Chapter 1.

Introduction to Legal Heritage

1.1. What is Law?
Any society enacts and enforces laws that govern the conduct of the individuals,
businesses and other organizations that function within it. In other words, without law
we cannot live.
The law consists of rules that regulate the conduct of individuals, businesses and
other organizations within society. It is intended to protect persons and their property
against unwanted interference from others. In other words, the law forbids persons from
engaging in certain undesirable activities.
Definition of Law
The concept of law is broad. Although it is difficult to state a precise definition, it
can be said that: law, in its generic sense, is a body of rules of action or conduct
prescribed by controlling authority and having binding legal force. That which must be
obeyed and followed by citizens subect to sanctions or legal conse!uences is a law.
The difference between moral rules of conduct and the rules of law consists in the
presence of a sanction that comes when brea"ing the later.
#ocial conduct rules are governing our e$istence giving meaning to it through order.
Thus, our society functions in a ust, fair way, the right way.
Also, the word right has also another meaning in %nglish. It refers to the
prerogatives of every individual: the right to freedom, education, wor", private enterprise
etc. These prerogatives are best "nown as human rights or individual freedoms and their
respect should be guaranteed by state authorities in any society that calls itself
democratic.
Functions of the Law
The law is often described by the function it serves within a society. The primary
functions served by the law in any democratic country are:
&. "eeping the social peace 'e$ample: laws that ma"e certain activities crimes()
&
*. shaping moral standards 'e$ample: laws that discourage drug and alcohol
abuse()
+. promoting social ustice 'e$ample: laws that prohibit discrimination in
employment()
,. maintaining the status !uo 'e$ample: laws that prevent the forceful
overthrow of the government()
-. facilitating orderly change 'e$ample: laws enacted only after considerable
study, debate and public input()
.. facilitating planning 'e$ample: well/designed commercial laws that allow
businesses to plan their activities, allocate their productive resources and
assess the ris"s they ta"e(.
#ome scholars believe that other function of the law is the ma$imization of
individual freedom as long as the 0onstitution of a state is granting the freedom of
speech, religion and association.
Fairness of the Law
1n the whole, any legal system has to be comprehensive, fair and democratic.
2evertheless, some misuses and over/sights of any legal system, including abuses of
discretion, mista"es by udges, une!ual applications of law and procedural mishaps allow
some guilty parties to go unpunished. 3owever, these situations have to e$ist as
e$ceptions, as mista"es that can be corrected.
Flexibility of the Law
The rules of law evolve and change along with the norms of society, technology
and the growth and e$pansion of different activities in the world and in a particular
country.
The law always has been, is now and will ever be largely vague and variable.
And how this could be otherwise4 The law deals with human relations and their most
complicated aspects
&
.
&
5erome 6ran", The Law and the Modern Mind, 7rentano8s 9ubl. 3ouse, 2ew :or", &;+<.
*
Schools of Jurisprudential Thought
The philosophy or science of the law is referred to as urisprudence. There are
several different philosophies about how the law developed, ranging from classical
natural theory to modern theories of law and economics and critical legal studies.
0lassical legal philosophies are discussed in the following paragraphs.
Natural Law School
The 2atural =aw #chool of urisprudence postulates that the law is based on what
is correct. 2atural law philosophers emphasize a moral theory of law > that is, law
should be based on morality and ethics. 2atural law is discovered by human thought,
the use of reason and choosing between good and evil.
Historical School
The 3istorical #chool of urisprudence believes that the law is an aggregate of
social traditions and customs that have developed over centuries. It believes that changes
in the norms of society will gradually be reflected in the law. To these legal philosophers,
the law is an evolutionary process. 3istorical legal scholars loo" to past legal decisions
'precedents( to solve contemporary problems.
Analytical School
The Analytical #chool of urisprudence maintains that the law is shaped by logic.
Analytical philosophers believe that results are reached by applying principles of logic to
specific facts of the case. The emphasis is on the logic of the result rather than on how the
result is reached.
