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COMPARATIVE BUSINESS LAW
LECTURE 1
Business law: understand the role of the law (international law, with different legal systems) in business issues. International business refers to those business activities that take place beyond the geographical boundaries (boundaries refers to the difference of juridical business, nowadays there are no longer boundaries in the world) of a country. It involves not only international movements of goods and services but also capital, technology, IP like patents, trademarks, copyrights, etc.. This exchange meets legislation. (For example: India selling agricultural products to foreign countries is an international business) Advancement in technology and better communication facilities have increased international business with great success in various countries. International business provides a wide market range to organizations and gives them an opportunity to satisfy the needs of customers all over the world. There are rules which regulate the market and the exchange of goods. Reasons for international business: -Uneven distribution of natural resources: due to unequal distribution of natural resources, all countries cannot produce goods at a low cost. As a consequence, it has an impact on their productivity levels. The countries with less quantity of natural resource either purchase the resource of the actual product itself from the countries with an abundance of these (For example: crude oil from the USA as it is found in abundance there) -Availability of Productivity Factors:The numerous production variables, like labor, capital and raw materials, that are required to produce and distribute diverse commodities and services are found in different quantities in different countries. It gives rise to buying and selling of productivity factors among countries. -Specialization: some countries specialize in producing goods and services for which they have advantages. It results in the business between different countries for the purchase and sale of specialized products. -Cost advantages: Production costs vary according to geographical, political and socio-economic situation in different countries, Some countries are in a better position to manufacture certain commodities at a lower cost than others, Firms participate in international trade to purchase products that are cheaper in other countries and to sell thing that they can supply at a lower cost. Scope of International Business , it has to include: -Imports and Exports of Merchandise: Merchandise refers to physical products, such as those that can be seen and felt. Therefore, imports and exports of merchandise mean the transfer or exchange of tangible goods from and to different countries of
the world. It is also called trade in goods as it excludes buying and selling of services. -Imports and exports of services: It involves intangible goods. Services such as tourism and travel, transportation, communication, etc. are imported and exported. -Licensing and Franchising: Licensing is a contractual agreement between two firms, where the licensor (one firm) grants the licensee (another firm) access to trademarks, copyrights, patents, etc. in a foreign country in exchange for a fee. The fee changed by the licensor is known as royalty. Franchising is similar to licensing. However, it provides services rather than access to patents etc. -Foreign investment: it means investing money into a foreign country in exchange for a profit. Foreign investment can be of two types Direct and Portfolio Investment. Benefits of International Business : -Benefits to Countries: ● Foreign Exchange ● Efficient Resource Utilization ● Growth Possibility and Job opportunities ● Improved standard of living -Benefits to Firms: ● Profit opportunities ● Increased resource utilization ● Growth prospects ● Decrease competition ● Improved business vision Benefits to countries: -Foreign exchange: it assist a country in earning foreign exchange, which may then be utilized to buy capital goods, technologies, and other products from foreign countries -More efficient resource utilization: it is based on the comparative cost advantage theory. It entails producing what your country can produce more efficiently and trading the surplus production with other countries to purchase what they can produce more efficiently -Improved standard of living: international business allows individuals to consume goods and services from other countries. Consumption of a variety of goods and services improves the standard of living of the people: Benefits to firms: -Profit opportunities: when compare to local business, international business (vedi slide) -Law exists because and insofar as a society does. Every society is grounded on and underpinned by law (no society without law). In fact, the assembly of individuals
fundamental for Western civilization, it does not seem that they acknowledged an overall -in In its earlier stages (753 bc-451 be), Roman law was confined to a number of fixed procedures and imbued with an extreme formalism, which however loosened through the historical development of the trial system. In fact, attention increasingly shifted from the law to be applied to the judicial proceedings as such, to the law to be applied to the facts alleged by the parties. Roman law thus gained a substantive dimension. In the late Republic (201 bc-27 be), jurista (prudentes) became a cadre of experts learned in Law, whose legal decisions (responsa) were at first rendered mainly on the basis of intuition and experience acquired through the administration of justice. Over time, however, their decisions were increasingly discussed as being principled and rationally grounded, thus showing a high degree of reasoning. 'sI The collections of the legal decisions authored by the most prominent classical juriats gradually constituted a body of specialized literature), which eventually amounted to the foundations of a proper farisprudentia (legal wisdom, or legal knowledge).
