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EIB 501

Introduction to Business

“Assignment on Laws that Affect Business”
This report is only base forIntroduction to Business EIB-501

Business Law (also referred to as Commercial Law) governs the transactions between businesses. This includes business formation; litigation; contracts; mergers and acquisitions; commercial leasing; and consumer protection. Business law deals primarily with the definition of rights and responsibilities, as opposed to the enforcement of laws. Business law and commercial law encompass several overlapping issues. The Uniform Commercial Code (UCC) is the primary governing authority for commercial transactions. Other specified legal areas have developed that are types of business or commercial law. They include Banking, Bankruptcy, Consumer Credit, Contracts, Debtor and Creditor, Landlord-Tenant, Mortgages, Negotiable Instruments, Real Estate Transactions, Sales and Secured Transactions. 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 your responsibility to know what laws affect your business. Business law and commercial law are broad legal topics that encompass business, commerce, consumer transactions, and the formation and management of business entities. Some of the more important areas of commercial law include sales, secured transactions, negotiable instruments, and debtor and creditor law. Business law overlaps, but also includes the formation and management of business entities. An attorney with experience in business and commercial law can help you with all of your questions. Numerous and Varied laws regulate the activities of all businesses and everyone involved in the business- from owner to manager to employee. Since every business, in every state, in every country is different, the laws that affect your business may be different than the laws that affect other businesses. For that reason, it is impossible to give an account of all laws that affect all businesses. You will need to find out what the laws are that affect your business. The major business law categories are:

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The Law of Torts The Law of Contracts The Law of Sales The Law of Agency The Law of Property The Law of Bankruptcy The Law of Negotiable Instruments.

The Law of Torts
Tort law refers to any given body of law that creates and provides remedy for civil wrongs that do not arise from contractual duties. A person who is legally injured may be able to use tort law to recover damages from someone who is legally responsible, or "liable," for those injuries. Tort law defines what constitutes a legal injury, and establishes the circumstances under which one person may be held liable for another's injury. Tort law is a branch of the law which covers civil wrongs, such as defamation and trespassing, among many other transgressions. Under tort law, if someone suffers a physical, legal, or economic harm, he or she may be entitled to bring suit. If the suit is deemed valid, damages may be awarded to the victim to compensate for his or her troubles. Most tort laws are found in regional, state, and national civil codes, which often spell out limits on damages and the statute of limitations for tort cases.

Categories of torts
Torts may be categorized in a number of ways: one such way is to divide them into Negligence Torts, and Intentional Torts. The standard action in tort is negligence. The tort of negligence provides a cause of action leading to damages, or to relief, in each case designed to protect legal rights, including those of personal safety, property, and, in some cases, intangible economic interests. Negligence actions include claims coming primarily from car accidents and personal injury accidents of many kinds, including clinical negligence, worker's negligence and so forth. Product liability cases, such as those involving warranties, may also be considered negligence actions, but there is frequently a significant overlay of additional lawful content. Intentional torts include, among others, certain torts arising from the occupation or use of land. The tort of nuisance, for example, involves strict liability for a neighbor who interferes with another's enjoyment of his real property. Trespass allows owners to sue for entrances by a person (or his structure, such as an overhanging building) on their land. Several intentional torts do not involve land. Examples include false imprisonment, the tort of unlawfully arresting or detaining someone, and defamation (in some jurisdictions split into libel and slander), where false information is broadcast and damages the plaintiff's reputation. In some cases, the development of tort law has spurred lawmakers to create alternative solutions to disputes. For example, in some areas, workers' compensation laws arose as a legislative response to court rulings restricting the extent to which employees could sue their employers in respect of injuries sustained during employment.

Theories of Tort Law: Justice, Rights, and Duties
 Corrective Justice

Corrective justice theory — the most influential non-economic perspective on tort law — understands tort law as embodying a system of first- and second-order duties. Duties of the first order are duties not to injure. These duties establish norms of conduct. (Some theorists believe that corrective justice has nothing to say about the character of these norms; others think that it helps define their scope and content.) Duties of the second order are duties of repair. These duties arise upon the breach of first-order duties. That second-order duties so arise follow from the principle of corrective justice, which says that an individual has a duty to repair the wrongful losses that his conduct causes. For a loss to be wrongful in the relevant sense, it need not be one for which the wrongdoer is morally to blame. It need only be a loss incident to the violation of the victim's right not to be injured — a right correlative to the wrongdoer's first-order duty not to injure. We can bring out what is distinctive about the corrective justice approach to tort law by contrasting it with various alternatives. Corrective Justice versus Economic Analysis From the standpoint of economic analysis, all legal liabilities are but costs of one sort or another, there being no normative differences between such things as licensing fees, tort liability, and taxes. In contrast, corrective justice theory maintains that tort liability is not simply a mechanism for shifting costs. A licensing fee imposes a cost, as does a tax, but we would not say that in levying fees or taxes we are holding people responsible. For this reason, corrective justice theory insists that different legal liabilities are not simply interchangeable cost-shifting implements in the reformer's tool box. Corrective Justice versus Retributive Justice Many theorists believe that a principle of retributive justice — says, that the blameworthy deserve to suffer — does a good job of interpreting and justifying criminal law. Yet most theorists think that such a principle does a rather poor job of interpreting and justifying tort law (except, perhaps, for the part of tort law concerned with punitive damages). First, the concept of responsibility at play in tort law is that of ‘outcome responsibility,’ not moral responsibility. Tort asks whether a given loss is something that the defendant in some sense owns. It does not ask whether the defendant's action is something for which he is morally to blame. Second, the duty of repair in tort is in essence a debt of repayment. Like other debts of repayment, it can be paid by third parties — and not just when the creditor (the plaintiff) has authorized repayment. By contrast, ‘debts’ incurred as a result of criminal mischief can never be paid by third parties.

