3. Questions.

1)      What are the two main branches of law in England?

2)      What are the two types of legal personality?

3)      How are corporations classified?

4)      What are the major sources of English Law?

5)      How is a precedent established in case law?

6)      What statement of law is binding?

7)      What are the sources of European Community law?

4. Find the following sentences in the text.

1)      В Англии основное различие – это различие между уголовным и гражданским правом.

2)      Физическое лицо обычно имеет только одно гражданство, но может иметь двойное гражданство или не иметь гражданства.

3)      Самые ранние торговые корпорации были созданы таким способом: Компания Гудзонова Залива, Ост-Индская Компания.

4)      Заявление, сделанное судьей при вынесении решения по делу, создает прецедент.

5)      Только заявление, создающее основу для вынесения решения, является обязательным.

6)    Решения Суда Европейских Сообществ и Суда Первой Инстанции обязательны для государственных судов стран-членов.

7)    Английские суды должны толковать законодательство Сообщества, используя Европейские методы.

 

5. Recite the main points of the text.

 

 

Unit 2. Business Organisations

 

1. Words to be remembered. 

sole trader – единственный владелец, работающий без партнеров

partnership – товарищество

registered company – акционерное общество

loan– заем, ссуда, кредит

security of charges – гарантия оплаты

shares – акции

losses– убытки, потери

borrowing– заем

subsist– существовать

stipulation– обусловленность, договоренность

charitable– благотворительный

tort– правонарушение

incur– подвергаться

sue– иск, подавать иск

binding– обязательный

entity– экономическая единица, субъект экономической

деятельности

defendant– ответчик

promoter– учредитель

plaintiff– истец

mandate– поручение

credit(to) – давать кредит, кредитовать

authorise– наделять правами

repudiate– отказываться, аннулировать

unsound– психически ненормальный

passing-off– ведение дела под чужим именем

injunction– запрет, запретительная норма

illegal– незаконный

byimplication– косвенно, подразумеваемым образом

interalia(лат.) –

dissolution– прекращение, расторжение

windingup– прекращение

assets– активы

lease– арендовать

writ– судебное решение, предписание

judgement– решение суда

deficiency– недостаток, отсутствие

indemnify– гарантировать возмещение ущерба

tobeentitledto– иметь право доступа

remuneration– вознаграждение

expel– исключать

fiduciary– доверительный

undertake– принимать, обязываться, брать на себя

freeholdreversion– изменение права собственности, переход к

первоначальному собственнику

estate– собственность

vicariouslyliable– ответственный без вины за действия другого

common law – общее право

injury – вред, ущерб

bribe– взятка, дать взятку

rival– конкурент

wrongfulact– неправомерное действие

legitimate– законный

illegitimate – незаконный

 

2. Text for reading.

The basic business organisations in England and Wales are the sole trader, the partnership and the registered company. There are advantages and disadvantages associated with these different forms. The most important point of distinction is that, where persons choose to register a company, the company is a juristic or artificial legal person which, with certain obvious exceptions, enjoys the same rights under the law as a natural person. In the case of the sole trader or the partnership, no separate legal person is created. The main consequence is that the registered company provides the protection of liability for its members.

A. The Sole Trader

The proprietor may, of course, employ other people but the responsibility for the success or failure of the enterprise is in the hands of the sole trader who will usually raise the capital of the business by loans from banks against the security of charges on his private property, such as house, life insurance policy or shares. The proprietor retains all the profits but is liable for all the losses up to the full extent of his private fortune and any legal action in respect of the business will be brought against the proprietor.

The proprietor has great freedom but suffers disadvantages including: (i) limited capital, (ii) limited borrowing, (iii) problems with holidays and sickness, (iv) limited scope for expansion. But these would not necessarily be removed by incorporation.

B. The Partnership

The partnership allows for an increased capital base, improved borrowing and reduces the problems relating to holidays and sickness. The Partnership Act 1890 (PA 1890) defines a partnership as ‘the relation which subsists between persons carrying on a business in common with a view of profit’. There must be at least two persons associating for the purposes of carrying on a common business which includes any ‘trade, profession or occupation’. The stipulation relating to profit means that the form cannot be used for charitable or non-commercial purposes.

The partnership is not a separate legal person under the law, and partners are jointly liable for the debts and obligations of the partnership without limit, and jointly and independently for torts committed by partners and employees of the firm – even for partners who do not play an active part in the management of the business (so-called ‘sleeping partners’). Partnership is not suitable for a person who merely wishes to invest money in a business without incurring any further exposure to risk. 

The definition of a partnership establishes the essential criteria required for proving the existence of a partnership. These are: (i) the existence of a business; (ii) carried on in common; (iii) with a view of profit. Thus the firm can sue and be sued in its own name under the Rules of the Supreme Court, but any judgement against the partnership is binding on the partners. In addition, the Insolvent Partnerships Order 1994 allows a partnership to be treated as an entity which can enter arrangements with its creditors in the same way as a limited company. 

