LAW427 - Business Law Presentation till Midterm PDF

LAW427 – Business Law THE COURSE RUNDOWN LAW427 Business Law Fundamental Commercial Enterprise Brief Introductions to...

LAW427 – Business Law THE COURSE RUNDOWN LAW427 Business Law Fundamental Commercial Enterprise Brief Introductions to Law Concepts of Law Intellectual Property Law Law of Obligations & & Business Entities Competition (Antitrust) Law Private Law (Companies) Labor Law LAW427 – Business Law ▪ Law as a Discipline: Definition, Functions and Nature of Law ▪ Sources of Law ▪ Hierarch of Norms ▪ Branches of Law LAW427 – Business Law MAIN CHARACTERISTICS OF LEGAL RULES Established and Enforced by the State Common and General (as regards circumstances) Mandatory Objective and Non—personal (as regards subjects) Legal Rules Abstract and Steady Involve Legal Consequences and/or Sanctions LAW427 – Business Law MAIN TYPES OF LEGAL RULES § Regulatory rules § Descriptive rules § Power conferring rules § Rules of recognition § Repealing / amending rules § Interpretative rules LAW427 – Business Law Sources of Law § Sources of law refer to the set of written and unwritten resources from which legally binding norms are drawn. Sources of § Law In that sense, ’Sources of law’ refer to the collection of contemporary legal rules, the positive law on which a judges bases a decision. § The sources do not contain information about the law, they constitute the law per se as they decide what counts as law.  LAW427 – Business Law Sources of Law Sources of Law Primary Sources Secondary Sources Written Sources Unwritten Sources Court Decisions Doctrine (Case Law) (Books of Authority) Constitution Customary Law Acts, Codes, Statutes International Agreements Presidential Decrees By-Laws LAW427 – Business Law Sources of Law § The main distinction between primary and secondary sources of law is their binding power. § Whilst the written and unwritten rules are binding in the sense that a judge has to base their decision on (or conform with) these rules, secondary rules (i.e. case law and doctrine) do not have such a binding power but they may serve as guidelines. § As regards non-bindingness of case law there are two exceptions in Turkish Law. § YARGITAY’s decisions on the unification of conflicting judgments Create binding effect § DANIŞTAY’s decisions on the unification of conflicting judgments on other courts LAW427 – Business Law Sources of Law PRIMARY, WRITTEN SOURCES - CONSTITUTION § Constitution is the code defining the form and ideology of the state, the principal organs of government, the rights and duties of the individual towards the states and vice versa as well as the relationship between the state and individuals. § By analogy, we can say that the constitutions of countries bear the DNA Codes of that state § It contains the most general and abstract legal rules of the country. § As it stands to be the supreme law of the country, no law can be contrary to the constitution. ARTICLE 11, Turkish Constitution- The provisions of the Constitution are fundamental legal rules binding upon legislative, executive and judicial organs, and administrative authorities and other institutions and individuals. Laws shall not be contrary to the Constitution. LAW427 – Business Law Sources of Law PRIMARY, WRITTEN SOURCES - ACTS, CODES, STATUTES § Acts, codes, statutes (or collectively referred to as ‘laws’) are written legal rules that are adopted and put into effect by the legislative organ of the states in pursuance of constitutionally prescribed principles and procedures. § Different codes and different statutes have different scopes and fields of application. (e.g. labor law, IP law, criminal law, administrative law, family law,…) § While laws are general, common, objective and abstract, scope of some laws may be more specific and defined such as to apply to persons in a specific legal or factual situation and/or relation. § Principally, laws are applicable until they are abrogated (abolished) or replaced by new laws. However they may be some laws that are temporal. (ex. Budgetary laws as prescribed Art. 161 of Turkish Constitution). LAW427 – Business Law Sources of Law PRIMARY, WRITTEN SOURCES - INTERNATIONAL AGREEMENTS § International agreements (treaties) are written agreements concluded between two or more states or international organizations that are equipped with agreement- making capacity. § Agreements between two states → bilateral agreement Agreements between 2+ states → multilateral agreements § With international agreements, states undertake certain and specific legal obligations, therefore these serve as a source of law. § International treaties to which Turkey is a party are approved by the Turkish Grand National Assembly (the Parliament) by the enactment of a law. Therefore, much like other national codes, acts and statutes, international agreements are made part of the ‘law’ through the approval of parliament. LAW427 – Business Law Sources of Law PRIMARY, WRITTEN SOURCES - INTERNATIONAL AGREEMENTS § International agreements have a binding power equivalent to that of acts, codes and statutes. “International agreements duly put into effect have the force of law.” § International agreements, duly put into effect, concerning fundamental rights and freedoms prevail over national laws in case of a conflict of norms. § Moreover, “No appeal to the Constitutional Court shall be made with regard to these agreements, on the grounds that they are unconstitutional.” § Exceptionally, some int. agreements do not require the approval of the Parliament; “Agreements regulating economic, commercial or technical relations, and covering a period of no more than one year, may be put into effect through promulgation, provided they do not entail any financial commitment by the State, and provided they do not interfere with the status of individuals or with the property rights of Turks abroad.” LAW427 – Business Law Sources of Law PRIMARY, WRITTEN SOURCES - PRESIDENTIAL DECREES § The President of Turkish Republic may issue presidential decrees on the matters regarding executive power. § The fundamental rights, individual rights and duties and the political rights and duties set out in the Constitution cannot be regulated by a presidential decree. § No presidential decree shall be issued on the matters which are stipulated in the Constitution to be regulated exclusively by law. § No presidential decree shall be issued on the matters explicitly regulated by law. § In the case of a discrepancy between provisions of the presidential decrees and the laws, the provisions of the laws shall prevail. § A presidential decree shall become null and void if the Grand National Assembly of Turkey enacts a law on the same matter. LAW427 – Business Law Sources of Law PRIMARY, WRITTEN SOURCES - BY-LAWS § They can be defined as regulations that have been adopted by an authorized body (The President of the Republic, the ministries, and public corporate bodies), which receive the power to do so by specific mandate from an act of parliament in order to ensure the implementation of laws and presidential decrees relating to their jurisdiction and area of operation. § By-laws cannot be contrary to these laws and decrees on which they are based (or which they are empowered