Law for business students 5th adams

Karen Boyd FCCA, Senior Lecturer at Northumbria University.

Law for Business Students
FIFTH EDITION

ALIX ADAMS
Law for Business Students provides an approachable
introduction to the law for those new to the subject or studying
law as part of a non-law degree. Alix Adams’ writing style
brings the subject to life and encourages you to apply the law
to your own experiences and the world around you.
The new edition supports your learning and engagement
with this area through a new colour design and a number of
learning features that include:
❉ Learning objectives, chapter introductions and
summaries to help structure your reading, aid navigation
and ensure you understand the key points
❉ Real life examples to highlight how the law works in
everyday situations
❉ In the news features that focus on topical and recent cases
or issues and address how the law is relevant today
❉ End of chapter key terms to provide clear definitions for
technical or legal terms
❉ Quizzes to allow you to test your knowledge on the key
points in each chapter while web activities encourage
further exploration of relevant law as it relates to you

Visit www.mylawchamber.co.uk/adams to access
interactive exercises and flashcards designed so
that you can test yourself on topics covered in the
book. There are also legal updates and live weblinks

to help you impress examiners and lecturers with
knowledge of the latest developments.
Lecturers: use the site to access resources to
help you teach the subject, including a testbank
of multiple choice questions which can be used
to assess students’ progress.

ALIX ADAMS

Worried about getting to grips with cases?
Case Navigator offers unique online support that helps you
improve your case reading and analysis skills in Business
Law. Cases contained within this resource are highlighted
throughout this book. The LexisNexis element of Case
Navigator is only available to those who currently subscribe
to LexisNexis Butterworths online.

FIFTH
EDITION

C AS E

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POWERED BY

ALIX ADAMS has over thirty years’ experience of teaching

Law for
Business
Students

V I G AT O

law from GCSE to degree and postgraduate level and is a
qualified Barrister.

ADAMS

❉ Assignments, Worth thinking about?, and Take a closer
look features which all encourage you to think in more
detail about the law and discuss some more complex
issues

Do you want to give yourself a head start come
exam time?

FIFTH EDITION

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www.pearson-books.com

Cover image © Getty Images

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ideal seminar activities.’

Law for Business Students

‘Alix Adams really knows business students. She concentrates on explaining the principles and application of
law, without the complex details of loads of cases. Simple, easy to understand explanations are throughout the
book, making it enjoyable for the students. The new activities and assignments at the end of each chapter make

V I G AT O

POWERED BY

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Law for Business Students

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We work with leading authors to develop the strongest educational
materials in business and law, bringing cutting-edge thinking and
best learning practice to a global market.
Under a range of well-known imprints, including
Longman, we craft high quality print and
electronic publications which help readers to understand
and apply their content, whether studying or at work.
To find out more about the complete range of our
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Page iii

Law for Business
Students
Fifth edition

Alix Adams
LLB (Bristol), LLM (Cardiff), Barrister, Cert. Ed.


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For Cherry, who helped to make it happen
Pearson Education Limited
Edinburgh Gate
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Essex CM20 2JE
England
and Associated Companies throughout the world
Visit us on the World Wide Web at:
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First published under the Pitman Publishing imprint in Great Britain in 1996
Second edition published 2000
Third edition published 2003
Fourth edition published 2006
Fifth edition published 2008

© Pearson Professional Limited 1996
© Pearson Education Limited 2000, 2008
The right of Alix Adams to be identified as author of this work has
been asserted by her in accordance with the Copyright, Designs and Patents Act 1988.
All rights reserved. No part of this publication may be reproduced, stored in a retrieval
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Crown Copyright material is reproduced with the permission of the Controller of HMSO and the
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ISBN: 978-1-4058-5888-5
British Library Cataloguing-in-Publication Data
A catalogue record for this book is available from the British Library
Library of Congress Cataloging-in-Publication Data
Adams, Alix.
Law for business students / Alix Adams.—5th ed.
p. cm.
Includes index.
ISBN 978-1-4058-5888-5 (pbk.)
1. Business law–England. I. Title.
KD661. A33 2008
346.4207—dc22
2008006019
10 9 8 7 6 5 4 3 2
12 11 10 09 08

Typeset in 9.5/13 pt Stone Sans by 30
Printed and bound by Rotolito Lombarda, Italy
The publisher’s policy is to use paper manufactured from sustainable forests


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Brief contents

Contents
Guided tour
Acknowledgements
Preface
Table of cases
Table of statutes
Table of statutory instruments
Table of European and international legislation

vii
xviii
xxii
xxiii
xxiv
xxxiii

xxxvii
xxxix

Part 1: Introduction
1
2
3

Getting started: an introduction to studying law
How the law is made
Resolving legal disputes

Part 2: Law of contract, agency and sale of goods
4
5
6
7
8

The law of contract: offer and acceptance
The law of contract: consideration, intention and privity
The terms of the contract
Defects in the contract: misrepresentation, mistake, duress and
undue influence
More defects: illegality and incapacity

3
4
16
40

61
62
82
100
126
154
v


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BRIEF CONTENTS

9
10
11
12

Discharge of the contract and remedies for breach
The law of agency
Sale of goods: the contract and its terms
Sale of goods: transfer of ownership, performance and remedies for
breach of contract

