Traduccin IV Carolina Andrade Vargas

The Practice of Law The practice of law is a wide and varied area of employment ranging from academic studies to lawyers working for law firms. Each country has different education systems, different requirements for certain types of work and different titles for its lawyers. The following is therefore a general description of the various types of work within the legal profession. It should also be noted that lawyers often move between these areas of practice in order to gain experience from one field which may be useful in another area of work. Education In most countries, one must have studied law at a graduate level to be able to work within the legal profession. As an example, in the UK, most people study law for 3 years. If one then wishes to start working for a law firm or work within the court system, it is necessary to attend law school or bar school for an additional year. Law school is for law students who wish to work with law firms and bar school is for those who wish to work either as barristers or judges (public prosecutors or private defense lawyers). In the United States, it is generally required that one obtains a fouryear undergraduate degree in any subject and subsequently attend law school for three years. However, in other countries, like Sweden or Belgium, students study law at university and then start to work directly, usually taking an exam at a later stage to become a qualified lawyer of some kind. Practice areas Law firms Law firms vary in size but are basically a group of lawyers working together for various private and public clients. They are often set up as partnerships where the lawyers who work together own the law firm together. These owners are called partners. The largest law firms are large international partnerships with offices all over the world. The largest law firms may have thousands of lawyers working worldwide consisting of partners, senior and junior associates, and trainees, as well as support staff such as secretaries, human resources, and IT experts. The large law firms are divided into specialized groups made up of lawyers working within the same area of law, for example a corporate department which works with company law (US corporate law), a tax department which works with tax law, a litigation department which works with litigation issues, etc. Much of the work carried out by the larger law firms are large projects which involve many different departments within the law firm and, in addition, involve working with lawyers from other countries. Other law firms are smaller and focus on more local or national work. Law firms also work with other, non-economic areas of law, for example, criminal law when defending persons accused of crimes or family law when helping a couple obtain a divorce. Lawyers who work at law firms usually work with private clients, although many are also instructed by public authorities to act on behalf of the state in all kinds of legal areas, civil and criminal. Lawyers who work at law firms will often obtain special titles after working for a certain length of time, such as solicitor (UK) or advocate (FR). These titles are usually earned after passing a specific exam and/or having worked for a certain amount of time. Court system The courts of a country enforce the criminal and civil laws which are imposed on the countrys citizens and companies. The court system is usually structured in different levels, where the most number of courts are at the first level (first instance). Decisions from these courts can then, in most cases, be appealed to higher level courts, with one court being the ultimate deciding authority, such as the House of Lords in England and the Supreme Court of the United States. Most countries only have one court system. However, in the US there is a federal and a state court system and in the European Union countries, the European Court of Justice (ECJ) is an additional court which can enforce European Union law within the member countries. Courts are normally headed by judges who often are lawyers, although in specialized courts such as commercial courts or employment courts, the judges may often be professionals with many years experience and expertise within a special area of law. There are other officials who work at courts who do not have a legal education, such as lay judges and the administrative personnel. Generally speaking, lawyers within the court system usually work as public prosecutors or judges. A public prosecutor is a person who prosecutes criminals on behalf of the State and is therefore employed by the State. To become a judge, one normally must have worked in some capacity previously within the court system, either as a public prosecutor or as a court clerk and progress to being nominated as a judge. In some countries, for example Sweden, a law student starts to work in a district court and works their way from being court clerks to junior, then senior, judge. In the United Kingdom a law student first has to qualify as a barrister then seek work as a junior judge, and work their way to becoming a more senior judge. This process is not the same for all

courts in all jurisdictions, however. There are some courts where judges are appointed without any previous court experience. Companies All companies need help with legal issues, from actually forming the company to running operations and dealing with everyday business problems. Companies sometimes use law firms for this work, but more often (especially in larger companies) employ their own lawyers who only work for them. These are often referred to as in-house counsel or company lawyers. Some large multinational companies have large groups of lawyers working for them all over the world. There is usually a lead in-house counsel who is also a member of the board of directors. These lawyers work mostly with commercial and corporate law although other areas of law are common too. For example, in-house counsel at a large bank will work with banking, finance and capital markets law. An in-house counsel at a large petrol company may work with environmental law. The in-house counsel works closely with the management of the company and with the board of directors to ensure that the decisions taken by the management and directors comply with the laws applicable to the company. Many lawyers who work at companies will often have worked at commercial law firms as well. Public sector There are many lawyers who work within the public sector, both within the government and within the many different public authorities. In the US and the UK, it is often common for politicians to have a legal background. Lawyers who work within government departments prepare and draft new or amended legislation which the government wishes to pass through parliament. Legislation is constantly changed so that it is up-to-date and relevant in relation to the changes which take place within society, such as technological developments, globalization and environmental changes. Therefore, lawyers who work for the government have to draft new legislation to cover new technology, such as when mobile phones were introduced, or re-draft existing legislation such as contract law which covers the sale of goods to include the selling of goods over the internet. The public authorities of a country are authorized by the legal system of that country to enforce the legislation that has been enacted. There are a large number of public authorities prepare legislation and enforce different laws applicable to private persons and companies. For example, most countries have an authority which supervises banks and financial institutions to ensure that they carry on their business according to the laws and regulations which are enacted within that area. There are also authorities which are entrusted with enforcing competition legislation (see section on Competition Law) whereby companies market behavior is supervised and to a certain extent controlled. The lawyers who work for public authorities will then also represent the state in any court proceeding which may be necessary to enforce the law.

Traduccin IV Carolina Andrade Vargas

Company formation and management There are many different types of business associations that exist around the world in order to suit different needs. Different countries allow various types of business associations to be formed, each requiring different documents for formation. Some of the main considerations when choosing which business form to use are: (i) the types of products or services; (ii) tax issues; (iii) control and management objectives; (iv) liability risks; (v) business risks; (vi) financial, growth and investment goals; (vii) owner and employee compensation and benefit goals; and (viii) scope of the intended geographic market for products and services. This section will summarize briefly the main types of business associations that exist, as well as their formation documents and other requirements. Types of entities Sole Proprietorship A sole proprietorship exists when one person (the sole proprietor) carries on a business without forming a separate company. That person is the sole owner of the business. The sole proprietor may employ others as employees but such employees are not otherwise involved in the management of the business. All of the income, losses, assets and liabilities of the business are also those of the sole proprietor (i.e., the person is not a separate legal entity from the business). The sole proprietor may, however, limit personal liability by purchasing insurance. There are obviously few legal formalities in forming or operating a sole proprietorship and thus many small businesses choose to be so organised. Partnership A partnership exists when two or more persons (called partners) carry on a business together with a view to profit. These persons can be either individuals or corporations (corporations are viewed as legal persons under the law). Partnerships are generally preferable to corporations from a tax standpoint in that they are said to have passthrough or flow-through taxation. In other words, the profits of the partnership pass through the entity to the partners themselves. As a result, partnerships are only taxed once via the partners income tax (unlike a corporation which is subject to double taxation of corporate profits and shareholders income). Partnerships are a common form of business organisation, used often by lawyers and chartered accountants, but also by small businesses and large commercial projects. Normally, partners will have a kind of partnership agreement (which is a contract between the partners, often called Articles of Partnership), which lays out certain aspects of the partnership, such as who the partners are, when the partnership commences, its planned duration or how it is to be managed (Appendix 1 contains a sample partnership agreement). The corporate law of many countries often permits different forms of partnerships. A general partnership is one in which the liability of each partner for the debts and other obligations of the partnership is unlimited, which means that all partners can be held responsible for re-payment of all of the partnerships debts. On the other hand, in a limited partnership (or LP), the liability of general partners is unlimited, but the liability of limited partners is restricted to the amount that the limited partner contributed or agreed to contribute to the partnership. In exchange for this limited liability, a limited partner is often required to be a passive investor rather than an active participant in the operation of the limited partnership. A common business form for law firms in the US, the UK, Japan and Canada is the limited liability partnership or LLP. In this form, all partners have a limited liability (rather than just the limited partners like in the limited partnership) regardless of whether they manage the business directly. A LLP is often appropriate when all partners wish to take an active role in management of the business. This business form, however, is generally only available for law firms, accounting firms and other professional organizations. Companies/Corporations A company or corporation is the business entity most often used when carrying on business activities. The word company is often preferred in the UK whereas the word corporation is generally used in the US. A company is a separate legal entity from its owners. Some of the consequences of this are that it can sue and be sued and is taxed in its own name. The owners of a company are its shareholders. These are people who provide the company with money, property or services, which then belong to the company. A company may own property, carry on business, possess rights and incur liabilities in its own name while the shareholders own the company through the ownership of shares or stock in the company. Although shareholders are described as the companys owners, they do not personally own the business or the property of the company. Likewise, the rights and liabilities of the company are separate from those of the

shareholders. Shareholders thus have limited liability since their liability is restricted to the value of their shares, and they can never lose more than the amount they paid for their shares even if the company should end up with liabilities in excess of its assets. A company thus allows owners to invest in a business without exposing their other assets, including personal assets, to the creditors of the business. Other important participants in a company are the directors and officers. Directors are primarily charged with the responsibility of managing the business. They often sit together as a board and are referred to as the board of directors of a company. They are usually elected by the shareholders at the annual meeting of the shareholders called the annual general meeting or AGM or the annual meeting. The directors usually then choose officers who are responsible for the day-to-day management of the business. Another characteristic of a company is that it has perpetual existence. The assets and the structure of the company last beyond the lifetime or withdrawal of an owner/shareholder. In order for a company to be dissolved, a majority of shareholders must resolve that it should be, a court must order it, or the relevant government official may dissolve the company if the company is in breach of applicable legislation or it has been inactive.

