Fundamentals of Business Law PDF

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Fundamentals of Business Law Notes This is a foundation Law subject. It covers a broad range of core LLB topics drawn from the traditional areas such as legal history, contracts, corporation law, tort law and consumer protection law. This subject imparts a risk management or proactive approach to law. This differs from the reactive and crisis management approach which used to be taught in the olden days (e.g. two decades ago). This subject is designed for law and business students. Risk management is the process of reducing foreseeable harm to stakeholders. Legal liability is the state of being responsible or accountable for something within the legal framework. Proactive- controlling or managing a risk rather than responding to it afterwards. This approach helps get the right outcomes. How do you read a law textbook/ make notes? I read the chapter summary for each chapter. Then I skim read the introduction/ topic sentences, key buzz words (definitions), read the chapter summary again, read the textbook/ tutorial questions and highlight the key points. Then I read the textbook's highlighted points and chapter summary. I write the chapter summary into my notebook and use the textbook/ tutorial questions as the framework for forming my notes. I got HD in a law subject the way I did it was: Aim to do all the textbook, tutorial, online and past paper questions -go to all the lectures and tutorials -make notes -Aim to read the textbook and cases -do the law assignment - share notes/ network with other students -work eight weeks ahead of the class -have plenty of times for revision before the exams and consistently revise throughout the semester. - I did one subject each semester, for my weekly schedule I would do 3 days of reading the textbook/ making notes and 4 days of doing questions. -aim to get 100 per cent (I got 85 per cent in Business Law and Ethics). Law is hard. You have to work hard and you have to work smart. There are a select few in each cohort that are made for the law and the law is made for them. Generally, those that are 'suited', if there's such a thing, to the law possess acute analytical skills, think quickly, respond well to stress, and have a comprehensive conceptual framework of law.(they model themselves on the best) Those are some of the characteristics of those that I've met who are excellent in the law.

Chapter One: Law and Ethics Terminology: Understanding the language (vocabulary) of the legal system.

Accused- A person formally charged with having committed a criminal offence. Bicameral- consisting of two houses. Bill- a document that if approved by parliament, will become an Act of Parliament. Common law- law that is made by the courts via decisions of judges. Constitution- an Act of Parliament that created our federal system. Defendant- the person against whom legal action is brought. Delegated legislation- legislation made by a body that has been given law making powers by parliament. Equity Government- the political party (such as the Australian Labor Party or the Coalition for the Federal Parliament; the New South Wales Labor Party or the New South Wales Coalition for the NSW state Parliament) which has the majority of the seats in the lower house. 1.Define regulation. Regulation- rule of conduct. 2. Give two explanations of law. Law is the rules for the condition of society brought about by their observance. The study of such rules- jurisprudence. 3. Distinguish rules from laws. Rules are code of conduct established by an organisation or institution. For example in cricket if the bowler bowls out the batsmen then the batsmen has to leave the field of play. The above statement is a rule and not a law because it is not set by the government but is set by the sporting organisation. However, if a company director commits insider trading or insolvent trading then they are punished under the Corporations Act 2001 (Commonwealth) with criminal sanctions. Laws are regulations emanating from government and applicable to people via legislation, custom and policies recognised and enforced by judicial decision. There are three questions that determine laws from rules. -

Where does the rule come from? Who enforces the rule? What is the punishment for breaking the rule?

Laws are derived from Acts of Parliament (statute law) or common law (judge made law). Business Law end users are those engaged in the world of business, the quality of life of which is aided by primary sources of law e.g. employer, employee, consumer, agent or principal. The legal system comprises a number of institutions such as courts, correctional services and Parliament. Why do we need law?

