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Describe about the legal issues of Florence Treasures it has been found that the trader will face legal issue in future specially in case of intrastate trade which the trader is dealing with the suppliers of Russia?
The present memorandum of advice (MOA) is framed to instruct Florence Treasures Ltd regarding import laws and International trade Regulations of UK. Florence Treasures Ltd imports jewellery products from countries like Latvia, Lithuania and Russia. As per the Import Law, under the International Trade Law, for products manufactured outside EU and commercially imported into UK should undergo Customs clearance procedures. Thus, the MOA will deal with the ascertainment of the necessity of Import regulations within the contracts with the suppliers (Crawford, 2012). Further, the MOA will also assess the necessity of the legal legislations with regard to purchase of furniture for the London residence from Spain. Florence Treasures Ltd has also entered into a house extension agreement with a Poland based company for extension of the UK residence. Thus, the MOA here targets the necessity of the legislations concerning the Import law, trade law and the house property law in case of any dispute arising within the contract.
Summary of advice
Florence Treasures Ltd generally imports jewellery goods from three major countries namely Latvia, Lithuania and Russia. In case of any import disputes, resulting between Florence Treasures and the suppliers of these countries relevant legislative norms should be included in the import contract to help Florence Treasures seek legal advice. In this regard, Florence Treasures will be required to frame a legal contract with the suppliers in Russia because as per the International Trade Laws, for trade with any countries outside European Union, the imported products are required to undergo customs clearance process. Thus, if the clearance certificate is not included along with the products imported from Russia, Florence will be legally breaching the International law of Trade (Delfino, 2012).
Further, in case of internal trading between the EU countries like Latvia and Lithuania with Florence Treasures, the norms of internal goods dispatch will be applicable. In case of the internal dispatch, the VAT rates will only be applicable. Similarly, in case of the purchase of furniture and house renovation agreement between Florence and Poland Company, the agreement should contain the VAT registration number of the company and provide details on Interstate returns. In this regard, it may be advised that the suppliers of Latvia and Lithuania along with the companies of Spain and Poland are liable to show their return under the Interstate returns. In case if the export arrivals of Florence Treasures exceeds £ 1.5 million then Florence Treasures will also face legal obligation for not showing the interstate returns and the VAT rate applicability.
In assessment of the effect of Import laws and VAT laws within the contract with the suppliers it may be recommended that the import laws may offer restrictions on quantity, impose duties and increase the price of the goods making the jewellery products costlier for Florence Treasures. However, the imposition of the contracts and agreements along with the import laws will not hamper the trading relations between Florence and its suppliers (Hogan, 2011).
Cause of action/offences
In case of Florence Treasures, interstate trade is taking place between the EU countries namely UK, Latvia and Lithuania. Intrastate trade is taking place between Russia and UK. In case of trade between the interstate countries, Florence is liable to pay VAT on the total purchase (Huberman, 2012). However, since Florence treasures have no legal import contract with the suppliers thus it is uncertain whether the company is a VAT registered company or not. As per the Value added Tax Act, the VAT registration is voluntary and will give the business the opportunity to cover the input tax credit. However, in thus case since Florence Treasures are not registered under the VAT hence the company will not be able to recover the input tax credit. Further, even if the company is registered under the VAT legislations, then as per section 72 (1) of the Value Added Tax act, the evasion of the VAT will be considered as a criminal offense on the part of the company. The owner of Florence Treasures will also be convicted to 6 months of imprisonment and monetary fine as a part of the penalty(Calley, 2012).
In case of the Russian supplier, Florence Treasures are required to make payment on custom duties and import duties. As per the Customs Civil Evasion Penalty (CCEPs), the EU companies trading with any other company of other countries require to make customs and import duty payments. In this case since Florence Treasures have no legal contract with the Russian suppliers hence the y may face issues relating to non-payment of import duties and custom duties with respect to the import of the jewellery product from Russia. As per the Finance Act 2003, in future circumstances, this may pose as a problem for Florence Treasures and they may be penalised (Chen-Wishart, 2012).
In third case, Florence has given a house construction project to a Poland based company for the extension of a UK based house. In case of the extension project the absence of a valid contract between the builder and the owner may put the owner under several future threats. For instance, in this case, the Poland builder may delay the completion time of the construction, the construction may not be in accordance to the provided details or the builder may cheat on the owner. Thus, Florence Treasures is required to maintain a Joint Contracts Tribunal (JCT) with the proposed builder, which will set the legal guidelines and will protect Florence, from any future mishaps from the builder.
