F4 Course Notes – Very useful (I think!)

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    fbawany
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    After having to sit the F4 ENG paper a few times, I put together my own notes. These notes are pretty detailed, but please be aware that they dont cover the whole syllabus.

    Its a large document, so here you go (if you want this in word, send me a msg with your e-mail address and i’ll e-mail it over to you);

    ACCA Paper F4 CORPORATE AND BUSINESS LAW (ENGLISH)

    Contents
    Structure Of The Legal System 14
    Civil Law 14
    Criminal Law 14
    Distinction between Civil and Criminal Law (Tip Dec 09) 15
    Sources of Law 15
    Case Law 15
    Common Law 15
    Judicial Precedent 16
    Ratio Decidendi 16
    Obiter Dicta 16
    Equity 16
    Advantages of case law 17
    Statute Law / Legislation 17
    Forms of legislation 17
    Advantages of statute law 17
    Disadvantages of statute law 17
    Delegated Legislation 17
    Advantages / Importance of delegated legislation 18
    Disadvantages of delegated legislation 18
    Parliamentary procedure 18
    COURTS – Hierarchy of the Courts 18
    European Court of Justice (ECJ) 18
    Supreme Court (SC) (previously know as House of Lords (judicial capacity)) 19
    Court of Appeal (C of A) 19
    High Court (HC) 19
    Crown Court (Crown C) 19
    County Court (County C) 19
    Magistrates Courts (MC) 19
    Tribunals 19
    Tracking 19
    Statutory Interpretation Rules (Kaplan Jun 09 Mock Q1) 20
    Literal rule 20
    Fisher v Bell 20
    Golden rule 20
    Re Sigsworth / Whitely v Chappell / Adler v George (1964) 20
    Mischief rule 20
    Gorris v Scott 20
    Purposive rule 20
    Gardner v Sevenoaks RDC (1950) 20
    Eiusdem Generis 20
    Evans v Cross (1938) 20
    Powell v Kempton Park Race Course Co (1899) 20
    Expressio unius est exclusio alterius 20
    Noscitur a socis 20
    In pari material 21
    Statutory Interpretation Presumptions 21
    Aids to Interpretation 21
    Intrinsic 21
    Extrinsic 21
    Interpretation Act 1987 22
    Contract Law (Invitations, offers and acceptance) 22
    Essential elements of a contract 22
    Offers 22
    Termination of Offer 23
    Lapse of time 23
    Ramsgate Victoria Hotel v Montefiori (1866) 23
    Counter-offer / Rejection 23
    Hyde v Wrench (1840) 23
    Death (personal services) 23
    Notification of death (non-personal services) 23
    Bradbury v Morgan (1862) 23
    Failure of a condition precedent 24
    Financings Ltd v Stimson (1962) 24
    Notice of revocation may be communicated through a reliable third party 24
    Dickinson v Dodds (1876) 24
    Request for information 24
    Stevenson v Mclean (1880) 24
    Privity of contract 24
    Tweddle v Atkinson (1861) 24
    Acceptance 24
    Communicated by a reliable third party 25
    Powell v Lee (1908) 25
    Business agreements (ex-gratia) 25
    Edwards v Skyways (1964) 25
    Binding in honour only 25
    Jones v Vernon Pools (1938) 25
    Acceptance may be by conduct 25
    Brogden v Metropolitan Railways Co (1877) 25
    Silence is not enough 25
    Felthouse v Bindley (1862) 25
    Postal rule applies 25
    Adam v Lindsell (1818) 25
    Acceptance by prescribed means 25
    Yates Building Co v R J Pulleyn & Sons (York (1975)) 25
    Advert offering reward 25
    Williams v Carwardine (1833) 25
    Invitation to treat 26
    Partridge v Crittenden (1968) 26
    Pharmaceutical Society of Great Britain v Boots Cash Chemist (1952) 26
    Fisher v Bell (1961) 26
    Grainger v Grough (1896) 26
    Consideration 26
    Currie v Misa (1875) 26
    Privity of contract 26
    Williams v Roffey 27
    Carlill v Carbolic Smoke Ball Co (1893) 27
    Adequacy 27
    Thomas v Thomas (1842) 27
    Sufficiency 27
    Chappell & Co v Nestle Co (1960) 27
    Executed 27
    Executory 27
    Past consideration 28
    Re McArdle, Roscorla v Thomas 28
    Exceptions to past consideration 28
    Letter of comfort 28
    Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd (1989) 28
    Letter of intent 28
    Privity of Contract 28
    Beswick v Beswick 28
    Keech v Sandford 28
    Tulk v Moxhay 28
    Exceptions to the rule that third parties cannot enforce contracts; 29
    • Beswick v Beswick (1968) 29
    • Shanklin Pier v Detel Products Ltd 29
    • Linden Garden Trust Ltd v Lenesta Sludge Disposals Ltd (1994) 29
    Collateral Contracts 29
    Unilateral Contracts 29
    Regina v Clarke (1927) 29
    Williams v Carwardine (1833) 29
    Pinnell and its exceptions (part payment of debt) 29
    Promissory Estoppels Doctrine; 29
    • Central London Property Trust v High Trees House (1947) 29
    • Combe v Combe 29
    • D & C Builders v Rees 30
    Intention to Create Legal Relations 30
    Domestic Arrangements 30
    Balfour v Balfour 30
    Merritt v Merritt 30
    Simpkin v Pays / Jones v Padavatton / Parker v Clark 30
    Commercial Arrangements 30
    Rose & Frank v Crompton (1923) 30
    Jones v Vernon Pools / Appleson v Littlewoods 30
    Carlill v Carbolic 30
    Voidable contracts 30
    Contractual Terms 30
    Condition 31
    Poussard v Spiers (1876) 31
    Warranty 31
    Bettini v Gye (1876) 31
    Innominate Terms 31
    Bunge Corporation v Tradax SA (1981) 31
    Hong Kong Fir shipping Co Ltd v Kawasaki Kisa Kaisha Ltd (1962) 31
    The Hansa Nord 31
    Sources of Terms 31
    Express 32
    Les Affreteurs v Walford (1919) 32
    Implied 32
    ? Poussard v Spiers 32
    ? Bettini v Gye 32
    ? The Hansa Nord 32
    Exclusion Clauses 32
    Incorporated by Notice 33
    Olley v Marlborough Court Hotel 33
    Thompson v LMS Railway 33
    Incorporated by Signature 33
    L’Estrange v Graucob 33
    Misrepresentation of Clause (exception) 33
    Curtis v Chemical Cleaning Co 33
    Consistent course of dealings 33
    J Spurling v Bradshaw (1956) 33
    Hollier v Rambler Motors (1972) 33
    Hardwick v Suffolk 33
    Contra-Proferentum 33
    Andrews v Singer 33
    Photo Productions v Securicor (1980) 34
    Unfair Terms Legislation (Unfair Contract Terms Act (UCTA 1977) 34
    Template Answer – Exclusion Clause 34
    Signature 34
    Notice 34
    Conra-poferuntum rule 35
    Course of dealing 35
    Unfair Contract Terms Act 35
    Breach of Contract 35
    Anticipatory 35
    Express 35
    Implied 35
    Hochster v De La Tour (1853) 36
    White and Carter Councils v MacGregor (1961) 36
    Avery v Bowden 36
    The Mihalis Angelos 36
    Hochester v De La Tour (1853) 36
    Repudiatory / Actual (aka During) 36
    Common Law Remedies 36
    Damages 37
    Liquidated Damages 37
    Penalty Clause 37
    Remoteness 37
    The Wagon Mound (1961) 37
    Hadley v Baxendale (1854) 37
    Victoria Laundry (Windsor) v Newman Industries (1949) 37
    Jarvis v Swan Tours 37
    Measure 37
    C & P Haulage v Middleton 37
    Thompson v Robinson 37
    Anglia Television Ltd v Reed (1972) 37
    Alexander v Rolls Royce 38
    Ruxley Electronics v Forsyth 38
    Other common law remedies 38
    Equitable remedies 38
    Mitigate loss 38
    Payzu Ltd v Saunders (1919) 38
    Tort 38
    Trespass to land 38
    Trespass to person 38
    Nuisance 39
    Defamation 39
    Deceit 39
    Passing-off 39
    Ewing v Buttercup Margarine Co Ltd (1917) 39
    Negligence 39
    Loss of damage as a result of the breach 40
    Barnett v Chelsea & Kensington HMC (1989) 40
    Defences against claim for negligence 40
    Contributory negligence 40
    Sayers v Harlow UDS (1958) 40
    Volenti non fit injura 40
    Professional Negligence 40
    Caparo Industries v Dickman & others (1990) 40
    ADT Ltd v Binder Hamlyn 40
    Candler v Crane, Christmas & Co (1957) 40
    Barings Plc v Coopers & Lybrand (1997) 40
    Duty of care 40
    Donoghue v Stevenson (1932) 41
    Richley v Fould (1965) 41
    Proximity 41
    Breach of Duty of Care 41
    Res ipsa loquitur 41
    Mahon v Osbourse (1939) 41
    Employment Law 41
    Contract of Employment 41
    Employee 41
    Dismissal and Redundancy 42
    Notice and termination of contract by breach 42
    Constructive Dismissal 42
    Reduction in pay 42
    Industrial Rubber Products v Gillon (1977) 42
    Change in nature of job 42
    Ford v Milthorn Toleman Ltd (1980) 42
    Failure to follow disciplinary procedure 42
    Post Office v Strange (1981) 42
    Failure to provide suitable working environment 42
    Waltons & Morse v Donnington (1997) 42
    Failure to implement proper procedure 42
    WA Goold (Pearmak) Ltd v McConnell & Another (1995) 42
    Suspended without pay 42
    Western Excavating (ECC) Ltd v Sharp (1978) 42
    Summary Dismissal 43
    Wilson v Racher (1974) 43
    Unfair dismissal 43
    Massey v Crown Life Assurance (1978) 43
    Remedies for unfair dismissal 43
    Criteria for unfair dismissal 43
    Wrongful Dismissal 43
    Justifiable reasons for dismissal; 43
    Potentially fair reasons for dismissal 44
    Automatically Fair reasons for dismissal 44
    Automatically Unfair reasons for dismissal 44
    Criteria to obtain compensation for unfair dismissal 44
    Exceptions to one year’s continuous service 45
    Remedies for wrongful dismissal 45
    Criteria for obtaining wrongful dismissal 45
    Redundancy 45
    Employed v Self-Employed 45
    Employee 45
    Self-Employed 45
    Ferguson v John Dawson & Partners (1976) 46
    Ferguson v John Dawson & Partners (1976) 46
    Reasons for distinction 46
    Employment Control Test 46
    Massey Docks & Harbour Board v Coggins & Griffiths (Liverpool) (1947) 46
    Employment Integration Test 46
    Cassidy v Ministry of Health (1951) 46
    • Mersey Docks & Harbour Board v Loggins & Griffith (Liverpool) Ltd (1947) 46
    • Cassidy v Ministry of health (1957) 46
    Economic Reality 46
    O’Kelly v Trusthouse Forte Plc (1983) 46
    Ready mix concrete (south east) v Ministry of pensions & national insurance (1968) 46
    Employment Relationships 47
    Ferguson v John Dawson & Partners (1976) 47
    Massey Docks & Harbour Board v Coggins & Griffiths (Liverpool) (1947) 47
    Job Existence 47
    North Riding Garages v Butterwick (1967) 47
    Agency / Partnership 47
    Actual Authority 47
    Express Authority 47
    Implied Authority 47
    Watteau v Fenwick (1893) 47
    Ostensible Authority 48
    Freeman & Lockyer v Bukhurst Part Properties (Mangal) (1964) 48
    Panarama Developments Ltd v Fedelus Furnishing Fabrics (1971) 48
    Types of Agent 48
    Agency workers 48
    Frank v Reuters Ltd (2005) 48
    Motorola v Davidson and Melville Craig (2001) 48
    Partnerships 48
    Retiring Partners 48
    • Contract of Novation 48
    Sleeping Partners 49
    Company Law 49
    Advantages of forming a company as compared to a partnership 49
    • Salomon v Salomon 49
    Disadvantages of forming a company as compared to a partnership 49
    Formation of company 50
    Memorandum of Association 50
    Articles of Association 50
    Form 10 50
    Form 12 50
    Alteration to articles 50
    o Greenhalgh v Arderne Cinemas Ltd (1950) 51
    Effect of articles 51
    • Hickman v Kent 51
    • Eley v Positive Government Security Life Assurance Co (1876) 51
    Restrictions to alterations of articles 51
    Company Auditor 51
    Appointment 51
    Termination 51
    Duties 52
    Rights 52
    Company Secretary 52
    Appointment 52
    Responsibilities 53
    Qualifications 53
    Ostensible Authority 53
    Powers of Company Secretary 53
    Panorama Developments Ltd v Fedelus Furnishing Fabrics (1971) 53
    Dividends 54
    Directors 54
    • Bamford v Bamford 54
    Appointment 54
    Removal 55
    Powers 55
    Freeman & Lockyer v Buckhurst Park Properties Mangal Ltd (1964) 55
    Howard Smith v Ampol Petroleum 55
    Greenhalgh v Arderne Cinemas Ltd (1950) 55
    Fiduciary Duties 55
    • Smith v Fawcett Ltd (1942) 55
    • Hogg v Cramphorn (1966) 56
    Statutory Duties 56
    Remedies for breach of director’s duties 56
    Regal (Hastings) Ltd v Gulliver (1942) 56
    Industrial Development Consultants Ltd v Cooley (1972) 56
    Weighted voting rights 56
    Bushell v Faith (1970) 56
    Shadow directors 57
    Executive director 57
    Non-Executive Director 57
    Difference between Executive and non-Executive directors 57
    Management Director 57
    Company Meetings 58
    Annual General Meeting 58
    General Meeting 58
    Class Meeting 58
    Company Resolutions 58
    Key Terms 60
    Structure of the legal system 60
    Binding precedent 60
    Young v Bristol Aeroplane Co (1944) 60
    Purpose of Binding Precedent 60
    Advantage of Binding Precedent 60
    Disadvantage of Binding Precedent 60
    Avoidance of Binding Precedent 60
    Reversing 60
    Overruling 61
    Distinguishing 61
    Recission 61
    Fiduciary 61
    Indictment 61
    Bonafide 61
    Mitigate 61
    Repudiatory 61
    Cease 61
    Indemnity 61
    Rescind 61
    Ultra-vires 61
    Ostensible 61
    Requisite 62
    Codification 62
    Consolidation 62
    Repeal law 62
    Alteration to articles 62
    Appellate cases 62
    Per incuriam 62
    Stare decisis 62
    Dissipate 62
    Gratuitous promises 62
    Plaintiff 62
    Prima facie 63
    Renunciation 63
    Purportedly 63
    Convenant 63
    Doctrine of restituition 63
    Volenti no fit injuria 63
    Proximity 63
    Res ipsa Loquitor 63
    Nouus actus intervieniens 63
    Exonerate 63
    Quasi partnership 63
    Quantum meruit 63
    Indictable offences 64
    Summary offences 64
    Capital Maintenance 64
    Corporate Governance 64
    Knowledge Gap 64
    Importance of good corporate governance 65
    Cross 65
    Insider dealing 65
    Law 65
    Lifting the veil 65
    By statute 65
    To prevent evasion of obligations 66
    Group Situations 66
    Adam v Cape Industries (1990) 66
    Limited by Shares 66
    Limited by Guarantee 66
    Money Laundering 66
    Plaintiff 67
    Postal rule 67
    Adam v Lindsell 67
    Presumption 67
    Rebuttal 67
    Transfer of undertakings 67
    List of cases 68
    Legal Personality 68
    Salomon v Salomon & Co Ltd (1897) 68
    Quasi Partnership 68
    Ebrahimi v Westbourne Gallaries Ltd (1973) 68
    Dunlop Pneumatic Type Co Ltd v Dunlop Motor Co Ltd (1907) 68
    Tips 68
    Terms 68
    Structure Of The Legal System
    Civil Law
    Private law

