Business Law

Key differences between public and private law: purpose

Public/criminal law: To regulate the behaviour of people (and organisations) within society with the threat of punishment.

Private/civil law: A system for private individuals (and organisations) to settle legal disputes.

Key differences between public and private law: who brings the case?

Public: The case is brought by the state in the name of the Crown Rex in England/Wales and Lord Advocate in Scotland (His Majesty’s Advocate, or HMA).

The claimant (England/Wales and Scotland) shall raise the action, ie the individual who has suffered a loss, and the other party to the action is called the defendant (England/Wales) or respondent (Scotland).

Key differences between public and private law: standard of proof

Public/criminal law = beyond reasonable doubt
Private/civil = on the balance of probabilities

Key differences between public and private law: burden of proving

Public/criminal = rests with the state
Private/civil = rests with the claimant

Key differences between public and private law: outcome

Public/criminal = the defendant/accused is found guilty by a magistrate/sheriff or the Crown jury and is punished
Private/criminal = where the defendant is liable for the claimant’s loss, they pay compensation

Public/criminal law; who are the prosecuting agencies in England/Wales and in Scotland?

England/Wales = Crown Prosecution Service (CPS)
Scotland = Crown Office and Procurator Fiscal Service (COPFS)

What is case law made up of?

Common law (doctrine of binding precedent) and Equity (aiming to achieve fairness/justice by offering discretionary equitable remedies by the judge beyond the scope of common law rules)

What sources of law does the UK have?

• case law (common law and equity)

• legislation/statutory law (Parliament, as the supreme legislative body, enacts laws and statutes through Acts of Parliament)

• EU legislation (regulations and directives; referred to as ‘direct effect’ laws - they had a direct impact on rights/obligations within the UK until 2020)

• International treaties and conventions
  

What are the UK’s primary sources of law?

Case law (common law and equity) and Statutory legislation

How do Acts of parliament/statutory provisions/legislation come about?

Through parliamentary process; a Bill is presented in parliament; is made law by the King by royal assent; the government fixes a date for the Bill to come into law; the UK courts must apply the legislation.

What is devolution?

Devolution allows decisions to be made at a local level. UK Parliament has granted powers to decide on certain issues to:

• Scottish Parliament

• Welsh Parliament

• Northern Ireland Assembly

What’s the difference between devolved matters and reserved matters?

Reserved matters are the responsibility of the UK Parliament only; the UK Parliament won’t normally make laws on matters devolved to the local parliaments, e.g. the Scottish Parliament, without their consent.

What is delegated legislation?

Legislation that courts can challenge but not apply - parliament has ‘delegated’ law-making powers to another ‘body’ to make law in that specific area. The UK courts can then challenge this legislation through a process called judicial review.

Why would UK courts challenge delegated legislation?

Because the body making the law has acted beyond the powers it was delegated - this is known as acting ultra vires (beyond the powers)

What are the three forms of delegated legislation?

Bylaws (local councils make laws enforceable in council boundaries)
Statutory instruments (gov ministers make laws in their area/department)
Orders in Council (the King makes orders, with advice from the Privy Council)

In Equity, the judge has discretion to grant either specific performance or injunction; what does this mean and what are the equivalent Scottish terms?

specific performance or injunction (tell the defendant to do something or stop doing something)

Scotland: ‘specific implement’ and ‘interdict’

What are the ratio decidendi and the obiter dicta?

Ratio decidendi (ratio of the case) = the legal reason for a court ruling (the key ruling made) - this becomes precedent and is binding for lower courts.

Obiter dicta (obiter statement) = an opinion expressed ‘in passing’ that has no significance for the outcome of the case; this is NOT binding, NOT precedent, merely persuasive.

What is invoice fraud?

Over/underinvoicing, falsely describing goods and services, phantom shipping and fraudulent documentation of this

What is smurfing?

Breaking a large sum into smaller, less suspicious transactions below the reporting threshold. The illegal funds are often deposited into multiple bank accounts by several people known as smurfs

What is blending of funds?

Blending illegal funds with the legal proceeds from cash-based businesses, e.g. newsagents, restaurants, car washes

What are aborted/cancelled transactions?

The money is transferred to a finance/legal professional to hold, but then the proposed transaction is cancelled and the funds are repaid to the criminal from a seemingly legitimate source.

