BUSINESS LAW SUMMARY
Ch. 24
24.1 Types of Legal Systems
The legal systems used in different countries can be broken down into several basic types.
● Common-Law
○ Common law legal systems primarily rely on judge-made case law.
Common-law judges examine past judicial decisions to form general rules
(called “precedents”) that serve as guidelines for similar cases in the future.
○ A judge can depart from precedent and establish a new rule if the existing rule
has proved unworkable or if new considerations and developments cause the
judge to believe that a different rule is needed to promote justice, fairness,
more economically efficient behavior, or the furtherance of other important
public policies.
■ The new rule will itself become precedent if other judges in that
jurisdiction accept and apply it in subsequent cases or if it is adopted
by the highest court in the jurisdiction, in which case the new rule
becomes binding on lower courts.
○ Codification is a process by which existing common law rules are restated and
laid down in a statute.
Differences between the US and British common law system
● Unlike the U.S. system, the British common law system does not use juries in civil
cases.
● The British system generally prohibits contingency fee agreements, whereby the
attorney receives a percentage of any judgment awarded to his or her client, but they
are allowed in commercial litigation in England and Wales.
● The British system requires the losing party in a lawsuit to pay both its own attorneys’
fees and those of the prevailing party.
● There are two types of lawyers in the United Kingdom: solicitors and barristers. A
solicitor can perform legal services outside of court, but only barristers may appear
and argue on behalf of a client in court.
● Civil law
○ Civil law relies primarily on statutes that are embodied in a unified code.
Lower courts usually have no power to declare these statutes unconstitutional.
○ Civil law statutes and codes tend to be more general and abstract than codified
common law so they can cover a wider range of facts.
○ Common-law judges are expected to be more creative when applying the law
than civil law judges are.
■ In common law systems, the judge is a neutral party in the
proceedings, whereas a civil law judge assumes many of the roles of a
1
, lawyer in a common law system, such as deciding what evidence needs
to be developed or produced.
Other Families of Law
Some countries have adopted other forms of legal systems, many of which are rooted in or
based on religious principles and orders.
● Islamic Law
○ Civil law in Islamic countries is interpreted in harmony with Sharia. The duty
to honor agreements and observe good faith in commercial dealings is a
central premise of Islamic law.
○ Islamic trade and commerce are governed by the concepts of Zakat, Riba and
Gharar.
■ “Zakat” is the allocation of certain taxes to deprived and poor people
as a welfare contribution.
■ “Riba” prohibits unearned or unjustified (illicit) profits and can
therefore lead to problems when interest is charged on loans.
■ Islamic law forbids excessive “Gharar”, or uncertainty if it will lead to
exploitation and injustice.
● Hindu Law
○ Classical Hindu law contained a set of rules, customs, and usages to guide the
life and beliefs of Hindus.
○ Hindu law is applied only to very personal matters—namely, marriage,
divorce, and inheritance and succession questions. As a result, it is referred to
as “personal law.”
■ Most other legal issues in India are governed by codified Indian law,
which is a secular law based on English common law but tailored to
the needs of Indian society.
● Socialist Law
○ Socialist legal systems are based on civil law systems with changes and
additions from the states’ respective ideological backgrounds (mostly
Marxist–Leninist).
■ One of the most important aspects of a socialist system is public
ownership of property and the means of production.
2
, 24.2 International Law
It refers to different legal principles that together comprise the laws of the international
community. International law is often divided into public international law and private
international law.
- Public international law governs the relationships among nation-states.
- Private international law governs the relationships between private parties engaged in
transactions across national borders.
- Supranational law is another type of international law, under which nations submit
their decision-making authority to a common organization or institution, such as the
World Trade Organization.
National law is normally enacted by the legislative body of a country, but there is no similar
legislative body that creates international law. Therefore, in most cases, at least two nations
are involved in creating the legal rules that will be applied as international law. International
law may be created by treaties or continuous customary practices.
● Treaties
○ Most international rules of law are set forth in written agreements between or
among two or more countries, called treaties. Such agreements may also be
referred to as conventions, pacts, protocols, or accords.
