Business Law

Table of Contents
1. Types of Contract Breach ....................................................................................... 1
1.1 Fundamental Breach .......................................................................................... 1
1.1 Minor Breach..................................................................................................... 2
1.2 Material Breach ................................................................................................. 2
1.3 Anticipatory Breach .......................................................................................... 2
2. Omani Contract Provisions..................................................................................... 4
3. Legal Aspects of Business in Oman ........................................................................ 5
3.1 Tanfeeth ............................................................................................................. 6
3.2 Objectives of Tanfeeth ...................................................................................... 6
Figure 3: Tanfeeth Analysis Chart.................................................................... 7
3.3 Comparison of Oman and GCC countries ........................................................ 7
Figure 3.3.1 Qatar FDI inflow ....................................................................................... 8
Figure 3.3.2 UAE FDI inflow ........................................................................................ 9
Figure 3.3.3 Oman FDI Inflow ...................................................................................... 9
4.1 Business Ethics .............................................................................................. 10
4.2 Corporate Social Responsibility................................................................... 10
4.3 Corporate Governance ................................................................................. 11
4.3.1 Good Corporate Governance Example .................................................. 11
5.1 Air Pollution................................................................................................... 11
5.2 Noise Pollution ............................................................................................... 12
5.3 Marine Pollution............................................................................................ 12
References ...................................................................................................... 13
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Question: 1

1. Types of Contract Breach

When there are two parties that are involved in some legal binding, then the act of

infringement from either of the party against the legal binding comes under breach of

contract.

Basically there are four types of contract breach which are recognized by law:

 Fundamental Breach

 Anticipatory Breach

 Material Breach

 Minor Breach

1.1 Fundamental Breach

It is the kind of contract breach in which one party of the contract doesn’t fulfills

their part of the contractual terms (Zagenczyk et al., 2015). It might be the

compulsory clause that must be fulfilled and not fulfilling those clause may result in a

dispute among the parties. It is a crucial thing in a contract and the suffering party

holds the right to terminate the contract. For example, three parties namely A, D and

E are involved in a contract. Party A places an order to provide them with

air-conditioners, Party D agrees to manufacture the air conditioners while party E

agrees the deliverance and installation of air-conditioners. Therefore, if party D fails

to manufacture the air-conditioners then consequently party E would not be able to

deliver and install them and party A holds the exclusive right to cancel the contract as

they didn’t get what they needed and the contract provides them with leverage to

move to vendor.
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1.1 Minor Breach

Minor breach of contract also known as partial breach means that one party

performs all the major obligations but neglects the minor contractual terms that may

result in breach of trust as well.

1.2 Material Breach

Material breach is a tedious thing to be handled which makes the fulfillment of

the contract difficult or impossible. It is the breach of major clauses of the contract.

The non-breaching party has the right to terminate the contract and sue the breaching

party. For example, if the seller of the car refuses to handover car credentials after

receiving down payment from the owner.

1.3 Anticipatory Breach

An anticipatory breach also known as anticipatory repudiation, it is the type of

contract breach in which one party feels that the other party is not capable of fulfilling

the contract (Griep, Vantilborgh & Jones, 2018). By providing a legitimate prove

which demonstrates that the unwillingness of one party to perform its responsibilities,

the counter-party might taken action against them on legal grounds.

Example Of Contract Breach

An employee visited the Sultanate of Oman on employment visa in order to seek the

job. A well reputed company appointed him and employer provided him in contract
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that he will be awarded 1/3 extra wage if he works for extra hours. But when he was

given the wages he wasn’t provided with incentives promised to him in the contract

by the employer. According to the Article 41 of the Omani Labor Law it was a classic

defrauding case and the Employer was bound to pay fair compensation fee under

Article 42 of the labor law.

Contract Breach Under Oman Commercial Law

The Omani Commercial law has certain legislations and doctrines while dealing with

the award of contract (Abdallah, 2017):

1. While dealing with the compensation of the breach of contract, either the parties

involved in the contracts can set a prior amount for contract breach or the court of law

could intervene to settle the matter.. The whole process would be under the guidance

of law and is only implicated under certain circumstances.