You cannot serve my prison sentence. Third, a person cannot guard against liability to criminal sanction by purchasing insurance. Yet it is common to purchase insurance to guard against the burdens of tort liability. Indeed, in some areas of life (e.g., driving), purchasing third-party insurance is mandatory. Corrective Justice versus Distributive Justice Some theorists are skeptical of the idea that corrective justice is really an independent principle of justice. Their concern is twofold: considerations that make corrective justice seem like a genuine principle of justice also seem to undermine its independence from distributive justice (justice in the distribution of resources); at the same time, considerations that support the principle's independence from distributive justice also seem to undermine its status as a genuine principle of justice. This twofold concern stems from the fact that corrective justice requires the reversal of wrongful changes to an initial distribution of resources. If, on the one hand, some initial distribution of resources is just, then corrective justice seemingly does no more than require that we return individuals to the position to which they are entitled merely as a matter of distributive justice. This suggests that corrective justice is but distributive justice from an ex post perspective rather than an independent principle of justice. If, on the other hand, an initial distribution of resources is unjust, then corrective justice seemingly requires that we sustain, enforce, or entrench what is ex hypothesis an injustice. This suggests that corrective justice is not really a matter of justice at all: independent, yes; a genuine principle of justice, no. First Response: Corrective Justice as Transactional Justice. Some theorists respond by suggesting that we understand corrective justice as a kind of transactional justice. These theorists identify the domain of distributive justice with the initial distribution of holdings and take corrective justice to be concerned exclusively with norms of transfer, norms that govern whether departures from an initial distribution are legitimate. Whatever the underlying pattern of holdings, we can distinguish legitimate modes of transfer from illegitimate modes. If agreement or gift moves resources from one person to another, then the mode of transfer is legitimate. Never mind whether the resultant allocation of resources is unequal or unfair: that is a concern of distributive, not transactional, justice. If fraud or force moves resources from one person to another, then the mode of transfer is illegitimate. Even if an illegitimate transfer gives rise to an equitable distribution, the transaction is unjust and must therefore be annulled. Second Response: Justice versus Legitimacy. Other theorists respond by distinguishing between a distribution's justness and its legitimacy. These theorists allow that a legitimate distribution of resources may fall short of being a fully just distribution. But they insist that a (merely) legitimate distribution can suffice to generate duties of repair.

Civil Recourse Theory

Civil recourse theory agrees with corrective justice theory that tort's normative structure involves a variety of first-order duties, duties that establish norms of conduct. Yet civil recourse theory takes a very different view of the legal consequence of a first-order duty's breach. Whereas corrective justice theory holds that such a breach saddles the would-be defendant with a second-order duty — in particular, a duty of repair — civil recourse theory holds that no such second-order duty results directly from the breach. Rather, the breach of a first-order duty endows the victim with a right of action: a legal power to seek redress from her injurer. That this power so arises follows from what proponents regard as a deeply embedded legal principle — the principle of civil recourse — which says that one who has been wronged is legally entitled to an avenue of recourse against the perpetrator. Civil recourse theory has substantial explanatory power. Perhaps most obvious, it explains why tort suits have a bilateral structure — why the victim of a tortuous wrong seeks redress from the wrongdoer herself instead of drawing on a common pool of resources. It also explains why tort suits are privately prosecuted — why the state does not act of its own accord to impose liability on those who breach firstorder duties. According to civil recourse theory, the breach of a first-order duty gives rise not to a legal duty but to a legal power, a power the victim can choose not to exercise. Furthermore, civil recourse theory accommodates a number of tort's central substantive features, features that arguably elude corrective justice theory. Prominent among these are (i) the fact that tort offers a variety of different remedies, only some of which are designed to restore the plaintiff's antecedent holdings, and (ii) the fact that the defendant incurs a legal duty to pay damages only upon a lawsuit's successful conclusion (either by settlement or by the final judgment of a court), rather than immediately upon the breach of a first-order duty. It remains unresolved whether corrective justice theory has the resources to explain these two substantive features. Despite its explanatory power, civil recourse theory is vulnerable to a potentially serious objection — or else it seems to leave tort law vulnerable to such an objection. Because civil recourse theory offers little guidance as to what sort of redress is appropriate, the theory depicts tort law primarily as an institution that enables one person to harm another with the aid of the state's coercive power. Tort law may well be such an institution, of course. But if it is, it may be deeply flawed — indeed, it may be unjust. This problem can be posed in the form of a dilemma. Either the principle of civil recourse is grounded in a principle of justice or it is not. If the principle of civil recourse is grounded in a principle of justice, then civil recourse theory threatens to collapse into a kind of a justice-based theory. If the principle of civil recourse is not so grounded, then the principle apparently does no more than license one party to inflict an evil on another. If that is what the principle does, we might reasonably wonder whether it can justify or even make coherent sense of an entire body of law.

The Law of Contracts
A contract is a legally enforceable agreement between two or more parties with mutual obligations. The remedy at law for breach of contract is "damages" or monetary compensation. In equity, the remedy can be specific performance of the contract or an injunction. Both remedies award the damaged party the "benefit of the bargain" or expectation damages, which are greater than mere reliance damages, as in promissory estoppels.