by). § By-laws –although not made through a parliamentary legislative process – are published in the Official Gazette, much like acts, codes, statutes and presidential decrees. LAW427 – Business Law Sources of Law PRIMARY, UN-WRITTEN SOURCE – CUSTOMARY LAW § You will remember customary rules as a one category of informal social rules. Customary § Normally three elements identify the Rules customary rules: antiquity, continuity, Refers to the rules that are derived from the habits and daily behavior general practice. of people in a society. Involves the repeated actions of § With that, for a customary rule to become humanbeings, carried out through generations. a primary (unwritten) source of law, two Rules as such exhibit 3 elements: antiquity, continuity, general more elements needed: practice. While not completely static State Sanction changes in them happen slowly. Conformity with Statutory Law Sanctions of customary rules are expressed in social reactions and pressure. LAW427 – Business Law Sources of Law PRIMARY, UN-WRITTEN SOURCE – CUSTOMARY LAW State Sanction: Until the courts apply customs, giving them the sanction of state authority, they are not law. A customary rule receives legal recognition when it is enforced by court order, unlike a statute, which is a law even before it is enforced by a court. Statutory (written) law often tells when to resort to customary law. In cases under the Civil Code or the Code of Obligations, judges are allowed to apply customary principles when the statutes are silent. Where no provisions are applicable, the judge should decide according to existing customary law and where such does not exist, he should decide according to the rules which he would lay down if he had himself to act as legislator. In this, he must be guided by approved legal doctrine and case law. (Turkish Civil Code, Art.1) LAW427 – Business Law Sources of Law PRIMARY, UN-WRITTEN SOURCE – CUSTOMARY LAW Conformity with Statutory Law A custom contrary to statutory law will not be legally valid. Clearly, a statutory law is superior to customary rule. Customs contradictory to written law can never be considered as legally valid even if the habits and practices underlying that custom continue to be observed in the society. LAW427 – Business Law Sources of Law PRIMARY, UN-WRITTEN SOURCE – CUSTOMARY LAW TURKISH COMMERCIAL CODE Art. 1(2) The court, in commercial matters for which there is no commercial provision, shall decide according to the commercial customs and, if the latter absent (if there is no commercial custom either), according to the general provisions. LAW427 – Business Law Sources of Law SECONDARY SOURCES – CASE LAW § Civil law system, court decisions, in principle, do not have a binding power other than for the persons or parties being subject to the decision. § However, there are two exceptions in Turkish Law. § YARGITAY’s (The Court of Cassations) decisions on the unification of conflicting judgments § DANIŞTAY’s (The Council of State) decisions on the unification of conflicting judgments § Even though set of decisions rendered by courts do not have a legally binding effect, the ruling given in respect to the same and/or similar legal problems may serve as influential guidelines to the other courts facing that particular legal problem. LAW427 – Business Law Sources of Law SECONDARY SOURCES – DOCTRINE § Doctoring is opinion of law from jurists or legal scholars. § They include doctoral or master dissertations on law, monographic or otherwise works of legal scholars or practitioners, as well as the articles written by them. § These opinions may be applied to interpret legal concepts and to provide clarity on ambiguous points of law. § Although, these have no binding effect on their own, the findings in some judicial decisions may be supported/enhanced with a reference to these doctrinal opinions. LAW427 – Business Law § Sources of Law differ between the Civil Law Legal Systems and Common Law Legal Systems § For example in the US § https://www.youtube.com/watch?app=desktop&v=y-rAjwNhp_8 § In the US system, case law (i.e. previous judicial decisions on the same/similar issues.) LAW427 – Business Law Hierarchy Of Norms HIERARCHY OF NORMS Constitution * According to Art. 90(5) of Turkish Constitution, in the case of a conflict between Laws & International international agreements, duly Treaties * put into effect, concerning fundamental rights and freedoms and the laws due to Presidential Decrees differences in provisions on the same matter, the provisions of international By-Laws agreements shall prevail. LAW427 – Business Law Hierarchy Of Norms HIERARCHY OF NORMS § Hierarchy of norms connote that every norm depends on a superior norm for its authority. § Accordingly, each norm has to conform with the one(s) above them on the pyramid. § Each norm derives its legitimacy from the one(s) above them. § As you descend down on the pyramid, the norms get more specific and concrete in scope. § By the same logic, as you go up, you find more general and abstract norms. § Failure of norms to comply with superior norm(s) result in annullability upon a judicial review. Judicial review of laws (codes, statutes, acts) and presidential decrees is carried out by the Constitutional Court (Art. 148 of Turkish Constitution). Jurisdiction for the judicial review of by-laws rest with administrative justice system (in that Danıştay / The Council of State). LAW427 – Business Law Branches of Law § It is possible to make a categorization of law by various various features (e.g. scope, subjects etc.). § One of the main divisions is made with a reference to realm of validity of laws; International Law; set outs rules generally regarded and accepted as binding in relations between the actors international law (i.e. states or international organizations. As a result of sovereignty principle, it can be said that international law is mainly consent-based. Accordingly, a state member of the international community is not obliged to abide by international law unless it consented to a particular course of conduct. Rights and obligations arising from international law primarily concerns the states rather than actual persons. There are two main sub-branches of International Law: o Public International Law governs the relationships of international entities. These include the birth and death of states and of international organizations, elements of an independent state and of international organization, conclusion and effects of international agreements, international customs, borders of states etc. LAW427 – Business Law Branches of Law o Private International Law (also referred to as "conflict of laws") governs the choice of law to apply when there are conflicts in the domestic law of different nations related to private transactions between those nations. Private international law deals with a variety of topics such as contracts, marriage and divorce, jurisdiction, recognition of judgments, child adoption and abduction, and the like. Supranational Law; Supranational law is a form of international law, based on the limitation of the rights of sovereign nations between one another. Nations explicitly submit their right to make judicial decisions by treaty to a set of common tribunal. At the heart of supranational