Part 3: The law of tort
13
14
15

Tort liability for defective goods
Tort liability for defective services
Tort liability for premises

Part 4: Elements of employment law
16
17
18

Rights at work: the contract of employment and health and safety at work
Rights at work: protection against discrimination
Rights at work: protection against dismissal and redundancy

Part 5: An introduction to company law
19
20
21
22
23

Part 6:
24
25

Business organisation
Forming a registered company
Running the company: raising and maintaining capital
Daily management of the company: functions of directors, secretary
and auditors
Company meetings and shareholder participation

General principles of intellectual property law
Statutory intellectual property protection: copyright, designs, patents and
trade marks
Common law protection of intellectual property: passing off, malicious
falsehood and breach of confidence

Part 7: Study skills
26

vi

170
202
220
238

259
260
278
312

341
342

360
386

407
408
430
444
456
476

491

492
514

531

Study skills, and revision and examination hints

532

Appendix 1
Appendix 2
Index

541
545
558

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Contents

Guided tour
Acknowledgements
Preface
Table of cases
Table of statutes
Table of statutory instruments
Table of European and international legislation

Part 1: Introduction
1

Getting started: an introduction to studying law

xviii
xxii
xxiii
xxiv
xxxiii
xxxvii
xxxix

3
4

Introduction
What is law?
The characteristics of English law
Why do we need law?
The differences between criminal and civil law
Changing the law
Essential legal terms
Introductory study tips
Chapter summary
Key terms

5
6
6
8
9
10
11
12
14
14

Quiz 1

15

vii


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A HEADING
CONTENTS

2

3

How the law is made

16

Introduction
European law
Parliament
The courts
The Human Rights Act 1998 (HRA 1998)
Chapter summary
Key terms

17
18
21
24
32
36
37

Quiz 2
Take a closer look
Web activity
Assignment 1

38
38
39
39

Resolving legal disputes

40

Introduction
The court system
Bringing a case in the civil courts
The Woolf reforms 1999
Settlement out of court
Payment into court and offers to settle
Civil litigation procedures
The trial of the case

Executing the judgment
Alternative dispute resolution (ADR)
The tribunal system
Chapter summary
Key terms

41
42
47
47
47
48
49
51
51
52
54
57
58

Quiz 3
Web activity
Assignment 2

59
59
59

Part 2: Law of contract, agency and sale of goods
4

viii

61

The law of contract: offer and acceptance

62

Introduction
The essentials of a binding contract
The offer
The acceptance
Chapter summary
Key terms

63
64
64
73
78
79


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A
CONTENTS
HEADING

5

6

7

Quiz 4
Take a closer look
Web activity
Assignment 3

80
80
81
81

The law of contract: consideration, intention and privity

82

Introduction
Consideration
Intention to create legal relations
Privity of contract

Chapter summary
Key terms

83
84
92
94
97
97

Quiz 5
Take a closer look
Web activity
Assignment 4

98
98
99
99

The terms of the contract

100

Introduction
Express and implied terms
The relative importance of contractual terms
Limitation and exclusion of liability
Chapter summary
Key terms

101
102
103
106
121
122

Quiz 6
Take a closer look
Web activity
Assignment 5

122
123
123
124

Defects in the contract: misrepresentation, mistake, duress and undue influence 126
Introduction
Misrepresentation
Mistake
Duress and undue influence
Chapter summary
Key terms

127
128
136
144

148
149

Quiz 7
Take a closer look
Web activity
Assignment 6

150
151
151
151

ix


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A HEADING
CONTENTS

8

9

10

x

More defects: illegality and incapacity

154

Introduction
Illegality
Contractual incapacity
Chapter summary
Key terms

155
156
163
166
167

Quiz 8
Take a closer look
Web activity
Assignment 7

167
168
168
168

Discharge of the contract and remedies for breach

170

Introduction
Discharge of contracts
Remedies for breach of contract
Chapter summary
Key terms

171
172
187
197
198

Quiz 9
Take a closer look
Web activity
Assignment 8

199
199
200
200

The law of agency

202

Introduction
The creation of agency
The rights and duties of the agent
The rights and duties of the principal
Termination of agency
Some common types of specialist agents
Chapter summary
Key terms

203
204
209
212
213
214
216
216

Quiz 10
Take a closer look
Web activity
Assignment 9

217
217
218
218

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A
CONTENTS
HEADING

11

12

Sale of goods: the contract and its terms

220

Introduction
The sale of goods contract
The terms implied by the Sale of Goods Act 1979
Implied conditions in other Acts
Chapter summary
Key terms

221
222
224

233
234
235

Quiz 11
Take a closer look
Web activity
Assignment 10

235
236
236
236

Sale of goods: transfer of ownership, performance and remedies
for breach of contract

238

Introduction
The statutory rules governing transfer of title from seller to buyer
Transfer of title by non-owner
The passage of risk
Performance of the contract
Remedies for breach of the sale of goods contract
Chapter summary
Key terms

239
240

244
246
247
249
255
255

Quiz 12
Take a closer look
Web activity
Assignment 11

256
256
257
257

Part 3: The Law of tort
13

259

Tort liability for defective goods

260

Introduction
Negligence liability
The Consumer Protection Act 1987 (Part I)
Chapter summary

