Introduction to Business Law

Introduction to Business Law

• Business law requires defining business and law.
• Business can be defined from accounting and legal perspectives.
• From accounting, business is a process that produces goods and rendering services for profit.
• Article 124 of the Commercial Code defines business as an incorporeal movable that consists of movable and immovable things.
• Business is intangible and distinct from its movable and immovable parts.
• Business mainly consists of intangible aspects like goodwill, trade names, trademarks, and intellectual property rights.
• Law, generally, is the accepted norm, principle, or rule enacted by a sovereign body to regulate social interaction.
• Law is backed by sanction or punishment.
• Black’s Law Dictionary defines law as a regime ordering human activities through systematic application of force, social pressure, or normative sanctions.
• Law generally determines what is right and wrong and should originate from a legitimate authority.
• Business Law is a legal regime that regulates traders, business people, organizations, and transactions.

Nature of Law

• The nature of law differentiates it from customs, moral rules, standards, societal values, and habits.
• Law differs from socially non-binding rules because of its basic natures.

Generality

• Generality means law is stated in general terms for enforcement organs. All members of a group are governed or bound by law without distinction.
• Laws apply to those within its jurisdiction, e.g., laws that apply to traders may not apply to non-traders.
• Everyone within the group is presumed equal, regardless of status, economic standing, or social position.
• Laws are equally binding on everyone within a group when a violation occurs.

Normativity

• Normativity means law is binding, and its subjects must abide by it, willingly or not.
• It is a mandatory rule of conduct respected due to fear of sanction or punishment, differentiating it from non-binding social norms.
• An executive organ is responsible for enforcing laws that are violated.
• Law is superior to human conduct and presupposes supremacy and prevalence of rule of law.

Functions of Law

• Law plays pivotal roles in society which maintains peace and order:
  • Shaping moral standards.
  • Promoting social justice.
  • Maintaining social peace and order.
  • Facilitating orderly planning and change.
  • Providing a basis for compromise.
  • Maximizing individual freedom.

Sources of Law

• Sources of law trace its the validity, origin, and content. There are two main categories the material and formal sources.

Material Sources of Law

• Material origins include the origin or contents of the law.
• Custom and religion are the most common and important.
• Law should reflect custom, religion, values, and morality.
• Custom and religion are common material sources.
• The Ethiopian Constitution recognize custom and religion as material sources.
• Custom and religion are rejected when they are against accepted principles or harmful practices.

Formal Sources of Law

• Formal deal with the validity claim.

• The source traces the Authority or Organization which enacted the law.

• Formal kinds are:

  • Constitution.
  • International Agreements.
  • Proclamations.
  • Court Decisions.

• Constitution is the supreme law which is above all other laws.

• International Treaties and Parliamentary laws/proclamations rank second to the Constitution.

• Regulations, directives, and notices rank 3rd, 4th, and 5th respectively.

• Regulations are enacted by Council of ministers, Directives by Ministries, and notices by departmental Bureaus.

Classification of Laws

• Laws are classified into categories for management and administration efficiency.

• Classifications are based on:

  • Geography - International, National, Federal, and State Laws.
  • Function - Substantive, Procedural, Public, Private, Civil, and Criminal Laws.
  • Authority - Primary and Secondary laws.
  • Convenience - Procedural, Evidence, Civil, and Commercial Law.

Function of Laws

• Several categories are:
  • Substantive establish citizen's rights and duties.
  • Procedural enforce the substantive rights.
  • Public regulate relationship between the Government and the public.
  • Private regulate relationships between individuals.
  • Civil stipulate civil rights and duties.
  • Criminal formulate crimes and punishments.

Authrority of Laws

• Primary laws - enacted by parliament while secondary laws enacted by subsidiary organs through delegation.

Convenience of Laws

• Procedural law, evidence law, civil law, and commercial law are example classifications.

Law of Persons

• Examines questions such as:
  • Definition of person.
  • Attributes of personality.
  • How personality is acquired, exercised, and extinguished.
• Two categories:
  • Natural persons
  • Legal persons
• Natural persons are human beings born alive and viable for more than 48 hours. Personality is acquired through birth and staying for over 48 hours.
• Monsters are not natural persons.
• Legal persons are fictitious entities considered persons by law, i.e., business organizations, institutions, and associations. The fictitious, artificial, or juridical persons.
• Personality confers:
  • Name.
  • Nationality.
  • Domicile and Residence.
  • Exercise of rights and duties.

What is the function of name?