Companies in different jurisdictions United Kingdom Registration for all companies must be done through Companies House. The overwhelming majority of companies are limited companies, where the responsibility of shareholders is restricted in some way (depending on the type of limited company). There are three types of limited company: (i) Public limited company (plc) the shares of the company may be offered for sale to the general public. Liability is limited to the amount unpaid on shares held by shareholders. There is a minimum amount of share capital which must be issued in order to establish this kind of company (presently 50,000). Many of the large multinational companies are incorporated as PLCs in the UK, such as Cadbury Schweppes plc, Rolls-Royce plc, Tesco plc, Unilever plc, Vodafone Group plc, and British Airways plc. (ii) Private company limited by shares (Ltd, Ltd., Limited, Incorporated or inc.) liability is limited to the capital invested, in other words, the sale of shares. Unlike in a public limited company, shares may not, however, be offered to the general public and therefore cannot be traded on a public exchange. There is a maximum and minimum number of people that can hold shares (presently in the UK, the maximum is 50 and the minimum is two). Most UK companies, especially smaller ones, are private companies limited by shares. (iii) Private company limited by guarantee no shares are issued but the company is instead guaranteed by its members who agree to pay a fixed amount in case of liquidation/bankruptcy. Charities and political parties often use this kind of company. For all of these types of companies, one must send a memorandum of association, articles of association and two other forms, together with registration fees to the Companies House in order to register the company. United States In the US, several forms of corporations exist since each state has jurisdiction over the formation, management, operation and termination of corporations. Many of the states follow the same general format for company law as found in the Model Business Corporation Act, which was originally developed by the American Bar Association (ABA). It is not law, but rather it simply provides guidance for State governments to develop their corporate laws. However many companies are formed in the state of Delaware (about half of Fortune 500 companies), which does not follow the Model Business Corporation Act. Law students therefore generally study both models of companies in law school and some other states (such as New York, California, Texas, Illinois) combine both of these two model laws. There are generally two types of corporations in the US. The C Corporation is one which files its own tax returns and pays its own taxes, rather than passing this liability onto its owners. An S Corporation, on the other hand, is taxed like a partnership and the profits and losses of such a corporation flow through to its owners in proportion to their stock ownership. Stockholders are still protected from the liabilities of the business, however, in an S Corporation. The S Corporation is often preferred by small businesses, especially when stockholders are often also employees of the corporation or are otherwise involved in the day-to-day operations of the corporation. Many companies choose to incorporate in the state of Delaware for many reasons, including its sophisticated and flexible corporate law and their separate commercial law courts with judges who are knowledgeable and experienced in corporate law matters. A company does not have to have its headquarters in Delaware, but it must have at least a registered agent there. Loosely equivalent to the UKs limited liability company, another business form in the US is the limited liability company or LLC which differs from both a corporation and a partnership in its formation, management and tax responsibilities (note: the correct term is limited liability company and not limited liability corporation). One may wish to form an LLC because it combines the limited liability features of the corporation with the tax efficiencies of a partnership. Some of the small differences in company formation include that while shareholders own a corporation, members own a LLC. Members establish a general operating agreement which empowers managers to manage the affairs of the business. Ownership percentages, profit and loss distribution and voting rights are determined by the

Articles of Organization rather than by stock ownership. In addition, LLCs are treated as partnerships for tax purposes and there is also no requirement for directors or officers. Full text may be found at http://www.abanet.org/buslaw/library/onlinepublications/mbca2002.pdf (last visited 2006-1123). European Union The EU has developed a new form of European company called the Societas Europaea or SE. This is a public limited company which may be created through registration in any one of the member states of the European Economic Area. An SE is to be treated as if it is a public limited company according to the law of the member state in which it has its registered office. The reasoning behind the development of a SE is to allow companies incorporated in different member states to merge or join together in some other manner while avoiding the legal and practical constraints arising from compliance with all of the different laws of the different member states in which they are doing business. For tax purposes, an SE company is treated like any other multinational company according to the law of the member state in which it has its registered office. Company Documents A company usually requires founding documents (which one can liken to a constitution) which defines the existence of the company and regulates the structure and control of the company. Sometimes, this is composed of two documents. The first specifies the companys objects and powers and its authorized share capital. In the US, this is called the charter (or the articles of incorporation) and in the UK, this is called the memorandum of association. The second document outlines the company rules for internal affairs and management, such as procedures for board meetings and annual shareholder meetings. In the US, this is called the bylaws and in the UK, this is called the articles of association. Companies will often have shareholder agreements which normally do not have to be made publicly available. There are different types of shareholder agreements but they are all contracts either between shareholders or between shareholders and the company. One common one is the unanimous shareholder agreement (USA) in which all shareholders of a company agree on certain ways of exercising their rights and agree to the management of the business of the company by the directors and officers. All the shareholders of a company must sign the USA for it to be valid, however a valid one may, in some jurisdictions, supersede the companys articles of incorporation/memorandum of association (Appendix 2 contains an example of articles of incorporation). Company law in practice Corporate or company lawyers advise companies and other legal entities on a wide range of issues. Lawyers advise on company law matters, such as which type of business association is most appropriate, how to set up a company, how the company is managed (corporate governance), employment law matters and duties of directors, and draft documents needed in the running of the company, such as minutes of meetings, the constitutional documents of the company, the shareholders agreement, and contracts with suppliers and customers. Some documents are also required by law to be filed with the companies registration office. Companies will either engage law firms to provide this type of legal assistance or use lawyers who work in-house at the company. Larger companies often have a legal department containing a number of in-house counsel because their advice is required on a daily basis. In-house counsel are also sometimes involved in the running of the business, including sitting as a member of the board of directors. Lawyers also advise on transactional work. Lawyers at larger commercial law firms in particular will often be retained to negotiate, and draft documentation for, transactions, such as the acquisition of another company. This may require extensive work, including conducting due diligence on the target company and negotiating and drafting the sale and purchase agreement (SPA). The company may also wish to raise capital by issuing shares to existing or new shareholders, which will require a lawyer to ensure these procedures are conducted correctly and to draft relevant documents (see section on Company Law: Capitalisation). Company Law Capitalisation Share capitalisation (or capitalization) refers to the capital structure of a corporation, in other words, the nature of a companys wealth including how many shares a company has and how those shares are structured. The terms equity securities or equity also refer to the shares of a corporation. A share (US: stock) is a fractional part of the capital of a corporation which becomes a persons personal property when bought. However, the corporations assets remain the property of the corporation. Shares confer both rights and liabilities onto the owner. Possible rights may include the right to dividends, the right to vote and/or the right to participate in the distribution of assets upon the winding up of the company. Shareholder liabilities may include the responsibility to contribute to the capital of the company. The rights and obligations of a particular class of share are normally described either in the articles of association (US: by-laws) or in a shareholder agreement (Appendix 1 contains a sample shareholders agreement). Share capital is divided into authorised capital (US: authorized capital or nominal capital) and issued capital. Authorised capital is the maximum amount of shares a corporation is authorised to issue. This authorisation derives from one of the companys constitutional documents. A portion of the authorised capital can (and often does) remain unissued to shareholders. Those shares that are actually issued to shareholders are referred to as the issued

capital. When a share is issued to a shareholder, a certificate is normally distributed evidencing that the listed person is a registered shareholder. That persons name also enters the companys share registry. Different classes of shares A company may have different classes of shares which confer different rights upon their owners. Each class contains different rights with respect to voting, receiving dividends and receiving capital in the event of a winding up. Different jurisdictions may allow a variety of classes of shares to be issued, but there are some common classes: Ordinary shares This is the most commonly held type of share in a company. Ordinary (US: common shares) are the most familiar form of stock ownership, with the investor making or losing money depending on company (and thus, share) performance. In general, however, ordinary carry the most risk since holders of preference shares will normally recover their contributions first following the winding up of a company. Preference shares This is the class of shares which carry additional rights above and beyond those carried by ordinary shares. Usually this includes a right to a dividend, if declared or resolved by the board of directors. Preference may also be given upon the winding up of the company. However, preference shares (US: preferred shares) usually do not carry voting rights. Different classes of preference shares may also be issued by the company (e.g., some are called Class A Preference Shares, Class B Preference Shares, etc.). Preference shares are more common in private companies. Sometimes certain rights will be granted to certain shareholders; this would often be agreed upon in the shareholders agreement. One right that may be available to a shareholder is the right to convert shares into shares of another class (convertible shares). Shareholders may sometimes have a pre-emption right (US: pre-emptive right) or a right of first refusal which protects the shareholders existing holdings. It consists of the right to an option to take up a pro rata (proportional) portion of any new issue of shares. These are just two examples of the many kinds of rights and options that may be offered to shareholders in a shareholders agreement. Dividends The concept of a dividend has been mentioned several times so far. When a company earns a profit, this profit may be reinvested in the company or it may be distributed to shareholders in the form of a dividend. Different jurisdictions will determine how often a dividend will be distributed. In the US, dividends are often declared quarterly. Sometimes the board of directors will propose a dividend and the shareholders must vote on it. The most common form of dividend is a cash payment. Dividends may also be distributed in the form of additional shares or in property (which is extremely rare). Law in Practice Corporate lawyers advise on matters relating to share capitalisation. This may involve providing advice and drafting documents relating to the issue of shares to existing shareholders (known as a rights issue) or to a particular group of investors (known as a private placement or placing). The company may wish instead to raise capital by offering shares to the general public, by way of an IPO (introductory public offer or initial public offering). Following the IPO, the company would then usually be listed on a stock exchange. An offer document must be drafted and a number of regulations need to be complied with, so a lawyers advice is essential. SupportThe Practice of LawCompany formation and managementCompany Law CapitalisationContract LawRemediesEmployment LawSale of GoodsReal Property LawIntellectual Property LawNegotiable instrumentsSecured TransactionsDebtor-Creditor LawCompetition LawTeacher Training ResourcesLETS Frequently Asked Questions LLM UniversitiesUniversit Paris I Panthon-Sorbonne Panthon Sorbonne UniversityMcGill University Queen Mary, University of LondonColumbia Law SchoolSydney Law School - University of Sydney Michigan Law School (University of Michigan)Westminster University - School of LawTexas (University of) at Austin ("UT Law")Birmingham (University of)Glasgow (University of) Legal English Dictionaryinvidious discriminationrecitalscheduleoverreachengage in (something)overridemisrepresentationcallstrictlyconstructive noticejoint tenancydetainaggravatedarraignmentincompatibleperpetratenegotiationhousing lawglobalisationblackmail Contract Law Under common law, a contract is an agreement made orally or in writing between two or more people or which is manifested by conduct and words of the parties, to do or not do something which they then wish to be enforceable according to law and not only as a normal promise between people. For example, if Bob agrees with Jim that Jim will cut the grass in Bobs garden while Bob is away on holiday and just before Bob leaves he pays Jim $50 for the work,