Key terms

261
262
267
274
274

Quiz 13
Take a closer look
Web activity
Assignment 12

275
275
276
276

xi


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A HEADING

CONTENTS

14

15

Tort liability for defective services

278

Introduction
Problematic duty situations
Breach of duty
Proving consequent damage
Chapter summary
Key terms

279
280
296
301
308
309

Quiz 14
Take a closer look
Web activity
Assignment 13

310

310
311
311

Tort liability for premises

312

Introduction
The occupier’s liability to people on the premises
Duties of an occupier to people outside the premises
Defences in tort
Vicarious liability
Chapter summary
Key terms

313
314
321
329
333
336
337

Quiz 15
Take a closer look
Web activity
Assignment 14

337

338
338
338

Part 4: Elements of employment law
16

xii

341

Rights at work: the contract of employment and health and safety at work

342

Introduction
The employment contract: a contract of service
The law of tort: employers’ civil liability for industrial injuries
Criminal law regulation of safety in the workplace
Chapter summary
Key terms

343
344
349
354
357
357

Quiz 16

Take a closer look
Web activity
Assignment 15

358
358
359
359


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A
CONTENTS
HEADING

17

18

Rights at work: protection against discrimination

360

Introduction
The Equal Pay Act 1970
The Sex Discrimination Act 1975
The Race Relations Act 1976
The Disability Discrimination Act 1995
Sexual orientation
Religion or belief
Age discrimination
Enforcing anti-discrimination legislation
The Commission for Equality and Human Rights
Chapter summary
Key terms

361
362
365
370
375
377
379
379
380
381
382
382

Quiz 17
Take a closer look
Web activity
Assignment 16

383
383
384
384

Rights at work: protection against dismissal and redundancy

386

Introduction
Wrongful dismissal
Unfair dismissal
Redundancy
Transfer of undertakings
Chapter summary
Key terms

387
388
388
397
400
402
402

Quiz 18
Take a closer look
Web activity
Assignment 17

403
404
404
404

Part 5: Introduction to company law
19

407

Business organisation

408

Introduction
Legal personality, incorporation and limited liability
The sole trader
The partnership
The registered company
The impact of the Human Rights Act 1998 (HRA 1998) on business organisations
In conclusion
Chapter summary
Key terms

409
410
411
411
415

423
424
426
426
xiii


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A HEADING
CONTENTS

20

21

22

xiv

Quiz 19
Take a closer look
Web activity
Assignment 18

427
427
428
428

Forming a registered company

430

Introduction
Promoting the company
Forming the company
Buying a company ‘off the shelf’
Chapter summary
Key terms

431
432
432
440
441
441

Quiz 20
Take a closer look
Web activity
Assignment 19

442

442
443
443

Running the company: raising and maintaining capital

444

Introduction
Share capital
Loan capital
Chapter summary
Key terms

445
446
450
453
454

Quiz 21
Web activity
Assignment 20

455
455
455

Daily management of the company: functions of directors,
secretary and auditors

456

Introduction
The directors
The company secretary
The auditors of the company
Insider dealing
Chapter summary
Key terms

457
458
468
470
471
472
473

Quiz 22
Take a closer look
Web activity
Assignment 21

473
474
474
474

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A
CONTENTS
HEADING

23

Company meetings and shareholder participation

476

Introduction
General meetings
Protecting the rights of minority shareholders
Chapter summary
Key terms

477
478
482
486
487

Quiz 23
Web activity
Assignment 22

487
488
488

Part 6: General principles of intellectual property law
24

25

491

Statutory intellectual property protection: copyright, designs,
patents and trade marks

492

Introduction
Statutory regulation of intellectual property
The impact of EC law and international treaties on intellectual property rights
Chapter summary
Key terms

493
494
508
510

511

Quiz 24
Take a closer look
Web activity
Assignment 23

511
512
512
512

Common law protection of intellectual property: passing off, malicious
falsehood and breach of confidence

514

Introduction
Passing off
Malicious falsehood
Breach of confidence
Remedies for passing off, malicious falsehood and breach of confidence
Chapter summary
Key terms

515
516
517
521
526

527
527

Quiz 25
Take a closer look
Web activity
Assignment 24

528
528
529
529

xv


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A HEADING
CONTENTS

Part 7: Study skills
26

xvi

531

Study skills, and revision and examination hints

532

Introduction
Beginning to study
Writing law assignments
Revision and examination technique

533
534
535
537

Appendix 1
Appendix 2
Index

541
545
558


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Page xvii

Visit the Law for Business Students, 5th edition mylawchamber site at
www.mylawchamber.co.uk/adams to access valuable learning material.

