BUSINESS LAW lecture notes

BUSINESS LAW THE UNIVERSITY OF BAMENDA INSTITUT SUPÉRIEUR JIMIT JIMIT HIGHER INSTITUTE YAOUNDÉ HIGHER INSTITUTE OF MANAGEMENT AND INFORMATION TECHNOLOGY - JIMIT SCHOOL OF BIOMEDICAL SCIENCES - JIMIT BTS, HND, LICENCES PROFESSIONNELLES, BACHELOR, MASTERS CAPACITE EN DROIT ET FORMATION PROFESSIONNELLE “An Icon of Professionalism” Affiliated to the University of Bamenda (UBa) LECTURE NOTES FOR BUSINESS LAW LEVEL: MASTERS By; PEFELA Gildas NYUGHA, PhD Email: [email protected] 2023/2024 1 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW BUSINESS LAW INTRODUCTION What is law? In the words of Salmond,‖ Law is the body of principles recognized and applied by the state in the administration of justice.‖ Woodrow Wilson has defined law as ―that portion of the established habit and thought of mankind which has gained distinct and formal recognition in the shape of uniform rules backed by the authority and power of the government.‖ The law is a body of principles established by parliament (ie, by our representatives) and by the courts. Law is therefore made by us and for us. It is legally enforceable and developed to set standards of conduct between people, businesses and government. If these standards of conduct are not followed, the law sorts the conflicts that arise, and punishes those who breach these standards of conduct. The law is made up of:  Enacted law; This is the law made (enacted) by parliament known as statute law, legislation or Acts of Parliament and delegated legislation  Unenacted law; This is the judgments, usually written, of judges in cases heard by them, known as case law, precedent or sometimes common law Business law, also called Commercial Law or Mercantile Law, is the body of rules, whether by convention, agreement, or national or international legislation, governing the dealings between persons in commercial matters. Business law encompasses all of the laws that dictate how to form and run a business. This includes all of the laws that govern how to start, buy, manage and close or sell any type of business. Business laws establish the rules that all businesses should follow. 2 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW Business law consists of many different areas taught in business school curricula, including: Contracts, the law of Corporations and other Business Organizations, Securities Law, Intellectual Property, Antitrust, Secured Transactions, Commercial Paper, Income Tax, Pensions & Benefits, Trusts & Estates, Immigration Law, Labor Law, Employment Law and Bankruptcy. It is a branch of law that examines topics that impact the operation of a business. Business law aspect in Cameroon is governed by Treaty on the Organization for the Harmonization of Business Law in Africa (OHADA).1 On the 17th of April 1993, countries of the franc zone met in Mauritius Island and signed the treaty of Port Louise creating OHADA. This entered into force on the 19th September 1995 in countries that ratified it. Cameroon ratified the treaty by Degree No 96/177 of 5th September 1996 pursuant to law No 94/04 of 4th August 1994, authorising the President of the Republic to do so. This treaty provides for the adoption of Uniform Acts2 which will enable the Organization to regulate specific areas of business law in the Member States. As a matter of fact, the main objective was to harmonise business law in member states through the elaboration and adoption of simple, modern and common rules adapted to their economies by setting up appropriate judicial procedures and by encouraging arbitration for the settlement of contractual disputes. The treaty calls for the elaboration of laws known as ―Uniform Acts″ that as per Article 10 of the OHADA Treaty, are directly applicable in member states notwithstanding 1 2 Organization Pour L'Harmonisation en Afrique du Droit Des Affaires. The Uniform Acts (UA) are adopted by the Council of Ministers which is the legislative organ of OHADA. This adoption by virtue of Article 8 of the treaty, requires a unanimous vote of the member states present, not taking into account any abstention with a quorum of two-third of the member states. See Rosaline (M), 2013. ―Attachment of property: innovations of the. OHADA to the law hitherto application in former west Cameroon‖, Doctorate/PhD in Private Law, University of Dschang, July 19, 2013. P.5. 3 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW any provision of domestic laws.3 OHADA laws accomplish all this while retaining simplicity compatible with an evolving legal infrastructure.4 This treaty enables the organization to regulate specific areas of law in member states. So far, OHADA has adopted nine Uniform Acts relating to business law in Africa.5 The permanent Secretariat draws up these treaties and proposes them to the Council of Ministers for adoption. The Uniform Act Relating to General Commercial Law is the main OHADA instrument regulating business and commercial activities in Cameroon. When it comes to commercial companies, we have Uniform Act on Commercial Companies and Economic Interest Groups (UACCEIG) adopted on 17 April 1997 in Cotounou and published in the Official journal of OHADA in Yaoundé on 11 October 1997. It has been revised by the new UA adopted on 30 January 2014. 3 Article 10 of the OHADA Treaty: Uniform Acts shall be directly applicable to and binding on the States Parties notwithstanding any previous or subsequent conflicting provisions of the national law. 4 Dickerson, C.M., (2005), "Harmonizing Business laws in Africa: OHADA Calls the tune", Columbia Journal on Transnational law, P. 64. 5 UNIFORM ACT RELATING TO GENERAL COMMERCIAL LAW  UNIFORM ACT RELATING TO COMMERCIAL COMPANIES AND ECONOMIC INTEREST GROUPS  UNIFORM ACT ORGANISING SECURITIES  UNIFORM ACT ORGANIZING COLLECTIVE PROCEEDINGS FOR CLEARING OF DEBTS  UNIFORM ACT ORGANIZING SIMPLIFIED RECOVERY PROCEDURES AND ENFORCEMENT MEASURES  UNIFORM ACT ON ARBITRATION  UNIFORM ACT ON MEDIATION  UNIFORM ACT OF 24 MARCH 2000 ON THE HARMONIZATION OF THE ACCOUNTS OF ENTERPRISES  UNIFORM ACT ON THE CONTRACT FOR THE CARRIAGE OF GOODS BY ROAD . 4 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW I. BUSINESS ETHICS AND SOCIAL RESPONSIBILITY A. Business Ethics6 Businesses must establish a clear set of values that promote ethical practices and social responsibility. In today‘s business climate, companies are increasingly under scrutiny by private citizens. A company that builds its foundation on sound principles will have a better chance of staying competitive in a volatile market. Business ethics are considered to be the blueprint for building a successful organization. If an organization is built on socially responsible values, it will be stronger than an organization that is built on profit alone. More than just a positive reputation, the core ethics of a business dictate how every decision, process, and procedure will take place. This steadfast governance applies even if the business faces hard times or difficult situations. Some will even argue that businesses require full transparency in today‘s world. Businesses are more than people working together to offer a product or service. Businesses are often viewed as entities that should protect stakeholders from unethical behaviors and activities. A set of governing rules should be in place to set the bar high for ethical compliance in every organization. 1. Importance of Corporate Ethics in Business The idea of business ethics may seem subjective, but it comes down to acceptable levels of behavior for each individual who makes up the organization. This behavior must start at the top with responsible actions demonstrated by leadership. By doing so, leaders create a set of rules that are to be followed by others in the company. These rules can be based on the deep values that the company has concerning the quality of products and services, the commitment to customers, or how the organization gives something back to the 6 QUESTION: ANALYZE THE ROLE OF ETHICS AND SOCIAL RESPONSIBILITY IN BUSINESS. 5 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW community. The more a company lives by its set of ethics, the more likely it is to be successful. Anna Spooner, shares tips on how to evaluate whether or not an organization is creating ethical practices by determining the impact of each practice. Some examples include: Executive compensation rates during employee layoffs. Let‘s say a company is struggling during an economic downturn and must lay off a portion of its workforce. Unethical business behaviors can have a negative impact on any business. Even if an unethical decision is made by a single member of the executive team, it can have far-reaching repercussions. Some possible results of unethical business actions may include: Poor company reputation. In an increasingly transparent world, unethical decisions made by business people become permanent stains on the company. Social networks have become sounding boards for anything deemed unethical or politically incorrect, and everyone from disgruntled employees to dissatisfied customers can rate companies on public company review websites. 2. Negative Employee Relations If employees continually see a discrepancy between what‘s expected of them and how leadership behaves, this contrast can create serious problems in the management of employees. Some employees may become disengaged, while others will stop working as hard. After all, if the same rules don‘t apply to everyone, why even bother? The downside to negative employee relations is that the entire company becomes less productive, less responsive to customers, and less profitable. 3. Recruitment and Retention Problems Once a company has developed a negative reputation, it can be difficult to recruit new talent, let alone retain the talent that‘s already there. Disengaged employees who grow tired of the double standards will leave. This attrition can 6 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW impact customers who then have to deal with less experienced and less interested employees, who are already overworked and frustrated. 