law rests the principle of conferral (of powers). National Law; is the rules which govern a certain country, prescribed by the government of a sovereign state that holds force throughout the regions and territories within the government's dominion. National laws are identified by the territorial effect, according to which, national laws of a country does not have effect in another country’s territory unless that second state agrees to give them an effect. LAW427 – Business Law Branches of Law § Another distinction can be made by a reference to whether or not the laws actually govern the conduct or they set out the rules that governs the application of substantive rules. Substantive Law refers to the rules and regulations that define the rights, duties, and obligations of persons and entities (including state and its organs). Procedural Law refers to the rules and regulations that govern the process of enforcing substantive law. § A more significant and important distinction takes as its basis the nature of the substantive area regulated by law. That is, public law – private law distinction. LAW427 – Business Law Branches of Law Branches of Law PUBLIC LAW PRIVATE LAW Constitutional Law Civil Law Administrative Law Law of Obligations Criminal Law Commercial Law Public International Law Private International Law Tax Law Family Law … … LAW427 – Business Law Branches of Law PUBLIC LAW § It consists of the legal rules that regulate the person's relationship with the state and other public institutions and the relationship between the state and another state. § This also includes the relations between the organs of the state. § The benefit protected by branches of public law usually the benefit of public and/or public order. § The fundamental concept of public law: The State § The concept of «state» can be defined with three main components A defined territory, A permanent population and Sovereignty over territory and population § Some examples of Public Law areas … LAW427 – Business Law Branches of Law PUBLIC LAW – CONSTITUTIONAL LAW § The main principle: The Rule of Law/ (Hukuk Devleti İlkesi) § Substantively relates to; the organization, powers and frame of government, the distribution of political and governmental authorities and functions, the fundamental principles which regulate the relations of government and citizen. PUBLIC LAW – ADMINISTRATIVE LAW § Administrative law deals, primarily, with the status, powers / competences and activities of the administrative authorities. § (All the rules which are concerned with the establishment, duties and authorities of administrative organs and public officers) LAW427 – Business Law Branches of Law PUBLIC LAW – CRIMINAL LAW § As an extension of the constitutional principle of Rule of Law, no one faces the threat of criminal sanctions unless such a crime and its punishment is set out by the law. Nullum crimen, nulla poena sine lege No crime, no punishment without law. § Again, in a state where the rule of law prevails, no person is permitted creating his / her own justice outside the law. The contrary would amount to vigilantism and it is not legal. Vigilantism is the act of preventing, investigating and punishing perceived offenses and crimes without legal authority. § Criminal law falls under public law because the authority to introduce a type of crime as well as punishment of it rests with the public. That is because the main interest a crime harms is the interest of public. § That is to say, criminal law is not a revenge law for the injured but it’s a sanction applied for harming public order. LAW427 – Business Law Branches of Law PRIVATE LAW § Private law is the field of law that regulates the relations between members of society who have equal rights. § This means that a superior being such as a state (i.e. that enjoys and uses public power) is not one of the parties to such relations. § Main subject of the Private Law: Persons Natural persons Ali, Daniel, Eva, Thomas Legal persons (might be public, private or mixed) AYBÜ, Hyundai Assan Otomotiv San. Tic. A.Ş § Some examples of Public Law areas … LAW427 – Business Law Branches of Law PRIVATE LAW – CIVIL LAW § Civil law deals with matters such as personality, family relations, rules of succession (inheritance), property rights, and law of obligations. § Sub-branches of civil include the following Law of Persons Family Law Law of Succession Law of Property Law of Obligations LAW427 – Business Law Branches of Law PRIVATE LAW – CIVIL LAW § Civil law deals with matters such as personality, family relations, rules of succession (inheritance), property rights, and law of obligations. § Sub-branches of civil include the following Law of Persons (Turkish Civil Code Art. 8-117) Family Law (Turkish Civil Code Art. 118-494) Law of Succession (Turkish Civil Code Art. 495-682) Law of Property (Turkish Civil Code Art. 683-1027) Law of Obligations (Turkish Code of Obligations), ARTICLE 646- This Law is based on the Turkish Civil Code … It is the fifth book and its complement. LAW427 – Business Law Branches of Law PRIVATE LAW – COMMERCIAL LAW § Commercial law is concerned with the rights, relations, and conduct of persons and businesses engaged in commerce, merchandising, trade, and sales. § Especially persons, entities and partnerships engaged in commercial activities are the main subject of the commercial law. § Some of these are, Public Limited Company (A.Ş), Private Limited Company (Limited Şirket), General Partnership (Kollektif Şirket), Limited (Commandité) Partnership (Komandit Şirket) LAW427 – Business Law Branches of Law QUESTION DO THE BRANCHES OF LAW ALWAYS SHARPLY FALL IN ONE OF THESE CATEGORIES (i.e. Public Law and Private Law)? - WHAT IS THE TAXONOMY WHEN IT COMES TO BUSINESS LAW? LAW427 – Business Law Person PRIVATE LAW § Persons are the subjects of private law. § From legal perspective, the word “person” refers to the beings that may (liable to) have rights and obligations. § The term “person” is not limited to human beings (real persons). In addition to real persons; A corporation, a foundation, an association may qualify as ”person”. This is called legal / juridical personality. Legal/juridical persons are legally capable of; o Acquiring rights, undertake obligations, owning property… o Entering into contracts, to sue, or to be sued.. o However, they cannot create family relations, since they have different nature from human beings.. LAW427 – Business Law Person PRIVATE LAW Legal Capacity to Act § A person who has the capacity to act can acquire rights and incur obligations through his/her own actions. (Turkish Civil Code, Art. 9) § Legal entities (juridical persons) acquire the capacity to act by having the necessary bodies in accordance with the law and their founding documents. (Turkish Civil Code, Art. 49) Conditions for the Capacity to Act § Ability of discernment – Mental capacity Ability to act reasonably § Age of majority § Not being in the state of restriction Any adult who cannot perform their duties due to mental illness or mental weakness, or who requires constant assistance for her protection and care, or who endangers the safety of others, is restricted. LAW427 – Business Law General Provisions In Civil Code GENERAL RULES in TURKISH CIVIL CODE (T.Civ.) Art. 