Business Law

Case Study on The Business Law and its Principles

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INTRODUCTION

The project report is undertaken to help learners gain knowledge on business law and its various aspects through case analysis. The report covers principles affecting legal relationship between organizations and their consumers which includes legal rules on implied terms, statutory provisions on property transfer and buyer seller remedies. The second part covers the legal rules on consumer credit agreements through cases on types of credit agreements and rules in termination of rights and notices, types of agent and their duties and rights. The third part of the report covers the legal rules related to mergers, monopolies and anti competitive practices. The last part focuses on highlighting key provisions related to the intellectual property rights.

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TASK 1 PRINCIPLES AFFECTING THE LEGAL RELATIONSHIP BETWEEN BUSINESS ORGANISATIONS AND THEIR CONSUMERS

1.1 Legal rules on implied terms relating to the sale of goods and supply of services

The implied terms for the goods sale and supplying services are mentioned in 1979 Act divided into following sections.

Section 12: Title - The rules states that seller must have goods title which refers to ownership and right to sell they are intending to. As the car was destroyed in fire, Emmanuel does not have the ownership to sell the car to John (Druker, and Stanworth, 2004).

Section 13: Description - The rules under this section state that the goods must correspond to the description as mentioned before the sale. Now, when the car has been totally destroyed, it does not correspond to the same condition the seller agreed to the buyer.

Section 14: Quality - The Sale and Supply of Goods Act 1994 states that goods must be of satisfactory quality. This means that is for the purpose it is to be used, goods in appearance and finish, safe and durable (Djankov, and et. al., 2008). But the car, after damaged in fire does not fit in any of the condition of the act. Also the act does not allow buyer to seek legal remedy in case of -

  • accidental damage and misuse
  • if the buyer does not want it
  • acceptable wear and tear of goods

Section 15: Sale by sample - The rule states that if selling was done on sample basis, then the sample must reflect the actual bulk order and is free from any defect.

According to the case, John agreed to buy the car of Emmanuel on the condition that Emmanuel would repair the car before handling over to him. Also John paid 20% of the price of car. But before Emmanuel handed the car, it was destroyed in fire. According to Section 12, Emmanuel does not have the ownership to sell the car to John. Also the car has been fully destroyed in fire and does not correspond to the same condition the seller agreed to the buyer. According to the Sale and Supply of Goods Act 1994 which states that quality of goods must be satisfactory to use, the car after destroyed in fire in not in a condition to drive. thus, the law states that Emmanuel is not liable to for the fire. but as he had received advance for the car he should repay it because the car has not beensold to the John.

1.2 Apply the statutory provisions on the transfer of property and possession

The Transfer of Property Act, 1882 and Law of Property Act, 1925 governs the transfer of property and possession in UK. The statutory provisions are as follows -

What may be transferred - The rules states that property must not be prohibited by law to transfer to another party. Computers can be legally sold and transferred in UK (Atiyah, Adams and MacQueen, 2005).

Competency of transferor - Both the parties in selling and buying of computers are legally competent.

Operation of transfer - The rules states that after the transfer of property, the goods title will be held by the buyer.

Interest and condition - It means that transfer of computers must be in interest of both the parties and in satisfactory condition (Bridge, 2007).

According to the Transfer of Property Act, 1882 and Law of Property Act, 1925 in reference with the case, Joe promised to deliver the computers but failed to do so because of the unavailability of the stock. as per the law computers are legally sold and purchased in UK and all the parties for the agreement are legally competent. But at the time of delivery Joe does not have the enough stock and his business was also collapsed. In this case, the available stock is 50% of the suppliers demand. so it can now be equally distributed among the three which means that 50% of the order value to each suppliers will be paid in stock and remaining 50% in cash.

1.3 Statutory provisions on buyer’s and seller’s remedies

a. Rachel is entitled to claim compensation for the injury and hospital treatment charges. When the details of manufacturer are not available, then it is the responsibility of the pub owner to pay damages.

b. If George is the manufacturer of the drink, then Rachel can directly claim compensation from the manufacturer. In this case, the pub owner will not have to pay anything (Scott, and Black, 2000).

Remedies for buyer

Suit of damages - The rules states that buyer can sue the seller for negligence or refusal in delivery. The drink was properly delivered.

Suit for special performance - This suit is applicable if seller breaches the contract to deliver ascertained or specific goods (Beatson, and et. al., 2010).

Suit for interest - This states that buyer can seek damages from the seller for unsatisfactory performance of the goods as they are entitled to.

