A Brief Introduction to Commercial Law

According to Wikipedia, “Commercial law (sometimes known as business law) is the body of law which governs business and commerce. It is often considered to be a branch of civil law and deals both with issues of private law and public law. Commercial law regulates corporate contracts, hiring practices, and the manufacture and sales of consumer goods. ” The Law is a system of rules usually enforced through a set of institutions. It affects politics, economics and society in numerous ways. Contract law regulates everything from buying a bus ticket to trading swaptions on a derivatives market.

Property law defines rights and obligations related to transfer and title of personal and real property, for instance, in home loans (bonds) or renting a home. As members of a society we need a set of laws which defines our rights and duties, a society cannot function effectively and efficiently without a set of rules governing human behaviour. TABLE OF CONTENTS EXECUTIVE SUMMARY1 TABLE OF CONTENTS2 INTRODUCTION3 QUESTION ONE4 QUESTION TWO6 QUESTION THREE8 QUESTION FOUR10 QUESTION FIVE12 The following are essential elements in a contract of lease:12 Specified immovable property12 Specific period13.

Express Renewal13 Tacit Renewal13 Specified Rental14 The Formation of the Contract of Lease14 Duties of the Landlord14 Timeous delivery of the leases property14 Warranty against interference15 Maintenance15 Damage to property of tenant15 Special terms15 The Duties of the Tenant15 Payment of the rent15 No misuse of the property16 Return the property undamaged16 Specific performance16 QUESTION SIX17 QUESTION SEVEN19 A contract surety may terminate due to the following:20 QUESTION EIGHT21 Sole Proprietorship21 Partnership22 Close Corporation23 Private Company24 CONCLUSION26 REFERENCES27 INTRODUCTION.

In this assignment I will distinguish between criminal or civil cases and the differences between real and personal rights. The steps involved before one goes to trial will be discussed. I will be explaining how the court of law may handle a case of a mentally disabled or a minor who enters a contract. The risk and liabilities to both the seller and purchaser will be discussed. The essential elements of a lease and the duties of the landlord and tenant under the contract of a lease will be discussed. Breach of contract will be explained and the legal choices the injured party may have will be discussed.

The concept of suretyship will be explained and the ways it can be terminated is explained. The different forms of a business enterprise will be explained and examples will be given. QUESTION ONE Jury Duty Information defines a civil case as being “a lawsuit is called a civil case when it is between two or more individuals or corporations involved in a dispute and usually seeking a judgment awarding monetary damages. ” McPhee (2003) defines a criminal case as “a case concerning an act considered harmful to the general public that is forbidden by law and punishable by fine, imprisonment, or community service.

” Before we can say that someone has committed a crime, it must be proved beyond reasonable doubt that the person committed an unlawful act, and that he or she had a blameworthy state of mind at the time. From the above definitions and statements I conclude that this is a civil case as a criminal act has not been committed, but a dispute has arisen between Joshua and Simon due to Simon’s non payment of the money that he owes Joshua in lieu of the sale of the vehicle. Simon has not fulfilled his monetary obligation towards Joshua.

Regent study aid states that “a civil case is brought by a person (referred to as “the plaintiff”) who feels that he has been wronged by another person (referred to as “the defendant”). From the aforementioned we can see that Joshua is the plaintiff and Simon is the defendant, as Simon has not fulfilled his monetary obligation towards Joshua, therefore Joshua feels wronged by him and has decided to take Simon to court. A real right, or ius in rem, is enforceable against the whole world, or any legal subject. This means that you can legally protect your real right in something from anyone in the world who tries to interfere.

A personal right or ius in personam, exists against a specific legal subject. This means that you can only legally protect your personal rights against interference from a specific person. Joshua is enforcing his personal rights because Simon has taken his possession (vehicle) and has defaulted on payment. By taking Simon to court, Joshua is trying to recover money which is rightfully due to him. QUESTION TWO •Joshua (the plaintiff) asks an attorney to send Simon (the defendant) a Letter of Demand, by registered post, requesting payment within a specified time, failing which further legal action will be taken.

•If Simon does not pay, the attorney will draft a Summons setting out the case, and have the summons served on (delivered to) Simon by an official called the Deputy Sheriff. •If Simon decides to defend the case he will lodge a Notice of Intention to Defend with the court within a specific time period. If Simon fails to lodge at court Notice of Intention to Defend, Joshua may take judgement against him. •If Simon lodges at court a Notice Of Intention to Defend, and Joshua believes it has been entered solely for the purpose of delay, he may apply to court for judgement against Simon.