2. Contract is equivalent to a law which bounds both parties to abide by it. In legal

terms, it is called ‘Pucta Sunt Servanda’. This is for the contracts that have private

terms in which the parties involved in the contract have already agreed to the amount

of breach and court could only intervene in order to enforce the breaching party to pay

for the penalty.

3. The award for damage in the contract is determined by three elements: contract

breach, causation and loss. The definition of type of loss must be defined clearly in

the contract and there must be some association between the contract breach and the

loss suffered.
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4. Financial loss is the most heinous type of contractual obligation breach.

Compensation is only awarded in case of actual loss, which means that penalty would

only be paid in case of direct loss. If there is a minor loss or the breach of contract

alone is not sufficient for the award of compensation.

Royal Decree on Contract Breach

In essence of the Article 173 of the Civil code “If the contract is terminated

automatically or by the parties, the two contracting parties shall return to the

state that they were before the contract was made but rights resulting from same

shall be performed, and if that is not possible, compensation shall be ordered.”

According to the Oman’s Civil Transaction Law, Royal Decree 27/2013 Article 99 of

the Royal Decree, only the Civil Court holds the authority to terminate the contract on

the grounds of breaching. The two parties involved in the contract are not allowed to

terminate the contract by themselves.

Question 2

2. Omani Contract Provisions

In essence of the Article 167 of Oman Civil law “If the contract is valid and binding,

neither of the contracting parties may terminate or amend thereof, save by mutual

agreement or litigation”. Oman Civil Code has adopted a modernistic approach in

handling the cases related to contract breach as different multinational companies are

operating in the country (Thomas, 2017). According to the Article 167, if the law

doesn’t provides clarity in the termination of the contract, then the parties that are part

of the contract must seek permission from the court. In accordance with the Royal

Decree 27/2013 set out in the Oman Civil Law, a person who has not reached a legal

age of adulthood set by the country or doesn’t has the mental capacity to run a
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business is not allowed to enter any type of contract or run a business. A legal

guardian on his behalf could handle the legal and business matters which are also

bound by certain restrictions.

Article 40 (9) of Royal Decree 35/2003, the employer has the right to terminate the

employee on misconduct without any prior notice (Machado, 2018). For example, the

employee was asked to sign the terms that his working hours would be increased and

he would be paid an amount for it. The employee was asked to sign the contract and

keep a copy of it as an official record. The employee read the contractual terms and in

dismay he ripped the contract. This act is also termed as a ‘misconduct’ by the Appeal

Court and Primary Court as well. The employer issued a Letter of Acquisition against

the employee regarding this misconduct. In response to the letter, the employee holds

the right to give clarification of his conduct. If the employer remains unsatisfied with

the response of employee, then he might send termination letter to the employee

within the stipulated time by the Court. If the employee reaches out the Omani court

and files an appeal that he has been unjustly terminated from the job, then the

employer is bound to pay twelve months salary to the employee only if the employee

successfully proves his point before the Court.

Question 3

3. Legal Aspects of Business in Oman

Islamic Sharia Law is the preliminary law that is the basis of all legislations imposed

in the country. The Sultanate of Oman is continuously working on improving its legal

system to bring it at par with the modernized world (Palalić, Dana & Ramadani, 2019).

The business disputes are settled through Commercial Law. Foreigners who

arewilling to make an investment in the country must abide by the Foreign Capital
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and Investment law (Royal Decree No 102/1994). In order to establish business in

Oman, the non-GCC individual must apply for license from Ministry of Commerce

and Industry. There are some pre-requisites that a non-GCC member must fulfil

before establishing business in Oman (Eicher, 2016):

1. An individual can freely engage in business with some other country unless there

are some restrictions imposed by UN Security Council.

2. If a foreign company succeeds in securing a contract with government then it is

qualified to register 100% subsidiary.

3. An individual or a company is not bound by any exchange control and currency

regulation.