    To settle disputes between individuals

    No concept of punishment, if liable, then compensation payable

    Objective is to compensate the wronged party

    Need to prove ‘on the balance of probability‘

    Plaintiff (claimant) and defendant

    Personal action brought by the aggrieved party

    Court may award an equitable remedy if damages are inappropriate

    Example case: Carlill v Carbolic

    Criminal Law
    Public law

    A wrongdoer has broken the law

    A wrong done to society

    If guilty, then punished (community service, fine or imprisonment)

    Prosecutor and accused

    Need to prove ‘beyond reasonable doubt’

    Police decide whether to prosecute, this decision is reviewed by the Crown Prosecution Service

    Example case: R v Jones (Regina v Jones) / Sale of Goods Act (1979)

    Distinction between Civil and Criminal Law (Tip Dec 09)

    It is not the act or event which creates the distinction but the legal consequences. The proceedings can be made clear as the below 3 facts are different;
    1. The courts where the case is heard
    2. The procedures (objective)
    3. The terminology

    All other differences can be picked up from civil law and criminal law details mentioned above

    Sources of Law
    Case Law
    Forms of case law include;

    Common Law
    • Introduced the system of precedent
    • The only remedy was damages – a monetary award
    • Rigid and inflexible

    Development started with effect from 1066

    King’s representatives attended local courts, then met in London on a regular basis to discuss

    Over a period of 200 years, law was commonised – “Common Law”

    Cornerstone of Common Law is judicial precedent (Ratio decidendi and obiter dicta)

    With commonisation came recognition of deficiencies

    Highlighted the need for alternative remedies – Equity

    Common Law courts were separate from court of equity until the late nineteenth century

    Judicial Precedent
    Ratio Decidendi
    Ratio is ‘the reason for the decision’

    Definition – Any rule of law expressly or impliedly treated by the judge as a necessary step in reaching his conclusion, having regard to the line of reasoning adopted by him, or a necessary part of his direction to the jury (cross).

    Ratio is binding on future judges in similar cases of equal or lower courts. And it is only persuasive for courts higher in the hierarchy

    Ratio not binding if too obscure

    made without care (per incuriam)

    in conflict with a basic principle of law

    in conflict with European law

    too wide

    Obiter Dicta
    Obiter are words in a judgement which are said ‘by the way’. They do not form part of the ratio decidendi and are not binding on future cases but merely persuasive.

    Equity
    • Began as a form of appeal
    • More flexible than common law
    • Introduced new discretionary remedies such as injunctions and specific performance
    • Concerned with fairness

    Grew from the recognition of deficiencies of Common Law

    If a monetary award of damages was not appropriate, there was nothing else to offer

    In fourteenth century, Aequitas

    Chancellor’s court

    Early seventeenth century, Earl of Oxford’s case (1615) – Where equitable rules conflict with common law rules, then equitable rules will prevail

    Confirmed by 1873 – 1875 Judicature Acts

    Main remedies: Specific performance, Injunction, Rescission or Rectification

    Remedies are given at Court’s discretion

    Only given if damages are inappropriate

    Main remedies for Equity;
    • Specific Performance
    • Injunction
    • Recission
    • Rectification

    Advantages of case law
    • Certainty
    • Clarity
    • Flexibility
    • Detail
    • Practicality

    Statute Law / Legislation
    Statute may be fresh legislation or it may be a consolidation of existing statutes and their amendments, i.e., CA (2006), or it may be a codification of existing statutory and case law, i.e., Sale of Goods Act (1979)

    Parliament passes laws (statutes), and only parliament can change / repeal those laws

    Forms of legislation
    Direct Legislation, i.e., Acts of Parliament

    Indirect legislation, i.e., delegated legislation (see below)

    Advantages of statute law
    • The house of common is elected at intervals of not more than 5 years, hence the law making procedure is theoretically responsive to public opinion;
    • Statute law can in theory deal with any problem;
    • Statutes are carefully constructed codes of law;
    • A new problem in society or some unwelcome development in case law can be dealt with by passing an Act of Parliament

    Disadvantages of statute law
    • Bulky;
    • Parliament often lacks time to consider draft legislation in sufficient detail;
    • A substantial statute can take up a lot of parliament time;
    • Statute law is a statement of general rules. Those who draft it cannot anticipate every individual case which may arise

    Delegated Legislation
    Rules of law, often of a detailed nature, made by subordinate bodies to whom the power to do so has been given by statute.

    Statutory instruments (responsible ministers)

    Bye – laws (Burnley) – i.e., no ball games

    Rules of Court (made by judiciary)

    Professional regulations (ACCA) – regulation by the professional body of the conduct of its members

    Orders in Council (Privy Council – very rare)

    Advantages / Importance of delegated legislation
    • Saves parliamentary time
    • Greater Flexibility – regulations can be altered later without the need to revert to parliament
    • Allows general principles to be written into statute, with fine detail added later by minister with consultation with professional bodies
    • Allows very quick passing of statute in cases of e.g. national emergency
    • Prevents parliament from being overwhelmed with excessive work-load

    Disadvantages of delegated legislation
    • There are concerns over the accountability of parliament. Individual MPs and their civil servants effectively become the source of law
    • Because delegated legislation can be produced in bulk, individual MPs and the public find it difficult to keep up-to-date with developments

    Parliamentary procedure
    Green paper – A proposal for new law

    White paper – After comments received a draft for the new law

    First reading – Introduction to the House

    Second reading – Debate about the merits of the proposed legislation

    Committee stage – All-party committee discussion and amend the draft

    Report stage – The amended draft then presented to the House for approval

    Third reading – Final approval by the House

    Same procedure in the other house

    Royal Assent

    COURTS – Hierarchy of the Courts
    European Court of Justice (ECJ)
    Binds all English courts not bound by anyone, not even itself

    Supreme Court (SC) (previously know as House of Lords (judicial capacity))
    Binds all English courts, but not itself bound by ECJ

    Court of Appeal (C of A)
    Binds all lower courts, bound by ECJ, SC and itself – unless

    Unless two similar decisions conflict – must then decide which to follow;
    Earlier decision conflicts with a later SC decision;
    Earlier decision made per incuriam

    High Court (HC)
    3 divisions (Queens Bench Division, Chancery & Family). Binds all lower courts, bound by all higher courts and itself. A single judge’s decision is not binding on cases where multiple judges reside on.

    Crown Court (Crown C)
    Criminal cases, binds no-one, not even itself, bound by all higher courts

    County Court (County C)
    Civil cases, binds no-one, not even itself, bound by all higher courts. Civil cases appealed to C of A. a bankruptcy case appealed to HC (Chancery Division)

    Magistrates Courts (MC)
    Binds no-one, not even itself, bound by all higher courts

    Tribunals
    (i.e., Employment Tribunal) – Less formal procedures, quicker, hears disputes between employees and employers, can appeal to;

    Employment Appeal Tribunal (EAT) – Equal status as SC, can further appeal to C of A, but only on a point of law, not on a matter of fact

    Tracking
    3 types of tracking: small claims, fast & multi track

    Small claims track claim < £5,000, quick, informal, no need for legal representation

    Fast Track claim £5,000 < £15,000, trial will last < 1 day, less formal court procedures, claim will be determined within 30 weeks

    Multi Track claim £15,000, full court hearing, but management conference held to encourage alternative dispute resolution, which are faster and cheaper

    Statutory Interpretation Rules (Kaplan Jun 09 Mock Q1)
    Literal rule
    Ordinary everyday meaning, even if it produces undesirable outcome, unless;
    Fisher v Bell

    Golden rule
    If literal rule would lead to absurd results, chose a result which produces the least absurd result. This is an extension to the literal rule
    Re Sigsworth / Whitely v Chappell / Adler v George (1964)

    Mischief rule
    What mischief is the statute trying to control?
    Gorris v Scott – the spread of contagious disease only

    Purposive rule
    What is the purpose of the act / Rule?
    Gardner v Sevenoaks RDC (1950)

    Eiusdem Generis
    The Euisdem Generis rule follows the premise that statutes often list a number of specific things and end with more general words. In that case the general words are to be limited in their meaning to other things of the same kind as the specific items which precede them

    Evans v Cross (1938) – charged with driving his car in such a way as to ‘ignore a traffic sign’ (driving on the wrong side of the road)

    Powell v Kempton Park Race Course Co (1899) – prohibited betting in a ‘house, room or other place’

    Expressio unius est exclusio alterius
    To express one thing is by implication to exclude anything else

    Noscitur a socis
    It is presumed that words draw meaning from the other words around them. For example, ‘children’s books, children’s toys, and clothes’, would mean children’s clothes

    In pari material
    If the statute forms part of a series which deals with similar subject matter, the court may look to the interpretation of previous statutes on the assumption that Parliament intended the same thing.