- Indeed, what characterized Roman law is that It was organized in a highly specialized and autonomous field of rational knowledge, which jurists developed over time to govern social conflicts and to provide a shared education, culture, and mentality to officials and professionals involved in steering society and addressing Its development. Although Increasingly challenged by contemporary legal realism, Western law is still styled as being endowed with an Inner rationality and an Ideal existence which oppose ita single application to empirical facts and, in so doing, raise expectations of justice. The French revolution represents a complete change in Europe. At the base of the French revolution there was the Enlightenment. From a political point of view the idea was the refusal of the king and the adoption of democracy. The general idea was that every person is equal and equality is a right. Votation was adopted. Napoleon wanted a civil law, compatible with the principle of dignity of every person and with the ideas of the French Revolution →recognition of the human rights principle. However, law was confined between the national boundaries. It was more difficult to conduct business, it was not necessary an international law. After the I War Word there are two big passages:
- Implement the dialogue between nations; birth of the Society of the Nations. Creation of international environment
- Start of commercial and trading agreement between the states with enabled to implement the law between the states, with a system of trials in order to solve the controverses
This is the moment of the birth of international law: a legal system which creates a general set of rules that every state must respect and which is entitled to create legislation. There are primary and secondary sources of international law. -Primary sources are: international agreements, customs, general principle of the law (law posteriors to certain laws, which derogate the previous laws) -Secondary sources: judicial decisions (case law, the decisions have no binding force), writing of jurists LECTURE 2 International law is used to solve international controversies between the states. All the systems of human rights give the right not to obey the laws which are against human rights. Sources if International Law (article 38): ● Treaty ● Customs ● General principles ● Scholars Primary sources: ❖ International agreements ❖ Customs ❖ General principles of law Secondary sources: ● Judicial decisions (case law)- have no binding force ● Writings of jurists- create changement in the international law system 1.International agreements Two or more states decide to solve a problem together by creating laws. -bind only the parties to it -established by A) THE UNITED NATIONS (The universal declaration of human rights, the charter of the united nations). Political and juridical activity, it has different commissions which create the draft of agreements. The most important agreement is the Universal declaration of Human Right B) through INTERNATIONAL TREATIES (the Geneva Conventions on the conduct of war or armed conflict, the UNESCO Convention against Discrimination in Education, the World Trade Organization Framework Convention on tobacco control, Vienna Convention on the Law of Treaties) The main types of international agreements -Treaty: an international agreement concluded between States in written form and governed by international law, embodied in a single instrument or in two or more related instruments; Bilateral treaties; Multilateral treaties (if ratified binding on the parties)
-The principle of reparation -The principle of state’s responsibility for its agents -The rule of good faith -The doctrine of necessary and self-defense The international court of Justice has the task to solve the general disputes between the states. International Criminal Court has the task to solve criminal prosecutions of war and crimes Local courts are devoted to the implementation of conventions related to a certain number of states (subscribed to the conventions), they live side by side with the international courts, however they have certain limitations. Dialogue between domestic and international courts. Common law system: -An adversarial system -Common law is not codified -Judicial precedents are binding -The main source is judicial precedents of case law -Judges make rulings, set of precedents and moderate between the conflicting parties Civil law system: -An inquisitorial system -Civil law is a codified set of laws -Judicial precedents are not binding -Statutes and other subsidiary legislations are the main sources -The judge’s role is to establish the facts of the case and apply the applicable code’s provisions Private property: the possessor has the absolute right to use its properties, total exercise of power on its properties. Private autonomy: the possessor is autonomous on the destiny of its properties. However, this is not an absolute right. Create a balance with the public needs and private autonomy has some limitations. The power of public authorities is strong, it creates limitations on public authority. There are several types of interventions of the public authorities in the market, which can create limitations. Private law: it is in the civil code or international treaties and it is about private properties and private intervention. Nowadays it is in the constitution too because it has to be under the control of the state. Public law: land of the market, in order to create limitation to private authorities
