Commercial Law: Essential Concepts & Interactive Learning Sessions

Oct 26, 2023

Written By Zara Arif

Commercial law is the rules that apply to the rights, relations and conducts of people and businesses during business transactions. It is an important area of law to get to grips with as it serves as the legal foundation for conducting business activities ethically and legally.

Contracts in Commercial Law

In order to understand commercial law it is also important to understand the principles that make a contract legally binding.

Firstly, one party must make an offer which is then accepted by another party. Then each party must provide consideration to the other. Consideration can include things like making a promise to pay money or provide something else of value.

Both parties must also have the intention to be bound by the contract and be legally recognised entities who have the capacity to enter into the contract such as a company.

There are a variety of contracts that you may come across in commercial law in particular. These include common business scenarios such as employment contracts, partnership agreements and sales contracts.

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Business Entities and Structures

Sole trader: a sole trader is what is known as self-employed. They run their business and can employ staff. They can keep their profits after tax but they are fully liable for all their debts.

Partnership: in this business structure, a person and their partner(s) share responsibility. Profits are shared and each partner pays tax on what they get. A partnership is easy to manage and run as more people means a greater chance of being able to raise money. However, there could be disagreements and also liability problems which affect everyone involved.

Limited Liability Partnership: in this structure, there is no limit on the number of partners. It is like a limited company in that it protects its members’ assets. The members also agree the amount of profit each receives in a members’ agreement. The advantages include flexibility and the combination of the benefits of a limited company and partnership combined.

When considering what business structure to choose, clients should consider factors such as liability protection, tax requirements and management.

Commercial Transactions

There are some laws which apply to selling goods in commercial transactions. These include the Sale of Goods Act, which states that goods that are sold must be satisfactory and fit for purpose. It provides protection to consumers by ensuring that any goods they are sold are received as they were described.

The Uniform Commercial Code is a US based code, which aims to synchronise sales law and harmonise contract law. It’s a model of many laws so it’s simply a guideline of legal rules states should follow.

Finally, there are a variety of payment methods and financing options available in commercial transactions including cash, debit, giving away equity or ownership or credit. One common method is a credit letter. This is when a bank issues a letter guaranteeing that a buyer’s payment to a seller will be made and if it cannot be made the bank will cover the payment.

Competition Law

Antitrust regulation ensures fair competition in the markets. This means that regulations do not allow several companies within the same industry to form a monopoly and have a majority stake in the market or for multinational companies such as Microsoft or Google for example to acquire smaller companies, which would give them an unfair position in the market.

Antitrust authorities review proposed mergers and acquisitions to ensure that if two companies come together, no violation of competition law occurs. This means that companies cannot merge together to eliminate competition between them, but often they can agree to acquire certain parts of a business to comply with competition laws.

Consumer Protection

Consumer rights include the right to protection against unfair practices, product safety regulations and consumer contract rights.

As these are legally recognised rights, consumers can seek remedies for breaches. These remedies can be sought in the form of filing complaints, pursuing legal action or seeking compensation.

International Commercial Law

International trade agreements and the World Trade Organisation play an important role in regulating global commerce. Through cooperation with global organisations such as the UN, they enforce and review the rules that govern international trade. They also regulate the relationships between countries and governments.

When disputes arise in matters of international business it is important to have in-depth knowledge of international commercial law and dispute resolution methods. Often when governments are involved, international arbitration is seen as the best option. The parties involved can name their own arbitrator and avoid going through international courts.

Commercial Law in Practice

On a day to day basis, the responsibilities of a legal professional in commercial law include liaising with clients, drafting documents and negotiating terms of contracts.

Most commercial lawyers work on cases that involve mergers and acquisitions. As seen above, many aspects of law can come into these cases, including competition, employment and company law. This specialism therefore requires attention to detail, concision and a lot of time management skills.

A real-world example of a commercial law case would be the UBS takeover of Credit Suisse. A variety of law firms supported both sides on a variety of issues, including pensions, tax and employment concerns.

Conclusion

Commercial law is a varied and exciting area of law, which despite being challenging, can lead to a very rewarding legal career as it can allow exposure to so many different principles and concepts.

It is an ever evolving and dynamic area of law both to study and practice.

The best way to find out if commercial law is for you is to explore further by reading books, legal journals and websites to gain a deeper understanding. There are also a plethora of webinars, courses and certifications available to help you gain a practical insight into this area of law.

Commercial Awareness