CH1Mindmap
Tap any card to reveal its definition
π₯ Stakeholders
Entrepreneur
Spots a gap in the market, uses initiative and takes personal and financial risk to set up a business and make a profit.
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Investor
Gives capital to fund a business in return for a return on investment (e.g. dividends or interest).
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Employer
Hires employees to carry out work, paying them wages in return.
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Employee
Gets paid wages to carry out work for their employer.
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Manager
Runs a business or part of it (a department) on behalf of the entrepreneur. Does not take the financial risk.
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Producer
Manufactures goods from raw materials using the factors of production.
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Supplier
Sells a business goods (stock) or partly finished goods (raw materials) for use in production.
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Service Provider
Offers a business services such as electricity, internet, legal advice or banking.
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Consumer
Buys goods and services for their own personal consumption.
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Interest Group
Represents and promotes the interests of a group with a common interest. Uses lobbying, negotiation, protests and information campaigns to influence decision makers. e.g. IBEC, ICTU, IFA.
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π€ Types of Relationship
Competitive Relationship
Win-lose β one party benefits at the expense of another (mutually exclusive goals). e.g. Volkswagen and Renault competing on price, quality and customer service.
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Co-Operative Relationship
Win-win β both parties work together towards a mutual benefit/common goal. e.g. two rival car manufacturers sharing the cost of developing an in-car IT system.
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Examples by Stakeholder Pair
Employer / Employee
Co-op: Employer funds training β employee gains skills, employer gains productivity.
Competitive: Dispute over pay β employer wants lower costs; employee wants higher wages.
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Competitive: Dispute over pay β employer wants lower costs; employee wants higher wages.
Investor / Entrepreneur
Co-op: Investor provides capital; entrepreneur uses it to grow the business and generate returns.
Competitive: Investor wants dividends paid out now; entrepreneur wants to reinvest profits for expansion.
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Competitive: Investor wants dividends paid out now; entrepreneur wants to reinvest profits for expansion.
Investor / Manager
Co-op: Both want the business to grow β investor provides capital; manager delivers results.
Competitive: Manager wants to retain profits for the business; investor wants maximum dividend.
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Competitive: Manager wants to retain profits for the business; investor wants maximum dividend.
Two Producers
Co-op: Share costs of research and development; bulk-buy raw materials together.
Competitive: Compete on price, quality, customer service and choice of goods.
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Competitive: Compete on price, quality, customer service and choice of goods.
βοΈ Elements of a Valid Contract (7)
Agreement
A clear, complete and unconditional offer and acceptance must exist. Offer can be verbal, written or by conduct. A counter-offer cancels the original offer. e.g. Tesco sells a sandwich for β¬5 β Tom presents β¬5 at the till.
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Consideration
Something of real value must be exchanged between the parties β usually money for a good. e.g. β¬5 paid in exchange for a sandwich. A court will not question the adequacy once something of value exists.
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Legality of Form
Some contracts must take a certain form to be legally valid β e.g. a house sale must be in writing. A contract of employment must also be provided in writing.
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Consent to Contract
Both parties must enter the contract on their own free will. A contract signed under threats or undue pressure is not legally binding. e.g. a contract signed at gunpoint is invalid.
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Capacity to Contract
A party must have the legal ability to agree β cannot be bankrupt, of unsound mind, a minor (under 18) or acting Ultra Vires. e.g. a 7-year-old cannot legally buy a house.
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Legality of Purpose
The intention of the contract must comply with all laws. Illegal contracts such as a drug deal are not enforceable by law.
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Intention to Contract
Both parties must be aware that the agreement is legally binding β not just a social or domestic arrangement. e.g. agreeing to meet a friend for coffee is not a legally binding contract.
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π Termination of a Contract (4)
Performance
Both sides have fully carried out their contractual obligations β the contract ends naturally. The most common way a contract ends.
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Agreement
Both parties decide to end the contract early by mutual consent β neither side is penalised.
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Frustration
An event occurs (such as death or bankruptcy) that makes it impossible to fulfil the contract β not the fault of either party.
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Breach
A party breaks an essential element (condition) of the contract β the injured party can seek a remedy.
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π Remedies for Breach of Contract (3)
Specific Performance
Court orders the guilty party to fulfil the agreed terms of the contract.
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Financial Compensation
Court orders the guilty party to pay damages to the injured party.