• Name is for the purpose of identity. No direct relationship between a name and a person. But there may be a relationship between the name and a legal person as most of the time legal persons use names which indicate their purpose and objectives.
• All natural people shall have one or more first name , Patronymic(father) name, and Family(Grandfather) name.
• The order of writing the name of natural person :Family name, first name, and father's name.
• However, this name form has never been practiced in Ethiopia except on official international documents.
• A person may have more than one first name but one of the names should be primary and official.
• Names should not impugn morality or the law.
• You cannot assume the name of a family member.
• The abuse and usurpation of name bears civil and criminal liabilities. You cannot illegally use your name in a confusing manner to use the good will or reputation of others.
• Assuming the name of another person for personal gain or causing damage to the holder of that name is illegal.
• Anyone can change their name at any time so long as it causes no damage to others. Cannot change the father's name at will.
• First name is given to the parents.
• A child whose father is unknown has the patronymic name of their maternal grandfather.
• Legal entities must have names that do not contravene public morality.
• All business organizations and institutions have a trade name.

Attributes of Personality

• The second attribute is nationality, acquiring it by birth or family origins.
• Legal entities obtain nationality from their incorporation.
• Residence and domicile are attributes of personality.
• All people have one or more residences, but only one domicile.
• Residence as a place where a person normally resides (Civil Code Article 174).
• Traders or business organizations have a residence where they conduct business (Civil Code Article 180).
• Domicile as that of the Civil Codes Article 183 is is the principal seat of their business and interests, intending permanent residence.
• Residency requires living in an area for over 3 months, while domicile requires business/personal ties and intent to live there indefinitely.
• The last attribute of personality is exercising rights and duties, such as "Patrimony".
• The Civil Code states all persons are subjects of rights and duties from birth to death.
• Incapable persons exercise rights through representatives.
• Minors get rights/liabilities through guardians.
• Organizations act through agents/managers.
• A person can sue or be sued, not the representative.
• Personality acquired by nature or law can be extinguished.
• Common grounds of extinction: death/absence (natural), dissolution/bankruptcy (legal), but not loss of nationality.
• Extinction of personality terminates rights, duties, and patrimony.

Law of General Contracts

• The chapter briefly addresses the meaning of contract:
  • Sources.
  • Elements.
  • Natures.
  • Defects.
  • Effects.
  • Performance.
  • Extinction grounds.

Concept of Obligation

• The definition by many scholars is a relationship between two or more persons to do, not to do, or give something.
• Contract is proprietary nature
• As defined in Civil Code Article 1675, contract is an agreement where two or more persons create, vary, or extinguish an obligation.

Sources of Obligations

• Contractual, non-contractual, and legal sources.
• Arising from sustainable agreements.
• Extra-contractual obligations entail arising civil liabilities.
• Legal obligations are imposed through laws for policy reasons; family obligations taxes, fees, etc.

Types of Obligation

• Unilateral: One party legally bound for the other's benefit. (donations)
• Bilateral: Both parties legally bound with two promisors and promises.
• Multilateral: Obligations classified into:
  • Simple joint obligation.
  • Joint obligations.
  • Several and joint obligations.
• Simple Joint - Parties each liable for their share of debt, not total.
• Joint - Debtors jointly liable to creditors.
• Several and Joint - Co-debtors jointly and severally liable; creditor may seek full discharge from any debtor.

Purpose and Scope of Contract Law

• To govern and facilitate transactions by setting legal principles.
• General contract law governs ordinary and special contracts; articles 1776 and 1777 may apply to extra-contractual obligations.

Formation of Contracts

• Basic elements for contract formation (Article 1678).
• Capacity the law stipulates the minimum conditions needed to undertake juridical acts.
• Consent essential, so it must be free, volitional, intended, and non-vitiated.
• Consent made sustainable when communicated to the contracting party through writing, orally, conduct, or conventional sign.
• Offer and Acceptance.
• Offer shows willingness to enter a contract, conditional on something. Article 1681 to 1695 show Offeror and Offeree express contracts regarding an object.
• Offer and acceptance may take a long time.
• Counter-offer is a modified or conditional acceptance.
• Silence usually does not amount to acceptance.
• Unreasonably delayed acceptance is considered decline, while offer can be withdrawn before acceptance.
• A contract can be formed wherever convenient.
• Defects in Consent can be due to the party's status, means, or object of the contract, leading to mistakes, fraud, duress, or other grounds.
• Object element allows anything legal, moral, and possible, defining its contours.
• Parties define contract content, the main area of contractual freedom.
• What if the party needs to define terms of the contract but fail to do so Article1695 is a possible way. Out what do you imagine are the other possible ways out?
• It is an element of contract provided by the law.
• Parties have great freedom regarding formality. But what do you understand about special form?
• An argument made by the Federal Cassation Bench is that a contracts that are Made in written form should be attested at least by two witnesses. Article, articles 1720 to 1729 of the code are relevant provisions.
• VOidable contact for civil contracts but valid for commercial contracts, argued. But what is/are/ the justifications for their argument?
• Elements of Contracts where object and consent primarily determine contract validity, while the effects depend on the specific facts of the contract.

