Business Law and Ethics
ESSAY
A business is defined as a commercial activity undertaken by an entrepreneur to earn profits. A successful entrepreneur along with the knowledge of business must also possess basic knowledge of the relevant laws useful for the business. The two most crucial areas of every person associated with the corporate world are contract division and corporate division. This essay will help in understanding these two broad divisions in the context of Specific Performance (SP) of the contract and Corporate Social Responsibility (CSR) respectively. Initially, the remedy of SP and the limitation by the court for granting the same will be discussed. Further, with respect to corporate division, the extent of CSR applicable to corporate will be explained. These two areas are very crucial, even a person who is exploring the commercial scenario must also possess the necessary understanding about such two divisions above-mentioned.
A contract refers to legal obligations (written or oral) between two or more parties in return for consideration. The contract law in the UK is governed by the common law and also Acts of the Parliament. The law also provides for remedies in case of breach of said obligation or liability. SP is a remedy under the contractual breach wherein the court by its order compelling the other party of the contract to perform their part of the promise or such contractual obligations agreed in the terms of the contract. It is an equitable remedy obtainable for the breach of contract wherein the court by a decree orders the party to fulfil its contractual liability (Pargendler, 2018). It is important to note that the remedy of SP can also be granted in addition to the damages or instead of damages. Further, it is also needed to highlight that the damages are available in a breach of a contract as a matter of right whereas the remedy of SP is available subject to the court’s discretion. In other words, the grant of SP is an exception and notes a rule per se.
The said remedy is only available if the damages are alone not inadequate and the party cannot carry out the said obligation personally or engage in a similar replacement. If the damages are adequate for the breach then the remedy of SP can be refused (Makdessi v Cavendish Square Holdings BV). This remedy will also not be available in the case where constant supervision or monitoring on the part of the court over a particular period of time is necessary (Co-opInsurance v Argyll Stores). The court in the case of National and Provincial Building Society v British Waterways Board set out another limitation, the court by order refused claims due to the fact that they are too closely connected. The court established a principle wherein held that if the two claims are too closely associated with each other, like that providing relief of one would affect the favourable outcome of the other, the decree of SP should be refused (Wessing, 2017).
The Part V of the Sales of Goods Act 1893, provides for actions in case of breach of the contract. Section 52 highlight the remedy of SP as one of the remedies available for the buyer, it states that in breach of a contract of delivering ascertainable goods, the court may, if thinks fit, by a decree or judgment, direct to specifically perform the contractual liability. The said judgment or a decree may be conditional or unconditional as the court may seem just (Legislation.gov, 2022).
The remedy of SP may usually not be available when the contracts of personal service are involved. As witnessed in the case of Lumley v. Wagner, an opera singer refused to sing in a specific opera house. The court held that the court cannot demand or compel her to sing as such order would amount to an SP in circumstances where SP would not be available. The court, however, in this case, granted an injunction preventing her to perform somewhere else and held that wherever the court does not have requisite jurisdiction to enforce SP, it works to tie men’s conscience, as far as possible, to a literal and true performance of their agreement.
In addition to the contract law, another important area for a person associated with the business is to get an understanding of the other corporate division, in particular, the company law. It is a recognised fact that a business without ignoring society cannot get success in the business as a business runs in the society and uses its resources. Thus, it is of utmost importance to take due care of society. Considering the said area of concern, the concept of CSR was recognized throughout the world. The European Union attempted to define CSR as a voluntary unification of economical and social concerns into business activities and for their relationship with all stakeholders of the business. It encourages businesses to invest more in the environment, human capital, and stakeholders’ relations (European Commission, 2022).
CSR is not a new concept as various benevolent entrepreneurs even before the origination of the concept of CSR in the 1800s believed in the concept of providing social security schemes and necessary living conditions to their employees in order to keep them satisfied with the work. CSR is based on the ‘Triple Bottom Line Approach’ which integrates people, profits, and the planet amongst the corporation. The UK is one of the first countries to integrate the said approach amongst its corporations through varied statutes and regulations. However, under the regulations of the UK, CSR is not a mandatory activity and merely voluntary guidelines to the corporations. The UK however took initiatives to promote CSR, as it becomes the first country in the world to set up a ‘Ministry of CSR’ under the leadership of Tony Blair, to promote CSR activities amongst government departments.
