Essays From Business Law

8/8/2019 Essays From Business Law

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Essays from business law

1. Sources of obligationsAn obligation can be defined as a relationship between at least two persons, where one personis bound to perform a given action to the other person, while the second person has a right to

require the first person to do it. The obligation action can consist of giving, acting, non-acting,

or bearing. Legal facts and conditions that form the basis of obligations are sources of

obligations. The most frequent source of obligations includes legal transactions in general,

particularly contracts. A contract includes expressions of will by two or more persons, which

are bound to perform the contracted actions. Unilateral civil-law transactions are those

wherein the obligation as a bilateral legal relation arises by an expression of will by one

person only. This include issuing securities and public promise of reward. Causing damage or

civil offence is a source of obligation, in the way that the person that caused the damage to

another person through an unlawful action is bound to indemnify the latter for the damage,

unless he proves that the damage occured with no fault of his. Acquisition without

foundations as a source of obligation creates the obligation to return what was received

without foundations. If someone takes an action in good faith in another person's interest and

without the latter's authorization it is called management without mandate.

2. Classification of companiesCompany law is an independent legal discipline which studies the legal regime of companies,

both the general legal regime and the legal regime of each individual company. The basic goal

of forming companies is making profit, while in the case of other types of associations thegoal is the satisfaction of certain interests. Companies are generally classified as corporations

and partnerships. Further corporations are classified as joint-stock company and limited-

liability company, while partnerships are classifiedas general partnership, limited partnership

and limited-stock partnership. Corporations are a special form of business organization, where

interests of capital dominate over the personal features of members. It can be established by

one or more person, founders can include legal or natural local and foreign persons. Members

of corporations are not liable for the company's obligations with their property, but their rights

to participate in the management and distribution of profit are proportional to their shares. The

minimum amount of equity for establishing a joint-stock company is 50 000, where the

minimum amount for establishing a limited-liability company is 2 000. The company isestablished by means of a contract on the establishment, memorandum of association, but also

has its statute. The basic difference between corporations and partnerships is in the regimen of

liability for obligations in legal and business operations. The characteristic of partnership is

that they have no less than two members, wherein at least one is liable for the company's

obligations with his entire property. The law does not prescribe the minimum equity capital

for their establishment and operations. The partnership is also established through

memorandum of association.


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3. Liability of corporationsCompany liability implies a few legal and economic aspects. In order to establish a company,

the act of registration itself has to be preceded by taking a number of obligations necessary for

a company to be established. These can include obtaining loans, acquisition of required

equipment, signing contracts... All companies, regardless of their type, are liable with the

company's entire property. Founders of joint-stock companies and founders of limited-

liability companies are liable up to the value of their shares. When assets decrease below a

minimum defined by law, liquidation proceedings are ordered. When founding a company, its

future members freely choose whether they will establish a company, which type of company

they will select, and which activity they will engage in. They also freely decide upon the

company management, within limits set by law. Members distribute profit and cover losses

proportionally to their shares, but are also free to liquidate the company if they don't want to

be involved in a commercial activity any longer.

4. Merger by formation of a new companyA merger by formation of a new company includes the association of two or more companies

of the same or different organization forms into a single new company. This is a form of

universal succession in the sense of taking over the rights and obligations of transferor

companies. The decision on this status change is made at the shareholders' general meeting in

the case of corporations, or by all the company members in the case of partnership. The

decision must be made by all the companies that merge, and must be the same; otherwise it

could not be the subject of implementation. The decision must result from the freely

expressed will by the owners or organs of companies that merge. Every form of status change

must be registered with the court register of companies. In the case of merger between anopen-joint stock company with another company, the result of the merger has to be a new

open joint-stock company. Regardless of whether it is a case of status change of merger by

formation of a new company, merger by absorption or division, just as with the change in

company form, a so-called reorganization plan has to be made, which includes data on

participating companies, ownership rights of shareholders, description, valuation and

distribution of transferor companis' assets and liabilities, and so on.

5. Systems of establishing companiesSystems of establishing companies are: normative system, system of law, system of

concessions, system of applications, and licensing system. The complexity of organizing

separate forms of companies leads to the implementation of the combination of two or more

systems of establishing companies in such individual forms. The normative system is

considered dominant both in our legal system and in others. The essence of this system is that

a law prescribes requirements for company establishment. Establishment of a company is

completed with the act of its registration. All the potential founders are equal. The normative


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system prevails because it is applicable to all forms of company organization. System of law

implies that a company is established by means of a special law or another administrative

document, and are registered as one of the two forms of corporations. The system of

concessions originated in the Middle Ages, and was associated with granting permits to

conduct, typically, trading activities. This is a combination of the normative regime and the

concession regime of company establishment. In this system the company establishment isalso completed by registration with the authorized registration court. The licensing system

applies to special forms of organization, when a special law of the lex specialis natureprovides

the basis for establishing these companies. These are licenses granted by state regulatory

organs. The procedure of its establishment is also completed by registration with the

authorized registration court. The legal regime of application is applied in cases when starting

a given company requires an application. The application is submitted to the authorized state

organ. This regime is necessary and is usually present in recording foreign investments.

