The effect of Business Laws


In the current world business are playing an important role in every aspect of life. Standard of living, one’s life style are determine by business, also education and even cultural standard (Cheesemen, 2004). So to lead a better life we need to understand business and study business. Coping with both predictable and unpredictable events can be easier, more efficient, and less traumatic if we understand business. Study of business will help us to understand that today, national economies are no more independent entities rather dependent and taking an uneven global shape. Economic depression in U.S.A. has an impact on the whole world, business and global warming are not different issues, war in Iraq or Afghanistan has some kind of link with business, China becoming a factor in the world economy because of excellent business skill and the system known as “Free Enterprise". However the road to success will be easier for those who understand how business works.

Business is a crucial part of life, there should be some kind of rules and regulations to control and operate it in a disciplined way (Cheesemen, 2004). In order to do so, business laws have been introduced. And in the present world business firms must operate within the boundaries of laws and government regulation. Laws have been developed not only to protect consumers but also to preserve competition. Government agencies enforce these laws at different administrative levels. Business firms that do not comply with the laws face fines, penalties and in consequences fail to run. So, knowing business laws are very important to operate a business.

The purpose of this dissertation is to investigate how business laws will improve or effect our daily business operations. Mentioning a literature review, sources of business law, different laws affecting businesses, laws regarding commerce and industry in South Africa. My findings will be put together in a conclusion.


The objective of this TIS is to investigate how business laws improve or effect our daily business operations. The topic I have chosen is about how business laws plays an important role in every aspect of life. Rules and regulations have been implemented to control how businesses operate. These laws protect consumers and also preserve competition between businesses. Businesses that do not obey with any of the business laws will face fines or penalties.

Dr. Henry R. Cheeseman, past researcher, is a lawyer and economist. His speciality is interrelationships of law with economics and finance. His expertise lies in savings, loans, banking, anti-trust law, economics and regularity law. In his fifth book he adds coverage and importance on the internet as a vital aspect for business laws. He also wrote several other publications including “Contemporary Business & E-Commerce Law" and “The Legal and Regulatory Environment".

Stephen Judge studied LL.B (Hons) at the University of Jean Moulin. Currently he is teaching Commercial Law as his main subject. He taught Company Law and Corporate Insolvency previously. He is interested in the following research: The European Charter on Regional or Minority Languages and Comparative Company Law.

This TIS mainly focuses on sources of business law, how businesses are being affected by different laws, laws regarding commerce and industry in South Africa. This TIS shows how important business laws are in today’s world, what business laws means for the consumers and businesses. Without business laws the current businesses will not be able to function or survive.


Laws are basically derived from three major sources:

Common Law:

Is known when a law is created through the court decisions by judges. It’s mostly based on tradition, usage and court rulings of early England (Bushman 2007).

Statutory Law:

A law created by parliament, constitution, law commission or agreement is called statue. Most laws created today are statues. A statutory law is made up by various legislative endorsed bodies. For a law to be constitutional it must be drawn up in a specific way. However, courts often must interpret a law’s meaning (Miller 2000). Statues getting changes is sometimes due to the decision by the court.

Administrative Law:

Laws concerned with the powers and functions of the executive branch of the government, its organizations, their interrelations with each other, citizens and the non-governmental entities. The intention of administrative law is to provide a legal framework for regulating the powers, procedures and acts of public administration (Cheesemen, 2001).


Business Law is the body of law that governs business and commercial transactions (Bushman 2007). In today’s complicated business world in order to operate and control a Business Laws are a must. So, this part of law deals with businesses to keep businesses running in a disciplined way as all the parties related to businesses get protection as well as feel responsible in their respective positions, is known as business law.


Several and different laws control the actions of all the businesses and each person involved in the business, from the manager the employee and even the owner.

Some major business law categories are as follows:

5.1 The Law of Torts:

While criminal law deals with crimes against society of the state, tort law is concerned with compensating the victims of noncriminal wrongs. Tort is a noncriminal injury to other persons or their property or reputation (Judge 1999). There are two types of torts:

Intentional Torts:

Intentional torts are deliberate acts by a person or business firm.

Negligence Torts:

A tort results from negligence when one party fails to exercise reasonable care and causes injury to another. Negligence torts arise from carelessness rather than intentional behaviour.

