Business Law and Regulation
Business Law and Regulation tests the legal framework in which transactions, employment and securities activity occur. Expect contract formation, terms and remedies, agency, tort and negligence, company law and directors' duties, and regulatory compliance including insider dealing and competition rules.
Contract formation
A contract needs offer, acceptance, consideration, intention to create legal relations and capacity. An invitation to treat - a price list, advertisement or shop display - is not an offer. A counteroffer destroys the original offer, so a later "acceptance" of the original terms is only a new offer. Acceptance must be communicated; the postal rule can deem acceptance on posting where it applies, but instantaneous methods generally require receipt. Consideration must be sufficient but need not be adequate; past consideration is not good consideration.
Terms and remedies
Terms may be express, implied by statute or incorporated by notice. Exemption clauses are construed strictly and are subject to statutory reasonableness and unfair-terms controls. Remedies include damages for foreseeable loss, specific performance, injunction and rescission. Damages aim to put the claimant in the position as if the contract had been performed, subject to mitigation and remoteness.
Agency and directors' duties
An agent can bind a principal through actual authority (express or implied) or apparent authority where the principal's representation creates the appearance of authority. Directors owe fiduciary duties: to act within powers, promote the success of the company, exercise independent judgement, avoid conflicts, not accept benefits from third parties, and declare interests. Breach can lead to account of profits, rescission or compensation.
Worked example
A offers to sell machinery to B for 50,000. B replies, "I will pay 45,000". A refuses. B then says, "I accept your original price of 50,000". There is no contract. B's 45,000 reply was a counteroffer, which terminated A's original offer, so B's later words can only be a fresh offer, which A has not accepted. Had A merely asked whether B could do better, that would be a request for information, not a counteroffer, and the original offer would survive.
Traps
Treating a counteroffer as acceptance. Assuming consideration must be fair in value. Enforcing an exemption clause that fails statutory reasonableness. Confusing actual with apparent authority. Forgetting to check whether a director's conflict was declared and approved. Treating breach of a regulatory rule as automatically voiding the contract.