4.
The Political and Legal Environment
How does the legal system affect the business organization?
• By governing the transactions between organizations and their customers and
suppliers
• By protecting consumers
• By protecting employees and governing the relations between employers and
employees
• By controlling the competitive environment
• By protecting investment in research
Dealings between organizations their customers for the supply of goods and services
- The law of contract
- Non-contractual liability
- Supply of goods
Law of contract
1. Offer: the offerer intends to be legally bound; the offer must be clear and
unambiguous, oral or in writing.
NB: Advertisements and goods displayed are not offers but an invitation to treat.
2. Acceptance: must be absolute and unqualified, not adding new terms and conditions
3. Intention to create legal relations
4. Consideration – one party must give up something to the benefit of the other – usually
in form of a payment
5. Capacity – any person or organization may enter into an agreement which may be
enforced against them – except minors, drunks and mentally incapacitated
Non-contractual liability
Concerns issues of negligence and may arise where
– there is no contract between two parties
– One party incurs injuries directly or indirectly attributable to the other party
The injured party may claim for damages
Claims for damages arising from negligence may occur where:
• The defendant was under a duty of care to the plaintiff
• There is a breach of duty
• There is damage to the plaintiff as a result of breach of duty
Supply of goods and services
Trade Descriptions Act: an offence to make a false or misleading trade description
– False description of goods, ie indication of physical characteristics
– False description of price, in particular where price is adverised as reduced
– False description of services
Sale of Goods Act
Goods must be :
• as described on package
• of satisfactory quality
• fit for the common purpose
• free from minor defects
• safe
• durable
Consumer protection
1. Consumer Protection Act:
Consumers have the right to sue for damages if they suffer from personal injury or damage to
property as a result of using a defective product.
2. Consumer Credit Act
• Is designed to protect consumers from entering into highly disadvantageous credit
agreements
• Debtor must be made fully aware of the nature and costs of a transaction
• Creditor must disclose all charges accruing and make debtor aware of their rights and
liabilities
Codes of practice – outside the force of law
• Voluntary codes, adopted by an industry branch to arbitrate cases without legal action
– eg holiday industry
• Advertising codes, set down by Advertising Standards Authority to deal with
complaints
Employment legislation
Includes common law principles of contract law and negligence, supplemented by statutory
intervention
Employment in an organization is covered by contract of employment or contract to suppy
services in case of self-employed
Short-term contracts offer flexibility to employers to recruit and dismiss employees, wher
permanent contracts make this difficult
• Health and Safety legislation: to provide a safe working environment
• Minimum Wage legislaion
• Working hours: EU Working Time directive
• Termination of contract: Employment Relations Act governing unfair dismissal
Discrimination at Work
• Sex Discrimination Act: to prevent discrimination against (mainly) women in
recruitment and in the workplace
• Equal Pay Act: women entitled to same pay as men if doing the same job for the same
employer
• Race Relations Act: to prevent descrimination against persons on racial grounds
Right to workers representation: covering rights to form a trade union, to strike and to
undertake industrial action
EU Directive on Workers Councils governing employees' rights to consultation
Intellectual property law
To protect persons' or organizations' inventions, research or products
• Patent protection
• Brand names
• Trade marks: that which can be presented graphically and which distinguishes one
product from another
Law and production processes
• Environmental Protection Act, to protect against pollution of the natural environment
• Requirements governing the disposal of waste, to insulate against noise
Competition law
To promote competition and prohibit anti-competitive practices such as cartels and price-
fixing.