4. Company Credibility Lost Customers are savvy enough to follow what‘s going on from an ethics standpoint. If they hear of a problem, they begin to question the actions of every person at the company. For example, if a member of the board is accepting expensive gifts from clients in exchange for favorable pricing of materials, this situation could set off major alarms for other customers, and even vendors. The company can expect to lose business if this unethical behavior continues. As you can see, poor ethics can quickly spiral downward, destroying every aspect of the business and making it very difficult to compete. It‘s critical for every business to pay attention to ethical standards and continually remind employees at all levels that their behavior has an impact on the entire organization. B. Corporate Governance The concept of corporate governance is relatively new compared to the entire history of free trade and business formation. There was likely some ―code of honor‖ followed by businesses in the past, but it wasn‘t until the 21st century that greater attention was paid to how companies operate and how the operation impacts employees and the communities in which they serve. According to the Ethics and Compliance Initiative, which is comprised of organizations that are committed to creating best practices in ethics, each decade has been influenced by external factors, such as war or economic turmoil, combined with major ethical focal areas, and the result has been the development of ethics and compliance programs. 7 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW 1. Ethical Decision-Making Policies In any organization, sound moral, business, and financial practices must be followed at all times. No one is above the law or has special privileges when it comes to ethics. Decision making needs to happen with corporate governance in mind. According to Michigan State University, the six steps to ethical decision making are: a. Make sure leaders understand the issue at hand and have gathered all of the facts related to it. b. Leaders should list all of the facts they know, and list any assumptions they are making about the issue. This step ensures that the leaders keep the facts and assumptions differentiated and in mind. c. Note all of the concerns related to the issue, including all of the people concerned, the laws related to the issue, and any corporate or professional ethical guidelines that may be involved. d. Construct a potential solution to the problem. e. Evaluate the proposed solution, making sure to consider all of the ethical aspects noted in step c. f. Once leaders have come to a solution, they recommend it, as well as any actions that need to be taken. 2. Establishing a Code of Conduct To educate and guide others in the organization, a set of ethics, or a code of conduct, should be developed and distributed. A code of ethics is important for businesses to establish to ensure that everyone in the company is clear on the mission, values and guiding principles of the company.7 3. Legal Considerations 7 Kimberlee Leonard, who writes for the Houston Chronicle. 8 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW The business is a legal entity, and therefore all employees should be thinking about their behavior and how it could easily turn into a lawsuit. In Cameroon, a company obtains legal personality from the date of registration with the registry of commerce and securities unless otherwise provided for in the Uniform Act. (See Article 98 of the UACCEIG). Establishing conduct rules at this level can clear up any gray areas. For example, a company should define what sexual harassment is and what to do if an employee experiences it. New items that detail specific codes of conduct can be added as they come up. 4. Regulatory Ethics These are designed to maintain certain standards of performance based on the industry. One example is a commitment to maintaining data privacy at all times, as it pertains to customer records. This element defines how employees are to handle sensitive data and what will happen if someone doesn‘t follow the rules. 5. Professional Behaviors One should never assume that just because someone puts on a business suit and goes to work that he or she will behave professionally. Problems such as bullying, harassment, and abuse can happen in the workplace. Establishing behavioral standards for professionalism should include what is acceptable in the office, while traveling, during meetings, and after hours, when colleagues meet with clients and one another. A good code of conduct is a working document that can be updated and shared as needed. Many companies include this document as part of their employee manual, while others use a secure intranet for displaying this information. No matter where it is housed, employees need to be educated on the code of conduct and refer to it often, starting on the first day on the job. Most company defines this in their Articles of Association. See Article 10 et seq of the UACCEIG. 9 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW It should be noted that along with a code of conduct, there needs to be a clear “whistleblower” policy in which violators are identified and action is taken. This process should be handled with complete confidentiality and sensitivity to the company and all parties involved. Retaliation should never be tolerated when it comes to ethics violations. The company should have a stepby-step plan of action for dealing with ethics problems at all levels, up to and including the executive leadership of the company. A third-party investigative firm can be used to handle such matters to remove the burden and influence that internal resources may have. C. Social Responsibility Over the last few decades, there has been a movement throughout the global business community to improve the world through smarter use of resources and giving back to communities. This movement is called corporate social responsibility. In the following section, you will learn what social responsibility is and how it is a win-win for businesses and consumers. 1. Corporate Responsibility Corporate responsibility refers to the idea that a business is given the opportunity and privilege to make the world a better place. This process can happen through a variety of methods, including the donation of funds, volunteerism, and implementation of environmentally friendly policies. It is up to each organization to determine the best way to demonstrate social responsibility. While certainly not mandatory, corporate social responsibility has become a popular way for companies to improve their image and promote causes they believe in at the same time. Corporate social responsibility may involve focusing on the immediate community in which a company does business. However, there are some organizations that take it a step further and focus on more widespread global issues. For example, the shoe company 10 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW TOMS has created a mission to make sure that every boy and girl in underprivileged countries has proper footwear. Blake Mycoskie, CEO of TOMS, has created a complete business model around social responsibility. Not stopping at shoes, the company now also helps with bringing fresh water to communities, as well as making birth safer for babies in developing nations. 2. Benefits of Corporate Responsibility to Business There are many ways that corporate social responsibility can benefit a business and its objectives. Aside from being able to promote the causes that are closely connected to the values of the company, a business can improve its reputation exponentially. Benefits of corporate social responsibility include many direct and indirect effects. A major benefit of engaging in corporate social responsibility efforts is that consumers regularly check in with their favorite brands to see what they are doing, and they are influenced to make purchases so they can be part of this community. With the process of posting messages on social networks, entire movements can take off via the support of loyal consumers. Businesses must be continually mindful of the image that they project to the world and be sure to align their corporate social responsibility campaigns with their culture. An authentic cause that is backed by all is far better than one that is dreamt up purely for the sake of marketing. 3. Product and Strict Liability Determination of fault and damages for intentional torts and negligence in business are based on the reasonable standard of care. Another form of torts looks at liability without fault, or strict liability. Strict liability determines liability, or harm, based on reasons other than fault. The mistakes leading to harm can be completely unintentional, and in some cases, unavoidable. Yet, damage is done, and a civil suit arises. 11 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW a) Strict Liability Strict liability provides a remedy when harm is suffered through no intentional fault. The courts needed to create a standard that would cover this form of tort, or one without fault. The courts came up with the abnormally dangerous activity standard, which assigns responsibility when an individual engages in some form of dangerous activity, even if care is taken to avoid mishap. If a homeowner has horses in a pasture that is bounded by electric fencing, it can be determined that the homeowner exercised reasonable care. However, suppose that the electricity goes down, the horses get out onto the road, and an accident occurs as a result. In this case, the owner is responsible, even though he took reasonable care and the event was unforeseen. For a court to assign strict liability based on abnormally dangerous activities, the activity must meet certain criteria. The court must establish that at least four of the following six factors are present:  The activity poses a high degree of risk of harm to a person, the land of another, or the property owned by another.  