STUDENT: ȘĂULEAN RUXANDRA ANDREEA

Commercial Law

Concept

Commercial law, also known as business law, is the body of law that applies to the rights, relations, and conduct of persons and businesses engaged in commerce, merchandising, trade, and sales. It is often considered to be a branch of civil law and deals with issues of both private law and public law.

It can also be understood to regulate corporate contracts, hiring practices, and the manufacture and sales of consumer goods. Many countries have adopted civil codes that contain comprehensive statements of their commercial law. ¹

Commercial law governs the broad areas of business, commerce, and consumer transactions. Specific law has developed in a number of commercial fields. These include²:

¹en.wikipedia.org/wiki/Commercial_law²https://www.law.cornell.edu/wex/commercial_law

• Banking• Bankruptcy• Consumer credit• Contracts• Debtor and

creditor• Landlord-tenant

• Mortgages• Negotiable instruments• Real estate transactions• Sales• Secured transactions

Professionals and non-professionals

The professional, in the meaning of commercial law, is the outfitter and can be defined as any individual or legal entity, who/which exploits a company for profit, which is registered in the state’s central register, commercial register or companies register.

To exploit a company means the systematic exertion of one or more persons to organize an activity, which can consists of goods production, administration or alienation or of services provision, having the purpose of obtaining a profit.³

The non-professional is any individual who purchases the goods or uses the services provided by the professional, called consumer. A consumer is defined as someone who acquires goods or services for direct use or ownership rather than for resale or use in production and manufacturing.

³http://ro.scribd.com

Commercial contracts- special rules-

Apart from the common legislation regarded to the contracts, for those in which one part is a professional, there are special applicable rules. This rules were implemented by the Uniform Commercial Code in American legislation and were adopted in part or in whole by all states in America and they are accepted also by European states, representing essential components to a valid legal contract and they refer to the following: There must be an agreement—The technical language of the law is that

there must be offer and acceptance. Essentially, though, this means that the parties must be in accord regarding all the material elements of the agreement—what’s being bought, sold or delivered; how much is being paid, when the goods or services will be delivered.

Each party must give something in exchange—This is what distinguishes a contract from a gift. The law calls this “consideration,” but it really means that both parties must either give up something that they had a right to keep (dollars, goods, services) or refrain from doing something they had a right to do.

The subject matter of the contract must be legal—You cannot enforce a contract to perform an illegal act.

Commercial contracts- special rules-

The parties must have the legal capacity to enter into a contract—Basically, this means that you must understand that you are entering into a contract, and that the contract will be binding. If you suffering from delusions at the time, or were intoxicated or under the influence of a mind-altering drug, you (or others) may argue that you did not understand what you were doing and, therefore, lacked capacity. Most states have laws as well that hold that persons under a certain age (typically 18) have not fully matured to the point where they understand the legal implications of a contract.

You must willingly enter into a contract—If you entered into a contract against your will, or you were misled into signing or entering into a contract, you may be able to void the agreement. Examples include situations where you were subjected to duress or undue influence, or where the other party misrepresented the nature of the agreement or that you were entering into a contract. You may also be able to void a contract if there was a mistake about what was being bought or sold.⁴

⁴http://public.getlegal.com

Types of contracts

A contract may be executed to establish the terms of any legal business transaction, provided the components listed above are present. Typical business agreements involve:

The sale of goods, either retail products or parts;

The provision of services, including vendor services or employment;

The use of intellectual property, such as patents, copyrights, trademarks and trade secrets;

A party’s right to disclose confidential information, or to engage in competition;

The purchase or lease of real property. ⁵http://public.getlegal.com

Commercial contracts

As any contract, the commercial contract is an agreement between the parties, based on the principle of contracting freedom, according to which the parties have the right to establish their own contractual terms according to their willing.

Apart from the general conditions regarded to parties’ capacity and consent, the morality and legality of the good and transaction’s scope, and also the required form for the valid contracting or regarding the offer – acceptance, there are also some specific regulations.

This specific regulations refer to the fact that, depending on it’s type, the contract should contain terms on parties’ obligations during the contract’s execution, on the way the goods be delivered, time limits and modalities of payment, inflation, price consolidation and the way of solving the conflicts. ⁶

There are also special principles regarded to commercial contracts. The main principles are the following: The prohibition of unfair terms. The products quality and consumer’s safety. Consumer’s rights.

⁶https://ro.scribd.com

Commercial contracts-principles-

The prohibition of unfair terms.

An unfair contract term is one which is declared by a court to be unfair. A court, on an application from the Commerce Commission, will consider any "standard form consumer contract". A standard form consumer contract essentially means a contract in which the terms have not been effectively negotiated between the parties. The court may then declare that the term is unfair if it:

would cause a significant imbalance in the parties' rights and obligations under the contract;

is not reasonably necessary in order to protect the legitimate interests of the party who would be advantaged by the term; and

would cause detriment (whether financial or otherwise) to a party if it were applied, enforced, or relied on.