    Purposive approach, for example, civil partnerships

    Cannot interpret statute which would lead to conflict with European Law

    Statutory Interpretation Presumptions
    As well as being bound by rules, judges are also bound by presumptions, which include;

    • Statute is not to alter existing common law

    • Where statute deprives a person of his property, statute does not operate retrospectively

    • Statute does not bind the Crown

    • Statute is not to deprive a person of their liberty

    • Statute operates throughout the UK, but not in conflict with Europe

    • Unless perfectly clear, statute is not to create an offence of absolute liability

    • Statute is not to conflict with existing statute

    Aids to Interpretation

    2 types: Intrinsic and Extrinsic

    Intrinsic
    Intrinsic aids are those words contained in the Queen’s printer’s copy of the statute.
    • The title of the statute may give an indication of its objective E.g. Anzac (Restriction on Trade Use of Word) Act 1916.
    • The preamble – the introduction to the statute at the start of the document
    • Interpretation section within the statute
    • Margin notes (summary notes in the margin)

    Extrinsic
    Extrinsic aids are those found elsewhere (other than the Queen’s printer’s copy of the statute)
    • Reports of committees
    • Hansard
    • Dictionary Books of authority

    Interpretation Act 1987

    Contract Law (Invitations, offers and acceptance)
    An invitation must be distinguished from an offer

    is not capable of acceptance

    is inviting another person to make an offer

    Goods in a supermarket are invitations (Pharmaceutical Society of Great Britain v Boots Cash Chemist (1952))

    Goods in a shop window are invitations (Fisher v Bell (1961))

    Adverts are normally invitations (Partridge v Crittenden (1968))

    Very occasionally, adverts may be taken to be offers (Carlill v Carbolic Smoke Ball Company (1893))

    Mail catalogues are invitations (Grainger v Gough 1896)

    The process of an auction sale constitutes the auctioneer inviting offers to be made (Barry v Davies (2000))

    An advert offering a reward is an offer, not an invitation (Williams v Carwardine, R v Clark, Carlill v Carbolic)

    Essential elements of a contract
    • Offer and Acceptance
    • Consideration
    • Intention to create legal relations

    Offers
    A definite promise to be bound on specific terms

    Must be certain (Gunthing v Lynn (1831)) – Horse if lucky. Offer was too vague, and contract could not be formed

    Half of the ‘agreement’

    An expression of willingness to be bound on specific terms

    Carlill v Carbolic Smoke Balls (1893) – £100 reward for anyone who contracts influenza after having used the smoke ball three times, claimant used the smoke ball as prescribed but still caught influenza, offer valid, as £100 already deposited in the bank

    Must still exist when ‘accepted’

    Must be distinguished from invitations

    Must be distinguished from statements of intent (Harris v Nickerson (1873)) – advert to say an auction is taking place. If auction doesn’t take place, potential buyers cannot sue

    A response to a request for information is not an offer (Harvey v Facey (1893)) – A mere statement of a min price one would consider. The telegram was not an offer

    Bigg v Boyd Gibbons (1971) – However, if the vendor states the lowest price he will accept for a sale, that statement may be an offer which can be accepted

    A request for information is not a counter offer (Stevenson v McLean)

    Revocation must actually be communicated to the offeree (Byrne v Van Tienhoven)

    May be made to the world at large (R v Clark, Williams v Carwardine)

    Termination of Offer
    An offer may only be accepted while it is still open. In the absence of an acceptance, an offer may be terminated in any of the following ways;
    • Rejection
    • Counter-offer
    • Lapse of time
    • Revocation by the offerror (must be communicated to offerree)
    • Failure of a condition to which the offer was subject
    • Death of one of the parties

    May be revoked at any time before acceptance, revocation must be communicated to the offeree

    Postal rule does not apply

    Lapse of time
    Ramsgate Victoria Hotel v Montefiori (1866) – The defendant applied for shares in June and paid deposit, the acceptance by the company was sent in November and asked for the balance due. The defendant contented that the offer had expired and could no longer be accepted. The offer was for a reasonable time, and five months was much more than that. The offer had lapsed

    Counter-offer / Rejection
    Hyde v Wrench (1840) – Original offer of £1,000 was terminated by the counter-offer of £950

    A counter-offer is a final rejection of the original offer. If a counter-offer is made, the original offerror may accept it, but if rejected, the original offer is no longer available for acceptance.

    Death (personal services)

    Notification of death (non-personal services)
    Bradbury v Morgan (1862) – The death of the offeree terminates the offer. The offeror’s death terminates the offer, unless the offeree accepts the offer in ignorance of the death, and the offer is not of a personal nature

    Failure of a condition precedent
    Financings Ltd v Stimson (1962) – Contract stated that agreement will not be binding unless signed by claimant. The claimant signed the agreement after the car was stolen, hence the defendant was not bound to take the car

    Notice of revocation may be communicated through a reliable third party
    Dickinson v Dodds (1876) – Property offered for sale until specified time, before the end of time, the defendant sold the property to a third party who had been an intermediary between Dickinson and Dodds, that intermediary informed the claimant of the sale, the claimant sent a formal letter of acceptance before the end of the deadline. The defendant was free to sell, as the claimant was reliably informed of the sale.

    Request for information
    Stevenson v Mclean (1880) – Defendant offered to sell iron at a specified price, ‘open till Monday’. The claimant enquired whether he would agree to deliver over two months. The defendant did not reply and within the stated time sold the item to a third party. The claimant accepted the original offer, and was able to sue as the request was merely for information

    Privity of contract
    Tweddle v Atkinson (1861) – Only a person who is party of a contract has enforceable rights or obligations under it

    Acceptance
    A positive act by a person to whom an offer has been made which, if unconditional, brings a binding contract into affect

    The other half of the ‘agreement’

    Acceptance must be complete and unconditional

    Acceptance must be an unqualified agreement to the terms of the offer and must not introduce new terms

    Acceptance cannot vary the original offer. That would be a counter-offer (Northland Airlines v Dennis Ferranti Meters)

    The offer must still be ‘open’ at the time of acceptance (Hyde v Wrench)

    Acceptance can be express (oral or written) or implied and must be communicated to the offerror unless offeror waives the need of communication (Carlill v Carbolic)

    Acceptance must be communicated to the offeror, but offeror may waive the right of communication (Carlill v Carbolic)

    Communicated by a reliable third party
    Powell v Lee (1908)

    Business agreements (ex-gratia)
    Edwards v Skyways (1964) – ‘ex-gratia’ payment as part of a larger negotiation is binding

    Binding in honour only
    Jones v Vernon Pools (1938) – the conditions stated that the transaction should not ‘give rise to any legal relationship, but be binding in honour only’

    Acceptance may be by conduct
    Brogden v Metropolitan Railways Co (1877) – Actions of the parties. Had been dealing with each other for a number of years, claimant suggested they should have a written agreement. Defendant’s agent sent a draft for consideration, but no-one signed it. The parties applied their dealings to the terms of the draft agreement. The conduct of the parties was only explicable on the assumption that they both agreed the draft agreement.

    Silence is not enough
    Felthouse v Bindley (1862) – Defendant wrote to his nephew offering to buy his horse, adding ‘if I hear no more about him, I consider the horse mine’. The nephew instructed the auctioneer to sell the horse, the horse was sold, the uncle sued the auctioneer, and he failed.

    Postal rule applies
    Acceptance must be made within a reasonable time (Household Fire Insurance Co v Grant (1879)) – the defendant handed a letter of application for shares in the claimant’s company agent. The company’s acceptance of application never arrived. The defendant called up the money for shares, the defendant had to pay as the contract had been formed when the acceptance was posted.

    Adam v Lindsell (1818) – acceptance occurs as soon as the letter is posted

    Acceptance by prescribed means
    Yates Building Co v R J Pulleyn & Sons (York (1975)) – the offer called for acceptance by registered or recorded delivery. The offerree sent an ordinary letter, which arrived on time and the offerror suffered no disadvantage, hence acceptance was valid

    Advert offering reward
    Williams v Carwardine (1833) – Plaintiff (Mrs Williams) gave evidence for a case, but did not disclose everything she knew. Sometime later the victim’s brother placed an advert asking for more information; she came forward and gave the additional evidence. She was entitled to the reward as it was apparent that after the first murder trial, Mrs Williams had been savagely beaten by Mr Williams

    Invitation to treat
    An indication that a person is prepared to receive offers with a view to entering into a binding contract.

    Partridge v Crittenden (1968) – placed an advert to sell birds, which were supposed to be preserved. RSPCA failed to bring a case against him, as it was an invitation to treat.
    Pharmaceutical Society of Great Britain v Boots Cash Chemist (1952) – drugs which had to be supervised were placed in a self-service shop. Customers could still reject the goods at the till.
    Fisher v Bell (1961) – shop owner being prosecuted for displaying an offensive item for sale. Shelf displays are only invitation to treat.

    Grainger v Grough (1896) – circulation of price list

    Consideration
    Consideration is what each party brings to the contract

    Consideration need not be adequate but must be sufficient

    A valuable consideration in the sense of the law may consist either in some right, interest profit or benefit accruing to one party, or some forbearance, loss or responsibility given, suffered or undertaken by the other

    Every contract must be supported by consideration.

    Consideration is a two-way thing in simple / Parol contracts (only one-way is necessary in specialty contracts/deeds)

    Currie v Misa (1875) / Dunlop v Selfridges

    Consideration must be legal and possible

    Privity of contract – Consideration must move from the promisee

    Courts may imply an implied promise to pay a reasonable sum (Lampleigh v Braithwait)

    Courts will not look at the adequacy of agreed consideration

    Consideration must have some value (sufficient) (Chappell v Nestle)

    Not sufficient if in accordance with a natural duty already owed (White v Bluett)

    Not sufficient if in accordance with a legal duty already owed (Collins v Godefroy)

    Not sufficient if in accordance with a contractual duty already owed (Stilk v Myrick) – 2 crew members deserted, captain unable to recruit substitutes, and promised the remaining crew that they would share the deserter’s wages. Upon arrival at Bombay, the captain refused the additional pay, and weren’t liable, as the crew did not give consideration for the promise of extra pay.

    If over and above a natural duty, OK (Ward v Byham)

    legal duty, OK (Glasbrook v Glamorgan)

    contractual duty, OK (Hartley v Ponsonby)

    Williams v Roffey

    Carlill v Carbolic Smoke Ball Co (1893) – £100 reward for anyone who contracts influenza after having used the smoke ball three times
    Consideration is what each side brings to the contract. Mrs Carlill gave consideration by using the smoke ball

    Adequacy
    It is presumed that each party is capable of serving his own interests, and the courts will not seek to weigh up the comparative value of the promises or acts exchanged

    Thomas v Thomas (1842) – widow to occupy house for £1 rent per annum. Compliance with the husband’s wishes was not valuable consideration (no economic value attached to it), but the rent was sufficient consideration.

    Sufficiency
    Consideration is sufficient if it has some identifiable value. The law only requires an element of bargain, not necessarily that it should be a good bargain

    Chappell & Co v Nestle Co (1960) – defendant offered to supply a record to anyone who sent in a postal order for 1s 6d and three wrappers from 6d bars of chocolate. The wrappers were part of the consideration, as they had commercial value to the defendant.