The Elements of a Contract
Typically, in order to be enforceable, a contract must involve the following elements:  A "Meeting of the Minds" (Mutual Consent)

The parties to the contract have a mutual understanding of what the contract covers. For example, in a contract for the sale of a "mustang", the buyer thinks he will obtain a car and the seller believes he is contracting to sell a horse, there is no meeting of the minds and the contract will likely be held unenforceable.  Offer and Acceptance

The contract involves an offer (or more than one offer) to another party, who accepts the offer. For example, in a contract for the sale of a piano, the seller may offer the piano to the buyer for $1,000.00. The buyer's acceptance of that offer is a necessary part of creating a binding contract for the sale of the piano. Please note that a counter-offer is not an acceptance, and will typically be treated as a rejection of the offer. For example, if the buyer counter-offers to purchase the piano for $800.00, that typically counts as a rejection of the original offer for sale. If the seller accepts the counter-offer, a contract may be completed. However, if the seller rejects the counter-offer, the buyer will not ordinarily be entitled to enforce the prior $1,000.00 price if the seller decides either to raise the price or to sell the piano to somebody else.  Mutual Consideration (The mutual exchange of something of value)

In order to be valid, the parties to a contract must exchange something of value. In the case of the sale of a piano, the buyer receives something of value in the form of the piano, and the seller receives money. While the validity of consideration may be subject to attack on the basis that it is illusory (e.g., one party receives only what the other party was already obligated to provide), or that there is a failure of consideration (e.g., the consideration received by one party is essentially worthless), these defenses will not let a party to a contract

escape the consequences of bad negotiation. For example, if a seller enters into a contract to sell a piano for $100, and later gets an offer from somebody else for $1,000, the seller can't revoke the contract on the basis that the piano was worth a lot more than he bargained to receive.  Performance or Delivery

In order to be enforceable, the action contemplated by the contract must be completed. For example, if the purchaser of a piano pays the $1,000 purchase price, he can enforce the contract to require the delivery of the piano. However, unless the contract provides that delivery will occur before payment, the buyer may not be able to enforce the contract if he does not "perform" by paying the $1,000. Similarly, again depending upon the contract terms, the seller may not be able to enforce the contract without first delivering the piano. In a typical "breach of contract" action, the party alleging the breach will recite that it performed all of its duties under the contract, whereas the other party failed to perform its duties or obligations. Additionally, the following elements may factor into the enforceability of any contract:  Good Faith

It is implicit within all contracts that the parties are acting in good faith. For example, if the seller of a "mustang" knows that the buyer thinks he is purchasing a car, but secretly intends to sell the buyer a horse, the seller is not acting in good faith and the contract will not be enforceable.  No Violation of Public Policy

In order to be enforceable, a contract cannot violate "public policy". For example, if the subject matter of a contract is illegal, you cannot enforce the contract. A contract for the sale of illegal drugs, for example, violates public policy and is not enforceable. Please note that public policy can shift. Traditionally, many states refused to honor gambling debts incurred in other jurisdictions on public policy grounds. However, as more and more states have permitted gambling within their own borders, that policy has mostly been abandoned and gambling debts from legal enterprises are now typically enforceable. (A "bookie" might not be able to enforce a debt arising from an illegal gambling enterprise, but a legal casino will now typically be able to enforce its debt.) Similarly, it used to be legal to sell "switchblade kits" through the U.S. mail, but that practice is now illegal. Contracts for the interstate sale of such kits were no longer enforceable following that change in the law.

Oral Contracts
There is an old joke that "an oral contract isn't worth the paper it's written on". That's a reference to the fact that it can be very difficult to prove that an oral contract exists. Absent proof of the terms of the contract, a party may be unable to enforce the contract or may be forced to settle for less than the original bargain. Thus, even when there is not an opportunity to draft up a formal contract, it is good practice to always make some sort of writing, signed by both parties, to memorialize the key terms of an agreement. At the same time, under most circumstances, if the terms of an oral contract can be proved or are admitted by the other party, an oral contract is every bit as enforceable as one that is in writing. There are, however, "statute of fraud" laws which hold that some contracts cannot be enforced unless reduced to writing and signed by both parties. For more information on the Statute of Frauds, please see this associated article. Please note that, although sometimes an oral contract is referred to as a "verbal contract", the term "oral" means "spoken" while the term "verbal" can also mean" in words". Under that definition, all contracts are technically "verbal". If you mean to refer to a contract that is not written, although most people will recognize what you mean by "verbal contract", for maximum clarity it is helpful to refer to it as an "oral contract".

The Law of Sales
The law relating to the transfer of ownership of property from one person to another for value, which is codified in article 2 of the Uniform Commercial Code (UCC), a body of law governing mercantile transactions adopted in whole or in part by the states. The sale of a good, or an item of value, is a transaction designed to benefit both buyer and seller. However, sales transactions can be complex, and they do not always proceed smoothly. Problems can arise at several phases of a sale, and at least one of the parties may suffer a loss. In recognition of these realities and of the basic importance of orderly commerce to society, legislatures and courts create laws governing sales of goods.

The most comprehensive set of laws on sales is the Uniform Commercial Code (UCC). The UCC is a collection of model laws on an assortment of commercial activities. The UCC itself does not have legal effect; it was written by the lawyers, judges, and professors in the American Law Institute and the National Conference of Commissioners on Uniform State Laws. All states have adopted the UCC in whole or in part by enacting the model laws contained in its eleven articles. Article 2 of the UCC deals with the sale of goods. All states with the exception of Louisiana have enacted at least some of the model laws in article 2. Laws on the sale of real estate and the sale of services are different from laws on the sale of goods, and they are excluded from article 2. A service contract may be covered by the provisions in article 2 insofar as it involves the transfer of goods, and courts may use article 2 as a reference for interpreting laws on the sale of services. Some contracts are a blend of the sale of goods and the sale of services and may be covered by article 2. For example, the service of food by a restaurant may be considered, for some purposes, a contract for a sale of goods (U.C.C. Sec. 2-314). Article 2 covers sales by both private individuals and merchants. Merchants are persons engaged in the business of buying or selling goods. A small number of provisions apply only to merchants, but otherwise the provisions cover all sales.