4. A non-GCC individual must have a least capital of OMR 150,000.

5. The non-GCC individual could engage in the businesses defined in the Commercial

Company Law. Keeping in mind that the capital of an individual in that particular

business must not exceed the limit of 70%.

3.1 Tanfeeth

Tanfeeth is the development program initiated by the Sultanate of Oman which is

planning to upgrade main sectors including: Mining, Fisheries, Tourism and Transport

and Logistics (Battaglia, 2018). Tanfeeth is the plan to diversify the national income

resources which is a part of nine year development plan. In addition, Tanfeeth plan

aims to bring together private and public sector on one page to work together for the

sustainability of the country. Tanfeeth would be pointing out key challenges and

opportunities related to the government and community projects. The aim of this plan
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is also to take input from the local community to help government to fulfil its KPIs

(Atef & Al Balushi, 2017). For the efficient implementation of solutions, Tanfeeth is

outlining and desiginating the responsibilities, timeframe, resources, strategies and

KIPs. The assurance of these elements would be done through periodic reports which

would then be shared with the public to keep them updated regarding the initiatives

and to ensure transparency.

3.2 Objectives of Tanfeeth

Following are the objectives of Tanfeeth plan (Benayoune, 2018):

i. The provision of clarity in objectives and KPIs which is complemented by a

transparent mechanism for the monitoring of execution.

ii. An increase in the Oman’s GDP.

iii. Provision of a clear and executable plan in order to increase the domestic and

foreign investment in the Sultanate.

iv. Provide the government with best practices of social and economic planning,

make the best utilization of the budget within the projects that provide good

economic returns.

v. Accelerating the pace of implementation of economic diversification plans.

Following figure provides a statistical view of Tanfeeth plan:

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Figure 3: Tanfeeth Analysis Chart

3.3 Comparison of Oman and GCC countries

The comparison of GCC countries with Oman has been given in a graphical manner

which shows upward and downward trend in the FDI inflow of the countries.

The state of Qatar first witnessed its downward from the peak since 2009 in the year

2013 with the net outflows. The state tried to stabilize the situation but it gained much

lower levels. The decline in investment is due to the global financial crisis, domestic

constraints to the FDI, complex bureaucratic processes, lack of transparency in

government procurement of contracts and decline in oil prices.

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Figure 3.3.1 Qatar FDI inflow

There has been a continuous increase from 2011 which has also coincided with

economic growth owing to the real estate business, petrochemicals, and oil

manufacturing industries. The FDI of UAE reached its highest level in the year 2014.
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Figure 3.3.2 UAE FDI inflow

The Sultanate of Oman observed a negative trend 2015 and its FDI kept on decreasing

since the year 2008. As compared to the GCC nations, Omani reforms were

insufficient to attract the foreign investors. The country is ranked lower than GCC

nations in Global Competitiveness Index and holds a position at 66th number.

Figure 3.3.3 Oman FDI Inflow

Question 4

4.1 Business Ethics

Business ethics are the set of ethics which deal with the principles, problems and

ethical moral associated with business activities. It is the collection of norms and

morals that are necessary for business activities (Barry, 2016). in addition, it

differentiates between the right and wrong conducts in business activities. For

example: keeping a good conduct with the employees, charging just price for the
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products and services; making a legitimate earning and complying by country’s law

are all part of good business ethics.

4.2 Corporate Social Responsibility

Corporate Social Responsibility means how company creates goodwill values for the

sustainability of the society along with executing its business activities (Grayson &

Hodges, 2017). It is a commitment by the company to give a hand in contribution to

the well-being of economy and work for the betterment of the society as well.

Figure 4.2: Corporate Social Responsibility

4.3 Corporate Governance

Corporate governance is a set of principles, processes and practices by which a firm is

directed and controlled (Tricker, 2015). It involves maintaining a balance with

multiple stakeholders including: shareholders, government, community, financiers,

customers, suppliers and senior management executives.

