Anglo-American

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY

Promotion Robert Badinter, 2013-2014

1 / LEGAL PRACTICE AND PROFESSIONS P.7

LEGAL PRACTICE - UNITED STATES P.9

Legal Education Typical American Law School Subjects Bar Admission or Membership Legal Practice and Profession Fee Arrangements Typical vocabulary and terminology regarding the activities of a lawyer Definitions of Key Words Sample CV Sample Lawyer Client Employment Contract Sample California Code Sections regarding Legal Profession responsibility Questions

ENGLISH LEGAL PROFESSIONS P.20

Solicitors Barristers Queen’s Council Notary public Reforms Definitions of Key Words Questions

2 / THE AMERICAN LEGAL SYSTEM P.29

United States Legal System The Federal Court System The Federal Courts Administrative law and Courts State Law State Court Systems The Difference between Federal and State Courts American Court systems State vs. Federal Intermediate Courts of Appeal Sources of Law Checks and Balances in the American Legal System Classifications of Law and Terminology Definitions of Key Words Questions

3 / THE ENGLISH LEGAL SYSTEM P.51

ORIGINS AND DEVELOPMENT OF ENGLISH LAW P.52

Common Law Guide to the passage of Bill Royal Assent European Union Legislation Definitions of Key Words

THE ENGLISH AND WALES COURT SYSTEM P.59

Inferior or Lower Courts Superior or Higher Courts Definitions of Key Words

POLITICAL INSTITUTIONS IN THE UNITED KINGDOM P.68

Parliament The Executive Branch The British Monarchy Definitions of Key Words Questions

4/ COMPARATIVE LEGAL CIVIL PROCEEDINGS P.74

Comparative Legal Civil Proceedings

UNITED STATES CIVIL PROCEDURE P.76

Jurisdiction Civil Procedure Class Actions in the United States

CIVIL PROCEEDINGS IN ENGLAND AND WALES P.87

The Court System The Overriding Objective Allocation to Track Court Procedure under the Rules Enforcement FRENCH CIVIL LAW SYSTEM P.91

Civil Procedure Appellate Procedure

COMMON LAW VS. CIVIL LAW P.93

Approach Court structures Proceeding Judges

INTERNATIONAL ENFORCEMENT OF FOREIGN JUDGMENTS P.95

Definitions of Key Words Questions

5/ ANGLO-AMERICAN COMMON-LAW CONTRACT LAW P.102

Contract Law Types of Contracts Applicable Law The Elements of a Contract Validity of the Contract Discharge or Termination of Contract Breach of Contract and Remedies Contract Checklist Contract Drafting and Vocabulary Definitions of Key Words Questions

6/ ANGLO-AMERICAN COMMON-LAW TORT LAW P.144

Anglo-American Common-Law Tort Law Common Law Intentional Torts Intentional Torts to the Person Intentional Torts to Property Defenses to Intentional Torts Non-Intentional Torts – Negligence Defenses to Negligence Strict Liability Product liability Sample Tort Complaint for Personal Injury English Tort Law Case Precedents Definitions of Key Words Questions 7/ ANGLO-AMERICAN COMMON LAW CRIMINAL LAW P.176

Criminal Law Theories of Criminal Punishment Sources of Law Common Law Elements of a Crime Common Law Criminal Offenses Participatory Offenses Valid Defenses The Differences between a Criminal Case and a Civil Case Punishment Definitions of Key Words Questions

8/ ANGLO-AMERICAN BUSINESS LAW STRUCTURES P.200

United States Business Structures Reasons to Incorporate in Delaware Control and Management of a Corporation UK Legal Business Structures The Companies Act 2006 Common Law Business Trust Common Law Non-profit Organizations Sample UK Memorandum of Association/Articles Us “Corporation” By-laws Definitions of Key Words Questions

9/ ANGLO-AMERICAN AND EUROPEAN UNION COMPETITION (ANTITRUST) LAW p. 233

Competition (Antitrust) Law Origins and Purpose United States Antitrust Law Competition Law in the United Kingdom European Union Competition Law Articles of the European Union Treaty « Microsoft v EU Commission » Definitions of Key Words Questions 10 / INTERNATIONAL AND ANGLO-AMERICAN INTELLECTUAL PROPERTY LAW p. 257

Introduction to Intellectual Property Copyright Law International Law Relating to Intellectual Property Patent Law Trade Secret Law Trademark Law Geographical Indications Licenses Franchise Agreements Definitions of Key Words Questions

11 / ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.282

Historical Background Labor Law v Employment Law United States Employment and Labor Law UK Employment and Labor Law European Labor Law Employment Agreement Definitions of Key Words Questions LEGAL PRACTICE and PROFESSIONS P.7

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY LEGAL PRACTICE1 AND PROFESSIONS

LEGAL PRACTICE AND PROFESSIONS

1Legal Practice - United States P.9 Legal Education P.9

Typical American Law School Subjects P.10 Bar Admission or Membership P.10 Legal Practice and Profession P.10

Fee Arrangements P.12

Typical vocabulary and terminology regarding the activities of a lawyer P.13 Definitions of Key Words P.13

Sample CV P.15

Sample Lawyer Client Employment Contract P.16

Sample California Code Sections regarding Legal Profession responsibility P.18

Questions P.19

ENGLISH LEGAL PROFESSIONS P.20

Solicitors P.20

Barristers P.22

Queen’s Council P.23

Notary public P.24

Reforms P.25

Definitions of Key Words P.26

Questions P.28 LEGAL PRACTICE and PROFESSIONS P.9

LEGAL PRACTICE AND PROFESSIONS

Legal Practice - United States

After completing this lesson, one should:  Understand the educational requirements needed to qualify to become an attorney in the United States  Know the role of the state bar association and the function of the state bar exam 1 Be familiar with typical US law office structures  Understand the legal vocabulary used by attorneys in the US  Understand the fee arrangements used by lawyers  Know what state law requires as professional responsibilities of a lawyer

Legal Education

The practice of law in the United States is controlled by the fifty individual states and their respective bar associations. Someone who wants to study law must first obtain an undergraduate degree prior to being admitted to a law school. This four-year degree or diploma consists of various required cour- ses and two years of specialization with a ‘major’. Law is not a part of the undergraduate curriculum. After this degree, usually a Bachelor of Arts (BA) or Bachelor of Science (BS), the student will apply to a law university program and take the standardized LSAT, or Law School Admission Test. Many laws schools are very selective, accepting only ten percent of their applicants. It normally takes three years of full-time work to receive a law degree, known as the Juris Doctor (JD). In the first year, law students are generally required to take basic introductory subjects such as torts, contracts, criminal law, civil procedure, property law, and constitutional law. Many schools require legal research and legal writing. The second and third years allow the student to concentrate on particular areas such as business law, litigation, international law, or family law. A number of other subjects may also be chosen or even required, like federal income taxation, corporations, commercial law, and legal professional responsibility or ethics. In addition, the students are often provided with opportunities to get legal experience through internships and clerkships.

One interesting aspect of legal study in the United States is the case study, using the Socratic Method, where students learn basic legal concepts by reading decisions of courts and are then interrogated by their professors in class on the facts and issues of a particular case. This is meant to train students to analyze a question quickly under stressful conditions for future dealings with judges in court or with clients in negotiations. Law students can also participate in extra-curricular activities, e.g. working on legal academic journals. There is also a moot court competition in the last year, where students prepare briefs and argue a case to gain advocacy experience by acting out a trial before a panel of judges.

For the majority of American law students, the JD is the final degree; however, some go on to do an LLM, or Master of Laws, degree, which is usually a one-year program in a specialized subject such as taxation or intellectual property. There are also LLM programs specially designed for foreign students who would like to study a year abroad in an American university. LEGAL PRACTICE and PROFESSIONS P.10

Typical American Law School Subjects Torts (Civil Liability), Contracts, Constitutional law, Criminal law and Procedure, Civil Procedure, Real Property, Personal Property, Intellectual Property (Copyright, Patent, Trademark), Probate, Wills (Tes- taments), Intestate Succession, Trusts and Decedents Estates, Family Law (Domestic Relations, Com- munity Property), Business Organizations (Corporations, Partnerships, Sole Proprietorship), Securities Regulations, Commercial law, Debtor-Creditor law (Security Interests and Bankruptcy), Evidence, Trial Practice and Advocacy (litigation), Professional Responsibility, Remedies, Legal Research, Legal Wri- ting, Banking law, Finance Law, International Public law, International Business Transactions and Tra- de law, Employment and Labor law, Mergers and Acquisitions, Competition law (Anti-Trust), European Union law, Administrative law, Admiralty law, Communications law, Conflicts of Law, Cyberspace law, Information Technology law, Arbitration and Dispute Resolution, Entertainment and Sports law, Medi- cal or Health Care law, Immigration and Nationality law, Economic law, Legal History, Tax law (Income, Corporate, Individual, Sales VAT, Estate and Gift), Insurance law, Environmental law, Oil and Gas law, Media Law, Government Procurement, Maritime law, Project Finance.

Bar Admission or Membership Admission to the practice of law or admission to the bar of a state is governed by the rules and regulations of that state’s courts, legislature and bar association. The rules cannot, however, violate the due process and equal protection clauses of the Constitution. The general requirements for admission to a state bar are similar throughout the fifty states. The applicant must have “good moral character” with no previous criminal record, provide references attesting to his or her honesty and integrity, have graduated from an accredited law school, and have passed the bar examination. The bar examination usually lasts three days and consists of several parts: essay questions, multi-state multiple choice questions, a professional responsibility exam, and a performance exam. The success rate varies from state to state: New York and California are considered the hardest, with around fifty percent of candidates passing. Most states do not limit the number of times a person may take the exam.

Upon admission to the bar, lawyers must normally take an oath declaring their obligation to the courts and to the state and federal governments, as officers of the court. They must register with the court and receive their license to practice. If a lawyer who is a member of the bar of one state wishes to practice in another state, it may be necessary to be admitted to that state bar as well, which could mean taking another bar exam; such requirements might also be waived.

Legal Practice and Profession The American lawyer, unlike the lawyers of the British and civil law systems, is qualified for all the professions in law. This means that upon being sworn in, the American lawyers may choose between many different careers. Some will work for corporations or businesses as salaried employees called corporate counsel, known informally as in-house counsel. Others will work for the government and in particular as public prosecutors in criminal matters. Judges are usually chosen from members of the legal profession having several years of experience, as there is no school for judicial training. Lawyers may also become law professors or work in a legal aid society. In the US there is no such profession as the civil law notaire; therefore lawyers prepare testaments and real estate transactions. In private practice they work either as sole practitioners or in a law firm and are known as attorneys at law or simply attorneys. LEGAL PRACTICE and PROFESSIONS P.11

Law Office Structures Most lawyers in the United States work in a private law structure, either a sole proprietorship or, more often, an LLP, or Limited Liability Partnership. During the past thirty years, there has been a substantial growth in multi-office law firms with offices in several American cities, as well as international firms, some having over two thousand partners and more than twenty-five foreign offices.

Almost all medium-size or large law firms (200+ lawyers) are divided into departments or practice groups which cover the practice of law in specific fields. Typical categories include tax, litigation, trusts and estates, securities law, mergers and acquisitions, intellectual property, employment, real estate and corporate departments.

A partnership is defined as two or more persons who combine their skills, knowledge, clients and assets for a business with an agreement to share profits and losses. Partners manage and run the firm, are responsible and liable for it, and divide the profits. Within a large firm there might be a management committee or executive committee. Associates are usually salaried employees of the firm and work for the partners. They may or may not have an employment contract, depending on the firm. If there is a contract, it might involve, for example, billing a certain number of hours each year in return for a salary. Sometimes associates are just out of law school and do not have much experience, so they will probably be asked to do legal research or draft legal documents, but will have little work involving litigation or contact with clients. ‘Of counsel’ lawyers are those who have a relationship with a firm, but one which is not like that of an associate. Among them are, for instance, a retired lawyer or partner who still wishes to work on a case, a law professor who might be asked to work on a special file, or a ‘contract lawyer’ who works on a temporary basis when the situation requires such assistance. Support staff in a firm might includeparalegals , who have obtained a degree, maybe an undergraduate degree or a degree from a technical business college, but have not gone on to law university and therefore do not have the bar examination and are not members of a bar association. They assist with legal tasks such as doing legal research, drafting legal documents, preparing certain documents for real estate or testamentary matters, and helping to organize the preparation of major litigation cases.

Attorney-client privilege is the rule that a lawyer may not reveal the content of communications, conversations, and letters between lawyer and client, under the principle that a client should be able to speak freely and honestly with the lawyer, without fear of future disclosure. In the trial, deposition, and interrogatories, the lawyer must refuse, and the client may refuse, to answer any question or produce any document which was part of the attorney-client contact. If a document was made up as part of the legal preparation for a client, it is usually a "work product" and is also privileged. Paralegals, law interns, and support staff do not have this privilege; for this reason their presence may not be allowed at the client interview. This privilege, which prevents confidential information from being disclosed and helps a lawyer to speak freely with the client, can only exist with a lawyer who has become a member of the bar. LEGAL PRACTICE and PROFESSIONS P.12

Fee Arrangements The legal fees charged by lawyers take into account a number of factors, including the amount of time and money spent on the case, the complexity of the case, the lawyer’s skills, experience, and renown, and the final outcome. A law firm is a business, clients are the source of revenue, and work must be properly invoiced or billed to the client. Lawyers commonly use the following types of fee arrangements:

Flat fee The lawyer or firm may charge a negotiated specific total fee for specifically defined work. This fee is generally applied only in fairly simple matters, e.g. uncontested divorce.

Hourly fee One of the first things a new associate learns in a firm is ‘how to bill’ or the system of ‘billable hours’. The hourly rate, sometimes based on portions of an hour, is the most typical fee arrangement: this is when the lawyer charges for the time spent working on the client’s case. The amounts can vary considerably, however, according to the person billing—paralegal, associate, or partner.

Referral fee A lawyer who transmits or refers a case to another lawyer may request payment of a part of the total amount billed by the lawyer who takes the case. Referral fees are prohibited in some states; in others, certain criteria must be followed under bar association professional responsibility codes.

Retainer fee A fixed sum, serving as a down payment, from the client is put in an account to reserve or ‘retain’ the lawyer’s services, and money is deducted each time the lawyer’s hours and other expenses are billed. The sum or balance is often non-refundable.

Statutory fee Certain legal fees may be set by a legislative body or a court. Probate, bankruptcy, and employment cases often involve statutory amounts.

Contingency fee It is generally acceptable in the United States for a lawyer to charge a contingency fee for a case. This fee is contingent or dependent on the final outcome of the case. A lawyer who obtains a favorable result in the client’s case is paid from the proceeds of the outcome. Such fees are determined beforehand between the client and the lawyer. This fee arrangement can be risky for the lawyer, because it means that if the lawyer loses the case and the recovery is zero, then the fee is zero. Contingency fees vary and can be based on a number of factors. For example, to settle out of court before trial, the fee is typically thirty-three percent of the sum awarded; if there is a trial it may reach forty percent; and if an appeal is needed, fifty percent may be demanded. This type of fee is usually charged in tort where there is personal injury or property damage. It is prohibited in many states in family law and criminal law. LEGAL PRACTICE and PROFESSIONS P.13

Typical vocabulary and terminology regarding the activities of a lawyer Knowledge and application of legal principles and procedures (substantive and procedural law) Litigation, appearance in court, to plead, to advocate Advising, give legal advice, to counsel To interview clients, investigate facts, interview and prepare witnesses Preparation of pleadings, assist and prepare cases for trial Drafting of legal documents or legal instruments Maintain a business, office administrative matters, knowledge of law office systems and technology Organize and management of legal work Negotiate with opposing counsel Fixing and collecting fees for services rendered Do legal research, ability in legal analysis and reasoning, plan solutions Organize and manage legal work, cases or files Maintain professional or legal ethics Instill clients’ confidence in you Communicate information to clients and others

Definitions of Key Words

 Academic journal: a periodical (often quarterly) publication composed of articles written by specialists and scholars.  Advocacy: for a lawyer, the act and skill of pleading in court.  Associate: a subordinate, salaried member of a commercial partnership.  Attorney at law: a person licensed to practise law in a particular state or jurisdiction of the US.  Attorney-client privilege: a legal principle that protects the confidential nature of information exchanged between client and lawyer and which the lawyer cannot be forced to reveal.  BA: Bachelor of Arts, a degree awarded by a US college or university after a four-year course in the humanities (e.g. literature, language, music) or social sciences (e.g. psychology, history, economics).  Bar association: a body of lawyers who, in the US, regulate the legal profession in their state (or jurisdiction) and require membership for the practice of law in that state. The American Bar Asso- ciation (ABA)—with voluntary membership—is a separate organization which contributes to setting academic and ethical standards for lawyers across the nation.  Brief: written legal argument presented to the court by one or both parties in a lawsuit.  BS: Bachelor of Science, a degree awarded by a US college or university after a four-year course in applied scientific or professional studies (e.g. business, engineering, advertising).  Case study: an exercise in which law students examine a real or imagined conflict to identify and apply legal principles. LEGAL PRACTICE and PROFESSIONS P.14

 Clerkship: a prestigious job, usually given to a student who has graduated with honors from one of the top law schools, as a law clerk assisting a judge in research and writing.  Construe: To interpret or explain the meaning of something  Corporate counsel: attorneys working in the legal departments of companies or corporations.  Criminal record: a list, provided by state and federal authorities, of crimes for which a particular person has been convicted.  Curriculum: a complete program or course of study leading to a particular degree.  Fee arrangement: an agreement concerning the way in which a professional will charge a client for services and expenses (see list of examples in the text)  In-house counsel: see “corporate counsel”.  Internship: a student training job (part-time or summer) related to the student’s professional future.  JD: Juris Doctor or Doctor of Law, a US law degree generally following three years of post-graduate studies in law (after a Bachelor’s degree).  LSAT: the Law School Admission Test, a standardized examination which students must take before applying for admission to an accredited law school in the US.  Legal aid society: a non-profit organization which provides legal assistance to poor people.  LLM: Master of Laws, from Latin Legum Magister, an advanced law degree (after the JD in the US) in a specialized legal subject.  LLP: a Limited Liability Partnership, a type of partnership usually set up by professionals (lawyers, accountants, etc.).  Moot court: an imitation of trial or appellate court proceedings by law students for training; sometimes called “mock trial”.  Oath: a solemn promise that one’s affirmation is true.  ‘Of counsel’ lawyer: an attorney who provides contractual legal services to a law firm without being a partner or associate.  Paralegal: a person with legal skills who assists lawyers in legal tasks.  Partnership: a business relationship in which two or more persons, known as partners, share responsibilities, profits and losses.  Prosecutor: a lawyer who represents the government in a criminal case.  Sole (or solo) practitioner: a professional (here, lawyer) who owns and manages a business alone.  Sole (or solo) proprietorship: a business owned and managed by a single person.  Substantiate: establish or strengthen as with new evidence or facts  Swear in (v.): administer an oath to (a person making a solemn promise).  Waive (v.): give up (a right or claim) voluntarily. LEGAL PRACTICE and PROFESSIONS P.15

Sample CV

Robert Washington 2475 Golden Gate Street San Francisco, California 317-555-1234 Member of New York and California Bar Associations

Professional experience Partner, Attorney at law currently Sullivan and Cromwell LLP, New York Work on client development, firm’s budget, financial management, strategic planning, governance and employment of associates and administrative staff. Litigate securities regulations disputes.

. Associate 1994 to 2004 Freshfields LLP, London Solicitors Engaged in communications with clients and opposing counsel, international arbitration and negotiations, succession law and drafted legal documents such as testaments and real estate conveyance deeds.

. Law Intern Summer of 1991 Jones Day LLP, Washington, DC Drafted research memoranda, pleadings, discovery motions, corporate by-laws and contracts. Assisted with research and drafting for appellate briefs regarding issues such as banking law, contract law, labor and employment law. Developed knowledge of the litigation process while attending trials, pre-trial hearings, depositions, client consultations and arbitration.

. Law Clerk Jan. - May 1991 Court of Appeals, Chicago Conducted legal research regarding issues such as felony offenses and determined appropriate sentencing for cases before the court. Gained knowledge of the judicial system by observing trials on commercial, tort, and corporate litigation, decedent estates and domestic relations. Researched legal authority cited in parties’ briefs to determine accuracy and relevance.

. Research Assistant Sept. - Dec.1990 Professor James Farnsworth, New York University School of Law – New York Conducted research regarding merger and acquisitions tax problems for law review article. Edited Professor Young’s new casebook on Constitutional law.

. Office Support Staff May 1986-April 1988 Obama and Clinton, Los Angeles Administrative Assistant and Paralegal Developed interpersonal skills while assisting clients. Improved organizational skills. Conducted legal research.

Education

. Harvard University School of Law – Boston LLM tax program June 1994 International taxation of multinational corporations

. Stanford University School of Law – Palo Alto Doctor of Jurisprudence, May 1993, Graduated with Honors European Summer Law Program Member, Stanford Law Review

. University of California - Berkeley Bachelor of Arts diploma in Economics and Political Science, 1989, Graduated with Highest Honors President, Economics Society Member of Debate Club Baseball and Football teams

. Community involvement Pro Bono work for Legal Aid Society LEGAL PRACTICE and PROFESSIONS P.16

Sample Lawyer Client Employment Contract

Associate Lawyer Employment Agreement

This AGREEMENT made as of this …… day of ……………………, 20……, between …………………… and ………………………, hereinafter referred to as the "Firm" and ……………………, hereinafter referred to as the "Lawyer."

RECITALS The Firm is a Partnership/Professional Service Corporation formed under the laws of New York to render legal services. The Lawyer is licensed to practice law in the State of New York. The Firm and the Lawyer desire to have the lawyer practice law as an employee of the Firm. It is agreed by and between the parties as follows:

Section 1. Employment and Duties. 1.1. Employment. The Firm employs the Lawyer and the Lawyer accepts employment as a lawyer in accordance with the terms of this Agreement. 1.2. Full Time. The Lawyer shall devote full working time and attention to the practice of law for the Firm and the Lawyer shall not, without the written consent of the Firm, directly or indirectly render services of a professional nature to or for any person or firm except as an employee of the Firm. 1.3. Duties and Assignments. The Firm shall determine the duties to be performed by the Lawyer and the means and the manner by which those duties shall be performed. The Firm shall determine the assignment of clients to the Lawyer, and the Lawyer shall perform services for the clients assigned. The Firm shall determine the rates at which the Lawyer's work shall be billed.

Section 2. Compensation. 2.1. Salary. For all services rendered by the Lawyer under this Agreement, the Firm shall pay the Lawyer an annual salary of $ …………, payable monthly or as otherwise may be mutually agreed. The salary may be changed by mutual agreement of the parties at any time. 2.2. Bonus. In addition to the salary specified in 2.1, the Lawyer may receive a bonus. The bonus, if any, will be in an amount as the Firm may determine in its absolute discretion.

Section 3. Partnership. It is the policy of the Firm to employ as lawyers persons who will be given the opportunity to become partners in the Firm. The Firm after a certain number of years will make the determination as to whether the Lawyer will be admitted to partnership.

Section 4. Facilities. 4.1. Office. The Firm shall furnish the Lawyer with office space, staff assistance and such other facilities and services as are reasonably necessary to the performance of the Lawyer's duties. 4.2. Liability Insurance. The Firm shall maintain professional liability insurance covering the acts and omissions of the Lawyer in the performance of the Lawyer's professional duties, and the amount of coverage shall be …………………………. 4.3. Travel. The Lawyer may be required to travel on business for the Firm and shall be reimbursed for all reasonable and necessary expenses incurred; provided, however, that a detailed account of the expenses is provided to the Firm. 4.4. Professional Societies. The Firm shall pay the Lawyer's dues for membership in The New York Bar and the American Bar Association. 4.5. Education. The Firm shall pay the reasonable amount of expenses incurred by the Lawyer to maintain or improve the Lawyer's professional skills. The Lawyer agrees to submit to the Firm such documentation as may be necessary to substantiate the expenses. LEGAL PRACTICE and PROFESSIONS P.17

Section 5. Additional Benefits. 5.1. Medical Insurance. The Firm agrees to provide coverage for the Lawyer, the Lawyer's spouse and dependents under a group accident and health insurance policy, the terms and benefits of which shall be determined by the Firm. 5.2. Vacation. The Lawyer shall be entitled to reasonable vacation time each year; however, the Lawyer's vacation will be scheduled at a time that will least interfere with the business of the Firm. The Lawyer is further entitled to time off on all holidays normally celebrated in accordance with the Firm’s stated policy. (Provisions may be included to establish exactly when vacation is earned.) 5.3. Life Insurance. The Firm may provide group life insurance coverage in amounts that shall be determined by the Firm. 5.4. Retirement Plan. The Lawyer shall participate in any Firm qualified retirement plan according to the terms of the plan as amended from time to time. 5.5. Disability. In the event the Lawyer is unable to perform his or her regular duties as a result of personal disability, the Firm will pay the Lawyer's salary during the disability for a total of ninety (90) days in any twelve (12) month period.

Section 6. Operations. 6.1. Records and Files. All records, documents, and files concerning clients of the Firm shall belong to and remain the property of the Firm. On termination of employment, the Lawyer shall not be entitled to keep or reproduce the Firm's records, documents or files relating to any client unless the client shall specifically request that its files be transmitted to the Lawyer. 6.2. Fees. All fees and compensation received or realized as a result of the provision of professional legal services by the Lawyer shall belong to and be paid to the Firm. Any fee received by the Lawyer for professional services or other professional activities performed by the Lawyer shall belong to the Firm.

Section 7. Term. 7.1. One Year, Automatic Extension. The term of this Agreement shall begin on the date hereof and continue for a period of one year and shall be automatically extended from year to year unless terminated in accordance with this section. 7.2. Events of Termination. This Agreement shall be terminated upon the happening of any of the following events: The death of the Lawyer Dismissal of the Lawyer for cause as hereinafter provided Occurrence of the effective date of termination, notice of which has been given in writing by either party to the other, so long as there are at least sixty (60) days between giving of the notice and the effective date of termination. The mutual written agreement of the Lawyer and the Firm to termination. 7.3. Causes for Dismissal. The Firm may dismiss the Lawyer for cause in the event it determines there has been continued neglect by the Lawyer of his or her duties or willful misconduct on the part of the Lawyer, including but not limited to a finding of probable cause by the Office of Disciplinary Counsel for investigating a complaint filed with the Commission on Lawyer Conduct or the filing of criminal charges against the Lawyer, which would make retention of the Lawyer by the Firm prejudicial to the Firm's best interest. 7.4. Invalidity. The invalidity or unenforceability of any provision or provisions of this Agreement shall not affect the other provisions, and this Agreement shall be construed in all respects as if any invalid or unenforceable provisions were omitted. 7.5. Arbitration. All disputes, differences and controversies arising out of, under, or in connection with this Agreement shall be settled and finally determined by Arbitration in the …………………… , under the then existing Rules of the American Arbitration Association.

The parties have executed this Agreement as of the date and year first above written. LEGAL PRACTICE and PROFESSIONS P.18

Sample California Code Sections regarding Legal Profession responsibility CALIFORNIA CIVIL CODE SECTION§ 6068.

It is the duty of an attorney to do all of the following: (a) To support the Constitution and laws of the United States and of this state. (b) To maintain the respect due to the courts of justice and judicial officers. (c) To counsel or maintain such actions, proceedings, or defenses only as appear to him or her legal or just, except the defense of a person charged with a public offense. (d) To employ, for the purpose of maintaining the causes confided to him or her such means only as are consistent with truth, and never to seek to mislead the judge or any judicial officer by an artifice or false statement of fact or law. (e) To maintain inviolate the confidence, and at every peril to himself or herself to preserve the secrets, of his or her client. (f) To abstain from all offensive personality, and to advance no fact prejudicial to the honor or reputation of a party or witness, unless required by the justice of the cause with which he or she is charged. (g) Not to encourage either the commencement or the continuance of an action or proceeding from any corrupt motive of passion or interest. (h) Never to reject, for any consideration personal to himself or herself, the cause of the defenseless or the oppressed. (i) To cooperate and participate in any disciplinary investigation or other regulatory or disciplinary proceeding pending against the attorney. However, this subdivision shall not be construed to deprive an attorney of any privilege guaranteed by the Fifth Amendment to the Constitution of the United States or any other constitutional or statutory privileges. This subdivision shall not be construed to require an attorney to cooperate with a request that requires the attorney to waive any constitutional or statutory privilege or to comply with a request for information or other matters within an unreasonable period of time in light of the time constraints of the attorney's practice. Any exercise by an attorney of any constitutional or statutory privilege shall not be used against the attorney in a regulatory or disciplinary proceeding against him or her. (j) To respond promptly to reasonable status inquiries of clients and to keep clients reasonably informed of significant developments in matters with regard to which the attorney has agreed to provide legal services. (k) To provide copies to the client of certain documents under time limits and as prescribed in a rule of professional conduct which the board shall adopt. LEGAL PRACTICE and PROFESSIONS P.19

Questions 1. How does one become an attorney in the United States?

2. Name some typical law school subjects?

3. What are some of the legal professional responsibilities of an attorney?

4. Give some examples of the fee structures practiced in the United States

Sources for this chapter:

1) The English of Law: U.S. Law & Politics / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Mohammedi, Michel Perdu, William Yeago et al. Editeur : Belin 2007

2) The English of Law: England and Wales / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Mohammedi, Michel Perdu, William Yeago et al. Editeur : Belin 2007

3) International Legal English / Lindner/Translegal – William Yeago Cambridge University Press 2006

4) Black’s Law Dictionary West Publishing – sixth edition LEGAL PRACTICE and PROFESSIONS P.20

LEGAL PRACTICE AND PROFESSIONS

ENGLISH LEGAL PROFESSIONS

After completing this lesson, one should:  Know the role of barristers in England and Wales  Know the role of solicitors in England and Wales  Understand the requirements to become a barrister or solicitor in England and Wales  Comprehend the working relationship between barristers and solicitors

Since the 14th century, the legal profession in England and Wales has been divided into two main branches: solicitors and barristers. In general, solicitors advise their clients on legal matters while barristers represent their clients in the higher courts. Although both are lawyers, there are significant differences in their training and practices. Many countries with common law legal systems, such as the United States, do not observe this distinction between barristers and solicitors. In civil law countries, such as France, the legal profession is often separated into avocat, juriste, and notaire, but these divisions are not exactly parallel to those of barristers and solicitors.

Solicitors

People may require the services of a solicitor for various reasons such as settling a legal dispute; planning the distribution of their estate after death, purchasing a house, adopting a child, or getting a divorce.

Future solicitors need to achieve excellent A-level grades. They must then work towards either a qualifying law degree or a degree in any other subjects. An LLB (Bachelor of Laws) is obtained after a three-year university course specializing in law. Non-law graduates must successfully complete a CPE/GDL course (Common Professional Examination/Graduate Diploma in Law), a one-year conversion programme which teaches what are considered to be the 7 basic areas of legal practise (see below).

After Law University, graduates with an LLB or GDL advance to the vocational stage, which begins with the one-year Legal Practice Course (LPC). Offered at more than thirty universities and specialised institutions, it is designed to teach students the basic skills to become a lawyer, the LPC covers a common curriculum set by the Law Society the body that regulates the profession of solicitors. The curriculum includes the following core subjects: Criminal Law, Equity and the Law of Trusts, Property Law, Public Law, The Law of Tort, European Community Law, The Law of Contract. On successful completion of the course, candidates enter a two-year training contract with a law firm and are called trainee solicitors, still sometimes referred to as 'articled clerks'. This work experience enables them to qualify as solicitors: they are then admitted to the roll, i.e. their names are entered on the Law So- ciety's official list of solicitors. To obtain their annual practising certificate, they pay a fee to the Law Society. LEGAL PRACTICE and PROFESSIONS P.21

Fully qualified solicitors may work assole practitioners or join a firm; they may deal with all aspects of the law as a generalist or specialise in a particular field. A solicitor may work in the environment of a small town in what is known as ‘high street practice’, catering to the needs of the local community, or as a solicitor in a City firm employing hundreds of salaried solicitors. This is known as ‘City practise’ where solicitors are specialized, working for ‘niche’ law firms for clients with specialist needs such as shipping, intellectual property or institutional work for banks, insurance companies and investment funds. Solicitors may be employed in the legal departments of companies, and in the public sector such government services. The most common activities of a solicitors’ firm are providing general legal advice, preparing documents, advising on litigation and instructing barristers.

Activities of a Solicitor

1) Legal advice Someone who seeks legal advice will generally consult a solicitor in private practice or utilize the services of a law firm with a legal aid franchise. For a person who wants to create a business structure, purchase real estate, adopt a child, get a divorce; solicitors are the best advisors.

2) Legal documents Solicitors may be asked to prepare legal documents, such as drawing up contracts, wills (testaments), mortgages, conveyances or leases and to administer their execution, by applying for probate.

3) Litigation Solicitors advise clients involved in litigation; they prepare cases for trial. In the past solicitors traditionally could only appear as advocates in the lower courts. The Courts and Legal Services Act 1990 gave them the opportunity to obtain qualification in the higher courts, which now allows them to present cases before these higher courts as solicitor advocates.

4) Instructing barristers Before the Courts and Legal Services Act 1990 act, only barristers had the right of audience in the higher courts and they still continue to do so in most cases. Barristers are instructed by solicitors. This means that the solicitor presents a client’s case to the barrister in a document called a brief, and that the barrister represents the client in court. LEGAL PRACTICE and PROFESSIONS P.22

Barristers

Barristers could not until recently, be approached directly by members of the public. This is now possible under certain rules, but barristers still concentrate very much on providing specialist legal advice, drafting court documents and pleading, i.e. representing parties in court.

Just like solicitors, either the LLB or a non-law degree followed by the GDL at law universities, is needed to become a barrister. After obtaining the required academic qualifications, future barristers must attend a school of law at one of the several accredited institutions, taking a competitive one-year Bar Professional Training Course (BPTC), during which they receive training in the drafting of legal documents and in advocacy skills. In order to register at a law school, they must first be admitted to one of the four Inns of Court in London.

The Inns of Court (Lincoln’s Inn, Gray’s Inn, Middle Temple, and Inner Temple) date back to medieval times and each inn has its own traditions. They are non-academic societies that provide scholastic and instructive practical training for barristers and student barristers. Students from all BPTC centres must obtain twelve qualifying units by attending a number of Inn events and dinners: this requirement is called keeping terms. These occasions provide students with opportunities to meet practising barristers, to seek their advice and learn from their professional experience.

After completing the Bar Professional Training Course , a prospective barrister must undertake pupillage, a one-year apprenticeship under an established barrister acting as a pupil supervisor. Fol- lowing this period, the student barrister is entitled to apply to sets of chambers in the hope of being offered a tenancy, i.e. a permanent place. Pupil barristers who have been awarded tenancy become qualified barristers when they are called to the Bar by their Inns of Court and the regulatory body for barristers, the Bar Council. Because of the shortage and competition for places, many barristers, who have not found a tenancy after the one year pupillage, may do additional 6-month periods as ‘squat- ters’ in chambers until they find a tenancy.

Barristers are at the centre of the litigation process. They are most importantly specialised in civil or criminal cases. A skilful barrister must be persuasive in court and an effective advocate. The main activities of barristers are advocacy, providing written opinions on points of law and evidence for solicitors and drawing up documents. Some barristers (for example, those specialising in crime) spend nearly all of their time representing clients in court, whereas others are primarily ‘paper practices’ such as drafting legal opinions and hardly ever leave their chambers to litigate.

1) Litigation

Since barristers plead in the higher courts, they are more likely to represent and litigate for large businesses and for those individuals who are charged with serious criminal offences.

In chambers, clerks manage the practices of the barrister members. They are contacted by solicitors, who seek a barrister for their advice or to draft pleadings or who wish to brief a barrister for a court hearing. In theory, barristers are not permitted to refuse to take on a case, according to the cab rank rule. However, they are under an obligation to refuse to accept a case that is not within their expertise, experience or ability. Barristers may decline to accept a brief or an instruction where the fee is insufficient. When briefed, they are paid by the solicitors on behalf of the clients. Though clients are represented by barristers, they only meet each other in conference with the client’s solicitor or just LEGAL PRACTICE and PROFESSIONS P.23

before proceedings commence in court. If the barrister is drafting an opinion, he may never meet the client concerned. Barristers and solicitors both have a relationship of confidence with their clients and, as officers of the courts, a duty not to mislead the courts. They must ensure that all information that should be disclosed is indeed disclosed, in accordance with the ethics of the profession.

2) Opinions

Barristers are considered specialists in their respective fields and they can be asked to give advice on a particular point of law. Members of other professions such architects, conveyancers, auctioneers and accountants are permitted to instruct barristers directly without the intermediary of solicitors.

Queen’s Council

Barristers and solicitors who have been successful and who have acquired the necessary experience and knowledge may apply to become Queen’s Counsel (QCs) or senior counsel. The Commission for Judicial Appointments selects the best candidates to be QCs. When they become senior counsel, it is said that they take silk, as the robes they will wear are made of silk. For this reason they are very often referred to as 'silks'. QCs concentrate primarily on advocacy and undertake the most difficult cases. Generally a junior barrister (a barrister who is not a QC) will carry out the preliminary work for a QC. Queen’s Counsel is often considered a first step to becoming a judge in the highest courts. LEGAL PRACTICE and PROFESSIONS P.24

Notary public

A notary public (notary) is a public officer constituted by law who serves the public in non-contentious matters and is usually concerned with the drafting and execution of legal documents. Notaries traditionally recorded matters of judicial importance as well as private transactions or events, where an officially authenticated record or a document drawn up with professional skill or knowledge was required.

The term notary public only refers to common-law notaries and should not be confused with civil-law “notaries”. To qualify as a Notary Public in England and Wales it is necessary to have earned a law degree or qualified as a solicitor or barrister in the past five years, and then to take a two-year Postgra- duate Diploma in Notarial Practice. In practice, in the UK, the notary public is a qualified solicitor with experience as such plus an additional qualification. The need for their services within the jurisdiction of England and Wales is very limited as a solicitor may also witness legal documents, administer oaths, sign affidavits and statutory declarations etc. In fact most of the notary public’s work is related to international matters for the execution of documents needed for use overseas. There are approximately 800 active notary publics currently practicing in the UK.

Documents that are certified by notaries are sealed with the notary's seal or stamp and are recorded by the notary in a register maintained and permanently kept by him or her. These are known as "notarial acts".

Notarization services (acts) include:  attesting the signature and execution of documents  authenticating the execution of documents  authenticating the contents of documents  administration of oaths and declarations  providing documents to deal with the administration of the estate of people who are abroad, or owning property abroad  authenticating personal documents and information for immigration or emigration purposes, or to apply to marry, divorce, adopt children, to purchase real estate or to work abroad  verification of translations from foreign languages to English and vice versa  authenticating company and business documents and transactions LEGAL PRACTICE and PROFESSIONS P.25

Reforms

The English legal system is continually being re-evaluated as it must adapt to the changing needs of society. Reforms are often determined by different political ideologies of the ruling governments and by the need to act in accordance with European Union Law.

In recent years, sole practitioners and small practices of solicitors who are mostly generalists have gone out of business and are being absorbed into larger firms. More and more, firms today are specialising in specific areas of law. A recent trend is the recruiting of barristers by a small number of firms to act as in-house counsel providing advice, drafting pleadings and appearing in court. Multi-disciplined practices may be putting an end to the traditional division in the legal profession between general practitioners and specialists.

As previously indicated above, with the Courts and Legal Services Act 1990, Barristers no longer have a monopoly on conducting litigation before the higher courts and therefore, solicitors who have met the training requirements and obtained the Higher Courts Qualification haverights of audience before all courts in England and Wales.

Solicitors through the Administration of Justice Act 1985, lost their monopoly on conveyancing, which established a new professional category of licensed conveyancers. LEGAL PRACTICE and PROFESSIONS P.26

Definitions of Key Words

 Accountant: professional who keeps or checks financial accounts.  Attest: to witness, certify, declare to be correct or true.  Auctioneer: a person who directs an auction and sells goods by inviting people to make bids (offers).  Advocacy (to advocate): the work of lawyers consisting in pleading in court.  A-levels: final examinations students take on chosen subjects at the end of their secondary education.  Bar Council: the body that regulates the profession of barristers.  Brief: a document in which a solicitor sets out the facts of a case for the barrister who is to represent a client in court.  Cab-rank rule: the principle according to which a barrister should accept any case within their specialised field when briefed by a solicitor.  To be called to the Bar : to receive the title of barrister by the Bar Council, in a ceremony at an Inn of Court, after completing qualification.  Chambers: offices from where self-employed barristers have their practices.  Clerk: a very important individual in a barristers’ chambers whose primary duty is to distribute instructions received from firms of solicitors to the barristers to represent clients in court. A clerk to a chambers may make or break a barrister’s career by giving or withholding instructions. He or she is also employed, as in an office, to keep records, file, type, or perform other general office tasks.  Contract: an agreement between two or more parties to create legally enforceable obligations between them.  Conveyance: a document used to effect a property transfer.  Conveyancing: the legal process of transferring property title from one person to another.  Counsel: a barrister as referred to in court.  Draft: to prepare or compose in written form a legal document  Draw up: to write and prepare a legal document  Fee: money paid to a professional for their services.  Firm: a business entity, usually a partnership or a company.  In-house: employed by a firm or company for exclusive service within its domain of activity.  Inns of Court: the four legal centres in London in which barristers train and practice.  Instruct a barrister: to direct a barrister to represent a client in court by sending him or her a brief along with documents needed for the court hearing.  Keep terms: to attend training and social events, generally organised by a student barrister's Inn, to obtain qualifying units required to be called to the Bar.  Law Society: the professional body, founded in 1825, that regulates the profession of solicitors.  Legal aid franchise: is an approved licence or franchise granted to a firm of solicitors by the Legal Services Commission which runs legal aid in the UK to provide legal services to persons otherwise unable to afford legal representation. LEGAL PRACTICE and PROFESSIONS P.27

 Lease: a contract between a tenant and a landlord for the letting (renting) of property.  Litigation: the judicial process of resolving a dispute between two or more parties.  Mortgage: a contract in which real property being purchased is used as a guarantee for repayment of a loan.  Opinion (of a barrister): a barrister’s advice on a precise point of law needed by solicitors, other professionals or lay (non-professional) clients.  Partner: a person who has a share in the ownership of a firm.  Plead: to represent a client in court.  Pleadings: written statements setting out a party's legal and factual assertions about a case and filed at the court.  Probate: the process of proving the validity of a will and the distribution a deceased person's estate by probate registries which are regionally based throughout the UK.  Pupil barrister: a law graduate who has completed the Bar Professional Training Course and is doing their training period under a pupil supervisor.  Pupil supervisor: an experienced barrister who trains a pupil barrister.  Pupillage: a period of apprenticeship required to practise as a barrister.  Qualifying law degree: a university qualification in law (LLB or CPE/GDL), recognised by the Law So- ciety and the Bar Council, which enables a law student to complete the first stage of training to become a solicitor or a barrister and to gain access to the Legal Practice Course or the Bar Professional Training Course .  Queen’s Counsel (or, when the ruling monarch is a king) King’s Counsel (QC, KC): an experienced barrister who has been appointed counsel to the Crown on the recommendation of the Lord Chancellor, who specialises primarily in advocacy and pleads in the higher courts and normally acts for clients in more complex and technical cases, or, in criminal matters for the most serious indict- ments. A QC is usually assisted by a junior counsel.  Right of audience: the right for a solicitor or a barrister to appear on behalf of a client in court.  Salaried solicitor: a solicitor who is employed by a firm of solicitors but is not a partner.  Seek: To try to find, to look for, to search; to inquire for.  Sole practitioner: a solicitor who works on their own in a one-person law practice.  Solicitor advocate: a solicitor who has completed further training in advocacy and thus obtained a higher courts qualification, enabling him or her to appear in all courts.  Take silk: to become a QC (senior barrister) (since the robes worn by QCs are made of silk).  Tenancy: a permanent place for a barrister in a set of chambers.  Trainee solicitor: a law graduate who has completed the LPC and is completing a training period under the supervision of an experienced solicitor.  Will (last will and testament): a legal declaration specifying the manner in which a person wishes their property to be disposed of when they die. LEGAL PRACTICE and PROFESSIONS P.28

Questions

1. What are the main activities of barristers? 2. How does one become a barrister? 3. What is the relationship between solicitors and barristers? 4. What are the Inns of court? 5. In terms of career, what is the next step for a QC? 6. How did the Courts and Legal Services Act 1990 act affect the roles of barristers and solicitors? 7. Is a notary public the same as a French notaire?

Sources for this chapter:

1) The English of Law: England and Wales / Jean-Eric Branaa, Anne Brunon-Ernst, Nicki Chau- doir, Charles Davey, Severine Letalleur, Jennifer Merchant, Yasmine Mohammedi, Frédérique Podolin, Yvonne-Marie Rogez, William Yeago Editeur : Belin 2006

2) International Legal English / Lindner/Translegal – William Yeago Cambridge University Press 2006

3) Black’s Law Dictionary / West Publishing – sixth edition

www.lawsociety.org.uk www.barcouncil.org.uk www.legalservices.gov.uk www.findlaw.com www.law.com www.dictionary.law.com THE AMERICAN LEGAL SYSTEM P.29

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY THE AMERICAN2 LEGAL SYSTEM THE AMERICAN LEGAL SYSTEM P.30

THE AMERICAN LEGAL SYSTEM

2United States Legal System P.31 The Federal Court System P.32

The Federal Courts P.33

Administrative law and Courts P.36

State Law P.37

State Court Systems P.38

The Difference between Federal and State Courts P.40

American Court systems State vs. Federal P.41

Intermediate Courts of Appeal P.42

Sources of Law P.43

Checks and Balances in the American Legal System P.44

Classifications of Law and Terminology P.46

Definitions of Key Words P.46

Questions P.49 THE AMERICAN LEGAL SYSTEM P.31

THE AMERICAN LEGAL SYSTEM

After completing this lesson, one should:  Understand that the American judicial system is actually made up of two separate court systems: the federal court system and the state court systems.  Know the structure of the federal court system and a typical state court system and be able to discuss the similarities and differences between the two.  Distinguish between the types of cases that are heard in the federal courts and those that are heard in the state courts. 2 Know the sources of United States Law.  Be aware of the concept of Administrative or Public law.  Understand the system of Checks & Balances and how it affects the three branches of the American system.

United States Legal System

The American court system is made up of two separate and interacting jurisdictions; one at the state level and the other at the federal level. This division of power is based on the history of the United States. Before a federalist system was established by the US Constitution in 1787, the United States established a confederation and each of the 13 colonies had its own constitution, its own executive, its own legislature and its own judiciary. The 13 colonies were willing to relinquish some of their powers to a stronger central federal government in order to create a stronger union, but the states still wanted to be able to have some control and management of their internal affairs. In order to create this dual and sharing of powers system Article VI of the US Constitution called the supremacy clause provides that the Constitution is the supreme law of the United States and The Constitution, laws of Congress and treaties, therefore take precedence over any state constitution or law if there is a conflict.

The Constitution also establishes three branches of the federal government — legislative, executive, and judicial — each operating within a constitutional system known as "checks and balances." This means that although each branch is formally separate from the other two, the Constitution often requires cooperation among the branches. Federal laws, for example, are enacted and passed by Congress and signed by the President. The judicial branch, in turn, has the authority to decide the constitutionality of federal laws and resolve disputes over them, but judges must depend upon the executive branch to enforce court decisions.

Federal Courts & Congress The Constitution gives Congress the power to create federal courts other than the Supreme Court and to determine their jurisdiction. It is Congress, not the judiciary that controls the type of cases that may be addressed in the federal courts.

Congress has three other basic responsibilities that determine how the courts will operate. First, it decides how many judges there should be and where they will work. Second, through the confirmation process, Congress determines which of the President's judicial nominees ultimately become federal judges. Third, Congress approves the federal courts' budget and appropriates money for the judiciary to operate. THE AMERICAN LEGAL SYSTEM P.32

Federal Courts & the Executive Branch Under the Constitution, the President appoints federal judges with the "advice and consent" of the Senate. The President usually consults with senators or other elected officials concerning candidates for vacancies on the federal courts. The President's power to appoint new federal judges is not the judiciary's only interaction with the executive branch. The Department of Justice, which is responsible for prosecuting federal crimes and for representing the government in civil cases, is the most frequent litigator in the federal court system.

The Federal Court System Jurisdiction of the Federal Courts Federal Courts, have a strictly defined and limited jurisdiction which falls within two categories called diversity of citizenship and federal question.