For students
Companion website support
Do you want to give yourself a head start come exam time?
• Use the multiple choice questions and flashcards to test yourself on each topic throughout the course.
• Use the updates to major changes in the law to make sure you are ahead of the game by
knowing the latest developments.
• Use the live weblinks to help you explore the law as it relates to you.
Online Study Guide
Struggling with some of the core concepts in Contract Law?
This study guide includes a series of interactive problem solving exercises to help you revise
key topics in Contract Law.
Case Navigator*
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Worried about getting to grips with cases?
This unique online support helps you to improve your case reading and analysis skills.
• Direct deep links to the core cases in Business Law.
• Short introductions provide guidance on what you should look out for while reading the
case.
• Questions help you to test your understanding of the case, and provide feedback on
what you should have grasped.
• Summaries contextualise the case and point you to further reading so that you are fully
prepared for seminars and discussions.
Also: The Companion Website provides the following features:
• Search tool to help locate specific items of content.
• E-mail results and profile tools to send results of quizzes to instructors
• Online help and support to assist with website usage and troubleshooting.
For more information please contact your local Pearson Education sales representative or
visit www.mylawchamber.co.uk/adams
*Please note that access to Case Navigator is free with the purchase of this book, but you must register with us for access. Full
registration instructions are available on the website. The LexisNexis element of Case Navigator is only available to those who
currently subscribe to LexisNexis Butterworths online.


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Guided tour

I n t ro d u c t i o n
In general terms, the company’s capital includes all its business assets, including premises,
equipment, stock in trade and goodwill. This chapter is concerned with capital in more
specialised terms: that which can be raised through the issue of shares or through loans made
to the company.
A company may need to borrow money and may do so under the relevant powers in its objects
clause. Security to lenders may be obtained from registered charges on the company’s
property which require registration under the Companies Acts.
Capital may be raised in two ways:
1 by selling shares (share capital): the buyers become company members;

Chapter introductions
Outline the key concepts that each chapter is going to discuss
in detail so that you are aware of the main issues before you
start your reading.

2 by obtaining loans (loan capital): the lenders do not become members by virtue of their loan
– they are creditors of the company.
This area of the law is largely unchanged in substance by the Companies Act 2006 and the
existing principles have been restated.

L e a r n i n g O b j e c t i ve s
When you have studied this chapter you should be able to:
■

Distinguish between the different types of share capital

■

Define ordinary/preference/redeemable/deferred shares

■

Appreciate how shares may be bought and sold

■

Understand how a company may obtain loans.

Learning objectives
Highlight the essential points in each chapter so you can
check your understanding while reading.

Photo: Getty/Getty Images

THE LAW OF TORT

Real Life
Horace was injured and suffered damage to his property when an electric blanket, manufactured
by Cosiwarm and which was a present from his Aunt Betty, caught fire on its first use. As well as
a claim in negligence, Horace also has a claim under the CPA 1987, as his losses certainly exceed
the £275 minimum.
Cosiwarm the manufacturer is liable as producer under the CPA 1987 if the blanket is proven to
be defective. Even if Cosiwarm is not clearly identifiable as producer of the blanket, it may still be
best to claim under the CPA, as this may give Horace more flexibility in his choice of defendant.
Flash Electricals, from which Aunt Betty bought the blanket, would be the ‘marker’, if the blanket was marketed as Flash’s own brand. If there is no label saying who the producer is, Flash may
still be personally liable as ‘supplier’ unless it identifies the producer. Even if Flash merely
imported the blanket, it could still be sued as ‘importer’ if it obtained the goods directly from any

country outside the EU.
As long as he can prove that the electric blanket was defective and actually caused the fire, he
will be successful and will not have to prove failure to take reasonable care as the CPA 1987
imposes strict liability.

The impact of the Consumer Protection Act 1987
As cases emerged some commentators perceived that the way in which the law was
being interpreted seemed to provide no more protection for claimants than an action in
negligence. This was a concern since the Product Liability Directive had indicated that its
purpose was to enable claimants to avoid the need to prove fault by the defendant, thus
overcoming one of the main obstacles to a successful claim. The Act (s 1) stated that it
was intended to comply with the Directive.

European Commission v UK (1997, ECJ)
The Commission claimed that the UK was failing in its obligations to implement the purpose of the
Directive with respect to the concept of a defective product and the scope of the state of the art defence.
Held: it was essential that the Act be construed in accordance with the purpose of the Directive
and that the Directive must prevail in the event of conflict.

Two subsequent judgments since this case clearly reflect this approach.

Abouzaid v Mothercare (UK) Ltd (2000, CA)
The claimant, who was 12 years old, was blinded in one eye while attempting to attach the defendant’s product (a Cosytoes sleeping bag) to his little brother’s push chair. An elastic fastening strap
sprang from his hand and the attached buckle struck his eye.

272

xviii

Real life boxes

Give you examples of how the law is applied to everyday
situations allowing a deeper understanding of the key legal
principles.


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GUIDED TOUR

LAW OF CONTRACT, AGENCY AND SALE OF GOODS

SALE OF GOODS: TRANSFER OF OWNERSHIP, ETC.

Chapter summary
or her work for the principal and avoid any
conflict of interest.

The authority of the agent is usually:
Actual: express/implied and derived from the
agreement.

Duties of principal
To the agent: Perform reciprocal fiduciary duty.
Pay agreed remuneration.

Indemnify expenses.

Exceptionally agency arises without
actual authority:
By estoppel: if the principal allows a person to
behave like their agent that person has apparent/ostensible authority.

He or she must carry out their work with reasonable care and skill.

Principal’s liability to third parties:
Liable to perform authorised contracts.
Vicariously liable for the agent’s torts.