•After Simon lodges a Notice of Intention to Defend, he may want more details as to the case. He sends written questions, a Request for Further Particulars, to Joshua (via his attorney). •Joshua will issue Simon with Further Particulars, i. e. the written questions answered, in writing. •Simon may then submit a plea, which is the defence to the claim, example he does not have the money to settle the debt, at the moment •Simon may submit a Counterclaim for example he may claim the car is not in proper working order as told by Joshua.

•Joshua may now issue a Request for Further Particulars to Counterclaim asking Simon for details regarding the claims made that the car is not in working order. •Simon would then provide Further Particulars to Counterclaim where these questions are answered •Joshua or Simon may request the other, via Notices, to disclose relevant documents such as quotes etc •If an agreement cannot be reached between Simon and Joshua they will have to go to Trial •An Application for Trial Date would then be sent to the court to ask when a court will be available to hear the matter. •Set Down: a court is booked for the date allocated.

•The case now goes to Trial. Each side leads evidence from witnesses and produced documents to the court to prove its case. •When Judgement is issued, the presiding officer decides who wins, or if the court cannot decide, grants “absolution from the instance”, i. e. no-one wins and the matter is thrown out of court. •Either party is entitled to ask that the case be taken on appeal where the judgement of the court is reconsidered. For example if Simon is found guilty of non-payment, he may ask that the case go on appeal so that another court can re-consider the facts.

An Appeal is extremely costly and should only be considered if there is a very real chance that another court would find differently. QUESTION THREE Anderson (2003) cites “all persons, regardless of age, mental capacity, etc. have certain legal rights and duties. But the capacity to perform certain juristic acts, such as entering into contracts, may be limited. ” A supposed contract made by a mentally disabled person is void if, at the time of the agreement, he could not understand and appreciate consequences of his actions. To overcome this The Supreme Court may appoint a curator to such a person to assist the mentally disabled person.

The curator acts simply as a guardian, and must assist the person with all his contracts. No contact is binding unless it is agreed to by the curator. Your age is a very important factor in what you are and aren’t legally entitled to do. A minor is an unmarried person under the age of 21 years. A minor may not, generally, contract without the assistance of his guardian. This is done to protect the minor from is own immature judgement. The natural guardian is the biological father, but may be the mother if the father has died or the child is illegitimate.

A legal guardian may be appointed by the Supreme Court, which is the self appointed upper guardian of all minors, if there is no satisfactory natural guardian. Guardians may give consent to a contract entered into by the unassisted minor before or even after the contract has been entered into. The guardian may also contract on behalf of the minor. In both cases the minor will be bound on the contract. If a minor contracts without the consent of the guardian, the contract may later be ratified, either by the guardian or by the minor on attaining majority (turning 21).

Where the contract has been entered into by the minor without the guardian’s consent, the contract is void, and the minor cannot be held liable under the terms of the contract. QUESTION FOUR The seller must take good care of the thing that has been sold until he delivers or the buyer fetches the thing that has been sold. It is the sellers duty to take care of the good(s) being sold until it is collected or delivered to the new owner. If the seller does not take care of or is negligent or careless and as a result there is damage to the good(s), the buyer can get his money back from the seller.

If the seller does take care of the good(s) and it gets damaged by accident, the seller is not held responsible and the buyer will have to take the damaged good(s). This is a legal rule called “the passing of the risk. ” The passing of the risk in law means that after the offer by the seller has been accepted by the buyer in a contract of sale and the sale is said to be concluded, the risk of accidental damage to the thing that been sold but not yet delivered passes to the buyer. In case (A) because the contract is complete, the risk of accidental damage to the vehicle passes to George “passing of the risk” legal rule is applicable.

George is liable for the damages to the car if any was incurred by lightning. Lightning is an Act of God therefore Pat cannot be liable for any damages caused by lightning striking the vehicle, “the passing of the risk. ” George carries the risk and cannot get money back from Pat. George must take the vehicle in its damaged state and even if the vehicle was totally destroyed by the lightning, George will get nothing although he has already paid for the vehicle. In case (B) the vehicle has been damaged through Pat’s fault, i. e. she was negligent and crashed into a tree.

George is therefore able to get his money back from Pat because the risk does not pass if the seller is careless in looking after the thing sold before it has been delivered. QUESTION FIVE What is a lease? Mohamed (2003) defines a lease as “a contract between landlord and the tenant to allow the tenant temporary use and enjoyment of the dwelling. ” Many people do not own their own homes but rent a place to stay. The owner of the property (lessor/landlord) allows a person (lessee/tenant) to stay on their property in exchange for the payment of rent. This agreement is called a lease.