    Executed
    An act in exchange for a promise
    That which takes place at the present time. Thus in a contract for the sale of goods, the consideration is executed if the price is paid at the same time that the goods are delivered.

    Executory
    A promise (to perform an act at a future date) in exchange for a promise (or an act)

    That which is to take place at some future time. The consideration for the delivery of goods would be executory if it is a promise to pay at a future date.

    Past consideration
    Re McArdle, Roscorla v Thomas – There is no consideration. Children were entitled to mother’s house after her death. One of the children’s wives made improvements and the others agreed in writing to pay her, but at the mother’s death, they refused to pay her. The work on the house had been done before the documents were signed, so promise not binding

    Something which has already been done at the time the promise is made. An example would be a promise to pay for work already carried out, unless there was implied promise to pay a reasonable sum before the work began.

    Exceptions to past consideration
    • Bill of exchange
    • Request for service – it may be implied that the person will pay for them

    Letter of comfort
    Kleinwort Benson Ltd v Malaysia Mining Corporation Bhd (1989) – letters of comfort to creditors are not binding

    Letter of intent
    A letter of intent is a means by which one party gives a strong indication to another that he is likely to place a contract with him.

    Privity of Contract
    Only a party to a contract may sue to enforce it, but there are exceptions

    A person entitled to benefit under third party motor insurance can sue the insurer

    A principal may sue to enforce a contract entered into by his agent

    A holder-in-due-course of a bill of exchange can sue all prior parties

    Beswick v Beswick – Where a special relationship exists; for example, an executor may sue to enforce a contract entered into by the deceased

    Keech v Sandford / Shamia v Joory – A beneficiary may sue a trustee

    A manufacturer of goods may be sued by the ultimate consumer (Donahue v Stevenson)

    An employer may be sued for the negligent acts (tort, not contract) of its employees

    Tulk v Moxhay – Restrictive covenants on land apply to subsequent owners

    Exceptions to the rule that third parties cannot enforce contracts;
    • Where the contract has been validly assigned to the third party
    • Beswick v Beswick (1968) – Where they act in another capacity – widow suing as deceased husband’s admin
    • Shanklin Pier v Detel Products Ltd – Where the contract is a collateral contract
    • Linden Garden Trust Ltd v Lenesta Sludge Disposals Ltd (1994) – Where there is foreseeable loss to a third party – a third party in the contemplation of both parties when contract was made

    Collateral Contracts
    A contract where consideration is provided by the making of another contract. For example, if there are two separate contracts, one between A and B and one between A and C, on terms which involve some concerted action between B and C, there may be a contract between B and C.

    An injured party can sue even though the other party is not a party to the contract (Shanklin Pier Ltd v Detel Products Ltd (1951) – defendant gave assurances that the paint was satisfactory and durable if used to paint the claimant’s pier. Claimant had an agreement with X to use the defendant’s paint, which was the consideration for a contract between the claimant and the defendant)

    Unilateral Contracts
    A contracts where the terms of the offer are fulfilled by the actions of the offerree.

    Regina v Clarke (1927) – no acceptance without knowledge of offer. Information given on the arrest and conviction of a murderer.

    Williams v Carwardine (1833) – provided info about criminals with knowledge of the reward. Acceptance was related to the offer.

    Pinnell and its exceptions (part payment of debt)
    General principle – part payment of a debt does not achieve full settlement (Pinnell’s case)

    Illustrated by Foakes v Beer, but there are exceptions

    Receiving something different to which you were not already entitled

    Goods instead of cash; settlement before the due date

    Arrangement with creditors generally that collectively they agree to accept only part payment

    Payment by someone other than the debtor (Welby v Drake); payment at a different location than originally agreed

    Promissory Estoppels Doctrine;
    • Central London Property Trust v High Trees House (1947) – reduced rent during war time, then wanted to reclaim the reduction. The agreement had estopped any claim
    • Combe v Combe
    • D & C Builders v Rees

    Intention to Create Legal Relations

    May be express or implied

    Presumed unless rebutted

    Domestic Arrangements
    Presume no intention to be legally bound
    Balfour v Balfour – husband and wife, living together, monthly allowance.

    Merritt v Merritt / Spellman v Spellman – presumption rebutted, as husband and wife separated / living apart

    Simpkin v Pays / Jones v Padavatton / Parker v Clark – other than husband and wife

    Commercial Arrangements
    Presume intention to be legally bound
    Rose & Frank v Crompton (1923) – claimant appointed distributor for USA, when order placed, defendant terminated agreement. Claim for breach of contract failed, but damages for non-delivery of goods succeeded because the order was accepted when placed.

    Jones v Vernon Pools / Appleson v Littlewoods – Express exclusions – binding in honour only. Wording of contract stated ‘binding in honour only’. Therefore, no intention to be legally bound

    Presumptions – assumed until proved otherwise

    Rebuttal – disproving a presumption

    Carlill v Carbolic – payment of £1,000 into bank account

    Voidable contracts
    These may be cancelled by one party if they choose to. They may continue as a valid contract if the affected party chooses to.

    Contractual Terms
    As a general principle, the parties to a contract may include in their contract, whatever terms they choose. The agreement reached on the terms must be complete in order to be legally binding and those terms must be sufficiently clear and precise (Scammell v Ousten (1941))

    Condition
    A term which is a condition is fundamental to the contract

    Breach of a term which is a condition allows the injured party to treat the contract as discharged and sue for damages

    Poussard v Spiers (1876) – opera singer unable to appear on the opening night due to illness.
    Warranty
    A warranty is superficial to the contract

    Breach of warranty allows the injured party to claim damages only

    But the contract is not discharged

    Bettini v Gye (1876) – opera singer did not arrive for rehearsal 3 days before opening night (out of a possible 6) due to illness. Rehearsal was subsidiary to the main purpose.
    Innominate Terms
    Bunge Corporation v Tradax SA (1981) – The courts will seek to construe what was the intention of the parties at the time of the contract as to whether a broken term was to be a condition or warranty

    Innominate terms are those where it is not clear, until breached, whether they are fundamental or merely superficial

    Remedy depends on the effects of the breach

    Hong Kong Fir shipping Co Ltd v Kawasaki Kisa Kaisha Ltd (1962) – claimant to provide a ship that was ‘in every way fitted for ordinary cargo’, ship was only available for 17 out of 24 months

    The Hansa Nord – some of the ships cargo arrived in poor condition. Buyer rejected the whole cargo. Held only remedy was damages.

    Sources of Terms
    May be express or implied

    Term Representation
    Condition Warranty Innominate Induces contract
    Fundamental to contract Superficial to contract Not clear until breached Does not become part of the contract
    Routledge v McKay (1954)

    Express
    Express terms are those agreed by the parties and may be written into the contract or simply agreed orally and the court will ascertain whether any oral statement constitutes a term of the contract or simply a representation

    Les Affreteurs v Walford (1919) – Express terms override any terms that are implied by custom

    Implied
    Implied terms may be judicially or statutorily implied by the nature of the contract, by custom & usage

    Judicially implied terms - business efficacy (The Moorcock (1889)) (Express Newspapers v Silverstone)

    – trade custom (Hutton v Warren (1836)) – the defending landlord gave notice to the claimant to vacate the farm, the claimant should continue to farm the land during the notice, and was entitled to ‘a fair allowance’ for seeds and labour from which the received no benefit

    – course of trade (Hillas v Arcos)

    Statutorily implied terms, e.g., Sale of Goods legislation

    Powers of partners / MDs to bind partnerships / company

    Limited ability to exclude statutorily implied terms

    Term re title cannot be excluded in ANY contract

    Others from Sale of Goods legislation cannot be excluded in a consumer contract

    • Implied – covered by statute – company secretary ordered a van for hire
    • Express – oral or written
    o Terms – put on top of the contract. Contractually binding part of contract. Generally written.
    ? Poussard v Spiers (opera singer failed to attend opening night) – Conditions – Essential, goes to the heart of the contract
    ? Bettini v Gye (opera singer failed to attend rehearsals) – Warranties – subsidiary term of contract. Contract can be performed with adjustments, i.e., new car delivered which was not cleaned. Generally oral. Breaching party liable to pay damages only.
    ? The Hansa Nord (some cargo arrived in poor condition) – Innominate Terms – cannot determine if condition or warranty. Breach insufficient to justify treating contract as ended
    o Representations – throw away inducements – do not form contract

    Exclusion Clauses
    Must be incorporated into the contract either by signature, notice or previous dealings.

    Definition – a clause in a contract which purports to exclude liability altogether or to restrict it by limiting damages or imposing other onerous conditions. They are sometimes referred to as exemption clauses.

    Used in contracts in an attempt to eliminate or limit the extent of a breaching party’s liability

    Incorporated by Notice
    Olley v Marlborough Court Hotel – Must be communicated to the other party at the time the contract is entered into – sign in a hotel room not incorporated as it is not seen until after the contract is made

    Thompson v LMS Railway – Should be brought to the attention of the other party – elderly lady asked niece to purchase train tickets. Exclusions printed on the back of the ticket, stating that the ticket was issued subject to conditions contained in the company’s timetable excluding liability for injury. Conditions adequately communicated, therefore accepted.

    Incorporated by Signature
    L’Estrange v Graucob – Where a document apparently has a legal affect, should make sure before you sign it – slot machine sold under condition which excluded the claimant’s normal rights under the Sale of Goods Act (1893) – conditions binding as she signed the contract, even if she didn’t read or understand it

    Misrepresentation of Clause (exception)
    Curtis v Chemical Cleaning Co – Oral statements by an employee can destroy the effectiveness of an exclusion clause – shop floor assistant stressed the exclusion of the damage to beads and sequins, dress badly damaged in dry cleaning, so defendant liable.

    Consistent course of dealings
    J Spurling v Bradshaw (1956) – Where parties have a history of trade, other party may be deemed to be aware of the exclusion clause – customer never read the terms and conditions. He gave a few barrels to be stored they were returned empty. Defendant not liable.

    Hollier v Rambler Motors (1972) – But this course of trade should be more than 3 or 4 occasions in the previous 5 years – used garage 3/4 times over 5 yrs, car damaged in fire by negligence of garage employees. Defendant (garage) liable, as there was no evidence to show that the claimant knew of and agreed to the condition as a continuing term.

    Hardwick v Suffolk – more than 100 times in a 3 year period

    Contra-Proferentum
    Andrews v Singer – Any ambiguity will be read strictly against the party seeking to rely on it

    Photo Productions v Securicor (1980) – Possible to exclude liability for fundamental breach – one of the defendant’s security guards deliberately started fire on the claimant’s premises that he was guarding. The exclusion clause stated that the defendants were not liable for any damage caused to the property or to its contents however caused. Claimant’s claim failed, as this was before the Unfair Contract Terms Act (1977) came into force.

    Unfair Terms Legislation (Unfair Contract Terms Act (UCTA 1977)
    Unfair Contract Terms Act 1977 and Unfair Terms in Consumer Contract Regulations 1999

    Restricts or limits the extent of liability for negligence in consumer contracts

    Some are void, others are subject to a test of reasonableness

    Cannot exclude liability for negligence resulting in death or personal injury

    Cannot exclude liability for partial or incomplete performance by the seller

    Cannot have a term which binds the consumer but allows seller to avoid the contract

    Reasonable? S11 UCTA 77 takes account of : Relative bargaining power. Any inducement offered, or normal trade custom Special ordered goods Fair and equitable treatment of the consumer by the seller Extent of ability to cover by insurance

    Regulations apply to terms which have not been separately negotiated

    A consumer is a ‘natural person who is acting for purposes outside his business’

    An unfair term is “any term which causes a significant imbalance in the parties’ rights and obligations to the detriment of the consumer”

    Template Answer – Exclusion Clause
    Exclusion clauses can be incorporated into contracts by;
    • Signature
    • Notice
    • A course of dealing (for the court to decide)

    Signature
    Signatory is taken to know of the terms even if he could not read them (L’Estrange v Groucob (1934))

    Notice
    With regards to notice, it must be shown that the person seeking to rely on the exclusion clause has taken reasonable steps to bring the existence of the clause to the attention of the other party at the time the contract was made (Olley v Malborough Court (1949))

    Conra-poferuntum rule
    In deciding what an exclusion clause means, the courts interpret any ambiguity against the person seeking to rely on the exclusion clause.