What are the three phases of money laundering?

Placement: Money enters the financial system

Layering: Criminals obscure the money trail, making it harder for officials to trace it back; e.g. through investing, shell companies, transferring money to and from offshore accounts.

Integration: Money is re-introduced into the legitimate economy, by investing in property, artworks, jewellery.

What are shell companies?

Companies without significant business operations or assets; sometimes legitimate, but sometimes exist for money laundering or tax fraud purposes.

What does the Proceeds of Crime Act (2002) tackle?

Anything related to the proceeds of crime (money/assets gained by criminals during the course of criminal activity), including theft, fraud and money laundering.

What are the three categories of criminal offence created by POCA 2002?

Laundering: concealing/transferring the proceeds of crime; becoming involved in arrangements that they know or suspect facilitate using/controlling criminal property; doing actual money laundering (using/possessing criminal property)

Failure to Report: individuals in regulated sectors must disclose reports to their firm’s Money Laundering Reporting Officer (MLRO) if they know/suspect money laundering.

Tipping Off: Telling the people involved in money laundering that they need to be careful/ that they’re being investigated by the NCA, or sharing any confidential information.

What is the maximum penalty for money laundering?

Up to 14 years imprisonment and/or a fine.

What is the maximum penalty for tipping off?

2 years imprisonment and/or a fine

Who are MLROs?

Each firm has a Money Laundering Reporting Officer whose job it is to investigate issues raised and in turn report to the National Crime Agency (NCA).

When must an individual in a regulated sector report to their firm’s MLRO?

Where:
a) They know/suspect that someone is engaged in money laundering.
AND
b) They can identify the person/location of laundered property OR provide information that leads to this.
AND
c) The information has come to them in the normal course of business.

What is the KYC/ CDD requirement for accountants?

Know your client/Customer due diligence - accountants must understand the business and risk profile, and ascertain the source of funds, keeping in mind money laundering.

What information is needed to verify clients under KYC?

• Check the company is properly registered with Companies House

• Check the identity of directors

• Check the identity of beneficial owners (shareholders with 25% or more voting rights in a company)

What are PEPs and what is required from accountants in relation to them?

Politically exposed persons - individuals holding significant public roles, e.g. MPs, the judiciary. AND their family/close associates. Accountants must do enhanced due diligence on them.

How long must accountants maintain comprehensive records of client transactions and client due diligence?

At least 5 years

When must accountants report to the NCA?

They must submit SARs (suspicious activity reports) when they have reasonable grounds to suspect money laundering or terrorist financing.

What do the following laws involve?

The Money Laundering, Terrorist Financing and Transfer of Funds (Information on the Payer) Regulations 2017

The Money Laundering and Terrorist Financing (Amendment) Regulations 2019

They set out the additional obligations for firms working in areas of higher money laundering risk, e.g. risk assessments of clients and keeping records of these for 5 years; money laundering policies, controls, procedures, including internal controls and staff training

What are the three key areas covered by the Money Laundering Regulations?

1. Risk assessment and controls

2. Customer due diligence

3. Registration and supervision of relevant businesses

What is the main thing that sanctions legislation in the UK says?

It’s a criminal offence for anyone to have business dealings with anyone on a sanctions list, known as a designated person.

What % of reported crime in the UK each year does fraud make up?

40%

What are the offences of fraud in England/Wales/NI under the Fraud Act 2006?

Fraud can be carried out by:

• Dishonestly making false representation with intent to make gain or cause loss to another

• Dishonesty by failing to disclose information when under legal duty to do so, in order to make gain or cause loss to another

• Dishonesty by abuse of position with intent to make gain or cause loss to another

• Revenue fraud, fraudulent evasion of income tax.

What are the main fraud offences in Scotland?

• Common law fraud (the catch-all for fraud in Scotland) - false pretences with intent to deceive

• Uttering - when someone submits forged documents with intention to defraud or prejudice another person

• Embezzlement - appropriating property (money/assets) entrusted to you and using it for a different purpose than that intended by the owner

• More statutory offences

What is the sanction imposed for fraud in Scotland?

an unlimited fine and/or imprisonment of up to 5 years

Who are the parties involved in the detection and prosecution of fraud?

