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Ninth Keenan & Riches’ BUSINESS LAW Keenan & Riches’ edition BUSINESS LAW ‘This book is comprehensive in coverage and provides a well rounded introduction to business law. It is clearly written and likely to become a ‘must have’ text for all business law students.’ Indira Carr, Professor of Law at the University of Surrey B U Ninth edition Business Law, now in its ninth edition, is a manageable, well trusted and reliable text specifi cally designed for non-law students studying law for the fi rst time. Maintaining the direct and accessible approach S K Sarah Riches & Vida Allen which has made this book so popular, Riches and Allen provide user-friendly explanations of the law in a highly practical and e I engaging style immediately equipping you with a good understanding e N Do you want to give yourself a head of key legal concepts. n start come exam time? a En Visit www.mylawchamber.co.uk/riches to Now thoroughly revised and updated, the new edition includes access answers to the questions in the book & key changes to the law on: to test yourself on topics covered. You’ll S also fi nd legal updates to help you impress examiners and lecturers with knowledge of • The Consumer Protection from Unfair Trading Regulations 2008 the latest developments. R • Companies Act 2006 Worried about getting to grips with Si c cases? • The Employment Equality (Age) Regulations 2006 Amendment Case Navigator offers unique online support h Regulations 2008 that helps you improve your case reading e and analysis skills in Business Law. L Cases contained within this resource are s highlighted throughout this book. ’ The LexisNexis element of Case Navigator is A The coverage of tort law has also been expanded and only available to those who currently subscribe to LexisNexis Butterworths CASE restructured in this edition to better match how the topic is covered on online. business law courses. NAVIGATOR W The new text design and handy cross-references allow you to fi nd the information you need quickly and easily while the use of extensive cases and diagrams make sometimes complex points in the law easier to understand. Learning aids popular in previous editions have been retained and include: R i • Learning objectives highlight key points you should understand as you progress through each chapter c • Self test questions allow you to assess for yourself whether your knowledge is up to scratch h • Case summaries are included throughout to give you the key facts, legal principle e s and context underlying important cases • End of chapter specimen examination questions provide valuable examples of the typical types & of question you may face in an exam enabling you to better prepare for assessments A l l Sarah Riches is Director of Planning and Policy at the University of Bolton e C ASE and has many years’ teaching experience. n Vida Allen is Principal Lecturer in Law at Kingston University where she teaches business and company law. R www.pearson-books.com N O Cover photograph: Getty Images/Pete Gardner AVIGA T POWERED BY CVR_RICH9642_09_SE_CVR.indd 1 20/3/09 12:11:39 BUSL_A01.qxd 3/13/09 10:28 AM Page i Keenan and Riches’ BUSINESS LAW .. BUSL_A01.qxd 3/13/09 10:28 AM Page ii Also available: Smith and Keenan’s LAW FOR BUSINESS Smith and Keenan’s ENGLISH LAW TEXTANDCASES Smith and Keenan’s COMPANY LAW Smith and Keenan’s COMPANY LAW WITHSCOTTISHSUPPLEMENT .. BUSL_A01.qxd 3/13/09 10:28 AM Page iii Keenan and Riches’ Ninth Edition BUSINESS LAW Sarah Riches and Vida Allen .. BUSL_A01.qxd 3/13/09 10:28 AM Page iv Pearson Education Limited Edinburgh Gate Harlow Essex CM20 2JE England and Associated Companies throughout the world Visit us on the World Wide Web at: www.pearsoned.co.uk First published in Great Britain under the Pitman Publishing imprint in 1987 Second edition published 1990 Third edition published 1993 Fourth edition published 1995 Fifth edition published 1998 Sixth edition published under the Longman imprint in 2002 Seventh edition published 2005 Eighth edition published 2007 Ninth edition published 2009 © Mary Keenan, Sarah Riches and Vida Allen 2009 The rights of Denis Keenan, Sarah Riches and Vida Allen to be identified as authors of this work have been asserted by them 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 system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, without either the prior written permission of the publisher or a licence permitting restricted copying in the United Kingdom issued by the Copyright Licensing Agency Ltd, Saffron House, 6–10 Kirby Street, London EC1N 8TS. All trademarks used herein are the