then an enforceable contract has been entered into. However, if Jim just tells Bob that he can help him to cut the grass while Bob is away and Bob agrees, then Jim has only made a promise to Bob which in not enforceable under law. How is a contract formed? In order to create an enforceable contract there must be an offer from one person (the offeror) asking another person (the offeree) to do or not do something. There needs to be an acceptance of this offer by the other person (the offeree). And lastly, there needs to be payment of some kind (consideration) for the benefit that is gained from the contract. Consideration is different from a gift or donation as these two types of payments do not ask for a benefit in return, for example if you decide to give $100 to an animal charity then you are not entering into a contract with the charity, they cannot ask anything of you and you cannot ask anything in return from them. Also, consideration does not have to be money. It can consist of products or the performance of a service. This is of course how contracts were originally entered into, for example, your neighbor helps you mend your roof and in return you paid him for his service with a bag of wheat. A counter-offer is when a person would like to accept an offer but on different terms than those set out in the original offer. Again, there has to be an acceptance of the counter-offer for there to be a contract. For example, company A offers to buy pens (the offer) from company B at a price of $1 for each pen. Company B says they want $2 for each pen (counter-offer). For there to be an enforceable contract, company A has to accept the new price of $2 for each pen. Essential terms of a contract? In general, anything can be written in a contract as long as it is an agreement about something legal. The normal content of a contract will firstly set out the parties who have entered into the contract. Then it should also detail the subject matter of that which has been agreed, for example, the delivery of goods or services, the appointment of an exclusive distributor or the development and sale of a new technology. The price that shall be paid should also be set out in detail regarding when and how payment should be made. Most commercial contracts of course often regulate large, complex projects. However, many subject matters, otherwise called clauses or provisions, are standard clauses which are nearly always present in a commercial contract. Examples of such standard clauses are force majeure clauses which regulate what should happen if extraordinary circumstances (for example, war, labor conflicts, etc) arise during the performance of the contract and confidentiality clauses which state to what extent the information which is exchanged between the parties to the contract is to be kept secret, i.e. not given to other parties. The contract may be clearly stated in writing or been orally agreed between the parties (an express contract). It can also be the case that two people have been conducting themselves in a certain manner and a contract can therefore be understood to exist between them (implied contact), for example, where Peter has employed a builder to build a garage next to his house and during the work the builder notices that the roof on Peters house needs to be fixed, if the builder then starts work on the roof as well and Peter knows this and allows him to carry on, an implied contract relating to the work carried out on the roof will be implied through the actions of Peter and the builder. There are situations where a countrys laws, for example the Statute of Frauds (US), state that a contract involving the sale of land or other real property(e.g. a house) has to be in writing. When is a contract not formed? Every adult person is able to enter into a contract. There are however exceptions to this rule. For example, lack of capacity such as being a minor, i.e. people who are below the age of 18, may not enter into a contract. Therefore, if Joe who is 15 buys a mobile phone and agrees to pay for it by monthly payments during a year, if Joe fails to pay one month, the phone company cannot sue Joe as he is unable to enter into an enforceable contract. Also, contracts which have an illegal subject matter, are not enforceable. For example, if one person agrees with another that he will pay him 1000 for a painting which the other person first has to steal from a house, and after being paid the other person never steals the painting, then the contract cannot be enforced as stealing is illegal. There are other factors which may cause a contract to be invalid. These factors have to do with whether a person has actually consented to the agreement or can be said to be under duress. For example misrepresentation is when one party gives information to induce the other party to enter into the contract and the information turns out to be false, for example if you are told that a painting is an original piece of work by a famous artist and it is actual a copy of the original, then you can return the painting and ask for you money back. Duress is where a party is coerced into entering the contract as a result of immediate fear of injury to himself, other persons, or to his property. An example is if you sign a contract to sell your house because a person is threatening to harm your children if you do not. Contracts and third parties

Contracts are often made between two parties but there may a contract which is performed in order for a third person or entity to benefit from the performance of the contract (third-party beneficiary contracts). Third parties (assignee) may also gain benefits from a contract they are not party to by being assigned the rights in a contract by one of the contracting parties (assignor). This means that if Pepsi decides to buy Coca Cola, instead of having to negotiate new supply contracts Coca Cola can assign the existing contracts it has to Pepsi and then Pepsi has to perform the contracts and will receive the money under the contracts. Breach of contract Breach of contract occurs when one party to the contract acts in contradiction to what the parties have expressly agreed in the contract. A contract can be breached in many different ways, for example, by not paying the whole price stated in the contract. When this occurs, the party who suffers some loss due to the breach will normally terminate the contract and ask a court for compensation. For example, one party may breach a contract by not timely delivering the goods or services that have been agreed. If the other party who was to receive the goods or services suffers a loss due to the delay, he can go to a court and claim different types of remedies in order to receive compensation for the loss. Compensation can be in the form of money but may also be in the form of actions or prohibitions. The following are examples of remedies which may be sought from a court. For a more detailed discussion of remedies please refer to the section on Remedies. Damages This is probably the most common remedy and is a request that the breaching party pay an amount of money representing the loss which has been caused by the breach. Often the parties to a contract will try to assess beforehand how much damages they should have to pay if one party breaches the contract. The pre-determined amount of damages set forth in a contract is called liquidated damages. The amount should be a reasonable estimation of the loss that will be suffered. If the parties to the contract have not set out what should be paid if one breaches the contract, then a court will have to decide what amount should be awarded. These types of damages compensate the party for the loss suffered, it is not intended to be a punishment against the other party (so-called punitive damages). A party cannot receive damages for losses which are not linked to the breach itself. This means that a party will not be compensated for losses suffered that are not a natural consequence of the breach. Contract law in practice Contracts are made in all areas of life, from contracts entered into before marriage about how the property shall be shared in case of a divorce, to all the contracts needed for a project to build a sports stadium. Lawyers are needed to prepare, negotiate, draft (write) and change (amend) the contracts to ensure that they state the parties intentions and needs and are enforceable under the laws of the country where they are to be used. A lawyer who works in a commercial department at a law firm will first speak to the parties in order to understand what they want, then based on this, write the contract which then is negotiated, amended and finally signed by the parties. Often law firms will have standard contracts (format or template contracts) which are changed in different ways to suit the individual clients different needs. Certain clauses are removed or added so that the parties intentions are reflected in the contract. For example a lawyer may have different clients all of which are supermarkets. He then uses one standard contract each time one of the supermarket companies wants to enter into a new supply agreement with, e.g. a fruit supplier, and just changes the name of the parties, the price, the type of fruit to be supplied, details about the delivery, etc. Some contracts are short and easily prepared while other consist of many different, interconnected documents which can take many months to negotiate and agree upon. Remedies Every party who files a lawsuit seeks a remedy. As defined in Blacks Law Dictionary, a remedy is the means by which a right is enforced or the violation of a right is prevented, redressed, or compensated. The word remedy in a legal context has virtually the same meaning in a medical context, namely, to cure. In a legal context, a remedy cures the violation of a legal right. In the common law system, there are two types of remedies, legal remedies and equitable remedies.These will be discussed in turn. A few words about the development of law and equity As is well-known, England and most of her former colonies operate under a common law system. Very briefly, this means that in the absence of a statute or other legislation or regulation, judges have the authority to decide what the law is on a particular issue. Subsequent courts addressing the same issue are then bound by the previous courts decision, which is known as a precedent. In order for this system to develop in an organised fashion, precedent was

rigidly applied; if the facts of the case were more or less the same as a precedent, the precedent governed the case before the court. Fairly early on (in the Middle Ages) cracks began to develop in the systemwhat if the facts were close enough to precedent to dictate the application of precedent, but the application of precedent would result in a clearly unfair result? A separate system, known as equity, began to develop parallel to the common law system (and continued to develop over the course of several hundred years). The two separate court systems that resulted were empowered to award different types of remedies. Courts of law could award damages, i.e. money, to compensate a person for the loss he or she had suffered. The Chancery Court, which was the court of equity, could award remedies that would restore equilibrium and lead to a just and fair result between the parties.In order to eliminate problems that arose from these differences, the separate courts were, for all practical purposes, merged in the 19th century. However, the classification of rules and remedies as legal or equitable survives. This is so because the system of precedents that characterises the common law system requires that decisions and remedies be based on earlier cases, and so judges and lawyers still need to make these distinctions in the argumentation and decision processes. Legal remedies As mentioned above, courts of law were empowered to award damages. Damages are the legal remedy. Damage is what happens to you (as lawyers say, what you suffer) and damages are what the court gives you (as lawyers say, award you) if you can prove that you have suffered damage. Damage remains singular even if the party suffers several different types of injury. For example, Jones paid Smith to deliver 100 kilos of prime beef to Jones for the opening night of Jones new steakhouse restaurant. Smith failed to deliver and Jones had to find a supplier who could quickly provide him with enough beef for the evening. Unfortunately, the supplier could only deliver 75 kilos of inferior quality beef at twice the price, the kitchen ran out of steak before the evening was over, and Jones had to close the restaurant early. What is Jones damage? He lost the money that he paid to Smith for the delivery. He had to pay the second supplier. He lost income, since he could not fill all the orders for steak that night. He suffered injury to his reputation, since he advertised and could not provide the product that he offered. Jones damages are the amount of money that the court awards him for the various types of damage which he has suffered. Contract damages The theory underlying contract damages is that a party to a contract is entitled to the benefit of his or her bargain. The damages that are awarded for a breach of contract are compensatorythey compensate the non-breaching party for his or her loss. These damages can be divided into two categories: general damages and special damages. General damages are damages which flow directly from the breach of contract. In the steakhouse example, Jones general damages are the money the court awards him to compensate for (1) the amount that he paid Smith, (2) the amount that he paid to replace the meat that Smith failed to deliver, and (3) the lost income for the steak orders that Jones couldnt fill. His special damages are consequential damages damages which are a consequence of the breach of contract, namely damages for injury to his reputation and lost income because he had to close the restaurant early. In order to recover these consequential damages he will need to be able to prove the damages with reasonable certainty and show that Smith could have foreseen the loss if he failed to deliver the meat. Once damage has been proven and the right to damages is clear, the court needs to calculate the damages. As noted above, the non-breaching party is entitled to the benefit of his or her bargain. The simplest remedy is expectation damages, that is an amount of money which will place the non-breaching party in the position he or she would have been in had the contract been performed. The expectation damages for Jones steakhouse are set forth in the preceding paragraph. What if Jones hadnt been able to find a substitute supplier and had been unable to open his steakhouse as planned? He cant recover expectation damages because there is no way of knowing how much money the steakhouse would have made that night. Instead of expectation damages, he can recover reliance damages. He relied on the fact that Smith would perform and prepared to open his restaurant. He cant be put in the position he would have enjoyed had Smith performed, but he is entitled to be put in the position he was in before the contract was made; the status quo will be restored and Jones will be made whole. He will be able to recover, for example, the advertising costs, personnel costs, and all other costs expended in preparing his restaurant. Damages do not always need to be proven. The contract may provide for liquidated damages, sometimes known as stipulated damages. A liquidated damages clause states that in the event of a proven breach of contract, the nonbreaching party is entitled to recover a sum stated in the contract. In order to be enforceable, the stipulated amount must bear a reasonable relationship to the breach of contract; the liquidated damages clause may not operate as a penalty. If the contract between Smith and Jones provided for liquidated damages of 1,000,000 for any delay in delivery and Smith delivered the meat 20 minutes late, a strict interpretation of the contract would mean that Smith must pay 1,000,000 for being 20 minutes late. A court would almost certainly find this to be a penalty and strike down the liquidated damages clause (this would not mean that Smith would not have to pay any damages at all, but rather that the amount of damages must be determined by the court according to the principles set forth above.)