According to Butler, (2012) in a civil or criminal law, it is a common act for the defendant to raise a defence and find a loop hole within the law in order to avoid criminal or civil liability. The defendants generally avoid the criminal or the civil liability and make allegations against the prosecutor or the plaintiff to prove their innocence. In certain circumstances, it is acceptable on the part of the law that the defences are true. Thus to prove the innocence, the defendant must show burden of proof. Two major customs penalties operate under the civil law namely the Customs civil penalties and the Customs Civil Evasion Penalties. Florence Treasures have not entered into any contract thus; the trader will be legally liable for the penalties under the civil law and non-payment of customs duty. As per the Finance Act 1996, if the trader imports restricted goods like the jewelleries without the any legal documentation, the importation of the prohibited goods will be dealt as a criminal offence and no defence in this regard will be available. Moreover, the HMRC will charge interest if the customs duty are not paid within the due date. Section 197 of Finance Act 1996, states that the HMRC officers may issue penalties to the traders like ceasing of the goods of the traders for the regulatory contraventions (James, 2010)
However, in this regard, there is a defence for the trader, if the trader has paid the customs and the excise duty, then the trader is entitled to reclaim the seized goods. Thus, if Florence Treasures is able to make payment of the customs and the excise after entering into a valid contract with the suppliers of Russia, Latvia and Lithuania, then the trader may reclaim the goods (Jeongpyo Lee, 2012).
Two major issues have been highlighted for Florence Treasures. Firstly, the non-payment of the customs and the excise duty for the interstate and intrastate trade with the different suppliers, and, secondly, the issue of non-existence of any contract between house builder and Florence. As per the legal legislations of International Trade law and JCT, Florence Treasures are entitled to certain remedies, which they can adopt before the issues arise (Kerr and Gaisford, 2007).
In the first case, since Florence Treasures is a jeweller, hence the trader is supposed to know about the International trade laws that affect the traders, suppliers and the customers. In case of Trading with the customers, the jewellers in UK are required to abide by the Hallmark Act 1973, which provides details on law covering the hallmarking and describing of articles specially the jewellery items. The approval of the Hallmarks provide the customers with the assurance that the material sold by the jewellers are free from any defects and have correct values and weights (Koch, 2010). Import restrictions are generally either product-specific or trade specific. Some of the products are subject to product specific standards and needs to be supported by applicable certificates and documents. Thus, if Florence Treasures adopts the import duties and the tariffs then the trader will be able to trade legally with the interstate and the intrastate suppliers (Boeckman, Greenwald and Von Bismarck, 2013).
In the second case, entering into a JCT contract will give Florence the benefit of making legal claim if the builder is in breach of the contract. However, as per the JCT contract, the homeowner should first check whether the builder is in breach of the contract or not. Secondly, the homeowner should check which of the contract terms have been breached. For instance, if the delay in the construction or the extension has occurred due to the weather conditions of due to any other natural occurrences, then the blame should not be given on the builder and the contract is not seen to be breached (Koch, 2010). However, if the JCT contract does not show the specific issues relating to the breach then the homeowner can implement the following steps namely:
The homeowner can pay the builder the value of the correctly executed work and decline from making payment of any non-specified work (Lakhan and Heiss, 2010)
The homeowner can also give the builder the opportunity to make this correct and right
If the builder is not able to meet the requirements of the homeowner within a reasonable period, then the homeowner can opt for employment of a replacement builder to change the defects ad may appoint the first builder to pay the costs of the replacement builder
Moreover, with the help of a JCT contract, the homeowner and the build both will have a proceeding guideline regarding the legal legislations concerning the building extensions and construction methods. In case of Florence, since the trader is employing a builder residing at Poland for extending the house property in London, hence it is highly recommended for Florence to frame a legal JCT contract. Bix, (2012) stated that under a JCT contract the customer pays the builder 95% of the price of the construction work either in instalments during the tenure of the construction work or at the end when the construction process is completed. Thus, this contract gives the owner the opportunity of making the payment after being satisfied with the completed job. If the job is not completed then the owner may not make any payment or in case of instalments, the owner can stop the instalment at the position when the owner finds that the construction is not satisfactory in nature (Lessambo, 2013).