Commercial contracts-principles-

A court must also take into account the extent to which the term is transparent (for instance, whether it is readily available to any party affected by the term) and consider the contract as a whole (some terms that might seem quite unfair in one context may not be unfair in another). The good news is that the subject of the contract and the upfront price payable cannot be declared unfair.

Given the vague definition of "unfair", the Bill provides a list of contract terms that may possibly be declared unfair depending on the circumstances. These include: a right for only one party to vary the terms of the contract; a right for one party to unilaterally vary the price without giving

the other party the right to terminate the contract; a right for only one party to terminate or renew the contract; or a right to unilaterally vary the characteristics of the goods or

services supplied.⁷⁷ http://www.simpsongrierson.com

Commercial contracts-principles-

The products quality and consumer’s safety involves the fact that the delivered product has to meet consumer’s expectations by respecting the presented characteristics with which the consumer agreed. In the same time, it refers to the validity of the product, especially when the product is a consumer one according to consumer’s right to health.

Apart from the right to health, there are many consumer’s rights to be taken into consideration in a commercial relationship. In a democratic society, the main rights of the consumer are the following: Right to Safety- means safeguarding against goods that are

hazardous to life and properties. Right to Information-means that consumers have the rights to

be informed regarding the price, quality, quantity etc., regarding the products.

Commercial contracts-principles-

Right to Choice-refers that consumers should be provided wide variety of goods to choose from.

Right to be Heard-means the right of the consumers complaints to be heard.

Right to Redress-means that the consumers have the right to seek redresses regarding their complaint in the forums.

Right to consumer education-the right of the consumers to be educated about their rights.⁸

All this principles and rights are established according to consumer protection.

⁸http://en.wikipedia.org

Consumer protection

Consumer protection is a group of laws and organizations designed to ensure the rights of consumers as well as fair trade, competition and accurate information in the marketplace. The laws are designed to prevent businesses that engage in fraud or specified unfair practices from gaining an advantage over competitors. They may also provide additional protection for those most vulnerable in society. Consumer protection laws are a form of government regulation, which aim to protect the rights of consumers. For example, a government may require businesses to disclose detailed information about products—particularly in areas where safety or public health is an issue, such as food. Consumer protection is linked to the idea of consumer rights, and to the formation of consumer organizations, which help consumers make better choices in the marketplace and get help with consumer complaints.

Consumer protection

Other organizations that promote consumer protection include government organizations and self-regulating business organizations such as consumer protection agencies and organizations, the Federal Trade Commission, ombudsmen, Better Business Bureaus, etc.

Consumer interests can also be protected by promoting competition in the markets which directly and indirectly serve consumers, consistent with economic efficiency, but this topic is treated in competition law. Consumer protection can also be asserted via non-government organizations and individuals as consumer activism.⁹

⁹http://en.wikipedia.org

Varieties of commercial contracts

Depending on the object of the contract and on the qualification of the contractual parties, there are recognized some specific commercial contracts. These are:

contract of sale supply contract (delivery agreement) brokerage contract (factoring), including commission

(poundage) contract and agent's contract insurance contract lease contract (agreement).

Contract of sale

The contract of sale can be defined as a contract by which the seller transfers or agrees to transfer the property in goods to the buyer for a money consideration, called the price.

Where under a contract of sale the property in the goods is transferred from the seller to the buyer the contract is called a sale.

Where under a contract of sale the transfer of the property in the goods is to take place at a future time or subject to some condition later to be fulfilled the contract is called an agreement to sell. ¹⁰

¹⁰http://catalogue.pearsoned.co.uk

Contractual obligations

As any contract, also the commercial contract has the power of law between parties. This means that both of them have to respect and behave according to its provisions by fulfilling the obligations. So, the general obligations a contract of sale involves are:

for the professionals (seller): to transfer the ownership of the sold product. to deliver (to actually give) the good. to guarantee for eviction or good’s defects.

for the consumer (buyer): To pay the price. To take the good (product).¹¹

¹¹ https://ro.scribd.com

Supply contract (delivery agreement)

Supply contracts are types of contracts that establish the terms of a working relationship between a vendor and a customer. A supply contract is often necessary in order to lock in discounted pricing and other benefits that the supplier is agreeing to provide to the client for a specific period of time. The terms of a supply contract often define everything from the means whereby the products are delivered, terms of payment, and any other aspect of the relationship that the two parties have determined to be necessary.

While the exact form of this type of requirement contract varies from one industry to the next, there are a few elements that are inherent for most examples of the supply contract. The most common element is the pricing schedule that will govern the charges for goods or services rendered to the customer. Often, this portion of the contract will be structured to identify special pricing extended to the customer, either as a flat rate, or on a sliding scale, based on the volume of units ordered.