The last type of damages available under a contract are restitution damages. These damages require the breaching party to return the monetary value of the benefit that he or she received under the contract. Unlike expectation and reliance damages, which focus on what the non-breaching party has suffered, restitution damages focus on what the breaching party has gained. In addition, restitution damages are only awarded when there was no contract in force at the time of the lawsuit. There are two cases in which this can happen. The first is if the non-breaching party chose to rescind the contract when the breaching party failed to perform. The second case is where no contract ever existed but the non-breaching party performed and the breaching party accepted performance. For example, return to Jones steakhouse, but imagine that, without any contract, Smith delivered meat and Jones accepted it. Jones then refused to pay, saying that he had no contract with Smith. A court would find that Jones must pay restitution damages to Smith. Tort damages As discussed in another article, tort is the body of law that addresses non-criminal, non-contractual wrongs, such as personal injury, injury to reputation, trespass and non-criminal property damage. The purpose of damages in tort is to compensate the victim for his or her loss; thus we can say that tort damages are compensatory in nature. Nevertheless, on certain occasions, tort damages may also punish a defendant for his or her actions. Tort damages can be broken down into types, as follows. a. Nominal and contemptuous damages A woman in a fur coat with two small children walks up to a taxi at a taxi station. When she tries to engage the cab, the driver starts to scream and curse and calls her all kinds of horrible names because she is wearing a fur coat and he is offended by fur coats. She is insulted, her children start to cry and ask why the man is calling her a murderer and who she killed. She engages the next taxi in the queue and goes home. She later sues the first taxi driver for defamation of character and damaging her childrens trust in her. The court finds that she indeed suffered injury but that she suffered no lossshe was able to take a taxi to where she wanted to go, her childrens trust was quickly restored without expensive psychotherapy, and she was angry and insulted, but not damaged. The court will award nominal damages. Nominal damages are a token amount awarded by the court when the plaintiff has suffered no loss but an award of damages is appropriate so that the court can (a) order that the defendant pay the plaintiffs court costs ; or (b) award exemplary damages (see below) if the defendants behaviour is so offensive that he needs to be punished. Contemptuous damages are the mirror image of nominal damages, in that the successful plaintiff is scolded for bringing the lawsuit. Green and Brown are next-door neighbours who have never gotten along. Greens dog wanders onto Browns property one day and relieves himself. Brown steps in the dogs faeces, is disgusted, and sues Green for trespass and for failing to control his dog. The court finds that Brown was technically legally correct and thus he must win the lawsuit, but that the lawsuit was rather ridiculous and wasted everybodys time. The court will award damages in the amount of one penny (the smallest monetary amount) to make this statement to Brown. b. General and special damages General and special damages in tort are completely different from general and special damages in contract. Special damages are damages that can be itemised at the time of the lawsuit. For example, consider again Green and Brown and the dog. This time, Brown slips, breaks his leg and drops his laptop computer onto a rock. His lawsuit now has merit since he has suffered a real, quantifiable injury. His special damages (think special in terms of specifiable, not special in terms of extraordinary) might include his medical bills, lost wages until the date of the trial and the cost of repairing his computer. His general damages are damages that cannot be specified as of the day of trial, such as projected future lost wages as well as pain and suffering, i.e. his psychological injury. c. Exemplary and aggravated damages Exemplary damages, also known as punitive damages, are damages that the court awards when it is shocked by the defendants behaviour. To return to the taxicab example, the court could find it highly offensive that a professional cab driver addresses personal insults to a person with small children. An award of exemplary damages would, in essence, tell the driver that although his offence was not criminal, he will nevertheless be punished because we just dont behave that way in polite society. In the UK, exemplary damages are generally limited to oppressive behaviour by government employees, cases in which the defendant has profited by his actions, or where a large number of people are affected by the action. Aggravated damages are awarded when the defendants behaviour was calculated to insult the plaintiff. They are actually compensatory in nature; the principle is that the loss suffered by the plaintiff was worse than a mechanical application of the rules for calculation of damages would indicate. They compensate the plaintiff for additional mental distress.

Equitable remedies

As discussed previously, equitable remedies are appropriate when an award of damages will not lead to a fair result. Equitable remedies in contract and quasi-contract Where damages will be insufficient because something about the contract is unique, the court will award specific performance. The court enforces the terms of the contract. For example, two parties enter into a contract for the sale of a house. The seller has second thoughts and decides not to go through with the sale. The court may award the buyer specific performance, since real property is unique and another house will not give the buyer the benefit of his bargain. Specific performance is often ordered when the dispute involves art or antiquities. The remedy of replevin requires a party to return goods that are wrongfully in its possession. For example, Gray hires a storage locker and pays rent for one year in advance. At the end of the year he returns to the storage facility to claim his goods. The owner refuses to release the goods because he says that Gray still owes him money. Assuming that no money is owing, Gray will file an action for replevin to recover his property. A court may order rescission when a party has entered into a contract under duress or due to fraud or misrepresentation. Rescission cancels the contract as if it was never entered into in the first place and the innocent party is excused of all obligations under the contract. Rescission is only available as remedy when the parties can be returned to the status quo ante, that is when they can be returned to exact position they occupied before the contract was entered into. Otherwise, damages are the appropriate remedy. Where the parties entered into a written contract and both parties agree that the written contract does not reflect their understanding or circumstances have changed, the court may order reformation of the contract. For example, White is a dog breeder and contracts with Black for the sale of a purebred puppy from the next litter produced by the kennel. During negotiations, both parties understood that Black wanted a female puppy so that she could start her own kennel. However, the parties failed to specify the gender of the puppy in the contract and, when the litter is born, it contains only male puppies. White seeks to enforce the contract and require Black to purchase a puppy, but since there is clear and convincing evidence that the parties intended that the contract refer only to a female puppy, the court can order reformation of the contract. Restitution, discussed above, can also be an equitable remedy, and is the remedy whereby a party must return something to its rightful owner. For example, you lend your car to your neighbour, who then refuses to return it to you as agreed. He hasnt stolen it (because he acquired possession lawfully) but you can sue for restitution and force him to return it. Where a party wants a declaration of its rights under a contract but is not seeking enforcement of the contract or damages, the court may issue a declaratory judgment setting forth the relative rights and obligations of the parties. A classic example of this is when an insurance company refuses to provide coverage under the insurance contract because it says that the loss does not fall within the scope of the insurance. The policyholder will then sue for a declaratory judgment so that the court can determine whether the loss is covered. The policyholder is not asking the court to enforce the contractpresumably once the parties relative rights and obligations are determined, the insurance company will comply with the terms of the contract. Equitable remedies in tort A court can issue an injunction to order a party to stop doing something (a prohibitory injunction) or to do something (a mandatory injunction). A factory is dumping toxic waste into the river. The neighbours down-river sue for an injunction, asking the court to order the factory to stop dumping wastedamages will be inadequate because once the environment is destroyed, no amount of money will adequately compensate for the loss. While the lawsuit is pending, the plaintiffs want the factory owner to stop dumping so that the pollution does not get worse while their relative rights are determined. The plaintiffs will request a temporary injunction (also known as an interlocutory or preliminary injunction) to stop the dumping until a judgment is entered in the matter. Assuming the plaintiff prevails, the court will then issue a permanent injunction, ordering the factory to never again dump toxic waste into the river. The court may also issue a mandatory injunction, ordering the factory to clean up the river. Restitution and declaratory judgment are also available in tort.

Law in practice The remedy sought must always be appropriate to address the damage suffered. When a lawyer takes a case, he or she must understand not only the law relating to the damage the plaintiff is alleged to have suffered, but also the law regarding the available remedies.

Some lawyers work primarily with contracts, such as commercial lawyers, real estate lawyers, corporate lawyers, competition lawyers, and employment lawyers. These lawyers must understand the remedies necessary to help their clients receive the benefit of the bargain that they entered into. For example, the dispute between Jones, the restaurant owner, and Smith, the meat supplier, is a commercial dispute and their lawyers must understand how to calculate damages in contract. The calculation of certain consequential damages, i.e. injury to reputation, may require expert assistance from, for example, an accountant who has worked with many restaurants. If this accountant testifies at trial regarding the loss, she will be called as an expert witness. Smiths lawyer will then (presumably) call his expert witness to provide another calculation for the judge or jury to consider. There are also lawyers who deal primarily with tort claims, such as personal injury lawyers, environmental lawyers, and libel and slander lawyers. The damages calculations that their work requires can be, arguably, more complex than those used by lawyers working primarily with contracts. Consider again the case of the factory dumping toxic waste into the river. In addition to the injunction, the neighbours down-river may seek damages for the loss of use and diminution in value of their waterfront property or, if they are farmers or fishermen or hotel owners, damages for lost income. If they have become ill as a result of the dumping, they may also seek damages for medical expenses and future medical expenses. The services of an expert witness are almost always required in such cases. The law is complex, and there is no such thing as a tort lawyer or a contract lawyer. An employment lawyer works primarily with contracts, but if her client suffered emotional trauma or illness as a result of being unfairly terminated, she will need to understand and apply tort law principles and remedies. Since environmental problems usually develop over time and a polluting factory may change owners during the course of the pollution, the environmental lawyer needs to understand the complexities of contractual relationships and the allocation of liability among everyone who has ever owned the factory. Similarly, since personal injury cases may also involve insurance issues , the personal injury lawyer needs to understand his clients rights and remedies under the insurance contract. SupportThe Practice of LawCompany formation and managementCompany Law CapitalisationContract LawRemediesEmployment LawSale of GoodsReal Property LawIntellectual Property LawNegotiable instrumentsSecured TransactionsDebtor-Creditor LawCompetition LawTeacher Training ResourcesLETS Frequently Asked Questions LLM UniversitiesUniversity College London (UCL)Penn Law School (University of Pennsylvania)Leiden Law SchoolSydney Law School - University of Sydney Utrecht University School of LawWestminster University - School of LawZurich (University of Zurich) Kent (University of)Victoria University of WellingtonVanderbilt University Law School Legal English Dictionarynexus of contract (theory)enactratificationfacadelaunchappositegeneral partneramendmentissuerdogmapractitionerprocedural safeguardcertificate of formationcontrolling interestcommunity servicepersonal propertyincorporatorsuperfluousdisseminateMember of the European Parliament Employment Law Employment law is an expansive area including all areas of the employer/employee relationship except the negotiation process covered by labor law and collective bargaining. Laws to establish fair wages, limit the number of hours worked in a week, and prevent children from being exploited are some of the areas covered by employment law. Rules to regulate the cleanliness of the workplace, and precautions to protect employees and prevent dangerous accidents are also components of employment law. Employment law also includes protection against discrimination in the workplace based on race, gender, religion, or disability. Generally, employment law protects employees from any exploitation by their employers.

