BUSINESS AND LABOUR LAW

REPORT ON BUSINESS LAWS

NECESSITY AND IMPORTANCE
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EXECUTIVE SUMMARY

Pakistan government has made some laws after it came into being in 1947 which has to be followed by every citizen living in Pakistan. Law plays very important rule in every country, mostly the business law which helps country to maintain its positions in front of other countries, so that they can do trade with each other. Putting these entire factors in mind we have created the report of business law that what its importance and how it is effected in various conditions, what is its effect on society and on international trade. We have also discussed about the types of laws and the types of business forms in Pakistan. The report helps us to gain knowledge about business law which will be very helpful for us in future.

INTRODUCTION TO BUSINESS LAW

Business:- All those activities which are aimed at transfer of goods & services from the

production centre to consumption centre carried out by an entrepreneur by optimally utilizing resources at his command i.e. money, man, material & machine with a view to maximize profit.
Law: - Rules & Regulations which has a force of authority, passed by legislative bodies.

law in its most general and comprehensive sense signifiesa rule of action it applies indiscriminately to all kinds of action animate or inanimate; rational and irrational Anything that brings uniformity in human behavior can be called as Law

Law is a general rule of external human action, enforced by the Sovereign Political Authority.

LAWS

Constitutional Law (Relating to rights, Duties of citizens Towards the state & administration)

Criminal Law (Crime & Punishment)

Civil Law (Business & Property matters)

International Law (Dealing between citizens of two countries)

Meaning, necessity and Importance of Law

Most of us are required to observe many different kinds of rules. School children may be required to wear a uniform. People belonging to certain religion are prohibited to eat a particular substance or do a particular thing. Law is often based on morality. For example, murder and rape are regarded as immoral, and are punishable in all societies and are proscribed by most religions. In such cases, the law coincides with morality but this need not always is the case. For example lending money at interest is practiced since times immemorial. But this is prohibited by Islam. Similarly, Christianity prohibits Usury, i.e. excessive interest. Traditional Hindus follow the rule of Damdupat, i.e. the total interest must not increase the principal sum. The Money-lender Acts in force of various states do regulate interest which, by virtue of the practice of compounding their interest but they have limited application There are many perspectives regarding Law. From one outlook, law can be said as an abstract body of rules and statues. And from the other, it could be seen as a social method of dispute resolution of the conflicting interests of the people living in the society. Law may also be considered as of having a coercive character, or can also be seen as made by the customs, traditions or religion. Law can also be said to inherently exist in the society. Some thinkers have made an attempt to clear the picture of the concept of law. In the words of Kant law is the sum total of the conditions under which the personal wishes of one man can be combined with the personal wishes of another man in accordance with the general law of freedom . Hegel explains law as the, the abstract expression of the general will exist in and for itself. John Austin says, Law is the command of Sovereign, Sevigne considers law as Volksgeist i.e. the spirit of the people. While, Roscoe Pound, a thinker of Sociological school of law, considers law as Social Engineering.

ROLE OF BUSINESS LAW:

1. An instrument to provide justice in businesses 2. Stability and social security of organization. 3. Regulating behavior and interactions between people of companies

Sources of Law:
Formal source Validity and force is drawn by law

Material source Sources used to create the law Legal source Legislations, case laws, customary laws

Historical sources Sources used to import meaning to the law Juristic writing, literary works, foreign decisions

Classification of Law:

Imperative law General course of action imposed on other by way of physical force or other compulsions Smoking on screen, theft

Physical law Uniformities, regularity and harmony observable by all Traffic rules

Conventional law Regulation of conduct towards each other Family visits

Customary Law It is firmly established and enforced by state marriage

Practical law The law with social objectives Town and country planning act

Civil Law Public law, private law, personal law, business law, industrial law etc

