Chapter 1 - People in Business

Stakeholders

People affected by businesses operating around them

Stakeholders examples

1. Entrepreneur

2. Employees

3. Employers

4. Suppliers

5. Services Provider

6. Investor

7. Manager

8. Producer

9. Consumer

10. Government

11. Interest groups

Entrpreneur

An entrepreneur is a person who spots a gap in the market for a good or service, then takes on financial and personal risk or starting a business in order to make a profit

interest group

An interest group refers to a group of people who come together with a common interest/goal they lobby decision makers (gov and eu) to make a decision in their favour

Interest group example

IFA

IFA

Irish Farmers Association

Putting pressure on the government

- Lobbying

- Boycott

Lobying

Lobbying refers to contacting decision makers through petitions and letters

Boycott

Organising boycotts and publicity campaigns again businesses who act in unethical manners

IBEC

Irish Business and Employers Confederation

Trade unions

Trade unions are a type of interest group

Trade unions examples

- ASTI

- TUI

- INMA

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ASTI

Association of Secondary Teachers of Ireland

TUI

Teachers Union Ireland

INMA

Irish Nurses Midwives Association

what exists between stakeholders

A relationship exists between stakeholders

cooperative relationship

A cooperative relationship exists when stakeholders work together towards a common goal. It is a win-win relationship

What occurs when both stakeholders act in a mutually beneficial manner

If both stakeholders act in a mutually beneficial manner hey both gain and are better off then they were beforehand

Cooperative relationships

Purchasing manager and supplier/ entrepreneur and government

Purchasing Manager Relationship

A purchasing manager may ask for their credit period to be extended when they are experiencing cash flow problems

What happens if the supplier increases the credit period

If the increases the credit period they will win as they are building customer loyalty for future sales

How does purchasing manager benifit 3

The purchasing manager also wins as they will have some time to raise enough cash to pay off their debts and will not face penalties or bankruptcy

Government and Entrpreneur: What does the government invest

The government invests in export business through the state body enterprise Ireland which awards grants to to businesses to help them export

How does the government benifit from investing

This will help the government by increasing the amount of exports sold from Ireland thereby increasing government revenue

How does the business benifit from the government investment

This will help the business by providing them with capital to improve sales

Competitive Relationships

A competitive relationship exists when one stakeholder benifits at the other party's expense. It is a win lose relationship

What happens when both stakeholders want different outcomes

If both stakeholders want different outcomes when one gains the other will lose out

Examples of competitive relationships

Investors and entrepreneurs/ Employee and Employers

Investors and entrepreneurs

An investor will want a high return on investment. If they negotiate for a higher return from the entrepreneur they will receive a higher share of the profits and dividends at the expense of the entrepreneur who whill have to give more away of their business

Competitive relationship Employee and employer

An employee will want a fair wage. If employees want a higher wages because the cost of living has increased, if they negotiate a higher wage, they will increase their income and the employer will face higher wage costs

Cooperative relationship between employee and employer

Employers invest in training which upskills employees leading to increased motivation and productivity employer gives pay rise so a gain in income for employees and gain in productivity for employer

Contract

A formal agreement between two or more people enforceable by law

elements of an enforceable contract

1. Agreement

2. Consideration

3. Legality of form

4. Consent to contract

5. Capacity to contract

6. Legality of purpose

7. Intention to contract

1. Agreement

For an agreement to take place there must be an offer and acceptance

Offer

A promise made by the person making the offer to be bound by the offer provided the terms of the offer are accepted. It can be made orally in writing or by conduct and is a clear indication of the offerers willingness to enter an agreement under specified terms

Acceptance

The person or party that has received the offer agrees to the specified terms without any changes to any conditions of the original offer

Invitation to treat

An invitation to treat is only inviting a person to make an offer that does not have to be accepted.

2. Consideration

Something of value must pass between both parties to a contract for it to be legally valid

Usually money is exchanged for some good or service but anything of value exchanged for another item is consideration

Legality of form

Some contracts must be drawn up in a certain manner in order to be legally valid some contracts should be written in a legal manner

Legality of form example

Bank loan for the purchase of the house must be in writing and signed by both parties

Consent to contract

Each party choses to enter a contract voluntarily - if either party was forced to enter a contract through intimidation then it would not be valid if they can prove there was intimidation

Consent to contract example

If a party was given a death threat and forced to sign over shares in business to another party the contract would be rescinded in court if coercion was proven to have taken place

Capacity to contract

The legal ability and right to enter into a legal contract

people businesses and corporate entities have this ability under law

Capacity to contract

If a business that had gone bankrupt signed a contract with another business it would not be legally valid

A person would not have the capacity to contract if they were:

- Bankrupt

- Insane

- Under 18

- Under the influence

- A diplomat

A company would not have the capacity to contract if they were:

- Operating outside its powers (ultra vires)

- Bankrupt

legality of purpose

To be valid a contract must be for legal activities only

- An agreement between two parties for an illegal activity would have no legal reprucussions if one of the parties breached the the agreement

legality of purpose example

IF a drug dealer did not exchnage the agreed amount of money for a shipment of drugs they could not due the other party in court for compensation

Intention to contract

- There must be awareness that the agreement is going to be legally valid contract and not just a social arrangement or non legal agreement

What does a legally binding contract have

A legally binding contract has potential legal repercussions in court if one part does not do what is agreed

Inention to contract

Parties agreeing to meet for a game of five a side football cannot sue a person who does not show up and hence ruins the game. It was a social agreement and no intention for it to be a legal agreement

How a legal contract is terminated

- Fustration

- Performance

- Agreement

- breach

Fustration

An event occurs that makes the original terms of the contract impossible to complete by one of the parties - this could be due to bankruptcy and death

Fustration example

If a construction business goes bankrupt while carrying out its side of the contract the latter cannot be completed

Performance

When both parties fulfill what has been agreed in the original terms of the contracts the contract has been executed and has now ceased

Performance example

If a construction business builds an apartment block for a developer as agreed they are paid, then the contract has ended

Agreement

If both parties in the contract decide they no longer want to carry on the contract before it has ended they may agree by mutual consent to end the cotract early

Agreement

Micheal Horn Ceo of volkswagen left by mutual agreement after its Us sales continued to fall following the emissions - test cheating scandal

Breach

If one party breaks their contractual obligations they are said to be a in breach the other party could take legal action against them

Warranty

A smaller part of a contract failing to fulfill it would not lead to a breach of contract

Breach - example

If a construction business left a job for a property developer half way through because it received a much better offer the first party could sue the construction company and the judge could order the other party to complete the contract

Specific performance

The court orders the party who broke the contract to to fulfill its agreed terms and carry out the contractual obligations

Specific performance Example

IF a construction company left a job to go a more lucrative one a court could order it to go back to the first job and complete the contract as originally agreed

financial compensation

Court orders guilty party to pay damages in the form of money. The party in breach may have to pay them the value of the unfulfilled contract as well as extra costs such as any earnings lost by the injured party because of the breach

Financial compensation - Permanent TSB

IN 2019 Permanent TSB was in breach of its tracker mortgage contract with customers by not offering them lower rates as they agreed in the original contract. Permanent TSB was sued and ordered to pay damages in excess of the amounts its customers lost

Rescind the contract

A court orders that both parties return to the position they were in before the contract commenced - the contract would be effectively cancelled restoring both parties to the initial position