Business law, also known as commercial law or mercantile law, is the body of regulations governing inter-person interactions in commercial matters, whether established by convention, agreement, national or international legislation.
Business law is divided into two distinct categories: (1) the laws governing companies, partnerships, agencies, and bankruptcy; and (2) the laws governing contracts and related fields, which govern business transactions.
Company law is composed of statute law in countries with civil law; in nations with common law, it is composed of statute law as well as the customary rules of common law and equity. The idea of legal personality and the theory of limited liability are the two fundamental legal theories that underpin all of company law. Most statutory laws are designed to protect either
Different types of legal business entities exist, ranging from the sole trader—who alone is responsible for managing a business and collecting profits—to the registered company with limited liability and multinational corporations. Because they do not legally form an association, these entities are not subject to any special rules of law. Members of a partnership “associate,” forming an association in which they all take part in management and profit sharing, bear responsibility for the firm’s debts, and are subject to joint and several liability for the firm’s contracts and torts. Each partner acts as the other’s agent, and as a result, they have a fiduciary duty to one another.
An agent is a person who works on behalf of his principal to enter into contracts with third parties. There are several types of agency that are governed by law, including universal agency, where an agent is designated to manage all of his principal’s affairs, general agency, where an agent is authorised to represent his principal in all transactions of a particular type, and special agency, where an agent is designated for a specific purpose and given only limited authority. The parties’ actions, the demise, insolvency, or insanity of the principal or agent, frustration, intervening illegality, or termination of the appointment—whether express or implied—can all terminate the appointment.
It is inevitable that business entities may occasionally be unable to fulfil their financial obligations. A set of laws governing bankruptcy emerged along with the development of the laws governing commercial enterprises. When an individual or business becomes insolvent (i.e., unable to pay debts as and when they become due), either they or their creditors may ask the court to take over the administration of their estate and distribute the proceeds among their creditors. Three principles become clear: to free the debtor from his obligations, to ensure a fair and equal distribution of the available property among the creditors, and to determine the cause of the debtor’s insolvency.
