, 195, 250–2, 270 repudiation, 104, 106, 183–6, 189–91, 249 requisitioning property, 176 resale, right of, 253 rescission, 132–6, 148, 195 rescue cases, 288, 330–1 reservation of title, 242–4 resolutions, 478, 480–2 restitution orders, 165 restraint of trade, contracts in, 157–63, 197, 524–5 retirement age, 380, 394 rewards, 64, 69, 78, 84 roam, right to, 318 rules, definition of, sale of goods contracts, 222–4 see also implied terms in sale of goods contracts barter, 223 delivery, 247–9 examination of goods, 250–1 free gifts, 223–4 future goods, 222 goods and services contracts, 223 hire and hire–purchase contracts, 223, 246 liens, 253, 254 passing of risk, 246 payment, refusal of, 249–50 performance, discharge by, 247–9 price, 222 rejection, 249–52 remedies for breach, 249–54 repair or replacement, 250–2 resale, right of, 253 services contracts, 223 stoppage in transit, 253, 254 transfer of title, 242–4 unascertained goods, 222 sample, sale by, 226, 232 satisfactory quality, 102, 227–30, 249–51 search orders, 423 seizure, delivery up or destruction orders, 508 self-employed, health and safety and, 355 self-incrimination, privilege against, 424 settlements, 47–8 sex discrimination, 365–70 gender equality duty on public authorities, 370 gender reassignment, 370 genuine occupational requirements, 368 harassment, 366, 368–9 marital status, 367 part-time workers, 367, 389 pensions, 369–70 pregnancy and parental responsibility, 369 vicarious liability, 368–9 victimization, 367 sexual orientation discrimination, 377–8 sexually immoral purpose, contracts for, 156–7 share capital, 420, 446–50 shareholders, 414, 417, 419–20, 449–50, 466, 481–5 skill and care, 210–11, 299, 460–1, 463–4 small claims track, 49 social or domestic context, agreements made in, 92–3, 283 sole traders, 411 solus agreements, 157, 161–2 sources of law, 20–1 specific performance, 195–6, 252 staff rule books, 345 standard of care, 301, 315–17 standard terms, 73, 111–12, 114, 118, 132 Statute of Frauds, 64, 69 statutory instruments, 23 statutory interpretation, 24–9 stigma damages, 189 stoppage in transit, 253, 254 stress, 351–2 strict liability, 224, 267, 270 study skills, 534–40 subject to contract, 73–4 subsidiaries, 417 summary dismissal, 388 supply of goods and services, 233 supremacy of EC law, 18 Supreme Court, 45, 46 tax, 413–14, 419, 422 tenancies, unfair contract terms and, 117 tenders, 69 terms of the contract, see also exclusion clauses, implied terms, implied terms in sale of goods contracts, unfair contract terms, exclusion of liability and articles of association, 436–7 conditions, 103, 104, 183, 224 employment contracts, 345–6, 401 innominate terms, 104–6 mistake, 142 standard terms, 73, 111–12, 114, 118, 132 warranties, 103–4, 133, 134, 183 tickets, 107 time of the essence, 248 time off for dependants, 369 title, 225, 234, 242–3, 240–6 tort,156, 212, 329–32, 420, 471 see also negligence trade marks, 505–8, 518–19 trade secrets, 158–9, 521 transfer of title, 240–6 transfer of undertakings, 400–2 tree roots, encroachment of, 322 trespass, 318–21 tribunals, 54–6, 364, 374–5 trust and confidence, mutual duty of, 349 typographical arrangements of published works, 494 undue influence, 145–8 unfair contract terms, exclusion of liability and, 111–21, 132, 234, 283, 318 565 Z02.QXD 23/2/08 11:37 Page 566 INDEX unfair dismissal, 388–97 automatically unfair dismissal, 396 capability, 392 constructive dismissal, 390 continuity of employment, 389 damages, 189–90, 393, 395–7 failure to return to work after leave of absence, 390 fair reasons for dismissal, 395 grievance procedures, compliance with, 390 industrial action, 396 long-term sickness, 392, 394 maternity rights, 390, 396 566 part-time workers, sex discrimination and, 389 procedure, following correct, 395, 397 redundancy, 394, 396–7, 399–400 reinstatement and reengagement, 396 resignation, 390 retirement age, age discrimination and, 394 some other substantial reason, 394–5 warnings, 395 vicarious liability, 333–6, 368–9, 374, 377–8, 420 victimisation, 367, 373, 379–80 warnings, 267, 269, 317, 320, 395 warranties, 103–4, 133, 134, 183 Woolf reforms, 47, 54 written statement of employment particulars, contents of, 344–5 wrongful dismissal, 388 wrongful trading, 468 Z02.QXD 23/2/08 11:37 Page 567 The essential reference for all students of law Fully comprehensive entries on all aspects of English Law Clear definitions of specialised legal terminology Cross-referenced, giving full references for cases and statutes The dictionary is fully supported by a companion website which links to additional legal information, and provides updates to definitions Available from all good bookshops or order online at: www.pearsoned.co.uk/law *Prices are correct at time of going to press Z02.QXD 23/2/08 11:37 Page 568 Get more support with study and revision than you ever thought possible … >H7C/.,-&)%*-*.**)™—10#  6kV^aVWaZ[gdbVaa\ddYWdd`h]deh Law Express: Understand quickly Revise effectively Take exams with confidence Other titles are available in this series ;dg[jgi]Zg^c[dgbVi^dcdgiddgYZgi]ZhZWdd`h! eaZVhZk^h^i/ mmm$f[Whied[Z$Ye$ka%bWm *Prices are correct at time of going to press ... Congress Cataloging-in-Publication Data Adams, Alix Law for business students / Alix Adams. 5th ed p cm Includes index ISBN 978-1-4058-5888-5 (pbk.) Business law England I Title KD661 A33 2008 346.4207—dc22... understanding of the law and to better familiarise yourself with legal terminology Visit the Law for Business Students, 5th edition mylawchamber site at www.mylawchamber.co.uk /adams to access: •... Table of Cases C AS E N A R A01.QXD V I G AT O Visit the Law for Business Students 5th edition mylawchamber site at www.mylawchamber.co.uk /adams to access unique online support to improve your case