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Business Law 1 summary
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A summary for the first bachelor of business Economics: Business Law. I used my summary and got a 15/20 in the first exam period.
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Professor: Tina CoenBusiness Economics bachelor 1: Business Law
Business Law: Law, entrepeneurship and the value of legal astuteness
Understand, describe and illustrate the goal of the course, the purpose and the distinguishing features
of the law, the main classifications of law, the main areas of business law
1. Why study business law?
Goal is to develop legal astuteness -> dynamic capability of top managers to work effectively with
councils/lawyers to solve complex problems/protect/leverage a businesses resources.
A set of attitudes: Recognise importance of law to business’ success, it’s the job of the business manager
(not the lawyer) to decide whether a particular legal risk is worth taking or a particular opportunity is worth
pursuing. Appreciate the importance of selecting a counsellor at law who combines knowledge of law with
judgement/wisdom, acknowledge -> law is highly ambiguous, understand that ethical considerations impinge
upon most legal questions and may influence how the law is applied in given situation.
A proactive approach Take active rol in managing legal dimension of business, include legal
constraints/opportunities at each stage of strategy formulation and execution, expect laywers to help them
address business opportunities and threats in ways that are legally permissible, effective and efficient.
The ability to exercise informed judgement when managing the legal dimensions of a business know
how to factor legal considerations into business decisions and how to deal with legal ambiguity/uncertainty,
understand legal ramifications of actions and be able to factor legal risks into business decisions the same
way that other risks.
Context-specific knowledge of the law and legal tools Understand what your lawyer is talking about,
with a focus on the law of those jurisdictions where the business has assets, operations, or important
customers or suppliers, understand legal tools/ techniques available to increase realisable value while
managing risk.
2. What is Law and why do we need it?
Law -> A system of rules, commands that regulate behaviour and tells those to whom it applies what they
can do (permission), must do (obligation) or cannot do (prohibition), with or without further conditions. That
is created by an authority – unilaterally (e.g. constitution, legislation) or in agreement with other authorities
(e.g. international treaties, international customs, EU law). That applies and is binding to anyone within the
territory or with the nationality of the authority that created it, and That is enforced by the authority (e.g. a
state, a supranational organisation), which may impose sanctions or penalties in case of a violation
We need it to provide a governmental structure and legislative procedures, To promote social justice and
well-being
- to provide public services and raise taxes to pay for them.
- To promote public order and preserve national security
- To regulate and promote the economy
- To give individual members personal rights and obligations in relation to others and to enable personal
enforcement of these rights
- To give legal validity to approved relationships and transactions between members of the society.
- To end/prevent disputes, remain peace/order
3. Legal rules and other rules
A rule is a legal rule when it stems from official source -> official sources vary from jurisdiction to jurisdiction
(depends on underlying legal tradition) -> most common sources = legislation/statute law ( treaties, Eu
Regulations, state laws), Case Law, Equity (trusts and action for performance in English law), Agreements
between contracting parties, customs ( constitution UK, Handshake agreements between entrepreneurs)
Society isn’t only governed by legal rules, also other types
- Ethical rules (a set of moral principles that govern our behaviour)
- Rules of etiquette (a set of rules indicating the proper and polite way to behave)
- The laws of physics (e.g. every action has an equal and opposite reaction)
- The laws of economics (e.g. the law of supply and demand)
4. Hard law vs Soft law – Comply or explain
,Professor: Tina Coen
Hard law -> Rules that are legally binding and enforceable before court. Examples of hard law instruments ->
Convention for the Protection of Human Rights and Fundamental Freedoms/ Charter of Fundamental Rights
of the European Union.
Soft law -> Principles, declarations and rules that are not legally binding, but are used to guide people’s
behaviour on a more voluntary basis. Examples of soft law instruments -> UN General Assembly resolutions
(Universal declaration on human rights), certifications given by private bodies.
The “comply or explain” mechanism combines voluntary compliance with corporate governance codes and a
legal obligation to declare compliance with or explain deviations from a code.
- Strengths: stimulates discussion and prepares the grounds for changes in legislation, flexibility and
compliance ‘made to measure” monitoring and benchmarking by the capital markets, often resulting in
a higher level of compliance, transparency and accountability of directors towards shareholders
- Weaknesses: material compliance is hard to monitor and to enforce, only ex post supervision by the
shareholders, possible overemphasis on compliance instead of good governance as such poor reporting
quality
- Example -> corporate governance statement of companies listed* on a stock exchange* within the EU
5. Main classifications
Law is not a homogenous body of rules -> it consists of many fields or areas of law that sometimes exhibit
large differences in the purpose, procedures and terminology used.