• Police services

• National Fraud Intelligence Bureau

• Action Fraud (national reporting centre)

• Financial Conduct Authority

• Trading Standards (a gov office accessed through Citizens Advice)

• Department for Work and Pensions

• Crown Office and Procurator Fiscal Service

• Serious Fraud Office

What new offence was introduced by the Economic Crime and Corporate Transparency Act 2023?

Failure to prevent fraud - when corporate org employees/agents commit fraud for the org’s benefit

What is the Material Fraud Statement under the Companies Act 2006 amendment that will commence on/after 1 Jan 2025?

That all Directors’ Reports on the FS must include a Material Fraud Statement explaining how they are detecting and preventing material fraud.

What are the 4 offences included within the Bribery Act 2010?

1. Offence of bribing another person

2. Offence of being bribed

3. Bribing a foreign public official to obtain/retain business or to get some advantage

4. Offence FOR A COMMERCIAL ORG (i.e., not an individual) to fail to have measures to prevent bribery.

What are the sanctions for individuals/companies found guilty under the Bribery Act 2010?

for offences 1-3, imprisonment for up to 10 years and/or a fine (a fine for companies and Scottish partnerships)

for offence 4, an unlimited fine

What is the UKGDPR?

The UK Data Protection Act 2018, which governs how personal data is collected, processed, stored and shared.

What is the ICO?

The Information Commissioner’s Office - the UK’s independent body responsible for upholding information rights

What is ‘special category data’ (sensitive personal data) under UK GDPR?

info about racial/ethnic origin, political opinions, sexual orientation, religious beliefs, health data

What is the UK GDPR definition of ‘personal data’?

Any information relating to an identified or identifiable natural person

What are the 7 key principles under the UK GDPR for the processing of personal data?

1. Lawfulness, fairness and transparency

2. Purpose limitation (purposes must be specified, explicit and legitimate)

3. Data minimisation

4. Accuracy (accurate and up to date)

5. Storage limitation (mustn’t be kept for longer than necessary)

6. Integrity and confidentiality (must be processed in a secure, protected manner)

7. Accountability (the org, known as the ‘controller’ of the data, must take responsibility for how they handle personal data).

Who has rights under the Data Protection Act / UK GDPR and what are these?

Living individuals.

• Right to know what personal info is being collected about them, how it will be processed and for what purpose

• Right to access their personal data, to request its deletion

• Right to rectify info if data held about them is inaccurate

• Right of data portability - requiring data to be transferred from one controller to another

What is the difference between data controllers and data processors?

Controllers - make the decisions, deciding what kind of data is to be collected and what it will be used for

Processors - merely process the data on the controller’s behalf

What are the duties of organisations under the UK GDPR with regard to personal data breaches?

They must report qualifying breaches to the ICO within 72 hours of becoming aware of the breach; qualifying breaches are when there is a likely and severe risk to individuals’ rights and freedoms following the breach

What is a DPO and when must orgs have one?

A Data Protection Officer who makes sure the org complies with UK GDPR. Public authorities and orgs carrying out certain types of processing activities are required to have a DPO.

What are the punishments for non-compliance with data protection obligations?

The ICO can fine you up to £17.5m OR 4% of your annual global turnover (whichever is higher)

IP. What requirements must a business meet to make a successful claim against a defendant for the crime of ‘passing off’?

1. Goodwill; the business must prove that they OWN a REPUTATION in the market that the public associated with their specific product/service.

2. Misrepresentation; the business must prove that the defendant has deceived/misled the customers into believing that their goods/services are actually those of the business.

3. Damage; the business must prove that they have or will incur a financial or reputational loss because of this.

What is passing off?

When a person/business deliberately or unintentionally creates the impression that they are a brand or have a connection with it

What are the remedies available if a claimant successfully brings a passing off claim?

• Applying for an injunction/interdict to prevent the other business carrying on.

• Applying to have the goods made so far destroyed

• suing for loss of sales and damage to reputation

• seeking payment for lost profits

What are the five different types of IP protection available to a business? And which arise automatically

1. Trade mark

2. Copyright (arises automatically)

3. Patents

4. Designs (automatic protection; but greater protection if registered)

5. Trade secrets

How long does a trade mark last?

Registered with the UK Intellectual Property Office (IPO) under the Trade Marks Act 1994. Lasts for 10 years, and can be renewed every 10 years.

