Law

Introduction to law

Terminology:
e.g. = exempli gratia for example
Inc = Incorporation legal form in the U.S
a.k.a. = also known as
p.p. = per procurationem You are signing a letter on somebody elses behalf
recd = received
VAT = Value Added Tax
PR = proportional representation
AOB = Any Other Business
IOU = I owe you A legal binding agreement
e. & o.e. = Errors and Omissions Excepted

Latin Phrases:
inter alia = among other things
vice versa = in the opposite way
ipso facto = by this fact, in itself
per capita = for each person
prima facie as things seem at first
caveat emptor = the buyer is responsible for checking the purchase
bona fide = in good faith
toties quoties = often as necessary

How some countries organize law
Public law: the relationship between the state and its citizens
for example: criminal law, constitutional law, administrative law

Private law: rights and duties of individuals towards each other
for example: property, family, contract, tort, probate, company law,
partnership law

Written (civil) law: Written in ONE document
Unwritten (common) law: Not written in ONE document

Principle of judicial precedence: where a decision made by judges in a higher
court must be followed by judges in lower courts if the facts of the case are
sufficiently relevant. These decisions are BINDING.

Constitution: The law about how a country rules itself are set out in a
constitution.

Every country will make national laws by: proposal - debate vote
In the UK: bill (proposal) - passage of bill (debate, consolation) - act (vote)

Sources and types of law in the EU

Three law making bodies: European commission
- is made up of 27 commissioners nominated by their countries and voted
on by the European Parliament, for a term of 5 years
- the commissioners must put the interests of the EU above those of their
country
- each commissioner is assigned responsibility to propose and manage
policy for a specific area e.g. environment
- it is the only body with the power to propose laws
- is responsible for enforcing EU laws
- has power to draft the EU budget and distribute money to member states
- represents all members in the negotiations of treaties

European parliament
- is the only directly elected body of the EU
- members represent the interests of their country
- members are elected in their member states for a 5 year term
- the parliament gives credibility because it is directly elected
- the number of members rep
- the parliament can accept, reject and put forward amendments to
proposals made by the commission
- it can debate and pass laws and debate and adopt the budget
-
question commissioners.

European council of ministers
- is the main legislative decision making body
- ministers are not elected but nominated by their national governments
- the council will adopt and pass EU laws, the EU budget and develop EU
foreign and defense policy
- the presidency of the council rotates every 6 months and the president
must chair the council meetings
- the numbers of votes each country has in council broadly reflects the
population of their country


How an EU law is made
The commission has the right of initiative, and it uses public consolations
to get proposals right.
Public consultation is allowing individuals or businesses to have a say in
legislation.

The EU PRINCIPLE OF SUBSIDIARY is that the EU must only draft laws involving
issues that cannot be dealt with effectively at national, regional or local levels.

The EU PRINCIPLE OF PROPORTIONALITY is that the law must not go beyond
what is necessary to achieve the goal they serve.

A draft of the proposal must be agreed by 14 of the 27 commissioners to be
sent to the council of ministers and parliament.

The ordinary legislative procedure consists of two successive readings, by
parliament and the council, of a commission proposal. If the two co-
legislators cannot agree there is a meeting of a conciliation committee,
composed of council and parliament representatives, with the participation of
the commission to reach an agreement. This agreement is then submitted to
parliament and council for a third reading.

Qualified majority voting: the number of votes each country has broadly
reflects the population of their country.
For a motion to be passed 55% of the EU member states must vote in favor
and that will represent 65% of the EU population.

Treaties, regulations, directives
Treaty: a treaty is an agreement in written form between nation states
Regulations: a regulation is a binding legislative act. It must be applied in its
entirely across the EU. These are directly applicable. The PRINCIPLE OF
DIRECT APPLICABILITY means that it applies to all member states without
implementation with the same effect and in the terms in which it is made.
Directive: a directive sets out a goal that all EU countries must achieve. It is
up to the individual countries to decide how.