We can see that there are two parties to a contract of lease namely the lessor or landlord or the lessee or tenant. Parties have to agree on the rental to be paid in respect of the dwelling let. Without a rental agreement, there is no lease contract. According to Mohamed (2003) a lease can be oral (verbal) or in writing. However, the landlord must reduce the lease to writing should the tenant request in terms of section 5(2). A lease cannot be changed while it is in use, unless both the landlord and tenant agree to any change. The following are essential elements in a contract of lease: Specified immovable property

•The parties to the lease must be in complete agreement about the subject matter of the contract. The lessor or landlord and the lessee or tenant must both know exactly what the immovable property is to be let. It must be specific example room, flat or house. Specific period •The period of time that the tenant can use the property must be agreed by the parties, as the parties do not intend that the lessee have the use of the property permanently but only for a fixed period. A lease is generally for a definite period example six months, a year or two years.

There are however indefinite leases where the lease can be for an indefinite time period. That is the lessee or tenant keeps paying rent until such time as either the lessor (landlord) or the lessee (tenant) wants to end the lease contract by giving the other party notice. The lease may be renewed. Express Renewal •The original lease generally contains an option to renew the lease during its currency, thus giving the tenant the right to renew on the expiry of the old lease. To exercise this right to renew, the tenant must comply with the option clause. This is known as “conventional relocation.

” Tacit Renewal •Tacit relocation is the term referred to when the landlord simply allows the tenant to stay in occupation after the termination of the lease and continues to take his rent for the use and enjoyment of the property. If the landlord dies or if either party lacks capacity or becomes insane with no curator there will be no tacit relocation. Specified Rental •It is imperative that the parties agree to the sum of rent that is to be paid. If the owner of the property allows the tenant to stay on the property without paying rent, it will not be a contract of lease.

A definite rent that can be calculated must be agreed upon, or a manner of determining that amount, or else there is no lease. This poses a problem when in addition to a fixed rental; tenants have had to pay maintenance charges for common areas, or for the upkeep of the building. These amounts obviously cannot be calculated at the time the lease is entered into. The courts have held that these form part of the lease, and that unless they are specified or ascertainable, the leases concerned are unenforceable since the determination of the amounts payable at the instance of the landlord only. The Formation of the Contract of Lease.

•A lease can be oral (verbal) or in writing. A lease of any property which is ten years or longer should be registered on the title deeds of the property. Duties of the Landlord Timeous delivery of the leases property •The landlord (lessor) must make the property available to the tenant so that the tenant can move in on the day that the parties agreed. If the lessor has agreed for the tenant to move in on the 1st January then the lessor must hand the key to the tenant on 1st January. According to Anderson (2003) “the landlord has to allow the tenant onto the premises from the first day of the rental period.

” Warranty against interference •A tenant rents a property for his or her quiet and undisturbed use and enjoyment. It is the landlord’s duty to fulfil this right during the lease period. Maintenance •The landlord has to hand over the dwelling for occupation to the tenant in a reasonable condition (“a good state of repair”) that would allow the tenant undisturbed use and enjoyment. A landlord is further required to maintain the property both internally and externally at all times. Parties can however agree that the tenant will take over certain duties of the landlord.

Damage to property of tenant •Damages caused to the tenant or tenant’s property due to something seriously wrong with the property will have to be paid by the landlord. Special terms •Any special terms agreed upon by the parties must be carried out, example if the lessor agreed to install a security gate. The Duties of the Tenant Payment of the rent •The payment of rental on time is an important part of the rental agreement. It must be paid at the time and place agreed to, and in the manner requested (cash, cheque, money order, etc).

Under common law a landlord may only cancel a lease after two years rent arrears, and then only after notice to the tenant. In order to protect themselves from non-payment by tenants, landlords normally insert forfeiture clauses in a lease, which enables the landlord to cancel the lease. No misuse of the property •Tenants must keep the dwelling in a clean, tidy, safe and sanitary condition and shall otherwise comply with all local municipal laws requiring tenants to maintain rented dwellings. Tenants cannot use the property for any other purpose other than stated in the lease.

Return the property undamaged •At the end of the lease the tenant must give the property back in the same good condition in which it was given to them. Specific performance •If there were any special or extra terms of the lease contract that the tenant agreed to, he must carry them out. For example if the tenant agreed to clean the floor carpets before he moves out. QUESTION SIX Havenga (2002) cites “the primary purpose when creating contracts is their fulfilment or discharge by due and proper performance. ” Unfortunately not all contracts end in this way.