Remedies for seller

Special performance - If in case the contract was created for special consideration then the seller is not entitled to pay damages.

Exclusion clause - This states that if exclusion clause is inserted by the seller, then he is not entitled to pay any damage (Collins, 2003).

1.4 Product liability statutory provisions

In the case given, the product liability arises under the statutory law of Consumer Protection Act, 1987 of contract and tort law. For the purpose, Rebecca must prove that -

  • Product is defective.
  • The defective product caused injury to her.
  • The defendant i.e. the hotel owner is responsible for the defective product.

Rebecca fell from the balcony of the hotel which causes severe injuries. She can claim the damages from the hotel owner i.e. David because it is the responsibility of the owner to ensure that property is safe and must act in the manner as described (Cartwright, 2001). The brochure nowhere mentions that standing at the balcony or the glass plates are not safe.

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TASK 2 LEGAL RULES ON CONSUMER CREDIT AGREEMENTS AND AGENCY

2.1 Types of credit agreements

The Consumer Credit Act of 1974 governs the credit agreements in UK.

Credit Sale - This involves agreements for expensive goods such as luxury products cars and similar. It is in the form of loan against the purchase price of the item with the money paid over a fixed duration in equal monthly payments. From the case, John purchases the car and loan was granted by NatWest Bank for £10,000 for five years and equal monthly payment of £200 (Scott, and Black, 2000).

Hire Purchase (HP) - Under this agreement, the buyer pays an amount every month to hire the product but did not own it until full payment has been made.

Hire Contracts - Under this agreement, the buyer pays monthly payment to hire the goods. The buyer never own the goods but to continue the agreement does one of the following -

  • Renew the agreement after it ends.
  • Return the goods to the seller.
  • The seller can sue the buyer for non-payment and failing to return the goods.

Conditional Sale - It is similar to the hire purchase agreement but requires some additional conditions to be fulfilled to fully own the goods.

In the case given, the bank can terminate the agreement with John because of the reason that loan amount is too high and also if John did not return from the holiday, then they will not be able to recover the loan amount. Also, there is no guarantee submitted by John in case of non fulfilment of loan amount (Cartwright, 2001).

The advice would be same if the loan is taken for the purchase of Honda Accord because it also a luxury good.

2.2 Rules, termination rights and default notices

In the case, the lender is intending to end the agreement for the non-payment of the monthly installments. The following law applies.

Default notices

The sections of 87 and 88 of Consumer Credit Act amended under by the Consumer Credit Act of 2006 section 14, it is mandatory to serve a default notice and give the consumer duration of 14 days to remedy the breach of agreement as specified in it. These practices are required to be followed by the creditor i.e. Brit College before it takes actions against Mr. Ali -

  • Terminate the agreement.
  • Repossess the car.
  • To treat as deferred or terminated other rights of Mr. Ali in the agreement.
  • To enforce any security which could be in the form of mortgage, third party guarantee.

According to the law, the court also allows under section 88 a time of 19 days to the debtor to repay the remaining amount. The time duration also includes the weekends. The default notice must also satisfy the conditions as mentioned under the consumer credit act of 1983. In case, if Ali fails to pay the remaining amount of car to the college, the college owes the right to take legal action against him. The college can terminate the agreement and take the possession of the car (Djankov, and et. al., 2008).

2.3 Different types of agent

Agency can be defined as relationship between two or more parties wherein one party expressly and impliedly gives consent that another will act on his behalf to carry on the relationship with third party. The various types of agents are as follows -

Co-agent - In this case, multiple agents are in relationship with one principle and the individuals are working as agents. The managing director is obliged to follow the principles of his acts and cannot be held liable for other people's performance (Lan, and Heracleous, 2010).

Dual agent - It is referred to the individual who is working on behalf of multiple principles for office transactions and operations. The managing director is under legal obligations towards the business clients.

Sub-agent - These are the agents of the agent. If the managing director is authorized to hire someone else, the other will be called as sub agent and will work on behalf of first agent and principle (Eyre, and Lodge, 2000).

The importance of agency is central to the business dealings as the principal cannot do everything on himself and delegates some duties to the agents. As a Managing Director, the person assigned with the responsibility is liable to act on behalf of the board of directors. Any outside person or business interested in doing business with the company will contact with the MD who should act in interest of the company by obliging the principles of the law.