1 – Scope of T.Civ. Art. 2 – Good Faith Art. 3 – Presumption of Good Faith This law applies in all matters to Everyone must comply with the In cases where the law attaches a which it refers in word and substance. rules of honesty while exercising their rights legal consequence to good faith, the If there is no applicable and fulfilling their obligations. presumption is the existence of good faith. provision in the law, the judge decides The legal order does not protect However, a person who fails to according to customary law, or if the latter is the explicit abuse of a right. fulfill the duty of care (due diligence) absent, the judge decides as if s/he were the expected from them in accordance with the legislator. situation at hand cannot claim good faith. Art. 4 – Discretion of Judge Art. 5 – Provisions of General Nature Art. 6 – Burden of Proof In matters where the law grants This Law (T.Civ.) and the Unless there is a contrary discretion or orders to take into account the provisions of general nature of the Code of provision in the law, each party bears the requirements of the situation or justified Obligations (T.Obl.) apply to all private law burden of proving the existence of the facts reasons, the judge decides in accordance relationships to the extent appropriate. on which s/he bases its rights. with law and equity. LAW427 – Business Law LAW OF OBLIGATIONS ▪ CONTRACT o Definition o Birth of a Contract o Subject of a Contract o Capacity to Conclude Law of Obligations o Termination o Breach ▪ TORT o Fault-based Liability o Objective Liability ▪ UNJUST ENRICHMENT  Definition LAW427 – Business Law & Sources of Obligation CONCEPT and SOURCES of OBLIGATION According to Turkish Code of Obligations Law No. 6098 An OBLIGATION is Sources of Obligation are: § A legal requirement that compels one Contract (Art. 1-48) follow or avoid a particular course of action. Tort (Art. 48-76) § A duty imposed on a (real or judicial) person to perform a certain act or Unjust Enrichment (Art. 76-82) refrain from performing a certain act such as; Law of Obligations organize and regulate o To hand over sold good to other party (purchaser); The voluntary and involuntary legal o To pay the consideration (i.e. relations between persons with respect to money and the like) in exchange of purchased good; obligations. o To refrain from entering into competition with a company in the same commercial field LAW427 – Business Law CONTRACT LAW427 – Business Law Contract: Definition CONTRACT § A contract is a legally binding agreement between two or more parties that creates the obligation to (or not to) perform a particular duty. § Agreements generates rights and obligations that may be enforced by law (i.e. in courts). § Provisions of a contract are as strong as statutory legal rules in their legal effects. However unlike statutory legal rules, the contracts are not general and abstract. That is to say the legal effects and bindingness of a contract applies only to the parties of that contract. § In that sense, a contract creates legally enforceable rules between parties, that is analogous to creating a law for the parties concerned. LAW427 – Business Law Freedom of Contract FREEDOM of CONTRACT § Freedom of contract is a fundamental principle that is recognized (and) almost in every legal system. § Accordingly, parties are free to enter (or not to enter) into contracts and to determine their contents of these agreements with their free will. § However, this is not an absolute freedom. The parties can exercise this freedom in respect only to private law relationships and only within the boundaries permitted by law. § Parties can freely determine the content of a contract within the limits prescribed by law. (T.Obl. Art. 26) LAW427 – Business Law Freedom of Contract FREEDOM of CONTRACT - Limits § Freedom of contract does not apply where the Subject matter is in conflict with a mandatory legal provision Subject matter is against morality Subject matter is against the public order Subject matter violates the right of personality Subject matter is (objectively and permanently) impossible to perform. § In these cases, the contract shall be deemed void. This voidness is intrinsic, it does not require action or notification to be proven void. In case of a legal dispute, the court in charge shall consider voidness ex officio. LAW427 – Business Law Parties PARTIES TO CONTRACT § Any relationship entailing an obligation -including a contract- has at least two parties. § These are DEBTOR and CREDITOR. These designations center around the subject matter of the contract. § Creditor: In a debt (obligation) relationship, it is the party who has the authority to request a certain course action from the debtor in his favor. § Debtor: Is the person who is obliged to perform a certain act towards the creditor due to the debt relationship between them. § These roles are identified with a refence to each specific performance in the contract. Remember, contracts principally set forth corresponding performances. LAW427 – Business Law Parties PARTIES TO CONTRACT § Let’s identify the debtor and creditor in following legal relationships; Sales of a book Lease agreement for an apartment An employment contract of a factory worker LAW427 – Business Law WEEK - VI ▪ CONTRACT LAW – The Birth of a Contract – Form of Contract – General (Standard) Contractual Terms LAW427 – Business Law The Birth of Contract FORMATION OF A CONTRACT -I Establishment (conclusion / formation) of a contract is as simple as the matching of the OFFER and ACCEPTANCE. § The conclusion of a contract requires a mutual expression of intent by the parties. § This expression may be express or even implied. The contract is established with the parties’ mutual and coherent expression of their will. (T.Obl., Art. 1) If the parties agree on the essential points of the contract, the contract is deemed to have been established, even if the secondary points are not emphasized. (T.Obl., Art. 2) LAW427 – Business Law The Birth of Contract FORMATION OF A CONTRACT -II Establishment (conclusion / formation) of a contract is as simple as the matching of the OFFER and ACCEPTANCE. § The conclusion of a contract requires a mutual expression of intent by the parties. § This expression may be express or even implied. The contract is established with the parties’ mutual and coherent expression of their will. (T.Obl., Art. 1) If the parties agree on the essential points of the contract, the contract is deemed to have been Subject matter Consideration established, even if the secondary points are not emphasized. Agreement (T.Obl., Art. 2) LAW427 – Business Law The Birth of Contract FORMATION OF A CONTRACT -III The fundamental criterion: Offer matching the acceptance When student X from AYBU asks Taxi driver Y to take him to Esenboga Campus If driver Y says OKAY, contract is concluded. Parties of the contract: Student X and Driver Y Subject matter of the contract: Taking X to AYBÜ Esenboga by taxi Consideration: Some amount of money Either an agreed sum or whatever taximeter indicates In farmers market peach is sold 10 Lira/kg, you offer the seller to pay 25 Lira for 3 kgs of peaches and he starts filling the bag; contract is concluded. Parties of the contract: You and the fruits vendor Subject