The harm resulting from this activity would likely be substantial.  The use of reasonable care would not eliminate this risk.  The activity is not something that would be considered a matter of common usage.  The activity is not appropriate for the place where it occurs.  The danger of the activity overshadows the benefit it poses to a given community. In essence, the basis for determining strict liability is the extent of the risk involved in the activity. This basis could also apply to the ownership of dangerous pets. A dog that is known to be aggressive would qualify the owner for strict liability should it get out and bite someone. The courts would find that 12 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW the owner knew, or should have known, that the dog was dangerous and had a propensity to cause harm. b) Trespass In some situations, the owner of the dangerous activity might not be held liable. One such situation is trespassing. Trespassing occurs as an individual enters or remains upon property owned by another without permission. In the case of trespassing, the owner of the property does not have a duty to make the premises safe based on reasonable care for the trespasser. Also, the owner does not have a responsibility to cancel or alter activities on the premises to avoid endangering the trespasser. In some cases, however, the property owner could be held liable:  When the area in question is a common place for trespassing.  When the owner knows a trespasser is present.  When the trespasser needs aid, then the owner has a duty to rescue him or her.  When the trespasser is a child, and the dangerous activity is deemed as an attractive nuisance, or an attraction that a reasonable child would wish to view. Even though trespassing can present an exception to liability in the presence of a dangerous activity, it is not absolute. There are numerous exceptions that allow for liability. In effect, strict liability can occur in a given situation even when the property owner has provided care that goes above and beyond what is reasonable. The court does not need to establish proof of lack of due care when applying strict liability to a case. 13 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW c) Product Liability Individuals are not always the defendants involved in civil suits. Manufacturers, wholesalers, distributors, and retailers can also be named in torts that pertain to products and qualify as strict liability. Some products contain flaws that were not intentionally created; such flaws may not be discovered until an individual suffers harm as a result of using them. It is not always possible to conclusively prove that an act or omission was responsible for the harm. As a result, the courts developed the doctrine of res ipsa loquitor, which means that whatever it is speaks for itself. The burden of proof shifts from the plaintiff to the defendant, who must disprove negligence. However, the plaintiff must first establish three factors:  The defendant had control over the product in question while it was being manufactured.  Under normal use and circumstances, the product would not cause damage or harm, but damage or harm has occurred in the case in question.  The behavior of the plaintiff did not significantly contribute to the harm caused. The doctrine of res ipsa loquitor does not establish proof of negligence, but it does allow the jury to infer what is not explicitly available pertaining to negligent acts or omissions on the part of the defendant. Negligence can occur when products are created because defects can harm consumers. Think about the potential harm that would occur if brake manufacturers were negligent. This negligence would cause brakes to have flaws, which would prevent them from doing their job of stopping cars. If a car does not stop, people will likely be injured. The manufacturing defect would result in a product liability lawsuit, based on legal responsibility for the harmful consequences proximately caused by the product defect. Since the 14 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW courts would not be able to see the negligence occurring, the courts would base their decision on res ipsa loquitor and the fact that the brakes would not normally fail under normal use by the driver. d) Defenses There are defenses to product liability claims. In some cases, the plaintiff‘s own behaviors contribute to his or her injuries, based on his or her own negligence. This situation is known as contributory negligence. Contributory negligence, when determined by the court, prevents any recovery of damages by the plaintiff. So, if the court finds contributory negligence, the plaintiff is unable to recover any damages for the injury. Two forms of contributory negligence are assumption of risk and misuse. Assumption of risk is one defense. In some cases, the defendant can argue that the user assumed the risk of using the product if he or she used the product while knowing that the defect in the product created a risk. An individual who purchases a saw and sees that the guard is too small to cover the teeth, but decides to use it anyway, is assuming the risk of using the product. If the saw cuts the individual, then the manufacturer could argue that the person assumed the risk because he saw the defect, understood the risk, and used the saw anyway. Another defense is product misuse. In some cases, an individual will use a product in ways that it is not meant to be used. The user might not be aware of a defect, and he or she proceeds to use the product incorrectly. Misuse by the individual would be to blame for any resulting harm. Plaintiffs might also be responsible for comparative negligence. With comparative negligence, the plaintiff‘s own actions in the use of the product contributed to the harm caused by the product, but the plaintiff might still receive damages. The amount of negligence on behalf of each part (plaintiff and defendant) is compared to determine the damages to which the plaintiff is 15 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW entitled. If a plaintiff is found to be 30% responsible, and the defendant 70% responsible, then the plaintiff would be entitled to 70% of the damages suffered. Conclusion In some cases, a plaintiff suffers harm, but fault is not easily determined, or fault is not the issue. A defendant can exercise reasonable care while the nature of the activity lends itself to risk of harm. Products could have obvious or hidden defects that cause harm to another. When defects occur, the plaintiff has the ability to file a civil suit against the entity that is responsible for the harmcausing defect. The plaintiff might also share some responsibility in the harm, and based on product liability, the court decision will be adjusted accordingly.8 8 Endnotes Baime. E. (2018). Fundamentals of tort law. Retrieved from: https://nationalparalegal.edu/ FundamentalsTortLaw.aspx. Cornell Law School. (n.d.). Tort. Retrieved from: https://www.law.cornell.edu/wex/tort. Kionka, E. J. (2013). Torts (5th ed.). St. Paul, MN: West Academic Publishing. Retrieved from: https://lscontent.westlaw.com/images/content/Torts5th.pdf. Baime. E. (2018). Fundamentals of tort law. Retrieved from: https://nationalparalegal.edu/ FundamentalsTortLaw.aspx. CCBC Legal Studies (n.d.) Strict liability. Retrieved from: https://ccbclegalstudiesbusinesslaw.wordpress.com/ unit-1-foundations-of-law/torts/strict-liability/. Kionka, E. J. (2013). Torts (5th ed.). St. Paul, MN: West Academic Publishing. Retrieved from: https://lscontent.westlaw.com/images/content/Torts5th.pdf. 16 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW II. CORPORATE LAW A. The Notion of Corporate Law Corporate law (also known as business law or enterprise law or sometimes company law) is the body of law governing the rights, relations, and conduct of persons, companies, organizations and businesses. The term refers to the legal practice of law relating to corporations, or to the theory of corporations. Corporate law often describes the law relating to matters which derive directly from the life-cycle of a corporation. It thus encompasses the formation, funding, governance, and death of a corporation. Corporate law regulates how corporations, investors, shareholders, directors, employees, creditors, and other stakeholders such and the environment interact as consumers, with the community, one another. Whilst the term company or business law is colloquially used interchangeably with corporate law, the term business law mostly refers to wider concepts of commercial law, that is the law relating to commercial and business related purposes and activities. In some cases, this may include matters relating to corporate governance or financial law. When used as a substitute for corporate law, business law means the law relating to the business corporation (or business enterprises), including such activity as raising capital, company formation, and registration with the government. B. Characteristics Universal to Business Enterprises Academics identify four legal characteristics universal to business enterprises. These are:  Separate legal personality of the corporation (access to tort and contract law in a manner similar to a person) 17 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW  Limited liability of the shareholders (a shareholder's personal liability is limited to the value of their shares in the corporation)  Transferable shares (if the corporation is a "public company", the shares are traded on a stock exchange)  Delegated management under a board structure; the board of directors delegates day-to-day management of the company to executives. Widely available and user-friendly corporate law enables business participants to possess these four legal characteristics and thus transact as businesses. Thus, corporate law is a