Laws Affecting Business.pdf

Laws Affecting

Business

ASM TOWHEED

Assignment On Laws Affecting Businesses

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Prepared for:

Professor ABU HOSSAIN SIDDIQUE

Department of International Business

University of Dhaka

Prepared by:

ASM TOWHEED

ID: 8001312006

Course name: Introduction to Business

Course no: EIB501

Department of International Business

University of Dhaka

Date: 21st Dec 2013


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What is Law?

A law is a standard or rule established by a society to govern the behavior of its member.

Law is the system of rules which a particular country or community recognizes as regulating the actions of its

members and which it may enforce by the imposition of penalties.

When discussing law and morality or law and justice, it is important to define the terms, from the below you

will probably decide it is not possible to define what law IS, but it is possible to describe what it does and

what rules apply. This is essentially a philosophical question, which probably has no answer, but some

theorists have attempted to do so.

Similarly, there is no agreement what morality is, or justice IS and there are various schools of thought.

We shall be looking at the writings and thoughts of philosophers and jurists (legal scholars) each named

person should be considered as an authority in his field whose opinions are worthy of respect.

It is possible to describe law as the body of official rules and regulations, generally found in constitutions,

legislation, judicial opinions, and the like, that is used to govern a society and to control the behaviour of its

members, so Law is a formal mechanism of social control.

Legal systems are particular ways of establishing and maintaining social order.


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Business Law

Business persons are part of the society, numerous and varied laws regulate the activities of all business and

everyone involved in the business from owner to manager to employee. Law involves many elements; like

torts, contracts, sales, agency, property, bankruptcy and negotiable instruments. Also the labor law of a

country is very important for a business to run in a curtain country.

Laws That Affect Businesses

Businesses can choose from many different models, styles and types of growth, but they are still structured

and directed by government regulation. A large number of laws affect businesses, defining illegality and

misconduct or setting financial and operational codes for a business to follow. The many business laws can

be divided into several primary groups, depending on what aspect of the business they affect.

The law of Trots

A tort, in common law jurisdictions, is a civil wrong which unfairly causes someone else to suffer loss or harm

resulting in legal liability for the person who commits the tortious act, called a tortfeasor. Although crimes

may be torts, the cause of legal action is not necessarily a crime as the harm may be due to negligence which

does not amount to criminal negligence. The victim of the harm can recover their loss as damages in a

lawsuit. In order to prevail, the plaintiff in the lawsuit must show that the actions or lack of action was the

legally recognizable cause of the harm. The equivalent of tort in civil law jurisdictions is delict.

Legal injuries are not limited to physical injuries and may include emotional, economic, or reputational

injuries as well as violations of privacy, property, or constitutional rights. Torts comprise such varied topics

as auto accidents, false imprisonment, defamation, product liability, copyright infringement, and

environmental pollution (toxic torts). While many torts are the result of negligence, tort law also recognizes

intentional torts, where a person has intentionally acted in a way that harms another, and in a few cases

(particularly for product liability in the United States) "strict liability" which allows recovery without the need

to demonstrate negligence.

The primordial origin of torts and crimes at common law was a system of compensation for wrongs, with no

clear distinction between crimes and other wrongs. In Anglo-Saxon law, wrongs required payment of bt

(literally, 'remedy') to wronged person or their clan, and wte (literally, 'blame, fault') paid to the king, based

upon a victim's worth (weregild); these were also intended to prevent blood feuds. Items or creatures which

caused death were also destroyed as deodands. The trespass action was a distinctive early tort in which

damages were paid to the victim; if no payment was made, the defendant was imprisoned. Although the

details of its exact origin are unclear, it became popular around 1250 and it may have arisen either out of the

"Appeal of Felony" or disseizing or replevin. Later, after the Statute of Westminster 1285, the "trespass on

the case" action arose for when the defendant did not direct force. The English Judicature Act passed 1873

through 1875 abolished the separate actions of trespass and trespass on the case.

In 1401, the English case Beaulieu v Finglam imposed strict liability for the escape of fire; additionally, strict

liability was imposed for the release of cattle. Negligently handling fire was of particular importance in these

societies given capacity for destruction and relatively limited firefighting resources. Liability for common

carrier, which arose around 1400, was also emphasized in the medieval period. Unintentional injuries were


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relatively infrequent in the medieval period. As transportation improved and carriages became popular in

the 18th and 19th centuries, however, collisions and carelessness became more prominent in court records.

In general, scholars of England such as William Blackstone took a hostile view to litigation, and rules against

champerty and maintenance and vexatious litigation existed. The restriction on assignment of a cause of

action is a related rule based on public policy.

Tort law is different from criminal law in that:

1. Torts may result from negligent but not intentional or criminal actions

2. Tort lawsuits have a lower burden of proof such as preponderance of evidence rather than beyond a

reasonable doubt.

Sometimes a plaintiff may prevail in a tort case even if the person who caused the harm was acquitted in an

earlier criminal trial. For example, O.J. Simpson was acquitted in criminal court and later found liable for the

tort of wrongful death.

The law of torts for various jurisdictions has developed independently. In the case of the United States, a

survey of trial lawyers pointed to several modern developments, including strict liability for products based

on Greenman v. Yuba Power Products, the limitation of various immunities (e.g. sovereign immunity,

charitable immunity), comparative negligence, broader rules for admitting evidence, increased damages for

emotional distress, and toxic torts and class action lawsuits. However, there has also been a reaction in

terms of tort reform, which in some cases have been struck down as violating state constitutions, and

federal preemption of state laws.

Modern torts are heavily affected by insurance and insurance law, as most cases are settled through claims

adjustment rather than by trial, and are defended by insurance lawyers, with the insurance policy, a deep

pocket limit setting a ceiling on the possible payment.

In the comparative law of modern tort law, common law jurisdictions based upon English tort law are more

similar to each other than civil law jurisdiction, which may be based on the Roman concept of delict, but

significant differences exist even in common law countries. For example, in England attorney fees of the

winner are paid by the loser (the English rule versus the American rule of attorney fees). Common law

systems include United States tort law, Australian tort law, Canadian tort law, Irish tort law, and Scots Law of

Delict. Israeli law of rabbinic damages is another example although tort law in Israeli law is technically similar

to English law as it was enacted by British Mandate of Palestine authorities in 1944 and took effect in 1947.

There is more apparent split between the Commonwealth countries (principally England and including

Canada and Australia) and the United States, although Canada may be more influenced by the United States

due to its proximity.

The United States has been perceived as particularly prone to filing tort lawsuits even relative to other

common law countries, although this perception has been criticized and debated. As of 1987, class actions

were relatively uncommon outside of the United States. As of 1987, English law was less generous to the

plaintiff in the following ways: contingent fee arrangements were restricted, English judges tried more

decisions and set damages rather than juries, wrongful death lawsuits were relatively restricted, punitive

damages were relatively unavailable, the collateral source rule was restricted, and strict liability, such as for

product liability, was relatively unavailable. England's welfare state, such as free healthcare through National

Health Service, may limit lawsuits. On the other hand, as of 1987 England had no workers compensation


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system and lawsuits due to workplace injuries were relatively common and facilitated by trade unions,

whereas in the United States the system of workers compensation insurance prohibits lawsuits against the

employer although lawsuits against third-parties such as manufacturers does occur. The United States also

has faced a rise in no-fault insurance for automobile liability in several states. In England, ombudsmen may

also take cases which could alternatively become tort lawsuits.

When comparing Australia and the United States, Australia's tort law is similarly state law; however, there is

a federal common law for torts unlike the United States. The influence of the United States on Australia has

been limited. The United States may have influenced Australia's development of strict liability for products

indirectly through legislation affected by European Union, and in the 1990s class actions were introduced in

Australia. Australia has universal healthcare and 'welfare state' systems which also limit lawsuits. In New

Zealand, a no-fault accident compensation system has limited the development of personal injury torts.