Sociological School
The #ociological #chool of urisprudence asserts that the law is a means of
achieving and advancing certain social goals. The followers of this philosophy, "nown as
realists, believe that the purpose of law is to shape social behavior. #ociological
philosophers are unli"ely to adhere to past law as precedent.
Coand School
The philosopher of 0ommand #chool of urisprudence believe that the law is a set
of rules developed, communicated and enforced by the ruling party rather than a
reflection of the society8s morality, history, logic or sociology. This school maintains that
the law changes when the ruling class changes.
+
Critical Legal Studies School
The 0ritical =egal #tudies #chool proposes that legal rules are unnecessary and
are used as an obstacle by the powerful to maintain the status !uo. 0ritical legal theorists
argue that legal disputes should be solved by applying arbitrary rules that are based on
broad notions of what is fair in each circumstances. ?nder this theory, subective
decision ma"ing by udges should be permitted.
Law and !conoics School
The =aw and %conomics #chool or the 0hicago #chool believes that promoting
mar"et efficiency should be the central goal of legal decision ma"ing. 6or e$ample,
proponents of law and economics theory believe that a prisoner cannot find a lawyer who
will ta"e the case on a contingency/free basis 'pro bono(, the case is probably not worth
bringing to ustice.
1.2. Sources of Law
In most countries, the sources of modern law have a certain hierarchy according to
the authority that enacts them. Also, the sources of law can vary due to the e$istence of
two maor legal systems: civil law system or common law system.
The "oano#$eranic ci%il law syste, commonly called civil law dates of ,-<
7.0. when @ome adopted the Twelve Tables, a code of laws applicable to the @omans. A
compilation of @oman =aw called 0orpus 5uris 0ivilis '7ody of 0ivil =aw( was
completed in -+, A.A. =ater, two national codes > The 6rench 0ivil 0ode of &B<, 'The
2apoleonic 0ode( and the Cerman 0ivil 0ode of &B;. > became models for countries
that adopted civil codes.
In contrast to the Anglo/#a$on common law system, in which the laws are created
by the udicial system as well as by the legislative power, the 0ivil 0ode and
parliamentary statutes that e$pand and interpret it are the sole sources of the law in most
civil law countries. Thus, the adudication of a case is simply the application of the code
or the statutes to particular set of facts. In some civil law countries, court decisions
'urisprudence( do not have the force of law. Dost %uropean countries follow the civil
law system.
,
Anglo#Saxon coon law or %nglish common law is the other maor legal system
developed by the udges who issued their opinions when deciding cases. The principles
announced in these cases became precedent for later udges deciding similar cases. The
common law system has been developed in ?nited Eingdom after &<... The system is
used today in some countries around the word, usually countries that were influenced by
the 7ritish colonial empire: ?nited #tates of America, Australia, 2ew Feeland, Dalaysia,
Thailand etc.
In spite of the differences, similarities e$ist between the two legal systems. These
similarities are mirrored by the principles of law that are animating the two systems,
including the sources of law.
The main sources of law are the following:
A& Constitution
Dost countries have 0onstitutions as the supreme law of the land. This means that
any other law, whether national or local, that conflicts with the 0onstitution is
unconstitutional and, therefore, unenforceable.
The principles enumerated in the constitution are very broad because it is usually
intended for them to be applied to evolving social, technological, economic conditions.
The 0onstitution established the structure of state governance, usually creating three
branches of government and giving them the following powers:
The legislati%e branch '9arliament( has the power to ma"e 'enact( the law.
The executi%e branch 'Covernment, 9resident or both( has the power to
enforce the law.
The 'udicial branch 'courts and other udicial authorities( has the power to
interpret and determine the validity of the law.
(& Statutes or Laws
#tatutes are written laws that establish a certain courses of conduct that must be
adhered to by the covered parties. The statutes are enacted by 9arliaments or by similar
bodies.
#ometimes, when a statute comprises an e$tensive set of rules it is organized as a
0ode '0ivil 0ode, 0riminal 0ode, 0ivil 9rocedure 0ode etc.(.
