Business Law: Introduction and Basic Concepts

Definition of Law

  • Defining 'law' is complex because its meaning evolves and scholars have varying definitions.
  • Definitions differ based on the intended purpose.
  • Legal theories influence the definition of law.
  • Black’s Law Dictionary: Law consists of rules of action or conduct, issued by an authority, with binding force, obeyed by citizens, and may include sanctions.

Basic Features of Law

Generality

  • Law is a general rule of human conduct, not specific to individuals or behaviors.
  • Generality applies to both individuals governed and behaviors controlled.
  • The extent of generality depends on the law's applicability.
    • Illustration 1: "Everyone has the right to life, liberty and the security of a person." [Art 3, UNDHR; 1948]. This is applicable to every person in the world and, thus, is universal.
    • Illustration 2: “Every person has the inviolable and inalienable right to life, the security of person and liberty.” [Article 14 of the 1995 Constitution of the Federal Democratic Republic of Ethiopia]. This applies to every person in Ethiopia, making it national in scope.
    • Illustration 3: “Every Ethiopian national, without any discrimination based on colour, race, nation, nationality, sex, status, has the following rights… (b) On attainment of 18 years of age, to vote in accordance with the law.” [Article 38(1)(b) of the 1995 Constitution of the Federal Democratic Republic of Ethiopia.]. This applies only to Ethiopian nationals who are 18 years or older.
    • Illustration 4: “Whoever intentionally spreads or transmits a communicable human disease is punishable with rigorous imprisonment not exceeding ten years.” [Article 514 (1) of the 2004 Criminal Code of the Federal Democratic Republic of Ethiopia]. This is applicable only to a person who commits the crime.
    • Illustration 5: “The term of office of the presidents shall be six years. No person shall be selected president for more than two terms” [Article 70(4) of the 1995 Constitution of the Federal Democratic Republic of Ethiopia]. This is applicable only to a person who becomes a president in Ethiopia.
  • Generality promotes uniformity and equality before the law.
  • It provides relative permanence to the law, as it applies to any person falling under the subject of the law.
  • Generality applies to human conduct, governing millions of similar acts with a general statement.

Normativity

  • Law intends to create norms in society by allowing, ordering, or prohibiting social behavior.
  • Law can be classified as permissive, directive, or prohibitive.
Permissive Law
  • Permissive laws allow subjects to do the provided act.
  • They give a right or option to act or not to act.
  • Common phrases include:
    • has/ have the right to
    • is/are permitted/allowed to
    • shall have the right
    • shall be entitled to
    • may
    • is/are free to
  • Illustrations:
    • “Every person is free to think and to express his idea.” [Article 14 of The 1960 Civil Code of Ethiopia].
    • “Accused persons have the right to be informed with sufficient particulars of charge brought against them and to be given the charge in writing.” [Article 20(2) of the 1995 Constitution of the Federal Democratic Republic of Ethiopia]
Directive Law
  • Directive law orders, directs, or commands the subject to perform the act provided.
  • It is not optional; the subject has a legal duty.
  • Failure to comply results in consequences.
  • Common phrases include:
    • must
    • shall
    • has/have the obligation
    • is/are obliged to
    • is/are ordered to
    • shall have the obligation/duty
  • Illustrations:
    • “The debtor shall personally carry out his obligations under the contract where this is essential to the creditor or has been expressly agreed.” [Civ. C. Art. 1740(1)].
    • “Every worker shall have the following obligations to perform in person the work specified in the contract of employment.” ( emphasis added) [Article 13(1) of the 2003 Labour Code Proclamation No. 377/2003].
  • Directive laws are mandatory provisions.
Prohibitive Law
  • Prohibitive law discourages subjects from performing certain acts.
  • Violation results in negative consequences.
  • All criminal code provisions are prohibitive laws.
  • Common phrases include:
    • must not
    • shall not
    • should not
    • no one shall/should
    • no person shall/should
    • may not
    • is/are not permitted/allowed
    • is/are prohibited
    • is/are punishable
    • is a crime
  • Illustrations:
    • “Any unmarried person who marries another he knows to be tied by the bond of an existing marriage is punishable with simple imprisonment.” [Article 650(2) of the 2004 Criminal Code of Ethiopia]
    • “No one may enter the domicile of another against the will of such person; neither may a search be effected there in, except in the case provided by law.”[Civ. C. Art 13].

Sanction

  • Each member of society must follow the law.
  • Violation results in sanctions.
  • Sanction: A penalty or coercive measure resulting from failure to comply with the law (Black’s Law Dictionary).
  • Purpose: To prompt the wrongdoer to recognize and correct their fault.
  • Sanctions can be criminal, with criminal liability attached to criminal law violations.

Function of Law

  • The object of law is to ensure justice, either distributive or corrective.
  • Distributive justice ensures fair distribution of social benefits and burdens.
  • Corrective justice remedies wrongs, such as restoring wrongfully taken property.
  • Rule of law is essential for even-handed justice, implying equality before the law, equal protection, and impartial judges.
  • Justice is not the only goal; law balances uniformity and flexibility.
  • Uniformity provides certainty and predictability for citizens to plan activities.
  • Certainty is crucial for laws like contract or property law.
  • Uniformity brings stability and security to the social order.

Important Functions of Law Today

Social Control
  • Members of society have diverse values, behaviors, and interests.
  • Law controls behaviors and instills socially acceptable norms.
  • Social controls can be formal or informal; law is a form of formal control.
  • Roscoe Pound: Law is a highly specialized form of social control in developed, politically organized society.
  • Lawrence M. Freedman: Law specifies essential rules and norms and punishes deviance. The legal system enforces these rules through police, prosecutors, courts, prison guards, and parole boards.
Dispute Settlement
  • Disputes are unavoidable; law settles them.
  • Justifiable disagreements are resolved in or out of court through alternative dispute settlement mechanisms.
Social Change
  • Law enables purposive, planned, and directed social change.
  • Flexibility allows law to adapt to social conditions.
  • Rigid laws may lead to resentment, dissatisfaction, and violence.
  • Some flexibility is inevitable.

Classification of Law

  1. Public vs. Private Law
  2. International and National Law
  3. Substantive and Procedural Law
  4. Civil and Criminal Law

Hierarchy of Laws

  • Constitution
  • Proclamations
  • Regulations
  • Directives