Discrimination In the recruiting processes, employers must take into consideration that it is unlawful to discriminate between applicants on the basis of gender, marital or civil partner status, race, colour, nationality, ethnic or national origins, pregnancy, sexual orientation, religion or other belief. It is also unlawful to publish job advertisements which might be construed as discriminatory. Discrimination in hiring and in respect of the terms and conditions of employment is also forbidden. Exceptions to this rule do exist, for example where sex or marital status is a genuine occupational qualification (GOQ). The law protects disabled persons by making it unlawful to discriminate against such persons in the interviewing and hiring process and regarding the terms of the offer of employment. Employers are required to make reasonable adjustments in the place of work to accommodate disabled persons. However, cost may be taken into account in determining what is reasonable. Termination of employment Matters relating to termination of employment are governed by the Employment Rights Act 1996. When the decision to terminate employment is in some way related to the activities of a trade union, however, the matter may be governed by the Trade Union and Labour Relations Act 1992. Termination of employment or dismissal occurs where

the employer ends the employment relationship, fails to renew an employment contract or forces the employee to retire. Discrimination in dismissal can take the form of unfair dismissal, wrongful dismissal, constructive dismissal or redundancy dismissal. Unfair dismissal Unfair dismissal occurs where for example, the employer fails to give a valid reason for the dismissal. Wrongful dismissal occurs where the employer fails to give proper notice of termination or fails to follow the guidelines for termination contained in the employment contract. A dismissal can be both unfair and wrongful. For example, if an employee is fired with immediate effect and without being given a reason for the dismissal, she may choose to bring an action against her employer for both unfair dismissal, i.e. dismissing without reason; and unlawful dismissal, i.e. dismissing with immediate effect instead of giving the 3 months notice as required by the employment contract. Redundancy Redundancy occurs where the employees job becomes unnecessary or redundant due to, for example, the implementation of a new system or new technology, the closing or moving of the business or a reduction in staffing to cut costs. Employees employed for more than 2 years are entitled under statute to redundancy payments. An employer may seek to avoid these redundancy payments by retaining the employee but changing their duties to such an extent that the employee is no longer able to do the job and resigns. In such a case, the employers actions have, in effect, forced the employee to resign and the employee in this case may be able to bring an action against his employer for constructive dismissal. Enforcement of rights Protection of employee rights is largely enforced through an Employment Tribunal. The Tribunal has the power to make decisions and issue orders in respect of the parties rights with regards to complaints. It may also order compensation for loss of prospective earnings and injured feelings. EU employment law Employment law in Europe is influenced by EU law. The EU issues directives which dictate to European governments the results to be achieved while leaving it up to the governments to decide upon the method to be used to ensure the results are achieved. The use of EU directives allows the upholding of certain EU Standards while giving member states leeway in accommodating national cultures. For example, the European Working Time Directive limits the maximum length of a working week to 48 hours over 7 days and requires a minimum rest period of 11 hours in each 24 hour period. In the UK this directive has been implemented through the Working Time Regulations 1998 which provides for a maximum working week of 48 hours but allows employers to ask employees to opt out of this maximum. Other EU directives have been passed in the areas of equal pay for equal work, sex discrimination, acquired rights and collective redundancies. Employment law in the US In the US employment legislation consists of federal and state statutes, administrative regulations and judicial decisions. Employment laws are enforced through the US Federal Department of Labor, the Equal Opportunity Commission, and the National Labor Relations Board. Just as in the UK, US employment legislation is aimed at protecting employees rights. For example the Fair Labor Standards Act prescribes minimum wage and overtime pay standards as well as record keeping and child labor standards for most private and public employment, including work conducted at home. Employment law relates to the areas covered above while labour law refers to the negotiation, collective bargaining and arbitration processes. Labour laws deal primarily with the relationship between employers and trade unions. These laws grant employees the right to unionise and allow employers and employees to engage in certain activities (e.g. strikes, picketing, seeking injunctions, lockouts) so as to have their demands fulfilled. Employment law in practice Lawyers working with employment law may work with a range of issues such as writing and reviewing employment contracts, reviewing termination practices and compensation plans, handling dismissal cases, consulting on management education and training and compliance with health and safety regulations. Labour law lawyers advise on collective agreements, collective bargaining, strikes, lock-outs and unfair labour practices. Sale of Goods

The following is a brief summary about the broad area of the law referred to as sale of goods designed to provide the Legal English teacher with information supplemental to that set forth in the International Legal English coursebook.

Contracts relating to the sale of goods are typically covered by the legislation of the relevant country or, less frequently, by general contractual principles of law. In the UK, the principal relevant legislation is the 1979 Sale of Goods Act. In the United States, the Uniform Commercial Code (UCC) normally applies to sale of goods contracts. A person or entity may have rights under a Sale of Goods Act if they have bought goods for commercial or personal use. Many countries have separate Sale of Goods Acts one for sales between merchants and one for sales involving consumers. If the goods are in some way faulty, the purchaser of such goods may be entitled to a full refund or partial compensation. Sale of Goods Acts often list terms or concepts which are implied in every sale of goods contract, regardless of whether they are expressly stated in the contract itself. Good Faith In many jurisdictions, a duty of good faith and fair dealing is implied in all contracts, i.e. neither party can do anything that would have the effect of destroying or injuring the right of the other party to receive the benefits of the contract. Although many jurisdictions (including the US) recognise good faith, English law generally refuses to recognise it as an implied contractual term. Terms implied by custom or trade One is generally bound by the customs of a particular industry. The terms of a sale of goods contract may have been negotiated against the background of the customs of a particular locality or trade. The parties often assume that their contract will be subject to such customs and thus do not deal specifically with the matter in their contract. Course of Dealing If two parties have regularly conducted business on certain terms, the terms may be assumed to be same for each contract made. The parties must have dealt with each other on numerous occasions and been aware of the term meant to be implied. Terms (or entire contracts) may be implied based on the previous course of dealing between the parties. Implied Warranties In common law jurisdictions, there are certain implied warranties or assurances presumed to be made in the sale of goods. The warranty of merchantability is implied, unless expressly disclaimed or a sale is made using the phrase as is or with all faults. In order to be merchantable, the goods must reasonably conform to an ordinary buyer's expectations, i.e., it functions like other goods of the same type. The warranty of fitness for a particular purpose is implied by law where a seller knows or has reason to know of a particular purpose or use for which an item is being purchased by the buyer (and the buyer relies on the sellers expertise in selecting the product). Other implied warranties include warranty of title, implying that the seller has the right to sell items and is the proper owner and, in conjunction with real estate transactions, the warranty of habitability, often defined as the minimum standard for housing suitable for human habitation. Battle of the Forms In many sale of goods transactions, the parties exchange printed purchase orders and acknowledgement forms. Naturally, these forms are oriented to the thinking of the respective drafting parties and the terms contained in them often do not correspond. Sale of Goods Acts provide rules for contract formation in cases in which the parties exchange forms that do not agree on all the terms. Under the common laws mirror-image rule, an acceptance that varies the terms of an offer becomes a counter-offer. This operates as a rejection of the original offer. Many modern statutes, such as the UCC and the Sale of Goods Act, change this rule and convert a counter-offer into an acceptance even if it contains additional or different terms. The only requirement is that the responding form must contain a definite and seasonable expression of acceptance. The terms of the responding form that correspond to the offer constitute the contract. Any additional terms become proposals for additions to the contract. When the transaction is between merchants, the additional terms become part of the contract unless the offer is specifically limited to its terms, the offeror objects to the new terms, or the additional terms materially alter the offer.

Real Property Law Real property is a legal term referring to real estate (permanent, immovable property) and its ownership interests. In the most general sense, the term real property refers to land, meaning not only the earth but everything of a permanent nature over or under it including structures and minerals. The opposite of real property is personal property. In modern legal systems, classification of property as real or personal may vary somewhat according to jurisdiction or, even within jurisdictions, according to purpose, and determines whether and how the property may be taxed. Real property is not just the ownership of property and buildings it includes many legal relationships between owners of real estate. Real property can be held in various ways. In some jurisdictions, real property is held absolutely (free of any encumbrances or superior ownership interests), while under English common law it may still be considered to be owned by the Crown. Such distinctions can be important in determining who inherits the real property upon the death or insolvency of the owner An important aspect of real property law is the various definitions of estates in land. In the law of almost every country, it is the State that is the true owner of all land within its territory, because it is the sovereign, or supreme, lawmaking authority over such land. Individuals don't "own" the land, but rather "estates" in the land (also known as "equitable interests") such as the transferable right to use and exclude others from use. Estate law and ownership interests The law recognizes different types of ownership interests in real property. These different interests, called "estates," encompass different rights. The type of estate held by a landowner is generally determined by the language of the grant through which the landowner acquired the land. Two differentiating characteristics of estates in land are their duration and transferability. Some important types of estates include: Fee simple: This is the most common estate which lasts forever and can be freely transferred. This type of estate (sometimes called fee simple absolute or fee tail) signifies that the owner has the right to dispose of the property as she sees fit and is a form of estate in which an individual has ownership for an indefinite period of time (sometimes referred to as freehold estates). Life estate: This is another form of freehold estate in which the individual (grantee or life tenant) retains possession of the land for the duration of his or her life. Though it can generally be sold, sale does not change its duration, which remains limited by the original grantee's life. Upon the individuals death, possession reverts back to the grantor. Leasehold: Leasehold estates are estates of limited duration. For example, an apartment-dweller with a one year lease has a leasehold estate in his apartment. Often, leasehold tenants must pay rent. Different terminology is used to distinguish between various forms of leasehold estates, including tenancy for years, tenancy at will, and tenancy at sufferance. If an estate is of limited duration, whoever will take ownership of the land upon its termination has a "future interest." Two important types of future interests are: Reversion: A reversion arises when a tenant grants an estate of lesser maximum duration than his own. Ownership of the land returns to the original tenant when the grantee's estate expires. The original tenant's future interest is a reversion. Remainder: A remainder arises when a tenant with a fee simple grants someone a life estate, and specifies a third party to whom the land goes when the life estate ends. The third party is said to have a remainder. The third party may have some legal rights to limit the life tenant's use of the land. Concurrent Estates exist when property is owned or possessed by two or more individuals simultaneously. Estates may be held jointly as joint tenants with rights of survivorship or as tenants in common. The difference in these two types of joint ownership of an estate in land is basically the inheritability of the estate. In joint tenancy (sometimes called tenancy of the entirety s the tenants are married to each other) the surviving tenant (or tenants) become the sole owner (or owners) of the estate. Nothing passes to the heirs of the deceased tenant. In some jurisdictions the phrase "with right of survivorship" must be used or the tenancy will assumed to be tenants in common. Tenants in common will have an inheritable portion of the estate in proportion to their ownership interest which is presumed to be equal amongst tenants unless otherwise stated in the transfer deed.