-
C& $o%ernent )executi%e branch* ordinances+ decisions and executi%e orders
#tate legislative is sometimes delegating lawma"ing to the Covernment
'e$ecutive branch(. Thus, the Covernment enacts ordinances that are considered sourced
of law. Also, the Covernment is ma"ing decisions while enforcing the law. These
decisions can sometimes be considered sources of law as well.
%$ecutive orders are issued by a member of the Covernment and they can also be
considered, in certain cases, sources of law.
D& ,residential executi%e orders
In some countries, including @omania, the 9resident can issue an e$ecutive order
that can sometimes be considered a source of law.
!& "egulations and -rders of Adinistrati%e Agencies
In some countries, li"e the ?nited #tates of America, the legislative and e$ecutive
branch of federal and state governments are empowered to establish administrative
agencies to enforce and interpret statutes enacted by the legislative branch. Dany of these
agencies regulate commercial activities. Thus, these agencies are empowered to adopt
administrative rules and regulations, which have the force of law.
F& Treaties and other international sources of law
In most countries, including @omania, treaties are usually signed by the 9resident
of a country with the advice of the Covernment and with the consent of the legislative
branch '9arliament(. Thus, treaties are given the force of law becoming a national source
of law for a particular country or countries.
Gith increasing international economic relations among nations, treaties are
becoming an even more important source of law that will affect business in the future.
$& Judicial decisions
7ased on the common law tradition, in certain countries, past court decisions
become precedent for deciding future cases. =ower courts must follow the precedent
established by the higher courts. 7oth types of courts will have to follow the precedents
of country8s supreme court decisions. Thus, udicial decisions are considered sources of
law in common law countries, stare decisis doctrine promoting the uniformity of law and
the efficiency of the court system.
.
3owever, in civil law countries, court decisions are not considered sources of law.
0ourt decisions can only be used as a basis for interpretation of the law but cannot be
referred as sources of law.
1.3. What is Business Law?
All social, economic, political and cultural activities are governed by law. Thus,
there is also an obvious and strong relationship between law and economic activity. Any
country8s economic development > and, on an individual level, the economic well/being
of a particular individual or family or business entity > ta"es place within the conte$t of
laws. #ome of these laws provide the means by which individuals can carry out a
business on their own or they can oin together into companies for the same reason. #ome
laws establish a system by which a business can get access to ban"ing services, such as
financing for the purchase and sale of goods. 1ther laws set forth rules regarding the
e$istence of different contracts or minimum re!uirements as to how a company should
treat its employees, refraining from damaging the environment or conduct its business
fairly.
This complicated web of legal rules is often referred as economic law or
business law. The first of these two terms, economic law is maybe more accurate and
descriptive of the two because it casts a wider net of meaning and the relationship
between law and economic activity encompasses many subects. The term business
law, however, is more familiar in some countries, for e$ample ?#A or ?E.
Dost law is national law. That is, the rules that govern behavior, including
economic activity, e$ist at the level of a particular country. 1nly a relatively few such
rules are international in scope or source. This fact reflects the importance of the nation/
state in today8s world. There are ust under *<< nation/states in the world and most of the
laws in each are different from those in all the rest. Therefore, law practitioners must loo"
mainly to his or her own country rules for the specific legal rules that apply in a particular
case.
Aespite the diversity in specific legal rules, certain basic concepts do hold true in
most countries. That is, some general principles of law are global in applicability and
H
underlie the specific rules in most countries. Thus, there are also some general principles
specifically in the area of business and economic law and some rules that have been
e$plicitly agreed to at the international level) these include rules on international business
transactions and international economic relations.
Also, in order to determine how best to structure a particular transaction or how
much ta$ to pay on business profits or how to handle similar detailed matters, the
applicable rules of the local and national urisdiction must be applied. In these particular
situations one has to "now e$actly what are the specific national rules in order to avoid
mista"es that can easily lead to serious and costly conflicts.



B