Legal Issues in Business: Contract Dispute, Employment Issues, and Company Directors' Duties

Illustrating the impact of law on businesses

LO1 Illustrate the potential impact of the law on a business

LO2 Recommend appropriate legal solutions to resolve areas of dispute

Ann Adams is the Managing Director of the new London Office of an American IT consultancy USAI, where you are working shortly after the completion of your Higher National Diploma.

She knows that you studied a unit on Business Law, so she expects you can assist her with some legal problems.

USAI has signed a contract for healthcare software with the National Health Service (NHS) in England.

• “USAI shall not be liable in any way for death or personal injury caused by use of the Software...”

• “USAI shall be liable to a maximum of £250,000 for any and all liability howsoever caused, whether arising under contract or from negligence, loss of profit or consequential loss.”

• “Any dispute relating to this agreement shall be submitted to mediation under the mediation rules of the ADR Group.”

• Several NHS patients developed a more serious medical condition and one of them died;

• Staff spent many working hours trying to find and fix the problem, until eventually a replacement system was bought, all together costing the NHS £1,250,000; and

• A letter has been received from the NHS’ solicitors threatening action in the High Court.

(a) Explain the impact of contract law on the business in this case;

(b) Compare and evaluate, as legal solutions for resolving the dispute, the use of ADR and litigation, and state which of the two you would recommend; and

(c) Compare and evaluate, as sources of legal advice and support, solicitors and barristers, and explain how a company can obtain the services of each of these two.

Beth Bell, an employee in the London Office, when bending down under a workstation after dropping an earring on the floor, injured her back. She is arguing that the company “failed to take reasonable steps to provide her with a safe system of work” and demanding £500,000.

Meanwhile Charles Cole is one of 20 Computer Programmers working at the USAI London Office. All have complained about deadline-driven projects, like that for the NHS, with impossible deadlines and 100 hour working weeks. Charles has gone to a doctor several times and now has a note that he has “severe stress” and is “not fit for work.”

Ann has not been sympathetic, micro-managing and monitoring every project and making constant criticisms of the programmers’ work. One time she told Charles, “Don’t be such a cry-baby”, and another introduced him to some visiting contractors as “My whinny Limey”.

Sitting at home depressed watching daytime television, Charles sees an advertisement for lawyers who make claims on behalf of people who want to sue their employers. He calls Ann to inform her that he is planning to sue. Ann’s reaction is to conduct a Performance Review, as a result of which Charles is made redundant.

(d) Explain the potential impact of employment law on the business in these cases (for example, what legal claims they might make, what laws they might say have been broken, how many people might sue, how much their claims might cost the company);

(e) Identify if possible what legislation, regulations or standards are involved;

(f) What court or tribunal would deal with these cases; and

(g) Evaluate the effectiveness of Charles’ getting advice from a Citizens Advice Bureau and involving a Union.

David Dilling is the Finance Director of USAI (UK) Ltd. He has awarded a contract for recruiting all IT and specialist staff to a company called Healthrecruit Ltd.

Ann has discovered that the Managing Director of Healthrecruit is David’s wife, and that David himself is also acting as the Finance Director of that company. At the last Board Meeting of USAI (UK), when this transaction was put before the Board and discussed, this was not disclosed to the other Directors.

The profits from this business are already more than £20,000, and over the years the contract is expected to be worth a substantial sum.

(h) Explain the impact of company law in this case; and additionally, as far as you can,

(i) Evaluate critically any of the various laws and legal solutions you have reviewed for Ann