1) Diversity Jurisdiction of Citizenship/"Erie Doctrine" In diversity cases, the subject matter jurisdiction of the federal courts is defined by the parties to the lawsuit rather than the subject matter of the dispute. Diversity cases provide federal courts with subject matter jurisdiction if opposing parties live in separate states and the amount in controversy exceeds $75,000. If the opposing parties live in the same state, the case may still qualify for federal subject matter jurisdiction if there is some remaining citizenship diversity between parties. The Erie Doctrine provides that a federal court sitting in diversity jurisdiction regarding a state law dispute must apply state substantive common law in resolving the dispute but the federal procedure of the court. The Erie doctrine is a fundamental legal doctrine of civil procedure in the American legal system that stems from Supreme Court Justice Louis Brandeis' watershed opinion in the landmark decision of Erie Railroad Co. v. Tompkins 304 U.S. 64 (1938).

2) Federal Question The Federal Courts have jurisdiction in all cases involving the Constitution, federal laws and treaties. This does not mean that state courts are not allowed to interpret the Constitution, but if they do so, their decision is not final and can be reviewed by the federal courts. This Federal Question is based on the powers expressly enumerated from the US Constitution listed below.

Enumerated Powers 1) The Congress shall have Power To declare and collect Taxes, to pay the Debts and provide for the common Defence and general Welfare of the United States; 2) To borrow money on the credit of the United States; 3) To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes; (to regulate international trade and interstate commerce power) 4) To establish a uniform Rule of Naturalization, and uniform Laws on the subject of Bankruptcies throughout the United States; 5) To coin Money and to provide for the Punishment of counterfeiting the currency of the United States; 6) To establish Post Offices; THE AMERICAN LEGAL SYSTEM P.33

7) To promote the Progress of Science and Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries; (Intellectual Property power) 8) To define and punish crimes committed on the high Seas, and Offenses against the Law of Nations; (Maritime law and International law) 9) To declare War, to raise and support Armies, to provide and maintain a Navy; 10) To make all Laws which shall be necessary and proper for carrying into Execution the foregoing Powers, and all other Powers vested by this Constitution in the Government or in any Department or Office of the United States.

The Federal Courts The Supreme Court of the United States The Supreme Court is the highest court in the federal Judiciary. Congress has established two levels of federal courts under the Supreme Court: the trial courts and the appellate courts.

The United States Supreme Court consists of the Chief Justice of the United States and eight associate justices. At its discretion, and within certain guidelines established by Congress, the Supreme Court each year hears a limited number of the cases it is asked to decide. Those cases may begin in the federal or state courts, and they usually involve important questions about the Constitution or federal law. Their appointment is made with the consent of the Senate. This consent is given after confirmation hearings by the Senate Judiciary Committee. The court is traditionally divided into two schools of construction and interpretation. One school, which believes the intentions of the Founding Fathers in drafting the Constitution should be literally respected and interpreted strictly, are called conservatives. Those justices who think that Constitution has to be adapted to the changing needs of society are usually called liberals.

Types of Appeals to the Supreme Court: 1) An appeal from the US Courts of Appeals for the Federal Circuit to the Supreme Court. 2) An appeal lies from state courts of last resort to the Supreme Court. This last form of appeal is called a petition for a writ of certiorari. The petitioner files a petition to have his case sent to the Court for review. This type of appeal to the Supreme Court is not a matter of right but is discretionary. For a petition for a writ of certiorari to be granted, 4 of the 9 justices must agree that the case to be heard; must be ripe, that is, it raises an issue of national importance. Only about 75 cases are “granted cert” and selected each year among the 5000 petitions filed. THE AMERICAN LEGAL SYSTEM P.34

District (Trial) Courts The United States district courts are the trial courts of the federal court system. Within limits set by Congress and the Constitution, the district courts have jurisdiction to hear nearly all categories of federal cases, including both civil and criminal matters. There are 94 federal judicial districts with at least one district in each state, plus the District of Columbia and Puerto Rico. Each district court has a United States bankruptcy court unit. Three territories of the United States — the Virgin Islands, Guam, and the Northern Mariana Islands — have district courts that hear federal cases, including bankruptcy cases.

There are two special trial courts that have nationwide jurisdiction over certain types of cases. The Court of International Trade addresses cases involving international trade and customs issues. The United States Court of Federal Claims has jurisdiction over most claims for monetary damages against the United States, disputes over federal contracts, unlawful "taking" of private property by the federal government, and a variety of other claims against the United States.

Appellate Courts The 94 judicial districts are organized into 12 regional circuits, each of which has a United States court of appeals. A court of appeals hears appeals from the district courts located within its circuit, as well as appeals from decisions of federal administrative agencies. In addition, the Court of Appeals for the Federal Circuit has nationwide jurisdiction to hear appeals in specialized cases, such as those involving patent laws and cases decided by the Court of International Trade and the Court of Federal Claims. THE AMERICAN LEGAL SYSTEM P.35

Special Federal Courts

US Courts of Federal Claims The United States Court of Federal Claims hears cases against the United States primarily on money claims which include damages, federal contracts, appropriation of private property. The court’s workload is mainly made up of government contract claims, some dealing with complex tax law cases and environmental issues. The court also settles civilian and military disputes, hears intellectual property cases, Native American Indian tribes issues and claims against the US by individuals, companies, states, Indian reservations, non-US citizens and foreign governments.

US Court of International Trade The United States Court of International Trade hears cases dealing with international trade and customs. The geographical jurisdiction of the Courts extends over the whole territory of the United States. The court may grant any remedy available, among which money compensation, writs of mandamus and preliminary or permanent injunctions. Judges sit alone, except when the case involves the constitutionality of an act of Congress, the court then has a panel of three. Appeals against decisions of the US Court of International Trade are heard by the United States Court of Appeals for the Federal Circuit.

Magistrate Courts

Magistrate Courts help lessen the workload assigned to the Federal Circuit Courts. They are courts of limited jurisdiction which handle minor criminal cases and civil cases where the parties have agreed to see their case dealt with by Magistrate Courts. Magistrates Courts exercise jurisdiction over matters determined by statute, as well as those delegated by the district judges as ancillary duties, so that the job of magistrates may vary greatly from court to court. Decisions taken by a magistrate can be reviewed by a District Judge of the same court. Magistrate judges are appointed for 8 years full-time or 4 years part-time by a life-term federal judge.

Bankruptcy Courts A bankruptcy case must be filed in a Bankruptcy Court, since Federal Court have exclusive jurisdiction over these cases. Bankruptcy laws provides for people who cannot pay their creditors anymore by liquidating their assets or establishing a repayment plan. Bankruptcy cases are covered under the US Bankruptcy Code.

US Tax Courts The U.S. Tax Court is a Federal court of record created to hear disputes on tax matters. The court is composed of 19 judges appointed by the President with an expertise on tax law. Trials take place both in Washington and in various cities where judges travel to hear cases. Hearings are before one judge without a jury. THE AMERICAN LEGAL SYSTEM P.36

Administrative law and Courts

Administrative law is that branch of law which regulates administrative agencies in the exercise of their powers. An administrative agency is part of the executive, rather than the legislative or judicial branch of the government. It has the power to affect the rights of parties by making regulation or by administration judicial decisions. Both state and federal governments operate through agencies. Administrative law is considered a branch of public law in such areas as international trade, manufacturing, the environment, taxation, broadcasting, immigration and transport.

Administrative law deals with the decision-making of administrative units of government (e.g., tribunals, boards or commissions) that are part of a national regulatory scheme. Today they regulate air transportation, radio and television, the internet, the food and drug industry, and oversee the stock market. Some examples of agencies in the federal government include the Internal Revenue Service, the National Labor Relations Board, the Social Security Administration, the Food and Drug Administra- tion, The Securities Exchange Commission and the Federal Communications Commission.

Powers that are delegated to, and exist within, the administrative agencies may include an executive power, which includes the ability to investigate, administer and enforce; a legislative power which gives the right to make appropriate rules and regulations within the agency’s jurisdiction; and a judicial power which includes the authority to hear and determine cases within the subject matter jurisdiction of the agency. Take for example the Internal Revenue Service, which is in charge of federal taxation. It issues rules, which are procedural, and regulations, generally substantive; it investigates and collects taxes and it makes determinations of tax liabilities.

Administrative procedure: Agencies exercise a quasi-judicial function which is known as a hearing, as required by the due process of law clause of the fifth and fourteenth amendments of the US Constitution. The purpose of the hearing is to bring facts and information before the adjudicating body.

An administrative law judge is an official who presides at an administrative law hearing to resolve a dispute between a government agency and someone affected by a decision of that agency. The administrative law judge can administer oaths, take testimony, rule on questions of evidence, and make factual and legal determinations. Federal Administrative law judges are appointed by the various agency commissions. Their appointments are merit-based on scores achieved in a comprehensive testing procedure and are the only judges in the United States chosen on their merit. THE AMERICAN LEGAL SYSTEM P.37

State Law

Just as the federal courts interpret federal statutes and decide matters of federal common law, the state courts judge issues of state law. They interpret the state's constitution and statutes, and have broad powers in developing common law doctrines through judicial decisions.

Also like the federal system, the courts in each state are arranged in a hierarchical format. Appellate courts decide points of law and establish rules binding throughout the state, while trial courts handle the bulk of judicial matters and are the courts with which most people come in contact. In most states, these local courts not only handle litigation, but maintain documents such as deeds and wills.

Every state has a court of last resort, which hears appeals and has the final word on interpretation of state law. This high court is called the Supreme Court in most states, but there are a few local variations. In Maine and Massachusetts, the court of last resort is called the Supreme Judicial Court, and in Maryland and New York it is called the Court of Appeals. (Just to confuse matters further, the Supreme Court in New York's court system is the general trial court.)

Most states have procedures similar to the federal court system, with an automatic right of appeal to the intermediate level and discretionary review by the court of last resort.

Structural differences are not the only distinctions among state court systems. Because states vary so dramatically in population and therefore in the amount of work their courts must handle, there are significant practical differences in the body of legal doctrine created by court decisions. State court research is different in large states with hundreds of judges while small states may have just a few dozen judges. Because larger states have more courts and more litigation, they produce more cases to guide future disputes. Large states produce not only more case law, but a more extensive body of legal literature such as treatises. Larger states have more law schools and therefore more law reviews. Their substantial lawyer population can support the publication of state legal encyclopedias, such as California Jurisprudence and extensive sets of specialized treatises and practice guides. Less popu- lous states may have few secondary sources available. THE AMERICAN LEGAL SYSTEM P.38

State Court Systems

No two state court systems are exactly alike. Nevertheless, there are sufficient similarities to provide an example of what a typical state court system looks like. Most state court systems are made up of

1) two sets of trial courts: (a) trial courts of limited jurisdiction (probate, family, traffic, etc.) and (b) trial courts of general jurisdiction (main trial-level courts); 2) intermediate appellate courts (in many, but not all, states); and 3) the highest state courts (called by various names).

Unlike federal judges, most state court judges are not appointed for life but are either elected or appointed (or a combination of both) for a certain number of years.

Trial Courts of Limited Jurisdiction Trial courts of limited jurisdiction are courts that deal with only specific types of cases. They are often located in/near the county courthouse and are usually presided over by a single judge. A judge sitting without a jury hears most of the cases heard by these courts. Some examples of trial courts of limited jurisdiction include: 1. Probate court: This court handles matters concerning administering the estate of a person who has died (decedent). It sees that the provisions of a will are carried out or sees that a decedent's property is distributed according to state law if they died intestate (without a will). 2. Family court: This court handles matters concerning adoption, annulments, divorce, alimony, custody, child support, etc. 3. Traffic court: This court usually handles minor violations of traffic laws. 4. Juvenile court: This court usually handles cases involving delinquent children under a certain age, for example, 16 or perhaps 18. 5. Small claims court: This court usually handles suits between private persons of a relatively low dollar amount, for example, less than $5,000. 6. Municipal court: This court usually handles cases involving offenses against city ordinances.

Trial Courts of General Jurisdiction Trial courts of general jurisdiction are the main trial courts in the state system. They hear cases outside the jurisdiction of the trial courts of limited jurisdiction. These involve both civil and criminal cases. One judge (often sitting with a jury) usually hears them. In such cases, the judge decides issues of law, while the jury decides issues of fact. A record of the proceeding is made and may be used on appeal. These courts are called by a variety of names, including (1) circuit courts, (2) superior courts, (3) courts of common pleas, (4) and even, in New York, supreme courts. In certain cases, these courts can hear appeals from trial courts of limited jurisdiction. THE AMERICAN LEGAL SYSTEM P.39

Intermediate Appellate Courts Many, but not all, states have intermediate appellate courts between the trial courts of general jurisdiction and the highest court in the state. Any party, except in a case where a defendant in a criminal trial has been found not guilty, who is not satisfied with the judgment of a state trial court may appeal the matter to an appropriate intermediate appellate court. Such appeals are usually a matter of right (meaning the court must hear them). However, these courts address only alleged procedural mistakes and errors of law made by the trial court. They will usually neither review the facts of the case, which have been established during the trial, nor accept additional evidence. These courts usually sit in panels of two or three judges.

Highest State Courts All states have some sort of highest court. In states with intermediate appellate courts, the highest state courts usually have discretionary review as to whether to accept a case. In states without intermediate appellate courts, appeals may usually be taken to the highest state court as a matter of right. Like the intermediate appellate courts, appeals taken usually allege a mistake of law and not fact. In addition, many state supreme courts have original jurisdiction in certain matters. For example, the highest courts in several states have original jurisdiction over controversies regarding elections and the reapportionment of legislative districts. These courts often sit in panels of three, five, seven, or nine judges/justices.

MODEL OF STATE COURT SYSTEM

STATE SUPREME COURT

STATE COURT OF APPEALS

Civil Courts Criminal Family Court Probate Juvenile Commercial Courts Court Court Court Superior Court County Court Superior Court Lower Court

Municipal Small Claims Landlord Traffic Court Court Court Tenant Court THE AMERICAN LEGAL SYSTEM P.40

THE DIFFERENCE BETWEEN FEDERAL AND STATE COURT THE AMERICAN LEGAL SYSTEM P.41

AMERICAN COURT SYSTEMS State vs. Federal

U.S. Supreme Court

The U.S. Supreme Court is free to accept or reject the cases it will hear. It must, however, hear certain rare mandatory appeals and cases within its original jurisdiction as specified by the Constitutuion.

State Supreme Courts

Called the State Supreme Court in almost all states. It's the final court of appeal for all but a small number of state cases. If a case involves a right protected by the U.S. Constitution, a party may appeal to the U.S. Circuit Court of Appeals.

Intermediate Courts of Appeal

State Intermediate U.S. Circuit Courts U.S. Circuit Courts Courts of Appeal of Appeal of Appeals for the Federal Circuit 40 states have ICAs. There are 12 of these These courts are the first courts. Each state This court reviews court of appeals for most and U.S District civil appeals dealing state cases. In 10 states Court is in one of the with minor claims the state Supreme Court is 12 circuits. Each against the U.S. the only court of appeals. court reviews cases government; appeals from the U.S. in patent right cases District Courts in its and cases involving Circuit. Appeals go international trade to the U.S. Supreme disputes. Court. THE AMERICAN LEGAL SYSTEM P.42

INTERMEDIATE COURTS OF APPEAL

Trial Courts

State Trial Courts U.S. District Courts U.S. Court of International Trade Almost all cases involving There are 94 federal state civil and criminal district courts, which Specializes in cases that laws are initially filed in handle criminal and civil involve international trade. state or local trial courts. cases involving : Appeals go to the U.S. They are typically called Court of Appeals for the Municipal, County, District, - Federal statutes Federal Circuit (CAFC) Circuit, or Superior Courts. - The U.S. Constitution - Civil cases between U.S. Claims Court Appeals from the state citizens from different trial court usually go to the states and the amount of For Federal cases state intermediate court of money at stake is more involving amounts over appeals. then $75,000 (this is the $10,000, conflicts from About 95% of all court cases most common type of Indian Claims Commission in the U.S. come through the and cases involving some state trial courts. case in the U.S. District Court). government contractors. Most appeals from here go to the U.S. Circuit Court of Appeals; some go to the U.S. Court of Appeals for the Federal Circuit. THE AMERICAN LEGAL SYSTEM P.43

Sources of Law

 Constitutional Law is based on a formal document that defines broad powers. Federal constitutional law originates from the U.S. constitution. State constitutional law originates from the individual state constitutions.  Statutes and Ordinances are legislation passed on the federal, state, or local levels.  Common Law is based on the concept of precedence - on how the courts have interpreted the law. Under common law, the facts of a particular case are determined and compared to previous cases having similar facts in order to reach a decision by analogy. Common law applies mostly at the state level. It originated in the 13th century when royal judges began recording their decisions and the reasoning behind the decisions.  Administrative Law - federal, state, and local level. Administrative law is made by administrative agencies that define the intent of the legislative body that passed the law.

The sources of law have both vertical and horizontal dimensions. Vertical dimensions include federal authority, state authority, and concurrent authority. Federalism refers to this form of government, in which there is national and local authority.

Federal authority covers laws related to intellectual property, immigration, banking, finance, securities regulation, insurance and labor issues.

State authority covers business structures, contracts, torts, testament and succession law and family law.

Concurrent authority covers criminal, environmental law, tax law, and employment law. Note that employment law refers to non-union relationships; labor law refers to union relationships.

The horizontal dimension is related to the separation of power between the executive branch, which creates administrative law, the legislative branch, which creates statutes, and the judicial branch, which creates common law. The judicial system in the U.S. has a pyramid structure consisting of fewer higher level courts and lower level courts. THE AMERICAN LEGAL SYSTEM P.44

Checks and Balances in the American Legal System

In the system created by the U.S. Constitution, the national government is divided into three branches: legislative, executive, and judicial. These three branches are not independent of one another because the Constitution set up a system of checks and balances to help ensure that no one branch became too powerful. Each branch has powers that it can use to check and balance the operations and power of the other two branches.

Checks and Balances of the Legislative Branch The Legislative Branch is given the powers to make the laws. It has the following checks over the Executive Branch:  May override presidential vetoes with a two-thirds vote  Has the power over the monetary budget to actually fund any executive actions  May remove the president through impeachment  Senate approves treaties  Senate approves presidential appointments

The Legislative Branch has the following checks over the Judicial Branch:  Creates lower courts  May remove judges through impeachment  Senate approves appointments of judges

Checks and Balances of the Executive Branch The Executive Branch is given the power to carry out the laws. It has the following checks over the Legislative Branch:  Veto power  Ability to call special sessions of Congress  Can recommend legislation  Can appeal to the people concerning legislation and more

The Executive Branch has the following checks over the Judicial Branch:  President appoints Supreme Court and other federal judges THE AMERICAN LEGAL SYSTEM P.45

Checks and Balances of the Judicial Branch The Judicial Branch is given the power to interpret the laws. It has the following checks over the Exe- cutive Branch:  Judges, once appointed for life, are free from controls from the executive branch  Courts can judge executive actions to be unconstitutional through the power of judicial review

The Judicial Branch has the following checks over the Legislative Branch:  Courts can judge legislative acts to be unconstitutional. THE AMERICAN LEGAL SYSTEM P.46

Classifications of Law and Terminology

 Substantive law vs. procedural law: Substantive law creates, defines, and regulates legal rights and obligations. Procedural law defines the rules that are used to enforce substantive law.

 Common law vs. statutory law: Common law is defined by judges. Statutory law is passed by legislatures. For example, the Securities Act of 1933 is statutory law.

 Criminal law vs. civil law: Criminal law is between private parties and society. Civil law is between private parties only.

Definitions of Key Words

 Appeals: To appeal the hearing decision, an administrative agency may have an Appeals Council and after, it may be appealed to the courts in the judiciary system for judicial review.

 Appeal lies: when an appeal is available or possible or approved

 Bankruptcy: declaration of inability of an individual or business to pay their creditors

 Bulk: a major portion

 Concurrent jurisdiction: the jurisdiction of several courts which are authorized to hear the same subject matter.

 Controversy: a contentious dispute, a strong disagreement in opinions.

 Court of record: a court in which the proceedings are recorded and preserved.

 Deed: A document giving the holder the title to property

 Decedent: an individual who has died.

 Due process of law clause: provision in the US Constitution that guarantees a person fair procedures and protects one’s property from unfair government taking.

 Enact: to make into law

 Enumerated: to expressly list or to specify

 Evidence: a judicial means by which an alleged fact is established or disproved at a trial.

 Exclusive jurisdiction: a case that can only be filed in one court.

 Findings of fact (or issues of fact): findings made by judge and jury in determining which evidence is truthful and which is not.

 General jurisdiction: a court which has jurisdiction to hear a wide range of civil and criminal cases. THE AMERICAN LEGAL SYSTEM P.47

 Intellectual property: intangible property that is the result of creativity

 Interstate commerce power: power to regulate business or commercial exchanges in all of its forms between citizens and businesses of different states.

 Intestate: Having died without a valid will or without providing legally binding instructions for the distribution of one's property after death.

 Judicial review: authority of a court to review and declare unconstitutional the actions of other branches of government.

 Justice: a judge

 Law review: journal containing scholarly articles, essays on legal topics written by legal professors, scholars, students.

 Limited jurisdiction: a court which has restricted jurisdiction to hear certain types of cases, such as family and juvenile courts.

 Litigate: to plead in the judicial process

 Maritime law: branch of international law that deals with territorial and international waters or with shipping or with ocean fishery

 Mistake of law (or errors of law): an erroneous conclusion on interpretation of law with a legal effect.

 Necessary and proper: This clause establishes the "implied powers," by which Congress has authority to pass legislation in areas not specifically listed in the Constitution.

 Ordinance: local or municipal law

 Original jurisdiction: the power of a court to hear a particular case first.

 Override: to reject, to annul, to make void

 Panel: a group of judges assigned to hear the case.

 Party: a person or a company, a group of persons or companies involved in legal proceedings.

 Petition: a written request to the court to take action.

 Prerogative: a right reserved to a particular person or group.

 Probate: to recognize a document as a deceased person's will.

 Procedure: the steps and rules in the legal process.

 Proceeding: the conduct of business in court.

 Provision: a clause in a legal document. THE AMERICAN LEGAL SYSTEM P.48

 Regulation: A law or administrative rule, issued by the executive branch, used to make the detailed measures, which give effect to the intent and purpose of primary legislation.

 Relinquish: renouncing a claim or right or position

 Remedy: a judicial means by which a right is enforced or the violation of a right is prevented.

 Review: a re-examination of the proceedings of a lower court or of the actions of government bodies.

 Ripe: the readiness of a case for litigation

 Subject matter jurisdiction: authority of a court to hear cases of a particular type or cases relating to a specific subject matter such as family law, commercial law, probate law

 Substantive common law (maybe state of federal): law created by judges that establishes principles, rights and limitations under which society is governed, as differentiated from "procedural law," which sets the rules employed in how the courts are conducted.

 Succession law: the law relating to wills or testaments

 Suit: a lawsuit: the proceedings in a law court.

 Supremacy clause: the clause established in Article VI of the United States Constitution and stating that the Constitution, Federal Statutes, and U.S. treaties are "the supreme law of the land."

 Treatise: writing or production of legal doctrine

 Trial court: the first court to decide on the facts of a case.

 Vest: provide a right with power and authority

 Welfare: health, happiness and prosperity; well-doing or well-being in any respect. Aid or assistance provided by a government to people in need.

 Will (Testament): a legal document declaring a person's wishes regarding the distribution of their property when they die.

 Writ of certiorari: a writ by which an order is issued directing the lower court to transmit records of a case the Supreme Court wishes to hear on appeal.

 Writ of mandamus: court order that requires another court, government official, public body, corporation or individual to do something it so orders. THE AMERICAN LEGAL SYSTEM P.49

Questions

1. What are the Two Court Systems in the United States?

2. Explain some of the differences between the two systems?

3. What is Federalism?

4. What do we mean when we say jurisdiction? And what are the different types?

5. What are the three branches of the US Federal system?

6. What is Administrative law in the United States?

7. What is the difference between Substantive and Procedural law?

8. Describe some of the powers that are subject to ‘checks and balances’?

9. What are some sources of American law?

Sources for this chapter:

1) The English of Law: U.S. Law & Politics / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Moham- medi, Michel Perdu, William Yeago et al. Editeur : Belin 2007

2) International Legal English / Lindner/Translegal – William Yeago Cambridge University Press 2006

3) Black’s Law Dictionary West Publishing – sixth edition

www.usconstitution.net www.uscourts.gov www.usa.gov www.findlaw.com www.law.com www.dictionary.law.com THE ENGLISH LEGAL SYSTEM P.50

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY THE ENGLISH3 LEGAL SYSTEM THE ENGLISH LEGAL SYSTEM P.51

THE ENGLISH LEGAL SYSTEM

3Origins and Development of English L aw P.52 Common Law P.52

Guide to the passage of Bill P.55

Royal Assent P.55

European Union Legislation P.56

Definitions of Key Words P.56

THE ENGLISH AND WALES COURT SYSTEM P.59 Inferior or lower courts P.59 Superior or higher courts P.60 Definitions of Key Words P.65

POLITICAL INSTITUTIONS IN THE UNITED KINGDOM P.68

Parliament P.68 The executive branch P.69 The British monarchy P.69 Definitions of Key Words P.70 Questions P.71 THE ENGLISH LEGAL SYSTEM P.52

THE ENGLISH LEGAL SYSTEM

After completing this lesson, one should:  Know the sources of the British Constitution.  Know the difference between Common Law and Equity.  Distinguish the types of cases that are heard in the higher courts and those that are heard in the lower courts. 3 Understand Case Law and Precedent. Origins and development of english law

There are two major systems of law that have developed historically in Europe: the Roman law system (also referred to as ‘codified’ or statute law) and the English common law system. The Roman law system was adopted in France and remains the basis of many other modern systems, notably in continental Europe but also in Quebec (Canada), Japan, Latin America and most of the former colonies of continental Europe. Other countries, including the United States of America, Canada and Australia, have adopted the common law system. The English legal system is in force in England and Wales. The administrative entity of England and Wales is not to be mistaken with the United Kingdom (UK), Great Britain (GB) or the British Isles.

Common Law

England is often referred to as a common law country while continental legal systems such as that of France are called civil law. The common law countries’ approach to resolving disputes is different from that of Roman/Civil law countries. The reason for this difference is the history of the British Isles. Although the Romans briefly occupied England and Wales, Roman law did not have the enduring influence there that it had on the continent. The origins of the English legal system grew after the Nor- man invasion.

Common law can be defined in two different ways: 1) as the legal system in England and Wales in its historical development; 2) as the general system of law, its sources and its particular set of rules established within the United Kingdom.

There are a variety of sources of English law: custom, equity, case law, UK legislation, EC legislation and the Human Rights Act 1998, which is the transposition of the European Convention on Human Rights, a Council of Europe document, into English law. This may be considered a new source of English law as it provides a whole new layer to English law and has had a substantive effect on English law in general. THE ENGLISH LEGAL SYSTEM P.53

Custom, or customary law Customary law first developed in the Anglo-Saxon period when local customs formed most laws affecting family rights, ownership and inheritance, contracts and personal violence. The Norman Conquest of England, led by William the Conqueror at the battle of Hastings in 1066, created the foundations for the English legal system. Before 1066 there was no unified body of law in the country. Unwritten local customs were used to compensate and punish members of the various communities.

The Norman conquerors sought to establish their rule in England by enforcing their methods of administration. The Norman Kings appointed travelling justices to examine the different local practices that dealt with disputes and crimes, with the purpose of founding a set of laws to be applied uniformly throughout the country. The common law was consequently built up from both local customary rulings and judge-made law. This practice among these judges became a system known as the principle of stare decisis, where judges abide by decisions made by their predecessors. Laws, which were now being made ‘common’ to all the communities, were created by these judicial decisions, in recognising and unifying these local customs.

Today, custom or customary law consists of established patterns of behaviour that can be verified objectively within a particular social setting. Hence, in the UK system, it is always possible for any individual to plead custom, as long as they comply with the requirements for it to be law. A given custom must meet several conditions to be legally enforceable. It must be reasonable, clear and certain, in conformity with existing statutes and can be exercised in a peaceful manner. Further, it must apply to a given locality and in order to be recognised as custom it must be proved to have existed in ‘living memory’ i.e. at least as long as the oldest inhabitant in the locality can remember.

Equity Equity developed through an evolution of a certain number of common principles which supplement rules of law where their application would operate harshly. Equity is commonly said to moderate the inflexibility of common law, allowing courts to use their discretion and apply justice in accordance with natural law. Equity was meant to supplement the common law and not to challenge it, as the maxim “equity follows the law” exemplifies.

It is also important to remember one of the maxims of equity: “He who comes to equity must come with clean hands,” which bars relief for anyone guilty of improper conduct in the matter at hand. All equitable remedies are at the discretion of the court. Equity recognises rights that the common law does not, such as the equity of redemption and the rights of a beneficiary under a trust. Equity grants numerous remedies which are still available today, such as injunction, specific performance and rescission.

Case law Case law is often also referred to as “judge-made law”, however judges no longer “make laws”, as they did until the 17th century, but rather interpret laws that come in the form of statute law. Nonetheless, judges still play an essential role in influencing English law by deciding upon cases and by interpreting legislation. The body of their decisions is thus known as case law, which involve interpreting prior decisions, and statutes. These decisions are collected and compiled into case books, almost certainly the most important source of law for the legal profession. THE ENGLISH LEGAL SYSTEM P.54

The basis of the system of precedent is known as the principle of stare decisis (“stand by what has previously been decided in a similar case”). A statement of law by a judge in a case can become binding on judges of inferior courts in similar cases. This means that inferior court judges may not arrive at a different conclusion in a similar case, and therefore must adopt the argument determined in the previous ruling, which is defined as a precedent. Court hierarchy is important in defining which court ruling is binding, and therefore in general, higher court decisions are binding upon lower court decisions. The Supreme Court, previously known as the Appellate Committee of the House of Lords, is at the top of the court system. Its decisions are binding on all the lower courts, but to allow more flexibility, reflecting constant changes in society, the Supreme Court is not bound by its previous rulings.

A judicial decision is typically made up of four major developments: 1) statement of material facts. 2) statement of legal principles material to the decision also referred to as the ratio decidendi, (the reasoning behind the decision). 3) discussion of the legal principles raised in the arguments, but not necessarily material to the decision. This is known as obiter dictum or something discussed in the case about the law or facts which are “by the way”, but not strictly necessary for the legal basis of the decision. 4) the decision or verdict.

The ratio decidendi is consequently binding upon lower court judges; the obiter dicta are not binding, but may be considered as ‘persuasive’.

The doctrine of precedent governs the implementation of case law. A later judge will have to determine what pronouncements of earlier decisions are relevant; and what parts are binding to the current case before them.

The doctrine of precedent has become a flexible system thanks to overruling, distinguishing and departing. A higher court can overrule the decision of a lower court. Judges who think that there are material differences between their present case and a precedent will apply different principles; this is known as distinguishing. A lower court can depart from its own previous decision, but the Court of Appeal is normally bound by its previous decisions.

UK legislation A major portion of UK law is statute law, known also as legislation or legislative acts. In the UK, legislation can be defined as either primary or secondary. The British Parliament votes on primary legislation (Acts of Parliament). Government bodies, such as government departments, are empowered by Parliament to pass legislation, known as secondary legislation or delegated legislation. This legislation is issued as statutory instruments, otherwise known as “orders” or “regulations”. THE ENGLISH LEGAL SYSTEM P.55

Guide to the passage of a Bill

A Bill is a proposal for a new law, or a proposal to change an existing law, presented for debate before Parliament by a Member of Parliament (MP), who is usually but not always, a government Minister in the House of Commons. A Peer will introduce a bill in the House of Lords.

A Bill can start in the House of Commons or the House of Lords and must be approved in the same form by both Houses before becoming an Act (law).

The diagram below shows the passage of a Bill through Parliament and provides further information about each stage of the process.

First readingSecondCommitee readingReport stage Thirdstage reading First readingSecondCommitee readingReport stage Thirdstage reading Consideration of amendments

House of Commons House of Lords Bill starting in the A Royal Assent House of Commons 1 2 C R 3 1 2 C R 3

House of Lords House of Commons Bill starting in the A Royal Assent House of Lords 1 2 C R 3 1 2 C R 3

Royal Assent

Royal Assent is the final step required for a parliamentary bill to become law. Once a bill is presented to the Queen (or King), there are three options:  grant the Royal Assent, thereby making the bill an Act of Parliament.  withhold the Royal Assent, vetoing the bill.  may reserve the Royal Assent, that is to defer a decision on the bill until a later time.

The Sovereign acts on the advice of his or her ministers. Since these ministers most often maintain the support of Parliament and are the ones who obtain the passage of bills, it is highly improbable that they would advise the Sovereign to withhold Assent. For this reason, in modern practice, the Royal Assent is almost always granted. THE ENGLISH LEGAL SYSTEM P.56

European Union Legislation

As the United Kingdom is a member of the European Union, European Union legislation is also a source of English law. In cases of conflict between UK and EU legislation, EU law takes precedence, but, European Union legislation contains no specific terms stating that European Community law overrides or is subordinate to national laws. However the principle of the primacy of European Community law over national law was declared and well-defined by the European Court of Justice in the case Costa v ENEL (1964).

There are four types of EU law: recommendations and opinions, decisions, directives and regulations.

The roles of the European Court of Justice and the European Court of First Instance must be empha- sised. The importance of their decisions and rulings in the uniform interpretation of European Commu- nity law is to guarantee that EU law is observed and precisely applied among the Member States, to strengthen the protection of individual interests, and to issue rulings on breaches of Community law by the Member States.

Their powers revolve around issuing opinions on international agreements and addressing disputes between: - Member States; - the EU and Member State; - institutions; - individuals and the EU.

Definitions of Key Words

 Act of Parliament: a law passed by Parliament.

 Beneficiary: a person meant to receive something, to benefit or gain profit from something.

 Binding: requiring lower court judges to come to the same decision in similar cases.

 British Isles: a group of islands in Western Europe comprising Great Britain, Ireland and adjacent islands.

 Case books: volumes containing the case law decisions..

 Case law: the major volume of judicial decisions.

 Civil law: the general system of law based on codes and prevalent in continental Europe, Central and South America, unlike the common law system.

 Claimant: the person who first initiates a complaint/claim in a civil case.

 Common law: the general system of law, its sources and its particular set of rules established within the United Kingdom. THE ENGLISH LEGAL SYSTEM P.57

 Custom or customary law: established patterns of behaviour established within particular social settings and localities.

 Depart from: to ignore or set aside (a previous decision of the same court).

 Directive: legislative act of the European Union, which requires member states to achieve a particular result without dictating the means of achieving that result.

 Discretion: prudence; ability to adapt action to circumstance, or the freedom to decide what should be done in a particular situation.

 Distinguish: to apply different principles to a decision, when a judge decides that there are material or factual differences between the case being considered and a precedent.

 Duty: obligation.

 Equity: a part of the common law system that provides remedies other than damages.

 Equity of redemption: a right to redeem or recover property in certain circumstances.

 Great Britain: island in Western Europe comprising England, Scotland, and Wales.

 Injunction: an equitable remedy in the form of a court order that prohibits a party from doing or continuing to do something.

 Litigant: a person engaged in a lawsuit.

 Material: tangible, concrete (facts or elements of a case).

 Maxims: general rules of conduct which were the basis of equity.

 Obiter dictum: comment in a judicial decision that says something "by the way" about the law or the facts of the case but not necessary for the legal basis of the decision.

 Order: delegated legislation in the form of a statutory instrument, rule or regulation.

 Overrule: to rule against, to cancel or reverse a previous decision.

 Natural law: general moral principles, such as justice, fairness, and respect for other persons, and to values inherent in human nature and essential to human society

 Plaintiff: former legal term for one who starts a claim now known as a claimant.

 Precedent: a previous judicial decision that has a subsequent binding effect.

 Primary legislation: laws passed by the UK Parliament.

 Ratio decidendi: the core reasoning within a judicial decision.

 Real actions: actions for the recovery of land. THE ENGLISH LEGAL SYSTEM P.58

 Regulation: rule or a legislative act of the European Union which becomes immediately enforceable as law in all member states simultaneously.

 Remedy: solution or compensation for a claimant.

 Rescission: an equitable remedy of the court which consists in the cancellation of a contract between the parties.

 Right: the power or liberty to which a person or a group is justly entitled or to which they have a moral or legal claim.

 Secondary legislation: laws passed by government bodies empowered to do so by Parliament.

 Specific performance: an equitable remedy in the form of a court order that expresses the demand of a party to perform a specific act usually in contract law.

 Stare decisis: the principle of standing by what has previously been decided in a similar case.

 Statute: a law passed by Parliament and which has received the Royal Assent (signed by the monarch).

 Statutory instrument: delegated or secondary legislation brought to Parliament by a Government minister, exercising legislative powers delegated to them by an Act of Parliament

 Trust: an equitable property interest held by one person on behalf of another.

 United Kingdom (or United Kingdom of Great Britain and Northern Ireland): country in Western Europe comprising Great Britain and Northern Ireland.

 Writ: a formal written order issued by an administrative or juridical authority. THE ENGLISH LEGAL SYSTEM P.59

THE ENGLISH AND WALES COURT SYSTEM (Scotland and Northern Ireland have their own, highly distinct, judicial systems.)

Inferior or Lower Courts 1) Magistrates' Courts: Magistrates' courts go back as far as Anglo-Saxon times, but they officially originate from 1285, during the reign of Edward I, when ‘good and lawful men’ were commissioned to keep the King’s peace. From that point, and continuing today, Justices of the Peace, otherwise known as magistrates, have undertaken the majority of the judicial work carried out in England and Wales (today, about 95 per cent of criminal cases are dealt with by magistrates). These courts are overseen by unpaid and part-time magistrates drawn from the local community. Cases are either heard by a panel of two or three lay magistrates or by a single District Judge who is a professional judge. Lay magistrates are referred to simply as magistrates, or sometimes as Justices of the Peace (JPs). They are assisted by legally-qualifiedcourt clerks, who are trained solicitors or barristers. In addition to criminal law, the competence of Magistrates’ Courts includes a limited number of civil matters involving family issues, divorce, maintenance relating to spouses and children, personal protection orders in cases of matrimonial violence and local gambling and liquor licenses.

2) County Courts: have generally speaking the same jurisdiction as the High Court (see below) except that the claim value is generally lower and the subject matter is likely to be less complex. Cases dealt with include contract or tort disputes, personal injury claims where the amount demanded is less than £50,000, and money claims where the claimant does not expect to recover more than £15,000. Claims above these amounts can be brought in either the County Court or the High Court. County courts jurisdiction consists principally of personal injury, negligence and contract claims, matters involving equity such as trusts or mortgages, real property claims, bankruptcy and some family proceedings, especially divorce and including marital finance disputes over custody of, and access to, children. Circuit Judges, Recorders, and District Judges all sit in County Courts. Circuit Judges are assigned to an administrative regional division, called a circuit, and are entitled to sit at any of the Crown and County Courts on that circuit although they are generally allocated to, and remain in, one particular court. District Judges are also appointed to a particular circuit and Recorders work as part-time judges. THE ENGLISH LEGAL SYSTEM P.60

Superior or Higher Courts 1) The Crown Court handles any criminal cases not dealt with in the Magistrates’ Courts. It sits in some 92 locations throughout England and Wales. A Magistrates Court may commit (transfer) a case to the Crown Court that it believes is sufficiently serious, as the sentencing powers of magistrates are strictly limited to a maximum sentence of 6 months imprisonment or more rarely, 12 months imprisonment for 2 separate offences or more. The most famous criminal court in England, and possibly the most famous court in the world, ‘The Old Bailey’ in London is a Crown Court.

The Crown Court has first instance jurisdiction in cases involving indictable offences, and in either way offences committed to the Crown Court by the Magistrates’ Courts. Indictable offences are serious offences that must be tried before a judge and a jury.

The Crown Court is presided over by a professional judge. In the most serious cases, the judge is likely to be a High Court Judge (from the Queen’s Bench Division) also known as a puisne judge. Other cases are heard by a Circuit Judge or a Recorder.

2) The High Court The High Court hears civil cases and sits at the Royal Courts of Justice in London as well as in various cities across the country. It is organised into three divisions: the Queen’s Bench Division (QBD), the Chancery Division and the Family Division and each division includes a court of appeal called Divisional Court, in which two or three judges hear certain appeals from other courts and tribunals.

 Family Division deals with disputes concerning family matters and hears cases relating to minors, defended divorce, wardship, adoption, legitimacy, non-contentious probate matters, wills and medical treatment cases.

 Chancery Division deals with disputed wills, the administration of estates, the appointment of guardians, trusts, the rectification of deeds, land and mortgage actions, partnerships, company law, bankruptcy, patents, trademarks, copyrights and revenue law. Queens Bench Division deals with other civil law cases including libel, slander and breach of contract.

The civil justice system in the UK was reformed in 1999 following the Lord Woolf Report. The recommendations in the report led to reforms which attempted to simplify procedures and terminology, speed up the process and make the system less expensive for litigants. The Civil Procedure rules (CPR) 1999 created a common set of court procedure rules. There is now an identical procedure and jurisdiction in both the county court and High Court.

There are two Courts of First Instance which hear civil claims; the County Court and High Court. Cases are initially allocated to a ‘track’ by the litigant’s solicitor. There are 3 tracks: the small claims track, fast track and multi track.

1. The small claims track: is for claims below £5000. These cases must be heard in the County Court small claims court and to save on costs, the parties either represent themselves or, if they do instruct a lawyer, they cannot claim their lawyer’s costs if they win the case. 2. Claims between £5,000 and £25,000 (£15,000 for cases started before April 2009) that are capable of being tried within one day are allocated to the "Fast Track". 3. Claims over £25,000 (£15,000 for cases started before April 2009) are allocated to the "Multi Track". THE ENGLISH LEGAL SYSTEM P.61

These 'tracks' are labels for the use of the court system - the actual cases will be heard in the County Court or the High Court depending on their value. For personal injury, defamation, and some landlord-tenant dispute cases the thresholds for each track have different values. The High Court and County Courts Jurisdiction Order 1991 lays down some restrictions as follows;

 Personal Injury cases for less than £50,000 must be started in the County Court.

 Defamation actions must be started in the High Court.

Cases can be transferred from one court to another for the actual trial. Initially the choice is made by the claimant’s solicitor when s/he initiated the claim. However the judge dealing with the case, known as the ‘case management judge’ may change the initial allocation after s/he has had time to study the pleadings of the parties and an allocation questionnaire which is filled in by the lawyers representing the parties and submitted to the court after the pleadings have been completed e.g. a case of a value in excess of £50.000 may be allocated to the County Court because it is not considered to be a complex case. Similarly a case of a value less than £50.000 may be considered complex enough to be dealt with by the High Court. Furthermore certain matters which require a specialist court – mercantile, shipping, intellectual property, company matters etc. may be dealt with by the High Court which has the requisite specialist courts and specialist judges regardless of the value of the case.

There are also various specialised courts within the QBD: the Commercial Court (banking and insurance-related litigation), the Admiralty Court (shipping-related litigation), the Administrative Court (dealing with claims for judicial review), and the Technology and Construction Court (computer and engineering-related litigation). The Divisional Court of the QBD has both criminal and civil appellate jurisdiction. It hears appeals by way of case stated from the Magistrates’ Courts.

Any matter dealt with by the Magistrates’ Court may be appealed. On a question of conviction and/or sentence, the appeal will be to the Crown Court which sits with a circuit judge and at least 2 magistrates who were not part of the original trial in the Magistrates. The appeal is a complete rehearing of the original case with witnesses giving evidence.

If the appeal is on pure law, the appellant may refer the matter to the High Court. This is known as an appeal by way of case stated otherwise known as a ‘paper appeal’ because all the appeal documents are on paper and witnesses are not heard. The defendant’s lawyer will ask the Magistrates to state a case i.e. why they came to their decision. This paper appeal will be sent to the High Court which will review the case and the original decision. The High Court judges will make recommendations which must be applied by the Magistrates Court.

This court also hears applications for habeas corpus, in which applicants claim they are unlawfully detained, be it in a police station, a hospital, a prison or by any person, and demand to be set free. Habeas corpus is still available in the United Kingdom today. Its importance and use, however, has diminished considerably due to extensive statutory protections that exist to protect a person’s liberty. In recent times habeas corpus has most often been used in immigration cases to test the legality of the detention of immigrants, extradition proceedings, and to challenge detention under mental health legislation.

Lastly, the High Court exercises judicial review of decisions made by government bodies, inferior courts and tribunals.

To be appointed a High Court judge, candidates must be barristers or solicitor-advocates with at least ten years’ experience in the High Court or two years’ experience as a Circuit Judge. Appointments are made by the Queen on the advice of the Lord Chancellor with the recommendations of a Judicial Appointments Commission. THE ENGLISH LEGAL SYSTEM P.62

3) The Court of Appeal has two divisions dealing with appeals regarding criminal and civil law. The judges usually sit in panels of three.

The Master of the Rolls is the president of the civil division and the head of the civil justice system. The other judges are the Lord Justices of Appeal. These judges are chosen from among High Court judges with at least two years’ experience, or advocates who have had a minimum of 10 years’ experience. Appointments are usually from the ranks of experienced High Court Judges.

Decisions are taken by a majority. The Civil Division hears appeals on questions of law and in certain circumstances, on issues of fact. The Court of Appeal will seldom interfere with a jury’s findings of fact. If the appeal is accepted, the original decision can be reversed, affirmed, oramended , or a new trial can be ordered.

The Criminal division hears appeals against sentences and convictions in the Crown Court. These appeals are filed by defendants who were convicted on indictment. Any decision in favour of the appellant will be on the grounds that the original decision was ‘unsafe’.

The Lord Chief Justice of England and Wales is the head of the criminal justice system and presides over this division. The judges who sit in this Court are Lord Justices of Appeal, but some High Court Judges and some Circuit Judges are authorised to sit in the Court of Appeal.

The Criminal Division can dismiss appeals. It can also quash previous convictions and order retrials.

4) The Supreme Court of the United Kingdom The Supreme Court is the most senior UK Court, where appeals against the decisions of lower courts, in both criminal and civil cases are decided. Formerly, this court was called the Appellate Committee of the House of Lords though it was generally known simply as “The House of Lords”. In 2009 the court moved from its base in the House of Lords (the reason why its judges were referred to as ‘law lords’) to the new Supreme Court premises on the other side of Parliament Square in Westminster. The Supreme Court, as well as being the final court of appeal, plays an important role in the development of United Kingdom law. As an appeal court, The Supreme Court cannot consider a case unless a relevant order has been made in a lower court.

The Supreme Court:

 is the final court of appeal for all United Kingdom civil cases, and criminal cases from England, Wales and Northern Ireland

 hears appeals on arguable points of law of general public importance

 concentrates on cases of the greatest public and constitutional importance

 maintains and develops the role of the highest court in the United Kingdom as a leader in the common law world

The 12 Justices of the Supreme Court were previously called Lord Justices of Appeal in Ordinary or Law Lords. As provided by the Constitutional Reform Act 2005, the Court is headed by a President and a Deputy President. Qualifications for office are at least two years of high judicial office or a minimum of fifteen years as a qualified practitioner. In practice, Law Lords are generally appointed from among the most respected judges of the Court of Appeal in England and Wales, Scotland, or Northern Ireland. Supreme Court Justices sit in panels of 5 and occasionally of 7. THE ENGLISH LEGAL SYSTEM P.63

Criteria to be used when considering whether more than five Justices should sit on a panel:

 If the Court is being asked to depart, or may decide to depart from a previous decision.

 A case of high constitutional importance.

 A case of great public importance.

 A case where a conflict between decisions in the House of Lords, Judicial Committee of the Privy Council and/ or the Supreme Court has to be reconciled.

 A case raising an important point in relation to the European Convention on Human Rights.

Their decisions are taken by majority. Each Justice may give a separate argued judgment or express his or her agreement with the judgment of one of the other members of the court. Minority judgements are called ‘dissenting judgements’. The court can affirm or reverse a decision of the Court of Appeal, and has the power to overrule its own previous decisions.

On average only 80 to 90 appeals are heard by the Supreme Court (and formerly the House of Lords) per year. The majority of the cases are civil law matters. In recent years it has become a convention for a case which could have been heard by the Supreme Court, to be heard by the Court of Appeal sitting in a quorum of 7 appeal court judges.

5) Judicial Committee of the Privy Council The Privy Council is the oldest institution in the United Kingdom being in existence since the 11th century. It performs a number of judicial functions, in addition to its executive role of advising the sovereign on policy. It serves as a final court of appeal for the UK Overseas Territories and for a number of Commonwealth countries. It also has domestic jurisdiction, principally concerned with final appeals in matters relating to professional discipline for medical practitioners, dentists, opticians, veterinary surgeons, osteopaths, and chiropractors.

The Judicial Committee of the Privy Council is made up of judges who hold, or have held high judicial office in the UK. Its members are the Lord Chancellor, past Lord Chancellors and the Lords of Appeal. Privy Counsellors have held high judicial office and may be judges of certain superior courts in other Commonwealth countries.