response to three endemic opportunism: conflicts between managers and shareholders, between controlling and noncontrolling shareholders; and between shareholders and other contractual counterparts (including creditors and employees). A corporation may accurately be called a company; however, a company should not necessarily be called a corporation, which has distinct characteristics. In most countries, a company may or may not be a separate legal entity, and is often used synonymous with "firm" or "business." According to Black's Law Dictionary, a company means "a corporation — or, less commonly, an association, partnership or union — that carries on industrial enterprise." Corporate law deals with companies that are incorporated or registered under the corporate or company law of a sovereign state or their sub-national states. Details below. The defining feature of a corporation is its legal independence from the shareholders that own it. Under corporate law, corporations of all sizes have separate legal personality, with limited or unlimited liability for its shareholders. Shareholders control the company through a board of directors which, in turn, typically delegates control of the corporation's day-today operations to a full-time executive. Shareholders' losses, in the event of liquidation, are limited to their stake in the corporation, and they are not liable 18 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW for any remaining debts owed to the corporation's creditors. This rule is called limited liability, and it is why the names of corporations end with "Ltd." or some variant such as "Inc." or "plc." Under almost all legal systems corporations have much the same legal rights and obligations as individuals. In some jurisdictions, this extends to allow corporations to exercise human rights against real individuals and the state, and they may be responsible for human rights violations. Just as they are "born" into existence through its members obtaining a certificate of incorporation, they can "die" when they lose money into insolvency. Corporations can even be convicted of criminal offences, such as corporate fraud and corporate manslaughter. C. Classification of Commercial Companies Article 3 of the OHADA UACCEIG states that any persons whatever their nationality wishing to engage in commercial activity in the form of a company on the territory of one of the contracting states shall choose the form of the company which suits the activity envisaged from amongst those provided by the Uniform Act (UA). Thus, the UA recognizes four forms of companies that can be registered and two forms that can exist though not registered.9 The OHADA UA makes provision for four types of companies that can be registered. These include;  The Société en Nom Collectif (SNC) "Partnership",  The Société en Commandite Simple (SCS) "Limited Partnership",  The Société à Responsabilitée Limitée (SARL) "Private Limited Companies" 9 Tchuingue Monkam T., (2020), «La Personnalité Juridique Des Groupements Commerciaux En Droit OHADA » PHD Thesis, University of Dschang, Faculty of Law and Political Science, Droit des affaires et de l‘entreprise. P.35. 19 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW  The Société Anonyme (SA) "Public Limited Companies" (PLC). OHADA Law makes provision for two types of unregistered companies namely;  The Société en Participation or SP (Joint-Ventures) and  The Société de Fait or SF (De Facto Partnership). The revised UACCEIG creates the "Société par Actions Simplifiée"SAS (Simplified Joint Stock Company), based on the French SAS model.10 Private Limited Company11 is a hybrid which borrows some of the characteristics of both the unlimited and limited liability companies. The Unlimited Liability Companies also called Société des personnes are concluded intuitu personae. They are charaterised by joined and unlimited liabilities of the shareholders towards the debt of the company. They are based on mutual trust and confidence between shareholders. The shares in unlimited liability companies cannot be transferred or transmitted without the unanimous consent of all the shareholders. These companies are made up of Private Companies (SNC), Sleeping Partnership (SAS), and Joint Stock Company (SP). The Limited Liability Companies or Société des capitaux or Par Action, are essentially based on maney. The personality of the shareholder is not important. The liabilty of each shareholder is limited to the amount of his shares. The shareholder is free to transfer or withdraw his share at will. These types of companies are Public Limited Companies (SA) and Société par action simplifie (SAS). Under Common Law, a variety of companies12 may be incorporated under the Companies Act 2006.13 The people interested in starting the 10 See Articles 853-1 to 852-23 of the Revised UA. SARL. 12 Limited Company Registered under Companies Act 2006 includes; Registered/statutory/chartered companies, Limited/unlimited companies, Companies limited by guarantee/companies limited by shares, Private/public companies, Listed/unlisted companies, and Parent/subsidiary companies. 11 20 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW enterprise - the prospective directors, employees and shareholders - may choose, firstly, an unlimited or a limited company. "Unlimited" will mean the incorporators will be liable for all losses and debts under the general principles of civil law. The option of a limited company leads to a second choice. A company can be "limited by guarantee", meaning that if the company owes more debts than it can pay, the guarantors' liability will be limited 14 to the extent of the money they elect to guarantee. Or a company may choose to be ―limited by shares‖, meaning capital investors' liability is limited to the amount they subscribe for in share capital.15 A third choice is whether a company limited by shares will be public or private. Both kinds of companies must display (partly as a warning) the endings "Plc" or "Ltd" following the company name. Most new businesses will opt for a private company limited by shares, while unlimited companies and companies limited by guarantee are typically chosen by either charities, risky ventures or mutual funds wanting to signal they will not leave debts unpaid. Charitable ventures also have the option to become a community interest company. Public Companies are the predominant business vehicle in the UK economy. While far less numerous than private companies, they employ the overwhelming mass of British workers and turn over the greatest share of wealth. D. Benefits of Incorporating A Business Entity One of the biggest benefits of incorporating a business and becoming a Private Limited Company (Ltd) is the protection it provides the directors and shareholders from the company‘s debts. Having ‗limited liability‘ allows 13 The Companies Act 2006 (c 46) is an Act of the Parliament of the United Kingdom which forms the primary source of UK company law. It had the distinction of being the longest Act in British Parliamentary history: with 1,300 sections and covering nearly 700 pages, and containing 16 schedules (the list of contents is 59 pages long) but it has since been surpassed, in that respect, by the Corporation Tax Act 2009. 14 Limited Liability refers to the liability of the members, not the liability of the company. The company will always be liable to the full extent of its debts. The liability of the members, whether limited or unlimited, is to the company, not to the individual creditors of the company. See Ankur Mittal., (2017), ―Company Law Lecture Notes‖, University of Melbourne/Blaw 20001. Coursehero.com. P. 4. Visited March 12, 2018. 15 Ibid. 21 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW shareholders to invest in businesses safely in the knowledge that if things were to go wrong, all they stand to lose is the value of their initial investment, and importantly, their personal finances and assets would be safe. This is a boast to the country‘s economy. However, the situation is not always so clear-cut. There are a number of different scenarios which could lead to a company director/shareholder being made liable for a proportion of the company‘s debts. It‘s a good idea to be aware of those different situations to avoid what could be a nasty shock. The clarity of these different scenarios is of great importance to commercial and business engagements. The privilege of limited liability for business debts is one of the principal advantages of doing business under the corporate form of organization. The company, being a separate person, is the owner of its assets and bound by its liabilities. The liability of a member as a shareholder extends to the contribution to the capital of the company up to the nominal value of the shares held and not paid by him. Members, even as a whole, are neither the owners of the company‘s undertakings, nor liable for its debts. In other words, a shareholder is liable to pay the balance, if any, due on the shares held by him, when called upon to pay and nothing more, even if the liabilities of the company far exceed its assets.16 This means that the liability of a member is limited17. As a matter of fact, Limited Liability under Company Laws emphasizes that shareholders are under no obligation to the company or its creditors beyond their obligations on the par value of their shares.18 16 La SARL a l'avantage de permettre à ses associés de se livrer à une exploitation commerciale, sans prendre personnellement la qualité de commerçant. Pougoue, P.G., Anoukaha, F., & Nguebou, T. J., op. cit., at P53. Visited March 12, 2018. 17 Also see Association of Corporate Council, Multi-Jurisdictional Guide 2012/13., ―Practical law company: corporate governance and directors‘ duties‖, Available online at www.practicallaw.com/corpgov-mjg visited June 15, 2017. 18 Adil Sinjakli., ―Responsibility of Limited Liability Companies' Managers under Article 219 of the UAE Companies Law‖, Arab Law Quarterly, Vol. 17, No. 1 (2002), pp. 53-55. 