1.Definition of Law
As defined by Steven J. Skinner and John M. Lvanncevich, A law is a standard or rule established by a society to govern the behavior of its members. Federal, state, and local governments, constitutions, and treaties all establish laws. Laws have a direct and substantial impact on how business firms conduct various activities. Law, as it is, is the command of the Sovereign. It means, law has its source in sovereign authority; which is accompanied by sanctions, and the command to be a law should compel a course of conduct. Being a command the law must flow from a determinate person or group of persons with the threat of displeasure if it is not obeyed. Thus the term Law is used to denote rules of conduct emanated from and enforced by the state.
The laws of a country relate to many subjects, e.g., inheritance and transfer of property, relationship between persons, crime and their punishments, as well as matter relating to industry trade and commerce. The term Business Law is used to rules and regulations relating to industry trade and commerce. There are several sources of law. The bodies of law created by judges through their court decisions are common laws. As a body, the laws enacted by the local governments, constitutions or treaties are statutory law. Moreover, there are administrative laws and judicial laws.
2.Various categories of Business Law
Numerous and several types of laws regulate the activities of all businesses and everyone involved in the business, from owner to manager to employees. These include –
•Tort law (which includes product liability),
•Laws governing contractual agreements,
•Use of agents,
•Bankruptcy proceedings, and
3.Laws that affect business in Bangladesh
It is important for all business owners to know and understand the laws that affect their businesses. It is equally important to comply with those laws. Ignorance of the laws has never been a valid excuse in any Court of Law, and it never will be. As a business owner, it is owner’s responsibility to know what laws affect the business. Business Law may be defined as that part of law which regulates the transactions of the mercantile community. The scope of commercial law is large. It includes the laws relating to contract, partnership, negotiable instruments, sale of goods companies etc. It is noted that there is no fixed line of division between commercial law and other branches of law, nor is there any conflict or contradiction between them. The law of contract, which is a very important part of commercial law, is applicable not only to merchants and bankers but also to other persons. Commercial law deals with only those parts of law which are of special importance to the mercantile community. The same laws are applicable to other citizens under appropriate circumstances.
4.The Law of Contract
The Law of Contract deals with agreements which can be enforced through courts of law. The Law of Contract is the most important part of commercial law because every commercial transaction starts from an agreement between two or more persons. An agreement enforceable by law is a contract. Therefore in a contract there must be an agreement and the agreement must be enforceable by law. The objective of The Law of Contract is to introduce definiteness in commercial and other transactions.
The contract Act, 1872 covers most of the laws of contract. It includes total eleven chapters with lots of clauses. An overview of the laws has been enclosed in Appendix. Few of the details of the elements of the acts are described in the following page.
4.1 The essentials elements of a Contract
An agreement becomes enforceable by law when it fulfills certain conditions. In this context, there are several laws which uphold the terms and conditions for legal steps and guidelines for business activities. These conditions, which may be called the Essential Elements of a Contract, are explained below.
1. Offer and Acceptance
There must be a lawful offer by one party and a lawful acceptance of the offer by other party or parties. An ”offer” involves the making of a ”proposal”. When the person to whom the proposal is made signifies is assent thereto, the proposal is said to be accepted.
2. Intention to create Legal Relationship
There must be an intention (among parties) that the agreement shall result in or create legal relations. An agreement to dine at a friend’s house is not an agreement intended to create legal relations and is not a contract.
3. Lawful Consideration
Subject to certain exceptions, an agreement is legally enforceable only when each of the parties to it gives something and gets something. An agreement to do something for nothing is usually not enforceable by law. The something given or obtained is called consideration.
4. Capacity of parties
The parties to an agreement must be legally capable of entering into an agreement; otherwise it cannot be forced by a court of law. Want of capacity arises from minority, lunacy, idiocy, drunkenness, and similar other factors. If any of theparties to the agreement suffers from any such disability, the agreement is not enforceable by law, except in some special
5. Free Consent
In order to be enforceable, an agreement must be based on the free consent of all parties. There is absence of genuine consent if the agreement is induced by coercion, undue influence, mistake, misrepresentation, and fraud. A person guilty of coercion, undue influence etc. cannot enforce it, subject to rules laid down in the Act.
6. Legality of the Object
The object for which the agreement has been entered into must not be illegal, or immoral or opposed to public policy.
The agreement must not be vague. It must be possible to ascertain the meaning of the agreement, for otherwise it cannot be enforced.
8. Possibility of Performance
The agreement must be capable of being performed. A promise to do an impossible thing cannot be forced.