Advice on specific issues of law
The MOA focuses on advising the client on the legislations of the import laws, construction laws and the trade laws so that the client may not face any legal dispute with respect to the absence of any particular legal contracts (Zimmermann, 2012). As per the International Trade laws, if the trader or the consumer is able to bring any goods from outside the country for own personal use then the trader will not be required to pay any customs or import tax on the goods. The unlimited amount of goods can be imported from any EU countries if the goods are imported for personal use. Hence, in this case, Florence Treasures can effectively import goods from Spain, Latvia and Lithuania if the goods are brought in for personal use (MacLeod, 2010). However, in the given case Florence Treasures have imported the following goods for the following purpose namely:
Necklaces and rings from the Latvia, Russia and Lithuania suppliers for shop selling purpose
Display cabinet for keeping the jewellery in the shop from Spain
Chairs and Furniture from Spain for office use
Thus, in this case Florence Treasures have brought in all the items for trading purpose, which shows that the major focus of Florence Treasures was to gain profit out of the business operations (Michaels, 2012). Thus, Florence Treasures cannot claim the non-payment of the customs and the import duties. Again, in case of importing goods from outside EU, the major focus should be on bringing the goods at least possible cost. In certain cases the duty free import is possible if the goods are brought from outside EU, that is form the countries, which are not a part of the EU. The following are the circumstances under which the goods can be made duty free:
The trader should transport the goods, which are brought in from the countries, which are outside EU
If the goods are used by the trader for own continence or if the goods are used as gift to begiven to some other individual (Moloney, 2010)
As per the International Trade Law, the customs for the goods, which are brought externally from different parts of other countries apart from the EU members, is around 2.5%. Thus if the customs duty is not paid for the trading goods then the trader may be required to undergo the civil as well as the criminal penalty charges (Zimmermann, 2012). In the given case, it is thus advisable for Florence Treasures to at least incorporate a trade contract with the suppliers in Russia because the import of the jewellery form Russia include importing of goods from countries outside EU. Thus, if no legal contract is prevalent then the profit earned by Florence Treasures by selling of the jewellery items will be penalised and the trader will have to serve civil and criminal penalties (Stone, 2013). Thus, in order to avoid the civil and the criminal penalties, it is advisable that the trader should make the payment of 2.5% customs on the jewellery goods brought in from Russia. In this regard, it may be stated that apart from the customs, the traders are also required to make a payment of the import VAT. Ayres and Ayres, (2012) stated that an import VAT will be paid by the trader on the total value of the goods plus the customs duty which has been allocated for the goods. The standard VAT rate for all types of goods and services including the jewellery items are 20% in UK. Previously the VAT rate was 17.5% however, with the large increase in the import levels the VAT rate increased to 20%. Thus, in this case, for the jewellery pieces that Florence will import from Russia, the trader will need to pay both customs @ 2.5% and VAT on the overall value of the product plus the total customs @ 20%. This will thus create a big burden on the trader if all customs and the VAT is paid together at the same time (Suharnoko, 2012).
Procedural and evidential issues
The procedural evidence shows that the traders are required to pay penalties in various cases when the trader does not pay the custom duties and the excise duties. The non-payment of the VAT @ 20% makes the trader loose the ownership over the goods. However, under other circumstances if the goods are seized by the trading department then the trader should pay off the outstanding duties and the VAT amount so that the goods can be retrieved from the trading department (Trebilcock, Howse and Eliason, 2012). Evidences of construction faults are also seen in case of the various construction issues. In 90% of the construction cases, the early payment system to the construction builders creates problem for the owner of the house. Some of the major problems, which the owners face, are the delay in the construction process due to the natural disasters and lack of sufficient labours. Thus, in this case of Florence Treasures have the JCT contract then the trader will be able to resolve the issues and make monthly instalment payments as and when the construction is completed.
The overall analysis of the legal issues of Florence Treasures it has been found that the trader will face legal issue in future specially in case of intrastate trade which the trader is dealing with the suppliers of Russia. In case of the construction process, which the trader will undertake specially from the builders in Poland, the trader can further face the issue of not getting satisfactory results. The major aim of the memorandum of Advice is to provide the client with the necessary advice on the different aspects of legal legislations that the client may face in future. Thus, in this case since the client is facing uncertainty and thus the client has focused on legal advice. Thus, in this regard the major advice that can be given to the client is that the client should enter into a valid contract with the suppliers in Russia, Latvia and Lithuania. The major focus of the client should be on the calculations of the primary customs and the excise duties that are required to be paid in case of interstate and intrastate trading relations. In the second issue, the MOA will highlight the issue that the trader may face in future concerning the construction issues with the builder in Poland. If the builder is not able to complete the work within the scheduled period or the builder is not able to produce a satisfactory work process then the trader will have no option of any further amendments since there are no valid contracts. Thus, the trader should enter into a JCT contract with the builder in Poland so that the construction process is completed successfully. Thus, the overall MOA shows the issues, the defences that are possible if the issues arise and the possible legislations that should be undertaken by the trader so that legal issues can be resolved.
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