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ACCA (ENG) (F4) Corporate and Business Law Mind Maps

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Essential Elements of Legal Systems

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Cases The English Legal system


Area
Golden rule

Case
Adler v George

Description
The word in the vicinity of a prohibited place in the Official secrets Act was held to cover the acts of the defendant which took place within a prohibited place The contagious diseases (animals) act provided that any ship carrying animals should carry them in pens. Defendants sheep washed overboard. Held Purpose of act was to prevent spread of diseases. Claim failed.

Mischief rule

Gorris v Scott

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The Civil Courts - UK


European Court of Justice
If EU matter

European Court Of Human Rights

Privy Council

House of Lords

Court of Appeal EAT


High Court

Ch a

County

nc er

Fa m y

ily

Queens Bench

Employment Tribunal 7
Magistrates (small area for council tax and some family OneStudy Trainingmatters) Limited

Arbitration

The Criminal Courts - UK


European Court of Justice House of Lords European Court of Human Rights

Court of Appeal

Divisional Court QBD


Points of law

Crown Court

Magistrates Court 8
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The Law of Obligations

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Watch out for Williams v Roffey - considered a new contract when: 1.Practical benefit. 2. Not extracted by fraud or pressure

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Cases Valid contract


Area
Offer

Case
Carbolic Smoke Ball Co

Key Points
A contract can be formed where acceptance is by conduct (unilateral). Note The offer cannot be withdrawn when performance to meet offer has began Deemed accepted on date of posting (unless strike). Goods on a shop shelf are an invitation to treat

Acceptance (postal rule) Invitation to treat

Household Fire Insurance v Grant Pharmaceutical society v Boots cash chemists

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Cases Valid contract


Area
Invitation to treat (adverts)

Case
Partridge v Chrittenden

Key Points
Case - The appellant put the following advert in a magazine: Bramblefinch cocks and Hens 25s each Held Advertisements are not offers unless definite (carlill) Facts - The restriction of offensive weapons act creates a criminal offence of offering for sale certain offensive weapons. A shopkeeper was prosecuted under this statute for displaying a flick knife in his window. Held Invitation to treat as shopkeepers can refuse Case - Wrench offered to sell Hyde a farm for 1000. Hyde made a counteroffer, by offering 950. Wrench rejected this. Later Hyde came back and said that he now accepted the original offer of 1000. Wrench rejected it. Held A new offer was made Facts M querying delivery times in Iron. S tried to pull the offer saying that this query was a counter offer. Held Cannot treat simple queries as counter offers.

Invitation to treat

Fisher v Bell

Counter offer

Hyde v Wrench

Offer

Stevenson v McLean

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Cases Valid contract


Area
Intention

Case
Simpkins v Pays

Key Points
Case Competition where 3 friends entered every week, one name on application, winner refused to share proceeds. Held - Intention to create legal relations if there is mutuality in the arrangements between the parties Case Pools vendor stole money. Held Disclaimer on back was enough to protect Vernons. Stilk Some Seamen, captain offer extra wages if remaining men completed voyage. Held - An undertaking to perform a contract is not consideration for a new contract Hartley Significant number of seamen deserted, captain offer extra wages if remaining men completed voyage. Held Entitled to payment as changed their duties to an extent that they would not be bound to continue under the existing contract Case Extra money offered to ensure work completed on time to avoid the Plaintiff suffering a penalty clause. Held Even though defendant was in effect doing nothing over and above the original agreement, there was a new contract as penalty clause were avoided as was cost of employing new contractors. Also, promise to pay extra had not been extracted by fraud or pressure

Intention (commercial, assumption is binding) Consideration. New contracts require new consideration

Jones v Vernons pools

Stilk v Myrik And Hartley v Ponsonby

The performance of an existing contractual duty may be sufficient if it confers some benefit of a practical nature on the other party

Williams v Roffey

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Cases Valid contract


Area
Consideration Must be valuable

Case
Collins v Godefroy

Key Points
Case - A witness was promised payment it he would attend court and give evidence. Held Not consideration as duty required anyway.

Past consideration is insufficient

Re McArdle

Case A husband and wife had repaired a house. Held Their work could not support a later promise to reimburse the cost of the repairs The case established that an advertisement that goods will be put up for auction does not constitute an offer to any person that the goods will actually be put up, and that the advertiser is therefore free to withdraw the goods from the auction at any time prior to the auction.

