Differences in UK and US Business Law

In this guest post, James Faulkner, a specialist legal copywriter from the United Kingdom, discusses the differences in United Kingdom and United States business law. The views expressed in this article are Mr. Faulkner’s own.

*Photo by Joe Jenkins is licensed under CC 2.0. *

Business law, otherwise known as commercial law, is a complex body of law that covers “the rights, relations, and conduct of persons and business engaged in commerce, merchandising, trade, and sales.” Commercial law covers a diverse range of topics from employer/employee rights, consumer rights, and very often the drawing up of contracts.

Employment Law

Employment law in the U.K. and the rest of Europe is designed to protect employees, whereas the U.S. tends to favour the employer in many regards.

For instance, if you’re an employer in the U.K. you can terminate an employee’s contract only with a justifiable reason, and you can be taken to a tribunal if the employee believes they have been unfairly dismissed. However, in the U.S. “At-will employment” is commonplace, where the employer is free to discharge individuals for ‘good cause, bad cause or no cause at all’.

Employers in the U.S. also have the right to conduct thorough background checks pre-employment without too many obstacles, but U.K. employers can only do so when relevant to the role in question. Additionally, non-compete agreements tend to be more widely used in the U.S. and more strictly scrutinised in the U.K. where the law is again skewed in favour of the employee.

Contracts

The ‘bread and butter’ of most commercial law firms is the drawing up of contracts. There are however several profound differences between contracts in the U.K. and those in the U.S.

Firstly, the two nations differ as to the understanding of good faith. Unlike U.S. law, U.K. law does not work on a general implied duty of good faith except in certain areas like employment and insurance law.

Secondly, the two nations differ when it comes to limitation clauses. In English law if a breach of contract leads to loss of revenue, production and profit, the contact must expressly state that such losses are excluded to make sure that such losses are excluded. In the U.S. the words “indirect and consequential losses” expressly exclude loss of revenue, production and profit that stem from a breach of contract.

Thirdly, the concept of a unilateral mistake is different in the two nations. Under U.S. law when a mistaken party can avoid a contract if enforcement would be unconscionable and the innocent party did not know or have reason to know of the mistake. In England, the contract is only void if the innocent party know of the other party’s mistake and the mistake relates to some fundamental part of the offer.

Business Structure

Businesses can be legally structured in several ways, from corporations and partnerships, to Limited Liability Companies and Sole Traders/Propietorships.

Laws regarding business structure in both the U.S. and the U.K. deal with the liabilities of those who own and run the business. There are several major differences between the two countries.

Under English law, partnerships are governed by the Partnership Act 1890 and limited partnerships by the Limited Partnership Act 1907. In the former, partners are jointly and severally liable; in the latter there can be partners who are only accountable up to their investment in the business i.e. they will not be responsible for debts in the event of liquidation. In the U.S. however there is no specific statutory law governing the establishment of partnerships, each state and the District of Columbia having different partnerships. Essentially, the U.K. has laws which apply to all businesses in its jurisdiction whereas the U.S. has a much more fragmented system.

The use of Alternative Business Structures (ABSs) in the U.K. is yet to be adopted fully by the U.S. In 2011, the American Bar Association floated the prospect of allowing a limited number of ABSs as a way to facilitate the work U.S. lawyers and law firms in the global legal services industry which is increasingly opting for these alternative structures.

Author Bio: James Faulkner is a specialist legal copywriter working alongside Carter Moore Employment Law Solicitors.

This article is provided for informational and educational purposes only. I am not licensed to practice law in the United Kingdom. Those in need of any legal advice regarding the laws of foreign countries should consult with a qualified attorney.

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