Understanding Legal Rules: Custom, Obligations, and Capacity, Lecture notes of Law

Download Understanding Legal Rules: Custom, Obligations, and Capacity and more Lecture notes Law in PDF only on Docsity! Business Administration & Agribusiness 1 UNIT 1. LEGAL SYSTEM, BASIC LEGAL TERMS 1. Law as social rule custom (habit): during a longer period the members of the society solve the same problems (conflicts) on the same way rule: sample of a behaviour, and in case of breech, it becomes a sanction legal rule (norm, law, act): a social rule, which can be forced by the state forcing the legal rule: the application of the sanction is obligatory, and the state has the specific organs to perform it types of legal rules (normativity):  obligatory: if somebody does NOT act like the sample in the rule, becomes sanction  forbidden: if somebody acts like the sample in the rule, becomes sanction  permissible: if somebody does NOT act like the sample in the rule, becomes NO sanction validity: the legislation process was perfect efficiency (effectiveness): the rule is applicable (period, territory, person, object) 2. Content and function of law rationality the law is the product of the society, and its function is to restore the rational relation among the people moral (ethics) the moral rules, which are generally obligatory for the members of the society, are the minimum of the legal rules individual freedom the law has to ensure the individual freedom for the people opposit to the state economic power the law is the will of the economic governing classes religion lots of secular rules come from the religious rules, which became custom in the recent countries 3. Categories of rules in the legal system public law  relation between state and citizen  the state is dominant to citizen  the citizen is NOT able to influence the content of the legal relations  e.g. criminal law, international law, administrative law  Business Administration & Agribusiness 2 private law  relation between citizens / state and citizen  state and citizen are equal  the citizen is able to influence the content of the legal relations  e.g. contractual law 4. Sources of law (in the continental legal system) formal (primary) sources  predicted written law: acts, decrees, orders etc.  complete, coherent, evident  hierarchy among the types of rules: the rule placed under can not be opposite to the rules placed above  non-formal (secundary) sources  not (able to be) predicted in writing: equity, rationality, generally contemplated behaviour etc.  help to interpret the written law in case of lack, collision or unintelligible text  applicable only if a court can rely on it passing a judgement/verdict/sentence 5. Legislation (lawmaking), jurisdiction (application of the law) legislation: decision in specified form of the entitled organs of the state which classify behaviours obligatory, forbidden or permissible, and which are publicated in the given official journal jurisdiction:  enforcing the legal rules in the society  finding the applicable legal rule (sample of behaviour) for the real situation (actual behaviour) 6. Legal relation legal relation: legally regulated social relation relationship between legal and social relations:  selective: law regulates only the most important elements of the social relation (legal rules come after the social relation);  constitutive: the law (state) creates a new social relation making unprecedented legal rules  elements of legal relations:  subject: person who has capability to own specified rights and obligations in the given legal relation  object: the actual behaviour in the legal relation, and the matter (res) which is involved with the behaviour  content: the aggregate of rights and obligations in the given legal relation of the subject (person) Business Administration & Agribusiness 5 g. any breach of the right to facial likeness and recorded voice. 2. Protection of rights relating to personality (1) Everyone is entitled to freely practice his personality rights within the framework of the law and within the rights of others, and to not be impeded in exercising such right by others. (2) Human dignity and the related personality rights must be respected by all. Personality rights are protected under law. (3) Personality rights shall not be considered violated by any conduct if the person affected has given prior consent thereto. Business Administration & Agribusiness 6 UNIT 3. RIGHTS IN REM (OWNERSHIP RIGHTS) I. THE THING 1. The thing and similar legal objects (1) There may be ownership of all things of a tangible nature which are capable of appropriation. (2) The provisions pertaining to things shall also apply to money and securities, including natural resources that can be utilized as capital goods. (3) The provisions pertaining to things shall apply to animals in accordance with the statutory provisions laying down derogations consistent with their natural characteristics. 2. Components Ownership extends to everything that is permanently enjoined with a thing in such a way that disjunction would cause the thing or its disjoined part to be destroyed or would significantly reduce its value or usefulness. 3. Accessories When in doubt, ownership shall also extend to parts that are not components but are usually necessary or beneficial for the proper use or maintenance of a thing. II. POSSESSION 1. Possessor Possessor is the person in possession of a thing as his own, or who keeps possession of a thing under temporary right. 2. Acquisition of possession The person who actually controls a thing is considered to have acquired possession of that thing. 3. Transfer of possession The transfer of possession shall materialize upon the conveyance of physical control of the thing on the basis of an agreement therefor. Transfers of possession shall be governed by the provisions on contracting and on the validity of contracts. 