Business Law

Business law
Prepared by Dr. Galal Elmasry
MGM412
Lecture 1
Business law
Lecture 1
MGM412
Prepared by
Dr. Galal Elmasry www.midocean.ae
Chapter
01 Lecture No.1 :Basic Terms in Law:
The most important main themes of the lecture:

1- State and Law.
2- Legal Norm.
3- Legal Act.
4- Legal Relation.
5- Effect of Time on Legal Relations.
6-Subjects of Law.
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Chapter
01
1- State and Law:
Chapter
01
-In a broad sense, a state is an organisation regulated by a special system of rules (law) of the
ruling class with the monopoly of physical coercion, which submits the population in a certain
territory to its sovereign authority, thus sustaining the way of production and political relations
in the given society that are in the interest of the ruling class. A state is comprised of three
constituent elements: territory, population and sovereignty/ sovereign public power. In a
narrower sense, a state implies a state organisation or state apparatus. State organisation, i.e. a
state in a narrow sense, is a hierarchically ordered and legally organized system of authorities
which have a monopoly of physical coercion and a power of creation and application of rules of
conduct.
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Chapter
01
1- State and Law:
01
 Sociologically observed, law represents one of the systems of rules of
people’s conduct within a society organized into a state. Law substantially
differs from other systems of social norms because it contains a request to
implement sanctions by state authorities.
 In a broader sense, the term law encompasses the legal system. It is a
hierarchically systematized set of rules of conduct that apply for subjects
within a society, whose violation in social relations is sanctioned by a special
organisation with the monopoly of physical coercion (the state). Such rules
of conduct are created by state authorities (parliament, government), non-
government authorities (corporations) and natural persons. A legal norm is a
rule of conduct of subjects whose potential violation should be sanctioned by
the state.
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Chapter
01
1- State and Law:
01
 A legal norm, a set of legal norms or an entire system of law are sometimes
called objective law or law in objective sense. The term objective law
includes all legal norms created by the state and other authorized subjects.
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Chapter
01
1- State and Law:
01
1- Legal system:
 Law consists of an enormous number of legal norms, i.e. rules of conduct. In
order for them to be as efficiently and fully applied in practice as possible,
i.e. implemented in social relations, in order to easily identify potential
contradictions between particular norms and to better fill legal gaps, it is
necessary to systematize all existing legal norms into a single collection/unit.
Therefore, a legal system is a unique and non-conflicting unit created by
hierarchical systematization of all existing legal norms and their
classification into smaller or bigger, lower or higher related groups.
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Chapter
01
1- State and Law:
01
1- Legal system:
 According to the applied legal technique, i.e. the method of regulation of
social relations primarily in the areas of sources of law, existing legal
systems in the world can be classified into three major groups: European
Continental, Anglo-Saxon and religious-traditional system.
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Chapter
01
1- State and Law:
01
2- Elements of a legal system:
 Based on various criteria, three basic elements of any legal system can be
identified: a legal norm, a legal institution or institute and a branch of law.
Legal areas that incorporate a number of related branches of law may but do
not have to be an element of a legal system. This depends on a specific legal
order.
 A legal norm is a basic cell, an atom of law. Accordingly, a legal norm must
be a fundamental element of a legal system. A legal institution or institute is
a common name for a collection of all legal norms that regulate different
sides of a single legal relation using a common method.
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Chapter
01
1- State and Law:
01
2- Elements of a legal system:
- A branch of law is a set of, generally higher, more complex institutions that
use the same basic method to regulate a broad area of related social relations.
Firm and absolute boundaries may not be set either among institutions or among
branches of law. Property relations of subjects, those created in objects that
carry a certain economic value which can be expressed in money, are regulated
by an extensive range of branches of law. The most relevant group of such
relations, those created by goods and in an exchange of goods and money or
due to it, normatively express civil law and business law. In contemporary
world.
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Chapter
01
2-Legal Norm:
01
1-Elements of a legal norm:
- A legal norm is comprised of two basic elements: disposition and sanction.
Each of these elements of a legal norm represents a rule of conduct and
therefore has a normative character. Each of these rules of conduct may be
applied if certain requirements are met. This part of a norm that contains the
requirements for the application of one of the basic elements of a legal norm is
their hypothesis. A hypothesis represents a description of a real, factual
condition that should occur and exist in order for a disposition (disposition
hypothesis), or a sanction (a hypothesis of a sanction) to be applied.
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Chapter
01 2-Legal Norm:
01
1-Elements of a legal norm:
-A disposition hypothesis determines a factual situation that should occur in order to
create an obligation to certain conduct according to the disposition, i.e. to a legal
norm. For instance, those who possess property are obliged to pay taxes; motor
vehicle drivers are obliged to drive on the right. The disposition here is an obligation
to pay taxes or to drive on the right. However, such an obligation only occurs for
those who own property or those who drive motor vehicles. A disposition hypothesis,
therefore, is those who have property or those who drive motor vehicles. Hypothesis
is sometimes formulated as a component of a legal norm. In other cases, it is apparent
from the context, the logic of a norm. It is so clear that there is no need to emphasise
it. For instance: pedestrians may cross the street when there is green light on traffic
lights. The assumption for the application of this norm is that in that street there is a
traffic light installed.
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Chapter
01
2-Legal Norm:
01
2- Legal norms according to scope and object of regulation:
- According to whether a legal norm pertains to an indefinite number of cases of
the same kind or it regulates a specific relation, norms are classified into general
and individual. General norms refer to all entities that are or may be in a
situation anticipated by the disposition hypothesis of that norm. Therefore,
general norms regulate a specific type of relations. The number of cases that
they refer to is theoretically unlimited. This is why it can be said that general
norms determine its object of regulation in advance. Persons who possess
property are obliged to pay taxes is an example of a general norm. Individual
norms refer to one specific case; one specific person. For example, J.M. is
obliged to pay 1,000KM of total income tax.
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Chapter
01
2-Legal Norm:
01
2- Legal norms according to scope and object of regulation:
- Norms can further be classified according to which area of social life they regulate,
which branch of law they belong to. There are: constitutional norms, civil law norms,
criminal law norms, administrative norms, etc. Civil law norms regulate civil law
relations; criminal law norms regulate criminal law relations, etc.
-Norms of substantive legal nature are those that regulate relations between subjects
in the society. On the other hand, procedural legal norms regulate the procedure itself,
i.e. how those who should act according to a norm shall behave, primarily a state
authority when it needs to apply a legal norm. Substantive legal norms are contained
in various laws (primarily in the civil code and criminal code). Procedural legal norms
are contained in the regulations of specific types of proceedings (the Law on Civil
Proceedings, the Law on Criminal Proceedings, the Law on Administrative
Proceedings).
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Chapter
01
2-Legal Norm:
01
3- Legal norms according to degree of disposition determination:
-In a peremptory norm, a disposition is predetermined, it is clearly defined what kind of
conduct is expected. A subject can only behave in accordance with a clearly formulated rule
of conduct; otherwise a sanction is applied. For instance, a debtor is obliged to repay a
debt. Such norms (and dispositions) are also known as absolutely definite and categorical.
- An alternative norm includes two or more rules of conduct, from which a subject to which
a norm is addressed (addressee) can chose whichever he finds more suitable. Whichever
rule of conduct within that norm the subject opts for, the conduct is in accordance with the
norm. A subject is therefore left to choose which rule of conduct to obey to. He is free
within that framework. Therefore, alternative norms belong to a type of relatively indefinite
legal norms, which give a subject a freedom to choose a rule of conduct from that norm and
to behave in accordance with it, e.g. Taxes can be paid either in cash or by depositing
securities.
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Chapter
01
2-Legal Norm:
01
-A dispositive norm includes a rule of conduct, but simultaneously gives subjects
authorisation to regulate their relation in a manner that suits them, to create a different rule
of conduct in a manner they find appropriate. Only in cases when addressees do not want to
determine what kind of rules and obligations should arise from a particular relation, a rule
of conduct from a legal norm is applied. Therefore, a dispositive norm gives an absolute
freedom to parties to regulate their behaviour, as long as it is within the framework of
objective law. A rule of conduct which is contained in a dispositive norm determines how
entities ought to behave only if they do not determine it themselves. Hence, they are also
known as replaceable, e.g. A seller is obliged to deliver the goods of medium quality, unless
otherwise provided by the contract. Dispositive norms are typical of obligatory agreements.
In regards to their formulation, as one can notice, they usually include the phrase unless
otherwise provided by the agreement.
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Chapter
01
2-Legal Norm:
01
- Adiscretionary norm includes an authorization of a state authority to, taking
into consideration certain circumstances, act as it considers being the most
purposeful, i.e. it gives it discretionary powers. The freedom of a state authority
to exercise discretionary powers is limited not only by circumstances but also
by an aim for which it was constituted. Under no circumstances should it be
used for the interest of official persons who constitute that authority (abuse of
power). The authorizations from discretionary norms are performed on the basis
of and within the framework of regulations.
.
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Chapter
01
3-Legal Acts:
- A form of a legal act represents a dialectical unity of a process of generating an

act and the very act as a special social and legal creation. The aforementioned
definition clearly indicates that the term of a form of a legal act contains several
elements. The first element is the authority. It implies an authorization to issue a
specific legal act. Such a definition includes the authorization of state authorities
(parliament, government) as well as the right of non-state entities (companies,
associations) to create some types of legal acts.
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Chapter
01
3-Legal Acts:
-The second element of the form of a legal act is the procedure of issuance. The
procedure should be a guarantee of quality of the act which will result from the
procedure. Hence, it is understandable why a complex procedure is expected to
occur for the issuance of more significant acts. A legal order does not merely
regulate the procedure of issuing legal acts by state authorities; but also by
persons and legal entities – subjects of civil and business law. The same rule
applies here as well: the more significant the act, the more complex the foregoing
procedure.
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Chapter
01
3-Legal Acts:
- The third element of the form is a materialization of an act, i.e. “a physical

action whereby an act is expressed externally, and a material instrument that
potentially provides its duration”.The expression of an act (decision of a will) can
be: oral, expressed by unambiguous gestures or other actions (conclusive acts),
and written. Exceptionally, in certain cases prescribed by the law, decisions of a
will expressed tacitly have the same effect. Nowadays, a written act, as a result of
a written expression of a decision of a will, is the most frequent type of a
permanent materialization of an act. In theory of law, due to their generality, the
content and form of an act are the most common criterion of classification of
legal acts.
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Chapter
01
3-Legal Acts:
1- General legal acts:

-A general legal act regulates in advance and in a general manner a number of
more or less definite repeatable relations with the same characteristics and of the
same kind. The manner in which a general act is applied depends on the degree of
determination of a disposition hypothesis and a disposition of the general legal
norm which it contains. Considering the legal form criterion, general legal acts
can be classified into the following sub-groups: the constitution, the law, bylaws
(ordinances, decrees, decisions), a court ruling based on precedent, customary
law and general acts of social organizations authorized by a legal order to create
legal norms.
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Chapter
01
3-Legal Acts:

1- In a legal sense, a constitution is a system of general legal acts or one general
legal act which incorporates political and legal norms, principles of organizing a
monopoly of physical coercion and legal order in a given society, as well as legal
principles of organizing those segments of social life on which the holders of a
monopoly of physical coercion particularly insist. It is a legal act with the
highest legal power. Authority to enact a constitution belongs to the highest state
authorities. Which one of them specifically has the authority to do it depends on
the social circumstances in which the constitution is being enacted.
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Chapter
01
3-Legal Acts:

2-Constitutional principles are formulated in such a way that it is very difficult to
implement them directly. Hence, it is necessary to implement their concretization,
elaboration and sanction in secondary legal acts. The first act in which this is
done is a law. A law can be defined as a written legal act which is enacted by a
legislative authority according to a legislative procedure and which contains
either individual or general legal norms.
3-In a broader sense, all legal acts which are lower than a law could be
classified as bylaws regardless of who the legislator is and what they incorporate.
In a narrower sense, only general acts issued by state authorities who are lower in
authority than the assembly are considered as bylaws.
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Chapter
01
3-Legal Acts:

4-There are three ways in which a state adopts general acts of social organisations
(companies, associations) into a legal order. The first one is a legal initiation, i.e.
an advance assessment made by a constitution or a law to determine whether acts
passed by social organizations are legal acts. The second way is mostly a legal
sanction, i.e. adopting into a legal order the acts which were not legal at the time
of the enactment. The third way is a combination of the previous two: a legal
initiation and a legal sanction. With its ordinance, the state declares that an act of
a social organisation is a legal act if a certain state authority verifies it. The first
system is accepted in our law when it comes to general acts of companies and
associations.
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Chapter
01
3-Legal Acts:

5-A custom is a social norm which occurs due to a certain way of behaviour of
persons in one situation being repeated until a conscience is formed that such a
behaviour is mandatory in any future identical situations. In order for a customary
rule to be sanctioned and so admitted as a source of law by the state, it must meet
two requirements. Firstly, a respective custom must not be contrary to existing
legal regulations, principles of the legal order or moral principles of a given
society. Secondly, it must be in accordance with the basics of a social-political
order.
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Chapter
01
3-Legal Acts:

6-Nowadays, theoreticians agree that the decisions made by a constitutional court are a
source of law. Since constitutional courts make decisions regarding a compliance of
lower general legal acts with higher general legal acts, their decisions must have a
general character. In theory, along with the decisions of a constitutional court, the
attribute of being a source of law is acknowledged by the decisions of the highest court
in a country as they are considered to have a precedent character. Attaching the attribute
of being a source of law to the adjudications of lower courts is controversial. It seems
that a standpoint according to which a judicial act is always given an attribute of being a
source of law can be adopted. The existence of and necessity for filling legal loopholes,
the method of work of courts and the formation of a judicial practice are in its favour.
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Chapter
01
3-Legal Acts:
2-Individual legal acts:

-An individual act regulates a specific, unrepeatable, existing relation. It is issued
“backwards’ and therefore is generally unconditional. Moreover, except in the
case of a legal gap – absence of a general norm required for a social relation
which should be regulated beforehand, an individual legal act is issued based on a
general legal act. Therefore, it represents a concretization of a general act which
does not exclude the element of creativity.
- Incompletely individual legal acts are divided into those which contain a
disposition: administrative acts and legal affairs and those which contain a
sanction – court rulings.
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Chapter
01
3-Legal Acts:

1- An administrative act is defined in several ways. If the content of an act is taken as a
criterion, then it is “an individual act which determines a disposition which obliges a
subject whose conduct it regulates even against their will” .
2- A legal affair is an individual legal act issued by a non-state subject which was
created voluntarily on the basis of the authorisation of a legal order and within its
framework, and which is made binding according to such a basis.
3- a legal act. In theory, a legal affair obliges only its creators, on the basis of their own
consent. If a legal affair occurs in the field of economic and property relations, it is a
civil-law affair. Civil-law affairs can be divided into civil-law affairs in a narrower
sense and affairs of business (commercial) law.
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Chapter
01
3-Legal Acts:

4-A court act can be defined as an act issued by court authorities (courts) using a
special court procedure. The multitude of court authorities, various procedures
that they apply, and the diversity of needs which are met by court acts have led to
the creation of several types of court acts. The most significant among them are:
judgement, resolution and principled stand. A judgement is a court act by which
the court “makes a decision regarding the claim i.e. the subject of a dispute . A
resolution is a court act by which a court “makes resolutions regarding all matters
except the subject of a dispute” .
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Chapter
01
3-Legal Acts:
3-Definition and hierarchy of sources of law:

- All social factors which affect the creation and implementation of legal norms,
as well as the facts by which those norms are acknowledged, are in theory
figuratively known as sources of law. Regarding whether they create or merely
express a norm, all sources of law can be divided into material and formal
sources of law. Material sources of law could be defined as social facts and
factors which lead to the creation of legal norms and their implementation.
Formal sources of law are, in essence, acts by which material sources of law take
a legal shape. We believe that sources of law, in a formal sense, are all legal acts
which include either a general or an individual legal norm.
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Chapter
01
3-Legal Acts:
3-Definition and hierarchy of sources of law:

-A hierarchy generally denotes a formally determined relation of authority and
subordination of sections within a particular system. A hierarchy of sources of
law is a set of general legal acts and those individual legal acts that include legal
norms, arranged according to their legal power. A legal power of a legal act is its
effect (impact) on other legal acts and factual human behaviour. That power
depends on the issuer of an act and on the procedure according to which the act
was passed.
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Chapter
01
3-Legal Acts:
4-Sources of European Union law:

-European Union law implies a set of legal norms of the European Union which
regulate the authority of its institutions and the rights of member states and
individuals that are part of it.
Primary community law consists of legal norms which are incorporated in acts
adopted by member states within their contractual-constitutional roles, i.e. in their
roles of subjects of international law and founders of the Community as a
supranational foundation sui generis. The rules incorporated in such acts of the
Community, along with the group of general legal principles, represent a
constitutional-legal framework of the European Union.
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Chapter
01
3-Legal Acts:
4-Sources of European Union law:

-Secondary law represents a special group of sources of law which are adopted,
i.e. passed by institutions of the European Union, in accordance with the relevant
provisions of primary community law. Regarding the enactor, this group of
sources of law can be divided into acts issued by the Council of Europe, acts of
the European Commission which were passed either individually or with the
participation of the European Parliament, and acts issued by the Court. In terms
of the formal-legal effect, they can be classified as binding, coercive or non-
binding. Secondary law includes: regulations, directives, decisions,
recommendations and opinions.
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Chapter
01
4-Legal Relation:
- Law regulates social relations between people, legal entities (companies,

associations) and other entities. Not all social relations are a subject of legal
regulation. Those relations which are arranged and regulated by a legal norm,
regardless of whether they existed before the norm was proposed or whether the
norm caused their adoption are considered as legal relations. In accordance with
objective law, persons who are in such a relation are defined as subjects of a legal
relation. A legal relation consists of an authorization of one subject and an
obligation of the other subject that participate in that legal relation. According to
legal ordinances, from objective law, individuals as well as legal entities either
obtain authorization or obligations are imposed on them.
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Chapter
01
4-Legal Relation:
- Two very important components of a legal relation are: authorization and

responsibility or obligation. In a legal relation, authorization and responsibility
are in correlation: every authorization of one subject corresponds with an
obligation of another subject, and vice versa (e.g. the authorization of a vendor to
request of a buyer to pay for the price of an item corresponds to the buyer’s
obligation to pay).
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Chapter
01
5-Effect of Time on Legal Relations:
- The lapse of time may result in the obtainment, loss or modification of rights.
This means that the time affects the occurrence, change and termination of a legal
relation. In a legal terminology, the time which has an effect on legal situations is
called a deadline. The effect of deadlines on law is manifested through the
beginning and the end of a legal relation, as well as obsolescence, positive
prescription and preclusion. Obsolescence is a legal institute according to which
the possibility of a coercive exercise of a right ceases due to a failure to act during
a period of time prescribed by the law. Courts and other state authorities do not,
by virtue of their positions (ex officio), pay a great attention to the expiration of
obsolescence period. www.midocean.ae
Chapter
01
5-Subjects of Law:
-In legal relations, persons are found either directly or through their organizations
(companies, associations). They are the bearers of authorizations and obligations
of those relations. These bearers of rights, authority and obligations (holders of
title) are referred to as subjects of law, subjects in a legal relation, legal subjects.
Their attribute to be bearers of rights and obligations, and the possibility to have
the rights and obligations is defined as a legal capacity. Under the conditions set
forth by the legal order, a group of people, a collective (a company) can be given
special or independent legal. Such a subject of law is called a legal entity.
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Chapter
01
5-Subjects of Law:
1-Natural persons as subjects of law:

