Linda Green and potential employee
The report below consists of all the procedures which the owner of a sole proprietorship is required to do in order to
get the name of business registered in accordance with the UK laws. The report gives a brief explanation as to what are the differences between different companies of limited and unlimited with that of a sole trade. The report shows that how and what laws are applied regarding registration or dissolution of the sole trade. The given case scenarios make clear that how a contract between an employer and employee and between a buyer and seller is executed and what remedies are provided by the law on breach of such contracts.
Task 1: A valid contract in a Business Context
a) Basic principles of a contract between Linda Green and a potential employee.
If a person agrees to work for someone and the other agrees to pay for that work done, then they are said to have entered into a contract of employment. Here, the contract between Linda and her potential employee will be the contract of employment whereby, Linda will be the employer.
The basic principles of contract between Linda Green and a potential employee’s are-
- The employers should clearly define the principle terms of employment in writing and should comply with the Basic Conditions of Employment Act. Section 29 of the Act states to include the following particulars-
- A description of the job
- The hours that the employee will be expected to work
- Ordinary and overtime rates of payment, including payment in kind and its value
- Number of leaves the employee is entitled to
- Notice period
- Name and address of the employer
- Date of payment (Chapter 6 – Labour Law, (n.d)).
- If Linda enters into an indefinite contract with the employees, then the following conditions for termination must be stated within it-
- on a misconduct of the employee, or the incapacity of the employee or on account of retrenchment, the contract will be terminated
- the contract will be terminated on the retirement of the employee as laid down by the company
- The contract is terminated on death of the employee (Chapter 6 – Labour Law, (n.d)).
- If Linda chooses to enter into a fixed term contract with her potential employee then she needs to comply with terms of following two types of fixed term contracts-
- Contractual employees
- Seasonal employees
Contractual employees are those who leave their houses and go to work on temporary basis.
The employees working for a fixed season for that particular time is said to be a seasonal employee (Chapter 6 – Labour Law, (n.d)).
- The employee shall get higher wage if she/he performs their work for an extended number of days. On account of employer not paying for the extra work, the employee has the right to take the dispute of unfair payment to a Bargaining Council or the Department of Labour (Chapter 6 – Labour Law, (n.d)).
- National Minimum Wage- Workers in UK are entitled to be paid at least the minimum wage set by the UK government (Focused on client service, 2014).
b) Identify and explain the legal terms included in contract.
A contract of employment is an agreement that sets out the-
- Employment conditions of an employee- This contains the time, hours and number of days which the employee is expected to work.
- Rights of an employee- Contracts of Employments Act 1963, the Redundancy Payments Act 1965, the Employment Protection Act 1975, the Wages Act 1986, and the Employment Rights Act 1996, deals with the rights of the employees including unfair dismissal, time off rights for parenting, redundancy and more. The right to request flexible working time was included in the Labour government 1997.
- Responsibilities of an employee- The contract determines the responsibilities of the employee as to what type of work they will be assigned.
- Duties of an employee- It shall be the duty of the employee to finish all the work assigned to them.
These are called ‘terms’ of contract (Gov.UK, 2014).
And these terms could be in either of the following form-
- Written contract– A written contract explicitly mentions all the agreed terms of the employer and employee and is enforceable for breach of any of its term (Chapter 6 – Labour Law, (n.d)).
- Written statement of employment– If an employment contract lasts within 2 months then the employer is supposed to give a ‘written statement of employment particulars’ to their employees.
A written statement consists of the following-
- Business name
- Employees name
- Job title
- Description of work
- Date of joining
- Payment details as to how and when the payment will be made
- Hours of work describing weekend working, overtime and holiday entitlement
- Place of working
- Job duration as to how long a temporary job shall last
- The end date of a fixed term contract
- Notice periods
- Who to go to the grievance
- How to complain about handling of grievance
- How to complain about disciplinary or dismissal action (Gov.UK, 2014).
- Verbal contract- A contract needs not to be in written form. If two persons speak and agree on those terms then such contract is a verbal contract and is legal in the eyes of law (Chapter 6 – Labour Law, (n.d)).
- In collective agreements– an agreement between the representatives of employees and employer that contains the negotiation term and condition of working hours and payment as per those hours, is called collective agreement.
The terms of a collective agreement are-
- How negotiation shall be organized
- Who will represent employees
- Which employees will be covered by the agreement
- Terms and conditions that shall be covered by the agreement (Gov.UK, 2014).
- Implied contract– There is things that are not cleared between the employer and employee but they are agreed between the parties, these are called implied terms (Chapter 6 – Labour Law, (n.d)).
- Express contract– The terms and conditions of employment such as type of work, hours of work, place to live etc. are considered as part of the contract and are express terms of the contract (Chapter 6 – Labour Law, (n.d)).
Linda should also include the following terms in her contract-
- Condition- Condition is that term in a contract for breach of which a contract can be terminated because the term is the root of the contract (Poussard v Spiers , 1876).