Five judges normally sit to hear Commonwealth appeals usually from former colonies which are independent but still do not have an appeals infrastructure in their own countries and use the Privy Council to hear appeals from final appeals in their own countries. In recent years there have been several death sentence appeals from Jamaica which have been reversed by the Privy Council.

The Privy Council is a consultative body, but it still has great authority since under s.4 of the Judicial Committee Act 1833: “the Queen must refer any matter to it for an advisory opinion.” For professional matters, it is still a final court of appeal and its decisions are enforceable. THE ENGLISH LEGAL SYSTEM P.64

6) European Courts The European Court of Justice (ECJ) in Luxembourg acts only as a supreme court for the interpretation of European Union law. Consequently, there is no right to appeal at any stage in UK court proceedings to the ECJ. However, any court in the UK may refer a particular point of law relating to European Union law to the ECJ for determination.

The European Court of Human Rights in Strasbourg is an international court that hears complaints concerning breaches of the European Convention on Human Rights and Fundamental Freedoms. A dissatisfied litigant in England and Wales might complain to the court that English law has violated his or her rights. However, a decision in the European Court of Human Rights will not change English law, and it is up to the Government of the United Kingdom to decide what action (if any) to take after an adverse finding. THE ENGLISH LEGAL SYSTEM P.65

Definitions of Key Words

 Amend: to alter a written or oral statement by correcting or adding changes to it.

 Appeal by way of case stated: a procedure whereby a lower court issues a statement in writing of facts agreed upon during the first-instance trial and formulates a question to a higher court seeking its opinion on the legal points raised.

 Appellant: a person who files an appeal against a court decision.

 Appellate jurisdiction: authority of a court or tribunal to determine appeals from lower courts.

 Bail: release from custody on a promise to return for the next stage of a criminal case.

 Bankruptcy: the condition in which an individual cannot meet their debt obligations, the court appoints a trustee in bankruptcy to control and distribute the bankrupt’s assets among his creditors.

 Circuit: one of the six judicial and administrative divisions of England and Wales (Northern, North-Eastern, Midland and Oxford, Wales and Chester, South-Eastern, and Western).

 Community punishment order: a sentence requiring an offender to complete a number of hours of unpaid work in the interest of the community.

 Community rehabilitation order: a sentence aimed at helping offenders towards rehabilitation through compulsory work with a supervising officer; this may include an obligation to undergo treatment or attend a training programme.

 Conviction: a court decision stating that someone is guilty of a crime.

 Court clerk: in the Magistrates’ Court, a barrister or solicitor working as legal advisor to lay magistrates.

 Deed: a legal document which transfers title of goods and property from one individual to another.

 Defamation: tort of injuring a person’s reputation by making false statement of fact.

 Defended divorce: a divorce where one party does not agree to the divorce.

 District Judge (Magistrates' Court): a professional judge appointed to sit full-time at a Magistrates' Court.

 Dismiss : to stop a court case from continuing.

 Triable-either-way offence: an offence that can either be tried before a Magistrates’ Court without a jury or with a jury in a Crown Court.

 European Court of Human Rights: International court located in Strasbourg, established by the European Convention on Human Rights, which provides legal recourse of last resort for individuals who feel that their human rights have been violated by a contracting party to the Convention.

 European Court of Justice ECJ: the judicial branch of the European Union (EU). Its headquarters are in Luxembourg. THE ENGLISH LEGAL SYSTEM P.66

 Evidence: oral statements, written witness statements, affidavits, and various kinds of exhibits that are used in a trial.

 Fine: a financial penalty which may be imposed in a criminal case.

 First-instance jurisdiction: authority of a court or tribunal in which cases are first tried.

 Fraud: criminal or civil wrong involving the intentional deception of other persons in order to gain material advantage or injure their interests.

 Guardian: a person legally in charge of a child in the absence or death of the parents.

 Habeas corpus: a civil proceeding used to determine whether the imprisonment of a person is legal.

 HMCS: an executive agency of the Ministry of Justice, called Her Majesty's Court Service.

 Indictable offence: a serious offence which can only be tried in a Crown Court with a jury.

 Indictment: an official written statement which charges someone with a serious criminal offence.

 Judge: a legally trained professional arbitrator appointed to settle disputes according to the law.

 Judicial review: the examination by judges of the legality and correctness of decisions emanating from lower courts or actions taken by government bodies. It is a procedure that should usually only be invoked when there is no further right of appeal from that decision or action.

 Jury: a group of 12 men and women selected at random from the electoral register and sworn in to decide the guilt or innocence of a person accused of a criminal offence and who is being tried in the Crown Court. The role of a jury in civil cases is a rarity in the UK. Juries of 7 persons may be empanelled at the discretion of the court. A jury may however be ordered on the application of either party in cases of defamation, malicious prosecution, fraud and false imprisonment unless the judge considers that case will require prolonged examination of documents, witnesses and other evidence. The role of the civil jury is to determine factual issues between the parties, and to determine the appropriate award of damages.

 Justice of the Peace: see magistrate.

 Lay magistrate: see magistrate.

 Libel: the tort of publishing a false statement in some permanent form that is likely to injure a person’s reputation in the opinion of others, or which makes him look ridiculous. It is a criminal offence to publish a libel knowing it to be untrue although most libel cases are civil in nature as the ultimate objective of the claimant is to be awarded damages..

 Lord Chancellor: the highest officer of the Crown who is head of the judiciary and who presides in the House of Lords.

 Magistrate: a paid member of the community without any legal qualification who volunteers and is appointed to sit for a set number of days per year in Magistrates’ Courts to judge minor civil and criminal cases.

 Malicious prosecution: tort of instituting or pursuing civil or criminal legal action without probable cause and in bad faith. THE ENGLISH LEGAL SYSTEM P.67

 Master of the Rolls: the President of the Civil Division of the Court of Appeal and the second most senior judge in England and Wales, after the Lord Chief Justice.

 Mortgage: a legal document pledging property to the lender as security for payment of a debt.

 Non-indictable offence: see summary offence and either-way offence.

 Offender: a person who has been convicted of an offence.

 Panel: a group of people, often with specialist knowledge, chosen to give advice or take decisions.

 Patent: the registration of an invention, which gives the patentee the right to a short term monopoly on the production and sale of his or her invention.

 Personal injury: a tort or civil wrong occurring when a person is physically or mentally injured as a result of another person’s actions or omissions.

 Puisne judge: a judge who sits on the High Court.

 Quash: to officially state that a legal decision is no longer valid.

 Retrial: the process of judging a case anew.

 Reverse: to change a decision so that it is the opposite of what it was.

 Sentence: a punishment given by a judge to someone who is guilty of a crime.

 Slander: tort of making a false oral statement against a living person. Slander is only actionable on proof of damage while libel is actionable per se i.e. without having to show proof of any loss or damage.

 Summary offence: an offence which can only be tried in a Magistrates’ Court without a jury.

 Theft: an offence consisting in dishonestly appropriating property belonging to another person with the intention of permanently depriving the other of it.

 Tribunal: a body appointed to adjudicate or arbitrate on a disputed question.

 Trust: an equitable entity created to hold goods and property for the benefit of certain persons, charities or companies, where a trustee manages the trust and often holds property titles on behalf of the trust, for the beneficiaries.

 Wardship: the fact of legally being in charge of a person, especially a child, called a ward. Wardship decisions are made by the Family Division of the High Court.

 Youth Court: a court held at a Magistrates' Court, hearing cases in which children between ten and seventeen have been charged with an offence. THE ENGLISH LEGAL SYSTEM P.68

POLITICAL INSTITUTIONS IN THE UNITED KINGDOM

There is no written English constitution (i.e., there is no one single document called the constitution); "constitutional law" concerns issues such as the role of the state, the protection of individual rights, It is therefore often said that the country has an ‘unwritten’ constitution. The British constitution is embodied in the written form, within statutes, court judgments, and treaties. The foundation of the British constitution has traditionally been the doctrine of Parliamentary sovereignty, according to which, statutes passed by Parliament are the UK's supreme and final source of law. The doctrine of parliamentary supremacy may be summarised in three points:

 Parliament can make laws concerning anything.

 No Parliament can bind a future parliament (that is, it cannot pass a law that cannot be changed or reversed by a future Parliament).

 A valid Act of Parliament cannot be questioned by the court. Parliament is the supreme lawmaker.

Parliament

The Parliament of the United Kingdom and Northern Ireland is the oldest surviving representative assembly in the world. It is the supreme legislative institution in the UK. It is a bicameral legislature which includes an Upper House, called the House of Lords, and a Lower House, called the House of Commons. Members of the House of Lords are at present not elected by universal suffrage whereas members of the House of Commons are democratically elected. The members of the United Kingdom Parliament come from England, Northern Ireland, Scotland and Wales. The House of Lords and the House of Commons meet in separate chambers in the Palace of Westminster in London. The legislative process involves three components, namely both Houses of Parliament and the Monarch. The supremacy of the House of Commons was clearly established during the 20th Century through various Acts of Parliament which deprived the Upper House of some of its prerogatives.

Its sovereignty has been restricted by the United Kingdom's membership of the European Union, which has the power to make laws enforceable in each member state. In order to circumvent the supremacy of parliament rule, the UK parliament passed the European Communities Act 1972 which provides for the incorporation of European Community legislation, including Conventions, Directives, Regulations and case law, into the domestic law of the United Kingdom. Parliament has also created national devolved assemblies with legislative authority in Scotland, Wales and Northern Ireland.

Each House of Parliament preserves various ancient privileges. The foremost privilege claimed by both Houses is that of freedom of speech in debate. Nothing said in either House may be challenged in any court of law or other institution outside Parliament. Freedom from arrest except in case of high treason, felony or breach of the peace constitutes another of those privileges. Members of both Houses are also excused from jury duty. THE ENGLISH LEGAL SYSTEM P.69

The Executive Branch

The Government performs the executive functions of the United Kingdom and defines the policies that determine how the country is run. The Government is divided between specialised Departments of State and is headed by the Prime Minister, who is by convention the member of the House of Commons most likely to form a Govern- ment after a general election. As the Executive is drawn from Parliament, it is also accountable to it under the principle of Responsible Government. In practice Members of Parliament of major parties vote according to party policy. Thus, a government backed by a large majority is seldom defeated in Parliament.

The Cabinet The key decision-making body in government is the Cabinet which is made up of about twenty of the most senior government ministers. Cabinet members traditionally include the Lord Chancellor and the Chancellor of the Exchequer (in charge of the Treasury), the Home Secretary, the Secretary of State for Foreign and Commonwealth Affairs, the Education Secretary, the Lord Privy Seal (a Minister without a Portfolio who is often the Leader of the House of Commons). The Opposition organises its highest-ranking members into a Shadow Cabinet. Each “shadow” member is a counterpart of a Cabinet member

The British Monarchy

The British Monarch or Sovereign is the Head of State of the United Kingdom and British territories. Powers of the Monarch, known as the Royal Prerogative, are essentially symbolic and are usually not exercised by the monarch, but by ministers acting on his or her behalf.

Political power is exercised by the Parliament of the United Kingdom, of which the Sovereign is a non-partisan component, and by the Prime Minister and Cabinet. In the modern British constitutional monarchy, the Sove- reign's role is in practice, limited to ceremonial functions.

The Sovereign has to remain politically impartial and it is his or her duty to ask the leader of the majority party to become Prime Minister. The Monarch and the Prime Minister (PM) meet on a weekly basis after Cabinet meetings but what is said remains private. Through these meetings, the Monarch may advise the PM on policy matters.

Another aspect of the Monarch’s legislative role is the Royal Assent whereby a bill becomes an Act of Parlia- ment. It is given at the end of the law-making process. As Head of State, the Monarch symbolises the sovereignty of the State in foreign affairs and is Commander in Chief of the Armed Forces. The Sovereign is also the Supreme Governor of the established Church of England and also Head of the Commonwealth, an association of sovereign and independent nations, which were formerly part of the British Empire. The Sovereign’s official expendi- ture is controlled by Parliament through the Civil List which establishes a budget. THE ENGLISH LEGAL SYSTEM P.70

Definitions of Key Words

 Bill: a parliamentary proposal which becomes an Act of Parliament if it is passed by both Houses and receives the Royal Assent.

 Breach of the peace: behaviour harming or likely to harm a person or his property.

 Cabinet: a group of senior government officials appointed by the Prime Minister, responsible for much of the Government’s policy-making, and collectively answerable to Parliament. They are said to have collective responsibility, in other words they must support decisions made by the cabinet majority even if they themselves dissent. In such a situation a dissenting minister must either support the cabinet decision or resign his post and go to the back benches.

 Chancellor of the Exchequer: a Secretary of State responsible for the Sovereign’s treasury.

 Civil list: The amount of money, a fixed annual payment, provided by Parliament to meet the official expenses of The Kings or Queens Household.

 Civil Service: the body of non-political public servants.

 Commonwealth: former British colonies now mostly forming an association of 53 sovereign and independent nations.

 Draft: a first attempt at a legal document that has yet to be approved.

 Devolve: a transfer of powers from a central government to local units.

 Enforceable: that has to be obeyed, compelling.

 Executive agency: a public body in charge of a specific administrative task.

 Federal system: a system wherein limited powers exercised by sub-entities are constitutionally defined.

 Felony: a serious offence more commonly known as an indictable offence.

 House of Commons: the lower house of Parliament.

 House of Lords: the upper house of Parliament.

 King/ Queen in Parliament: the role of the Sovereign as part of the legislative branch.

 Legislature: a State body empowered to make law.

 Opposition: the minority party or coalition that sits in Parliament.

 Lord Privy Seal: leader of the House of Commons; also a Minister but without a portfolio

 Parliamentary sovereignty: absolute sovereignty of a Parliament, meaning it is supreme to all other government institutions including any executive or judicial bodies as they may exist. THE ENGLISH LEGAL SYSTEM P.71

 Peer / peeress: a member of the House of Lords.

 Responsible government: a principle whereby all Cabinet members are collectively responsible to Parlia- ment for the decisions taken.

 Royal Assent: the Monarch’s formal approval of a bill passed by Parliament.

 Royal prerogative: the collective powers of the Monarchy.

 Tie: an equal number of votes.

 Treason: violation of allegiance to sovereign or State.

 Shadow Cabinet: counterpart Cabinet set up by the Opposition mirroring the Cabinet in power.

 Speaker(s): the presiding member(s) of the House of Commons and the House of Lords.

Questions

1. What are the main differences between Common law and Civil law countries?

2. What is the “doctrine of precedent”?

3. What are “either-way cases”?

4. What is the difference between “obiter dictum” and “ratio decidendi”?

5. What is the difference between statute law and equity?

6. What is the role of The Supreme Court?

7. Which judges make precedents?

8. Does the British Monarch have any powers?

9. What is the difference between lay magistrates and district judges (magistrates’ courts)?

10. In which two courts might a civil case be tried?

11. How will it be decided which of the two courts is the appropriate court to try the case?

12. From which civil courts does the Supreme Court hear appeals? THE ENGLISH LEGAL SYSTEM P.72

Sources for this chapter:

1) The English of Law: England and Wales / Jean-Eric Branaa, Anne Brunon-Ernst, Nicki Chaudoir, Charles Davey, Severine Letalleur, Jennifer Merchant, Yasmine Mohammedi, Frédérique Podolin, Yvonne-Marie Rogez, William Yeago Editeur : Belin 2006

2) International Legal English / Lindner/Translegal – William Yeago Cambridge University Press 2006

3) Black’s Law Dictionary West Publishing – sixth edition

4) Dahl's Law Dictionary / Henry Saint Dahl Dalloz, 1995

www.dca.gov.uk www.suite101.com www.supremecourt.gov.uk Comparative Legal Civil Proceedings P.73

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY Comparative4 Legal Civil Proceedings Comparative Legal Civil Proceedings P.74

Comparative Legal Civil Proceedings 4Comparative Legal Civil Proceedings P.75 United States Civil Procedure P.76 Jurisdiction P.76 Civil Procedure P.77 Class actions in the United States P.83

Civil Proceedings in England and Wales P.87 The Court System P.87 The Tribunal system P.87 The Overriding Objective P.87 Allocation to Track P.88 Court Procedure under the Rules P.88 Enforcement P.90

French Civil Law System P.91 Civil Procedure P.91 Appellate Procedure P.92

Common law vs. Civil law P.93 Approach P.93 Court structures P.93 Proceeding P.94 Judges P.94

International Enforcement of foreign judgments P.95

Definitions of Key Words P.97 Questions P.100 Comparative Legal Civil Proceedings P.75

Comparative Legal Civil Proceedings

After completing this lesson, one should:  Have an overview of the legal principles of the US and the UK civil procedure systems and how they operate,  Develop an understanding of the similarities, differences and relationships between the civil proceedings of the US, the UK and France  Analyze and compare the basic distinctive methods and approaches between "civil" and "common" legal systems, 4 Be familiar with the International System of enforcement of judgments.

Comparative Legal Civil Proceedings

Civil procedure is the body of law concerned with methods, rules, and practices by which courts conduct civil litigation. The judicial systems of the United States, both federal and state, and the United Kingdom, deal essentially with two types of cases: civil and criminal. Civil procedure is a study of the procedures that apply in cases that are not criminal, and concern the judicial decision of disputes by one individual or group against another. In criminal trials, the state prosecutes a person (natural or legal) for violation of criminal substantive law, which must follow the rules of criminal procedure.

Generally, criminal trials are used by government to protect and provide relief to the general public by attempting to punish an individual or entity. Civil trials can be used by anyone to protect their legal rights through court orders and monetary awards. The two types of trials are very different in character and thus have separate procedural rules and practices.

Constitutions, statutes, and judicial decisions form the basis for substantive civil law on matters such as contracts, torts, and probate. Procedural law prescribes the methods by which individuals may enforce substantive laws. The basic concern of procedural law is the fair, orderly, efficient and predictable application of substantive laws. Procedural guidance can be found in court-approved rules, in statutes, and in judicial decisions.

Civil substantive law includes contract law, tort law, real estate law, family law, testamentary law, constitutional law, and business law for example. Civil law is primarily concerned with monetary compensation known as damages or equitable relief – i.e. court orders or injunctions – while criminal law is concerned with punishment by the state. Comparative Legal Civil Proceedings P.76

United States Civil Procedure Jurisdiction

To initiate civil legal proceedings in the United States, one of the first requirements is that a court must have jurisdiction, which is the power and authority of a court to decide a case. A court, either civil or criminal or federal or state, must have jurisdiction, not only over the subject matter, but the parties as well.

Jurisdiction over the parties Jurisdiction relates to the question of whether someone from another state or jurisdiction can be forced to come to the venue where the lawsuit was filed, known as the ‘forum state’, to defend against the lawsuit. The existence of 'personal jurisdiction' depends on a connection between the defendant and the forum state. A person may be subject to personal jurisdiction if they are physically present in the state, when they are served with a summons and complaint, if they have a residence or own land or property in the state, they injure someone while in the state, they consent to the jurisdiction or they have sufficient dealings or connections with the forum state know as ‘minimum contacts’. These factors allow ‘long arm statutes’ which refer to the ability of a state to ‘reach out’ beyond its borders to declare jurisdiction over a non-resident.

Delaware Corporation Code Jurisdiction regarding ‘long arm statutes’.

Chapter 31 – Process -Commencement of Actions § 3104. Personal jurisdiction by acts of non-residents. (a) The term "person" in this section includes any natural person, association, partnership or corporation. (b) The following acts constitute legal presence within the State. Any person who commits any of the acts hereinafter enumerated thereby submits to the jurisdiction of the Delaware courts. (c) As to a cause of action brought by any person arising from any of the acts enumerated in this section, a court may exercise personal jurisdiction over any nonresident, or through their agent : (1) Transacts any business or performs any character of work or service in the State; (2) Contracts to supply services or goods in this State ; (3) Causes tortious injury in the State by an act or omission in this State ; (4) Has an interest in, uses or possesses real property in the State ; or (6) Contracts to insure or act as surety for, or on, any person, property, risk, contract, obligation or agreement located, executed or to be performed within the State at the time the contract is made, unless the parties otherwise provide in writing. Comparative Legal Civil Proceedings P.77

Subject matter jurisdiction Subject matter jurisdiction refers to the question of whether a particular court has the power or authority to decide the type of dispute involved.

While each state has its own judicial court system, there is a federal court system as well, which has subject matter jurisdiction to decide federal questions or laws, and controversies arising from the Constitution and Federal law.

Diversity Jurisdiction/"Erie Doctrine" In diversity cases the subject matter jurisdiction of the federal courts is defined by the parties to the lawsuit, rather than the subject matter of the dispute. Diversity cases provide federal courts with subject matter jurisdiction if opposing parties live in separate states and the amount in controversy exceeds $75,000. The Erie Doctrine provides that a federal court sitting in diversity jurisdiction, regarding a dispute involving state laws must apply state substantive common law in resolving the dispute, but following the federal procedure of the court. The term 'Erie doctrine' comes from the well-known Supreme Court decision Erie Railroad Co. v. Tompkins 304 U.S. 64 (1938).

Civil Procedure

In the United States, civil procedure in the federal court system follows the Federal Rules of Civil Procedure (FRCP). Every state has its own separate code of Civil Procedure, which is generally similar to the Federal Rules.

Civil procedure governs the process of a lawsuit in the common law adversarial system of dispute resolution. Procedural rules are based on statutory laws, case law, and constitutional provisions such as ‘due process’ that define the rights of the parties to a lawsuit. The rules of procedure specify the timing and progression of the lawsuit; when, where, what and how to file a claim and the process in getting a resolution. Failure to comply exactly with these procedural rules may result in serious consequences in the pre-trial or trial stages and can even result in dismissal of the lawsuit.

A. Pre-trial procedures A significant portion of civil proceedings in the United States actually takes place before trial and many cases end before reaching the trial stage. Over 90% of civil law suits filed in the United States for example, are settled before the actual trial, usually through some form of Alternative Dispute Resolution (ADR) such as mediation, arbitration, or out of court settlement negotiations.

Before commencing a legal action, it is generally preferable for a lawyer to send the other party a demand letter seeking an out-of-court resolution of the dispute. If this fails, a person who wishes to proceed must decide whether to commence a legal court action or seek arbitration. Arbitration has become a very popular alternative to the traditional justice of the court system. It allows disputes to be resolved in privacy and very often is quicker and less expensive, than a court procedure would be. Many contracts, for example stipulate that arbitration must be sought in case of a disagreement. On the other hand, if the plaintiff elects to proceed through a formal court action, they must first file a formal complaint or petition with a court clerk, stating clearly what the cause of action and the Comparative Legal Civil Proceedings P.78

nature of the claim are. The complaint should be filed in a timely manner in compliance with the time limit provided by the relevant state's statute of limitations. The statutes of limitation vary from state to state. For example, in some states a tort claim must be filed within ten years after the injury is known, for breach of contract seven years and real property disputes, ten years.

A summons is then served on the defendant who generally has thirty days in which to return his or her answer. The response may contain an admission of liability or a denial of the facts alleged by the complaint or sometimes counterclaims against the plaintiff. This initial phase, called pre- trial pleadings, defines the scope of the lawsuit, the legal issues and factual disputes raised. If the parties fail to agree as to the precise issue of the case, a pre-trial conference may be called by the judge in charge. Many pre-trial conferences result in a resolution of the case without trial.

If the case goes forward, the next step of pre-trial procedure is the discovery phase.

Discovery Discovery is the phase in a lawsuit in which each party, through the laws of civil procedure, can request documents and other evidence from other parties or can compel the production of evidence, by using a subpoena.

Discovery in the United States is unique compared to other common law countries. In the United States, discovery is mostly performed by the litigating parties themselves, with relatively minimal judicial oversight.

The primary discovery devices are interrogatories, depositions, demands to examine or inspect, and requests for production. Although discovery typically comes from parties, courts also allow limited discovery from non-parties.

Civil discovery is wide-ranging and can involve any material which is relevant to the case excepting information which is privileged, information which is the work product of the opposing party’s lawyer. Electronic discovery or "e-discovery" is now used when the material is stored on electronic media.

In practice, most civil cases in the United States are settled after discovery. After discovery, both sides usually are in agreement about the strength of each side's case and this may produce a settlement which eliminates the expense and risks of a trial. A settlement can be reached by the parties, however at any time following the commencement of a civil action.

Parties at this stage in the procedure often file a motion for a summary judgment when they believe the law to be on their side with no need for any more consideration of the facts. If granted, this motion results in an immediate judgment for the party. Depending on the outcome of this pre-trial motion, a trial may or may not take place. Comparative Legal Civil Proceedings P.79

The Federal Rules of Civil Procedure guide discovery in the US federal court system. (Excerpts)

Rule 26. General Provisions Governing Discovery; Duty of Disclosure

Subdivision (a) provides for automatic disclosure, which requires parties to share their own supporting evidence without being requested to by the other party. Failure to do so can preclude that evidence from being used at trial. This applies only to evidence that supports their own case, not anything that would harm their case.

Subdivision (b) is the heart of the discovery rule, and defines what is discoverable and what is limited. Anything that is ‘relevant’ is available for the other party to request, as long as it is not privileged or otherwise protected.

Relevance is defined as anything more or less likely to prove a fact that affects the outcome of the claim.

Some limitation to the discovery procedure:

Section 2 allows the court to alter the limits of discovery on the number of depositions, interrogatories, and document requests, if it determines that the discovery sought is overly burdensome, redundant, unnecessary, or disproportionately difficult to produce with respect to the importance of the case or specific issue.

Section 3, the “work-product doctrine” protects items created in anticipation of the litigation (e.g., a memorandum from an attorney outlining his strategy in the case). Protecting work product is considered in the interest of justice because discovery of such work product would expose an attorney's complete legal strategy before trial.

Section 4 allows discovery of experts whose opinions may be presented at trial.

Section 5 generally prohibits the discovery of any material legally privileged (attorney-client, doctor-patient, etc.).

Rule 27. Depositions before Action or Pending Appeal

Limits depositions to only one day of questioning, for seven hours during that one day. Any more must be approved by court order or stipulation of the parties involved. Rule 27 also provides for times when an attorney may intervene and direct his client not to answer the question.

Rule 32. Use of Depositions in Court Proceedings

Usually testimony in court is preferred, but if a witness dies or flees the country before trial, a deposition may be read into the record.

Rule 33. Interrogatories to Parties

Governs Interrogatories, which are written questions to an opposing party. Limited to twenty-five questions without special court order.

Rule 34. Production of Documents and Entry upon Land for Inspection and Other Purposes

In some cases, a party may simply allow free access to enter its property and inspect its documents as it sees fit. For example, the plaintiff requests some files which are part of a substantial collection of files and defendant simply lets the plaintiff look through them, placing the burden on the other party. Discovery may also be used for land inspection in certain cases, e.g. so a plaintiff may enter the defendant's land to inspect a defective feature where an injury may have occurred. Comparative Legal Civil Proceedings P.80

B. The Trial Jury Selection. The right to a jury trial in a civil suit in a federal court is guaranteed by the U.S. Constitution. State constitutions likewise provide for such a right. A jury trial may be waived by either party, in which case the judge decides the matter. Although the jury traditionally consists of 12 persons, today the number varies.

Jurors must be selected in a random manner from a fair cross-section of the community. A large panel of jurors is called to the courthouse when a case is assigned to a court for trial.

Following the “voir dire” examination, which may include challenges to certain jurors by the attorneys, a jury to hear the particular case will be seated. Lawyers and the judge may challenge a prospective juror for cause, in which case the judge must determine whether the person challenged is impartial.

Opening Statements. After the jury has been chosen, the attorneys present their opening statements. The plaintiff's attorney begins by explaining to the jury what the case is about and what the plaintiff's side expects to prove. The defendant's lawyer can usually choose either to make an opening statement or wait until the plaintiff's case has been completely presented. Opening statements are valuable because they outline the case and make it easier for the jury to understand the evidence as it is presented.

Presentation of the Plaintiff's Case. In the normal civil case, the plaintiff's side is first to present and attempt to prove its case to the jury and last to make closing arguments. In presenting the case, the plaintiff's lawyer will normally call witnesses to testify and produce documents or other exhibits.

When a witness is called, they will undergo direct examination by the plaintiff's attorney. Then the defendant's attorney will have the opportunity to ask questions or cross-examine the witness. Following the cross-examination, the plaintiff's lawyer may conduct a redirect examination.

Generally speaking, witnesses may testify only about matters they have actually observed; they may not express their opinions. However, an important exception to this general rule is that expert witnesses are specifically called upon to give their opinions in matters within their areas of expertise.

To qualify as an expert witness, a person must possess substantial knowledge about a particular field. Furthermore, this knowledge must normally be established in open court. Both sides often present experts whose opinions are contradictory. When this happens, the jury must ultimately decide which opinion is the correct one.

When the plaintiff's side has presented all its evidence, the attorney rests the case.

Presentation of the Defendant's Case. The defendant's case is presented in the same way as the plaintiff's case. That is, there is direct examination of witnesses and presentation of documents and other exhibits. The plaintiff has the right to cross-examine witnesses. Redirect may follow.

Closing Arguments. After all the evidence has been presented, the lawyers make closing arguments, or summations, to the jury. The plaintiff's attorney speaks both first and last. That is, they open the argument and close it, and the defendant's lawyer argues in between. In this stage of the process each attorney attacks the opponent's evidence for its unreliability and may also attempt to discredit the opponent's witnesses. In doing so, the lawyers often wax eloquent or deliver an emotional appeal to the jury. However, the arguments must be based upon facts supported by the evidence and introduced at the trial. Comparative Legal Civil Proceedings P.81

Instructions to the Jury. Assuming that a jury trial has not been waived, the instructions to the jury follow the conclusion of the closing arguments. The judge informs the jury that it must base its verdict on the evidence presented at the trial. The judge's instructions also inform the jurors about the rules, principles, and standards of the particular legal concept involved. In civil cases a finding for the plaintiff is based on a “preponderance of the evidence”. This means that the jurors must weigh the evidence presented during the trial and determine in their minds that the greater weight of the evidence, in merit and in worth, favors the plaintiff. Note in criminal law the burden of proof is “beyond a reasonable doubt” requiring evidence that is sufficient to eliminate any doubts that a reasonable person might entertain about whether a claim is more likely to be true than not.

The Verdict. The jury retires to the seclusion of the jury room to conduct its deliberations. The members must reach a verdict without outside contact. In some instances the deliberations are so long and detailed that the jurors must be provided meals and sleeping accommodations until they can reach a verdict. The verdict, then, represents the jurors' agreement after detailed discussions and analyses of the evidence. Sometimes the jury deliberates in all good faith but cannot reach a verdict. When this occurs, the judge may declare a mistrial. This means that a new trial may have to be conducted.

After the verdict is reached, the jury is conducted back into open court, where it delivers its verdict to the judge. The parties are informed of the verdict.

Appeal. If one party feels that an error of law was made during the trial, then the dissatisfied party may appeal to a higher court. Probably the most common grounds for appeal are that the judge allegedly admitted evidence that should have been excluded, refused to admit evidence that should have been introduced, failed to properly instruct the jury or the jury awarded excessive or inadequate damages.

An attorney lays the groundwork for an appeal by objecting to the alleged error during the trial. This objection goes into the trial record and becomes a part of the trial transcript, which may be reviewed by an appellate court. The appellate court decision may call for the lower court to enforce its earlier verdict or to hold a new trial.

C. Post-trial procedure After the judgment is entered a losing party may file for an appeal. In most states a person has thirty days to file an appeal with an appeals court.

An appellate court, usually sits as a tribunal of three judges, and hears the case without a jury or witnesses. The judges base their decision on the court transcript from the lower court, the appellate briefs prepared by the attorneys, which make their arguments based on prior case law and statutes. The lawyers are usually permitted to plead an oral argument before the appeals court and respond to questions by the appellate justices. The judges, after reviewing all the documents presented to them, either concur or dissent in written opinions. These opinions are published and may serve as precedent for future cases.

The likely outcome of the appeal will be one of the following four options:

The lower court's decision may be affirmed, in which the appellate court upholds or agrees with the decision of the lower court. The case may be remanded. This is when an appellate court sends an appealed case back to the trial court for further action. This usually happens if the trial judge has Comparative Legal Civil Proceedings P.82

made an error which requires a new trial or hearing. For example, assume that a trial court refuses to allow a party to introduce certain evidence. If the appellate court decides that the evidence should have been admitted and that the exclusion of the evidence was prejudicial to the party offering it, the appellate court would likely remand the case for new trial and order the evidence introduced.

A judgment or opinion may be vacated. When an appellate court replaces a decision issued by a trial court or lower appellate court with its own opinion or judgment, the higher court usually declares the lower court's opinion or judgment vacated. A vacated opinion or judgment is considered to have never existed and cannot be used as authority when deciding similar future cases.

The lower court's ruling may be reversed. If an appellate court rules that a trial court or lower appellate court made errors that may have caused an incorrect outcome in a case, the appellate court has various options: reverse the decision and remand the case back for a new trial, substitute a new decision, or modify the outcome, for example, by reducing the amount of damages.

If a party is dissatisfied with the ruling of an appellate court, they can petition a Supreme Court (state or federal) to review the decision of the lower court of appeals. This request is a Petition for a Writ of Certiorari. A party who wants a Supreme Court (state or federal) to review a decision of an appellate court, files a "petition for writ of certiorari" to that Supreme Court.

The United States Supreme Court denies the vast majority of petitions and thus leaves the decision of the lower court to stand without review. In the past, it has accepted around 70 to 100 cases of the 8,000 petitions filed each year . The US Supreme Court is generally careful to choose only cases which the Court considers sufficiently important, involving controversial constitutional questions such as freedom of expression, separation of church and state, police searches and discrimination.

D. Enforcement of Judgments Courts only decide issues and render judgments. However if the losing party does not pay the amount of judgment, the winning party must take legal steps to insure that the judgment will be satisfied. Most states provide post-judgment proceedings to help a party collect court-ordered damages. A writ of execution issued by a judge will direct the sheriff (state) or Marshall (federal) to seize certain assets of the judgment debtor or to garnish the debtor’s bank account or salary to satisfy the judgment amount. Comparative Legal Civil Proceedings P.83

Class Actions in the United States

An action in law, in which a representative plaintiff sues or a representative defendant is sued on behalf of a class of plaintiffs or defendants who have the same interests in the litigation as their representative and whose rights or liabilities can be better determined as a group than in a series of individual suits. This type of lawsuit is used when there is a very large number of parties to a dispute who have common interests and stakes in the outcome. In a class action, the case is tried by one or a few parties who represent many others, and the judgment in the case is binding on all members of the class involved in the dispute.

In the United States, federal and state courts allow class action suits. These suits for the most part are used by groups of consumers and others seeking to establish liability caused by various products or services. Class action is commonly used to promote consumer protection and to combat consumer fraud, price fixing, and other commercial abuses. It is also widely utilized in mass tort liability cases of negligence, where numerous plaintiffs are injured at the hands of a single defendant such as a pharmaceutical company or an airline.

In federal civil procedure law, the class action must have certain distinct characteristics: (1) the class must be so large as to make individual suits impractical, (2) there must be legal or factual claims in common (3) the claims or defenses must be typical of the plaintiffs or defendants, and (4) the representative parties must adequately protect the interests of the class. In many cases, the party seeking certification must also show that the class action, instead of individual litigation, is a superior vehicle for resolution of the disputes at hand.

A class action may seek an injunction or some type of relief compelling the defendant either to cease a certain activity or to perform some other type of action. In the class action lawsuit, the questions of law or fact must be common to the entire class and individual members of the class may "opt out" of the litigation if they do not want to be bound by the results of the suit. Comparative Legal Civil Proceedings P.84

UNITED STATES DISTRICT COURT SOUTHERN DISTRICT OF NEW YORK Federal Court Docket

------X

ASHLEY PELMAN, a child under the age of 18 years, by her mother and guardian, ROBERTA PELMAN, JAZLEN BRADLEY, a child under the age of 18 years, by her father and guardian, ISRAEL BRADLEY, Plaintiffs,

COMPLAINT

- against - MCDONALD’S CORPORATION, Defendants. ------X

Plaintiffs, by their attorney SAMUEL HIRSCH, ESQ., on behalf of themselves and all other similarly situated persons, upon information and belief, respectfully show and allege as follows:

INTRODUCTION 1. Plaintiffs and proposed Plaintiff-Class Members bring this action on behalf of all New York State residents to secure redress from deceptive practices in the promotion, distribution, advertising, processing and sale of certain products, hereinafter alleged, by defendant, McDonald’s Corporation, under the New York State Consumer Protection Statute, General Business Laws §349 and §350 and New York State Principles of Laws. 2. That upon information and belief, commencing in 1987 and continuing thereafter to present, the Defendant and its agents represented and/or attempted to allegedly mislead the users and consumers, in widespread advertising campaigns, “consumer-oriented” statements, promotions, brochures, press releases, statements, and on McDonald’s Internet website and in McDonald’s restaurants, that its certain foods, including but not limited to Chicken McNuggets, Filet-O-Fish, Chicken Sandwich, French Fries, Hamburger-beef products, were nutritional or of beneficial nutritional nature and effect to purchasers and consumers, and its products could easily be consumed as part of a balanced diet and lifestyle without any detrimental health effects. 3. That upon information and belief, commencing in 1987 and continuing thereafter to present, the Defendant and its agents allegedly mislead the users and consumers, in widespread advertising campaigns, “consumer-oriented” statements, promotions, brochures, press releases, statements, and on McDonald’s Internet website and in McDonald’s restaurants, that its certain foods, including but not limited to Chicken McNuggets, Filet-O-Fish, Chicken Sandwich, French Fries, Hamburger-beef products, were substantially healthier or not as detrimental to one’s health, when-in-fact, said products were hazardous or detrimental to an extent beyond which was contemplated or understood by the reasonable and ordinary Plaintiff purchaser and consumer, relying on the ordinary and customary knowledge of the community regarding the accepted characteristics and composition of Chicken, Fish, Potatoes and seasonings 4. In fact, upon information and belief, vast medical authorities and researchers, including the Defendant’s own Nutritional Division in France(“hereafter “McDonalds France”) have warned that Defendant’s certain foods are not nutritious, can not be easily be consumed as part of a balanced daily diet and that users and children should not consume the Defendant’s certain product more than once per week, and that such consumption beyond once per week over several years, could have contributory detrimental effects upon such consumer’s health, including increasing risks for development of obesity, diabetes, coronary heart disease, high blood pressure, and elevated cholesterol. Comparative Legal Civil Proceedings P.85

DETRIMENTAL HEALTH AFFECTS AND RISKS 5. The United States is experiencing substantial increases in overweight and obesity that cut across all ages, racial and ethnic groups, and both genders, has been increasing in every State in the Nation that has reached epidemic proportions. In 1999, an estimated 61 percent of U.S. adults were overweight or obese, and 13 percent of children and adolescents were overweight.

JURISDICTION AND VENUE 14. This Court has jurisdiction over this matter pursuant to 28 U.S.C. 1332(a) since the amount in controversy exceeds $75,000 per plaintiff exclusive of interests and costs and there is diversity of citizenship. Plaintiff further invokes the pendent and supplemental jurisdiction of this Court to hear and decide claims arising under state law, pursuant to 28 U.S.C. §1367.

PARTIES Plaintiffs 15. The Infant - Plaintiff, ASHLEY PELMAN, was and still is a resident of the State of New York, is currently fourteen years and exceeds the Body Mass Index (BMI) as established by the U.S. Surgeon General, National Institutes of Health, Centers for Disease Control, U.S. Food and Drug Administration and all acceptable scientific, medical guidelines for the classification of clinical obesity. She has purchased and/or consumed the Defendant’s aforementioned products in New York State stores/franchises (Happy Meals, Big Mac) on average of three to four times per week from the ages of 5 through twelve. 16. The Plaintiff, ROBERTA PELMAN, was and still is a resident of the State of New York, is the mother and natural guardian of Plaintiff, ASHLEY PELMAN, and has purchased and/or consumed the Defendant’s products for herself and/or infant plaintiff in New York State stores/franchises on average of three to four times per week from the ages of 5 through twelve.

DEFENDANT 28. The Defendant McDonald’s Corporation, is the nationally known leading fast food chain, with stores throughout every state in the United States and in 120 other countries. It is a Delaware corporation headquartered at One McDonald’s Plaza, Oak Brook, Illinois. In 2001, McDonald’s U. S. sales exceeded $15.5 billion and according to Records spends over 1 billion on annual advertising, proclaims 43% of the United States market share for fast food, serving over 99 billion hamburgers, over 46 million customers every day, in 30,000 stores and does substantial business within the State of New York, and throughout the fifty United States. 29. That at all times hereinafter mentioned, the Defendant, its agents, servants, and/or employees, placed the aforementioned goods, services, promotions, advertisements, and/or products within the “stream of commerce” within the State of New York. 30. That, upon information and belief, and at all times hereinafter mentioned, the Defendants were and still are corporations and/or legal entities engaged in the distribution, ownership retail, manufacture, sale, marketing and/or production of certain food products within the State of New York.

FACTUAL BACKGROUND 34. That upon information and belief, the Defendant periodically conducts surveys of the frequency of purchasers and consumers at its stores, and in one such survey found (75%) of said consumers of its products were “Heavy Users” and of these consumers, 1/3(33.33%) were “Super Heavy Users.” 35. That upon information and belief, the Defendant’s Vice-President of Marketing for the United States, David Green, has testified in prior proceedings that the Defendant specifically targets “Heavy Users” and “Super Heavy User” consumers in their advertising campaigns in an effort have them increase the frequencies of purchases at their stores and consumption of their products. 35. That upon information and belief, McDonald’s present marketing goal for “Heavy Users” is approximately twenty (20) times per month for every food fast user. Comparative Legal Civil Proceedings P.86

AS AND FOR A CAUSE OF ACTION AGAINST THE DEFENDANTS 58. Plaintiffs allege and incorporate all the foregoing facts and allegations as if fully set forth herein. 59. That, upon information and belief, the Defendants, MCDONALD'S. CORPORATION, its respective agents, servants, and or employees, engaged in unfair and deceptive acts and practices, in violation of the consumer fraud statutes and provisions of the New York Consumer Protection Act (N.Y. Gen. Bus. Law §§349, 350 by representing and/or attempting to allegedly mislead the users and consumers, from 1987 and continuing thereafter to present, in widespread advertising campaigns, promotions, brochures, press releases, “consumer-oriented” statements, and on McDonald’s Internet website and in McDonald’s restaurants,(specifically identified above herein), that its certain specified food products, including but not limited to: Chicken McNuggets, Filet-O-Fish, Chicken Sandwich, French Fries and/or Hamburgers were nutritious, of a beneficial nutritional nature/effect, and/or easily part of a healthy lifestyle if consumed on a daily basis, all or partly being in contradiction to medically and nutritionally established acceptable guidelines. 60. That upon information and belief, the aforementioned material. representations, nutritional advices, and campaigns, viewed in a cumulative effect, and/or on an individual basis were continual in nature, misleading and contrary to medical, nutritional and scientific studies which have shown that the Defendant’s represented products were not nutritious or of a beneficial nutritional nature and effect, and actually, if consumed on a continual basis several times per week over several years, could be shown to be significant and/or substantial factors in the Plaintiffs development of obesity, diabetes, coronary heart disease, high blood pressure, elevated cholesterol intake, related cancers, and/or other detrimental and adverse health effects and/or diseases. 61. Plaintiffs relied upon the skill and judgments of Defendant, its agents, servants and/or employees and the representations and nutritional claims of the attributes of the aforementioned products in connection with the use and consumption of said food products. 62. That the Defendants, their agents, servants, and/or employees engaged in such conduct and activities in the course of trade and commerce. 63. That by reason of the foregoing, and through defendant’s alleged misleading representations, plaintiffs have been caused to purchase and/or consume the aforementioned products of Defendant, several times per week over the course of several years, in larger quantities thereof, and expend sums of money therefore, and have further suffered damages including, but not limited to, the development of obesity, diabetes, coronary heart disease, high blood pressure, elevated cholesterol intake, related cancers, and/or other detrimental and adverse health effects and/or diseases, and are entitled to statutory, compensatory, punitive and pecuniary damages, in an amount to be determined by a jury at trial.

WHEREFORE, Plaintiffs and Plaintiffs-Class demand a jury trial and judgment and damages against the Defendant, and further relief as follows: a. For an Order certifying the Plaintiff-Class herein; b. For compensatory, and/or punitive damages in an amount to be determined by a jury at trial together with interests; c. For the funding of an educational program to inform children and adults of the dangers of eating certain foods sold, marketed, produced by Defendants and containing high levels of fat, salt, sugar and cholesterol content; d. For Attorneys Fees, litigation expenses, and costs e. Such other or further relief as is appropriate. Dated: New York, New York February 12, 2003 ______

SAMUEL HIRSCH, ESQ.(5149) Attorney for Plaintiff / 350 Fifth Avenue / New York, New York 10118 / (212) 947-3800 Comparative Legal Civil Proceedings P.87

Civil proceedings in England and Wales The Court System

The two main Courts dealing with civil claims in England and Wales are the High Court and the County Court. On the whole, the High Court deals with major disputes while the County Court deals with more minor matters.

The Tribunal System

The Tribunal system in the UK handles a wide variety of legal issues (over a million cases each year). Tribunals are managed by her Majesty’s Courts and Tribunals Service, created on 1 April 2011, an executive agency of the Ministry of Justice. The Tribunals, Courts and Enforcement Act, which came into force in November 2008, created a new two-tier Tribunal System: a First-tier Tribunal and an Upper Tribunal, both of which are split into Chambers (six for the first-tier, four for the second). Each Chamber comprises similar jurisdictions or brings together similar types of experts to hear appeals.

The Upper Tribunal primarily, but not exclusively, reviews and decides appeals coming from the First-tier Tribunal. Like the High Court, it is a superior court of record. As well as having the existing specialist judges of the senior tribunals judiciary at its disposal, it can also call on the services of High Court Judges. There is a right of appeal on a question of law from the First-tier to the Upper Tribunal, and some limited jurisdiction for judicial review.

Tribunals usually sit as a panel, incorporating a legally qualified tribunal chairman, as well as panel members with specific areas of expertise, but not every panel includes non-legal members. All legally qualified tribunal members take the title of judge. Proceedings in tribunals are often relatively informal compared to the courts. Tribunal users often appear without legal representation so the judges and members generally explain the proceedings to users and ask questions to get more information about the case they are hearing. In many cases, no oath will be administered and hearsay evidence can be considered. Tribunals have limited powers (depending on the jurisdiction of the case) to impose fines and penalties or to award compensation and costs.

Some Tribunals are for administrative reasons, not part of the new 2-tier structure; the Employment Tribunal, along with several other Tribunals such as the Gender Recognition Panel, currently remain distinct of this new hierarchy.

The Overriding Objective

The Court Rules (known as the 'Civil Procedure Rules' or 'CPR') have the 'overriding objective' of enabling the Court to deal with cases justly, requiring the Court to deal with cases in a way which is proportionate to the amount of money involved, the importance of the case, the complexity of the issues and the financial position of each party. The parties are expected to co-operate with each other and the Court to further the overriding objective.

The Rules actively encourage settlement of disputes without resorting to litigation. These other methods are usual known as "ADR" - alternative dispute resolution. The Court may even suspend the proceedings for a period to allow the parties to hold settlement discussions or pursue ADR. Comparative Legal Civil Proceedings P.88

Allocation to Track

A case proceeds along one of three 'tracks', which are sets of procedural rules and timetables governing a case depending on its financial value:

The small claims track is the normal track for claims with a financial value of not more than £5,000. The procedure is intended to be fast, cheap and informal.

The fast track is the normal track for claims not falling within the small claims track and with a financial value of not more than £25,000. The costs which may be recovered by the successful party are limited.

The multi track is for claims of greater value (over £25,000) or which are considered sufficiently complex to merit allocation to the multi track.

Court Procedure under the Rules Commencing a claim Proceedings are commenced when the Claimant issues a Claim Form.

A Claim Form is a public document open to inspection. The full details of the claim are sometimes set out in a separate document (called Particulars of Claim) which, although filed at Court, is not generally available to the public unless a written request is made.

Security for Costs Where the Defendant believes that it may be difficult to recover costs from the Claimant should the Claim ultimately prove unsuccessful, it may apply to the Court for an order for security for costs. Such an order compels a Claimant to give security for the Defendant's costs, often by depositing money into court or by providing a form of guarantee, before it is allowed to continue with its Claim. However, the circumstances in which such an order is available are limited.

Statements of Case Statement of case is the overall term used to describe the formal Court documents in which the parties set out the factual contentions of the Claim, the Defence to the Claim and any Counterclaim which the Defendant may have. Statements of Case are verified by a 'statement of truth', signed by the party or its solicitor, confirming that the contents are true.