European Court of Justice
PRINCIPLE OF DIRECT EFFECT: the ECJ ruled that in some circumstances EU
laws have a direct effect on citizens of member states meaning that they can
rely on the EU law in their own member state courts.
PRINCIPLE OF INDIRECT EFFECT: the ECJ ruled that the courts of member
states should comply with EU law when interpreting national legislation
PRINCIPLE OF SUPREMACY: in the event of a conflict it was ruled that EU law
should always be supreme
- The ECJ consists of 1 judge per country plus 8 advocate generals
- All are nominated by their member state governments for a 6-year term
- Cases are usually heard by 3 - 5 judges
- The rulings they make are BINDING on the parties to whom they are
addressed
- The principle of judicial precedence does not apply to ECJ

Recommendation: when the commission issues a recommendation it is not
binding and has no legal consequence. It allows the commission to suggest a
line of action. Opinion: This is not binding and has no legal consequence. It
allows the parliament, commission and council along with other bodies to
express their point of view and contribute to debate

Business law

Ways to set up a business

Sole trader
- Any person may set up a business as a sole trader
- The owner has independent control of the business
- The owner must provide all start-up capital which may involve a loan
- The owner must keep records showing business income and expenses
- The owner keeps all profits
- The owner is self-employed and responsible for submitting taxes
- The owner has total responsibility for all legal liabilities and financial risks

Why be a sole trader?
- May want to test a business idea for the first time, without the cost of
registering a company.
- May want minimal paperwork
- May not need or want financial security of the limited business
- May have a minimal outlay to start business
- May not need to raise any capital

Partnership
- two or more persons sharing business with a view to making profits
- partners provide the capital money and share the responsibility of running
the business on agreement between its members
- Partnerships are common in the same services provided by sole traders.
a partnership has the advantage to raise more money because each
partner could make a financial contribution
- partners must keep records of all business income and expenses
- partners share profits between them
- partners are self-employed and responsible for submitting taxes: paying
income tax the liability for any debts of the business would be the partners. The
partners could bedeclared bankrupt.

Why be a partnership?
- May need someone else s expertise along with yours
- may feel more confident to set up business with someone else sharing the
responsibility
- able to contribute and raise more money
- still less paperwork than a registered business

Limited company
- a limited company can be public (shared may be transferred by the public)
and private(limited by shares or by guarantee)
- in relation to set up and administration, a private company must be
registered (incorporated)at companies house or equivalent in another
country
- limited company must file accounts and a return annually with Companies
House
- will pay corporate tax

Incorporated means...

- company members have limited liability for the companys debts
- the company is a separate legal entity distinct from its members
- the company may be legally liable for breach of contract, tort or criminal
offences
- the company records and accounts are made public every year
- the ownership and management may change but the company continues
to exist
- the company can take different types of loans which may be less
expensive
- the company name will be registered, stopping anyone else from using it
- bigger companies are registered so being registered makes people think
your business is bigger and more reputable

How to set up a company
The following information must be submitted to the Company Register with
the correct fee:
Memorandum of association
- this is part of the companys constitution and sets out the rules for the companys
relationship with the outside world.
- It contains of the following: companys name, address of the registered
office, liability of the members, authorized capital and the objectives of
the company
- the memorandum is a public document and may be inspected by anyone
- almost all of it can be altered by the companys members by
following agreed and allowed procedures

Articles of association
- this is the second part of the company s constitution and set out the rules for the
internalmanagement of the company and its relationships between it and
its members.
- the articles state the rules necessary for the internal conduct of the
companys business
- examples: number of directors, method of appointment, power of
directors, procedure forcalling and the conduct of meetings, voting rights,
keepment and payment of dividends.

A statuary declaration that the legal requirements have been complied with.
The registry will issue a certificate of incorporation saying that the legal formalities have
been complied with and that the company appears to be formed to pursue a
legal objective.

Together the memorandum and articles of association represent a contract
between the company and each of its members. And the members of the
company (with each other)

Protection of business ideas

The law will protect the parts of your business that relate to tangible goods and
intangibles. This is called intellectual property
Copyright: writing, drama, art (books, films, songs)
Design right: original design for 3D functional items
Registered design: new design for something that exists
Patents: new inventions
Trademarks: distinctive identifying symbol for goods or services

There is a lot EU law o Intellectual property because it affects free trade
within the single market. If you register with registered community design
you have protection throughout the EU. There is also a World Intellectual
Property Organization.