5.The Law of Agency
An ‘Agent’ is a person employed to do any act for another or to represent another in dealing with third persons. The person for whom such act is done, or who is so represented, is called the Principal. The following table depicts few of the laws related to Agency. The Contract Act, 1872
185. No consideration is necessary to create an agency. The Contract Act, 1872
190. An agent cannot lawfully employ another to perform acts which he has expressly or impliedly undertaken to perform personally, unless by the ordinary custom of trade a sub-agent may, or, from the nature of the agency, a sub-agent must, be employed. The Contract Act, 1872
191. A “sub-agent” is a person employed by, and acting under the control of, the original agent in the business of the agency. The Contract Act, 1872
194. Where an agent, holding an express or implied authority to name another person to act for the principal in the business of the agency, has named another person accordingly, such person is not a sub-agent, but an agent of the principal for such part of the business of the agency as is entrusted to him. The Contract Act, 1872
201. An agency is terminated by the principal revoking his authority; or by the agent renouncing the business of the agency; or by the business of the agency being completed; or by either the principal or agent dying or becoming of unsound mind; or by the principal being adjudicated an insolvent under the provisions of any Act for the time being. The Contract Act, 1872
202. Where the agent has himself an interest in the property which forms the subject-matter of the agency, the agency cannot, in the absence of an express contract, be terminated to the prejudice of such interest.
The Contract Act, 1872
204. The principal cannot revoke the authority given to his agent after the authority has been partly exercised so far as regards such acts and obligations as arise from acts already done in the agency. The Contract Act, 1872
205. Where there is an express or implied contract that the agency should be continued for any period of time, the principal must make compensation to the agent, or the agent to the principal, as the case may be, for any previous revocation or renunciation of the agency without sufficient cause. The Contract Act, 1872
209. When an agency is terminated by the principal dying or becoming of unsound mind, the agent is bound to take, on behalf of the representatives of his late principal, all reasonable steps for the protection and preservation of the interests entrusted to him. The Contract Act, 1872
212. An agent is bound to conduct the business of the agency with as much skill as is generally possessed by persons engaged in similar business, unless the principal has notice of his want of skill. The agent is always bound to act with reasonable diligence, and to use such skill as he possesses; and to make compensation to his party. * all the above Acts in the table is under Act no: IX
An Agent may be appointed by the Principal, executing a written and stamped document. Such a document is called Power of Attorney. There are two kinds of Power of Attorney: General and Special. A general power is one by which the agent is given an authority to do certain general objectives, e.g., managing an estate or a business. A special or particular power may be appointed by which an agent is authorized to do a specific thing, e.g., selling some goods. A man dealing with a particular agent is bound to find out the limits of the authority by which the authority of the agent can act accordingly.
6.The Law relating to Sale of Goods
The law relating to the sale of movable goods is contained in the sale of Goods Acts.
6.1 Buyer, Seller and Goods
Buyer refers to a person who buys or agrees to buy goods. While Seller means a person who sells or agrees to sell goods. The term ‘Goods’ includes every kind of movable property except •Actionable claims and
An actionable claim means a debt or a claim for money which a person may have against another and which he/she may recover by suit. Money means legal tender money. Goods may be classified into three types: Existing Goods, Future Goods, and Contingent Goods. Existing goods are goods which are already in existence and which are physically present in some person’s possession and ownership. Future goods are goods which will be manufactured or produced or acquired by the seller after the making of the contract of sale. There may be a contract for the sale of goods the acquisition of which by the seller depends upon a contingency which may or may not happen. In such cases the goods sold are called Contingent goods.
6.2 Sale and Agreement to Sell
A contract for the sale of goods may be either a sale or an agreement to sell. Where under a contract of sale, the goods is transferred from the seller to the buyer, the contract is called a sale. The transaction is a sale even though the price is payable at a later date or delivery to be given in the future, provided the ownership of the good is transferred from the seller to the buyer.
When the transfer of ownership is to take place at a future time or subject to some condition to be fulfilled later, the contract is called an agreement to sell. An agreement to sell becomes a sale when the prescribed time elapses or the conditions, subject to which the property in the goods is to be transferred, are fulfilled.
6.3 The Essential Elements
The essential elements of a contract for the sale of goods are enumerated below.
1. Movable goods
The sale of goods act deals only with the movable goods, excepting actionable claims and money. This Act does not apply to immovable properties.
2. Movable goods for money
There must be a contract for the exchange of movable goods for money. Therefore in a sale there must be money-consideration. An exchange of goods for goods is not a sale.
3. Two Parties
Since a contract of sale involves a change of Ownership, it follows that the buyer and the seller must be different persons. A sale is a bilateral contract. A man cannot buy form or sell goods to himself.
4. Formation of the contract of sale
A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery and payment by installments, or that the delivery or payment or both shall be postponed.
5. Method of forming the contract
Subject to the provision of any law for the time being in force, a contract of sale may be writing, or by word of mouth, or may be implied from the conduct of the parties.
6. The terms of contract
The parties may agree upon any term concerning the time, place, and mode of delivery. The terms may be of two types: •Conditional terms
•warranties of the terms
Essential terms of the contract are called Conditions, while the non-essential terms are called Warranties.
7.The Law of Partnership
Partnership is the relation between who have agreed to share the profits of a business carried on by all or any of them acting for all. A partnership, as defined in the Act, must have the following •There must be an agreement entered into by two or more persons. •The agreement must be to share the profits of a business. •The business must be carried on by all or any of them.
7.1 Constitutions in partnership agreement
1. Voluntary Agreement
The first element shows the voluntary contractual nature of partnership. A partnership can only arise as a result of an agreement, express or implied, between two or more persons.
2. Sharing of Profits of a Business
The second element states the motive underlying the information of a partnership. It also lays down that the existence of a business is essential to a partnership. Business includes any trade, occupation or profession. If two or more persons join together to form a music club it is not a partnership because there is no business in this case. But if two or more persons join together to give musical performance to the public with a view of earning profit, there is a business and partnership is formed.
3. Mutual Agency
The third element is the most important feature of partnership. It states that persons carrying on business in partnership are agents as well as principals. The business of a firm is carried on by all or by any one or more of them on behalf of all. 7.2 Entities in Partnership
A person may be partner if he has the capacity to enter into a contract. Who is a ‘person’? For the purposes of the Partnership Act, the term ‘person’ does not include a partnership or a limited company.
A minor cannot be a partner. But in an existing partnership, a minor can be admitted into a firm if all the partners of the firm agree. Such a minor gets all the benefits of a partnership.
3. Person of an unsound mind
A person who is of unsound mind cannot become a partner.
A woman can be a partner, married or unmarried. Of course a woman cannot be a partner if she is a minor or she is of unsound mind.
In a Company the capacity to enter into contract is determined by the Memorandum and Articles of the Association of the company. The liability of the members of a firm under the Partnership Act, for the debts of the firm, is unlimited liability. Therefore, a company cannot become a partner of a firm.
6. An alien
An alien enemy cannot enter into a contract of partnership with a citizen of Bangladesh.
8.Law Relating to Negotiable Instruments
Documents of a certain type, used in commercial transactions and monetary dealings, are called Negotiable Instruments. “Negotiable” means transferable by delivery and “instrument” means a written document by which a right is created in favor of some persons. The term negotiable instrument literally means “a document transferable by delivery”. Three kinds of instruments are recognized as negotiable instruments- promissory notes, bills of exchange and Cheques.
8.1 Promissory Note
A promissory note is an instrument in writing (not being a bank note or a current note) containing an unconditional undertaking signed by the marker, to pay a certain sum of money only to, or to order of a certain person, or to the bearer of the instrument. 8.2 Essential Elements of Promissory Note
From the definition given in the Act it is apparent that the following essential requirements must be fulfilled by an instrument intended to be a promissory note.
1. The instrument must be in writing.
2. The instrument must be signed by a marker of it. A signature in pencil or by a rubber stamp of facsimile is good. An illiterate person may use a mark or cross instead of writing out his name. The signature or mark may be placed anywhere on the instrument, not necessarily at the bottom. 3. The instrument must contain a promise to pay. The promise to pay must be express. It cannot be implied or inferred. 4. The promise to pay must be unconditional. If the promise to pay is coupled with a condition it is not a promissory note. 5. The maker of the instrument must be certain and definite. 6. A promissory note must be stamped according to the Bangladeshi Stamp Act. 7. The sum of money to be paid must be certain.
8. The payment must be in the legal tender money of Bangladesh. A promise to pay certain quantity of goods or a certain amount of foreign money is not a promissory note. 9. The money must be payable to a definite person or according to his order. A note is valid even if the payee is misnamed or it is indicated by his official designation only. 10. The promissory note may be payable on demand or after a certain definite period of time.
8.3 Bill of Exchange
A Bill of Exchange is an instrument in writing containing an unconditional order, signed by the marker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument.
