Professional Documents
Culture Documents
Unit Objectives
Introduction
Learning Outcomes
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INTRODUCTION
Law is essential to every society, so that it provides the rules by which people and
businesses interact. Law affects almost every function and area of business. In
absence of rules and regulations, there will be total chaos and havoc. These laws
define the way of working; it is the regulation or way of functioning of different
transactions in the society. All the decisions of the society are bounded by law;
this binding of law ensures systematic execution of things.
The authors of one business law text go so far as to say that “the difference between
winning and losing in the business world often depends upon the ability to make good
choices from a legal perspective.” This is because almost every business decision has
legal repercussions, including deciding whether to incorporate a business,
obtaining financing, protecting proprietary knowledge used to develop
products/services, entering into contracts to purchase raw materials, ensuring
that products meet safety standards, disposing of plant wastes, promoting and
pricing products/services, entering into contracts to sell products/services, and
providing product warranties and after sales service. At all stages of business,
running unpleasant of the law can hurt a business, while playing within the
boundaries of the law can help the business to succeed. For this reason,
accountants, who play a key role in almost every aspect of operations, must have
a solid working knowledge of the law.
The content and assessments of this unit have been developed to achieve the
following learning outcomes:
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INTRODUCTION TO LAW AND BUSINESS LAWS
The word “law” is generally associated with the word “rules.” McInnes, Kerr, and Van
Duzer provide a simple definition of law as “a rule that can be enforced by the courts.”
Similarly, Yates defines law as “the body of rules that can be enforced by the courts or by other
government agencies.”
DuPlessis and O'Byrne defined law as “a set of rules and principles intended to guide conduct
in society, primarily by protecting persons and their property; facilitating personal and
commercial interactions; and providing mechanisms for dispute recognition.”
Smyth, Soberman, Easson, and McGill describe what law does, which is to “set
standards of behaviour that are -enforced by government, and also by individuals and groups with
the help of government.”
PHILOSOPHY OF LAW
Philosophy of law (or legal philosophy) is related with providing a general philosophical
analysis of law and legal institutions. Issues in the field range from abstract conceptual
questions about the nature of law and legal systems to normative questions about the
relationship between law and morality and the justification for various legal institutions.
The topics in legal philosophy tend to be more theoretical than related topics in study of
political philosophy and applied ethics. For example, whereas the question of how
properly to interpret the U.S. Constitution belongs to the democratic theory (and hence
falls under the heading of political philosophy), the analysis of legal interpretation falls
under the heading of legal philosophy. On the same grounds, whereas the question of
whether capital punishment is morally allowed comes under the heading of applied
ethics, the question of whether the institution of punishment can be justified falls under
the heading of legal philosophy.
There are roughly three categories into which the topics of legal philosophy fall:
a) analytic jurisprudence,
b) normative jurisprudence, and
c) critical theories of law.
1. Analytic Jurisprudence
As John Austin describes the project, analytic jurisprudence looks for “the essence or
nature which is common to all laws that are properly so called” (Austin 1995, p. 11).
Accordingly, analytic jurisprudence is related with providing necessary and sufficient
conditions for the reality of law that distinguish law from non-law.
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While this task is usually interpreted as an attempt to analyze the concepts of law and
legal system, there is some confusion as to both the value and character of conceptual
analysis in philosophy of law. As Brian Leiter (1998) points out, philosophy of law is one
of the few philosophical disciplines that takes conceptual analysis as its main concern;
most other areas in philosophy have taken a naturalistic turn, including the tools and
methods of the sciences. To clarify the role of conceptual analysis in law, Brian Bix (1995)
distinguishes a number of different purposes that can be served by conceptual claims to:
2. Normative Jurisprudence
Normative jurisprudence involves the examination of normative, evaluative, and
otherwise prescriptive issues about the law, such as restrictions on freedom, obligations
to obey the law, and the grounds for punishment.
Here we will examine three key issues: (a) when and to what extent laws can restrict the
freedom of citizens; (b) the nature of one's obligation to obey the law; and (c) the
justification of punishment by law.
The legal realist movement was inspired by John Chipman Gray and Oliver Wendall
Holmes and reached its apex in the 1920s and 30s through the work of Karl Llewellyn,
Jerome Frank, and Felix Cohen. The realists disregarded the conceptual approach of the
positivists and naturalists in favour of an observed analysis that sought to show how
practicing judges really decide cases. (Realist is an artist or writer whose style is characterized
by the representation of people or things as they actually are) The realists were deeply doubtful
of the rising concept that judicial legislation is an uncommonness. While not entirely
rejecting the idea that judges can be controlled by rules, the realists maintained that
judges create new law through the exercise of law-making freedom considerably more
often than is commonly supposed. On their view, judicial decision is guided far more
frequently by political and moral intuitions about the facts of the case (instead of by legal
rules) than theories like positivism and naturalism acknowledge.