Statement of Truth These are short statements verifying the truth of facts and matters set out in certain formal documents. Statements of truth have to be signed by the party itself, or the solicitor on its behalf. Proceedings for contempt of court may be brought against a person who makes a false statement in a document verified by a statement of truth without an honest belief that the statement is true. Comparative Legal Civil Proceedings P.89

Discontinuance Once a claim form has been issued, it must be served on the Defendant. Thereafter, the Claimant may abandon the claim by filing and serving notice of discontinuance on every other party to the proceedings. However, the Claimant will be liable for the costs incurred by the Defendant up to the date the notice of discontinuance was served.

Summary Judgment A Claimant or a Defendant may apply for summary judgment on the whole claim or a particular issue on the ground that: the Claimant has no real prospect of succeeding on the claim or issue; or the Defendant has no real prospect of successfully defending the claim or issue; and there is no other reason why the matter should proceed to a full trial.

Disclosure Disclosure is the process by which the parties provide to each other copies of the documents which are relevant to the issues in the proceedings.

Disclosure of documents usually occurs after all statements of case have been served. However, an order for disclosure may be obtained even before proceedings are commenced if that disclosure would (i) dispose fairly of the anticipated proceedings, (ii) assist the dispute to be resolved without proceedings or (iii) simply save costs.

The normal procedure is known as "standard disclosure", by which the parties are obliged to disclose to each other the documents which they control and upon which they rely or which adversely affect their respective cases or assist another party's case. Both parties may 'inspect' the documents disclosed by the other side. However, certain communications between a client and its solicitors are privileged from production to the other side. The obligation to disclose is a continuing one and newly located or created (non-privileged) documents will have to be disclosed even if lists of documents have already been exchanged.

Evidence The parties' solicitors will prepare statements setting out the evidence of the witnesses to be called to give evidence at trial. These must be verified by a statement of truth and are served on the other parties in advance of the trial.

Where there are issues on which the court requires technical evidence or expert opinion, the court may appoint a single expert to assist it. In other circumstances, the parties may apply for permission to instruct their own experts. Experts are required to give independent evidence to assist the Court and should not be advocates on behalf of the party instructing them.

The Trial The time frame between issue of proceedings and the date on which the trial will take place depends on the track to which the case is allocated and the availability of the Court. Comparative Legal Civil Proceedings P.90

The Claimant's Counsel will begin the case at trial by summarising the facts and the arguments for the benefit of the Judge. This stage is known as the opening. The Claimant's witnesses will then give their evidence and may be cross-examined by the Defendant's Counsel and re-examined on behalf of the Claimant. Relevant documents will be referred to during the course of the evidence. The Defendant's Counsel then has an opportunity to "open" his case. He will then call his witnesses who are subject to cross-examination and re-examination in the same way as the Claimant's witnesses. Finally, Counsel for the Defendant and then the Claimant make submissions to the Judge on the evidence and the law. In straightforward cases judgment will be given immediately. In more complex matters the Judge may reserve judgment to a future date.

Injunctions In certain limited circumstances, where a Claimant's claim would be frustrated by the time the case reached trial, the Court will grant an injunction early in the action to preserve the Claimant's position, by restraining the Defendant from doing or continuing to do a particular act. Breach of an injunction is a contempt of Court, punishable by a fine or even imprisonment.

Costs The general rule is that the successful party in the litigation will ordinarily be entitled to be paid its costs by the unsuccessful party but this is subject to the successful party conducting itself reasonably, both before and during proceedings. In the absence of agreement, costs are assessed by the Court. A number of factors are taken into account by the Court in deciding the amount of costs to award. However, the costs recovered by the successful party are likely to be only a proportion of the costs actually incurred by that party. Part 36 - Payments and Offers Litigants may protect themselves from adverse cost consequences by making a Part 36 (of the Rules) payment or offer. A Defendant may pay money into Court as an offer to settle or the Claimant may make a formal written offer to accept a certain sum in settlement of its Claim. Should the other party refuse the offer and subsequently fail to do better at trial, there may be severe costs consequences for that party.

Enforcement

If the Claimant is successful in obtaining a money judgment but the Defendant does not pay voluntarily he or she will need to enforce its judgment. The main methods are: Third Party Debt Order. The Claimant may obtain an order which directs a person who owes a debt to the Defendant (such as a bank or building society) to pay the Claimant instead. In the High Court these orders are still referred to as Garnishee Orders.  A Charging Order. The Claimant may obtain a charge on certain of the Defendant's assets, (e.g. Property, stocks and shares), and may then obtain an order that those assets be sold and the proceeds paid to reduce the judgment debt.  Warrant of Execution. A Court Officer attends at the Defendant's home or premises and seizes the Defendant's goods. These are then sold and the proceeds paid (after costs) to the Claimant. In addition or as an alternative, the Claimant may take steps to bankrupt an individual Defendant or to wind up a corporate Defendant. Comparative Legal Civil Proceedings P.91

In the High Court this order is called a Writ of Fieri Facias

 Warrant of Delivery. This method of enforcement allows goods or specific items to be returned to the judgment creditor.

 Attachment of Earnings Order. The employer of a judgment debtor may be ordered to deduct a certain amount from the debtor’s salary in order to pay the judgment debt.

French Civil Law System

In the French system, the apex of the ordinary court structure is the Cour de Cassation (Supreme Court of Cassation). The court reviews, on a discretionary basis, only questions of statutory interpretation. The Court of Cassation is composed of about 125 judges who sit in six rotating specialized panels (five civil and one criminal) and, in certain situations, in combined panels or plenary session.

The first level of French ordinary courts consists of general civil and criminal trial courts and several specialized courts. Cases arising under the commercial code, for example, are first heard in a commercial court in which the panels of part-time judges are businessmen elected by their colleagues. Similarly, employment disputes are heard by a labor court consisting of two elected representatives from labor and management. The labor court first attempts to settle a case by conciliation, but if the case proceeds to adjudication, a professional judge sits with the lay panel. Appeals from the trial- level courts proceed to a court of appeal within the territorial jurisdiction of the lower court.

Apart from the ordinary courts, typical civil-law court systems also include administrative courts that exercise independent jurisdiction. The creation of administrative courts and law grew out of the strong tradition of separation of powers that established the legislature as the premier source of law. The judiciary was not viewed as competent to render decisions on the legality of administrative action. In France the need for a review procedure is by the Council of State — whose members are public administrators with training different from that of the ordinary judiciary—is the principal source of French administrative law.

In theory, ordinary court and administrative court jurisdiction is separate and exclusive, but disputes arise. In France, a special Tribunal of Conflicts decides which is the proper court for a disputed case.

Civil Procedure

A civil-law civil action is a continuing series of meetings, hearings, and written communications through which evidence is introduced and evaluated, testimony is taken, and motions are made and decided. Initial pleadings are quite general, and the issues are defined at the direction of the judge as the proceedings progress.

The civil process tends to be conducted primarily in writing, and the concept of a highly concentrated and dramatic “trial” in the common-law sense is not emphasized. Thus, a lawyer who wishes to question a witness must first submit to the judge and opposing counsel “articles of proof” describing the scope of the potential questions. The witness will be questioned at a later hearing at which the judge will typically ask the questions, often framing or reformulating the issues raised in the case. Cross-examination is uncommon. Instead, opposing counsel’s role is to make certain that the record summary of the testimony is complete and correct. Comparative Legal Civil Proceedings P.92

The judge supervises the collection of evidence and preparation of a summary of the record on which a decision will be based. Since there is no “pretrial” phase of the proceeding, the evidence is not “discovered” in the sense understood by common-law lawyers. Instead, the parties submit proposed evidence to the judge in writing or at oral hearings and the judge delivers rulings concerning the relevance and admissibility of evidence.

Many of the differences between the common-law and civil-law judicial process may be attributed to the absence of the civil jury. Lay judges are generally selected on the basis of experience in the subject matter of the court (e.g., labor law), or as representatives of a particular interest group (e.g., unions or management). Unlike common-law jurors, lay judges usually serve for a continuing term instead of only a single case.

Civil-law procedure does not emphasize the need to have a single-event trial because there is no need to convene a jury to hear the evidence, find the facts, and apply the law to the facts. The absence of the civil jury also helps to explain the relative lack of restrictions on the admissibility of evidence in the civil-law system. Evidence is more freely admitted than in common law systems. Issues of evidentiary weight are left to the judge. Nonetheless, there are indications that the common- law and civil-law procedures are not as different as they appear. American pretrial discovery, for example, significantly reduces the amount of “surprise” evidence that will come forth at trial. A central difference between the common-law and civil-law systems is that the common-law system leaves to parties and their lawyers the work of collecting and producing the factual material or evidence upon which adjudication depends.” In contrast, lawyers in the civil-law system mainly act as “law adversaries” (i.e., arguing points of law), and judges more actively control the investigation and fact-finding process. The public prosecutor may also have a role in a civil case.

Appellate Procedure

A primary difference between common-law and civil-law appellate procedure is that intermediate appellate review in the civil-law tradition often involves a “de novo” review of both the facts and law of the case. Thus, intermediate appellate courts may obtain additional testimony, supervise the collection of new evidence, and seek out expert opinions.

Appellate courts of last resort, like their common-law counterparts, generally consider only questions of law. Comparative Legal Civil Proceedings P.93

Common law vs. Civil law Systems Approach

Civil-law countries have comprehensive codes, often developed from a single drafting event. The codes cover an abundance of legal topics often treating private law, criminal law, and commercial law separately. While common-law countries do sometimes have codes in specific areas, these codes have been derived from many different sources over the years. Moreover, codes of common- law countries very often reflect the rules of law enunciated in judicial decisions (i.e., they are the statutory result of rules developed through the judicial decision-making process).

The existence of integrated, all-inclusive codes in civil-law countries and the lack thereof in common- law countries has resulted in another point of distinction: the existence and growth of equity law.

Equity law developed in England as a legal method to soften the often harsh effects of judicial precedent or legislation; to establish different procedures that might be required for a particular issue in the interests of justice and fairness when common-law remedies were not available. There is no comparable equity law in civil-law countries; the system orientation of the codes does not permit the growth of another branch of law outside the framework of the system. Equity would disrupt the certainty required in the interests of legal science. Equitable principles and remedies, to the extent they exist in the civil-law tradition, are built into the structure of the codes as part of the overall system.

The codification/judicial-decision dichotomy relating to the development of legal principles has given rise to two other distinctions between the systems: the role of judicial decisions in the making of law, and the manner of legal reasoning. In civil-law systems, the role and influence of judicial precedent, at least until more recent times, has been minor, in the common-law countries, precedent has been elevated to a position of supreme prominence. Civil-law judges or their scholar-advisers initially look to code provisions to resolve a case, while common-law judges instinctively reach for past cases and precedents to find the solution to a legal issue.

In the civil-law tradition, the reasoning process is deductive, proceeding from stated general principles or rules of law contained in the legal codes to a specific solution. In common-law countries the process is the reverse—judges apply inductive reasoning, deriving general principles or rules of law from precedent or a series of specific decisions and extracting an applicable rule, which is then applied to a particular case.

Court structures

The structures of courts are distinctly different in the two systems. Common law systems favor integrated court systems with courts of general jurisdiction available to adjudicate criminal and most types of civil cases, including those involving constitutional law, administrative law, and commercial law. Civil-law systems, on the other hand, following the tradition of separate codes for separate areas of law, favor specialty court systems and specialty courts to deal with constitutional law, criminal law, administrative law, commercial law, and civil or private law. Comparative Legal Civil Proceedings P.94

Proceedings

The trial process is different in the two systems. In the civil-law system, the single-event trial is unknown, and trials involve an extended process with a series of successive hearings and consultations for the presentation and consideration of evidence. There are also procedural differences relating to the role of the judge in the trial process. In civil-law system trials using the inquisitorial process, the role of the judge is elevated—the judge assumes the role of principal interrogator of witnesses, resulting in a simultaneous derogation of the role of lawyers during the trial. Conversely, in the common- law system the role of the judge as the manager of the trial and “referee” of the lawyers acting in an adversary role, is secondary to that of the lawyers, who are the major players in the process, introducing evidence and interrogating witnesses.

Judges

This contrasting role played by the judges in the trial process of the two systems has also resulted in a difference in judicial attitudes. Judges in the civil law systems view themselves less as being in the business of creating law than as mere appliers of the law (i.e., a more technical, less active role in the development of the law than their common-law counterparts’). In civil-law countries, the judge merely applies the applicable code provisions to a case, with little opportunity for judicial creativity and often with the assistance of legal scholars and legal scholarship. The common-law judge, in contrast, is able to search creatively for an answer to a question or issue among many potentially applicable judicial precedents.

There is a distinct difference in the two systems in the manner in which judges are selected and trained and in their legal education. In the civil-law tradition the judiciary is usually part of the civil service of the country—a recent law graduate selects the judiciary as a career and then follows a prescribed career path, first attending a special training institution for judges, and then acting as a judge in a particular geographical area and particular court system as assigned by the institutional body responsible for the administration of the judicial branch, often the Ministry of Justice. In contrast, common-law judges are generally selected as part of the political process for a specific judicial post that they hold for life or for a specified term, with no system of advancement to higher courts as a reward for service. In many states in the US judges for the lower level courts are often elected in general elections. Comparative Legal Civil Proceedings P.95

International enforcement of foreign judgments

In law, the enforcement of foreign judgments is the recognition and enforcement in one jurisdiction of judgments rendered in another ("foreign") jurisdiction. Foreign judgments may be recognized based on bilateral or multilateral treaties (such as the Hague Conventions – of which France, the UK and the USA are parties to). Where recognition is not based on an express agreement or treaty, it may be founded on the principles of comity, i.e. mutual respect between courts of different countries.

The "recognition" of a foreign judgment occurs when the court of one country or jurisdiction accepts a judicial decision made by the courts of another "foreign" country or jurisdiction, and issues a judgment in substantially identical terms without retrying the original lawsuit.

Once a foreign judgment is recognized, the party who was successful in the original case can then seek its "enforcement" in the recognizing country. If the foreign judgment is a money judgment and the debtor has assets in the recognizing jurisdiction, the judgment creditor has access to all the enforcement remedies, as if the case had originated in the recognizing country, e.g. garnishment, seizure, and judicial sale. If some other form of judgment was obtained, such as granting an injunction, the recognizing court will take the appropriate measures to make the original judgment effective. Comparative Legal Civil Proceedings P.96

THE HAGUE CONVENTION ON THE RECOGNITION AND ENFORCEMENT OF FOREIGN JUDGMENTS IN CIVIL AND COMMERCIAL MATTERS (Concluded 1 February 1971) (Excerpts) The States signatory to the present Convention, desiring to establish common provisions on mutual recognition and enforcement of judicial decisions rendered in their respective countries, have resolved to conclude a Convention to this effect and have agreed on the following provisions:

CHAPTER I - SCOPE OF THE CONVENTION Article 1 This Convention shall apply to decisions rendered in civil or commercial matters by the courts of Contracting States.

Article 2 This Convention shall apply to all decisions given by the courts of a Contracting State, irrespective of the name given by that State to the proceedings which gave rise to the decision or of the name given to the decision itself such as judgment, order or writ of execution.

Article 3 This Convention shall apply irrespective of the nationality of the parties.

CHAPTER II - CONDITIONS OF RECOGNITION AND ENFORCEMENT Article 4 A decision rendered in one of the Contracting States shall be entitled to recognition and enforcement in another Contracting State under the terms of this Convention - (1) if the decision was given by a court considered to have jurisdiction within the meaning of this Convention, and (2) if it is no longer subject to ordinary forms of review in the State of origin. In addition, to be enforceable in the State addressed, a decision must be enforceable in the State of origin.

Article 5 Recognition or enforcement of a decision may nevertheless be refused in any of the following cases - (1) if recognition or enforcement of the decision is manifestly incompatible with the public policy of the State addressed or if the decision resulted from proceedings incompatible with the requirements of due process of law or if, in the circumstances, either party had no adequate opportunity fairly to present his case; (2) if the decision was obtained by fraud in the procedural sense; (3) if proceedings between the same parties, based on the same facts and having the same purpose - a) are pending before a court of the State addressed and those proceedings were the first to be instituted, or b) have resulted in a decision by a court of the State addressed, or c) have resulted in a decision by a court of another State which would be entitled to recognition and enforcement under the law of the State addressed. Comparative Legal Civil Proceedings P.97

Definitions of Key Words

 Affirm: uphold the decision of a lower court.  Arbitration: a procedure by which parties choose to let an arbitrator resolve their dispute without going to court, in compliance with certain agreed-upon rules.  Beyond a reasonable doubt: The degree of proof needed for a judge or jury to convict an accused person of a crime.  Cause of action: facts which give a party a legal right to seek relief in court.  Certification: the validation of a class by a judge in the context of a class action.  Charging order in English law, is an order obtained from a court or judge by a judgment creditor, by which the property of the judgment debtor in any stocks or funds or land stands charged with the payment of the amount for which judgment shall have been recovered, with interest and costs.  Civil procedure: a body of rules governing how civil trials should be conducted.  Complaint: a legal document in which the plaintiff states his/her cause of action and the facts of the case to initiate a lawsuit.  Comity: refers to legal reciprocity--the principle that one jurisdiction will extend certain courtesies to other nations, particularly by recognizing the validity and effect of their executive, legislative, and judicial acts.  Contempt of court : Wilful disobedience of a judge's command or of an official court order.  Counterclaim: a claim made by the defendant against the plaintiff in a civil action as a response to the plaintiff's claim.  Demand letter: a letter written by an aggrieved party before any legal action is taken in order to warn the potential defendant that a lawsuit will be filed if the case cannot be resolved otherwise.  Deposition: a testimony given under oath outside the courtroom in the presence of both parties to a case, whose transcript becomes an element of the court's file.  Discovery: the part of pre-trial proceedings where parties gather facts and information about a case.  Frustrate: to prevent realization or attainment of a desire or goal.  Garnish: seize the assets of a debtor by means of a court order.  Hague Conventions: are a series of multilateral international conventions promoting the harmonization of legal conflicts in diverse subject matters. Over seventy nations are currently members of the Hague Conference, the preeminent organization in the area of private international law, including China, Russia, the United States, and all member states of the European Union. It was formed in 1893 to "work for the progressive unification of the rules of private international law".  Interrogatories: a set or series of written questions sent to a party, witness, or other person having information or interest in a case; used in the discovery phase of a case.

 Judicial sale: a sale of property under authority of a court order to satisfy an unpaid obligation. Comparative Legal Civil Proceedings P.98

 Lay judge: is a person assisting a judge in a trial. Lay judges are used in civil law jurisdictions, are appointed, and often require some legal instruction. Lay judges are usually used when the country doesn’t have a jury system.  Liability: legal responsibility for a wrongful act or omission.  Long arm statute: state legislation establishing personal jurisdiction over non-resident defendants who are somehow connected to the state.  Mistrial: a fundamental error in a trial. When a mistrial is declared, the trial must start again with the selection of a new jury.  Opt out: to choose not to participate in something.  Pleadings: written statements of fact and law filed by the parties to a lawsuit.  Preponderance of the evidence: the standard of proof, which must be met in a civil court proceeding. This would be evidence, which cumulatively outweighs the evidence presented by the opposing party.  Pre-trial motion: a request filed by a party in order to resolve a specific issue before the trial .  Private law: a branch of law dealing with property and the relationships between private persons, i.e. tort law, contract law...  Remand: return a case to a lower court for further proceedings.  Rests a case: when a party to a trial, advises the court that they have produced all the evidence that they wish to submit for the case.  Reverse: issue a contrary decision.  Seizure: legal procedure used in many legal systems whereby the authorities take possession of assets to satisfy a judgment.  Settlement: an agreement between the parties ending a lawsuit.  Sheriff: the executive officer of local court in some areas. In other jurisdictions the sheriff is the chief law enforcement officer of a county.  Statute of limitations: a statute which limits the right of a plaintiff to file an action unless it is done within a specified time period after the occurrence which gives rise to the right to sue.  Subpoena: a command to appear at a certain time and place to give testimony upon a certain matter.  Substantive law: law defining rights and duties as opposed to procedural law.  Summary judgment: a judgment in favour of the moving party as a matter of law when the court finds that a trial would be unnecessary in light of the evidence.  Summons: papers issued by a court following a complaint and served on a defendant to commence a civil action.  Third party debt order: a legal proceeding in English law to recover money that is owed to the debtor by some third party.  Uphold: to support, to sustain, to maintain. The decision of an appellate court not to reverse a lower court decision. Comparative Legal Civil Proceedings P.99

 Vacate: annul a lower court decision.  Venue: authority of a court to hear a matter based on geographical location.  "Voir dire": The preliminary examination made in court of a witness or juror to determine his competency or interest in a matter. ("to speak the truth").  Writ of certiorari: an order issued by the Supreme Court directing the lower court to transmit records for a case for which it will hear on appeal.  Writ of execution: an order requiring an officer to enforce a court decision. Comparative Legal Civil ProceedingsP.100

Questions:

1. Explain briefly the civil procedure in the US or the UK. Compare it with that of French proceedings. Analyze some of the differences or similarities with France. 2. What is a class action in the US? Do you think this concept is a good idea? Will it ever come to France? 3. What is meant by “discovery” in the US system? How is this different from the French procedure of collecting evidence? 4. Explain why jurisdiction in civil procedure is so important, especially in the US system. 5. What are some basis differences or similarities between the Common law and Civil law Systems? 6. What is meant by the recognition and enforcement of a foreign judgment?

Sources for this chapter:

1) The English of Law: U.S. Law & Politics / Anne Brunon-Ernst, Yasmine Mohammedi, Michel Perdu, William Yeago et al. Editeur: Belin

2) The English of Law: England and Wales / Jean-Eric Branaa, Anne Brunon-Ernst, Charles Davey, William Yeago et al. Editeur: Belin

3) International Legal English / Lindner/Translegal – William Yeago Cambridge University Press 2006

4) Black’s Law Dictionary West Publishing – sixth edition

5) Dahl's Law Dictionary / Henry Saint Dahl Dalloz, 1995

6) Primer on the Civil Law System / James Apple and Robert Deyling Federal Judicial Center – International Judicial Relations Committee / www.fjc.gov

7) Hague Conference on Private International Law

www.hcch.net www.solts.co.uk www.dca.gov.uk www.suite101.com www.supremecourt.gov.uk www.america.gov Anglo-American Common-Law Contract Law P.101

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY

Anglo-American Common-Law Contract 5L aw Anglo-American Common-Law Contract Law P.102

Anglo-American Common-Law Contract L aw

5Contract Law P.103 Types of Contracts P.104

Applicable Law P.106

The Elements of a Contract P.107

Validity of the Contract P.111

Discharge or Termination of Contract P.118

Breach of Contract and Remedies P.125

Contract Checklist P.128

Contract Drafting and Vocabulary P.133

Definitions of Key Words P.137

Questions P.141 Anglo-American Common-Law Contract Law P.103

Anglo-American Common-Law Contract L aw

After completing this lesson, one should:  Understand the general principles of common-law contracts and the requirements that must be satisfied for an action in contract to be pursued  Appreciate what constitutes a valid contract, and what remedies are available if a contract term is breached  Consider to what extent damages can be excluded by a contracting party  Appreciate when defenses such as consent, mistake, illegality will be available to a 5defendant  Understand the equitable remedies that may be available in contract  Comprehend the doctrine of frustration of contract  Compare the traditional analysis of consideration in terms of benefit and detriment in common law with that of civil law  Appreciate how and in what circumstances parties may be discharged from a contract  Ascertain and define the express and implied terms of a contract, agreements to modify terms, and certain defenses to contract formation

Contract Law A contract is an agreement between two or more persons (physical/natural or legal) that creates an obligation to do, or not to do a particular thing. If there is a failure of this obligation, the courts will provide a remedy.

The purpose of a contract is to enact an agreement between parties and to establish rights and duties in accordance with that agreement. The courts must enforce a valid contract as it is made, unless there are justifications that bar its enforcement.

Statutes and case law impose and restrict the terms of a contract affecting the general public. When the parties have no express or implied agreement on the essential terms of a contract, there is no contract. A contract, to be enforceable, must be a valid, subsisting agreement between the parties.

It is the policy of the law to encourage the formation of contracts between competent parties for lawful objectives. As a general rule, contracts by competent persons are valid and enforceable. Parties to a contract are bound by the terms to which they have agreed, as long as they do not result from fraud, duress, or undue influence. The binding force of a contract is based on the fact that it reflects “a meeting of minds” of two parties in good faith. Contracts mutually entered into between parties with the capacity to contract, are binding obligations and cannot be breached by either party, unless a statute provides to the contrary.

It should be noted that, in the United States, contracts for the sale of goods are governed by the Uniform Commercial Code (UCC) and in the United Kingdom by the Sale of Goods Act and therefore the above common law contractual principles may have been supplemented or replaced by these statutory provisions. Anglo-American Common-Law Contract Law P.104

Types of Contracts Contracts under Seal Traditionally, a contract was an enforceable legal document only if it was stamped with a seal. The seal represented that the parties intended the agreement to necessitate legal consequences. No consideration was required since the seal was a symbol of the solemn acceptance of the legal effect and consequences of the agreement. In the past, all contracts were required to be under seal to be valid, but the seal has lost some or all of its effect by statute in many jurisdictions. Recognition by the courts of informal contracts, such as implied contracts, has also diminished the importance and employment of formal contracts under seal.

Express Contracts In an express contract the parties state the terms, either orally or in writing, at the time of its formation. There is a definite written or oral offer which is accepted by the offeree (the person to whom the offer is made) in a manner that explicitly demonstrates consent to its terms.

Implied Contracts There are two kinds of implied contracts: contracts implied-in-fact and contracts implied-at-law. An implied contract consists of obligations arising from a mutual agreement and intent to promise that have not been expressed in words. An implied-in-fact contract is where circumstances imply that parties have reached an agreement, even though they have not done so expressly. It is a contract that is inferred from the conduct of the parties. Often such contracts involve a course of dealing between the parties or a common trade usage. For example by going to a doctor a patient impliedly agrees that he or she will pay a fair price for the service and if he or she refuses to pay after being examined, an implied in fact contract has been breached. A manufacturer may tell a supplier to send a number of units without asking the current price. In such circumstances, a contract to pay the current price for the items is implied, even though the parties have not entered into an express contract. The legal elements of an implied-in-fact contract are the same as an express contract. However, some of the terms must be deduced from the parties' actions. A contract will not be implied where it would result in unfairness or harm. If, for example, after an agreement expires, the parties continue to perform according to its terms, an implication arises that they have mutually assented to a new contract containing the same provisions as the old agreement. Where doubt and difference exist in the minds of the parties, the court cannot infer a contractual relationship.

An implied-at-law contract, by contrast, is a legal fiction used by courts to prevent a person's unjust enrichment at the expense of another. A contract implied-at-law is actually an obligation imposed by law, and treated as a contract only for the purposes of an equitable remedy. In such cases, the courts use quasi-contract theories to assure a just result. For example, an unconscious patient treated by a doctor at the scene of an accident has not agreed (either expressly or by implication) to pay the doctor for emergency services, but the patient would be unjustly enriched by the doctor's services were the patient not required to compensate the doctor. Anglo-American Common-Law Contract Law P.105

Executed and Executory Contracts An executed contract is one in which nothing remains to be done by either party. An executory contract is one in which some future act or obligation remains to be performed under its terms.

Bilateral and Unilateral Contracts The exchange of mutual, reciprocal promises between persons that entails the performance of an act, or refraining from the performance of an act, with respect to each party, is a bilateral contract. A bilateral contract is sometimes called a two-sided contract because of the two promises that constitute it. The promise that a person makes, constitutes sufficient consideration for the promise made by the other.

A unilateral contract involves a promise made by only one party. The offeror, a person who makes a proposal, promises to do a certain thing, if the offeree performs a requested act that he or she knows is the basis of a legally enforceable contract. The performance constitutes an acceptance of the offer, and the contract then becomes executed. Acceptance of the offer can be revoked, however, until the performance has been completed. This is in contrast to a bilateral contract.

Unconscionable Contracts An unconscionable contract is one that is unjust or extremely one-sided in favor of the person who has the superior bargaining power. The term “unconscionable” signifies that which offends the sense of fairness and decency. It needs to be grossly unfair or unjust. The terms and potential benefit of the contract should be generally shocking to a normal person’s conscience. An unconscionable contract is one that no person who is considered mentally competent would enter into, and that no fair and honest person would accept. Courts find that unconscionable contracts usually result from the exploitation of consumers who are poorly educated, impoverished, and are unable to shop around for the best price available in the competitive marketplace.

The majority of unconscionable contracts occur in consumer transactions. Contractual provisions that indicate gross one-sidedness in favor of the seller include limiting damages or the rights of the purchaser to seek court relief against the seller, or disclaiming a warranty (a statement of fact concerning the nature or caliber of goods sold, made by the seller to induce the sale, and relied on by the purchaser).

Unconscionability is ascertained by examining the circumstances of the parties when the contract is made.

Uniform Commercial Code - ARTICLE 2 - SALES PART 3. GENERAL OBLIGATION AND CONSTRUCTION OF CONTRACT

§ 2-302. Unconscionable contract or Clause. (1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result. (2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination. Anglo-American Common-Law Contract Law P.106

Adhesion Contracts Adhesion contracts are those that are drafted by the party who has the greater bargaining advantage, providing the weaker party with only the opportunity to adhere to the contract or reject it. They are frequently employed because most businesses could not transact business if it were necessary to negotiate all the terms of every contract. Not all adhesion contracts are unconscionable since the terms of such contracts do not necessarily exploit the party who signs the contract. Courts, however, often refuse to enforce contracts of adhesion on the grounds that a true meeting of the minds never existed, or that there was no acceptance of the offer because the purchaser actually had no choice in the bargain.

Void and Voidable Contracts Contracts can be either void or voidable. A void contract imposes no legal rights or obligations upon either party and is not enforceable by a court. It is, in effect, no contract at all.

A voidable contract may be a legally enforceable agreement. The contract is not void unless and until the party chooses to treat it as such by opposing its enforcement. A voidable contract can be ratified either expressly or impliedly by the party who possesses the right to avoid it.

Applicable Law Although a general body of contract law exists, some aspects of it, such as construction (the process of ascertaining the proper explanation of equivocal terms), vary among the different jurisdictions. When courts must select the law to be applied with respect to a contract, they consider what the parties intended as to which law should govern, the place where the contract was entered into, and the place of performance of the contract. Many courts apply the modern doctrine of “the center of gravity”, in which the law of the jurisdiction that has the closest or most significant relationship with the matter in issue applies. Where foreign law governs, contracts may be recognized and enforced under the doctrine of comity (acknowledgment that one nation gives within its territory to the legislative, executive, or judicial acts of another nation).

Applicable law/Jurisdiction

This contract shall be governed by and construed in accordance with the law of ______. Venue of any cause of action arising under this contract shall be in a court of competent jurisdiction in ______. If either party refers this contract to the courts to enforce their rights, the prevailing party shall be entitled to all reasonable costs, expenses including reasonable legal fees for pre-trial, trial appellate proceedings.

Applicable law and Jurisdiction

The applicable law shall be French law and the commercial court of ______shall have jurisdiction. Anglo-American Common-Law Contract Law P.107

The Elements of a Contract Formation of the Contract Mutual Agreement There must be an agreement between the parties, or mutual assent, for a contract to be formed. In order for an agreement to exist, the parties must have a common intention or a meeting of the minds, on the terms of the contract and pledge to the same bargain.

The parties can settle one term at a time, but their contract becomes complete only when they assent to the final term. An agreement is binding if the parties concur with respect to the essential terms and intend the agreement to be binding, even though all the details are not definitely fixed.

The price and quantity of goods for example, are usually essential terms of the contract that must be agreed upon if the contract is to be enforced. Exceptions to this rule requiring the terms of an agreement to be definite and certain, permit the courts to imply reasonably the missing terms if the essential terms unambiguously demonstrate the mutual agreement of the parties.

Offer An offer is a promise, which by its terms, is conditional upon an act, forbearance, or return promise being given in exchange for the promise or its performance. It is a demonstration of willingness to enter into a bargain, made so that another person is justified in understanding that his or her assent to the bargain is invited and will conclude it. Any offer must consist of a statement of present intent to enter a contract; a definite proposal that is certain in terms; and communication of the offer to the prospective offeree. If any of these elements are missing, there is no offer to form the basis of a contract.

Preliminary negotiations, advertisements, invitations to bid Preliminary negotiations are clearly distinguished from offers because they contain no demonstration of present intent to contract. No contract is formed when prospective purchasers respond to such terms, since they are merely invitations or requests for an offer. Unless this interpretation is employed, any person in a position similar to a seller who advertises goods in any medium would be liable for numerous contracts when there is usually a limited quantity of merchandise for sale.

An advertisement, price quotation, or catalogue is customarily viewed as only an invitation to a customer to make an offer, and not an offer itself. The courts reason that an establishment might not have sufficient stock to satisfy potential demand and that it would not be reasonable for a customer to expect to form a binding contract by responding to advertisements that are intended to make consumers aware of a product for sale.

An advertisement or request for bids for the sale of particular property or the erection or construction of a particular structure is merely an invitation for offers or proposals. The bids submitted, however, are offers, which become a valid contract upon acceptance by the offeree. Anglo-American Common-Law Contract Law P.108

Letter of intent To facilitate the start of a business deal or project, or when contract negotiations take a long time, or there are many potential partners, a memorandum of understanding or letter of intent may be signed during negotiations. This is a declaration of the intent of the parties to conclude a contract. One of its main characteristics is that major terms of the contract have not yet been specified. The purposes of a memorandum of understanding or letter of intent are to clarify the key points of a complex transaction for the convenience of the parties, to declare officially that the parties are currently negotiating, and to provide safeguards in case the deal collapses during negotiation.

The parties are simply expressing their desire to enter into serious contractual negotiations. The signing of a memorandum of understanding / letter of intent alone does not obligate the parties to subsequently conclude a contract. In general, a memorandum of understanding is signed by all potential parties, while a letter of intent is a unilateral declaration. They may resemble written contracts, but are usually not binding on the parties in their entirety. They may, however, contain provisions that are binding, such as non-disclosure agreements, a covenant to negotiate in good faith, or a promise of exclusive rights to negotiate.

Termination of an offer An offer continues until the expiration of its specified time period or, if there is no time limit, until a reasonable time has elapsed. A reasonable time is determined according to what a reasonable person would consider sufficient time to accept the offer.

The death or insanity of either party before an acceptance is communicated causes an offer to end. The destruction of the subject matter of the contract, conditions that render the contract impossible to perform, or the intervening illegality of the proposed contract results in the termination of the offer.

An offeror may revoke an offer anytime before it has been accepted, but the revocation is not effective until communicated, either verbally or by conduct, to the offeree. Where an offer is made to the general public, it can be revoked by furnishing public notice of its termination equal to the publicity given to the offer.

Irrevocable offers An option is a right that is purchased by a person to have an offer remain open at agreed-upon price and terms, for a specified time, during which it is irrevocable. It constitutes an exception to the general rule that an offer can be withdrawn prior to acceptance. The offeror cannot withdraw this offer since the offeror is bound by the consideration paid by the offeree. The offeree is free, however, to decide whether or not to accept the offer. Anglo-American Common-Law Contract Law P.109

Rejection of an offer An offer is rejected when the offeror is justified in understanding from the words or conduct of the offeree that he or she does not intend to accept the offer, or to take it under further advisement.

Rejection might be in the form of:

 an express refusal to accept an offer by a counteroffer, which is a new proposal that rejects the offer by implication;

 or by a conditional acceptance that operates as a counteroffer.

The offer can continue, however, if the offeree in the counteroffer expressly states that it shall not constitute a rejection of the offer.

If an offer is rejected, the party making the original offer no longer has any liability for that offer.

Acceptance Acceptance of an offer is an expression of assent to its terms. This expression of assent must be made by the offeree in a manner requested or authorized by the offeror.

An acceptance is valid only if:  the offeree knows of the offer,  the offeree manifests an intention to accept,  the acceptance is unequivocal and unconditional, and  the acceptance is manifested according to the terms of the offer.

The determination of a valid acceptance is governed by whether a promise or an act by the offeree was the bargained-for response. Since the acceptance of a unilateral contract requires an act rather than a promise, it is unnecessary to furnish notice of intended performance unless requested by the offeror. If, however, the offeree has reason to believe that the offeror will not learn of the acceptance with reasonable promptness, the duty of the offeror is discharged, unless:  the offeree makes a reasonable attempt to give notice,  the offeror learns of the performance, or  the offer indicates that no notice is required.

In bilateral contracts the offer is effective when the offeree receives it. The offeree can accept it until he receives notice of revocation from the offeror. Thereafter, an offer is revoked.

Rejection of the offer or revocation of conditional acceptance is effective upon receipt. A late or defective acceptance is treated as a counteroffer, which will not result in a contract unless it is accepted by the offeror. If offers cross in the mail, there is no binding contract, since an offer cannot be accepted if there is no knowledge of it. Anglo-American Common-Law Contract Law P.110

As a general rule, an offer can be accepted only by the offeree or an authorized agent. If, however, the offer is contained in an option contract, it can be the subject of an assignment or transfer, without the consent of the offeror, unless the option involves a purchase on credit or expressly prohibits an assignment.

An acceptance must comply exactly with the requirements of the offer, and omit nothing from the promise or performance requested. If a response to an offer purports to accept it but adds qualifications or conditions, then it is a counteroffer and not an acceptance. Acceptance may be inferred from the offeree's acts or conduct. As a general rule, silence alone, can never be acceptance.

Consideration Consideration is the inducement, the reason, the cause, the price or motive that causes a party to enter into an agreement or contract. A valid contract requires consideration by both parties. It is something of value that is given in exchange for getting something in return. Often referred to as “something for something” or “quid pro quo”. To constitute consideration each party in a contract must receive a benefit or right, but must also have an obligation or detriment from their respective promises. In a contract for the sale of a car for example; there will be both a benefit and detriment to both parties. The seller experiences a detriment by losing a car, but benefits by receiving payment for it. The buyer, on the other hand, benefits by acquiring a car, but experiences a detriment for having to pay for it.

Consideration can consist of a promise; an act other than a promise; a forbearance from suing on a claim that is the subject of an honest and reasonable dispute; or the creation, modification, or destruction of a legal relationship. It signifies that the promisee will relinquish some legal right in the present or restrict his or her legal freedom of action in the future as an inducement for the promise or the other party. It is not substantially concerned with the benefit that accrues to the promisor.

Love and affection are not consideration. A promise to make a gift contains no consideration because it does not entail a legal benefit received by the promisor or a legal detriment suffered by the promisee. Since a promise to give a gift is freely made by the promisor, who is not subject to any legal duty to do so, the promise is not enforceable unless there is promissory estoppel. Promissory estoppel is a doctrine by which a court enforces a promise reasonably expected by the promisor, to induce action or forbearance on the part of a promisee, who justifiably relied on the promise and suffered a substantial detriment as a result.

The common law courts refused to inquire into the adequacy or fairness of a bargain, finding that the payment of some price constituted legally sufficient consideration. If one is seeking to prove mistake, misrepresentation, fraud, or dures – or to assert a similar defense – the inadequacy or the price paid for the promise might represent significant evidence for such defenses, but the law does not require adequacy of consideration to find a contract enforceable. Anglo-American Common-Law Contract Law P.111

Mutuality of Obligation Where promises constitute the consideration in a bilateral contract, they must be mutually binding. This concept is known as mutuality of obligation. If a party does not actually bind himself to some performance or forbearance, it is an illusory promise and there is no enforceable contract.

Where the contract provides one party with the right to cancel, there might not be any consideration because of lack of mutuality of obligation. If there is an absolute and unlimited right to cancel the obligation, the promise of the party with the right of cancellation is illusory, and the lack of consideration means there is no contract. If the power to cancel the contract is restricted in any manner, the contract is usually considered binding.

A promise to do an act that one is legally bound to perform, does not qualify as consideration for another promise.

Past consideration consists of actions that occurred prior to the making of the contractual promise, without any purpose of inducing a promise in exchange. It is not valid because it is not furnished as the bargained-for exchange of the present promise. There are exceptions to this rule, such as a present promise to pay a debt discharged in bankruptcy, which constitutes valid consideration because it renews a former promise to pay a debt that was supported by consideration.

Most states do not recognize moral obligation as consideration, since there is no acceptable method to set the parameters of moral duty. A few courts will enforce a moral obligation where there has been a benefit conferred on the promisor.

Validity of the contract Competent Parties A natural person who agrees to a transaction must possess complete legal capacity to become liable for duties under the contract. Those who do not have the ability to enter into a legal contract are considered to lack legal capacity. These include minors, the mentally incompetent or intoxicated persons.

Minors A minor is generally defined as a person under the age of eighteen. A contract made by a minor is voidable but is valid and enforceable until disaffirmed by that person. He or she can avoid the legal duty to perform the terms of the contract without any liability for breach of contract. Minors are treated in such a way because public policy deems it desirable to protect the immature and naive minor from liability for unfair contracts that he or she is too inexperienced to negotiate on equal terms with the other party.

The law imposes liability on the minor in certain cases. Although the contract of a minor may be voidable, the minor may still be liable in quasi-contract to avoid unjust enrichment for the reasonable value of goods or services furnished if they are necessaries that are reasonably required for the person's health, comfort, or education.

The majority of courts hold that a minor who willfully misrepresents his or her age may, nevertheless, exercise the power to avoid the contract. Jurisdictions are in disagreement in regard to whether a minor is liable in tort (a civil wrong other than breach of contract) for willful misrepresentation of his or her age. Anglo-American Common-Law Contract Law P.112

Mental incapacity When a party does not comprehend the nature and consequences of the contract when it is formed, he or she is regarded as having mental incapacity. A distinction must be drawn between persons who have been adjudicated incompetent by a court and had a guardian appointed and mentally incompetent persons who have not been so adjudicated. A person who has been declared incompetent in a court proceeding lacks the legal capacity to enter into a contract with another. Such a person is unable to consent to the contract, since the court has determined that he or she does not understand the obligations and effects of the contract. A contract made by such a person is void and without any legal effect. Neither party can be legally compelled to perform or comply with the terms of the contract. If there has been no adjudication of insanity, a contract made by a mentally incapacitated person is voidable by him or her.

Many contract principles that apply to minors, also apply to insane persons. There is an obligation to recompense the injured party where a voidable contract is avoided, and to pay for necessaries based upon quasi-contract for the reasonable value of the goods or services. The right to avoid the contract belongs to the incompetent person; the other party cannot avoid the contractual obligation.

Intoxicated persons A contract made by an intoxicated person is voidable. When a person is intoxicated at the time of entering into a contract with another, and subsequently becomes sober, and either promises to perform the contract or fails to disaffirm it within a reasonable time after becoming sober, the person has ratified his or her voidable contract and is legally bound to perform.

Representation on Authority of Parties/Signatories: Each person signing this Agreement represents that he or she is duly authorized and has legal capacity to execute and deliver this Agreement. Each party represents to the other that the execution and delivery of the Agreement and the performance of such party’s obligations hereunder have been duly authorized and that the Agreement is a valid and legal agreement binding on such party and enforceable in accordance with its terms.

Legality of the Subject Matter Any undertaking can be the subject of a contract provided it is not prohibited by law.

When a contract is formed in restraint of trade, courts will not enforce it because it imposes an illegal and unreasonable burden on business by hindering competition. Contracts that provide for the commission of a crime or any illegal objective are also void.

Illegality: If any provision of this Agreement shall be determined by the arbitrators or any Court having jurisdiction, to be invalid, illegal or unenforceable, the remainder of this Agreement shall not be affected thereby, but shall continue in full force and effect as though such invalid, illegal or unenforceable provision or provisions were not originally a part hereof.

Future rights and liabilities such as performing or refraining from some designated act, or assuming particular risks or obligations can be the basis of a contract. A person cannot legally contract concerning a right that he or she does not have. Anglo-American Common-Law Contract Law P.113

Reality of Consent The parties must mutually assent to the proposed objectives and terms of a contract for it to be enforceable. The manifestation of the common intent of the parties is discerned from their conduct or verbal exchanges.

What one party secretly intended is irrelevant if his or her conduct appears to demonstrate agreement. In a few limited cases, however, where there is no stated expression of the parties' intent, their subjective intentions may establish an enforceable contract if both believe in the same terms of the contract.

There can be no binding contract without the real consent of the parties. Apparent consent can be vitiated because of mistake, fraud, innocent misrepresentation, duress, or undue influence, all of which are defenses to the enforcement of the contract.

Mutual Mistake When there is a mutual or common mistake of fact with respect to the subject of the contract, the subjective intention of the parties is evaluated by the courts to determine whether there had been, in fact, a “meeting of the minds” of the parties.

If the mutual mistake significantly changed the subject matter of the contract, a court will refuse to enforce the contract. If, however, the difference in the subject matter of the contract concerned some incidental quality that has no, or negligible effect on the value of the contract, the contract is binding.

Unilateral Mistake Ordinarily a unilateral mistake (an error made by one party) affords no basis for avoiding a contract but a contract containing a typographical error can be corrected. A contract may be avoided if the error in value in what is to be exchanged is substantial, or if the mistake is caused by, or known to, the other party. Unilateral mistakes frequently occur where a contractor submits an erroneous bid for a public contract. Where such a bid is accepted, the contractor will be permitted to avoid the contract only if the agreement has not been executed or if the other party can be placed in the position occupied prior to the contract. If the mistake is obvious, the contract will not be enforced; but if it is inconsequential, the contract will be upheld. The mistake must consist of a clerical error or a mistake in computation, since an error in judgment will not permit a contractor to avoid a contract.

Excerpt from the US Restatement (Second) of Contracts 152. When mistake of Both Parties Make a Contract Voidable  Where a mistake of both parties at the time of contract was made as a basic assumption on which the contract was made has a material effect on the agreed exchange of performances, the contract is voidable by the adversely affected party unless he bears the risk of the mistake under the rule stated in 154.

153. When Mistake of One Party makes a Contract Voidable  Where a mistake of one party at the time a contract was made as to a basic assumption on which he make the contract has a material effect on the agreed exchange of performances that is adverse to him, the contract is voidable by him if he does not bear the risk of the mistake under the rule stated in 154, and the effect of the mistake is such that enforcement of the contract would be unconscionable or,  The other party had reason to know of the mistake or his fault caused the mistake Anglo-American Common-Law Contract Law P.114

154. When a Party bears the Risk of a Mistake A party bears the risk of a mistake when:  the risk is allocated to him by agreement of the parties, or  he is aware, at the time the contract is made, that he has only limited knowledge with respect to the facts to which the mistake relates but treats his limited knowledge as sufficient or,  he risk is allocated to him by the court on the ground that is reasonable in the circumstances to do so.

Mistake of Law When a party having full knowledge of the facts reaches an erroneous conclusion as to their legal effect, such a mistake of law will not invalidate a contract or affect its enforceability.

Fraud Fraud prevents mutual agreement to a contract because one party intentionally deceives another, as to the nature and the consequences of a contract. It is the willful misrepresentation or concealment of a material fact of a contract, designed to persuade another to enter into it. As a general rule, nondisclosure of a material fact is fraud. Many courts have held in the past that mere silence concerning a material fact did not constitute fraud, but the emerging trend is to find a duty to disclose and, therefore, deliberate concealment of a material fact gives rise to an action for fraud.

Since fraud prevents a meeting of the minds of the parties, the contract may be void or voidable. If the fraud is done during the execution of the contract so that the party would not have signed the document if he or she understood its nature, the contract is void from its inception. The signatory is not bound if a different contract has been substituted for the one he or she intended to execute. If, however, a person negligently chooses to sign the contract without reading it, no fraud exists and the contract is enforceable. Should a contract fail to express the agreement that the parties intended it to express due to fraud, the defrauded party may seek the equitable remedy of reformation by which the court will rewrite a written agreement to conform with the original intent of the parties.

Misrepresentation without Fraud A contract can be invalidated if it was based on any innocent misrepresentation pertaining to a material matter on which one party justifiably relied.

Representations When a contract uses the terms "representations" and "warranties" together, they blend the past, present, and future together within terms of the contract. Every contract is different, but the language is basically the same. Representations and warranties are assurances that one party gives to another party in a contract. These assurances are statements that the purchasing party can rely on as factual.

A representation or warranty is made in writing by a seller in a business transaction. Typically, during buy/sell transactions, the seller makes contractual "representations and warranties" that form the foundation for the purchase decision. The representations and warranties also serve as a basis for the buyer to sue the seller, if a representation or warranty has been breached. The seller provides these Anglo-American Common-Law Contract Law P.115

representations in good faith in a transaction document; the buyer relies upon these statements to close the transaction. However, undiscovered liabilities can and do arise.

Generally, representations are statements of past and existing facts made to induce someone to act, especially to enter into a contract; warranties are promises that existing or future facts are or will be true. These representations and warranties provide the buyer with information essential to the decision to implement the transaction.

Most new consumer products today are covered by a warranty. Its purpose is to give the consumer some recourse if a purchase fails to live up to what was promised. A warranty generally moves from the present to the future. The product that you are buying is warranted as being free of defects, and the seller agrees to fix any defects for a specified amount of time into the future. The warranty obligates the seller to the terms of the contract.

Warranties can be either expressed or implied. Expressed warranties mean they are written into the contract, and, for the most part, buyers should insist upon them. Implied warranties are commonly provided for in commercial or consumer codes.

An implied warranty of merchantability is not expressly stated, and is considered as having risen from the nature of the transaction and the basic understanding between buyer and seller. This means that the seller does not have to explicitly state the warranty. Implied warranties are essentially built into transactions. An implied warranty on a product for sale essentially guarantees through implication, that a product will reasonably conform to a buyer's standards, and that the product is suitable for sale. In other words, unless the seller of the product explicitly states otherwise by using a phrase such as “as is” or “defective” in describing the product, the buyer has the reasonable right to expect that the item he is buying will conform to his basic expectations and will have no flaws that are not immediately discernible or part of the nature of the item.

The implied warranty of fitness for a particular purpose means that any seller is presumed to guarantee that an item will be fit for the particular purpose for which the buyer is getting it, as long as the seller has reason to know that the buyer is relying on the seller to supply a suitable item. A particular purpose of the buyer differs from the ordinary purpose for which goods are used. Goods can be merchantable but unfit for a buyer's particular purpose. Anglo-American Common-Law Contract Law P.116

U.C.C. - ARTICLE 2 - SALES § 2-314. Implied Warranty: Merchantability; Usage of Trade.

(1) A warranty that the goods shall be merchantable is implied in a contract for their sale if the seller is a merchant with respect to goods of that kind.

(2) Goods to be merchantable must be at least such as (a) pass without objection in the trade under the contract description; and (b) in the case of goods, are of fair average quality within the description; and (c) are fit for the ordinary purposes for which such goods are used; and (d) are, within the variations permitted by the agreement, of even kind, quality and quantity within each unit and among all units involved; and (e) are adequately contained, packaged, and labeled as the agreement may require; and (f) conform to the promise or affirmations of fact made on the container or label if any.

(3) Implied warranties may arise from course of dealing or usage of trade.

§ 2-315. Implied Warranty: Fitness for Particular Purpose. Where the seller at the time of contracting has reason to know any particular purpose for which the goods are required and that the buyer is relying on the seller's skill or judgment to select or furnish suitable goods, there is unless excluded or modified under the next section an implied warranty that the goods shall be fit for such purpose.

Disclaimer of Warranties As a general rule, parties to a commercial contract are free to disclaim any warranties for the product being sold. However, there are several rules regarding the method of the disclaimer and the type of warranty, either express or implied.

An express warranty can be disclaimed quite easily by statements in brochures, models, and samples stating that no warranty is created by those terms. The seller must be careful not to make any oral promises without such a condition. Express warranties can also be disclaimed by statements in a contract for a sale excluding any express warranties.

Implied warranties may also be disclaimed although there are consumer law restrictions limiting disclaimers on consumer goods. To disclaim implied warranties, the seller must inform the buyer in writing, that the seller would not be liable if the product is defective or does not perform as the buyer believed it would. Alternatively, the seller can label a product as being sold "as is" or "with all faults" which will disclaim implied warranties, but not remove liability for defective or dangerous products.

2-316. Exclusion or Modification of Warranties.

To exclude or modify the implied warranty of merchantability or any part of it the language must mention merchantability and in case of a writing must be conspicuous, and to exclude or modify any implied warranty of fitness the exclusion must be by a writing and conspicuous. Language to exclude all implied warranties of fitness is sufficient if it states, for example, that "There are no warranties which extend beyond the description on the face hereof." Anglo-American Common-Law Contract Law P.117

WARRANTY: Any technical information or assistance that Seller gives Buyer is provided at Buyer's risk and is not a warranty or specification. Seller warrants that (a) the product shall meet the specifications set forth in this contract, (b) the product was produced in material compliance with all applicable laws, (c) Seller has good title to the product and (d) the product will not infringe any valid claim of any United States or Canadian patent covering the product itself (but Seller does not warrant against patent infringement caused by Buyer's use or handling of the product). SELLER MAKES NO OTHER REPRESENTATIONS OR WARRANTIES OF ANY KIND, EXPRESS OR IMPLIED, WHETHER OF MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE OR OTHERWISE. Buyer warrants that (a) the product is being purchased only for Buyer's use or consumption and will not be resold or otherwise transferred, (b) Buyer's handling, use or consumption of the product will not infringe any valid claim of any United States or Canadian patent, (c) Buyer will not use, consume or combine the product for end uses intended to be toxic or lethal to humans, (d) Buyer has, and will use, the requisite expertise, personnel and equipment to handle, store, transport, use, consume and dispose of the product (i) in compliance with all applicable laws and governmental regulations, actions, orders, decrees and requests and (ii) in a manner so that the product will not be injurious to any person or the environment, and (e) Buyer will promptly and carefully inspect the product upon receipt.

Duress Duress is a wrongful act or threat by one person that compels another person to perform some act, such as sign a contract, which he or she would not have performed voluntarily. As a result, there is no true ‘meeting of minds’ of the parties and, therefore, there is no legally enforceable contract. Blackmail, threats of physical violence, or threats to institute legal proceedings in an abusive manner can constitute duress.

A contract induced by duress is either void or voidable. If the duress consists of one party taking the other's hand, and signs his or her name to a contract, the contract is void for lack of any intent on the victim's part to perform the act. The result is the same if the victim is compelled to sign a contract at gunpoint without any knowledge of its contents. These are highly unusual situations. In most cases involving duress the contract is voidable, and the person who was subjected to the duress can ask the court to declare the contract unenforceable.

Undue Influence Undue influence is unlawful control exercised by one person over another, in order to substitute the first person's will for that of the other. It generally occurs in two types of situations. In the first, a person takes advantage of the psychological weakness of another to influence that person to agree to a contract to which, under normal circumstances, he or she would not consent. The second situation entails undue influence based on a fiduciary relationship that exists between the parties. This occurs where one party occupies a position of trust and confidence in relation to the other, as in familial or professional-client relationships. The question of whether the assent of each party to the contract is real or induced by factors that inhibit the exercise of free choice determines the existence of undue influence. Mere legitimate persuasion, sales talk and suggestion that do not destroy free will are not considered undue influence and have no effect on the legality of a contract.

Independent Legal Advice: Each party acknowledges that it has been advised and has been given the opportunity to obtain independent advice regarding the legal, tax, and accounting issues and consequences of this Agreement. The parties further acknowledge that they have been given the opportunity to make their own separate judgments, and each is relying solely on its own review and that of its own advisors regarding the rights, obligations, liabilities, and consequences of this agreement. Anglo-American Common-Law Contract Law P.118

Discharge or Termination of Contract Discharge of contracts by operation of law The duties under a contract are discharged when there is a legally binding termination of such duty, by a voluntary act of the parties or by operation of law. The usual and normal method by which parties discharge their contractual obligations is through performance of the contractual terms.

Conditions and Promises of Performance The duty of performance under many contracts is contingent upon the occurrence of a designated condition or promise.

1. A condition is an act or event that affects a duty to render a promised performance specified in a contract. A condition may be viewed as a qualification placed upon a promise. 2. A promise or duty is absolute or unconditional when it does not depend on any external events. 3. When the time for performance of an unconditional promise arrives, immediate performance is due. 4. A dependent or conditional promise is not effective until some external event that the parties have specified occurs. 5. An implied condition is one that the parties should have reasonably comprehended to be part of the contract because of its presence by implication.

Types of conditions Condition precedent, condition concurrent, and condition subsequent are types of conditions commonly found in contracts.

1. A condition precedent is an event that must exist as a fact before the promisor incurs any Liability pursuant to it. A law firm partner informs an intern that if the intern successfully passes the bar exam, he or she will be offered a position in the firm. The successful result of the exam must exist as a fact before the employer can be liable, and when that fact occurs, the employer is liable.

2. A condition concurrent must exist as a fact when both parties to a contract are to perform simultaneously. Neither party has a duty to perform until the other has performed or tendered performance. Practically speaking, however, the party who wants to complete the transaction must perform in order to establish the duty of performance by the other party. The performances are concurrently contingent upon each other. Concurrent conditions are usually found in contracts for the sale of goods and contracts for the conveyance of land.

3. A condition subsequent is one that, when it exists, ends the duty of performance or payment under the contract. For example, an insurance contract provides that suit against it for a loss covered by the policy must be commenced within one year of the insured's loss. If the destruction of the insured's building by fire is a risk covered by the policy, the insured must file suit against the insurer within the time specified, or the condition subsequent ends the duty of the company pursuant to the policy. Anglo-American Common-Law Contract Law P.119

Time: The parties agree that time is of the essence and that timely performance of this Agreement is important, and provided that if a party fails to perform on time, the parties will strive to renegotiate the terms.

Satisfactory Performance A contract may be contingent or conditioned upon the satisfaction of a person's opinion. Most courts apply a good faith test in determining whether rejection of a performance was reasonable. If a rejection is made in bad faith, the courts will enforce the contract.

Satisfaction can be measured with reference to the commercial value or quality of the subject matter of the contract. To justify non enforcement of the contract, the performance must be proved to be deficient in these respects so that the dissatisfaction is reasonable and well founded. The test is the objective test of - Would a reasonable person be satisfied? The condition of satisfaction need not be met when the expression of dissatisfaction is made in bad faith, and not related to the quality or commercial value of the subject of the contract.

Breach of Conditions Compliance with a condition can be excused under certain circumstances. As a general rule, if the facts would excuse compliance with a condition, they will also excuse performance of a promise. An excuse for non-performance of a condition can exist in many forms, such as a waiver (the intentional relinquishment of a known right) of performance or the condition. Other excuses for non-performance are the wrongful prevention or hindrance of performance by the other party, impossibility to perform personal services because of death or illness, or impossibility caused by the other party.

Waiver: No waiver of a breach, failure of any condition, or any right or remedy contained in or granted by the provisions of this Agreement shall be effective unless it is in writing and signed by the party waiving the breach, failure, right, or remedy. No waiver of any breach, failure, right, or remedy, whether or not similar, shall constitute a continuing waiver unless the writing so specifies.

Substantial Performance The failure to comply strictly with the terms of a condition will not prevent recovery if there has been substantial performance of the contractual obligation. Courts created this doctrine to prevent forfeitures and ensure justice. Where recovery is permitted for substantial performance, it is offset by damages for injuries caused by failure to render complete performance. Courts determine whether there has been a breach or a substantial performance of a contract by evaluating the purpose to be served, the excuse for deviation from the letter of the contract, and the cruelty of enforced adherence to the contract. If the deviation from the contract was accidental and resulted in only a trivial difference between what was required by the contract, and what was performed, the plaintiff will receive only nominal damages. Anglo-American Common-Law Contract Law P.120

Mutual Discharge by the Parties The two most significant methods of voluntary discharge are accord and satisfaction and novation. An accord is an agreement to accept some performance other than that which was previously owed under a prior contract. Satisfaction is the performance of the terms of that accord.

A novation involves the substitution of a new party while discharging one of the original parties to a contract by agreement of all three parties. A new contract is created with the same terms as the original one, but the parties are different.

Contractual liability may be voluntarily discharged by the agreement by the parties, and by the cancellation, intentional destruction, or surrender of a contract under seal with intent to discharge the duty.

Assignments An assignment of a contract is the transfer to another person of the rights of performance under it. Contracts were not assignable in early common law, but today most contracts are assignable unless the nature of the contract or its provisions demonstrates that the parties intend to make it personal to them and therefore incapable of assignment.

Assignment: Neither party may assign this contract or any rights or obligations hereunder without the prior written consent of the other party, which consent shall not be unreasonably withheld. Any assignment of this contract without such consent shall be null and void. Notwithstanding the foregoing, Seller may assign this contract, without such consent, to a purchaser or transferee of all or a substantial portion of Seller's facilities which is usually producing the product for sale under this contract. Upon Seller's written request, Buyer shall assign this contract to any purchaser or other transferee of all or a substantial portion of the facilities for which Buyer is purchasing the product.

Third-Party Beneficiaries There are only two principal parties to an ordinary contract, the offeror and the offeree. The terms of the contract bind one or both parties to render performance to the other in consideration of receiving or having received the other's performance. Contracts sometimes specify that the benefits accruing to one party will be conferred upon a third person. The effect of a third-party contract is to provide a legal right to enforce the contract to a person who is not a party to it.

A creditor beneficiary is a nonparty to a contract who receives the benefit when a promise is made to satisfy a legal duty. For example, a debtor owed a creditor $500. The debtor lends $500 to a third person, who promises to use the money to pay the debtor's debt. The third person is the promisor, who makes the promise to be enforced. The debtor is the promisee, to whom the promise is made. The contract is between the debtor and the third person, the promisor, and the consideration for the promise is the $500 loan the promisor received from the debtor. The creditor is the third-party beneficiary. If the promisor refuses to pay the creditor $500, the creditor can sue the promisor and prevail. Although the creditor is not a party to their contract, both the debtor and the promisor intend that the creditor should be the beneficiary of the contract and have enforceable rights against the promisor, since he or she is to pay the creditor. The debtor or the creditor can sue to enforce the promisor's promise to pay. The Anglo-American Common-Law Contract Law P.121

creditor can also sue the debtor for the $500 since the debtor had a legal duty to pay this loan. The debtor then can sue the promisor for breach of contract for refusing to pay the creditor.

A donee beneficiary of the contract is a nonparty who benefits from a promise made for the purpose of making a gift to him or her. A donor wishes to give a donee $200 as an anniversary present. The donor plans to sell a television set for $200 to a purchaser, who promises to pay the donee the $200 directly. The donee is a donee beneficiary of the purchaser's promise to pay the money and can enforce this claim against the purchaser. The donee has no claim against the donor, the promisee, since the donor has no legal duty to the donee but is merely giving the donee a gift. The donor will, however, be able to sue the purchaser for refusal to pay the donee, since it would be a breach of the terms of their contract of sale.

The difference between a creditor beneficiary and a donee beneficiary becomes significant when the parties to a contract attempt to alter the rights of the third-party beneficiary. The promisor and the promisee have no right or power to alter the accrued rights of the donee beneficiary without consent unless this power was expressly reserved in the contract, regardless of whether the donee knows about the contract. A donee beneficiary's rights become effective when the contract is made for his or her benefit, regardless of whether he or she knows about the contract. In contrast, a creditor beneficiary's rights vest only when the creditor beneficiary learns of, and assents to, the contract.

Right To Cancel: The Buyer has a right to cancel this Agreement if the Seller fails to ship all or any of the Goods on time. The Seller has a right to cancel this Agreement if the Buyer fails to make any payment required by this Agreement within (number) days of its due date. If either party notifies the other that it will not, or is unable to, perform this Agreement, the party receiving notice is entitled to cancel the Agreement. To make the cancellation effective, the party seeking to cancel must give notice to the other party that the Agreement is deemed canceled. The date of the cancellation will be the date on which the party receives the notice of non-performance.

Frustration of Contract When unexpected events arise, outside the control of the contracting parties, make a contract ‘impossible’ or ‘impracticable’ to be performed, they entitle the frustrated party to rescind the contract without paying damages.

There are two types of impossibility of performance that discharge the duty of performance under a contract:  Subjective impossibility is due to the inability of the individual promisor to perform, such as by illness or death.  Objective impossibility means that the performance cannot be rendered by anyone. The destruction of the subject matter of the contract, the frustration of its purpose, or supervening impossibility after the contract is formed are types of objective impossibility.

The doctrine of impracticability excuses performance of a duty, where that duty has become unfeasibly difficult or expensive for the party who was to perform. Impracticability is similar in some respects to the doctrine of impossibility because it is triggered by the occurrence of a condition which prevents one party from fulfilling the contract. The major difference between the two doctrines is that while Anglo-American Common-Law Contract Law P.122

impossibility excuses performance where the contractual duty cannot physically be performed, the doctrine of impracticability comes into play where performance is still physically possible, but would be very burdensome for the party whose performance is due.

The doctrine of impracticability has three elements:  something unexpected must have occurred;  the risk of the occurrence must not be assigned by the contract or by custom and;  the unexpected occurrence must have rendered performance commercially impracticable.

Hardship Clause Hardship clause is a clause in a contract that is intended to cover cases in which unforeseen events occur that fundamentally alter the equilibrium of a contract resulting in an excessive burden being placed on one of the parties involved.

Hardship clauses typically recognize that parties must perform their contractual obligations, even if events have rendered performance more onerous than would reasonably have been anticipated at the time of the conclusion of the contract. However, where continued performance has become excessively burdensome, due to an event beyond a party’s reasonable control, that it could not reasonably have been expected to have taken into account, the clause can obligate the parties to negotiate alternative contractual terms which reasonably allow for the consequences of the event.

Relation to Force Majeure The hardship clause is sometimes used in relation to force majeure, particularly due to the fact that they share similar features and they both cater to situations of changed circumstances. The difference between the two concepts is that hardship is where the performance of the disadvantaged party has become much more burdensome, but not impossible, while force majeure refers to a party's contractual requirements that have become impossible, at least temporarily. Hardship constitutes a reason for a change in the contractual program of the parties. The aim of the parties remains to implement the contract. Force majeure, however, is situated in the context of non-performance, and deals with the suspension or termination of the contract.

Force Majeure: Performance of any obligation under this contract may be suspended by either party without liability to the other party, to the extent that: an Act of God; war; riot; fire; explosion; accident; flood; sabotage; mechanical breakdown; cancellation of any permit or license; plant shutdown that is beyond a party's reasonable control; Seller's inability to obtain fuel, power, raw materials or equipment from its usual sources at prices it deems, in good faith, to be reasonable; labor trouble, strike, lockout or injunction (whether or not such labor event is within the reasonable control of such party); governmental laws, regulations or orders; or any other cause beyond the reasonable control of such party that delays, prevents, restricts, limits, or renders commercially infeasible or impractical, the performance of this contract or the consumption, sale or use of the product, except as to product already in transit. A Force Majeure event shall also include a party's suspension of operation or closure of a facility that produces or consumes a product because the operation of or product from that facility fails to comply with, or becomes uneconomical because of compliance with, any applicable law or governmental regulation, order, decree or request. The affected party shall invoke this provision by promptly giving written notice to the other party of the nature and estimated duration and effect of the Force Majeure event. The total contract quantity hereunder shall be reduced by the quantity not delivered because of the Force Majeure Event, and the contract shall otherwise remain unaffected; provided, however, that this contract shall automatically terminate if such reduction continues for 180 consecutive days. Anglo-American Common-Law Contract Law P.123

Statute of Frauds The Statute of Frauds was enacted by the English Parliament in 1677 and has since been the law in the United States in varying forms. It was largely repealed in England and Wales in 1954. The Statute of Frauds is a collective term describing the various statutory provisions which render unenforceable certain types of contracts unless they are evidenced by “a writing” or a memorandum. The Statute of Frauds does not mean that oral agreements that fall within the scope of the Statute cannot be made and performed or that they are illegal. It merely means that enforcement may be unavailable if one of the parties refuses to fulfill their obligations.

Traditionally, the Statute of Frauds requires a signed writing in the following circumstances:  promises to answer for the debt or duty of another,  contracts not to be performed within one year from the making thereof,  contracts not to be performed within the lifetime of the promisor,  contracts for the sale of goods for the price of $5000,  contracts in consideration of marriage, (this provision covers pre-nuptial agreements)  contracts for the transfer of an interest in land. (this applies not only to a contract to sell land but also to any other contract in which land or an interest in it is disposed, such as the grant of a mortgage, a rental agreement or an easement,  contracts by the executor of a will to pay a debt of the estate with his own money,  contracts in which one party becomes a surety (acts as guarantor) for another party's debt or other obligation,  securities transactions.

The object of the Statute of Frauds is to prevent perjured testimony in proof of purported contracts of important types and the statute applies only to those enumerated types.

The Statute does not require the writing to be in a single document. It may be assembled from separate writings connected with one another, referred to as a memorandum. Signed and unsigned writings may be read together, provided that they clearly refer to the same subject matter or transaction. At a minimum the memorandum must state with reasonable certainty:  the identity of both contracting parties;  the subject matter of the contract so that it can be identified either from the writing or if the writing is not clear by the aid of extrinsic evidence;  the essential terms and conditions of all the promises constituting the contract and by whom and to whom the promises are made;  ‘signature’ by the party to be charged.

"Signature" merely means any authentication which identifies the party to be charged. An agreement that falls within the Statute of Frauds must be signed by or on behalf of the party against whom enforcement is sought. A signature may include any mark or symbol with which the signer intends to authenticate “a writing”. The signature may be written, printed, stamped, engraved, or otherwise marked on the writing. Signatures may include initials, imprinted signatures, letterheads, and firm logos. Also recognized as valid are digital signatures such as credit card numbers or personal identification codes. Anglo-American Common-Law Contract Law P.124

An agreement may still be enforced however, even if it does not comply with the statute of frauds, in the following situations:  Admission of the existence of a contract by the defendant under oath,  Part Performance of the contract, the agreement is enforceable up to the amount already paid, delivered, etc.,  The goods were specially manufactured for the buyer and the seller began manufacturing them,  Promissory Estoppel can be applied when the charging party detrimentally relies on the otherwise unenforceable contract.

Parol Evidence Rule Tentative terms discussed in preliminary negotiations are subsumed by the provisions of the contract executed by the parties. The parol evidence rule governs the admissibility of evidence other than the actual agreement when a dispute arises over a written contract. When parties put their agreements in writing, all previous and contemporaneous oral agreements merge in the writing. The written contract cannot be modified, altered, or varied by parol or oral evidence, provided it has been legally executed by a person intending it to represent the final and complete expression of his or her intention. This is not the case, however, where there has been some mistake or fraud in the drafting of the document. The parol evidence rule effectuates the presumed intention of the parties, achieves certainty and finality as to the rights and duties of the contracting parties, and prevents fraudulent and perjured claims.

Entire Agreement: This Agreement and all other agreements and schedules referred to in this Agreement constitute(s) the final, complete, and exclusive statement of the terms of the agreement between the parties pertaining to the subject matter of this Agreement and supersedes all prior and contemporaneous understandings or agreements of the parties. This Agreement may not be contradicted by evidence of any prior or contemporaneous statements or agreements. No party has been induced to enter into this Agreement by, nor is any party relying on, any representation, understanding, agreement, commitment or warranty outside those expressly set forth in this Agreement.

Ambiguity Ambiguity in the terms of a contract exists when the court cannot, after applying the rules or tools of interpretation, give a meaning to the language used in an agreement or document. The plain meaning rule is often applied judicially to ascertain whether a contract is ambiguous. If the contract appears to the trial judge to be clear and unequivocal on its face, there is no need for parol evidence. However, when ‘a writing’ is ambiguous, parol evidence is admissible only to clarify, but not vary, the instrument as written. Anglo-American Common-Law Contract Law P.125

Breach of Contract and Remedies Breach of Contract An unjustifiable failure to perform all or some part of a contractual duty is a breach of contract. Such a breach ensues when a party who has a duty of immediate performance fails to perform, or when one party prevents the performance of the other party.

A total, major, material, or substantial breach of contract is a failure to perform properly a material part of the contract. A partial or minor breach of contract is merely a slight deviation from the bargained- for performance. A breach can occur by anticipatory repudiation, whereby the promisor, without justification and before committing a breach, makes an affirmative statement to the promisee indicating that he or she will not or cannot perform the contractual duties.

Remedies for Breach of Contract

Damages Damages are a sum of money awarded by the court as a monetary compensation remedy for an injury caused by a breach of contract. The measure of damages is the amount necessary to recompense the injured party for the losses incurred. The injured party should be placed in the exact same financial position he or she would have occupied if the contract had been performed, that is to receive the “benefit of the bargain”, the net gain that would have accrued under the contract. The injured party is not, however, to be put in a better position than he or she would have occupied had performance taken place.

Types of Damages Compensatory damages are those damages that flow directly from the wrongful conduct of the breaching party. The usual measure of compensatory damages is the amount of money necessary to compensate the non-breaching party for the breach. The plaintiff must be able to prove the amount of damages with reasonable certainty. Damages for lost profits and mental stress are difficult to prove. Compensatory damages, also called actual damages, are typically broken down into two categories: general and special:  General damages arise naturally and logically from a defendant's conduct or breach of contract. They are the immediate, direct, and proximate result of an injury or breach of contract. General damages are not used to hold a defendant liable for remote consequences flowing from an act or omission. Moreover, they cannot be based upon mere speculation or speculation, but must be established with reasonable certainty. They do not have to be specially pleaded, merely proven at trial.  Special or Consequential damages are foreseeable damages that result from a party's breach. Consequential Damages are limited to those losses which were foreseeable, that is in contemplation by the parties at the time the contract was entered into. (Hadley v. Baxendale. 9 Exch. 341(1854). Special damages are recoverable when special circumstances exist which cause some unusual injury to the plaintiff. The plaintiff can only recover special damages if the defendant knew or should have known of the special circumstances at the time he or she entered into the contract. Anglo-American Common-Law Contract Law P.126

Nominal damages are awarded when a plaintiff has suffered an injury caused by defendant's wrongful conduct, but the plaintiff is unable to establish proof of a compensable loss. This is typically a very small sum such as a dollar or a pound, and is meant to be symbolic. Nominal damages are usually awarded only after a plaintiff tries but fails to prove compensatory damages in a case where a real injury occurred, or where there has been a technical invasion of rights or a breach of duty but no substantial loss or injury.

Punitive damages are non-compensatory and are used to punish a defendant who has acted in a willful, malicious, abusive or other outrageous manner. Punitive damages are also known as exemplary damages because they make an example of the defendant in order to deter others. Punitive damages are never mandatory and are only awarded in addition to an award for compensatory damages. Punitive damages are rarely permitted in breach of contract cases.

A contract may contain a provision, called a liquidated damages clause, by which the parties agree in advance to the damages to be paid in the event of breach. The purpose of a liquidated damages clause is to ensure that a reasonable estimate of probable damages is available in case of breach. The liquidated damages clause is designed not only to avoid the problem of determining and proving damages but also to avoid the likelihood of conflict over the amount of damages. Three elements of a valid liquidated damages clause are that:  the clause must reasonably forecast the probable loss due to breach;  the loss anticipated by the breach is difficult to calculate;  the clause must not be intended as a penalty.

When the parties have included a liquidated damage clause in a contract, it will generally be enforced. Additional damages usually cannot be claimed.

Liquidated Damages: Each party understands that a breach of this Agreement will cause the non-breaching party damages that will be difficult to calculate in terms of sales, markets, and goodwill lost. It is agreed that the parties have considered what would be a reasonable estimate of the damages each would suffer if the other were to breach this Agreement. If the Seller cannot deliver the Goods for any reason other than by fault of the Buyer, the Seller will pay to the Buyer as liquidated damages the sum of [currency and amount]. If the Buyer fails to furnish shipping instructions, wrongfully refuses to accept the Goods, or fails to pay the amount due on time, the Buyer will pay to the Seller as liquidated damages the sum of [currency and amount]. If the Buyer infringes the Seller's Intellectual Property, the Buyer will pay to the Seller as liquidated damages the sum of [currency and amount] for each day of continued use. Payment of liquidated damages will not, in any way, affect the Seller's rights to enjoin the Buyer's continued use of the Sellers Intellectual Property.

Duty to Mitigate Damages When a breach of contract occurs, the injured party is required to take reasonable steps to mitigate (reduce or lessen) the damages that he or she may sustain. The injured party may not recover damages for loss that could have been avoided. Thus, the non-breaching party must:  refrain from increasing the amount of losses after notice of breach;  not incur further costs or expenditures;  make reasonable efforts to reduce his or her losses by obtaining a substitute at a reasonable price. Anglo-American Common-Law Contract Law P.127

Partial performance When the defendant has failed to complete performance of an agreement according to its terms, the plaintiff can recover such damages as will compensate him or her to the same extent had the contract been completely performed. The customary measure of damages is the reasonable expense of completion. Completion refers to a fulfillment of the same work, if possible, which does not involve unreasonable economic waste.

Defective performance Damages for defective performance of a contractual agreement are measured by calculating the difference in value between what is actually tendered and what is required as performance under the agreement. If the performance tendered is either of no value or unsuitable for the purpose that the contract contemplated, the proper measure of damages is the sum necessary to repair the defect. If a defect can be easily remedied through repairs, the measure of damages is the price of the repairs performed.

Delay in performance The loss precipitated by the wrongful delay of the performance of a contract is calculated by fixing the rental or use of the property or interest as a result of the loss incurred through increased material and labor expenses, as opposed to what the value would have been, had the contract been performed on time.

Equitable Relief or Equitable Remedies

Reformation Reformation is an equitable remedy that is applied when the written agreement does not correspond to the contract actually formed by the parties, as a result of fraud or mutual mistake in drafting the original document. Quasi-contractual relief for the reasonable value of services rendered is also available, although it applies only when there is no enforceable contract.

Rescission Rescission terminates the contract, and the parties are placed in the position of never having entered into the contract.

Restitution Restitution is a remedy designed to restore the injured party to the position occupied prior to the formation of the contract. Anglo-American Common-Law Contract Law P.128

Specific Performance Specific performance is an equitable remedy by which a person is required to execute, as nearly as practicable, a promised performance because monetary damages are inadequate to compensate for the breach. A contract to sell land is specifically enforceable because land is considered unique and not compensable by money. In addition, property possessing sentimental value and antique or one- of-a-kind articles are viewed as unique, and it is therefore impossible to estimate damages. A personal service contract or an employment contract, however, cannot be specifically enforced because it is against public policy. If, however, the contract excludes a person from performing some act, breach of this negative covenant can be specifically enforced.

Specific Performance: The parties acknowledge that it will be impossible to measure in money the damages to them caused by any failure to comply with the covenants set forth in this agreement, that each such covenant is material, and that in the event of any such failure, the injured party will not have an adequate remedy at law or in damages. Therefore, the parties consent to the issuance of an injunction or the enforcement of other equitable remedies against them to compel performance of all of the terms of their obligations and waive the defense of the availability of relief in damages.

Contract checklist 1. Identity of Parties/Introduction  Name  Type of entity of each party (Corporation, LLP, Partnership, etc.)  Addresses

2. Recitals  Background of agreement  Purpose for entering into the contract

3. Definitions of the terms used in the Contract

4. Obligations of the Parties  What is each side required to do?  By what date?  If something has to be delivered, whose obligation is it and at who’s cost?

5. Terms of the Contract  Is the contract a one time situation or will it last for some designated time period?  How can the term be renewed or extended? Anglo-American Common-Law Contract Law P.129

6. Price/Consideration  What is the price for the product or service?  Is it a fixed price, determined by an outside source, or some other manner?  Who pays any tax?

7. Payment Terms  When is payment due?  Will there be installment payments?  Will interest be charged?  Is there a penalty for late payment?

8. Representations and Warranties  What representations and warranties are to be made by the parties?  Are certain warranties disclaimed (e.g., merchantability or fitness for a particular purpose)?  How long are any warranties good for?

9. Liability  What limitations of liability exist (e.g., no liability for consequential, special or indirect damages)?  Under what circumstances is one party liable (e.g., material breach of agreement or negligent in performing services)?

10. Termination of Contract  When can one party terminate the contract early?  What are the consequences of termination?  What post-termination obligations are there?

11. Confidentiality  What confidentiality obligations are there?  What are the exclusions from confidentiality?

12. Default  What are the events of default?  Does a party have a period to cure a default?  What are the consequences of a default?

12. Dispute Resolution  How are disputes to be handled – litigation, mediation or arbitration?  If arbitration, what rules will govern? Anglo-American Common-Law Contract Law P.130

Letter of Intent – Negotiation of Sales After friendly consultations based on the principles of equality and mutual benefit, …………………………………………………………………………………………...... of …………………………………………………………………………… (‘Party A’) and …………………………………………………………………………………………...... of ……………………………………………………………………………(‘Party B’) have agreed to execute this Letter of Intent to accord the understanding reached during discussions and to indicate their support for continuing negotiations. 1. This Letter of Intent is dated the ……………… day of ………………. 2011. 2. Party A agrees that Party B has the product and ability to undertake transactions …………………………………. for the purpose of supplying product to Part A. 3. The parties agree that discussions between Party A and Party B have greatly advanced the understanding between the parties concerning the products required by Party A and the ability of Party B to provide the products. 4. The parties agree to continue their discussion over the next ……………… with the aim of reaching agreement for the sale and purchase of product. 5. A negotiation agreement would involve Party B providing proof of supply of its product. For its part, Party A would provide proof of payment for the purchase of the product in a form to be agreed in …………………………………………. 6. The parties agree that any transaction to the Directors of each party approving the terms and conditions of the proposed transaction and unless such approval is obtained from the respective Boards, the transaction shall not proceed. 7. If a transaction is to be undertaken in ………………………………...... it shall be in Accordance with the Laws of ……………………………………………………...... 8. The parties agree to meet the proforma and negotiable credit conditions of each party towards establishing a satisfactory product, sales, purchase and delivery schedule of agreement.

SIGNED by: …………………………………………….. DATE ...... Anglo-American Common-Law Contract Law P.131

IMPORTANT PROVISIONS FOR CONTRACTS Preamble This Licensing Agreement is made on the...... day of ...... 20.... between THE UNDERSIGNED MICROTECH INC, a corporation duly organized under the laws of the state of Delaware, United States of America, and having its principal place of business at 155 Lemon Street, New York, New York (hereinafter 'the Licensor') AND ROYAL ENTERPRISES LIMlTED, a private limited company formed under the Companies Act 1985, Company Number……….with its registered office at 240 Kensington High Street London EC9 (hereinafter 'the Licensee')

Recitals or Whereas Clauses WHEREAS 1) The Licensor has developed special techniques for manufacturing microchips from recycled mobile telephones; 2) The Licensee wishes to manufacture these microchips in the United Kingdom using the techniques developed by the licensor; and 3) The Licensor is the owner of certain patents, trademarks, processes and technical knowledge relating to the manufacture of these microchips utilising the new techniques and wishes to make these available to the Licensee NOW THEREFORE, in consideration of the mutual promises and covenants hereinafter set forth, the parties agree as follows: IT IS NOW HEREBY AGREED [by the parties] as follows:

Choice of Law: This Agreement, and any dispute arising from the relationship between the parties to this Agreement, shall be governed by [e.g., French, New York ] law, excluding any laws that direct the application of another jurisdiction’s laws.

Arbitration: "Any dispute, controversy or claim arising under, out of or relating to this contract and any subsequent amendments of this contract, including, without limitation, its formation, validity, binding effect, interpretation, performance, breach or termination, as well as non-contractual claims, shall be referred to and finally determined by arbitration in accordance with the WIPO Arbitration Rules. The arbitral tribunal shall consist of [three arbitrators][a sole arbitrator]. The place of arbitration shall be [specify place]. The language to be used in the arbitral proceedings shall be [specify language]. The dispute, controversy or claim shall be decided in accordance with the law of [specify jurisdiction]."

Attorney Fees Provision: In any litigation, arbitration, or other proceeding by which one party either seeks to enforce its rights under this Agreement (whether in contract, tort, or both) or seeks a declaration of any rights or obligations under this Agreement, the prevailing party shall be awarded its reasonable attorney fees, and costs and expenses incurred. Modification of Agreement: This Agreement may be supplemented, or modified only by the mutual agreement of the parties. No supplement or modification of this Agreement shall be binding unless it is in writing and signed by all parties. Time of the Essence: Time is of the essence in respect to all provisions of this Agreement that specify a time for performance. Anglo-American Common-Law Contract Law P.132

Liability And Claims: NEITHER PARTY SHALL BE LIABLE TO THE OTHER PARTY FOR ANY CONSEQUENTIAL, INCIDENTAL AND/OR SPECIAL DAMAGES. SELLER'S MAXIMUM LIABILITY TO BUYER FOR A CLAIM, SHALL NOT EXCEED THE PURCHASE PRICE OF THE QUANTITY OF product IN RESPECT OF WHICH THAT CLAIM IS MADE.

Jury Trial Waivers: To the fullest extent permitted by law, and as separately bargained-for-consideration, each party hereby waives any right to trial by jury in any proceeding or counterclaim of any kind arising out of this Agreement.

Counterparts: This contract may be executed in one or more counterparts, each of which shall be deemed an original and all of which shall be deemed to be one and the same agreement.

Language: The parties confirm that it is their wish that this contract, as well as any other documents relating to the contract, including notices, schedules and authorizations, have been and shall be drawn up in the English language only.

Notices: Any notice shall be sufficiently given when sent by mail, postage prepaid, or e-mail and received by the recipient at the address set forth herein or such other address as the recipient may by notice designate to the other party.

Headings: The section and subsection headings or titles are included for ease of reference only and do not affect any part of the text or affect its meaning or interpretation.

Severability of Agreement: If any term or provision of this Agreement is determined to be illegal, unenforceable, or invalid in whole or in part for any reason, such illegal, unenforceable, or invalid provisions or part thereof shall be stricken from this Agreement, and such provision shall not affect the legality, enforceability, or validity of the remainder of this Agreement. If any provision or part thereof of this Agreement is stricken in accordance with the provisions of this section, then this stricken provision shall be replaced, to the extent possible, with a legal, enforceable, and valid provision that is as similar in tenor to the stricken provision as is legally possible. Anglo-American Common-Law Contract Law P.133

Contract Drafting and Vocabulary There is vocabulary which is typical of legal documents. In fact, some words are only used in legal documents. They are used to refer to specific times and places in and around documents. Most are formed using ‘here’ and ‘there’. 'here' means 'this' document .... the one you are reading. there' means 'that' document .... the one which is being discussed, not the one you are reading.

Here hereafter ..... in the future - from the production of this document on hereby ..... resulting from this document herein ..... appearing somewhere in this document hereinafter ..... listed later in this document hereof ..... relating to this document or part of it hereto ..... following this document heretofore ..... previous to the production of this document hereunder .... mentioned in this same section of this document herewith ..... accompanying this document

There thereafter ..... from the production of that document until now thereby ..... resulting from that document or decision therefore ..... for that reason or purpose therein ..... appearing somewhere in that document thereinafter ..... listed later in that document thereof ..... relating to that document thereto ..... following that document theretofore ..... in the time before that document was produced therein under .... mentioned in that section of that document therewith ..... accompanying that document thereunto ..... to that or it thereupon ..... in consequence of that, soon or immediately after that Anglo-American Common-Law Contract Law P.134

Where whereas ..... taking into consideration the fact that, when in fact whereat ..... at which place or point, for which reason whereby ..... by what or which means, in accordance with which wherefore ..... for what or which reason wherefrom ..... from where or which wherein ..... in what or which place or respect whereof ..... of what or which means, or of whom whereon .... on what or which whereupon ..... upon which, immediately after which wherever ..... in or to whatever place

Miscellaneous forasmuch as ..... in view of the fact that foregoing ..... previously mentioned or stated, preceding forthwith ...... immediately, without delay inasmuch as ..... seeing that, to such a degree as, to the extent that nevertheless ..... in spite of that notwithstanding ..... in spite of, although, nevertheless whatever ..... anything that, no matter what, of any kind, in any amount whenever ..... at whatever time Anglo-American Common-Law Contract Law P.135

Legal Drafting suggestions: In contracts, it is usual to find the words shall, will, must, and may used over and over again. The words are used in different contexts. In the third person, will refers to a future intention whereas shall indicates an imperative. Legal documents, drafted in the third person, often express obligations using shall.

May is used in the following situations: To express a possibility that something may be done To indicate that one has discretion to do that thing To indicate a wish

May not indicates that a part does not have discretion to do something. Shall not is stronger, indicating a duty not to do something. In summary, use: “will” to state a future fact “shall” to state an obligation “may” to state an option or a right, and “must” to state a condition precedent Draft in the present tense. Draft in the active voice. Ask who is obligated to do something or to refrain from doing something.

Parts of a contract: Declarations are clauses or provisions in a contract where the parties mutually agree and state the private law that will govern their contract. They address questions of jurisdiction, attorney’s fees, assignment, applicable law, notices, damages, waivers, force majeure and arbitration. Warranties are promises that guarantee an obligation of a future performance which become part of the basis of the bargain of the contract. Representations are statements of past facts or existing facts that the parties rely upon as an inducement for entering into a contract. Duty is a legally enforceable obligation to do or refrain from doing certain things. The non-performance of a contractual duty makes the breaching party liable in monetary damages or in equitable relief to the other party. It may excuse the other party's performance, temporarily or permanently. Rights are the converse of duties. A rights possessor is the party to whom the duty is owed. The right entitles that party to invoke the power of the state in the enforcement of that duty, whether the duty is of a statutory or contractual nature. Privilege: a privilege creates a discretionary authority to act or to refrain from acting. A privilege differs from a right in that it has no corresponding duty other than a general duty on everyone to refrain from interfering with the privilege-holder's exercise of the privilege. Condition: a condition is something that must be satisfied before some other legal consequence attaches. Non-satisfaction of a condition simply means that the legal consequence does not attach. A condition thus differs from a duty in that the party charged with satisfying a condition is not liable in damages for a failure to do so. They can be subsequent, precedent or concurrent. They may relate to the conduct of the parties, for example, a seller may have no duty to ship the goods until the buyer has paid in full. Or a condition may relate to external events which are sometimes referred as a 'contingency', as when a seller may have no duty to ship until an embargo ends. Anglo-American Common-Law Contract Law P.136

Hadley v. Baxendale, 9 Exch. 341, 156 Eng. Rep. 145 (1854). Facts A shaft in Hadley’s (P) mill broke rendering the mill inoperable. Hadley hired Baxendale (D) to transport the broken mill shaft to an engineer in Greenwich so that he could make a duplicate. Hadley told Baxendale that the shaft must be sent immediately and Baxendale promised to deliver it the next day. Baxendale did not know that the mill would be inoperable until the new shaft arrived. Baxendale was negligent and did not transport the shaft as promised, causing the mill to remain shut down for an additional five days. Hadley had paid 2 pounds four shillings to ship the shaft and sued for 300 pounds in damages due to lost profits and wages. The jury awarded Hadley 25 pounds beyond the amount already paid to the court and Baxendale appealed.

Issue What is the amount of damages to which an injured party is entitled for breach of contract?

Holding and Rule An injured party may recover those damages reasonably considered to arise naturally from a breach of contract, or those damages within the reasonable contemplation of the parties at the time of contracting. The court held that the usual rule was that the claimant is entitled to the amount he or she would have received if the breaching party had performed; i.e. the plaintiff is placed in the same position she would have been in had the breaching party performed. Under this rule, Hadley would have been entitled to recover lost profits from the five extra days the mill was inoperable. The court held that in this case however the rule should be that the damages were those fairly and reasonably considered to have arisen naturally from the breach itself, or such as may be reasonably supposed to have been in the contemplation of both parties at the time the contract was made. The court held that if there were special circumstances under which the contract had been made, and these circumstances were known to both parties at the time they made the contract, then any breach of the contract would result in damages that would naturally flow from those special circumstances. Damages for special circumstances are assessed against a party only when they were reasonably within the contemplation of both parties as a probable consequence of a breach. The court held that in this case Baxendale did not know that the mill was shut down and would remain closed until the new shaft arrived. Loss of profits could not fairly or reasonably have been contemplated by both parties in case of a breach of this contract without Hadley having communicated the special circumstances to Baxendale. The court ruled that the jury should not have taken the loss of profits into consideration. Vacated and remanded for new trial.

Notes Consequential damages are linked to knowledge and foreseeability at the time of contracting and deal with the recovery of damages for loss other than those arising naturally. Modern courts do not look at the implied tacit agreement discussed in this case, and instead use foreseeability as the cornerstone to determine consequential damages. The object of damages as a remedy in a contract is to make the parties finish in a position they would have been in, had the contract been properly performed. What is reasonably foreseeable at the time of contracting requires evidence of the circumstances under which the parties entered into the contract and the knowledge that they possess. Such knowledge can be imputed to the parties from customary trade practice and other sources. Anglo-American Common-Law Contract Law P.137

Definitions of Key Words

 Assignement: the transfer of rights held by one party—the assignor—to another party—the assignee. The legal nature of the assignment determines some additional rights and liabilities that accompany the act.

 Actual damages: losses suffered as a direct result of an act, or a failure to act, and for which the aggrieved party has a right to compensation.

 Anticipatory repudiation: also called an anticipatory breach, is a term in the law of contracts that describes a declaration by the promising party to a contract, that he or she does not intend to perform his or her obligations under the contract.

 Accord and satisfaction: where one party's obligations under a contract change and consideration is provided in return for the other party's agreement to the change.

 Adhere: be compatible or in accordance with.

 Adequacy of consideration: being able to meet satisfactorily the necessary amount of consideration in a contract.

 Agreement: a contract which is legally binding upon the parties to a contract. agreement for sale: a legal contract between a seller and a purchaser stating the sale price, the settlement date and terms and conditions of sale.

 Bar: to prevent or stop.

 “Benefit of the bargain”: the principle that the aggrieved party is entitled from the party who breached the contract to everything that he or she would have received, including profits, if the breach had not occurred.

 Bid: a formal proposal to buy at a specified price.

 Bilateral contract: a contract which binds both parties to the contract. a promise for a promise.

 Bind: to obligate one in a contract – (past tense) – bound.

 Blackmail: crime of threatening to reveal substantially true information about a person to the public.

 Breach of contract: unjustifiable failure to perform under the terms of a contract when performance is due.

 “Center of gravity”: significant relationship or connection in conflicts of law.

 Comity: legal reciprocity or mutual respect.

 Common/mutual mistake: when the parties to a contract are both mistaken about the same material fact within their contract. They are at cross-purposes. There is a meeting of the minds, but the parties are mistaken. Hence the contract is voidable. Anglo-American Common-Law Contract Law P.138

 Common trade usage: uniform practice or course of conduct followed in certain lines of business or professions that is relied upon by the parties to a contractual transaction.

 Concur: to unite or agree (in action or opinion); to have a common opinion.

 Consideration: money, goods or services given by one party to another to induce them to enter into a contract.

 Contract of agency: an internal bilateral agreement between principal and agent. contract of employment: a contract for work binding upon the employer and the employee.

 Contract under seal: an legal document enforceable only if it was stamped with a seal. conveyance: transfer of title to land.

 Counteroffer: a new offer made as a reply to an offer received; it has the effect of rejecting the original offer, which cannot be accepted thereafter unless revived by the offeror.

 Course of dealing: pattern of normal business conduct between two parties. It is established over a period involving several transactions, and may be used as a reliable indicator of how they intend to deal in the future.

 Covenant: a written promise which derives its validity from being intended, witnessed and signed.

 Discharge: free from obligations or duties, to dismiss or release.

 Disclaim: to specify or restrict the scope of rights and obligations that may be exercised and enforced by parties in a legally recognized relationship.

 Duress: unlawful pressure exerted upon a person to force that person to perform an act that he or she ordinarily would not perform.

 Duty: legal obligation imposed on an individual; that which one is morally or legally obligated to do; work that you are obliged to perform for moral or legal reasons.

 Easement: an easement is a non-possessory interest to use real property in possession of another person for a stated purpose.

 Executed contract: a contract which is completely performed.

 Executory contact: a contract which is either partially performed or totally unperformed.

 Express contract: a contract which is clearly defined as such by both parties.

 Exemplary: damages which are awarded over and above simple compensatory damages.

 Forebearance: delay in enforcing rights or claims or privileges; refraining from acting.

 General damages: compensation for losses that can readily be proven to have occurred and for which the injured party has the right to be compensated. Anglo-American Common-Law Contract Law P.139

 Good faith: good, sincere and genuine attempt or effort of intention - a party's legitimate and honest efforts to meet their obligations in a given situation.

 Guardian: a person who legally cares for persons or property.

 Illegal contract: a contract which does not only disrespect criminal law, but which is also contrary to public interest.

 Illusory: deceptive, imaginary, unreal.

 Implied-in-fact contract: a contract term which can be inferred from the conduct of the promisor and the promisee or from the circumstances of the promise.

 Implied-in-law: a contract which is a fiction but enforced by the courts to avoid the unjust enrichment of a party.

 Inequity: unfairness; injustice by virtue of not conforming with rules or standards, a lack of justice; injustice; an unjust act.

 Invitation to treat: a situation, such as display of goods, which may lead to the formation of a contract but which is distinguished from an offer in that it does not show specific intention to enter into legal relations.

 Legal person: legal entity through which the law allows a group of natural persons to act as if they were a single composite individual for certain purposes.

 Letterhead: specialized paper with a logo or name printed at the top.

 Malicious: wanting to cause harm or pain to another.

 “Meeting of the minds”: mutual agreement, mutual assent.

 Memorandum: informal written notes of a transaction.

 Misrepresentation: a false statement of facts made by a party during contractual negotiations, which may lead to rescission of a contract, if acceptance results from reliance on the deceptive representation. (in tort and criminal law, known as fraud).

 Nominal damages: a small amount of money awarded to a plaintiff in a lawsuit to show he or she was right but suffered no substantial harm. (symbolic damages)

 Novation: The substitution by agreement of a new obligation for an existing one or substituting new parties to an existing obligation.

 Proximate: closest in degree or order (space or time) especially in a chain of causes and effects.

 Offer: a specific proposal to enter into a contract, which can be oral, written or by conduct.

 Promissory estoppel: the doctrine allowing recovery on a promise made without consideration when the reliance on the promise was reasonable, and the promisee relied to his or her detriment. Anglo-American Common-Law Contract Law P.140

 Punitive damages: (termed exemplary damages in the United Kingdom) are damages intended to reform or deter the defendant and others from engaging in conduct similar to that which formed the basis of the lawsuit.

 Quasi-contract: a contract which is a fiction but the act giving rise to it is considered as a contract, therefore enforced by the courts to avoid the unjust enrichment of a party.

 Reasonable person: legal fiction in common law representing an objective standard against which any individual's conduct can be measured.

 Receipt: acknowledge, reception, the act of receiving.

 Reformation of contract: improve by alteration or correction of errors or defects and put into a better condition.

 Rescission: the cancelling of a contract which may be ordered by a court when there has been a breach or when a factor such as misrepresentation has affected the formation of the contract. revocation of a contract (to revoke): the cancelling of a contract. revocation of an offer: the cancelling of an offer which can be made by the offeror as long as acceptance has not occurred.

 Sale of Goods Act: legislation in the United Kingdom relating to the sale of goods.

 Securities: financial instruments (such as bonds or stocks) that can be traded freely on the open market. solemn: dignified and somber in manner or character and committed to keeping promises.

 Special damages: damages that can be awarded to a plaintiff in a lawsuit upon proof of specific monetary loss.

 Subsum: to include or place within something larger or more comprehensive :to encompass as a subordinate or component element.

 Term: A condition in a contract that limits or defines its scope. A term can be either implied or expressed.

 Title: an established or recognized right usually ownership of an asset.

 Tort: A wrongful act which results in injury or damage and on which a civil action may be based.

 U.C.C: The Uniform Commercial Code (UCC or the Code), first published in 1952, is one of a number of uniform acts that have been created to harmonize the law of sales and other commercial transactions in all 50 states within the United States of America.

 Unconscionable: oppressive, overreaching or “shocking” to the conscience.

 Undue influence: taking advantage of another person because one holds a unique position of trust.

 Unequivocal: clearly defined or formulated.

 Uphold: to keep or maintain, support against an opponent, decision of an appellate court not to reverse a lower court decision. Anglo-American Common-Law Contract Law P.141

 Unilateral mistake: where only one party to a contract is mistaken as to the terms or subject-matter contained in a contract.

 Unjust enrichment: the fact of benefiting from an other party without giving proper compensation.

 Unilateral contract: a contract which binds only the promisor.

 Valid contract: a contract which gives rise to the full force and effect of the promise.

 Vitiate: to make ineffective

 Vest: to give an immediately secured right of present or future enjoyment.

 Void contract: an agreement which is not legally binding for various reasons (misrepresentation, illegality etc.).

 Voidable contract: a contract which comes into existence, but which may be challenged because of the actions of one of the parties.

 Warranty: an express or implied promise that something in furtherance of the contract is guaranteed.

 Willful: the planning and desire to perform an act.

Questions 1) What form can an enforceable contract take?

2) When do third-parties possess enforceable rights in a contract?

3) Upon which grounds related to the formation of a contract may its validity be attacked?

4) What are the elements of an enforceable contract?

5) What are the essential terms of a contract?

6) What is consideration?

7) What legal remedies are available if an agreement is entered into under fraud or duress?

8) What are the rights given to third-party beneficiaries to a contract?

9) What is the difference between impossibility and impracticability of contract? Anglo-American Common-Law Contract Law P.142

Sources for this chapter:

1) “The English of Law: U.S. Law & Politics” / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Mohammedi, Michel Perdu, William Yeago et al. Editeur: Belin 2007

2) “The English of Law: England and Wales” / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Mohammedi, Michel Perdu, William Yeago et al. Editeur: Belin 2007

3) International Legal English / Lindner/Translegal – William Yeago Cambridge University Press 2006

4) Black’s Law Dictionary West Publishing – sixth edition

www.findlaw.com/ www.law.com/ www.dictionary.law.com/ www.freeadvice.com www.lawexperts.com ANGLO-AMERICAN COMMON-LAW TORT LAW P.143

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY ANGLO-AMERICAN6 COMMON-LAW TORT LAW ANGLO-AMERICAN COMMON-LAW TORT LAW P.144

ANGLO-AMERICAN COMMON-LAW TORT LAW

6Anglo-American Common-Law Tort Law P.145 Common Law Intentional Torts P.146

Intentional Torts to the Person P.148

Intentional Torts to Property P.151

Defenses to Intentional Torts P.153

Non-Intentional Torts – Negligence P.156

Defenses to Negligence P.162

Strict Liability P.164

Product liability P.165

Sample Tort Complaint for Personal Injury P.166

English Tort Law Case Precedents P.168

Definitions of Key Words P.170

Questions P.174 ANGLO-AMERICAN COMMON-LAW TORT LAW P.145

ANGLO-AMERICAN COMMON-LAW TORT LAW

After completing this lesson, one should:  Understand the general elements of the prima facie case in the various types of tortious conduct  Have an overview of intentional and non-intentional torts  Be familiar with the relevant privileges and defenses that can be raised in tort law  Analyze the underlying principles justifying and limiting liability in tort  Understand the concept of strict liability 6 Appreciate how and in what circumstances modern products liability may be applicable  Be familiar with the types of Tort damages and applicable remedies.

Anglo-American Common-Law Tort Law

A tort is a private wrong (civil as opposed to criminal) resulting from a breach of a legal duty derived from society's expectations regarding proper and improper conduct. The word tort comes from the Latin term “torquere”, which means "twisted or wrong." A person whose rights have been invaded and who has suffered an injury may bring a civil action to recover monetary damages suffered because of the breach of his or her rights. Unlike actions for breach of contract, tort actions are not dependent upon an agreement between parties. Such rights or duties may derive from either statutory law or common law. In a tort action, an injured party sues to obtain compensation for the damages that he or she sustained as a result of the defendant's wrongful conduct. The fundamental purpose of tort law is to compensate the injured party, not necessarily to punish the wrongdoer as in criminal law. However, punitive damages (compensation in excess of actual damages) may be awarded if the defendant's conduct was intentional or grossly negligent.

The law of torts serves four objectives:  it seeks to compensate victims for injuries suffered by the culpable action or inaction of others,  it seeks to shift the cost of such injuries to the person or persons who are legally responsible for inflicting them,  it seeks to discourage injurious, careless, and risky behavior in the future,  it seeks to vindicate legal rights and interests that have been made ineffectual, compromised, or diminished.

In economic affairs, tort law provides remedies for businesses that are harmed by the unfair and deceptive trade practices of a competitor. In the workplace, tort law protects employees from the intentional or negligent infliction of emotional distress. Tort law also helps regulate the environment, providing remedies against both individuals and businesses that pollute the air, land, and water to such an extent that it amounts to a nuisance. When a loved one is killed by a tortious act, surviving family members may bring a wrongful death action to recover financial losses. Tort law also governs a wide range of behavior in less personal settings as well, such as the operation of motor vehicles on public roadways. ANGLO-AMERICAN COMMON-LAW TORT LAW P.146

Crime v Tort

Conduct that is a tort may also be a crime. Conduct that unreasonably interferes with someone else's interest is frequently both a tort and a crime. Tort law is imposed by the state on all its citizens. A tort is a breach of a civil duty owed to someone else. It is differentiated from criminal wrongdoing, which involves a breach of a duty owed to society. One who commits a tortious act is called a tortfeasor. The equivalent of tort in civil law jurisdictions is “delict”. Most crimes involve socially unacceptable conduct that unreasonably interferes with another's interests such as arson, burglary, manslaughter, murder, rape, and robbery. Criminal actions are brought by the government and a prosecutor, while tort actions are initiated by private citizens. The burden of proof in a tort action is “preponderance of the evidence" (known as the ‘balance of probabilities’ in English law), which is much lighter than the state's burden in a criminal action ("beyond a reasonable doubt"). Therefore it is possible to prevail in a tort action, while the state may not necessarily succeed in its related criminal prosecution, even with the exact same facts or evidence. Thus, differentiating between a tort and a crime is essential. A tort is any socially unreasonable conduct, which is not contractual, for which a court of law will grant monetary damages or an equitable remedy to compensate an individual for his or her injury while a crime is an offense against the public and has little, if anything, to do with compensating the victim of the crime.

Classification of Torts

Torts can be classified into three general categories:  intentional torts - wrongs that wrongdoers intend to commit,  negligent torts - unintentional wrongs that breach a duty to an individual,  strict liability - liability imposed without fault.

Common Law Intentional Torts An intentional tort is any deliberate interference with a legally recognized interest, such as the rights to bodily integrity, emotional tranquility, dominion over property, seclusion from public scrutiny, and freedom from confinement or deception. These interests are violated by the intentional torts of assault, battery, trespass, false imprisonment, invasion of privacy, conversion, misrepresentation, and fraud. Intentional torts are any conscious deliberate acts that are reasonably foreseeable to cause harm to an individual and do so. Intentional torts have several subcategories, including torts against the person and intentional interference with the property rights of the claimant (plaintiff).

To establish a prima facie case (“one sufficient on its face to recover damages”) for intentional tort liability, the plaintiff generally must prove the following:  An act by the defendant  Causation  Intent ANGLO-AMERICAN COMMON-LAW TORT LAW P.147

Act - The "act" requirement for intentional tort liability refers to a volitional movement by the defendant.

EXAMPLE 1: Bruce pushed Mike into Cindy. Bruce has committed a volitional act; Mike has not.

Causation is the "causal relationship between conduct and result". That is to say that causation provides a means of connecting conduct with a resulting effect, typically an injury or damage to one’s property. Causation limits one's liability to results "proximately caused" by, or connected to, one's conduct.

EXAMPLE: Bob wrongfully discharged Pete from his job. Pete, frustrated and angry, robbed a bank and injured a guard. If Pete had not been discharged, he probably would not have injured the guard. But the injury was not a reasonably foreseeable consequence of Bob’s action. Because his conduct was not the proximate cause, Bruce is not liable for the guard's injury.

Intent is a mental attitude with which an individual acts, and therefore it cannot ordinarily be directly proved but must be inferred from surrounding facts and circumstances. Intent refers only to the state of mind with which the act is done or omitted. Intent may be either specific or general. Intent is specific if an actor "intends" the consequences of his or her conduct to be the objective for these consequences. Intent is general when an actor knows with substantial certainty that these consequences will result. General intent is also referred to in many jurisdictions as gross negligence in that the actor did not intend his act to injure anyone, but he or she ‘should have known’ the consequences of their act.

EXAMPLE: Betty pulled a chair out from under James as he was about to sit down. Even if Betty did not desire that James hit the ground, she knew with substantial certainty that James was trying to sit down and that he would hit the ground if the chair were removed. She would have the necessary intent (general intent) for battery and be liable for any injuries.

A doctrine in tort law provides that if a defendant intends harm to A, but harms B instead, the "intent" is said to be "transferred" to the harm occurred by the actual victim. This is a legal fiction, created in order to accomplish the desired result in terms of liability.

EXAMPLE: Sam tried to hit Bob, intending only to frighten him. Sam's fist struck Larry instead. Sam's intent to commit assault on Bob was transferred to Larry, and Sam's act constituted a battery on Larry. ANGLO-AMERICAN COMMON-LAW TORT LAW P.148

Intentional Torts to the Person (Trespass to the Person) Battery

Battery is the intentional unprivileged and unwanted harmful or offensive contact with a person or to something closely associated with them such as their hat or their purse. The contact can be by one person (the tortfeasor) of another (the victim), or the contact may be by an object brought about by the tortfeasor. For example, the intentional contact by an automobile driven by the tortfeasor against another person is a battery. The degree of harm suffered by a victim will often determine the type of damages requested in a lawsuit.

Assault

Assault is an act by the defendant that causes a reasonable apprehension or fear to the plaintiff of immediate harmful or offensive contact (a battery). Generally, it must be shown that the defendant threatened to use force and had the apparent present ability to carry-out his or her threat. Words alone traditionally do not constitute an assault. However, if the plaintiff is aware of the defendant's conduct and reasonably believes to be threatened, that is, a reasonable person in the position of plaintiff would, under the circumstances, have been in apprehension for his or her own safety as a result of the defendant's conduct, an assault would exist.

EXAMPLE: As a practical joke Bob points a toy gun at Jim. Was there the intent to cause a threat to Jim? If so did Jim really believe it was a real gun?

False Imprisonment

The tort of false imprisonment or false arrest can be defined as intentionally causing the confinement of another without consent or legal justification. Actual physical force is not required. The mere threat, express or implied, of physical harm, the existence of physical barriers, or a threat to the plaintiff’s property may suffice. Obstructing a person's freedom of movement is not false imprisonment as long as there is a reasonable means of escape or way out. The majority of false imprisonment cases arise from the detention of persons accused of shoplifting or police arrest without probable cause.

Intentional Infliction of Emotional Distress

Often known as the tort of "outrage," this tort may be defined as an act or the use of words by a person with the intent of causing another person to experience "shock." Outrageous conduct is behavior that transcends the bounds of human decency. No physical injury or any threat thereof need occur. Mere words may be enough for intentional infliction of emotional distress. In the UK this tort is known as the Intentional Inflection of Mental Shock or simply as the rule of Wilkenson v Downton, the 1897 case which created it as a tort.

EXAMPLES: Harassing phone calls by a collection agency between 1 and 5 a.m.; bad-faith refusal to pay an insurance policy; placing a snake in another's bed as a joke or sexual harassment at the workplace. ANGLO-AMERICAN COMMON-LAW TORT LAW P.149

Invasion of Privacy

The intrusion into the personal life of another, without just cause, can give the person whose privacy has been invaded a right to bring a lawsuit for damages against the person or entity that intruded.

A public figure is a person who has achieved a certain degree of recognition in the public sphere such as politicians, entertainers, or professional athletes. Public figures are not protected in most situations, since they have placed themselves, usually voluntarily in the public eye, and their activities (even personal and sometimes intimate) are considered newsworthy and therefore, of legitimate public interest. Public figures are expected to tolerate more inquiry than other people, and consequently have more difficulties in winning cases surrounding the issues of defamation and privacy.

However, an otherwise non-public individual has a right to privacy from:  Appropriation of a name or likeness (the right of publicity) is the use of another's name or likeness for the benefit of the defendant, for example, using one’s photo in advertising without authorization. Public persons may however enforce this invasion of privacy violation.  Publicity given to private life (public disclosure of private facts) results in liability, if a matter that is highly offensive to a reasonable person and is not of legitimate concern to the public is publicized by the defendant. An example is a newspaper article reporting that a person who is not a public figure and has not been involved in recent newsworthy actions served a prison sentence many years ago. Thus, publication in this context means making private facts public knowledge, not mere communication to another person. Moreover, even though the publicized information is truthful, it will constitute a tort.  Publicity placing a person in false light – when one person publishes information in such a manner as to shed a false light upon the integrity or character of another person. Examples include a newspaper publishing an innocent person's picture as part of a story about sex offenders or reporting that someone was involved in a domestic dispute when, in fact, there was no such dispute.  Intrusion upon seclusion is an invasion of the solitude or private affairs or concerns of another. The defendant is liable if the intrusion would be highly offensive to a reasonable person. Intrusion may include such actions as physical entry into the plaintiff’s home, unauthorized electronic surveillance, or examination of private papers without consent. In the UK there is no tort law which recognizes the right to privacy (see Kaye v Robertson) 1991 FSR 62 and Wainwright and another (Appelants) v Home Office (Respondents) 2003, UKHL 53; 2003, 3 WLR 1137), this is being protected under Article 8 of the European Convention of Human Rights.

Defamation

Generally speaking, defamation is the issuance of a false statement about another person, which causes that person to suffer harm. Under common law, slander was a defamatory ‘spoken’ statement, while libel referred to any other form of communication such as ‘written’ words or images. Today, slander is any type of defamation with no permanent record, usually an oral representation, while libel involves the making of defamatory statements in a printed or fixed medium, such as a magazine or newspaper, a letter, a website posting, an email, a picture, or a radio or TV broadcast. The law treats slander differently from libel: with slander, you have to prove you suffered damages, in the form of financial loss, to get compensation. But with libel, the law presumes you suffered damages. ANGLO-AMERICAN COMMON-LAW TORT LAW P.150

Typically, the elements of a cause of action for defamation include:  a false and defamatory statement concerning another;  the unprivileged publication of the statement to a third party (that is, somebody other than the person defamed by the statement);  damage to the plaintiff.

Damages are typically to the reputation of the plaintiff. Most jurisdictions also recognize "per se" defamation, where the allegations are presumed to cause damage to the plaintiff.

Typically, the following may constitute “defamation per se”:  attacks on a person's professional character or standing;  allegations that an unmarried person is unchaste;  allegations that a person is infected with a sexually transmitted disease;  allegations that the person has committed a crime of moral turpitude.

While actions for defamation have their roots in common law, most jurisdictions have now enacted statutes which modify the common law.

They may:  change the elements of the cause of action,  limit when an action may be filed, or  modify the defenses to an action for defamation.

Some may even require that the defendant be given an opportunity to apologize before the plaintiff can seek non-economic damages.

Deceit

The tort of deceit, also known as "fraud, is founded on the concept that a falsehood is made with intention to influence the acts of the party receiving it. Fraud is an intentional deception made for personal gain or to damage another individual. It is for the injured party to prove the facts, which give rise to the dishonesty, including the state of mind of the person making the misrepresentation and reliance. A statement need not be affirmative to be fraudulent. When a person has a duty to speak, silence may be treated as a false statement. In order to sustain the cause of action of deceit one must prove six elements:  that a material representation was made,  the representation was false,  when the representation was made, the speaker knew it was false or made it recklessly without any knowledge of the truth and as a positive assertion,  the speaker made the representation with the intent that the other party should act upon it,  the party acted in reliance on the representation,  the party thereby suffered injury. ANGLO-AMERICAN COMMON-LAW TORT LAW P.151

EXAMPLES: an individual makes a false insurance claim to their insurer in the case of a automobile accident. The seller of a car with a defective engine tells the buyer the car is in excellent running condition. A real estate agent fails to disclose that a home is built on a toxic waste dump.

Improper Use of Legal Procedure

Unjustified resort to the legal system may result in the torts of malicious prosecution or abuse of process.

The tort of malicious prosecution of a criminal or civil action involves proof of three elements:  the prosecution complained of was without probable cause,  the proceedings ended favorably for the person bringing the malicious prosecution suit, and  the initiator of the proceedings acted with malice (for an improper purpose).

In a suit for malicious prosecution of a civil action, a fourth element must be shown: that the plaintiff suffered actual harm. However, a criminal prosecutor acting in his or her official capacity is absolutely immune from tort suits for malicious prosecution.

Intentional Torts to Property (Trespass to Land and Chattels) Intentional torts may cause physical damage to a person's property or interference with his or her property rights. This area of tort law governs the various liabilities violating rights regarding ownership or possession of real property (immoveable property such land, buildings or structures) and chattels (moveable or personal property).

Trespass to land

The unauthorized entry of a person or thing on to the land of another is known as trespass. The basis of the tort is the right to exclusive possession of land, including the surface, the area beneath the land, and even the air above (but not that above the minimum altitude for flight).

There must be an actual intentional physical invasion of land without the plaintiff’s consent caused by the defendant's conduct. Most courts hold that, if a person is on land, intends to be on that land, and does not have permission to be there from the person with the possessory interest in the land, he or she is liable for trespass even if his or her presence is based on a good faith mistake, such as ignorance of boundary link or ownership.

No actual damage to land is necessary to bring and win a suit for trespass.

Nuisance

Nuisance is the unlawful and unreasonable interference with the use and enjoyment of another landowner. Nuisances typically involve noise, odors, or similar activity rather than physical invasion. ANGLO-AMERICAN COMMON-LAW TORT LAW P.152

Determining the presence or absence of nuisance requires courts to balance the competing interests of the parties' respective uses of their property.

Nuisances may be private or public. To recover under a theory of private nuisance, the landowner or occupant must establish a substantial lessening of the enjoyment of his or her land by the alleged nuisance and, if successful, may obtain damages or injunctive relief. A public nuisance is an activity that harms members of the public, not necessarily their property. A suit to stop a public nuisance must usually be brought by a government agency, but private parties may obtain damages or injunctive relief if they suffer harm unique from that experienced by the general public.

EXAMPLES: Neighbors playing music too loud, or their dog barking all the time; factories polluting the air or rivers.

Defendants sometimes may argue that a plaintiff "came to a nuisance" by moving on to property next to an already operating source of interference, such as knowingly buying an apartment over a nightclub or a house located near an airport or a train rail system.

Trespass to chattels

Trespass to chattels is the intentional and harmful interference with possession of chattels (personal property) without the consent of the person with the right to its present possession. Personal property means any movable or portable property. Trespass to chattels (any tangible, movable property) generally involves temporary use of, or slight harm to, an item of property. The plaintiff's damages ordinarily would be the value of the loss of use of the item, plus any diminution in value caused by defendant's use. One with a right to possession can bring suit for trespass to chattels; they need not be the owner.

EXAMPLE: Henry had never driven a Rolls Royce before. Henry saw one parked at the airport with the keys in it and took it for a 10 minute drive, not intending to steal it. The owner returned and discovered that his automobile was missing, just as Henry was returning it to its original parking space. Henry had actually interfered, with the owner's right to possession. Henry’s actions were the cause of the owner's damages. Loss of possession itself, regardless of the length of time involved, is sufficient to satisfy the legal damage requirement.

Conversion

Conversion consists of treating property in a manner that is utterly inconsistent with the true owner's rights. Conversion is an intentional exercise of dominion or control over a chattel that so seriously interferes with the rights of the true owner that the one interfering is liable for its full value. It is the wrongful taking of another's property for an indefinite period, (theft in criminal law), or destroying or selling the property of another without their knowledge or permission. In an action for conversion, the owner recovers the full value of the property at the time of the conversion.

EXAMPLE: In the previous example, had Henry kept possession of Owner's Rolls Royce by keeping the automobile and not returning it, Henry would have committed the tort of conversion as well as the crime of theft. ANGLO-AMERICAN COMMON-LAW TORT LAW P.153

Sometimes, if possible, the owner of converted property may seek to have the actual property returned. In such a case, a court may issue an order called a "writ of replevin" (in some states this is referred to as "claim and delivery").

Defenses to Intentional Torts Consent

Express consent: If the plaintiff expressly consents to an intentional interference with his person or property, the defendant will not be liable for that interference.

EXAMPLE: Paul says to Dan, "Go ahead, hit me in the stomach- I'll show you how strong I am." If Dan does so, Paul's consent prevents Paul from suing for battery.

Implied consent: Existence of consent may also be implied from custom or from the circumstances.

EXAMPLE: When one rides the metro at 9 am and there are a lot of passengers, it is very likely that there might be some physical contact with other passengers. This contact will be implied by taking the metro during this time.

Lack of capacity: Consent will be invalidated if the plaintiff is incapable of giving that consent, because he or she is a minor, intoxicated, or unconscious.

Consent as a matter of law: If the plaintiff is incapable of truly giving consent, consent will be implied "as a matter of law" if these factors exist: 1) P is unable to give consent; 2) immediate action is necessary to save P's life or health, (3) there is no indication that P would not consent if able; and 3) a reasonable person would consent in the circumstances.

EXAMPLE: The plaintiff is brought unconscious to the emergency room of the defendant, a hospital. The defendant can perform emergency surgery without the plaintiff's actual consent. The consent will be implied as a matter of law. Therefore, the plaintiff cannot sue for battery.

Exceeding scope of consent: Even if the Plaintiff does consent to an invasion of his or her rights, Defendant will not be protected by privilege if he or she goes substantially beyond the scope of that consent.

EXAMPLE: In a boxing match the boxers expressly and impliedly consent to physical contact, but should the defendant hit the plaintiff below the waist, which is against boxing rules, there is no consent. ANGLO-AMERICAN COMMON-LAW TORT LAW P.154

Self-Defense

A person generally is entitled to use reasonable force to prevent any threatened harmful or offensive bodily contact, and any threatened confinement or imprisonment. Self-defense may be used not only where there is a real threat of harm, but also where the defendant reasonably believes that there is one. The defense of self-defense applies only where defendant uses the force needed to protect himself against harm.

Retaliation: Thus D may not use any degree of force in retaliation for a tort already committed.

EXAMPLE: Paul hits Dan with a rock. Ten minutes later, Dan hits Paul with a rock, in retaliation. Dan has committed battery on Paul, because Dan's act was not done in true self-defense.

Degree of force: Only the degree of force necessary to prevent the threatened harm may be used. If defendant uses more force than necessary, he or she will be liable for damage caused by the excess. Defendants may not use deadly force unless they are in danger of death or serious bodily harm.

EXAMPLE: Peter attacks David with his fists, in a way that does not threaten David with serious bodily harm. Even if there is no other way for David to prevent the attack, David may not use his gun to shoot Peter, even if the shot is intended only to injure Peter. David must defend the attack without the use of deadly force.

Defense of Others

A person may use reasonable force to defend another person against attack. The same rules apply as in self-defense: the defender may only use reasonable force, and may not use deadly force to repel a non-deadly attack.

Defense of Property

A person may generally only use reasonable force to defend his or her property both land and chattels. The owner may use deadly force only if the owner reasonably believes that without deadly force, death or serious bodily harm will occur.

EXAMPLE: Dennis sees Paul trespassing in his backyard. Dennis asks Paul to leave, but Paul refuses. Even if there is no way to make Paul leave, except by shooting at him, Dennis may not do so, since Paul’s conduct does not threaten Dennis with death or serious bodily harm.

However, a homeowner is generally allowed to use deadly force against a burglar, provided that he or she reasonably believes that nothing short of this force will safely keep the burglar out. ANGLO-AMERICAN COMMON-LAW TORT LAW P.155

Recapture of Chattels

A property owner generally has the right to use reasonable force to regain possession of chattels taken from him or her by someone else. This privilege exists only if the property owner is in "fresh pursuit" to recover his property. That is, the owner must act without unreasonable delay. The force used must be reasonable, and deadly force can never be used. The privilege exists only if the property was taken wrongfully from the owner. Where a merchant reasonably believes that a person is stealing his property, many courts give the merchant a shopkeeper’s privilege, to temporarily detain the person for investigation. The detention must be limited to a short time, generally 10 or 15 minutes or less, just long enough to determine whether the person has really shoplifted or not. Then, the police must be called (the merchant may not arrest the suspect himself).

Necessity

Under the defense of "necessity", the Defendant has a privilege to damage the property interest of the Plaintiff, where it is necessary in order to prevent great harm to third persons or to the defendant. If interference with the land or chattels of another is necessary to prevent a disaster to the community or to many people, the privilege is that of ''public necessity."

Example: Firefighters demolish David's house, in which a fire has started, because that is the best way to stop the fire from spreading much further. The firefighters and the city employing them are not liable in tort, because they are protected by the privilege of public necessity.

If a person prevents injury or damage to himself or others, this is protected by the privilege of "private necessity," if there is no less damaging way of preventing the harm.

EXAMPLE: Adam, while sailing, is caught in a very violent storm. To save his life, he may secure his boat at a dock owned by Bill, and will not be liable for trespass.

Where the privilege of private necessity exists, it will be a complete defense to a tort claim where the plaintiff has suffered no actual substantial harm (as in the above example). But if actual damage occurs, the plaintiff must pay for the damage he or she has caused.

EXAMPLE: On the facts of the above example, if Adam's boat slammed into Bill's dock and damaged it, Adam would have to pay. ANGLO-AMERICAN COMMON-LAW TORT LAW P.156

Arrest

Arrest with warrant: Where a police officer executes an arrest with an arrest warrant that appears to be correctly issued from a judge, he or she will not be liable even if it turns out that there was no probable cause or the procedures used to get the warrant were not proper. Arrest without warrant: A police officer may make a warrantless arrest for a crime, if the offense is being committed or seems about to be committed in his presence (“plain view”). A citizen in many common law jurisdictions may do the same. One making an arrest may not use more force than is reasonably necessary. Where the arrest is made to prevent a serious crime, which threatens human life or safety, even deadly force may be used, if there is no other way to prevent the crime. But where the crime does not involve such danger, deadly force may not be used. If a crime has already been committed, the police may use deadly force only if the suspect poses a significant threat of death or serious physical injury to others.

EXAMPLE: An officer spots a burglar escaping after his crime. The officer knows that the burglar is unarmed and unlikely to be violent. The officer may not shoot at the burglar to arrest him, even if there is no other way to make the arrest.

Non-Intentional Torts - Negligence Negligence involves conduct that produces an unreasonable risk of harm. Failure to exercise the degree of care that a person of ordinary prudence would exercise under the same circumstances is negligence. Negligence is decided on a case-by-case basis. It is impossible to have a specific statutory code that would define every conceivable act or omission that could be considered negligent. Negligence is conduct that falls below the standards of behavior established by law or society for the protection of others against unreasonable risk of harm.

EXAMPLE: The driver of an automobile intentionally hits a pedestrian. The driver has committed the intentional tort of battery and a crime as well. However, if the driver hits and injures a person accidentally without intent and failed to use due care, he or she has been negligent.

To establish a cause of action for negligence, the plaintiff is required to prove the following four elements:  the defendant owed a duty to conform to a specific standard of conduct for the protection of the plaintiff against an unreasonable risk of injury,  there was a breach of that duty by the defendant,  the breach was both a cause in fact and proximate cause of plaintiff’s injury,  damage to the plaintiff's person or property resulted. ANGLO-AMERICAN COMMON-LAW TORT LAW P.157

Duty

A general duty of care is imposed regarding all human activity. Although there are divergent views on who owes a duty of care and when such duty arises, it is commonly agreed that, when a person engages in any activity, he or she is under a legal duty to act as an ordinary, prudent, reasonable person. In general, a duty of care arises whenever a person should foresee that his or her conduct will cause an unreasonable risk of harm to others.

EXAMPLE: Henry might not produce an unreasonable risk of harm to others by driving his car on a deserted highway at 100 kilometers per hour, but this same conduct in a city would probably produce such a risk.

Ordinarily, no duty is imposed upon a person to take precautions against events that cannot be reasonably foreseen. The general rule is that a duty of care is owed only to a foreseeable plaintiff or a class to which the plaintiff belongs. Foreseeability is a concept used to limit the liability of a party to the natural and probable consequences, a person of ordinary prudence, would reasonably expect to occur. According to a majority of common law jurisdictions, a plaintiff can recover only if he or she can establish that a reasonable person in the position of the defendant would have foreseen a risk of injury to the plaintiff under the circumstances.

Standards of Care

The duty of care imposed by law is measured by the reasonable person standard. The defendant's conduct will be measured against the conduct of a reasonable, ordinary, prudent person, who is never negligent. The reasonable person standard is an objective standard. The hypothetical reasonable person provides an objective by which the conduct of others is judged. In law, the reasonable person is not an average person or a typical person, but a composite of the community's judgment as to how the typical community member should behave, in situations that might pose a threat of harm to the public.

A person is expected to conform to the conduct of a reasonable person having similar physical characteristics. For example, a physically impaired individual cannot be expected to conform to a standard of conduct that would be physically impossible for him or her to meet. Although a person's physical characteristics are taken into account in determining negligence, the person's mental capacity is generally ignored and does not excuse the person from acting according to the reasonable person standard. The fact that an individual is lacking in intelligence, judgment, memory, or emotional stability does not excuse the person's failure to act as a reasonably prudent person would have acted under the same circumstances.

EXAMPLE: a person who causes a forest fire by failing to extinguish his campfire cannot claim that he was not negligent because he lacked the intelligence, judgment, or experience to appreciate the risk of an untended campfire. ANGLO-AMERICAN COMMON-LAW TORT LAW P.158

Persons who practice a profession or trade that require special expertise and skills are required to exercise that degree of care and skill exercised by a member of that profession in good standing in the same or similar circumstances.

EXAMPLE: In administering first-aid to an injured person, a non-doctor would not be held to the same standard of care as a doctor.

In determining whether a defendant's conduct is reasonable, that he or she was acting in an emergency is taken into consideration. An emergency is a sudden, unexpected event that demands immediate action and does not permit time for deliberation. A person is usually not required to aid another in peril. However, the law may impose a duty on a person to aid or protect another if they have a special relationship. The special relationships giving rise to the duty to aid or protect another include innkeeper- guest, common carrier-passenger, employer-employee, and parent-child.

“Good Samaritan” statutes have been passed in a majority of common law jurisdictions to prevent negligence suits by victims against those, such as physicians, who voluntarily come to their assistance. The basic rule is that a parent is not liable for tort of a minor child merely because of the familial relationship. However, when the parent authorizes, participates in, encourages, or ratifies the child's act, the parent may be liable. Moreover, a parent may be liable for a child's tort if the parent was negligent, for example, by leaving a dangerous item within reach of a young child.

A possessor of land owes each person who enters his land a certain duty of care based on the person's status. The legal significance is that a possessor of land has the duty to an invitee (one who is invited as a guest or a store customer) to inspect the premises for hidden defects and to repair or erect safeguards, if necessary, to make the premises reasonably safe. Generally, an owner owes trespassers no duty of care because he has no reason to expect them to be on his property. Therefore, he does not have to warn or protect them from potentially harmful conditions on the property.

However, an exception applies, under the “attractive nuisance doctrine”. A possessor of land has a greater obligation to children who trespass on the land. Thus, if the possessor has reason to know that children are likely to trespass, the condition on the land poses an unreasonable risk of serious bodily harm and the children because of their youth do not realize the risk, the possessor should exercise reasonable care to eliminate the danger or protect the children.

EXAMPLE: the owner of a backyard private swimming pool has a duty to enclose it with a fence.

A lessor (landlord-owner) is required to give warning to the lessee (renter) of existing defects on the premises of which the lessor knows or has reason to know, and which the lessee is not likely to discover on reasonable inspection.

A seller of real property has the duty, at the time of transfer, to disclose concealed, unreasonably dangerous conditions of which the seller knows or has reason to know, and of which he or she knows the buyer is ignorant of and is not likely to discover on reasonable inspection. ANGLO-AMERICAN COMMON-LAW TORT LAW P.159

Negligence ‘per se’ is negligence that is due to the violation or avoidance of a public duty that has been codified in law and defines exactly what happens when there is a failure of care that constitutes negligence. In order to prove negligence per se, the plaintiff at trial must be able to show that the defendant violated a pertinent statute or regulation; the statute is a safety statute; the act caused an injury or injuries that the statute is designed to prevent.

EXAMPLES: High-speed driving beyond the speed limit is ‘negligence per se’. A building contractor violated a building code when constructing a house; the house collapses and somebody is injured. The violation of the building code establishes negligence per se and the contractor will have to pay damages to the injured party, as long as the homeowner is able to show that the contractor's breach of the code was the cause of the home collapsing.

Vicarious Liability Vicarious liability occurs when one person is held responsible for the negligence of another. Typically, this applies in an employment context, where the employer is responsible for the negligent acts of the employee which occur within the context of the employment relationship.

EXAMPLE: an employer may be liable for an accident caused by an employee as the result of the negligent operation of the employer’s delivery vehicle.

Breach of Duty

A breach of duty means that a person has failed to act in the same manner as a reasonable person under the same or similar circumstances. Whether the duty of care is breached in an individual case is a question of fact decided by a judge or jury. The judge or jury compares the defendant's conduct with the presumed conduct of a reasonably prudent person under the same or similar circumstances. If the defendant's conduct does not conform to the reasonable person standard, the defendant will be deemed to have breached his or her duty.

Res ipsa loquitur Res ipsa loquitur (“the thing speaks for itself”) is a method of using circumstantial evidence to establish a prima facie case of negligence and has the effect of shifting the burden of proof from the plaintiff to the defendant. Res ipsa loquitur requires that:  the accident causing the injury would not normally occur absent someone's negligence,  the defendant was in exclusive control of the instrumentality causing the injury,  the plaintiff is free from fault. ANGLO-AMERICAN COMMON-LAW TORT LAW P.160

Examples of circumstances to which res ipsa loquitur might be applicable include: a) A person swallows an unknown object while drinking a can of soda purchased from a convenience store. b) A bottle of cola explodes under otherwise normal conditions. c) A building, in the process of construction by a developer that is also the sole owner of the land and the structure collapses, and there is no evidence as to the cause.

d) A heavy object goes through a window and falls from the 45th floor of an office building.

Causation

When there is a duty and a breach of that duty, the plaintiff must establish a causal connection between the injury and the defendant's act. For a defendant to have caused a plaintiff's injury and to be held negligent, the defendant's act must have been both the cause in fact (actual cause) and the proximate cause of the plaintiff's injury.

A cause in fact is a defendant's act or omission but for which the plaintiff’s injury would not have occurred. The defendant is not held liable for injury that is not the result of his or her negligence. This initial test to determine whether an act is the cause in fact is frequently referred to as the "but for" test.

EXAMPLE: A sailor falls from a ship into the sea and is lost during a heavy storm. The defendant's ship company failed to supply lifeboats on board the ship. It could not be shown that, “but for” the failure to have lifeboats on board the ship, the sailor would have been saved. The lifeboats could not have been used anyway because of the storm and heavy seas. Therefore, not having any lifeboats is not the ‘cause in fact’ of the sailor's death.

Once actual causation (cause in fact) has been established, the plaintiff must also establish proximate cause. Proximate cause places the negligent conduct into a broader context by considering all the causes contributing to an injury. The purpose of requiring proof of proximate cause is to place a limitation on the defendant's liability. The theory of proximate cause recognizes that a series of events, including multiple acts of negligence, may have contributed to the ultimate injury. The term proximate cause is somewhat misleading because it has little to do with proximity or causation. Proximate cause limits the scope of liability to those injuries that bear some reasonable relationship to the risk created by the defendant. Proximate cause is evaluated in terms of foreseeability.

For a negligent act or omission to be a proximate cause of damage, it must be a natural and probable (not just possible) result of a sequence unbroken by any intervening causes. Proximate cause recognizes that legal responsibility should end when the results are extraordinary or unanticipated.

EXAMPLE: Guy was driving dangerously when his car crashed into a telephone pole, which fell on a house. The plaintiff homeowner must show that the damage was a foreseeable consequence of Guy's negligent act (proximate cause).

This requirement does not mean that the precise consequences could or should have been foreseen as they actually occurred, but merely that the events were within the scope of foreseeable risk. ANGLO-AMERICAN COMMON-LAW TORT LAW P.161

An intervening cause is one that occurs after the defendant's negligence and alters the consequences. A variety of intervening causes might exist, and the defendant should not always be held liable for the plaintiff's injury. Generally, the defendant is liable only if the intervening cause of the plaintiff’s injury is reasonably foreseeable.

An intervening cause that is not foreseeable is called a superseding cause. A superseding cause breaks the causal connection between the initial wrongful act and the ultimate injury. Thus, the first actor (defendant) would be relieved of liability.

EXAMPLE: Construction Co. negligently left a fuse lying in the open. Steve found it and took it home. Steve's parents knew that Steve was playing with the fuse, but they did not take it away from him. Steve set the fuse on fire. It caused his parents' house to burn.

The parents' omission (failure to take away the fuse) is a superseding intervening force cutting off Construction Co.'s liability for its negligent act.

Damages

When duty, breach, and proximate cause have been established in a tort action, the plaintiff may recover damages for the financial losses sustained. Damages may be mental as well as physical. The plaintiff should be placed in the same economic position he or she would have been in, if the wrong had not occurred. The plaintiff is to be compensated for all his or her damages: past, present, and future. The measure of damages is determined by the nature of the tort committed and the type of injury suffered. Damages for tortious acts generally fall into one of four categories: damages for injury to person, damages for injury to personal property, damages for injury to real property, and punitive damages.

Damages may be recovered for physical, psychological, and emotional injury. Specifically, these injuries may include permanent disability, pain and suffering, disfigurement, humiliation, embarrassment, distress, impairment of earning capacity, lost wages or profits, medical costs, and out-of-pocket expenses. Courts typically rely on expert testimony to transform such losses into monetary figures.

Plaintiffs suffering damage to personal property must elect between two methods of recovery. First, plaintiffs may elect to recover the difference between the value of the property before the tort and the value of the property after it. Second, plaintiffs may elect to recover the reasonable costs of repair for damaged personal property. However, if the property is destroyed, irreparable, or economically infeasible to repair, damages are measured by the replacement value of the property. Persons who are temporarily deprived of personal property may sue to recover the rental value of the property for the period of deprivation.

Damages for injury to real property may be measured by the difference in the realty's value before and after the tort. Alternatively, plaintiffs may elect to recover the reasonable costs of restoring the property to its original condition. In either case, plaintiffs may also recover the rental value of their property if its use and enjoyment has been interrupted by tortious behavior. Mental, emotional, and physical harm that is sustained in the process of an injury to real property is compensable as well. ANGLO-AMERICAN COMMON-LAW TORT LAW P.162

Punitive damages (generally only in the United States), called exemplary damages in some jurisdictions, are recoverable against tortfeasors whose injurious conduct is sufficiently reckless or malicious. Although punitive damages are typically awarded for injuries suffered from intentional torts, they can also be awarded against tortfeasors who act with reckless indifference (gross negligence) to the safety of others. Because one purpose of punitive damages is to punish the defendant, plaintiffs may introduce evidence regarding a tortfeasor's wealth or financial status to allow the jury to better assess the amount of damages necessary for punishment.

Generally, attorney's fees are not recoverable except when provided for by a statute or contract. The plaintiff has a duty to mitigate or avoid damages and cannot recover for damages that could reasonably have been avoided. In property cases, the plaintiff must preserve and safeguard the property. In personal injury cases, the plaintiff must seek and undergo appropriate standard medical treatment.

In addition to damages for past tortious conduct; plaintiffs may seek the equitable relief of injunction to prevent future harm against: for example manufacturing plants that release smoke that pollutes the air, companies that discharge chemicals that poison the water or factories that store chemicals that migrate through the soil creating risks of injury that are likely to recur over time. If the harmfulness of such operations outweighs their usefulness, plaintiffs may successfully obtain a court order enjoining or restraining them.

Defenses to Negligence Even if a plaintiff has established all the required elements of an action for negligence, he or she may nevertheless be denied recovery if the defendant has a valid defense.

The three major defenses to the tort of negligence are:  Contributory negligence  Comparative negligence  Assumption of the risk

Contributory negligence

Contributory negligence is failure by the plaintiff to exercise due care for his or her own safety. Such failure must be a legally contributing cause of plaintiff's injury. Contributory negligence is now a minority position and has been modified or rejected by most common law jurisdictions. In pure contributory negligence, if the negligence of the plaintiff in conjunction with the negligence of the defendant caused the injury sustained by the plaintiff, the plaintiff is barred from recovering any damages from the defendant. The harshness of the contributory negligence doctrine has caused the majority of common law jurisdictions to reject this “all-or-nothing” rule. ANGLO-AMERICAN COMMON-LAW TORT LAW P.163

Comparative negligence

A substantial majority of common law jurisdictions today now permit a contributorily negligent plaintiff to recover a percentage of his or her damages under a system of comparative negligence. Comparative negligence requires the judge or jury to apportion damages between the plaintiff and the defendant.

EXAMPLE: In an automobile accident, the defendant is found to be 75% at fault, and the plaintiff is found to be 25% at fault. If the plaintiff sustains £10,000 worth of damages, the jury would award the plaintiff £7,500. In jurisdictions adopting "partial" or "modified" comparative negligence, the defendant's fault must be as great as or greater than the plaintiff’s if the latter is to recover anything.

When contributory negligence is shown, the judge or the jury weighs the plaintiff’s negligence against that of the defendant and reduces the plaintiff’s damages accordingly.

Assumption of the risk

The defense of assumption of the risk arises when the plaintiff voluntarily and knowingly encounters a known risk. This defense is similar to "consent" as a defense to an intentional tort. One must have knowledge of the risk before it can be assumed.

A plaintiff’s assumption of the risk may be express or implied.

Common examples of assumption of the risk follow: 1) Accepting employment knowing that one is expected to work in a dangerous area. 2) Driving a car with full knowledge that the brakes are in disrepair.

3) Entering a baseball stadium with full knowledge that one can be struck by foul balls or broken bats.

The reasonable person model is not used to determine whether the plaintiff assumed the risk of the defendant's negligence; the judge or jury applies a subjective test. The judge or jury considers the specific plaintiff’s age, experience, and knowledge because these are important factors affecting the person's ability to understand and consent to the particular danger involved in the specific situation.

Immunity

Certain individuals and entities are granted immunity from both damage awards and assessments of liability in tort. Immunity is a defense to a legal action where public policy demands special protection for an entity or class of persons participating in a particular field or activity. Historically, immunity from tort litigation has been granted to government units, public officials, charities, educational institutions, spouses, parents, and children. Government immunity, also known as sovereign immunity, insulates governments from liability for torts that an employee commits within the scope of her or his official duties. Public policy, as reflected by legislation, common-law precedent, and popular opinion, has required courts to protect the government from unnecessary disruptions that invariably result from civil litigation. Similarly, educational institutions generally have been immunized from tort actions to protect ANGLO-AMERICAN COMMON-LAW TORT LAW P.164

students and faculty from distraction. Charities and other philanthropic organizations have been given qualified immunity from tort liability as well. This immunity is based on the fear that donors would stop giving money to charities if the funds were used to pay tort claims.

Strict Liability In some cases tort law imposes liability on defendants who are neither negligent nor guilty of intentional wrongdoing. Known as strict liability, or liability without fault, this branch of torts seeks to regulate those activities that are useful and necessary but that create abnormally dangerous risks to society. These activities include blasting, transporting hazardous materials, storing dangerous substances, and keeping certain wild animals in captivity.

Persons who engage in ultra hazardous activities may be morally blameless because no amount of care or diligence can make their activities safe for society. However, such persons will nonetheless be held legally responsible for harm that results from their activities as a means of shifting the costs of injury from potential victims to tortfeasors. As a matter of social policy, individuals and entities that engage in abnormally dangerous activities for profit must be willing to ensure the safety of others as a price of doing business. Consumers who have been injured by defectively manufactured products also rely on strict liability. The law of torts will hold manufacturers strictly liable for any injuries that result from placing unreasonably dangerous products into the stream of commerce, without regard to the amount of care exercised in preparing the product for sale and distribution and without regard to whether the consumer purchased the product from, or entered into a contractual relationship with the manufacturer.

The law of intentional torts and negligence was focused on situations in which liability is based on fault. In contrast, under the theory of strict liability the law has determined that certain types of otherwise socially acceptable activity pose sufficient risk of harm, regardless of how carefully conducted, to impose liability (liability without fault).

To establish a case of strict liability, the following elements must be proved:  an absolute duty of the defendant to make safe,  breach of that duty,  plaintiff’s injury proximately caused by the breach,  damage to the plaintiff's person or property.

Liability for Animals

Keepers of wild or domestic animals ordinarily are strictly liable for the damage done by the trespass of their animals. However, in many jurisdictions, keepers of cats and dogs must be shown to be negligent. If the owner (e.g., a zookeeper) is under a public duty to keep animals, negligence must be shown. If trespassers (those who enter the land of another without their permission), are bitten or attacked by a wild animal (say a bear or a mountain lion) on an owner’s land, the landowner is not liable in strict liability. However the failure to warn trespassers of known dangerous animals on the land, (which might be unknown to a trespasser, but which the property owner is aware), could be considered in some jurisdictions, as a failure of an obligation and therefore negligence. A warning sign at the entrance to the land will suffice for this purpose such as “Danger wolves in area”,” Beware of Dog”. ANGLO-AMERICAN COMMON-LAW TORT LAW P.165

Liability for Ultra hazardous Activities

Generally, the defendant is liable without proof of fault for injury to the person or property of another caused by an ultra hazardous activity that is inappropriate to the particular locale. An activity is ultra hazardous if it involves a substantial risk of serious harm to persons or property regardless of the amount of care exercised. Common examples of ultra hazardous activities include blasting, fumigating, and manufacturing highly flammable products.

Product Liability Product liability is the area of law in torts that holds a manufacturer or a seller of a product liable if a defective product is placed in the commercial market and causes an injury. The liability may be based on negligence or on a warranty, or it may be strict liability. The law of products’ liability allows users who are injured, through no fault of their own because of defective fault in a product, to recover damages from the manufacturer, the wholesaler, or the retailer of the product.

EXAMPLE: Guy, farmer, purchased a new tractor from Farmco for $10,000. Due to a manufacturing defect, the engine exploded without warning when Guy first started the tractor. Guy and Sal, a bystander, were injured. Guy may revoke his acceptance of the tractor and recover the purchase price from Farmco. Moreover, under products liability law, both Guy and Sal may recover for their injuries.

The law of products liability has shifted the burden of loss from the injured buyer, user, or bystander to those most capable of bearing it: the manufacturer, the wholesaler, or the retailer. ANGLO-AMERICAN COMMON-LAW TORT LAW P.166

SAMPLE TORTS COMPLAINT FOR PERSONAL INJURY

MARY ANN JOHNSON……………………………………… IN THE………………………………………………..

Plaintiff………………………………………………………… CIRCUIT COURT…………………………………… v.………………………………………………… FOR………………………………………………………………….

JAMES C. SEXTON…………………………… BALTIMORE CITY………………………………………………….

Defendant……………………………………… CIVIL ACTION NO:……………………………………………….....

COMPLAINT AND REQUEST FOR JURY TRIAL

Mary Ann Johnson, Plaintiff, by Laura G. Zois, and Miller & Zois, her attorneys, sues the defendant, James C. Sexton, and in support, states as follows:

PREAMBLE

1. Mary Ann Johnson, Plaintiff, is a resident of Maryland.

2. James C. Sexton, Defendant, is a resident of Maryland.

3. The Defendant regularly visits and is engaged in business in Baltimore City, Maryland.

4. This action arises from a car accident which occurred on May 22, 2010 at the intersection of Maryland Route 152 and Rockord Road. Both are public roads in Maryland.

STATEMENT OF FACTS

5. On May 22, 2009, the Plaintiff, Mary Ann Johnson, was carefully and prudently stopped in her motor vehicle on Route 152, when her vehicle was violently struck from behind by the Defendant.

6. At the same time, a motor vehicle operated by James C. Sexton, the Defendant was traveling, and smashed into the Plaintiff’s vehicle, causing a car accident in which the Plaintiff sustained serious personal injuries.

COUNT ONE

Plaintiff, Mary Ann Johnson alleges and incorporates by reference all the facts and allegations in paragraphs 1 through 6 above, and further alleges: 7. The collision was caused by the recklessness, carelessness and negligence of the Defendant, James C. Sexton, for that among other acts and omissions the Defendant: a. operated the motor vehicle at a high, dangerous and excessive rate of speed under the circumstances then and there existing; b. failed to reduce speed to avoid a collision; c. failed to observe due care and precaution and to maintain proper and adequate control of the motor vehicle; d. failed to keep a proper lookout for other vehicles lawfully upon the highway; e. failed to exercise reasonable care in the operation of the motor vehicle under the circumstances then and there existing; and ANGLO-AMERICAN COMMON-LAW TORT LAW P.167

8. As a direct and proximate result of the negligence and carelessness of the Defendant, the Plaintiff: a. suffered serious, painful and permanent bodily injuries, great physical pain and mental anguish, severe and substantial emotion distress, loss of the capacity for the enjoyment of life; b. was, is and will be required to undergo medical treatment and to incur medical costs and expenses in order to alleviate injuries, pain and suffering; c. was, is and will be precluded from engaging in normal activities and pursuits, including a loss of ability to earn money and of actual earnings; d. and, otherwise was hurt, injured and caused to sustain losses.

9. All of the Plaintiff's losses were, are and will be due solely to and by reason of the carelessness and negligence of the Defendant, James C. Sexton, without any negligence or want of due care on the Plaintiff's part contributing thereto.

WHEREFORE, this Plaintiff claims ONE MILLION FIVE HUNDRED THOUSAND DOLLARS ($1,500,000.00) in damages.

Respectfully submitted, MILLER & ZOIS, LLC

______

Laura G. Zois Empire Towers, Suite 1001 7310 Ritchie Highway Glen Burnie, Maryland 20161 410-553-6000 410-760-8922 - FAX ANGLO-AMERICAN COMMON-LAW TORT LAW P.168

ENGLISH TORT LAW CASE PRECEDENTS

I de S et Ux. v. W de S, At the Assizes, Y.B. Lib.Ass. folio 99, placitum 60 (1348).

Facts: W (D) beat on the door of I’s (P1) tavern with a hatchet after it had closed in order to get P1 to open the door so that he could buy wine. P1’s wife (P2) stuck her head out of the window and shouted at D to stop. D hit the door with the hatchet but did not injure P2 and the plaintiffs brought suit.

D claimed as his defense that there were no damages because he did not actually harm P2. The court dismissed the action because P2 did not suffer physical harm and the plaintiffs appealed.

Issue: Is a party liable for placing another in fear of harm if no actual physical harm is caused?

Holding and Rule: Yes. D frightened P2 when he swung the hatchet and the plaintiffs were entitled to recover damages even though there was no actual physical harm.

Disposition: Reversed.

Notes: The tort of assault is an act intended to cause an apprehension of harmful or offensive contact that causes apprehension of such contact in the victim. The transferred intent doctrine applies. ANGLO-AMERICAN COMMON-LAW TORT LAW P.169

Donoghue v. Stevenson

Donoghue v. Stevenson [1932] All ER Rep 1; [1932] AC 562; House of Lords Negligence, Whether duty owed to person injured. Duty of manufacturer of article to ultimate consumer. Bottle of ginger beer bought from retailer. Bottle containing dead snail. Purchaser poisoned by drinking contents. Liability of manufacturer to consumer. The common law duty of care; the ‘neighbour principle’

Facts On 9th April 1929 Mrs Mary M'Alister or Donoghue brought an action against David Stevenson aerated water manufacturer Paisley, in which she claimed £500 as damages for injuries sustained by her through drinking ginger beer which had been manufactured by the defender. Mrs. Donoghue and her friend went to a shop occupied by Francis Minchella, and known as Wellmeadow Café, at Wellmeadow Place, Paisley where the friend purchased ice cream, and ginger beer suitable to be used with the ice cream as an iced drink for Mrs. Donoghue to drink. Mrs. Donoghue had no direct or indirect claim against the manufacturer based on contractual obligations because she did not purchase the product. The ginger beer was contained in an opaque bottle that prevented the contents from being viewed clearly. Mrs. Donoghue consumed some of the product after which the decomposed remains of a snail emerged from the bottle when the remaining ginger beer was poured into her glass. She sought damages against the manufacturer, Stevenson, from the resulting nervous shock and gastro-enteritis, which she claimed was caused through the incident. The trial judge found that the plaintiff could bring an action. The Court of Appeal overturned this decision. The plaintiff appealed to the House of Lords.

The Decision The issue of law before the House of Lords was whether the defendant (Stevenson) owed Mrs. Donoghue a duty of care. The case was never tried on the facts. Dicta of Lord Atkin: ". The complainant has to show that he has been injured by the breach of duty owed to him in the circumstances by the defendant to take reasonable care to avoid such injury". The rule in Heaven v. Pender was "demonstrably too wide." The concept of negligence is based upon "a sentiment of moral wrongdoing (for) which the offender must pay." Not every moral wrong can have a practical effect in law so it must be limited to taking "...reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour." A neighbour is a person so closely connected with and directly affected by (proximate to) my act (or omission) that I should have had them in mind when I committed the act (or omission). It would be a grave defect in the law if a consumer could not claim in circumstances such as a manufacturer negligently mixing poison into a drink. Lord Buckmaster referring to the dicta of Brett MR in Heaven v. Pender and the decision in George v. Skivington (1867) LR5 Ex 1 (which were applied by Lord Atkin): ". It is in my opinion better that they should be buried so securely that their perturbed spirits shall no longer vex the law." You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour/another.

Note Lord Atkin's statement Lord Atkin's statement about the foreseeability of the effects of one's acts on one's neighbours is central to the existence of a duty of care in the law of tort/delict, especially on the then developing nascent tort/delict of negligence. In this judgement he formulates what is commonly known as the "neighbour principle". There must be, and is, some general conception of relations giving rise to a duty of care, of which the particular cases found in the books are but instances. ... The rule that you are to love your neighbour becomes in law you must not injure your neighbour; and the lawyer's question: Who is my neighbour? receives a restricted reply. You must take reasonable care to avoid acts or omissions which you can reasonably foresee would be likely to injure your neighbour. Who, then, in law, is my neighbour? The answer seems to be — persons who are so closely and directly affected by my act that I ought reasonably to have them in contemplation as long as so affected when I am directing my mind to the acts or omissions that are called in question. ANGLO-AMERICAN COMMON-LAW TORT LAW P.170

Definitions of Key Words

 Actual cause: (cause in fact) causation providing a means of connecting conduct with a resulting effect.

 Assault: an act, intentional or reckless, leading a person to fear immediate personal violence.

 Assumption of the risk: when a person voluntarily and knowingly proceeds in the face of an obvious and known danger.

 ‘Attractive nuisance’: condition that can attract and injure children. Owners or occupants of land on which such a condition exists are liable for injuries to children.

 ‘Balance of probabilities’: a standard of proof required in a civil action in the UK to establish liability.

 Breach: a failure to discharge an obligation, especially in the law of negligence and in the law of contract.

 Burden of proof: duty of a party in a legal case to prove or disprove an allegation in court.

 Burglar: a thief who enters a building with intent to steal.

 Bystander: a non-participant.

 Chattel: anything tangible and owned, other than real estate. The same as personal property.

 ‘Coming to the nuisance’: defense used against a party who moves to the where a nuisance already exists. Where the interference of their use and enjoyment of their land existed before they arrived.

 Comparative negligence: the process of apportioning damages and liability to multiple parties, determined by the proportion of fault in an accident.

 Compensation: an amount given by the wrongdoer or received by the injured party as payment or reparation for losses suffered or physical injuries sustained.

 Consent: voluntary agreement or permission.

 Contributory negligence: common law defense against negligence that states that if an individual contributes to his or to her own loss in any way, then someone else cannot be held liable for the loss.

 Conversion: a voluntary act by one person inconsistent with the ownership rights of another. Theft in criminal law.

 Deceit: misrepresentation; a misleading falsehood.

 Duty of care: the legal responsibility a person owes others to act reasonably in the law of negligence, so as to avoid foreseeable harm.

 Falsehood: a lie or an untruth. ANGLO-AMERICAN COMMON-LAW TORT LAW P.171

 ‘Fresh pursuit’: immediate chase of a suspected criminal by a law enforcement officer, a situation in which the officer may arrest the suspect without a warrant.

 Foreseeability: a legal concept first formulated in “Donoghue v Stevenson” in relation to the notion of duty of care. Foreseeability of damage means likelihood of damage.

 ‘Good Samaritan’: a person who voluntarily offers help or sympathy in times of trouble.

 Gross negligence: a negligent act committed with a conscious or willful or wanton indifference to the consequences; recklessness.

 Injunction: an equitable remedy issued by a court to forbid or to compel a party to do or not to do a particular activity.

 Intervening cause: a cause occurring or falling between events or points in time.

 Invitee: an invitee is a person who is invited onto land by the possessor of the land as a member of the public or one who is invited onto the land for the purpose of business dealings with the possessor of the land.

 Legal fiction: fact assumed or created by courts which is then used in order to apply a legal rule which was not necessarily designed to be used in that way.

 Libel: publication of material unjustly injurious to someone's reputation.

 Malice: wrongful act done intentionally without excuse.

 Mitigate: to reduce, lessen, or decrease.

 Moral turpitude: conduct that is considered contrary to community standards of justice, honesty or good morals.

 Necessity: the condition of being essential or indispensable.

 Nuisance: the unlawful or unreasonable use of land by its owner causing injury or interference of the rights of another property owner or the public.

 ‘Out of pocket’ expenses: amount spent, usually cash, and reimbursable at a later time.

 Outrage: a wantonly cruel act.

 “Per se”: Latin phrase used in English to mean "in itself".

 Personal property: private property that is moveable, as opposed to real property or real estate. In the common law systems personal property may also be called chattels or personalty.

 ‘Plain view doctrine’: rule that a law enforcement officer may make a search and seizure without obtaining a search warrant, if evidence of criminal activity or the product of a crime can be seen without entry or search. ANGLO-AMERICAN COMMON-LAW TORT LAW P.172

 Possessor of land: a person who occupies land and intends to control it. Most often, it is the owner of the property, but can be a renter as well.

 ‘preponderance of the evidence’: standard of proof in civil suits (US) which is met when a party's evidence on a fact indicates that it is more likely than not that the fact is as the party alleges it to be.

 Prima facie case: a case that is sufficient and has the minimum amount of evidence necessary to allow it to continue in the judicial process.

 Privilege: immunity from liability enjoyed by a category of persons or under specific circumstances.

 Probable cause: reasonable belief that a crime has occurred, is occurring, or will occur, which is sufficient to justify an arrest of a person, a search, or a seizure of property. It is often described as more than a mere suspicion.

 Proximate cause: an event which, in a natural and continuous sequence, unbroken by any efficient intervening cause, produces and injury, and without which the injury would not have occurred.

 Prudent: careful and sensible; marked by sound judgment.

 Public figure: a person who receives frequent media attention, or is well-known in a particular area.

 Punitive damages: court awarded amounts exceeding economic losses suffered by a party, that are intended solely to punish the defendant.

 Real property: land, building structures and interests in land.

 Reasonableness: a legal fiction developed by the common law and used in tort and contract law as the standard according to which some actions or omissions are assessed.

 Retailer: business involved in the sale of goods and services directly to consumers for their personal, family, or household use.

 Remedy: the resolution of a case ordered by a court. Remedies in tort can be damages, injunctions or restitution.

 ‘Res ipsa loquitur’: Latin for " the thing that speaks for itself." In tort law, the doctrine which holds a defendant guilty of negligence without an actual showing that he or she was negligent.

 Right of publicity: the right to prevent unauthorized use of one's name or likeness by a third person for commercial benefit

 Scope: an area in which something acts or operates or has power or control.

 Shopkeeper privilege: privilege, under which a shopkeeper is allowed to detain a suspected shoplifter on store property for a reasonable period of time, so long as he or she has cause to believe that the person detained in fact committed, or attempted to commit, a crime.

 Slander: oral communication of false statements that are harmful to a person's reputation. standard of care: degree of caution that a reasonable person should exercise in a given situation so as to avoid causing injury or damage. ANGLO-AMERICAN COMMON-LAW TORT LAW P.173

 Strict liability: makes one responsible for the damage and loss caused by his or her acts and omissions regardless of culpability.

 Substantial certainty: assumption of intent, even if the actor did not intend the result, but knew or should have known the effect would occur as a result of his action.

 Superseding cause: a separate act or omission that breaks the direct connection between the defendant's actions and an injury or loss to another person, and may relieve the defendant of liability for the injury or loss.

 Theft: the wrongful taking of the property of another.

 Tortfeasor: a person who commits a tort.

 Transferred intent: a doctrine used in both criminal law and tort law when the intention to harm one individual inadvertently causes a second person to be injured or harmed instead.

 Trespass: intrusion into another person's property.

 Unchaste: sexual behavior of a man or woman unacceptable to the ethical norms and guidelines of a culture, civilization, or religion.

 Vicarious liability: the indirect responsibility of a person for the acts or omissions of another, usually in the context of employment.

 Warranty: an express or implied promise that something in furtherance of the contract is guaranteed, especially a seller's promise that what is being sold is as represented.

 Wholesaler: an intermediary which sells to other intermediaries, such as a firm that buys from a manufacturer and sells to a retailer.

 Writ of replevin: a judicial order issued to a party claiming the right to possession of goods or property.

 Wrongful death: type of civil lawsuit that is brought on behalf of the surviving family members of a person who has died due to negligence or misconduct of another. ANGLO-AMERICAN COMMON-LAW TORT LAW P.174

Questions 1) What is a tort?

2) How are a tort and a crime similar and different?

3) Briefly explain the differences between an intentional and non-intentional tort.

4) What are common law intentional torts to the person? To property?

5) What are some of the defenses available against an intentional tort?

6) Can you analyze and examine the elements of negligence?

7) What is meant by ‘proximate cause’?

8) What defenses might be available in a negligence action?

9) In what situations is it possible to use strict liability? Product liability?

Sources for this chapter:

1) Introduction to Legal English / Lindner, Firth, (Translegal), Yeago Cambridge Press 2008

2) The English of Law: England and Wales / Jean-Eric Branaa, Anne Brunon-Ernst, Charles Davey, William Yeago et al. Editeur: Belin

3) International Legal English / Lindner/(Translega)l – William Yeago Cambridge University Press 2006

4) Black’s Law Dictionary West Publishing – sixth edition

5) Dahl's Law Dictionary / Henry Saint Dahl Dalloz, 1995

www.findlaw.com www.law.com www.dictionary.law.com www.freeadvice.com www.lawexperts.com ANGLO-AMERICAN COMMON-LAW TORT LAW P.175

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY

ANGLO-AMERICAN COMMON LAW CRIMINAL LAW7 ANGLO-AMERICAN COMMON-LAW TORT LAW P.176

ANGLO-AMERICAN COMMON LAW CRIMINAL LAW

7Criminal Law P.177 Theories of Criminal Punishment P.177

Sources of Law P.178

Common Law Elements of a Crime P.179

Common Law Criminal Offenses P.183

Participatory Offenses P.189

Valid Defenses P.190

The Differences between a Criminal Case and a Civil Case P.192

Punishment P.192

Definitions of Key Words P.193

Questions P.197 ANGLO-AMERICAN COMMON-LAW TORT LAW P.177

ANGLO-AMERICAN COMMON LAW CRIMINAL LAW

After completing this lesson, one should:  Understand the general principles and scope of Common law criminal law and the nature of criminal liability.  Have an insight to the various theories or reasons why punishment exists in society.  Know the basic approaches to analyzing substantive criminal law.  Ascertain and define the fundamental features of selected specific offences or crimes. 7 Comprehend and understand the elements of selected specific defenses.  Be able to compare and explain the differences between criminal and civil law.

Criminal Law

Criminal law, often termed as ‘Penal law’, is the law dealing with any criminal activity that harms, threatens or endangers the safety of the public. It establishes the punishment to be imposed on those who breach these laws. Criminal law is typically enforced by the government, unlike civil law, which may be enforced by private parties. The government, through its prosecutors, initiates the criminal proceedings.

Criminal law defines the crimes committed against the state and may establish punishment. It defines how the facts in the case will be handled, the classification of the crimes, as well as how the crime should be charged. In essence, it deals with the “substance” of the matter. Criminal statutes determine which courts will hear what cases and who will prosecute those cases.

Criminal Procedure (another area of law but not covered in this chapter) describes the methods through which the criminal laws are enforced. For example: arrest requirements; when the accused can be searched; when evidence can be seized, and interrogation procedures. Criminal Procedure also deals with a defendant's individual, constitutional, or human rights, including the right to remain silent, the right to a public trial, and the right to have competent legal representation.

Theories of Criminal Punishment In the application of punishment, there are various theories or objectives: deterrence, rehabilitation, retribution, denunciation, incapacitation and restitution. Common-law jurisdictions differ on the value to be placed on each.

Deterrence – The aim is to impose a sufficient penalty to discourage an offender from criminal behavior. By imposing a penalty on those who commit offenses, other individuals are discouraged from committing those offenses (intimidation). Punishment is justifiable as it is expected to result in a reduction of crime. Punishment must be proportional to the crime, that is to say, that punishment be imposed in the amount required (but no more than is required) to satisfy crime prevention goals. ANGLO-AMERICAN COMMON-LAW TORT LAW P.178

Rehabilitation – Aims at transforming an offender into a valuable member of society. Its primary objective is to prevent further offenses by convincing the offender that their conduct was wrong. Examples of rehabilitative “punishment” might include: psychiatric care, therapy for drug addiction, or academic or vocational training.

Retributive – Under a retributive theory of penal law, a convicted defendant is punished simply because he or she deserves it. There is no exterior motive such as deterring others from crime or protecting society; the purpose is to make the defendant suffer in order to pay for his crime. Retributive theory assigns punishment on a proportional basis so that crimes that cause greater harm or are committed with a higher degree of culpability (e.g., intentional versus negligent) receive more severe punishment than lesser criminal activity.

Denunciation – This theory holds that punishment is justified as a means of expressing society’s condemnation of a crime; denunciation is desirable because it educates individuals as to what community considers specific improper conduct, directs community anger away from personal vengeance, and serves to maintain social cohesion.

Incapacitation – Designed simply to keep criminals away from society so that the public is protected from their misconduct. This is often achieved through prison sentences today. The death penalty and banishment in those jurisdictions where applicable, are intended to serve the same purpose.

Restitution – This is a victim-oriented theory of punishment. The object is to restore to the victim, through state authority, any loss inflicted by the offender. For example, one who embezzles will be required to repay the amount improperly acquired.

Sources of Law The sources of English criminal law are case-law and statutes, but its content is also governed by two sources of fundamental rights: European Community law and the European Convention on Human Rights (incorporated into domestic law by the Human Rights Act 1998). The European Convention on Human rights operates as a source of higher law. Courts are also required to interpret domestic law consistently with the Convention, if it is possible to do so.

In the United States, Criminal law is derived from various sources. These sources include statutory law, administrative regulations, and the common law (which includes case law and precedents). The most important source of law, however, is the United States Constitution (and its case-law interpretations); all other law is subordinate to that document. No law may contradict the Constitution. Generally most criminal acts are under the jurisdiction of the individual states; however the federal government has the power to determine what types of crimes constitute a federal offense. There are a variety of crimes that are considered federal offenses such as kidnapping across state lines, interstate drug trafficking, bank robbery, counterfeiting, acts of terrorism, immigration violations, and insider trading. The Federal Bureau of Investigation (FBI) is the primary federal law enforcement agency in the U.S. ANGLO-AMERICAN COMMON-LAW TORT LAW P.179

Common Law Elements of a Crime A crime is composed of three necessary elements:  “actus reus”, which refers to the guilty act that must be established in a criminal case. The “actus reus” in itself sometimes helps define the intention behind the possible results of the action.  “mens rea” which is Latin for a "guilty mind", is the expression used in legal English to refer to the offender’s ill-intended state of mind, and  the lack of a valid defense.

Imposing liability in criminal law requires that the defendant be proved to have committed a ‘guilty act’ with ‘guilty intent’.

“Mens rea” Most crimes require a mental aspect of what a defendant was thinking and what the defendant intended when the crime was committed. “Mens rea” allows the criminal justice system to differentiate between someone who did not intend to commit a crime and someone who intentionally set out to commit a crime.

EXAMPLE: Two drivers hit and kill a pedestrian. Driver A never saw the person until it was too late, tried his or her best to avoid the situation, but could do nothing to stop the accident and in fact, ended up killing the pedestrian. Driver A could be liable in civil court for damages, almost certainly under the tort law of negligence. Driver B, on the other hand, had been out looking for the pedestrian and upon seeing him, steered towards him, accelerated and crashed into him, killing him instantly. Driver B is criminally liable because he or she intended to kill the pedestrian. Even though the pedestrian is killed in both situations (the result is the same), the intent of both drivers was very different, and therefore their legal liabilities will be substantially different as a result.

Carelessness versus Criminal Carelessness is sometimes referred to as "negligence" in legal terminology, and generally results in only civil but not criminal liability. However, at some point general carelessness turns into something more culpable such as criminal, gross or reckless negligence. Courts often consider whether the actor did recognize the danger, or alternatively ought to have recognized a risk.

EXAMPLE: If Driver A in the above example had been heavily drinking and driving excessively fast, exceeding the speed limit and then hit and killed a pedestrian, he or she could be liable in criminal law, even thought the necessary intent requirement was missing.

Intention under criminal law is separate from a person's motive. Motive is an indirect way to prove that something was done intentionally or knowingly. For example, a defendant in an assault case may claim that he punched the victim by accident and thus didn't have the necessary intent for an assault (i.e., intent to cause bodily harm). If the prosecution, however, can demonstrate that the defendant and victim had been arguing shortly before the alleged assault, that motive can serve as circumstantial evidence that a defendant really did mean to hit the victim. ANGLO-AMERICAN COMMON-LAW TORT LAW P.180

Robin Hood robs from the rich king because his motive is to give the money to the poor villagers, his "good intentions" do not change his criminal intention to commit robbery.

Wrongfulness of intent also may vary the seriousness of an offense. A killing committed with specific intent to kill or with conscious recognition that death or serious bodily harm will result, would be murder, whereas a killing by reckless acts lacking such a consciousness could be manslaughter. On the other hand, it does not matter who is actually harmed by a defendant's actions. The doctrine of transferred malice means, for instance, that if a man intends to strike a person with a rock, but the rock bounces-off and hits another, “mens rea” is transferred from the intended target to the person who was actually struck.

“Actus reus” "Actus reus" is Latin for "guilty act" and is the physical element of committing a crime. It may be accomplished by an action, by threat of action, or exceptionally, by an omission to act, which is a legal duty to act. The concept of “actus reus” is derived from English common law. Under English common- law principals, an act alone did not make a person guilty of committing a crime. Both “actus reus”, the illegal action, and the illegal intent were required, since a person must both intend to commit a crime, and actually take steps toward committing the crime in order to be guilty in the eyes of the law. “Actus reus” is always required for the commission of a crime, since a person cannot be found guilty of thinking criminal thoughts, or wishing that a crime would take place. The term generally includes:  a voluntary act,  causation,  social harm.

In many of the common law criminal jurisdictions the act must be voluntary and exclude from punishment any acts that are caused by a reflex or convulsion, acts that occurred while unconscious or asleep, acts that occurred under hypnosis, and other bodily movements that are not intended by the actor. These exclusions protect a person from being found guilty of a crime based on action that was not under his or her control.

EXAMPLE: When a person who knows he or she is prone to epileptic seizures, operates a car on a public highway, has a seizure and kills people, it is still considered a voluntary action even though the immediate action causing the harm was involuntary (the idea is the defendant knew he or she was likely to have the seizure and disregarded the consequences).

An act doesn't necessarily have to be a physical action, but can also be an omission or the act of possessing something. Voluntarily being in possession of an illegal substance, such as a drug, can also be considered an "action." Although a person may generally not be found criminally liable for an omission, “actus reus” may sometimes be found to exist when the defendant failed to perform a legal duty to take positive action. ANGLO-AMERICAN COMMON-LAW TORT LAW P.181

EXAMPLE: D was a railway crossing keeper who negligently left open the crossing gate. This led to the death of a pedestrian who was struck by a train and D was convicted of manslaughter. D had a duty (arising from his contract of employment) to shut the gate upon the approach of a train, and his negligent failure to act lead to a criminal conviction.

EXAMPLE: Two parents were found guilty of the manslaughter of their daughter after refusing to allow doctors to treat her diabetes with insulin. Their duty to act arose from their relationship: parents have a duty to take proper care of their children, and if they fail to do so, they can be criminally liable for the consequences. It has been suggested in English law that adults may have a similar duty to their infirm parents.

Causation refers to the enquiry as to whether the defendant's conduct (or omission) caused the harm or damage. Causation must be established in all result crimes. Causation like Tort liability is divided into factual causation and legal causation. Factual causation is the starting point and consists of applying the 'but for' test. In most instances, where there exist no complicating factors, factual causation on its own will suffice to establish causation. However, in some circumstances it will also be necessary to consider legal causation (proximate causation). There must be no new intervening act which could break the chain of causation and therefore, not be the cause of the resulting harm.

There are several ways in which the chain of causation might be broken:  the acts of a third party,  the acts of the victim themselves,  a natural event or ‘act of God’.

EXAMPLE: Pagett took his girlfriend Gail from her home by force and held her prisoner in a flat. When the police surrounded the flat, Pagett came out holding Gail in front of him as a shield. He fired a shotgun at the police and they shot back; Gail was hit by three police bullets and died. Pagett's conviction for manslaughter was upheld by the Court of Appeal; his act (shooting at the police) was the cause of Gail's death, because if he had not shot first they would not have shot back. The police return of fire was a foreseeable consequence of Pagett's actions, so his act was the proximate or legal cause of Gail's death.

EXAMPLE: Meaning to kill his mother, White put a few drops of cyanide into her lemonade. Soon afterwards, before drinking the lemonade, his mother died of a heart attack. He was acquitted of murder on the grounds that he had not actually “caused” his mother's death: her death would have happened anyway. He was convicted of attempted murder, however.

EXAMPLE: B shot and injured a woman V; V was taken to hospital, where she recovered from the shooting but caught scarlet fever from the other patients at the hospital. B's conviction for murder was reversed on appeal; his act may have been a factual cause of V's death (because V would not have met the doctor ‘but for’ the injury) but it was not the legal cause. ANGLO-AMERICAN COMMON-LAW TORT LAW P.182

Strict Liability Finally, there are some criminal laws, called strict liability laws, that don't require any “mens rea” at all. In many crimes, the “actus reus” and “mens rea” do not carry equal weight. These laws are justified by claiming that no matter what you intended, the act itself deserves criminal punishment. Many strict liability laws involve minors, such as laws prohibiting "statutory rape" and the sale of alcohol to minors. It doesn't matter that you may have honestly thought that the minor was over 18 in the case of statutory rape, or over 21 in the case of selling alcohol. These laws often seem harsh, but the underlying theory behind it is the protection of the minor over the possible innocence of the defendant.

“mala in se” v. “mala prohibita” Crimes are divided into "mala in se" and "mala prohibita" laws. Both are Latin legal terms, ‘mala in se’ meaning crimes that are thought to be naturally evil or ethically wrong due to the nature of the act. They are regarded as crimes in all the various common-law jurisdictions. For example, crimes such as murder, rape, and battery fit this description as they are inherently and objectively wrong acts that have no place in a civilized society. Any crime that is objectively morally reprehensible is considered ‘mala in se’.

“Mala prohibita”, on the other hand, refers to offenses that do not have wrongfulness necessarily associated with them. As societies develop, the law goes beyond those crimes that are just morally wrong, but creates laws that are required in order to ensure that the society may continue to properly function. Violations of such rules and regulations are differentiated from those that are considered ‘mala in se’ and are referred to as “mala prohibita”, which is literally translated from Latin to “wrong as prohibited.” Parking in a restricted area, driving the wrong way down a one-way street, crossing the street against a red light or unlicensed fishing are examples of acts that are prohibited by statute, but which are not considered wrong. “Mala prohibita” statutes are usually imposed strictly, as there does not need to be a “mens rea” component for punishment under those offenses, the act itself being sufficient. Laws that are “mala prohibita” are those that are wrong only because a particular law dictates that they are wrong.

The difference between ‘mala in se’ and “mala prohibita” is not always so easy to determine. For example, the crime of tax evasion could be evaluated as either ‘mala in se’ or “mala prohibita”. While taxes are a social creation of which the failure to pay might not seem objectively morally reprehensible, there is a fair argument that tax evasion is on par with the ‘mala in se’ crime of larceny, which involves directly taking the property of another. Many crimes fall within this ‘gray’ area between the two.

An attempt to commit a crime, is conduct intended to lead to the commission of the crime. It is more than mere preparation, but it falls short of actual commission of the intended offense. ‘Intent’ to commit a crime is not the same as an ‘attempt’ to commit a crime’. Intent is a mental quality that implies a purpose, whereas attempt implies an effort to carry that purpose or intent into execution. An attempt goes beyond preliminary planning and involves a move toward commission of the crime.

As a general rule, an attempt to commit a crime is generally a less serious or minor offense; however, in a case of a violent crime, an attempt may be classified as a felony or serious offense. Attempted murder and attempted rape are examples of felonious or serious offense attempts. In an attempt case, the prosecution must prove that the defendant specifically intended to commit the attempted crime that has been charged. ANGLO-AMERICAN COMMON-LAW TORT LAW P.183

When individuals attempt to commit a crime, they can face criminal charges even if the crime is not successful. Even if an individual does not effectively commit a crime, he or she may face consequences of his or her attempt to commit a crime. An individual may not have been successful in killing his or her victim, or robbing his or her target; nevertheless, he or she had the intention to do so, and initiated the crime. In instances such as these, an individual has proven that he or she is dangerous and likely to engage in criminal behavior. If convicted of an attempted crime, an individual can face extensive jail time, especially if the intended offense was serious.

Common-Law Criminal Offenses Criminal offenses are classified according to their seriousness. For crimes against property, the gravity of a crime is generally commensurate with the value of the property taken or damaged: the greater the property value, the more serious the crime. For crimes against persons, the same proportionality principle applies to bodily injury inflicted upon individuals: the greater the injury, the more serious the crime. However, numerous other factors can influence the seriousness of a criminal offense. These factors include whether the defendant had a prior criminal record; whether the defendant committed the crime with cruelty, malice, intent, or in reckless disregard of another person's safety; and whether the victim was a member of a protected class such as minors, minorities, senior citizens, or the disabled. Thus, a less serious crime can be made more serious by the presence of these additional factors, and a more serious crime can be made less serious by their absence.

Historically, three categories of criminal offenses were known at common law, treason, felony, and misdemeanor, with treason being the most serious type of crime and misdemeanor being the least serious. The common-law distinction between treason and felony was particularly important in England because a traitor's lands were forfeited to the Crown.

Today every U. S. jurisdiction retains the distinction between felony level criminal offenses and misdemeanor level offenses. However, most jurisdictions have added a third-tier of criminal offense, typically called an infraction or a petty offense. Although the definitions of all three offenses differ in the various common-law jurisdictions, they do share some common characteristics.

In the UK, the distinction between felony and misdemeanour was abolished with the Criminal Law Act 1967. Yet these notions are still very much present in the terminology, due to the nature of the legal system based on judicial precedent. The past division has become one between serious and minor offences, replacing the former arrestable and non-arrestable offences.

Categorization of Offences (Selected Common-law crimes) Homicide Homicide is a term which is used to describe the killing of a human being by another human being. There are a number of different forms of homicide and while this term is often linked with murder, homicide and murder are actually two different things. Murder is always viewed as a criminal act. At common law, murder is considered to be ‘mala in se’, (an act which is evil within itself). There are cases where homicide is not criminal, but is actually sanctioned or carried out by the state; there are also situations in which it may be viewed as justifiable or as an unfortunate accident. ANGLO-AMERICAN COMMON-LAW TORT LAW P.184

The elements of common law murder are:  the killing of a human being  by another human being  with malice aforethought (a deliberate and premeditated killing of another, motivated by ‘ill-will’)

Malice describes not only the intent to do harm but also a reckless disregard for the harm that one's actions could cause. If one recognizes that his or her actions can cause harm but acts anyway, his or her disregard can, legally speaking, be considered the same as intent to cause harm. It is also important to note that the amount of harm an individual believes his actions can cause does not matter. If an action that an individual believes will only cause a small amount of harm, actually causes a great deal of harm, malice can still be demonstrated because the individual acted with the understanding that his actions would cause harm.

Malice includes cases of premeditated murder as well as murder committed during the course of a crime.

EXAMPLE: Dan returns to his apartment to find his wife in bed with Victor. Three days later, Dan waits for Victor outside his house. When Victor comes home from work, Dan shoots and kills him.

In some US jurisdictions, there is a legal concept known as the "felony murder rule". It states that any death which occurs during the commission or attempt to commit certain felonies, (arson, rape or other sexual offenses, burglary, robbery or kidnapping), is considered murder and all participants in the felony can be held equally culpable. This includes those who did no harm, had no weapon, and did not intend to hurt anyone. Today in the UK a conviction for murder does not require the prosecution to prove that there was either premeditation or malice (ill will). The mens rea requirement of murder is 1) an intention to commit an act (or an omission) and 2) the fact that there is a “high degree of probability” that such an act or omission will result in the death or serious injury of another person. The courts therefore interpret malice aforethought as being far wider than killing with premeditation and ill will. If it can be shown that a person dies as the result of an act or omission deliberately done and that this caused grievous bodily harm which resulted in death, than the perpetrator of that act can be found guilty of murder.

Example: Dan and Connie rob Victor's liquor store, but as they are fleeing, Victor shoots and kills Dan. Under the felony murder rule, Connie can be charged with felony murder for Dan's death.

Manslaughter is a legal term for the killing of a human being, in a manner considered by law as less culpable than murder. Where murder requires either the intent to kill or malice aforethought, manslaughter, on the other hand, requires a lack of any prior intention to kill or create a deadly situation.

A person charged with manslaughter is accused of being unintentionally responsible for the unlawful death of another person. A separate crime from murder, manslaughter charges depend on the concept that the accused person did not mean to kill, but brought about the death through illegal or irresponsible behavior. There are many different types of manslaughter laws that may vary depending on the various common-law jurisdictions; however the majority of them do make a basic distinction between voluntary and involuntary manslaughter. ANGLO-AMERICAN COMMON-LAW TORT LAW P.185

Involuntary manslaughter means that there was no intent to cause harm or kill, but the death was caused by negligent or criminal behavior of the defendant.

EXAMPLES: A drunk driver who kills someone in a traffic accident could be charged with involuntary manslaughter (also referred to in various common law jurisdictions as criminal negligence, gross negligence or vehicular manslaughter). Another example might be the accidental killing of someone by a hunter during the hunting season.

Voluntary manslaughter generally suggests that the defendant meant to cause harm but not to kill, or to kill but only under extraordinary circumstances. It is generally considered a more serious crime and may carry penalties similar to that of murder. It occurs when the defendant had no pre-meditated intent to kill the victim; rather, the decision was made spontaneously. Many jurisdictions characterize it as a crime that happens during the “heat of passion.” In other words, the defendant was provoked to kill the victim due to circumstances that would cause a reasonable person to act recklessly and without thought. A classic example of a “heat of passion” moment is a man who comes home to find his wife in bed with another man, who he then kills at that moment.

Homicide can be considered justifiable in cases of self-defense; someone who kills an armed attacker, for example, will not be charged with murder because the person was defending his or her life.

Homicide sanctioned by the state includes capital punishment (US only), in which people are put to death for crimes which are viewed as particularly deplorable, such as murder. Military actions and deaths on the battlefield are not prosecuted as murders, but are considered part of war.

Other Offences Against the Person Many criminal codes protect the physical integrity of the body. The crime of battery is traditionally understood as an unlawful touching, although this does not include everyday contact to which people silently consent to as the result of presence in a crowd for example. Creating a fear of imminent battery is an assault and also may give rise to criminal liability. Non-consensual intercourse, or rape, is a particularly odious form of battery. In the case of assault and battery charges, assault actually refers to the threat of physical violence, while battery indicates that physical contact or any unlawful touching of the other that actually occurred.

EXAMPLE: Pointing a gun at someone, waving a knife or a potential weapon like a baseball or cricket bat is assault. At that moment, anyone who is being threatened is being assaulted. As soon as a threat makes actual contact, the crime is then assault and battery.

False imprisonment "False imprisonment" is a crime which consists in unlawfully restraining a person’s freedom of movement. It includes confinement in a prison, a house (obviously even one’s very own), an office, a vehicle, a room, or any other place. There are various types of false imprisonment such as kidnapping, the taking of hostages and the abduction of children. ANGLO-AMERICAN COMMON-LAW TORT LAW P.186

Offensive weapons The Firearms Act 1968 in the UK states that “any person who without lawful authority or reasonable excuse, the proof whereof shall lie on him, has with him in any public place an offensive weapon shall be guilty of an offence”. The Public Order Act 1986 defines an offensive weapon as “any article made or adapted for use for causing injury to the person, or intended by the person having it with him for such use by him or by some other person.”

Drug possession Laws make it a crime to wilfully possess illegal controlled substances such as marijuana, cocaine and heroin. Drug possession laws vary according to drug type, amount, and the jurisdiction of the offense. Possession of small quantities may be deemed "simple" possession, while possession of large amounts may result in a charge of presumed "possession with intent to distribute," in which the punishment would be more severe.

The Sexual Offences Act 1956 of the UK provides: “A person commits rape if he or she has sexual intercourse with a person, who at the time of the intercourse does not consent to it.” Rape is forced, unwanted sexual intercourse. It is called ‘sexual assault’ in some jurisdictions and can happen to both men and women of any age. A rapist uses actual force or violence, or the threat of it, to take control over another human being. Rape is a crime, whether the person committing it is a stranger, a known acquaintance, or a family member.

EXAMPLE: Two men were convicted of raping a woman who had been asleep (or perhaps drunk and insensible) and remembered nothing. They appealed on the grounds that there could be no rape as she had not resisted their advances, but the appeal failed: the test is whether or not she consented, and clearly she did not.

Infractions An infraction, sometimes called a petty offense, is the violation of an administrative regulation, a municipal code, and, in some jurisdictions, local traffic rule. In many jurisdictions, an infraction is not generally considered a criminal offense and thus not punishable by incarceration. Instead, such jurisdictions treat infractions as civil offenses and apply a fine. Even in jurisdictions that treat infractions as criminal offenses, incarceration is not usually contemplated as punishment, and when it is, confinement is limited to serving time in a local jail.

Road traffic offences UK excerpts: 1. Careless driving The Road Traffic Act 1991 states that “If a person drives a mechanically propelled vehicle on a road or other public place without due care and attention, or without reasonable consideration for other persons using the road or place, he or she is guilty of an offence.” This offence is only a summary offense punishable by fine.

2. Dangerous driving It is left to the court to evaluate the offence as objectively as possible according to two criteria: “[driving in a way] far below what would be expected of a competent and careful driver and […] driving in a way that would seem dangerous [to the competent and careful driver].”

3. Causing death by dangerous or careless driving This crime used to be likened to manslaughter, but today conviction of manslaughter is only applied in extraordinary circumstances. It is triable only on indictment and is punishable by a ten-year imprisonment sentence and/or a fine. ANGLO-AMERICAN COMMON-LAW TORT LAW P.187

Offenses against Property Larceny is a crime in which someone unlawfully takes something which belongs to someone else, with the intent to permanently deprive the owner of his or her rightful possession. Larceny may also be known as “theft”. As a general rule, most legal systems distinguish between petty larceny and grand larceny on the basis of the value of the item stolen. One of the defining characteristics of larceny is that it is nonviolent.

EXAMPLE: stealing a car would be a case of grand larceny, as cars are generally quite valuable, while stealing a book from a store would be petty larceny. In both cases, the thief intends to benefit in some way from the object stolen, while the person to whom the object belonged suffers, as a result of its absence. The punishment would be proportional to the crime committed.

The Theft Act 1968 of the UK states: “A person is guilty of theft if he or she dishonestly appropriates property belonging to another with the intention of permanently depriving the other of it; and ‘thief’ and ‘steal’ shall be construed accordingly.”

Robbery is differentiated from other types of theft or larceny in that it is typically performed in connection with violence or a threat of violence. Someone breaking into a car and stealing something from within the car when no one is around is committing larceny or theft, since there is no threat or violence performed against the owner of the car. On the other hand, if the person approaches a car in which the owner is currently located and threatens or does physically harm to a person, to steal the item from the car, then it would constitute robbery.

Trespassing is the unlawful entry onto the real property of another. Criminal trespass can occur, either if someone knows before entering someone else’s property that he or she does not have permission to do so, or if upon being informed or learning that he or she doesn’t have permission, he or she remains on the property.

Burglary is a crime that occurs when one breaks into and enters another person’s premises with the intent to commit a crime once inside. Traditionally in common law, burglary required the offender to commit the crime at night. In modern times, however, most jurisdictions have abolished this distinction. In many jurisdictions, there are different degrees of burglary, depending on the circumstances of the incident. Factors influencing this might include whether anyone was in the premises when the breaking and entering occurred, the location of the building, and the use of any weapons.

Arson is committed when a person intentionally burns almost any kind of structure, building, or forest. Many jurisdictions recognize differing degrees of arson, based on such factors as whether the building was occupied and whether insurance fraud was intended.

Fraud is a broad term that refers to a variety of offenses involving dishonesty or "fraudulent acts". Fraud offenses always include some sort of false statement, misrepresentation, or deceitful conduct. The main purpose of fraud is to gain something of value (usually money or property) by misleading or deceiving someone into thinking something which the fraud perpetrator knows to be false. ANGLO-AMERICAN COMMON-LAW TORT LAW P.188

There are many types of fraud offenses, several of which occur through the mail, internet, phone, or by wire. Common types generally found in white-collar crime include:  bankruptcy fraud,  tax fraud (tax evasion),  identity theft,  insurance fraud,  mail fraud, and  credit/debit card fraud.  securities fraud

Forgery refers to the making of a false instrument (such as official documents, stamps, recordings, banknotes etc.) with which someone intents to deceive. Counterfeiting refers to the imitation of something with the intent to deceive. As a general rule, people use the term specifically to refer to the crime where individuals replicate currency in the hopes of passing it off as legal tender. However, a variety of things can be counterfeited, from designer handbags to legal documents.

Offences against public order Within this category are rioting, violent disorder, affray, fear or provocation of violence, harassment, alarm or distress and public nuisance.

White Collar Crime is a generic term for non-violent crimes, motivated primarily by personal monetary gain, committed by business people or public officials. There is no fixed definition of what constitutes a white collar crime. However, the myriad of violations associated with this term are extensive, including: various acts of fraud, antitrust violations, tax evasion, environmental law violations, cheating consumers, bribery, kickbacks, counterfeiting, public corruption, money laundering, economic espionage, trade secret theft, insider trading on the stock market, embezzlement and other forms of dishonest business schemes.

The term originates from the dated assumption that business executives wear white shirts with ties and the erroneous generalization is that these types of crimes are committed by executives. Moreover, white collar crime overlaps corporate crime because the opportunities for these types of criminal violations are more available to white collar employees. Persons convicted of this class of crimes are sentenced to minimum security prisons, rather than maximum security prisons.

A common term associated with white collar crime is fraud, which is the intentional deception of a person or business. Commercial fraud, consumer/internet fraud, credit card fraud, phone/telemarketing fraud, healthcare fraud, insurance fraud, mail fraud, government fraud, and securities fraud are all examples of white collar crime. ANGLO-AMERICAN COMMON-LAW TORT LAW P.189

Participatory Offenses Some criminal codes consider secondary participation, association or involvement in a criminal endeavor a crime, even if it does not actually come to fruition. Some examples are aiding, abetting, conspiracy, and attempt.

In law, an accomplice is someone who has any ‘direct’ involvement in the commission of a crime. For example, if two people decide to work together to commit an armed robbery of a bank, one of them could end up being an accomplice to the crime. A common example consists of one robber holding a gun on a bank or store employee while the other serves as a lookout. Despite the fact that the lookout did not actually hold the gun or receive the stolen money, he or she is considered to be an accomplice.

"Aider" and "abettor" are other terms often used as well, to refer to someone who has participated in a crime because he or she helped at least one or more of the criminals. An accomplice is prosecuted with the same degree of guilt as the person who he or she assisted in the commission of the crime; and therefore is also subject to the same criminal penalties. Accomplice law is a contentious matter because of these penalties; for example, this means that someone who assisted in the commission of a homicide, although he or she might not have actually committed the murder, would be an accomplice to murder. If the jurisdiction where the murder was committed provides for punishment by death, accomplices to murder could receive the death penalty.

It should be understood that being an accomplice to a crime is not the same as being an accessory to one. Accessories to a crime are not directly involved in the actual commission of the crime and are usually not present when it is committed, but he or she contributes to the crime in some other way. This is why he or she might receive a lesser punishment than the person or people who actually committed the criminal act.

EXAMPLE: Andy draws a floor plan of a bank, knowing of Dan's intention to rob it. After Dan commits the robbery, Alice agrees to let him store the stolen money at her house. Both Andy and Alice are not accomplices as they did not participate directly in the robbery, but they still can be charged; Andy with acting as an accessory before the fact and Alice with acting as an accessory after the fact.

A conspiracy involves two or more people who commit or plan a crime, and at least one of them takes some type of action toward committing the crime. A criminal conspiracy charge can often be used by prosecutors in the UK and the US to ensure that multiple people responsible for a crime are charged together. ANGLO-AMERICAN COMMON-LAW TORT LAW P.190

Valid Defenses (Selected common law defenses) In court, criminal defense lawyers often rely on the concept of “mens rea” to organise their defense strategy. Providing evidence that the person had little criminal responsibility in the criminal act, he or she allegedly caused, often constitutes the main purpose of a defense. The following selected valid defenses can therefore be put forward in order to prove the absence of “mens rea”:

Self-defense – A non-aggressor is justified in using force upon another if he or she reasonably believes that such force is necessary to protect oneself from imminent use of unlawful force by the other person. However, the use of force must not be excessive in relation to the harm threatened. One is never permitted to use deadly force to repel a non-deadly attack. Generally speaking, a person is justified in using force to protect a third-party from the unlawful use of force by an aggressor to the extent that the third-party is justified in acting in self-defense.

A person in possession of real or personal property is justified in using non-deadly force against a would-be dispossessor, if he or she reasonably believes that such force is necessary to prevent imminent and unlawful dispossession of the property. Under no circumstances may a person use deadly force to prevent dispossession.