Contract Formation
A contract for the sale of goods can be made in any manner that shows agreement between the buyer and seller. A contract may be made in writing, orally, or through any other conduct by both parties that acknowledge the existence of a contract. To form a contract, one of the parties must make an offer, the other party must accept the offer, and consideration, or something of value, must be exchanged. An offer may be revoked without any loss to the offeror if the revocation is made before the other party accepts the offer and gives consideration. However, an offer may not be revoked for up to ninety days if it is (1) accompanied by an assurance that the offer will be kept open; (2) made by a merchant; and (3) in writing signed by the offering merchant (U.C.C. Sec. 2-205). If a party accepts an offer but in the process of accepting changes material terms of the offer, the acceptance may be considered a counteroffer. A counteroffer eliminates the first offer, and no contract is formed until the original offeror accepts the counteroffer and consideration is exchanged. In contracts between merchants, additional or different terms by the offeree become part of the contract unless (1) the offer expressly limited acceptance to the terms of the offer; (2) the new terms materially alter the contract; or (3) the offeror objects within a reasonable time.

Many basic principles of contract law also apply to the sale of goods. The Statute of Frauds requires that an agreement to sell goods at $500 or more must be in writing or it cannot be enforced in court. The writing must be signed by the party to be charged, it must contain language indicating that a contract has been made, and it must identify the parties to the contract and the quantity of goods sold. There are a few exceptions to the Statute of Frauds. A sales contract that is unconscionable may be struck down in whole or in part by a court. A sale is unconscionable if a person in a superior bargaining position dictates terms that are grossly unfair to the other party. A court will determine whether a sale is unconscionable by examining the circumstances at the time the contract was made. Courts rarely find unconscionability in sales between merchants because merchants generally are more sophisticated in sales negotiations than are nonmerchants.

Seller's Obligations
Generally, the seller's primary obligations are to transfer ownership of the goods and deliver the goods. A seller may agree with the buyer to perform other obligations. For instance, a seller may agree to package or label the goods in a certain way or service the goods for a specific period of time. A seller should convey the title to the goods free from any security interest or other lien or claim, unless the buyer was aware at the time of the sale that other persons had a claim to the goods. If the sales contract does not specify a time of delivery, the seller should deliver the goods within a reasonable time after the contract is made. Delivery should occur in one shipment unless the parties agree otherwise. If the sales agreement does not indicate where the goods are to be turned over, the delivery of the goods should occur at the seller's place of business. The tender of the goods should be at a reasonable hour of the day, and the buyer should have the ability to take the goods away. If the goods are in the possession of a third party, or bailee, at the time of the sale, the seller must arrange matters with the bailee so that the buyer may take possession. If the goods are to be transported, there are two ways to handle delivery. The buyer and seller may agree to a shipment contract, in which case the seller must arrange for the transportation. In a shipment contract, the seller's duties for delivery are complete as soon as the goods are delivered to the carrier. With a destination contract, the seller's obligation to deliver does not end until the goods are delivered to the buyer or at a selected location.

Buyer's Obligations
A buyer's basic obligations are to accept the goods and pay the sale price. If the goods are nonconforming, the buyer may reject the goods. If the goods conform to the specifications of the sales contract and the buyer wrongfully rejects them, the seller may choose one of four options, or a blend of two or more options. First, the seller may sue for damages. The amount of damages for a wrongful rejection would be the sale price minus the market price of the goods, measured at the time and place of the tender. Second, the seller may sue for the price of the goods, but only if the goods cannot be resold in the seller's ordinary course of business, or if circumstances indicate that resale efforts will be fruitless. Third, the seller could cancel the contract, putting an end to shipments and reserving the right to sue for damages or collect unpaid balances. Fourth, the seller could resell the goods to a third party and recover the difference between the sale price and the resale price plus any incidental damages. The resale of wrongfully rejected goods presents a few special problems. Under section 2-706 of the UCC, the sale may be either public or private. A private sale is made personally by the seller, whereas a public sale is made with public notice and carried out by a sheriff or at a publicly held auction. In either case the sale must be commercially reasonable in method, manner, time, place, and terms. Furthermore, the seller must notify new buyers that the goods are being resold under a breached contract to disclose the potential for legal conflict. A seller who resells wrongfully rejected goods must inform the original buyer of the resale. If wrongfully rejected goods are perishable, the seller need not give notice to the buyer of the time and place of the resale. If the resale of wrongfully rejected goods is at a public sale, only goods identified in the contract may be sold, and the sale must be made at a usual place for public sale, provided such a site is reasonably available. If the goods are not in view of bidders at a public sale, the public notice of the sale must state the place where the goods are located, and the seller must give bidders an opportunity to inspect the goods. If the seller resells the goods for a price higher than the price in the original sales contract and the extra profit covers costs incident to the resale, the seller has no damages, and the original buyer is not liable to the seller for the wrongful rejection. In sales where the buyer pays a deposit and then wrongfully rejects the goods, the seller may keep the goods and the deposit. However, a seller is not entitled to a deposit that far exceeds her actual or expected damages. Under section 2-718 of the UCC, a buyer is entitled to restitution of any amount by which the sum of the payments already made exceeds either (1) the amount of any reasonable liquidated damages clause, or (2) 20 percent of the value of the total performance for which the buyer is obligated under the contract, or $500, whichever amount is smaller.