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Rescind the Contract
Court orders both parties to return to their initial starting position as if the contract never existed.
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2023 Q1(A) + 2017 Q1(A)
Co-operative and competitive relationships between stakeholders. (20)
βΌ
Describe one example of a co-operative relationship and one example of a competitive relationship that could arise between the following stakeholders:
(i) Employer and employee
(ii) Investor and the manager of a business. (20 marks β 2 Γ 10, each: 2 + 4(3+1) + 4(3+1))
(i) Employer and employee
(ii) Investor and the manager of a business. (20 marks β 2 Γ 10, each: 2 + 4(3+1) + 4(3+1))
βοΈ Part (i) β Employer and Employee
Co-operative (win-win): A co-operative relationship exists where both parties work towards a common goal. An employer and employee could have a co-operative relationship when the employer invests in training for the employee. This upskills the employee and improves their productivity β the employer gains a more efficient workforce while the employee gains new skills and improved career prospects.
Competitive (win-lose): A competitive relationship exists where both parties pursue a mutually exclusive goal. An employer and employee may have a competitive relationship over pay increases β the employer wants to minimise labour costs to protect profits while the employee wants higher wages, so one benefits at the expense of the other.
βοΈ Part (ii) β Investor and Manager
Co-operative (win-win): The investor and manager might have a co-operative relationship when both are trying to grow the business. The investor provides capital and the manager delivers strong performance β the investor receives a return (dividend) and the manager's position is secured.
Competitive (win-lose): A competitive relationship may arise when deciding on the distribution of profits. The manager may want to retain profits to reinvest in the business while the investor wants the maximum dividend paid out β only one can win.
π Marking scheme: 2 marks for naming the type of relationship + 4 marks for describing the example (3 for explanation + 1 for showing the benefit to each party). Both the benefit to the employer AND the employee must be stated β missing one side costs a mark.
2021 Q4(B)
Co-operative and competitive relationships between two producers. (20)
βΌ
Describe a co-operative relationship and a competitive relationship between two producers in the same line of business. Use appropriate examples to support your answer. (20 marks β 2 Γ 10, each: 4+3+3)
βοΈ Suggested Answer
Co-operative relationship (win-win): A co-operative relationship exists where both parties work together to achieve a common goal β it is a win-win scenario where both sides benefit. Two rival car manufacturers could share the cost of developing an in-car IT system. Both businesses reduce their R&D costs while benefiting from the shared technology, making it mutually profitable.
Competitive relationship (win-lose): A competitive relationship between rival businesses refers to both pursuing a mutually exclusive goal at the expense of the other β a win-lose situation. Car manufacturers such as Volkswagen and Renault compete on price, quality of goods, customer service and choice of products. When one wins a customer, the other loses that sale.
π Exam tip: The question says "use appropriate examples" β this means examples are allocated marks, not optional. Named businesses score better than generic examples. 4 marks for the definition, 3 for the explanation, 3 for the example applied correctly.
2023 Q1(C) + 2025 Q1(A)
Illustrate elements of a valid contract. (20)
βΌ
Illustrate your understanding of the following essential elements of a valid contract:
Consideration Β· Legality of Form Β· Intention to Contract
(20 marks β 2 Γ 8 marks (4+4) + 1 Γ 4 marks (2+2))
Consideration Β· Legality of Form Β· Intention to Contract
(20 marks β 2 Γ 8 marks (4+4) + 1 Γ 4 marks (2+2))
βοΈ Consideration (8 marks)
Definition: Each party in a contract must exchange something of real value to the other party. Consideration is usually in the form of money but it could also be something valuable exchanged as part of the contract. A court will not question its adequacy provided some value exists.
Example: Tesco displays a sandwich for β¬5. Tom presents β¬5 at the till. Both parties have exchanged something of value β the goods and the money.
Example: Tesco displays a sandwich for β¬5. Tom presents β¬5 at the till. Both parties have exchanged something of value β the goods and the money.
βοΈ Legality of Form (8 marks)
Definition: Certain contracts, to be considered legal, must be drawn up in a particular manner. Some contracts must be in writing if they are to be legally valid.
Example: The sale of a house must be in writing to be legally valid. A contract of employment must also be provided to the employee in writing.
Example: The sale of a house must be in writing to be legally valid. A contract of employment must also be provided to the employee in writing.