Effects of Contract

• What do Effects of Contract Mean? The contracts binding nature makes it a law. What is the status of understanding of memorandum and relationship of pre contractual under contract of Ethiopian Law. Note that you would contract made between parties with business.
• Contracts do not need interpretation if terms are clear; it is for uncovering party intentions in the contract when it is needed .
• Variation of Contracts are modification by parties, the court, and intervening events.

Performance of Contracts

• Performance constitutes complying with all terms of the contract. But should non compliance with any minor noncompliance constitute nonperformance?
• fundamental and importantto the creditor. Size, place, quality, quantities, mode of delivery, time of delivery are some of terms of contract which are fundamentally affect the expectation of the party.

Who Performs Contracts?

• The principle is that the debtor should perform the contract personally when the personal qualification of the debtor is paramount to the creditor.

To Whom Performance Made?

• The performance should be made to the designated creditor.

What to Perform?

• the qualities, quantities and nature of the thing to be performed should be those stated in the contract.

How to Perform?

• The act should be according to the means and modes stipulated in the contract.

When to Perform?

• The deadline should be On or before the due date, what are the effects of failure to comply with the deadline leading to Non performance, Default notice and Default notice exceptions described in Art. 1775.

Remedies for Non-Performance

• Specific, compensation, or cancellation, often concurrently exercised, with damages or cancellation.

Defenses for Non-Performance

• These are Force majeure , fault requirement, and absence of loss.
• Contractual is based on strict liability what is provided under article 1895 is only the exception.

Extinction of Contract

• Relates to the end of a contract, its life span birth, growth, and death intervals.

• Grounds for extinction:

  • Performance.
  • Invalidation.
  • Cancellation.
  • Termination.
  • Novation.
  • Set off.
  • Period of limitation.
  • Merger.

Performance of Contract

• Fulfilling terms and mandatory laws discharges obligations if without discrepancy; some minor terms may not.

Invalidation/Cancellation of Contract

• . Defect made in the formation of the contract that is caused by invalidation of a contract. It happens where rescission occurs when a party lacks capacity or consent.
• Commonalities include inability to conduct but their differences lies in effects while invalidation deals with vitiated consent/capacity, that of cancellation is deals with non performance.

Termination of Contract

• Invalidation and cancellation, obligation also happens with termination of the contract.

• A parties for terminated and concluded is related to employment.

• Grounds lack formation defects/non-performance.

• It is done up on agreement except judicial.

• Termination forms:

  • Bilateral - by agreement.
  • Unilateral - clause-based prerogative.
  • Judicial - by court order where one party requires it.

Remission of Debt

• Is releasing voluntary a debtor of his obligation by the creditor. Article 1825 for the extinction.
• Informs debtor and to be debt is now no more to be remitted.

Novation

• Principle that is provided under the following article gives some clue as to what constitutes Novation.

• Article 1826

  • is an obligation extinguished the where new agreement differs from to the account of its object or nature.
  • There is substantial change whether in the object or in the nature because of the obligation of existing in its place.

• To be intentional.

• If this necessary for contract, then will it be necessary for new to consider new contracts. Will there to be negative.

• What if there is a new document that is stated before

Set off

• Setoff is fairly defined under article 1831 of the code. It occurs where they are two people for money except provided where the the obligations were to repay.

Merger

• Merger is another method by which obligation extinguishes. Happens when the position of creditor and debtor becomes one and the same.

Limitation of Actions

• Every human action that occurs needs to be done in a order way. Is a action is in bounded in or by this the period of time. Therefore, there is claim in an order of law.
• It is that the maintain that maintain the security of transaction and release those debator that are sleeping. Therefore, there are limitative an perscripitive

Sales Contract

• A contract with distinctive features that shows relationships of buyers and sellers

• In defined.

  • where to deliver a specified thing.
  • and it must have an exchange of money.
  • As such it states in the C.O.C.

• Some have seller, buyer ownership exchange and is paid for in that.

• There are things that are in the contracts.

• All aspects are essential for formation.

• Sale contract without any processes. All rules that applies as they should. Therefore, you much have capacity.

The rights and duties for the sale

• In relation to with the performance.
• Performance is what does it. All parts that are related is because it all can happen at any stage or point, what does and should determine the relationship.

The perform for a sale

• All the performance part is related to the action for some people. At will the to be made. They agreed to everything. However, you should bear in with that.

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