When a buyer accepts a seller's tender of conforming goods, the buyer is obligated to pay the sale price contained in the contract for sale. In some cases the parties may fail to agree to a price or choose to leave the price terms open. Under section 2-305 of the UCC, if a price term is left open, the price should be set in good faith at a reasonable market price at the time of delivery. If the parties intend that there is to be no contract unless a price is agreed to or fixed by a particular market indicator and the parties ultimately are unable to agree to a price term, there is no contract. In such a case the buyer must return any goods received, and the seller must return any money paid by the buyer. Generally, a buyer has the right to pay in any manner observed in the business unless the seller demands a particular form of payment. Unless the parties agree otherwise, payment should be made when the goods are delivered to the buyer. A buyer does not have the right to inspect the goods if they are delivered cash on delivery or on similar terms, or if the contract provides for payment before inspection.

The Law of Agency

The law of agency is an area of commercial law dealing with a contractual or quasicontractual, or non-contractual set of relationships when a person, called the agent, is authorized to act on behalf of another (called the principal) to create a legal relationship with a third party.[1] Succinctly, it may be referred to as the relationship between a principal and an agent whereby the principal, expressly or impliedly, authorizes the agent to work under his control and on his behalf. The agent is, thus, required to negotiate on behalf of the principal or bring him and third parties into contractual relationship. This branch of law separates and regulates the relationships between:
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Agents and principals; Agents and the third parties with whom they deal on their principals' behalf; and Principals and the third parties when the agents purport to deal on their behalf.

The common law principle in operation is usually represented in the Latin phrase, qui facit per alium, facit per se, i.e. the one who acts through another, acts in his or her own interests and it is a parallel concept to vicarious liability and strict liability in which one person is held liable in criminal law or tort for the acts or omissions of another.

The reciprocal rights and liabilities between a principal and an agent reflect commercial and legal realities. A business owner often relies on an employee or another person to conduct a business. In the case of a corporation, since a corporation is a fictitious legal person, it can only act through human agents. The principal is bound by the contract entered into by the agent, so long as the agent performs within the scope of the agency. A third party may rely in good faith on the representation by a person who identifies himself as an agent for another. It is not always cost effective to check whether someone who is represented as having the authority to act for another actually has such authority. If it is subsequently found that the alleged agent was acting without necessary authority, the agent will generally be held liable. There are three broad classes of agent 1. Universal agents hold broad authority to act on behalf of the principal, e.g. they may hold a power of attorney (also known as a mandate in civil law jurisdictions) or have a professional relationship, say, as lawyer and client. 2. General agents hold a more limited authority to conduct a series of transactions over a continuous period of time; and 3. Special agents are authorized to conduct either only a single transaction or a specified series of transactions over a limited period of time.

Agent or Independent Contractor
Not every person employed by another to accomplish an object, is an agent. The relation of agency implies control of the agent by the principal. A person may be employed to do certain things in such a way as to leave him independent, so far as any such authority of his employer is concerned, and bound to his employer only by such definite agreements as exist between them. Thus it has been held that a person employed under a certain contract to build a house for another, was not an agent, but was an independent contractor; and it is probable that the contractor under the ordinary building contract would be so held. An important result of this would be that the owner would not be liable for acts and neglect of the contractor in the way in which it will appear a principal is liable for acts and neglect of his agent.

Powers of Agent
So long as an agent acts within the scope of his authority, he binds his principal thereby. The authority of an agent may be expressly granted or impliedly granted. If persons dealing with an agent know him to be acting under a written power of attorney, they are bound to inquire and take notice of the nature and scope of the power, and fail to do so at their own risk. If the expression of the authority has excluded a certain power, persons dealing with the agent are held to know that such is the fact, and cannot, therefore, hold the principal bound by the action of his agent in excess of the power granted.

But an agent may, and usually does, have powers outside of such as are expressed. These are called implied powers. The extent of such implied powers is oftentimes a difficult question of law. Such powers are to be implied only from facts from which is inferred the intention of the principal to grant them. It is said that every delegation of power carries with it, as implied powers, authority to do all things reasonably necessary and proper to carry into effect the main power conferred, and not forbidden by the principal. Moreover a widely known and long existing usage which is reasonable and not contrary to law, may have the effect of conferring power upon an agent in addition to that expressly granted. It is also to be noted that although an act of an agent exceeds his authority, the principal may subsequently ratify the act so as to make it binding upon himself as if authorized in the first instance.

Liability of Principal
Not only is a principal liable upon such contractual obligations as may be entered into by his agent acting in his behalf within the scope of the granted authority, but the principal is also liable for such torts, or civil wrongs, such as trespass, assault, or battery, which his agent may commit in the course of his business. This often proves a serious matter to employers, although the development of liability insurance has furnished a means of equalizing the risks. These shows further the importance of the question whether a person is an agent or an independent contractor. If he be the former, then the principal as well as the agent himself, is liable for torts. If the latter, there is no way of going back of the individual wrongdoing.

The Law of Property

Property law is the area of law that governs the various form of ownership in real property (land as distinct from personal or movable possessions) and in personal property, within the common law legal system. In the civil law system, there is a division between movable and immovable property. Movable property roughly corresponds to personal property, while immovable property corresponds to real estate or real property, and the associated rights and obligations thereon. The concept, idea or philosophy of property underlies all property law. In some jurisdictions, historically all property was owned by the monarch and it devolved through feudal land tenure or other feudal systems of loyalty and fealty. Though the Napoleonic code was among the first government acts of modern times to introduce the notion of absolute ownership into statute, protection of personal property rights was present in medieval Islamic law and jurisprudence, and in more feudalist forms in the common law courts of medieval and early modern England.