In addition to statutory written laws there are common laws protecting
intellectual property. There is protection against:

Tort of passing off: This protects reputation from another business
pretending something is work or copying.
Tort of malicious falsehood: This protects the business from lies about a business
Tort of breach of confidence: To stop people sharing information you have told
them in confidence

Competition law

Three main elements:
- Prohibiting agreements or practices that restrict free trading and
competition between businesses. This includes in particular the
repression of free trade.
- Banning abusive behaviour by a firm dominating a market or anti-
competitive practices that tend to lead to such a dominant position.
- Supervising the mergers and acquisitions (legal terms!!) of large
corporations, including some joint ventures.

Competition law varies from jurisdiction tor jurisdiction. The important objectives are
protecting the interests of consumers and ensuring that entrepreneurs have the
opportunity to compete in the market economy.


Contract law

Contract: a legal enforceable agreement between two or more parties.Can be
verbal or written. It is a set of mutual promises (consideration).

A contract consists of three main parts:
- offer and acceptance
- intention to create a legally binding relationship
- consideration
A set of promises the law will enforce
- agreement
- consideration
- intention
- form
- capacity
- geniuses of consent
- legality
An agreement consists of an offer and acceptance

OFFER
The person who makes the offer is the offer or and the person to whom the
offer is the offeree.

A legally binding offer will have: clearly stated terms, intention to do
business and communication of that intention.

An offer is not quite: An invitation to treat
This invites one to make an offer or to negotiate. Items in a shop window are
NOT an offer, they are an invitation to enter the shop, bring the item to the
cash desk and offer the buy.

An invitation to tender
This invites one to take part in a procedure where more than one party
makes an offer for the same thing but only one is chosen.
For example Avans invites tenders from cleaning companies to clean the
school. Many companies will send an offer.

ACCEPTANCE
Acceptance is: agreement to be bound to all the items of the offer. It must be
a mirror image of the offer, must be firm and must be communicated to the
offerer.

The intention to create a legally binding relationship. Generally the courts will
presume that domestic or social agreements are not meant to be legally
binding. Business agreements are meant to be legally binding.

Consideration is the item or service that each party to a contract is willing to
trade to obtain an item or service from the other party. (transaction)

Terms in a contract

General terms of a contract:
Templates of contracts are widely available to help you begin. This includes
the names of the parties, the introduction to the contract, the nature of their
agreement their signature, names and details.

Special terms in a contract:
Boiler plate clauses: these are ready made clauses that will usually appear in
all commercial contracts. An example is a clause of force majeure which
means that the contract will be suspended or terminated if events occur that
are beyond reasonable control of the parties.

Limitation of liability clauses
These are clauses that mean the parties agree to limit any action or
compensation if something goes wrong with the contract.

Sale of goods contracts

Goods: includes all personal property capable of physical possession and
control. Not intellectual property like copyright and trademark, not land and
no company shares.

Terms that is implied in sales of goods contract:
- the seller has lawful authority to transfer ownership
- the goods match their description
- the goods are of satisfactory quality
- the goods will be suitable for any purpose specified by the buyer
- the goods match any sample produced prior to the contract

Duties and rights of the seller
The sellers duties are to:
- Pass good title and deliver the goods on time, the correct quantity and
correct quality.
The sellers rights are:
- to retain title of the goods until payment is made
- to stop goods in transit if the buyer becomes insolvent
- to re-sell to another buyer
- the right to sue for the price if the buyer does not pay the agreed price

Duties and rights of the buyer
The buyers duties are to:
- accept delivery of the goods at a specified time or within a reasonable
time
- pay the price agreed either at the same time as goods are delivered or at
an agreed time
The buyers rights are:
- to reject the goods if they do not meet the specifications set out in the
contract
- to specific performance (goods identified and agreed)
- to claim damages or cancel the contract because of misrepresentation by
the seller
Retention of title clause
This means that the legal ownership of title remains with the seller until the
goods have been paid for. In practice the buyer will accept the risk for the
goods when they leave the seller. If goods are to be sent by air freight the


Confidentially agreements in a contract
These agreements protect sensitive technical or commercial information from
disclosure to others. They are usually imposed by one party on another: the
recipient. They can prevent the forfeiture of valuable patent rights. In some
countries the public disclosure of an invention can be deemed as a forfeiture
of patent rights in that invention. It defines exactly what information can and
cannot be disclosed.
Exceptions are:
- information that the recipient can show that they had knowledge prior to
receipt of information from the discloser
- Information that becomes known to the public through no fault of the
recipient.
- information that was public knowledge before the disclosure of the
information to the recipient
- Information independently created by the recipient.