22 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW It is a fundamental principle of English Company Law and modern commerce that a Limited Liability Company is an entity separate and distinct from its shareholders and directors. The limited liability company is an apparently indispensable aspect of modern commercial life. All varieties of commercial undertaking adopt limited liability form, from giant corporate groups to small family businesses. Even non-commercial enterprises often register as limited liability companies. The principal legal benefits obtained when registering as a limited enterprise are perpetual succession, a separate legal identity from the incorporators and a limitation of the liability of the investors and/or members of the relevant undertaking.19 One of the biggest advantages of a company is that it is a separate legal person, which assumes its own liability. If the company goes bankrupt, gets sued, or has some sort of accident, the directors and officers of the company are generally protected by the ―corporate veil.‖ This means that the company is the person that may be held liable, not the people who run it. In exchange for this protection, the law expects directors and officers to fulfill certain duties. In general, more is expected of a director than of an officer. If you don‘t live up to those duties, you may lose the protection of the corporate form, and face personal liability. On incorporation, a company becomes a person in the eyes of law, it has a perpetual succession, its members may come and may go but the company lives till its death as aforementioned. It has a common seal, which is affixed on all the legal documents executed on behalf of the company in the presence of and signed by authorized signatory or signatories. It is empowered to hold all properties in its own name and in its own right. It can sue others and can be sued by others in its own name. Incorporating business activities into a company confers life on the business as a ‗separate legal entity‘. Profits and losses are the company‘s and it has its own debts and obligations. The business 19 McQueen, R., (2009), Op.cit,. P.1. 23 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW continues despite the resignation, death or bankruptcy of management and shareholders and it offers the ideal vehicle for expansion and the participation of outside investors.20 All these niceties are of course the benefits of a Limited Liability Company. 20 Clayton, Patricia., (2006), Forming a Limited company: A Practical Guide to Legal Requirements and Procedures, 9th Ed., Bell & Bain, Glasgow, Great Britain. P 1. 24 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW III. CONTRACT LAW A contract21 is defined as an agreement between two or more parties that is enforceable by law. To be considered enforceable by law, a contract must contain several elements, including offer and acceptance, genuine agreement, consideration, capacity, and legality. G.H.Treitel in defining a contract states that a contract is an agreement giving rise to obligations which are enforceable or recognized by law. To summarize the above definitions a contract may be defined as an agreement between two or more persons which is recognized by law as affecting the legal rights or duties of the parties. It follows that a contract is an agreement giving rise to obligations which are enforced or recognized by law. The distinguishing factor between contracts and other legal obligations is that they are based on the agreements of the contracting parties. This implies that there has to be an agreement between two or more persons which is intended by them to be enforceable at law. In the words of Lord Cairns in Cundy V.Lindsay there must be a consensus ad idem or the meeting of the minds. AGREEMENT = OFFER + ACCEPTANCE. The key to a contract is that there must be an offer, and acceptance of the terms of that offer. An offer is a proposal made to demonstrate an intent to enter a contract. Acceptance is the agreement to be bound by the terms of the offer. Offers must be made with intent, must be definite and certain (i.e., the offer must be clearly expressed for it to be enforceable), and must be communicated to the offeree. An acceptance must demonstrate the willingness to consent to all of the terms of the offer. A. Essential Elements of Valid Contract  Offer and acceptance 21 QUESTION: ANALYZE THE PRINCIPLES OF CONTRACT LAW AND HOW THEY APPLY TO BUSINESSES 25 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW  Intention to create legal relationship  Lawful consideration  Capacity of parties – competency  Free and genuine consent  Lawful object  Agreement not declared void  Certainty and possibility of performance  Legal formalities 1) Some Key Words When Talking About Contract a. Consensus Ad Idem; The parties to the agreement must have agreed about the subject matter of the agreement in the same sense and at the same time. Unless there is consensus ad idem, there can be no contract. b. Obligation; It is defined as a legal tie which imposes upon a definite person or persons the necessity of doing or abstaining from doing a definite act or acts It may relate to social or legal matters An agreement which gives rise to social obligation is not a contract c. Genuine agreement, i.e., “a meeting of the minds,” is also required Agreement can be destroyed by fraud, misrepresentation, mistake, duress, or undue influence. d. Consideration must be included in contracts Consideration is a thing of value promised in exchange for something else of value. This mutual exchange binds the parties together. e. Capacity to contract is the next element required for a valid agreement The law presumes that anyone entering a contract has the legal capacity to do so. Minors are generally excused from contractual responsibility, as are mentally incompetent and drugged or drunk individuals. 26 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW f. Capacity For a contract to be legally binding, the parties entering into the contract must have the capacity to do so. As a legal matter, there are certain classes of people who are presumed to have no capacity to contract. These include legal minors, the mentally ill, and those who are intoxicated. If people meeting these criteria enter into a contract, the agreement is considered voidable. If a contract is voidable, then the person who lacked capacity has the choice to either end the contract or continue with it as agreed upon. This design is meant to protect the party lacking capacity. Following are some examples of the application of these rules. i. Minors Have No Capacity to Contract In most states, minors under the age of 18 lack the capacity to make a contract and may therefore either honor an agreement or void the contract. However, there are a few exceptions to this rule. In most states, a contract for necessities (i.e. food and clothing) may not be voided. Also, in most states, the contract can no longer be voided when the minor turns 18. ii. Mental Incapacity If a person lacks the mental capacity to enter a contract, then either he or she, or his or her legal guardian, may void it, except in cases where the contract involved necessities. In most states, mental capacity is measured against the “cognitive standard” of whether the party understood its meaning and effect. iii. Voluntary Intoxication – Drugs and Alcohol Courts generally do not find lack of capacity to contract for people who are voluntarily intoxicated. The rationale for this decision is found in the reasoning that individuals should not be allowed to side-step their contractual obligations by virtue of their self-induced states. By another token, however, 27 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW courts also seek to avoid the undesirable result of allowing the sober party to take advantage of the other person‘s condition. Therefore, if a party is so inebriated that he or she is unable to understand the nature and consequences of the agreement, then the contract may be voided by the inebriated party. g. Finally, legality is the last element considered Contracts must be created for the exchange of legal goods and services to be enforced. An agreement is void if it violates the law, or is formed for the purpose of violating the law. Contracts may also be found voidable if they are found violative of public policy, although this is rarer. Typically, this conclusion is only invoked in clear cases where the potential harm to the public is substantially incontestable, eluding the idiosyncrasies of particular judges. For a contract to be binding, it must not have a criminal or immoral purpose or go against public policy. For example, a contract to commit murder in exchange for money will not be enforced by the courts. If performing the terms of the agreement, or if formation of the contract, will cause the parties to engage in activity that is illegal, then the contract will be deemed illegal and will be considered void or ―unenforceable,‖ similar to a nonexistent contract. In this case, there will not be any relief available to either party if they breach the contract. Indeed, it is a defense to a breach of contract claim that the contract itself was illegal. Some examples of contracts that would be considered illegal are contracts for the sale or distribution of illegal drugs, contracts for illegal activities such as loansharking, and employment contracts for the hiring of undocumented workers. Parties entering into contracts that involve illegal conduct may not expect judicial relief to have that contract enforced. This theory has also been applied to conduct that would be considered in opposition to public policy. 28 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW B. Consideration And Promissory Estoppel Contract law employs the principles of consideration and promissory estoppel. 