The existence of a business 

The essential is that there must be some commercial venture. This excludes relationships whose basis is merely joint ownership of property without any common commercial venture.

In Keith Spicer Ltd  v. Mansell [1970] the defendant and another person intended to set up a company to take over and run a restaurant owned by the defendant. They opened a bank account in the name of the proposed company but left off the word ‘Limited’. The second promoter ordered goods from the plaintiff for the proposed company, which was never formed and the plaintiff sued the defendant for the price, arguing that the two persons were partners. The Court of Appeal rejected this. The defendant and the other promoter were merely working to form a company but not ‘carrying on a business in common with a view of profit’. Had  they actually started trading in anticipation of the company’s incorporation the decision would have been different.

Partnership can be formed for the purpose of carrying through one transaction: Mann v. D’Arcy [1968].

Carried on in common

The distinction which is important here is between being merely connected with the business in some capacity and actually participating actively within it. In Briton v. The Commissioners of Customs & Exise [1986], the court rejected the existence of a partnership between a husband and a wife where the wife merely helped in what was his business. In Saywell v. Pope [1979], Mr Saywell and Mr Pope were partners and their wives did some work for the firm. The firm expanded in 1973, after which the wives took a more active part in the business. The firm’s accountant suggested that the four should draw up a partnership agreement; this was done but the agreement was not signed until June 1975. Between 1973 and June 1975, the bank mandate still only mandated Mr Saywell and Mr Pope, the wives contributed no capital. A share of the profits had been credited to them for 1973 and 1974 but they had never drawn on them. The court agreed with the Inland Revenue that the wives only became partners in 1975 since, before the signing of the agreement, the wives had never done anything in the capacity of partners; they had never been integrated into the firm. 

With a view of profit

The major essential in identifying the existence of a partnership relates to taking a share of profit from the business.

In Britton v. The Commissioners of Customs & Excise (1986) the profits from the business were paid into a joint bank account which operated both as a business account and the domestic account from which the wife drew. The court held that: ‘The profit was Mr Britton’s and Mrs Britton as his wife had access to it.’ Sharing profits did not of itself create a partnership. And in Saywell v. Pope (1979), the fact that the wives did not draw on the share of profits credited to them was regarded as evidence of absence of receipt of those profits which required something more than a mere entry in the accounts. What is required is a business in common as well as the sharing of profits. 

Persons capable of being partners

A limited liability company can be a partner if authorised by its memorandum of association: Newstead (Inspector of Taxes) v. Frost [1980]. An enemy alien cannot be a partner.

A minor can be a partner but can repudiate the agreement at any time during minority or during a reasonable period thereafter, but will be unable to recover any money paid under the partnership agreement unless there is a total failure of consideration. In Steinberg v. Scala (Leeds) Ltd [1923] the plaintiff purchased shares in the defendant company, paying money on application and on one further call made by the company. Being unable to meet any further calls, she repudiated the contract while still a minor and claimed recovery of  the money already paid. The claim for recovery failed as there had been no total failure of consideration since the plaintiff had received what she had contract for. The minor will not be liable for any of the firm’s debts during minority but can ratify them on majority. Capital invested by a minor can be used to meet the firm’s debts. The minor can be the firm’s and the other partners’ general agent even though without personal contractual capacity.

A person who is unsound of mind can escape from a partnership agreement if he can show that he was unsound of mind when he entered the agreement and that the other partner(s) knew that he could not understand the nature of the agreement. The fact that a partner is unsound of mind is a ground for the other partner(s) to petition for the firm’s dissolution 

Firm and the firm name

Partners may trade under any ‘firm name’ they please but where the name is not a combination of their own names, the name is subject to: (i) compliance with the Business Names Act 1985 and (ii) the common law tort of passing off.

 

The Business Names Act 1985.

There is a restriction on the use of words giving the impression that the bussiness is linked with central or local government; in addition certain words require prior permission: for example, bank, building society, trust and so on. Where a business name is used, the stationery and so on must carry the names and addresses of the individual partners and a notice must be prominently displayed at the place of business with the same information.

 

Passing off.

The firm name must not be so like that of an existing business as to cause confusion in the mind of the public. In Ewing v. Buttercup Margarine Co. Ltd (1917), the plaintiff, who traded in dairy products in the north of England and Scotland as the Buttercup Diary, successfully obtained an injuction against the defendant company which was registered in London. Normally the two concerns must also carry on the same business but this is not absolutely necessary. In Annabel’s (Berkeley Square) v. G. Schoek (trading as Anabel’s Escort Agency) [1972], the plaintiff was able to obtain an injunction to prevent the defendants from using their name in a way which would damage the goodwill on their night club.