Jones v Gallagher and Gallagher (2005, CA)

From necessity: where one party in control of
another’s property has to take steps to protect
it in an emergency.

Termination of the agency relationship
Operation of law: incapacity/death, bankruptcy, or frustration of the agency agreement.

By ratification: a party subsequently ratifies a
contract made by another for their benefit.

Act of the parties: performance, agreement or
revocation.

Duties of the agent
The agency relationship is fiduciary: the agent

must account for any profits arising from his

12
However, where the buyer is deemed to have delayed rejection unreasonably he or
she will lose their right.

Enduring/irrevocable/lasting power of attorney may prevent termination.

Key terms
Agency of necessity: agency created by an emergency requiring the agent to take reasonable
steps to preserve the principal’s property.

Sale of goods

Creation of agency agreement:
deed (power of attorney); or
in writing; or
by word of mouth.

spin mechanism malfunctioned leaving Horace with a load of very wet washing. The engineer was
summoned and claimed there was nothing wrong and suggested that Horace had either overfilled
the machine, or that the load had become unbalanced. Horace tried again with a small load and
again the machine refused to spin.
Horace would be best advised to give up at this point and promptly tell Floggit to take away the
machine and give him back his money. He would be fully entitled to do this. The machine is clearly
not of satisfactory quality, nor fit for its purpose. The fact that he agreed to repairs does not in these
circumstances amount to acceptance of the goods when rejection is made within a reasonable time.

The Joneses sought to reject a fitted kitchen when the work was complete. Their initial and principal complaint was that the colour was wrong but some time later they raised other concerns and
then permitted some attempts at rectification by the Gallaghers before eventually seeking to reject

the work totally. They argued that they were still entitled to reject under s 35(6)because, while a
period of complaint was ongoing, the right to reject could not be lost.
Held: the right to reject had been lost as several weeks had elapsed before the Joneses had sought
to exercise it. The colour issue which was the main complaint would have been noticeable at the
point the kitchen was unpacked and they had delayed raising this and the other issues and then
waited even longer before seeking to reject the goods.

The House of Lords recently held (J & H Ritchie Ltd v Lloyd Ltd (2007): see ‘In the
news’) that when goods are returned to a buyer for inspection with a view to repair this
constitutes a separate agreement from the contract of sale itself. It puts the seller under
an implied duty to inform the buyer of the nature of the defect so that the seller can
then decide whether or not to repudiate the sale of goods contract.

Agent: a person with the authority to carry out business on behalf of another person.
Apparent authority: the agent has no real authority but it appears that they do, because of
failure by the principal to give notice that it has ended or to correct the impression that it exists.

In the news

Broker: an intermediary who introduces parties to enable them to do business.
Enduring power of attorney: continues despite incapacity of the principal to enable their
affairs to be managed under the supervision of the Court of Protection.
Estopped: prevented in law from denying the existence of a right of another person.

J & H Ritchie Ltd v Lloyd Ltd (2007, HL)
The claimant farming contractor bought a seed drill and harrow from the defendant. As soon as it
was used the claimant noticed that it vibrated very loudly and he operated it only for a short time
before reporting the matter to the defendant. The defendant agreed to remove the equipment for
inspection, with a view to possibly repairing it. In due course it was returned, having been repaired
▲

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251

Key terms

In the news boxes

Are highlighted in red and definitions can be
found at the end of each chapter. Use them to get
up to speed quickly with legal terminology.

Provides you with contemporary examples that
stress how the law impacts on 21st century life
and business!

HOW THE LAW IS MADE

LAW OF CONTRACT, AGENCY AND SALE OF GOODS

would reasonably expect successful receipt. This principle, generally applied by the
courts, enables objective assessment of the parties’ behaviour from which it can be
determined whether the intention to offer or accept is adequately demonstrated.

Electronic communications

A prostitute who, from her window, encouraged gentlemen passing in the street to avail themselves of her services was successfully prosecuted for ‘soliciting in the street’.
Held: the purpose of the legislation was to prevent annoyance to people arising from the activities
of prostitutes in public places. Since the effects of the defendant’s conduct were felt by people in

the street, that conduct clearly fell within the purpose of the Street Offences Act 1959.

(d) The mischief rule. This sixteenth-century rule allows the court to adopt a meaning
which will enable the statute to fulfil its intended purpose. The court examines the law
before the Act to discover the problem (mischief) which the statute was intended to
correct; then the statute can be given the meaning which resolves the problem.
This rule largely fell into disfavour with the rise of the literal rule, which dominated judicial decision-making in the nineteenth century and for approximately the
first 70 years of the twentieth century.
(e) The purposive approach. This approach, which is somewhat similar to the mischief
approach, but broader in its effect, has come into use since the UK’s entry into the
EC. The courts of other member states have traditionally used this approach, as does
the European Court of Justice. It requires the court to interpret the statute by looking beyond its words to determine the general purpose behind it. To do this the
court may examine relevant extrinsic documentary evidence such as government
reports proposing the reform. The next case is a good example of this.