Law of Contract Regulating the relationship arising out of contract

COURTS IN PAKISTAN

LAW AND THE SOCIETY

Law is nothing more than the morals and ethics of group "A" being imposed upon group "B". Whether it's a representative legislature, a panel of judges, a supernatural deity, or a dictator, the law is passed and handed down by a supposed "higher" power to those deemed to be of a lower status or class. In anything other than a true "one man, one vote" society, the law's only purpose is to keep the "lesser" citizenry in check and toeing the line. Laws are only effective on the law-abiding citizen, and they do serve their purpose, to an extent. Most people agree that murdering another human for sport is wrong, therefore a law against hunting humans for fun is justified...but then again, the deranged mind that enjoys hunting other people probably won't be deterred by something as simple as a law. Basically, the lawless will always have contempt for the law. For example, the United States is the lone industrialized and "democratic" country to still implement the death penalty, yet its citizens continue to commit crimes that they know will earn them a sentence of death. Suspects knowingly open fire upon police officers, and people willingly and meticulously plan out murders. At their most basic level, the lawless do not obey the law. Laws are only effective as long as those who are being governed accept the moral and ethical basis for said laws; the ineffectiveness of law stems from the fact that it is impossible to legislate morality. Laws exist to keep a society from tearing itself apart through immorality and inhumane acts. They do serve their purpose, but like any other man-made device or construct, they do have the potential for abuse, and sometimes they are all too easily ignored, especially if the morals and ethics of the governed change over time.

Objectives of study of Pakistan business law

It is essential to know about business law before starting a business, as it will help you operate your business without the hindrances of ignorance. It is better to seek the expert guidance of an accountant and an attorney to learn about the latest business laws that will affect your business. The study of Pakistan business law provides a good working understanding of

What is legal consideration in making contracts? What are the constraints upon setting up and running companies? How employment contracts are protected. Realizing the business ethics, he or she must follow. To run a proper and authenticated business.

Effects of law on business:

Just as law affects actions of private individuals, so it affects actions of businessmen. Trade is nothing but a series of contracts. Such contracts shall be enforceable and valuable to business only when they are legally protected. Law lays down rules and guidelines for setting up and administrative running of certain categories of businesses e.g. Partnership organization is governed by the partnership act, 1932. Companies are governed by companies ordinance, 1984. Insurance companies are subjected to insurance act, 1938. Banking companies are controlled by banking companies ordinance, 1962. Modaraba companies are regulated by modaraba companies and modaraba (floatation & control) ordinance, 1980.

Effects of law on various professions:

An accountant is considered an expert in auditing, taxation and corporate law matters and the clients very often ask him for advice on these matters, so if he does not study law and acquire necessary knowledge he cannot render any profession any professional assistance to his clients. An accountant, whether in public practice or in full-time employment, is required to his client or employer on a number of matters involving law, such as:

Formation of a company Underwriting agreement Agency contracts Purchase and supply contracts Forward trading Settlement of labor disputes Protection of trademarks, copy rights Many other matters of business interest

Effects of law on international trading:

International trade International trade can be defined as either the buying (importing) or selling (exporting) of goods or services on a global basis. Thanks in great measure to the Internet; many starting businesses can enrich their prospects of success by incorporating IT into their overall business plan. In some cases, a business can be enhanced by incorporating IT marketing to supplement a domestic operation. In other cases, a business can depend solely on international trade. Lets review some examples:

Advantages and Disadvantages of International Trade

Enhance your domestic competitiveness Increase sales and profits Gain your global market share Reduce dependence on existing markets Exploit international trade technology Reduce dependence on existing markets Exploit international trade technology Extend sales potential of existing products Stabilize seasonal market fluctuations Enhance potential for expansion of your business Sell excess production capacity Maintain cost competitiveness in your domestic market

Disadvantages to keep in mind:

You may need to wait for long-term gains Hire staff to launch international trading Modify your product or packaging Develop new promotional material Incur added administrative costs Dedicate personnel for traveling Wait long for paymen Apply for additional financing Deal with special licenses and regulations International law body of rules considered legally binding in the relations between national states, also known as the law of nations. It is sometimes called public international law in contrast to private international law (or conflict of laws ), which regulates private legal affairs affected by more than one jurisdiction. International law includes both the customary rules and usages to which states have given express or tacit assent and the provisions of ratified treaties and conventions. International law is directly and strongly influenced, although not made, by the writings of jurists and publicists, by instructions to diplomatic agents, by important conventions even when they are not ratified, and by arbitral awards. The decisions of the International Court of Justice and of certain national courts.