4. Protection of possession on the basis of actual possessory status (1) The possessor shall be entitled to file a request within one year with the notary for having the original state of possession reestablished or for the discontinuance of restraint. (2) The notary shall order the reestablishment of the original state of possession and prohibit the trespasser from continuing in this conduct, unless it is evident that the person who has requested protection is not entitled to possession or has been obliged to tolerate such restraint. 5. Loss of possession (1) The possessor shall lose possession if definitively abandoning physical possession of the thing, or if possession of the thing is acquired by others. Business Administration & Agribusiness 7 (2) Possession shall not cease if the possessor is unable to maintain physical possession of the thing temporarily. 6. Status of wrongful possessor, obligation to surrender possession Any person who wrongfully holds a thing in his possession shall be required to surrender the thing to its rightful possessor. III. OWNERSHIP RIGHTS 1. Ownership (1) Ownership means the rights of an owner to lawfully exercise the full and exclusive right to control property within the framework of law and without prejudice to the rights of others. (2) The owner shall have the right of/to: a. possession, b. use, c. beneficial enjoyment (collection of proceeds), d. dispose over property. 2. Protection of ownership rights (1) The owner shall have the right to avert all forms of unlawful intrusions. (2) Ownership claims shall not lapse. (3) The owner may demand the termination of illegal intrusions or influences and to demand from the wrongful possessor to surrender the thing. 3. Acquisition of ownership 3.1. The transfer (1) Ownership by transfer may be acquired only from the owner of the thing. (2) For the acquisition of ownership of movable property by way of transfer, a contract for transfer or other legal title is required and, in that context, possession of the thing shall be conveyed. (3) For the acquisition of title to real estate property by way of transfer, a contract for transfer or other legal title is required and, in that context, the change of owners shall be registered in the real estate register. 3.2. Acquisition of ownership from a person other than the owner Where ownership is acquired in good faith, in the course of trade for consideration, the transferee shall acquire ownership by way of transfer even if the transferor was not the owner. 3.3. Acquisition of ownership by means of administrative decision or official auction Any person who has acquired a thing in good faith by means of official resolution or official auction shall gain ownership irrespective of who the previous owner was. 3.4. Expropriation Ownership of real estate property may be acquired under exceptional circumstances for public use against immediate, full and unconditional compensation. Business Administration & Agribusiness 10 A legal statement is a unilateral act intended to have legal effect. 2.2. Forms of legal statements A legal statement can be made orally, in writing or by implicit conduct. 2.3. Interpretation of legal statements In the event of a dispute, the parties shall, in light of the presumed intent of the person issuing the legal statement and the circumstances of the case, construe statements in accordance with the generally accepted meaning of the words. 4. Representation Unless otherwise provided for in law, a legal statement can be made through another person as well. A legal statement made by a representative shall entitle and bind the person represented. 5. Performance of service A service shall be performed according to the contents of the obligation. II. CONTRACTS 1. Definition of contract A contract is concluded upon the mutual and congruent expression of the parties’ agreement intended to give rise to obligations to perform services and to entitlements to demand services. 2. Freedom of contract (1) The parties are free to conclude a contract and to choose the other party. (2) The parties are free to determine the contents of the contract. The parties may depart from the provisions relating to their rights and obligations with mutual consent, unless prohibited by law. 3. Presumption of reciprocity Unless the contract or the applicable circumstances expressly indicate otherwise, a consideration is due for services set forth in the contract. 4. Conclusion and contents of contracts Contracts are concluded upon the mutual and congruent expression of the parties’ intent. 5. Process of making contracts 5.1. Binding period of an offer Business Administration & Agribusiness 11 (1) Any person who makes a legal statement clearly indicating his intention to enter into a contract, showing also the relevant issues, shall be bound by his statement. The offeror may specify the period for his offer to remain binding. (2) The binding period shall commence when the offer takes effect. 5.2. Acceptance of an offer Any form of statement by the offeree is an acceptance if it indicates assent to the offer. 6. Preliminary contract If the parties agree to enter into a contract at a later date, and they define the material terms of that contract, the court shall have powers to establish the contract under such terms and conditions at the request of either party. 7. Standard contract terms Standard contract terms means contract terms which have been unilaterally drafted in advance by one of the parties for several transactions involving different parties, and which have not been individually negotiated by the parties. 8. Invalidity 8.1. Nullity (errors in contract statements) (1) Annulled contracts shall be considered null and void as from their conclusion. No special procedure is required for the establishment of invalidity; the court observes the nullity of the contract of its own motion. (2) Causes of nullity: a. Sham contracts b. Illegal contracts c. Immoral contracts d. Usurious contracts e. Impossible performance. 