PRINCIPLES OF BUSINESS

GRADE 10

HANDOUT THREE

FACTORS AFFECTING THE LOCATION OF A BUSINESS & INTRODUCTION TO LEGAL ASPECT OF A

BUSINESS CONTRACTS

Geography

Key geographical features that dictate whether a location is good for a business include the following.

• Natural features (the terrain of the land, the availability of water supplies, etc.). Population (the size of the local population, the age
structure of the local population, and Other demographic factors),

• The industries that already exist in a region (suppliers, competitors, etc.}.

Many businesses need to be located close to their market and their customers. For example, many manufacturing industries locate
close to their market, particularly if they produce bulky or fragile items that are expensive to transport.

Availability and Location of Raw Materials and Supplies

➢ Some manufacturing businesses use a lot of heavy, bulky raw materials to make their products, even though the end product is
smaller and lighter. For example, finished steel is a lot lighter than the ore, limestone and other materials of which it consists. If
the raw materials are bulky and expensive to transport, it makes sense to locate near their source.

Infrastructure

➢ Infrastructure refers to the key physical and organisational structures and facilities (such as buildings, power supplies and
roads) needed for the operation of a business, Businesses requi re access to electricity supplies for lighting and heating, and
good transport links for employees to get to work, for supplies to reach the company and for goods to get to market In addition,
businesses will either need to buy premises or rent them, so the availability of suitable buildings in an area is very important.
Power and Water Supplies

➢ A business must consider five standard utilities gas, electricity, water, waste disposal and drainage. Power is particularly
important in manufacturing, but it can also be important for large service organisations such as banks and insurance
companies. Industries such as food preparation and paper production use large quantities of water. Food processing creates
waste, and the cost of waste disposal will affect the choice of location.
Telecommunications

➢ Businesses need a strong communication system. This is particularly important in the Caribbean, where many companies trade
and communicate globally. It is therefore important to set up in areas where communications are clear and reliable. This might
exclude some mountainous or highland areas, or countries where the telecommunication links do not exist. Cities with
excellent wireless and broadband facilities can be attractive for new businesses

Transport Links.

➢ Two major influences on transport costs are the type of raw materials used by the business, and how near the business is to its
market. Transport costs will also be affected by whether the industry is " bulk increasing' or "bulk decreasing" (i.e. whether the
goods become larger and heavier or smaller and lighter as they are assembled.
Health facilities

➢ A health facility is any location where healthcare is provided, for example a doctor's surgery or hospital. Good healthcare
facilities are an important aspect of business, particularly for industries that are more likely to result in accidents and injury
(for example mining and farming).

➢ Employers also benefit from having easy access to health facilities to keep a workforce healthy and capable of effective work.
For example, if employees need to visit a clinic, then it is helpful if they can visit the doctor quickly and then return to work.

Supply of labour

➢ Labour and skills are more readily available in some areas than others, and this will be an important factor for most businesses
when they choose their location. If businesses want a large pool of cheap labour, they might set up in areas where there are not
many existing employers- If they want skilled labour, they will need to set up where they are most likely to find those skills.
Government regulations

➢ Government regulation can have a major impact on a business location. For example, in some areas of the Caribbean, there is
relatively little regulation (rules, laws and taxes), and some businesses locate to areas as a result, for example offshore financial
institutions. A lack of regulation helps to reduce business costs, as less paperwork is required to carry out business.
Activity 1:

Explain the significance of collateral in accessing capital to establish a business. Start by defining the concept of collateral and list the
different types of collateral.
Legal Aspect of a Business
Key Terms:

Offer: a proposal made by one party to another party, establishing his or her willingness to enter into a legal binding
agreement. The basis Of the Offer will help to form the contract
Acceptance: the act Of agreeing to take up (accept) an offer. A situation where the offeree agrees to the terms and conditions
set out by the offeror in the contract.
Under seal: this term applies to a situation where legal documents are differentiated from other types of document. A seal is a
legal mark which signifies that the document with the seal is a legal document and that it is binding.

The concept of a Contract

A contract is a legal/lawful agreement that is enforceable by law, with specific terms between two or more people or entities, in
which there is a promise to do something in return for a valuable benefit (known as a consideration).

➢ For example, an employment contract is an agreement between an employer (to provide work) and an employee (to provide
labour services in exchange for wages).

➢ The terms are the conditions of a contract which need to be fulfilled, for example to work for 40 hours per week, to make
payments at a certain rate per hour, etc. Contracts can be either oral or written.

➢ However, oral contracts are more difficult to prove. This is because there is no paperwork for evidence. When there is a
physical contract outlining the terms, this cannot be disputed, As well as being oral or written, a contract can also be implied
based on conduct (what someone does).

Simple Contracts
A simple contract is where there is an Offer and acceptance of terms. It is legally binding, but the contract has no deed (it is not
signed, sealed or delivered).

Such contracts are very popular and generally implied, expressed orally or written down.

The three key elements of a simple contract are:

Legality: being in accordance (conformity} with the law.

The offer: a promise which, according to the terms set out, becomes legally enforceable if accepted,
Acceptance: an act or conduct that indicates assent to the terms of the offer.

Specialty Contracts

A specialty contract, in contrast, is a contract under seal, and in law it is considered to be a more serious and official contract than a
simple one.

Examples include contracts to do with the sale of land, the sale of property, mortgages, hire purchase agreements, etc.

➢ These contracts often involve large sums of money or considerable obligations and terms. They will be in writing or printed on
paper, and will be sealed.

➢ The contract is conclusive between the two parties when it has been signed, sealed and delivered. For example, when a
purchaser has signed a contract to buy goods under a hire purchase agreement, where the finance is provided by a finance
company and the document is under seal.

Activity 2: Describe the characteristics of a simple contract.

In order for a simple contract to be enforceable in the court Of law, it must satisfy the following requirements/elements

1. offer and acceptance

2. competence of the parties (capacity)
3. intention to create legal relations
4. consideration.
SIR: V.MALCOME