matter of the contract: Sales of peaches Consideration: Some amount of money; 25 Lira you agreed on LAW427 – Business Law The Birth of Contract OFFER -I § To conclude a valid contract, an offer is needed from the offeror and that be accepted by the offeree. § In this sequential setting, an offer is a call for contract. § And offer is made when a person makes it clear by words or actions that s/he is prepared to be bound with the contract as soon as the offer is accepted by whom it is addressed. The addressee of the offer may be a person, a group of persons or public. § The intent to be bound with a contract is an essential element of an offer. LAW427 – Business Law The Birth of Contract OFFER -II § The offeror may set a time limit for acceptance. If that is the case, s/he is bound with this offer only until the time elapses. An acceptance made within this time shall form a binding contract. If, however, the acceptance comes after this period, a contract is not created. (Q:Could this be regarded as a new offer by the other party?) § Where the offer is made in the presence of the addressee and no time limit has been set, acceptance creates the contract only if it’s immediate. An offer made during direct communication via means of communication such as telephone or computer is treated as if made among those present. LAW427 – Business Law The Birth of Contract OFFER -III § Where the offer is made in the absence of the addressee (e.g. via post, mail or other means of non-immediate means of communication) and no time limit has been set, the offeror is bound with his/her offer until such a period that a timely and duly submitted response can be expected to arrive. § If a timely sent acceptance reaches the offeror late and the offeror does no longer want to be bound by it, he must immediately notify the offeree of the situation. § Exhibiting products with prices on or sending tariffs, price lists or the like are considered as offers, unless otherwise clearly and easily understood. LAW427 – Business Law The Birth of Contract ACCEPTANCE -I § Acceptance can be defined as a consent (agreement) to all terms of an offer either by words (written/spoken) or by conduct. Remember the conduct of fruits vendor in the previous example; no words but act! § In order for a contract to be born, acceptance must exactly match the terms of the offer. An acceptance cannot introduce new terms or change the terms An acceptance must be unconditional The contrary scenarios give a rise to what is called a ”counter-offer” In that case the roles switched: the initial offeree becomes the offeror and the initial offeror becomes the offeree. LAW427 – Business Law The Birth of Contract ACCEPTANCE - II § (In addition to written or verbal acceptance) the conduct of offeree may qualify as an acceptance. This is called implied acceptance and it is where the offeree acts as if s/he accepted the offer. Important, however, silence does not mean acceptance unless a provision of law so orders or the specific circumstances of the relationship between the parties so require! § Acceptance must be communicated to the offeror. MOMENT OF BIRTH § Contracts concluded between those who are present take effect immediately. § Contracts concluded between those who are not present take effect from the moment the acceptance is sent. § In cases where an express acceptance is not required, the contract takes effect from the moment the acceptance is received. LAW427 – Business Law The Birth of Contract ACCEPTANCE § Let’s look into following scenarios and identify if there’s a valid acceptance; Mike: I don’t really need tomatoes, how about those cucumbers at the same price? Mike: Sounds good but I need no less than Jane: I got freshly picked tomatoes. If 30 kgs. you’re interested, I can let go at $3 per Mike: Perfect! I will get them all. kilo. Mike: I could get them all if you take $50 I got up to 20 kgs available. for all. Mike: I’ll get 5 kgs of them. Mike: I’ll look around the farmers market and I will get them all if I can’t get any cheaper elsewhere. LAW427 – Business Law The Birth of Contract INVITATION TO OFFER § Look into the following dialog and identify the nature of statements; David: Hi! I need a dining table and six chairs. Do you have anything you can offer? Alex: Let me show you this set over here. It’s almost new, I can let it go for $200 David: Cool, I will take it! § Remember, an offer has to contain the essential elements of agreement. These are; Subject matter of contract Consideration Intent to make an agreement § If essential elements are not contained, this may qualify as an invitation to offer. LAW427 – Business Law The Birth of Contract FUN FACT Source: https://www.nytimes.com/2023/07/07/world/canada/canada-thumbs-up-emoji-contract.html LAW427 – Business Law FORM OF CONTRACTS LAW427 – Business Law Form of Contracts FORM OF CONTRACTS - I § As an extension of freedom of contract, the default rule is the freedom of form. Accordingly, the validity of contracts is not subject to any form requirement, unless otherwise provided by law. Therefore, both verbal and written matching of offer and acceptance creates a valid contract. § If, however, the law stipulates a form requirement, the prescribed form is deemed to be a requisite for validity. (Official form requirement) Contracts established without complying with the statutorily prescribed form will not be valid. LAW427 – Business Law Form of Contracts FORM OF CONTRACTS - II § If a contract is required by law to be in written form, it must be signed by all persons on whom it imposes obligations. (Art. 14 T.Obl.) § Any amendment to the written contract must also be made in written form (Art. 13 T.Obl.) § If there is no written form requirement for a contract in statutory law, the parties may themselves. (Voluntary form requirement) If that is the case, the parties have to comply with this form requirement they opted for. Non-compliance results in non-bindingness (Art. 17 TCO) § If there is a form requirement either officially or voluntarily stipulated, non- compliance results in invalidity. Voluntary does not mean optional! LAW427 – Business Law Form of Contracts FORM OF CONTRACTS - III GENERAL RULE : FREEDOM OF FORM Could be stipulated by law (legal form requirement) FORM REQUIREMENT : WRITTEN FORM 〈 Or agreed upon by parties (voluntary form requirement) Simple Written Form* Official Written Form* (having been made in written (it has to be made in written form suffices) form in front of competent public authorities such as notary, land registry etc.) * Where the law stipulates a written form requirement, it also specifies whether it should be simple or official form. LAW427 – Business Law Form of Contracts FORM OF CONTRACTS - IV § The form requirement may originate from the Code of Obligations (T.Obl) as well as other statutes, codes and laws. Here are some examples; “In order for the sale of real estate to be valid, the contract must be prepared officially.” (Art. 237 T.Obl) ”The surety agreement is not valid unless it is made in writing...” (Art. 583 T.Obl) “Contracts and dispositions regarding financial rights [in respect to copyright] must be in writing.” [Art. 52 Turkish Law on Intellectual and Artistic Works (Copyright Law)] “The property regime agreement is made