The post rule

Royal College of Nursing v DHSS (1981, HL)

The post rule provides an exception to the usual communication rule. In the nineteenth and early twentieth centuries the only method of communication for parties
contracting at a distance from each other was the post. In the milestone case of Adams v
Lindsell (1818) it was held that once a letter of acceptance is posted, a contract comes
into existence immediately. The postal rules were later extended to cover telegrams. The
rules were clarified further by Household Insurance v Grant (1879, CA) which held that
communication of acceptance by post is effective even if a letter is delayed in the post or
fails to reach the offeror, as long as this is not due to some fault of the offeree’s: for
example, an incorrect address.

Section 1(1) of the Abortion Act 1967 states that an abortion is legal only if carried out by a ‘registered medical practitioner’. A change in abortion methods after the Act was passed meant that
the procedure was largely carried out by nurses, subject to some supervision by a doctor. The

courts had to decide whether abortions carried out by this procedure were legal under the Act.

Worth thinking about?

2
How the law is made

As yet there are no reported cases involving communication via fax, or answerphone. Using
the reasonable expectations approach, faxes are likely to be treated like telex messages.
It can probably be successfully argued that messages left on answering machines are
not communicated until, like any telephone message, the recipient actually hears them.
It is, after all, immediately evident to the sender that the message is not going to be
transmitted at once.
Emails have implicitly been accepted by the courts as a valid means of communication of
acceptance but without any ruling on when communication becomes effective (see Nilesh
J. Pereira Fernandes SA v Mehta (2006) above at page 69). It may be reasonable to argue that
since, once they have been sent, arrival may well be instantaneous but delays may occur in
transmission via the server, perhaps here communication should be deemed to exist once
the message is capable of being downloaded to the receiver’s mailbox. Where a contract is
made on the Internet, the website details of goods appear to be an invitation to treat. It
would seem that the customer communicates the offer by placing the order, entering name,
address and credit card details and transmitting this information to the seller with a click on
the relevant button. The seller does not accept until it has approved the customer’s credit
card details and communicates acceptance by sending a message confirming that the order
has been or will be dispatched. This would reflect the E-Commerce Directive 2000/31/EC,
Article 11 which states that electronic orders/acknowledgements of orders ‘are deemed to
be received when the parties to whom they are addressed are able to access them’.

Smith v Hughes (1960)

The Court of Appeal held (adopting a literal approach) that the practice was unlawful since nurses
do not have the necessary qualifications.
The House of Lords held (by majority) that a purposive approach should be used and that no illegality had occurred. Lord Diplock said: ‘The approach of the Act seems to me to be clear. There
are two aspects of it: the first, to broaden the grounds on which an abortion may be obtained; the
second is to ensure that the abortion is carried out with proper skill and in hygienic conditions.’
(Before the Act legalised abortion in certain circumstances, many women died at the hands of
back-street abortionists.)

Judges always have a reason for changing the law.
Why do you think the post rule was developed?
Suggested solutions can be found in Appendix 2.

The House of Lords’ decision in Pepper v Hart (see above at page 25) may be seen as
enabling and encouraging this approach. While the literal rule is still used today, a
purposive approach is common where this assists a just outcome in the public inter27

76

‘Worth thinking about?’

Case summaries

Encourages you to think in more detail about a
point of law and can be used in class discussions.
Solutions can be found in Appendix 2.

Introduce you to legal cases in a straightforward
and easy to understand manner.

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GUIDED TOUR

RIGHTS AT WORK: PROTECTION AGAINST DISMISSAL AND REDUNDANCY

DISCHARGE OF THE CONTRACT AND REMEDIES FOR BREACH

Injunction
An injunction is a commonly requested remedy for breach of restraint of trade contracts (see Chapter 8). It will not generally be granted to force one party to employ or
work for another, as this would amount to enforcing a contract of employment indirectly. In Page One Records v Britton (1968) it was held that an injunction would not be
granted to restrain The Troggs (a pop group) from employing a new manager, since this
would force them to go on employing the claimant. But compare Page One Records v
Britton with the following case.

Compensatory award: damages intended to compensate an unfairly dismissed employee for
losses arising from the dismissal which are the fault of the employer.
Constructive dismissal: employee feels forced into resignation by employer’s behaviour.
Continuous employment: minimum of one year’s working for the same employer which
qualifies an employee to claim unfair dismissal at the employment tribunal.
Deemed dismissal: an employer who refuses to permit an employee to resume her job after
maternity leave is deemed to have dismissed her.

18

Redundancy: an employee’s job ceases to exist because the employer restructures/changes
business practices/ceases to carry on business/or closes location where employee works.

Rights at work: protection against dismissal and redundancy

Summary dismissal: employee is dismissed without notice.
Transfer of undertakings: a new employer takes over an existing business.
Unfair dismissal: dismissal which cannot be justified as fair by the employer.
Wrongful dismissal: breach of contract by the employer.

Quiz 18
1

Distinguish between wrongful and unfair dismissal.

2

On what grounds may Tiger Enterprises claim that they fairly dismissed the following employees?
(a) Zebra, who was given a job as a trainee lorry driver three years ago and has just failed the
HGV test for the sixth time.
(b) Camel, who sexually harassed Ms Wart-Hog at the works’ Christmas party.
(c) Possum, a van driver who has crashed his vehicle three times.
(d) Rhino, who was recently convicted of being drunk and disorderly one Saturday night.

3

Have the following employees been made redundant by Lynx plc?