Real property may also be owned jointly through the device of the condominium or cooperative. A condominium is an apartment house, office building, or other multiple-unit complex, the units of which are individually owned, each owner receiving a recordable deed to the individual unit purchased, including the right to sell, mortgage, or even lease that unit and sharing in joint ownership of any common grounds or passageways. A cooperative is a building owned and managed by a corporation in which shares are sold, entitling the shareholders to occupy individual units in the building. Real estate transactions In many countries, professional organizations may also provide further guidelines. For example, in the United States, the Federal Fair Housing Act prohibits discrimination in real estate transactions on account of race, color, religion, sex, or national origin. The agreement to sell between a buyer and seller of real estate, often referred to as the purchase agreement, is governed by the general principles of contract law. It is a common requirement that any contract for real property be in writing. Another common requirement in real estate contracts is that the title to the property sold be marketable. This requires that the seller have proof of title to all the property he or she is selling and that third parties do not have undisclosed interests in the title. A title insurance company or an attorney is often employed by the buyer to investigate whether the title is, indeed, marketable. Title insurance companies also insure the buyer against losses caused by the title being invalid. In order to pass title, a deed with a proper description of the land must be executed and delivered. Some states require that the deed be officially recorded to establish ownership of the property and/or provide notice of its transfer to subsequent purchasers. The most common method of financing real estate transactions is through a mortgage, or arrangements by individuals and businesses wishing to make large value purchases of real estate without paying the entire value of the purchase up front. Under such an arrangement, the borrower is obliged to pay back the amount borrowed to the lender with a predetermined set of payments. Real property law in practice Lawyers working with real property have a wide variety of duties. Such lawyers are often requested to assisting with all aspects of real estate transactions. Although it is licensed brokers (usually non-lawyers) who normally represent buyers and sellers of real estate, real property lawyers are sometimes requested to assist in the negotiation or review of the closing documents or the sale purchase agreement. With respect to litigation and arbitration, real property lawyers often find themselves represented either wronged tenants/buyers or landlords/sellers accused of wrongdoing. Real property lawyers may also be involved, or cooperate with brokers, in financing and the arranging of suitable mortgages. Finally, such lawyers are often requested to assist in estate or trust distribution where necessary. Intellectual Property Law Often known by the abbreviation IP, is an umbrella term referring to creations of the mind or intellect, e.g., inventions, literary and artistic works, and symbols, names, images, and designs used in commerce. Intellectual property is sometimes divided into two categories: (i) industrial property, which includes inventions (patents), trade marks, industrial designs, and geographic indications of source; and (ii) copyright, which includes literary and artistic works such as novels, poems and plays, films, musical works, artistic works such as drawings, paintings, photographs and sculptures, and architectural designs. However, in some jurisdictions, the phrases industrial property and intellectual property are used interchangeably with no real distinction in meaning. The three main, traditional areas of IP are patents, trade marks and copyrights. Patent law The purpose of patent law is to foster and encourage innovation by granting inventors exclusive rights protecting their original inventions. The issuance of a patent is essentially a bargain between an inventor and a state. The inventor must disclose the details of the invention in exchange for enforceable rights to exclude or prevent others from using, making or selling this invention. Such exclusive rights, however, exist only for a limited time. After that period expires (generally twenty years), the invention enters the public domain and is then free to be used and exploited by anyone. Patent protection is available for nearly all manufactured items. The patent laws usually require that, in order for an invention to be patentable, it must be novel, useful, and non-obvious. An invention is considered novel if it merely has not been previously invented by another; at least some aspect of the invention must be new. An invention is deemed useful if it provides some form of benefit or is capable of industrial application. Whether a patent is obvious is the most subjective element of any patent application. The mere fact that a patent reflects a simple idea does not mean that it is obvious; the issue is whether it would have been obvious to somebody with ordinary skill in the area related to the invention at the time the invention was made. European patent law requires that a patent involves an inventive step which is the equivalent of the non-obvious requirement.

Prior to filing a patent application, inventors often obtain a patentability opinion from a patent attorney regarding whether an invention satisfies the substantive conditions of patentability. In such cases, a search of existing patents and "prior art" is made to help determine the viability of the application. In order to obtain a patent, an applicant must provide a written description of the invention in sufficient detail for a person skilled in the art to make and use the invention. This written description is known as the patent specification, which is often accompanied by drawings or diagrams demonstrating how an invention is made and how it operates. In addition, the applicant must provide the patent office with one or more claims that distinctly set forth what the applicant regards as the invention. A claim is a description designed to notify the public of precisely what the patent owner can exclude others from making, using, or selling. Trade mark law A trade mark (US: trademark ) is anything that is used to identify and differentiate the goods of one owner from the goods of others. Trade marks consist of any word, name, symbol, logo, sound or other device which acts as a source identifier. These are often referred to as brand names. A service mark is virtually identical to a trade mark, except that it is used to identify services rather than goods. Although this distinction exists between trade marks and service marks, the term trade mark is an umbrella term that usually refers to both. Trade marks are exceedingly important business tools which enable a company to establish a product's reputation without the fear of a subsequent company diminishing this reputation or reaping profits by confusing or deceiving consumers. A mark is eligible for registration if it has distinctive character. A mark is either (a) inherently distinctive or (b) notinherently distinctive. Inherently distinctive marks are fanciful, arbitrary or suggestive in relation to the goods or services with which the mark is used. Fanciful marks are comprised of entirely invented or coined terms or signs. Such marks are prima facie registrable. For example, KODAK had no meaning in any context before it was adopted as a trade mark. Fanciful marks are terms not previously found in any dictionary. These represent the strongest of all trade marks because there is no reason whatsoever for competitors to use the term. Arbitrary marks are usually common words used in a meaningless context (e.g., CAMEL for cigarettes or APPLE for computers). Such marks consist of words or images which have some dictionary meaning but which are used in connection with products or services unrelated to that meaning. Suggestive marks suggest a quality or a characteristic of the products or services in relation to which they are used, but require imagination on the part of the consumer to identify the characteristic (e.g., GREYHOUND for bus services). Suggestive marks invoke the consumers perceptive imagination. Marks that are not-inherently distinctive are afforded less protection. Descriptive marks are comprised of terms describing a quality or characteristic of the product or service used in connection with the mark (e.g., WIPE AWAY for a cleaning product). Marks that are primarily merely surnames (e.g., JOHNSONS for any good or service) and geographically descriptive (CALIFORNIA SPIRITS for alcoholic beverages) are also deemed not-inherently distinctive. Due to their lack of distinctiveness or uniqueness, marks that are not-inherently distinctive are not registrable unless it can be shown that they have acquired distinctiveness (also called secondary meaning in the United States) through extensive use in the marketplace. Acquired distinctiveness can be established by presenting evidence showing that, in the minds of the public, the mark has become so associated with one particular owner or source that it is no longer merely descriptive. If a mark merely consists of a generic term (e.g., water or bread), it is incapable of becoming a trade mark under any circumstance. Such terms must be free to be used by competitors in order to describe their products and services. Trade mark infringement occurs when one uses a mark that is likely to confuse consumers due to its similarity to another mark. This likelihood of confusion standard is also used by some national trade mark offices to deny a particular registration. Copyright law Copyright refers to a set of exclusive rights granted to authors of original works created in a fixed, tangible form of expression. In this regard, copyright protects only the expression of ideas, not the ideas themselves. Copyright may subsist in a wide range of artistic forms including, inter alia, books, movies, sound recordings, musical compositions, photographs, radio and TV broadcasts, paintings, drawings, poems, plays, sculptures. A copyright owner has the exclusive right to reproduce the copyrighted work, prepare derivative works and to copy, perform and display the work. Upon creation of the work, the copyright immediately becomes the property of the author. Copyright is secured automatically when a work is created. A work is considered created when it is fixed in a tangible medium of expression, such as the first time it is written or recorded. Neither publication nor registration in any Copyright Office is required in order to obtain a copyright. In order to qualify for copyright, a work must be an original creation. This

requirement means only that the work must have been independently created and not copied. In fact, two works could conceivably be identical and nevertheless copyrightable provided they were created independently. A copyright lasts for a specified period of time, depending on the jurisdiction. Currently, in most countries, the term of copyright protection endures for the authors life plus an additional 70 years after the authors death. For works made for hire, or works created within the scope of employment, the duration of copyright is generally 95 years from publication or 120 years from creation, whichever is shorter. After the expiration of these prescribed time periods, the works enter the public domain and can be used, copied and exploited freely by anyone. Subject to certain exceptions, any unauthorized use of a copyrighted work is a copyright infringement. In order to be found liable for infringement, the alleged infringer must have had access to the copyrighted work and copied such work. Also, the alleged infringers resulting work must be substantially similar to the copyrighted work. Certain acts, however, are minimal enough that they do not interfere with the copyright holders exclusive rights and therefore do not rise to the level of infringement. The concept of fair use, or exceptions or exemptions from acts otherwise prohibited under copyright law, recognizes that certain types of use of copyright-protected works do not require the copyright holders authorization. Fair use is primarily designed to allow the use of the copyright-protected work for commentary, parody, news reporting, research and educational purposes. Law in Practice Intellectual property law in practice Lawyers working with intellectual property law have a wide variety of duties depending on their specialty. Lawyers working in all three areas (trade mark, patent and copyright) often assist in litigation involving intellectual property, primarily infringement actions. IP lawyers also are requested to draft and enforce license agreements and assignments of IP rights. Such lawyers also file applications with national IP offices to attempt to obtain registrations for their clients. While a trade mark or copyright application takes only a few hours, or even minutes, a patent application usually takes months to prepare (due to its technical nature ). For this reason, most jurisdictions require patent attorneys to have scientific or technical backgrounds. In order to become a licensed patent attorney, most jurisdictions require an advanced degree in such areas and often require attorneys to pass an additional exam to qualify. Negotiable instruments The law of negotiable instruments (also called commercial paper in the US) is an area of commercial and business law which sets out the general rules that relate to certain documents of payment. A negotiable instrument is a document which promises the payment of a fixed amount of money and may be transferred from person to person. Negotiable instruments have two functionsa payment function and a credit function. This area of law started developing in the fourteenth century because merchants needed a less risky and more convenient alternative to carrying large amounts of gold or money, as well as ways of obtaining credit. This law was eventually codified, and since 1882, in England, transactions in negotiable instruments are governed by the Bills of Exchange Act. In the US, this area is regulated by the Uniform Commercial Code, Article 3, which has been adopted in all states. The rules are very similar in other common-law jurisdictions such as Canada, India and Pakistan. What is negotiability? In this context, the word negotiable means transferable; it does not mean open to discussion or modification, as it does in a litigation context. Negotiability allows the transfer of ownership from one party (the transferor) to another (the transferee) by delivery or endorsement. Endorsement is the action of signing an instrument to make it payable to another person or cashable by any person. That means merely signing your name on the back of the document, or adding an instruction such as pay to the order of Emily Burns. What kinds of instruments are negotiable? There are several types of common negotiable instruments including promissory notes, certificates of deposit, cheques (US checks) and bills of exchange. A promissory note is a document, signed by the person making the document, containing an unconditional promise to pay a fixed sum of money to a named person, to the order of a named person, or to the bearer (the person who is in physical possession) of the document. Loans are typically formalized in promissory notes, and since they often provide for payments over time, they function to provide credit to the borrower who is the maker of the note. A debenture (UK) or bond or secured debenture (US) has a similar function to a promissory note; it is a written acknowledgment of debt, secured on the assets of a company. In fact debentures are the most common form of longterm loan used by UK companies.