    This rule would be applied if there is any ambiguity or if the terms are particularly unusual or wide

    Course of dealing
    Where the parties deal frequently under the same terms, the exclusion clause is taken to be incorporated in the previous dealing, even if the claimant never read it (Spurling v Bradshaw (1996)). The position is not so straight forward if the dealings have not been on a consistent basis (Hollier v Rambler Motors (1972))

    Unfair Contract Terms Act
    Even if the clause is incorporated and can be interpreted to cover the loss, statute imposes some very important restrictions on the use of exclusion clauses. These are covered under the Unfair Contract Terms Act (1977), which divides these clauses into two;

    1. Those which are void
    2. Those which are valid only as far as they are reasonable

    Void
    • Cannot exclude liability for negligence resulting in death or personal injury
    • Cannot exclude liability for partial or incomplete performance by the seller
    • Cannot have a term which binds the consumer but allows the seller to avoid the contract

    Valid if reasonable
    • Relative bargain power
    • Any inducements offer to the buyer the ability of the party to insure against the liability
    • Fair and equitable treatment of customer – whether the buyer knew or ought to have known of the existence and extent of the term

    Breach of Contract
    May be ‘during’ or ‘anticipatory’

    Anticipatory
    One party gives notice, before the contract start date that they will not go ahead with their obligations

    Anticipatory breach can be;
    Express – one party declares they have no intention of performing the contract
    Implied – one parry does something which makes performance impossible

    Hochster v De La Tour (1853) – Injured party may sue immediately – claimant was informed by the defendant before his European tour started that he was no longer needed. Claimant entitled to sue as soon as the anticipatory breach occurred.

    White and Carter Councils v MacGregor (1961) – Or ignore, go ahead with their obligations, and then sue – claimants provided free bins, as the defendant contracted to pay them for advertising space, the defendant wrote to claimant to cancel the contract, but the claimant continued and was entitled to sue.

    Or wait, and hope the other party will change their minds

    Avery v Bowden – But if they choose to wait, they could lose their right to sue

    To be able to achieve full compensation, the injured party must have been in a position to complete their obligation at the date the contract was due to start

    The Mihalis Angelos

    Hochester v De La Tour (1853) – tour guide sent confirmation that he will not be able to attend

    Repudiatory / Actual (aka During)
    One party refuses to continue

    Becomes apparent at or after the time set for performance

    Definition – a repudiatory breach occurs when a party indicates, either by words or by conduct, that he does not intend to honour his contractual obligations or commits a breach of condition or commits a breach, which has very serious consequences for the injured party. It usually occurs when performance is due.

    Injured party may treat the contract as discharged (if a breach of condition) and sue for damages immediately

    Types of repudiatory breach;
    • Refusal to perform (renunciation) – Hochster v De la Tour (1853) – one party renounces his contractual obligations by showing that he has no intention to perform them
    • Failure to perform an entire obligation – complete and precise performance is a precondition
    • Incapacitation – a party prevents himself from performing his contractual obligations
    • Breach of condition –
    • Breach of innominate term -

    Common Law Remedies
    Monetary compensation, not punitive

    Damages
    Damages are a common law remedy intented to restore the party who has suffered loss to the same position he would have been in if the contract had been performed.

    Liquidated Damages – genuine pre-estimate of expected loss. Enforceable by the courts

    Penalty Clause – threatens large damages for breach. Unenforceable

    2 parts to ‘damages’- Remoteness and Measurement

    It is not intended as a punishment

    Remoteness
    The Wagon Mound (1961) – oil leaked out of defendants boat and ignited when it came in contact with cotton waste – defendant not liable, as possibilit too remote

    Only awarded if the damage suffered should have been in the reasonable contemplation of the ordinary man

    Loss suffered should either arise as a natural consequence of the breach or,

    The breacher was aware of the special circumstances of the injured party

    Hadley v Baxendale (1854) – mill-shaft broke, contract made with the defendant to transport the broken milk-shaft to serve as a pattern for making a new shaft. Delayed in transport caused the mill to be out of action for longer, the defendant was not made aware of the fact that the mill will be idle until the new shaft was delivered to the mill

    Victoria Laundry (Windsor) v Newman Industries (1949) – Defendant contracted to sell boiler for ‘immediate use’, and boiler broke down causing the claimant to lose a ‘lucrative contract’. As the defendant was not made aware of the abnormal profits from the ‘lucrative contract’, only the normal profits were recoverable

    Jarvis v Swan Tours – can’t usually recover for loss of enjoyment, unless contract is one designed to give enjoyment

    Measure
    Courts determine how much award is necessary to put the injured party into the position they would have achieved if there had been no breach

    C & P Haulage v Middleton

    Thompson v Robinson – May take account of speculative loss

    Anglia Television Ltd v Reed (1972) – But may not. Actor pulled-out at the last minute, and project was abandoned. Claimants claim for expenditure such as hiring other actors and research were granted. Had the claimed for loss of profits, they would not have succeeded

    Alexander v Rolls Royce – But may not

    If the cost of ‘repair’ far outweighs the loss suffered, courts may make an award based on loss of amenity

    Ruxley Electronics v Forsyth

    The injured party has a duty to mitigate their loss

    Other common law remedies
    • Action for price – Retail price of item
    • Quantum Meruit – calculation of value of item
    • Specific Performance – return your item back. Cannot use in personal service contracts, i.e., individuals. Equitable remedy

    Equitable remedies
    • Injunction – through the courts – order someone to do or not to do something
    • Recission
    • Rectification
    • Mareva Injunction

    Mitigate loss
    Mitigation – Reducing your loss
    Payzu Ltd v Saunders (1919) – contract for the supply of goods and for the payment to be in instalments. The claimant failed to make the first payment when due, and the defendant stopped further delivery, then the price rose. The claimant should have mitigated the loss by accepting the seller’s offer of delivery against cash.

    Tort
    Trespass to land
    • Entering land
    • Remaining on land
    • Placing objects

    Trespass to person
    • Battery – intentionally bringing of a material object into contact with another
    • Assault – intentional act of putting another in reasonable fear or apprehension of immediate battery
    • False imprisonment – unlawfully arresting, imprisoning or preventing a person from leaving

    Nuisance
    • Causing distress to another by, e.g., noise, smell, etc
    • Private – unlawful interference with a person’s use or enjoyment of land or some right or in connection with it
    • Public – acts of omissions that materially affect the reasonable comfort and convenience of the life of a class of Her Majesty’s subjects

    Defamation
    Libel refers to visible acts such as writing, pictures and even effigies. This is a criminal act.
    Slander refers to spoken acts or gestures. This is a civil injury, where damage must be proved.

    Deceit
    Deliberately misleading another into a detrimental position

    Passing-off
    Use of a name, mark or description by one business that misleads a consumer to believe that their business is that of another

    Ewing v Buttercup Margarine Co Ltd (1917) – using a similar name to an established margarine retailer.

    Negligence
    Carelessly carrying out an act and breaking a legal duty of care owed to another causing them loss or damage.

    This is the most important modern tort. The claimant must prove that;
    • The defendant had a duty of care to avoid causing injury, damage or loss
    • There was a breach of that duty by the defendant
    • In consequence, the claimant suffered injury, damage or loss

    Loss of damage as a result of the breach
    Barnett v Chelsea & Kensington HMC (1989) – negligent doctor sent patient home, but the patient would have dies anyway

    Defences against claim for negligence
    Contributory negligence
    A court may reduce the amount of damages paid to the claimant if the defendant establishes that the claimant contributed to their injury or loss

    Sayers v Harlow UDS (1958)

    Volenti non fit injura
    Voluntary acceptance of the risk of injury / unless expressly consented to risk – i.e., boat race case

    Professional Negligence
    Caparo Industries v Dickman & others (1990) – the auditors duties does not extend to potential investors nor to existing shareholders increasing their stakes.
    ADT Ltd v Binder Hamlyn – advising on takeovers. Binder Hamlyn was held to have specifically assumed responsibility for its statements at a meeting held to discuss the audited results, which made it liable outside the usual sphere laid down by Caparo.
    Candler v Crane, Christmas & Co (1957) – special relationship
    Barings Plc v Coopers & Lybrand (1997) – auditors liable for group companies
    Auditors not liable to potential investors
    • Foreseability
    • Proximity
    • Fairness

    Duty of care
    A person might owe a duty of care to another with whom he had no contractual relationship.
    • Was the harm reasonably foreseeable
    • Was there a relationship of proximity between the parties
    • Considering the circumstances, is it fair, just and reasonable to impose duty of care
    o Is it just and reasonable that they should be relying on your info – just for shareholders, but not investors and shareholders wanting to increase their stake

    Donoghue v Stevenson (1932) – a purchased a bottle and B drank from it, which contained the remains of a decomposed snail, and became ill. Defendant responsible.
    Richley v Fould (1965) – car skidded to the other side of the road. Careless driving

    Proximity
    Special relationship. Legal neighbour. Does that person have a close enough relation to you to rely on your advice?

    Breach of Duty of Care
    Res ipsa loquitur
    The facts speak for themselves. If an accident occurs which appears to be most likely caused by negligence, the court may apply this maxim and infer negligence from mere proof of the facts.

    Applies in circumstances where the cause of the injury was under the control of the defendant and that the incident would not have occurred if they had taken proper care.

    Mahon v Osbourse (1939) – The burden of proof is reversed and the defendant must prove that s/he was not negligent.

    Employment Law
    Contract of Employment
    A contract of employment is ‘a contract of service or apprenticeship, whether express or implied, and (if it is express) whether it is oral or in writing’

    An independent contractor is a person who contracts to provide services for another party (contract for service)

    Employee
    An employee is an individual who has entered into, or works under a contract of employment (ERA 1966)

    Someone employed by an employer under the terms of a formal contract of employment (a contract of service)

    Dismissal and Redundancy
    Notice and termination of contract by breach
    An employment contract is terminated by breach of the following;
    • Summary dismissal
    • Constructive dismissal
    • Employer unable to continue
    • Employee repudiates contract

    Constructive Dismissal
    This is when employer, although willing to continue the employment, repudiates some essential term of the contract, for example by the imposition of a complete change in the employee’s duties, and the employee resigns. The employer is liable for breach of contract.

    This is where the employer commits a breach of contract, thereby causing the employee to resign. By implication, this is also dismissal without notice

    Reduction in pay
    Industrial Rubber Products v Gillon (1977)

    Change in nature of job
    Ford v Milthorn Toleman Ltd (1980)

    Failure to follow disciplinary procedure
    Post Office v Strange (1981)

    Failure to provide suitable working environment
    Waltons & Morse v Donnington (1997)

    Failure to implement proper procedure
    WA Goold (Pearmak) Ltd v McConnell & Another (1995)

    Suspended without pay
    Western Excavating (ECC) Ltd v Sharp (1978) – defendant suspended for misconduct, this caused him financial harm, and was also refused advance holiday pay, so he left. Employer had not repudiated the contract, so no dismissal.

    Summary Dismissal
    This is when the employer dismisses the employee without notice. He may do this if the employee has committed a serious breach of contract and, if so, the employer incurs no liability.

    Wilson v Racher (1974) – a gardener swore at his employer. The employees case for wrongful dismissal succeeded, as the employer’s actions provoked the outburst.

    Unfair dismissal
    This is a statutory concept introduced by employment protection legislation. As a rule, every employee has the right not to be unfairly dismissed

    Correspondingly, fair dismissal is a statutory concept where a person has been dismissed as a result of a fair reason under legislation

    The distinction between wrongful and unfair dismissal is in the remedies available.