- Modern law recognizes every individual, every natural person to have the
characteristic of a subject of law. For a person to have such an attribute
recognized, it is sufficient for a child to be born and to have a human shape, not to
be a behemoth. Natural persons cease to be a subject of law once they die. Under
certain legal conditions, a court can proclaim a missing person to be dead. In such
cases, a rebuttable legal presumption regarding the termination of being a subject
of law is prescribed by a court act. The opposite can be proven.
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Chapter
01
5-Subjects of Law:
2-Legal entities as subjects of law:

- A legal entity is a social creation, an organisation, which has its own special
socially-acceptable goals and interests and whose state of being a legal entity is
recognised by a legal order. As a special subject, a legal entity clearly differs in a
practical and juridical manner from individuals who are in their structure or are
related to them. A legal entity starts to exist at the moment of establishment and
ceases to exist once it is deleted from the relevant register where all its status data
are listed. In order for a social legal creation (entity) to have the attribute of being
a legal entity recognised, the following requirements need to be met:
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Chapter
01
5-Subjects of Law:
2-Legal entities as subjects of law:

1- there has to be a legal organisation (organisational unity) and the boards of that
organisation through which it formulates its interests, goals and decisions, and
enters into relations with third parties;
2- that organisation needs to have a goal for which it was established, tasks it
needs to accomplish in order to reach that goal, vision and mission;
3- it should appear in its own name for the purpose of exercising the rights and
performing obligations, it should have its independence and existence, separate
from the existence of founders/members and employees;
4- it should have its own property (independent property) separate from the
property of any member of that legal entity (e.g. company) and it should be solely
responsible for it. www.midocean.ae
Thank You
Business law
MGM412
Lecture 2
Business law
Lecture 2
MGM412
Prepared by
Chapter
02 Chapter 2 :Definition, Sources and
Subject of Business Law:
1- Definition, Subject Matter and Method OF Business Law.
2- Sources of Business Law.
3-Subjects of Business Law.
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Chapter
02
1- Definition, Subject Matter and Method OF
Business Law:
01
1- Definition of business law:
- Business law is a systematized set of predominantly dispositive legal norms that regulate
property relations of professional transfer of assets aimed at selling and purchasing exchange
values of goods rather than their utility. Business law is a branch of law that regulates relations
that originate from conducting economic activities or that are in a close subject or functional
relation with such activities. Business law is a branch of law that regulates relations from and
concerning trade in the broadest sense i.e. professional conduct of economic activities.
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Chapter 1- Definition, Subject Matter and Method OF
02
01 Business Law:
- “Trade law” or “law of traders”: a term that originated as a counterpoint to

the Roman “ius civile” – “civil law”. In Roman law, it was concealed by the
term “ius gentium”. Since the tenth century, a specific law that regulates
relations among traders has developed, called “Lex mercatoria” or “Merchant
Law”. In large bourgeois codifications that defined trade business subjectively
at first – as a trader’s job, the term “trade law” or “commercial law” was kept.
This was done primarily in the Austrian Civil Code (ACC) of 1811, and the
German Commercial Code (GCC) of 1863. In these laws, “trade law” is an
absolutely appropriate term.
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02
01 Business Law:
- “Commercial law” is a term whose meaning lies in the political need to free
the “commerce” i.e. economic activities from guild and administrative control
imposed by absolute monarchs. The Napoleonic Code de Commerce of 1807
defined the operations that are objectively, by their nature and characteristics,
economic, i.e. “commercial”. Anyone who conducted such activities had the
status of a trader, regardless of guild and other administrative conditions. Later
developments have brought these two concepts closer together. German law, for
instance, knows of “Musskaufleute” and “Kannkaufleute”.
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02
01 Business Law:
- “Economic law” or “Wirtschaftsrecht” originated in Germany at the end of

the 19th century, with the formation of a large set of coercive regulations that
dealt with the legal framework of conducting economic activities. The
difference between “Handelsrecht” and “Wirtschaftsrecht” is primarily in
the methodology, and it expresses a contrast: coordination vs. subordination.
When the administrative socialism accepted the fact that administrative
intervention in economy has its specific characteristics (“gosudarstvenici” vs,
“hazjastvenici”), the term “economic law” was adopted for both economic and
state legal relations that deal with economy.
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02
01 Business Law:
- “Business Law” originated in the common law system, particularly the one in
the United States of America. By its content, it is a counterpart of the term
“commercial law”. The reasons to adopt the term “business law” are the
following:
1) in our area, commerce is understood as the exchange of goods for money
rather than as an equivalent of all economic activities;
2) the term “economic law” is not common in market economies as it reminds
of an enforced legal administrative framework of conducting economic
activities;
3) “social property” as a proprietary basis of “economic law” has disappeared.
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02
01 Business Law:
2- Subject matter of business law:

- Theory is not unanimous regarding the subject matter of business law.
Professor Bartoš asserts that it implies all relations that concern trade in legal
sense of the word, regardless of who participates in such relations and whether
they are regulated by dispositive or coercive norms. Professor Vedriš claims that
it only includes legal relations that originate from the dynamics of goods-
monetary relations; only the relations that concern commerce in legal sense,
involving the subjects that conduct such activities professionally and in order to
gain a profit, regardless of the method of regulation.
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02
01 Business Law:
2- Subject matter of business law:

-The subject matter of this branch of law encompasses a set of regulations
regarding business-legal relations that subjects establish in order to gain a profit
(regulations that concern: companies, bankruptcy and liquidation, intellectual
property right, business law contracts, securities, the right of competition and
public procurement).
-Carriers of rights and obligations include persons who establish such relations
continually and professionally rather than occasionally. Due to the exposure of
the relations and the way of acting of the subjects in those relations, all types of
companies occur as subjects of business law, including sole proprietors.
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02
01 Business Law:
3-Method of business law:

- Professional conduct of activities in order to gain a profit has determined basic
characteristics of the method of business law.
- Business law is a dynamic category in which a large number of legal affairs
are concluded, with high speed and generally a high value. As a result,
professionalism is assumed to be a feature of each participant in business
transactions, as well as relations based on trust and business ethics. In the field
of business law, state intervention is present, as well as the formation of special
courts and arbitration.
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02
01 Business Law:
- The method of business law is a set of principles and rules that regulate
business relations of professional subjects. Special characteristics of
business law method are:
1)legal equality of parties in a relation and the equality of their wills, including
the specific position of individual subjects (monopolistic and oligopolistic);
2)freedom of parties’ initiative and the autonomy of their wills with significant
limitations in business law;
3)form contracts and general business conditions;
4)property sanctions, with the application of non-property sanctions of non-
contractual character;
5)a possibility of transfer of right onto another subject;
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02
01 Business Law:

6)a general predominance of dispositive norms;
7) sources of law that suit the needs of economy and customs;
8) a stricter responsibility of participants in business relations;
9) dispute resolution (special courts and arbitration) and a simplified proof
procedure.
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Chapter 2- Sources of Business Law:
02
01
- Correspondingly, the hierarchy of business law sources is: constitutions,
ratified international contracts, laws, other mandatory general acts of legal
bodies, bylaws, general acts of companies, contracts, customs, usances, civil
law, and decisions of supervisory and court authorities.
- Sources of business law may be substantial and procedural sources of law.
Business relations include various facts, conditions, and actions in the conduct
of business. They represent substantial sources of business law. Procedural
sources of business law are legal acts that contain legal norms that regulate
business legal relations. The main classification of procedural sources of
business law is into: general sources (constitution, law and bylaws) and
autonomous sources (custom, usances, form contracts and general conditions of
doing business).
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02
01
1-General sources of business law:
- As the source of business law, the constitution functions to the extent of which
the social and economic systems are the subject of constitutional regulation.
The history of constitutionality confirms this. The Constitution of Bosnia and
Herzegovina, which is incorporated in the Annex 4 of the General Framework
Agreement for Peace in Bosnia and Herzegovina and the Constitutions of
Entities, considers property to be a natural human right. Hence, out of all
provisions which are relevant for the regulation of property relations, the
constitutions incorporate only certain legislative authorities. This means that the
constitutions do not represent indirect sources of business law. As the sources of
law, the constitutional principles are implemented by the law.
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02
01
1-General sources of business law:
- The laws are the most important and the most numerous sources of business
law. As the sources of business law, the laws usually regulate property relations
among companies in a general and uniform manner, thus meeting the needs of
legal security in business transactions in the market in the best way. The most
important legislation in the area of business law is the following: The Law on
Business Entities, The Law on Obligations, The Law on Banks, The Law on
Bankruptcy Proceedings, The Law on Liquidation Proceedings, The Law on the
Securities Market, The Law on Internal Trade, the Law on Bill of Exchange,
The Law on Cheques, and so forth.
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02
01
2-Autonomous sources of business law:
- Practice as a source of law has a far greater role in business law than in civil
law. Throughout centuries, the role of trade practices and their effect on
business law have been significant. Rationality and practicality of
commercial/economic practices have made them an important source of
comparative law. The reason for this is the dynamics of the turnover of goods
which does not take any prolongation in finding adequate legal solutions for
new circumstances. Nowadays, business practices are formed promptly and on
the basis of the acts of autonomous business law (forms, general terms of
business), and hence they are easily and quickly accessible to everyone. The
Law on Obligations defines the term of practice and the basics of its
implementation in the area of civil and business law.
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02
01
- Commercial business practices represent business practices in a narrower,
legal-technical sense. It is a commercial practice which is so widely
implemented that the participants in business relations expect the contracting
parties to act in accordance with it.48 In order for a particular behaviour to
become a commercial business practice, it needs to be rational, assertive,
generally known, in accordance with the company’s spirit and legal order,
and accepted by the majority of participants in business relations.
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02
01
- Commercial business practices can be classified according to various criteria.
Regarding the territorial coverage, they can be classified into: general, regional and
local. In terms of the sectors that the practices are applied in, they can be general
(horizontal, which are valid in all economic activities) and special (vertical, which
are implemented only in certain sectors). If there is a conflict of different rules of
practices, then the practices which arise from a narrower territory or sector are
hierarchically stronger.
- As a source of the business law, a business practice can have two roles. It can be a
primary source if there is no regulation. If there is a regulation, then the practice
has an interpretative role. In such cases, a business practice supplements the law,
i.e. facilitates the interpretation of the law in accordance with the needs of the
time.
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02
01
- Depending on which practices are the subject of systematization, usances can
be classified into general (those which pertain to all economic activities) and
special (those which are only implemented in certain sectors). If there is a
conflict of usances, then those coming from a narrower area are to be applied.
- Economic chambers, professional associations of economists, and institutions of
public and semi-public character adopt usances. State authorities perform a
limited control over the adoption of usances. The control is performed at the
time of authorization for the adoption of usances or their formulation. The
protection of public interests is the primary goal of such control. The General
Usances for Trade with Goods dating 1954 are the most important source of
business law.
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Chapter
02 3-Subjects of Business Law:
1- Definition of subjects of business law:

- A subject of law is any person who has the capacity to be a carrier of rights and
obligations. Generally, natural and legal persons occur as subjects of law. For
that reason, the subjects of business law need to be searched for within the
framework of natural and legal persons that have certain characteristics when
compared to other persons. Classic theory generally determines the subjects of
business law via the term of trade business and the characteristics of persons
who conduct business activities. Such approach implies the existence of three
basic criteria for the determination of business law subjects: objective,
subjective and mixed.
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Chapter

- According to the objective criterion, which is based on French law (Code de
commerce, 1807), a trader’s characteristic is derived from the objective
definition of trade business – such activities have strict legal definitions. Ergo,
the trader (a subject of business law) is a person who conducts trade activities
as his regular occupation (profession). Objective (absolute) trade activities
include: banking, issuing a bill of exchange, purchasing goods in order to resell
it, agency and other activities. A person, who commences such activities, even
if for the first time, has the characteristic of a trader.
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Chapter

- The subjective criterion, based on German law (Handelsgesetzbuh, 1897),
takes the characteristic of a person rather than the nature of business /
activities. A trader is a person who “conducts trade profession” and the
conditions for this are determined by the law. A trader is a person who
conducts such activities: as his profession, or that he is a trader by the method
of establishment or the form, or to conduct activities in the way and scope that
require his determination as a trader. All activities conducted by traders are
trade business and the regime of trade law is applied to them.
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Chapter

- According to the mixed criterion, a series of characteristics determine a trader, which
gives this term a wide meaning. A typical example is American law. Using mixed
criteria in the process of defining a trader, American law alternatively takes these
characteristics into consideration: doing business with certain goods (a subject of
transaction); the profession of the person who exhibits knowledge or a skill specific
for actions or goods in transactions (relation toward the total transaction); and a
profession or employment of a person (agent, broker, other intermediaries) who, by
doing their job, show that they possess the knowledge or skill necessary for such
activities. One of these criteria may be fulfilled by an individual or a legal entity and
then it is a subject of business law, i.e. has the status of a business subject.
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Chapter
2-Classification of business law subjects:

- Both contemporary comparative laws and our law contain various criteria
according to which subjects of business law can be classified. Bosnia and
Herzegovina adopted the mixed system of classification. Persons from the cycle
of business law subjects regularly meet several criteria. The criteria are listed
below:
1) the objective of establishment and existence of a particular entity;
2) mandatory registration at authorized state bodies (a court or management
body);
3) performing a registered activity in the form of a registered profession and the
method of performing this activity;
4) the nature of jobs that a certain subject performs.
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Chapter
2-Classification of business law subjects:

- Subjects of business law are established and conduct business in order to make a
profit (lucrative goals).61 Entities established and operating on the regulations of
business law are always assumed.
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Thank You
Business law
MGM412
Lecture 3
Business law
Lecture 3
MGM412
Prepared by
Chapter
03 Chapter 3 :BASICS OF LAW OF
OBLIGATIONS:
1- Obligations.
2- Types of Obligations.
3-Subject of Obligations.
4- Sources of Obligations.
5- Cessation of Obligations.
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Chapter
03
1- Obligations:
01
1- Definition and characteristics of obligations:
- Law of obligations is a set of all legal norms that regulate obligations. Obligations (obligation
relations) represent legal relations between certain persons/entities in which one entity is obliged
to perform an obligation to the other entity, and the other entity has the right/authorization to
request the first entity to do it. There are two parties in obligations; however, one or more
persons/entities can be in each party. The first party is a person who is authorized, has the right
to demand and request, and that party is called a creditor (active side of an obligation).
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Chapter 1- Obligations:
01
03
- The creditor’s authorization to request something from the other party is called a
claim. The other party is a person who is obliged to do something for the creditor, so
this party is called a debtor (passive side of an obligation). Subjects of obligations
can be legal or natural persons.
-A debtor is obliged to meet his obligations towards a creditor, to do what the creditor
is authorized to request from him. This is how the term law of obligations was coined
(Lat. obligatio= obligation). An obligation also denotes the entire specific contractual
legal relation between a creditor and a debtor.
Considering that obligations represent legal relations, a creditor can force a debtor via
the intervention of a state authority to do what he is obliged to do in this relation. Like
other legal
relations, obligations are protected and can be implemented by fi ling a lawsuit in
court. The court includes arbitral tribunal as well.
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01
03
- Obligations are civil legal relations, and their characteristic is that they are legal
relations between precisely determined persons and due to a precisely determined
action. Law of obligations is a relative right, which means that it is not addressed
towards everyone, and that its holder is not protected against everyone’s actions,
which is the case with absolute rights (e.g. ownership, pledge). A creditor may only
exercise his right from an obligation of his (specific) debtor (e.g. a seller and a buyer).
The creditor has no rights whatsoever over third parties, that are not in that obligation.
The debtor, as the other party in the obligation should take certain action by which he
will bring the creditor into a relation with a certain object and enable him to use it. In
order to become an owner, a buyer cannot take the item he has bought;
the seller has to give it to him.
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01
03
-In Bosnian law, like in contemporary law in general, a typical lawsuit for the
protection of an obligation is a civil legal lawsuit. The means of coercion against the
debtor who does not perform the obligation towards the creditor are not aimed against
his person, but rather against his property. A typical sanction against a violator of an
obligation is damage compensation (reimbursement). It is implemented in various
ways.
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01
03
2-Performance of an obligation:
-Obligations are determined by legal norms. The disposition of a legal norm
determines the conduct of a subject in the obligation. This conduct, what they should
do in the obligation, is called performance of an obligation, or simply performance,
prestation. The performance is an object of obligation, unlike the content of
obligation. The content includes rights and obligations of subjects in an obligation:
the authorisation of a creditor to request a debtor to act in a certain way (e.g. to pay
the rent) and the obligation of a debtor to meet the request of a creditor, to act as
obliged (to pay the rent).
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01
03
-Performance (by its nature) can be giving (dare) an item, acting (facere), non acting
(non facere), i.e. refraining from doing something, failing to do something, and
enduring (pati)– allowing the creditor to do something which he would not be allowed
to do otherwise.
- Law of obligations as part of civil law or property law regulates property relations
between persons. Therefore, a performance of an obligation must primarily be of a
proprietary character, must directly or indirectly concern the property of persons who
establish obligations. This means that it must be expressible in money terms.
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Chapter 2- Types of Obligations:
01
03
1-Obligations according to types of performance:

- Performance of obligation can imply, as already mentioned, giving, acting or non-
acting, as well as enduring and failing to perform. This means that the debtor’s role in
an obligation can be active, when the debtor gives or does something, or passive,
when the debtor is obliged to not do something, to miss doing what he would, if there
was no obligation, have the right to do, or to endure something which he would
normally not be obliged to endure. According to this criterion, i.e. whether a
performance implies giving and acting, or non-acting and enduring, obligations are
classified into active or positive, and passive or negative. The significance of
differentiation between the two is in the burden of proof: in positive obligations the
burden of proof is on the creditor, in passive obligations it is on the debtor.
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01
03
- Obligations are strictly personal if only the debtor is obliged to perform the obligation
and no one else. It does not make a difference what reasons led to the acceptance of an
obligation for the obligation to be considered performed only if it is performed by the
debtor personally. It does not have to be the case of the debtor’s particular ability, or of
the creditor’s trust;
however, more often than not, that is the case. Other obligations are impersonal. Some
authors call them personal obligations though. In impersonal obligations, someone else
can perform
the obligation instead of the debtor. Impersonal obligations are usually positive. The
significance of differentiation: in impersonal obligations it is possible to change the
subject, while in strictly personal obligations this is not possible; the death of a subject in
an obligation leads to the termination of a strictly personal obligation, which is not the
case with impersonal obligations.
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01
03

- According to whether the obligation can be performed in a specific, short period of
time, or the performance takes a longer period of time, obligations are either current
or permanent. A
current obligation, for example, would be delivering goods or their transfer in one or
several rounds, one following the other.
-A permanent obligation, for example, is a rent, obligation of a transport organization
to transport all goods for someone to the railway station during a certain period of
time. The duration of an obligation can be a fixed term (e.g. six months, a year), or an
indefinite period of time (e.g. until someone is dismissed).
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01
03

- Regarding whether the performance of obligation is divisible, it can be performed in
parts (instalments) which have the same characteristics, or it is indivisible, cannot be
divided, cannot be performed part by part without destroying its essence and
decreasing its value, obligations are either divisible or indivisible.
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01
03
2-Obligations according to method of determination of a performance:

-Regarding the criterion of the method of determination of a performance, obligations
are classified into: individual, generic (determined by the type), as well as alternative
and facultative.
-A special or individual obligation is an obligation in which it is known which
specific performance a debtor is obliged. The performance is specially determined (in
species) and the
obligation can only be performed by performing that specific action (e.g. the same
machinery that was rented out must be returned). It is characteristic for special
obligations that a debtor is not held responsible if the obligation cannot be performed
due to a subsequent objective impossibility, with the condition of a lack of his fault
(e.g. when the affair fails due to force majeure).
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01
03
2-Obligations according to method of determination of a performance:

-An object of obligation can be determined by genus i.e. kind only. These are generic
obligations. Unlike individual, in which the object of obligation is precisely
determined, in generic obligations the object is not sufficiently determined (e.g. 100
litres of white wine). Only the kind (genus) of the item or the performance is
determined, and which exact item or performance is going to be used at the moment
of fulfilling the obligation is less relevant for the parties in the obligation. This usually
concerns fungible things whose kind can be of a narrower or wider scope.
- An obligation can be such that it concerns one action, its object is one specific
action, but the debtor is authorized to perform the obligation by performing another
obligation which is also determined. This is a facultative obligation.
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Chapter
03 3-Subjects of Obligations:

- A subject of law is any person who has the capacity to be a carrier of rights and
obligations. Generally, natural and legal persons occur as subjects of law. For that
reason, the subjects of business law need to be searched for within the framework of
natural and legal persons that have certain characteristics when compared to other
persons. Classic theory generally determines the subjects of business law via the term
of trade business and the characteristics of persons who conduct business activities.
Such approach implies the existence of three basic criteria for the determination of
business law subjects: objective, subjective and mixed.
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Chapter
- An obligation can be one with several subjects in one or both parties. Clearly, an
obligation cannot be with one subject, as one cannot be in a legal relation with oneself.
Namely, no one cannot owe or demand something from themselves.
1- Multitude of subjects in an obligation:
- Several persons can be found in an obligation, on each side, i.e. several persons or
entities as creditors or several persons or entities as debtors, or several persons on both
sides. Various reasons can lead to such arrangements. Likewise, a mutual relation of
several persons who represent the same side of the obligation can be different. A
performance can be divisible, so that several persons are obliged, or that they appear as
creditors whether jointly or individually. A performance can be the one which can be
performed once only, that it cannot be divided, so that each person on the creditor’s side
can request the fulfilment of the entire obligation, i.e. each person on the debtor’s side can
only fulfil the obligation in its entirety.
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Chapter

-When a performance is divisible, and the relation between the multitude of subjects is
such that each creditor is authorized to demand only his own portion of the claim, such
an obligation is a divided obligation (simple joint obligation).
- If there are several subjects on one side of an obligation, and the performance is
divisible, the obligation is divided, unless determined by the law or by a contract that
such an obligation is a joint one. In this situation, if it concerns a business law contract,
and there are several subjects on the side of the debtor, there is a legal assumption of a
joint obligation which can be explicitly excluded by a contract.
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Chapter

-In the case of multitude of subjects in an obligation, their mutual relation can be
arranged so that all co-debtors (e.g. three of them) are obliged to perform the entire
obligation, and that all co-creditors (e.g. two of them) are authorized to demand the
entire obligation to be performed, regardless of the performance being divisible. Those
are solidary (joint) obligations (solidum – solid figure, a whole). The principle is: one
for all, all for one.
-The relation of solidarity can exist on the side of the creditor (active solidarity), or on
the debtor’s side (passive solidarity), or simultaneously on both sides. In a solidary
obligation there is an external relation (creditors – debtors) and an internal relation
(relation between creditors or between debtors).
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Chapter
2-Change of subjects in an obligation:

-In a legal relation in general, except in the case of a strictly personal obligation,
subjects who participate can be changed.
This is true for obligations as well, in which the object of obligation has property value,
because, generally, property can be utilized. Rights and obligations from an obligation
can be transferred to other persons/entities. Clearly, the object of obligation remains the
same. The content (identity) of obligation does not change either. Only the subjects who
participate in the obligation change. Instead of a creditor, another one can enter the
obligation and have the same authorization like the previous one. Likewise, instead of a
debtor, a new one can take the same obligation that the previous one had.
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Chapter

-If the creditor in an obligation changes, it is called a cession, or transfer of a claim. A
cession of a claim i.e. a change of a creditor most frequently occurs based on a contract.
Exceptionally, it can occur based on a unilateral legal affair (e.g. a testator transfers
his claim to someone, in case of his death). By the contract, the old creditor (cedent)
transfers his claim onto his contractor –the new creditor (cessionary). The debtor
(census) remains the same, and the performance remains the same as well. A cession
can be performed several times: each creditor can transfer a claim to a new cessionary.
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Chapter

-A cession of a claim has its economic reason and its legal basis. The legal basis is a
legal affair in whose performance a cession occurs. There are different basic legal
affairs. One can gift his claim to someone, or return a debt by transferring his claim, or
an item one is buying can be paid by transferring a claim. A claim can be sold as well,
whereby the creditor transfers his claim to a new creditor. The cause can be: causa
solved – performing another, existing claim, causa credenda in which the transferred
claim is a loan, or causa do Nandi in which the transferred claim is a gift. A cession can
occur based on a court decision, or based on the law, which is rarer.
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Chapter

-The change of a subject of obligation on the debtor’s side is possible in several ways.
The most common change of debtors is conducted by the transfer of debt (intercession).
Furthermore, the change of a debtor is possible through accession to debt or transfer of
fulfilment. A change of a debtor can occur based on a contract but also based on the
law, which is less common.
- By a change of a debtor, the obligation (content of obligation) remains the same, and
only the debtor (person) changes.
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Chapter
03 4-Sources of obligations:
- Legal facts and states on the basis of which obligations occur are the sources of
obligations, the basics of the occurrence of obligations. They are the reasons due to
which the obligations occur. The first, the richest and the most frequent source of
obligations are legal affairs in general and contracts in particular.
- Agreements/contracts are consented declarations of will of two or more persons with
which these persons agree that a particular obligation occurs between them, and that
they perform an agreed obligation. The second source of obligations is unilateral civil-
law affairs. Their specificity is in the fact that an obligation, as a bilateral legal relation,
occurs with a declaration of will of only one party.
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Chapter
- The third source is inflicting damage .A civil offence is a source of obligations in the
sense that a person who illegally inflicts damage to another person/entity assumes the
obligation to compensate such damage (to the damaged party), unless it can be proven
that the damage occurred without his fault. Therefore, in theory, in order for an
obligation to occur, the damage should have been caused by the person (a person that
caused the damage) due to whose actions that damage had been caused. It is a system
(theory) of subjective responsibility for which the following requirements ought to be
met: unlawfulness of an action made by a person who caused the damage.
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Chapter
- Damage can be caused by a harmful action to a person with whom a person who
caused damage has not been in a legal relation up to that time. In such a case we are
dealing with a
Delict civil liability (non-contractual liability). Damage could be caused to a contractual
partner by non-fulfilment of illegitimate fulfilment of contractual obligations. It is a
contractual civil liability.
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Chapter
-Acquiring without ground represents the fourth source of obligations . It is also known
as an unlawful or unjust enrichment. When someone has obtained something or received
something and hence enriched his property without legal foundations, i.e. unjustly, then
it is said that he has enriched without any grounds for it. In fact, one part of someone’s
property becomes a part of someone else’s property, and that transfer has no legal or
lawful grounds in legal affairs (e.g. a person A had paid twice to a person B for the same
debt). If that had happened in a lawful manner and not by theft, deceit, or any other
illicit action and if no offence was made, then it is referred to as acquiring without
ground.
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Chapter
-The fifth source doing business without order or authority. If someone, with a good
intention, undertakes an action for the interest of another person, and without that
person’s consent, then it is referred to as doing business without order or authority, an
unbidden performance of someone else’s activities or effectiveness without a proxy. If
the undertaken action is accepted by and approved by another person, then a relation
occurs in the same manner as in the case of representation. If the untaken action is not
approved by another person, then this obligation occurs, similar to a case when a
representative oversteps the scope of authorization. If a business manager acted dully
and did what was required by the circumstances and took over the liabilities for the
main manager of business, then the main manager of business is obliged to compensate
him for all necessary expenses including the effort for his job.
Chapter
03 5-Cessation of Obligations:
-There are numerous ways of cessation of an obligation:

1- Fulfilment, payment is a usual way of cessation of an obligation. A debtor performs
an action which he was obliged to perform for a creditor. A creditor cannot request of a
debtor to do something else, nor can a debtor entail a creditor to fulfil an obligation
apart from the one to which he had committed.
2- In principle, the death of a subject of obligation (debtor’s or creditor’s), does not
imply the cessation of an obligation, but rather the rights and liabilities are transferred
onto a successor. However, in a case when a liability or right is strictly linked to an
individual that is a subject of obligation, the cessation of obligation occurs in a case of a
subject’s death.
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Chapter

3- Compensation, offsetting, set-off is a setoff of a debt for debt by settling mutual
obligations.
4- A novation, substitution is a substitution of an existing obligation for another one, a
new one. Hence the name substitution. The existing (old) obligation ceases to exist with
the agreement of subjects, and instead of it, a new obligation is founded.
5- Obligation can cease to exist by a discharge of debt. It is a waiver of the right to
claim, which in fact is a gift of what a debtor owed.
6- Obligation ceases to exist when a claim and a debt affiliate at the same person, when
the attributes of a creditor and of a debtor are found in the same person.
Chapter

7- Furthermore, an obligation can cease to exist by a settlement or arrangement. A
settlement is an agreement between subjects of one existing obligation, whereby their
unclear and disputed claims and debts from that obligation are eliminated and whereby
what is left to do, is determined in regards to what is owed and what is claimed.
8- A law could be enacted for many reasons whereby obligations are either annulled or
repealed or in general they cease to exist.
9- Obsolescence as a way of cessation of obligations was discussed in a section on the
effect of time on legal relations. It is a loss of the right to a coercive realization of a
claim by the expiration of a specified period of time.
Thank You
Business law
MGM412
Lecture 4
Business law
Lecture 4
MGM412
Prepared by
Chapter
04 Chapter 4 :COMPANIES:

1- Introduction.
2- Company Identifiers.
3-Registration Of Companies.
4- Represntation and Presentation Of Companies.
5- Status Changes and Change Of Form.
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Chapter
04
1. INTRODUCTION:
01
1- Definition:
-There are various conceptual definitions of a business entity in legal theory. In general, a
business entity (company) is a business organization which represents: a union of generally two
or more parties (natural and/or legal persons) created by a contract, with a status of a legal entity,
in which these parties invest the capital and labour and as such, conduct a registered business
activity under a joint name (business name) with the
goal of making profit. A business entity can be formed and run by one person (one man
company, Ger. Einmann Gesell schaft.
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Chapter 1. INTRODUCTION:
01
04
1- Definition:
Therefore, a business entity/company can be defined as a for profit organization with a status
of a legal entity, formed by one or more natural or legal persons in which they permanently
invest the capital (money, goods, rights) through their contributions, whose equity is divided
into stakes, with the goal of conducting a registered business activity on the market and
gaining profit, and such an organization is run by company members.
The elements of the general definition of a company are the following: company’s goal, legal
status, legal basis for the establishment, founders, permanent contributions, registration,
equity capital, assets and liability. In other words, companies have the following legal
characteristics:
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1- Goal: gaining profit, in accordance with financial regulations, which is distributed among
its members.
2- Legal status: positive law gives a company as a social creation the attribute of a legal
entity, which means that it can sue and be sued.
3-Legal basis for the establishment: it is generally a contract between founders (contract of
incorporation), whereas in a one man company, a decision on incorporation represents a
founding document.
4- Founders: one or more persons (proprietorship and corporations), or two or more persons
(partnerships), whether they are legal entities and/or natural persons, domestic and/ or
foreign.
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5- Permanent contributions: founders and investors invest their capital into a company in
the form of permanent contributions, which generally cannot be withdrawn, except in special
cases permitted by the law.
6- Registration: in our law, a company is obliged to be registered at a court, along with its
activities (business operations), including other legally relevant facts prescribed by the law.
7- Equity capital: Equity capital is a financial category formed in a company from founders’
contributions and subsequent investments. During the establishment of a company, it is initial
equity capital, which increases with new investments.
8- Assets: a company’s assets are separated from its members’ assets and these two
categories must not be legally confused.
9- Liability: as a legal entity, a company is held liable with its entire assets for its obligations
created through transactions.
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2- Types of business entities( companies):

- Business entities/companies are generally classified into:
1) Corporations (capital companies), and
2) Partnerships (personal companies).
- In addition to the aforementioned general classification, business entities are classified
into the following:
1- a joint stock company.
2- a limited liability company.
3- a general partnership.
4- a limited partnership.
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3- Legal nature of companies:

- Legal theory is not unanimous with regard to the legal nature of companies. In American
theory, the legal nature of companies, especially of corporations, is compared to the nature of
a person, individual (entity), the state and nationality.115 There are three basic theories in the
European law: contract theory, institutional theory and mixed theory.116 Basic conceptions
of these theories will be illustrated.
-According to the contract theory, a company represents an entity-contract. The basic
postulate of this theory lies in the fact that a company is a contractual entity. This legal act
regulates its legal structure, legal organization and all other functions of a company.
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3- Legal nature of companies:

- A company is registered according to a contract and in a manner determined by a contract.
Resolutions of other acts (statutes, rules) derive from the basic contract. The relations
between founders (members) of an entity are determined, prima vista, by a contract.
According to the advocates of this theory, if a contract does not include certain resolutions,
then general rules of contract theory (law of obligations) should be applied. The institutional
theory recognizes a company as a distinct and autonomous legal institution (individual,
entity).
- The theory of a mixed legal nature of companies is based on the standpoint that companies
are neither fully contracts nor institutions. The rules of contract law and legal rules, along
with the autonomous rules stipulated in statutes and decisions of management bodies (rules
of a company-institution) coexist parallelly in these entities.
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4- Systems of establishing companies:

-Theoretically observed, the establishment of a company includes a set of legal and factual
actions of founders (one or more) and a state authority, taken in accordance with a procedure
prescribed by the law and meeting legal requirements, in order for the unity of capital and
work to be recognized by a legal order so that it creates a legal entity. The system of
establishment represents a set of legal rules which regulate the method and requirements of
the establishment. There are three basic systems whereby companies are formed: concession,
a normative system (the system of free establishment) and the system of the law or
administrative act.
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4- Systems of establishing companies:

-Which system is going to be applied in a country depends on the attitude of the society
towards economy and interference of the state in economic activity. Positive regulations
generally combine these systems. However, one system always dominates. Most frequently,
differences occur depending on the sector in which a company is established (financial
sector) or depending on the founders (foreign investment).
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Chapter 2- Company Identifiers:
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- Companies are participants in the market, and therefore they have a reasonable economic
interest to acquire business reputation (image), and goodwill through their identifiers. It is
very important for companies to differentiate in the market by their individual identifiers for
prospective business partners as users of their services or buyers of their products. Hence, a
company’s identifiers have extensive significance for its differentiation in the market,
regarding: the fulfilment of its business; the fulfilment of consumers’ interests and consumer
protection; the fulfilment and acquirement of legal security in the market; and the assurance
of wider social interests.
Every company in the market achieves its individuality through the following compulsory
identifiers: company name (trade name), company activity (company objects); head office;
nationality (country of origin) and a unique identification number. In business practise, there
are other identifiers by which a company achieves is recognition (e.g. management).
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1- Business name:
- The Bosnian term for business name (trade name, trading name) – “firma” originates from
German law. In business practise, this term is usually used as a synonym for a company
(company).
-This is due to a great economic significance of a business name in comparison with other
status identifications of an entity. A business name represents an individual identification
under which a company has the right and obligation to operate and to represent and sign itself
in its operations. A business name is a name under which a company operates.
This is precisely why a business name is the most significant mark of individualization and a
status identifier inseparable from a company.
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2- Head office:
-A company’s head office is its compulsory element, i.e. it represents a constituent part of a
business name. A company’s head office is the place which is recorded as the head office in
the register of companies. It is determined in a memorandum of association or the statute
(Art. 10 of the LBE), and in practice it is determined in both acts. A head office is a
compulsory element of a business name and therefore every company can have only one
head office. Determination of a head office is a matter of
freely expressed will of a company’s founders. Generally, a head office is the place where
business operations are managed from - the seat of the general management.
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3- Activity:
-Activity represents business operations that a company performs in order to accomplish its
goals that are listed in the court register.
- Activity is often referred to as an object of business. A company can perform its activity in
domestic or international transactions. Companies generally register a number of activities;
usually activities that they assume could be the object of their business. Founders, i.e.
company members are free in the determination of activities that are prescribed by the law
and elaborated in bylaws.
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04 3-Registration Of Companies:
1- Definition and subjects of registration:

- Registration is a documented entry of by the law prescribed facts and legal states of a
company in the court or other register, by a prescribed procedure. Companies are registered in
the register of companies (court register), whereas sole traders are registered in the register of
individual entrepreneurs kept in municipalities.
- A court register has a significance of a public registry. The data listed in the court register are
public and therefore, without any proof of a legal interest, anyone can review the data in the
main registry along with the public data in the collection of identification documents in the
register, and request to be issued an extract, i.e. a copy of public data from the main registry.
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2- Object of registration and registration procedure:

- A register is a database which includes data and documents of subjects of registration which
are obliged to be registered pursuant to the provisions of the LRBE, and it consists of the main
register and a collection of registry documents. The main register represents the public section
of the register, which contains data on the subjects of entry, and the collection of registry
documents is a part of register that contains documents based on which the entry of data was
made, as well as other supporting documents of proof and decisions made during the process of
registration.
- The register is kept by a competent registration court which A court register contains data on
legal states (situations) of legal status character which a company obtains during the period of
its existence, from its establishment until its termination.
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- A court register contains data on legal states (situations) of legal status character which a
company obtains during the period of its existence, from its establishment until its termination.
3- Types of registration:
- Types of registration in the court register can be classified according to a number of criteria.
The most common method is their classification according to the effect of registration, into:
final, temporary (conditional) and informative.
- A final registration is such a registration in which the listed facts are unconditional and final,
with no time limitation. This type of registration includes: registration of establishment,
organizational form change (transformation), status change registration, registration of status
merger, and registration of termination of a company.
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A competent registration court shall remove an unsubstantial final registration by virtue of the
office, or upon a request of a person with a legal interest.
4- Principles of registration in a court register:
There are several principles on which the registration of subjects in a court register is
conducted:
-The principle of obligatority implies that, by the law, all companies are obliged to register in a
court register.
-The principle of legality supplements the principle of obligatority. Basically, it stems from the
normative system of the establishment of business subjects.
-The principle of formality is applied during the entire procedure of registration.
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-The principle of documentarity implies that the registration in the court register is conducted
based on the presented documents and identifications that prove the facts relevant for
registration.
-The principle of priority implies the priority of that subject which requested the registration
first, i.e.
-The principle of constitutionality means that the real facts regarding the subject of registration
become legal facts at the moment of registration.
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Chapter
04 4-Represntation and Presentation Of Companies:
1- Definition:
-Representation implies taking legal actions in the name of and on behalf of another person. In
a company, a legal representative is, exlege, the director or the president of the board of
managers.
-The statute of a company can specify a wider circle of managers or employees as the
company’s representatives. If there are several representatives, the statute or some other act
must separate and restrict the authority. Representation can be classified into legal, statutory,
contractual and representation based on a unilateral declaration of will in the form of an
authorisation.
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1- Definition:
-The function of a legal representative in corporations is performed by the management.
Partnerships use different methods of representation as compared to corporations. Regardless
of the type of partnership, the function of representation is implemented through the equality
of all members/partners.
2- Power of attorney:
- Power of attorney is a legal foundation based on which a certain person called an agent or
attorney-in-fact is authorized to represent another person, known as a grantor or principal.
Power of attorney, in our legal system, is prescribed by the norms of the LoO.
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3- Procuration:
- Procuration (general power to represent) is a type of business authorisation that implies taking
legal actions in the name of and on behalf of a company. It originates from the German legal
circles and today it represents a common type of a business power of attorney. Procuration,
comparatively observed, is legally defined in two ways, either within obligations or within
commercial codifications.
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3- Procuration:
- Procuration is defined as the broadest business power of attorney, and therefore should not
have any limitations. If nothing is specified, it is considered that procuration is issued to the
entire company. It can be issued to a subsidiary as well, which must be explicitly specified and
registered in the register of companies. Procuration is only issued to persons with business
capacity. These individuals do not have to be related to a company. They can be employees,
founders or third parties
- outside of the company. In business practise, procuration is often used so that the founders
who do not perform any management functions in a company can keep full control over the
company's operations, particularly with regard to the interest in company's assets.
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04 5- Status Changes and Change Of Form:
- Status changes represent a set of legal and factual actions performed pursuant to the law,
which lead to universal succession of property and a change of a legal status (position) of a
company or entities affected by these changes.
- The changes occur in the economic and legal identity of entities, which is reflected in legal
transactions. These changes lead to the formation of larger or smaller companies as the assets of
existing companies merge to form a new company, merge to absorb, or split. Some forms of
status changes represent aspects of integration or concentration of capital (merger by formation
of a new company or merger by absorption), whereas others cause a splitting of existent assets
into pieces and the formation of a multitude of subjects in economic life (split).
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-There are various reasons for the implementation of status changes of companies:
1- Merger by formation of a new company:
A merger by formation of a new company represents merging of two or more companies of the
same or different organizational form into a new company. It implies a merger of two or more
companies for the purpose of establishing a new company without the implementation of a
liquidation procedure. This is universal succession in terms of the obligation to obtain the
predecessors’ rights and liabilities. The decision on a status change is made by the general
meeting in corporations, and by all members in partnerships.
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2- Merger by absorption:
A merger by absorption is another form of fusion, which is more common in practice. By this
status change, one or more companies are merged into another company, whereby they cease to
exist as independent legal entities. They are assimilated, absorbed by the other company. A
merger by absorption does not lead to the formation of a new company. A company which had
absorbed other companies keeps its legal status, with a slightly changed structure of assets.
Namely, the assets of the absorbed entities are included into its assets, forming a single, much
stronger and more powerful unit. The absorbed companies are dissolved, deleted from the court
register, and their legal successor is the company that absorbed them.
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Hence, the company that absorbed other companies is liable for their obligations created prior
to the merger, as a universal successor.
3-Split:
A split represents a type of status change in which one company is divided into two or more
companies by transfer of assets and obligations, without a liquidation procedure. The new
companies become its legal successors, jointly liable for its obligations.
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4- Change of form:
A change of form is a transformation of a company from one type into another, in which the
structure of ownership, assets, business name, as well as other company identifiers remain
unchanged. All companies, excluding a general partnership and an open joint stock company
can change its form.
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Thank You
Business law
MGM412
Lecture 5
Business law
Lecture 5
MGM412
Prepared by
Chapter
05 Chapter 5 :Consumer Law:

1- Introduction.
2- Protecting the Purchaser.
3- Protecting the Debtor.
4- Enforcement.
5- Concluding Thoughts.
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05
1- Introduction:
01
- Consumer law is the area of law dealing with consumer transactions, including an individual’s
ability to obtain credit, goods, real property, or services for personal, family, or household
purposes. Business to business transactions are usually governed by contract law and are not
considered part of consumer law.
- Consumer protection laws are laws designed to protect consumers against unfair trade and
credit practices involving consumer goods, as well as to protect consumers against faulty and
dangerous goods. The focus of these laws is to ensure that businesses do not take advantage of
individual consumers.
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Chapter 2- Protecting the Purchaser:
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- Consumer protection laws that protect purchasers of goods and services generally fall
into four categories:
1- Labeling and Packaging:
- How goods are labeled and packaged influences whether consumers will buy them. As a
result, regulations require that labels must be truthful and allow consumers to understand
what the product is, what it contains, and any potential hazards.
- Labeling and packaging regulations fall into four categories:
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- Consumer protection laws that protect purchasers of goods and services generally fall
into four categories:
1- Labeling and Packaging:
- How goods are labeled and packaged influences whether consumers will buy them. As a
result, regulations require that labels must be truthful and allow consumers to understand
what the product is, what it contains, and any potential hazards.
- Labeling and packaging regulations fall into four categories:
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2- Sales:
- The general principle in sales regulations is that advertising must be honest. Consumers
should be able to make informed decisions based on what products and services really are
and not based on false claims or empty promises. These regulations apply to all sales
materials regardless of medium: print, electronic, social media, or radio.
- One important regulation involves door-to-door sales. Consumers who buy goods or
services from door-to-door salespeople have three days to cancel purchases without penalty.
This is called a cooling off period and is intended to protect consumers from high pressure
sales tactics. The exception to the cooling off period is when services are immediately
rendered. For example, someone who aerates a lawn or removes.
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2- Sales:
- Another important regulation involves delivery of goods ordered online, through catalogs,
or by door-to-door sales. Goods must be shipped within the promised time period or notice
must be given to the consumer. If the goods are not shipped and proper notice is not given,
then the consumer has the right to cancel the order for a full refund. Similarly, if a consumer
receives goods that he or she did not order through the mail, the consumer can treat it as a
gift and does not have to pay for it.
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2- Sales:
-Sellers are allowed to promote their goods and services and make them appealing to
consumers. Puffery is a broad promotional statement made by a business about goods or
services that is not intended to be taken literally. In other words, puffery is an exaggerated
opinion, such as “the best,” “most popular,” and “nobody can beat it!” As long as puffery
remains an opinion and does not contain false factual statements, puffery is legal. However, if
puffery contains false statements, then the statements are deceptive advertising and illegal.
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3- Deceptive Advertising:
-Deceptive advertising is a material misrepresentation or omission likely to mislead a
potential customer and would mislead a reasonable customer. In other words, deceptive
advertising is a lie.
- For example, if a car manufacturer advertises a vehicle as “the best in its class” or “the most
popular” sedan, such statements are legal puffery. If the manufacturer advertises that the
vehicle gets 35 miles per gallon when it only gets 30 miles per gallon, then that statement is
deceptive advertising.
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3- Deceptive Advertising:
-Another form of deceptive advertising is called bait and switch or bait advertising. Bait and
switch is a sales practice where a seller advertises a low-priced product to lure consumers
into a store only to induce them to buy a higher-priced product. Often the advertised product
is not actually available as advertised or the seller refuses to sell it on the advertised terms.
The low-priced.
product is the “bait” that brings consumers in but then the seller “switches” the higher-priced
product as the subject of the transaction. Bait and switch advertising can also apply to sales
of services.
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4- Hazardous Materials:
-In the context of consumer protection law, hazardous materials are products deemed
dangerous to the consuming public. Hazardous materials include drugs that may be
consumed safely in small amounts under supervision of a medical provider, as well as toxic
chemicals that are banned for certain public uses such as lead and asbestos.
-Hazardous materials regulations are extensive to ensure that products reaching consumers
are safe for their intended use and other reasonable, foreseeable uses. These regulations also
control product recalls.
-Regulations vary depending on the business’s industry. To help consumers understand their
rights and report harmful products, the Consumer Product Safety Commission established the
www.SaferProducts.gov website.
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Chapter 3- Protecting the Debtor:
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- A debtor is someone who owes an obligation to another individual or business, especially

the obligation to pay money. Consumers become debtors when they owe a business money
for the purchase price of goods and services. If consumers pay the purchase price at the time
of the transaction or shortly afterward, then the transaction is completed. If, however, the
consumer does not immediately pay but receives the goods or services, then the consumer
becomes a debtor under consumer protection laws.
- Consumer protection laws that protect debtors generally fall into five categories:
-Obtaining credit;
-Reporting credit information;
-Electronic fund transfers;
-Identity theft; and
-Debt collection.
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1- Obtaining Credit:
The process of obtaining credit is regulated by two federal laws. The Truth in Lending Act
regulates what information must be provided by creditors who wish to extend credit to
consumers. The Equal Credit Opportunity Act prohibit creditors from discriminating against
consumers based on their membership in certain protected classes.
A-Truth in Lending Act:
- Congress passed the Truth in Lending Act (TILA) in 1968 to help consumers understand
and compare various credit options available to them. TILA only applies to consumer credit
transactions and leasing. The law does not apply to commercial credit transactions.
- TILA applies to all real estate transactions and consumer credit transactions of $25,000 or
less. The law also applies to credit transactions involving finance charges or when the loan
repayment involves four or more installments.
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- TILA also regulates credit cards. The law prohibits credit card companies from issuing
credit cards unless they were requested by the consumer. Any changes to interest rates or
policies to existing credit card accounts must be provided in writing to consumers, who must
be allowed to cancel their credit cards without penalty. Consumers are required to pay any
outstanding balance accrued to that point, but they cannot be forced to accept altered terms.
TILA requires certain disclosures be made to applicants for credit. These disclosures
include:
- Minimum rate of repayment;
- Billing period;
-Interest rate in the form of the annual percentage rate;
- Type of interest (simple or compound);
-Service charges and fees; and Prepayment penalties.
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-All disclosures must be in ordinary language that makes sense to the ordinary customer.
Disclosures must also be clear and conspicuous, meaning that the terms cannot be buried in a
contract to hide them from consumers.
B-Equal Credit Opportunity Act:
- Congress passed the Equal Credit Opportunity Act (ECOA) in 1975 to protect consumers
from discrimination when applying for credit. ECOA prohibits creditors from discriminating
against creditors based on their:
- Race; -Color;
- National origin; - Religion;
- Gender; - Age;
- Marital status; and - Welfare status.
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-The purpose of ECOA is to require creditors to consider only those characteristics of an

applicant related to creditworthiness rather than social status or stereotypes. Therefore,
creditors may consider an applicant’s marital or welfare status only to the extent that it relates
to the applicant’s creditworthiness. For example, an applicant’s marital assets and debts are
relevant factors when determining how much credit, if any, should be extended to the
applicant. However, denying or granting credit solely on the basis of marital and welfare
status is illegal.
- ECOA also requires creditors to provide specific reasons for denying credit to applicants.
This allows applicants to determine whether the denial was for discriminatory reasons or as
pretext to hide the discriminatory reason, in violation of the law.
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2-Reporting Credit Information:

-Congress passed the Fair Credit Reporting Act (FCRA) in 1970 to regulate the gathering,
storage, and reporting of credit-related information. FCRA applies to individual consumer
information only. FCRA does not apply to business entities’ credit reports.
-A credit bureau is an organization that maintains and distributes information regarding a
person’s credit worthiness to potential creditors, insurance companies, and employers. The
three main credit bureaus in the United States are Equifax, Experian, and Transunion.
-Before releasing consumer information, a credit bureau must confirm the identity of the
party making the request and verify the reason for its use. The credit bureau then provides
information about a consumer’s credit in the form of a credit report.
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-In general, consumers do not have to consent to the release of their information. FCRA
requires notice to consumers in three specific circumstances:
1- A credit report is provided to an employer and includes negative information that could
prevent the consumer from being hired;
2- When the consumer is denied credit, insurance, or employment based on information
contained in the report;
3- An investigative report is requested about the consumer’s character, personal attributes,
and living arrangements.
Credit bureaus must delete general information that is more than seven years old, and
bankruptcies that are more than ten years old. If debts were incurred over seven years ago, or
bankruptcies filed more than ten years ago, but are still “open” because the debt has not been
paid off, then that information may be reported.
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-FCRA gives consumers some specific rights regarding their consumer reports. First,
consumers are entitled to one free report per year from each of the credit bureaus. Consumers
may pay for additional copies of their credit reports.
-Second, consumers are entitled to dispute information included in a credit report. If the
credit bureau determines that the report contained an error, the erroneous information must be
removed. If the credit bureau confirms the information or cannot determine that it was
erroneous, then the consumer has the right to add an objection to the information in the
report.
-Finally, consumers are entitled to place a credit freeze on their credit reports. A credit freeze
is when the consumer restricts or prohibits creditors from requesting credit reports about
them. In essence, a credit freeze prevents third parties from requesting a consumer’s credit
report without the consumer’s permission. If the consumer wants to apply for credit or a new
job, then the consumer may lift the credit freeze for a limited period of time or give authority
to specific entities to request a credit report.
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3-Electronic Fund Transfers:

- The Electronic Fund Transfer Act (EFTA) was passed by Congress in 1978 to protect
consumers from unauthorized electronic fund transfers from their accounts. EFTA applies to
electronic direct deposits and withdrawals, automatic teller machines (ATMs), and point-of-
sale transactions with merchants.
- EFTA requires banks to investigate errors and reported fraud promptly and to correct any
errors within one business day. A consumer’s liability for unauthorized transfers is limited to
$50 or the amount of the transfer (whichever is less) for transfers made before the consumer
notified the bank of the unauthorized use. After the consumer notifies the bank, the consumer
is not liable for any additional unauthorized transfers. However, if the consumer fails to
notify the bank within two business days of the unauthorized transfer, then the consumer’s
liability rises to $500.
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3-Electronic Fund Transfers:

-A preauthorized transfer is an electronic fund transfer authorized in advance to recur at
regular intervals. For example, a consumer authorizes her monthly mortgage payment to be
automatically withdrawn from her banking account on the first of every month.
Preauthorized transfers require banks to:
1- Receive written instructions from the consumer about the timing, amount, and duration of
the transfers; and
2- Allow the consumer to stop payment up to three business days before the scheduled
transfer date.
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Chapter
05 3- Protecting the Debtor:
4-Identity Theft:
-Identity theft is an increasing concern for businesses and consumers. The Federal Trade
Commission estimates that at least ten million consumers are victims of identity theft each
year.
- While consumers cannot completely prevent identity theft, there are some steps that they can
take to minimize their risk. First, consumers should monitor their bank accounts and charges
on their credit and debit cards. If they notify their banks of unauthorized transactions as soon as
possible, then they will minimize their personal liability. Second, consumers should request
their credit report at least annually. Parents are entitled to request credit reports for their minor
children. Third, consumers can place a credit freeze on their credit report to prevent third
parties from accessing their financial and personal information and from obtaining credit under
their name.
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Chapter
4-Identity Theft:
-If a consumer is a victim of identity theft, he or she can post a fraud alert with the credit
bureaus to be included in his or her credit report. A fraud alert requires businesses to verify the
identity of an applicant for credit before extending any credit to him or her.
5- Debt Collection:
Businesses that are owed money from debtors may seek a court judgment to collect the debt.
However, the judicial process is often expensive and time consuming. As a result, many
businesses prefer to collect debts outside of the court system.
To prevent abusive practices by debt collectors, Congress passed the Fair Debt Collection
Practices Act (FDCPA) in 1978. Under FDCPA, a debt collector must, within five days of
contacting a debtor, send a written notice containing:
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• The amount of the debt;

• The name of the creditor to whom the debt is owed; and
• A statement that if the debtor disputes the debt in writing, all collection efforts must stop
until the creditor receives evidence of the debt.
- FDCPA also prohibits certain debt collection practices. Debt collectors cannot:
1-Contact a debtor who has notified the collector in writing that he or she wants no further
contact;
2- Contact a debtor who is represented by an attorney;
3-Call a debtor before 8:00 a.m. or after 9:00 p.m.;
4-Threaten a debtor or use obscene or abusive language;
5- Contact a debtor at work if the employer prohibits such contact;
6-Imply or say that they are attorneys or government officials when they are not;
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7-Use a false name;
8-Make any false, deceptive, or misleading statements;
9-Contact family and acquaintances of the debtor more than once or for any reason other than
to locate the debtor;
10-Tell family and acquaintances of the debtor that he or she is in debt;
11-Publish the debtor’s name and address on a “bad debt” list on the internet or in the
newspaper; or
12-Collect charges in addition to the debt unless permitted by state law or contract signed by
the debtor.
-Filing a collection action in court does not violate any of these rules.
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Chapter
05 4-Enforcement:
-Congress empowered both the Federal Trade Commission and the Consumer Financial
Protection Bureau to enforce the primary federal consumer protection laws. However,
numerous federal and state laws contain provisions to protect consumers. As a result,
there are many federal and state agencies that have regulations related to consumer protection.
- The Consumer Financial Protection Bureau (CFPB) was created by Congress in 2010 to be a
single point of contact for consumers who seek financial consumer protection. The CFPB is
intended to consolidate enforcement efforts and to make them more consistent than when they
were shared among agencies. The CFPB is authorized to enforce the federal consumer
protection laws discussed in this chapter, as well as others.
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Chapter
05 5-Concluding Thoughts:
-Consumer protection laws are intended to protect consumers from unethical and unfair
business practices. These laws are broad in range, from advertising and marketing to recalling
delivered products that are hazardous. With the continued evolution of electronic transactions
and banking, consumer law will continue to evolve to address areas of concern as they develop.
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Thank You
Business law
MGM412
Lecture 6
Business law
Lecture 6
MGM412
Prepared by
Chapter
06 Chapter 6 :Business Organizations

1- Introduction.
2- Sole Proprietorship.
3- Partnerships.
4- Franchises.
5- Joint Venture.
6-Corporations.
7-Limited Liability Entities.
8-Concluding Thoughts.
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Chapter
06
1- Introduction:
01
- At its most fundamental level, a business exists to make a profit for its owners. Some
businesses make things in factories (manufacturers), other businesses sell things that other
businesses make (retailers), and still other businesses exist to help both the makers and sellers
make and sell better (business consultants). Some businesses don’t make things at all, and
instead profit by selling their services or by lending money.
- With this diversity, it’s not surprising that there is no “one size fits all” approach to choosing a
business organization. When choosing what form of entity is best, several factors are important
to consider:
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Chapter 1- Introduction:
01
06
1. How much it costs to create the entity and how hard it is to create.
2. How easy it is for the business to continue if the founder dies or retires.
3. How difficult it is to raise money to grow or expand the business.
4. What type of managerial control they wish to keep on the business, and whether they are
willing to cede control to outsiders.
5. If expanding ownership to members of the public is desired.
6. How to minimize the taxes paid on earnings and income.
7. How to protect personal assets from claims, a feature known as limited liability.
- Depending on the type of business and its goals, different business entities may be
appropriate.
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Chapter 2- Sole Proprietorship:
01
06
- A sole proprietorship is an unincorporated business owned by one person or married

couple. The legal name for a sole proprietorship is usually the owner’s name.
- There are many advantages to doing business as a sole proprietor. First, it’s easy to
create a sole proprietorship. In effect, no creation costs or time is required because there is
nothing to create. The entrepreneur in charge of the business simply starts doing business,
charging money, and providing goods or services.
- Another key advantage to sole proprietorship is autonomy. The owner can decide how
he or she wants to run the business. The owner can set her own hours, grow as quickly or
slowly as she wants, and expand into new lines of businesses. That autonomy also comes
with total ownership of the business’s finances. All the money that the owner takes in, even if
it is in a separate bank account, belongs to her, and she can do with that money whatever she
wants.
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01
06
-A sole proprietorship is a flow-through tax entity, which means the business does not pay
tax on its profits and does not file a separate tax return. Instead, the owner pays personal
income tax on all business profits.
- These advantages must be weighed against some disadvantages. First, because a sole
proprietorship can have only one owner, it is impossible to bring in others to the business. In
addition, the business and the owner are identical so it is impossible to pass on the business.
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01
06
-Raising working capital can be a problem for sole proprietors, especially those early in
their business ventures. Many entrepreneurial ventures are built on great ideas but need
capital to flourish and develop. If the entrepreneur lacks individual wealth, then he or she
must seek those funds from other sources. Outsiders can make a loan to the owner, or enter
into a profitsharing contract with her, but there is no way for him to own any part of the
owner’s business. Traditionally, most sole proprietors seek funding from banks. Banks
approach these loans just like any other personal loan to an individual, such as a car loan or
mortgage. Down payment requirements may be high, and typically the banks require some
form of personal collateral to guarantee the loan, even though the loan is to be used to grow
the business.
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01
06
-Sole proprietors are personally liable for all the business’s debts and obligations.
Unlimited liability puts all the personal assets of the sole proprietor at risk. Personal
homes, automobiles, bank accounts and retirement accounts—all are within reach of
creditors.
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Chapter 3- Partnerships:
01
06
-A partnership is an unincorporated association of two or more co-owners who operate

a business for profit. Each owner is called a general partner.
1- General Partnerships:
- A general partnership is when all partners participate fully in running the business and share
equally in profits and losses, even if the partners’ monetary contributions vary. No legal
documents are required to file with the government to form a partnership. If two or more
people do business together, sharing management of the business, profits and losses, they
have a partnership.
- If a partnership is formed formally, then the written agreement is called the articles of
partnership. The articles can set forth anything the partners wish to include about how the
partnership will be run. Normally, all general partners have an equal voice in management,
but as a creation of contract, the partners can modify this if they wish.
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01
06
-A general partnership is taxed just like a sole proprietorship. A partnership is a flow-

through tax entity, where the partnership’s income “flows through” the business to the
partners, who then pay individual tax on the business income. The partnership may file an
information return, reporting total income and losses for the partnership, and how those
profits and losses are allocated among the general partners. However, an information return is
usually not required.
-General partnerships are also similar to sole proprietorships in unlimited liability.
Every partner in the partnership is jointly and severally liable for the partnership’s debts and
obligations. This is a very unattractive feature of general partnerships. One partner may be
completely innocent of any wrongdoing and still be liable for another partner’s malpractice
or bad acts.
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01
06
2-Management Duties:
-Partners have a fiduciary duty to the partnership. This means that partners have a
duty to act for the benefit of the partnership. In particular:
• Partners have an obligation of good faith and fair dealing with each other and the
partnership.
• Partners are liable to the partnership for gross negligence or intentional misconduct.
Partners are not liable for ordinary negligence.
• Partners cannot compete with the partnership.
• Partners cannot take opportunities away from the partnership unless the other partners
consent.
• Partners cannot engage in conflicts of interest.
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01
06
3-Limited Partnerships:
- In most states, owners can form a limited partnership. A limited partnership has both
general partners and limited partners. As a limited partner, the most he or she can lose is the
amount of his investment into the business, nothing more. Limited partnerships have to be
formed in compliance with state law, and limited partners are generally prohibited from
participating in day-to-day management of the business. This often occurs when someone
invests money in the partnership but is not interested in running the business.
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Chapter 4- Franchises:
01
06
- A franchise is when a business grants to another the sole right of engaging in a certain
business or in a business using a particular trademark in a certain area. Franchises are not a
separate form of business organization. Rather, they are a form of contract between
businesses. Most franchises involve corporations or limited liability corporations, but they
may include sole proprietorships and partnerships..
- The advantage of a franchise is that under a franchise agreement, an entrepreneur can open
and run a business under a proven business model. The local owner, the franchisee, uses the
franchisor’s trademark, intellectual property, and business model under a license agreement.
The franchisee offers goods or services to the public and keeps any income earned. In
exchange for the right to sell goods or services developed by the franchisor, the franchisee
pays a fee to the franchisor.
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Chapter 4- Franchises:
01
06
-Franchises are common in some industries such as fast food restaurants, hotels, and tax
preparation services. Franchise agreements are very detailed and often require the franchisee
to use specific vendors, ingredients, store layouts, colors, etc.
-Franchises are also very popular with US businesses interested in conducting business
abroad. US businesses collect franchise fees from owners in other nations who are
responsible for running the business abroad. This allows US companies to have a presence in
nations that may restrict business ownership by foreigners because the businesses themselves
are owned and operated by locals.
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Chapter
06 5- Joint Venture:
-A joint venture is when two or more individuals or businesses combine their efforts in a
particular business enterprise and agree to share the profits and losses jointly or in proportion
to their contributions. Unlike a partnership, which operates as a general business for as long as
the partners desire, a joint venture is for a single transaction or a limited activity. The
businesses remain separate entities and they do not share financial or confidential information
unless they decide to. Joint ventures automatically terminate at the conclusion of an event or
project.
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Chapter
06 5- Joint Venture:
-Joint ventures are often formed to address a common need or to reach a mutual goal. For
example, Google and National Aeronautics and Space Administration (NASA) developed
Google Earth as a joint venture. To do so, they shared resources and information necessary to
develop Google Earth but Google did not become part of the government, nor did NASA share
any confidential information or intellectual property more than necessary.
- Joint ventures are also common to share the costs of major research or infrastructure projects
within an industry. This occurs frequently when industries are impacted by advances in
technology. For example, BMW and Toyota created a joint venture to research hydrogen fuel
cells, electric vehicles, and ultra-lightweight materials needed in next generation vehicles. By
sharing the cost of research and development, the companies are able to be on the forefront of
technological advancements in their industry.
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Chapter
06 6-Corporations:
- Unlike a sole proprietorship or general partnership, a corporation is a legal entity separate and
distinct from its owners. It can be created for a limited duration, or it can have a perpetual
existence. Since it is a separate legal entity, a corporation has continuity regardless of its
owners. Similarly, in a publicly traded company, the identity of shareholders can change, but
the corporation continues its business operations without being affected.
- Corporations must be formed in compliance with the law of the state law where they are
incorporated. Most corporations incorporate where their principal place of business is located,
but not all do. Many companies choose to incorporate in Delaware.
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Chapter
06 6-Corporations:
- Delaware chancery courts have developed a reputation for fairly and quickly applying a very
well-developed body of corporate law in Delaware. The courts also operate without a jury,
meaning that disputes heard in Delaware courts are usually predictable and transparent, with
well-written opinions explaining how the judges decided the cases.
- To start a corporation, the corporate founders must file articles of incorporation with
the Secretary of State where they are incorporated. Articles of incorporation typically
include:
- The name of the company; -Whether the company is for-profit or nonprofit;
-The founders’ names; - The company’s purpose;
- How many shares the corporation will issue initially; and - The par value of any shares
issued.
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Chapter
06 6-Corporations:
- Unlike sole proprietorships, corporations can be quite complicated to manage and often
require attorneys and accountants to maintain corporate books in good order. In addition to the
foundation requirements, corporate law requires ongoing annual maintenance of corporations.
In addition to filing fees due at the time of incorporation, there are typically annual license
fees, franchise fees and taxes, and fees related to maintaining minute books, corporate seals,
stock certificates and registries, as well as out-of-state registration. A domestic corporation is
entitled to operate in its state of incorporation but must register as a foreign corporation to do
business in other states.
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Chapter
06 6-Corporations:
1-Corporate Legal Structure:

-Owners of corporations are called shareholders. Corporations can have as few as one
shareholder or as many as millions of shareholders, and those shareholders can hold as few as
one share or as many as millions of shares. In a closely held corporation, the number of
shareholders tends to be small, while in a publicly traded corporation, the body of shareholders
tends to be large.
-In a publicly traded corporation, the value of a share is determined by the laws of supply and
demand, with various markets or exchanges providing trading space for buyers and sellers of
certain shares to be traded. Shareholders own shares in the company but have no legal right to
the company’s assets. As a separate legal entity, the corporation owns any property in its name.
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Chapter
06 6-Corporations:

-Shareholders of a corporation enjoy limited liability. The most they can lose is the amount of
their investment. Shareholders’ personal assets are not available to the corporation’s creditors.
- Shareholders can be individuals or other business entities, such as partnerships or
corporations. If one corporation owns all the stock of another corporation, the owner is said to
be a parent company, while the company being owned is a wholly owned subsidiary. Often
large corporations form subsidiaries for specific purposes so that the parent company has
limited liability or advantageous tax treatment.
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Chapter
06 6-Corporations:

-For example, large companies may form subsidiaries to hold real property so that premises
liability is limited to that real estate subsidiary only, shielding the parent company and its assets
from lawsuits. Companies that deal in a lot of intellectual property may form subsidiaries to
hold their intellectual property, which is then licensed back to the parent company so that the
parent company can deduct royalty payments for those licenses from its taxes. This type of
sophisticated liability and tax planning makes the corporate form very attractive for larger
businesses in the United States.
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Chapter
06 6-Corporations:
2-Rights of Shareholders:
-Not all shareholders in a corporation are necessarily equal. US corporate law allows for
the creation of different types, or classes, of shareholders. Shareholders in different classes may
be given preferential treatment when it comes to corporate actions such as paying dividends or
voting at shareholder meetings.
-Shareholder rights are generally outlined in a company’s articles of incorporation or
bylaws. Some of these rights may include the right to obtain a dividend, but only if the board
of directors approves one. They also include the right to attend shareholder meetings, the right
to examine the company’s financial records, and the right to a portion of liquidated company
assets.
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Chapter
06 6-Corporations:
-Under most state laws, shareholders are also given a unique right to sue a third party on behalf
of the corporation. This is called a shareholder derivative lawsuit. In essence, a shareholder
alleges that the people who are ordinarily charged with acting in the corporation’s best interests
(the officers and directors) are failing to do so, and therefore the shareholder must step in to
protect the corporation.
-One of the most important functions for shareholders is to elect the board of directors of a
corporation. Only shareholders elect a director. The board is responsible for making major
decisions that affect a corporation, such as declaring and paying a corporate dividend to
shareholders; authorizing major decisions; appointing and removing corporate officers;
determining employee compensation, especially bonus and incentive plans; and issuing new
shares and corporate bonds.
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Chapter
06 6-Corporations:
-One critical function for boards of directors is to appoint corporate officers. These officers
often hold titles such as chief executive officer, chief operating officer, chief marketing officer,
and so on. Officers are involved in everyday decision making for the company and implement
the board’s decisions. As officers of the company, they have legal authority to sign contracts on
behalf of the corporation, binding the corporation to legal obligations. Officers are employees
of the company and work full-time for the company, but can be removed by the board.
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Chapter
06 6-Corporations:
3-Corporate Taxation:
-Corporations are subject to double taxation. Because corporations are separate legal
entities, they must pay federal, state, and local tax on net income. Then, if the board of
directors declares a dividend, shareholders are taxed on the dividend that they receive in
the form of a dividend tax.
-One way for closely held corporations (such as small family-run businesses) to avoid
double taxation is to form an S corporation. An S corporation (the name comes from the
applicable subsection of the tax law) can choose to be taxed like a partnership or sole
proprietorship. In other words, taxes are only collected when a dividend is declared and not on
corporate net income. An S corporation is formed and treated just like any other corporation;
the only difference is in tax treatment.
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Chapter
06 6-Corporations:
3-Corporate Taxation:
-S corporations provide the limited liability feature of corporations but the single-level taxation
benefits of sole proprietorships.There are some important restrictions on S corporations,
however. They cannot have more than one hundred shareholders, all of whom must be US
citizens or resident aliens and cannot include partnerships and corporations. S corporations can
have only one class of stock and there are restrictions on how shares may be transferred.
Finally, all shareholders must agree that the company should be an S corporation. These
restrictions ensure that “S” tax treatment is reserved only for small businesses.
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Chapter
06 7-Limited Liability Entities:
-A limited liability company (LLC) is a “hybrid” form of business organization that offer the
limited liability feature of corporations but the tax benefits of partnerships. Owners of LLCs are
called members. Just like a sole proprietorship, it is possible to create an LLC with only one
member. LLC members can be individuals or other LLCs, corporations, or partnerships. LLC
members can participate in day-to-day management of the business.
-Members are not personally liable for the debts of the business. Like shareholders of a
corporation, members of an LLC risk only their financial investment in the company.
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Chapter
-Taxation of LLCs is very flexible. Every year the LLC can choose how it will be taxed. It
may want to be taxed as a corporation, for example, and pay corporate income tax on net
income. Or it may choose instead to have income “flow through” the corporate form to the
member-shareholders, who then pay personal income tax just as in a partnership. Sophisticated
tax planning becomes possible with LLCs because tax treatment can vary by year.
1-Limited Liability Partnerships:
A related entity to the LLC is the limited liability partnership, or LLP. Be careful not to confuse
limited liability partnerships with limited partnerships. LLPs are just like LLCs but are designed
for professionals who do business as partners. They allow the partnership to pass through
income for tax purposes, but retain limited liability for all partners. LLPs are especially popular
with doctors, architects, accountants, and lawyers.
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Chapter
- Most of the major accounting firms have now converted their corporate forms into
LLPs.
2-Professional Corporations:
-Professional Corporations (PCs) are mostly a legacy form of organization. In other words,
before LLCs and LLPs were an option, PCs were the only option available to professionals
who wanted limited liability. Some states still require doctors, lawyers, and accountants to
organize as a PC. If a member of a PC commits malpractice, the PC’s assets are at risk along
with the personal assets of the member who committed malpractice. However, the personal
assets of the non-involved members are not at risk. PCs do not shield individuals from their
own malpractice but they offer limited liability to innocent members.
PCs are a separate taxable entity but they are not flow-through entities like partnerships. As a
result, taxation of PCs is complicated and a major drawback of this form of business entity.
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Chapter
- Depending on a business’s type and goals, different business entities may fit the needs of
owners better than others. It is important when starting a business to decide how to minimize
tax and liability exposure and to maximize profits. Because there is no perfect “fit” for every
business need, understanding the advantages and disadvantages of the various business entities
is important.
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Thank You
Business law
MGM412
Lecture 7
Business law
Lecture 7
MGM412
Prepared by
Chapter
07 Chapter 7 :Workplace Privacy
and Information Security:
1- Introduction.
2- Right to Privacy.
3- Workplace Privacy.
4- Information Security Issues.
5- Concluding Thoughts.
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Chapter
07
1- Introduction:
- Privacy is a fundamental right of individuals that is often compromised by government and

businesses. Sometimes individuals and businesses voluntarily give up their privacy rights,
without considering the consequences of doing so. Workplace privacy and information security
is a fast growing area of the law that has important implications across industries.
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Chapter 2- Right to Privacy:
07
01
-Privacy is the right of a person or person’s property to be free from unwarranted
public scrutiny or exposure. In other words, it is the right to personal autonomy and to
express oneself selectively. Privacy includes both bodily integrity and the protection of
confidential information, including medical and financial records.
1-Implied Constitutional Right:
Privacy is an implied Constitutional right, meaning it is a right based on the “zones of
privacy” created by the US Constitution. However, the word “privacy” is not in the
Constitution itself.
The right to privacy was first mentioned in a Harvard Law Review article in 1890 by Samuel
Warren and Louis Brandeis, who later served on the US Supreme Court from 1916 until
1939. Warren and Brandeis argued the right to privacy is an important civil liberty which
should not be violated by sensational journalists and developments in technology.
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07
01
-The technology in the late 1890s they were the most concerned with was photography
and telephones. In particular, they were concerned about people losing their right to privacy
when others take photographs of them or listen to their conversations.
- Privacy was discussed in the legal community for 75 years before the US Supreme Court
expressly held individuals have a Constitutional right to privacy in the 1965 Griswold v.
Connecticut decision.
- Privacy cases involve different circumstances, such as the right to choose whether to
marry and to whom, the right to choose whether to have children, and the right to protect
confidential information such as medical and financial records.
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07
01
-The Framers of the Constitution did not include the word “privacy” in the
Constitution but it is a fundamental right underlying the core tenets of the document.
The Bill of Rights begins by recognizing fundamental rights that are essential to an
individual’s identity: speech, religion, press, assembly, and petition for redress from the
government. From there, the Bill of Rights expands protection of individuals to include their
homes and possessions. For example, the Fourth Amendment prohibits unreasonable searches
and seizures by the government. As reflected in the Bill of Rights, privacy is an essential
right the Constitution intends to protect.
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07
01
-When analyzing privacy cases, courts ask whether an individual has a reasonable
expectation of privacy. To establish a “reasonable expectation of privacy,” a person
must meet two requirements:
1. The individual has an actual, subjective expectation of privacy. In other words, did that
particular person think he or she was doing something in private that others could not
observe?
2. Society accepts the individual’s expectation of privacy as reasonable. In other words, as a
community do we expect those circumstances to be private?
- This legal test has both a subjective and objective standard. If an individual does not
expect their actions to be private, then no right to privacy exists under the circumstances.
Similarly, if society as a whole does not expect to have privacy under the circumstances, it
does not matter what the individual may personally believe, no right of privacy exists.
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07
01
-For example, if a person calls her doctor to discuss medical test results, then she has a
subjective expectation of privacy. If she calls her doctor from her home, then she has an
objective expectation of privacy because society recognizes the right of people to have
private conversations in their own homes. However, if she has the conversation on her cell
phone while riding the bus, then she does not have a right to privacy because it is not
objectively reasonable to expect privacy on public transportation.
2- Statutes:
- Congress and state legislatures have also passed various laws to protect the privacy of
individuals and their property. Some of the most important federal laws related to workplace
privacy are discussed below.
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07
01
2- Statutes:
- There is a growing trend among states to require internet service providers to obtain consent
from consumers before sharing any of their personal information, including websites visited
and consumer habits.
-Businesses engaged in e-commerce with residents of California must post their privacy
policy conspicuously on their websites and abide by their policies. California law also
requires disclosure of consumer software tracking policies.
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07
01
3- International Law:
- The right to privacy is contained in Article 12 of the Universal Declaration of Human
Rights, which was adopted in 1948 in response to the horrors of World War II. The Universal
Declaration of Human Rights states:
- No one shall be subjected to arbitrary interference with his privacy, family, home or
correspondence, nor to attacks upon his honor and reputation.
The Universal Declaration of Human Rights has been adopted by the majority of nations,
including the United States.
- Many other bilateral treaties and conventions recognize the right to privacy in various
circumstances. Currently, about 150 nations recognize privacy as part of their international
legal obligations. However, enforcement of the right to privacy is inconsistent across nations.
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Chapter
07 3- Workplace Privacy:
- Employees generally do not have a reasonable expectation of privacy in the workplace,

especially when using company equipment or when the employer has a policy stating
employees may be monitored. However, some areas such as employee restrooms and locker
rooms may not be monitored. Courts have held employees do not give up all expectations of
privacy by the nature of their employment. Therefore, employers should ensure that they limit
monitoring activities to reasonable places where the employer has a legitimate business interest
for doing so.
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Chapter
1- Hiring Process:
-Employers often run background checks on prospective employees as part of their hiring
process. Depending on what type of background check is done and the information used, a
range of privacy issues are involved. Some states regulate the type of documents that a
prospective employer may consider when making hiring decisions. Businesses need to ensure
they comply with all state laws where they hire employees.
- The use of artificial intelligence (AI) is a growing trend in recruiting and hiring. AI is often
used to review resumes, applications, and publicly available social media. AI-powered video-
interview platforms apply algorithms to video-recorded interviews to facilitate an employer’s
assessment of applicants.
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Chapter
2- Drug and Alcohol Testing:

- Employers with drug and alcohol testing policies are highly regulated by the states where they
operate. State requirements vary about required notice of testing, the nature and location of
testing, and when testing may occur. All states protect employee privacy regarding who
receives the test result and how those results are to be collected, stored, and destroyed.
Employers who engage in drug and alcohol testing need to be informed about the legal
consequences of enforcing their policies.
-Employees frequently challenge drug and alcohol testing as a violation of their right to
privacy. Employers generally win these lawsuits when:
• The employer complies with all state requirements for drug and alcohol testing;
• Conducts the test with the employee’s consent;
• Conducts the test in a manner that was not offensive;
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Chapter
• The test results do not reveal information unrelated to the purpose of the test.
- Employers must be careful to limit disclosure of test results to only those with a need to
know. Businesses may lawfully conduct a drug or alcohol test but still be liable for privacy
violations based on how they handled the results.
2- Health Insurance Portability and Accountability Act:
The Health Insurance Portability and Accountability Act of 1996 (HIPAA) seeks to protect
confidential health information and mandates standards for handling such information. HIPAA
has a Privacy Rule regulating the use and disclosure of individually identifiable health
information. The Privacy Rule protects Protected Health Information (PHI) , which includes all
information related to the past, present or future health status of an identified individual, of
treatment received, or of payment for treatment. PHI also includes billing records, information
about premium payments, and enrollment information.
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Chapter
2- Health Insurance Portability and Accountability Act:

-As a result, PHI includes medical information required by employers to carry out their
obligations under the Americans with Disabilities Act, the Family Medical Leave Act, workers’
compensation, drug testing, and employer-sponsored health care plans.
- HIPAA also has a Security Rule to ensure the confidentiality, integrity and availability
of electronic PHI. Under the Security Rule:
• Confidentiality means PHI is not made available or disclosed to unauthorized individuals or
processes;
• Integrity means PHI is not altered or destroyed in an unauthorized manner;
• Availability means PHI is accessible and usable upon demand by an authorized individual.
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Chapter
3- Electronic Monitoring:
- Federal law and most state laws allow employers to monitor their employees’ electronic
communications occurring over the employer’s hardware, software, and servers. If the
employer provides the computer system, the employer has the right to monitor electronic
communications on the system, even if those communications are not work related.
- Employers may also monitor communications when employees consent to the monitoring.
Therefore, many employers require employees to sign a waiver consenting to private
communications sent via the employer’s equipment to be monitored. This helps defend against
invasion of privacy claims better than having a policy in the employee handbook alone.
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Chapter
3- Electronic Monitoring:
-Businesses may also monitor conversations with customers in the ordinary course of business
as long as they give notice. As a result, many customer service lines use a recorded message
that “this call may be monitored for training purposes” before customers are connected to a
customer service agent.
- The most important federal law regarding monitoring of electronic communications is the
Electronic Communications Privacy Act (ECPA), which was passed by Congress in 1986.
ECPA has two parts. The first part is known as the Wiretap Act and the second as the Stored
Communications Act. ECPA prohibits the acquisition of the content of a wire, oral or electronic
communication using an electronic, mechanical or other device. ECPA also prohibits the use or
disclosure of an unlawfully intercepted communication.
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Chapter
4- Workplace Recordings:
-Although recordings may be useful to capture the content of a conversation, recordings pose
legal and business risks to employers. Both employers and employees may violate federal and
state wiretapping laws by recording conversations without consent of the other parties. Even
with consent, businesses that engage in recording employees and customers damage employee
morale and risk losing customers.
- Twelve states prohibit recording a conversation unless all parties consent. The majority of
states allow customers and employees to hold a business liable for wiretapping violations under
the respondeat superior doctrine. As a result, businesses may be liable for their employees’
unlawful recordings if done in the course and scope of employment or done to help the
business.
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Chapter
-State and federal wiretapping laws carry both civil and criminal penalties. Many state laws
provide for treble damages or a statutory damage amount. Federal wiretapping laws impose
fines up to one hundred dollars per day or ten thousand dollars, whichever is greater.
5- Social Media:
-An employer’s right to monitor electronic communications generally does not include social
media. As a result, employers are not entitled to monitor social media accounts through
coercion or deceit. For example, an employer cannot require employees to provide passwords
to their social media accounts. Employers also cannot log onto the social media accounts of
others (including employees) and pose as them to see private accounts.
- However, if social media accounts are public, then employers are entitled to review them to
the same extent as other members of the public.
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Chapter
6-Videotaping and Surveillance Cameras:

- ECPA only protects electronic communications. As a result, ECPA does not apply to video or camera
surveillance without an audio component. To avoid violating ECPA, businesses should ensure their
security and surveillance cameras do not capture human voices.
-Security cameras cannot be used in areas in which employees and customers have a reasonable
expectation of privacy. For example, retailers cannot use cameras in changing rooms, restrooms, and
locker rooms. Businesses need to place cameras so that private activity cannot, and is not, monitored
and recorded.
-Businesses engaged in surveillance must use the most limited means available to conduct the
surveillance. Companies should have a legitimate business reason to use security cameras, and they
need to ensure the surveillance is targeted and limited in duration and scope.
- Retailers who use cameras to prevent theft at entryways and cash registers should place cameras in
positions that are open and obvious to act as notice to customers. Signs giving express notice are also a
best practice to avoid legal liability.
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Chapter
07 4-Information Security Issues:
-Information security is one of the fastest growing areas of the law affecting businesses today.
Any business that collects, uses, and stores personal information about employees and
customers is subject to these laws. Businesses are also increasingly targeted by hackers who
seek to steal private information on a large scale.
1- Security Analysis:
- A simple but widely-used security model is the CIA Principle or CIA Security Rule, which
stands for Confidentiality, Integrity and Availability. The principle is applicable across points of
contact from access to a user’s internet history to security of encrypted
data across the Internet.
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Chapter
1- Security Analysis:
- Confidentiality is the ability to hide information from those without authorization to view it.
While perhaps the most obvious principle, it is usually the one that is attacked most often.
Cryptography and Encryption are methods used to protect confidentiality of data transferred
across the Internet.
- Integrity is the ability to ensure that data is an accurate and unchanged representation of the
original information. One common security attack is to intercept some important data and make
changes to it before sending it on to the intended receiver.
- Availability is the ability to make information readily accessible to authorized users at all
times. Some security attacks attempt to deny access.
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Chapter
2- Data Breaches:
- According to the Pew Research Center, almost eighty-five percent of individuals in the US
shop online. And most retailers collect customer’s personal and financial data. If a customer
uses a form of payment other than cash, then the customer’s personal and financial information
will be shared with the business.
Rather than pickpocket an individual consumer, thieves today are targeting businesses to collect
personal and financial information of entire consumer sets. Data breaches affect all industries,
such as retail, credit bureaus, hospitals, and government agencies. In the first half of 2019, there
were over 4.1 billion compromised documents reported as part of only 3,800 disclosed data
breaches.
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Chapter
2- Data Breaches:
- Cybersecurity experts advise that cyber criminals run automated online scripts looking for
unsecured databases. While some larger businesses are particularly targeted, cyber criminals are
the most successful when targeting small to medium-sized businesses that
are unaware of the threat or do not want to spend adequate resources on cybersecurity.
Businesses should be aware, though, that approximately sixty percent of data breaches are the
result of human error rather than outdated or insufficient technology. Therefore, by adequately
training employees, many data breaches may be avoided. For example, breaches often result
from sending emails to the wrong person, responding to phishing attacks, sharing passwords,
and leaving computer screens open.
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Chapter
3-Big Data:
- In addition to financial data, businesses collect personal information about consumers and
their habits. This is called big data. Consumer information is very valuable because businesses
can search the data to identify spending habits to target marketing to likely customers. This
reduces costs and increases profit for businesses, especially as e-commerce increases the
number of competitors across industries.
- Another benefit to mining the data available about consumers is businesses can make more
profitable decisions. For example, health insurance companies are heavily invested in big data
because they want information about the lifestyle habits of the people they insure and
potentially insure.
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Chapter
3-Big Data:
- If they know someone is a smoker, eats a lot of sugary foods, or has a sedentary lifestyle, then
they can adjust premiums accordingly to minimize their risk. Insurance companies look for
trends not just for individuals but also regions, types of occupations (including those with the
highest risk of addiction or obesity), and socio-economic status.
- Big data is also connected to the Internet of Things. The Internet of Things (IoT) is a system
of interrelated computing devices, mechanical and digital machines, objects, animals or people
that are provided with unique identifiers and the ability to transfer data over a network without
requiring human-to-human or human-to-computer interaction. In other words, the IoT includes
everyday devices connected to the internet, including medical devices, appliances, vehicles, and
buildings.
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Chapter
4-Transborder Data Transfers:

- As discussed previously, the EU has a comprehensive set of privacy laws and regulations. The
EU has strict limits on the export of all human resources data and consumer information to the
US, even when the data export occurs within the same business. To help US businesses comply
with the EU laws, the US Department of Commerce negotiated a “safe harbor” of data
protection practices that the EU approved. If a US business can certify its compliance with the
Safe Harbor Principles, then the EU will approve data transfers to that business.
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Chapter
5-Security Incident Preparation and Response:

-Businesses are not able to prevent all data security breaches. However, businesses need to take
steps to protect against known and reasonably anticipated threats to confidential information.
For businesses without sufficient in-house cybersecurity staff or expertise, Managed Security
Service Providers (MSSPs) offer a wide range of security services, including setting up security
infrastructure and incident response.
-Although federal and state laws vary regarding legal requirements, a business should have a
written cybersecurity program that conforms to their industry’s recognized cybersecurity
framework.
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Chapter
5-Security Incident Preparation and Response:

-In general, a cybersecurity program should:
• Protect the security and confidentiality of all electronically stored records containing an
employee or customer’s social security number, driver’s license number, state identification
card number, credit and debit card information, dates of birth, passwords, and personal
information;
• Protect against any anticipated threats or hazards to the security or integrity of the
confidential information;
• Provide for reliable and accurate backups of data; and
• Protect against unauthorized access to and acquisition of information likely to result in an
employee or customer being exposed to a material risk of identity theft or fraud.
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Chapter
- The internet and technology are changing the world at an incredibly fast pace. With those
changes come the challenges to individuals and businesses to maintain privacy and protect
personal information. Privacy is an implied Constitutional right deeply impacted by the use of
technology. Regardless of type of industry, businesses need to have adequate cybersecurity
policies and practices in place to protect confidential business, employee, and customers
information.
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Thank You
Business law
MGM412
Lecture 8
Business law
Lecture 8
MGM412
Prepared by
Chapter
08 Chapter 8 :Employment law:

1- The contract of employment.
2- Statutory rights of the employee.
3- ACAS grievance procedure.
4- Unfair and wrongful dismissal.
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Chapter
08
1-The contract of employment:
1- Written statement of employment particulars:

-Section 1 of the Employment Rights Act 1996 (ERA 1996) requires an employer to provide all
employees with a written statement of employment particulars. The statement, which has to be
provided within two months of the employment beginning, must contain the following
particulars:
(i) The names of the employer and the employee.
(ii) The date on which the employment began.
(iii) The date on which the employee’s period of continuous employment began, taking
into account whether any previous employment is to count as continuous employment.
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Chapter 1-The contract of employment:
08
01
(iv) The scale or rate of pay and the method of calculation.
(v) The intervals at which payment is made (weekly, monthly, etc.).
(vi) Any terms and conditions relating to hours of work.
(vii) Any terms and conditions relating to holiday entitlement, sick pay or pensions.
(viii) The length of notice which either party needs to give to end the employment.
(ix) The job title of the employee, or a brief description of his duties.
x) Where the employment is not intended to be permanent, the period for which it is
expected to continue or, of it is for a fixed term, the date on which the term is to end.
(xi) The place of work.
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01

xii) Any trade union agreements which directly affect the terms and conditions of the
employment.
(xiii) Where the employee is required to work outside the UK for a period of more than one
month, the period for which he is to work outside the UK, the currency in which he is
to be paid while working outside the UK and any additional salary or benefits to be
paid on account of his being required to work outside the UK.
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01
- The written particulars are very strong evidence of the terms of the contract of
employment. However, they are not the contract itself as this will already have been formed
by the time the statement is provided. An employee who has not been given the particulars
within the specified time period may complain to an employment tribunal. The tribunal will
make a minimum award of two weeks’ pay and a maximum award of four weeks’ pay and
order that particulars are given. For these purposes, the week’s pay is capped at the limit of
£380 which applies when calculating a redundancy payment.
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2-Itemised pay statements:
Section 8(1) ERA 1996 requires employers to provide a written itemised pay statement
when wages or salary are paid. Section 8(2) provides that this statement must contain
particulars of:
(i) the gross amount of the wages or salary;
(ii) the amount of any deductions from the gross amount and the purposes for which they
are made;
(iii) the net amount of wages or salary payable; and
(iv) where different parts of the net amount are paid in different ways, the amount and
method of payment of each part-payment.
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01
3-Implied obligations of the parties:
Certain terms are implied into contracts of employment. Some of these impose
obligations on the employee and some impose obligations on the employer:
1-Obligations imposed on the employee:
The obligations imposed on the employee are as follows:
(i) To show mutual respect to the employer.
(ii) To faithfully serve the employer.
(iii) To obey lawful and reasonable orders.
(iv) To use reasonable care and skill.
(v) Not to accept bribes.
(vi) Not to reveal confidential information.
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01
1-Obligations imposed on the employee:
-However, as regards the duty not to disclose confidential information, the Public Interest
Disclosure Act 1998 protects ‘whistleblower’ employees who disclose certain information,
such as that a crime is being committed or health and safety procedures ignored. Such
whistleblower employees must not suffer a detriment because of what they have done, and
any dismissal in consequence of what they have done will be automatically unfair.
Employees
do not have a duty to disclose their own shortcomings. However, some employees,
particularly those who are responsible for others, may have a duty to disclose the
shortcomings of others.
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01
2-Implied obligations of the employer:
-The implied obligations of the employer are as follows:
(i) To show mutual respect to the employee.
(ii) To provide work, or pay the employee if there is no work.
(iii) To pay wages.
(iv) Not to reveal confidential information.
(v) To indemnify employees for expenses and costs reasonably incurred.
(vi) To insure the employee.
(vii) To take reasonable care and skill in preparing a reference. (However, an employer has
no duty to provide a reference.)
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01
2-Implied obligations of the employer:
-It is possible that terms can be implied into a contract of employment by custom and
practice, as long as the terms in question are well known, certain and reasonable. Works rule
books are sometimes agreed by the parties to be included as terms of the contract of
employment. In other cases, the rules in the workbook are imposed by the employer. If this is
the case, then failure to obey the rules may be a breach of the duty to obey instructions.
4- Variation of the terms of the contract:
We saw that one party cannot unilaterally alter the terms of a contract but that both parties
must agree to the alteration. If an employer unilaterally imposes a significant change in an
employee’s terms and conditions then this will amount to a repudiation of the contract and
the employee can either accept the variation or not. An employee who does not accept the
variation can regard the contract as terminated and himself as dismissed.
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4- Variation of the terms of the contract:

-(In technical terms, the employee accepts that the employer’s repudiation has ended the
contract.). However, the employee might accept the variation. If so, the old contract will
have been discharged and the new one substituted. If an employee refuses to accept the new
terms but continues working under protest then, for a short time at least, the employee can
still leave and claim to have been dismissed. An employee who continues to work without
protesting will generally be taken to have accepted the unilateral change.
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Chapter
08 2- Statutory rights of the employee:
1-Maternity rights:
-Unless the contract terms give a more generous entitlement, all female employees have a
statutory right to 52 weeks’ ordinary maternity leave. This right, which is set out in the
Maternity and Parental Leave Regulations 1999, applies no matter how long the employee has
worked for the employer.
A female employee will qualify for statutory maternity pay if she meets three conditions:
(i) She must have 26 weeks’ continuous employment at a point 14 weeks before the
expected week of childbirth.
(ii) She must have stopped work due to the pregnancy.
(iii) Her weekly earnings must not be so low that no national insurance contributions have
to be paid.
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Chapter
2-Paternity leave and pay:

-Part II of the Paternity and Adoption Leave Regulations 2002 gives rights to paternity leave
and paternity pay. In order to qualify for paternity leave, the employee must satisfy three
conditions:
(i) The employee must have responsibility for the new child’s upbringing or expect to have
this responsibility.
(ii) He must either be the biological father of the child or he must be the husband or partner of
the child’s mother.
(iii) He must have at least 26 weeks’ continuous employment 15 weeks before the baby is
due to be born.
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Chapter
3-Adoption leave and pay:

-When a couple adopt a child, Part III of the Paternity and Adoption Leave Regulations 2002
entitles one member of the couple to time off work with statutory adoption pay. In addition,
the other member of the couple, or a partner of an individual who adopts, may be entitled to
paternity leave and pay.
-In order to claim adoption leave, the employee must have worked continuously for the
employer for 26 weeks and be newly matched with a child by an adoption agency. Such
employees are entitled to 26 weeks’ ordinary adoption leave, during which they are entitled to
statutory adoption pay, and an additional 26 weeks’ adoption leave. The leave can start either
on the date of the child’s placement or 14 days before the expected date of the placement.
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Chapter
4-Parental leave and time off for dependants:

-An employee with at least one year’s continuous employment is entitled to take up to13
weeks’ parental leave, in respect of each child, to look after his or her child or to make
arrangements for the child’s welfare. In the case of disabled children, 18 weeks’ leave per child
can be taken. In the case of twins, both parents can have 13 weeks’ leave for each child.
The leave must be taken before the child’s fifth birthday and can be taken in either long blocks
or short blocks.
5- Flexible working for parents and carers:
Section 80F of the Employment Rights Act 1996 has introduced a right for parents with
children under 16 years old to apply for flexible working. In the case of disabled children the
age limit is 18. The right is also available if the employee needs to look after a spouse, civil
partner, relative or person with whom the employee shares an address.
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Chapter
5- Flexible working for parents and carers:

-Employers have a statutory duty to consider these applications seriously but there is no
automatic right to work flexibly. However, an employer should refuse an application only if
there are good business reasons for doing so.
- Only employees with at least 26 weeks’ continuous employment can apply. They must either
be the child’s mother, father, adopter, guardian or foster parent or be married to such a person.
They must be making the application so that they can care for a child for whom they have, or
expect to have, responsibility for bringing up. Only one application can be made every 12
months and agency workers cannot apply.
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Chapter
6-Transfer of employees:
-The Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE)
provide that when a business is transferred from one employer to another as a going concern
the contracts of employment of all the employees are also transferred. These contracts then take
effect as if made between the individual employees and the new employer.
-If an employee refuses to accept the transfer, this ends the employment without a
dismissal having taken place. (So the employee will have no remedy.) However, an employee
can claim unfair dismissal if his refusal to be transferred was because the transfer would result
in significant and detrimental change. Any dismissal made because of the transfer is
automatically unfair unless it is made on account of the employee refusing to accept the
transfer.
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Chapter
08 3-ACAS grievance procedure:
-When an employee raises a concern, problem or complaint with his employer, the ACAS Code
of Practice should be followed. The Code advises that employers and employees should try to
resolve disciplinary and grievance matters informally in the workplace, and should consider
using independent third parties to help if necessary. However, where this is not possible the
Code sets out procedures which aim to ensure fairness and a standard of reasonable behaviour.
First, the employee should formally raise the grievance with the employer, via a manager who
is not the subject of the grievance. This should be done in writing and without unnecessary
delay.
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Chapter
-Second, the employer should hold a formal meeting with the employee, without unreasonable
delay, to discuss the nature of the grievance. The employer and the employee should make
every effort to attend the meeting. The employee should be given a chance to explain the
grievance and how he thinks it should be resolved. The employer should consider adjourning
the meeting to conduct any necessary investigation. The employer should allow the employee to
be accompanied at the meeting by a companion, such as a fellow worker or a trade union
representative.
Third, the employer should decide on appropriate action and communicate this to the employee
in writing. The employee should also be told of the right to appeal against the
decision.
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Chapter
-Finally, the employer should allow the employee to appeal against the decision if he does not
think that the grievance has been satisfactorily resolved. Appeals must be submitted in writing
and without unreasonable delay. An appeal should be heard without unreasonable delay,
preferably by a manager who has not previously been involved. The employee has the right to
be accompanied at the appeal. The outcome of the appeal should be communicated in writing
without unreasonable delay.
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Chapter
08 4- Unfair and wrongful dismissal:
-A dismissed employee may be able to sue the employer for either unfair or wrongful dismissal.
These are quite separate matters.
-Unfair dismissal is a statutory remedy which gives the dismissed employee a right to a
fixed payment.
-An employee who sues for wrongful dismissal is simply suing for breach of contract. All
contracts of employment give the employee an entitlement to a certain amount of notice after
one month in the job. If an employee is wrongfully dismissed, without having been given this
notice, the contract will have been breached and the employee will therefore be entitled to
damages. In theory, an employer could sue an employee who left the employment without
giving the required amount of notice but in practice this hardly ever happens.
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Chapter
1-Unfair dismissal:
Who can claim?
Section 94(1) of the Employment Rights Act 1996 gives an employee who has at least one
year’s continuous employment the right not to be unfairly dismissed. Section 212(1) ERA 1996
defines the weeks which count towards continuous employment.
What is a dismissal?
There can be a claim for unfair dismissal only if the employee is dismissed. Section 95 ERA
1996 provides that an employee is dismissed if:
(i) the employer terminates the contract, with or without notice;
(ii) a fixed term contract ends and is not renewed; or
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Chapter
iii) the employee terminates the contract on the grounds of the employer’s unreasonable
conduct (this is known as constructive dismissal).
When is a dismissal unfair?
‘Unfair’ has a technical meaning here. Section 98 ERA 1996 provides that all dismissals are
unfair unless the employer can justify the dismissal on one of following six grounds:
(i)The employee’s capability or qualifications to do the job. (Dismissal for lack of qualifications
is very unusual. Dismissal for lack of capability often arises because the employee is ill.)
(ii)The employee’s conduct, inside or outside the employment. (If the conduct is outside the
employment then it must be serious enough to have a detrimental effect on the employer’s
business).
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Chapter
(iii) That the employee was made redundant. (iv) That it would be illegal to keep the employee
on in the job.
(v) Retirement in accordance with the Equality Act 2010 .
(vi) Some other substantial reason which would justify the employee’s dismissal.
The last category is necessary to prevent the list of reasons from becoming too rigid. Usually
the reason is a commercial one.
*Automatically unfair dismissals:
A dismissal is automatically unfair if it was:
(i) on the grounds of the employee trying to enforce a relevant statutory right;
(ii) on the grounds of pregnancy;
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Chapter
(iii) for being a member of a trade union;

(iv) for being on strike, if the dismissal occurred in the first eight weeks of the strike;
v) for being a union representative;
(vi) for carrying out health and safety duties;
(vii) for refusing to work on Sundays (some workers do not have this protection);
(viii) in connection with a transfer of undertakings from one employer to another.
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Chapter
2-Wrongful dismissal:
An employee is summarily dismissed when he is dismissed without notice. The employee’s
behaviour might justify such a dismissal, in which case he will have no remedy. If an employee
is summarily dismissed without a justifiable reason, however, then his contract of employment,
which will entitle him to a period of notice, will have been broken. The employee can then sue
the employer for breach of contract, and such an action is known as an action for wrongful
dismissal. Of course, it is possible that the employer may lawfully dismiss the employee
without notice. This would be the case if the employee had behaved so badly that he had
committed a repudiation of the contract. The employer could accept the repudiation and dismiss
the employee without committing a breach of contract.
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Chapter
2-Wrongful dismissal:
-It is difficult to generalise from the cases, but employees have been held to repudiate the
contract by refusing to obey lawful orders, gross misconduct, neglect or serious breach of duty.
However, it must be stressed that each of these matters will not necessarily amount to a
repudiation which justifies dismissal. In each case the employment tribunal must consider the
facts and come to a decision.
-In general, an employer can escape liability for wrongful dismissal, but not for unfair
dismissal, by giving the employee wages in lieu of notice.
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Thank You
Business law
MGM412
Lecture 9
Business law
Lecture 9
MGM412
Prepared by
Chapter
09 Chapter 9 :Credit transactions and intellectual
property rights:
1- Credit transactions.
2- Business property.
3-Trade marks.
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Chapter
09
1-Credit transactions:
-When a loan is made, one person lends money to another. The person who has taken the loan is
known as a debtor because he is in debt and must repay the debt. The person who has given the
loan has provided credit and is therefore known as a creditor. Credit is given not only when a
loan is made, but whenever the payment of a debt is agreed to be postponed.
- We have considered the essential nature of a loan but now we need to consider loans in more
detail, as well as other ways in which businesses might be granted credit.
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Chapter 1-Credit transactions:
09
01
1-Loans:
- A loan is the most fundamental form of credit. If a loan is made a creditor lends money to a
debtor so that the debtor can buy goods or services. The debtor agrees to repay the money,
with interest, over a period of time.
-The creditor is generally not connected with the transaction he is financing. A bank, for
example, may lend money to enable a business to buy new machinery. The contract between
the business and the supplier of the machinery is nothing to do with the bank. The bank
merely lends the money.
-Creditors are, however, likely to want security for the money they lend. In this context,
security means something given, or promised, to ensure that the debt is repaid.
If the debtor is a company or an LLP, the creditor will probably register a charge over the
company’s assets.
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09
01
1-Loans:
-Essentially a charge is a mortgage over some of the company’s property. If the charge is a
floating charge (see p. 320) the company will be free to continue to use the property but if it
does not repay the debt as agreed, the bank can order the sale of the assets over which it has a
charge and take what it is owed. To preserve the rights granted, a charge holder should
register the charge with the Registrar of Companies.
- If the debtor is a partnership or a sole trader, the creditor may take a mortgage of property.
The property mortgaged does not need to be business property; it might well bethe house of
the sole trader or of one of the partners. If the loan is not repaid, the creditor will be able to
repossess the property (sell it and take the amount still owed). Where an individual or a
partnership gives goods as security for a loan, but retains possession of the goods, the
security interest must be registered under the Bills of Sale Act 1878.
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01
1-Loans:
-If the documents relating to the security interest are not attested and registered, within seven
days, the security becomes unenforceable. Registration requires a detailed inventory of the
goods given as security. For this reason individuals and partnerships cannot grant the
equivalent of a floating charge where a class of assets, both present and future, are given as
security for a loan.
- Future rights can be given as security. David Bowie famously gave future earnings from all
of his songs as security for a very large loan.
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01
2-Hire-purchase:
-Under a hire-purchase agreement a creditor hires goods for a fixed period, and has an option
to buy the goods for a token sum at the end of that period.
-A person who takes goods on hire-purchase has been given credit. The credit consists of the
difference between what the customer would have had to pay to buy the goods, and the
amount he actually paid by way of deposit.
- Usually, a third party finances the deal, although the customer might not be aware of this. If
the finance is provided by a third party, the hire-purchase agreement takes the form of a
triangular transaction as shown below.
(i) The dealer sells the goods to the finance company.
(ii) The finance company makes the hire-purchase agreement with the customer.
(iii) The dealer may be regarded as the agent of the finance company, as explained below.
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2-Hire-purchase:
-Hire-purchase presents difficulties when the goods do not match the description given to
them by the dealer. It would seem that the customer has no rights. His contract was not with
the dealer but with the finance company, which did not make the description. However, as
long as the hire-purchase agreement is a regulated agreement, s. 56 of the Consumer Credit
Act will make the dealer the agent of the finance company. This agency relates only to
misrepresentations and breach of descriptive terms made by the dealer before the hire-
purchase agreement was made. The effect of this will be that the finance company is liable
for any misrepresentation or breach of term as to description even though these were made by
the dealer.
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3-Conditional sales:
-A conditional sale is an agreement to sell under which ownership of the goods stays with
the seller until the buyer has paid the full price for the goods. The buyer usually takes
immediate possession of the goods.
-Conditional sales often involve a triangular transaction. So, in our example, the garage might
sell the car to a finance company and the finance company then make a conditional sale to
the florist.
-Where the goods are to be paid for by instalments, a conditional sale is very similar to hire-
purchase. The essential difference is that in hire-purchase the buyer does not commit himself
to completing the payments.
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4-Credit sales:
-Under a credit sale, ownership of the goods passes to the buyer immediately, and the seller
extends credit to the buyer.
-Credit sales are commonly used where the goods supplied have a low second-hand value,
there being no point in the seller retaining ownership if the goods are worth very little.
-The Sale of Goods Act applies to credit sales. The Consumer Credit Act will apply to credit
sales if the agreement is a regulated agreement.
5- Hire and rental agreements:
-A person who rents goods to another gives possession of the goods in return for regular
payments. He does not sell or agree to sell the goods. Hire is very similar, but is usually for a
shorter period. SGA 1979 does not apply to rental agreements, but SGSA 1982 does. The
Consumer Credit Act applies to both hire and rental agreements if the agreement is a
regulated agreement.
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09
01
6- Pledge:
- Goods are pledged when possession of them is given to a lender as security for a loan.
When the debtor repays the loan, he is given the goods back. If the debtor does not repay, the
creditor can eventually sell the goods and take what he is owed from the proceeds.Easily
transportable goods of high value are suitable to pledge, often to a pawnbroker.
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Chapter
09 2-Business property:
1-Legal concepts of property:

- The common law categorises all property as either real property or personal property.
Real property is made up of all freehold interests in land. Personal property is made up of all
other property, including leases of land. Although leases of land are classed as personal
property rather than as real property, the reasons for this are historical. Most businesses would
regard freehold and leasehold interests in land as much the same type of property.
-Personal property is classed as either chattels real or chattels personal. Chattels real
consist of leases of land. Chattels personal consist of all the remaining types of personal
property. Chattels personal are divided into things in possession, things in action and
intellectual property rights. Things in possession are movable things of which physical
possession can be taken, for example machines or books.
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Chapter
1-Legal concepts of property:

-Things in action are intangible rights which can be enforced only by taking legal action, for
example debts. Intellectual property rights, such as copyright or patents, are a separate class of
intangible property rights.
2-Copyright:
The law relating to copyright is governed by the Copyright, Designs and Patents Act 1988.
Section 1(1) CDPA 1988 defines copyright as a property right in either:
(a) original literary, dramatic, musical or artistic works;
(b) sound recordings, films, broadcasts or cable programmes; or
(c) the typographical arrangements of published editions.
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Chapter
-Typography is the art of planning and setting out type so that a work can be printed. Most
readers of a book would recognize that the author or publisher had copyright in the words.
-However, they might not realise that copyright also exists in the typographical arrangement of
the book, that is to say in the way in which the words appear on the page.
- Copyright protects the way in which ideas are expressed, rather than the ideas
themselves.
- In University of London Press Ltd v University Tutorial Press Ltd (1916) it was decided
that mathematics exams which drew on the stock of knowledge common to mathematicians
were literary works. The ideas were not new, but the precise way in which they were expressed
was new.
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Chapter
-It is not essential that the work must have taken a long time to complete, but very small
numbers of words will not be governed by copyright.
- A street directory has been held to be a literary work, because it presented information in
an original way. It is therefore plain that a literary work does not have to be what most people
would regard as a work of literature.
-A musical work is defined as a work consisting of music, exclusive of any words or action
intended to be sung, spoken or performed with the music. A dramatic work is not defined, but
includes a work of dance or mime as well as the more obvious example of a script for a play.
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Chapter
3-Acquiring copyright:
Section 3(2) CDPA 1988 provides that copyright does not exist in a literary, dramatic or
musical work until it is recorded, in writing or otherwise. As soon as it is recorded, it does exist
without the need for any formal application process. The recording of the work does not need
to be done by the author or with the author’s permission.
4-Authorship and ownership of copyright:
The Act defines the author of a work as the person who created it. However, where a literary,
dramatic, musical or artistic work, or a film, is made by an employee in the course of his
employment, the employer is the first owner of any copyright in the work subject to any
agreement to the contrary.
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Chapter
5-Duration of copyright:
-Copyright exists for different lengths of time, depending upon the type of work concerned.
As regards the copyright in literary, dramatic, musical or artistic works, the copyright finishes
at the end of 70 years from the end of the calendar year in which the author dies.
-Copyright in a sound recording finishes 50 years from the end of the calendar year in which
it is released. Pop stars of the 1950s and 1960s have indicated that they intend to challenge this
50-year time period to see if they can get it lengthened. If a sound recording is not released, it
expires 50 years from the end of the calendar year in which it was made.
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Chapter
5-Duration of copyright:
-The copyright in films expires 70 years from the end of the calendar year in which the
death occurs of the last to die of:
(i) the principal director;
(ii) the author of the screenplay;
(iii) the author of the dialogue; or
(iv) the composer of music specially created for and used in the film.
- Copyright in broadcast or cable programmes expires at the end of the period of 50 years from
the end of the calendar year in which the broadcast was made or the programme was included
in a cable programme service.
-Copyright in typographical arrangements of published editions expires at the end of
25 years from the end of the calendar year in which the edition was first published.
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Chapter
6-Rights of copyright owners:

-Section 16(1) CDPA 1988 gives the copyright owner the exclusive right to:
(a) copy the work; (b) issue copies of the work to the public;
(c) rent or lend the work to the public; (d) perform, show or play the work in public;
(e) broadcast the work or include it in a cable programme service;
(f) make an adaptation of the work or do any of the above in relation to an adaptation.
-If any person does any of the acts listed above, without the permission of the copyright holder,
or authorises anyone else to do this, copyright in the work is infringed. It is important to
remember that what is protected is not an idea, but the way in which an idea is expressed. It is
also important to realise that infringement does not need to be intentional and can be
committed unknowingly.
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Chapter
6-Rights of copyright owners:

- Copying the work can be done by storing the work electronically, for example by
downloading material onto a computer. Making a video recording of a film would infringe
copyright. Copyright can be infringed by renting the work for commercial gain. Lending of the
work to the public can also infringe copyright, even if no commercial advantage is gained.
- Secondary infringement is committed not by copying the work, but by exploiting it
commercially.
- Fair dealing with a literary work (other than a database), or a dramatic, musical or artistic
work for the purposes of research or private study does not infringe copyright.
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Chapter
7-Remedies for infringement:

-Damages and an injunction to prevent future breaches of copyright are the usual remedies for
infringement. An owner of copyright may also apply for a court order that a person hands over
an infringing copy of a work in his possession. An infringer may also be ordered to hand over
profits made from exploiting the copyright.
8-Moral rights:
-Authors are given several moral rights in respect of their works. These are not economic
rights, but if these rights are infringed then a remedy for breach of statutory duty will be
available. Damages are therefore available. An injunction will be the appropriate remedy to
prevent derogatory treatment of the work.
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Chapter
9-Criminal offences:
Various criminal offences are created in relation to articles which are, and which the
defendant knows or has reason to believe are, infringements of copyright. These offences
relate to:
(i) making copies of the work for sale or hire; (ii) importing them for business purposes;
(iii) possessing them for business purposes with a view to committing a copyright infringement;
And (iv) selling, exhibiting or distributing them.
10-Patents:
-Patents can be taken out only in respect of inventions which are capable of having an industrial
application. A patent must be applied for and is not easily granted. Patent law is governed by the
Patents Act 1977.
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Chapter
10-Patents:
-Patents have two purposes: they encourage innovation by granting monopoly rights in respect
of inventions, while at the same time making technological advances public.
11-Patentable inventions:
Section 1(1) of the Patents Act 1977 provides that a patent can only be granted for an
invention if:
(i) the invention is new; and
(ii) it involves an inventive step; and
(iii) it is capable of industrial application.
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Chapter
- PA 1977 does not define what an invention is, but s. 1(2) provides that the following
matters are not inventions and that there can therefore be no patenting of them:
(a) discoveries, scientific theories or mathematical methods;
(b) aesthetic creations and literary, dramatic, musical or artistic work (because these are
covered by copyright); (c) ways of performing a mental act, playing a game, or doing business,
(d) a program for a computer; or (e) the presentation of information.
An invention can be regarded as new only if it does not form part of the state of prior
knowledge, which includes all matters that have at any time before the date of the invention
been made available to the public in any way.
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Chapter
-A step can be regarded as an inventive step only if it was not obvious to a person who was
skilled in the relevant field.
-An invention is capable of having industrial application if it can be made or used in any kind
of industry, including agriculture. Almost every new invention will be regarded as having an
industrial application. There is no requirement that it can be put to an immediate industrial use.
New methods of surgery, therapy or diagnosis which are to be practised on humans or animals
cannot be taken to be of industrial application.
- Patents can apply not only to new items, but also to the way an existing item is used, or to the
way in which an existing item is produced. For example, a new way of manufacturing paper
could be patentable.
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Chapter
09 3-Trade marks:
1-Meaning of trade marks and registration of trade marks:

-The Trade Marks Act 1994 governs the law on trade marks. A trade mark is given a wide
definition as a ‘sign’, and can consist of almost any visual representation, including a letter,
word, drawing or shape. The only two requirements are that the sign should be capable of being
reproduced graphically and that it should be capable of distinguishing one person’s products
from another person’s. A mark which has no distinctive character cannot be registered as a trade
mark, but it is possible to register a shape.
- The rights given by TMA 1994 are only conferred once the trade mark, which is a property
right, is registered. As regards an unregistered trade mark an action for passing off may lie, but
TMA 1994 will provide no remedies.
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Chapter
09 3-Trade marks:
2-Effect of registered trade mark:

-The proprietor of a registered trade mark is given exclusive rights in the trade mark. If the
trade mark is used in the United Kingdom without his consent, these rights are infringed.
A sign can be used in various ways, including by:
(i) fixing it onto a package; (ii) putting goods under the sign;
(iii) importing or exporting under the sign; or (iv) using the sign on business paper or in
advertising.
-Trade marks are not infringed by a person using his own name and address, as long as the use
is in accordance with honest practices in industrial or commercial matters. This is an objective
test and is not the same as asking whether or not the defendant acted honestly.
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Chapter
09 3-Trade marks:
2-Effect of registered trade mark:

-An action for infringement is brought by the owner of the trade mark, and all remedies which
would be available in respect of any other property right are available. In addition the court
may:
(i) order offending signs to be erased or removed;
(ii) order infringing goods, materials or articles to be delivered up to the owner; and
(iii) order that these may be destroyed or forfeited to such person as the court thinks fit.
- If a groundless threat of infringement proceedings is made the victim may apply to a court for
a declaration that the threats are unjustifiable, or for damages or for an injunction.
A registered trade mark is personal property which can be co-owned or assigned to another.
Licences permitting their use may be granted to others.
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Chapter
09 3-Trade marks:
3-Procedure for registration:

-An application for registration of a trade mark has to include a statement of the goods or
services to which the trade mark is to apply, and a representation of the trade mark itself.
-A system of classification exists under which the applicant applies for registration into one of
more than 42 classes of goods and services. Where the registrar decides that the application for
registration has been accepted, he publishes this in the Trade Marks Journal. Initially, trade
marks are registered for a ten-year period from the date of registration. Registration may be
renewed for further periods of ten years if the proprietor pays the
appropriate fee.
- Damages or an injunction are the usual remedies for infringement, but destruction of
offending goods or erasure of offending signs can also be ordered.
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Chapter
09 3-Trade marks:
4-Breach of confidence:
-Article 8 of the European Convention on Human Rights gives the right to respect for a
person’s private and family life, home and correspondence. The Human Rights Act 1998 came
into force in 2000. It did not create a new tort of invasion of privacy but it did strengthen the
law of breach of confidence. However, Art. 10 of the Convention gives the right to freedom of
expression, and so freedom of the press has to be weighed against the right to privacy.
5- Suing for breach of privacy
A person bringing a claim for breach of privacy will need to prove three things:
(i) that the information disclosed was confidential; (ii) that there was an obligation of
confidence; and (iii) that there was unauthorized use of the information.
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Thank You
Business law
MGM412
Lecture 10
Business law
Lecture 10
MGM412
Prepared by
Chapter
10 Chapter 10 :COMPETITION LAW:

1- Definition of Competition law .
2- Institutes of Competition law.
3- Market Restriction and Unfair Competition.
4- Liability in Competition law.
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Chapter
10
1-Definition of Competition law:
1- Economic definition of competition:

-The Bosnian term “konkurencija” (English: competition) is of Latin origin (concurrentia) and
represents competing, rivalry and contest. In economy, it refers to the competition of business
subjects in order to achieve the same or similar business goals.
- Several types of competition have been identified in economic theory. They all have the
characteristics of a model. Hence we shall focus on three basic types:
1- Complete or perfect competition.
2- Incomplete or imperfect competition.
3- Monopolistic competition.
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Chapter 1-Definition of Competition law:
01
10
1- Economic definition of competition:

-The legal definition of “competition” does not exist either in comparative law or our law.
That is why the legal term of competition is a work of theory. Its content depends on the aim
for which the defining is conducted. However, some common traits can be identified. The
first is that the essence of competition is always respected in the way in which it is
determined by economic theory. Secondly, definitions are of a different scope and can be
classified into wider (systemic), and narrower (legal technical). Finally, all definitions are
predetermined by numerous explanations and limitations. In law, competition is understood
as an event, an action and a relation. If nothing specific is pointed out in the text below, the
term “competition” shall imply a competitive relation in the market.
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10
2-Competition law in European Union law:

-The Commission, along with the national authorities for market competition, directly
enforces the EU rules of market competition, pursuant to Articles 101-109 of the Treaty on
the Functioning of the European Union (TFEU), in order for EU markets to function better,
ensuring that all companies compete equally and fairly in accordance with legal regulations.
This benefits consumers and businesses as well as the European economy as a whole. Within
the Commission, the Directorate-General for Competition is the primary responsible
authority that applies its authorities directly.
-However, there are strict limitations. The Directorate-General for Competition may only
intervene if it has the evidence of the breach of competition rules and its decisions may be a
subject of appeal before the Court of Justice of the European Union.
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10
3-Subject matter of competition law:

-Subject matter of competition law includes social and business relations of economic-
political and property character that represent a method of economic game in the field of
transfer of goods and services in a unique market. Within such broadly determined area of
relations and norms, the following basic institutes i.e. prohibited activities can be
distinguished:
1) Monopolistic behaviour, which includes prohibited agreements and the abuse of a
dominant position,
2) Prohibited concentrations,
3) Distortion of the unity of the market, and
4) Unfair competition/game.
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01
10
4-Method of competition law:

-The method of competition law represents the way in which the relations in this field are
regulated. The characteristics of the method of competition law are expressed in all institutes
of competition law, albeit not in the identical form and the same intensity. The first
characteristic concerns the particularity of sources of law. Their number and complexity
approach the system of sources of business law, industrial property rights and administrative
law. To a larger extent than before, the laws dominate in it. Thanks to the authorizations that
the Law on Competition transferred to the Council of Competition, its regulations as bylaws
have become an extremely important source of law for antitrust law. Secondly, the
interpretative role of customs, both those qualified as good ones and those “business” ones
has been increased. Thanks to the definition of illegal trade, the system of trade customs is
directly involved in the sources of regulation of competition.
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01
10

-Competition as a separate social value and a protected object of the first order has caused the
second characteristic of the method of this branch: the majority of coercive (imperative)
norms. Thirdly, competition law is marked by a specific unity of prohibitive (“negative”) and
enforcement (“positive”) norms. The entity laws on trade as sectoral acts lose the primacy
before the general Law on Competition of Bosnia and Herzegovina.
- Economic and political significance of competition has determined the fourth characteristic
of the method of legal regulation; a unique treatment of all subjects that operate towards a
market and in it. This principle has been emphasised in the provisions of the LIT which ban
governmental authorities, at least at the level of declaration, from distorting the unique
market of the Federation.
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01
10

-The fifth characteristic of the method is the establishment of aspecial complex system of
authorities of control. Its first segment is the Council of Competition. In the most important
part of competition law, in antitrust law, the Council of Competition has a regulatory, control
function, as well as the authority to perform administrative proceedings and impose fines.
-The sixth characteristic is the use of a general clause and designated cases. A general clause
implies giving a general definition of a prohibited act or action that distorts competition.It
contains relevant elements, the essence of each individual institute. Designated cases
represent listing the most typical and most frequent manifestations of each type of a
prohibited act in competition. In theory and comparative legislative, there are two approaches
to the relation of a general clause and designated cases.
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Chapter
10 2- Institutes of Competition law:
1-Definition of monopolistic behaviour:

-Etymologically, the term “monopoly” is of Greek origin, comprising of monus – the only and
polion – sale, or poleo – by sale. In the broadest sense of the word, monopoly represents a
stage in the development of capitalism characterised by a paramount influence of major
concentrations in economy and the society, first at the national level and then globally as well.
The second meaning of monopoly implies market relations in which there is an exclusive
authority or an undisputable dominance of a single business subject or a homogenous group of
business subjects over supply or demand of goods and services in a relevant market.
Monopoly defined this way can appear as a monoemporium i.e. as different variants of
monopoly/monopsony, duopoly/duopsony, and oligopoly/oligopsony.
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Chapter
1-Definition of monopolistic behaviour:

-The third meaning of the term monopoly is aimed at the determination of participants in a
monopolistic market relation.
-Two elements are critical for its classification: the existence or non-existence of a formal-legal
transaction by which a monopolistic relation is established, and the preservation or loss of a
legal identity of participants in this agreement and in a relation created by it. The most relevant
permanent monopolies are cartels, unions and trusts. Temporary monopolies are short-term
monopolistic agreements (corner, ring, pull, etc.)which are formed in order to conduct specific
tasks in a market performance and are generally dispersed as soon as such tasks are finalised.
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Chapter
2-Prohibited agreements:
-The introductory part of the provision of Article 101 of the Treaty on the Functioning of the
European Union contains a general prohibition of cartel behaviour. It encompasses: all
agreements between business subjects, decisions by associations of business subjects and
concerted practices which may affect trade between member states and which have as their
object or affect the prevention, restriction or distortion of competition within the internal
market.708 The above and similar agreements are null and void (Art. 101, par. 2 of the TFEU).
In accordance with the stance that some agreements, even though restrictive from the
point of competition, still may be a support to a more efficient economy, the Treaty explicitly
establishes a possibility of their exemption from the general prohibition. Pursuant to Article
101, paragraph 3 of the TFEU, some agreements or groups of agreements are treated as
allowed, if they:
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Chapter
1)contribute to the improvement of production or distribution of goods or promote technical or
economic progress,
2)while allowing consumers a “fair share” of the resulting benefit,
3)do not impose on companies any restrictions which are not necessary for the achievement of
such goals, and
4-do not give the participants a possibility of eliminating from competition a significant portion
of the products in question.
-Pursuant to Article 4 of the Law on Competition, the following are prohibited: all agreements,
contracts, single provision of agreements or contracts, concerted practices, explicit and tacit
agreements between the companies, as well as other acts of companies the object or effect of
which is to prevent, restrict or distort market competition in the relevant market.
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Chapter
- For further harmonisation of competition law in BiH and in the EU, it would be necessary to
determine as monopolistic all those agreements whose goals or results are affects harmful for
competition in the relevant market. Such agreements are null and void. They are agreements
that refer to:
1-adirect or indirect determination of purchase and selling prices or other commercial
conditions;
2) limitation or control of production, markets, technical development or investment;
3) fragmentation of the market or of sources of supply;
4) application of dissimilar conditions to equivalent or similar transactions with other parties,
thereby placing them at a competitive disadvantage;
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Chapter
3-Dominant position and abuse of dominant position:

-The section on competition of the original contract on the EEC incorporates a provision which
regulates the cases of a governing, i.e. a dominant position of a company in the internal market
– Article 102 of the TFEU. Possessing a dominant position in the market is not prohibited.
However, the abuse of such a position is prohibited.715 According to Article 102, paragraph 2
of the TFEU, the abuse can be reflected in the following types of practices:
1- directly or indirectly imposing unfair purchase or selling prices or other unfair trading
conditions;
2) limiting production, markets or technical development to the prejudice of consumers;
3) applying dissimilar conditions to equivalent transactions with other trading parties, thereby
placing them at a competitive disadvantage;
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Chapter

4)making the conclusion of contracts subject to acceptance by the other parties of
supplementary obligations which, by their nature or according to commercial usage, have no
connection with the subject of such contracts.
-The provision regarding the prohibition incorporated in the Article 102 of the TFEU stipulates
the following elements: one or more enterprises, a dominant, i.e. a governing position; a
dominant position in the internal market or a significant part of it; an abuse; and the effect on
trade, i.e. the exchange of goods and services between member states.
- A business subject has a dominant position in the relevant market of goods or services, when
due to its market power it can operate considerably independently from its actual or potential
competitors, buyers, consumers or suppliers, taking into account the market share of that
company in the relevant market, market shares of its competitors, as well as the legal and other
barriers to the entry of other business subjects in the market.
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Chapter

-According to the resolutions of the LC, any abuse of a dominant position of one or more
companies in a relevant market is prohibited. The abuse of a dominant position occurs in the
following cases:
1) direct or indirect imposition of unfair purchase and selling prices or other trading conditions
which restrict competition;
2) limitation of production, markets or technical development to the prejudice of consumers;
3) application of dissimilar conditions to equivalent or similar transactions with other parties,
thereby placing them at a competitive disadvantage;
4)making the conclusions of the contracts subject to acceptance by the other party of
supplementary obligations, which by their nature and according to the commercial usage, have
no connection with the subject of such contract.
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Chapter
4-Concentrations and prohibited concentrations:

-The control of concentration is directed towards the prevention of power concentration in the
market. Based on Article 352 of the TFEU, in 1989 the legislator implemented the Council
Regulation on the Control of Concentrations between Companies (CRCC)718, and it was
significantly revised in 2004. Pursuant to Article 3, paragraph 1 of the CRCC, a concentration
implies a permanent change of control over a company which results from:
1) a merger of two or more previously independent companies or their parts, or
2) an acquirement, by one or more persons already controlling at least one company, or by one
or more companies, whether by purchase of securities or assets, by contract or by any other
means, of direct or indirect control of the whole or parts of one or more other companies.
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Chapter
4-Concentrations and prohibited concentrations:

- The listed types of concentration can occur in three forms. Namely, companies or companies
can be: 1) at the same level of economic operations (e.g. production level): horizontal merger,
acquisition and cooperation; 2) at different levels (e.g. production and distribution): vertical
merger, acquisition or cooperation; and 3) companies which do not operate at the same
production market or geographical market, i.e. if their merger does not have vertical or
horizontal effects: conglomerate mergers, associations, concentrations.
-Any concentration which restricts effective competition in the internal market or in its
significant part, particularly by creating or strengthening a dominant position in the market, is
contrary to the internal market of the EU and hence, it is prohibited by the CRCC. A preventive
control system has been arranged in a procedural manner, and it stipulates that the Commission
must be notified of the intended concentration (fusion).
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Chapter
10 3-Market Restriction and Unfair Competition:
1-Market restriction:
- Market restriction is a legal term that refers to a considered institute of competition law. As
there are other forms of market violation along with market division, we have opted for the
theoretical term “violation of market unity”. A united market is an important requirement and a
system framework for a regular existence and operation of competition. Antitrust law is not
sufficient for the suppression of all the forms of violation of the internal market’s unity.
Consequently, modern states use other legal means of disabling this type of socially dangerous
acts, regardless of who the perpetrator of these acts is. These instruments should suppress
prohibited competition operations which are not covered by anti-monopoly law, i.e. which
cannot be suppressed effectively. The stated need is met differently in comparative law.
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Chapter
2-Unfair competition:
- The Bosnian term “nelojalna konkurencija” (unfair competition) originates from the French
phrase concurrence deloyal, which was created in the 19th century by the case-law in this
country.
- Deloyal can also be translated as: unfair, dishonest, disloyal, and unfaithful. Taking legal
terminology into consideration, we will use the variant “unfair”. It is very difficult to give a
general theoretical definition of this institute due to differences between comparative law and a
great number of current emerging variants present in practice. We consider that an unfair game
can be defined as an initiation of any kind of action by a trader or any other subject of business
law, which is contrary to the usual recognized mode of action towards the market from the
social economic or constitutional order and which has real or potential adverse effects.
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Chapter
2-Unfair competition:
- The outspread of The Paris Convention for the Protection of Industrial Property (Paris
Convention) has greatly contributed to the unification of legal suppression of unfair
competition between two great groups of legal systems and also within each one of them.
Considering the fact that Bosnia and Herzegovina has become a member of the Paris
Convention by succession, we present its resolutions below.
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Chapter
10 4- Liability in Competition law:
1- Supervision authorities and the procedure:

- Pursuant to the provisions of the Law on Competition, a special authority is formed: the
Council of Competition of Bosnia and Herzegovina725, with the offices in charge of
competition in the Federation of Bosnia and Herzegovina and the Republic of Srpska.
The Council of Competition is an independent authority obliged to ensure a consistent
enforcement of the Law on Competition in the territory of Bosnia and Herzegovina and it has
an exclusive authority in deciding whether there are particular types of unlawful competitive
activities.
- In performing its authority, the Council of Competition: passes by-laws required for the
enforcement of the Law on Competition;
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Chapter
1- Supervision authorities and the procedure:

-enacts definitions and calculation methods for certain operations; enacts and provides the
interpretation of general and special definitions of terms regarding competition, along with the
calculation methods for fundamental terms in competition; makes decisions regarding requests
for the enforcement of proceedings and conducts proceedings; passes legal acts for the
finalization of proceedings before the Council of Competition; gives opinions and
recommendations regarding any aspect of competition, exofficio or upon a request of a state
authority, a business entity or an association; passes internal acts regarding the organization of
the Council of Competition; takes the initiative to make amendments or additions to the LC,
etc.
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Chapter
2- System of liability:
-It has already been emphasised that combining more types of sanctions represents a
characteristic of the methods of competition law. If reviewed on its own, the system of liability
in competition law represents a far more complicated and complex picture. Such a picture has
the following characteristics:
1) the inclusion of social and legal sanctions,
2) the possibility of cumulative implementation of certain types of sanctions for the same
committed unmet competition offence,
3) a predominantly repressive character, and
4) the existence of specific features in the sub-system of sanctions for every institute of
competition law.
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Chapter
-Social sanctions are incorporated in the system of liability due to a general importance of
competition as a synonym of a free market. Good business custom represents a legal-technical
basis for their affiliation with legal. Social sanctions can be classified according to whether they
are implemented by a disorganized, diffuse company or non-governmental social institutions
are established for the purpose of their implementation. In the first group, sanctions
implemented by the members of the same industry and by consumers are particularly relevant.
In the second group, the sanctions of the courts of honour and the assemblies of chambers of
commerce are relevant. The development of the market strengthens the role of extralegal
sanctions. In situations where it applies, the possibility to request an announcement of the
convictions in the media serves its realization.
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Chapter
-The sanctions can be property-legal sanctions and criminal legal sanctions. The Law on
Competition differentiates serious and other infringements of competition law. In accordance
with that, Article 48 stipulates a fine for any serious infringement of up to 10% of the value of
the total annual income of a company earned in the financial year preceding the year when the
infringements is committed, if a company or an individual: a) concludes a prohibited agreement
or in any other way participate in an agreement that caused prevention, restriction or distortion
of competition b) abuses a dominant position; c) participates in a prohibited concentration of
companies; d) fails to comply with the decisions made by the Council of Competition; e)
implements a concentration without a prior decision on the concentration.
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Thank You

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Business Law

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Business law

Prepared by Dr. Galal Elmasry

The most important main themes of the lecture:

- A form of a legal act represents a dialectical unity of a process of generating an

- The third element of the form is a materialization of an act, i.e. “a physical

1- General legal acts:

1- General legal acts:

1- General legal acts:

1- General legal acts:

1- General legal acts:

1- General legal acts:

2-Individual legal acts:

2-Individual legal acts:

2-Individual legal acts:

3-Definition and hierarchy of sources of law:

3-Definition and hierarchy of sources of law:

4-Sources of European Union law:

4-Sources of European Union law:

- Law regulates social relations between people, legal entities (companies,

- Two very important components of a legal relation are: authorization and

1-Natural persons as subjects of law:

2-Legal entities as subjects of law:

2-Legal entities as subjects of law:

Prepared by Dr. Galal Elmasry

- “Trade law” or “law of traders”: a term that originated as a counterpoint to

- “Economic law” or “Wirtschaftsrecht” originated in Germany at the end of

2- Subject matter of business law:

2- Subject matter of business law:

3-Method of business law:

3-Method of business law:

1- Definition of subjects of business law:

1- Definition of subjects of business law:

1- Definition of subjects of business law:

1- Definition of subjects of business law:

2-Classification of business law subjects:

2-Classification of business law subjects:

Prepared by Dr. Galal Elmasry

1-Obligations according to types of performance:

1-Obligations according to types of performance:

1-Obligations according to types of performance:

2-Obligations according to method of determination of a performance:

2-Obligations according to method of determination of a performance:

1- Definition of subjects of business law:

1- Multitude of subjects in an obligation:

1- Multitude of subjects in an obligation:

2-Change of subjects in an obligation:

2-Change of subjects in an obligation:

2-Change of subjects in an obligation:

2-Change of subjects in an obligation:

-There are numerous ways of cessation of an obligation:

-There are numerous ways of cessation of an obligation:

-There are numerous ways of cessation of an obligation:

Prepared by Dr. Galal Elmasry

The most important main themes of the lecture:

2- Types of business entities( companies):

3- Legal nature of companies:

3- Legal nature of companies:

4- Systems of establishing companies:

4- Systems of establishing companies:

1- Definition and subjects of registration:

2- Object of registration and registration procedure:

Prepared by Dr. Galal Elmasry

The most important main themes of the lecture: