Business Law Essentials: Contracts, Property, and Competition
Freedom of Enterprise
- Freedom to choose business
- Private Property
- Free competition
- Protect customers
- State obligation to promote private initiative
- Economic policies derived from National Legislation
Individual Entrepreneur
- Capacity to act (18+)
- Disposition of assets
- Exceptions: minors, married individuals
- Incompatibilities: general representatives & CEO
Collaborators
- Dependent: obey orders (workers)
- Non-dependent: autonomy, franchise
Limited Liability Entrepreneur
Not unlimited liability before creditors.
Requirements to Protect First Home:
- Have legal capacity
- Must add VAT number & acronym ERL to name
Requirements:
- Manifest to notary to be L.L.E. – indicate activity
- Inscription to Public Register of Commerce and Property
Exceptions:
- Debts to Tax agency & social security, entrepreneur commits fraud
- First home over 30k, debts not related to economic activity
Partnership Agreement Peculiarities
- Plurilaterality: 2+ persons
- Contributions: need patrimony represented, movable/unmovable goods e.g., assets, money
- Creates an order: rights & duties for each member + proceedings (how company works)
- Distribution: profit
- Formalities: public document signed before notary & registered at Public Register of Commerce
Social Entrepreneur
Legal person, to develop entrepreneurial activity, brought about through Partnership Agreement.
- Have legal personality & capacity
- Own rights & obligations
- Founded for profit (distributed with partners)
- Associative elements: partners constitute common fund to achieve shared purpose.
Types of Corporations
- Personalist partnerships:
- Collective partnership
- Limited partnerships
- Corporate enterprises:
- Limited liability company
- Joint-stock company
- Limited partnership by shares
- Social interest companies:
- Cooperative associations
- Worker-owned company
Types of Liability
- Joint & several: share rights & liabilities with members
- Joint: responsibility falls equally on parties entering an obligation
- Several / individual: responsibility falls individually on each party, regarding commitments taken.
Joint Stock Company (SA)
- 60k
- Limited responsibility
- Management partner/ external person
- Transmission shares: FREE
Limited Liability Company (SL/SRL)
- 3k
- Management partner/ external person
- Transmission shares: 1st refusal
Limited Partnership by Shares
- Min 3k – max 120k
- 2-5 natural persons
- Online in 48h
Professional Company (SLP)
- Requires qualification
- Joint exercise of professional activity – direct/ through professional companies
Worker Owned Company
- Private – min 3k
- Public – 60,101€
- Minimum 3 partners
- Permanent contracts & employment
- Partners max capital 33.33%
- Transfer shares: permanent workers have preference
Listed Companies
- Listed in stock market
- 25% available for public
- Value of 6M
- Limited responsibility
- NO LIMIT transmission
- Minimum 1202,25€
Cooperative Association
- Limited responsibility
- All have equal rights
- Tax benefits
- Hire people: difficult
Distinguishing Signs
Irreplaceable tool to communicate with customers – essential elements. Enable conquering market share. Differentiate from others.
- Trademarks
- Trade Names
Trademarks
Sign, combination of signs that distinguish them from others.
Purpose
- Products & services = identify the commercial source
- Collective = owned by an association, they use it to identify themselves
- Certification = given for compliance with defined standards, but not confirmed to any membership.
Trade Names
Owner has exclusive rights over use of sign/ name used to identify company in commercial trade. Independent from company names registered.
Copyright
Respect of literacy & artistic creations, may be done with author’s authorisation.
Industrial Property
Protect inventions & industrial creative work.
Not Covered:
- Math methods
- Science theories
- Cloning
- Generic modification of human beings
PDO (Protected Designation of Origin)
Strongest link to place made.
PGI (Protected Geographical Indication)
Relationship between specific geographical region & product names.
Innovation
Smoothing new, improves a product, process, service. It is protected through patents & intellectual property
Patent (20 years)
Right granted to inventor by state. It allows inventor to exclude anyone from commercially exploiting inventions for a limited time.