    Massey v Crown Life Assurance (1978) – employee became self-employed for some role, then got sacked, then sued for unfair dismissal, claim to be a dismissed employee failed

    Remedies for unfair dismissal
    • Compensation
    o Limited to £60,600
    • Re-instatement – same job without break
    • Re-engagement – new employment with terms specified in the order by the court – very rare

    Criteria for unfair d


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    Remedies for unfair dismissal
    • Compensation
    o Limited to £60,600
    • Re-instatement – same job without break
    • Re-engagement – new employment with terms specified in the order by the court – very rare

    Criteria for unfair dismissal
    • Continuously employed for > 1 yr
    • Have been dismissed (inc constructive dismissal)
    • Have been unfairly dismissed

    Wrongful Dismissal
    This is common law concept arising in specific circumstances. It gives the employee an action for breach of contract, i.e., where insufficient notice has been given

    Justifiable reasons for dismissal;
    • Wilful disobedience of a lawful order
    • Misconduct
    • Dishonesty (where the employee is in a position of particular trust)
    • Incompetence or neglect, where an employee fails to use the skills he claims
    • Gross negligence, depending on the nature of the job
    • Immorality (if it will affect the performance of duties/reputation of the business)
    • Drunkenness (in aggravated circumstances or repeated)

    Generally, the only effective remedy for wrongful dismissal is to claim for damages based on the loss of earnings.

    Potentially fair reasons for dismissal
    • Capability or Qualifications of employee for performing the work of the kind which he was employed to do
    • Conduct of employee
    • Redundancy
    • Legal Prohibition – restrictions preventing the employee from lawfully working in the position which he held
    • Other substantial reasons
    o Refusal to accept changed work practices agreed by majority of workforce, this also includes change of shifts
    o For the above to be fair, there must be evidence of employer’s reasonable conduct in this regard, which would be consultation with the employee to determine the area of difficulties, allowing a reasonable time for improvement, providing training if necessary and considering all alternatives to dismissal
    o The employee was married to a competitor

    Automatically Fair reasons for dismissal
    • Taking part in unofficial industrial action
    • Being a threat to national security (to be certified by the government)

    Automatically Unfair reasons for dismissal
    • Pregnancy
    • Spent conviction
    • Trade union membership
    • On transfer of undertakings (new ownership)
    • Takings steps to avert health and safety problems
    • Exercising certain rights under minimum wage, working time, Sunday trading or public interest disclosure acts

    Criteria to obtain compensation for unfair dismissal
    • Have been in continuous employment for one year whether full-time or part-time
    • Have been dismissed. This may have to be determined by the tribunal, for example if the employee resigned claiming constructive dismissal
    • Have been unfairly dismissed. Dismissal may be unfair even though it is not a breach of contract by the employer

    Exceptions to one year’s continuous service
    • Where the matter concerns a safety representative being penalised for carrying out legitimate health and safety activities
    • Where an employee is being denied a statutory right (for example an unlawful deduction from wages)
    • Where the employee is pregnant

    Remedies for wrongful dismissal
    • Damages based on loss of earnings
    • Wronged party to mitigate loss by seeking other work

    Criteria for obtaining wrongful dismissal
    • Insufficient notice given (i.e., summarily dismissal)

    Redundancy
    A dismissal is treated as redundancy if the main or the only reason for dismissal is;
    • The employer has ceased, or intends to cease, to carry on the business in which the employee has worked
    • The requirements of that business for employees to carry on the work done by the employee have ceased or diminished

    Redundancy is unfair if based on the membership of a trade union membership or activities, but redundancy notice is fair and no redundancy is payable if employee is on strike action (pg 173 & 177 of s/txt).

    When an employee is laid-off or kept on short-term they may claim redundancy by informing the employer of their intention to do so

    Payment must be claimed with 6 months

    Calculations are the same as unfair dismissal basic award

    Employed v Self-Employed
    Employee
    Someone employed by an employer under the terms of a formal contract of employment (‘a contract of service’)

    Self-Employed
    Someone who contracts to provide services for another party (‘contract for service’)

    Ferguson v John Dawson & Partners (1976) – was self-employed but employers controlled what he did and when, so he was an employee and could sue for the accident at work.
    Ferguson v John Dawson & Partners (1976) – Express intentions of parties not necessarily conclusive. Builder paid gross, his employer could dismiss him, decide on which site he would work on, so he was employed.

    Reasons for distinction
    • Legislation may offer employment protection to employees under a contract of service
    • Benefits & statutory sick pay entitlement
    • Employed taxed under Schedule E whereas self-employed taxed under Schedule D
    • Employer may be vicariously liable for tortuous acts by employees
    • In the case of liquidation, employees hold preference over self-employed for outstanding salaries and redundancy payments

    Employment Control Test
    Massey Docks & Harbour Board v Coggins & Griffiths (Liverpool) (1947) – crane operator hired from Harbour Board, who caused an accident by negligence, Harbour Board liable, as they were the ‘general employer’

    Employment Integration Test
    Cassidy v Ministry of Health (1951) – surgeon employee
    • Mersey Docks & Harbour Board v Loggins & Griffith (Liverpool) Ltd (1947) – control
    • Cassidy v Ministry of health (1957) – Integration. Hospital disclaiming responsibility of surgeon’s carelessness in carrying out an operation
    • Economic reality (multiple) – see below

    Economic Reality
    O’Kelly v Trusthouse Forte Plc (1983) – waiter working on a casual basis not permanent, so no contract
    Ready mix concrete (south east) v Ministry of pensions & national insurance (1968) – employer trying to avoid paying employers NI contributions as claiming the employee is paid gross

    Employment Relationships
    Ferguson v John Dawson & Partners (1976) – builder paid gross salary, but employer controlled his work, hence employed

    Massey Docks & Harbour Board v Coggins & Griffiths (Liverpool) (1947) – crane operator self-employed – employer lacked sufficient control

    Job Existence
    North Riding Garages v Butterwick (1967) – a garage reorganised its working arrangements so that the workshop manager’s duties involved more administrative work. He was dismissed when it was found he could not perform these duties. His claim for redundancy pay must fail since it was not a case of redundancy.
    Agency / Partnership
    If an agent acts within the limits of his authority, any contract he makes on the principal’s behalf is binding on both parties. The extent of the agent’s authority may be express, implied or ostensible.

    An agent is a person who is authorised to act for another, the principal, in the making of legal relations with third parties. The relationship can arise in a number of ways;

    Actual Authority
    Express Authority
    This is a matter between principal and agent. This is authority explicitly given by the principle to the agent to perform particular tasks, along with the powers necessary to perform those tasks.

    Implied Authority
    Watteau v Fenwick (1893) – previous hotel owner ordered cigars even though he didn’t have authority. Hotel owner liable, as the change of manager should have been communicated to the cigar seller.

    Where there is no express authority, authority may be implied from the nature of the agent’s activities or from what is usual or customary in the circumstances.

    An agent who exceeds their ostensible / apparent authority will have no liability to the principle, but the agent will be liable to the 3rd party for breach of warranty of authority.

    Ostensible Authority
    Freeman & Lockyer v Bukhurst Part Properties (Mangal) (1964) – a director acting as MD. Company liable under the principle of ‘Holding out’ (or estoppel)

    Company secretaries have this authority. An agent’s apparent / ostensible authority may be greater than his express or implied authority. This occurs where a principle holds it out to be so to a third party, who relied on the representation and altered his position as a result. It may be more extensive than what is usual or incidental.

    Panarama Developments Ltd v Fedelus Furnishing Fabrics (1971) –

    Types of Agent
    • Partners
    • Directors
    • Auctioneers
    • Brokers (shares, insurance, etc)
    • Promoters (Directors are not agents)
    • Factors
    • Estate Agents

    Agency workers
    Frank v Reuters Ltd (2005) – Length of service. Agency worker had been providing services for some 6 years, was so integrated as to be indistinguishable.

    Motorola v Davidson and Melville Craig (2001) – Control (client or agency). Motorola had sufficient control over Davidson to make them the employer.

    Partnerships
    The relationship which subsists between persons carrying on a business in common with the intention to making profit

    Retiring Partners
    • Is liable for debts incurred by the partnership prior to retirement
    • Contract of Novation
    o Discharges retiring partners from existing liabilities. Creditors and remaining partners agree to discharge the retiring partner and liabilities are passed to the remaining partners
    o Until creditors do not agree to the contract of novation, the retiring partner is not discharged from their liabilities prior to retirement
    • Notice to existing customers must also be given
    • If new suppliers have good reason to believe that the retiring partner was actually a partner, then the retiring partner will also be liable for the debts of the partnership, unless notice was given to the supplier

    Sleeping Partners
    • Law does not recognise sleeping partners
    • Personally liable for the debts of the partnership

    Company Law
    Advantages of forming a company as compared to a partnership
    • Salomon v Salomon – Separate legal personality
    • Limited liability
    • Perpetual existence
    • Raising finance
    • Ownership of property
    • Number of members
    • Transfer of interest is easier

    Disadvantages of forming a company as compared to a partnership
    • Legal implications – personally liable for debts
    o Formation
    o Audit
    o Share issue
    o Meetings and resolutions
    o Liquidation
    o “Proper accounting records”

    • Expense
    • Publicity and disclosure
    o Details of directors and remunerations
    o Business details

    Formation of company
    The following 4 forms are needed for a company to be incorporated (formed);
    Memorandum of Association
    • Is the primary document
    • Regulates the company’s activities with the outside world, i.e., company objectives, powers, co name, capital structure, whether it is public / private, whether it enjoys limited liability, etc;
    • This gives the internal management, affairs and running of the company;
    • Each subscriber to the shares should sign this;
    • At least 2 people should sign this document
    • Signatures to be witnessed by a third person

    Articles of Association
    • Is the secondary document
    • Regulates company’s internal affairs and management
    • Covers the issuing & transferring of shares
    • Voting and dividend rights attached to different classes of shares
    • Board and shareholder meeting conduct
    • This states the company name, the situation of the Registered Office (to be England and Wales, Scotland or Wales), the objects of the company and its Liability
    • Includes rights of shareholders and directors
    • The appointment, dismissal, powers and responsibilities of directors
    • Communication with members
    • Documents and records

    Form 10
    • Details of Directors, Secretary and registered office
    • Registered office (England, Wales, etc)
    • Contains details of 1st directors and secretary including service address
    • Subscribers must sign this also

    Form 12
    • Declaration of compliance with Companies Act 2006

    Alteration to articles
    • Articles can be altered by special resolution (75%) for public company, or written resolution (75%) for private company;
    • The basic test is whether the alteration is for the benefit of the company as a whole;
    • Alterations must be filed with the registrar within 15 days of the passing of the special resolution;
    • A company can ‘entrench’ provisions into their articles. This means specific provisions may only be removed or amended if certain conditions, which are more restrictive than a special resolution are met;
    • A member or a group holding up to 15% of the voting rights can apply to the courts to cancel the variation to the articles;
    • For an alteration to be valid, the majority should honestly believe that it is in the interest of the company as a whole (subjective test) and it would be in the interest of a hypothetical individual member (objective test)
    o Greenhalgh v Arderne Cinemas Ltd (1950) – Increase in share capital

    Effect of articles
    • Binds the company and its members
    • Thus binding contract between company and its members
    • Hickman v Kent – company’s articles were enforceable by a company against one of its shareholders
    • Eley v Positive Government Security Life Assurance Co (1876) – the articles do not constitute a contract with any 3rd party

    Restrictions to alterations of articles
    Even after the passing of a special resolution, alterations to the articles may be restricted by the following principles;

    • If in conflict with CA;
    • To protect a minority, the court may order that an alteration be made;
    • Alterations to certain class rights – correct rights variation procedure needs to be followed to obtain the consent of the class;
    • The minority who approve the alteration, did not act in a bonafide manner in what they deem to be the interests of the company as a whole