Business Laws in Pakistan

This overview of business laws of Pakistan is a very brief description of common forms of businesses adopted by private and public sector investors in Pakistan. An attempt has also been made to outline general requirements and regulatory regimes for each of these forms of businesses in Pakistan. These brief notes are for general guidance only and should not be taken as a substitute for thorough and professional legal advice. What are the common forms of business in Pakistan? Main forms of business organisations adopted by private sector in Pakistan are as follows:

Sole proprietorship in Pakistan Partnership in Pakistan Limited liability company in Pakistan Joint venture in Pakistan

Main forms of business organisations adopted by the public sector, where the government wishes to undertake an enterprise, in Pakistan are either a limited liability company or a statutory corporation. Out of these diverse forms of business set ups in Pakistan, a limited liability company remains the most favourable form of business organisation for medium and large-scale businesses in Pakistan.

Important Business Laws of Pakistan

THE COMPANIES ORDINANCE, 1984:

An ordinance to consolidate and amend the law relating to companies and certain other associations, for the purpose of healthy growth of corporate enterprises, protection of investors, promotion of investment and development of economy and matter arising out of and connect there with.

OBJECTIVES

1. Healthy Growth of the corporate enterprises. 2. Protection of investors and creditors. 3. promotion of investment, and 4. Development of economy.

PRELIMINARY
-Short title extent and commencement

1. This ordinance may be called the companies ordinance 1984. 2. It extends to whole of Pakistan. 3. This section come into force at once and remaining provisions of this ordinance shall come into force on such date as the Federal Government may, by notification in the official Gazette, appoint, and different date may be so appointed for different provisions.

COMPANY

Company means a company formed and registered under this ordinance or an existing company.

Company limited by shares means a company having the liability of its members limited by the memorandum to the amount, if any, unpaid on the shares respectively held by them.

Company limited by guarantee means a company having the liability of its members limited by the memorandum to such amount as the members may respectively thereby undertake to contribute to the assets of the company in this event of its winding up.

DIFFERENCE BETWEEN PUBLIC AND PRIVATE COMPANY

1. A public company can invite subscription from the public, a private company can not. 2. A public company does not have restriction on transfer of the shares. Transfer of shares restricted in private company. 3. A public company should have at least seven members a private company have at least two members. 4. There is no restriction on upper limit of the members while private company can not exceed 50 members. 5. A public company is required to file its accounts with the registrar; filing of accounts is not required in private company.

INCORPORATION OF COMPANIES AND MATTERS INCIDENTAL THRETO OBLIGATION:

1. No association, partnership or company consisting of more than twenty persons shall be formed for the purpose of carrying on any business that has for its object the acquisition of gain by the association, partnership or company, or by the individual members thereof, unless it is registered as a company under this ordinance. 2. Every person who is member of any association, partnership or company carrying on business in contravention of provisions of this section shall be punishable with fine which may extend to five thousand rupees and also be personally liable for all the liabilities incurred in such business. 3. Nothing in this section shall apply to Any society, body or association other than a partnership, formed or incorporated under any other Pakistan law; or A joint family carrying on joint family business; or A partnership of two or more joint families where the total numbers of members such families, excluding the minor members, does not exceed 20 members. A partnership form to carry on practice as lawyers, accountants or any other profession where practice as a limited liability company is not permitted under the relevant laws or regulation for such practice.

The Contract Act, 1872

Law of contract is that branch of commercial or business law which ensures that the promises made by one person to another in respect of any transaction shall be performed by the parties exactly in accordance with the arrangement between them and in case of any default the party shall compensate the innocent party.

Definition of contract
A contract is an exchange of promises by two or more persons resulting in an obligation to do or to refrain from doing a particular act, which obligation is recognized and enforced by law.

Main feature of contract:

Offer and acceptance Capacity of contract Free consent Consideration Legality of objects Agreements declared void Contingent contracts Performance of contract Discharge of contract Quasi contracts Breach of contract indemnity of guarantee Bailment and pledge Contract of agency

Promise & agreement:

Promise: when the person to whom the proposal is made signifies his assent thereto, the proposal is said to be accepted. A proposal, when accepted, becomes a promise. Promise for consideration At the desire of the promisor Express and implied promises Acceptance of consideration for a promise. Agreement: every promise and every set of promises, forming the consideration for each other is an agreement. Agreements required to be in writing Executed and executor agreement Agreement to sell

Bailment:
Def: Delivery of goods by one person to another for some purpose upon a contract and to be returned or disposed otherwise when the purpose is accomplished.