1) Consideration In most cases, consideration need not be pecuniary (monetary). Most contracts are enforceable only if each party gets consideration from the agreement. Consideration can be money, property, a promise, or some right. For instance, when a music company sells studio equipment, the promised equipment is the consideration for the buyer. The seller‘s consideration is the money the buyer promises to pay for the equipment. 2) Promissory Estoppel The promissory estoppel doctrine is an exception to the requirement of consideration for contracts. Promissory estoppel is triggered when one party acts on the other party‘s promise. In cases where it is triggered, there is harm or severe injustice to the party who acted because they relied on the other party‘s broken promise. The doctrine of promissory estoppel allows aggrieved parties to pursue justice or fairness for the performance of a contract in court, or other equitable remedies, even in the absence of any consideration. Its legal application may vary from state to state, but the basic elements include: a) A legal relationship existed between the parties. b) A promise was made. c) There was reliance on the promise that caused one party to act before any real consideration was exchanged. d) A substantial and measurable detriment occurred as a result of the failure to perform on the contract. e) An unconscionable result, or gross injustice, resulted from the broken promise. 29 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW If it is found that these elements are satisfied and that the doctrine of estoppel is applicable, then the court will issue the appropriate damages in the form of reliance damages to restore the aggrieved party to the position they were in prior to the broken promise. Expectation damages are not usually available if promissory estoppel is being claimed. The doctrines of consideration and promissory estoppel are essential to an understanding of how contracts are formed and enforced in most countries C. Breach of Contract and Remedies 1. Breach of Contract Once a contract is legally formed, both parties are generally expected to perform according to the terms of the contract. A breach of contract claim arises when either (or both) parties claim that there was a failure, without legal excuse, to perform on any, or all, parts and promises of the contract. Several inquiries are triggered when a breach of contract claims is initiated. The first step is to determine whether a contract existed in the first place. If it did, the following questions may be asked: What did the terms of the contract require of the parties? Were the contractual terms modified at any point? Did the breach actually occur? Was the claimed breach material to the contract? Does any legal excuse or defense to enforcement of the contract exist? What damages were caused by the breach? 2. Remedies Typically, the remedies that will be available if a breach of contract is found are money damages, restitution, rescission, reformation, specific performance, and injunction.  Money damages include compensation for financial losses caused by the breach. 30 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW  Restitution restores the injured party to status quo or the position they had prior to the formation of the contract, by returning to the plaintiff any money or property given pursuant to the contract. This type of relief is typically sought when a contract is voided by courts due to a finding that the defendant is incompetent or lacks capacity.  Rescission or reformation may be available to parties who enter into contracts by mistake, fraud, undue influence, or duress. Rescission terminates the duties of both parties under the contract, while reformation allows courts to equitably change the contract‘s substance.  Specific performance compels one party to perform the promises stated in the contract as nearly as practicable. Specific performance is only mandated when money damages do not adequately compensate for the breach.  Injunction: Where a party is in breach of a negative term of a contract, the court may, by issuing an order, restrain him from doing what he promised not to do. Such an order of the court is known as an ―Injunction‖. Inevitably, when valid contracts are created, the potential for breach exists. An understanding of what happens when a contract‘s terms are breached is fundamental to an understanding of contract law. D. Specific Types of Contract 1. Contract of Indemnity The term Indemnity literally means ―Security against loss‖. In a contract of indemnity one party – i.e. the indemnifier promise to compensate the other party i.e. the indemnified against the loss suffered by the other. Under a contract of indemnity, liability of the promisor arises from loss caused to the promisee by the conduct of the promisor himself or by the conduct of other person. [Punjab National Bank v Vikram Cotton Mills]. Every contract of insurance, other than life insurance, is a contract of indemnity. The 31 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW definition is restricted to cases where loss has been caused by some human agency. [GajananMoreshwar v Moreshwar Madan]. 2. Contract of Guarantee A ―contract of guarantee‖ is a contract to perform the promise, or discharge the liability, of a third person in case of his default. The person who gives the guarantee is called the “surety”; the person in respect of whose default the guarantee is given is called the “principal debtor “, and the person to whom the guarantee is given is called the‖ creditor ―. A guarantee may be either oral or written. 3. Contract of Bailment Derived from French word “bailler” means ―to deliver‖. In legal sense, it involves change in possession of goods from one person to another for some specific purpose. The delivery of goods by one person to another for some purpose, upon a contract, that they shall, when the purpose is accomplished, be returned or otherwise disposed of according to the directions of the person delivering them. 4. Contract of Agency Agency is a special type of contract. The concept of agency was developed as one man cannot possibly do every transaction himself. The principles of contract of agency are : – (a) Accepting matters of a personal nature (e.g. a person cannot marry through an agent, as it is a matter of personal nature). – (b) A person acting through another person. 32 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW Agent and Principal – An ―agent‖ is a person employed to do any act for another or to represent another in dealings with third persons. The person for whom such act is done, or who is so represented, is called the ―principal‖. E. NEGOTIABLE INSTRUMENTS 1. Concept A negotiable instrument is actually a written document. This document specifies payment to a specific person or the bearer of the instrument at a specific date. So we can define a bill of exchange as ―a document signifying an unconditional promise signed by the person giving the promise, requiring the person to whom it is addressed to pay on demand, or at a fixed date or time‖. 2. Characteristics Negotiable Instruments a) Must be in writing: A mere verbal promise to pay is not a promissory note. The method of writing (either in ink or pencil or printing, etc.) is unimportant, but it must be in any form that cannot be altered easily. b) Must certainly an express promise or clear understanding to pay: There must be an express undertaking to pay. A mere acknowledgment is not enough. c) Must be unconditional: A conditional undertaking destroys the negotiable character of an otherwise negotiable instrument. Therefore, the promise to pay must not depend upon the happening of some outside contingency or event. It must be payable absolutely. d) Signed by the maker: The person who promises to pay must sign the instrument even though it might have not been written by the promisor himself. There are no restrictions regarding the form or place of 33 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW signatures in the instrument. It may be in any part of the instrument. It may be in pencil or ink, a thumb mark or initials. e) Must be certain: The note self must show clearly who the person is agreeing to undertake the liability to pay the amount. In case a person signs in an assumed name, he is liable as a maker because a maker is taken as certain if from his description sufficient indication follows about his identity. In case two or more persons promise to pay, they may bind themselves jointly or jointly and severally, but their liability cannot be in the alternative. f) The payee must be certain: The instrument must point out with certainty the person to whom the promise has been made. The payee may be ascertained by name or by designation. g) The promise should be to pay money and money only: Money means legal tender money and not old and rare coins. A promise to deliver paddy either in the alternative or in addition to money does not constitute a promissory note. h) The amount should be certain: One of the important characteristics of a promissory note is a certainty- not only regarding the person to whom or by whom payment is to be made but also regarding the amount. 3. Bill of Exchange, A bill of exchange is defined as an instrument in writing containing an unconditional order, signed by the maker, directing a certain person to pay a certain sum of money only to, or to the order of a certain person or to the bearer of the instrument. – see Negotiable Instruments Act, 1881. Bill of exchange is an instrument ordering the debtor to pay a certain amount within a stipulated period of time. Bill of exchange needs to be accepted 34 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW in order to call it valid or applicable. And the bill of exchange is issued by the creditor. Promissory Note, on the other hand, is a promise to pay a certain amount of money within a stipulated period of time. And the promissory note is issued by the debtor. 