    Company Auditor
    A person independent to the company. They are not permitted to be a company officer by law and by the rules of their recognised supervisory bodies (i.e., ACCA)
    Appointment
    • First or casual vacancy – by directors (only valid until the conclusion of the 1st accounts meeting (AGM))
    • Normal course of business – by shareholders (members)
    • Secretary of state – if members fail to appoint an auditor, the company must within 28 days of the meeting give notice to the Secretary of State, who has the power to appoint auditors

    Termination
    • Removal by ordinary resolution (50%) with special notice (28 days) – for this both the members and auditors must be informed
    • Auditors rights on removal;
    o Submit a statement of circumstances surrounding removal
    o Written statement to members
    o Speak at general meeting
    • Resignation in writing to registered office;
    o Circulate written statement to members
    o Requisition (demand) a general meeting to explain their reasons
    o Speak at general meeting
    • Non-seeking election;
    o A written statement of circumstances or a statement to say there are non, is required
    • Auditor not re-elected when term expires
    o Special notice must be given of any resolution to appoint different auditors

    Duties
    • Give a true and fair view of the results for the year, and state of affairs of the company;
    • Confirm if the accounts have been properly prepared in accordance to Companies Act (CA) 2006

    Rights
    • Access to the books and records of the company
    • Information and explanation from the company officers as they consider necessary for the performance of their duties
    • Attend any general meeting
    • Be heard at general meeting
    • Right to receive notice of any written resolutions

    Company Secretary
    Appointment
    • Every public company must have one
    • A sole director cannot be company secretary
    • Directors of a public company must take all reasonable steps to ensure that the secretary is suitably qualified by knowledge and experience

    Responsibilities
    • Not defined by Companies Act, but laid down by the Company’s board of directors
    • Statutory registers and returns (annual accounts)
    • Organising board meetings and general meetings
    • Charged with ensuring the company and its officers comply with statutory and regulatory requirements
    • Ensuring accounts kept in accordance with requirements of companies act
    • Maintaining the register of members

    Qualifications
    • Member of one of a list of qualifying bodies, i.e., ACCA
    • Qualified as a solicitor or barrister in the UK
    • Appears to the directors to be capable of the post

    Ostensible Authority
    Company secretaries have ostensible authority to enter company into contracts connected with the admin of the company
    A company can have 2 or more secretaries
    A corporation can fulfil the role of company secretary to a company

    Powers of Company Secretary
    Has apparent / ostensible authority to bind the company, unless the company has denied him that authority and the other party has notice of the restriction

    Panorama Developments Ltd v Fedelus Furnishing Fabrics (1971) – company secretary order cars for hire. Company liable for the secretary had apparent authority.

    Dividends
    • May only be paid by a company out of profits available for the purpose
    • Every company has implied powers to declare dividends although express powers may be contained in the articles
    • Dividends are usually payable on the paid-up amount of share capital
    • Distributable Profits
    o Accumulated realised profits, so far as not previously utilised by distribution or capitalisation, less accumulated realised losses, so far as not previously written-off in a reduction or reorganisation of capital duly made.
    o Only profits up to the b/s date should be taken into account
    o Losses likely during the period, or between the y/e date and the date the a/c sign-off date, or even losses likely to arise should be taken into account
    • Undistributed Reserves
    o Comprise of share premium, capital redemption reserve, revaluation reserve and any reserve which the company is prohibited from distributing by statute or its own constitution
    • If dividends are paid in contravention, then directors may be liable to make good to the company the amount unlawfully distributed
    o Although relief may be available if the directors acted honestly and reasonably
    o If members receive dividend knowing its unlawful or have reasonable grounds to believe it, then they will be liable to pay the unlawfully paid amount back to the company

    Directors
    • Must be over 16 years of age;
    • A minimum of 1 for a private, and 2 for a public company;
    • A company must have at least 1 natural person as a director;
    • At a company’s AGM, half the directors resign, and are re-appointed by an ordinary resolution (automatically re-appointed, unless the meeting decides otherwise). MD’s are exempt from having to resign at AGMs;
    o So essentially, a director has a 2 year contract of service
    • Bamford v Bamford – A director’s election can be challenged if they exercise their powers for improper purposes or not in what they honestly believe to be in the best interests of the company.

    Appointment
    • Ordinary resolution (50% or more of the votes counted)
    • Send form 10 – to appoint a director of a new company
    • If you want to appoint a director during AGMs, then fellow directors bring that new director on board (as long as the powers allow this – must be in the articles), then s/he gets approved by the shareholders are the next AGM
    • 1st directors will be those named in the particulars delivered to the registrar of companies on incorporation
    • the company must notify companies house within 14 days of new appointments and any changes in particulars

    Removal
    • Ordinary resolution (50% or more of the votes counted) at a meeting of which special notice (28 days) has been served
    • Special resolution (75% or more of the votes counted) at a meeting of which ordinary notice (14 days) has been served
    o When a resolution is being voted on, the director has a right to submit a memorandum of reasonable length to the members, and they can attend the meeting
    • Disqualification – struck-off because of breach of statutory duties, i.e., bankruptcy, or enters into agreement with creditors
    o Company Directors Disqualifications Act (CDDA) (1986) – introduced to control individuals who persistently abused the various privileges given to directors
    • Resignation by written notice
    • Death
    • Insanity
    • Retirement
    o Plc – automatic retirement at retirement age
    o Ltd – Re-appointed every year
    • Rotation – forced to retire
    o Can put themselves forward again at the same meeting
    • Dissolution of the company
    • Infringement to the articles – i.e., not holding enough qualifying shares;
    • Absent for 3 consecutive months from board meetings without leave from the other directors
    • By not putting themselves for re-election

    Powers
    • Charged with managing the business of the company;
    • Powers are conferred on the director’s collectively and not upon individual directors (in most cases)
    • These powers are defined by the companies articles
    • Members are essestially responsible for giving directors their powers, as they have the vote with the special resolutions
    • Directors are not agents (only MD’s are)
    • Matters that the directors are solely responsible for include;
    o Capital reduction;
    o Voluntary liquidation;
    o Declaration of an interim dividend

    Freeman & Lockyer v Buckhurst Park Properties Mangal Ltd (1964) – 1 director acting as MD, the others knew of his actions, but did nothing to stop him. Company bound by the contract
    Howard Smith v Ampol Petroleum – Directors irregular use of powers to allot shares
    Greenhalgh v Arderne Cinemas Ltd (1950) – Increase in share capital

    Fiduciary Duties
    • Smith v Fawcett Ltd (1942) – Act within powers in a bonafide manner
    • Hogg v Cramphorn (1966) – Exercise powers for a proper purpose
    • Avoid conflict of interest

    Statutory Duties
    • S171 – Act within powers in a bonafide manner – Powers given within acts, cannot be ultra-vires (act beyond the powers)
    • S172 – Promote success of the company
    • S173 – Independent Judgement
    • S174 – Duty to use reasonable skill care and diligence – Tort of negligence. Skill and care you reasonably expect of a person of that knowledge.
    • Objective test (act in a manner reasonably expected
    • Subjective test
    • S175 – Avoid conflict of interest – if gifts disclosed and transparent, then OK
    • S176 – Not the accept benefits – i.e., bribes
    • S177 – Declare interest in proposed transactions or arrangements – transparency
    • The above can be remembered as A P I D A N D

    Remedies for breach of director’s duties
    • Damages or compensation where the company has suffered loss;
    • Restoration of the company’s property;
    • An account of profits made by the directors;
    • Rescission of a contract where the director failed to disclose an interest

    Regal (Hastings) Ltd v Gulliver (1942) – a company who owned a cinema, had the opportunity to acquire 2 more cinemas through acquisition of a subsidiary. The company didn’t have the money, but the directors, the chairman (acting as a nominee of the persons) and the company solicitor subscribed to the shares

    The decision was that the directors were accountable to the company. The chairman was not accountable as he did not obtain the shares for himself. The solicitor was not accountable as he is not a director

    Industrial Development Consultants Ltd v Cooley (1972) – MD realised that the company is unlikely to win a contract, but noticed that if he were to setup his own company then he will have a chance to obtain the contract.

    He gave notice to the board to say e was ill and needed to be discharged from his service agreement. On ceasing to be a director, he obtained the contract on his own

    The decision was that the MD for accountable to his old company for the profits of the contract

    Weighted voting rights
    Bushell v Faith (1970) – weighted voting rights for directors under attack

    Shadow directors
    A person might seek to avoid the legal responsibilities of being a director by avoiding appointment as such, but using their power, say as a major shareholder, to manipulate the acknowledgement of the board of directors

    Company law seeks to prevent this abuse, by extending several statutory duties to shadow directors

    Executive director
    A director who performs a specific role in a company under a service contract which requires a regular, possibly a daily involvement in management

    Must be a member of the board
    manager with management responsibilies as an employee

    Non-Executive Director
    Does not have a function to perform in the companies management, but is involved in its governance.

    • Contributes an independent view
    • Helps the board provide effective leadership
    • Ensures the continuing effectiveness of the executive directors
    • Ensure high standard of probity on the part of the company

    Difference between Executive and non-Executive directors
    • The executive directors have the power to manage the company
    • The non-executive directors have the power to Direct and Control the company

    Management Director
    One of the directors of the company, appointed to carry out overall day-to-day management functions
    A company can have 1 or more MD

    Company Meetings
    Annual General Meeting
    Timing – public companies must AGM within 6 months following their financial year end. Private companies are not required to hold an AGM
    Failure – the company and every officer can be fined if an AGM is not held within the time limits
    Notice – 21 days notice required unless every member entitled to attend and vote agrees to a shorter period
    Business – usual business includes considering accounts, appointment of auditors, elect directors and declare dividends
    Resolutions – members holding at least 5% of the voting rights (not just shares), or at least 100 members holding an average £100 paid-up capital have the right to propose a resolution and require the company to circulate details to all members

    General Meeting
    Timing – held whenever required
    Notice – at least 14 days
    Business – the person who requisitions the meeting sets the agenda

    Class Meeting
    Purpose – meeting of a class of shareholders, usually to consider a variation of their class rights
    Procedure – notice, etc as general meetings
    Quorum – two persons holding or representing by proxy at least 1/3 in normal value of the issued shares of the class in question
    Company Resolutions
    Type % required to pass To Registrar? Purpose of resolution
    Special 75 Yes – within 15 days Alter name, objects or articles. Reduce share capital. Wind up company
    Ordinary Simple majority Only if required by statute Used whenever the law or articles do not require a special resolution
    Written (private co only) Same majority as required in GM Yes if 75% majority required The purpose can be anything apart from resolutions requiring special notice.

    Members cannot revoke their agreement.

    The date of the resolution is the date when the necessary majority has been reached.

    The resolution must be passed within 28 days from its circulation

    Key Terms
    Structure of the legal system
    Binding precedent
    Binding precedent is the same as stare decisis

    Young v Bristol Aeroplane Co (1944) – court of appeal bound by its own decisions, unless two previous cases conflict

    Criminal cases – Appeals can be by way of ‘case stated’ – law misinterpreted by magistrates / hence heard by QBD of High Court

    Purpose of Binding Precedent
    • Coherency
    • Consistency
    • Predictability
    • Fairness

    Advantage of Binding Precedent
    • Certainty – law is decided fairly and predictably
    • Clarity – following the reason of the ratio decidendi should lead to statements of general legal principles
    • Flexibility – the system is able to change with changing circumstances
    • Detail – precedent states how the law applies to facts and should be flexible enough to allow for details to be different
    • Practicality – case law is based on experience of actual cases brought before the courts. This is an advantage over legislation which can be found wanting when tested.

