Business Law I.

- First mid-term
Norbi Székely

1 Introduction, basic concepts

• The law is a set of rules enforceable by the courts.
• The law maintains public order and safety, protects individual rights and liberties, organizes and
controls the political sphere, regulates human relationships (i.e.family, marriage, parent-child relation-
ships), regulates economic activity, preserves a moral order, and also regulates international relations.
• The consequence of the law, like imprisonment, is called a sanction and it is enforced by the state.
• Legal rules (i.e. law) specify facts and describe what should happen if they are fulfilled.
(“If..., then...” structures.)

• To apply the law we convert the general and abstract norm into an individual and specific one. Moreover
facts must fit every single element of the rule.
• Interpretations of the law
– Literal interpretation (meaning?)
– Systematic interpretation (context?)
– Historical interpretation (development?)
– Teleological interpretation (purpose?)
• Classification of the law
– Public law: The relationship between the state and its citizens.
∗ Constitutional law: Rules about the state, its organs and the fundamental rights of
individuals.
∗ Administrative law: Deals with taxes and media for instance.
∗ Criminal law: Forbids certain forms of wrongful conduct. Deals with crimes.
∗ International law: Regulates the relation between states and international organizations.
– Private law: Deals with the rights and duties of individuals towards each other.
∗ Civil law: Deals with contracts, torts1 , property, family issues, inheritance.
∗ Business law: Deals with commercial, company, insurance, banking, unfair competition and
intellectual property issues.
∗ Law of obligations: Deals with the rights and duties between individuals in connection
with legal transactions and unlawful acts.
∗ Law of real property: Deals with the persons’ rights with respect to physical property.
• Civil liability: Liabilities in contracts and torts.
• Criminal liability: A crime is an offence against the state.

1 Tort: A wrongful act leading to legal liability.

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 • Sources of law can be the acts of parliament, regulations, courts’ decisions, customary law, interna-
tional law, academic writing, legislation, soft law.
• Principles of interpretation:
– Lex Superior: Sometimes rules stand in an order based on a hierarchy between the legislative
bodies.
– Lex Specialis: Sometimes rules are over or under inclusive, therefore there is place for the specific
judgment to come into effect instead of the usage of the general rule if and only if it is reasonable
to do so.
– Lex Posterior: The newer rule prevails over the older one.
– Presumption: Accepting existence of one fact from the known existence of some other fact/s.
• Scope: The horizon in which the legal norms apply.

2 Constitutional law
• The branch of law that regulates the state itself.
• Sources of Constitutional Law:
– Constitutions: In most countries rules have been laid down in a central written document.
– Case law: When courts are called upon to interpret the meaning of the constitution or establish
fundamental rules and principles with constitutional significance in practical cases.
– Customs: Customs often play a role in the internal proceedings of parliaments (e.g. in the
composition of parliamentary committees).
• State: A legal person made up of people (citizenry), national territory and sovereign public authority.
This involves the legitimate monopoly of use of force.

• External sovereignty: Independence in international law and being a sovereign member of the
international community.
• Internal sovereignty: The source and legitimacy of the state to adopt and enforce binding rules on
its citizens and residents, and surfaces as legislative sovereignty.

• Failed states: Some states simply do not manage to exercise effective internal control and the monopoly
of force.
• Federal states (like U.S.A., Germany, Switzerland, etc.): In many states, regions are involved in
federal legislation.

• Confederations (like EU): The participating entities effectively remain sovereign states in their own
right. A confederation may in fact be so loose that it would not actually be called a state.
• Separation of powers: To avoid too much concentration of power, the same people should not
legislate, govern and judge. Also, there need to be some way in which each branch can be kept in check
by the others (checks and balances).

– Judiciary: independent courts

– Legislature: parliaments
– Executive: governments

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 • Forms of government
– Parliamentary systems: The head of the executive administration (i.e. head of the government)
is usually the prime minister. He is supported (or at least tolerated and not voted out of office)
by parliament.
– Presidential systems: The head of the executive is the President or the Governor who has her
own mandate, which is independent from parliament.
• Further, “fourth” and “fifth” possible powers: media, ombuds-institutions, internet, international law,
monetary regulators, civil society, etc.
• Judicial review: Courts can check the legality of acts of institutions of parliament and govern-
ment. Furthermore there can be a constitutional review, whereby a court checks whether legislation
adopted by parliament itself is lawful in the light of what the constitution provides. In a decentralized
system, the constitution is a norm that all judges must uphold. In centralized systems ordinary
judges must refer questions regarding the constitutionality of laws to a specialized constitutional court,
which then has the sole power to quash2 them.

• Bill of Rights: It’s about to curb the state’s power, and to protect the individual against it. Dividing
up powers between the state and private citizens is done by listing in a law certain basic rights of
citizens. If there is a written constitution the list will be part of the constitution.
• The Rule of Law: It may include such sweeping notions as fairness, inclusiveness, independent
adjudication, accountability, or transparency. It also has the qualitative meaning that the law must
not only be legal but also reasonable, compatible with human rights, and fair.
• Democracy: “Rule by the people.” a system of government where public power lies with, or emanates3
from, the people.
• Direct Democracy: The constituents4 who make the law decide by themselves and for themselves.