- Warranty- Warranty is of less importance and the breach of this term allows the aggrieved party to claim for damages (Bettini v Gye , 1876)
- Indemnity- under this term Linda can indemnify any third person for the loss of goods (Waite v Paccar Financial , 2012).
- Innominate-In case of any incidence which could not be determined as to whether it is a condition or warranty, the court will see to the matter as to as to how much a party is deprived of that breach of contract. If it is so much that the contract shall be repudiated then the court will order to terminate the court, and if remedy for damage is claim then the party shall only claim for damage and not terminate the contract (Schuler v Wickman Tools, 1974), (Lombard North Central v Butterworth, 1987).
- Office of fair trading- Under this clause Linda can be benefited for any unfair trading (Unfair contract terms, 2008).
c) Advise Linda Green to tackle the attitude of the wholesaler as per the contract
The Sale of Goods Act 1970 contains that-
- The supplier should provide the goods to the buyer with reasonable care
- The supplier should deliver the goods within the stipulated time
- The supplier provides the goods at a reasonable cost (Conway, 2012).
The Consumer Protection Act 1987 makes the supplier of goods liable for the damaged caused to the Goods (Gov.UK, (n.d)).
It is assumed or say, is an implied agreement that the subject matter of the transaction in a contract should be in proper condition. Under Sale of Goods Act 1979, a seller breaches a contract if the goods are damaged or the seller sales any faulty goods to the buyer. An implied term in such contract is that the goods sold will be of ‘satisfactory
quality’ and any fault on goods gives a right to the buyer to refund the goods (Conway, 2012).
In the present case, I advise Linda to refund the goods from the wholesaler or can repudiate the contract for breach of condition. Condition is that term in a contract for breach of which a contract can be terminated because the term is the root of the contract (Poussard v Spiers , 1876).
Task 2: Elements of a contract in Business situations
a) With reference to the Sale of Goods Act, outline the legal points upon which Linda could build a case against the wholesalers. How likely, is she to succeed?
Under the Sale of Goods Act 1979, Linda can sue the wholesaler for the following factors-
- That the goods were not of satisfactory quality
- That there is a breach of contract
- Linda has the right to either refund or replace the goods, or can reject for payment
- And that the damage so stated about the goods is within the limitation period and hence the buyer has all the rights to bring a suit against the seller.
- Under the Act Linda has the right to remedy for damages goods (The Law Commission and The Scottish Law Commission, 2009).
As per my opinion Linda can succeed in the case for breach of contract by the wholesaler.
b) With reference to the Consumer Credit Act 1974, outline the main issues that Linda must consider before embarking any future credit agreements with her suppliers.
Section 75 of the Consumer Credit Act 1974 provides that the consumer have the right to claim for faulty goods against the credit firm if those faulty goods were purchased via credit agreement arranged by the trader (Legislation.gov.uk, (n.d)). Under the Act the buyer is entitled to recover the money for the following reasons-
- Goods delivered are not of satisfacory quality
- Such quality of goods ensures that the seller has breached the contract
- There is breach of promise as to the delivery of goods which was agreed between them.
In the present case, Linda can make credit agreement with the suppliers or wholesalers in future so that in case of delivery of any faulty goods she will be entitled to claim against the seller as well the credit firms and that would be a safeguard for her to replace, refund the goods or recover the amount.
Task 3: Negligence in Business Activities
a) Differentiate by identifying the legal requirements between a sole trader, partnership and limited company.
Here are the differences between Sole trader, Partnership and limited company-
Sole trade is a legal entity and easiest of all the business to run in day to day business. It is a small business, wherein the owner is self-employed. The trader is not required to pay any registration fees. A book keeping for the record of business is simple as compared to those of huge firms. A self-employed under sole trading is required to submit a self-assessment tax return to the HM Revenue & Customs, hereinafter referred to as the HMRC every year. Also, in case of the insolvency of the business, the trader is personally liable for all its assets and debts incurred (unbiased.co.uk, 2014).
Two or more persons become partner to share the profit of the business and each partner is considered to be self-employed under the partnership firm. Each partner is jointly or severally liable for the debts of the firm. Like in sole trade, in partnership firm also, each partner as a self-employed are required to notify HMRC for the same and submit a self-assessment tax return every year to the HMRC. A written agreement is signed between the partners known as the partnership agreement which states the division of profits and liabilities between the partners (unbiased.co.uk, 2014).
In a limited company the neither the shareholders nor the company is personally liable for its debts. No one can claim for personal assets. In a limited company the shareholder could be a sole shareholder of the company. The profits are distributed amongst the shareholders in the form of dividends or the profit is left out as capital in the business. The limited company is required to prepare personal self-assessment tax return annually to report to the HMRC (unbiased.co.uk, 2014).
b) What should Linda consider before selecting the name ‘Scissors Salon’ for her business?
The type of business that Linda runs is a sole proprietorship. Under a sole trade the trader shall keep following things in mind before naming the business-
- The sole trader should not use the term Ltd, i.e. Limited liability in the business name as it describe the status of the business which Linda’s business is not into.