    Disadvantage of Binding Precedent
    • Rigidity & Inflexibility – the system can limit judge’s discretion
    • Uncertainty – finite no. of precedent
    • Unconstitutional – judges can make law not just act on it
    • Complexity – level of detail in material makes application of judge’s decisions unnecessarily difficult and complicated

    Avoidance of Binding Precedent
    The courts may decline to follow an apparently binding precedent by;
    • Distinguishing the facts
    • Declaring the ratio decidendi obscure
    • Stating the previous decision was made per incuriam (carelessly)
    • Stating it is in conflict with a fundamental principle
    • Declaring an earlier precedent too wide

    Reversing – higher court reverses lower court’s decision in same case

    Overruling – higher court overrules lower court’s decision in a different case

    Distinguishing – court avoids earlier precedent by distinguishing the facts

    Recission
    The act of cancelling, i.e., cancelling a treaty

    Fiduciary
    A trustee, i.e., charity trustee

    Indictment
    Chargeable, indictable offence

    Bonafide
    In good faith

    Mitigate
    Reduce, i.e., mitigate loss

    Repudiatory
    During, i.e., repudiatory breach

    Cease
    Comes to an end / closes down, i.e., company ceases trading

    Indemnity
    Compensation, reimbursement, guarantee

    Rescind
    Cancel

    Ultra-vires
    Act outside powers, i.e., Directors acting as MD

    Ostensible
    Apparent

    Requisite
    Demand

    Codification
    Collection into 1 body of the principle of a system of law (still left in its separate volumes)

    Consolidation
    Combining

    Repeal law
    Revoke, quash, nullify

    Alteration to articles
    Objective test
    It would be in the interest of a hypothetical individual member

    Subjective test
    The majority should honestly believe it is in the interest of the company as a whole

    Appellate cases
    Law of or relating to appeals

    Per incuriam
    Made without care

    Stare decisis
    Binding precedent

    Dissipate
    To exhaust

    Gratuitous promises
    Promises given for no return

    Plaintiff
    Claimant

    Prima facie
    At first sight

    Renunciation
    Refusal to perform (breach of contract)

    Purportedly
    Apparently

    Convenant
    Convenient

    Doctrine of restituition
    Restore the party to the place they would have been in if the contract had been performed as agreed (Breach of contract)

    Volenti no fit injuria
    Voluntarily acceptance of the risk of injury (boat case)

    Proximity
    Sufficiently close, so that it is ‘reasonably foreseeable’

    Res ipsa Loquitor
    The facts speak for themselves

    Nouus actus intervieniens
    Other events, which are outside the control of the defendant

    Exonerate
    Completely free

    Quasi partnership
    Partners fall out, and one or more seeks to remove the rest

    Quantum meruit
    How much is it worth (remedy for breach)

    Indictable offences
    Serious offences, which cannot be heard in magistrates courts, only start at crown court

    Summary offences
    Heard in magistrates courts

    Capital Maintenance
    The rules which dictate how a company is to manage and maintain its capital exists to maintain the delicate balance between the member’s enjoyment of limited liability and the creditor’s requirement that the company shall remain able to pay its debts

    • The company shall not make payments out of capital because this threatens creditors
    • Basic Principle: ltd companies should not be allowed to make payments out of capital
    • Exception to Basic Principle: reducing share capital (need power in articles, special resolution, confirmation from court, who will seek to protect the interest of creditors)
    • Private companies can avoid going to court by issuing a solvency statement
    • Solvency Statement:
    o A declaration by the directors, provided 15 days in advance of meeting where the special resolution is to be voted on
    o It states that there is no ground to suspect that the company is currently unable or will be unlikely to be able to pay its debts for the next twelve months.

    Corporate Governance
    Corporate governance is simply a term used for the way that companies (corporate) are run and operated (governed).

    Corporate governance is the system by which companies are directed and controlled (governed)

    The 1992 Cadbury Report identified the role of directors as;

    The directors are responsible for the corporate governance of the company

    Knowledge Gap
    In owner-managed companies, as the directors and shareholders are the same people, they have access to the same information and are in a position to direct company policy.

    In non-owner-managed companies this isn’t the case, and it creates a knowledge gap.

    This gap in the shareholders knowledge may cause difficulty for investors, who will want to be assured that their investment is being managed correctly and in accordance with their wishes as owners.

    Company law and practice have adopted various measures to attempt to bridge this gap by the introduction of, i.e.;
    • Financial statements
    • Annual general meetings
    • Corporate governance codes

    Importance of good corporate governance
    Shareholders and managers (Directors) are usually separate in a company and it is important that the management of the company deals fairly with the investments made by the owners

    Control the controller (system will control the controller)

    Cross
    This is the same as Jury

    Insider dealing
    Insider dealing is the statutory offence of dealing in securities while in possession of insider information as an insider, the securities being price affected by the information

    Section 52 of the Criminal Justice Act 1993 (CJA) sets out the three distinct offences of insider dealing:
    • An individual is guilty of insider dealing if they have information as an insider and deal in price-affected securities on the basis of that information.
    • An individual who has information as an insider will also be guilty of insider dealing if they encourage another person to deal in price-affected securities in relation to that information.
    • An individual who has information as an insider will also be guilty of insider dealing if they disclose it to anyone other than in the proper performance of their employment, office or profession.

    Section 56 defines inside information as:
    • Relating to particular securities,
    • Being specific or precise,
    • Not having been made public and
    • Being likely to have a significant effect on the price of the securities.

    Law
    Law is a formal mechanism of social control – David Kelly (Examiner)

    Lifting the veil
    By statute
    • Trading without trading certificate
    • Fraudulent and wrongful trading
    • Disqualified directors
    • Abuse of co names

    To prevent evasion of obligations
    • Quasi partnerships
    • Evasion of liabilities
    • Evasion of taxation
    • Public interest
    • Evasion of legal obligations

    Group Situations
    Adam v Cape Industries (1990) -
    • Subsidiary acting as agent for the holding company
    • The group is to be treated as single economic entity
    • The corporate structure is being used as a sham

    Limited by Shares
    Liability is usually limited by shares. This is the position when a company which has share capital states in its constitution that ‘the liability of members is limited’

    Limited by Guarantee
    The company’s constitution states the amount which each member undertakes to contribute in a winding up (AKA liquidation). A creditor has no direct claim against a member under his guarantee, nor can the company require a member to pay up under his guarantee until the company goes into liquidation

    Charities or trade associations are usually limited by guarantee

    These companies do not have share capital

    Money Laundering
    A term given to attemps to make the proceeds of crime appear respectable. It can refer to any process by which criminals seek to hide the source and ownership of the proceeds of criminal activities.

    The process usually involves;
    • Placement – Actual disposal of the proceeds of the initial illegal activity
    • Layering – Transfer of money from business to business, in order to conceal the original source
    • Integration – having been layered the money takes the appearance of coming from a legitimate source

    Money laundering was recognised as a criminal offence in the UK under the Drug Trafficking Act (1986), which is now regulated by Crime Act 2002

    Criminal offences under proceeds of Crime Act 2002;
    • Laundering – Acquisition, possession or use of proceeds of criminal conduct
    • Failure to report – failure to disclose knowledge or suspicion of money laundering
    • Tipping-Off – disclosing information to any person if disclosure may prejudice an investigation into Drug trafficking, drug money laundering, terrorist related activities or laundering the proceeds of criminal conduct.

    Plaintiff
    A person who brings suit in a court. This is the same as claimant, who is fighting a case against the defendant

    Postal rule
    Adam v Lindsell – Where the use of the post is in contemplation of both parties, the acceptance is completed and effective as soon as a letter is posted, even though it may be delayed or even lost altogether in the post

    Termination of offer cannot be complete until received by the offerree, if the offer is still open

    Presumption
    An assumption of facts accepted by the courts until disproved

    Rebuttal
    If a presumption is disproved or outweighed

    Transfer of undertakings
    When a business is transferred, so that an employee works for a new employer, this change represents no break in continuous service of employee

    List of cases
    Legal Personality
    Salomon v Salomon & Co Ltd (1897) – company a separate entity. An individual not liable for the debts of the company, even though Salomon was the sole owner

    Quasi Partnership
    Ebrahimi v Westbourne Gallaries Ltd (1973) – The courts are willing in such cases to treat the central relationship between the directors as being that of partners, and rule that it will unfair therefore to allow the company to continue with only some of its original members. An application to windup a company on the ‘just and equitable’ ground under the Insolvency Act 1986

    Dunlop Pneumatic Type Co Ltd v Dunlop Motor Co Ltd (1907) – If however, the two companies businesses are different, confusion is unlikely to occur.

    Tips
    • When answering scenario based questions, answer with an either or, so if the facts are true in the scenario, then A B & C, otherwise D E & F
    • Always have an introduction for any question before going into the specifics of the questions
    • Don’t use bullet points, always elaborate
    • Scenario based questions on;
    o Contract
    o Employment
    o Company
    • Open tuition’s tips (June 09)
    o Partnerships
    o Money laundering
    o Termination of partnership
    o Meetings – company
    o Director’s remuneration

    • Answer scenario based questions as ISAC;
    o Issue / Identify
    o State the law
    o Apply the law
    o Conclusion – relate to the facts of the case

    Terms
    • Novation – Incorporation of company (Pg 223 s/txt)


    avatar
    aam2009
    Participant
    • Topics: 8
    • Replies: 39

    Hey there mate, I was wondering if you could email me a word document copy please. I’ve tried to message you my email but it’s not sending. I’d rather not post my email here, so how can we do it?

    Seems like you put a lot of hard work into it and it’d be useful to compare with my own.

    I’d much appreciate it. Thanks in advance.


    Avatar of fbawany
    fbawany
    Participant
    • Topics: 13
    • Replies: 49

    Its now there in the documents section as F4-Course Notes. Good luck!


    avatar
    aam2009
    Participant
    • Topics: 8
    • Replies: 39

    Thank you very much!


    avatar
    tinaroscoe
    Participant
    • Topics: 6
    • Replies: 6

    Can you send this to me in word please.
    tinaroscoe2007@yahoo.co.uk

    Thank you in advance


    avatar
    tracy1305
    Participant
    • Topics: 9
    • Replies: 24

    Thanks, really usefull, good luck everyone with the exam.


    avatar
    stonerose
    Participant
    • Topics: 0
    • Replies: 1

    I am really struggling on F4, I need ur help, can you please send me ur notes on hussainchy@yahoo.com


    avatar
    fahax
    Member
    • Topics: 1
    • Replies: 2

    could you send it to me..fahax@yahoo.com. thank you


    avatar
    sabby.k
    Participant
    • Topics: 2
    • Replies: 3

    Please at this stage, we need a lot of help
    sabr@talktalk.net
    Thank you


    Avatar of fbawany
    fbawany
    Participant
    • Topics: 13
    • Replies: 49

    Hi All, I’ll forward everyone a copy once i can find the word document myself! I’ll search for it this weekend


    avatar
    cicilo
    Participant
    • Topics: 0
    • Replies: 1

    The notes are really useful, could u mail me a word document so that I can print it for detail reading, appreciate very much~my mail address is cici.913@hotmai.com
    thanks again


    avatar
    gingermaestro7
    Member
    • Topics: 0
    • Replies: 1

    Can you please send the file to gingermaestro7@aol.com? Many thanks Jason


    avatar
    nishta87
    Participant
    • Topics: 7
    • Replies: 15

    Please send me also on ravinee87@yahoo.com thanks in advance


    Avatar of fbawany
    fbawany
    Participant
    • Topics: 13
    • Replies: 49

    cicilo, i’ve tried sending you an e-mail, but it keeps bouncing back, all the rest of you should have had my notes by now. Good luck, and wish me luck too!


    avatar
    rodneyregis
    Participant
    • Topics: 0
    • Replies: 9

    Hi there, could you send to me? rmtebbot@hotmail.com

    Either way, good luck!


    Avatar of fbawany
    fbawany
    Participant
    • Topics: 13
    • Replies: 49

    just sent it to you rodneyregis


    Avatar of fbawany
    fbawany
    Participant
    • Topics: 13
    • Replies: 49

    rodneyregis, i sent it to mtebbot@hotmail.com as you mentioned above, but the e-mail has been returned undelivered, if you give me a correct e-mail add i’ll resend it, when i come back on


    avatar
    kcp123
    Participant
    • Topics: 3
    • Replies: 9

    please can you mail it to kcp.personal@gmail.com

    Thanks a lot


    Avatar of fbawany
    fbawany
    Participant
    • Topics: 13
    • Replies: 49

    just sent it to you kcp123

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