We need law to provide a complex system of social control, regulating conduct, source of protection, provides rules for governing relationships and provides the glue for a civilised society. If we didn’t have law in Australia we would be living under anarchy, social instability and total chaos, tantamount to Somalia. Civil Law - disputes between individuals (private law) - Plaintiff sues defendant e.g. Rabin v Abbott - Balance of probabilities - Damages, injunction, specific performance and rescission - Contract, tort, property, trust Criminal Law - offences against the state - Prosecutor prosecutes the defendant - R (crown) v Butler - Beyond reasonable doubt - Imprisonment, fine, community order - Murder, manslaughter, theft, tax evasion, money laundering and terrorism.

Public law (relationships between the state and its citizens i.e. constitutional, administrative and criminal) and private law (rights and duties of individuals to each other i.e. contract, tort, property and trust. The rule of law as prescribed by Dicey is a society where there was no one above the law and there was punishment only for conduct which the law made illegal. The schools of jurisprudence include: 1. Natural law 2. The Positivists 3. Pure Theory of Law 4. Neo Analytical 5. American Realists 6. Feminist Legal Theory The premise of natural law is that there enduring principles to which any law made by humankind must be subject i.e. to survive and procreate. Plato in Republic set out a mould for a perfect society. The building block of this society was a law state where rulers administer justice impartially as servants of the law. In Summa Theologica St Thomas Aquinas divided law into four categories which he called eternal, natural, divine and human. Thomas Hobbes in Leviathan stated that in his natural state man lived in anarchy in which life was solitary and nasty. Thus some sort of order was necessary to ensure mans self preservation and it was the law and government which guaranteed this.

John Locke believed that man had not lived in anarchy, but in idyllic existence. However, the problem was that property was insecure. In order to secure this property man gave up his idyllic existence and entered into a contract with a sovereign to protect it. In the Social Contract Jean Jacques Roseau pointed out that “man is born free but every where he is in chains.” The pre existing state of man whilst idyllic did not enable man to reach his potential while contemporary society also denied this opportunity. As a result the only way this potential could be realised was by the surrender of the individual to the community as a whole- the “general will.” In Natural Law and Natural Rights Finnis returns to the ideas expressed by Aristotle namely man’s aspirations stem from nature and this nature leads him to desire what is good. A) Life- capacity for man to use his potential. B) Knowledge- which is good in itself but acts as an aid to life. C) Practical reasonableness- ability to conduct oneself by a reasonable thought process.

Positivists ‘Jurisprudence is concerned with positive laws strictly so called without regard to their goodness or badness’ Every positive law is set by a supreme ruler to people in a state of subjection to its author. The reason is that it is only the supreme ruler who can issue a command which can be subject to a sanction for disobedience.

Pure Theory Pure Theory of Law is exclusively concerned with the accurate definition of its subject matter. It seeks to answer the question what is law? But not the question what ought it to be? It is a science and not a politics of law.

Neo- Analytical The most prominent general feature of the law at all times and places are that its existence means that certain types of conduct are no longer optional but mandatory.

American Realists The life of the law has not been logic, it has been experience. The prevalent moral and political theories, intuitions of public policy, even the prejudices which judges share with their fellow humans has a great deal more to do than the syllogism in determining the rules by which society is governed. Karl Lewin- law had to be shaped to fit the needs of society. Roscoe Pound- Law was a mechanism for balancing conflicting interests with the maximum of existing wants relative to the minimum friction.

Feminist Legal Theory

Liberal Feminism- women are as rational as men and are entitled to make the same choices because liberal philosophy holds that rights are gender neutral e.g. Mary Wollstonecraft. Thus it is vital rid the law of all barriers that prevent women from enjoying those rights on an equal basis with men. Radical Feminism- men dominate women and this has contributed to the notion of female inequality. A particular result of this domination is the depersonalisation of women to mere objects. Cultural Feminism- Carol Gilligan said there is a difference between men and women and that women have a particular moral voice arising from their role as carers and nurturers and that equality would recognise the difference between men and women. Post-modern Feminism- Drusilla Cornell argues that there is no unitary women’s point of view, but rather a multitude of possibilities applicable to women in certain circumstances.

