St.

Mary’s University
Business & company law

Lesson 6(2)
Elements of a business
As stipulated under Art 127 of the Commercial Code, elements of a business include both corporeal &
incorporeal elements. The corporeal element refers to the equipments and goods that help for the smooth
running of the business. An example in the case of the business carried by Saint Mary’s Education
center, PLC can be, the chairs in the class, the black & white board, and the computers in various offices
The main incorporeal element of a business is what is referred as ‘goodwill’. The code of commerce
defines good will as
“ The good will results from the creation and operation of a business and is a value which may vary
according to the probable or possible relations between a trader and third parties who may require
from him goods/service” (Art 130 of Commercial code)
Each one of us has a certain positive attachments to an individual trader or a product of a company. The
attitude to like a certain trader’s brand/mark is what we call ‘good will’. In simple terms, ask any person
the hotel he likes most or the beverage he prefer to consume or the brand of cloth he loves to wear. One
may like a suit by Ambassador while another likes to wear a suit by Le mond. The preference of
Ambassador over Le mond or other similar clothing traders whatever the reason, is presumed to result
from the good will the business has over the consumer.
The other incorporeal elements of a business are trade name and distinguishing mark. A trade-
name is the name a trader operates a business under. It shall designate the nature of business under taken
in a clear manner. It shall be the prerogative of a trader to register such to an appropriate authority. The
usual practice is using the trader’s own name/name of family members. Yet a trader can take an assumed
name to carry his trade by. The usage of trade name is mandatory. The trader must be careful in
selecting a name as he has the duty of registering same in the commercial register and ministry of trade
will be willing to register only when the name
a)is not identical or misleadingly similar to the trade names previously registered
b) Is not misleading other business persons and the society, in spite of the fact that it is not previously
registered
c) The part of the trade name desired to be owned solely by the applicant is not a descriptive or a generic
or a common name
d) That the trade name is not represented only by numbers; or
e) is not similar to the names of public bodies or public enterprises
f) is not similar to the name of any political party or labor union or any other association or aid
organization

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Business & company law

g) a proper authorization has been obtained to use as trade names the names of renowned people or
leaders of countries, if the name is so represented; or
h) the trade name of the business operated by a sole business person indicates the type of business
carried on; or
i) Is not among trade names well known in other countries or is not the one that has international
recognition, unless an authorization by the owner to use it has been secured, even though not registered as
a trade name in Ethiopia; or
j) is not submitted by adding prefix or suffix to an already registered trade name; or
k) Where the trade name is an acronym that it is meaningful or is representative of the name of the
applicant or where it is composed of the names of the members of a business organization that it contains
the beginning letters of the members; or
l) where it is intended to use the names of countries as trade names of business organizations, that
citizens coming from the countries are establishing the business organizations; or
m) Where it is intended to use a trade name of a business organization or a sole business person
registered in another country as a trade name of a business organization or a business of an individual
business person, that an authorization is obtained and that the same is authenticated in Ethiopia; or
n) Does not have similar reading sound with an already registered trade name; or
o) is not contrary to morality or public order;

A trade-mark (as the commercial code calls it ‘Distinguishing mark’) is either a name, designation, sign,
emblem affixed on the premise of the business or on the product itself. Though it is not compulsory to
use trade-marks, it is advisable from marketing point of view. The human mind responds well to the
signs/marks than words/names. We are all aware what comes to our though when we see marks like.

When looking for a trade mark a trader must be careful that the mark is capable of clearly distinguishing
the product/service of the trader from other traders/persons. Under this general bases a trade mark is not
capable of being registered and protected if
a. the trademark consists of sound or smell;
b. is contrary to public moral

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Business & company law

c. is already registered as a mark by another trader

d. is confusingly similar with a prior registered mark

The law allows the trader to stop the act of others who are competing in the trade circle from usurpation
of trade-names and marks. On top of the major duties of traders stated in lesson 6(1) there also exist the
duty to a fair competition between and among traders. Laws protect consumers from different unfair acts
of traders. They also protect a trader from an act of another competing trader if the competition is found
to be unfair. The good will of a trader can be preserved by a proceeding against acts of unfair trade
practice in a court of law and setting up legal and contractual; prohibitions.
What is an Unfair Competition is?
“Any act/practice, in the course of commercial activities, that aims at eliminating competitors through
different methods” is considered as unfair competition.
Article 133 of the commercial code has listed what amounts as unfair competition
a. Misleading customers (misrepresentation)
b. Making false statement about a trader (Fraudulent act)
Now the usage of an exact trade name/mark or usage of others mark/name by making minor modification,
which actually didn’t far that much from creating confusion among the users of those product is treated as
‘unfair competition’. The court has the power of ordering damages to the defaulted trader, cessation of
the act/practice, publication of apologies and clarification of the issue from the trader at fault to
consumers.
 Say yes/No. for the claim the following traders raise on issues of good will and unfair
competition on the use of trade name and trade matrk?
 Sony/sonyo
 St. Mary’s University College / St. Mary’s Construction Company
 Hayat Real estate/ Ayat shoe factory
 Tibebu workiye Records/Tibeb Jewelry
 Addidas/ Adibas/Adidos/adidas/addis
 Awash bank S.C. / Awash Insurance S.C.
 Which of the following acts constitute ‘unfair competition?’
- an act misleading the public about an enterprise of its product/service
- an act of disclosing information without consent of the holder
- false/unjustifiable allegation about a product
- Agreement of jointly fixing price

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Business & company law

- Agreements to allocate Quotas for sale

- Refusal to deal/sell a service.
If the trader /business organization has an intellectual property as a copy right or patent, such
also forms an incorporeal element of a business. The right to lease the immovable where the
business is operating is also regarded as a business element.
 Discuss whether the assets and liabilities of a business can be considered as elements
of a business? Why/why not.
 The Ethiopian commercial code states the fact that a business like any other
commodity is eligible for sale, hire, and mortgage and can be contributed in its entirety
for a newly established business organization. What does this phrase imply? Can a
trader sell his entire business? Can a trader sale only one element from his business,
say his trade name? Discuss.