2.4 Rights and duties of an agent

a. Rights of agents
  • Right to retain - It means that agent has the right to deduct the amount payable to the principal.
  • Right of stoppage in transit - It means that Joseph can stop the transfer of car to Paul.
  • Right to claim remuneration - Joseph can claim remuneration from Paul for his services.
  • Right of lien - Under this right, Joseph can take the possession of car (Cartwright, 2001).
Duties of Joseph
  • Joseph must perform in the manner as asked by the principal to do. This means that car must be properly checked to ensure that it is not involved in any accidents.
  • If there was a repair, it must be communicated to Paul.
  • He must not make any secret profits on the car selling (Atiyah, Adams, and MacQueen, 2005).

According to the principles of agent and principal, Joseph should perform his duties as asked by his principal. The primary duty of the Joseph was to properly check the car before the purchase. If Joseph was unaware of the mechanics and failure of the car, he should have informed his principal about this. But Joseph failed to notify and instead recommend the car which met with the accident. according to the principle, Joseph did not fulfil his duties towards his principal.

b. The standards laws of the principal and agent relation also govern the employment contracts which states that Joe must provide a regular opportunity of work to Jude under the contract. In case where the factory has been destroyed by storm that marked the end of the operation is now considered as termination of employment contract. Jude was entitles to remuneration for the duration he has worked for the employer.

According to the case, Joe was a shoe manufacturer and employed Jude under 10 year contract. But after 4 years, the show factory of Joe was destroyed in storm and ends his operations. In this, case the destruction of factory terminate the employment. it is because the employment contract states working in the factory and in the absence of the factory the employment cannot be continued. Although Jude is entitled to seek remuneration for the period he worked in the factory but cannot take legal action against the employer.

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TASK 3 LEGAL RULES RELATING TO MONOPOLIES, MERGERS AND ANTI COMPETITIVE PRACTICES

3.1 Monopolies and anti-competitive practice legislation in the UK

The situation of monopoly in UK arises when a business has market share of more than 25%. The businesses have such power that they can abuse it many a times. An important area where the businesses can use their power is setting up prices that make it difficult for smaller organizations to establish themselves in the market. The monopoly also leads to fewer choices for consumers, higher prices and low quality (Whish, 2012). The major areas of UK competition legislation are as follows -

  • Monopolies and Restrictive Practices (inquiry and Control) Act 1948 and Monopolies and Mergers Act 1965 - Under these, the competition commission can block business merger deals that are against the public interest.
  • Restrictive Trade Practices Act 1956 (goods) and Restrictive Practices Act 1976 (services) - A court is set to decide on the acceptability of the restrictive practices (Li, 2009).
  • Fair Trading Act 1973 - The Act defines monopoly of businesses at 25% market shares and set up governing bodies to control their operations.
  • Competition Act 1980 - The Act allows investigation for monopoly practices to the ministry.
  • Telecommunications Act 1984 - Under this Act, the competition commission is independent of the government.
  • Competition Act 1998 - The Act was developed to match the practices of EU and control anti competitive practices in the market (Beynon, and Driffield, 2005).

3.2 Role of the Competition Commission in the context of monopolies and anti-competitive practices and the UK Office of Fair Trading

The competition commission in UK is established to control the business wrongdoing and protect consumers from it. It also aims to educate businesses and focus on consumer protection to promote compliance and delivering knowledge of law. The roles of the authority are as follows -

  • To investigate merger deals that could lead to monopolistic situations and restrict competition in the market (Murray, and Stern, 2007).
  • Market research and investigate into the matters concerning competition and consumer problems.
  • Investigating business operations for the possibility of regulation breach and abuse of dominant position.
  • Enforcing legislation into practice to protect consumers from monopolistic market forces.
  • Allowing regulators to use competitive powers and stop monopolistic practices in the market (Eyre, and Lodge, 2000).

3.3 Definition of dominant positions within the EU common market

The dominance in EU common market cannot be solely depend on the quantitative market share of a business entity, but it also takes into account its influence in controlling the market and on the behavior of consumers and other firms. The dominant position as mentioned in Article 86 (EEC, newArticle 102TFEU) refers to a position of an entity that enjoys economic power that enables it to prevent an effective competition between the firms as required in the market and practices independently in the market (Li, 2009).

The abuse of dominant position refers to such practices that-

  • When the entity directly or indirectly exploits unfair buying and selling or unfair trading practices.
  • Controlling production, markets and technical development. It further means imposing unfair and discriminatory commercial fees on service providers.
  • Practicing unfair transactions abusing the power of monopoly.
  • Controlling the contracts acceptance and unfairly imposing them on other parties.
  • Eliminating competition through predatory pricing i.e. selling goods and services below the cost of production for a short term that discouraged competitors to establish in the market (Beynon, and Driffield, 2005).