Delivery and possession of goods Delivery and possession is temporary It is for some purpose Goods delivered to be returned or disposed off according to the direction of bailer, when the purpose is accomplished Only the moveable properties can be given for bail money

Kinds of Bailment

Deposit: Simple Bailment. Delivery of goods by one person to another to keep for bailers use. Commodatum: The goods lent to a friend gratis. HIRE: Goods given on HIRE. Pawn: Goods delivered to another by way of security for money borrowed. For Reward: goods carried for reward

Contract of Agency

Agent & Principal: A person employed to do any act for another or to represent

another in dealing third parties/persons. The person for whom such act is done is called Principal. Basic ingredients: basic ingredients of contract of agency are; 1) Agent has a power on behalf of the principal to deal with the third persons so as to bind the principal. 2) Subject matter of the agency has to be dealt with as the property of the principal and not of the agent. 3) The agent acts as intermediary for consideration and, The liability of the agent is always to account for the sale proceeds to the principal

Sales of Goods Act:

Def: It is a contract whereby seller, transfers or Agrees to transfer the property (Ownership) in goods to the buyer for a price. Goods: Goods mean every kind of moveable property other than Actionable claims and money But includes stocks/shares/bonds, growing crops, grass and things attached to or forming part of land. Goodwill, trademark, patent, water, electricity, gas, ships are all goods. Specific Goods: Goods identified and agreed upon at the time of contract of sale. Ascertained Goods: Goods which become ascertained subsequent to the formation of a contract sale. Conditions: It is a stipulation which is essential to the main purpose of the contract, breach of which gives the aggrieved party a right to treat the contract as repudiated. Warranty: stipulation collateral to the main purpose of the contract breach of which gives the aggrieved party a right to sue for damages only.

Implied conditions in Sales

Condition as to title
Sale by description Sale by sample Sale by sample and description Quality of fitness Merchantability Wholesomeness

Implied Warranties
Buyer must enjoy quit possession of goods Goods free from any charge or encumbrances Quality or fitness for particular purpose

Effects of the contract:

Transfer of property as between seller and buyer Goods must be ascertained. Property passes when intended to pass. Specific goods in a deliverable state. Specific goods to be put into a deliverable state. Specific goods in a deliverable state, when the seller has to do anything thereto in order to ascertain price. Goods sent on approval or on sale or return. Reservation of right of disposal.

Partnership Act
Def: It is the relation between persons who have agreed to share the profit of a business carried on by all or any of them acting for all.

Duties of Partners
To work for the greatest common advantage. To be just and faithful To render true account To provide full information To indemnify for fraud To attend duties diligently No claims of remuneration To share losses To indemnify for willful neglect Hold and use property for firm Account for private profit Accounts for profits of competing business. To act within authority To be liable jointly.

Right of partners
Take part in business Be consulted Access accounts Share in profits Interest on capital Interest on advances Be indemnified Of joint ownership of property. As agent of the firm Act in emergency Refuse permission to new partner No liability prior to joining firm Retire

Not to be expelled

Dissolution of Partnership
Dissolution by Agreement Compulsory a) Insolvency of all or all but one partner b) When business becomes unlawful Contingent c) Expiry of the term for which the partner was created d) On completion of a particular project/undertaking. a) Death of a partner b) Adjudication of a partner as an insolvent.

 By notice a) Partnership at will Dissolution by Court b) When any one partner becomes of unsound mind. c) When anyone partner becomes permanently incapacitated. d) Misconduct by one partner e) When any one partner disregards the agreement f) When partner sells his share to a third party g) When the business can be carried only on loss h) Any other reasonable cause.

Formation of partnership
Creation of partnership
Partnership is created by an agreement. The partnership agreement may be made orally or in writing or may be implied from the course of dealings among persons concerned. All the essential elements of a valid contract must be present. There must be free consent, lawful object and the partners must be competent to contract. Minor being incompetent to contract cannot become a partner in a firm, but if all the partners agree, he may be admitted to the benefits of partnership. No consideration is required to create a partnership.

Partnership Agreement:
Def: partnership deed is a written document legally drafted to incorporate the expressly agreed terms and conditions between the persons desirous of forming a trading partnership.

Partnership deed:
The document which contains the partnership agreement is called partnership deed or articles of partnership. Partnership deed contains the agreement between the persons who have consented to form a partnership.