The initiative in this regard has been incorporated in the Companies Act 2006. Section 172 of the Act broadly enshrined the director’s duty however it somewhere focuses on legislative approach with respect to sustainable decision making. For instance, the enlightened shareholder value principle (ESVP) adopted under the Act in section 172 is the duty to advance the success of the company. The purpose of advancing the companies success is for the member’s benefit. As per this section, the directors keeping into consideration the long-term success of the company, must create value for the shareholders and at the same time promote relationships with employees, suppliers, and society (Zhao, 2017). This principle can be construed to be shareholders centralised however, it also advocates for protecting a wide range of interests in appropriate circumstances. Thus, it can be construed that the Act makes CSR a legal duty as a segment of the fiduciary duty of the board of directors.
According to sections 414 A-D of the Act, the companies are obligated to prepare a ‘strategic report’. The preparation of the said report is essential with respect to corporate disclosures, as it is regarded as a crucial way to enhance corporate responsibility and accountability. It also helps in improving the translucency of corporate activities. This report is in form of a detailed report which shall contain matters pertaining to companies’ employees, environmental issues, and other social issues, to the extent required for their business considering the business performance, development, or position (Zhao, 2017). It along with employees and environmental issues, also recognise human rights issues. Other laws also promote the said concept, for instance, the Accounts Modernisation Directive provides a mandatory requirement for the large public companies to report on environmental significant matters publicly. The list is not exhaustive as various other legislations like The Health and Safety at Works Act 1974, The Working Time Regulations 2001, etc also provide guiding measures on the CSR-related expenditures however, do not mandate such spending.
This essay witnessed the importance of the contract and corporate divisions in the context of remedy of SP and the corporations’ obligations of CSR respectively. It can be concluded that a person looking for an opportunity in the commercial and corporate world must possess an understanding related to the above broad divisions. The initial part discussed the remedy of SP which can be granted when the damages are inadequate, the relevant cases and regulations, and the limitations imposed by the court. Further, this essay witnessed the definition of CSR, its voluntary nature of it, and the extent of it applied to the corporations with relevant regulatory provisions.
References
Cavendish Square Holding BV (Appellant) v Talal El Makdessi (Respondent)[2015] UKSC 67. https://www.supremecourt.uk/cases/docs/uksc-2013-0280-judgment.pdf.
Co-operative Insurance Society Limited v. Argyll Stores [1997] 3 All ER 297. https://publications.parliament.uk/pa/ld199798/ldjudgmt/jd970521/coop01.htm.
European Commission. 2022. Corporate social responsibility & Responsible business conduct. [online] ec.europa.eu. Available at:https://ec.europa.eu/growth/industry/sustainability/corporate-social-responsibility-responsible-business-conduct_en. [Accessed on: 25/02/2022]
Legislation.gov. 2022. Sale of Goods Act 1893. [online] legislation.gov.uk. Available at: https://www.legislation.gov.uk/ukpga/1893/71/section/52/enacted. [Accessed on: 25/02/2022]
Lumley v. Wagner (203) (UK 1852). https://e-lawresources.co.uk/cases/Lumley-v-Wagner.php.
Pargendler, M., 2018. The role of the state in contract law: The common-civil law divide. Yale J. Int'l L., 43, p.143. https://openyls.law.yale.edu/bitstream/handle/20.500.13051/6723/MarianaPargendlerTheRoleo.pdf?sequence=2
Wessing, T. 2017. National and Provincial Building Society v British Waterways Board [1992].mondaq.com. Available at: https://www.mondaq.com/uk/contracts-and-commercial-law/562518/specific-performance-can-be-available-even-if-the-claimant-is-in-breach. [Accessed on: 25/02/2022]
Zhao, J., 2017. Promoting more socially responsible corporations through a corporate law regulatory framework. Legal Studies, 37(1), pp.103-136. https://eprints.whiterose.ac.uk/99313/1/CSR%20FINAL%20clean.pdf.