The term “law” has no assigned meaning. It is used in a variety of senses. Though
different writers have attempted to explain the term, no generally acceptable explanation
has been given. Different writers explain the term law from different points of view. The
study of law is referred to as jurisprudence or legal philosophy.
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According to Hart, Law is a coercive instrument for regulating social behaviour. Law has
also been defined as a command backed by sanctions. These two explanations of the term
law presuppose the existence of a sovereign, which prescribes or formulates the
commands and enforces sanctions, which is not necessarily the case.
Morality consists of instructions of the society and is not enforceable, however, rules of
law are enforceable. Wrongs in society are contraventions of either law or morality or
both. However, law incorporates a significant proportion of morality and to that extent
morality is enforceable. However, such rules/contraventions are contraventions of law
for example murder, rape theft by servant or agent.
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A) Wriflen Law: These are rules of law that have been reduced into a written form. They
are embodied in a formal document. For example, the Constitution of Kenya, laws
made by parliament (statutes). Such laws prevail over unwritten law.
Unwriflen Law: These are rules of law that have not been reduced into the written
form. They are not embodied in any single document. For example, African
Customary Law, Islamic Law, Hindu Law, Common Law, Equity. Their existence
must be proved.
B) National or Municipal Law: These are rules of law operational within the boundaries
of a country. It regulates the relation between citizens and the state. It is based on the
Acts of the Parliament, customary, and religious practices of the people.
C) Public Law: It consists of those fields or branches of law in which the state has an
interest as the sovereign. For example, criminal law, constitutional law,
administrative law. Public law is concerned with the constitution and functions of the
various organs of the government including local authorities, their relations with
each other and with the citizens. It asserts state sovereignty/power.
Private Law: It consists of those fields or branches of law in which the state has no
direct interest as the sovereign, for example law of contracts, law of tout, law of
property, law of succession. Private law is concerned with day to day transactions of
legal relationships between persons. It defines the rights and duties of parties.
E) Criminal Law: Criminal law has been defined as the law of crimes. A crime has been
defined as an act or omission, committed or omitted in violation of public law. For
example, murder, manslaughter, robbery, burglary, rape, stealing, theft by servant or
agent. All crimes or offences are created by parliament through statutes. Suspects are
arrested by the state through the police. However, individuals have the liberty to
arrest suspects. Offences are generally prosecuted by the state through the office of
the Attorney General.
When charged with an offence the suspect becomes an accused hence criminal cases
are styled as R V Accused. Under sec 77 of the constitution the person cannot
generally be prosecuted for an act or omission which was not defined by law as a
crime when committed or omitted. Under section 77(2)(a) of the constitution an
accused person is presumed innocent until proven or has pleaded guilty. It is the
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duty of the prosecution to prove its case against the accused. The burden of proof
rests on the prosecution.
The standard of proof in criminal cases is beyond any reasonable doubt. In the event
of any reasonable doubt the accused is set free (acquitted). The court must be satisfied
that the accused committed offence as charged. If the prosecution discharges the
burden of proof, the accused is convicted and sentenced which could take any of the
following forms:
Civil Law: Civil law is concerned with violations of private rights in their individual or
corporate capacity, like for example breach of contract, negligence, insult, nuisance,
passing off trespass to the person or goods.
If a person's private rights are violated, the person has a cause of action. Causes of action
are recognized by statutes and by the common law. The person whose rights have been
allegedly violated sues the alleged wrong doer. It is his duty of the plaintiff to find
evidence to prove his case the burden of proof lies on the plaintiff.
If the plaintiff discharges the burden of proof then he wins the case and is awarded
judgement which could take any of the following forms:
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The Judicial System or the court system is also known as the Judiciary System. The court
has the power to make decisions, enforce the law, and solve disputes. Judiciary system
consists of judges and other magistrates. They form the bench or the core of the judiciary
system. The Judiciary system of India is law and rules stated for the welfare of citizens. It
is responsible to ensure and re-enforce law and order.
The court structure is set as per the judiciary system prevailing in India with
differentiation of applicability as per the merit of the case. The normal trend of the
judiciary system is to start any general dispute in the lower court which is being escalated
as per the satisfaction of the parties to the higher courts.
The hierarchical structure of court is being endorsed by the Constituency of India with
the level of power exercised by the different level of courts. The judgments can be
challenged in the higher courts if the parties to the cases are not satisfied. The process of
escalation is systematic and thus the system of providing maximum level of satisfaction
to the parties is sincerely tried by the judiciary system.