6. C

ompany activity

Companies have their identifiers defined by law. The essential reason for the existence of

company identifiers is their distinction in legal and business transactions. The basic

mandatory company identifiers are: company name, company activity, and registered office.

There are other identifiers as well, like registration number, tax number, custom number,

banking account and etc. Company activity is the economic activity conducted by a company.

Activity is frequently called the field of business. Activity itself implies a set of a few

activities registered by a company in the court register. In practice, companies register a

greater number of activities, typically those they assume could be their field of business.

Companies must register their activity into the court register. A company can thus be engaged

only in the activity for which it satisfies special requirements according to a decision by thecompetent state administrative organ.

7. Power of attorneyPower of attorney is a legal relationship whereby a given person, named principal, authorizes

another person, named attorney-in-fact, to act as his agent. In our legal system, power of

attorney remains defined through norms listed in the LoO. The agent and attorney-in-fact act

on behalf and on account of the principal. Agency finds its legal grounds in the law, while

power of attorney finds its legal grounds in the written power of attorney, the legal groundsfor which are again found in legal document. The second difference is that agency is

exercised by a person who has a legal employment status with the company, while in the case

ofPOA these are mostly persons who do not have such a status. The legal transaction ofPOA

requires a legally defined written form. It can be time limited or unlimited, and territorially

limited or unlimited. The scope ofPOA is defined by the principal's will. Other tasks beyond

the scope of regular operations require obtaining a special POA. The LoO provides for a

special POA in the following cases: taking up liability on a bill, signing a guarantee contract,


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signing a settlement contract, signing a contract on a selected court... The POA should be

restricted or revoked in the same way in which it was granted, in written form.

8. Data for the court registerRegistration is obligatory for all the business entities that appear in legal and business

operations, as well as entities with so called public authority, such as school establishments,

state institutes, agencies, etc. Entry into the court register can be considered as the first

instance of a company acquiring a legal and business capacity. The registration court can

require only the information determined by the law. The data are classified as either general

or specific. The general data include: company name and seat, object of entry, name and seat

of the subject of entry, abbreviated name of firm, taxation and identification number, form of

the subject of entry, full name and position of the agent, extent of authorities of the agent,

amount of agreed equity, percentage of participation of each individual founder... Special data

on the other side include: branches or the business units of the subject of entry, ties to a

subsidiary, the merger between two or more subjects of entry, changes in the form of subject

entry, cessation of the subject of entry... For the existence of general and special data on

registration in the court register to be proven, they must be documented appropriately. These

documents are also called registration documents. S pecial documents are necessary for

registering a change in data significant for legal operations. This is extremely important due to

the protection of creditors' or other third parties' interest. As a separate obligation in

registering the necessary data, the LoC provides for the registration of identification

information on members, contributions and liability for the obligations of the company with

regard to interest and shares in the company. Also the LoO prescribes the obligation for entry

into the court register at the start of a company's liquidation or bankruptcy proceeding,

including the full name and residence address of the trustee in liquidation or bankruptcy, andthe date of termination or completion of the procedure.

9. Bankruptcy as a form of business cessationBusiness cessation is an unavoidable occurence in a company's work and operations. There is

the fundamental LoC, regulations on both company establishment and operations and the

major reasons and ways in which companies cease to exist. Besides bankruptcy and

liquidation, the forms of cessation also include status changes, which are forms of cessation in

a conditional sense. Persons affected by the opening of the proceedings; creditors inbankruptcy, must declare their opinion on the reorganization plan. If the reorganization plan is

not presented or approved by vote, the bankruptcy proceedings are closed by sales; converting

the debtor's assets into money in order to pay creditors. In cases when bankruptcy proceedings

rules are applied pursuant to the regulation, three kinds of proceedings are possible. These

are: main proceeding, secondary proceeding, and territorial proceeding. The main proceeding

itself can be opened in an EU member state where the debtor has its centre of business

interests. The centre of business interests can be defined as a centre where the company's


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office is registered, or as a location where the company's management is seated. Secondary

proceedings can be opened in any territory where the debtor has a registered branch.

Territorial proceedings are those that are opened toward a branch prior to the opening of the

main bankruptcy proceedings.