8.2. Avoidance (defects in consent) (1) A contract which may be avoided shall, in consequence of being avoided, become invalid as of the date on which it was concluded. (2) The aggrieved party and persons with a lawful interest in the avoidance of a contract shall be entitled to do so. (3) Avoidance may be effected by notice to the other party, or by legal action brought in court. (4) Causes of avoidance: a. Mistake b. Misrepresentation c. Threat d. Gross disparity in value 8.3. Applying the legal consequences of invalidity Business Administration & Agribusiness 12 No right may be established and performance may not be demanded on the basis of an invalid contract. Other legal effects of invalidity shall be invoked by the court at the party’s request to that effect, within the framework of prescription and adverse possession. 9. Non-performance 9.1. Definition of non-performance Non-performance of an obligation is any failure to perform that obligation. 9.2. Right of requiring performance In the event of non-performance, the aggrieved party shall be entitled to require performance of the obligation. 9.3. Obligor’s delay (1) An obligor shall be in delay if he does not perform his obligation when due. (2) In the event of the obligor’s delay, the obligee shall be entitled to require performance or, if performance no longer serves his interest, he shall be entitled to withdraw from the contract. 9.4. Warranty rights (1) On the basis of a contract in which the parties owe mutual services to one another, the obligor shall be liable to provide warranty for lack of conformity. (2) On the basis of warranty rights, the obligee shall have the option: a. to choose either repair or replacement; or b. to ask for a commensurate reduction in the consideration, repair the defect himself or have it repaired at the obligor’s expense, or to withdraw from the contract 10. Confirmation of Contract 10.1. Earnest money (1) A sum of cash deposited with the other party shall be construed as earnest money if provided to evidence commitment and if this intention is expressly indicated in the contract. (2) The person responsible for the failure of performance shall forfeit the earnest money that he has given, or he shall refund twice the amount of the earnest money he has received. 10.2. Contractual penalty (1) The obligor may pledge to pay a certain sum of money in case he fails to perform the contract for reasons attributable to him. (2) The obligor shall be relieved from the obligation of payment of contractual penalty, if his non- performance is excused. 10.3. Forfeiture clause Parties shall be entitled to agree in writing that the party responsible for any non-performance shall forfeit a right to which he would be entitled on the basis of the contract. Business Administration & Agribusiness 15 Lease agreements: the lessor undertakes to convey temporary use of a thing, and the lessee undertakes to accept the thing and pay the lease charge. Leasehold contracts: the lessee shall be entitled to use temporarily an economically viable thing or to exercise an economically viable right, and to collect the proceeds thereof, and he shall be obliged to pay appropriate rent therefor. Lending arrangements: the lender undertakes to make available for use, for a limited period of time and not for direct or indirect economic or commercial advantage, a specific thing, and the borrower shall accept the thing. 13.5. Deposit contracts Under a deposit contract the depositary undertakes to safeguard the movable property to which the contract pertains, and to return it when the contract is terminated, and the depositor undertakes to pay the fee agreed upon. 13.6. Distribution contract Under a distribution contract the supplier undertakes to sell specific movable property (hereinafter referred to as „product”) to the distributor, and the distributor undertakes to purchase the product from the supplier and to sell it in his own name and on his own behalf. 13.7. License (franchise) agreements Under a license agreement the franchisor undertakes to grant rights of use, utilization and exploitation rights relating to assets protected by copyright or industrial property rights, including know-how, and the franchisee undertakes to produce and supply goods and/or services through the use, utilization or exploitation of such assets protected by copyright or industrial property rights, including know-how, and to pay the fee agreed upon. 13.8. Credit and account agreements a. Credit agreements: the creditor undertakes to ensure the availability of a specific credit limit, and to conclude a loan agreement, contract of suretyship, guarantee contract or conduct other loan operations up to the said credit limit, and the debtor undertakes to pay the fee agreed upon. b. Loan agreements: the creditor undertakes to make available a specific sum of money, and the debtor undertakes to repay that sum to the creditor at a later date with interest. c. Deposit account contracts: the deposit holder is entitled to deposit a specific amount of money to the bank, and the bank undertakes to accept the sum of money offered by the deposit holder and to repay the same amount at a later date with interest. d. Current account contracts: the parties shall assume an obligation to record and settle their enforceable monetary claims arising from a specific relationship in a consolidated account. e. Payment account contracts: the account keeper undertakes to open a current account for the account holder for handling his financial transactions („payment account”), and the account holder undertakes to pay the fee agreed upon. f. Factoring contracts: the factor undertakes to pay a certain amount of money, and the debtor undertakes to assign his claim from a third party to the factor; if the obligor fails to satisfy the assigned claim at the time when due, the debtor shall be liable to repay the funds received with interest, and the factor shall be liable to re-assign the claim. Business Administration & Agribusiness 16 g. Financial leasing agreements: the lessor undertakes to make available for use, for a limited period of time a thing or a right he owns (hereinafter referred to as „leased asset”), and the lessee undertakes to accept the leased asset and to make lease payments if the lessee is given the right under the agreement to use the leased asset up to or surpassing its economic lifetime, or - if use is stipulated for a shorter period - to acquire the leased asset at the end of the term of the contract without any consideration or at a price considerably lower than the market value prevailing at the time of conclusion of the contract, or the total sum of lease payments reaches or exceeds the leased asset’s market value prevailing at the time of conclusion of the contract. 