Business Law and Regulatory Compliance
This section covers Business Law and Regulatory Compliance. The exam tests contract, employment, intellectual property, competition and privacy issues that managers must spot before calling counsel.
Core rules and concepts
- A contract needs offer, acceptance, consideration, intention and capacity. Breach remedies include expectation damages, reliance damages and specific performance. Liquidated damages must be a genuine estimate, not a penalty.
- Agency law binds a principal for an agent's authorised acts. Employment law distinguishes employees from independent contractors using control, integration and economic reality tests.
- IP rights include patents, copyright, trademarks and trade secrets. Competition law prohibits cartels and abuses of dominance. Privacy and anti-corruption rules require risk-based compliance programmes.
Worked example
A supplier fails to deliver 1,000 units at $50. The buyer covers at $65, paying $15,000 more. Expectation damages are $15,000 plus incidental cover costs, if mitigation was reasonable. Lost profits are recoverable only if foreseeable and proven. Reason: damages aim to put the buyer in the position performance would have created, not to punish the supplier.
Traps
Assuming only signed documents create contracts; treating legal compliance as complete ethics; misclassifying workers to cut costs; using penalty clauses as deterrents; ignoring IP ownership in contractor agreements; copying a compliance policy without controls.