(a) Aardvark, who heard rumours of redundancy and resigned.
(b) Porcupine, a senior computer programmer, whose current workplace is being closed
down. He is told that he is being transferred to another branch 80 miles away.

4

What procedures should be observed by an employer before making employees redundant?
Answers to all quizzes can be found in Appendix 2.

9
Warner Bros v Nelson (1936)
The film star, Bette Davis (Nelson), breached her contract, under which she had agreed not to act
on stage or screen for anybody except Warner Bros for one year, by agreeing to make a film with a
UK company.
Held: an injunction would be granted to restrain Bette Davis from making films for the rival company. The contract restrained her from acting for anyone other than Warner, but did not prevent
her from earning her living in other ways. The injunction did not force her to perform the contract
if she was prepared to earn her living in a less profitable way.

Very exceptionally a court may use an injunction actually to compel performance of a
contract where this is in the interests of justice. In Gryf Lowczowski v Hinchingbrooke
Healthcare (2006) Mr Justice Gray clearly felt than an injunction was necessary to assist
the claimant to obtain a fair outcome in a situation where his employers had treated him
very inappropriately. (See ‘In the news’ above, page 179.)

Chapter summary
Discharge of contracts
Performance: must generally be complete.
Exceptions: contract divisible, acceptance of
part performance, prevention of performance,
substantial performance.

Agreement: mutuality essential.
Frustration: performance becomes impossible
or futile due to circumstances beyond the control of either of the parties and not due to
their fault.

Discharge of the contract and remedies for breach

ETO: an economic, technical or organisational reason to justify changes to workforce/conditions
of service after the transfer of an undertaking.

The Law Reform (Frustrated Contracts) Act
1943 determines how far the parties may
recover any resulting financial losses.
Breach of a condition gives the innocent party
the option of avoiding the contract and suing
immediately or awaiting performance date.
Remedies
Damages: the innocent party may claim damages for any quantifiable loss or harm resulting
▲

403

197

Quiz

Chapter summary

Test your knowledge on what you have read by
doing the end of chapter quiz. Solutions can be

found in Appendix 2

Outlines the key points you should understand
after reading each chapter

FORMING A REGISTERED COMPANY
INTRODUCTION TO COMPANY LAW

Web activity
Please go to:
www.bytestart.co.uk/index.shtml
There is a wealth of information for small businesses. Check out their guides to setting up as sole
trader, partnership and registered company.

Assignment 19
(a) What is the purpose of the objects clause in the company’s memorandum and to what extent
may the wording restrict the trading activities of a company?
(b) How far does the objects clause affect the ability of a third party to enforce a contract against
the company?

20

Jackie and Simon run the Good Hair Day hairdressing salon, which is prospering. They would like
to expand their premises and staff and hope ultimately to open other salons in different locations.
They are debating whether to continue to trade as a partnership or set up a limited company.

Visit www.mylawchamber.co.uk/adams to access multiple choice questions and glossary
flashcards to test yourself on this chapter. You’ll also find suggested solutions to questions
in the book.

Advise Jackie and Simon.

Forming a registered company

Assignment 18

Visit www.mylawchamber.co.uk/adams to access multiple choice questions and glossary
flashcards to test yourself on this chapter. You’ll also find suggested solutions to questions
in the book.

443
428

xx

Web activity

End of chapter assignments

Understand how the law works in the real world
by logging on and trying the web activities.

Test your knowledge in more depth by answering
the assignments. They are great practice for what
you may be faced with in an exam.


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GUIDED TOUR

RIGHTS AT WORK: PROTECTION AGAINST DISCRIMINATION

Equality clause: implied term in a woman’s employment contract entitling her to equal pay
with men doing the same/similar/equivalent work or work of equal value.
Gender equality duty: Equality Act 2006 requires public authorities positively to promote
gender equality and eradicate racism in all aspects of their work.
Genuine occupational qualification (GOQ): essential characteristic needed for a job which
may permit employer to discriminate against members of groups who lack it.
Harassment: verbal/non-verbal behaviour which creates an intimidating/hostile/degrading/
offensive environment and is intended/has the effect of violating a person’s dignity.

Racial grounds: RRA 1976 definition: colour/race/nationality, or ethnic/national origins.

Quiz 17
1

(a) Ms Antelope, who is employed as a cleaner by Cheetah plc, is paid less than the packers.

2

What is the difference between direct and indirect discrimination?

3

When may it be legal to advertise a job as being open only to members of a particular ethnic
group?

4

What aspects of employment discrimination come within the scope of the Sex Discrimination
Act 1975 and the Race Relations Act 1976?

(b) Mr Buck was refused a job at the Warren Family Planning Clinic because of his sex.
What legal rights may they have?

Answers to all quizzes can be found in Appendix 2.

17
Rights at work: protection against discrimination

Indirect discrimination: covert discrimination. Selection criteria, policies, benefits, rules or
conditions applicable to the whole workforce but discriminatory to members of a particular
group.