Classification
Property law is characterized by a great deal of historical continuity and technical terminology. The basic distinction in common law systems is between real property (land) and personal property (chattels). Before the mid-19th century, the principles governing the devolution of real property and personal property on an intestacy were quite different. Though this dichotomy does not have the same significance anymore, the distinction is still fundamental because of the essential differences between the two categories. An obvious example is the fact that land is immovable, and thus the rules that govern its use must differ. A further reason for the distinction is that legislation is often drafted employing the traditional terminology. The division of land and chattels has been criticized as being not satisfactory as a basis for categorizing the principles of property law since it concentrates attention not on the proprietary interests themselves but on the objects of those interests. [2] Moreover, in the case of fixtures, chattels which are affixed to or placed on land may become part of the land. Real property is generally sub-classified into: 1. corporeal hereditaments – tangible real property (land) 2. incorporeal hereditaments – intangible real property such as an easement of way

Possession
The concept of possession developed from a legal system whose principal concern was to avoid civil disorder. The general principle is that a person in possession of land or goods, even as a wrongdoer, is entitled to take action against anyone interfering with the possession unless the person interfering is able to demonstrate a superior right to do so. In England, the Torts (Interference with Goods) Act 1977 has significantly amended the law relating to wrongful interference with goods and abolished some longstanding remedies and doctrines.

Transfer of property
The most usual way of acquiring an interest in property is as the result of a consensual transaction with the previous owner, for example, a sale or a gift. Dispositions by will may also be regarded as consensual transactions, since the effect of a will is to provide for the distribution of the deceased person's property to nominated beneficiaries. A person may also obtain an interest in property under a trust established for his or her benefit by the owner of the property.

It is also possible for property to pass from one person to another independently of the consent of the property owner. For example, this occurs when a person dies intestate, goes bankrupt, or has the property taken in execution of a court judgment.

Priority
Different parties may claim an interest in property by mistake or fraud, with the claims being inconsistent of each other. For example, the party creating or transferring an interest may have a valid title, but intentionally or negligently creates several interests wholly or partially inconsistent with each other. A court resolves the dispute by adjudicating the priorities of the interests. but according to the Indian property law it define the ‘Transfer of property’ means an act by which a living person conveys property, in present or in future, to one or more other living persons, or to himself and one or more other living persons; and "to transfer property" is to perform such act. In this section "living person includes a company or association or body of individuals, whether incorporated or not, but nothing herein contained shall affect any law for the time being in force relating to transfer of property to or by companies, associations or bodies of individuals John Hardy from the Legal institute of England stated "For the title to be valid, we must incorporate the company or association for the living" This statement has been used thoroughly.

Lease
Historically, leases served many purposes, and the regulation varied according to intended purposes and the economic conditions of the time. Leaseholds, for example, were mainly granted for agriculture until the late eighteenth century and early nineteenth century, when the growth of cities made the leasehold an important form of landholding in urban areas. The modern law of landlord and tenant in common law jurisdictions retains the influence of the common law and, particularly, the laissez-faire philosophy that dominated the law of contract and the law of property in the 19th century. With the growth of consumerism, the law of consumer protection recognized that common law principles assuming equal bargaining power between parties may cause unfairness. Consequently, reformers have emphasized the need to assess residential tenancy laws in terms of protection they provide to tenants. Legislation to protect tenants is now common.

The Law of Bankruptcy

Bankruptcy or insolvency is a legal status of a person or an organization that cannot repay the debts it owes to its creditors. Creditors may file a bankruptcy petition against a business or corporate debtor ("involuntary bankruptcy") in an effort to recoup a portion of what they are owed or initiate a restructuring. In the majority of cases, however, bankruptcy is initiated by the debtor (a "voluntary bankruptcy" that is filed by the insolvent individual or organization). An involuntary bankruptcy petition may not be filed against an individual consumer debtor who is not engaged in business. The word bankruptcy is formed from the ancient Latin bancus (a bench or table), and ruptus (broken). A "bank" originally referred to a bench, which the first bankers had in the public places, in markets, fairs, etc. on which they tolled their money, wrote their bills of exchange, etc. Hence, when a banker failed, he broke his bank, to advertise to the public that the person to whom the bank belonged was no longer in a condition to continue his business. As this practice was very frequent in Italy, it is said the term bankrupt is derived from the Italian banco rotto, broken bank. Bankruptcy law is the legal framework that provides the necessary groundwork for any individual or business entity who may find themselves in a position where they are no longer able to fulfill their debt obligations. The reasons for filing bankruptcy are numerous; individuals or business entities can face insurmountable debts as a result of failed business ventures, investments, or simply by overextending their spending habits. There are two basic types of Bankruptcy proceedings. A filing under Chapter 7 is called liquidation. It is the most common type of bankruptcy proceeding. Liquidation involves the appointment of a trustee who collects the non-exempt property of the debtor, sells it and distributes the proceeds to the creditors. Bankruptcy proceedings under Chapters 11, 12, and 13 involve the rehabilitation of the debtor to allow him or her to use future earnings to pay off creditors. Under Chapter 7, 12, 13, and some 11 proceedings, a trustee is appointed to supervise the assets of the debtor. A bankruptcy proceeding can either be entered into voluntarily by a debtor or initiated by creditors. After a bankruptcy proceeding is filed, creditors, for the most part, may not seek to collect their debts outside of the proceeding. The debtor is not allowed to transfer property that has been declared part of the estate subject to proceedings. Furthermore, certain pre-proceeding transfers of property, secured interests, and liens may be delayed or invalidated. Various provisions of the Bankruptcy Code also establish the priority of creditors' interests.