On 26 January 1950, the Indian Constitution was written and it is the world's largest written
constitution. The constitution is the source of law in India and also the supreme law of
India. Judicial System of India consists of Supreme Court, High Court, District Court or
Subordinate Court.
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VILLAGE COURTS
The village courts are named as Lok Adalat or Nyaya Panchyat, which means the service
of justice extended to the villagers of India. This is the system for resolving disputes in
micro level. The need of these courts is justified though the Madras Village Court Act of
1888. This act is followed by the development post 1935 in different provinces, which are
re-termed as different states after the independence of 1947.
This conceptual model had been started to be sued from the state of Gujarat consisting of
a judge and two assessors since 1970s. The Law Commission had recommended in 1984
to form the Nyaya Panchayats in the rural areas with the people of educational
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attainment. The latest development had been observed in 2008 through initiation of
Gram Nyaylayas Act which had sponsored the concept of installation of 5000 mobile
courts throughout the country. These courts are assigned to judge the petty cases related
to civil and criminal offence which can generate the penalty of up to 2 years
imprisonment.
So far the available statistics of 2012 there are only 151 Gram Nyaylayas, which are
functional in this big country which is far below the targeted figures of 5000 mobile
courts. While trying to find the basic reasons for this non achievement, it was found as
financial constraints followed by shown reluctance by the lawyers, respective
government officials and police.
(i) Common Law: The Common Law, in this context is the name given to those
principles of law evolved by the judges in making decisions on cases that
are brought before them. These principles have been built up over many
years so as to form a complete statement of the law in particular areas.
Thus, Common Law denotes that body of legal rules, the primary sources
of which were the general distant past customs, judicial decisions and text
books on Jurisprudence. Common Law is unwritten law of England which
is common to the whole of the realm.
(ii) Law Merchant: The Law Merchant is the most important source of the
Mercantile Law. Law Merchant means those customs and usages which are
binding on traders in their dealings with each other. But before a custom
can have a binding force of law, it must be shown that such a custom is
ancient, general as well as requires universal compliance. In all other cases,
a custom has to be proved by the party claiming it.
(iii) Principle of Equity: Equity is a body of rules, the primary source of which
was neither custom nor written law, but the important dictates of
conscience and which had been set forth and developed in the Courts of
Chancery. The procedure of Common Law Courts was very technical and
slow. Action at Common Law could be started by first obtaining a writ
(summon / court order) or a process. The writs were limited in number and
unless a person was able to bring his case within one of those writs, no
action could lie at Common Law.
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In some cases, there was no remedy or inadequate remedy at Common Law. The King
is considered as the fountain head of justice; when people were dissatisfied or
aggrieved with the decision of the Common Law Court, they could always file a
mercy petition with the King-in-Council. The King would refer these petitions to his
Chancellor. The Chancellor, who was usually a Bishop, would dispose of these
petitions not according to the rigid letter of the law but according to his own dictates
of commonsense, natural justice and good conscience. The law so administered by
the Chancellor came to be known as 'Equity' and such courts as 'Equity Courts'. These
'Equity Courts' acted on number of guidelines e.g.:
1. “He who seeks equity must do equity”,
2. “He who comes to equity must come with clean hands.”
The Equity Courts had their separate existence from the Common Law Courts in
England until the passing of the Judicature Act of 1873, when the separate existence of
such courts was abolished and all High Courts were established to grant either or
both the remedies (Common Law as well as Equity) according to the circumstances of
each case.
Some of the important principles and remedies developed by Equity Courts are
recognition of the right of beneficiary to trust property, remedy of specific
performance of contracts, equity of redemption in case of mortgages etc.
(ii) Statute Law: “Statute law is that portion of law which is evolved from the
legislation or enactment of Parliament or the subordinate and delegated legislative
bodies.” It is now a very important source of Mercantile Law. A written or statute law
overrides unwritten law, i.e., both Common Law and Equity. Some of the important
enactments in the domain of Mercantile Law are: The English Partnership Act, 1890,
The English Sale of Goods Act,1893, Bankruptcy Act, 1914, Carriers Act, 1830, The
English Companies Act, 1948 etc.
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– Constitutional Law
– Administrative Law
– Criminal Law
– Civil Law
– Mercantile or Commercial Law
Mercantile Law is related to the commercial activities of the people of the society. It is
that branch of law that is applicable to or concerned with trade and commerce in
connection with various mercantile or business transactions. Mercantile Law is a wide
term and embraces all legal principles concerning business transactions. The most
important feature of such a business transaction is the existence of a valid agreement,
express or implied, between the parties concerned.
