Summer 2016 semester project business & labour laws (71416).doc

Semester Project-Business & Labour Laws

SEMSTER PROJECT

CASE STUDIES TYPES OF CONTRACT

Name of Student: Muhammad Asif KhanStudent ID: MB-2-05-51271Campus: PAF-KIET (City Campus)Program: MBA-RegularCourse Name: Business & Labour LawsCourse Instructor: Javed Akhtar

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Semester: Summer-2016AN INTRO TO LEGAL SYSTEM

The law does not operate in a vacuum. The law is part of system commonly referred to as the ‘legal system’. The term can be defined broadly as including the components set out below:

Institutions Laws People

Parliament Courts Government

Departments Correctional

Institutions

Statue Law Common Law Equity Delegated Legislation

Members of Parliament

Judges Magistrates Barristers Solicitors Court Officials Correctional Service

Officers

The legal system comprises number of institutions such as courts, correctional institutions and Parliament. The courts and Parliament are responsible for producing common law and statue law, respectively. The legal system also includes those persons who work within this system: lawyers, judges, police officers, politicians and correctional service officers.

Definition of Business

Business is nothing new in human society. Ancient Business is a part of our social life in different forms. Presence of business proves that we are dependent on each other and with the passes of time this dependency is increasing.

At the early stage people engaged in exchange of goods without using money which was called trade. Over the years many things have changed, money has been introduced as medium of exchange and through lots of forms businesses are now in the present forms. Today business means exchange of goods, services or money for mutual benefit or profit.

Definition of Law

Law is a structure of rules, typically prescribed through a set of institutions. Politics, Economics and Society are shaped by it in numerous ways and aids as a primary social mediator of relations among people.

In other words law can be defined as “A standard or rule established by the society to oversee the behavior of its members".

Branches of the Law:

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The law can be divided into two broad categories: Private Law and Public Law. The private law category allows individuals to take one another (i.e. to sue one another). Public law is concerned with the imposition of rules on the whole of society so that it operates in an equitable and peaceful way.

Examples of laws falling into each category are described below:

Criminal Constitutional Taxation Property Tort Contract

Business Law

The business law can be defined as:

“Business Law is the body of law that governs business and commercial transactions.”

In today’s complicated business world in order to operate and control a Business Laws are a must. So, this part of law deals with businesses to keep businesses running in a disciplined way as all the parties related to businesses get protection as well as feel responsible in their respective positions, is known as business law.

We all make agreements, and if an agreement has special features, it is a contract, an agreement enforceable by law. Contracts commonly entered into in the course of business are set out in the following figure:

Contracts of Consumer Credit Contracts of LeaseContracts for sale of Goods and Services Contracts to purchase goods

Contracts of agency Contracts for mortgage of land Employment Contracts Contracts to insure property

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Types of Business Contract

Types of Laws

Public Laws Private Laws


Business law lays down the rights, duties and obligations owed by parties to a contract. It will define the areas of law relevant to the world of business, and the rights of people who engaged with in it. These persons may be operating a business as sole traders or partners, or they may incorporate a company. Other people may be part of the world of business as consumers of goods and services and as owners of property.

Purpose of business laws:

1. Business Laws Exist To Create Reliable Standards For Companies To Follow. 2. Business Laws Create Consistent, Predictable Standards. 3. Some Most Important Purpose Are: Uniform Commercial Code Uniformity

Enforcement Predictability 4. Enforcement Provide Enforcement That Allows Contractual Relationships To Stay

Intact. 5. Predictability Allow People In Business To Enter Into Multiple Transactions With

Certain Protection. 6. Uniformity When Business Owners Rely On The Same Laws To Conduct Business,

They Need To Know That State Agencies And Courts Apply The Laws In A Uniform Fashion.

7. Uniform Commercial Code Extensive set of Law Governing Commercial Transactions between Businesses.

Sources of Business Law:

Common Law:

Is known when a law is created through the court decisions by judges. It’s mostly based on tradition, usage and court rulings.

Statutory Law:

A law created by parliament, constitution, law commission or agreement is called statue. Most laws created today are statues. A statutory law is made up by various legislative endorsed bodies. For a law to be constitutional it must be drawn up in a specific way. However, courts often must interpret a law’s meaning. Statues getting changes is sometimes due to the decision by the court.

Administrative Law:

Laws troubled with the rules and tasks of the executive branch of the government, its organizations, their interrelations with each other, citizens and the non-governmental entities. The intention of administrative law is to provide a legal framework for regulating the powers, procedures and acts of public administration.