Discharge of a contract
A contract is discharged (fulfilled, completed or ended) by:
- performance (each party does what agreed)
- agreement (parties may agree not to proceed)
- frustration (if the contract becomes impossible to discharge due to events
outside the parties control)
- breach (sometimes a breach of contract may be capable of ending it
because it cannot be continued)

Remedies for a contract: what the court may order
Damages: if party suffers loss or damage from a breach of contract the court
may order the other party to pay compensation. The aim of this is to put the
injured party in the financial position they would be if the contract had been
performed.

Specific performance: the court may order that the parties must perform the
contractual obligations

Rescission: the court may allow the contract to be set aside and the parties
restored to their pre-contract position

Defects in a contract that may stop it being enforced
Form: most contracts can be made without writing, verbally: I want a cup of
coffee, or by conduct, taking goods to the checkout. Some contracts must be
in writing: usually involving land.

Capacity: if a contract is entered into by a vulnerable person (under 18years
of age), or someone mentally impaired (ill, addicted), the court may stop the
contract being enforced against them.

Consent: a contract must be a voluntary agreement. Evidence of duress and
undue influence may stop enforcement.

Legality: a contract to commit a crime, tort or fraud cannot be enforced. Also
contracts that are against the public interest may not be enforced

Misrepresentation: untrue or incorrect statements made to encourage the
contract.
Mistake: genuine mistake by all parties to the contract.

Where a contract will not be enforced
A contract is VOID. The defect is so serious the law will say that no contract
ever existed, even if both parties want to enforce it. A contract is VOIDABLE.
The defect is not so serious to void but one party has the right to opt out. A
contract is UNENFORABLE. The contract is valid but not enforced against a
vulnerable party.

Tort, court and arbitration

Tort liability
A tort is a civil wrong independent of a contract in a business environment a
contract may not provide sufficient protection for all consumers because the
contract will only protect the parties to the contract. The most well-known
form of tort is the tort of negligence.
A person who suffers a tortious injury is entitled to receive damages,
usually monetary compensation, from the person or people responsible, or
liable, for those injuries. Tort law defines what a legal injury is and therefore
whether a person may be held liable for an injury they have caused.
Legal injuries are not limited to physical injuries. They may also include
emotional, economic or reputational injuries as well as violations of privacy,
property or constitutional rights.
Tort of negligence
The tort of negligence means that where a person A suffers an injury,
physical or otherwise because of the negligence of person B, person A has
the right to claim compensation i.e. damages. It can relate to a whole range
of injury situations: road accidents, illness or injury caused by workplace
conditions, harm arising through medical treatment. In product liability
negligence may relate to any person who suffers damage because of defects
in a product caused by the carelessness of the manufacturer or other party
responsible for the state of goods. The tort of negligence has been
supported by written legislation in most countries.
Claim of negligence
The claimant must prove that:
- the defendant owed a duty of care
- failed to perform that duty
- as a result, the claimant suffered damage
The duty caused the damage!
Duty of care
A duty of care arises where one individual or group undertakes an activity
which could reasonablyharm another, either physically, mentally or
economically. The principle of the duty of care is limitedto situations where
the risk is:
- reasonably foreseeable
- proximate
- fair, just and reasonable