by drawing up or approving at the notary.” (Art. 205 T.Civ) LAW427 – Business Law STANDARD CONTRACTUAL TERMS LAW427 – Business Law Standard Contractual Terms STANDARD CONTRACTUAL TERMS (General Transaction Conditions) § QUESTION - When you go to a mobile phone operator to get a phone line, do you negotiate the terms of contract? - How about when you go to the bank to start an account or take a loan? - Does this situation really accommodate the freedom of contract? § Typically, the nature of standard contractual terms (or general transaction Conditions) include following: Drafted in advance unilaterally by the issuer (often by the financially more advantageous party). To be used in several further contracts in future. Without being personalized or customized to each (new) party. Leaving the other party no room/opportunity for negotiating the terms. LAW427 – Business Law Standard Contractual Terms STANDARD CONTRACTUAL TERMS (General Transaction Conditions) § The implementation of standard contractual terms may diminish the freedom of contract on the end of the party to which those terms are dictated. § The issuer may therefore take unduly advantage of the other party. § To eliminate this issue, the Turkish Law of Obligations provides a mechanism that controls the standard contractual terms. § This mechanism provides that standard contractual terms against the interest of the other party are deemed unwritten (hence, as if they’ve never been a part of the contract) unless they comply with certain criteria. This means that they have no legal effect. LAW427 – Business Law Standard Contractual Terms STANDARD CONTRACTUAL TERMS (General Transaction Conditions) § The inclusion of general transaction conditions that are contrary to the interest of the other party within the scope of the contract depends on: the issuer clearly informing the other party about the existence of these conditions providing the opportunity to learn their content during the conclusion of the contract the other party accepting these conditions. § If these conditions are not meet, the relevant provisions are deemed unwritten. § In addition, general transaction conditions that are foreign (irrelevant) to the nature of the contract and the nature of the business are also deemed not to have been written. LAW427 – Business Law VOIDNESS LET’S REMEMBER! - The Freedom of contract does not apply where the; 1) Subject matter is in conflict with a mandatory legal provision “The total of overtime working hours cannot exceed two hundred and seventy hours in a year.” (Labor Code, Art. 4) When a contract sets that the worker must do 500 hrs. of overtime, it is deemed void. 2) Subject matter is against morality For example a contract for a person to cheat on their suppose must be deemed against morality. 3) Subject matter is against the public order Contracts on committing a crime or violating the public interest may fall in this category. 4) Subject matter violates the right of personality For instance contracts on waiver of personal and economic freedom may fall in this category. 5) Subject matter is (objectively and permanently) impossible to perform. This connotes the impossibility at the outset (not those which occurred after the conclusion). For example, sales (by an individual) of a public property. LAW427 – Business Law VOIDNESS LET’S REMEMBER! - The Freedom of contract does not apply where the; § In these cases, the contract shall be deemed VOID. This voidness is intrinsic, It does not require action or notification to be proven void. In case of a legal dispute, the court in charge shall consider voidness ex officio. LAW427 – Business Law Void vs. Voidable VOID vs. VOIDABLE § As you already know the formation of a contract depends on mutual and coherent will to agree on the essentials of the subject matter. § The principle of contractual freedom puts the will/consent onto the center of a contractual relationship. § The scenarios of voidness comprise the legal limits of contractual freedom regardless of whether or not parties’ consent are present. Existence of one of these automatically results in non-creation of the contract at the outset (i.e. contract never formed). § There are however other cases, where contract is not necessarily void at the outset but the will / consent of one of the parties has been somehow defected / impaired. § In such cases, voidability of contract may be possible LAW427 – Business Law Void vs. Voidable VOID vs. VOIDABLE § In the case of voidness, the effect is automatic; claim doesn’t have to be made to prove or substantiate the voidness; The courts must consider this fact on their own (ex officio) Because the reasons of voidness have impact beyond parties (to public). § In case of voidability; The reason is mostly about (or such as to affect) only the parties, The effect is not automatic, voidability renders the contract void only when ruled so by the court. The reasons of voidability cannot be examined by court ex officio without the relevant party claiming it. § The defects of will consent/set out by law are as follows ERROR/MISTAKE FRAUD DURESS UNFAIR ADVANTAGE (T.Obl. Art. 30 – 35) (T.Obl. Art. 36) (T.Obl. Art. 37, 38) (LESION BEYOND MOIETY) (T.Obl. Art. 28) LAW427 – Business Law Void vs. Voidable TYPES OF DEFECTS in CONSENT / WILL: ERROR / MISTAKE § A mistake occurs where the actual will (intention) unintentionally differs from the will that has been expressed. § The impact of a mistake to the validity of a contract depends on the nature and the extent of that mistake. § According to Art. 30 of T.Obl. ERROR/MISTAKE (T.Obl. Art. 30 – 35) A party who makes a fundamental mistake when establishing a contract will not be bound by the contract. § For a mistake to comprise a ground for voidability, it has to be fundamental. That means, not every mistake shall result in voidability. LAW427 – Business Law Void vs. Voidable TYPES OF DEFECTS in CONSENT / WILL: ERROR / MISTAKE § The Code of Obligation defines some cases where the mistake shall be regarded fundamental (Art. 31 of T.Obl.): § Mistake in the Type of Contract: Where the mistaken party has expressed his/her will for a contract other than the one s/he intended to be established. § Example: One party is supposing that s/he concluding lease (rental) ERROR/MISTAKE (T.Obl. Art. 30 – 35) contract, but the actual case is a purchase contract. § Mistake in the Subject Matter of Contract: Where the mistaken party expressed his/her will for some other subject matter than what s/he intended. § Example: One party is supposing that s/he purchasing a laundry machine but actually doing the transaction for a dryer. LAW427 – Business Law Void vs. Voidable TYPES OF DEFECTS in CONSENT / WILL: ERROR / MISTAKE § Mistake in the Other Party: Where the mistaken party has expressed his will to make a contract to someone other than the person with whom he actually intended to conclude a contract. / where the mistaken party took into account a person with certain qualifications when making the contract, but expressed his will for another person. § Example: When (A) actually wants to donate an asset to (B) but expresses his will for (C). Where one party is supposes that (X) will ERROR/MISTAKE draw his/her portrait, but the drawer is actually (Y). (T.Obl. Art. 30 – 