A certificate of deposit (CD) is a document from a bank which indicates that a specific sum of money has been deposited and promises to repay that sum with interest to the order of the depositor, or to some other persons order. A CD, which is also called a time deposit, bears a maturity date (the date when it must be repaid) and a specified interest rate, which is usually higher than on ordinary savings accounts. A bill of exchange is a three-party written order signed by the first party (the drawer), requiring the second party (the drawee) to make a specified payment to a third party (the payee) on demand or at a fixed future date. A cheque is a type of bill of exchange where the drawee is always a bank and is payable on demand. Unlike promissory notes and certificates of deposit bills of exchange and cheques do not pay interest. A letter of credit is a document provided by a bank or other financial institution as a guarantee that a specific sum of money will be paid once stated conditions have been met. Letters of credit are often used in the import and export business to ensure that payment will be received. Because of factors such as distance, different laws in each country and difficulty in knowing each party personally, the use of letters of credit has become a very important aspect of international trade. Key legal concepts in negotiable instruments lawnemo dat and holder in due course The nemo dat rule is an important general principle of law that states that only holders of good title (legal owners) can transfer ownership. However, this rule does not apply to negotiable instruments. This is to facilitate the free transferability of negotiable instruments, which aids commerce in general. Because negotiable instruments can be payable to the order or to the bearer of the instrument, they can be held by someone who is not connected with the underlying transaction and does not know of any potential defect in that transaction. If such a holder holds the instrument in good faith and is not aware of any problems with the instrument, the holder is a bona-fide purchaser for value or holder in due course (HDC). This means that the HDC takes good title to the instrument and can claim payment even if the person from whom he or she received it did not hold title. The HDC acquires greater rights under a negotiable instrument than an ordinary transferee of a contractual right. Negotiable instruments law in practice Lawyers who practice negotiable instruments law usually work for banks , commercial law firms, or governmental authorities. Many lawyers at certain commercial law firms work in the field of capital markets. Capital markets is a term used to describe the pool of investors (including pension funds, hedge funds, financial institutions and retail clients) who have funds to invest in financial products. Such products would, generally, include corporate bonds, financial bonds and structured securities. Capital markets lawyers will typically advise investment banks when they issue bonds to raise money. A corporate bond has similar characteristics to a loan in that money is borrowed by a company to be repaid at a date in the future with interest paid thereon. The key difference is that because the company is accessing the capital markets (and thereby a pool of investors), each taking a smaller proportion of risk than lenders in a loan agreement, the company may be able to borrow at more favourable rates. The investor receives interest throughout the life of the bond (in a similar way to a loan agreement) and receives back their principal at maturity (the end of the term of the bond). If there is an event of default (eg the company that issued the bonds becomes insolvent), the investor becomes a creditor in the companys insolvency. In such an insolvency situation, lawyers may advise a trustee interposed in order to act on behalf of the bondholders. Commercial lawyers in private law firms also deal with negotiable instruments because they are often used as means of payment in mergers and acquisitions, and other transactions. Lawyers who represent debtors and creditors in bankruptcy cases litigate regarding the validity of the instruments, the rights of the creditors to get paid and the lack of the debtors ability to pay. They also try to work out new payment plans on promissory notes, to enable debtors to pay. Banks are often parties to negotiable instruments, for example, as lenders in promissory notes, as borrowers in CDs, and as guarantors in letters of credit. Therefore, bank lawyers are involved in drafting the forms and seeing that all of the legal prerequisites are met. They can also be involved in bringing collection proceedings and other litigation where other parties to the instruments have defaulted on their obligations, usually by failing to make timely payment under the instruments. Lawyers who work for governmental tax authorities often monitor negotiable instruments to make sure that they are not used for evading taxes. Consumer protection authorities scrutinize instruments, particularly promissory notes, to see whether the terms and conditions of the loan are unreasonable to the consumer-borrower. For instance, they regulate the amount of interest that may be charged.

Secured Transactions Secured transactions are an essential part of commercial law and many everyday transactions as well. In a secured transaction a borrower agrees that the lender (the secured party) may take property (collateral) owned by the borrower should the borrower default on the loan. In other words, the purpose of secured transactions is to secure a loan. Secured interests are often required when a party borrows money, which means the loans must be securitized. Lenders often require more than just promises of repayment in order to extend credit to borrowers. The law of secured transactions deals with the collateral interests formed between a lender and borrower. The collateral interests secure the loan by allowing property to act as security for the borrower's obligation to repay the loan. A security interest is created by an agreement (security agreement also called a debenture) and arises when in exchange for a loan, a borrower agrees that the lender may take specific collateral owned by the borrower in the event of a default on the loan. Notably, a lender does not take a security interest in order to acquire the property, the collateral is simply a protection in case of a default. For example, if the borrower is unable to fulfill his obligation to make loan payments as agreed, then the lender may take possession of a specified security property. In addition, a security interest assures the lender that if the debtor should go bankrupt (or becomes insolvent), the lender may be able to recover the value of the loan by taking possession of the specified collateral instead of receiving only a portion of the borrowers property after it is divided among all creditors. Security agreements as contracts Security agreements are contracts and so the law of secured transactions is generally considered to be a form of contract law. The law of secured transactions generally applies to any transaction, regardless of its form, that creates a security interest in personal property through a a contract. This includes sales of accounts, promissory notes, consignments, and various other security agreements. Typically, a statute of frauds requires that security agreements be in writing unless the security is pledged. A pledged security agreement arises when the borrower transfers the collateral to the lender in exchange for a loan. To perfect a security agreement the filing of a public notice is usually required. This act of filing is generally known as perfection, which denotes the additional steps which must be taken in order to make the security effective against third parties and to ensure its effectiveness if the issuer goes bankrupt. In this context, the perfection of a security agreement allows a lender to gain priority to the collateral over any third party. Taking security in the context of a loan Pursuant to a loan transaction, a bank will generally take security over the assets and undertaking of the borrower in order to increase its chances of being repaid, even on the insolvency of the borrower. Therefore, in conjunction with entering into the loan agreement, the borrower will be required to enter into a debenture or security agreement, which is the document under which the borrower creates the security in favor of a bank for a loan. Such security typically includes creating a fixed charge over the fixed assets of the borrower (such as plants and machinery), which means that the borrower may not sell or do anything to devalue its assets without the banks consent and the bank has recourse to the assets if the borrower defaults on the loan. In order to secure the remaining assets of the borrower which may fluctuate from time to time (such as its trading stock), the bank will also seek to take a floating charge over the whole undertaking of the borrower. A floating charge allows the borrower to deal with the charged assets in the ordinary course of business without the requirement of the banks consent. However, on the occurrence of certain events, such as a default under the loan agreement, the floating charge will crystallize, which means that it is converted to a fixed charge over the assets which it covers at that time, so the borrower will only be able to deal with such assets with the banks consent. Other forms of security which the bank may hold include a mortgage over assets such as land or shares, which often grants the bank a right to sell on default; a pledge over assets capable of delivery such as bearer bonds, since this involves the bank taking physical possession of the asset; and an assignment of the borrowers rights against third parties, such as book debts. The bank will seek to ensure perfection of the security (i.e. to make it valid against third parties) by publicly registering the charges or security agreements. It will also seek to ensure that the charge ranks in priority to other charges, which it may achieve by the inclusion of a negative pledge, which is an undertaking by the borrower not to create any further security over its assets, in the debenture to prevent the borrower granting later fixed charges to third parties which take priority over the floating charge granted to the bank. Banks often create negative pledges by requiring the borrower to give covenants, or promises, including non-financial covenants, such as a negative pledge.

In addition to the security granted by the borrower, the bank may also seek a guarantee from the borrowers parent company or other group company to act as third party support, which is an undertaking by the guarantor to answer for the borrowers liabilities on its default. If the borrowers parent refuses to provide a guarantee, it may give a comfort letter, which is usually not intended to be legally binding and is merely a statement of intention to maintain an interest in and support for a subsidiary and to ensure it is capable of fulfilling its obligations under the loan, which acts as reassurance to the bank. Debtor-Creditor Law A debtor is someone who owes a financial obligation (a debt) to another, known as the creditor. An example of a debtor-creditor relationship is where a bank lends money to an individual or company, on the basis that the money has to be paid back at some point to the bank. The individual or company is therefore a debtor because it owes a debt to the bank, which is the creditor in this relationship. Another example is where a supplier provides goods or services to a company and sends the company a bill. The supplier is then owed money (and is thus a creditor) and the company owes money (and is thus the debtor in this relationship). If a debtor is unable or unwilling to pay back money borrowed, creditors want to ensure that they are repaid or at least have a better chance of being repaid. For this reason, certain creditors will always take security over the assets of the debtor, which means that creditors may be able to take the debtors possessions, such as their house, car, machinery, etc. if the debtor doesnt repay the loan. An example of this is where a family takes out a mortgage with a bank to buy a house. If the family fails to make repayments on time, the bank has the right to take possession of the house. Insolvency/bankruptcy of the debtor An individual or company that is unable to pay its debts when they fall due may be declared bankrupt/insolvent. In this situation, creditors such as banks who have lent money against security will have priority when it comes to getting their money back, particularly because they can take possession of the assets of the bankrupt individual or company. These creditors are known as secured creditors. However, there may be many other creditors who are owed money by the individual or company but have not taken any security, such as suppliers. These creditors (known as unsecured creditors) also want to get their money back but will be lower down in the order of priority, generally being paid after the secured creditors have received what they are owed. Certain creditors who are owed money and who have not taken any security are still given priority ahead of other creditors. They include tax authorities that are owed taxes and employees that are owed salaries. These creditors are known as preferential creditors. Liquidation/winding up of the debtor A company that is insolvent or facing insolvency may be liquidated/wound up, which involves the companys assets being sold, the money being used to pay off debts to creditors, and anything remaining being distributed to shareholders. The company will then be dissolved. The company itself may decide to wind itself up, but also creditors, among others, may apply to the court to have the company liquidated. A liquidator will be appointed to carry out the liquidation process, bringing with it a certain amount of control over the company. The process involves selling the debtors assets, collecting any debts due to the company, and then paying off creditors in the proper order (i.e. usually preferential creditors first, then secured creditors, then unsecured creditors). Actually, the expenses of the actual liquidation are paid off first, so the liquidator makes sure his/her fees are paid! Avoiding liquidation A company in financial difficulties may employ a rescue mechanism to postpone or avoid liquidation. An administrator may be appointed by the company or a court whose job it is to reorganise the company or realise its assets within a limited period in order to achieve maximum benefit for the company and thereby save it from liquidation. During this period, the company benefits from the protection of a moratorium, which is effectively a freeze on creditors taking action against the company, such as filing for compulsory liquidation or enforcing security. The management of the company continues to run the day-to-day business operations but all significant business decisions must be approved by the administrator. The administrator will put forward proposals to the shareholders and creditors for their approval as to how best to rescue the company. An arrangement must be approved by a certain majority of shareholders or creditors and often by a court as well, and will be binding on all creditors and shareholders if so approved. An example of such an arrangement is where creditors agree to convert the money that they are owed into shares in the debtor company (known as a debt for equity swap). This leaves the creditors without the money that they are owed, but they have the possibility of recouping the money at a later date if the company stays afloat and makes a profit, which can then

be distributed to the shareholders (as well as being in possession of shares which can increase in value and then be sold to someone else for a profit). Law in Practice Insolvency/ bankruptcy lawyers advise on numerous issues relating to the insolvency/bankruptcy of debtors. They can advise on rescue procedures for debtor companies that wish to avoid liquidation and dispute winding up proceedings on behalf of debtors. Lawyers can also advise creditors on enforcing security and stategies for recovering their debt. Insolvent companies often have assets in more than one country so advice on local insolvency/bankruptcy law from lawyers from different jurisdictions may be required. Competition Law Competition law is the government regulation of business with the goal of preventing and prohibiting anti-competitive behaviour and unfair business practices. It involves the regulation of the continuous struggle of companies for superiority by attempting to maintain fair competition so that all people and companies can benefit from competitive prices, product choice and quality services. In the US, this area of law is called antitrust because the area of law was originally designed to regulate the behaviour of business trusts, more commonly known today as cartels.