Supply contract (delivery agreement)

For example, a supply contract for teleconferencing would be structured to either extend a specific rate per minute per connection for conference call services, or include a chart that indicated a gradual reduction in unit price as the customer used more conference minutes over the course of the contract. The rate structure is usually in effect for whatever duration is specified in the contract, with periods of one year, two years, and five years being the most common.

Another aspect that is very common to a supply contract is the creation of sections and clauses that govern how the supplier will provide goods and services to the customer. This may include the terms for shipping, or any additional charges that may apply for expedited shipping above the terms defined in the contract. Some contracts include guarantees of shipment within a specific time frame after the order is placed, such as within twenty-four hours of receiving the order.

Supply contract (delivery agreement)

A supply contract usually defines the terms of payment, such as the different means whereby the customer may pay an outstanding invoice. This may include terms as payment by postal mail, online payment options, or even an electronic transfer of funds from the customer’s bank to the supplier’s bank. This section usually also defines the options open to the supplier in the event that the customer fails to pay invoices within terms, including rendering the contract null and void, or revoking the discount extended to the customer off the standard unit price.

In the best of situations, the supply contract protects the rights of both parties. The client knows what to expect in terms of the goods received and how they will be delivered. In turn, the supplier knows what the client is likely to need and how payment will be submitted. As long as both parties honor their responsibilities to one another, the business relationship is likely to be a profitable one for everyone involved.

Brokerage contract (factoring)

A brokerage contract (factoring) is a written contract by which a broker is employed as an agent to make contracts in the name and on behalf of the principal. It will contain details of the terms of the business relationship between a broker and his/her principal. Upon receiving signature from both parties, a brokerage contract becomes a working document to which both parties must abide. Non fulfillment of conditions stipulated in a contract would make the contract null and void. A broker usually receives a commission under the brokerage contract. It is also called as a brokerage agreement, dealer agreement, or a broker agreement.

A typical brokerage contract would cover issues such as acquisitions, proprietary investment opportunities, sale, mergers, re-capitalizations, management buyouts, financing or other typical business issues.

Commission (poundage) contract

A commission contract consists of agreements agreed explicitly with the commission contract partner, or implicitly through the standard commission contract or as a global agreement.

Individual agreements can only be made in the commission contract.

For example, payment agreements are usually negotiated individually, or internal titles, notice agreements, and so on.

Standardized agreements are included in the standard commission contract as templates. You can change the templates in the commission contract. (for example, performance-related remuneration). Agreements in the standard contract can be selected and attributes defined for them (such as flat rates, guarantee).

Commission (poundage) contract

Global agreements are predefined in the standard commission contract and these apply throughout the whole organization. Agreements can be changed in the standard commission contract and identified as global agreements. This means they cannot be changed in the commission contract itself. (Example: Sales performance and liability could be fixed for the whole organization in a global agreement.

General agreements are the core object of the commission contract; they contain all the information and agreements (such as start and end) required for the existence of the whole commission contract (such as contract start and end).

Agent's contract

An agency agreement is a legal contract creating a fiduciary relationship whereby the first party ("the principal") agrees that the actions of a second party ("the agent") binds the principal to later agreements made by the agent as if the principal had himself personally made the later agreements.

The power of the agent to bind the principal is usually legally referred to as authority. Agency created via an agreement may be a form of implied authority, such as when a person gives their credit card to a close relative, the cardholder may be required to pay for purchases made by the relative with their credit card.

Insurance contract

The insurance contract commonly refers to an agreement where one party (the insurer), agrees to provide coverage to another party (the insured), on the occurrence of a specified event that is beyond the control of either party, in exchange for receiving payment of premiums from the policyholder.

The definition of insurance contract in Romania is regulated by the Civil Code.

Article 2199 of Civil Code states that the insurance contract is a contract in which the policyholders or the insured is obliged to pay the insurance premium and the insurer, has to pay an indemnity in the event of the insured risk occurs, to the insured or injured third party insurance beneficiary.

Lease contract (agreement)

Lease is a legal document outlining the terms under which one party agrees to rent  property from another party. A lease guarantees the lessee (the renter) use of an  asset and guarantees the lessor (the property owner) regular payments from the  lessee for a specified number of months or years. Both the lessee and the lessor must uphold the terms of the contract for the lease to remain valid.

Leases are the contracts that lay out the details of rental agreements in the real estate market. For example, if you want to rent an apartment, the lease will  describe how much the monthly rent is, when it is due, what will happen if you don't pay, how much of a security deposit is required, the duration of the lease, whether you are allowed to have pets, how many occupants may live in the unit and any other essential information. The landlord will require you to sign the  lease before you can occupy the property as a tenant.