Offer and Acceptance

Harris v Nickerson

Acceptance

Felthouse v Bindley

This is the leading English contract law

case on the maxim that "silence does not amount to acceptance". Preperty owner was told, "If I hear no more about him, I consider the horse mine at 30l. 15s." No contract made!

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Cases Contract rules


Area
TERMS can be conditions, warranties or innominate. Breach of condition allows other party to end contract. Work out if the breach is a term or a representation

Case
Poussard v Spiers And Bettini v Gye

Key point
Poussard - Failed to appear on opening nights. Held- A breach in a condition gives the innocent party the right to repudiate the contract and claim damages. Bettini Failed to attend rehearsals. This was a warranty, therefore no right to end contract. The plaintiff was a buyer of hops and asked whether sulphur had been used in their cultivation. He added that if it had that he would not even bother to ask the price. The seller, the defendant, duly assured him that sulphur had not been used. It later transpired that sulphur had been used and the Claimant brought an action for breach. This assurance was held to be a condition of the contract because it was of such importance that without it, the buyer would not have contracted.

Terms or representations Strength of statement

Bannerman v White

Terms or representations Strength of statement


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Oscar Chess v Williams

The defendant was a private individual who sold car to a garage. He mistakenlty got registration date wrong by five years. Court held that as plaintiffs had greater skill the mistake would be regarded as a term.

Cases Contract rules


Area
Privity only parties to contract can sue and be sued

Case
Dunlop v Selfridge

Key Point
Dunlop, a tyre manufacturing company, made a contract with Dew, a trade purchaser, for tyres at a discounted price on condition that they would not resell the tyres at less than the listed price and that any reseller who wanted to buy them from Dew had to agree not to sell at the lower price either. Dew sold the tyres to Selfridge at the listed price and made Selfridge agree not to sell at a lower price either. However, Selfridge sold the tyres below the price he promised to sell them for. Dunlop then sued Selfridge for an injunction from selling tyres and damages. Held Dunlop lost. First, the doctrine of privity requires that only a party to a contract can sue. Second, the doctrine of consideration requires a person with whom a contract not under seal is made is only able to enforce it if there is consideration from the promisee to the promisor. The claimant was able to sue successfully in her capacity as the administratrix of her husband's estate, her husband being a party to the contract. The fact that she could enforce the contract was not a derogation

Privity only parties to contract can sue and be sued (exception)

Beswick v Beswick

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Cases Contract rules


Area
Exemption clauses Incorporation by Reasonable Notice Terms are only contractual if both parties had some sort of reasonable notice e.g they were found ion a place where you might expect terms to be found. Exemption clauses Incorporation must be before contract made. Exemption clauses Incorporation must be before contract made. Exemption clauses Deemed to accept if signed contract

Case
Chapelton v Barry Urban District Council

Key Point
showed that a ticket for a deckchair was a mere receipt or voucher, showing length of hire and the fee, not purporting to set out terms.

Olly v Marlborough Court Thornton v Shoe Lane Parking LEstrange v Gracob

Held - That a notice (on the back of a hotel door)giving conditions, seen later than the formation of the contract was not incorporated. Showed the time of formation of contract was the ticket issue, and notices elsewhere in the carpark were not incorporated. Incorporation by signature - this binds both parties unless there has been misrepresentation.

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Cases Breach of Contract


Area
Anticipatory Breach Can immediately treat as discharged

Case
Hochester v De la tour

Key point
Facts: In April, De La Tour employed Hochester to act as a travel courier on his European tour, starting 1 June. On 11 May De La Tour wrote to Hochester stating he would no longer be needing his services. Hochester started proceedings on 22 May. The defendant claimed there would be no cause of action until 1 June. Held The claimant was entitled to start the action as soon as the anticipatory breach occurred. Facts: Defendant asked claimant to cancel contract to place adverts on litter bins. Claimants refused and carried out contract. Held Claimants entitled to carry out contract and claim agreed price Facts R engaged to play leading role . R repudiated. Anglia could not find suitable replacement. Held Anglia could recover the whole of their wasted expenditure from R. Facts Brace employed for two years. After five months partnership terminated. Offered identical employment with reconstituted partnership. Refused and sued for remainder of two years wages. Held Brace had not mitigated loss. Could only recover nominal damages.