4. Cheques A cheque is a bill of exchange, drawn on a specified banker and it includes ‗the electronic image of truncated cheque‘ and ‗a cheque in electronic form‘. The cheque is always payable on demand. A cheque must contain all the characteristics of a bill of exchange. 35 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW IV. SALES CONTRACTS Contract of sale of goods is a contract, whereby, the seller transfers or agrees to transfer the property in goods to the buyer for a price. There can be a contract of sale between one part owner and another. A. Features of Sales Contracts22 Commercial enterprises that engage in buying and selling practices need to be aware of the features and nature of sales contracts. A contract of sale is a specific type of contract in which one party is obligated to deliver and transfer ownership of a good to a second party, who in turn is obligated to pay for the good in money, or its equivalent. The party who is obligated to deliver the good is known as the vendor or seller. The party who is obligated to pay for the good is known as the vendee or buyer. It has generally been established that there are six main features of sales contracts. Sales contracts are: 1. Consensual: they are perfected by mere consent without the need for any additional acts. 2. Bilateral: both parties in the contract are bound to fulfill reciprocal obligations toward each other. 3. Onerous: the good sold is conveyed in consideration of the price, and the price paid is conveyed in consideration of the good. 4. Commutative: the good sold is considered to be the equivalent of the price, and vice versa. 5. Nominate: this type of contract has a special designation (i.e., sale). 6. Principal: the validity does not depend upon the existence of other contracts. B. Warranties and Sales Contracts 22 Q. Recognize nuances of contracts pertaining to sales. 36 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW 1. Warranties A warranty is a guarantee on the good that comes as part of the sales contract, but contract law treats warranties as an additional form of contract that binds the selling party to undertake a certain action. Typically, the selling party has an obligation to provide a product that achieves a specified task, or to deliver a service that meets certain minimal standards. Warranties are offered for a range of different goods and services, from manufactured goods to real estate to plumbing services. The warranty assures the buyer that the good or service is free from defects, and it is a legally binding commitment. In the event that the product or service fails to meet the standards set out in the warranty, then the contract provides a specific remedy, such as a replacement or repair. 2. Express and Implied Warranties Warranties can be express, implied, or both. Both express and implied warranties provide legal relief for the purchaser in the event of a breach of contract. a) Express Warranty An express warranty is one in which the seller explicitly guarantees the quality of the good or service sold. Typically, the vendor provides a statement, or other binding document, as part of the sales contract. What this means in practice is that the buyer has engaged in the contract on the reasonable assumption that the quality, nature, character, purpose, performance, state, use, or capacity of the goods or services are the same as those stated by the seller. Therefore, the sales contract is based, in part, on the understanding that the goods or services being supplied by the seller will conform to the description, or any sample, that has been provided. There is not a specific way that words must be formed to make an express warranty valid. Importantly, the sales contract does not need to explicitly state 37 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW that a warranty is being intended. It is enough that the seller asserts facts about the goods that then become part of the contract between the parties. However, the courts do apply a reasonableness test of reliance upon warranties. Puffery, or language used to bolster sales, is lawful, and the consumer is required to apply reason when evaluating such statements. For example, buyers are expected to use reason when judging seller claims such as ―this sandwich is the best in the world.‖ Obvious sales talk cannot ordinarily be treated as a legally binding warranty. A breach of the warranty occurs when the express warranty has been found to be false. In such circumstances, the warrantor is legally liable just as though the truth of the warranty had been guaranteed. The courts do not accept as a defense: • Seller claims the warranty was true. • Seller claims due care was exercised in the production or handling of the product. • Seller claims there is not any reason to believe that the warranty was false. b) Implied Warranties In certain circumstances where no express warranty was made, the law implies a warranty. This statement means that the warranty automatically arises from the fact that a sale was made. With regard to implied warranties, the law distinguishes between casual sellers and merchant sellers, with the latter held to a higher standard, given that they are in the business of buying or selling the good or service rendered. For example, unless otherwise agreed, goods sold by merchants carry an implied warranty against claims by any third party by way of trademark infringement, patent infringement, or any other intellectual property law infringement. This type of warranty is known as the warranty against infringement. 38 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW Another implied warranty provided by merchant sellers is the warranty of fitness for normal use, which means that the goods must be fit for the ordinary purposes for which they are sold. It is important to note that if express warranties are made, this does not preclude implied warranties. If an express warranty is made, it should be consistent with implied warranties, and can be treated as cumulative, if such a construction is reasonable. If the express and implied warranties cannot be construed as consistent and cumulative, the express warranty generally prevails over the implied warranty, except in the case of the implied warranty of merchantability, or fitness for purpose. C. Breaches of Warranty If the buyer believes that there has been a breach of the implied warranty of merchantability, it is their responsibility to demonstrate that the good was defective, that this defect made the good not fit for purpose, and that this defect caused the plaintiff harm. Typical examples of defects are: • Design defects • Manufacturing defects • Inadequate instructions on the use of the good • Inadequate warning against the dangers involved in using the good. D. Warranty of Title By the mere act of selling, the vendor implies a warranty that the title is good and that the transfer of title is lawful. In addition, the act of the sale creates a warranty that the goods shall be delivered free from any lien of which the buyer was unaware. In some circumstances, the warranty of title can be excluded from the contract documents. For instance, when the seller makes the sale in a representative capacity (e.g. as an executor of an estate), then a warranty of title will not arise. 39 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW E. Doctrine of Caveat Emptor The doctrine of ‗Caveat Emptor’ means “let the buyer beware“. In other words, the buyer must take care of his own interest while purchasing the goods. While purchasing the goods the buyer should check the goods carefully. If a buyer purchases the goods and after it, he comes to know that these are defective. In this case, the seller will not be responsible for this defect. The object of this principle is to make the buyer more careful in purchasing. It is his duty that he should check the quality and fitness of the commodity which he needs. 40 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW V. EMPLOYMENT AND LABOR LAW Labor relations is the general term used to describe the relationship between employers and employees, as well as governance of that relationship. It refers to the micro-level interactions that take place between workers and individual managers, as well as the macro-level relations that occur between the external institutions that are tasked with governing such relations. This understanding of labor relations acknowledges the fact that there is a plurality of interests that must be taken into account in the processes and procedures of negotiation, bargaining, and dispute settlement relating to the workplace. It also recognizes that employees and employers‘ representatives are fundamental to the process of industrial relations, and that the state plays a key role in the development of labor laws, the regulation of collective bargaining, and the administration of disputes. In Cameroon, this is governed by Law N° 92/007 of August 14th 1992 governing labour relations between employees and employers as well as between employers and apprentices under their supervision. A. Trade Union A trade union, or labor union, is an organized group of workers who come together to lobby employers about conditions affecting their work. Section 4 (1) of the 1992 Labour Code states that: …Every worker and employer shall have the right to join a trade union or employers' association of his own choice in his occupation or kind of business. (2) Workers shall be protected from:  (a) any acts of anti-union discrimation in respect of their employment;  (b) any practice tending : 41 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW o - to make their employment subject to their membership or nonmembership in a trade union ; o - to cause their dismissal or other prejudice by reason of union membership or non-membership or participation in union activities. (3) Any act contrary to the provisions of this section shall be null and void. B. Collective Bargaining Collective bargaining involves the union and the employer negotiating contract terms. The outcome is known as a collective