A further point is the creation of the European Union, the rules are rules of administrative laws which give guidelines on certain aspects, it sets limitations on private autonomy in order to protect myself even against my willingness. the dignity of the person must be protected against private powers. However, this concept creates strong and complicated bureaucratic procedures and creates a difficult relationship between private and public. The concept of legal transaction (or negotiating act) is a conceptual creation indicating the act of private autonomy directed at the achievement of a practical purpose, recognized by the legal system and considered by the ame deserving of protection, to ensure the attainment of the purpose (where conforming to the legal order). The legal transaction is a subcategory of the legal act and produces legally relevant effects. (when we are out of the law, the law cannot protect us). Essential elements of the contracts -Agreement of the parties, namely the meeting of the parties’ will conclude the contract, the full coincidence between the wishes of the two. -The form, the way in which the manifestation of will can be declared. It can be manifested by words or other signs that in certain circumstances have the same meaning. -The cause, the economic and social function of the contract understood as the concrete reason of the act, a unifying element of the regulation of interest between the parties, capable of justifying the movement of goods and values -Condition, term, mode or burden(=onere) are non-essential contract elements. The conclusion of the contract is preceded by a preparatory phase during which the parties exchange proposals, discuss them and establish partial agreement: these are the “negotiations”. Negotiations do not oblige the parties to conclude the contract, even though the parties during this phase have an obligation to behave according to loyalty and/or good faith. LECTURE 3 COMPARATIVE BUSINESS LAW Different legal systems that change the final interpretation of the agreement. Potential judges may change the sentence in function of the specific applicable law. We need to adopt a COMPARATIVE APPROACH. -Legal system of the world The world is divided into two systems from a law point of view: 1.Common law. (The agreement is self regulated because a more pragmatic approach is adopted. In the common law system, normally the judge makes the law making appeal to precedents which have a binding force=precedente vincolante, to
-Contracts are usually distinguished on the basis of who concludes them: commercial contract B2B, pr B2C contracts,consumer contract C2C. Normally, the legislators and courts sometimes make rules specifically for B2B or B2C contracts. -Contracts can also be distinguished on the basis of their main characteristics: what parties need to do under the contracts depends on type of contract they concluded -The seller and buyer in a contract of sale of goods need to do something different than employer and employee in an employment contract for example (consideration) These so called specific contracts are all governed by their own specific rules, laid down in a national civil code or developed by courts (civil law vs common law).Other nominate contracts are not dealt with in detail in statutory law (example are franchise and distribution contracts). For certain types of agreements there are certain types of regulations. There are agreements which do not identify with the law (contratti atipici)= franchise agreement. If we have an agreement in which it is possible to provide an economic evaluation, this kind of agreement is accepted by Italian law. Joint venture contract: temporary agreement between two companies from different states. -A third categorisation of contracts is based on the REASONS WHY PARTIES WANT TO BE BOUND Each party assumes an obligation in order to obtain the performance to which the other party, in exchange, obliges itself towards the first party (BILATERAL CONTRACTS) and contracts in which a party is not promised anything in return for its performance (UNILATERAL CONTRACTS) (per esempio le donazioni), only one party gives something to the other party. Contract law as part of private law -In the civil law tradition contract law is seen as only one part of a more comprehensive «system» of private law. -Private Law consists of the rules and principles that deal with the relationships between private actors such as individuals and companies. -Tort law, restitution, property law, trust law, inheritance law, family law and company law are part of the overall system of private law. -The law of contract, tort and restitution are often lumped together under the heading of “law of obligations”. This is because they can all give rise to so-called “obligations”, a legal term indicating that an enforceable duty exists of one person vs another person of several other persons. Example: sale contract -While in case of contract, this obligation arises voluntarily because a party intends to be legally bound, in case of tort the obligation is imposed upon a person independent of its intention, usually because the law wants to attach consequence to wrongful behaviour causing damages for personal injury ( as in case of assault,
