Business Law Overview
Business law is a broad field of commercial law that applies to the rights, relations, and conduct of persons and companies engaged in commerce, merchandising, trade, and sales. It is also known as mercantile law or sales law. It refers to the legal regulations governing the conduct of persons and institutions engaged in buying and selling. Business law governs the rights, obligations, and privileges of those engaged in trade and commerce, and its primary focus is both the commercial and general business transactions .
Businesses engage in a number of legal transactions including selling products, making contracts, employing people, leasing office space, purchasing an enterprise, and hiring contractors. Business law governs all of these activities, and serves to regulate the commercial relationship between the seller and purchaser of a product—the supplier of a service and its client—the employer and employee—a debtor and creditor, etc. Business law also pertains to all elements relating to business finances, such as the safeguarding of intellectual property, liabilities and insurance, as well as the regulation of real property for business use.
Contract Law
Contract law governs the legally binding agreements that are essential to business transactions. Contracts are everywhere, and although some may be written in one dense paragraph and in a very simple sentence, they serve the same purpose: laying out the rights and obligations of each party. Contracts can involve sales of items between two businesses or the purchase of an item from a wholesaler. They can be agreements for the manufacture and sale of products. Contract law governs employment contracts and contractor agreements. It applies to commercial leases for buildings, land, and exclusivity for different services such as media.
Business contracts of particular interest include those for the sale of goods or real estate. These types of contracts differ. With the former, a contract spells out the terms of the sale. These may include the description of prospective buyers and sellers, the amount the seller will receive, the date of the sale, type of payment, and what happens if there is a breach in the contract. The sale of real estate is a more complicated process and involves far more documentation than does the sale of goods. Real estate contracts also involve the deeds. They must lay out the rights that are being conveyed as well as any other restrictions on use. They must designate the parties, specify the sale price as well as the earnest money, and cover contingencies and closing dates as well as the title.
Although the above contracts are some of the most common, it is easy to see that every type of business transaction has its own unique contract. They can range in length from single page to hundreds of pages. Confusing and complicated legal terminology aside, every type has to spell out essential contract elements which include:
A consumer transaction is an agreement in which one of the two parties is a consumer. The term is commonly used in contract law. It differs from a business transaction in that it is for the purchase of goods and services for personal use. A consumer contract is not required to have the same format as other types of contracts. Essentially, it is a receipt which lists in detail the items purchased, their price per unit, quantity, and types of warranties involved.
Employment Law
Employment law is focused on the legal definition of employer-employee relationships, as well as the rights and protections of employees in three key areas: workplace safety, protection from discrimination and harassment, and fair wages and work rights. While it is up to the employer whether to allow unionized workers or not, unions still play an important role in employment law. The law dictates what benefits employers must provide to unionized workers, when elections can be held and how they can be organized and what the union can do to organize workers through negotiations. Discrimination and harassment are defined by federal law. Certain minority classes are protected, as are pregnant workers. Employers also cannot discriminate against people with disabilities and veterans. Title VII of the Civil Rights Act of 1964 is one of the most significant federal laws regulating attorney labor law. This prohibits discrimination based on race, color, religion, sex and national origin. Other laws protecting workers include: Employment laws are constantly changing. For example, the Patient Protection and Affordable Care Act expanded coverage of pre-existing conditions that employers must provide.
Intellectual Property Law
Intellectual Property Law refers to the legal rights associated with the control and protection of tangible and intangible assets related to the ideas, inventions, and creative works of a business. For many businesses, especially those in technology and the arts, Intellectual Property can be their most valuable asset or significant source of income.
Types of Intellectual Property
There are three main types of Intellectual Property:
Intellectual Property law can be quite complicated, and it can take years for a business to build up a portfolio of Intellectual Property. It is important for California business owners to protect their IP early on, especially IP that may be difficult to protect with US laws, such as relocatable computer code and algorithms. Simply applying for trademark, copyright, or patent protection is not always enough. For example, while using a non-disclosure agreement (NDA) is often good enough, it may not be enough if you are sharing detailed code or algorithms because the act of telling a programmer generally means they must copy something to use it. Therefore, any restriction on copying may be rendered ineffective.
Corporate Law
As discussed in our introduction, corporate law assists with business incorporations and the structure of a business. They provide guidance to businesses as to corporate governance; essentially the way in which a business conducts themselves internally.
In following along with our incorporation example, the Corporations Act 2001 (Cth) (Act) sets out certain requirements that must be met for the business to be incorporated, including:
The businesses incorporation step is only the first of many steps that are required to commence the journey of a business operating, and corporate law assists businesses in implementing these. The Act sets out the process for developing governing rules including director duties, shareholder rights, appointment and removal of officers, financial reporting and audits. Corporate services will ensure that records and registrations are maintained, in accordance with the rules set out in the Act.
A breach of one of these rules or regulations has implications in both the civil and criminal sense. Breaching one of the director duties, for example, can result in prosecutions, criminal records and/or a term of imprisonment for the most serious offences (we will explore these in our Duty-Of-Care section).
Corporate law assists by setting out the penalties and restrictions that apply to an organisation that breaches the regulations set out in the Act. This means it is essential for corporate services to maintain accurate and consistent records to avoid penalties. It is important for shareholders that collaborate on running the business to understand the rules that apply to them, as well as understand the dispute resolution process and what they need to do if a dispute arises.
Taxation Law
The legal concept of tax law describes the various codes and laws that the government has in place to assess and collect various forms of tax on both individuals and businesses. Tax law can include corporate tax rules, sales tax rules, income tax rules, real estate tax rules, exemptions, credits, and any other tax-related issues that may affect your business or investments.
