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Chap8.pptChapter 8
Legal Environment
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MAJOR LEGAL SYSTEMS
- The laws of a society are one aspect of its culture. They are the rules established by authority, society, or custom. Collectively, these rules govern the affairs of people within a society.
- At least four broad classifications of law in the world: common law, civil law, socialist law, and Islamic law.
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The Common Law System
- The common law originated in England.
- The primary focus of the common law is the case. The law evolves over time as judges apply the reasoning of prior cases to new facts. A key concept in the common law is that similar disputes should have similar legal results.
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The Common Law System (Cont’d)
- Those earlier cases set a precedent for a current case. Precedents in common law are considered to provide the stability needed for citizens and business to plan future actions.
- The common law system allows more popular participation than any other legal system through the use of the jury.
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The Common Law System (Cont’d)
- A commercial business contract is a legal document that binds the parties involved in the business transaction to their respective obligations.
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The Common Law System (Cont’d)
- Following is the outline of the major components that are required by law for making a commercial contract:
1. A valid offer
2. A valid acceptance
3. The mutual assent of the parties
4. consideration
5. Contractual capacity of both parties
6. A lawful objective
7. Sometimes, a written contract (a commercial contract must
be in writing if a contract for sale of goods exceeds $500)
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The Common Law System (Cont’d)
- The parties to a contract are expected to perform as they agreed. Parties must do exactly what they promised on or before the time that was agreed.
- If a party does not do what was promised, and has no legally valid excuse for not doing it, the party is guilty of breaching the contract.
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The Civil Law System
- The civil law system traces its origin to the Roman Empire. Justinian, one of the last emperors, compiled the Corpus Juris Civilis I the sixth century.
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The Civil Law System (Cont’d)
- In some civil law countries, the civil codes attempt to cover every aspect of the legal system. In others, they cover more limited aspects, such as the obligations that individuals owe each other in tort and contract.
- In these countries, the codes will be supplemented by a substantial body of other statutory law.
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The Socialist Legal System
- The legal systems of the communist countries are based upon socialist law. The socialist legal system started with the Russian Revolution of 1917, and consequently has affected a number of other countries that adopted communism as their form of government, such as the former Eastern European countries, China, Cuba, and several countries in Asia and Africa.
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The Socialist Legal System (Cont’d)
- In the late 1980s, the communist governments in the Eastern European countries and the former Soviet Union collapsed.
- The socialist legal system has been gradually replaced by the civil law system as these countries developed new, free-market economic systems. For example, jury trials, abolished by the Bolsheviks in 1918, resumed in Russia in 1994.
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The Socialist Legal System (Cont’d)
- China still looks to socialism for its formal legal institutions and methods. Even today, with its rapid economic growth, China is still cautiously experimenting with both its economic and legal systems, resulting in a highly unstable legal environment for foreign business.
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The Socialist Legal System (Cont’d)
- McDonald’s restaurant in Beijing was opened in 1992. It is the largest restaurant in McDonald’s systemwide operations.
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The Socialist Legal System (Cont’d)
- In late November 1994, City officials demanded that McDonald’s vacate its central Beijing site to make room for a $1.2 million commercial and residential complex called Oriental Plaza, which was proposed and would be financed by a Hong Kong billionaire, Li Ka-shing. Apparently, he had better connections with the municipal officials in Beijing.
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The Islamic Legal System
- The Islamic legal system is the most important non-Western legal system that is based on the teachings of a religion. The Islamic religion is widely distributed in the world.
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INTERNATIONAL LAWS AND ORGANIZATIONS
- International law is different from the laws of nations. The reason is that there is no international legislative body making laws that govern international business affairs.
- What does exist is a collection of agreements, treaties, and conventions between two or more countries, which constitute an important element of international law.
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INTERNATIONAL LAWS AND ORGANIZATIONS (Cont’d)
- In addition, international organizations such as the United Nations, the General Agreement on Tariffs and Trade (GATT), the World Bank, and so on have a direct impact on the conduct of international business. International law is therefore an amalgamation of rules and obligations derived from a number of sources.
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INTERNATIONAL LAWS AND ORGANIZATIONS (Cont’d)
- International treaties (agreements, conventions) are a source to which a court refers regarding international commercial relations and disputes between countries.
- A treaty resembles an international contract. A treaty between two countries is bilateral, and one between three or more countries is multilateral.
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Agreement for the Sale of Services
- International agreements involving the sale of goods and services have been developed over the years by various sources, such as the General Agreement on Tariffs and Trade (GATT).
- Signed on January 1, 1948, the purpose of GATT was to commit member countries to the principles of nondiscrimination and reciprocity.
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WTO
- World Trade Organization.
- There were 151 members in 2007.
- Whereas GATT was a set of rules agreed upon by nations, the WTO is an institutional body.
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