bargaining agreement. The types of terms that are usually negotiated are wages and salaries, hours, and the terms and conditions of employment. If union members dispute working conditions, unfair labor practices, or economic benefits, they have the right to participate in a cessation of work activities, known as a strike. Some collective bargaining agreements include no-strike clauses. Some strikes are illegal fpr example; • Violent strikes • Sit-down strikes • Wildcat (unauthorized) strikes • Intermittent, or partial strikes In addition to striking, union members have the right to picket. This process involves walking in front of the employer‘s premises with signs that advertise the strike and the union‘s demands. Picketing is lawful as long as it does not: • Involve violence • Prevent customers from entering the premises • Prevent non-striking workers from entering the premises • Prevent the business from receiving deliveries or pickups 42 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW C. Sexual Harassment and Sex discriminations in Labour Contracts Sexual harassment is defined as unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature. Two types of sexual harassment are recognized. Quid pro quo occurs when a manager makes a sexual demand on a worker, and this demand is perceived as a condition of employment. Actions that create a hostile work environment are another type of sexual harassment. These issues have been used in cases of discrimination based on race and religion as well as sex. Since the 1997 case Oncale v. Sundowner Offshore Services Inc., it has been established that sexual harassment undertaken by a member of one sex against a member of the same sex is actionable. In some limited circumstances, employers may also be liable for harassment of employees by non-employees, e.g., customers. The employer is liable if it does nothing to prevent and remedy harassment targeted at one of its employees. The Pregnancy Discrimination Act of 1987 expanded the definition of sex discrimination to include discrimination based on pregnancy, childbirth, or medical conditions related to the same. 43 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW VI. ANTITRUST LAW The antitrust laws proscribe unlawful mergers and business practices in general terms, leaving courts to decide which ones are illegal based on the facts of each case. ... These include plain arrangements among competing individuals or businesses to fix prices, divide markets, or rig bids. An example of behavior that antitrust laws prohibit is lowering the price in a certain geographic area in order to push out the competition. For example, a large company sells widgets for $1.00 each throughout the country. Another company goes into business and sells widgets just in California or $. 90 each. Antitrust law is the law of competition. Why then is it called ―antitrust‖? The answer is that these laws were originally established to check the abuses threatened or imposed by the immense “trusts” that emerged in the late 19th Century. A. History of Antitrust Law What if the two largest manufacturers of soft drinks, Coca Cola Co. and PepsiCo, merged? It is likely that the mega-company that resulted would dominate the soft drink industry, squeezing out all of the other smaller competitors. In the late 1800s, concern over this kind of merger, as well as other attempts by large companies to create monopolies or to control the market, led state and federal lawmakers to take steps to reduce the risks associated with this type of practice. 44 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW 1. Business Trusts During the late 1800s, the United States became concerned about the development of corporate monopolies dominating the manufacturing and mining industries. The end of the Civil War marked the beginning of large advances in industrialization. Many large companies formed, especially in the oil and steel industries, which were two industries that the country was beginning to heavily rely on. Manufacturing and distributing companies grew at a fast pace in a wide variety of industries, ranging from sugar to beef to tobacco. The problem was that the growth occurred so rapidly that supply exceeded demand. This outcome increased competition, and many companies sought to reduce the number of competitors through forms of restraint of trade such as price-fixing, monopolies, and mergers. Some of the competitors were larger and more powerful than others, and they sought to limit the competition in the market by taking steps to reduce the number of smaller companies who were trying to compete with them. Some of the larger companies banded together to create business trusts. A business trust is a trust agreement that allows businesses to maintain profits as beneficiaries, but legal ownership and management of the company’s property is maintained through the power of trustees. These trusts allowed businesses that were members of the trust to grow larger, as they cooperated with one another and shut out other competitors. 2. Unfair Business Practices Companies tried to create situations that would drive some competitors out of business while solidifying their own share of the market. This effort resulted in mergers and consolidation practices that placed the largest share of the industries under the control of just a few, thereby increasing their power. 45 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW Since the trusts were able to fix prices and could afford to take some losses, they would drive prices down until competitors were forced out of business because they could not afford to operate at the lower rates. The markets began to consolidate under just a few companies because the smaller competitors continued to go out of business. The smaller competitors could not compete with the pricing and other practices that the trusts allowed the cooperative businesses to maintain. This design restricted free trade practices for both businesses and consumers. The few businesses in the trust, in turn, became more powerful, thus prompting the government to look for measures to control the situation. The government determined that laws needed to be created to prevent this form of trade restriction. Conclusion The original purpose of antitrust legislation, i.e., to foster competition that results in lower prices, more products, and more equal distribution of wealth between producers, remains relevant today. Yet, large companies still seek advantages in trade and work to put competitors out of business. It is important to maintain unrestrained trade and prevent the few from having too much power over the many. 46 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW VII. UNFAIR TRADE PRACTICES The term ―unfair trade practice‖ describes the use of deceptive, fraudulent, or unethical methods to gain business advantage or to cause injury to a consumer. Unfair trade practices are considered unlawful under the Consumer Protection Act. The purpose of the law is to ensure that consumers have the opportunity to make informed, rational decisions about the goods and services they purchase. Unfair trade practices include false representation of a good or service, targeting vulnerable populations, false advertising, tied selling, false free prize or gift offers, false or deceptive pricing, and non-compliance with manufacturing standards. Alternative names for unfair trade practices are ―deceptive trade practices‖ or ―unfair business practices.‖ VIII. INTERNATIONAL LAW International law relates to the policies and procedures that govern relationships among nations. These are crucial for businesses for multiple reasons. First, there is not a single authoritative legislative source for global business affairs, nor a single world court responsible for interpreting international law. There is also not a global executive branch that enforces international law, which leaves global business affairs particularly vulnerable. Secondly, if a nation violates an international law and persuasive tactics fail, then the countries that were violated, or international organizations tasked with overseeing global trade, may act. Often these actions use force to correct the offenses and may include economic sanctions, severance of diplomatic relations, boycotts, or even war against the offending nation. 47 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE BUSINESS LAW The purpose of international laws is to permit countries as much authority as possible over their own international business affairs, while maximizing economic benefits of trade and working relationships with other nations. Since many countries have historically allowed governance by international agreements when conducting global business, there exists an evolving body of international laws that facilitate global trade and commerce. IX. SOVEREIGNTY National sovereignty defines a nation. While clearly defined borders and independent governments also set parameters for a nation, sovereignty is an important legal principle that allows nations to enter negotiated treaties with other countries and honor territorial boundaries. It is among the most important international law principles, thus greatly impacting international trade and commerce. Since the 1800s, most established nations allowed for absolute sovereignty among the global community. However, by the 1940s, that allowance was significantly reduced, as countries revisited sovereignty in light of globalization, transportation, and communication advances, and the rise of international organizations. Consequentially, doctrines of limited immunity were created that established guidelines for how countries may prosecute, or hold foreign nationals accountable, during international trade and commerce dealings. A doctrine of sovereign immunity states that countries are granted immunity from lawsuits in courts of other countries. END 48 Delivered by DR. PEFELA Gildas Nyugha 679680463 /Masters 1. / JIMIT HIGHER INSTITUTE/ YAOUNDE