ICAEW ACA Business Law key terms

A clear statement of terms on which one party is prepared to be bound, becoming a contract once accepted. It must be sufficiently definite and is distinct from an invitation to treat.

An indication that a party is open to receiving offers rather than making one, so no contract arises if the other side responds. Shop displays, advertisements and auction calls are typical examples.

Unqualified agreement to every term of an offer, communicated to the offeror. A counter-offer destroys the original offer, and silence generally cannot amount to acceptance.

A response that varies the terms of the original offer, which operates as a rejection and a new offer. The original offer cannot later be accepted unless it is renewed.

Something of value given by each party in exchange for the other's promise, such as money, goods or a promise to do or refrain from doing something. It must not be past.

A requirement that the parties intended their agreement to be legally enforceable. It is presumed in commercial dealings but presumed absent in domestic and social arrangements.

The principle that acceptance by post takes effect when the letter is properly posted, not when it is received, provided post was contemplated. It does not apply to instantaneous communications.

The rule that only parties to a contract may enforce it or have obligations imposed on them. Statutory exceptions now allow certain third parties to enforce terms intended for their benefit.

A false statement of fact made by one party that induces the other to enter the contract. Remedies depend on whether it was fraudulent, negligent or wholly innocent.

A term that seeks to exclude or restrict liability for breach or negligence. It must be incorporated, cover the loss in question, and satisfy statutory reasonableness or fairness controls.

Automatic discharge of a contract when an unforeseen event, outside either party's control, makes performance impossible or radically different. It does not apply where the risk was allocated.

The test limiting recoverable losses to those arising naturally from the breach or those within the reasonable contemplation of both parties at the time of contracting.

Setting a contract aside so that the parties are restored to their pre-contract positions. It is available for misrepresentation but may be lost through affirmation, lapse of time or third-party rights.

Conduct showing that an innocent party has chosen to continue with a contract despite a breach or misrepresentation, thereby losing the right to terminate or rescind.

Failure to perform a contractual obligation, or performance that falls short of what was promised. It entitles the innocent party to damages and, for serious breaches, termination.

A business relationship between two or more persons carrying on a business in common with a view to profit. Partners are generally jointly and severally liable for the firm's debts.

The principle that a registered company is a legal person distinct from its members and directors, owning assets, contracting and being sued in its own name with limited member liability.

The position of members whose liability is capped at the amount unpaid on their shares, or the amount they agreed to contribute for a company limited by guarantee.

The separation between a company and its members. Courts pierce it only in narrow circumstances, such as where the company is a mere facade concealing wrongdoing.

A relationship in which one person, the agent, is authorised to act on behalf of another, the principal, creating legal relations between the principal and third parties.

A person who takes the initiative in forming a company and arranging its initial capital and contracts before incorporation. Promoters owe fiduciary duties and disclosure obligations to the company.

An agreement made on behalf of a company not yet formed. It does not bind the company, which may adopt it after incorporation, and the person who purported to act may be personally liable.

A formal statement that the subscribers wish to form a company and agree to become members, taking at least one share each. It is a constitutional document filed on incorporation.

The company's internal rulebook governing matters such as share transfers, board meetings and directors' powers. It operates as a contract between the company and its members.

A shareholder resolution passed by a majority of at least 75% of votes cast. It is required for major changes such as amending the articles or winding up voluntarily.

A shareholder resolution passed by a simple majority of votes cast. It is used for routine decisions such as appointing directors or approving a share issue.

Statutory and fiduciary obligations owed by directors to the company, including acting within powers, promoting success, exercising independent judgement, avoiding conflicts and not accepting benefits.

A claim brought by a member on behalf of the company against a director or third party for a wrong done to the company, requiring court permission to proceed.

A statutory remedy allowing a member to petition the court where the company's affairs are conducted in a manner unfairly prejudicial to members' interests, often resulting in a share purchase order.

The money or other value subscribed for shares, divided into nominal value and any share premium. It is generally treated as permanent capital and is subject to distribution rules.

A payment of profits to members, permitted only from distributable profits and supported by properly prepared accounts. Unlawful distributions may be recoverable from shareholders.

The principle that a company's share capital should not be returned to members except through permitted procedures such as a reduction of capital or a lawful redemption or purchase of shares.

The inability of a person or company to pay debts as they fall due, or the state where liabilities exceed assets. It triggers formal procedures and duties on directors.

Liability of a director who continued trading when they knew or ought to have concluded that insolvent liquidation was inevitable, without taking steps to minimise loss to creditors.

A rescue procedure placing a company under an administrator who manages its affairs to achieve statutory objectives, primarily rescuing the company or achieving a better result for creditors.

Dismissal of an employee that is not for a fair reason or does not follow a fair procedure. Eligible employees may claim before an employment tribunal for compensation or reinstatement.

A breach of the employment contract by the employer, typically dismissal without the required notice. The remedy is damages for the notice period, not a statutory fairness assessment.

Dismissal because the employer's need for employees to carry out work of a particular kind has ceased or diminished. Eligible employees may be entitled to a statutory redundancy payment.