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Business Law 2 summary
I made an elaborated summary of my whole Business Law 2 course based on the book and the lectures given (course given at the VUB, business economics)
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BUSINESS LAWWhat is business law?
- Legal scholars cannot agree with what law actually is ; what is there to help people, to
impose rules,…? It depends on where you come from, what you or society thinks it is
most important
Legal definition :
- enforceable rules governing relationships among individuals and between individuals and
society (if you enter into a contract = relationships between individuals; relationships
between society = paying taxes, traffic rules,… you may not necessarily agree on it but it
is still imposed on you)
- The Law sets out rights, duties and obligations of citizens
- key to the definition of law: enforceability; because when you don’t enforce the rules,
the rules are useless, dead letter. Laws that aren’t enforced exists.
- Enforceability is important to know what are the sanctions, the punishments that will be
imposed on the person who breaks those enforced rules
- For some, law is any rule that society finds important to enforce -> truth: society cannot
exist without law
Business perspective:
- business persons need to be able to plan their activities, to allocate risks, to assess risks
- result = stability and predictability -> business persons wants to know what are legal risks
before entering a new jurisdiction
Why? Law regulates conduct in society:
- personal level: citizens need to be able to determine “right from wrong”
- business level: degree of “legal certainty” in business dealings ; most business persons
make their business decisions but the legal risks are one form of risk, lawyer can give you
advise from a legal perspective but you still have a lot of concepts to think about when
you are making a decision
- e.g.: when you decide to work outside of your homebased; like McDonalds decide to
open here in Belgium : needs to follow Belgian rules + McDonalds “official” rules
function of law (ideally) :
- keeping peace
- shaping moral standards (you shouldn’t kill, steal)
- promotes social justice (we like to think in the best since of it)
- it maximizes your individual freedom as well as order in society
- any society makes and forces its laws
it’s no exaggeration :
fortunes are made and lost on legal questions such as:
- can I rely on my counterparty? (who I have never met in my life)
- What if this deal turns sour? (what if things goes wrong)
- Will we end up in court? (can counterparty sue me)
- Will the Law stand behind us?
These are the types of questions that you need to think about when you are entering in a
transaction
From a business point of view; what is legally right and wrong?
- It depends; on so many factors
- You can’t necessarily say what’s right and wrong
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,It often depends on how stable the legal environment is where you intend to do business ->
if you think employment laws -> Belgium: very clear, and employees have more protection
then in other parts of the world
- Look to the particular country where you are sitting at particular moment in history
- The law has dealt with business issues in very different ways at different times and places
in history
- E.g.: patent laws in US and EU, abortion, drinking age, driving age,death penalty, gun
control, same sex marriage…
What is the law?
The law is constantly evolving:
- Nomadic tribes -> unwritten rules
- Code of Hammurabi (ancient Babylonian) -> eye for eye, tooth for tooth-> you take out
my eye, I can take out your eye
- Greek concepts of democracy -> citizens were created equal, citizen didn’t include
women and slaves
- Roman code (533)-> civil law of Rome, basic of laws in Europe and Latin America as well
as parts of Asia and Africa
- Early common law courts (1066) -> were the story decides its precedents (?)
- Napoleonic code (1804) -> democratic achievements, French revolution
- Today’s modern laws/court decisions
The law is certainly evolving, but it can be behind the times -> part-time in South-Africa ;
there nothing changes
However society cannot exist without laws, any laws that society will enforce reflects the
values and beliefs of that society or ruling group -> not necessarily reflecting the views of all
members of society, but it can be imposed depending of the kind of government
Close relationship between morality and any rule that society will enforce -> abortion,
women’s right to vote, what are the values and believes of that society?
Influence on the law
Especially important in the international business context
- What is the current Legal Environment?
- Society’s current attitudes?
- Can the Law be “behind the times”? (patent law is an example)
- Noteworthy trends? (follow those trends?)
The law reflects prevailing morality
Is there a duty of the law to protect the weakest people in society? Law is not always
100% certain, and it is really difficult to ask you those questions -> but lawyers can tell
you what the rules are today;
Your role in business : key questions for international business persons
How will the local, legal environment affect my business decision making?
- Degree of predictability?
- Business implications?
- Many different laws can affect a single business decision?
Example: you are the president and CEO of a manufacturing company that intends to expand
overseas
How will the local laws of various countries influence your decision on where to build a new
manufacturing plant?
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, - Unionisation -> strong union laws: difficult for CEO’s who want to expand -> no unions:
interesting in a business perspective
- Tax laws -> how are my profits going to be taxed
- Environmental laws
- Labour laws-> how much are we going to pay our employees? Do they have right to a
13th month? How much vacation? Maternity leave? Paid vacation?
- Sales contracts
- Competition laws
- Consumer rights
- Banking
- Product liability
- Agency
- Mergers and acquisitions
- Intellectual property
- Corporate fraud -> you should not accept gifts, bribes,..
- Bankruptcy -> for example: Donald trump 3 bankruptcies -> still has been chosed as
president: business mentality of people in US
Example: Belgium changed capital requirements, there was a reduction in the number of
company forms ; in the past you needed much more capital to start a company, now it
has been reduced
International private law
- Set of rules or procedural law that regulates relationships between persons (or entities)
of different nationalities
- Determines which legal system and law of which jurisdiction will apply to a legal dispute
among individuals involving a foreign element
- Also known as “conflict of laws” -> who’s ethics do we apply? What you think is right I
might think it isn’t -> where you draw that line
- E.g.: New York bank operating out of Brussels, has a loan agreement with a Japanese
client -> he puts up as collateral the yacht that sitting in Monica -> Japanese client goes
bankrupt, which law do we apply?
o It depends: what is law of the contract first of all? We can sit in Belgium and sign a
New York law contract
o Bankruptcy : we end up in the court of the bankrupt entity or person ; new York law
contract over to Japan and we are going to enforce that contract over there, but we
don’t know which law applies -> land : has to be governed by the local law where it
has been sitting -> collateral moves around: where is the boat registered?
- Transnational rules that national courts use to regulate three primary relationships :
o Relationship between 2 nations
o Relationship between a nation and an individual
o Relationship between persons/entities from different countries
- Sources:
o International conventions and treaties; customs/general practice
o Widely accepted general principles of law and
o All other sources used in national law (such as judicial decisions and scholarly
writings)
- Examples of international conventions and treaties?
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