Ethics and Law Overview

Ethics

• Defined: A set of concepts and principles used to evaluate behaviors as helpful or harmful.
• Normative Ethics: Examines the morality of actions, distinct from descriptive ethics (empirical study of moral beliefs). Traditionally provides overarching moral principles.
• Applied Ethics: Philosophic discipline applying ethical theory to real-life situations. Includes fields like business ethics.
• Business Ethics: Practices within an organization, influencing core values positively or negatively. Reflects the interplay of profit-seeking and non-economic considerations. Promoted via ethics codes and social responsibility charters.

Law

• Defined: Created rules enforceable by social or governmental institutions to regulate behavior, prevent and resolve conflict, and enable peaceful coexistence.
• Origins:
• Customary law: Rules accepted as binding by a community.
• Statutory law: Rules created by legislative bodies.
• Executive, judicial, or autonomous: Law shaped by authorities/judges/private individuals.
• Legal Systems:
• Civil law: Formally codified law (e.g., Germany, France, Japan).
• Common law: Judges create binding case law, potentially overturned by higher courts or legislatures (e.g., Great Britain, USA).
• Legal Domains:
• Public law: State's relationship with individuals (constitutional, administrative, criminal law).
• Private law: Relationships between individuals (contract, property, tort law).
• Ethics and Law: Separate normative systems; rules justified by moral philosophy or authorized institutions. Moral vs. legal bindingness; enforcement differences.
• Positivist view: A law's validity doesn’t depend on its moral content, as long as enacted correctly.
• Natural law view: A law must align with justice to be considered valid.

Contracts

• Defined: Used to clarify uncertainties in exchanges (honesty, details, remedies). Rights protected by law, enforceable by court order.
• Freedom of Contract: Contracts can contain anything legal, not against common ethics/morals. Defined by non-monetary performance.
• Purchase Contract: Most common, permanent transfer of ownership for payment.
• Seller Obligations: Delivery, enabling ownership, agreed quality.
• Buyer Obligations: Payment, acceptance.
• Loan Contract: Permanent transfer of a thing, usually money, with interest. Payback terms negotiated.
• Lease Contract: Temporary use of a thing for payment. Continuing obligations. Not ownership transfer.
• Lessor Obligations: Granting use, proper condition.
• Lessee Obligations: Paying rent, care, agreed use.
• Service Contract: Engaging someone for a service against payment. Distinct from employment (individual control).
• Obligor Obligations: Performing the agreed service in person (unless otherwise specified).
• Creditor Obligations: Paying remuneration.
• Work Contract: Engaging someone for producing work against payment. Distinct from purchase due to production.
• Producer Obligations: Completing work to agreed quality.
• Customer Obligations: Paying remuneration, acceptance.
• Rules of Contract Formation: Consent, key elements (parties, performance, consideration). Offer/acceptance required. Implied consent via behavior.
• Contract Performance: Heart of contracts. Type determines obligations. "In kind" vs. "specific". Due date.
• Breach of Contract: Entitles obligee to compensation.
• Impossibility: Obligor cannot perform.
• Malperformance: Obligor fails to perform as promised.
• Delay: Late performance.
• Material change in transaction basis: Enabling renegotiation or rescission.
• Liability & Damages: Causation, attribution, negligence, intent. Liability for third-party actions. Damage proven by obligee.

Immoral Contracts

• Contracts against public morals: Always void. Public morals defined by average standards, taking legal input into account.
• Violations: Based on transaction content and circumstances; tortfeasor's conduct assessment (purpose, means, disproportion).
• Established immoral contracts: Gagging contracts, excessive suretyship, bribery, usury (conspicuous disproportion).
• Legal Consequences: Reclaim of money paid; voiding interest or loan, or compensation for damages against perpetrator.
• Injury against public morals (tort): Immoral injury in exceptional cases. Intentional immoral conduct (tortfeasor’s intent to cause damage). Proving immorality.
• Categories of immoral conduct: Violating relationships, intentional misinformation, misuse of rights, endangering creditors. Legal consequences: Tort damages, possible contract remedy.
• Principle of good faith: An attitude of reliability, sincerity, and consideration; clarifies/adds/supplements/corrects rights and obligations.
• Violation of good faith: Abuse of rights, contradictory behavior.
• Good faith vs. public morals: Public morals are external constraints, good faith are restrictions on internal conduct.

Legal Forms of Companies

• General Partnership: Small number of members, unanimous decision-making, unlimited liability for all partners.
• Limited Partnership: Two or more partners, general partners with unlimited liability, limited partners with limited liability, decisions by unanimity (limited partners may have veto rights).
• Limited Liability Company: Single or multiple members, limited liability for members, decisions via majority shareholders' assembly, management by appointed directors.
• Stock Corporation: Multiple members, limited liability, decisions by shareholders, management by board of directors, also influenced by supervisory board.
• Duty of Loyalty: Shareholders/directors act in company's best interests, especially avoiding conflicts of interest.
• Business Judgement Rule: Managers are protected from liability when making potentially risky decisions in company's best interest (with limited information, scope for discretion).
• Immoral corporate behavior: Includes abuse of voting rights, actions for annulment, destructive asset deprivation. Possible legal consequences.
• Corporate Governance Code: System directing and controlling businesses. Voluntary principles for improved management, transparency, and accountability, typically for listed companies. Comply or explain principle.
• Corporate Social Responsibility: Companies integrating social and environmental considerations into operations. Stakeholders' needs prioritized.