BUSINESS LAW

WALLAGA UNIVERSITY
SCHOOL OF LAW
BUSINESS LAW
BY ROBA ASSEFA (LL.B, LL.M)
OCTOBER, 2020
 Cont….
• Course Contents:
 Business law is not a separate branch of law;
 rather it is the collection of laws that deals
with business or commercial transactions
including the areas of contracts, negotiable
instruments, the purchase and sales of goods,
Business Organizations etc.
 Introduction to Law,
 Law of person,
 Law of contract n general,
 Law of special contracts…
 Cont…
Definition of law
• Due to the dynamic nature of it, the term law can be
defined differently.
• There is no universally recognized definition of law.
• Theories help to guide us to the definition of law.
• Besides, basic features and functions of law too.
• So what are the major theories of law, basic features
and functions of the law?
• What these theories say about law?
• There are four major theories of law
 cont
Natural law theory
• It’s the oldest theory.
• It put law as a set of objective moral principles,
which emanate from the very nature of the universe.
• Its validity judged from:
• nature, morality,
• justice and reason.
• Thus, man made law should conforms to these
objective moral principles to be true law.
 Cont…
The Positivist Theory
• According to this theory, law is the command of the
sovereign.
• Components of law are:
– Command, i.e desire to order the inferior
– Sovereign, I.e superior political body
– Sanction, I.e Coercion or penalty incase
disobedience
• Generally, law refers to the command of sovereign
backed up by the imposition of penalty where
disobedience exists.
 Cont…
MARXIST LAW THEORY
• As per Marxists, the basis for the coming into existence
of law and state, is private property.
• Private property enable those with means of production
to exploit those with no means of production.
• Thus, law is an instrument by state to protect solely
private property.
• Take private property, no state & law (primitive society).
• They argue that at communist stage equality can be
achieved
• But the reality is not materialized.
 Cont..
Theory of Legal Realism
 Law is what is administered and applied by the
courts.
 Unlike the positivists, the sovereign is not
political body/legislature in this theory.
 But the judges are sovereign.
 Thus, unless used to solve practical societal
problem through decision & interpretation, it is
dead words.
 Cont…
Essential Features of Law
• Normally speaking, there are various characteristics of
laws.
• But commonly shared are the following.
Generality of Law
• refers to the general statements on possible human
behavior.
• This has two main purpose:
– Promote uniformity and equality before the law,
– Give relative permanence to the law.
 Cont…
Normativity of law
• refers to as law is made up of rules of social
behavior.
• But not interested with every kind of human
behavior.
• Rather only the social behavior of man materialized
from social interaction.
• Such social behavior may be permitted, prohibited
or directed called normativity behave with in.
 Cont…
Sanction as basic feature of law
 Each and every member of a society is required to
follow the law.
 For noncompliance penalty will be imposed in the
form of sanction.
 Penalties such as criminal sanction, disciplinary
measures…
 It is effective part of the law.
 Cont…
Functions of Law
 Alike features of law, there are abundant functions
of law
 Holland states to ensure the well-being of the
society beyond protection of individuals’ rights.
 Roscoe Pound a species of social engineering.
 Generally laws are useful for:
Social control,
Dispute settlement and
Instrument of social change with sufficient
flexibility.
 Cont…
Classification of Law
• refers to shaping and developing of traditional
systematic conceptions and
traditional systematic categories in order to organize
the body of legal precepts.
• This may achieve:
• effectively stating with a minimum of repetition,
over lapping and potential conflict;
• administered effectively;
• taught effectively, and developed effectively for
new situations.
 Cont…
• Laws can be classified into four major category;
• Public and Private law,
• International and National law,
• Substantive and Procedural law, and
• Civil and Criminal law
• Public law regulates the acts of persons who act in the
general interest delegated by government.
• Constitutional law and
• Administrative law
• Private law regulates the acts of individuals in their
own names for their own individual interest and
individual capacity.
 Cont…
• Family law,
• Property law.
• International law consists of rules/the body of
customary and conventional rules (treaties).
• which regulate relations between State inter se.
• It can be public international law and private
international law.
• Public international law regulates the relation
between states.
– Ethiopia Vs Kenya
 Cont…
• Private international law governs the relations
between individuals of different nationals in
commercial transaction.
– Citizen of Ethiopia Vs Kenya
• National law called local law/law of the land that
pertains to a particular nation.
• It applicable all over a country in question.
• Can be local customary law and local enacted law.
• Local customary law emanate from custom.
• Local enacted law emanate local legislative authority.
 Cont…
• Substantive law is which defines a right and
privilege of individuals and society as a whole.
• Seek administration of justice.
• Law of contract,
• Property law…
• Procedural law governs the process of litigation for
remedies when the rights and privileges endangered.
• the laws of civil procedure or
• The laws of criminal procedure.
 Cont…
Civil and Criminal law
• Civil law is that branch of law dealing with the
definition and enforcement of all private or public
rights.
• a civil law codified in 1960, which is known
as Civil Code.
• Criminal law which also called Penal law.
• Concerned with application of penalties/punishment
of perpetrators.
• Criminal code of FDRE 2004
 Cont…
Hierarchy of laws in Ethiopia
 It is the superior and subordinate kind of relationship
that exists between the laws based on their respective
makers of authority. or
 a system in which all the laws of a certain country are
put at various levels or ranks according to their order
of importance.
 Hierarchy of law can be seen under different regimes
in Ethiopian history and current day of the country.
 Cont…
• Currently, Ethiopia has adopted a federal state
structure: Federal gov’t & regional states.
• Hence, two set of laws:
• Regional/State’s laws and
• Federal laws.
• The FDRE Constitution, 1995 is above any laws,
customary practice, treaties & government decision.
– I.e, The Supremacy of the FDRE
Constitution(Art (9(1)).
• It is source of power for both federal & regional
states.
 Cont…
• Next, proclamation & international treaties have
equal status on the ladder of hierarchy below FDRE
Constn.
• Both enacted & ratified by same organ (HOPR)
• If conflict arises between the two, subsequent law
prevail over prior law in time.
• Decree comes next to proclamation & treaties
• It is primary legislation, passed by Council of
Minister (COM)mandated by FDRE Constitution.
• Regulation is above directive next to decree.
• For regulation COM derives the power from HOPR.
 Cont…
State laws and their hierarchy
• States Constitutions declare in their supremacy clause
that subject to the supremacy of FDRE Constitution.
• Next, state statutes, decree, regulation & directives.
• Even though decree & regulation by same organ,
state executive, it argued decree should prevail as it
for emergence nature.
• Directive is below all similar to federal case.
• Can we put hierarchical order among federal
laws & regional laws?
• If yes, why? If no, why?
 Cont…
Law of Person
The meaning of person
 The literary understanding of the term person refers to
individual human being.
 But this way of defining person is incomplete.
 Legal definition of person refers to all beings capable
of having rights and duties.
 Two kinds of persons:
 physical (natural) persons and legal (artificial) persons.
 Physical person refers to human being by nature.
 Individual human being
 Cont…
 Legal persons include beings, which are given rights
and duties by the operation of the law.
They include associations, share companies,
private limited companies…
Commencement of personality
 For natural person
 Birth is in rule; The human person is' a subject of
rights from its birth to its death(Art. 1 Civil Code)
 Conception/Anticipation of personality in exception:
 Cont..
• Three conditions have to be fulfilled("A child merely
conceived shall be considered born whenever his
interest so demands provided he is born alive and
viable.“)
• Viability condition is when the child born live at least
for 48 hrs alive.
• But we have to examine cause of death:
• Internal factors,
• External factors
• Unless attributed to internal deficiency, death by
external factor before 48 hrs cannot reverse viability.
 Cont…
Legal person
 Three conditions have to be fulfilled.
 Formation which establishment by founders,
 Publication w/c is publicity in a newspaper, radio,
TV, social media, and
 Registration in the in the concerned authority such as
commercial register’s.
 Upon fulfilling these conditions, legal existence and
attains personality.
 Cont…
Attributes of legal personality
• They can sue and be sued during their own name.
• can administer their property in their own name.
• can conclude certain juridical acts like contracts.
• They pay tax in their own name …etc
• Capacity of persons
• Capacity refers to the ability to exercise juridical acts.
• Creation of contract,
• Making will,
• Conclusion of marriage…etc
 Cont…
General principles
Capacity is the rule and incapacity the
exception,
Capacity is presumed unless proved
otherwise,
The deprivation in the exercise of rights is
not absolute, i,e, lessened capacity
The prohibition of renunciation and
voluntary restriction of rights. i.e
constitutional rights are extra-
commercium
 Cont…
Termination of Personality
• For Natural person:
– Death
– Probable death, where death is probable, but
not certain.
– Such cases involve the issue of absence.
– But may reappear in case of absence
• For legal person dissolution applies.
• It is about process of liquating legal person for
d/t reasons.
 Cont…
Contracts in General
Sources of obligation:
• Obligation may emanate from a contract or law.
• Obligations arising from contracts are assumed by
free will.
• the law such as the obligations to pay tax are
mandatory.
• Subject matter of law of contract is obligations from
free will of parties.
• Law of contact: rules governing the formation,
variation, performance and enforcement of contracts.
 Cont…
• Meaning of contract?
• Art.1675 CCE: contract as an agreement whereby two
or more persons as between themselves create, vary, or
extinguish obligations of proprietary nature.
• Defining elements are:
– Agreement: meeting of mind of parties freely
w/ot compulsion
– Plurality of parties: two & above
– Obligation to create, vary, extinguish.
– As between themselves, in principle
obligation is not on third party
– Obligation of proprietary nature
 Cont…
• Thus, all contracts are agreement whereas all
agreements are not contract.
Formation of contract
• Article 1678 of the Civil Code provides requirements
that should be fulfilled to conclude a contract validly.
• i.e. Capacity,
• Consent,
• Object, and
• Form, if any
1. Capacity:
• ability to perform juridical acts. Juridical acts include
all acts of civil life.
 Cont…
• Elements of capacity are:
– Attaining the required minimum age,18 years
– mentally able to understand the nature and
consequences of making a contract,
– physically able to manifest consent to a bargain,
and
– is permitted by law to make the contract in
question.
• A person who lacks these abilities are under
incapacity.
• Categories of incapable include:
 Cont…
Minor
• Person of both sex under age of 18 years.
• Contracts concluded by minors in excess of their power
shall be of no effect.
• Can be invalidated by the minors or their legal
representatives or heirs.
• I.e, one sided rights to invalidate.
• But exceptionally minors can perform some JAs.
• acts of everyday life,
• Receiving income at 15 age from work,
• Making will & marriage by emancipation at 16 age
 Cont…
• Minority ends attains the age of majority & if
emancipated.
Judicial Interdiction
• Refers to Insane and Infirm Persons.
• Mental problem if judicially declared being inmate
of institutions due to his/her mental problem.
• Besides, known in community of less than 2000
• Such mental problem is Notorious Insanity(NI).
• Other wise mental problem would be non-notorious (NN).
• Any JAs by NI has no legal effect.
• But for NN s/he has to prove it is due to insanity.
 Cont…
• Apparent Infirm(AI), is physical problem.
• Blindness, deaf-mute…
• As a result cannot care for him/herself & administer
his/her property.
• Such acts by AI would be invalidated invoking
protection of NI.
Legal Interdiction
 Withdrawal of capacity by court decision.
 It is due to conviction of criminal offence.
Incapacitated from administering his/her
property for the period s/he sentenced.
 Cont…
2. Consent
• Voluntarily declaration of intention to be bound by
contract.
• Can be expressed by offer & acceptance.
• Offer is by offeror the proposal regarding contents of
that would be contract.
• To be binding have to be precise & certain.
• Apart communicated to the beneficiary.
– Exception: Public reward
• Acceptance is agreement to the exact contents of offer
by offeree.
 Cont…
• Offer & acceptance can be with time limit & without
lime limit.
• Forms of offer & acceptance can be oral, written,
signal & conduct.
• I.e, no special form stipulated.
Defect in Consent
• True & conscious consent may be vitiated through
mistake, fraud & duress.
• Mistake is holding mistaken belief about certain facts.
• It should be decisive & fundamental.
• Fraud is deceitful practices providing wrongful info.
• Duress is threat (physical or psychological)
 Cont…
• It can be targeted to the contracting party, his/her
families, property.
• To avoid such contract have to be serious &
imminent.
3. Object
• It refers to what parties agreed to undertake in the
form of rights & duties.
• In principle parties can decide freely their object of
contract.
• But limitations are:
• Object should be sufficiently defined, legal,
possible & moral.
 Cont..
• Not sufficiently defined, illegal, immoral &
impossible objects have no legal effect.
4. Form
• It is how the objects/contents of contract appears to
exist before third party.
• In principle, contracting parties are at freedom to
determine the form of contract.
• i.e, no specail form stipulated.
• But two limitations to freedom of form:
 Cont…
• When the law prescribes special form ( to be
written),
» Contract of house, with public
administration, loan beyond 500 Birr
• When parties agreed to special form.
Invalidation of Contract
• A legally binding contract is if in line with the
required capacity, consent, object & form only.
• Otherwise it would be mere statement/declaration.
• For defect of capacity & consent the victim party,
representative of heirs can invalidate.(i.e,one sided)
• For defect of object & form both side can invalidate.
 Cont…
• The right to invalidate has to be exercised within two
years from the date such ground of invalidation
disappeared.
Performance of Contract
• A legally binding contract should be performed as per
its terms& conditions.
• The performing party can be debtor, authorized by
debtor, court & law.
• Exceptionally personal performance is required when
expressly agreed & essential to creditor.
• Patient Vs Doctor,
• Contract with artist… professional works.
 Cont…
• The party receiving performance is the creditor, who
authorized by creditor, law & court.
• But exceptionally, performance to incapable &
unqualified creditor has no legal effect.
• However, if benefited and confirmed by such creditor.
• The place of performance is the agreed place.
• In default of it, the normal place of residence of debtor
at conclusion of contract.
• Again, the place that definite property located.
• The time of performance is agreed time.
• In default of this when performance required by
creditor.
 Cont…
Non-performance of Contract
• Non-performance refers to the breach of terms &
conditions of contract.
• For non-performance remedies of non-performance is
should be given to the victim party.
• What are the remedies of non-performance(RNP)?
• What is the prerequisite to claim remedies of non-
performance?
• The non-performing party, debtor, has to be given
default notice.
• So the creditor before claiming RNP should give
notice!
 Cont…
• No special form required to give notice(i.e, oral or
written).
• But under four conditions no default notice required:
– If the type of duty is not to do type/negative
duty,
– If expressly agreed as to no need of default
notice in contract,
– If the period fixed for performance elapsed &
– If debtor inform in written form as s/he would
not discharge the contract.
• After complying to default notice w/n required,
creditor can claim the following RNP:
 Cont
• Performance w/c is forced or substitutive,
• Cancellation, and
• Compensation.
• When these RNP can be awarded?
• Conditions to be satisfied?
• Forced performance is compelling the debtor.
• For forced performance two conditions must fulfilled:
• It not affect the personal liberty of debtor, &
• It is essential to the creditor.
• Substitutive performance is performance at the
expenses & costs of debtor authorized by court.
 Cont…
• Cancellation refers to the ending of contractual
obligation.
• The causes & effect of it differs from invalidation.
• Cancellation is due to non-performance.
• Invalidation is due to unlawfully formed contract
• Cancellation is aimed to restore party to the position
they were had the contract performed.
• Invalidation is restoring party to the position they
were had the contract not formed.
• It can be judicial & unilateral cancellation.
• The former is principle, breach of fundamental issues.
 Cont…
• Unilateral cancellation is up on the following
conditions if:
• a cancellation clause in the contract,
• the debtor has failed to honor certain time limits,
• performance becomes impossible, &
• anticipatory breach of contract/written
declaration of non performance by debtor.
• Only up on these conditions unilateral cancellation
possible.
 Cont…
• Compensation refers to payment of damages
equivalent to damage/harm.
• i.e, no loss, no compensation.
• Even though loss required, not fault expected to be
established.
• It is an additional remedy or alternative remedy.
• In order to be relieved from payment of
compensation, debtor have to proof that non-
performance is due to force majeure.
• Force majeure is any events unforeseeable and
beyond his/her control.