Product liability is an important part of tort law. Product liability involves the responsibility of business firms for negligence in design, manufacture, sale, and operation of their products. The business action examines some product liability cases in the tobacco industry. In certain instances, product liability laws have been expanded to their ends in which the producer or marketer of the product is not proved negligent (Judge 1999). Under strict product liability, the manufacturer is responsible if the injured party can show that the product was effective, that the defect caused the injury and the product to be dangerous.

5.2 The law of Contract:

A contract is a legally enforceable, voluntary agreement between two or more parties. A contract is like private statue, in which the parties define the consideration they owe each other. Contracts are generally part of most business transactions (Cheesemen, 2001). They can be either express or implied. An express contract is one in which the words are actually put forth, either orally or in writing. Generally, oral contracts are just as legally enforceable as written contracts.

Essential Elements or Feature of Contract:

Plurality of member

Offer and acceptance

Intention to establish legal relationship

Legal consideration

Legal objective

Capacity to contract

Free consent


Possibility of performance

Types of Contract:

Valid contract

Void contract

Voidable contract

Un-enforceable contract

Expressed contract

Implied contract

Independent contract

Bilateral contract

Executed contract

5.3 Law of Sales:

Sales law, which grew out of contract law, involves products sold for money or credit. The uniform commercial code provides that some sales contracts are binding even if all the requirements for a contract are not met (Judge 1999). For instance, a sales agreement is legally binding even if the selling price is left out of the agreement; the buyer must pay the reasonable value of the goods.

5.4 The Law of Agency:

An agency is a business relationship in which a principal appoints an agent to act on his or her behalf. The actions of the representative, authorized by the principal, are legally recognized as though they were performed by the principal. For example, a talent agent can enter into a contract for a client as though the client signed the contract him or herself. Agents are used in many diverse industries, including insurance, sports, entertainment, and real estate. Generally, agents are paid a fee or commission or their services.

Because the principal is bound by the actions of the agent, it is important to put the agency agreement in writing (Judge 1999). Generally, a legal document called a power of attorney is granted to authorize the agent to act on behalf of the principal.

5.5 The law of Property:

Anything that can be owned is considered property. Property is something for which a person or business entity has unrestricted of possession or use (Bushman 2007). There are several categories of property. Real property is real estate, land, and anything permanently attached to it, such as houses, buildings, and parking lots. Tangible personal property means physical items such as a store’s inventory of goods, equipment, and automobiles. Intangible personal property is that shown by documents or other written instruments, such as cheques, money orders, receipts, stocks and bonds.

Three forms of intangible personal property provide legal protection for individuals or business firms. A trademark is a name or symbol registered with the patent and trademark office. It guarantees the owner exclusive rights for certain years (varies country to country) and can be renewed as many times as the owner wishes. Patents granted by the patent and trademark office give inventors the exclusive right to make, use, or sell their product for certain years (varies country to country). A copyright filled with the copyright office, gives the creator exclusive right to publish and sell an original written works (Bushman 2007).

5.6 The law of Bankruptcy:

Bankruptcy is a legal procedure for individuals and firms that cannot pay their debts. By declaring bankruptcy, the individual or firm asks the court to be declares unable to satisfy creditors and to be released from financial obligations. The debtor’s assets are usually sold to pay off as much of the debt as possible.

5.7 The law of Negotiable instruments:

A negotiable instrument is a substitute for money (Cooke 2002). It is a written promise to pay a specified sum of money, if it can be transferred from one person or business firm to another. There are three types of negotiable instrument:


Bill of exchange

Promissory note

A negotiable instrument must meet the following requirements:

They must be written and signed by the maker or drawer (Bushman 2007).

They must contain an unconditional promise to pay a certain sum of money.

They must be payable on demand or at a specific date.

They must be payable to a specific person or business firm or the holder.

The recipient must endorse a negotiable instrument before it is transferred. An endorsement is a person’s signature on the back of a negotiable instrument. A bland endorsement is accomplished when the recipient sings the back of the instrument. Using the words for deposit only along with the signature constitutes a restrictive endorsement, it states what the instrument is for and is much safer than a blank endorsement. A special endorsement specifies to whom the instrument is payable by including the person’s or firm’s name on the back of the instrument along with the signature (Cooke 2002). Restrictive and special endorsements protect the negotiable instrument should it be lost or stolen. Finally, a qualified endorsement usually the words without recourse means the person who originally signed the instrument, not the endorser, are responsible for payment. The endorser does not guarantee payment if the instrument is not backed by sufficient funds.

Followings are the laws enacted in South-Africa and regulating business activities of the country. Most of the laws have their roots in the British colonial period.