Take a closer look
The following cases provide important examples of how the law you have studied in this chapter
has developed. They are primary sources illustrating the law in action and give you more detail
about their facts, as well as helping you to understand the law and to appreciate how the judges
reached their decisions.
Try looking them up in the law reports or accessing them via a database, e.g. Bailli
(www.bailii.org/databases.html). LexisNexis or Westlaw may be available in your university or college library, or you may find extracts in a case book. (See Appendix 1: Additional resources.)
▲

383

Take a closer look
Draws your attention to the key legal cases
covered in each chapter and invites you to read
the cases yourself in order to gain a deeper understanding of the law and to better familiarise
yourself with legal terminology.

Visit the Law for Business Students, 5th edition
mylawchamber site at
www.mylawchamber.co.uk/adams to access:
• Companion website support: Use the multiple
choice questions and flashcards to test yourself
on each topic throughout the course. The site
includes updates to major changes in the law to
make sure you are ahead of the game, and
weblinks to help you read more widely around
the subject.
• Online Study Guide: Use this resource to revise key topics in Contract Law by working through a
series of interactive problem-solving exercises.
• Case Navigator: provides access and guidance to key cases in the subject to improve your case
reading and analysis skills.

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Page xxii

Acknowledgements

The publisher would like to thank the following for their kind permission to reproduce
their photographs:
Alamy: Alex Segre p.40; Anthony Dunn p.126; Arcblue p.476; Chuck Pefley p.238;
Enigma p.456; Jeff Morgan retail and commerce p.430; Justin Kase zonez p.2; Lourens
Smak p.408; Manor Photography p.100; Redsnapper p.82; Robert Harding Picture Library
p.406; Roy Lawe p.530; Stockfolio p.16; UK Retail Alan King p.62; Vario Images GmbH &
Co.KG p.170; Art Directors and TRIP photo Library: Trip p.278; Corbis: Alan Schein
Photography p.220; Pawel Libera p.60; Richard Klune p.260; William Manning p.386;
Digital Vision: p.258, 312, 490, 514; Getty Images: AFP p.4, 532; Getty p.444;
Photographers Choice p.340; Imagestate: Michael Duerinckx p.492; John Binch: John
Binch p.342; Photodisc: p.154, p.202; PunchStock: Comstock p.360
Picture Research by: Alison Prior
Every effort has been made to trace the copyright holders and we apologise in advance
for any unintentional omissions. We would be pleased to insert the appropriate acknowledgement in any subsequent edition of this publication.

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Preface

Over thirty years of teaching law on a variety of further and higher education courses
from GCSE to post graduate level taught me much about the difficulties experienced by
students in grasping legal concepts. It can be particularly hard for students following an
intensive course of which law forms only one part. Hopefully this text will meet their
needs. I have tried to make it accessible, without over-simplification of the subject
matter. I have aimed at a light touch, in the hope that it may not only instruct its readers
but also entertain them a little as well.
Many thanks to all at Pearson who have helped me in the creation of this edition, especially my publisher Zoe Botterill, who has helped to inspire many of the changes in the
format of this new edition as well as giving me lots of support, and to Anita Atkinson
(Senior Editor) and to Kevin Ancient for his skill in designing it. I have enjoyed working
with them.
As ever, my partner Cherry Potts’ emotional and practical support has been crucial to the editing process. She has
encouraged me when my enthusiasm flagged and has also
given me lots of practical assistance. Her eagle eye has been
invaluable in ensuring removal of typos and her keen critical
mind has greatly assisted me in my endeavour to express the
law, as far as possible, in accessible terms for the lay person.
Alix Adams
December 2007
Source: Cherry Potts

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Page xxiv

Table of Cases

C AS E

N

A

R

A01.QXD

V I G AT O

Visit the Law for Business Students 5th edition mylawchamber site at
www.mylawchamber.co.uk/adams to access unique online support to
improve your case reading and analysis skills.

POWERED BY

Case Navigator provides:
• Direct deep links to the core cases in Business Law.
• Short introductions provide guidance on what you should look out for while reading the
case.
• Questions help you to test your understanding of the case, and provide feedback on what
you should have grasped.

• Summaries contextualise the case and point you to further reading so that you are fully
prepared for seminars and discussions.
Please note that access to Case Navigator is free with the purchase of this book, but you must register with us for
access. Full registration instructions are available on the website. The LexisNexis element of Case Navigator is
only available to those who currently subscribe to LexisNexis Butterworths online.

A v B, sub nom Gary Flitcroft v Mirror Group
Newspapers Ltd [2002] 2 All ER 545, 36, 522,
525, 526, 528
A and others v National Blood Authority [2001] 3 All
ER 289, 268, 273, 275
AB v Tameside & Glossop Health Authority [1997] 8
Med LR 91, 289
Abouzaid v Mothercare UK Ltd [2000] 1 All ER (D)
550, 272
Adams v Lindsell (1818) 1 B & Ald 681, 76

xxiv

Addie (Robert) & Sons (Collieries) Ltd v Dumbreck
[1929] AC 358, 545
Addis v Gramophone Ltd [1909] AC 488, 189
Adler v George [1964] 1 All ER 628, 26, 39
Aerial Advertising v Batchelors Peas [1938] 2 All ER
788, 190
Albert v Motor Insurers Bureau [1971] 2 All ER 1345, 93
Alcock v Wright [1991] 4 All ER 907, 290, 291, 292,
310, 547, 554
Allcard v Skinner [1887] 36 Ch D 145, 148