Conditions
- Industrial applicability; utility, practical use
- Novelty: new characteristics
- Inventive Step-non obvious: not deduced by a person with average knowledge.
Industrial Design
Ornamental/ aesthetic aspect of a useful article: shape, pattern, colour.
- Is right granted by countries, a registration system to protect original ornamental & non-functional features.
- Visual appeal influences customers
Requirements
- Novelty – no other identical design
- Unique Character
Utility Models (10 years)
Used to protect inventions
- Law in more than 30 countries + regional agreements, short-term: Hong Kong, Ireland & Slovenia
- Less complex inventions with short term commercial life
- Simpler to obtain than Patent
- Lower fees
- Novelty step must be met + inventive & non-obviousness
Difference Between Industrial Design & Utility Models
- Utility Models – protect inventions aimed to solve technical problems
- Industrial Design – protects appearance of product
Competition Law
Beneficiaries:
- Consumer: + operation, better quality, lower prices.
- Entrepreneur: equal opportunities
- Citizens: national production increase + competitive & guaranty transparency.
Objective:
Keep minimum level of competition. State promote economic activity + control/ surveillance
Main Functions:
- Enforce anti-trust law
- Promote competition
- Market unity
- Settle disputes between economic operations
- Oversee economic sector
Collusive Agreement
2 or + undertaking coordinate their behaviour, restricting competition.
Between Competitors:
- Raise prices of products
- Limit quantities
- Divide customers geographically
- Fraudulent bidding in public tenders
- Exchange info on future prices
Control of State Aid
Economic advantages that may be taken in many forms, offered by public authorities using state resources.
Abuse of Dominant Position
Company has high market share, can raise prices, worsen quality without complaints. NOT prohibited by competition law
Abuse
- Imposition prices/ unfair training
- Limitations of production, distribution or development
- Rejection to satisfy demands of purchase of products
- Different conditions to equivalent transactions in trading = disadvantages
- Acceptance of supplementary obligations
Conducts
- Conducts aim to exclude competitors: sell products below costs (predatory) so competition ends up leaving the market
- Conducts aim to exploit customers: excessive prices, well above costs = obtain + profits or obligating buy products in order to access desired product.
Economic Concentration Control
1 or + companies acquire control of other companies & change structure of them & market.
- EOS are obtained
- Costs are reduced
- More profitable
- Progress to speed
Subliminal Advertising
Use of images & sounds to influence consumers without being conscious. Illegal if it changes their consumption habits without them noticing.
Misrepresentation of Free Competition Through Unfair Acts
Exceptions
- New regulations
- Minor importance (that don’t affect competition)
- Agreements approved by CNMC
- Practices that improve production
- Practices promote technical/ economic progress
- Practices that benefit consumers
Infringements
- Minor: 1% of total turnover of infringement undertaking in year
- Serious: 5% of total turnover of infringement undertaking in year
- Very serious: 10% of total turnover of infringement undertaking in year
Unfair Competition
Conduct by market participant which gains/ seeks to gain an advantage over rivals through:
- Misleading
- Deceptive
- Dishonest
- Fraudulent
- Coercive
Considered an Act of Unfair Competition:
- Must be realised in market
- Purpose of act = produce harm
- Can cause economic injury
Advertising Contracts
Commercial contracts between entrepreneur, advertiser and advert agency. Provide a service in exchange for €.
- Seek diffusion of product
Elements
- Advertiser = Natural / Juristic person
- Advert Agency = N/L person who creates, prepares, executes adverts on behalf of advertiser.
Broadcasting Contract
Where advert. media is obligated in favour of an advertiser/ agency to provide slots for them in exchange for €.
- Media obligated to diffuse advertisement
- Advertiser has to pay
- Media not involved in preparation
Sponsorship Agreement
Party makes a contribution to the other party.