From the case, British Gas is undergoing a market investigation from Office of Fair Trading, and the Competition and Markets Authority and evidence show that it has charged highest prices in the last three years abusing its dominant position in the market and earns huge profits.

3.4 Application of EU exemptions to potentially anti-competitive practices

The agreement that is restrictive of competition does not indicate that is automatically prohibited. It may be that the agreement that falls under the prohibitions of Chapter I or Article 101 is excluded or deemed exempted from the competition laws.

  • The agreement that falls under Article 101 is assumed to be harmless as the parties involved in it have such low market share that it does not have any significant impact on the effective competition or trading practices (Murray, and Stern, 2007).
  • An agreement is also exempted when the competition restrictions outweigh the benefits expected to arrive.
  • The practice of an entity may be justified on the grounds that its behavior is necessary to protect the interest and normal conduct of the business.

The exemptions are meant to ensure normal market conditions whereby firms are operating normally and that consumer have enough choices. It ensures that no firm can abuse its position and power and influence the market conditions to behave in a normal way (Yang, and Maskus, 2001).

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TASK 4 KEY PROVISIONS RELATING TO INTELLECTUAL PROPERTY RIGHTS

4.1 Forms of intellectual property

The various forms of intellectual property protect the inventions and rights of owners to be copied and duplicate in an unauthorized manner. The different forms are.

Patents - This is an exclusive right granted for an invention of a product, service, or process that is aimed to provide an altogether a new way of doing something or offers a technical solution to a problem (Bekkers, Duysters, and Verspagen, 2002).

Trademark - This is sign that creates differentiation between firms and their products and services.

Copyright - This is a legal term used to grant rights to the creators of their literary and artistic work (Pitkethly, 2001).

4.2 Principles to the protection of inventions through patent rights and their infringement

  • The principles for the protection of inventions and their infringement are as follows -
  • Invention must be kept conferential to be patentable.
  • Invention must be eligible for practical application.
  • The process of patent application may take several years.
  • The patent can be renewed for a maximum of 20 years.
  • The infringement of patent laws is punishable acts and the guilty is obliged to pay penalties (Greenhalgh, and Longland, 2001).

4.3 Principles to copyright protection and their infringement

Copyright grants an automatic right to the creator of any new item such as a piece of text, a painting, a sound recording, music, etc. Copyright is granted for the lifetime of the originator in addition with 70 more years and applies to both published and unpublished materials. In case the copyright is jointly owned, it expires after the death of the last surviving creator. In case of anonymous, corporate, or pseudonymous material, it expires after 70 years from the date of the calendar year in which the item was created. In case the date is unknown, the law allows in guessing the date of creation. The copyright in typography and layout of text lasts only for 25 years (Murray, and Stern, 2007).

4.4 Compare and contrast the protection of trademarks and Business names

  • Trademark is a sign or mark that distinguishes a product or service from other firms in the market. Business name is a legal name given to an entity which is different from its owner.
  • Trademark is used to identify a particular product or service while business name is used to identify an organisation under which the products are developed.

Trademark laws give the right to the owner to take legal actions for the duplication of their signs and symbol without prior permission. The business owner under the Company Act and Intellectual Property Act can take action against its infringement (Yang, and Maskus, 2001).

CONCLUSION

The project report concludes that laws specific business activities are developed to protect the rights of the creators and ensures a healthy environment in the marketplace. The Sale of Goods Act is essential to maintain the proper transfer of products and services as promised before the sale. The competition law and fair trading practices ensures that organisations do not abuse their power and position and impact the normal operations of the market.

REFERENCES

  • Bekkers, R., Duysters, G., and Verspagen, B., 2002. Intellectual property rights, strategic technology agreements and market structure: The case of GSM. Research Policy.
  • Beynon, M. J., and Driffield, N., 2005. An illustration of variable precision rough sets model: an analysis of the findings of the UK Monopolies and Mergers Commission.Computers and operations research.
  • Bridge, M. 2007. Law for International Sale of Goods, A.Hong Kong.
  • Djankov, S., and et. al., 2008. The law and economics of self-dealing.Journal of financial economics.88(3).pp.
  • Druker, J., and Stanworth, C., 2004. Mutual expectations: a study of the three‐way relationship between employment agencies, their client organisations and white‐collar agency ‘temps’.Industrial Relations Journal.
 

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