Law and Justice Justice is the fitness of the purpose of society i.e. to live with fairness, economic prosperity and with security. John Rawls in a Theory of Justice argues that justice contains two cardinal principles: 1) Each person has equal right to basic liberties that are compatible with liberties of others. 2) Social and economic inequalities should be arranged so that they are advantageous as possible to the most disadvantaged. Robert Nozik in Anarchy, State and Utopia develops a theory of entitlements (acquisition, transfer, transaction and rectification) and states that there is no role for promoting social welfare. Ethical Dimensions of Business

What is Ethics? Ethics is a system encapsulating geo-political moral values, beliefs and acting in the best interests of the society that sustains us. Geo-political Liberalism effects on ethical development.

What is Liberalism? Liberalism is the theory that states that rational beings will pursue the good life to maximise pleasure.

Economic Neo-Liberalism The free market model is an economic system that upholds the autonomous nature of economic order, believing that the government should interfere as little as possible in

the direction of economic affairs. It extols the virtue of money and markets as the most efficient and thus rational organising principle for organising society.

What is Welfare Liberalism? Welfare Liberalism is a middle ground version that hovers between free market theory and socialism. It seeks to ameliorate the harsh offshoots of capitalism e.g. unemployment, inflation, economic poverty of the kind created by mismanaged economic institutions. The invisible hand i.e. market mechanism has a number of flaws that cannot be corrected by the minimal regulatory role proposed by Adam Smith.

What is Utilitarianism? The purest form of individualism stating that the happiness, usefulness and satisfaction conduct should be directed to promoting the greatest happiness to the greatest number of persons.

Chapter two: Australian Sources of Law English Legal History The Common law originated in 1066, with the Norman Conquest of England. In order to consolidate his position, William appointed a number of judges and sent them to hold courts around the country in uniform system of Law. In 1258, the Provisions of Oxford resulted in the common law losing much of its flexibility by providing among other things, if the facts in issue did not fit a standard form of writ, the action could fail.

Australian Legal History As a convict settlement in what was considered unoccupied land, English law was to apply under the Doctrine of Reception. The high court decision in Mabo resulted in the high court deciding that Aust had been acquired by settlement and that Australia wasn’t Terra Nullius at the time of settlement. This meant that Indigenous people had rights to native title under the common law. The Colonial Laws Validity Act 1865 (UK) established the right of colonies to: -amend their constitutions -enact law without applying English law to Australian law. The Australia Act 1986 repealed the Colonial Laws Validity Act and removed the right of appeal of state courts to the Privy Council.

The Australian Constitution The Commonwealth of Australia Constitution Act 1900 (UK) transformed the colonies into states creating bi-cameral federal and state system of government based on the Westminster model and making Australia a dominion.

Specific powers were granted exclusively to the federal Parliament under the Constitution with the bulk of powers shared between the Commonwealth and states concurrently (s 51) and the remaining powers vested with the states (residual powers). The Act also established High Court of Australia. Under the constitution three powers could be identified: -Exclusive- only the Commonwealth can legislation e.g. defence and customs. -Concurrent- forming the bulk of federal powers, with both the Commonwealth and states having the power to legislation in these areas e.g. education and health. -Residual- powers exclusive to the states as the Constitution is silent on particular areas e.g. transport. The doctrine of separation of powers prevents each constitutional institution from encroaching on the powers of the other: -Legislative- enactment of law (Queen, House of Reps and Senate) -Executive- formulation of policy and its administration in cabinet (Governor General and State Governor) Judicial- interpretation and enforcement of the law (High Court and Federal Courts).