When the intended result is not achieved as a consequence of the fault of one of the parties, that party commits breach of contract. Where one party to a contract commits breach of contract the rules of the law of contract protect the innocent party’s personal rights and grant him or her redress in the form of a legal remedy which can be enforced through an action in a court of law. According to Havenga (2005) “the legal remedies at the disposal of the innocent party are execution of the contract, cancellation of the contract, and damages. ”

Execution of the contract is the primary remedy while cancellation can be seen as another remedy for breach of contract. The remedy of execution of the contract is, in principle, available with respect to all forms of breach of contract. In principle, the remedy of cancellation of the contract is also available with respect to all forms of breach of contract, but only if the breach is of a serious nature or if the contract contains a cancellation clause. The remedies of execution of the contract and of cancellation of the contract are mutually exclusive and the innocent party has a choice between the one or the other.

Although the innocent party can claim the two remedies in the alternative, enforcement of the one excludes the other. Where the innocent party suffers damage as a result of the breach of contract of the other party, he or she is also entitled to claim damages as a remedy. This is also so irrespective of whether the innocent party has cancelled the contract or claimed execution thereof. Gregory who lives in Durban has agreed in a contract to sell his motor vehicle to Russel who lives in Gauteng. Russel is a sales representative, and requires this vehicle to generate sales.

Russel goes to fetch the vehicle from Gregory, and on arrival has been told by Gregory that he has sold the vehicle to somebody else who has offered him a higher purchase price. Russel’s legal choices can either be (a)Cancel the contract and sue Gregory for the cost of the travelling expenses that he incurred travelling to Gauteng. (b)OR abide by the contract and insist that he receives the vehicle and is compensated for the loss of revenue due to not having the promised vehicle. Anderson (2003) cites “breach of contract means that a party does not perform as agreed.

To perform means that each party must do or pay what they agreed in the contract. From the above example we see that Gregory is in breach of contract as there has been a failure on Gregory’s part to observe the terms of the contract he entered into with Russel. QUESTION SEVEN Bret’s mum(surety/second debtor)is obliged to pay for the outstanding amount owing of R2000. 00, as she signed the contract, acting as surety, in the event that Bret(principal debtor) defaults or is unable to make payment to Joanne(obligee/creditor). I have made the above conclusion due to the following statements and definitions:

According to Surety Bond “suretyship refers to obligations to pay the debts of, or answer for, the default of another. It assumes a legal relationship based upon the contract in which one person (the surety) undertakes to answer to another (the obligee) for the debt, default, or miscarriage of a third person (the principal) resulting from the third person’s failure to pay or perform as required by an underlying contract. ” Havenga (2000) defines the contract of suretyship as “an agreement by means of which one person (the surety) renders himself or herself liable towards a creditor for the proper compliance of the obligations of a debtor.

In such a case there are, therefore, two debtors, namely the debtor in the first agreement (the principal debtor) and the debtor in the contract of surety. ” The principal debtor remains liable in terms of his or her agreement with the creditor. The liability of the surety is additional to this. Havenga (2000) cites “personal security is given by granting the creditor the right, in case of non-payment of the principal debt, to secure payment by means of a personal right against another party to carry out the stipulated performance.

Lectric Law Library defines suretyship as “an accessory agreement by which a person binds himself for another already bound, either in whole or in part, as for his debt, default or miscarriage. ” A contract surety may terminate due to the following: •By payment, by the principal. •By release of the principal. •By tender made by principal to the creditor. •By compromise. •By accord and satisfaction •By novation. •By delegation. •By set-off. •By alteration of the contract. QUESTION EIGHT Sole Proprietorship ‘Sole’ means single and ‘proprietorship’ means ownership.

It means only one person or an individual becomes the owner of the business. Thus, the business organisation in which a single person owns, manages and controls all the activities of the business is known as sole proprietorship form of business organisation The individual who owns and runs the sole proprietorship business is called a ‘sole proprietor’ or ‘sole trader’. A sole proprietor pools and organises the resources in a systematic way and controls the activities with the sole objective of earning profit. Small shops like vegetable shops, grocery shops, telephone booths, chemist shops, etc.

are some of the commonly found sole proprietorship form of business organisation. Apart from trading business, small manufacturing units, fabrication units, garages, beauty parlours, etc. , can also be run by a sole proprietor. This form of business is the oldest and most common form of business organisation. Definition of Sole Proprietorship We can now define sole proprietorship as– A business enterprise exclusively owned, managed and controlled by a single Person with all authority, responsibility and risk. Partnership.

Often a business requires a combination of talents example, lawyers (Honey & Partners Attorneys) and doctors who specialize in different areas. Any two or more people can get together and from a partnership. Each agrees to provide some fraction of the work and capital, to share some percentage of the profits, and of course to share the losses or debts. Today, partnerships account for only a small fraction of total economic activity. The reason is that partnerships pose certain disadvantages that make them impractical for large businesses.

The major disadvantage is unlimited liability. General partners are liable without limit for all debts contracted by the partnership. The peril of unlimited liability and the difficulty of raising funds explain why partnerships tend to be confined to small, personal enterprises such as agriculture and retail trade. Partnerships are simply too risky for most situations. A partnership is a business that has between 2 and 20 partners. The partners own the business together. If two or more people want to start a partnership, they should sign a written agreement.

A lawyer should prepare this. The agreement must include these points: •what happens to the assets of the business, for example, the tools and the furniture, if the partnership ends •how the partners will share the profits (For example, one partner works every day and another partner only works three days a week. They would not want to share the profits equally because the one partner has worked more days than the other). •what happens if one of the partners wants to leave the partnership Every time a new partner joins, the partners must sign a new agreement.

People can write their own contracts for the partnership, but they must make sure that it is a valid contract. Like a sole trader, the law does not recognise a difference between the partnership’s assets and debts and the assets and debts of the partners themselves. Not only that, but the law does not recognise a difference between different partners’ assets and debts. Close Corporation Also known as a cc. This is the cheapest, quickest and easiest way to setup a “company” or formal business structure. An example of a close corporation is Ana Insurance Brokers cc.

They were established in 1986 and are an independent insurance brokerage operating from Durban’s’ Berea. They conduct business with all the major insurance companies in South Africa and are members of The Insurance Brokers’ Council of South Africa. Once you have registered your close corporation, you will have the name of your cc with which you can trade. You the “member” now own the cc. The cc is the “legal person” who will receive the income from your customers and pay the expenses to your suppliers. It will eventually own assets and owe liabilities.

The latter is quite important. In the event of a cc going broke, the member is not liable for the debts (unless you have traded recklessly, fraudulently, have signed sureties or owe the taxman). This means that in most cases you still have you house and car, and can try and start another business. The cc also allows you to go into business with others as several members can own a cc and then share the profits of their work. Private Company A Company is treated by law as a single legal entity. It has a life separate and apart from its owners with rights and duties of its own.

The owners of a private company are the shareholders. The managers of a private company may or may not be shareholders. The maximum number of shareholders is restricted to 50. Examples of private companies are Federated Timbers (Pty) Ltd builder’s merchant and DIY stores, Vodacom Service Provider Company (Pty) Ltd a cellular company. Some advantages: •The life of the business is perpetual. •The shareholders have limited liability. •The transfer of ownership is easy. •It is easier to raise capital and to expand. •Efficiency of management is maintained.

•It is adaptable to both small and large business. Some disadvantages: •Special taxation rates. •It is more difficult and expensive to organise than other forms of ownership. •It is subject to many legal requirements. CONCLUSION The Law is a set of rules governing human behaviour. Conduct that transgresses the norms of society is regarded as crime. Person who commit crime can be prosecuted in a criminal court and punished if found guilty. Long ago the principle of an eye for an eye meant that criminals were punished in the same manner as their offence.

Nowadays the system of punishment aims to prevent the occurrence of further crime; punish the offender; rehabilitate and reform the offender; and protect the interest of society. All law that is not criminal law is called civil law. Usually pertains to the settlement of disputes between individuals, organizations or groups and having to do with the establishment, recovery or redress of private and civil rights. Commercial law (sometimes known as business law) is the body of law which governs business and commerce.

It is often considered to be a branch of civil law and deals both with issues of private law and public law. Commercial law regulates corporate contracts, hiring practices, and the manufacture and sales of consumer goods. From the above definitions of law and the various types of law that has been covered in this assignment I have concluded that society as a whole be it business or individuals need a set of “rules” and “law” that governs the way in which we interact with each other and the manner in which businesses conduct their business activities.

A country has to have a legal system in place if it is to operate in the best interest of all its citizens. REFERENCES Text Books Anderson A M, Dodd A, Roos M C, 2003. Everyone’s guide to South African Law. Cape Town:Paarl Print Havenga P, Garbers C, Havenga M, Schulze W G , Van Der Linde K, Van Der Merwe T, 2000. General Principles of Commercial Law. Lansdowne:Juta Havenga P, Garbers C, Havenga M, Schulze W G , Van Der Linde K, Van Der Merwe T, 2005. General Principles of Commercial Law. Lansdowne:Juta Mohamed S I, 2003. Tenants and Landlord In South Africa, South Africa:Impress Regent Study Aid.

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