What is protected/recognised by copyright law?

original literary, dramatic, musical, artistic works; sound recordings, films, broadcasts; the specific arrangement of published books.

How long does UK copyright protection last?

It depends. For published works it can be up to 70 years after the author’s death before the work enters the public domain.

What are the requirements for a patent to be registered? and how long does a patent last?

1. The invention must be new

2. must involve an ‘inventive step’

3. must be capable of industrial application

4. the grant of a patent is not excluded/exempt

Granted for up to 20 years; renewal fees must be paid during the period for the patent to remain valid.

How long can a design be registered for? And how long does an unregistered design receive automatic protection for?

5 years initially; this can be extended for 4 further lots of 5 years. (i.e., 25 years in total)

3 years for unregistered ones.

How are trade secrets protected?

By the common law of confidence (though there is no formal definition of a ‘trade secret’); by the Trade Secrets Regulations 2018.

When is a trade secret recognised as such under common law of confidence? three-part test

1. The secret must have ‘a quality of confidence’ (not public knowledge)

2. The secret was provided with the expectation of confidentiality

3. Disclosing the secret, or threatening to, will cause detriment to the owner of the secret

What is a trade secret under the Trade Secrets Regulations?

1. It is not generally known among people who might normally know it in the course of their business

2. It has commercial value

3. The owner has tried to keep it secret.

What are the 5 essential elements of a contract?

1. A clear offer

2. Unqualified acceptance to create an agreement

3. Agreement must be supported by consideration

4. There must be intention to create legal relations

5. The parties have capacity to enter into a contract

What is a clear offer?

Clearly communicated offer from the offeror to the offeree, with specified terms and intent to be binding once accepted

What is an invitation to treat? And give an example

An invitation to treat is an invitation for someone to make an offer; there is room for negotiation and a lack of certainty in general. e.g. displaying goods, adverts

What is the multi-acceptance principle and why is it relevant to offers/ invitations to treat in regard to adverts?

If an advert was an offer, an unlimited number of people could accept it. This would cause problems where an advert is for a limited amount of goods and there were too many potential purchasers for the seller to satisfy the demand

What is required for withdrawal of offer before acceptance?

The offer can have a time limit, and after this limit no offer exists; an offer can be revoked, but only stands if this revocation is communicated to the offeree.

What does unqualified acceptance mean in contract law?

The offeree accepts the contract without adding further terms while accepting (if there is qualification, this is rejection of the offer and a counter-offer)

What is consideration in contract law?

For a contract to exist there must be consideration on both sides - both parties must receive a benefit from the other party performing their obligations under the contract. I.e., there must be agreement to exchange things that have value.

When do we assume that agreements between commercial parties are legal?

It is assumed for any agreement between commercial parties that there is an intention to create legal relations UNLESS there is evidence provided to the contrary

Who does and doesn’t have capacity to enter into a contract?

Adults do.

Minors - contracts bind the other contracting party but not the minor, apart from 16-17yr olds in Scotland.
Adults lacking mental capacity, or adults under the influence of drugs or alcohol (although this is not always the case when someone has voluntarily intoxicated themself)

What is the illegality principle in contract law?

The illegality principle states that illegal contracts are unenforceable; this covers:

1. where legislation specifically prohibits people from entering into certain contracts

2. where contracts involve crime

3. where the purpose of the contract is legal but it is performed in an illegal way, e.g. accidentally buying stolen goods

key = you can’t benefit from your own illegality.

What is the difference between a void and a voidable contract?

void = when a contract is not properly constituted, i.e., one of the elements is lacking, or it is illegal. this is always unenforceable.

voidable = the contract is valid/enforceable unless it is rescinded; it might be voidable if one of the parties is a minor, or there is a vitiating factor; the wronged/vulnerable party can rescind the contract

What are the three vitiating factors to make a contract voidable?

1. Misrepresentation

2. Duress (if the contract was entered into under duress, it is liable to be declared void)

3. Undue influence

REMEMBER: THESE DON’T MAKE A CONTRACT VOID, JUST VOIDABLE

What is misrepresentation as a vitiating factor and what are the three kinds?

There must have been some facts wrong - not opinions, facts - on which the contract was signed; the incorrect statement must be material to the decision to enter into a contract.

Three kinds =
1. Fradulent misrepresentation (knowing fraud)
2. Negligent misrepresentation (carelessness)
3. Innocent misrepresentation (neither fraudulent nor negligent)

What are the remedies for misrepresentation as a vitiating factor?

• The innocent party can apply to the courts to rescind the contract

• The claimant may also claim for damages.

CAN be BOTH. UNLESS this was a case of innocent misrepresentation, in which case it is either/or.

How do we define a material misrepresentation?

The statement made by one party to another has actively induced that party to enter into a contract

What is ‘duress to goods'?

When someone threatens to damage the property of another person

What is economic duress?

Changes to the terms of a contract once it has already been signed; threatening to breach a contract if the party doesn’t agree to amend its terms

What are the two requirements for something to be considered duress?

There must be:

1. Compulsion against the will of the victim (the victim has no realistic option but to agree to the demands)

2. Illegitimacy of the pressure (the threat is unlawful)

What is undue influence as a vitiating factor?

A contract is entered into as a result of one party taking advantage of/abusing an existing relationship of trust/confidence with another party

Does UK contract law require that both contracting parties volunteer all information they think could be relevant to the other party’s decision when they enter into a contract?

NO, info given must be accurate but there’s no need to volunteer info

Who takes overall responsibility for compliance with the ML Regulations?

Either the MLRO if they are senior enough within the firm OR a chosen member of the board/senior management

What approach do the ML Regs require financial and legal professionals to take in regard to money laundering?

A risk-based approach

When can a company have a defence under the Bribery Act?

When adequate policies and measures are in place to prevent bribery; this must include a clear, written statement that the company prohibits bribery.

A senior member of the org must have overall responsibility for developing and implementing the policy.

What companies can get got under the Bribery Act 2010?

Any org which carries out some or part of its business in the UK

What are the 4 main ways in which a contract can be discharged/ended?

1. performance (the parties perform their bits and the contract comes to a natural end)

2. agreement (the contract hasn’t been performed, but the parties agree to end the contract earlier)

3. impossibility of performance (doctrine of frustration; if the performance of the contract becomes impossible or unlawful, the contract may be discharged)

4. breach of contract (can be material or, if it causes little harm, immaterial)

What are the remedies when a contract is found to be frustrated?

Neither party can sue for breach of contract, BUT, if one party does their bit before the other person can, it might be possible for them to claim a reasonable sum (known as the quantum meruit)

What is a force majeure clause?

A clause on a contract stating that it will not be a breach of contract if an extreme, unforseeable event occurs which prevents/delays a party from performing their contractual obligations. DOESN’T DISCHARGE THE CONTRACT, JUST EXCUSES LIABILITY FOR NOT PERFORMING CONTRACT OR SUSPENDS IT.

What are conditions, warranties and innominate terms?

Conditions = major terms of the contract
Warranties = minor terms of the contract
Innominate = any other terms that can be either major or minor depending on the individual facts of the case

What are the three types of contract breaches (material; immaterial; and anticipatory) and what remedies are available for each?

• Material (breaching a condition of the contract/ a material contract term) - the innocent party can end the contract and sue for damages. This is a repudiatory breach.

• Immaterial (not that serious; unlikely to be able to end the contract, may still be entitled to damages)

• Anticipatory (where one party gives notice that they won’t be able to perform their obligations under a contract) (can end contract and sue for damages).

It’s always possible to keep the contract going.

What are expectation loss damages?

Payments by the party that breached the contract to put the innocent party in the same position as if the contract had been performed

What do remoteness of damages and duty to mitigate losses mean?

Remoteness of damages = must be losses that are a direct result of the breach of contract or a reasonably forseeable result

Duty to mitigate losses = the injured party still has a duty to take steps to minimise their losses; they’ll only be entitled to expectation loss damages if they’ve taken reasonable steps to minimise their losses already.

Other remedies for a breach of contract. What are restitution, specific performance and injunction?

Restitution = where one party has unjustly profited from breaching a contract; the injured party can sue and get back this equivalent sum

Specific performance (implement in Scotland) = when a party goes to court to force another party to perform their obligations under a contract

Injunction/interdict = a preventative remedy to try to stop a party from breaching a contract (i.e., a civil court order ordering a party to do something)