property of their respective owners. The use of any trademark in this text does not vest in the author or publisher any trademark ownership rights in such trademarks, nor does the use of such trademarks imply any affiliation with or endorsement of this book by such owners. Crown Copyright material is reproduced with the permission of the Controller of HMSO and the Queen’s Printer for Scotland. Law Commission Reports are reproduced under the terms of the Click-Use Licence. ISBN: 978-1-4058-9964-2 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 Riches, Sarah. Keenan and Riches’ business law. – 9th ed. / Sarah Riches and Vida Allen. p. cm. Rev. ed. of: Business law / Denis Keenan, Sarah Riches. 7th ed. 2005. Includes index. ISBN 978-1-4058-9964-2 (pbk.) 1. Business law–England. 2. Business law–Wales. I. Allen, Vida. II. Keenan, Denis J. Business law. III. Title. IV. Title: Business law. KD1629.K44 2009 346.4207–dc22 2009000630 10 9 8 7 6 5 4 3 2 1 13 12 11 10 09 Typeset in 9.5/12pt Minion by 35 Printed by Ashford Colour Press Ltd., Gosport The publisher’s policy is to use paper manufactured from sustainable forests. .. BUSL_A01.qxd 3/13/09 10:28 AM Page v Brief contents Guided tour xii Preface xvii Legal study skills xviii Case names, citations and law report abbreviations xxi Acknowledgements xxiv Table of cases xxv Table of statutes xxxviii Table of statutory instruments xli Table of European and other legislation xliv Part 1 INTRODUCTION TO LAW 1 1 The nature of law 3 2 Law making 12 3 Resolving disputes 45 Part 2 BUSINESS ORGANISATIONS 71 4 Classification and survey of types of business organisation 73 5 Non-corporate organisations – sole traders and partnerships 97 6 Companies 147 Part 3 BUSINESS TRANSACTIONS 201 7 Introduction to the law of contract 203 8 Types of business contract 266 9 The terms of business contracts 279 10 Contracts for the supply of goods and services 302 11 Business and the law of tort 330 12 Criminal liability in business 358 13 Credit 380 14 Consumer protection 401 Part 4 BUSINESS RESOURCES 419 15 Business property 421 16 Employing labour 452 Index 567 v .. 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BUSL_A01.qxd 3/13/09 10:28 AM Page vii Contents Guided tour xii 3 Resolving disputes 45 Preface xvii Learning objectives 45 Legal study skills xviii Legal services 45 Case names, citations and law report The legal profession 45 abbreviations xxi Other legal personnel 48 Acknowledgements xxiv Other sources of information and advice 48 Table of cases xxv Methods of dispute settlement: the courts 50 Table of statutes xxxviii Criminal courts 50 Table of statutory instruments xli Civil courts 56 Table of European and other Other important courts 62 legislation xliv Tribunals 62 Alternative dispute resolution 64 Part 1 Ombudsmen 66 INTRODUCTION TO LAW 1 Regulators 66 Self-test questions/activities 68 1 The nature of law 3 Specimen examination questions 68 Website references 68 Learning objectives 3 Classification of law 3 Part 2 The common law 6 Equity 6 BUSINESS ORGANISATIONS 71 Some basic principles of legal liability 8 Law of property 9 4 Classification and survey of Self-test questions/activities 10 types of business organisation 73 Specimen examination questions 10 Learning objectives 73 Website references 11 Classification of business organisations 73 Natural and juristic persons 75 2 Law making 12 Survey of types of business organisation: Learning objectives 12 advantages and disadvantages 78 Causes of legal change 12 Commencement of business 78 Legal change and the changing world 12 Raising business finance – generally 79 Law reform 13 Raising business finance – securities 80 The sources of legal change 14 Charges 80 Law-making processes 15 Guarantees 81 Legislation 15 Mortgages 83 Case law (judicial precedent) 22 Mortgages of personal property 85 European Community law 24 Mortgages of choses in action 85 Human rights 36 Liability of the proprietors 86 Self-test questions/activities 42 Continuity 87 Specimen examination questions 42 Publicity and external control of the Website references 43 undertaking 88 vii .. BUSL_A01.qxd 3/13/09 10:28 AM Page viii Contents Taxation and national insurance 90 Ordinary limited partnerships 133 Planning 93 Limited liability partnerships 134 Self-test questions/activities 95 Reform: a partnership with legal personality 137 Specimen examination questions 96 Model form of ordinary (or unlimited) Website references 96 partnership deed 139 Self-test questions/activities 144 Specimen examination questions 145 5 Non-corporate organisations – Website references 146 sole traders and partnerships 97 Learning