Business is nothing new in human society. Ancient Business is a part of our social life in different forms (Judge 1999). Presence of business proves that we are dependent on each other and with the passes of time this dependency is increasing. At the early stage people engaged in exchange of goods without using money which was called trade. Over the years many things have changed, money has been introduced as medium of exchange and through lots of forms businesses are now in the present forms. Today business means exchange of goods, services or money for mutual benefit or profit.


The Contract Act-1872

The Sale of Goods Act-1930

The Partnership Act-1932

The Negotiable Instrument Act-1881

The Company Act-1994

The Carriage of Goods Act

The Common Carriage Act-1865

The Railway Carriage Act-1890

The Carriage of Goods by Sea Act-1925

The Carriage by Air Act-1934

The Insurance Act-1938

The Insolvency Act-1997


Laws Based on Types of Work:

The Factories Act-1965

The Mines Act-1932

The Mines Labour Act-1934

Laws Regarding Wages:

The Payment of Wages Act-1936

The Minimum Wages Ordinance- 1936

The Provident Fund Act-1925

Laws Regarding Industrial Relation:

The Industrial Relations Ordinance-1969

The Industrial Relations (Amendment) Ordinance-1989

Laws Regarding Social Protections:

The Workmen’s Compensation Act-1923

The Employers Liabilities Act-1938

The Workmen’s security Act-1934

Laws Regarding Employment Condition:

The Employment of Labour (Standing Order) Act-1963

The Shops and Establishment Act-1965

Laws Regarding Child Labour:

The Child Labour Appointment Act-1938

The Child Labour Prohibition Act-1930


Law is a structure of rules, typically prescribed through a set of institutions. Politics, Economics and Society are shaped by it in numerous ways and aids as a primary social mediator of relations among people. In other words law can be defined as “A standard or rule established by the society to oversee the behaviour of its members" (Cooke 2002).


Favourable legal and business environment: South Africa has a world class, progressive legal framework. Legislation relating to commerce and labour issues is particularly well developed, while laws relating to competition policy, copyright, patents, trademarks and arguments adapt to international standards and agreements. Purity of contract is protected under common law, and independent courts ensure respect for commercial rights and obligations. The independence of the judges is guaranteed by the Constitution. South Africa's financial systems are sophisticated, healthy and well regulated. South African banking regulations rank with the best in the world, while the sector has long been rated among the top 10 globally. Foreign banks are well represented and electronic banking facilities are widespread, with internet banking a growth feature of the sector (Judge 1999).

Trade reform, strategic alliances: Since signing the Global Agreement on Tariffs and Trade in 1994, South Africa has become a player in the global trading system, and a series of trade restructurings, including a tariff reduction and reasoning programme have been implemented. Market access has been enhanced through free trade agreements with the European Union and the Southern African Development Community and the implementation of the Africa Growth and Opportunity Act by the United States. In recent years, South Africa has also developed strong relations with markets in the rest of Africa, Asia and Latin America (Cooke 2002).

Cost of doing business in SA: South Africa's exchange rate makes it one of the least expensive countries for foreigners to live and do business in, with a first-world infrastructure and high living standards ensuring good value for money. South Africa's energy costs are still among the lowest in the world, and the country compares favourably for petrol prices, with private sector and multinational oil companies refining and marketing nearly all imported petrol products in South Africa. Telecommunications costs are coming down. Recently licensed, fixed line operator, Neotel, has begun giving state company Telkom its first real taste of competition. The government is taking steps and refining laws to ensure cheaper and more widely available bandwidth capacity (Judge 1999).

Competition: The Competition Act of 1998 fundamentally reformed the country's competition legislation, strengthening the powers of the competition experts along the lines of the European Union, US and Canadian models. The law places various preventions on anti-competitive behaviour, restrictive practices (such as price fixing, greedy pricing) and "abuses" by "leading" firms (firms with a market share of 35% or more). The competition authorities monitor implementation and loyalty to the law, while state supervisors oversee natural monopolies and promote worldwide access to government utilities (Cooke 2002).


Therefore we see that laws are affecting business in numerous ways. Laws protect the business men as well as the customers which is essential to have a good relation between these two parties otherwise business firms will not run. Laws are necessary to incorporate a business firm, to run a business firm and to dissolve it. It should be mentioned that in this assignment, only the major laws from international perspective that are affecting business have been discussed shortly and only a list of the laws that are applicable in field of business in South-Africa has presented.