medical negligence or liability for defective products) or for defamation ( publishing false statements damaging someone’s reputation). -This classification is typical for the civil law and not of common law. In common law system agreement corresponds to agreement with consideration. Main principles of contract law -Freedom of contract (parties are free to negotiate in different forms but also through the behavior = comportamento concludente, but the contract has to fit into the society →) vs General conditions ( contract has to respect the law). Freedom to contract shall stop in front of mandatory rules (regole imperative) -Binding force: difference between agreement and non-agreement -Informality: there is not an obligation to have a written agreement -Contractual fairness (principio della correttezza/ buona fede): normally, parties during the performance of the agreement shall adopt fairness and good faith. In the civil law approach in business there is usually a short agreement. On the other hand, common law agreements tend to be longer. LANGUAGE AND RULES OF ITALIAN PRIVATE LAW: IN INTRODUCTION- SUGGESTED READING CONTRACTUAL FREEDOM -The law of contracts differs from other branches of law in very important respects. It does not lay down so many precise rights and duties which the law will protect and enforce. -It contains rather a number of limiting principles, subject to which the parties may create rights and duties for themselves, and the law will uphold those rights and duties. -In a sense, the parties to a contract, make the law for themselves -So long as they do not transgress some legal prohibition, they can frame any rules they like in regard to the subject matter of their contract and the law will give effect to their contract (contractual freedom) inadempimento fondamentale al contratto= fundamental breach. Specific terms must be used in agreement in order to not create misunderstanding and different opinions, it is important to insert specific clauses in order for the agreement to enter in a pathologic phase. Capta sunt servanda= i patti si rispettano. Eccessiva onerosità sopravvenuta= hardship clause: is a clause in a contract that is intended to cover cases in which unforeseen events occur that fundamentally alter the equilibrium of a contract resulting in an excessive burden being placed on one of the parties involved. Events that create disequilibrium in a contract. With the hardship clause parties may fix what they intend, giving the possibility to renegotiate the agreement.
-The Principle of European contract law (PECL) -Draft common frame of reference of European private law (DCEPL)
- UNIDROIT PRINCIPLE These principles set forth general rules for international commercial contracts. They shall be applied when the parties have agreed that their contract be governed by them. -They may be applied when the parties have agreed that their contract be governed by general principles of law, the lex mercatoria or the like -They may be applied when the parties have not chosen any law to govern their contract -They may be used to interpret or supplement international uniform law instrument (support to the contract and to the state) -They may be used to interpret or supplement domestic law -They may serve as a model for national and international legislators
- THE PRINCIPLE OF EUROPEAN CONTRACT LAW The Principles of European Contract Law (PECL) is a set of model rules drawn up by leading contract law academics in Europe. It attempts to elucidate basic rules of contract law and more generally the law of obligations which most legal systems of the member states of the European Union hold in common. The final version of the academic Draft Common Frame of Reference (DCFR) EXECUTIVE SUMMARY The final version of the academic Draft Common Frame of Reference (DCFR) was delivered to the Commission by the end of 2008. The Commission is currently carrying out an internal selection process with the aim of identifying which parts of the DCFR will be integrated into a political Common Frame of Reference. Against this background this note addresses whether the CFR could serve as an optional instrument for contract law. The note identifies the advantages and disadvantages of an optional contract law instrument and some problems that must be overcome. It also discusses its possible content of such an instrument and addresses the question of the legal basis.