objectives 97 6 Companies 147 The sole trader 97 Learning objectives 147 Formation of the business 97 Types of registered companies 147 Dissolution 99 Public and private companies 148 Debt recovery 99 Formation 149 Bankruptcy procedure – generally 101 Pre-incorporation contracts 150 The petition 101 The company’s constitution 151 Schemes of arrangement under the Deeds Articles of association 158 of Arrangement Act 1914 102 Financing the company 161 The interim order and voluntary arrangement The issue of shares and debentures 167 under the Insolvency Act 1986 102 Procedures for issuing shares to the public 168 The effect of a bankruptcy order – generally 103 Regulation of the securities market and Committee of creditors 105 of admission to it 168 The public examination 105 Offers of unlisted securities 170 The family home 105 The remedy of rescission 170 Proof of debt 106 Membership 170 Mutual dealings – set off 106 Meetings, resolutions and annual return 172 Carrying on the business and disclaimer 107 Protection of minority interests 176 Transactions at an undervalue and Directors and secretary 178 preferences 107 Powers of directors 185 Payment of the creditors – preferential Duties of directors 185 payments 108 Company insolvency and corporate rescue 188 Protection of employees 108 Liquidation 189 Trade creditors 109 Alternatives to liquidation: company rescue Deferred creditors 109 procedures 192 Discharge of the bankrupt 109 Administration 192 The ordinary partnership 111 Self-test questions/activities 198 Definition and nature of a partnership 111 Specimen examination questions 199 The sharing of profits as evidence of Website references 200 partnership 114 Types of partners 114 Part 3 Membership of the firm 117 BUSINESS TRANSACTIONS 201 The firm and the firm name 117 The relationship between partners and 7 Introduction to the law of outsiders 118 Partners’ powers 118 contract 203 Liability of incoming and outgoing partners 122 Learning objectives 203 Relationship of partners within the Business contracting – generally 203 partnership 123 Nature of a contract 204 Dissolution 128 Types of contract 204 viii .. BUSL_A01.qxd 3/13/09 10:28 AM Page ix Contents Essentials of a valid contract 205 10 Contracts for the supply of Agreement 205 goods and services 302 Consideration 215 Learning objectives 302 Privity of contract 221 Sale of goods 302 Intention 225 Definition 303 Form 227 Formation 303 Capacity 229 The implied terms 303 Genuineness of consent 231 Transfer of property in the goods 309 Mistake 231 Sale by a person who is not the owner 312 Misrepresentation 235 Performance of the contract 315 Duress and undue influence 239 Remedies 318 Legality 240 Supply of goods and services 321 Competition policy 244 Implied terms in contracts for the supply Discharge of contracts 249 of goods (Part I) 322 Remedies 254 Implied terms in contracts for the supply Limitation of actions 260 of services (Part II) 323 Self-test questions/activities 261 Manufacturer’s liability in contract 324 Specimen examination questions 264 Reform and guarantees 327 Website references 265 Self-test questions/activities 328 Specimen examination questions 329 8 Types of business contract 266 Website references 329 Learning objectives 266 Contracts for the supply of goods 266 11 Business and the law of tort 330 Contracts of bailment 268 Learning objectives 330 Employment contracts 268 Tortious liability 330 Contracts of agency 268 Basis of tortious liability 330 Contracts concerning land 272 Proof of damage 331 Contracts for financial services 272 Causation 331 Standard form contracts 273 Specific torts relevant to business 332 Self-test questions/activities 277 Defective goods 337 Specimen examination questions 277 Defective services – generally 342 Website references 277 Lawyers 344 Accountants and auditors 344 9 The terms of business con tracts 279 Valuers and surveyors 346 Other torts relevant to business 347 Learning objectives 279 Defences 352 Certainty of terms 279 Remedies 354 Puffs, representations and terms 281 Limitation of actions 355 Types of contractual terms 282 Self-test questions/activities 356 Express and implied terms 283 Specimen examination questions 356 Exemption clauses 286 Website references 357 Unfair Contract Terms Act 1977 290 Unfair Terms in Consumer Contracts 12 Criminal liability in business 358 Regulations 1999 296 Reform 298 Learning objectives 358 Fair Trading Act 1973 299 Criminal law and the supplier of goods Self-test questions/activities 299 and services 358 Specimen examination questions 300 Unfair commercial practices 359 Website references 301 Product safety 362 ix ..