- The sole trader should not use the term plc, i.e. Public limited company in the business name as it describe the status of the business which Linda’s business is not into.
- Unless otherwise a special permission is not obtained Linda shall not use the terms that would draw an inference that the business is connected to the government or is of national importance.
- Linda can use the name of the area where her business is incorporated so as to make clearer to the people about the type and place of her business.
- Before selecting the name Linda is supposed to check that ‘Scissors Salon’ is not used by any other trader as this would infringe the registered trademarks.
- Once all the above criteria’s are fulfilled Linda shall get it registered as a sole trader. Once this step is taken she need not get the name registered in the Companies House, rather she simply needs to register as self-employed with HMRC.
- I would advise Linda to get the business name registered with the National Business Register hereinafter referred to as the NBR. The NBR takes all the necessary checks on their part as to the matters involved in the name and informs if any issues arises. This will afford Linda more protection in case any legal issues of the business name
- Linda shall get the business registered at VAT (Startups.co.uk:Starting up a business advice and business ideas, 2014).
c) Necessary steps for dissolution of the business, should the business fail.
The following factors are responsible for insolvency of a business-
- Insolvency occurs when the business cannot meet financial obligations, i.e., the bills are not paid that leads to debts and hence the creditors takes legal action against the debtor.
- Cash flow insolvency occurs when the business does not meet the credit obligations when they fall in due.
- Balance sheet insolvency occurs when the liabilities exceeds its assets.
On dissolution of a sole trade it is important for Linda to take the following necessary steps-
To inform the HMRC
- The HMRC will then help Linda to get her tax and National Insurance in order (HM Revenue & Customs, (n.d)).
- In case of any tax that is not paid to the National Insurance, Linda can negotiate an agreement with HMRC and ask to extend the time for payment (HM Revenue & Customs, (n.d)).
- In certain cases Linda can claim back for some tax or National Insurance. These are costs involving the closing of business (HM Revenue & Customs, (n.d)).
- Linda shall cancel her VAT registration and can reclaim VAT paid on purchases (HM Revenue & Customs, (n.d))
- Linda shall apply in the registered office to strike off the name of her business (Companies House, 2014).
Task 4: Principles of liability in negligence in Business Situations
a) Identify the statutory provisions regarding employees of which Linda Green should be aware. State clearly from which legislation sources they have come.
- Contracts of Employments Act 1963– Contracts of Employments Act 1963 is the Act of Parliament of the United Kingdom which is required to give reasonable notice before dismissal. This section is now incorporated in section 86 of Employment Rights Act 1999, and in written particulars of a Contract of Employment Act 1996.
- Redundancy Payments Act 1965– Redundancy Payments Act 1965 is the Act of parliament of UK which was passed by the conservative government to codify the existing law on the rights of the individuals in UK labour law.
- Wage Determinations– This Act determines as to what are the minimum wages that an employer should
- Conditions of Employment Act 1997– This Act in UK states the time and hours of work that an employee has to do. It provides all the conditions of the work premises and includes the number of leaves as well.
- Equal Treatment Act- This Act consolidates that the employer should treat the employee equally without any discrimination as to men and women. There shall be no discrimination on the ground of sex.
- Equal pay for equal work 1970- This Act prohibits any less favourable treatment between men and women in terms of pay and conditions of employment.
- Equality Act 2010- The Act codifies the number of other Acts which forms the basis of anti-discrimination law in Great Britain.
b) Linda has decided to dismiss the stylist. Discuss what grounds she has for any possible dismissal of the junior stylist, and also list the steps she must take if she wishes to carry this out.
Linda may be vicariously liable for negligence committed by her employees. Vicarious liability is imposed on employer for tort committed by their employees during the course of employment and for act authorised by the employer (Acas, 2014). Hence, Linda must know the statutory rights and other laws and regulations relating to the employees so that she can implement those in the employment contract and use them for defences in future if a suit is filed against her for negligence or any other tort committed by her employees. Every employee cannot be expected to be sufficient in working, therefore Linda has the right to remove an employee if they are not working roperly.
The fact of the given case reveals the following about the junior stylist-
- A complaint from the customer that she was kept waiting for long and that the junior stylist left the salon vehemently
- Leaving the work as soon as the salon shut
- Never staying in office to complete the task
- Never did necessary cleaning up
- Once she left an hour before closing time
The above grounds from the facts of the case makes it clear that the junior stylist was is in breach of the contract
- By not completing her work.
- Her acts with the customers will leave a negative impact of the saloon in the eyes of the customer which is not good for the goodwill of the company
On the above grounds Linda can terminate the contract with the junior stylist for her incapacity (Paykel v Morton , 1994).
The report is all about the types of companies, their differences and types of contract with their remedies. The procedures of registration in the different type of companies in UK are quiet similar in respect of the name chosen for the business and but far different in other aspects. The dissolution process and the registration process in a sole trade are very simple and easy as compared to other type of businesses. The contract made between the employee and employer and the buyer and seller have legal affects and the remedies for breach of these contracts are redressed by the court.