Anticipatory Breach Wait until due date then sue

White & Carter (councils) v McGregor

Contract Law Measure of damages Reliance Damages

Anglia Television v Reed

Contract Law Measure of damages (Plaintiff to mitigate loss)

Brace v Calder

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Cases Breach of Contract


Area
Contract Law Damages Quantum Merit

Case
Planche v Colburn

Key point
Contract to write 12 magazine articles pulled half way through Held Only entitled to payment for articles written B Delayed in transporting a mill shaft for repair. H suffered loss through inactivity. Held Can only recover normal business loss. Entitled to assume business had spare shaft Swan Tours Holiday apartments were on building site Held Non-financial losses may be claimed where the contract is one for the provision of enjoyment

Contract Law Damages for Normal Loss (not too remote)

Victoria v Newman Laundry

Contract Law Damages for stress

Jarvis v Swan Tours

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Cases - Tort
Area
Tort Care owed by defendant (the neighbour principle (only covered physical loss)

Case
Donoghue v Stevenson

Key point
Case Mrs D found snail in ginger beer was so upset that she suffered physical illness. Held Duty on behalf of manufacturer to take care.You must take care to avoid acts or omissions which you can reasonable foresee would be likely to injure your neighbour. Slipped on yogurt.

Tort Was there a breach? Assess standard of care Tort Was there a breach? Assess standard of care

Thing speaks for itself res Pisa coquito. Tesco v Ward Higher if possess skill and facts known Case Claimant injured because of Roe v Ministry of Health invisible cracks in oxygen tube. Held Defendant not liable as behaviour judged in light of current medical knowledge at the time. Glasgow council Sawyers v Harlow Latimer v AEC

Tort probability of injury Tort defences Contributory negligence Tort Was there a breach? Assess standard of care

Warning sign to touch poisonous berries was not enough. Woman who escaped from public toilet was held to contribute. Floor covered with sawdust was enough care. Not liable to employee who slipped on only patch not covered

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Cases - Tort
Area
Tort demonstrate Claimant must demonstrate he suffered loss (casual link) Tort Negligent misstatement. (Can claim if financial loss was suffered)

Case
Jeb fastners v Marks, Bloom & Co

Key point
Case Accountants audited accounts and audit report was negligently prepared, claimant then took over company. Held Defendants owed claimants duty of care because they knew claimant company was considering taking over company. The appellants (Hedley Byrne) were advertising agents, who had contracted to place advertisements for their clients (Easipower) products. As this involved giving Easipower credit, they asked the respondents, who were Easipowers bankers, for a reference as to the creditworthiness of Easipower. Heller gave favourable references (but stipulated that the information was given without responsibility on their part). Relying on this information, the claimants extended credit to Easipower and lost over 17,000 when the latter, soon after, went into liquidation. The claimants sued Easipowers bankers for negligence. Held: The respondents disclaimer was adequate to exclude the assumption by them of the legal duty of care. However, in the absence of the disclaimer, the circumstances would have given rise to a duty of care in spite of the absence of a contractual or fiduciary relationship. Thus, but for the disclaimer, the bank was liable on its misleading statement. Note: nowadays the disclaimer might be invalidated under Unfair Contract Terms Act 1977 (UCTA 1977). A member of the public who relied on incorrectly audited accounts was not awarded compensation by the House of Lords as the auditors duty is owed simply to the company and its shareholders as a body. Final meeting with company who wanted to buy ADT, partner stood by accounts as accurate. Held Auditors liable.

Hedley Byrne v Heller

Auditors Duty of care to third parties

Caparo Industries v Dickman and others

Auditors who stood by accounts were liable to third parties

ADT v BDO Binder Hamlyn

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Employment Law

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Cases Employment Law


Area
Employment Law Control test Employment Law Integration test

Case
Walker v Crystal Palace Football club Whittaker v Minister of Pensions & National Insurance OKelly v Trusthouse Forte Plc Pepper v Webb

Details
Held Footballer is employee as he is directed when to train and when to play. Held Trapeze artist was employee as she was required to do other general task in addition to her circus work. Held Wine worker was self employed as there was no mutuality of obligation Case planted plants where he wanted no where told. Held Employee should obey reasonable orders Case Employee stole from till Held Employee must act in Good Faith. Case - Railway workers worked to rule. Held Must Co-operate with employer Case An employee negligently ran over another employee with a forklift truck. Held He was liable to his employer for damages. Case Employer covered spill with sawdust, tiny patch remained. Employee slipped on floor. Held Employer had not acted unreasonably Case Employer enforced gardening leave on employee. Held Employer breached contract as Employee had particular skills which had to be maintained.

