IIMA - Course Catalogue
PGP & PGP-FABM
Legal Aspects of Business
Prof. Akhileshwar Pathak,
Prof. M.P. Ram Mohan
Course Description & Objectives
Business practices are organised around the law leading to enmeshing of the law and business practices. Most of the law dealing with business is founded on simple principles. These principles are international and derive from the development of law in England. The magnitude and complexity of contemporary business, trade and commerce should not make us overlook that the world has seen trade and commerce for a long time.
The Merchants and traders had travelled within England, Europe and overseas, trading goods. When disputes arose in England, these were taken to the courts. The judges decided the cases on the basis of usage and custom of the community and the prevailing notions of equity and justice. Judges, in deciding cases, relied on prior judgements. As similar cases were decided alike, the reasoning and principles came to be formulated. The courts, thereafter, followed these principles as the law. Through this process of precedence, in several fields, a body of judge made law came to develop, which was called the common law. Common law in relation to business developed rapidly with the industrial revolution and rapid development of manufacturing, trade and commerce in England in mid-1800. The several fields included contract law, sale of goods, carriage and transportation, pledge, hypothecation, guarantee, partnership and negotiable instruments. The founding principles of company law came to be formulated through the same route.
The British took the principles wherever they expanded to, America, Canada, Australia, New Zealand, India and other parts of Asia and Africa. India, like other countries, adopted the principles by writing it down as the Contract Act, 1872. The principles contained in the Act are foundational and have not changed world over. These have only been applied to the changing business practices, the newest being commercial transactions through the internet. What has changed since, however, is that with the development of manufacturing, trade and commerce, the contractingparties have used several of the principles in conjunction to minutely define the rights and liabilities of the contracting parties. Not only do corporations deal with customers through lengthy standard contract documents, most of the business-to-business contracts are done through standard contract documents. These documents provide for, among others, scope of the contract, quality of goods, price and price variation, carriage and delivery, bank guarantee, insurance and risk, damages and compensation, arbitration, applicable law, jurisdiction of courts and indemnity. As mentioned earlier, the constituent principles are simple. Once one grasps the principles, one can dismember the terms of a contract and explore its import.
State, the governing mechanism of society, regulates the conduct of individuals, including business entities. The State does this by making laws, which is a network of legal instruments, Act, rules, notifications, government order, ordinance, bye-law. The freedom to contract is restricted by the law. Some laws regulate business as a whole, notably, law for the protection of consumers, preventing unfair trade practices, and preventing monopolies and ensuring competition. Other laws are sector specific, for example, the regulation of the stock exchange by the Securities and Exchange Board of India Act.
Thus, law is at the same time both, conceptual and detailed; simple and specialised. The detailed and specialised law rests on the foundations of simple and conceptual. The key challenge is to grasp the conceptual foundations of law.
The objective of the course is to understand the principles and concepts of law dealing with business. This includes formation of contracts; rights and obligations arising from contracts; special forms of contracts, namely, sale of goods, principalagent relationship, bank guarantee and bailment; law dealing with formation and functioning of companies; unfair trade practices, competition law; and protection of consumers.
The pedagogy of the course derives from the context and course objective. The participants would discover the principles and its application to business practices, as opposed to learn it. This will be facilitated by a combination of reading texts and case discussion.
For each session, the participant would read introduction to the subject which would equip the participant to explore and analyse the case(s) to be discussed in the class. The following three kinds of ‘cases’ will be used in the course:
Cases describing hypothetical situations and disputes. This serves the purpose of the participants discovering the principles.
Cases narrating just the facts of decided court cases. In attempting to decide the cases, the participants sharpen their understanding of the principles.
Edited text of court judgements. Statement of the principles and its application by the courts firms up the learning of the principles. Further, as the interpretation and formulations by the courts is the binding position, participants need to learn it.
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