What kinds of activities are regulated by competition law? Competition law covers the regulation of many different kinds of activities. Some examples are the following: Abuse of a dominant position (Also called misuse of market power and single firm conduct with respect to monopolization) It is not illegal to be a monopoly (i.e. a single firm in a dominant position) per se, but governments do regulate monopolies more closely than other companies since, on their own, they possess the power to easily engage in business practices which may be particularly harmful to consumers or to other competitors. Whether or not a company is a monopoly is part of the competition law analysis and depends on factors such as the definition of the product market and the geographic market. Competition law provisions on abuse of dominant position deal with the actions of both single-firm monopolies as well as a group of dominant firms. Competition law regulates the behaviour of firms in dominant positions to ensure that they do not, or are not likely to, behave anti-competitively or substantially lessen competition in a market. The purpose of this kind of regulation is to preserve competition within markets and promote effective competition, and not necessarily to protect individual competitors. Monopolies are prohibited from engaging in activities that firms not in a dominant position may be allowed to engage in, for example: exclusive agreements practices whereby a supplier requires or induces a customer to deal only with primary products designated by the supplier (can also be termed single branding agreements, exclusive purchasing, exclusive dealing, requirement contracts or non-compete obligations) or to refrain from dealing with products except as supplied by the supplier (such as through limited distribution, resale price maintenance or market partitioning). An example of this is when a sugar substitute company coupled (i) price discounting when a customer used the sugar substitutes own brand name and also (ii) provided discounts for the promotion of products containing only their particular sugar substitute. tie-in agreements (also termed tying agreements, tied in agreements , product tying or bundling) practices whereby the supplier requires that the customer purchase a second (tied) product from the supplier of a first (tying) product. This may be written into the contract or done through some other means. The supplying firm uses its market power in relation to the tying product to induce the customer to buy the tied product. For example, a manufacturer of nail guns and nail cartridges might require customers to purchase nails exclusively from it. Another famous example is when Microsoft required that purchasers of the Windows 95 operating system also acquire Internet Explorer web browser. refusal to supply Also called refusal to deal. This involves the situation where a buyer cannot obtain supplies of a product on usual trade terms from a dominant firm and is, as a result, substantially affected in its ability to conduct business, and competition is thereby adversely affected. This can essentially be a company boycotting a supplier or a customer. The competition authorities may decide that the dominant firm has an obligation to supply to other firms, especially if the dominant firm offers an essential facility. For example, a railroad company that controlled a railway, including bridges and switching yards was forced to allow competing railway companies to use its railway facilities. exploitative pricing practices An example of this would be price discrimination where goods are sold or purchased at prices not related to cost. One form of price discrimination is discounts or rebates which aim to bind customers to the producer, rendering it too difficult for new competitors to enter the market. For example, a sugar company in Ireland granted sugar export rebates to customers exporting outside Ireland but customers selling in Ireland received no rebate. Another example is a company which offered loyalty payments to builders merchants in Great Britain who stocked only their merchandise.

In the EU, Article 82 of the EC Treaty deals with the regulation of the behavior of the single, dominant firm or undertaking. In the US, both the Sherman Act and the Clayton Act are designed to regulate monopolies. Mergers -When all or part of one business is acquired by another business, competition authorities may review the merger to determine whether the transaction will, or is likely, to substantially prevent or lessen competition in the relevant market (US, UK, Canada) or whether the merger will create or strengthen a dominant position resulting in the obstruction of effective competition (EU). Merger control is usually carried out in the public interest and not in the interest of shareholders mergers may be prevented or altered if it is predicted that the market would be less competitive, and thus consumer welfare would be harmed, should the merger be allowed to proceed. In reviewing mergers, competition authorities consider many different elements, including the level of economic concentration in the relevant industry and the merging parties' market shares. In the EU, the term concentration may also be used instead of merger. Normally, mergers are not prevented by competition authorities but rather they may require a change in the structure of the deal in order to dampen or eliminate any predicted anti-competitive effects. For example if the resulting firm may be deemed to be too dominant in one area, competition authorities may require that the merged entity sell a certain part of its business in order to obtain merger approval. For example, when two wine and spirits companies planned to merge, competition authorities required that one of them sell certain spirits brands to a third party so that the merged entity would not be the only company selling that kind of spirit. However, one famous example of EU competition authorities preventing a merger occurred in 2001 when General Electric planned to merge with Honeywell. The merger was prevented as the EU felt that it would cause a sever reduction of competition in the aerospace industry. The case made headlines since the merger had already been approved by US antitrust authorities and it was the first time that a proposed merger between two US companies had been blocked solely by European authorities. Cartels Competition law also regulates the behaviour of firms in order to prohibit cartel-like activity which would enable firms to collude together to fix prices, limit supplies, divide markets or engage in other anti-competitive practices. Not all agreements between companies are considered to be anti-competitive (for example joint ventures, partnership agreements and research agreements are usually not anti-competitive), but agreements are evaluated depending on their effects on competition and whether they result in undesirable restrictive trade practices. Different language is again used to discuss this issue in different jurisdictions. In the EU, Article 81 of the EC Treaty stipulates that all agreements, decisions or concerted practices between firms can be evaluated in light of competition rules. Both horizontal agreements (agreements between companies at the same level of production) and vertical agreements (agreements between companies at different levels of production) are often discussed separately. The UK Competition Act also refers to agreements that may have an effect on competition. The Sherman Act of the US states that every contract, combination or conspiracy in restraint of trade is illegal. In Canada, the vocabulary used in the Canadian Competition Act is also that of conspiracies. In several countries, criminal sanctions can be imposed on parties found in breach of the relevant cartel provision (such as in Canada, France, Germany, Greece, Ireland, Japan, Korea, Mexico, Norway, Slovak Republic and the US). The relationship between intellectual property law and competition law Intellectual property law includes the regulation of patents, designs, copyrights and trademarks. In essence, the law grants to an owner of an exclusive right the power to behave in a certain monopolistic manner. For example, the owner of a patent may prevent others from producing the invention for a certain period of time. An obvious conflict therefore exists between intellectual property law, which aims to confer exclusivity upon right owners, and competition law, which aims to keep markets open and prevent exclusive behaviour. This is an interesting dilemma which has led some governments to react with tools such as compulsory licensing where an owner of a patent is forced to license its product to another firm so that the product can be produced by a competitor. This discussion is relevant, for example, to pharmaceutical companies which have patents for certain medication and as a result, the people who need the medication often cannot afford it (such as AIDS medication in Africa). Another example is the European Commissions requirement that Microsoft remove clauses from its software licences which provided for both minimum distribution volumes of Internet Explorer and also a prohibition against the advertising of competitor web browsers. Competition law in practice Lawyers who practice competition law often work either for the government or for a private law firm. Private practice competition lawyer

Lawyers who practice competition law in a private law firm have a wide variety of tasks. If the firm is a large commercial law firm, one of the most common tasks would be assisting the mergers & acquisitions department by obtaining approval from the competition authorities for any contemplated merger. This usually involves research into the relevant product and geographic market to determine market share of the proposed merged entity and arguments about why the proposed merger does not have any anti-competitive effect. This information is then submitted in written form to the relevant competition authority which will approve or forbid the merger to go through or allow the merger with certain changes, such as the divestiture of certain areas of business or assets. The latter may occur if the competition authority decides that the merged entity has too much market power in one product or geographic area and aims to allow for a more competitive market in that area. Sometimes the competition authority will also have a meeting together with all interested parties so that they can understand every partys side better. Another common activity of the competition lawyer in a private law firm is assisting companies to ensure they comply with competition law rules. For example, companies may check with their competition lawyer to ensure that proposed discounts, rebates or other pricing policies do not violate competition law. This would involve the lawyer reading through documents such as supply or distribution contracts or offers made to customers or potential customers regarding pricing. Companies might also ask the competition lawyer to review other customer contracts to ensure that the provisions do not add up to anti-competitive behaviour (for example, non-compete clauses, long-term customer contracts with automatic renewal or strict conditions for termination, excessive liquidated damages and rights of first refusal in the same contract may be deemed as anti-competitive behaviour). Government competition lawyers A competition lawyer working for the government usually works for the competition authority (or competition regulator) such as the DG Competition in the EU, the Federal Trade Commission and the Department of Justice in the US, the Office of Fair Trading and the Competition Commission in the UK, and the Competition Bureau in Canada. Lawyers who work for competition authorities ensure that competition laws are being followed and will perform such tasks as reading and deciding on applications for mergers, ensuring liberalisation or the opening up of markets to competition, and investigating the behaviour of companies to determine if any competition laws are being violated. In some countries, private parties may complain directly to the competition authorities regarding any suspected anti-competitive behaviour and the authority will conduct their investigation based on this complaint. Competition authorities are also often involved in competition litigation cases where competition law violations are tried in court. In the EU, the DG Competition (Directorate General Competition) is headed by the Commissioner and has the mission of enforcing the competition rules of the European Union treaties. It is located in Brussels, Belgium and is similar to a government ministry. In the US, the Federal Trade Commission (FTC) exists to promote consumer protection and to prevent anticompetitive trade practices. It is an independent agency of the government of the United States. Five commissioners head the FTC together, all of whom are nominated by the President and confirmed by the Senate. The Department of Justice (DOJ) Antitrust Division enforces both criminal and civil antitrust laws whereas the FTC regulates only civil antitrust laws together with the Department of Justice. The DOJ is a Cabinet department in the US government administered by the Attorney General. This has only been a brief summary of some of the main areas of competition law. For more information, please visit the following websites: