Business Law: Contract, Tort and Company Law Exam Revision

Void contract

No contract at all (e.g. illegal or contrary to public policy)

Voidable contract

Valid until the innocent party chooses to set it aside (misrepresentation, duress, undue influence, minor under 18)

Unenforceable contract

Valid but cannot be enforced, usually wrong form (e.g. oral land contract, guarantee not evidenced in writing)

Offer

Definite promise to be bound on specific terms (Carlill v Carbolic Smoke Ball)

Invitation to treat

Invitation to make an offer: adverts, shop displays, price lists, tenders

Counter-offer

New offer on different terms; destroys the original offer (Hyde v Wrench)

Request for information about an offer

NOT a rejection; original offer stays open (Stevenson v McLean)

Revocation of an offer

Must be communicated before acceptance; can be by a reliable third party (Dickinson v Dodds)

Silence as acceptance

Never acceptance (Felthouse v Bindley)

Postal rule

Acceptance complete when posted (not if offeror demands actual receipt)

Acceptance by fax or email

Effective when received

Consideration

Sufficient but need not be adequate (Chappell v Nestle, Thomas v Thomas)

Past consideration

No consideration (Re McArdle), unless there was a prior request implying payment (Re Casey's Patents)

Existing contractual duty

Not consideration unless exceeded (Hartley v Ponsonby) or practical benefit gained (Williams v Roffey)

Part payment of a debt

Does not discharge the whole debt (Foakes v Beer)

Part payment exceptions

Alternative consideration, creditors' bargain, third party pays

Social or domestic agreement

Presumed NO intention to be legally bound (Balfour v Balfour); rebutted if separated (Merritt v Merritt)

Commercial agreement

Presumed intention to be legally bound (Jones v Vernons Pools, rebutted only by clear wording)

Privity of contract

Only parties can sue; exceptions: Contracts (Rights of Third Parties) Act 1999, agency, trusts

Frustration

Performance becomes impossible through no fault of either party (Taylor v Caldwell); harder or dearer is not enough

Substantial performance

Pay the price less the cost of fixing defects (Hoenig v Isaacs)

Anticipatory breach

Breach before performance is due (Hochster v De La Tour)

Hadley v Baxendale

Remoteness: losses natural from breach OR in both parties' contemplation

Liquidated damages

Genuine pre-estimate of loss, enforceable

Penalty clause

Out of all proportion to legitimate interest, not enforceable (ParkingEye v Beavis was upheld)

Specific performance

Order to perform; mainly land; never personal services

Negligence: three elements

Duty of care, breach, loss caused by the breach

Neighbour principle

Donoghue v Stevenson: owe a duty to those you can reasonably foresee being affected

Duty of care tests (Caparo)

Foreseeable, proximity, fair just and reasonable, no public policy bar

Pure economic loss

Only recoverable with a special relationship (Hedley Byrne v Heller)

Res ipsa loquitur

The thing speaks for itself; burden shifts to defendant

Remoteness in negligence

Type of damage must be foreseeable (The Wagon Mound)

Contributory negligence

Claimant partly responsible, damages reduced

Volenti non fit injuria

Claimant freely consented to the risk, no damages

Vicarious liability

Employer liable for employee torts in the course of employment

Limitation period: contract and tort

6 years (3 years for personal injury in tort)

Salomon v Salomon

Company is a separate legal person (veil of incorporation)

Lifting the veil: examples

Sham company (Gilford v Horne), national identity (Daimler), group agency, wrongful or fraudulent trading, disqualified director

Public company minimum capital

50,000 allotted, with at least 25% paid up plus all premium

Public company minimum directors

2 (private company needs 1)

Public company trading certificate

Required before trading (s761); contracts still valid

Certificate of incorporation

Conclusive evidence; company exists from the date on it

Pre-incorporation contract

Company not bound and cannot ratify; person making it is personally liable (s51 CA 2006)

Articles of association (s33)

Contract between company and members, and between members; cannot enforce in another capacity (Eley)

Changing articles

Special resolution, file with Registrar within 15 days

Persons with significant control

Over 25% of shares or votes

Micro entity thresholds

Turnover 632k, assets 316k, 10 staff (2 of 3)

Small company thresholds

Turnover 10.2m, assets 5.1m, 50 staff (2 of 3)

Medium company thresholds

Turnover 36m, assets 18m, 250 staff (2 of 3)

Ordinary resolution

Over 50%

Special resolution

75% or more; file with Registrar within 15 days

Removing a director

Ordinary resolution with special notice (28 days)

Removing an auditor

Ordinary resolution with special notice

AGM notice

21 days (public companies only must hold one)

General meeting notice

14 days (90% can agree to shorter)

Requisitioning a general meeting

5% of voting rights; directors call within 21 days, held within 28 days

Poll demand

10% of voting rights

Class rights challenge

15% of the class, apply to court within 21 days, must show unfair prejudice

Blocking a special resolution

Over 25% of votes

Shares vs debentures

Shares = owner, dividends from profit; debentures = creditor, interest regardless of profit

Preference shares

Fixed dividend paid first, capital repaid first, no surplus share, limited votes

Issuing shares at a discount

Not allowed (nominal value); shareholder pays the discount plus interest

Share premium account

Non-distributable reserve

Allotment authority

Articles or ordinary resolution, maximum 5 years

Pre-emption rights

New equity shares for cash offered to existing holders first; 21 days to accept

Allotment return

Register within 2 months

Reducing share capital: public

Special resolution plus court approval

Reducing share capital: private

Special resolution plus solvency statement (no court)

Permissible capital payment

Private companies only; special resolution within 1 week; payment between 5 and 7 weeks after

Share buyback return to Registrar

28 days

Distributable profits

Accumulated realised profits less accumulated realised losses; revaluation reserve excluded

Fixed charge

Specific asset, attaches at once, company cannot freely sell

Floating charge

Class of changing assets, company deals freely until crystallisation

Registering a charge

21 days, otherwise void against liquidator

Charge priority

Fixed over floating, registered over unregistered, otherwise first created

Floating charge avoided by liquidator

Created within 12 months of winding up (2 years if connected) while insolvent

Administration: who can appoint

Court, QFCH (2 days' notice to prior QFCH), or company/directors (5 days' notice to QFCH)

Administrator: notice of appointment

File within 7 days; statement of affairs request within 7 days, officers comply in 11 days

Administrator: proposals

Within 8 weeks; normally ends within 12 months

CVA moratorium

28 days (can extend to 2 months)

Voluntary liquidation resolution

Special resolution (ordinary if articles provide)

Voluntary liquidation gazette notice

14 days

Members' voluntary liquidation

Solvent; declaration of solvency, debts payable within 12 months

Creditors' voluntary liquidation

Insolvent; statement of affairs within 7 working days; deemed consent unless 10% object

Compulsory liquidation petition

Creditor owed 750 or more, unpaid after 3 weeks' demand; Official Receiver becomes liquidator

Preference: time limits

6 months (2 years if connected person)

Transaction at an undervalue

2 years before liquidation

Liquidation priority order

Costs, preferential (employees), HMRC, floating charge holders, unsecured, members

Fraudulent trading

Intent to defraud; criminal (10 years) and civil; up to 15 years disqualification

Wrongful trading

Should have known no reasonable prospect of avoiding insolvent liquidation; civil only

Directors' duties (7)

Act within powers, promote success, independent judgment, care skill and diligence, avoid conflicts, no third-party benefits, declare interests

Substantial property transaction

Over 100,000, or over 10% of assets and over 5,000

Director service contract needing approval

2 years or more

Insider dealing penalty

Up to 7 years

Bribery Act penalty

Up to 10 years

Money laundering (POCA) maximum

14 years (failure to report 5 years, tipping off 2 years)

Failure to prevent fraud (large business)

Over 250 staff, 36m turnover or 18m assets (2 of 3)

Employee vs independent contractor

Personal service, control, mutuality of obligation first, then tools, risk, uniform, tax

Written particulars of employment

On or before the first day of employment

Minimum notice by employer

1 week (1 month to 2 years); 1 week per year (2 to 12 years); 12 weeks (12+ years)