Torts may be categorized in several ways, with a particularly common division between negligent and

intentional torts. Quasi-torts may be used to refer to torts which are similar but somewhat different than

typical torts. Particularly in the United States, "collateral tort" is used to refer to torts in labor law such as

intentional infliction of emotional distress ("outrage"); or wrongful dismissal; these evolving causes of action

are debated and overlap with contract law or other legal areas to some degree.

The standard action in tort is negligence. The tort of negligence provides a cause of action leading to

damages, or to relief, in each case designed to protect legal rights, including those of personal safety,

property, and, in some cases, intangible economic interests or noneconomic interests such as the tort of

negligent infliction of emotional distress. Negligence actions include claims coming primarily from car

accidents and personal injury accidents of many kinds, including clinical negligence, worker's negligence and

so forth. Product liability cases, such as those involving warranties, may also be considered negligence

actions or, particularly in the United States, may apply regardless of negligence or intention through strict

liability.

Intentional torts include, among others, certain torts arising from the occupation or use of land. The tort of

nuisance, for example, involves strict liability for a neighbor who interferes with another's enjoyment of his

real property. Trespass allows owners to sue for entrances by a person (or his structure, such as an

overhanging building) on their land. Several intentional torts do not involve land. Examples include false

imprisonment, the tort of unlawfully arresting or detaining someone, and defamation (in some jurisdictions

split into libel and slander), where false information is broadcast and damages the plaintiff's reputation.

In some cases, the development of tort law has spurred lawmakers to create alternative solutions to

disputes. For example, in some areas, workers' compensation laws arose as a legislative response to court

rulings restricting the extent to which employees could sue their employers in respect of injuries sustained

during employment. In other cases, legal commentary has led to the development of new causes of action

outside the traditional common law torts. These are loosely grouped into quasi-torts or liability torts.

Negligence is a tort which arises from the breach of the duty of care owed by one person to another from

the perspective of a reasonable person. Although credited as appearing in the United States in Brown v.

Kendall, the later English case of Donoghue v Stevenson [1932] brought England into line with the United

States and established the 'tort of negligence' as opposed to negligence as a component in specific actions.

In Donoghue, Mrs. Donoghue drank from an opaque bottle containing a decomposed snail and claimed that

it had made her ill. She could not sue Mr. Stevenson for damages for breach of contract and instead sued for


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negligence. The majority determined that the definition of negligence can be divided into four component

parts that the plaintiff must prove to establish negligence. The elements in determining the liability for

negligence are:

The plaintiff was owed a duty of care through a special relationship (e.g. doctor-patient) or some other

principle. There was a dereliction or breach of that duty. The tortfeasor directly caused the injury [but for

the defendant's actions, the plaintiff would not have suffered an injury]. The plaintiff suffered damage as a

result of that breach. The damage was not too remote; there was proximate cause to show the breach

caused the damage In certain cases, negligence can be assumed under the doctrine of res ipsa loquitur (Latin

for "the thing itself speaks"); particularly in the United States, a related concept is negligence per se.

Proximate cause means that one must be able to show that the harm was caused by the tort one are suing

for. The defense may argue that there was a prior cause or a superseding intervening cause. A common

situation where a prior cause becomes an issue is the personal injury car accident, where the person re-

injures an old injury. For example someone who has a bad back is injured in the back in a car accident. Years

later he is still in pain. He must prove the pain is caused by the car accident, and not the natural progression

of the previous problem with the back. A superseding intervening cause happens shortly after the injury. For

example, if after the accident the doctor who works on one commits malpractice and injures you further, the

defense can argue that it was not the accident, but the incompetent doctor who caused your injury.

Intentional torts are any intentional acts that are reasonably foreseeable to cause harm to an individual, and

that do so. Intentional torts have several subcategories:

Torts against the person include assault, battery, false imprisonment, intentional infliction of emotional

distress, and fraud, although the latter is also an economic tort.

Property torts involve any intentional interference with the property rights of the claimant (plaintiff). Those

commonly recognized include trespass to land, trespass to chattels (personal property), and conversion.

An intentional tort requires an overt act, some form of intent, and causation. In most cases, transferred

intent, which occurs when the defendant intends to injure an individual but actually ends up injuring another

individual, will satisfy the intent requirement. Causation can be satisfied as long as the defendant was a

substantial factor in causing the harm.

A statutory tort is like any other, in that it imposes duties on private or public parties, however they are

created by the legislature, not the courts. For example, the European Union's Product Liability Directive

imposes strict liability for defective products that harm people; such strict liability is not uncommon

although not necessarily statutory.

As another example, in England common law liability of a landowner to guests or trespassers was replaced

by the Occupiers' Liability Act 1957; a similar situation occurred in the U.S. State of California in which a

judicial common law rule established in Rowland v. Christian was amended through a 1985 statute. Statutory

torts also spread across workplace health and safety laws and health and safety in food. In some cases

federal or state statutes may preempt tort actions, which is particularly discussed in terms of the U.S. FDA

Preemption; although actions in the United States for medical devices are preempted due to Riegel v.

Medtronic, Inc. (2008), actions for medical drugs are not due to Wyeth v. Levine (2009).


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"Nuisance is traditionally used to describe an activity which is harmful or annoying to others such as

indecent conduct or a rubbish heap. Nuisances either affect private individuals (private nuisance) or the

general public (public nuisance). The claimant can sue for most acts that interfere with their use and

enjoyment of their land. In English law, whether activity was an illegal nuisance depended upon the area and

whether the activity was "for the benefit of the commonwealth", with richer areas subject to a greater

expectation of cleanliness and quiet. The case Jones v Powell (1629) provides an early example, in which a

person's professional papers were damaged by the vapors of a neighboring brewery. Although the outcome

of this case is unclear,[20] Whitelocke of the Court of the King's Bench is recorded as saying that since the

water supply in area was already contaminated, the nuisance was not actionable as it is "better that they

should be spoiled than that the commonwealth stand in need of good liquor".

In Rylands v. Fletcher (1868), strict liability was established for a dangerous escape of some hazard, including

water, fire, or an animal as long as the cause was not remote. In Cambridge Water Co Ltd v Eastern Counties

Leather plc (1994)), chemicals from a factory seeped through a floor into the water table, contaminating East

Anglia's water reservoirs.

Defamation is tarnishing the reputation of someone; it has two varieties, slander and libel. Slander is spoken

defamation and libel is printed or broadcast defamation. The two otherwise share the same features:

making a factual assertion for which evidence does not exist. Defamation does not affect or hinder the

voicing of opinions, but does occupy the same fields as rights to free speech in the First Amendment to the

Constitution of the United States, or Article 10 of the European Convention of Human Rights. Related to

defamation in the U.S. are the actions for misappropriation of publicity, invasion of privacy, and disclosure.

Abuse of process and malicious prosecution are often classified as dignitary torts as well.

Business or economic torts typically involve commercial transactions, and include tortious interference with

trade or contract, fraud, injurious falsehood, and negligent misrepresentation. Negligent misrepresentation

torts are distinct from contractual cases involving misrepresentation in that there is no privacy of contract;

these torts are likely to involve pure economic loss which has been less-commonly recoverable in tort. One

criterion for determining whether economic loss is recoverable is the "foreseeability" doctrine. The

economic loss rule is highly confusing and inconsistently applied. In 2010, the supreme court of the U.S.

state of Washington replaced the economic loss doctrine with an "independent duty doctrine".