Employment Law Economic reality test Employment Law Implied terms for employees. Obey reasonable orders

Employment Law Implied terms for employees. Act in good faith Employment Law Implied terms for employees. Must co-operate with employer. Employment Law Implied terms for employees. Care and Skill

Sinclair v neighbour SofS v ASLEF Lister v Romford Ice & cold storage

Employment Law Implied terms for employers. Provide a safe system of work

Latimer v AEC

Employment Law Implied terms for employers. Provision of work

William Hill v Tucker

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Cases Employment Law


Redundancy Kind of work ceased European Chefs Catering v Currell (1971) Case - A pastry cook was dismissed because the requirement for his speciality (clairs and meringues) had ceased. Held:The dismissed pastry cook had been dismissed for redundancy as the need for the particular work he contracted to do had ceased.
Case A quiet public house was modernised by installing a discotheque. The 57-year old barmaid, Mrs Ward, was dismissed in order to make way for a younger more glamorous barmaid. Held: Mrs Ward had not been dismissed for redundancy as there was no change in the nature of the particular work being done.

Redundancy Kind of work ceased (not!)

Vaux and Associated Breweries v Ward (1969)

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The Formation and Constitution of Business Organisations

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Cases - Agency
Area
Creation - Ratification

Case
Kelner v Baxter

Details
Facts Promoters entered into contract on behalf of company before it was incorporated to purchase property. Other party was not paid Held Company could not exist to ratify contract. Promoters personally liable. Facts Station master had to stable horse overnight. Held GNR entitled to recover costs as emergency, principal could not be contacted, property was entrusted to GNR and GNR acted in best interests of principal. Facts One director effectively ran company and on previous occasions had honoured contracts with claimant. Board refused to honour one contract as director had no express authority. Held Director had acquired authority by estoppel. They had honoured similar contracts in the past. Facts New owners of hotel continued to employ original owner as the manager. In new agreement, mgr ordered not to buy certain items. He breached this and still bought cigars from third party. Held The purchase of cigars was in usual authority of hotel manager. Contract binding on owners.

Creation - Necessity

Great Northern Railway v Swaffield

Creation - Estoppel

Freeman and Locker v Buckhurst Park Properties

Authority

Watteau v Fenwick

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Cases - Promoters
Area
Definition of Promoter

Case
Twycross v Grant

Key Points
A promoter is a person who undertakes to form a company with reference to a given project and to set it going, and who takes the necessary steps to accomplish that purpose. N granted lease to P before P was formed, N withdrew. P sued. Held: P not entitled to succeed as it could not adopt nor ratify a contract made before it (P) existed. K who knew company did not exist, wrote to B, C and D as agents for 'proposed' hotel company. B, C and D accepted offer to purchase wine - on behalf of the company. Wine delivered and drunk but company refused to pay K. Held: Company not liable but B, C and D held personally liable. Promoter not entitled to keep profit. Erlanger and friends sold a lease to a company making a substantial profit. They claimed disclosure to the board and appealed to keep the profit. Held The disclosure was not adequate as 2 directors were abroad, one was too busy, and rest were paid agents and instruments of vendors. Liquidator tried to claim expenses. Held Claim failed as company being promoted was not in existence, therefore could not request liability. Contract made at time when both parties were aware that company had not been formed. The defendant (company promoter) relied on that fact to avoid being personally held responsible for the contract (or for breach of that contract). Held: A person will be liable unless there was an express agreement to the contrary in the contract. In this case the promoter was claiming that there was an implied agreement. The court rejected his claim and held that he was personally liable.