35) § Mistake in the Quantity: Where the mistaken party expressed his will for an act significantly more than he actually wanted to undertake, or for a counter-act significantly less than s/he actually intended. § Example: While actually intending to contract for 1000 unit of goods, expressing the will for 10.000 units. LAW427 – Business Law Void vs. Voidable TYPES OF DEFECTS in CONSENT / WILL: ERROR / MISTAKE § Important!: These cases of error/mistake are listed in T.Obl. in an exemplary manner. The wording of Art. 31 T.Obl. so suggests by “especially the following shall be regarded as fundamental mistakes.” This means, depending on the nature and circumstances of each contract, courts may observe fundamental mistakes apart from those listed in the law. ERROR/MISTAKE (T.Obl. Art. 30 – 35) § Simple miscalculations do not affect the validity of the contract; It is enough to correct them. § The mistaken party cannot claim the voidability of the contract in a manner against the rule of good faith. § This is a reflection of general rule of good faith in the exercise of rights in Art. 2 T.Civ. LAW427 – Business Law Void vs. Voidable TYPES OF DEFECTS in CONSENT / WILL: FRAUD § A fraud (deception) is the act of deliberately creating a false belief in a person in order to induce someone to make a declaration of will, especially to make a contract, or to protect or maintain an existing false belief. § The difference between Error(Mistake) and Fraud(Deception): FRAUD Although the person is mistaken for reasons originating from (T.Obl. Art. 36) him/herself, in deception, the mistake is made due to the behavior of the other party or a third party. § “If one of the parties makes a contract as a result of deception by the other party, s/he is not bound by the contract, even if his/her mistake (the matter of deception) is not fundamental.” (T.Obl. Art. 36)  Void LAW427 – Business Law vs. Voidable TYPES OF DEFECTS in CONSENT / WILL: FRAUD § Q: What if the act of deception is done by a third party (someone other than the contracting parties)? Can the victim of fraud still seek to void the contract? § A: Depends on whether or not the other party knew or should have known of the fraud at the time of the contract was concluded. FRAUD (T.Obl. Art. 36) § If the other party (the one that benefits from third person’s fraud) knew or should’ve known the fraud, then the contract is voidable. § If however s/he didn’t know or couldn’t have known, (i.e. s/he is in good faith), then the contract is not voidable. LAW427 – Business Law Void vs. Voidable TYPES OF DEFECTS in CONSENT / WILL: DURESS § Duress is when a person knowingly creates fear in another party or takes advantage of an existing fear in order to induce him/her to enter into a contract. § Given the situation, if the person subjected to duress is reasonable to believe that there is a serious and imminent danger/risk of harm to the personal rights or property of DURESS (T.Obl. Art. 37 & 38) him/herself or one of his/her relatives, the intimidation is deemed to have occurred. § If one of the parties has entered into a contract as a result of intimidation (duress) by the other or a third party, they are not bound by the contract. (T.Obl. Art. 37) LAW427 – Business Law Void vs. Voidable CONSEQUENCES OF TYPES DEFECTS in CONSENT / WILL § If the party who made a contract due to Mistake (error) or ERROR/MISTAKE Fraud (deception) or (T.Obl. Art. 30 – 35) As a result of Duress FRAUD (T.Obl. Art. 36) does not declare that s/he is not bound by the contract or does not demand restitution within one (1) year from the moment DURESS - s/he learned about the mistake or deception (T.Obl. Art. 37 & 38) - the effect of the duress disappears, s/he is deemed to have approved the contract. LAW427 – Business Law Void vs. Voidable UNFAIR ADVANTAGE (LESION BEYOND MOIETY) According to T.Obl., Art. 28 § Where there is a clear discrepancy between performance and consideration under a contract concluded as a result of one party’s exploitation of the other’s straitened circumstances, inexperience or thoughtlessness, UNFAIR ADVANTAGE § The injured party may within one (1) year (either way no more than 5 years) (LESION BEYOND MOIETY) Declare that s/he will not honor the contract and demand (T.Obl. Art. 28) restitution of any performance already made. May request the disproportion between the acts to be eliminated. § The one-year period period commences at the time where the injured party notices that inexperience and thoughtlessness or the straitened circumstances disappear. LAW427 – Business Law In definitional terms, TORT IS WHAT KIND of UNLAWFULNESS? TORT vs. CRIME A tort is an act or omission that gives Unlawful act in the sense of Tort Law rise to injury or harm to another and does not necessarily have to be a crime. amounts to a civil wrong (but may Therefore a broader spectrum of act tend also be criminally punishable) for to fall into the category of tortious acts which courts impose civil law liability. TORT compared to crimes. An unlawful act within the meaning of Tort Law may also be a crime provided that it has been prescribed as a criminal offense in the criminal codes. In fact, a crime usually also constitutes a tort. It is also possible for a crime not to give a rise to tort, for example when this crime doesn’t cause a harm to someone else. LAW427 – Business Law EXAMPLES 1) – Breaking off the engagement Adultery Insult/defamation (when committed in the in the presence of less than 3 people; because the criminal provision prescribes it TORT TORT+CRIME CRIME as a crime only when it’s committed in the (1) (2) (3) presence of 3 or more people.) 2) - Most of the crimes also constitute a tort! Injury, Theft, Plunder, Damage to property 3) - Running a red light in traffic Carrying a gun with no license Not to report a crime LAW427 – Business Law TORT TORT LIABILITY in T. Obl. Anyone who causes harm to someone else through a faulty and unlawful act is obliged to compensate for this damage. Even if there is no legal rule prohibiting the harmful act, anyone who deliberately harms someone else with an immoral act is obliged to compensate for this harm. (Art. T. Obl.) LAW427 – Business Law ELEMENTS of TORT LIABILITY Anyone who causes harm to someone else through a faulty and § UNLAFWUL ACT unlawful act is obliged to compensate for this damage. § FAULT Even if there is no legal rule TORT § LOSS prohibiting the harmful act, anyone who deliberately harms § (CAUSAL) LINK BETWEEN someone else with an immoral act THE UNLAWFUL ACT AND is obliged to compensate for this LOSS harm. (Art. T. Obl.) LAW427 – Business Law ELEMENTS of TORT LIABILITY Ø UNLAFWUL ACT § Act in this context must be construed broadly to cover active and passive behavior; “Act” may transpire (occur) as to do something. For instance, causing damage to your neighbors' land by disposing chemicals there is an active behavior. “Act” may also transpire (occur) as not to do something. For instance, when your upstairs neighbor has leaking pipes which he doesn’t get fixed; water floods your apartment causing property damage. Here the neighbor's act is passive (not to do). For a passive act (not doing something) to be considered as an unlawful act, there has to be a legal duty to do that act. § The element of unlawfulness