Substantive law <-> procedural law.
- Substantive law creates, defines and regulates the legal rights and liabilities of persons between
themselves or between them and the state. Lays down the substance of subject matter which is
enforceable in the courts Ex. Right to vote, prohibition to smoke in public buildings
- Procedural law specifies the steps that must be followed in applying or enforcing those rights and
liabilities. Ex -> you might need a visa to enter European Union.
Criminal law and civil law.
- Criminal law -> wrongs against society, violation of such laws carry fines/incarceration or imprisonment
as penalties. Criminal proceedings = prosecutions. Burden of proof is higher than under civil law e.g.
money-laundering offences, tax-related fraud.
- Civil law -> the rights of one person against another: violation carry performance and/or compensatory
remedies for the wronged individual ex. Shareholder disputes. Civil law is to a common law system what
private law is to civil law system.
Public law/private law
- Public law -> part of law that’s govern vertical relations between legal subjects and a government,
governance relationships between states and different institutions within a state ex. Administrative law,
criminal law.
- Private law ->Part of law that deals with mutual relations between legal subjects ex. Family law,
contracts law.
- Division between public/private law -> not clear-cut, a state can be in horizontal relationship with its
legal subjects and be governed by private law, the division is typical for jurisdictions to the civil law legal
tradition.
National law/international public law
- National law -> laws that exist in particular state ex. Belgian Code of Economic law.
- International public law -> law that deals with mutual relations between states/supranational
organisations. Most important source -> international conventions/customs. Ex. WTO treaty.
6. International public law/international private law.
International private law -> deals with conflicts of law, procedural law that determines the law of which
jurisdiction will govern the legal relationship between legal subjects when that relationship involves a cross-
border element ex.
Transnational law -> ex. European convention of Homan rights (1953) -> established the European court of
human rights which can deliver rulings that interpret the application of the ECHR/ the institutions of the
European Union have been given powers to make new and independent European legal rules (“secondary
EU legislation”) that belong to a separate and autonomous legal system (“supranational law”)/ the Vienna
convention on the international Sale of Goods -> multilateral treaty that covers sales/supply contracts in
international context.
7. Areas of law that specifies to a business
,Professor: Tina Coen
Business law encompasses all the laws that deal with formations, governance, financing, dissolution of
businesses and commercials, transactions, economic activities.
Areas of law specific to businesses: Business organisation law, IP law, competition law, consumer protection
law, securities law.
Other areas of law that are important to businesses as well -> contract law, international private law, human
rights law, criminal law, tax law.
Business Law: legal traditions and their main features
1. Legal traditions
A set of deeply rooted, historically conditioned attitudes about the nature and role of law, about the
organisation and operation of a legal system, and about how the law is or should be made, applied, studies,
perfected and taught
nation-states are divided into different legal families, criteria that are used to asses which legal tradition the
legal system of a nation belongs The historical background/development system, sources of law,
distinctive institutions, characteristic mode of thought
Understanding the underlying legal tradition helps to understand the manner in which a legal system
functions -> not exact science -> significant difference exist between legal systems, even though they are
affiliated with the same legal family and follow the same legal tradition.
2. Five main legal traditions
Civil law legal tradition -> legal systems that adhere to this tradition -> origin in Roman legal system, they
have comprehensive, frequently updated legal codes E.G. -> all member states of the EU (no Ireland, Cyprus,
Malta).
Common law legal tradition -> origin in English legal system, more binding precedents E.G -> Ireland, UK, USA
Religious law legal tradition -> law emanates from texts/traditions within a given religious tradition E.G. ->
Different subsections (Islamic Law).
Customary law legal tradition -> Based on patterns/behaviour that have come to be accepted as legal
requirements or rules of conduct within a particular jurisdiction. Laws are unwritten and dispensed by elders,
passed down through generations. Ex. Andorra.
The mixed/hybrid legal tradition -> combine traits of two/more legal traditions (Cyprus, Malta)
3. The origins of the common law legal tradition
Common law: The Battle of Hastings in 1066 (England)
- Prior to the Norman Conquest of England in 1066, the English territory followed the law of the Anglo-Saxons,
which consisted of a developed body of rules that resembled the rules being used by the German tribes of
(northern) continental Europe -> Most matters were governed by local (unwritten) customs, while the church
played a large part in government.