- DRAFT COMMON FRAME OF REFERENCE The creation of an optional instrument of European contract law is at the moment very actively debated in academia and more importantly it is at the forefront of the European political agenda. The possibility is seriously being considered by the European institutions 1 and also several national legislators have indicated that they see important merits in an optional instrument
- An optional instrument of European contract law is characterized by the fact that its application depends on a choice by the parties to the contracts
- It does not replace national contract law but provides parties to a contract with an alternative4. The optional instruments discussed in this note are instruments parties can choose as the applicable law and not merely as contractual conditions. The party agreement -Freedom of contract entails that parties ar not only free to decide whether they want to contract at all, and with whom, but also that they can determine the contents of their contract. -The party agreement, consisting of what the parties expressly agreed upon when entering into the contract, ( price, quality, quantity etc..). -General conditions, standards forms, are used by almost all professional parties: it evoid to negotiating and drafting contract conditions for every new contract it wants to conclude. Official sources -Often, parties only discuss those elements of the contract that they consider essential (such as price and time of delivery ), not saying anything about other aspects ( such as the place of delivery or what will happen if the other party does not perform the contract. -In so far such matters are not covered by general conditions, the law should provide so-called default( or facilitative) rules that are automatically applicable if the parties have not made any other arrangements. -In other case the law may have to intervene with so- called mandatory rules that declare such a contract void or at least avoidable by one of the partie. -Both facilitative and mandatory laws ca flow from «official» national, European and supranational sources National law -Officially contract law at hte national level is primarily produced by the legislature and the courts. In civil law countries, general rules on contract law are tipically found in civil code. -French Civil Code 2016 https://www.trans-lex.org/601101/_/french-civil-code-2016/ THE LAW OF CONTRACT, THE GENERAL REGIME OF OBLIGATIONS,AND PROOF OF OBLIGATIONSThe new provisions of the Code civil created byOrdonnance n° 2016-131 of 10 February 2016translated into English CODE CIVIL TITLE IIITHE SOURCES OF OBLIGATIONS SUB-TITLE ICONTRACTCHAPTER IINTRODUCTORY PROVISIONS
-Next to the civil code, many civil law countries have more specific statutes in which contract law can be found. For example France and italy has adopted a separate Consumer code that collects and consolidates laws on consumer protection, as well as a commercial code ( France) that provides additional rules on B2B-contracts. Germany also keeps some laws outside the BGB, such as the Product Liability Act of 1989 adn statutory implementations of recent European directives.National law National law (English law) -The dominant source of contract law in the common law family is not the legislation but the case law developed by the courts. -The decisions of the supreme court of the United Kingdom and Court of appeal of England and Wales are dominant sources for an english judge or lawyer when confronted with a contract case. European law Contract law also flows from European sources. In the last 25 years the European legislature has promulgated over 15 directives with relevance for contract law Supranational law -A third source of official contract law consists of supranational rules. -A successful example is the unification of conflict of law rules in the context of Hague Conference on Private International law , or Convention on Contract for the International sales of Goods (CISG) concluded in Vienna in 1980 LECTURE 4 The economy is not localized in a single country. With globalization, we need a contract law to fix rules concerning a specific business. Local law needs to take into consideration international law as well. In order to fix ters, conditions between the parties on certain agreements we shall evaluate if a national law exists that impose certain terms and conditions. For this reason, it is necessary to adopt a comparative approach. Another aspect, it is important to identify the type of agreement to perform a specific economic activity. Law governs the relationship between people in a society. The law evaluates actions from a legal point of view, which will have legal consequences. Common law/ Civil law/ Islamic approach: Common law system: -An adversarial system -Common law is not codified -Judicial precedents are binding -The main source is judicial precedents of case law
-Judges make rulings, set of precedents and moderate between the conflicting parties -The judge makes the law by distinguishing or overruling (overcome the present law). Civil law system: -An inquisitorial system -Civil law is a codified set of laws -Judicial precedents are not binding -Statutes and other subsidiary legislations are the main sources -The judge’s role is to establish the facts of the case and apply the applicable code’s provisions. The judge applies the law in specific cases. There are also mixed legal systems. The source and the origin have to be analyzed. When there is an agreement, an obligation is created between two parties (bilateral) or unilateral. Freedom of contract= autonomia contrattuale Conclude a contract= the agreement creates obligation and it has a binding force because the two parties have to accomplish what the agreement says. The two parties are obligated to accomplish the obligations, if