• Representative or Indirect Democracy: Public power is exercised by a ruler, or group of rulers,

who have been elected or appointed by the ruled.
• Majority Systems: Plurality Systems (candidate with the most votes is elected), Absolute Majority
Systems (candidate needs more than half of the votes)
• Proportional Representation: The share of seats in the assembly is proportional to the share of
the votes. In other words: 20% of votes will translate into 20% of seats for a political party.
• Liberal Democracy: Marked not only by free and fair elections, but also by rule of law, separation
of powers, and the protections of basic liberties of speech, assembly, religion, and property.
• Illiberal Democracy: Formal electoral system prevails but the human rights and/or the rule of law
are not constantly present.

2 Quash: Reject as invalid, especially by legal procedure.

3 Emanate: Originate from, produced by.
4 Constituent: A member of an area which elects a representative to a legislative body.

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3 Criminal Law
• It deals with public wrongs and a violation of the rules of criminal law commonly triggers the
imposition of public censure and (severe) punishment.
• According to the consequentialist, utilitarian theory of punishment, there is individual deterrence,
when the law punishes an offender in order to prevent the same person from reoffending. In case of
the general deterrence, the punishment tries to discourage other people from committing crimes.

• Rehabilitation: It’s about preventing future crime by giving offenders the necessary treatment and
training that enable them to return to society as law-abiding5 members of the community.
• Retribution: Offenders are punished for their crimes because they deserve punishment (“an eye for
an eye” principle).

• Incapacitation: The state has a duty to protect the public from future wrongs or harms, and that
such protection can be afforded through some form of incarceration or incapacitation.
• Reparation: Crimes should be corrected by requiring that offenders make amends to victims to repair
the wrong that they have done.
• Restorative justice: It’s about trying to repair the harm that it has caused by involving those
who have been affected. It understands crime not only as a legal infraction that requires public
condemnation, but also as an injury to real people and relationships that needs healing.
• Mens rea: The mental element of a person’s intention to commit a crime; or knowledge that one’s
action or lack of action would cause a crime to be committed. In other words: guilty mind. It can
be direct or indirect.

• Actus reus: Action or conduct that caused a crime, “willed body movement”, guilty act .
• Direct intent: It comprises a strong volitional element, where the consequence of an intention is
actually desired.
• Indirect intent: A strong cognitive aspect exists where the agent knows his conduct will almost
certainly bring about the result, which he does not actually desire or primarily aim at.
• Conditional intent: The conscious acceptance of a possible risk.
• Negligence: A violation of the required duty of care that causes a result prohibited by criminal law.
It has two types: conscious and unconscious deviation from the required duty of care.

• Recklessness: Recklessness covers dangerous risk taking. It does not require the volitional element
of acceptance. It only needs to be proven that the defendant was aware of a risk, which is, in the
circumstances known to him, unreasonable to take.
• Justification: It negates the wrongfulness of the act.

• Excuse: Negates the blameworthiness of the agent.

• Necessary-/Self-defense: The kind of act that is required in order to fend off an imminent unlawful
assault from oneself or another.
• Insanity: If someone commits an act for which he cannot be held responsible by reason of a defective
development or medical disorder of his mental capacities is not criminally liable.

• Criminal attempt: A criminal has an intent to commit a crime and takes a substantial step toward
completing the crime, but for reasons not intended by the criminal, the final resulting crime does not
occur.
5 Law-abiding: Obedient to the laws of society.

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• Investigation: The investigation aims at discovering crimes. Once the suspicion of a crime comes
to the attention of the law enforcement authorities, they conduct investigation in order to find out if
an offense has been committed and unveil all relevant circumstances (the author, the actus reus, the
mens rea, mitigating or aggravating factors).
• Criminal trial: An impartial court (a single judge, a panel, or a jury) decides whether the accused
(more appropriately called “defendant” at this stage) is guilty of the alleged crime(s).
• Public trial: The publicity of the trial constitutes a prevention of abuses; it is a form of social control
on the criminal process.
• Adversarial trial: A dispute between the parties.

• Inquisitorial: Part of the court is actively involved in investigating the facts of the case.
• Juries: Frequently used in the common law system, but some continental countries have also intro-
duced jury systems. Also, conviction cannot be based on investigative evidence alone.
• Presumption of innocence: An individual is considered innocent and must be treated as such until
a decision of guilt is passed against her.
• The criminal liability of legal persons: The crime need to aim at or result in providing benefit of
any kind for the legal person. The legal person can be sanctioned to be winded up, its activities may
be limited, or fines may be imposed (along the confiscation of the illegal gain).
• Main chapters of The Fundamental Law of Hungary:

– National avowal: It is a kind of introduction of the Hungarian values, history and attitude.
– Foundation: In this section we can get information about very basic things in connection with
Hungary such as the name of the country, the form of government, the name of the capital city,
etc.
– Freedom and responsibility: Here we can read about the fundamental human rights like right
to liberty, to life, to speak freely, etc.
– The State: In this chapter we can learn about the way of the state is organised and the regulations
about it. Like about the government, the parliament, the national assembly, the courts, etc.
– Special Legal Order: This is about extreme situations when the country is or soon will be in
quite a danger due to a terror attack, military attack, emergency, etc.
– Criminal Code: This is the second main part of the Fundamental Law. It provides details
about the various crimes that people may commit and possible punishments for that. Also it
gives detailed orders about the way how a trial should be conducted or what kind of liabilities
can a natural person have and so on.