13.9. Guarantee agreements a. Contracts of suretyship: the surety undertakes the obligation of performance to the creditor in the event of nonperformance by the principal debtor. b. Guarantee contracts: the guarantee contract, and the statement of guarantee means a guarantor’s commitment under which payment is to be made to the creditor subject to the conditions laid down in the statement. 13.10. Insurance contracts a. Insurance contract: the insurer undertakes to provide coverage for the risk specified in the contract, and to provide settlement or benefits for loss arising upon the occurrence of a specific future event after the starting date of risk coverage, and the insured person undertakes to pay an insurance premium agreed upon. b. Special insurance contracts:  Indemnity Insurance  Liability insurance  Life insurance  Accident insurance  Health Insurance 13.11. Maintenance and life-annuity contracts a. Maintenance agreement: the person owing maintenance undertakes to provide care to the person to whom maintenance is owed and to ensure his sufficient living conditions, and the maintenance creditor undertakes to provide compensation. b. Life-annuity contracts: the annuity provider undertakes to provide a specific sum of money or other fungible property to the annuitant periodically, and the annuitant undertakes to provide compensation. III. NON-CONTRACTUAL LIABILITY FOR DAMAGES 1. General prohibition of torts All torts are prohibited by law. 2. General provisions on liability (1) Any person who causes damage to another person wrongfully shall be liable for such damage. (2) The tortfeasor shall be relieved of liability if able to prove that his conduct was not actionable. Business Administration & Agribusiness 17 3. Liability for Highly Dangerous Activities (Hazardous Operations) (1) A person who pursues an activity that is considered highly dangerous shall be liable for any damage caused thereby. (2) Where such person is able to prove that the damage occurred due to an unavoidable cause that falls beyond the realm of highly dangerous activities, he shall be relieved from liability. 4. Specific cases of liability 4.1. Liability for the Acts of Another Person a. Liability for the acts of employees and members of legal persons: If an employee causes damage to a third party in connection with his employment, liability in relation to the injured person lies with the employer. b. Liability for the actions of executive officers: If an executive officer of a legal person causes damage to a third party in connection with his office, liability in relation to the injured person lies with the executive officer and the legal person jointly and severally. c. Liability for the actions of nonpunishable persons: Any person whose discretionary ability is limited to an extent whereby such person is unable to comprehend the consequences of his actions leading to the damage shall not be held liable for the damage he has caused. 4.2. Liability for damage caused by defective products Liability for damage caused by defective products lies with the manufacturer of such products. 4.3. Liability for the actions of administrative authorities Liability for damages caused within the scope of administrative jurisdiction shall be established only if the damage results from actions or omissions in the exercise of public authority, and if the damage cannot be abated by common remedies or in proceedings for the judicial review of an administrative decision. 4.4. Building owner’s liability The owner of a building shall be liable for damage caused to other persons by parts of the building that have fallen off or by any other deficiency in the building, unless the owner is able to prove that the regulations pertaining to construction and maintenance have not been violated and that he has not acted wrongfully in the course of construction and maintenance with regard to the prevention of damage. 4.5. Liability for Damage Caused by Animals (1) Any person who keeps animals shall be liable for damages caused by the animals to other persons, unless he is able to prove that he has not acted wrongfully in the keeping of animals. (2) The keeper of a dangerous animal shall be held liable in accordance with the provisions on liability for hazardous operations. Business Administration & Agribusiness 20 3.5. Statutory auditor (1) The statutory auditor appointed by the supreme body shall be responsible for carrying out the audits of accounting documents according to the relevant regulations, and to provide an independent audit report to determine as to whether the annual account of the business association is in conformity with legal requirements, and whether it provides a true and fair view of the company’s assets and liabilities, financial position and profit or loss. (2) The statutory auditor may be an individual auditor or an audit firm shown in the register of auditors. Where auditing services are provided by an audit firm, this audit firm shall be required to designate the person who will be personally responsible for carrying out the audits. (3) If the company enlists the services of a statutory auditor to audit the company’s books, the statutory auditor a. shall have access to the documents, accounting records and books of the company, and b. shall be entitled to request information from executive officers, from the members of the supervisory board and from the company’s employees, and c. to inspect the company’s payment account, cash accounts, securities portfolio, inventories and contracts. 