βοΈ Intention to Contract (4 marks)
Definition: Both parties must be aware that they are entering into a legally binding agreement β not just a social or domestic arrangement.
Example: Agreeing to meet a friend for coffee is not legally binding. Signing a lease agreement is, because both parties intend to create legal obligations.
Example: Agreeing to meet a friend for coffee is not legally binding. Signing a lease agreement is, because both parties intend to create legal obligations.
π Illustrate = definition + example. Both parts are marked separately β the example must be clearly linked to the element, not a generic one. In 2023: Consideration and Legality of Form = 8 marks each (4+4); Intention = 4 marks (2+2). In 2025: all four elements = 5 marks each (4+1).
2018 Q1(A)
Termination of a legal contract β four methods. (25)
βΌ
(i) Explain the method of terminating the legal contract referred to in the text. (4 marks)
(ii) Outline three other methods for terminating a legal contract, providing an example in each case. (21 marks β 3 Γ 7 (2+3+2))
(ii) Outline three other methods for terminating a legal contract, providing an example in each case. (21 marks β 3 Γ 7 (2+3+2))
βοΈ The Four Methods
Performance: Both sides have fully carried out their contractual obligations β the contract ends naturally. e.g. A builder completes a house and the owner pays the agreed price in full.
Agreement: Both parties decide to end the contract early by mutual consent β neither is penalised. e.g. A landlord and tenant mutually agree to end a 12-month lease after 6 months.
Frustration: An event occurs that makes it impossible to fulfil the contract β not the fault of either party. e.g. A musician dies before performing at a booked concert β the contract is frustrated.
Breach: A party breaks an essential condition of the contract β the injured party may seek a remedy. e.g. A supplier fails to deliver goods on the agreed date, breaching the delivery condition.
π Common confusion: Performance (both sides complete their obligations β natural ending) vs Agreement (both sides choose to end it early β not natural). Students regularly mix these up. Performance = contract completed; Agreement = contract cancelled early by choice.
Short Q / 2010 Q1(C)
Illustrate Capacity to Contract + remedies for breach. (10)
βΌ
In relation to the Law of Contract, illustrate your understanding of Capacity to Contract. (10 marks β explanation 5m + example 5m)
βοΈ Suggested Answer
Capacity to Contract: All natural persons (human beings) and legal/corporate persons such as companies have the legal right and ability to enter into a valid contract. The following people generally do not have the capacity to contract: infants (under 18), persons under the influence of drink or drugs, persons of unsound mind, and bankrupt persons. If a company acts beyond its legal powers it is said to be acting Ultra Vires and the contract is unenforceable.
Example: A 7-year-old child cannot legally purchase a house as they are a minor β they lack the capacity to contract.
Example: A 7-year-old child cannot legally purchase a house as they are a minor β they lack the capacity to contract.
βοΈ Three Remedies for Breach
Specific Performance: Court orders the guilty party to fulfil the agreed terms. e.g. A seller who refuses to hand over a property after a signed contract is ordered by the court to complete the sale.
Financial Compensation: Court orders the guilty party to pay damages to the injured party. e.g. A contractor who abandons a building project pays damages for losses caused.
Rescind the Contract: Court returns both parties to their original position as if the contract never existed. e.g. A buyer who was misled about a car's condition gets their money back; the seller gets the car back.
π Ultra Vires is a key phrase worth including in Capacity to Contract answers β examiners recognise it and it signals a deeper understanding. Translated from Latin: "beyond the powers."
The following topics are identified as 2026 must-knows for Chapter 1: People in Business based on past paper frequency, examiner reports and the 2026 trend master sheet.
Co-operative and competitive relationships between stakeholders Hot
Appeared in 2023, 2022 Deferred, 2021, 2019, 2017 β one of the most consistently examined topics in Q1. Always pairs two specific stakeholders and asks for one co-op and one competitive example each. Know Employer/Employee, Investor/Manager and Two Producers as your core pairs. Benefit to each party must be stated.
Appeared in 2023, 2022 Deferred, 2021, 2019, 2017 β one of the most consistently examined topics in Q1. Always pairs two specific stakeholders and asks for one co-op and one competitive example each. Know Employer/Employee, Investor/Manager and Two Producers as your core pairs. Benefit to each party must be stated.