A company cannot ratify a contract made before it was incorporated

and Colonisation Co V Pauline Colliery Syndicate 1904

Promoters - Personal liability in preincorporated contracts

Kelner V Baxter 1866

Promoters Cannot make secret profits

Erlanger v New Sombrero Phosphate Co

Promoters no right to remuneration or pre-incorporation expenses Promoters - Personal liability in preincorporated contracts - post 1972

Re National Motor Mail Coach Co

Phonogram 1981

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Cases - Articles
Area
Articles Contract between members Articles Members are only bound in contract in capacity as members

Case
Rayfield v Hands Eley v Positive Life Assurance Co Ltd

Details
Case where directors were bound to purchase shares offered to them by members. Eley relied on a statement in the Articles that he would be solicitor to company for life. Held The Company could dispose of Eleys services as solicitor as it was not a general right of membership. Long struggle between Mallard Family (majority shareholders) and Greenhalgh a minority shareholder, Articles stated that shares must first be offered to existing shareholders, at a fair value. Mallard Family wanted to sell but not to Greenhalgh: Family carried a special resolution that there was no need to offer shares to other shareholders first. Greenhalgh challenged this in court. Held : Test - Was change to benefit of company as a whole or to majority. Alteration was held to be valid as the alteration, affected all shareholders. The articles were changed to permit the directors to purchase, at a fair price, the shares of any member competing with the business. The minority affected claimed that this process was an abuse of majority power as it effectively expelled members. Held: Change in articles was valid as the change was made in the interests of the company.

Articles -Contesting a change in the Articles of Association

Greenhalgh V Arderne Cinemas Ltd 1950

Articles Interests of company

Sidebottom v Kershaw, Leese and Co Ltd 1920

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Cases - Articles
Area
Articles - The company's constitution can be made unalterable

Case
Bushell V Faith 1990

Details
1. Inserting clause in memorandum as an unalterable (entrenched) article. 2. Articles may give to member additional votes so that he may use these to block resolutions. H was in dispute with company. Articles provided that disputes between company and members be settled by arbitration. H refused and sought to sue the company. Held: H had to abide by the 'contract' he had entered into as a member of the company.

Contract Memo and Arts

Hickeman V Kentor Romny Marsh Sheepbreeders Association 1915

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Cases - Veil
Area
Legal Identity

Case
Salomon V Salomon & Co Ltd 1897

Details
Mr Salomon was a secured creditor in company. When company went into liquidation Mr Salomon was paid debt first to the detriment of the other creditors. The other creditors protested as it was Mr Salomons company. Held - Company separate legal entity from owner and as such company law provided that secured creditors be paid first. Lee died in a crop spraying accident; he owned all but one share in the company. His widow claimed for employees death benefit. Held - Lees widow entitled to compensation as Lee was an employee. Horne breached an injunction not to solicit s customers. Veil was lifted to show company was formed to circumvent this injunction. Belhaven pubs restructured business for general commercial reasons, plaintiff wanted viel lifted on new subsidiary to pay a debt which could no longer be paid by original borrower. Held -Cannot lift veil on a new company (with same shareholders) if complaint is with a dissolved company. Dissolved company should be reinstated. Cannot lift veil to claim against parent. Subsidiaries are separate entities unless indissoluble relationship (see DHN v Tower Hamlets). Grocery business ran by DHN, Premises owned by wholly owned company. Local authority acquired premises and wanted to pay compensation to DHN as licensee. Held Licensee compensation not adequate and substantial compensation should be paid as group treated as single unit.

Legal Identity

Lee v Lees Air Farming

Lifting the veil Sham

Guildford Motor Co v Horne

Veil not lifted genuine restructure

Ord v Belhaven pubs

Veil not lifted -Subsidiary

Adams v cape

Veil Lifted Subsidiary

DHN Food Distributors v London Borough of Tower Hamlet

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Capital and the Financing of Companies

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Management, Administration and Regulation of Companies

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Directors Cases
Area
Best interests of the company (now s171)