Depending on your state, there could be any number of taxes that could be applied to your business and your property. For cities, municipalities, and towns, there are typically property taxes, and for businesses there is always a business license that is needed to operate.
Tax law is a broad area that is constantly being rewritten. There are many ways in which the government will assess your actual tax bill. The first form of taxation is indirect taxation. Indirect taxes are those that are spent by consumers. An example of an indirect tax would be a sales tax that is placed on top of every item you purchase. The seller requires the consumer to pay a set sales tax on everything the consumer purchases. That sales tax is then collected by the seller who then passes on the sales tax amount to the government. This is a means by which the government can ensure a collection from the consumer level without having to directly tax the consumer.
Indirect taxation serves another purpose , as it enables the government to tax private businesses without needing to tax the businesses directly. This essentially allows for a means by which tax can be collected without making a direct assessment against the business.
Tax law is considered an important part of the law because every company and business is subject to the different taxes that are available within your state. There are also various rules and regulations that are nuanced to each individual state that make hiring a qualified business attorney a must for every business owner. It is critical that any business operate under all laws and provisions concerning taxation to avoid any issues.
Securities Law
Securities Law governs financial markets in relation to investment instruments like stocks, bonds and derivatives. Securities law in the United States is divided into federal laws, such as the Securities Act and Securities Exchange Act, and state laws known as blue sky laws. Both federal and state securities laws require companies raising capital from the investing public to make full and fair disclosures.
The Federal securities laws give the SEC broad power to regulate the issuance and trading of securities. The SEC is authorized to bring civil enforcement actions against individuals and companies that commit fraud in the offer or sale of securities. Civil enforcement actions may seek penalties and/or injunctions, which prevent a person from further violations of federal securities laws.
If an investor suffers a loss because of illegal activity, the investor may file a private lawsuit against the violator to be compensated for their loss. Securities class actions are used to enforce Rule 10b-5, and are filed whenever investors suffer losses caused by securities fraud on a large scale.
Antitrust Law
Antitrust law is designed to promote fair competition among businesses and protect consumers from the potential abuse of market power. This body of law seeks to maintain a competitive marketplace, prevent monopolies and ensure that all companies have a chance to compete for customers.
There are several core concepts related to antitrust law, including:
• Price fixing: When competitors agree to set prices at a certain level, thereby stifling competition.
• Bid rigging: Manipulating a bidding process to seal a contract for specific parties.
• Market allocation: Dividing up the market among competitors according to territory or jurisdiction.
• Group boycotts: When two or more businesses work together to refuse to do business with a particular company.
• Tying: Forcing a customer to buy a product as a condition of buying another product.
Examples of antitrust law violations can be found in almost any industry. In most cases, examples of antitrust law violations involve competitors colluding to raise prices for goods or services, with little regard for the impact this would have on consumers or on other competitors not involved in the collusion.
For example, a group of healthcare providers could collude to restrict the supply of certain medications, raising the price for consumers and forcing up profits for the companies involved in the scheme.
Environmental Law
Environmental law encompasses a vast array of regulations that dictate how businesses should use the environment – from the natural resources that sustain them to the waste they generate as the byproduct of their activities. Broadly speaking, businesses are subject to the environmental and natural resource law when those laws regulate the company’s acquisition of resources, allocation of resources, and/or its waste disposal.
Waste disposal practices can have a significant impact on the environment. Therefore, environmental regulations and business law often overlap. Environmental law, for example, often presents a company with a series of compliance obligations and limitations on what practices it may use. For instance, many environmental regulations limit the extent to which a business can discharge pollutants; dictating the type of permit the company must secure to discharge water into a body or ground water, and/or which materials the company must monitor and monitor, among other things.
Environmental law is also impacted by federal regulations put in place by several US agencies, including the Clean Air Act; Clean Water Act; Comprehensive Environmental Response, Compensation, and Liability Act (CERCLA); Resource Conservation and Recovery Act (RCRA); Toxic Substances Control Act (TSCA); National Environmental Policy Act (NEPA); Endangered Species Act; the National Historic Preservation Act; and the Occupational Safety and Health Act (OSHA).
Businesses must also consider each individual state law. They must track any number of state regulations and ordinances, such as those stating the extent to which emissions must be reduced; the extent to which the business can drill or cut into the nearby ground; and/or where the business is allowed to drill, among other things.
Avoiding compliance with environmental law can have serious consequences. A business that violates environmental law can face fines and sanctions, including compliance orders, penalties, injunctions, and/or punitive action taken by government agencies, like the US EPA.
Consumer Protection Law
Consumer Protection Law encompasses a range of statutes aimed at protecting consumers’ rights and preventing extensive damages to their financial health. It is one of the many branches of law designed to protect individuals from the company and corporation.
Examples of consumer protection law include requirements that products carry warnings or instructions, limitations on product liability, and minimum standards for food and drugs. Other aspects of consumer protection law provide redress against unfair and deceptive marketing practices.
The Federal Trade Commission (FTC) is a primary enforcer of consumer protection law , though each state has its own consumer protection statutes and enforcement authorities as well. Under these federal and state laws, consumers have the right to receive accurate information about the products and services they are purchasing. False advertising, incomplete or misleading information, stolen identities, and unburdened credit are all areas that fall under consumer protection law.
The FTC defines deceptive advertising as follows:
A material representation or omission that is likely to mislead a consumer acting reasonably under the circumstances to the consumer’s detriment.
If you feel that a company has acted unfairly and you want to file a complaint, contact your state Attorney General or visit ftc.gov.