3
Ch. 24
24.1 Types of Legal Systems
The legal systems used in different countries can be broken down into several basic types.
● Common-Law
○ Common law legal systems primarily rely on judge-made case law.
Common-law judges examine past judicial decisions to form general rules
(called “precedents”) that serve as guidelines for similar cases in the future.
○ A judge can depart from precedent and establish a new rule if the existing rule
has proved unworkable or if new considerations and developments cause the
judge to believe that a different rule is needed to promote justice, fairness,
more economically efficient behavior, or the furtherance of other important
public policies.
■ The new rule will itself become precedent if other judges in that
jurisdiction accept and apply it in subsequent cases or if it is adopted
by the highest court in the jurisdiction, in which case the new rule
becomes binding on lower courts.
○ Codification is a process by which existing common law rules are restated and
laid down in a statute.
Differences between the US and British common law system
● Unlike the U.S. system, the British common law system does not use juries in civil
cases.
● The British system generally prohibits contingency fee agreements, whereby the
attorney receives a percentage of any judgment awarded to his or her client, but they
are allowed in commercial litigation in England and Wales.
● The British system requires the losing party in a lawsuit to pay both its own attorneys’
fees and those of the prevailing party.
● There are two types of lawyers in the United Kingdom: solicitors and barristers. A
solicitor can perform legal services outside of court, but only barristers may appear
and argue on behalf of a client in court.
● Civil law
○ Civil law relies primarily on statutes that are embodied in a unified code.
Lower courts usually have no power to declare these statutes unconstitutional.
○ Civil law statutes and codes tend to be more general and abstract than codified
common law so they can cover a wider range of facts.
○ Common-law judges are expected to be more creative when applying the law
than civil law judges are.
■ In common law systems, the judge is a neutral party in the
proceedings, whereas a civil law judge assumes many of the roles of a
1
, lawyer in a common law system, such as deciding what evidence needs
to be developed or produced.
Other Families of Law
Some countries have adopted other forms of legal systems, many of which are rooted in or
based on religious principles and orders.
● Islamic Law
○ Civil law in Islamic countries is interpreted in harmony with Sharia. The duty
to honor agreements and observe good faith in commercial dealings is a
central premise of Islamic law.
○ Islamic trade and commerce are governed by the concepts of Zakat, Riba and
Gharar.
■ “Zakat” is the allocation of certain taxes to deprived and poor people
as a welfare contribution.
■ “Riba” prohibits unearned or unjustified (illicit) profits and can
therefore lead to problems when interest is charged on loans.
■ Islamic law forbids excessive “Gharar”, or uncertainty if it will lead to
exploitation and injustice.
● Hindu Law
○ Classical Hindu law contained a set of rules, customs, and usages to guide the
life and beliefs of Hindus.
○ Hindu law is applied only to very personal matters—namely, marriage,
divorce, and inheritance and succession questions. As a result, it is referred to
as “personal law.”
■ Most other legal issues in India are governed by codified Indian law,
which is a secular law based on English common law but tailored to
the needs of Indian society.
● Socialist Law
○ Socialist legal systems are based on civil law systems with changes and
additions from the states’ respective ideological backgrounds (mostly
Marxist–Leninist).
■ One of the most important aspects of a socialist system is public
ownership of property and the means of production.
2
, 24.2 International Law
It refers to different legal principles that together comprise the laws of the international
community. International law is often divided into public international law and private
international law.
- Public international law governs the relationships among nation-states.
- Private international law governs the relationships between private parties engaged in
transactions across national borders.
- Supranational law is another type of international law, under which nations submit
their decision-making authority to a common organization or institution, such as the
World Trade Organization.
National law is normally enacted by the legislative body of a country, but there is no similar
legislative body that creates international law. Therefore, in most cases, at least two nations
are involved in creating the legal rules that will be applied as international law. International
law may be created by treaties or continuous customary practices.
● Treaties
○ Most international rules of law are set forth in written agreements between or
among two or more countries, called treaties. Such agreements may also be
referred to as conventions, pacts, protocols, or accords.
3