Chapter three: Legal Literacy for the lawyer / business professional Terminology: Understanding the language (vocabulary) of the legal system. House of Representatives- lower house of Parliament in Australian federal political system. Senate- the upper house (house of review) of Parliament in Australian federal political system. Minister- the Member of Parliament (MP) or Senator responsible for a key government portfolio e.g. Minister for Education and Workplace Relations, Minister for Finance, Minister for Immigration, Minister for Environment, Minister for Health, Minister for Transport, Minister for Foreign Affairs, Minister for Home Affairs, Attorney General and Treasurer. The court system at both federal and state levels is hierarchical in form. The High Court of Australia is Australia’s highest court with both original and appellate jurisdiction under the federal system and is the final court for the states. In the federal system, below the High Court is the Full Court of the Federal Court (which has appellate jurisdiction only and hears from both the Federal Court and from state Supreme Courts). The hierarchy of courts provides a system of appeals via which disgruntled litigants may appeal a decision of a lower court to a higher court to have the matter reconsidered, allows different of hearing due to the gravity of the case and is instrumental in the building up of precedent. There are four processes for Alternative Dispute Resolution: - Negotiation- voluntary/ confidential discussion between the parties with or without a third party. - Mediation- voluntary confidential negotiation process with a mediator.

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Conciliation- similar to mediation but the conciliator plays a more active role in getting an outcome) and expert determination (an independent witness to assist the parties on some disputed issue of fact / law). -Adjudication- who can force an outcome or commercial arbitration (where and arbitrator is chosen by the parties to settle a dispute by making an award.

Solicitors’ conveyance/ draft documents and give advice on commercial matters. Barristers give opinions to clients on facts presented to them, setting out the relevant law and indicating the likely result of any action, represent clients in court. Ratio decidendi – reason for the decision. Obiter dictum (sayings) statements which a judge may make in the course of judgement that don’t form part of the matters at issue The doctrine of precedent – an established legal principle in a case will be upheld in future cases with similar facts. The reasoning in reported decisions within the same court hierarchy must be followed where the facts are similar (binding precedent). Decisions outside their court hierarchy may be followed if the court can be persuaded that it represents a better/ more modern development of the law (persuasive precedent). How a Bill becomes an Act of Parliament. Presentation for first reading in the House of Representatives, second reading (Parliamentary Minister outlines purpose of the debate adjourned on a motion to enable Members to study the provisions of the Bill, and when debate is resumed, is on broad principles involved), Committee (Second reading), third reading (usually passed without further discussion), transmission to the Senate (Bill passes same stages as the lower house), Royal Assent by the Governor General.

Chapter four: Structuring your business Companies are regulated by the Corporations Act 2001 (Cwlth), which includes codified common law principles. The Corporation law is administered by the

Australian Securities and Investments Commission (ASIC) to investigate enforce and survey. A company is a distinct legal entity separate from its shareholders. It has: -Limited liability- shareholders liability for the debts of the company is limited to the amount invested on those shares (Salomon v Salomon and Co Ltd {1897}). -Perpetual succession- company continues to exist and retains character, rights and duties -Right to sue and be sued- institute and defend legal proceedings in its own name. - Right to hold property- avoid issues in a partnership as to who owns what assets Courts may lift the ‘veil of incorporation’ and give rights and duties to parties who would not otherwise have jurisdiction to do so e.g. a company which had been created to facilitate a fraud e.g. Green v Bestobell Industries Pty Ltd. Directors – a director is a manager of a company. The shareholders elect directors. Directors’ duties: -Contractual- expressed and implied terms relating to their duties including duty of care. -Equity- good faith, proper purpose, exercise discretion and conflicts of interest -Tortious- liable in negligence for breach of duty of care and diligence to the company.

-Statutory-the Corporations Act 2001 (Commonwealth) adopted the common law fiduciary duties of directors (s180-184) including: - Exercise due care and diligence s 180 (1) - Business Judgement Rule s 180(2) - act in the best interests of the company. - Act in good faith (s181) – (act in loyalty, trust and mutual obligation) - Not to make improper use of their position (s 182) - Not to make improper use of company information to gain advantage for themselves or someone else. - Not to act recklessly and intentionally dishonest (Criminal liability s 184). Case Studies ASIC v Gallagher: -Non Executive Directors had a duty to inform themselves so that they can make independent judgements. -Inquiries they were expected to make depend on the extent they were put on inquiry. - An ordinary person with the knowledge and experience of a director might have been expected to...