- Pay € OR exchange: party displays advert/ use products. ex. Barça – Nike
Limitations
- Illegal advertising
- Drugs & medicines
- Tobacco
- Sponsorship without appearing in advert
- Alcohol with + than 20º
Breaching Contracts
Has right to request fulfilment/ termination of contract + compensation for damages
- Reduction price
- Compensation for loss
- Repetition of bad advert
Illegal Advert
Threat to dignity, violates values & rights recognised in constitution especially, child, women & youth.
- Women discrimination/objectification
- Discrimination: race, sex, gender, religion
- Probed products (drugs)
- Misleading, aggressive, unfair adv.
Renting
Agreement where property transfers possession to somebody with periodic payments
- Short term agreement
- Usually movable/ non-funding goods
- Needs maintenance
- Accelerated depreciation
Leasing
Agreement where lessor gives possession of its assets for a period of time by periodic payments + maintenance is responsible for the lessee
- Long term
- No change in contract when closed
- End can: purchase, give back or renew it
EPC Contract (Engineering Procurement & Construction)
Type of construction contract between parties, contractor is responsible of engineering, procurement & construction and deliver complete project to customer.
Features
- Single point responsibility
- Fixed contract price
- Fixed competition date
- Performance guarantee
Contract
Legal transaction whereby parties create, modify and extinguish a patrimonial legal relationship. AIM= satisfy individual interest + serve a higher social purpose.
Elements of Contracts
- Consent
- Object
- Cause
Punitive Function
Conceive penalty as a sanction imposed on the offending debtor.
Compensatory Function
Considering the penalty a conventional & prior settlement of the damages.
Warranty Function
Considering penalty a conventional & prior settlement of damages
Electronic Contract
Formalised by electronic means, producing full effects. Are carried out through telematic networks
Contract with General Conditions
Done as drafts to include in many contracts as a “template”
Elements of Contract with General Conditions
- Create to apply several contracts
- To distinguish contracts needs, fitting each client
- Obligatory due to demands of party that created them
- One party creates these conditions to incorporate to contract
Requirements
- Specification, clarity & simplicity
- Accessibility & readability
- Good faith & fair balance of rights + obligations
Bailment Contract
Bailor transfers possession of goods to other person for particular purpose. Bailor has right to demand their return or direct their disposal at end of period
Guarantee
Legal instrument to ensure fulfilment of an obligation, like surety, the pledge or mortgage. Represents a safeguard to creditors rights.
Types
Personal: debtor presents 3rd person who undertakes to guarantee fulfilment of main obligation. If debtor doesn’t comply the 3rd party will be responsible
In Rem: debtor offers as safeguard his own property like a HOUSE or movable goods TRUCK/ CAR
Mortgage
Guarantee right in rem of real state as assurance for fulfilment of a debt if main obligation isn’t met the debtor can receive payment of real state. ONLY DISPOSABLE ASSETS.
- Must be constituted as public document, registered in property registry
- Once main obligation met = end mortgage
Pledge
Submitting to liability for a debt a cattle good that are in power of creditor/ 3rd party. Requires dispossession to be formed. If guarantee not paid, can proceed before notary to sell pledge.
Financial Lease
Type of commercial lease that finance company is legal owner of an asset, and user rents it for a period. It’s a legal contract
Bankruptcy
Process aims to provide credits to collect their debts in insolvency situation.
Functions
- Provide solutions: satisfy creditors through: agreement, liquidation of debtors assets & rights + pay them.
- Repressive function: debtor whose conduct caused state of insolvency
Insolvency Law
In plurality creditors, debtor can’t fulfil his obligations, then law establishes insolvency law.
It Is When:
- Suspension of current payments
- Existence of seizures for possible execution with effect of for debtor state
- Illegal removal of assets by debtor
- Non compliance of obligations like: salary pay, tax pay
Insolvency of debtor: can’t pay debts upon date & conditions of property + assets aren’t enough to pay.
Voluntary insolvency: Business decides to close = not able to pay. Debtor justifies debtless & insolvency to state.
Compulsory insolvency: justify insolvency state is difficult for creditors, they are allowed to apply for ” declaration to open insolvency proceedings” if debtor is under insolvency situation