Origin and Growth of Mercantile Law in England: The Mercantile Law or Law
Merchant or Lex Mercatorla is the name given to that part of law, which grew up from
the customs and usages of merchants or traders in England, which eventually became a
part of Common Law of England.
– Statute Law
– Common Law
– Principles of Equity.
These have already been discussed under the heading – Sources of English Law.
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(I) English Mercantile Law: The Indian Mercantile Law is mainly an adaptation of
English Mercantile Law. However, certain modifications wherever necessary, have
been incorporated in it to provide for local customs and usages of trade and to suit
Indian conditions. Its dependence on English Mercantile Law is so much that even
now in the absence of provisions relating to any matter in the Indian Law, alternative
is to be had to the English Mercantile Law.
(ii) Acts Enacted by Indian Legislature or Statute Law: The following Acts enacted by the
Indian legislature from time to time are important for the study of Indian Mercantile
Law: (i) The Indian Contract Act, 1872; (ii) The Sale of Goods Act, 1930; (iii) The Indian
Partnership Act, 1932; (iv) The Negotiable Instruments Act, 1881; (v) The Arbitration
and Conciliation Act, 1996; (vi) The Insurance Act, 1938; (vii) The Carriers Act, 1865;
(viii) The Presidency Towns Insolvency Act, 1909; and (ix) Provincial Insolvency Act,
1920.
(iii)Judicial Decisions: Judges interpret and explain the statutes. Whenever the law is
silent on a point, the judge has to decide the case according to the principles of justice,
equity and good conscience. It would be accepted in most systems of law that cases
which are identical in their facts, should also be identical in their decisions. That
principle ensures justice for the individual claimant and a measure of certainty for the
law itself. The English legal system has developed a system of judicial pattern, which
requires the extraction of the legal principle from a particular judicial decision and,
given the fulfilment of certain conditions, ensures that judges apply the same
principle in subsequent cases which are identical on lines.
The latter provision being termed “binding precedents” (binding standards). Such
decisions are called as standards and become an important source of law. Prior to
independence, the Privy Council of Great Britain was the final Court of Appeal and its
decisions were binding on Indian Courts. After independence, the Supreme Court of
India is the final Court of Appeal. But even then, the decisions of English Courts such
as Privy Council and House of Lords are frequently referred to as standards in
deciding certain cases and in interpreting Indian Statutes.
(iv)Customs and Trade Usages: Most of the Indian Law has been codified. But even then,
it has not altogether done away with customs and usages. Many Indian statutes make
specific provisions to the effect that the rules of law laid down in a particular Act are
subject to any special custom or usages of trade. It simply means that unless and until
required, the new laws are in addition of earlier existing laws or customs. For
example, Section 1 of the Indian Contract Act, 1872, lays down that, “Nothing herein
contained shall effect the provisions of any Statute, Act or Regulation not hereby expressly
repealed, nor any usage or custom of trade, nor any incident of any contract, not inconsistent
with the provisions of this Act.” Similarly, Section 1 of the Negotiable Instruments Act,
1881, lays down that, “nothing herein contained... affects any local usage relating to any
instrument in any oriental language”. It may be noted that the whole law relating to
Hundis and the Kachhi and Pakki Adat Systems of Agency is based on custom and
usage of trade as recognised and given legal effect to by courts of law in India.
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1.6 KEYWORDS
1.7 SUMMARY
Law affects almost every function and areas of a business. In absence of rules and
regulations, there will be a total chaos and havoc.
Laws are rules, which are to be enforced by the courts and a set of rules and
regulations formed to guide the conduct in the society.
The topics in legal philosophy tend to be more theoretical than related topics in
study of political philosophy and applied ethics.
Rules of law may be classified as – a)Written and Unwritten Law b) National and
International c) Public and Private d)Substantive and Procedural e) Criminal and
Civil.
The court structure is set as per the judiciary system prevailing in India with
differentiation of applicability as per the merit of the case. The normal trend of
the judiciary system is to start any general dispute in the lower court, which is
being escalated as per the satisfaction of the parties to the higher courts. The
constitution is the source of law in India and the supreme law of India. Judicial
System of India consists of Supreme Court, High Court, District Court or
Subordinate Court.
The Chief Sources of Law are Common Law, Law Merchant, Principle of Equity
and Statute Law.
Mercantile Law is related to the commercial activities of the people of the society.
It is that branch of law that is applicable to or concerned with trade and commerce
in connection with various mercantile or business transactions
The main sources of Indian Mercantile Law are English Mercantile Law, Acts
enacted by Indian Legislature, Judicial Decisions, Customs and Trade Usages.
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