4. Legal representation of companies (1) Companies are represented by their executive officers and other duly authorized employees in writing. (2) The executive officer shall exercise his power of representation independently. 5. Judicial oversight of legal persons (1) Judicial oversight of legal persons shall in general be carried out by the competent court of registry. Judicial oversight shall not apply to cases that are normally subject to other court or administrative proceedings. (2) The scope of judicial oversight shall not cover the business decisions of legal persons in terms of economic feasibility and efficiency. (2) If the measures taken to restore the legality of operations prove ineffective, the competent court of registry shall declare the legal person terminated. 6. Termination (dissolution) 6.1. Termination with universal succession (1) Transformation: in the case of transformation of a company to another type of company, the company undergoing transformation will be dissolved, and its rights and responsibilities shall be transferred to the company established by way of the transformation, as the general legal successor. (2) Merger: A company may combine with other companies as one legal entity by way of merger or acquisition. In the case of merger, the merging companies are terminated and a new company is established by way of universal succession. In the case of merger by acquisition, the acquired Business Administration & Agribusiness 21 company is terminated and all its assets and liabilities are transferred to the acquiring company by way of universal succession. (3) Demerger: Demerger means when a company is split into two or more companies by way of division or separation. Division means the operation whereby, after being terminated, a company transfers all its assets to more than one companies. In the case of separation the company shall continue to operate in its previous form and part of its assets are transferred to the successor company established by the separation. 6.2. Termination of legal persons without succession A company shall terminate without succession if: a. it was established for a fixed duration, and such period of time expires; b. it was subject to termination upon a certain condition, when this condition is met; c. declared terminated by its members or founders; or d. terminated by a body so authorized; provided in all cases that the company is cancelled from the registry following completion of the appropriate procedure for the settlement of the company’s financial affairs. II. SOLE COMPANY TYPES 1. Companies (capital collecting companies) 1.1. Basic rules of companies The companies are legal persons, obliged to enter into the firm registry, their legal personality starts with registration, and its memorandum of association (deed of incorporation, company contract etc.) has to contain obligatory elements. 1.2. Basic types of companies (1) Company limited by shares: business associations founded with a share capital consisting of shares of a pre-determined number and nominal value, where the obligation of shareholders to the limited company extends to the provision of funds covering the nominal value or the accounting par value of shares. Unless otherwise provided for in Act, shareholders shall not be held liable for the limited company’s obligations. (2) Company limited by guarantee: in case of termiation without succession of the company the members/directors are held liable for the debts and other obligations left behind. (3) Company limited by guarantee with share capital: mixture of the company limited bay shares and guarantee, where in case of termiation without succession of the company the members/directors are held liable for the debts and other obligations left behind, and the initial capital of the company is divided into shares. 1.5. Forms of operation of companies (1) Public limited company (PLC): can be company limited by shares or guarantee, and is entitled to issue shares and/or bonds. Business Administration & Agribusiness 22 (2) Private limited company, Ltd.: can be any form of companies, but is not entitled to issue shares and/or bonds. 1.4. Unlimited company If the founders/members of the company undertake unlimited liability for debts and losses of the company, the company is obliged to use the unlimited company in its name. 2. Partnerships 2.1. Basic rules of partnerships Partnerships has no legal personality, based on partnership contract as a certain obligation, no obligation to enter into the firm registry, but has the right to be subject to ownerhip, judicial or other official procedures, and are taxpayers. 2.2. Basic types of partnerships (1) General partnership: the members of the partnership agree to make available to the partnership the capital contribution necessary for its activities, and to undertake joint and several liability for the partnership’s obligations not covered by the assets of the partnership. (2) Limited partnership: the members of the partnership agree to make available to the partnership the capital contribution necessary for its activities, and at least one of the partners („general partner”) undertake joint and several liability together with the other general partners for the partnership’s obligations not covered by the assets of the partnership, while at least one other partner („limited partner”) is not liable for the obligations of the partnership, unless Act provides otherwise.