Elements of a Valid Contract β Illustrate Hot
Appeared in 2025, 2024, 2023, 2021 β three or four elements are selected from the seven and students must illustrate (define + example) each. Consideration, Legality of Form, Consent to Contract and Intention to Contract are the most frequently chosen. An example is compulsory for full marks β do not write definitions alone.
Appeared in 2025, 2024, 2023, 2021 β three or four elements are selected from the seven and students must illustrate (define + example) each. Consideration, Legality of Form, Consent to Contract and Intention to Contract are the most frequently chosen. An example is compulsory for full marks β do not write definitions alone.
Termination of a Contract β all four methods Watch
Appeared in 2018 Q1(A) as a 25-mark question. Know all four methods (Performance, Agreement, Frustration, Breach) with a clear example for each. The most likely format is 3 methods at 7 marks each (2+3+2) = name it, explain it, give an example. Don't confuse Performance with Agreement.
Appeared in 2018 Q1(A) as a 25-mark question. Know all four methods (Performance, Agreement, Frustration, Breach) with a clear example for each. The most likely format is 3 methods at 7 marks each (2+3+2) = name it, explain it, give an example. Don't confuse Performance with Agreement.
Remedies for Breach of Contract Watch
The three remedies (Specific Performance, Financial Compensation, Rescind) appear as short questions and as part of longer Q1 answers. Know the definition of each and a brief example. A scenario-style question may describe a breach and ask which remedy is most appropriate.
The three remedies (Specific Performance, Financial Compensation, Rescind) appear as short questions and as part of longer Q1 answers. Know the definition of each and a brief example. A scenario-style question may describe a breach and ask which remedy is most appropriate.
Interest Groups β definition and examples Possible
Frequently appears as a short question β define an interest group and give two examples. IBEC (employers), ICTU (trade unions) and IFA (farmers) are the standard examples. Know the methods used: lobbying, negotiation, protests, information campaigns. Could also appear in the context of competitive relationships between interest groups and government.
Frequently appears as a short question β define an interest group and give two examples. IBEC (employers), ICTU (trade unions) and IFA (farmers) are the standard examples. Know the methods used: lobbying, negotiation, protests, information campaigns. Could also appear in the context of competitive relationships between interest groups and government.
Illustrate
Definition + Example
You must give a clear definition AND a relevant example. For contract elements, the example must be clearly linked to that specific element β a generic example will not earn the example marks.
e.g. "Illustrate Consideration" β define it (exchange of value) + example (Tom pays β¬5 for a sandwich at Tesco β both parties exchange something of value).
Describe
Full explanation required
For relationship questions, "describe" requires: name the type (co-op / competitive) + explain what it means (win-win / win-lose) + describe the specific example + show the benefit to each party. All four parts are marked.
e.g. "Describe a co-operative relationship between employer and employee" β both benefit = employer gets productivity, employee gets training/wages β both sides must be stated.
Relationships
Win-win vs Win-lose
These are the two key phrases for every relationship question. Co-operative = win-win (both benefit). Competitive = win-lose (one gains at the other's expense). Always use these phrases β they are in the marking scheme.
e.g. "It is a win-win relationship β both the employer and employee benefit: the employer gains productivity and the employee gains new skills."
Contract Elements
Know all 7 β any 3 can appear
The SEC picks 3β4 from the 7 elements each year. You cannot predict which ones β learn all seven. Agreement, Consideration and Legality of Form appear most often but Capacity, Consent, Intention and Legality of Purpose have all featured too.
Memory trick: A C C C L L I β Agreement, Consideration, Capacity, Consent, Legality of Form, Legality of Purpose, Intention.
Termination
Performance β Agreement
The most common error in this topic. Performance = contract ends naturally because both sides completed their obligations. Agreement = contract ends early because both sides chose to cancel it. They are different β get this distinction right every time.
e.g. A builder finishes a house and is paid in full = Performance. A builder and client mutually agree to cancel a contract midway = Agreement.
Mark Schemes
Relationship Q structure
Relationship questions are typically 2 Γ 10 marks each broken down as: 2 marks for naming the relationship type + 4 marks (3+1) for first example + 4 marks (3+1) for second example. The (3+1) means 3 for the explanation and 1 for the benefit to each party.
e.g. 2023 Q1(A) = 2@10 (2, 2@4(3+1)) β the "2" is for naming co-op or competitive; the "4(3+1)" is for each stakeholder example with benefit shown.