- In 1066, the Duke of Normandy (“William the Conqueror”) invaded England and became the King of England by
the right of conquest
- King William did not overturn the local Anglo-Saxon customs, but set up a system of royal representatives who
travelled through England to administer the law
o Their task was to apply the same law everywhere, the law which would eventually become the common
law of England
Legal rules were made on an ad hoc basis (case-based reasoning).
A problem occurred, a solution was made
An identical problem occurred, the same solution was given
A similar problem occurred, the same solution was given if the facts were sufficiently similar
o This is also known as the doctrine of stare decisis
4. The origins of the civil law legal tradition
, Professor: Tina Coen
Civil law: The Rediscovery of the Digest at the University of Bologna in the 11th CE
- The Corpus Iuris Civilis (or “body of the law of the (Roman) citizens”) was issued on the order of Byzantine
Emperior Justinian over the course of the 6th CE; it comprised three parts -> codex, digest, institutions
- Originally, the practical influence of the Corpus Iuris Civilis (CIC) in Western Europe was limited
• The CIC was a product of the Eastern Roman Empire that managed to survive longer (until 1453) than
the western part (until 476); at the time the CIC was issued, Western Europe was divided into several
smaller and larger territories, inhabited by different peoples and with their own local customary law.
• However, in the 11th CE the Digest were “rediscovered” at the newly founded University of Bologna (Italy) where
it together with canon law , became an object of study-> As law schools started attracting students from all over
Western Europe, these students took knowledge of the Roman (and canon) law with them , Although local
customary law was still the standard, it was sometimes found to be inadequate; the more sophisticated Roman
(and canon) law started filling in the gaps, Over time, a kind of European “common law” emerged, known as the
ius commune
5. The Influence of Roman law
The common law legal tradition -> Only little influence of Roman law. The literate clergymen that acted as
administrators in Normandy were familiar with the Roman law, but the Anglo-Norm system that started
developing after the Norman conquest had attained sophistication quite early, making it difficult for the (by
Roman law influenced) Norman customs to be transplanted to England
The civil law legal tradition -> Significant influence
6. The use of legislation or statute law in both legal traditions
Legislation (statute law) can refer to the written laws that have been passed by a legislative authority in
accordance with the law-making process, or to the law-making process as such. Most important source of
law in civil law legal tradition -> one of principal sources of law in legal systems that adhere to the common
law legal tradition.
Primary or supreme legislation -> made by sovereign authority of a state, it cannot be repealed, controlled
by any other authority except the one from which it proceeds ex. Acts of parliament, founding treaties EU. In
some states, primary legislation -> overturned by constitutional or supreme court.
Secondary or delegated legislation -> proceeds from any other authority than sovereign power, made by
authority under power delegated to authority by the supreme authority ex. Secondary EY legislation,
executive legislation. Although the primary legislation of an EU Member State is subordinate to an EU
regulation, the EU Member State can always decide to leave the EU and therefore “take back control” ->
Brexit
7. The use of precedents in the common law legal tradition
The principle of stare decisis (et non quieta movere) is well established in legal systems that adhere to the
common law legal tradition and holds that points of law that has been settled by a court are no longer open
to examination
• Horizontal stare decisis: courts must adhere to their own precedents, except for the Supreme Court.
• Vertical stare decisis: courts must adhere to precedents from the senior court in their appeal path
Values: Ensures uniform justice and continuity in court decisions, Furthers predictable and consistent
development of legal principles, enabling citizens (and businesses) and greater perceived integrity of the
legal process, Increases the efficiency of the legal process; no need for courts to continuously re-examine the
fundamental principles of law; citizens (and businesses) are encouraged to settle their disputes privately and
are discouraged from forum and judge shopping.
Anti-values: Risk of inertia in the legal system, and difficulties to rapidly adapt to social changes, Wrongly
decided, poorly worded or politically biased court rulings are not easily remedied, Undemocratic law-making
process
Donoghue v. Stevenson case (1932) -> This case laid the foundation for the tort of negligence in the English
legal system (slide 14) -> 3 main principles -> negligence is a tort (there was no contract between the
parties), Duty of care (the manufacturer had a duty of care towards the final costumer), neighbour principle
(you must not injure your neighbour) -> The House of Lords (now the Supreme Court) decided in favour of
Mrs. Donoghue, this was the first time the House of Lords decided that the manufacturer owed a duty of
care to the ultimate consumer
8. The use of precedents in the common law legal tradition
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