However, a recent decision by the Supreme Court has shifted this power towards the debtor. In Rousey v. Jacoway, (April 4th, 2005), the Court held that assets in Individual Retirement Accounts (IRA's) are protected under 11 U.S.C Sec. 522(d) and thus exempt from withdrawal from the bankruptcy estate. This decision has broad implications for the baby-boomer generation, providing millions of Americans nearing retirement with increased protection of their earnings.

The Law of Negotiable Instruments

A negotiable instrument is a document guaranteeing the payment of a specific amount of money, either on demand, or at a set time. According to the Negotiable Instruments Act, 1881 in India there are just three types of negotiable instruments i.e., promissory note, bill of exchange and cheque. More specifically, it is a document contemplated by a contract, which (1) warrants the payment of money, the promise of or order for conveyance of which is unconditional; (2) specifies or describes the payee, who is designated on and memorialized by the instrument; and (3) is capable of change through transfer by valid negotiation of the instrument. As payment of money is promised subsequently, the instrument itself can be used by the holder in due course as a store of value; although, instruments can be transferred for amounts in contractual exchange that are less than the instrument’s face value (known as “discounting”). Under United States law, Article 3 of the Uniform Commercial Code as enacted in the applicable State law governs the use of negotiable instruments, except banknotes (“Federal Reserve Notes”, aka "paper dollars").

Negotiable instruments distinguished from contracts
A negotiable instrument can serve to convey value constituting at least part of the performance of a contract, albeit perhaps not obvious in contract formation, in terms inherent in and arising from the requisite offer and acceptance and conveyance of consideration. The underlying contract contemplates the right to hold the instrument as, and to negotiate the instrument to, a holder in due course, the payment on which is at least part of the performance of the contract to which the negotiable instrument is linked. The instrument, memorializing (1) the power to demand payment; and, (2) the right to be paid, can move, for example, in the instance of a 'bearer instrument', wherein the possession of the document itself attributes and ascribes the right to payment. Certain exceptions exist, such as instances of loss or theft of the instrument, wherein the possessor of the note may be a holder, but not necessarily a holder in due course. Negotiation requires a valid endorsement of the negotiable instrument.

The consideration constituted by a negotiable instrument is cognizable as the value given up to acquire it (benefit) and the consequent loss of value (detriment) to the prior holder; thus, no separate consideration is required to support an accompanying contract assignment. The instrument itself is understood as memorializing the right for, and power to demand, payment, and an obligation for payment evidenced by the instrument itself with possession as a holder in due course being the touchstone for the right to, and power to demand, payment. In some instances, the negotiable instrument can serve as the writing memorializing a contract, thus satisfying any applicable Statute of Frauds as to that contract.

Classes
Promissory notes and bills of exchange are two primary types of negotiable instruments.  Promissory note

A negotiable promissory note is an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand to the payee, or at fixed or determinable future time, ertain in money, to order or to bearer. (See Sec.194) Bank note is frequently referred to as a promissory note, a promissory note made by a bank and payable to bearer on demand.  Bill of exchange

A bill of exchange or "draft" is a written order by the drawer to the drawee to pay money to the payee. A common type of bill of exchange is the cheque (check in American English), defined as a bill of exchange drawn on a banker and payable on demand. Bills of exchange are used primarily in international trade, and are written orders by one person to his bank to pay the bearer a specific sum on a specific date. Prior to the advent of paper currency, bills of exchange were a common means of exchange. They are not used as often today. Bill of exchange, 1933 A bill of exchange is an unconditional order in writing addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand or at fixed or determinable future time a sum certain in money to order or to bearer. (Sec.126) It is essentially an order made by one person to another to pay money to a third person. A bill of exchange requires in its inception three parties—the drawer, the drawee, and the payee.

The person who draws the bill is called the drawer. He gives the order to pay money to the third party. The party upon whom the bill is drawn is called the drawee. He is the person to whom the bill is addressed and who is ordered to pay. He becomes an acceptor when he indicates his willingness to pay the bill. (Sec.62) The party in whose favor the bill is drawn or is payable is called the payee. The parties need not all be distinct persons. Thus, the drawer may draw on himself payable to his own order. (See Sec. 8) A bill of exchange may be endorsed by the payee in favor of a third party, who may in turn endorse it to a fourth, and so on indefinitely. The "holder in due course" may claim the amount of the bill against the drawee and all previous endorsers, regardless of any counterclaims that may have disabled the previous payee or endorser from doing so. This is what is meant by saying that a bill is negotiable. In some cases a bill is marked "not negotiable" – see crossing of cheques. In that case it can still be transferred to a third party, but the third party can have no better right than the transferor.