Case
Hogg v Cramphorn

Details
Another case involving a take-over where again the directors believed that the take-over would not be to the advantage of the company. In this case the directors issued shares to the trustees of the pension fund to foil the prospective take over. Held Provided directors acted in the best interest of the company, the company can in general meeting ratify the use of their powers for an improper purpose. However, the court ruled that only one vote per share would apply not the ten votes per share as given by the directors to the trustees. In recent cases, two involving the Secretary of State of Trade and Industry, the question of whether a person is or is not a director has been examined. The test appears to be what the person does this will determine whether the courts will regard him or not as a director. Case Cooley had been negotiating contract on behalf of company but third part wanted to award it to him personally. Cooley resigned (without giving reasons) and took contract personally. Held He as in breach of fiduciary duty as he had profited personally by use of an opportunity which came to him through his directorship. He was accountable to company for benefit gained. In the Articles there was the power to appoint an MD. This power had not been used. One of the Directors with the knowledge of, but not express authority of the remainder of the board, acted as if he were the MD in getting an architect to do work for the company. The company refused to pay the fees of the architect. Held: Had to pay as it had gone along with the Director in representing himself as MD.

De Facto Directors

Re: Hydrodam () ltd 1994 Secretary of State of Trade and Industry V Richardson 1998

Duty to declare interest in proposed transaction or arrangement

IDC v Cooley

Board allowing a director to act in a capacity he is not authorised may be estopped from relying on the true facts at a later date. By their action they are held to have permitted an agency by holding out
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Freeman and Lockyer V Properties (Mangal Ltd) 1964

Directors - Cases
Area
Directors - Duty of Care Now s 174

Case
Re: City Equitable Fire Insurance Co Ltd 1925

Details
In this case the insurance company chairman swindled it of large sums. The other directors were negligent of their duty of care in that they left the finances to the Chairman. Held - Directors negligent but not liable because the articles exempted directors from liable for negligence, unless it was wilful. (This would not hold today see below) A liquidator brought a claim of negligence. Held Standard is stated in s.214 of insolvency act. Director must show skill of his trade (e.g. accountants have higher duty of skill and care over finances) or skill that would objectively be expected of a director in that company. Two non executives were held responsible, after signing blank cheques. In this case the judge decided the duty of care as being the care an ordinary man might be expected to take on his own behalf.

Directors Duty of care Now s 174

Re DJan of london

Directors Duty of Care and the advent of the INSOLVENCY ACT 1986 s.214 which has put an additional burden on directors Now s 174

Dorchester Finance Co Ltd V Stebbing 1977; and confirmed in

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Cases Secretary and auditors


Area
Auditors Duty of care to third parties

Case
Caparo Industries v Dickman and others

Description
A member of the public who relied on incorrectly audited accounts was not awarded compensation by the House of Lords as the auditors duty is owed simply to the company and its shareholders as a body. Final meeting with company who wanted to buy ADT, partner stood by accounts as accurate. Held Auditors liable. Secretary hired cars and used them for his own purposes. Held Reasonable to assume secretary has authority to enter in to such transaction and company was held liable.

Auditors who stood by accounts ADT v BDO Binder Hamlyn were liable to third parties

Secretary is an agent of the company

Panorama developments Ltd v Fidelis Furnishings Fabric Ltd.

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Legal Implications Relating to Companies in Difficulty or in Crisis

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Cases Fraudulent and wrongful trading


Area
s214

Case
Wrongful trading

Details
Wrongful trading is when a company continues trading even though the director knew or should have known that there was no reasonable prospect that the company could avoid insolvent liquidation and the company did subsequently go into liquidation. A company was by negligence allowed to slide into liquidation. Fraudulent trading is where a company continues to carry on trading when the directors know that there are no reasonable prospects of the creditors being paid. It requires evidence of dishonesty other than incompetence.

s.214 Wrongful Trading S213 Insolvency Act

Re Produce Marketing Consortium Ltd 1989 Fraudulent Trading

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Dealing Acquiring or disposing of securities whether as principal or agent

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Insider dealing sections


Area
s52(2)

Details
Definition of insider dealing

Details
states that:"an individual who has information as an insider is also guilty of insider dealing if:a)He encourages another person to deal in securities that are (whether or not the other knows it) price-affected securities in relation to that information, knowing or having reasonable cause to believe, that the dealing would take place in the circumstances mentioned in subsection (3); or b)He discloses the information, otherwise than in the proper performance of the functions of his employment, office or profession, to another person. These include:1.There was no expectation of profit or avoidance of loss where there is reasonable grounds for the provider to believe that the information was widely available; and 2.s53(c) and (2) (c) that he would have done what he did even if he had not had the information.

S53

Defences to insider dealing

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Governance and Ethical Issues Relating to Business

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