Business Being Affected By Different Laws

Several and different laws control the actions of all the businesses and each person involved in the business, from the manager the employee and even the owner.

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Some major business law categories are as follows:

The Law of Tort:

While criminal law deals with crimes against society and people, tort law is worried with rewarding the victims of noncriminal wrongs. Tort is a noncriminal injury to any other person, their reputation or their property. There are two types of torts:

Intentional Torts:Any deliberate act by a business firm or person is known as an Intentional tort.

Negligence Torts:When one party causes injury to another party and fails to use reasonable care, this is known as a negligence tort. Negligence torts arise from carelessness rather than intentional behavior. Product accountability is a vital part of the tort law. Business firm’s responsibility is to involve the product liability for negligence in their manufacture, design, sale, and operation of their products. The business action examines some product liability cases in the tobacco industry. In many ways product liability laws have been extended to their ends in which the producer or marketer of the product is not able to prove negligence. Under strict product liability, the manufacturer is responsible if the injured party can show that the product was effective, that the defect caused the injury and the product to be dangerous.

The Law of Contract:

A contract is a legally binded agreement between two or more parties. A contract is like a private statue, in which the parties explain the agreement they owe each other. Most business transactions contain some kind of contract. They can be either express or implied. A contract in which the words are actually put forth, either orally or in writing is known as an express contract. Generally, oral contracts are just as legally enforceable as written contracts.

Law of Sales:

Products sold for money or credit is known as sales law. This law grew out of the contract law. Even if all the requirements are not met for a contract, the uniform commercial code provides that some sales contracts are still binding. For instance, a sales agreement is legally binding even if the selling price is left out of the agreement; the buyer must then still pay a reasonable value of what the goods are worth.

The Law of Agency:An agency is a business relationship in which a principal appoints an agent to act on his or her behalf. The actions of the representative, authorized by the principal, are legally recognized as though they were performed by the principal. For example, a talent agent can enter into a contract for a client as though the client signed the contract him or herself. Agents are used in many diverse industries, including insurance, sports, entertainment, and real estate. Generally, agents are paid a fee or commission or their services.

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Because the principal is bound by the actions of the agent, it is important to put the agency agreement in writing. Generally, a legal document called a power of attorney is granted to authorize the agent to act on behalf of the principal.

The Law of Property:

Property is considered by anything that can be owned. Property is something for which a person or business entity has unrestricted of possession or use. Property is divided into several categories. Real estate, land, and anything permanently attached to it, such as buildings, parking lots and houses is known as real property. Physical items such as a store’s inventory of goods, automobiles, and equipment is known as tangible personal property. Intangible personal property is that shown by documents or other written instruments, such as money orders, cheques, stocks, bonds and receipts.

Individuals or business firms get legal protection from any of the three forms of intangible personal property. A name or symbol registered with the trademark and patent office is known as a trademark. This will guarantee the owner exclusive rights for a certain amount of years (differs from country to country) and the owner can renew it as many times as he wishes. Patents granted by the patent and trademark office give inventors the exclusive right to make, use, or sell their product for certain years (varies country to country). A copyright filled with the copyright office, gives the creator or owner exclusive right to publish and sell original written work.

The Law of Bankruptcy:

Individuals and business firms that cannot pay their debts will be declared as bankruptcy. By declaring bankruptcy, the individual or firm asks the court to declare them as unable to satisfy creditors and to be released from financial responsibilities. The debtor’s assets are usually sold to pay off as much of the debt as possible.

The Law of Negotiable Instruments:

A negotiable instrument is a substitute for money. It is a written promise to pay a specified sum of money, if it can be transferred from one person or business firm to another. There are three types of negotiable instrument:

Promissory note Bill of exchange Cheque

How Business Laws Effect Business Operations

In the current world business are playing an important role in every aspect of life. One’s standard of living, life style, education and even cultural standards are determined by business. Studying business and understanding business will lead to a better life. If we understand business, both expected and unexpected events can be easier to cope with, less stressful and more efficient. The studying of business will give us a better understanding that in today’s world, national economies are not an independent entity anymore, but rather dependent and taking an uneven global shape. Now a day’s businesses are a crucial part of our daily life, there must be some kind of law (rules and regulations) for them to control their

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functions and align their work into a disciplined way. Business laws were introduced in order to fulfill this purpose. In today’s world, businesses must function within the restrictions of laws and under the defined regulations of the governments. Business laws are not only developed to protect consumers but also to preserve competition. These laws are enforced by government agencies at different administrative levels. Any business firm that do not keep to these laws will face fines, penalties and in consequences fail to run. It is very important to the individuals, who are studying management curriculums, to know the business laws to operate a business successful manner.

The Legal system of a country provides a progressive legal framework to the organization to operate their business in manner that it will be mutually beneficial for the society and itself. Legislation has been done to address the commerce and labor issues and it provides complete guideline to the business owners to formulate their working policies and procedures that protect their rights and as well as the rights of the other parties which are associate with them. The other laws has been developed not only to protect the legal rights of the businesses but also to develop the healthy competition among them which includes laws relating to competition policy, copyright, patents, trademarks, etc. Purity of contract is protected under common law, and independent courts ensure respect for commercial rights and obligations. The laws relating to the financial instructions has been developed to protect the businesses and provided a guideline to how to fulfill their financial obligations. Under these legal framework many organizations has been developed to protect these organizations from the extra ordinary act of the other organizations/institution, for example of the Monopolistic Competition Commission, etc.

Therefore we see that laws are affecting business in numerous ways. Laws protect the business men as well as the customers which is essential to have a good relation between these two parties otherwise business firms will not run. Laws are necessary to incorporate a business firm, to run a business firm and to dissolve it. It should be mentioned that in this assignment, only the major laws from international perspective that are affecting business have been discussed shortly and only a list of the laws that are applicable in field of business in Pakistan.

Business & Labour Laws Prevailing In Pakistan

Following are some prominent business laws exist in Pakistan:

Bill of lading Act 1856 Contract Act 1872

o Indemnity & Guaranteeo Pledge and Bailmento Agency

Negotiable Instruments Act 1881o Carriage of Goods

Trust Act 1882 Carriage of Goods By Sea Act 1925 Sales of Goods Act 1930 Partnership Act 1932 Companies Ordinance 1984

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Insurance Law

Labour Laws:

Workmen Compensation Act 1923 Factories Act 1934 Payment of Wages Act 1936 Industrial & Commercial Establishment (Standing Order) Ordinance 1968 Social Security Act 1968 Employees’ Old Age Benefit Act Industrial Relations Act 2008

Law of Contract 1872

The law relating to contracts in Pakistan is adopted from the law existing during the British era. The contract law of 1872 has been enforced in Pakistan with the necessary amendments. It extends to the whole of Pakistan and deals with the following:

General Principles governing all types of contracts, including:

o Contracts of indemnity, o Contact of Guarantee, o Contract of Bailment, o Contract of Pledge,o Contract of Agency

Definition of Contract

A contact is an agreement between two more persons to carry out a specified work or to accomplish a task for monetary or non monetary benefits. We can classify the agreements into following three categories:

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Social Agreements Domestic Agreements Business Agreements

The law of contract only deals with the Business Agreements. The term contract has been define by many scholars as follows:

According to Pollock:

“Every agreement and promise enforceable at law is a contract.”

According Salmond:

“A contract is an agreement creating and defining obligations between the parties.”

According Sir William Anson:

“An agreement enforceable by law made between two or more persons, by which rights are acquired by one or more to acts or forbearance on the other or others.”

The Law of Contract Act 1872 defines the terms contract as follows:

According to Section 2(h):

“An agreement enforceable by law is a contract.”

This simple definition consists of following elements:

1) An Agreement 2) The agreement enforceable by law

1) An Agreement: Section 2(e) provides us the distinctive definition of the agreement for this definition:

“Every promise and every set of promises, forming the consideration for each other, is an agreement.”

The term promise has been further clarified by the law in Section 2(b):

“When the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise.”

2) The Agreement Enforceable By Law: An agreement is enforceable if it is recognized by courts. In order to be enforceable by law, the agreement must create legal obligations between the parties. The term Agreement has broader meaning then the Contract. Thus, it can be say that every contract is an agreement but every agreement is not a contract.

Classification of Contracts:

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The contracts can be classified in to following broader categories:

1. According to Enforceability / Validity2. According to Formation3. According to Performance4. According to Parties

1) According to Enforceability:In this category the contracts can be divided in to following:

a) Valid Contract : A valid contract is enforceable by law. An agreement becomes enforceable by law when all the essentials of valid contract are present.

b) Void Contract : The section 2(j) defines the void contract as:“A contract which ceases to be enforceable by law becomes void, when it ceases to be enforceable.”

From the above definition a void contract is not void from the it’s beginning. It is valid contract when it is made but subsequently it becomes void due to certain reasons.

According to section 2(g), “An agreement with minor and an agreement without consideration is void from the beginning.”

c) Voidable Contract: According section 2(i) the voidable contract is:“An agreement which is enforceable by law at the option of one or more of the parties thereto, but not at the option of the other or others, is a voidable contract.”

A contract becomes voidable when the consent of one or more of the parties to a contract is obtained by coercion, undue influence, misrepresentation or fraud.

d) Unenforceable contract: An unenforceable contract is that contract which cannot be enforced in a court of law because of some technical defects such as absence of writing, registration, requisite stamp, etc. When these defects are removed, the contract can be enforced.

2) According to Formation: According to formation a contract has following three kinds:

a) Express Contract : Express contract in one which is expressed in words spoken or written. When such a contract is formed, there is no difficulty in understanding the rights and obligations of the parties. According section 9, in express contract, the parties directly stat the terms of the contract.

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b) Implied Contract: According to section 9, an implied contract is made otherwise than by words spoken or written. It arises from the acts, conduct of the parties, course of dealings or circumstances. It arises from when one person, without being requested to do so, renders services under circumstances indicating that he expects to be paid for them, and the other person, knowing such circumstances, accepts the benefit of those services.

c) Quasi Contract: In a quasi contract the law imposes certain obligations under some special circumstances. It is based upon the principle of equity that a person shall not be allowed to get benefit at the cost of another. In fact it is not a contract but creates relations similar to contract. It is also called constructive contract.

3) According to Performance: According to performance a contract is of the following two kinds:

a) Executed Contract: A contract is said to be executed when both the parties have completely performed their obligations. It means that nothing remains to be done by either party under the contract.

b) Executory Contract: In an executory contract something remains to be done. In other words a, contract is said to be executor when both the parties to a contract have yet to perform their obligations.

4) According to Parties: According to parties a contract may be of the following two kinds:

a) Unilateral Contract: In a unilateral contract only one party makes a commitment. In other words, it is a contract where only one party is bound but the other party chooses to be bound by it.

b) Bilateral Contract: It is a contract where as soon as the contract is made, both parties are bound by it. In other words it is a contract in which both the parties have yet to perform their obligations.

Further Classification of Contract:

Contract can also be classified into simple and formal contracts.

Formal Contracts:Formal contracts must be in a particular form but do not have to possess consideration. They are enforceable because of their form.

Formal Contracts can be further divided into two broad categories:

Contract of Record Contract of Under Seals(Deeds)

Simple Contracts: of 16


Simple contracts are all those contracts that are not formal contracts. They are not required to be in any particular form but are required to have consideration. As the name suggests, it’s required some formalities.

One significant difference between the two forms of contract relates to the rights of enforcement if a contract should be breached. Under a formal contract, contractual rights are enforceable for a longer period of time than is the case for simple contracts.

Case Studies of Types of Contracts

Following are the four selective case studies which help to understand the contract and its types:

Case Study 1:

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Contracts

Formal Contracts

Simple Contracts

Contracts of Records

Contracts under Seal

No Particular Form

Consideration must be Present


Mr. S purchased a Triumph ‘Spitfire’ sports car from Mr. T who claimed that the car was part of a limited series released in the mid-1960s. At a Triumph car show Mr. S is advised by a number of experts that the Triumph is a later model with some of the trimmings associated with the earlier model. Mr. S wishes to know whether the elements necessary to give rise to a valid contract are present.

Advise Mr. S on this point and outline his potential options.

Facts:

Mr. S has purchased a Sports Car ‘Spitfire’ of Triumph, from Mr. T. The special characteristic of this sale contract was the unique quality of the

Car that it belongs to the limited edition of the mid-1960, released by the Triumph.

In a Triumph car show it has been revealed to Mr.S that the Car does not belong to the mid-1960’s special edition released by Triumph. This Car is the later version the same series.

Common Law:

General rules that applicable to every kind of sales and purchase activity that seller will liable disclose all necessary facts that will help the buyer to make effective decision for the purchase of good.

Law:

The Law of Contract 1872 defines the parameters that make an agreement valid. According to act a contract is voidable when one of its essential is missing in the contract. From the above facts we can extract two assumptions:

o Mr. T has misrepresent the facts, oro Mr. T has an intention to make a fraud

The section 14 of the Contract Act 1872 emphasize that a consent will be free if it has not been affected one of following elements:

o Coerciono Undue influenceo Fraudo Misrepresentationo Mistake

Conclusion:

The following remedies available to the Mr. S:

Mr. S can avoid the contract and can contact with the court for the revocation of the contract.

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If fraud or misrepresentation is proved Mr. S will be eligible to recover his amount from Mr. T paid against the purchase of car.

Mr. S can sue for damages and recover the access amount paid for the unique characteristics of the car.

Mr. S can plea the court for the specific performance of the contract and Mr. T will liable provide him the prescribed car.

Case Study 2:

Mr. G has agreed verbally to pay Rs. 15,000/= for Mr. T’s collection of Literature. Before the matter can proceed any further Mr. T is involved in a serious car accident that results in him entering a coma. It is uncertain whether Mr. T will regain consciousness. Worried about Mr. T but still eager to purchase the Literature, Mr. G consults you to ascertain what essential elements required to give rise to valid contract.

Advise Mr. G on this point and explain what facts may prevent the existence of a valid contract.

Facts:

Mr. G was interested to purchase Literature from Mr. T amounted Rs. 15,000/=.

There is verbal agreement between them. Before the performance of the contract Mr. T has got an accident and went

into the coma. There is lesser chance that Mr. T will regain his state of consciousness.

Common Law:

A general rule is that, when an agreement has been formed with the mutual consents of the parties and the process of formal offer and acceptance has been performed whether verbally or in written, the legal heirs or representative of the parties will liable to perform the contract.

Law:

Section 2(a) and Section (b) of the Contract Act 1872 has defined offer and acceptance. When the offer and acceptance has been taken place in defined manner between the parties then, it will become a valid contract.

Conclusion:

Mr. G can ask the legal heirs or representatives of the Mr. T for the performance of the contract.

Case Study 3:

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Mr. B owns a large yatch, which he moors at Island. Upon turning eighty years of age, he reluctantly decides to sell his beloved possession. After an existence period of advertising Mr. B finds a willing purchaser in his home town, Mr. A. At the time of contract, unbeknown to either of them, the yatch had been wrecked. The yatch was wrecked by storm the day before the agreement was made.

What is the status of this contract?

Facts:

Mr. B owns a yatch which moors at Island. He had decided to sell out his collection.

He has made an advertisement for the same and got a tentative buyer Mr. A for the same.

A storm has destructed the yatch the day before they are going to make a contract of sales.

Common Law:

A general rule is that if the subject matter is destructed due to the reason beyond the control of the parties then the sales agreement stands enforceable.

Law:

Section (56) of the Contract Act 1872, explains that a contract will become void when the subject matter has been destructed or after the formation of the contract without the fault of the promisor or promisee.

Conclusion:

The destruction of the yatch due to the storm has discharged Mr. B and Mr. A from their obligations under the contract.

Case Study 4:

Mr. T owns two motorbikes, a Suzuki and a BMW. He agrees to sell his BMW to Mr. C for Rs. 200,000/=. Mr. C thinks that he is buying the Suzuki.

Does a contract exist between the parties?

Facts:

Mr. T owns two motorbikes of two different brands Suzuki and BMW. Mr. C agrees to purchase one of his bikes. Mr. T is intended to sale his BMW to Mr. C. Mr. C has an intention to purchase Suzuki.

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Common Law:

The general rules say that it is duty of the seller to clearly define the specification of the product (s) and its characteristics to the buyer and buyer has the responsibility to make all necessary investigation about the product that will help him to make buying decision and to avoid any misconception regarding the product (s).

Law:

Section (14) of the Contract Act 1872, defines the free consent which make the contract valid. If a contract is free from of the following elements:

o Coerciono Undue influenceo Fraudo Misrepresentationo Mistake

Law further explains that if parties give their consent under any error, there is no agreement. It means that there should be consensus ad-idem. Mistake can be divided into:

o Mistake of Fact o Mistake by law

Mistake of fact further divided into following:o Bilateral Mistakeo Unilateral Mistake

According to Section (22). “A contract is not voidable merely because it was caused by one of the parties to it being under a mistake as to a matter of fact.”

Conclusion:

The contract between Mr. T and Mr. C is a valid contract if it is the negligence of the Mr. C to understand the subject matter.

Mr. C can avoid the contract or can sue for the cancellation of the contract if he proves the fraud or misrepresentation at the end of Mr. T.

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Summer 2016 semester project business & labour laws (71416).doc

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