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 subject to sanctions or legal consequences is a law. The difference between moral rules of conduct and the rules of law consists in the presence of a well-established sanction that comes when breaking the later. Social conduct rules are governing our existence giving meaning to it through order. Thus, our society functions in a just, fair way, the right way. Also, the word right has also another meaning in English. It refers to the prerogatives of every individual: the right to freedom, education, work, private enterprise etc. These prerogatives are best known 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: 1. keeping the social peace (example: laws that make certain activities crimes);

2. shaping moral standards (example: laws that discourage drug and alcohol abuse); 3. promoting social justice (example: laws that prohibit discrimination in employment); 4. maintaining the status quo (example: laws that prevent the forceful overthrow of the government); 5. facilitating orderly change (example: laws enacted only after considerable study, debate and public input); 6. facilitating planning (example: well-designed commercial laws that allow businesses to plan their activities, allocate their productive resources and assess the risks they take). Some scholars believe that other function of the law is the maximization of individual freedom as long as the Constitution of a state is granting the freedom of speech, religion and association.

Fairness of the Law On the whole, any legal system has to be comprehensive, fair and democratic. Nevertheless, some misuses and over-sights of any legal system, including abuses of discretion, mistakes by judges, unequal applications of law and procedural mishaps allow some guilty parties to go unpunished. However, these situations have to exist as exceptions, as mistakes 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 expansion 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 otherwise? The law deals with human relations and their most complicated aspects1.

Jerome Frank, The Law and the Modern Mind, Brentanos Publ. House, New York, 1930.

Schools of Jurisprudential Thought The philosophy or science of the law is referred to as jurisprudence. 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. Classical legal philosophies are discussed in the following paragraphs. Natural Law School The Natural Law School of jurisprudence postulates that the law is based on what is correct. Natural law philosophers emphasize a moral theory of law that is, law should be based on morality and ethics. Natural law is discovered by human thought , the use of reason and choosing between good and evil. Historical School The Historical School of jurisprudence 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. Historical legal scholars look to past legal decisions (precedents) to solve contemporary problems. Analytical School The Analytical School of jurisprudence 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 Sociological School of jurisprudence asserts that the law is a means of achieving and advancing certain social goals. The followers of this philosophy, known as realists, believe that the purpose of law is to shape social behavior. Sociological philosophers are unlikely to adhere to past law as precedent. Command School The philosopher of Command School of jurisprudence believe that the law is a set of rules developed, communicated and enforced by the ruling party rather than a reflection of the societys morality, history, logic or sociology. This school maintains that the law changes when the ruling class changes.

Critical Legal Studies School The Critical Legal Studies School proposes that legal rules are unnecessary and are used as an obstacle by the powerful to maintain the status quo. Critical 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. Under this theory, subjective decision making by judges should be permitted. Law and Economics School The Law and Economics School or the Chicago School believes that promoting market efficiency should be the central goal of legal decision making. For example, proponents of law and economics theory believe that a prisoner cannot find a lawyer who will take the case on a contingency-free basis (pro bono), the case is probably not worth bringing to justice.

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 existence of two major legal systems: civil law system or common law system. The Romano-Germanic civil law system, commonly called civil law dates of 450 B.C. when Rome adopted the Twelve Tables, a code of laws applicable to the Romans. A compilation of Roman Law called Corpus Juris Civilis (Body of Civil Law) was completed in 534 A.D. Later, two national codes The French Civil Code of 1804 (The Napoleonic Code) and the German Civil Code of 1896 became models for countries that adopted civil codes. In contrast to the Anglo-Saxon common law system, in which the laws are created by the judicial system as well as by the legislative power, the Civil Code and parliamentary statutes that expand and interpret it are the sole sources of the law in most civil law countries. Thus, the adjudication 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 (jurisprudence) do not have the force of law. Most European countries follow the civil law system. 4

Anglo-Saxon common law or English common law is the other major legal system developed by the judges who issued their opinions when deciding cases. The principles announced in these cases became precedent for later judges deciding similar cases. The common law system has been developed in United Kingdom after 1066. The system is used today in some countries around the word, usually countries that were influenced by the British colonial empire: United States of America, Australia, New Zeeland, Malaysia, Thailand etc. In spite of the differences, similarities exist 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 Most countries have Constitutions as the supreme law of the land. This means that any other law, whether national or local, that conflicts with the Constitution 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 Constitution established the structure of state governance, usually creating three branches of government and giving them the following powers: The legislative branch (Parliament) has the power to make (enact) the law. The executive branch (Government, President or both) has the power to enforce the law. The judicial branch (courts and other judicial authorities) has the power to interpret and determine the validity of the law.

B. Statutes or Laws Statutes are written laws that establish a certain courses of conduct that must be adhered to by the covered parties. The statutes are enacted by Parliaments or by similar bodies. Sometimes, when a statute comprises an extensive set of rules it is organized as a Code (Civil Code, Criminal Code, Civil Procedure Code etc.).

C. Government (executive branch) ordinances, decisions and executive orders State legislative is sometimes delegating lawmaking to the Government (executive branch). Thus, the Government enacts ordinances that are considered sources of law. Also, the Government is making decisions while enforcing the law. These decisions can sometimes be considered sources of law as well. Executive orders are issued by a member of the Government and they can also be considered, in certain cases, sources of law. D. Presidential executive orders In some countries, including Romania, the President can issue an executive order that can sometimes be considered a source of law. E. Regulations and Orders of Administrative Agencies In some countries, like the United States of America, the legislative and executive branch of federal and state governments are empowered to establish administrative agencies to enforce and interpret statutes enacted by the legislative branch. Many 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 Romania, treaties are usually signed by the President of a country with the advice of the Government and with the consent of the legislative branch (Parliament). Thus, treaties are given the force of law becoming a national source of law for a particular country or countries. With increasing international economic relations among nations, treaties are becoming an even more important source of law that will affect business in the future. G. Judicial decisions Based on the common law tradition, in certain countries, past court decisions become precedent for deciding future cases. Lower courts must follow the precedent established by the higher courts. Both types of courts will have to follow the precedents of countrys supreme court decisions. Thus, judicial 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.

However, in civil law countries, court decisions are not considered sources of law. Court 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 countrys economic development and, on an individual level, the economic well-being of a particular individual or family or business entity takes place within the context of laws. Some of these laws provide the means by which individuals can carry out a business on their own or they can join together into companies for the same reason. Some laws establish a system by which a business can get access to banking services, such as financing for the purchase and sale of goods. Other laws set forth rules regarding the existence of different contracts or minimum requirements 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 subjects. The term business law, however, is more familiar in some countries, for example USA or UK. Most law is national law. That is, the rules that govern behavior, including economic activity, exist at the level of a particular country. Only a relatively few such rules are international in scope or source. This fact reflects the importance of the nationstate in todays world. There are just under 200 nation-states in the world and most of the laws in each are different from those in all the rest. Therefore, law practitioners must look mainly to his or her own country rules for the specific legal rules that apply in a particular case. Despite 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 7

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 explicitly 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 tax to pay on business profits or how to handle similar detailed matters, the applicable rules of the local and national jurisdiction must be applied. In these particular situations one has to know exactly what are the specific national rules in order to avoid mistakes that can easily lead to serious and costly conflicts.