Contents: the partnership deed usually provides for these matters:

1. Name of firm and names of partners, 2. Nature and place of business, 3. Date of commencement of partnership, 4. Duration of firm, 5. Capital, interest or drawings, 6. Operation of banking account, 7. Profit sharing ratio, 8. Management, 9. Accounts, 10. Valuation of goodwill, 11. Arbitration, 12. Continuance or otherwise of firm on death or insolvency of partner, 13. Rules regarding admission, retirement, expulsion, 14. Salaries of partners, 15. Settlement of account on discussion.

Who may or may not be partner

1. Married women 2. Alien friend 3. Corporation 4. Person of unsound mind 5. Minor 6. Alien enemy 7. Lender 8. Servant or partner 9. Widow of a deceased partner 10. Previous owner of business

Registration of Firm
Registration of partnership firm means that the firm has complied to the legal requirements specified in section 56 to 71 of the partnership Acts, 1932 and the name of the firm has been entered in the register of firms maintained by the registrar of firm.

Procedure of registration:
1. 2. 3. 4. 5. 6. Prepare an application in the prescribed form. Payment of prescribed amount of fees. Submission of application to registrar. Scrutiny and acceptance of application by registrar. Issuance of certificate of registration. Registration of material changes.

Preparation of application
An application for registration of firm shall be prepare in the prescribed form. The application shall contain the following information: 1. Name of firm 2. Principal place and the places of business. 3. Names and addresses of partners. 4. Date on which each partner joined the firm. 5. Duration of partnership, if decided. 6. Profit and loss sharing ratio. The application shall be signed by each partner or by their authorized agent.

Effects of non registration

1. 2. 3. 4. Partner can not sue other partners. Firm cannot sue third parties. Third party can sue firm. No claim for set-off allowed.

International Law

A body of rules Governing the intercourse of states Governing actions of International Organizations

Recent developments
Negotiations on
Trade Conventions Curbing terrorism Mechanism of peaceful settlement of disputes International institutions Maritime, air and space law Refugee problem Immigration problem Citizenship problem International peace missions

International Business Law

States concern
Monetary policy Defense Policy Customs and Cultural Policy

Tariffs

Tax imposed on imported products Protectionist measure Tariffs- four kinds Specific Alternative Compound Ad valorem

1. Ad Valorem duty The kind most commonly used is one that is calculated as a percentage of the value of the imported goods - for example, 10, 25 or 35 per cent. This may be based, depending on the country, either on destination (c.i.f.), or on the value of the goods at the port in the country of origin (f.o.b.). 2. A Specific duty Is a tax of so much local currency per unit of the goods imported (based on weight, number, length, volume or other unit of measurement. Specific duties are often levied on foodstuffs and raw materials.

3. An Alternative duty Is where both an Ad valorem duty and A Specific duty are prescribed for a product, with the requirement that the more onerous one shall be Ad valorem duty value plus 10 cents per kilo.

4. Compound duties Are imposed on manufactured goods that contain raw materials that are themselves subject to import duty. The "specific" part of the compound duty (called compensatory duty) is levied as protection for the local raw material industry.

Reasons for tariffs

Reduces consumption Increases the domestic production Improves the balance of trade position Generates revenue Welfare effect

WTO
World Trade Organization

Marrakesh agreement
The Marrakech Agreement was an agreement signed in Marrakech, Morocco, in 1994. The agreement established the World Trade Organization, which came into being upon its entry into force on January 1, 1995. The Marrakech Agreement developed out of the General Agreement on Tariffs and Trade, which it includes; but it supplemented it with several other agreements, on such issues as trade in services, sanitary and phytosanitary measures, trade-related aspects of intellectual property and technical barriers to trade. It also established a new, more efficient and legally binding means of dispute resolution. The various agreements which

Make up the Marrakech Agreement combine as an indivisible whole; no entity can be party to any one agreement without being party to them all.

General Agreement of tariff and trade

Objects: Raising standard of living Ensuring full employment Ensuring large and steady growth of income and economy Expanding the production, trade

Basic Principles (WTO)

Trade without discrimination No MFN (most favored nation) No national special treatment Freer trade Predictability by binding tariff Promoting fair competition Encouraging development and economic reform