10.ArbitrationB&H law enables all methods of extra-judicial settlement of business law disputes, including

amicable resolution, mediation, conciliation, and arbitration. The history of arbitration dispute

resolution in B&H is 120 years old. B&H law divides arbitrations into domestic and foreign

arbitrations. In case of dispute, the parties have two possibilities: to settle the dispute by

internal arbitration, or with international arbitration. The practice in B&H indicates that the

arbitration clause is provided for by the founding document. According to those arbitration

clauses, each party in a dispute appoints one arbitrator, at their discretion, and the appointed

arbitrators elect a president. The law in B&H respects the principle of the autonomy of wills

of the parties, which enables agreement on international arbitration. Agreement on the

relevant material law for the disputable relations between the business entities is also allowed.

If parties can autonomously dispose with their rights, they can make arbitral agreements for

existing or future disputes that might arise from a concrete legal relation. In order to be valid,

an arbitral agreement must be written.

11.Essential elements of a contract of saleThe essential elements of a contract are those components that give, to the contract, the

features of a defined type of legal transaction. The essential elements of a contract of salealways include an object. Quantity and price have this quality only under certain

circumstances. A thing as an object of sale is a limited part of nature that can be put under

human control and rule, and if it is factually and legally movable. According to the existence

criterion, an object of sale can include a perished, existing or future thing. In a contract, the

goods that are the object of sale have to be described at least to a degree that makes them

specifiable. Quantity is the physical, spatial and quantitative specification of the goods which

are the object of sale. Quantity is an essential element of a contract if it has been made

explicit, if the nature of goods points to it, and if it is required by a specific circumstance of

the actual transaction. In all other cases, it is a non-essential element. Regardless of legal

qualification, quantity is always specified in a contract. Price is the value compensation forthe provided goods and the transferred property right over it. The ways in which the price is

determined include coercive regulation, contract, and dispositive regulation. Generally

companies form prices freely based on market conditions. The needs of managing economic

policy, prevention of monopolistic agreements or behaviour, may lead to a smaller or greater

intervention by state. Price formation by means of a contract is the most frequent case in

practice. Price is entered in a contract as specified or specifiable. If the price is neither

specified nor specifiable in the contract, the buyer has to pay the price that was regularly


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charged by the seller at the time of contract formation. The reasonable price is considered to

be the current price at the time of contract formation.

12.Concept of agencyAgency in its broadest sense is acting for someone else. Agency can be defined as a

relationship between two persons whereby one, called an agent, is legally considered to

represent another, a principal, in such a way that he is capable of influencing the principal's

legal position toward strangers based on this relationship, in that he will form contracts or

dispose with property. There is also the term 'electronic agent', which refers to computer

software that automatically processes received offers or orders, and then send confirmations,

which in turn have the capacity of accepting received offers. It can be manifested by factual

and legal actions-statements of will. There are three subjects in agency: the principal, agent

and a third party. A relatively independent legal relation arises between each of these

respectively, and therefore agency as a whole is a complex legal structure. According to the

basis of its occurence, agency can be classified as: legal, statutory, based on the document of

relevant judicial or administrative organ, or contractual (power of attorney). If the agent is

authorized to give an unlimited number of statements, agency is general. If the number of

statements is specified, it is special agency. Regardless of the scope of authority, agents can

be unlimited, independent or more or less limited in their activity. The LoO recognizes

following kinds of agency: power of attorney, business power of attorney, traveling

salesman's authorities, and the so-called employment power of attorney. Agent is nothing else

than a person who represents another person in transactions and acts for him.

13.Essential elements of construction contractThe construction contract is a contract for services by an independent contractor. The

contractor as a characteristic debtor, does not take up the obligation of work but rather the

obligation of achieving the contracted result. Essential elements of the construction contruct

are: object, price, due date, contractual fine, premium to the contractor, warranty period for

the quality of work, and vwritten form of the contract. The object of the construction is

defined in a twofold way: as a 'building structure' and as 'construction work'. The object of the

transaction is defined either directly in the contract or, more frequently, by referring to

technical documentation. The price is the compensation owed by the investor to the contractor

for the achieved result: the structure or completed construction work. The price is alwaysascertained by an agreement between the parties. The due date is the moment by which, or the

period within which, the structure or construction work has to be completed. The contract

provides for the payment of a contractual fine if the contractor falls behind schedule. The

contract may provide for the payment of a specified amount by contracted periods, or as a

percentage of the value of uncompleted works for a specified time. The amount cannot exceed

5% of the total price of work. The contractor that is behind schedule of fulfilling its

obligations owes, to the investor, payment of the contracted fine pursuant to their agreement.


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Essays From Business Law