In the Commonwealth
In the commonwealth almost all jurisdictions have codified the law relating to negotiable instruments in a Bills of Exchange Act, e.g. Bills of Exchange Act 1882 in the UK, Bills of Exchange Act 1908 in New Zealand, The Negotiable Instrument Act 1881 in India and The Bills of Exchange Act 1914 in Mauritius. The Bills of Exchange Act: 1. defines a bill of exchange as: 'an unconditional order in writing, addressed by one person to another, signed by the person giving it, requiring the person to whom it is addressed to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person, or to bearer. 2. defines a cheque as: 'a bill of exchange drawn on a banker payable on demand' 3. defines a promissory note as: 'an unconditional promise in writing made by one person to another, signed by the maker, engaging to pay on demand, or at a fixed or determinable future time, a sum certain in money to or to the order of a specified person or to bearer.' Additionally most commonwealth jurisdictions have separate Cheques Acts providing for additional protections for bankers collecting unendorsed or irregularly endorsed cheques, providing that cheques that are crossed and marked 'not negotiable' or similar are not transferable, and providing for electronic presentation of cheques in inter-bank cheque clearing systems.

The 1911 Encyclopedia Britannica Eleventh Edition has a comprehensive article on the bill of exchange, detailing its history and operation, as understood at the time of its publication.

In the United States
In the United States, Article 3 and Article 4 of the Uniform Commercial Code govern the issuance and transfer of negotiable instruments. The various State law enactments of Uniform Commercial Code Sec.3-104(a) through (d) set forth the legal definition of what is and what is not a negotiable instrument: Sec. 3-104. NEGOTIABLE INSTRUMENT. (a) Except as provided in subsections (c) and (d), "negotiable instrument" means an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the promise or order, if it: (1) is payable to bearer or to order at the time it is issued or first comes into possession of a holder; (2) is payable on demand or at a definite time; and (3) does not state any other undertaking or instruction by the person promising or ordering payment to do any act in addition to the payment of money, but the promise or order may contain (i) an undertaking or power to give, maintain, or protect collateral to secure payment, (ii) an authorization or power to the holder to confess judgment or realize on or dispose of collateral, or (iii) A waiver of the benefit of any law intended for the advantage or protection of an obligor. (b) "Instrument" means a negotiable instrument. (c) An order that meets all of the requirements of subsection (a), except paragraph (1), and otherwise falls within the definition of "check" in subsection (f) is a negotiable instrument and a check. (d) A promise or order other than a check is not an instrument if, at the time it is issued or first comes into possession of a holder, it contains a conspicuous statement, however expressed, to the effect that the promise or order is not negotiable or is not an instrument governed by this Article.

Thus, for a writing to be a negotiable instrument under Article 3, the following requirements must be met: 1. The promise or order to pay must be unconditional; 2. The payment must be a specific sum of money, although interest may be added to the sum; 3. The payment must be made on demand or at a definite time; 4. The instrument must not require the person promising payment to perform any act other than paying the money specified; 5. The instrument must be payable to bearer or to order. The latter requirement is referred to as the "words of negotiability": a writing which does not contain the words "to the order of" (within the four corners of the instrument or in endorsement on the note or in along) or indicate that it is payable to the individual holding the contract document (analogous to the holder in due course) is not a negotiable instrument and is not governed by Article 3, even if it appears to have all of the other features of negotiability. The only exception is that if an instrument meets the definition of a cheque (a bill of exchange payable on demand and drawn on a bank) and is not payable to order (i.e. if it just reads "pay John Doe") then it is treated as a negotiable instrument.

Negotiation and endorsement
Persons other than the original obligor and obligee can become parties to a negotiable instrument. The most common manner in which this is done is by placing one's signature on the instrument (“endorsement”): if the person who signs does so with the intention of obtaining payment of the instrument or acquiring or transferring rights to the instrument, the signature is called an endorsement. There are five types of endorsements contemplated by the Code, covered in UCC Article 3, Sections 204–206:
 

An endorsement which purports to transfer the instrument to a specified person is a special endorsement; An endorsement by the payee or holder which does not contain any additional notation (thus purporting to make the instrument payable to bearer) is an endorsement in blank or blank endorsement; An endorsement which purports to require that the funds be applied in a certain manner (e.g. "for deposit only", "for collection") is a restrictive endorsement; and, An endorsement purporting to disclaim retroactive liability is called a qualified endorsement (through the inscription of the words "without recourse" as part of the endorsement on the instrument or in allonge to the instrument). An endorsement purporting to add terms and conditions is called a conditional endorsement – for example, "Pay to the order of Amy, if she rakes my lawn next Thursday November 11th, 2007". The UCC states that these conditions may be disregarded.

If a note or draft is negotiated to a person who acquires the instrument 1. in good faith; 2. for value; 3. without notice of any defenses to payment, The transferee is a holder in due course and can enforce the instrument without being subject to defenses which the maker of the instrument would be able to assert against the original payee, except for certain real defenses. These real defenses include (1) forgery of the instrument; (2) fraud as to the nature of the instrument being signed; (3) alteration of the instrument; (4) incapacity of the signer to contract; (5) infancy of the signer; (6) duress; (7) discharge in bankruptcy; and, (8) the running of a statute of limitations as to the validity of the instrument. The holder-in-due-course rule is a rebuttable presumption that makes the free transfer of negotiable instruments feasible in the modern economy. A person or entity purchasing an instrument in the ordinary course of business can reasonably expect that it will be paid when presented to, and not subject to dishonor by, the maker, without involving itself in a dispute between the maker and the person to whom the instrument was first issued (this can be contrasted to the lesser rights and obligations accruing to mere holders). Article 3 of the Uniform Commercial Code as enacted in a particular State’s law contemplates real defenses available to purported holders in due course. The foregoing is the theory and application presuming compliance with the relevant law. Practically, the obligor-payor on an instrument who feels he has been defrauded or otherwise unfairly dealt with by the payee may nonetheless refuse to pay even a holder in due course, requiring the latter to resort to litigation to recover on the instrument.

In conclusion we can say that, 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 your responsibility to know what laws affect your business.

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