may arise from contradicting any source of positive law, including acts, statutes, directive, regulations etc. § The acts contrary to morality are also considered as unlawful act; but in this case such a harmful act must be deliberate (willingly done). Mere fault, for instance in the form of negligence isn’t sufficient. LAW427 – Business Law ELEMENTS of TORT LIABILITY Ø UNLAFWUL ACT § In some cases, what is normally a harmful act ceases to be unlawful due to presence of some justifications. Self-defence / Necessary Defence, provided that the act is directed at (limited to) eliminating an attack, harm caused to the attacker would not give a rise to an unlawful act (hence, no tort). Force Meajure; for example to extinguish your burning house you let the fire truck drive into your neighbor's land and cause damage to his crops. ! In this case, there is no complete indemnification from compensation; judge may rule on an equitable compensation. Consent; Consent of the harmed party must be on a subject matter on which he can freely decide. For example the right to live is not one of them; no one can consent to being killed. Exercise of a legal competence (this may arise from private law or public law). For instance, legal enforcement officer to enter into someone’s property due to a task he is legally competent would not be an unlawful act (hence no tort). LAW427 – Business Law ELEMENTS of TORT LIABILITY Ø FAULT § Fault conceptualized someone’s act that are not approvable and acceptable by law. § There is ‘fault’ in acts that does not match with ‘how the law expects that act to be’. § Fault may appear in two different ways; Deliberate (intentional) unlawful act BOTH GIVES A RISE TO Neglective unlawful act TORT OBLIGATION LAW427 – Business Law ELEMENTS of TORT LIABILITY Ø FAULT § Fault conceptualized someone’s act that are not approvable and acceptable by law. § There is ‘fault’ in acts that does not match with ‘how the law expects that act to be’. § Fault may appear in two different ways; Deliberate (intentional) unlawful act BOTH GIVES A RISE TO Neglective unlawful act TORT OBLIGATION But remember, in the case of acts against morality (not law) only deliberate harm results in liability. LAW427 – Business Law ELEMENTS of TORT LIABILITY Ø LOSS § Without an actual loss accrued, there cannot be tort liability. § Because this obligation is all about compensating the loss caused by unlawful act. § The harm caused may be of pecuniary (ex. harm to property, assets etc.) or non- pecuniary nature (ex. harm to dignity, defamation etc.). But either way, compensation based-on tort liability shall be pecuniary. Ø CAUSAL LINK § There has to be a causal link between the unlawful act and the loss accrued. § Even if the act is unlawful, the loss (hence the liability) caused from another reason cannot be attributed to the person who did that act. § Example; Can the truck driver who drives 60 km/h at a 50 km/h zone be held liable for the collapse of the building on the side of the road? LAW427 – Business Law DAMAGES / COMPENSATION Ø The injured party has the burden of proving the damage and the fault of the person causing the damage. Ø If the amount of damage suffered cannot be proven exactly, the judge determines the amount of damage fairly, taking into account the ordinary course of events and the measures taken by the injured party. Ø The judge determines the scope (extent) of compensation and the way it is paid, taking into account the circumstances of the situation and especially the severity of the fault. Ø Claims for damages become time-barred (elapses) two years from the date on which the injured party became aware of the loss or damage was caused. In any event, time barred 10 years after the date on which the loss or damage was caused LAW427 – Business Law Although the Ground Rule In Certain Specific Cases is the Fault-based There are Exceptions to this Obligation/Liability (Objective Liability) FAULT-BASED OBJECTIVE LIABILITY LIABILITY Any person who unlawfully In these cases the fault of the causes loss or damage to person is not relevant or another, whether willfully or important to make him negligently, is obliged to liable. provide compensation LAW427 – Business Law STATES OF OBJECTIVE LIABILITY EQUITY LIABILITY DANGER LIABILITY On grounds of equity, the judge may also If damage occurs from the activities of a order a person who lacks capacity to business that entails a significant risk, the consent/who cannot enter into contractual owner of the business and the operator (if obligations to provide total or partial any) are jointly liable for this damage. compensation for the loss or damage he has It is considered to be a business with caused. significant risk where considering its nature or Remember!, normally who cannot enter the materials, tools or equipment used in the into contractual obligations, shall not have activity, it is concluded that it is likely to cause frequent or severe damage even if all the care any obligations either. But here on ground expected from a person expert in these works is of equity, the legal result is different. taken. LAW427 – Business Law STATES OF OBJECTIVE LIABILITY FIDUCIARY LIABILITY EMPLOYER’s LIABILITY ANIMAL KEEPER’s BUILDING OWNER’s LIAB. The employer is obliged to LIABILITY The owner of a building or other compensate for any damage The person who undertakes the construction works is obliged to caused to others by the employee care and management of an compensate for the damage during the performance of the animal permanently or arising from defects in their work assigned to him. temporarily is obliged to repair construction or deficiencies in If the employer proves that he the damage caused by the their maintenance. took the necessary care to prevent animal. Owners of usufruct and damage from occurring while If the keeper of the animal residence rights are jointly and selecting his employee, giving proves that he/she took the severally liable with the owner instructions regarding his work, necessary care to prevent this for damages arising from and supervising and supervising, damage from occurring, he/she deficiencies in the maintenance of he will not be liable. will not be liable. the building. LAW427 – Business Law Unjust enrichment, more precisely, IMPORTANT! unjust enrichment at the claimant's expense, is defined as the generic While Unlawful act is necessary in order conception of the event which for the existence of a TORT obligation, triggers the right to restitution. this is not necessarily the case for the unjust enrichment. Claim or remedy requiring a UNJUST UNJUST, in this context refers to the fact defendant to give up benefits ENRICHMENT that enrichment of one party at the wrongfully/unrightfully obtained. expense of the other does not have a justifiable reason. In general, for the restitution claim to ripen, Therefore, in order for there to be an it, must be shown that; obligation arising from unjust (i) the defendant has been enriched at the enrichment, it does not matter whether claimant's expense; the enriched party is at fault. (ii) the circumstances are such that the enrichment must be given up to the Because this is not a fault based claimant, in other words the enrichment obligation. And it does not depend on a was 'unjust’.