4.3.1 Good Corporate Governance Example

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For example, Al-Turki Enterprises, a leading firm in UAE has shown good corporate

governance through their following steps:

 The company has set out external and internal policies for delegation of authority,

professional ethics and conduct and information disclosure etc.

 The company has developed a remuneration and nomination committee and have

provided its terms of reference.

 The company has made a clear mechanism of bonuses, incentives and

allowances.

 It has developed a board that would lead the company in future and have

identified independent directors.

Question 5

Oman has some regulations to save the environment. According to the Law for

Protection of Environment and Combating Pollution (Royal Decree 114/01), anyone

who is found to be polluting marine area and found emitting toxic material into the

environment would have to face severe consequences (Choudri, Baawain & Ahmed,

2016).

5.1 Air Pollution

According to the Ministerial Decision 118/04, the companies are prohibited to burn

agricultural and organic waste into the air. In addition, they are also not allowed to

emit smoke over a specified density into the air (Brown & Cucinotta, 2019).

5.2 Noise Pollution

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According to the Ministerial Decision 80/94, the machineries and equipments used in

the factories should be checked for noise before they are installed.

5.3 Marine Pollution

According to the Law on Marine Pollution Control ( Royal Decree 34/74), ships are

not allowed to transfer oil into pollution free zones and also they should refrain from

releasing pollutants into the air (Tolma, Vesely, Oman, Boeckman & Aspy, 2018).
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References

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employment intentions and job preferences: ramifications on Omanization
plans. Quality Assurance in Education, 25(4), pp.440-461.

‫ (حماية‬Abdallah, A.K., 2017. Protection of Human Rights in Commercial Companies

‫حقوق االنسان لدى الشركات التجارية بين المبادئ الدولية والتشريعات الوطنية لسلطنة‬
.)70) ,Shariaa & Law Journal, College of Law, UAE universityٍ .)‫عمان‬

Brown, C. and Cucinotta, D., 2019. Treatment standards in environment-related

investor-state disputes. In Research Handbook on Environment and Investment
Law. Edward Elgar Publishing.

Barry, N., 2016. Business ethics. Springer.

Benayoune, A., 2018. Towards Effective Human Capital Development for the
Logistics Industry. International Journal of Trade, Economics and
Finance, 9(4).

Choudri, B.S., Baawain, M. and Ahmed, M., 2016. An overview of coastal and
marine resources and their management in sultanate of Oman. Journal of
Advanced Research in Management, 7(1), pp.21-32.

Eicher, S. ed., 2016. Corruption in international business: The challenge of cultural

and legal diversity. CRC Press.

Grayson, D. and Hodges, A., 2017. Corporate social opportunity!: Seven steps to
make corporate social responsibility work for your business. Routledge.

Griep, Y., Vantilborgh, T. and Jones, S.K., 2018. The relationship between
psychological contract breach and counterproductive work behavior in social
enterprises: Do paid employees and volunteers differ?. Economic and Industrial
Democracy, p.0143831X17744029.

Machado, P., 2018. Fahad Ahmad Bishara. A Sea of Debt: Law and Economic Life in
the Western Indian Ocean, 1780–1950.
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Palalić, R., Dana, L.P. and Ramadani, V., 2019. Refugee Entrepreneurship: A Case
Study from the Sultanate of Oman. In Refugee Entrepreneurship (pp. 207-219).

Thomas, D., 2017. Construction Contract Dispute Resolution in the Sultanate of

Oman. Const. L. Int'l, 12, p.26.

Tolma, E., Vesely, S., Oman, R., Boeckman, L. and Aspy, C., 2018. Examining
longitudinal relationships between youth assets, tobacco use and the
environment. European Journal of Public Health, 28(suppl_4), pp.cky213-513.

Tricker, B., 2015. Corporate governance: Principles, policies, and practices. Oxford
University Press, USA.

Zagenczyk, T.J., Cruz, K.S., Cheung, J.H., Scott, K.L., Kiewitz, C. and Galloway, B.,
2015. The moderating effect of power distance on employee responses to
psychological contract breach. European Journal of Work and Organizational
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