Breach of a duty
A claimant must prove that by objective standards the defendant failed to
take reasonable care. This includes taking into account the particular needs
of the customer and providing adequate working or instruction.
Consequential damage
A claimant must prove that it was the defendants breach of duty which
caused the damage suffered. The damage must be reasonably foreseeable
and proven be caused by the breach.
Liability for products
EU member states introduced the principle of strict liability. Strict liability
means that the claimant does not have to prove a breach of duty. He simply
has to prove a causal link between the defendants behaviour and the
damage suffered. It involves cases like those involving the side effects of
drugs.
Liability of occupiers
There is a duty on occupiers of any property to maintain premises safely for
the benefit of third parties on or outside the premises. The occupier must
take reasonable care to ensure that the visitor is reasonably safe for the
purposes for which the visitor is on the land.
Liability of employers
An employer can be liable for any harm caused to his employee as a result of
his employment: workaccident, bullying, illness induced by working
conditions.
Vicarious liability
This is the principle that a person finds themselves liable for the actions of
another. Most commonlyan employer will be vicariously liable for the actions
of his employee if those actions are carried outin the course of his
employment


When disputes arise
A dispute between parties can be dealt with in several different ways. The
majority of disputes aresettled without ever going to court.The most
common are alternative dispute resolution or civil litigation (court cases)
Alternative dispute resolution
Arbitration: the parties agree to submit their dispute to a third party and
agree to be bound by their decision. This form of resolution has been
available for commercial disputes for hundreds of years. It is usually
governed by written legislation which regulates the process.

It is common for an arbitration clause to be a term of contracts between
businesses. Any person acceptable to the parties may act as the third party
arbitrator. In practice they will want someone with expertise in the area.

It is a private process, more likely to lead to a friendly outcome than a court
case and relatively cheap and swift in a place convenient to the parties.

Conciliation: a conciliator aims to assist the parties find a resolution. He is
likely to suggest a solution but has no power to enforce it. It is popular in the
UK with employment issues. Disputes will first be referred to conciliation
before a court case.
Mediation: A mediator will assist the parties to communicate with each other
and find their own solution. It is popular with property or custody issues.
Ombudsman: Organizations supervising professions such as law, insurance,
financial & banking will have officials called ombudsmen who power to
investigate and resolve problems reported to them by dissatisfied customers.


Civil litigation
Starting a civil action: There are time limits to how long after an event a
claim can be brought. It is usually some years. When the parties begin or find
out about the claim they will engage a lawyer to represent their interests
1. Letters of claim - Rules are different in each country but generally each
party must tell the other their allegations and defenses. This may lead
to an early settlement.
2. Issue of claim - The claimant or plaintiff must complete a form giving
full details of the claim and submit this to the court to be processed
and sent to the defendant. The court case has begun.
3. Defendants response - The defendant has a set period of time to
respond by admitting or denying the claim. If denying, a detailed
defense must be submitted to the court and the claimant.
4. Interim matters - The preparation for trail. Each side may request
information, obtain witness evidence and make financial offers to settle
the claim.
5. Trial - Each party will present their version of events, evidence and
legal arguments to the judge. Witnesses may be called and questioned
and the claimant must prove its claim on thebalance of probabilities. It
is more likely than not that the claimants version of events is true.
Judgement
The judge will make a decision and explain the reasons. This is called
judgement for the claimant orthe defendant. If the claimant is successful the
judge will order a remedy and decide who should pay
all the costs of the action. Usually the losing side pays all the costs.

The usual remedy for a successful claim is an award of damages paid by the
defendant to the claimant (compensation).

After the court has given a judgement and if the claimant is successful,
damages have been awarded, the defendant must pay. Usually the defendant
will pay voluntarily but if not the claimant must return to the courts to
enforce the judgement.

Enforcing the judgement
There are various ways the court will order the payment to be made if
including :a writ allowing bailiffs to seize goods attachment of earnings
requiring the defendants employers to pay on his behalf a garnishee order
allowing the claimant to gain control of the defendants property held by a
third party (bank)charging order preventing the defendant from disposing of
assets until debt is paid in solvency proceedings a claimant may attempt to
have the defendant declared bankrupt.


Jurisdiction - where a case will be heard
In business parties to a contract may agree which country any dispute will be
dealt in. Depending on national laws a case may be issued out of any court,
usually that most local to the claimants lawyer. If, however, the defendant
requests it the case may be transferred to the defendants local court.
Internationally there will be different rules. In the EU the basic principle is
that the case will take place in the where the defendant is domiciled. The
domicile of a business is the address where the business is maintained or the
power is exercised. For a contractual dispute with no agreement the case
may be heard in the country where the contract takes place. For a tort the
case will be heart where the tort took place