the obligations are not fulfilled, there may be legal consequences. Good faith principle= it has to be applied during the negotiation and during the performance of the agreement (extra contractual responsibility). There may be legal consequences if the good faith principle is not applied. The freedom of contract is the principle source of agreement, then there are formal sources. Lex mercatoria -Lex mercatoria is the Latin expression for a body of trading principles used by merchants throughout Europe in the medieval period. Literally it means “merchant law” -It involved as a system of custom and practice, which was enforced through a system of merchant courts along the main trade routes. -It functioned as the international law of commerce. -It emphasized contractual freedom, alienability of property, while shunning legal technicalities and deciding cases ex aequo et bono. Sources of the Lex Mercatoria
(=responsabilità extra contrattuale) or the sub-title relating to other sources of obligations. Nature and definition of contract -From out of mind, contracts have played an essential role in human relations and economic activity. It is from this reality that the notion of contract was shaped into a legal concept. -A contract is covenant by which persons are mutually bound by pledging their word. Such pledge has been admitted, from time immemorial, as a moral principle and as established custom by all civilizations (pacta sunt servanda). -In modern legal system, the exigencies of rapidity and certainty preside over the shapes and forms of contract formations. -This modern vision is reflected in the definition of contract, as laid down under article 1321 italian civil code: “A contract is the agreement between two or more parties to establish, regulate or extinguish a patrimonial legal relationship among themselves” -According to French law a contract is defined as “a concurrence of wills between two or more persons to create, modify, assign or terminate obligations” French contract law is based on the freedom of contract principle, according to which parties have freedom to contract with the person and the content they choose to the extent permitted by the law. Italian: more attention to the patrimonial legal relationship, French: more attention on the freedom to contract -Spanish: civil law system -Uk law: “A contract is a legally binding promise (written or oral) by one party to fulfill an obligation to another party in return for consideration” Consideration is the relevant aspect of common law. It corresponds to Italian “causa”. It is the object of the agreement. Consideration= object. Consideration is the fundamental part. A basic binding contract must comprise four key elements: offer, acceptance, consideration and intent to create legal relations. -Us law: contract definition “A contract is an agreement between two parties that creates an obligation to perform (or not to perform) (vedi slide) -Islamic Law of Contract ● Contract in Shari’ah, Aqd, means a tie or a knot (=impegno) binding two parties together.
● Aqd literally means “to tie up, fasten, to knot or to join”. In the context of Islamic Law, Aqd is used to mean an agreement arising from a combination of offer and acceptance which gives rise to legal consequences. ● The contract is a declaration of offer and acceptance. Unlike English law which develop through the work of judges, Islamic of contract developed through the work of Fugaha (jurists), based on the principle laid down by the Quran and the narrations from the Prophet ● The Qur’an contains a large number of specific contracts, and axioms of wide application in the area of contractual relationships. These include various commercial contracts such as sale, hire, guarantee, security and deposits. In some of the verses of the Qur’an where such contracts are stated, foundation for rules of new contracts were initiated, in others recognition and legitimization of already existing practice at the advent of Islam are confirmed. ● The Islamic contract law is wider in scope than the English or French because it embraces some dispositions which are not considered “contract” in either English or French legal systems. Endowment (Dotazione/dote) is an example of such dispositions. Nature and definition of contract So, in accordance with Italian civil code, any agreement may qualify as contract, provided the relations which give rise to its susceptible of economic evaluation, pursuant to art. 1174 cc. No all reciprocal promise creates a « contract» under the law, but only such agreements as have economic relations as subject matter. A marriage, for instance, in Italy, is not a contract because its scope is a relation where personal aspects largely prevail over other aspects. Scope and efficacy of contract -As contracts freely set forth the reciprocal rights and obligations of persons involved in transactions in their pursuits of life, it follows that contracts shape up and regulate all aspects of economic life. -Jurists, however, are only concerned with the instrumentality of contracts, that is, the modes by which they are instrumental to a scope. -The scope is instrumental to the efficacy of the contract proper,as, under art 1372 cc: «a contract is legally binding for the parties» -So the law reserves to people the possibility to freely set legally binding rules, in particular in the pursuit of economic transactions. -Hence, the effect of a contract is to regulate – that is, lay down rules agreed upon by parties- specific economic interests and relations that preside over them. -In other words, a contract sets interests under rules. From that point of view, art. 1321 cc may be thus read: « a contract is an agreement between two or more parties aimed at establishing between them specific rules with regard to economic interests»