Economic antitrust torts has been somewhat been submerged by modern competition law. However, in the

United States, private parties are permitted in certain circumstances to sue for anticompetitive practices,

including under federal or state statutes or on the basis of common law tortious interference, which may be

based upon the Restatement (Second) of Torts 766. Federal laws include the Sherman Antitrust Act of 1890

followed by the Clayton Antitrust Act which restrict cartels and through Federal Trade Commission regulate

mergers and acquisitions. In the European Union, articles 101 and 102 of the Treaty on the Functioning of

the European Union apply but allowing private actions to enforce antitrust laws is under discussion.

Negligent misrepresentation as tort where no contractual privity exists was disallowed in England by Derry v

Peek [1889]; however, this position was overturned in Hedley Byrne v Heller in 1964 so that such actions

were allowed if a "special relationship" existed between the plaintiff and defendant. United States courts

and scholars "paid lip-service" to Derry; however, scholars such as William Prosser argued that it was

misinterpreted by English courts.[25] The case of Ultramares Corporation v. Touche (1932) limited the

liability of an auditor to known identified beneficiaries of the audit and this rule was widely applied in the

United States until the 1960s. The Restatement (Second) of Torts expanded liability to "foreseeable" users


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rather than specifically identified "foreseen" users of the information, dramatically expanding liability and

affecting professionals such as accountants, architects, attorneys, and surveyors. As of 1989, most U.S.

jurisdictions follow either the Ultramares approach or the Restatement approach.

The tort of deceit for inducement into a contract is a tort in English law, but in practice has been replaced by

actions under Misrepresentation Act 1967. In the United States, similar torts existed but have become

superseded to some degree by contract law and the pure economic loss rule. Historically (and to some

degree today), fraudulent (but not negligent) misrepresentation involving damages for economic loss may be

awarded under the "benefit-of-the-bargain" rule (damages identical to expectation damages in contracts)

which awards the plaintiff the difference between the value represented and the actual value. Beginning

with Stiles v. White (1846) in Massachusetts, this rule spread across the country as a majority rule with the

"out-of-pocket damages" rule as a minority rule. Although the damages under the "benefit-of-the-bargain"

are described as compensatory, the plaintiff is left better off than before the transaction. The economic loss

rule which emerged in the 20th century would eliminate these losses if applied strictly, which has led to

preclusion of the tort or an exception to allow the tort if not related to a contract.


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The Law of Contract

The law of contract is about the enforcement of promises. Not all promises are enforced by courts. To

enforce a set of promises, or an agreement, courts look for the presence of certain elements. When these

elements are present a court will find that the agreement is a contract. This is a somewhat artificial process.

To a certain extent, courts will find that some agreements simply look like contracts and they then reason

backward and find the elements necessary to form a contract.

As a student you need to be aware of the elements required to constitute an enforceable contract.

To say that we have a contract means that the parties have voluntarily assumed liabilities with regard to

each other. The process of agreement begins with an offer. For a contract to be formed, this offer must be

unconditionally accepted. The law imposes various requirements as to the communication of the offer and

the acceptance. Once there has been a valid communication of the acceptance, the law requires that certain

other elements (covered in Chapters 3 and 4 of this guide) are present.

If these elements are not present, a court will not find that a contract exists between the parties. In the

absence of a contract, neither party will be bound to the tentative promises or agreements they have made.

It is thus of critical importance to determine whether or not a contract has been formed.

The offer

It is important to understand that it is not the subjective intentions of the parties that determine the legal

effect of their words or actions but the objective inference from them. That is to say, the offer is interpreted

according to an objective intention the interpretation the reasonable person in the position of the offeree

would place upon the statement or action of the offeror. This is crucial in answering the basic question what

is an offer? See Centrovincial Estates v Merchant Investors Assurance Company (1983) regarding the

objective requirement.

An offer is an expression of willingness to contract on certain terms. It must be made with the intention that

it will become binding upon acceptance. There must be no further negotiations or discussions required. The

nature of an offer is encapsulated by two cases involving the same defendant, Manchester City Council. The

Council decided to sell houses that it owned to sitting tenants. In two cases, the claimants entered into

agreements with the Council. The Council then resolved not to sell housing unless it was contractually bound

to do so. In these two cases the question arose as to whether or not the Council had entered into a contract.

In one case, Storer v Manchester City Council (1974), the Court of Appeal found that there was a binding

contract. The Council had sent Storer a communication that they intended would be binding upon his

acceptance. All Storer had to do to bind himself to the later sale was to sign the document and return it.

In contrast, however, in Gibson v Manchester City Council (1979), the Council sent Gibson a document which

asked him to make a formal invitation to buy and stated that the Council may be prepared to sell the house

to him. Gibson signed the document and returned it. The House of Lords held that a contract had not been

concluded because the Council had not made an offer capable of being accepted. Lord Diplock stated:

The words may be prepared to sell are fatal, so is the invitation, not, be it noted, to accept the offer, but to

make formal application to buy on the enclosed application form.


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It is a letter setting out the financial terms on which it may be the council would be prepared to consider a

sale and purchase in due course.

An important distinction between the two cases is that in Storers case there was an agreement as to price,

but in Gibsons case there was not. In Gibsons case, important terms still needed to be determined.

It is very important to realise from the outset that not all communications will be offers. They will lack the

requisite intention to be bound upon acceptance. If they are not offers, what are they? At this point, we will

distinguish an offer from other steps in the negotiation process. Other steps in the negotiation process might

include a statement of intention, a supply of information or an invitation to treat. We will examine these in

turn.

A statement of intention

In this instance, one party states that he intends to do something. This differs from an offer in that he is not

stating that he will do something. The case of Harris v Nickerson (1873) illustrates this point. The

auctioneers advertisement was a statement that he intended to sell certain items; it was not an offer that

he would sell the items.

A supply of information

In this instance, one party provides information to another party. He supplies the information to enlighten

the other party. The statement is not intended to be acted upon. See Harvey v Facey (1893) where one party

telegraphed, in response to the query of the other, what the lowest price was that he would accept for his

property.

An invitation to treat

This is a puzzling term. An invitation to treat is an indication of a willingness to conduct business. It is an

invitation to make an offer or to commence negotiations.

Courts have considered whether or not a communication was an offer or an invitation to treat in a wide

variety of circumstances.

Communication of the offer

To be effective an offer must be communicated: there can be no acceptance of the offer without knowledge

of the offer. The reason for this requirement is that if we say that a contract is an agreed bargain, there can

be no agreement without knowledge. There can be no meeting of the minds if one mind is unaware of the

other. Stated another way, an acceptance cannot mirror an offer if the acceptance is made in ignorance of

the offer.

The authorities are, however, divided on the need to communicate the offer. In Gibbonsv Proctor (1891) a

policeman was allowed to recover a reward when he sent information in ignorance of the offer of reward.

The better view is thought to be expressed in the Australian case of R v Clarke (1927): there cannot be assent

without knowledge of the offer; and ignorance of the offer is the same thing whether it is due to never

hearing of it or forgetting it after hearing.

The case of Tinn v Hoffman (1873) deals with the problem of cross-offers.


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Acceptance of the offer

For a contract to be formed there must be an acceptance of the offer. The acceptance must be an

agreement to each of the terms of the offer. It is sometimes said that the acceptance must be a mirror

image of the offer. The acceptance can be by words or by conduct. See Brogden v Metropolitan Railway

Company, where the offeree accepted the offer by performance. Acceptance occurs when the offerees

words or conduct give rise to the objective inference that the offeree assents to the offerors terms: Day

Morris Associates v Voyce (2003).

If the offeree attempts to add new terms when accepting, this is a counter-offer and not an acceptance. A

counter-offer implies a rejection of the original offer, which is thereby destroyed and cannot subsequently

be accepted. See Hyde v Wrench (1840).

Where the offeree queries the offer and seeks more information, this is neither an acceptance nor a

rejection and the original offer stands. See Stevenson, Jacques & Co v McLean (1880).

In some cases, the parties will attempt to contract on (differing) standard forms. In this instance, there will

be a battle of the forms with offers and counter-offers passing to and fro. The Court of Appeal has held that

the last shot wins this battle of the forms. See Butler Machine Tool v Ex-Cell-o (1979) and Tekdata

Interconnections Ltd v Amphenol Ltd (2009).

Communication of the acceptance

The general rule is that acceptance is not effective until it is communicated to the offeror. This is sometimes

expressed by saying that the acceptance cannot be made through silence. See Felthouse v Bindley (1862).

The offeror cannot waive communication if that would be to the detriment of the offeree. This rule is not,

however, an absolute rule (see Vitol SA v Norelf Ltd (1996)).

The general rule is displaced in the case of a unilateral contract. A unilateral contract is one where one party

makes an offer to pay another if that other party performs some act or refrains from some act. The other

party need make no promise to do the act or refrain from the act. In these cases, acceptance of the offer

occurs through performance and there is no need to communicate acceptance in advance of p erformance.

An example of the offer of a unilateral contract is an offer of a reward for the return of a lost cat.

In the case of Carlill v Carbolic Smoke Ball Company (1893) it was established that performance is the

acceptance of the offer and there is no need to communicate the attempt to perform. Communication of the

acceptance is waived because it would be unreasonable of the offeror to rely on the absence of a

communication which would have been superfluous or which no reasonable person would expect to be

made.

Exceptions to the need for communication of the acceptance

As we saw above, the general rule is that for an acceptance to be valid it must be communicated to the

offeror. It must be brought to the offerors attention. To this general rule there are certain exceptions

situations where the law does not require communication of the acceptance. One such exception concerning

unilateral contracts was considered above. The other principal exception is the postal acceptance rule.


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Where the offeror has waived the requirement of communication

As we have seen above, in certain circumstances the offeror may waive the necessity for communication.

This is what occurred in Carlill v Carbolic Smoke Ball Co. A weakness to this exception is that it appears to be

of limited application where there is a bilateral contract. In Felthouse v Bindley, the argument can be made

that the uncle had clearly waived any need for the nephew to communicate his acceptance of the offer and

yet the court held that the offer had not been accepted.

The postal acceptance rule

Communication by post gives rise to special practical difficulties. An offer is posted. The offeree receives the

offer and posts her acceptance. The letter of acceptance will take several days to arrive. At what point is the

acceptance good? If one waits until the offeror receives the letter, how will the offeree know when this is?

The offeree has known from the time she posted the letter that she has accepted the offer. There is also the

occasional problem of the letter that never arrives at its destination.

To overcome these problems, the courts devised an exception to the general requirement of communication

(which would have been that the acceptance is only good when the letter arrives). The exception was

devised in the cases of Adams v Lindsell (1818) and Household Fire Insurance v Grant (1879).

These decisions establish the postal acceptance rule, that is, that acceptance is complete when posted. This

puts the risk of delay and loss on the offeror. It is important to understand that the rule is an exception to

the general rule requiring communication.

The postal acceptance rule will only prevail in certain circumstances. It will prevail where use of the post was

reasonably contemplated by the parties or stipulated by the offeror. See Household Fire Insurance v Grant

(1879).

The postal acceptance rule will not allow a contract to be concluded by posting the acceptance where the

letter is incorrectly addressed by the offeree. The offer may accept the risk of delay occasioned by the post

but not the carelessness of the offeree: LJ Korbetis v Transgrain Shipping BV (2005).

The operation of the postal acceptance rules creates practical difficulties. The greatest problem is that

contracts can be formed without the offeror being aware of the contract. For example, an offeror makes an

offer. Unbeknown to him, the offeree accepts. The offeror then revokes the offer before receiving the postal

acceptance.

The offeror contracts with another party over the same matter and then receives the postal acceptance

from the original offeree. The offeror is now in breach of his contract with the original offeree.

Partly because of these problems and partly because of technological advances (the post is no longer a such

crucial method of communication), courts seem to be confining the scope of the postal acceptance rule. This

is a rationale behind the decision in Holwell Securities v Hughes (1974). In this case, the postal acceptance

rule did not apply because the offeror did not intend that it would apply. While this case is authority for the

proposition that the terms of an offer must be met for acceptance to be valid, it also illustrates the

reservations modern courts have over the postal acceptance rule.


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As modern forms of communication such as fax and email have become almost instantaneous, courts have

shown a marked reluctance to extend the postal acceptance rule to these new forms of communication.

However, in an early case involving a telegram, a form of the postal acceptance rule was applied.

In later cases involving telexes, the courts refused to extend the application of the postal acceptance rules.

See Entores v Miles Far East Corp (1955) and Brinkibon Ltd v Stahag Stahl (1982).

These cases are also important for the principles they establish with respect to instantaneous forms of

communication.

English contract law awaits a case involving an almost instant aneous communication such as a fax or an

email. It is clear that a contract can be formed through such mediums (see, for example, Allianz Insurance

Co-Egypt v Aigaion Insurance Co SA (2008)).

Because of the technology involved in both these forms of communication they are not entirely

instantaneous. An email, in particular, may take some time to arrive at its destination, depending upon the

route it takes to its recipient. As Poole has suggested there are two possible approaches to the email

communication of the acceptance: postal analogy or receipt rule.

Method of acceptance

Sometimes an offeror may stipulate that acceptance is to be made using a specific method. See Eliason v

Henshaw (1819) and Manchester Diocesan Council for Education v Commercial and General Investments

(1970).

In other cases the required method for communicating acceptance may also be inferred from the making of

the offer. See Quenerduaine v Cole (1883).

The problem that arises is this: if the offeree uses another method of acceptance, does this acceptance

create a contract? The answer is that if the other method used is no less advantageous to the offeror, the

acceptance is good and a contract is formed. This is the result unless the offeror stipulates a certain method

of acceptance and further stipulates that only this method of acceptance is good. See Manchester Diocesan

Council for Education v Commercial and General Investments (1970).

The end of an unaccepted offer

Offers do not exist indefinitely; open for an indeterminate time awaiting acceptance. Indeed, some offers

may never be accepted. What we will consider at the conclusion of this chapter is what happens to an offer

before it has been accepted. There is no legal commitment until a contract has been concluded by the

acceptance of an offer.

Change of mind

Because there is no legal commitment until a contract has been formed, either party may change their mind

and withdraw from negotiations. See Offord v Davies (1862) and Routledge v Grant (1828). In situations

where an offeror has stipulated that the offer will be open for a certain time period, he or she can

nevertheless withdraw the offer within this time period. This will not be the case, however, where the

offeror is obliged (by a separate binding collateral contract) to keep the offer open for a specified period of


14

time. For the revocation of an offer to be effective, there must be actual communication of the revocation.

See Byrne v van Tienhoven (1880).

It is not necessary for revocation to be communicated by the offeror. Communication to the offeree through

a reliable source is sufficient. See Dickinson v Dodds (1876).

If a condition in the offer is not fulfilled, the offer terminates

Where the offer is made subject to a condition which is not fulfilled, the offer terminates. The condition may

be implied. See Financings Ltd v Stimson (1962). In this case, the offeror purported to accept an offer to

purchase a car after the car had been badly damaged.

Death: if the offeror dies, the offer may lapse

Again, a point on which the cases divide. On the one hand, Bradbury v Morgan (1862) 158 ER 877 (Ex) held

that the deceased offerors estate was liable on the offer of a guarantee after the death of the offeror.

However, obiter dicta in Dickinson v Dodds (1876) state that death of either party terminated the offer

because there could be no agreement. The best view is probably that a party cannot accept an offer once

notified of the death of the offeror but that in certain circumstances the offer could be accepted in

ignorance of death. The death of an offeree probably terminates the offer in that the offerees personal

representatives could not purport to accept the offer.

Lapse of an offer

The offeror may set a time limit for acceptance; once this time has passed the offer lapses. In many cases,

the offeror can revoke the offer before the time period lapses provided that the offer has not been

accepted. See Offord v Davies (1862). In cases in which no time period is stipulated for the offer, an offeree

cannot make an offeror wait forever. The offeror is entitled to assume that acceptance will be made within a

reasonable time period or not at all. What a reasonable time period is will depend upon the circumstances of

the case. See Ramsgate Victoria Hotel v Montefiore (1866).


15

The law of sales

This law has the purpose of promoting the protection of customers and thereby contributing to the sound

development of the national economy by prescribing the matters that financial product providers should

explain to customers in the sale etc. of financial products, by making financial product providers liable to

customers for damages where the customer is harmed by the financial product provider's failure to explain

such matters, and establishing measures for ensuring that solicitations made by financial product providers

in connection with the sale of financial products are proper.

The sale of goods (governed by the Sale of Goods Act 1930) is the most common of all commercial contracts.

Goods

GOODS form the subject of a contract of sale. They mean every kind of movable property other than

actionable claims & money, and include stock and shares, growing crops, grass and things attached to or

forming part of the land which are agreed to be severed before sale or under the contract of sale.

Sale & Quality of Goods

In a sale of description, the buyer must get the described goods if he has not seen the goods and relies on

the description alone.Where there is a contract for the sale of goods by description, there is an implied

condition that the goods shall correspond with the description.

Buyer Beware

There is no protection for the buyer in relation to the quality of goods except in the following situations:

Goods sold must be of merchantable quality. However, if the buyer has examined the goods, defects

which such examination ought to have revealed would be exempted from the requirement of

merchantable quality.

If the buyer relied on the skill and judgment of the seller, the good should be fit for the purpose

described by the buyer.

Conditions & Warranties

Warranty in its ordinary English meaning denotes a binding promise.

Everyone knows what a man means when he says, I guarantee it, or I warrant it, or I give one my word for

it. He means the he binds himself.

Lawyers use it to denote a subsidiary term in a contract as distinct from a vital term which they call a

condition.

Therefore, if used in this technical sphere, condition is a vital term and warranty is a subsidiary term.

Breach of Condition

It is the essential part or vital term of a contract whose breach creates the option for the buyer to terminate

the contract


16

Breach of Warranty

It is the subsidiary part of the contract. Its breach can only lead to a claim for damages but not to a

repudiation of the contract.

Implied Conditions

Condition as to title

Condition in a sale by description the buyer must get the described goods

Condition in a sale by sample, the bulk must correspond with the sample.

Conditions as to fitness & quality (in the following cases only; in other cases caveat emptor applies)

o Buyer makes known to the seller the particular purpose for which he requires the goods.

o Buyer relies on the skill & judgment of the seller (The sellers business is to supply such

goods whether he is the manufacturer or producer or not)

Condition as to merchantability (exception to the rule of caveat emptor)

Where goods are bought by description from a seller who deals in goods of that description

(whether he is manufacturer or producer or not), there is an implied condition that the goods shall

be of merchantable quality.

Merchantability means essentially that the goods must be fit for the ordinary purpose for which such goods

are used.

Condition as to merchantability when applied to food products, the condition of fitness of

merchantability requires that the goods should be wholesome, i.e. fit for the purpose of

consumption.

Change of condition to warranty

When a condition is reduced to the status of a warranty, the effect is not the condition becomes a warranty,

but that the condition remains a condition, it is only the remedy which changes.

Circumstances

Circumstances are such that goods cannot be returned

When the buyer has accepted the goods & intimates to the seller.

When goods have been delivered to the buyer & he does any act in relation to them which is

inconsistent with the ownership of the seller.

In a sale or return, after the lapse of reasonable time, the buyer retains them for unreasonably long

time without intimating, the seller that he has rejected them

Sale & Transfer of Ownership

Goods must be ascertained and specific for the transfer of ownership to take place.

In the case of specific and ascertained goods, we should explore whether the contract provides in

express or implied terms, on the passing of ownership. These terms should be applied.

In the case of specific and ascertained goods, if the contract does not provide in either express or

implied terms on the passing of ownership, the ownership is transferred to the buyer when the

contract is made.


17

The Law of Agency

The law of agency is an area of commercial law dealing with a set of contractual, quasi-contractual and non-

contractual relationships that involve a person, called the agent, that is authorized to act on behalf of

another (called the principal) to create a legal relationship with a third party.[1] Succinctly, it may be

referred to as the relationship between a principal and an agent whereby the principal, expressly or

implicitly, authorizes the agent to work under his control and on his behalf. The agent is, thus, required to

negotiate on behalf of the principal or bring him and third parties into contractual relationship. This branch

of law separates and regulates the relationships between:

Types of agent

1. Agents and principals

2. Agents and the third parties with whom they deal on their principals' behalf

3. Principals and the third parties when the agents purport to deal on their behalf.

The common law principle in operation is usually represented in the Latin phrase, qui facit per alium, facit

per se, i.e. the one who acts through another, acts in his or her own interests and it is a parallel concept to

vicarious liability and strict liability in which one person is held liable in criminal law or tort for the acts or

omissions of another.

Authority

An agent who acts within the scope of authority conferred by his or her principal binds the principal in the

obligations he or she creates against third parties. There are essentially three kinds of authority recognized

in the law: actual authority (whether express or implied), apparent authority, and ratified authority.

Actual authority can be of two kinds. Either the principal may have expressly conferred authority on the

agent, or authority may be implied. Authority arises by consensual agreement, and whether it exists is a

question of fact. An agent, as a general rule, is only entitled to indemnity from the principal if he or she has

acted within the scope of her actual authority, and may be in breach of contract, and liable to a third party

for breach of the implied warranty of authority. In tort, a claimant may not recover from the principal unless

the agent is acting within the scope of employment.

Express actual authority

Express actual authority means an agent has been expressly told he or she may act on behalf of a principal.

Ireland v Livingstone [1872] LR 5 HL 395

Implied actual authority

Implied actual authority, also called "usual authority", is authority an agent has by virtue of being reasonably

necessary to carry out his express authority. As such, it can be inferred by virtue of a position held by an

agent. For example, partners have authority to bind the other partners in the firm, their liability being joint

and several, and in a corporation, all executives and senior employees with decision-making authority by

virtue of their position have authority to bind the corporation.

Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549


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Apparent authority (also called "ostensible authority") exists where the principal's words or conduct would

lead a reasonable person in the third party's position to believe that the agent was authorized to act, even if

the principal and the purported agent had never discussed such a relationship. For example, where one

person appoints a person to a position which carries with it agency-like powers, those who know of the

appointment are entitled to assume that there is apparent authority to do the things ordinarily entrusted to

one occupying such a position. If a principal creates the impression that an agent is authorized but there is

no actual authority, third parties are protected so long as they have acted reasonably. This is sometimes

termed "agency by estoppel" or the "doctrine of holding out", where the principal will be estopped from

denying the grant of authority if third parties have changed their positions to their detriment in reliance on

the representations made.

Liability of agent to third party

If the agent has actual or apparent authority, the agent will not be liable for acts performed within the scope

of such authority, so long as the relationship of the agency and the identity of the principal have been

disclosed. When the agency is undisclosed or partially disclosed, however, both the agent and the principal

are liable. Where the principal is not bound because the agent has no actual or apparent authority, the

purported agent is liable to the third party for breach of the implied warranty of authority.

Liability of agent to principal

If the agent has acted without actual authority, but the principal is nevertheless bound because the agent

had apparent authority, the agent is liable to indemnify the principal for any resulting loss or damage.

Liability of principal to agent

If the agent has acted within the scope of the actual authority given, the principal must indemnify the agent

for payments made during the course of the relationship whether the expenditure was expressly authorized

or merely necessary in promoting the principal's business.

Duties

An agent owes the principal a number of duties. These include:

A duty to undertake the task or tasks specified by the terms of the agency (that is, the agent must

not do things that he has not been authorized by the principal to do)

A duty to discharge his duties with care and due diligence; and

A duty to avoid conflict of interest between the interests of the principal and his own (that is, the

agent cannot engage in conduct where stands to gain a benefit for himself to the detriment of the

principal).

An agent must not accept any new obligations that are inconsistent with the duties owed to the principal. An

agent can represent the interests of more than one principal, conflicting or potentially conflicting, only after

full disclosure and consent of the principal.

An agent also must not engage in self-dealing, or otherwise unduly enrich himself from the agency. An agent

must not usurp an opportunity from the principal by taking it for himself or passing it on to a third party.


19

In return, the principal must make a full disclosure of all information relevant to the transactions that the

agent is authorized to negotiate and pay the agent either a prearranged commission, or a reasonable fee

established after the fact.

The law of property

Property law is the area of law that governs the various forms of ownership and tenancy in real property

(land as distinct from personal or movable possessions) and in personal property, within the common law

legal system. In the civil law system, there is a division between movable and immovable property. Movable

property roughly corresponds to personal property, while immovable property corresponds to real estate or

real property, and the associated rights and obligations thereon.

The concept, idea or philosophy of property underlies all property law. In some jurisdictions, historically all

property was owned by the monarch and it devolved through feudal land tenure or other feudal systems of

loyalty and fealty.

Though the Napoleonic code was among the first government acts of modern times to introduce the notion

of absolute ownership into statute, protection of personal property rights was present in medieval Islamic

law and jurisprudence,[1] and in more feudalist forms in the common law courts of medieval and early

modern England.

Property rights and rights to people

Property rights are rights over things enforceable against all other persons. By contrast, contractual rights

are rights enforceable against particular persons. Property rights may, however, arise from a contract; the

two systems of rights overlap. In relation to the sale of land, for example, two sets of legal relationships exist

alongside one another: the contractual right to sue for damages, and the property right exercisable over the

land. More minor property rights may be created by contract, as in the case of easements, covenants, and

equitable servitudes.

A separate distinction is evident where the rights granted are insufficiently substantial to confer on the

nonowner a definable interest or right in the thing. The clearest example of these rights is the license. In

general, even if licenses are created by a binding contract, they do not give rise to property interests.

Property rights and personal rights

Property rights are also distinguished from personal rights. Practically all contemporary societies

acknowledge this basic ontological and ethical distinction. In the past, groups lacking political power have

often been disqualified from the benefits of property. In an extreme form, this has meant that people have

become "objects" of propertylegally "things" or chattels. (See slavery.) More commonly, marginalized

groups have been denied legal rights to own property. These include Jews in England and married women in

Western societies until the late 19th century.

The dividing line between personal rights and property rights is not always easy to draw. For instance, is

one's reputation property that can be commercially exploited by affording property rights to it? The

question of the proprietary character of personal rights is particularly relevant in the case of rights over

human tissue, organs and other body parts.


20

There have been recent cases of women being subordinated to the fetus, through the imposition of

unwanted caesarian sections. English judges have recently made the point that such women lack the right to

exclusive control over their own bodies, formerly considered a fundamental common-law right. In the

United States, a "quasi-property" interest has been explicitly declared in the dead body. Also in the United

States, it has been recognised that people have an alienable proprietary "right of publicity" over their

"persona". The patent\patenting of biotechnological processes and products based on human genetic

material may be characterised as creating property in human life.

A particularly difficult question is whether people have rights to intellectual property developed by others

from their body parts. In the pioneering case on this issue, the Supreme Court of California held in Moore v.

Regents of the University of California (1990) that individuals do not have such a property right.

Classification

Property law is characterised by a great deal of historical continuity and technical terminology. The basic

distinction in common law systems is between real property (land) and personal property (chattels).

Before the mid-19th century, the principles governing the transfer of real property and personal property on

intestacy were quite different. Though this dichotomy does not have the same significance anymore, the

distinction is still fundamental because of the essential differences between the two categories. An obvious

example is the fact that land is immovable, and thus the rules that govern its use must differ. A further

reason for the distinction is that legislation is often drafted employing the traditional terminology.

The division of land and chattels has been criticised as being not satisfactory as a basis for categorising the

principles of property law since it concentrates attention not on the proprietary interests themselves but on

the objects of those interests. Moreover, in the case of fixtures, chattels which are affixed to or placed on

land may become part of the land.

Real property is generally sub-classified into:

1. Corporeal hereditaments tangible real property (land)

2. Incorporeal hereditaments intangible real property such as an easement of way

Possession

The concept of possession developed from a legal system whose principal concern was to avoid civil

disorder. The general principle is that a person in possession of land or goods, even as a wrongdoer, is

entitled to take action against anyone interfering with the possession unless the person interfering is able to

demonstrate a superior right to do so.

In England, the Torts Act 1977 has significantly amended the law relating to wrongful interference with

goods and abolished some longstanding remedies and doctrines.

Transfer of property

The most usual way of acquiring an interest in property is as the result of a consensual transaction with the

previous owner, for example, a sale or a gift. Dispositions by will may also be regarded as consensual

transactions, since the effect of a will is to provide for the distribution of the deceased person's property to


21

nominated beneficiaries. A person may also obtain an interest in property under a trust established for his or

her benefit by the owner of the property.

It is also possible for property to pass from one person to another independently of the consent of the

property owner. For example, this occurs when a person dies intestate, goes bankrupt, or has the property

taken in execution of a court judgment.

Priority

Different parties may claim an interest in property by mistake or fraud, with the claims being inconsistent of

each other. For example, the party creating or transferring an interest may have a valid title, but

intentionally or negligently creates several interests wholly or partially inconsistent with each other. A court

resolves the dispute by adjudicating the priorities of the interests. but according to the Indian property law it

define the Transfer of property means an act by which a living person conveys property, in present or in

future, to one or more other living persons, or to himself and one or more other living persons; and "to

transfer property" is to perform such act. In this section "living person includes a company or association or

body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the

time being in force relating to transfer of property to or by companies, associations or bodies of individuals

John Hardy from the Legal institute of England stated "For the title to be valid, we must incorporate the

company or association for the living" This statement has been used thoroughly.

Lease

Historically, leases served many purposes, and the regulation varied according to intended purposes and the

economic conditions of the time. Leaseholds, for example, were mainly granted for agriculture until the late

eighteenth century and early nineteenth century, when the growth of cities made the leasehold an

important form of landholding in urban areas.

The modern law of landlord and tenant in common law jurisdictions retains the influence of the common law

and, particularly, the laissez-faire philosophy that dominated the law of contract and the law of property in

the 19th century. With the growth of consumerism, the law of consumer protection recognised that

common law principles assuming equal bargaining power between parties may cause unfairness.

Consequently, reformers have emphasised the need to assess residential tenancy laws in terms of protection

they provide to tenants. Legislation to protect tenants is now common.

The laws of Bankruptcy

Bankruptcy is a legal status of a person or other entity that cannot repay the debts it owes to creditors. In

most jurisdictions, bankruptcy is imposed by a court order, often initiated by the debtor.

Bankruptcy is not the only legal status that an insolvent person or other entity may have, and the term

bankruptcy is therefore not a synonym for insolvency. In some countries, including the United Kingdom,

bankruptcy is limited to individuals, and other forms of insolvency proceedings (such as liquidation and

administration) are applied to companies. In the United States, bankruptcy is applied more broadly to formal

insolvency proceedings


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Modern law and debt restructuring

The principal focus of modern insolvency legislation and business debt restructuring practices no longer rests

on the elimination of insolvent entities but on the remodelling of the financial and organisational structure

of debtors experiencing financial distress so as to permit the rehabilitation and continuation of their

business.

For private households, it is argued to be insufficient to merely dismiss debts after a certain period. It is

important to assess the underlying problems and to minimise the risk of financial distress to re-occur. It has

been stressed that debt advice, a supervised rehabilitation period, financial education and social help to find

sources of income and to manage household expenditures better need to be equally provided during this

period of rehabilitation (Reifner et al., 2003; Gerhardt, 2009; Frade, 2010). In most EU Member States, debt

discharge is conditioned by a partial payment obligation and by a number of requirements concerning the

debtor's behaviour. In the United States (US), discharge is conditioned to a lesser extent. Nevertheless, it

should be noted that the spectrum is broad in the EU, with the UK coming closest to the US system (Reifner

et al., 2003; Gerhardt, 2009; Frade, 2010). Other Member States do not provide the option of a debt

discharge. Spain, for example, passed a bankruptcy law (ley concursal) in 2003 which provides for debt

settlement plans that can result in a reduction of the debt (maximally half of the amount) or an extension of

the payment period of maximally five years (Gerhardt, 2009); nevertheless, it does not foresee debt

discharge.

Fraud

Bankruptcy fraud is a white-collar crime. While difficult to generalise across jurisdictions, common criminal

acts under bankruptcy statutes typically involve concealment of assets, concealment or destruction of

documents, conflicts of interest, fraudulent claims, false statements or declarations, and fee fixing or

redistribution arrangements. Falsifications on bankruptcy forms often constitute perjury. Multiple filings are

not in and of themselves criminal, but they may violate provisions of bankruptcy law. In the U.S., bankruptcy

fraud statutes are particularly focused on the mental state of particular actions. Bankruptcy fraud is a federal

crime in the United States.

Bankruptcy fraud should be distinguished from strategic bankruptcy, which is not a criminal act, but may

work against the filer.

All assets must be disclosed in bankruptcy schedules whether or not the debtor believes the asset has a net

value. This is because once a bankruptcy petition is filed, it is for the creditors, not the debtor, to decide

whether a particular asset has value. The future ramifications of omitting assets from schedules can be quite

serious for the offending debtor. In the United States, a closed bankruptcy may be reopened by motion of a

creditor or the U.S. trustee if a debtor attempts to later assert ownership of such an "unscheduled asset"

after being discharged of all debt in the bankruptcy. The trustee may then seize the asset and liquidate it for

the benefit of the (formerly discharged) creditors. Whether or not a concealment of such an asset should

also be considered for prosecution as fraud and/or perjury would then be at the discretion of the judge

The law of negotiable instruments

A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on

demand, or at a set time with the payer named on the negotiable instrument.More specifically, it is a


23

document contemplated by a contract, which warrants the payment of money without condition which may

be paid on demand or at a future date.

Examples of negotiable instruments include promissory notes, bills of exchange, bank notes and cheques.

Although, some banknotes are not legal negotiable instruments such as current Federal Reserve Notes.

Although passing for negotiable instruments most FRN's in circulation today are no longer legal negotiable

instruments since the promise to pay or pay to the bearer on demand was taken off the notes near 1963.

They no longer promise to pay dollars but claim to be dollars themselves.

As payment of money is promised subsequently, the instrument itself can be used by the holder in due

course as a store of value. The instrument can be transferred to a third party and it is the holder of the

instrument who will ultimately get paid by the payer on the instrument. Transfers can happen at less than

the face value of the instrument and this is known as discounting, this may happen for example if there is

doubt about the payer's ability to pay.

Negotiable instruments distinguished from other types of contracts

A negotiable instrument can serve to convey value constituting at least part of the performance of a

contract, albeit perhaps not obvious in contract formation, in terms inherent in and arising from the

requisite offer and acceptance and conveyance of consideration. The underlying contract contemplates the

right to hold the instrument as, and to negotiate the instrument to, a holder in due course, the payment on

which is at least part of the performance of the contract to which the negotiable instrument is linked. The

instrument, memorializing:

1. The power to demand payment

2. The right to be paid, can move

For example, in the instance of a 'bearer instrument', wherein the possession of the document itself

attributes and ascribes the right to payment. Certain exceptions exist, such as instances of loss or theft of

the instrument, wherein the possessor of the note may be a holder, but not necessarily a holder in due

course. Negotiation requires a valid endorsement of the negotiable instrument. The consideration

constituted by a negotiable instrument is cognizable as the value given up to acquire it (benefit) and the

consequent loss of value (detriment) to the prior holder; thus, no separate consideration is required to

support an accompanying contract assignment. The instrument itself is understood as memorializing the

right for, and power to demand, payment, and an obligation for payment evidenced by the instrument itself

with possession as a holder in due course being the touchstone for the right to, and power to demand,

payment. In some instances, the negotiable instrument can serve as the writing memorializing a contract,

thus satisfying any applicable Statute of Frauds as to that contract.

The holder in due course

The rights of a holder in due course of a negotiable instrument are qualitatively, as matters of law, superior

to those provided by ordinary species of contracts:

The rights to payment are not subject to set-off, and do not rely on the validity of the underlying contract

giving rise to the debt (for example if a cheque was drawn for payment for goods delivered but defective,

the drawer is still liable on the cheque)


24

No notice need be given to any party liable on the instrument for transfer of the rights under the instrument

by negotiation. However, payment by the party liable to the person previously entitled to enforce the

instrument "counts" as payment on the note until adequate notice has been received by the liable party that

a different party is to receive payments from then on.

Transfer free of equitiesthe holder in due course can hold better title than the party he obtains it from (as

in the instance of negotiation of the instrument from a mere holder to a holder in due course)

Negotiation often enables the transferee to become the party to the contract through a contract assignment

(provided for explicitly or by operation of law) and to enforce the contract in the transferee-assignees own

name. Negotiation can be effected by endorsement and delivery (order instruments), or by delivery alone

(bearer instruments).

Types of negotiable instruments

Promissory notes and bills of exchange are two primary types of negotiable instruments.

Promissory note

Although possibly non-negotiable, a promissory note may be a negotiable instrument if it is an unconditional

promise in writing made by one person to another, signed by the maker, engaging to pay on demand to the

payee, or at fixed or determinable future time, certain in money, to order or to bearer. (see Sec.194)[5] Bank

note is frequently referred to as a promissory note, a promissory note made by a bank and payable to bearer

on demand.

Introduction of Bill of exchange

A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee. A

common type of bill of exchange is the cheque (check in American English), defined as a bill of exchange

drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade, and

are written orders by one person to his bank to pay the bearer a specific sum on a specific date. Prior to the

advent of paper currency, bills of exchange were a common means of exchange.

Exceptions

Under the Code, the following are not negotiable instruments, although the law governing obligations with

respect to such items may be similar to or derived from the law applicable to negotiable instruments:

Bills of lading and other documents of title, which are governed by Article 7 of the Code. However,

under admiralty law, a bill of lading may either be a negotiable or 'order' bill of lading or a

nonnegotiable or 'straight' bill of lading.

Deeds and other documents conveying interests in real estate, although a mortgage may secure a

promissory note

IOUs

Letters of credit, which are governed by Article 5 of the Code


25

Labor Law

Labor law mediates the relationship between workers (employees), employers, trade unions and the

government. Collective labor law relates to the tripartite relationship between employee, employer and

union. Second, individual labor law concerns employees' rights at work and through the contract for work.

The labor movement has been instrumental in the enacting of laws protecting labor rights in the 19th and

20th centuries. Labor rights have been integral to the social and economic development since the Industrial

Revolution.

Contract of employment

The basic feature of labour law in almost every country is that the rights and obligations of the worker and

the employer between one another are mediated through the contract of employment between the two.

This has been the case since the collapse of feudalism and is the core reality of modern economic relations.

Many terms and conditions of the contract are however implied by legislation or common law, in such a way

as to restrict the freedom of people to agree to certain things to protect employees, and facilitate a fluid

labour market. In the U.S. for example, the majority of state laws allow for employment to be "at will",

meaning the employer can terminate an employee from a position for any reason, so long as the reason is

not an illegal reason, including a termination in violation of public policy.

Minimum wage

There may be law stating the minimum amount that a worker can be paid per hour. This varies country to

country and depends on the living standard. The minimum wage is usually different from the lowest wage

determined by the forces of supply and demand in a free market, and therefore acts as a price floor. Each

country sets its own minimum wage laws and regulations, and while a majority of industrialized countries

has a minimum wage, many developing countries have not.

Living wage

The living wage is higher than the minimum wage. All industrialized countries are discussing Living wage,

while many developing countries are still grappling with minimum wage.

Working time

The law working time was made as people were sent to work longer than they could without a break. People

could also not get wages for their extra work and to control this, this law was established so that workers

would need to be working only for a particular time.

Before the Industrial Revolution, the workday varied between 11 and 14 hours. With the growth of

industrialism and the introduction of machinery, longer hours became far more common, with 1415 hours

being the norm, and 16 not uncommon. Use of child labour was commonplace, often in factories. In England

and Scotland in 1788, about two-thirds of persons working in the new water-powered textile factories were

children. The eight-hour movement's struggle finally led to the first law on the length of a working day,

passed in 1833 in England, limiting miners to 12 hours, and children to 8 hours. The 10-hour day was

established in 1848, and shorter hours with the same pay were gradually accepted thereafter. The 1802

Factory Act was the first labor law in the UK.


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Health and safety

Other labour laws involve safety concerning workers. The earliest English factory law was passed in 1802 and

dealt with the safety and health of child textile workers. Occupational safety and health is an area concerned

with protecting the safety, health and welfare of people engaged in work or employment. The goals of

occupational safety and health programs include to foster a safe and healthy work environment. OSH may

also protect co-workers, family members, employers, customers, and many others who might be affected by

the workplace environment.

Occupational safety and health can be important for moral, legal, and financial reasons. All organisations

have a duty of care to ensure that employees and any other person who may be affected by the companies

undertaking remain safe at all times. Moral obligations would involve the protection of employee's lives and

health. Legal reasons for OSH practices relate to the preventative, punitive and compensatory effects of laws

that protect worker's safety and health. OSH can also reduce employee injury and illness related costs,

including medical care, sick leave and disability benefit costs. OSH may involve interactions among many

subject areas, including occupational medicine, occupational hygiene, public health, safety engineering,

industrial engineering, chemistry, health physics, industrial and organizational psychology, ergonomics, and

occupational health psychology.

Anti-discrimination

Anti-discrimination law refers to the law on the right of people to be treated equally. Some countries

mandate that in employment, in consumer transactions and in political participation people must be dealt

with on an equal basis regardless of sex, age, race, ethnicity, nationality, sexual orientation, gender identity

and sometimes religious and political opinions.

Unfair dismissal

International Labour Organization states that an employee "can't be fired without any legitimate motive"

and "before offering him the possibility to defend himself". The court considered that the two-years period

of "fire at will" (without any legal motive) was "unreasonable", and contrary to convention no. 158, ratified

by France.

Child labor

Child labor was not seen as a problem throughout most of history, only becoming a disputed issue with the

beginning of universal schooling and the concepts of laborers and children's rights. Child labor can be

factory work, mining or quarrying, agriculture, helping in the parents' business, having one's own small

business (such as selling food), or doing odd jobs.

Ethical Treading Initiative

The ETI Base Code is founded on the conventions of the International Labor Organization (ILO) and is an

internationally recognized code of labor practice.

1. Employment is freely chosen

There is no forced, bonded or involuntary prison labor.


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Workers are not required to lodge "deposits" or their identity papers with their employer and are free to

leave their employer after reasonable notice.

2. Freedom of association and the right to collective bargaining are respected

Workers, without distinction, have the right to join or form trade unions of their own choosing and to

bargain collectively.

The employer adopts an open attitude towards the activities of trade unions and their organizational

activities.

Workers representatives are not discriminated against and have access to carry out their representative

functions in the workplace.

Where the right to freedom of association and collective bargaining is restricted under law, the employer

facilitates, and does not hinder, the development of parallel means for independent and free association and

bargaining.

3. Working conditions are safe and hygienic

A safe and hygienic working environment shall be provided, bearing in mind the prevailing knowledge of the

industry and of any specific hazards. Adequate steps shall be taken to prevent accidents and injury to health

arising out of, associated with, or occurring in the course of work, by minimizing, so far as is reasonably

practicable, the causes of hazards inherent in the working environment.

Workers shall receive regular and recorded health and safety training, and such training shall be repeated for

new or reassigned workers.

Access to clean toilet facilities and to potable water, and, if appropriate, sanitary facilities for food storage

shall be provided.

Accommodation, where provided, shall be clean, safe, and meet the basic needs of the workers.

The company observing the code shall assign responsibility for health and safety to a senior management

representative.

4. Child labor shall not be used

There shall be no new recruitment of child labor.

Companies shall develop or participate in and contribute to policies and programmers which provide for the

transition of any child found to be performing child labor to enable her or him to attend and remain in

quality education until no longer a child; "child" and "child labor" being defined in the appendices.

Children and young persons under 18 shall not be employed at night or in hazardous conditions.

These policies and procedures shall conform to the provisions of the relevant ILO standards.


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5. Living wages are paid

Wages and benefits paid for a standard working week meet, at a minimum, national legal standards or

industry benchmark standards, whichever is higher. In any event wages should always be enough to meet

basic needs and to provide some discretionary income.

All workers shall be provided with written and understandable Information about their employment

conditions in respect to wages before they enter employment and about the particulars of their wages for

the pay period concerned each time that they are paid.

Deductions from wages as a disciplinary measure shall not be permitted nor shall any deductions from

wages not provided for by national law be permitted without the expressed permission of the worker

concerned. All disciplinary measures should be recorded.

6. Working hours are not excessive

Working hours comply with national laws and benchmark industry standards, whichever affords greater

protection.

In any event, workers shall not on a regular basis be required to work in excess of 48 hours per week and

shall be provided with at least one day off for every 7 day period on average. Overtime shall be voluntary,

shall not exceed 12 hours per week, shall not be demanded on a regular basis and shall always be

compensated at a premium rate.

7. No discrimination is practiced

There is no discrimination in hiring, compensation, access to training, promotion, termination or retirement

based on race, caste, national origin, religion, age, disability, gender, marital status, sexual orientation, union

membership or political affiliation.

8. Regular employment is provided

To every extent possible work performed must be on the basis of recognized employment relationship

established through national law and practice.

Obligations to employees under labor or social security laws and regulations arising from the regular

employment relationship shall not be avoided through the use of labor-only contracting, sub- contracting, or

home-working arrangements, or through apprenticeship schemes where there is no real intent to impart

skills or provide regular employment, nor shall any such obligations be avoided through the excessive use of

fixed-term contracts of employment.

9. No harsh or inhumane treatment is allowed

Physical abuse or discipline, the threat of physical abuse, sexual or other harassment an

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