8.4 Essential Elements of a Bill of Exchange
A bill of exchange to be valid must fulfill the following requirements.
1. The instrument must be in writing.
2. The instrument must be signed by a drawer
3. The instrument must be contained an order to pay, which is express and unconditional. 4. The drawer, drawee and the payee must be certain and definite individuals. 5. The amount of money to be paid must be certain.
6. The tender must be in the legal tender money of Bangladesh.
7. The money must be payable to a definite person or according to his order. 8. A bill of exchange must be properly stamped.
9. The bill may be made payable on demand or after a definite period of time.
A Cheque is a bill of exchange drawn upon a specified banker and payable on demand.
8.6 Essential features of Cheque
1. A Cheque must fulfill all the essential requirements of the bill of exchange. 2. A Cheque may payable to bearer or to order but in either case it must be payable on demand. 3. The banker named must pay it when it is presented for payment to him at his office during the usual office hours, provided the Cheque is validly drawn and the drawer has sufficient funds to hiscredit. 4. Bill and notes may be written entirely by hand. There is no legal bar to Cheques being hand-written. Usually however, banks provide their customers with printed Cheque forms which are filled up and signed by the drawer. 5. The signature must tally with the specification signature of the drawer kept in the bank. 6. A Cheque must be dated. A banker is entitled to refuse to pay a Cheque which is not dated. A Cheque becomes due for payment on the date specified on it. 7. A Cheque drawn with a future date is valid but it is payable on and after the date specified. Such Cheques are called post-datedCheques. 8. A Cheque must be presented for payment after the due date but if there is too much delay the bank is entitled to consider the circumstances suspicious and refuse to honor the Cheque.
8.7 Essential Features of Negotiable Instruments
1. Writing and Signature
Negotiable Instruments must be written and signed by the parties according to the rules relating to Promissory Notes, Bills of Exchange and Cheques.
Negotiable instruments are payable by legal tender money of Bangladesh. The liabilities of the parties of Negotiable Instruments are fixed and determined in terms of legal tender money.
Negotiable Instruments can be transferred from one person to another by a simple process. In the case of bearer instruments, delivery to the transferee is sufficient. In the case of order instruments two things are required for a valid transfer: endorsement and delivery.
The transferee of a negotiable instrument, when he fulfills the certain conditions, is called the holder in due course. The holder in due course gets a good title to the instrument even in cases where the title of the transferor is defective.
It is not necessary to give notice of transfer of a negotiable instrument to the party liable to pay. The transferee can sue in his own name.
Certain presumptions apply to all negotiable instruments. Example: It is presumed that there is consideration. It is not necessary to write in a promissory note the words “for value received” or similar expressions because the payment of consideration is presumed.
7. Special Procedure
A special procedure is provided for suits on promissory notes and bills of exchange. (The procedure is prescribed in the Civil Procedure Code). A decree can be obtained much more quickly than it can be in ordinary suits.
Negotiable instruments are popular in commercial transactions because of their easy negotiability and quick remedies.
A document which fails to qualify as a negotiable instrument may nevertheless be used as evidence of the fact of indebtedness.
9.Multinational Corporations (MNCs)
Laws that affect MNCs in Bangladesh
There are lots of MNCs operating business activities in Bangladesh. Apart from their global compliances and regulations, they are to follow and maintain the guidelines of laws and regulations imposed by Ministry of Law, Government of the people’s republic of Bangladesh and Board of Investments (BOI). There are a number of laws that affect business in MNCs. The following are the most important apart from the regular laws by local government: Equal Pay Act (1970)
Employers must pay all workers equal pay for equal work
Sex Discrimination Act (1975)
Employers must not discriminate against anyone for a job because of their sex Health and Safety at work Act (1974)
Employers must provide healthy and safe working conditions and employees must Contractact in a safe and responsible way. Race Relations Act (1976)
Employers must not discriminate against anyone for a job because of their race Sale of Goods Act (1979)
A consumer can sue a business if it sells them a product that is of poor quality, is not as described and does not fit the purpose for which it is being sold. Contract of Employment
An agreement between the employer and employee. It includes conditions such as rates of pay, hours of work, holidays, pension contributions and the amount of notice that must be given if the worker wants to leave or the employer wants to make the worker redundant. Employees taken on for a month or more must be given a written statement of the conditions within two months of the date the job starts.
There are also various laws which prevent firms from copying others’ ideas and inventions – COPYRIGHT – and which restrict the pollution that they can discharge – ENVIRONMENTAL.