Infancy – By statute in the UK, children under the age of 10 have no criminal responsibility. Above that age and until they reach 18, it is up to the prosecution to prove the child’s awareness of the seriousness of the crime committed. Some US states refuse to set a fixed minimum age, but leave discretion to prosecutors to argue or the judges to rule, on whether the child or juvenile defendant understood that his or her actions were wrong. If the defendant did not comprehend the difference between right and wrong, it may not be considered appropriate to treat such a person as responsible.

Mistake – Ignorance or mistake can be raised as a defense to criminal charges. Where a defendant has made a mistake, may be the basis of a claim that the prosecution has failed to prove all elements of the offence. However, not all mistakes have this effect. The effect of a mistake depends on whether it was a mistake of “fact” or of “law”.

Ignorance or mistake of the law will be a defense to a criminal charge only in limited circumstances. The courts have rarely allowed the defense of ignorance of the law to succeed. However, the courts have reasoned that the defense may be viable, if the act in question is not obviously wrong. The reasoning behind this, is that criminal punishment might not be appropriate in such cases unless it can be proven that the defendant intentionally disobeyed the law.

EXAMPLE: Bob honestly believed that one does not have to come to a complete stop at a "Stop" sign, when there are no other cars at the intersection. Bob made a mistake of law, because whether there are cars or not, you must always come to a complete stop. Bob was not allowed to argue that he misunderstood the law.

Ignorance or mistake of fact can be a defense to a criminal charge when the conduct in question would have been lawful had the facts been what they were reasonably thought to be. ANGLO-AMERICAN COMMON-LAW TORT LAW P.191

EXAMPLE: A customer intends to purchase merchandise from a store, but the cashier fails to ring up all of the merchandise. The customer may be arrested outside the store and charged with larceny. If the customer was genuinely unaware that some of the merchandise was not paid for when he left the store, then his lawyer might be able to argue that an honest mistake of fact eliminated the customer's intent to commit a crime.

Insanity – The idea behind permitting the insanity defense is essentially that an individual is only deserving of punishment for a crime, if he or she is capable of understanding the difference between right and wrong. Since it is believed that an insane person is incapable of making sound decisions, many believe such defendants should not be liable for their crimes. A defendant attempting such a defense will be required to submit to a mental examination. A person proved to be suffering from severe mental illness or disability at the time of the wrongful act will be acquitted. Insanity has to be proved on a balance of probabilities as opposed to “beyond reasonable doubt”. When the insanity defense is successful, the defendant is usually committed to a psychiatric hospital.

Necessity refers to very particular and unique situations, neither predictable nor definable, where the defendant was confronted with two alternatives, one involving the breaking of the law and the other causing harm to himself or to others.

All common-law definitions of the necessity defense include the following elements: 1) the defendant acted to avoid a significant risk of harm; 2) no adequate lawful means could have been used to escape the harm; and 3) the harm avoided was greater than that caused by breaking the law.

EXAMPLE: Defendant is accused of speeding (exceeding the speed limit), however he was rushing to the emergency room at a hospital, because his wife was having a baby in the back seat.

Intoxication – the effectiveness of this defense will sometimes depend on whether the defendant's intoxication was voluntary or involuntary. The potential defense would be denied to defendants who had voluntarily disabled themselves by knowingly consuming the relevant alcoholic liquids or drug substances, but allowed a defense to those who had unknowingly consumed them. Common law bans a defense of voluntary intoxication because society does not want individuals to avoid criminal prosecution, because they were intoxicated. Voluntary intoxication however, in limited circumstances, may negate the necessary state of mind for a given offense and thus prove exculpatory.

D and his girlfriend V each took a quantity of LSD (a hallucinatory drug). During his "trip", D imagined he was being attacked by snakes and had to defend himself; in doing so, he actually killed V. He was acquitted of murder because the jury was not sure that he had the necessary intention while being intoxicated, however he was convicted of manslaughter. ANGLO-AMERICAN COMMON-LAW TORT LAW P.192

The Differences between a Criminal Case and a Civil Case Crimes are generally offenses against the state, and are accordingly prosecuted by the state. Civil cases on the other hand, are typically disputes between individuals regarding the legal duties and responsibilities they owe one another.

Here are some of the key differences between a criminal case and a civil case: 1) Crimes are considered offenses against the state, or society as a whole. That means that even though one person might murder another person, murder itself is considered an offense to everyone in society. Accordingly, crimes against the state are prosecuted by the state, and the prosecutor (not the victim) files the case in court as a representative of the state. If it were a civil case, then the injured party would file the case. 2) Criminal offenses and civil offenses are generally different in terms of their punishment. Criminal cases will have jail time as a potential punishment, whereas civil cases generally only result in monetary damages or orders to do or not do something. Note that a criminal case may involve both jail time and monetary punishments in the form of fines. 3) The standard of proof is also very different in a criminal case versus a civil case. Crimes must generally be proved "beyond a reasonable doubt", whereas civil cases are proved by lower standards of proof such as "the preponderance of the evidence" (balance of probabilities in the UK), which essentially means that it was more likely than not that something occurred in a certain way. The difference in standards exists because civil liability is considered less blameworthy and because the punishments are less severe. 4) Criminal cases almost always allow for a trial by jury of felonies or serious offences. Civil cases do allow juries in some instances, but many civil cases will be decided by a judge.

In general, because criminal cases have greater consequences - the possibility of imprisonment and even death (US) - criminal cases have many more constitutional or human right protections in place and are harder to prove.

Punishment Criminal law is distinctive for the uniquely serious potential consequences or sanctions for failure to abide by its rules. Once a defendant has been proved guilty, the punishment has to fit the crime. When considering the sentence, courts have to assess the gravity of the crime, not only through moral fault but also through the degree of harm caused, no matter whether the convicted was fully aware of it at the time of the offence. The court may take into account the personality and circumstances of the defendant.

Capital punishment may be imposed in some jurisdictions of the US for the most serious crimes (murder or terrorism). The death penalty however was abolished in the UK in 1965. Individuals may be incarcerated in prison or jail in a variety of conditions depending on the jurisdiction. The length of incarceration may vary from one day to life. Government supervision may be imposed, including house arrest, and convicts may be required to conform to particularized guidelines as part of a parole or probation regimen. Fines may also be imposed and are normally fixed according to the seriousness of the offense. ANGLO-AMERICAN COMMON-LAW TORT LAW P.193

Probation is the usual punishment for a first offense in the less serious cases. It is an opportunity, notably for young or first offenders, to pay for their crimes without being isolated from society altogether. In the case of a second offense, the courts are more likely, on the other hand to apply a more severe or tougher sentence.

Community Service Orders are another alternative to imprisonment; they require the offender to perform a certain number of hours of unpaid time as reparation to the community: for instance, assisting the disabled or the elderly, visiting hospitals, cleaning the streets or removing graffiti off walls.

Parole refers to early release from prison. It will only be granted on criteria of good conduct and cooperative behaviour within prison life. Once freed, the parolee is placed under the supervision of a parole officer for a fixed period of time.

Definitions of Key Words

 Accessory to a crime: is any individual who knowingly and voluntarily participates in the commission of a crime. An accessory is not typically present at the scene of the crime, but contributes to the success of the crime before or after the fact.

 Accomplice: a person who actively participates in the commission of a crime, even though they take no part in the actual criminal offense.

 Acquit: to find a defendant not guilty in a criminal trial.

 ‘Actus reus’: Latin expression to refer to the guilty act which must be established in a criminal case.

 Affray: violence causing disturbance in a public place.

 Aid and abet: to actively, knowingly, or intentionally assist another person in the commission or attempted commission of a crime (but not after).

 Allege: to claim a fact in a pleading yet to be proved, to declare but not proved.

 Anti-trust: competition laws; laws which prohibit anti-competitive behavior and unfair business practices.

 Arrestable offense: (now obsolete term in English law); Criminal act for which there is a fixed mandatory sentence, or an act which carries a minimum sentence (commonly of five years' imprisonment).

 Balance of probabilities: legal standard, applied in UK for deciding the outcome of civil disputes, which requires that a dispute be decided in favor of the party whose claims are more likely to be true.

 Banishment: to punish a person by ordering them to leave a place or country.

 ‘Beyond a reasonable doubt’: standard in a criminal case requiring that the jury be satisfied to a moral certainty that every element of a crime has been proven by the prosecution.

 Blackmail: the threat of disclosing disreputable information and obtaining money in exchange for keeping that information secret. ANGLO-AMERICAN COMMON-LAW TORT LAW P.194

 Blameworthy: being wrong or evil or injurious; a state of guilt.

 Breaking and entering: trespassing for an unlawful purpose; illegal entrance into premises with criminal intent.

 Capital punishment: execution; putting a condemned person to death.

 Charged (to be): to make a claim of wrongdoing against; accuse or blame; to put the blame for; attribute or impute.

 Circumstantial evidence: evidence based on inference and not on personal knowledge or observation that does not directly prove a fact but gives rise to a presumption that a fact does exist.

 Coercion: the action of forcing someone to act against his or her will.

 Community service: performance of unpaid work to repay the community for an offense committed.

 Conspiracy: agreement between two or more persons to break the law at some time in the future.

 Convict: to find an accused person guilty. (as a noun): a person serving a prison sentence.

 Counterfeiting: an imitation, usually one that is made with the intent of fraudulently passing it off as genuine.

 Culpable: deserving blame as being wrong or evil or injurious.

 Custody: detaining of a person or a thing.

 Defense: the oral presentation aiming at proving someone’s innocence of a crime.

 ‘De minimus’ principle: (Latin): ‘the law does not concern itself with trifles’.

 Deterrence: prevention from action by fear of the consequences.

 Duress: unlawful use or threat or force.

 Embezzlement: stealing from an employer; to appropriate goods, service, or funds for personal use without permission.

 False pretenses: when a person or persons obtains property by lying about a past or existing fact.

 Felony: A serious criminal offense, which in the US is punishable by death or imprisonment for a term exceeding one year.

 Felony murder rule: law in some US states that a person can be criminally responsible for the actions of another if he or she aids and abets, or conspires with the principal.

 Fine: an amount of money to be paid in retribution for a crime committed. ANGLO-AMERICAN COMMON-LAW TORT LAW P.195

 Forgery: process of making, adapting, or imitating objects, statistics, or documents (see false document), with the intent to deceive.

 Gross or reckless negligence: carelessness which is in reckless disregard for the safety or lives of others, and is so great it appears to be a conscious violation of other people's rights to safety.

 Harassment: verbal and/or physical pressure exerted on someone resulting in annoyance and worry.

 Homicide: the killing of a human being by another human being.

 Hoax: an attempt to lead someone to believe something that is not true.

 Ill-intended: intention indicating hostility or enmity

 ‘Ill will’: hostility; hatred.

 Incarceration: the state of being imprisoned.

 Incest: sexual activity between individuals so closely related that marriage is prohibited.

 Indictment: a formal accusation that a person has committed a criminal offense.

 Infraction (petty offense): violation of a law that is punishable by a fine.

 Injury: physical harm done to a person.

 Insider trading: The buying or selling of a security by someone who has access to material, nonpublic information about the security.

 Intention: the determination to do something.

 Intercourse: the sexual act.

 Intimidation: discouraging through fear.

 Involuntary manslaughter: sometimes called ‘criminally negligent homicide’ in the United States or ‘culpable homicide’ in the UK, occurs where there is no intention to kill or cause serious injury, but death is due to recklessness or criminal negligence.

 Jail: local facility where persons in lawful custody are held; defendants awaiting trial and defendants convicted of minor crimes usually are held in jail, as opposed to prison.

 Juvenile: adolescent: displaying or suggesting a lack of maturity.

 Kickbacks: Illegal secret payments made in return for a referral which resulted in a transaction or contract.

 Kidnapping: taking away or transportation of a person against the person's will, usually to hold the person in false imprisonment, a confinement without legal authority; ANGLO-AMERICAN COMMON-LAW TORT LAW P.196

 Liability: the legal responsibility of someone for their actions.

 ‘Mala in se’: Latin for wrongs in themselves; acts morally wrong; offenses against conscience.

 ‘Mala prohibita’: Latin phrase used in law to refer to conduct that constitutes an unlawful act only by virtue of statute, as opposed to conduct evil in and of itself, or mala in se.

 Malice: legal term referring to a party's intention to do injury to another party.

 Manslaughter: homicide without malice aforethought.

 Maximum security prison: prison facilities that provide the highest level of prison security. These units hold those considered the most dangerous inmates.

 ‘Mens rea’: Latin for the offender’s ill-intended state of mind.

 Minimum security prison: security facilities that are considered to pose little physical risk to the public and are mainly non-violent "white collar criminals".

 Misdemeanor: a crime in the US usually punishable upon conviction by a small fine or by a short term of imprisonment.

 Mitigating factor: a factor that can lessen the responsibility of a person in committing a crime.

 Motive: cause that moves people to induce a certain action.

 Murder: the unlawful killing of another human being with intent (or malice aforethought).

 Parolee: a person who has been released before completing the full length of their prison sentence under certain conditions.

 Premeditated: planned, considered or estimated in advance; deliberate.

 Preponderance of the evidence: standard of proof in US civil suits which is met when a party's evidence on a fact indicates that it is more likely than not that the fact is as the party alleges it to be.

 Probation: alternative to imprisonment; conditions of freedom for offender in compliance with restrictions or requirements.

 Procurement: the act of providing prostitutes to people.

 Prosecution: the process aimed at proving someone’s guilt of a crime or the prosecuting party.

 Proximate causation: primary cause of an injury. It is not necessarily the closest cause in time or space nor the first event that sets in motion a sequence of events leading to an injury. Proximate cause produces particular, foreseeable consequences without the intervention of any independent or unforeseeable cause. It is also known as legal cause.

 Reckless: behaving in a way which shows clear lack of consideration for the possible dangers and repercussions of one’s actions.

 Retribution: punishment for a crime. ANGLO-AMERICAN COMMON-LAW TORT LAW P.197

 Roting: violent behaviour adopted by a group of people in a public place, which may occur during a protest or in any circumstances.

 Sentence: a final judgment of guilty in a criminal case and the punishment that is imposed.

 Smuggle: clandestine transportation of goods or persons past a point where prohibited.

 Statutory rape: sexual intercourse with a person (girl or boy) who has not reached the age of consent (even if both parties participate willingly).

 Subterfuge: something intended to misrepresent the true nature of an activity.

 Summary offense: minor violation of law prosecutable without an indictment or full trial.

 Transferred malice: doctrine used in both criminal law and tort law when the intention to harm one individual inadvertently causes a second person to be hurt instead.

 Treason: the betrayal of one's country.

 Voluntary manslaughter: the killing of a human being in which the offender had no prior intent to kill and acted during "the heat of passion”.

 White collar crime: variety of nonviolent crimes usually committed in commercial situations for financial gain.

Questions 1) Explain the various theories for punishment and the types of punishment imposed by criminal law.

2) Describe the elements of a crime.

3) Analyze the different types of homicide and the reasons for their distinctions.

4) What is the difference between ‘mala in se’ and ‘mala prohibita’?

5) What is malice?

6) What is meant by ‘white collar crimes’?

7) Explain some of the participatory crimes.

8) What is the difference between an accomplice and an accessory?

9) Describe some valid defenses.

10) Compare the differences between a civil case and a criminal case. ANGLO-AMERICAN COMMON-LAW TORT LAW P.198

Sources for this chapter:

1) Introduction to Legal English / Lindner, Firth, (Translegal), Yeago Cambridge Press 2008

2) The English of Law: England and Wales / Jean-Eric Branaa, Anne Brunon-Ernst, Charles Davey, William Yeago et al. Editeur: Belin

3) The English of Law: U.S. Law & Politics / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Mohammedi, Michel Perdu, William Yeago et al. Editeur : Belin 2007

4) International Legal English / Lindner/(Translegal) – William Yeago Cambridge University Press 2006

5) Black’s Law Dictionary West Publishing – sixth edition

6) Dahl's Law Dictionary / Henry Saint Dahl Dalloz, 1995

www.criminal.lawyers.com www.findlaw.com www.law.com www.dictionary.law.com www.freeadvice.com www.lawteacher.net www.lawexperts.com Anglo-American Business Law Structures P.199

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY

Anglo-American Business L aw8 Structures Anglo-American Business Law Structures P.200

Anglo-American Business L aw Structures

8United States Business Structures P.201 Reasons to Incorporate in Delaware P.204

Control and Management of a Corporation P.205

UK Legal Business Structures P.208

The Companies Act 2006 P.215

Common Law Business Trust P.216

Common Law Non-profit Organizations P.217

Sample UK Memorandum of Association/Articles P.220

US "CORPORATION" by-laws P.221

Definitions of Key Words P.225

Questions P.231 Anglo-American Business Law Structures P.201

Anglo-American Business L aw Structures

After completing this lesson, one should:  Have an overview of the various business structures in the US and UK.  Be familiar with the different types of legal documents creating such structures, such as Partnership Agreements, Articles of Incorporation and By-laws.  Understand the different roles and liabilities of Directors, Officers and Shareholders in a Company or Corporation.  Analyse the differences between General and Limited liability as a business owner. 8 Appreciate the concepts of Insolvency and Bankruptcy.  Be familiar with non-profit organizations.

United States Business Structures

When one starts a business, he or she must decide between several different types of business structures in the United States, whether it will be a sole proprietorship, partnership, or corporation. Business owners have to decide on the structure that best meets their personal or joint requirements, like the potential risks and liabilities, the formalities of creation and expenses concerned, the income tax situation of the various structures, and the investment needs of the owners. Businesses in the United States are created under state law with Delaware being the most popular state.

Sole Proprietorship

The simplest form of business entity is the Sole Proprietorship. It is a business owned and operated by a single person. The proprietor is responsible for all the business debts, and liable for any actions by the structure or its employees. Legally speaking the owner and the business are the same. There is no separate legal distinction. The profits and losses pass directly to the owner without any business income taxes.

Creating a sole proprietorship is not very expensive and is simple. It does not necessarily require the services of a lawyer, as the registration just involves filling in several forms, which might include providing proof of a business license, and acquiring a sales tax number. It is normally possible to use a family name or a fictitious trade name.

A major advantage of this business structure is there is no income tax attributed to the business itself, as the owner and structure are treated as a single entity. Business profits and losses are reported on the owner’s personal income tax return. This is known as a ‘flow-through’ structure because the profits or losses pass through the structure to the owner’s personal income tax.

An important disadvantage, however of doing business as a sole proprietor, is that the owner has unlimited personal liability on all business debts and any judgments held against the structure. Anglo-American Business Law Structures P.202

Partnerships

General Partnerships involve two or more persons (physical or legal) who agree to share all profits and losses. Partners are in general, personally liable for the acts done by any partner, the partnership or its employees. The profits pass directly to the partners without any business income taxes (flow- through) just like a sole proprietorship.

The official registration for setting up a partnership is quite simple and basically the same as for a sole proprietorship. The most efficient way to create a partnership is to have a lawyer draft a partnership agreement. This partnership contract should take into consideration some very basic points which should include: the name of the partnership, its purpose, address, the duration, the authority and responsibilities of each individual partner, the amount of capital to be contributed by each partner, the distribution of profits and losses, what happens upon the death, retirement or disability of a partner; what happens if the partner wants to sell his or her partnership interest: who the clients belong to, and how any disagreements with the contract are to be settled or negotiated.

As a partner in a General Partnership, the personal liability is exactly the same as that of a sole proprietor. A partner’s personal assets, (his or her home, car and bank account) are at risk as well as the assets or capital contributions of the partnership. This is known as ‘joint and several’ liability and it means that if one partner incurs liability or signs a contract on behalf of the partnership, this liability can be fully enforceable against the partnership itself and each individual partner, even if the other partners were not actually involved. Partners have a ‘fiduciary relationship’ to each another, which is a duty of good faith, loyalty and disclosure regarding everything that pertains to the partnership.

In regards to the business tax, it is the same as a sole proprietor and most definitely a major advantage. The structure itself does not pay income taxes, but each partner reports on his or her personal income statement the profits or losses from the partnership and pays the respective personal income tax. Personal income taxes rates are lower than business income rates.

Limited Partnerships entail at least one general partner who is personally liable for the company and liable for its debts. Limited partners are usually passive investors and are often referred to as ‘silent’ or ‘sleeping’ partners. Their liability is therefore, ‘limited’ just to the amount of their investment or capital contribution to the business. A limited partner will incur no personal liability and in exchange for this; he does not participate in the control or management of the partnership. The purpose of this form is generally to encourage investment and potentially receive bonuses or dividends, without risking more than the capital he or she has invested in the structure.

Limited Liability Partnerships (LLPs) are relatively new business entity structures in most states. They are not a common law structure, but have been created by statute in the course of the last twenty years. LLPs limit the liability of their partners, who are referred to as ‘members’, but enjoy the same tax benefits of sole proprietorships and partnerships. LLPs generally have higher fees to register and more complex financial and accounting procedures to respect than other small business options. They are limited to professionals such as attorneys and accountants to operate their practices. This structure is attractive since it blocks the partners from personal liability and yet it allows the partners to participate in the structure’s control and management. However, the partner who incurs the liability or causes the fault, still remains personally liable. Anglo-American Business Law Structures P.203

Corporations

A Corporation a is legal structure which is separate from its shareholders. Its shares can be transferred and it survives the death of its investors, which distinguishes it from the Sole Proprietorship and Partnership. A corporation is a‘legal person’ and therefore it must file and pay corporate or business taxes. There are many different types of corporations involving the public sector, for example:  Public corporations are state or government owned and are used for public purposes like managing the airport or urban public transportation.  Semi-Public corporations may provide public utilities like water, electricity or sanitation collection.  Non-Profit corporations such as charitable organizations, serve the community and may receive special tax considerations.

Corporations in the private sector allow businesses to insulate shareholders from many corporate debts and liabilities. Their liability is limited to the purchase price of the share, their investment or their capital contribution.

Types of Corporations

Publicly Held Corporations are mostly large businesses or multi-nationals with unlimited shareholders. The shares are bought and sold to the ‘public’ and therefore must be registered under the Federal Securities Exchange Act of 1934 as well as state law. Shares are usually traded on the stock market or securities exchange or ‘over-the-counter’.

Close Corporations and Limited Liability Companies (LLC) are corporations whose shares are usually held by comparatively few persons, sometimes families, and are typically limited to fewer than 35 shareholders. Their shares are not usually traded on a public market or ‘listed’, as there are many restrictions as to the transfer of the shares by shareholder agreement. To give an example, there may be a prohibition in the By-Laws on the selling of shares without the consent of the other shareholders.

In corporations, shareholders are protected from most corporate debts and liabilities. Profits are distributed to shareholders as dividends, and therefore are subject to ‘double taxation’. The structure as a ‘legal person’ pays business or corporate income taxes, and then the shareholders must pay personal income taxes on the dividends they received from the corporation. Anglo-American Business Law Structures P.204

Reasons to Incorporate in Delaware

The state of Delaware is the registered domicile of nearly 50% of the corporations listed on the New York and American Stock Exchanges, because of its corporation law structure, its stability, and its reputation. Many foreign multi-national corporations which do business in the United States choose Delaware for their corporate headquarters even though they may not have any sales or manufacturing facilities located in the state itself. Below are a few of the reasons why corporations, large and small, foreign and domestic, choose Delaware. Delaware is the least costly state in which to form a corporation. The annual franchise tax on corporations compares very favorably with other states (as little as $60/year in most cases). There is no Delaware sales tax, no property tax or state corporate income tax for corporations that are formed in Delaware and do not transact business in the state. There is no estate tax on shares of stock held by non-residents. These shares are taxed only in the state of residence of the corporation's owners. Shares of stock owned by a person outside the state are not subject to any Delaware taxes. One person may hold the offices of President, Treasurer and Secretary and be the sole director. Many states require at least three officers and/or directors. Thus, there is no need to bring other persons into a Delaware corporation if the owner so desires. Delaware is the only state to have a continuous Court of Chancery - a separate business court system. This is meaningful to entrepreneurs for two reasons. First, there is a long-established body of laws or jurisprudence relevant to corporations, which has been litigated in the Delaware courts for over 180 years. In the event of any legal action, therefore, there is a high degree of predictability. Second, Delaware has a long record of pro-management decisions. One can form a corporation without ever visiting the state. Even annual meetings need not be conducted in Delaware. Meetings can be held anywhere, at the option of the director(s). The same corporation may conduct different kinds of businesses. If the corporate documents filed with Delaware have the broadest type "purpose clause", any legal business activity of any kind may be conducted. More than one type of business can be conducted by the same corporation without any changes in the documents filed with the state. Delaware corporations have a special "Director Shield" that permits corporations to shelter their directors from personal liability in connection with their actions as board members. The by-laws of a Delaware corporation may be formulated or altered at any time by its directors. Delaware corporation stock can be privately owned or publicly traded on any stock exchange anywhere in the world when properly registered. The corporate headquarters and the records of a Delaware corporation may be located in any state in America or in any country in the world as long as the corporation maintains a registered agent to represent the corporation in Delaware. Most of the owners of Delaware corporations have never even been in Delaware. A Delaware corporation does do not need to maintain a Delaware business address except for its registered agent address which is required by law for service of process in case of legal action against the company. Anglo-American Business Law Structures P.205

Control and Management of a Corporation The authority of a corporation is exercised by its board of directors. Directors are elected by the shareholders usually at the annual shareholders meeting. Most state law requires a minimum number of three but another number can be specified in the by-laws. The Directors elect a Chairperson who presides over the board of directors meeting. This board directs and supervises the corporate business and determines corporate policy, which is then executed by the officers and the various employees of the corporation. The officers thus put into practice or execute the board's directives concerning the day-to-day management.

Directors

Publicly held corporations in accordance with the law, have two types of directors:  Inside directors, who work inside the structure and could be either officers of the corporation or even employees,  Outside directors, who have to be unaffiliated with the corporation except they may be shareholders and usually are. Federal law states that at least half the directors must be outside directors.

The most important function of the shareholders is to elect the board of directors at the shareholders annual or general meeting which is presided over by the Chairperson.

The board of directors have as their powers in conducting corporate policy, the selection and removal of officers, determining the capital structure, initiating fundamental modifications in the structure, such as mergers and acquisitions, declaring dividends, and deciding on management compensation such as employment contracts and bonuses. The board may not usually alter the by-laws or amend the articles of incorporation (corporate charter), without the approval of the shareholders.

Directors have a fiduciary duty to the shareholders and the corporation to perform their duties in good faith, with due care, and in the best interests of the corporation. Directors normally do not receive a salary for their services as directors but there may be an express agreement for them to receive fees. These fees can be in the form of stock options. Directors do not have the power to legally obligate the corporation when acting in an individual capacity, as they may only act as a combined board.

Directors having this fiduciary relationship must be diligent and careful in managing the corporation's business. They can be held personally liable for failure to act in good faith and with the standard of ‘due care that an ordinarily prudent person in a similar position would exercise under similar circumstances’. Shareholders place a vast deal of trust and confidence in the directors, with the expectation that they will administer the corporation in a profitable and socially responsible manner.

Directors make decisions that require the balancing of benefits and risks for the corporation.

Retrospection may reveal that some decisions made by the board were most unfavorable. The business judgment rule protects directors from liability related to such ‘second-guessing’ if the director was not guilty of gross negligence in reaching that decision and if he or she acted in good faith, was not motivated by fraud, conflict of interest, or illegality. Anglo-American Business Law Structures P.206

Officers

The officers of a corporation are determined and then appointed by the board of directors. These officers are agents of the corporation and they have the authority to conduct day-to-day operation of the business.

Typically, the officers appointed by the board are the President or CEO (Chief Executive Officer) and treasurer or CFO (Chief Financial Officer). Although there is no particular required legal number of officers, the Corporate Secretary or Chief Legal Officer (CLO) is responsible for the keeping of the minutes of directors' and shareholders’ meetings. One person may hold more than one position. For example, the CEO may also be the Chairperson or a CFO can be a director.

Generally, corporate officers follow the instructions of the board of directors, who may remove any officer at any time. As such, officers possess express authority conferred on them by either the by- laws or the board of directors and possess implied authority to implement things that are reasonably necessary to accomplish their duties. Officers may be personally liable however, if they go beyond their corporate authority.

The President (CEO) manages all the day-to-day business and affairs of the corporation, subject always to the discretion of the board. The Secretary (CLO), who is often the head of the Legal Department, duly notifies the participants of the shareholders’ meetings, must maintain the records of who is a shareholder ,and is often in charge of the issuance of stock certificates. The Treasurer (CFO) is responsible for the corporation's financial accounts and records. The Treasurer usually has the authority to sign all checks and deposit all money due and payable to the corporation.

An officer is in a position of trust and consequently owes a fiduciary duty to the corporation as well. Officers have a duty to act within the authority granted by the articles of incorporation, the by-laws, and the board of directors. They are subject to the same duties to the corporation as directors, namely the duty of care and the duty of loyalty. An officer may be liable for the failure of his or her acts or duties if he or she performed negligently.

Shareholders The first shareholders of a company on incorporation are the subscribers. New shares are issued by the board of directors and existing shares are transferred by current shareholders to other shareholders or third parties, subject to any restrictions imposed by the by-laws and the shareholders' agreement.

Every new shareholder must receive a share certificate from the company stating the number and type of shares held. The shareholder’s name should also be entered on the register of the corporation, which states the name and addresses of every shareholder, together with the number and type of shares held. A shareholder becomes the registered legal owner of the shares only when the shareholder’s name is entered on the register. Anglo-American Business Law Structures P.207

General Meetings and Voting Shareholders exercise their powers by passing resolutions in general or special meetings. The board of directors has the power to call meetings, notice of which must be given to shareholders in writing, within a specified period prior to the meeting.

Resolutions are only validly passed if the meeting has a quorum (a certain number of people must be present). Proxies are often appointed by shareholders to participate in, and vote at, meetings in their place. Resolutions, depending on the various state laws, usually require a majority of over 50% of the votes cast, to be passed. Special resolutions or extraordinary resolutions, which often require a majority of two-thirds or even 75% to be passed (sometimes referred to as a 'supermajority'), are required for important matters such as alteration of the articles or by-laws, a change of name, a reduction of capital, or the dissolution of the corporation.

Dividends and Classes of Shares The profits of a corporation are generally distributed to shareholders by dividends but only if there are profits available. A shareholder will be entitled to receive dividends in the order and amount determined by the class of share held.

A company may have as many different classes of shares as it wishes, all with different conditions attached to them. The most common shares are ordinary shares or common stock, which generally have no special rights or restrictions. The company may issue preference shares or preferred stock, entitling their holders to some kind of preferential right. Preferred shareholders are paid dividends before ordinary shareholders, and also have the priority of repayment of capital in dissolution. The preference shares may be described as cumulative, meaning that if the dividends are unpaid, the unpaid amount will accumulate and must be paid before any dividend can be paid on the ordinary shares. In general, in exchange for these rights, preferred shareholders do not usually have the right to vote in meetings.

The corporation may issue redeemable shares, which are shares able to be bought back by the corporation at the option of the company or the shareholder, or on a certain date. Convertible shares are shares which may be exchanged into a different class of shares upon the occurrence of a certain event, preference shares can usually be converted into ordinary shares.

Shareholders’ Liability A shareholder of a corporation has limited liability and is usually not liable for the acts and omissions of the company. A corporation has a separate legal personality from its shareholders and therefore the liability of a shareholder is limited to the value of his or her shares. Anglo-American Business Law Structures P.208

Piercing the Corporate Veil Under the Piercing the Corporate Veil principle, or ‘lifting the corporate veil’; if the corporate structure perpetuates a fraud, exceeds its lawful purpose, is undercapitalized or fails to follow legal statutory requirements, the courts may choose to disregard the separation of the corporate entity from its shareholders and the limited liability protection. If injured, third parties can prove individual, wrongful conduct , regarding the roles of any insider such as a director, officer or controlling shareholders, the law may impose personally liability on them.

Piercing the corporate veil is often used when there is a subsidiary, which is only a pretense for the activities of the dominant shareholder or parent corporation who is in fact, the corporate "alter ego". It can be initiated in this situation and others, when debts of the corporation were knowingly incurred, even when the entity was already known to the insiders to be insolvent; the required corporate- formalities or legal requirements were not observed and followed, the corporate records were not properly maintained, and there was the use of corporate assets such as bank accounts by persons for personal use.

UK Legal Business Structures In the UK, the legal structure of a business is fundamental to the way it operates. There are several structures to choose from. This legal framework determines who shares in the profits and losses, how taxes are paid, and where legal liabilities rest. It also determines the nature of a business' relationships with business associates, investors, creditors and employees. In the private sector, businesses consist of sole trader, partnership, private companies, public companies, and franchises. These are owned by individual business owners and shareholders who seek personal objectives such as making a profit. In the public sector there are organisations that are owned by the government on behalf of taxpayers. When one organizes a business it must be in compliance with various legal authorities including the HM Revenue & Customs (HMRC).

Sole Trader

A sole trader is an individual who runs a business on his or her own. It is sometimes known as a "sole proprietor" or (in the case of professional services) a ‘sole or solo practitioner’.

The sole trader structure is the most straight-forward option. The individual is taxed under the Inland Revenue's Self-Assessment system, with income tax calculated after deduction for legitimate business expenses and personal allowances.

Being a sole trader is the simplest way to run a business. He or she must register as self-employed, makes all the decisions on how to manage the business, raises money for the business out of his or her own assets and/or with loans from banks or other lenders. He or she must make an annual self- assessment tax return to HM Revenue & Customs, keeping financial records showing all business income and expenses. All profits go to the sole trader. As the sole trader is self-employed, his or her profits are taxed as personal income. A sole trader is personally responsible for any debts run up by his or her business. This means that personal assets such as a home or other assets, may be at risk if the business runs into trouble. Anglo-American Business Law Structures P.209

The terms 'Freelance', 'sole-trader' and 'self-employed' - A self-employed individual may variously be described in the UK as a freelance worker, sole trader, sole proprietor, self-employed, entrepreneur or similar term; regardless of how he is described or describes himself, the HMRC’s primary interest is in whether the individual is employed or self-employed for the purposes of liability to pay income tax.

Partnerships

These can be divided in three categories  Ordinary partnerships  Limited partnerships  Limited liability partnerships (LLPs)

A partnership is an association of two or more people formed for the purpose of a business. The Partnership Act of 1890 sets out the basic structure of partnerships. A second piece of legislation, the Limited Partnership Act of 1907 (amended by a legislative Reform Order in October 2009) introduced the concept of the Limited Partnership. The Limited Liability Partnership Act 2000 (with updated rules set out in Statuary Instruments from 2008 2009) created a new business entity, the LLP which is an incorporated business entity, sharing a number of features in common with a company.

All three types of partnerships share certain key features:  Two or more partners share the risks, costs and responsibilities of being in business (a partner being defined as an individual or another business, e.g. a limited company or another partnership).  The profits are divided equally amongst the partners (unless the partnership agreement states otherwise)  Each partner must register as self-employed and register with HM Revenue & Customs (HMRC) and complete annual self-assessment tax return  The partners themselves usually manage the business, although they can delegate certain responsibilities to employees, and that it is possible to have “sleeping partners” who contribute money to the business but are not involved in running it from day to day  The partnership must keep records showing business income and expenses

So effectively, a partnership is very similar to a sole trader, but involves two or more partners.

The operation of a partnership is usually governed by a Partnership Agreement. The specific terms of this agreement are determined by the partners themselves, covering various issues.

Here are some of the major areas that most UK partnership agreements cover: Anglo-American Business Law Structures P.210

 Name of the partnership. One of the first things is to agree on a name for the partnership. You can use your own family names, such as Smith & Windsor, or you can register a fictitious business name, such as “Kensington and Chelsea Flat Repairs”. If you choose a fictitious name, you must make sure that the name isn't already in use, as not to violate any trademark laws.

 Contributions to the partnership. It's critical that the partners work out and record who's going to contribute cash, property or services to the business before it opens, and what ownership percentage each partner will have. Disagreements over contributions have been the cause of many legal problems.

 Allocation of profits, losses and draws. - Normally, partners share equally in the profits. The partners may have different ideas about how the money should be divided up and distributed, and each partner may have different financial needs, so this is an important area to emphasise. It should be clearly stated whether profits and losses will be allocated in proportion to a partner's percentage interest in the business, and whether each partner will be entitled to a regular draw (a withdrawal of allocated profits from the business) or if all profits should be distributed at the end of each year. Any entitlement to receive salaries and other benefits in kind (e.g. cars, health insurance) should also be recorded.

 Partners' authority. Without an agreement to the contrary, any partner can bind the partnership without the consent of the other partners. If you want one or all of the partners to obtain the others' consent before binding the partnership, you must make this clear in your partnership agreement.

 Partnership decision-making. Although there's no specific procedure or language for allocating decisions among partners, it is a good idea to indicate beforehand who decides what. For example, the agreement may require a unanimous vote of all the partners for every business decision. If that seems too burdensome, it might be more efficient to draft an agreement requiring a unanimous vote for major decisions and allow individual partners to make minor decisions on their own. In that case, your partnership agreement will have to describe what constitutes a major or minor decision.

 Management duties. It might be wise to work out some guiding principles in advance. For example, who will keep the financial records? Who will work with customers or clients? Supervise employees? Negotiate with suppliers?

 Admitting new partners. Eventually, the business may grow and expand and the partnership may want to bring in new partners. Agreeing on a procedure for admitting new partners should be included in the agreement to avoid any disputes.

 Withdrawal, retirement or death of a partner. At least as important as the rules for admitting new partners to the business are the rules for handling the departure or retirement of partner. There should be a reasonable buyout plan in the partnership agreement.

 Resolving disputes. In case of dispute among the partners, it may be more beneficial to everyone involved if the partnership agreement provides for alternative dispute resolution, such as mediation or arbitration which is usually less expensive, quicker and private.

Creditors can claim a partner's personal assets to pay off any debts - even those debts caused by other partners. In England, Wales and Northern Ireland, partners are jointly liable for debts owed by the partnership and so are equally responsible for paying off the whole debt. They are not severally liable, which would mean each partner is responsible for paying off the entire debt. Partners in Scotland are both jointly and severally liable. However, if a partner leaves the partnership, the remaining partners may be liable for the entire debt of the partnership. Also, a creditor may choose to pursue any of the partners for the full debt owed in the case of insolvency when the partnership is dissolved. Anglo-American Business Law Structures P.211

Limited Liability Partnership

Under the 2000 Act, a Limited Liability Partnership is considered a legal person, which makes it rather different from a partnership or a limited partnership whose legal existence is dependent on that of its members. LLPs are consequently incorporated at Companies House and have a registered office.

In many ways an LLP is closer to a company than a classic partnership, it is very similar to a private limited company but is taxed as a partnership; in a LLP all partners have limited liability, whereas this is not the case for an LP.

Set-up  Each member needs to register as self-employed.  There must be a minimum of two designated members.  LLPs must register at Companies House.

Management and Raising Finance  Usually the members manage the business, but can delegate responsibilities to employees.  Members raise money out of their own assets and/or with loans.

Records and Accounts  The LLP itself and each individual member must make annual self-assessment returns to HM Revenue & Customs (HMRC).  All LLPs must file accounts with Companies House.

Profits  Each member takes an equal share of the profits, unless the members’ agreement specifies otherwise.

Tax and National Insurance  Members of a partnership pay tax and National Insurance contributions on their share of the profits.  The profits of a member of an LLP are taxable as profits of a trade, profession or vocation, and members remain self-employed and subject to National Insurance contributions.

The LLP structure is commonly used by accountants, as a company may not act as auditor to another company, as well as by firms of solicitors, who are not legally permitted to operate as a company. Anglo-American Business Law Structures P.212

The Designated Members are responsible for:

 Appointing an auditor (if one is needed)

 Signing the accounts on behalf of the members

 Delivering the accounts to Companies House

 Notifying Companies House of any changes to the membership, registered office or name of the LLP

 Preparing, signing and delivering the Annual Return

 Acting on behalf of the limited liability partnership if it is wound up and dissolved

Incorporated Companies

Incorporating business activities into a company creates a business as a "separate legal person". Profits and losses are the company's and it has its own debts and obligations. The company continues, despite the resignation, death or bankruptcy of management or shareholders. A company also offers the best structure for expansion and the provision of outside investors.

The vast majority of companies incorporated in the UK are "private limited liability companies".

The “Office of the Registrar of Companies" maintains a record of all UK private and public companies, their shareholders, directors and financial information. All this information has to be provided by companies by law, and is available to any member of the public for a small charge.

Limited Liability Companies

Limited companies exist in their own right. This means the company's finances are separate from the personal finances of their owners.

Shareholders may be individuals or other companies. They are not responsible for the company's debts unless they have given guarantees - for example, a bank loan. However, they may lose the money they have invested in the company if it fails.

Main Types  Private limited companies can have one or more members, e.g. shareholders. They cannot offer shares to the public.  Public limited companies (plcs) ) must have at least two shareholders , at least two directors, and a suitably qualified company secretary. Before a plc company can start business it must obtain a certificate to trade from Companies House confirming that it has the required minim allotted share capital. A plc can offer shares to the public and must have a minimum share capital of £50,000 or the prescribed equivalent in Euros, and allow for free transferability of its shares before it can trade. Public companies are the dominant business vehicle in the UK economy. Although there are far fewer of them than private companies, they employ the overwhelming mass of workers and turn over the greatest share of wealth. A plc may be listed on the stock exchange. Anglo-American Business Law Structures P.213

 Private limited Companies carry the suffix Ltd after the name, and are of two kinds, a private company limited by shares and a private company limited by guarantee; 1. a private company limited by shares, the most common type, issues shares and limits its members’ liability to the amount unpaid on the shares they hold. By definition, since the company is private, the shares cannot be offered to the public. A private limited company may have a single director and a single shareholder. Any profits made belong to the company and can be either reinvested in the company or passed onto the shareholders using dividend payments. 2. A private company limited by guarantee limits members’ liability to the amount they have agreed to contribute to the company’s assets if the company is wound up (usually £1 each). This kind of plc is commonly used for non- profit organizations, such as sports club or a political party.  Private unlimited companies – these are usually created for specific reasons; they can be with or without share capital. The members of such companies (directors, shareholders etc.) do not benefit from limited liability – indeed there is no limit to their liability. They do not need to file accounts with the Registrar of Companies.  Community Interest Companies – these were introduced under new legislation which came into effect in 2005. They are designed to meet the needs of social enterprises, and offer an alternative to the above mentioned private unlimited companies and private companies limited by guarantee which used to be frequent choices for charitable organizations.

Set-up  Must be registered (incorporated) at Companies House  Must have at least one director (two if it's a plc) who may also be a shareholder  Directors must be at least 16 years of age. At least one director must be an individual, rather than a company  Private companies are not obliged to appoint a company secretary but if one is appointed this must be notified to Companies House.

Management and raising finance  Board of directors make the management decisions  Finance comes from shareholders, loans and retained profits  Public Limited Companies can raise money by selling shares on the stock market, but private limited companies cannot.

Records and Accounts  Accounts must be filed with Companies House  Accounts must be audited each year  Directors are responsible for notifying Companies House of changes in the structure and management of the business Anglo-American Business Law Structures P.214

Profits  Profits are usually distributed to shareholders in the form of dividends, apart from profits retained in the business as working capital.

Tax and National Insurance  If a company has any taxable income or profits, it will be liable for corporation income tax and must make an annual return to HMRC.  Company directors are office holders of the company and therefore regarded as employed earners for National Insurance. As such, company directors must pay both income tax and National Insurance contributions on their director's earnings.

Liability  Shareholders are not personally responsible for the company's debts, but directors may be asked to give personal guarantees of loans to the company.

Franchises

Buying a franchise is a way of taking advantage of the success of an already established business. As the 'franchisee', you buy a licence to use the name, products, services and management support systems of the 'franchisor' company. This licence normally covers a particular geographical area and runs for a limited time, after which it should be renewable as long as you meet the terms of the franchise agreement.

The way you pay for the franchise may be through an initial fee, yearly management fees, a percentage of the turnover, purchases of goods from the franchisor, or a combination of these.

A franchise business can take different legal forms - most are sole traders, partnerships or limited companies. Whatever the structure, the franchisee's freedom to manage the business is limited by the terms of the franchise agreement.

Set-up  This depends on the business structure that the franchisee chooses for their business - usually a sole trader, partnership or limited company.

Management and Raising Finance  Franchise agreements usually set out how the franchised business should be run, although they may allow some flexibility. Franchisers usually provide management help and training to franchisees.  Normally the franchisee must find the money needed to start up the business, but franchisers may sometimes lend some of this to the franchisee. Anglo-American Business Law Structures P.215

Records and Accounts  These depend on the business structure that the franchisee chooses for this business. As well as the usual legal requirements, franchisers often expect franchisees to show them detailed financial records.

Profits  Franchisees often pay a percentage of their turnover to the franchisor, which decreases the overall profits.

Tax and National Insurance  These depend on the business structure that the franchisee chooses for his business.

Liability  This depends on the business structure that the franchisee chooses for his business.

The Companies Act 2006 The Companies Act 2006 (c 46) is an Act of the United Kingdom Parliament which forms the primary source of UK company law. The Act was brought into force in stages, with the final provision in effect on 1 October 2009. It superseded the Companies Act 1985. It was spread over a period of time to give companies sufficient time to prepare for the new regime under the Act, rather than implementing all 1,300 sections of the Act on one day.

The Act provides a comprehensive code of company law for the United Kingdom, and made changes to almost every aspect of the law in relation to companies. The key provisions are:  the Act codifies certain existing common law principles, such as those relating to directors' duties;  it implements the European Union's Takeover and Transparency Obligations Directives;  it introduces various new provisions for private and public companies;  it applies a single company law regime across the United Kingdom, replacing the two separate systems for Great Britain and Northern Ireland;  it otherwise amends or restates almost all of the Companies Act 1985 to varying degrees.

The Act contains various provisions which affect all companies irrespective of their status:  Company formation - the procedure for incorporating companies will be modernised to facilitate incorporation over the Internet. It will become possible for a single person to form a public company.  Constitutional documents - a company's articles of association will become its main constitutional document, and the company's memorandum will be treated as part of its articles. New model articles for private companies to be made under the Act are intended to reflect better the way that small companies operate, and will replace the existing Table. Anglo-American Business Law Structures P.216

 Share capital - the requirement for an authorised share capital will be abolished. Companies will be able to redenominate their share capital from one currency to another without an order of the court.  Shareholder communications - The Act made it easier for companies to communicate electronically (e.g. by email or by website) with their shareholders by express agreement.

Private companies:  Company secretaries - a private company no longer needs to appoint a company secretary, but may do so if it wishes.  Shareholders' written resolutions - the requirement for unanimity in shareholders' written resolutions was abolished, and the required majority is similar to that for shareholder meetings - a simple majority of the eligible shares for ordinary resolutions, or 75% for special resolutions.  Abolition of AGMs - private companies are no longer required to hold Annual General Meetings, although they can elect to provide for them in their articles if they wish.  Reduction of share capital - private companies will be able to reduce their share capital without the need to obtain a court order.

Common Law Business Trust A business trust is a common law construction created for the control and management of assets and property. This type of trust has trustees who take responsibility for the management and administration of the assets in the trust. The trustees have a fiduciary duty to manage the assets, not for their gain, but for the benefit of the beneficiaries. In order to be considered a business trust, the entity must have a business activity, such as investing or buying and selling products or services. The person or group of people who create a business trust is referred to as the trustor, grantor or settlor.

A business trust is essentially owned by the trustees who have legal title of the assets within it. The trust beneficiaries have equitable title, which permits them to receive profits or income from the trust and eventually upon dissolution the beneficiaries may receive disbursements of the assets. In the intervening time, a trust provides a way to keep business assets safe and protected from creditors and lawsuits. Depending on the jurisdiction where the trust is located and the way the trust is created, there may be protection from certain types of taxation as well.

Often, business trusts are mentioned in relation to corporations and partnerships, but are typically created as alternatives. The business trust can conduct a wide variety of business, including investing, buying and selling stocks, bonds, and real estate. Unlike corporations or companies, business trusts do not necessarily receive charters from the jurisdictions where they are organized but are formed through the creation of trust agreements, which their grantors voluntarily sign.

As with other trusts, the trustees hold the legal titles to the assets within the business trust for the sake of its beneficiaries. They administer the trust based on the terms set forth in the trust agreement. This document provides the information the trustees need to manage the trust according to the wishes of the person or group of people who created it. It provides for the duration and purpose of the trust, states the duties and authority the trustees have and also details the interest the beneficiaries have in the trust. Trust arrangements in the UK are mainly for non-profit charitable organizations. Anglo-American Business Law Structures P.217

Common Law Non-Profit Organizations Basically, a Non-Profit organization, often referred to as an association, is formed for the purpose of serving a purpose of public or mutual benefit other than the pursuit or accumulation of profits. Non-profit organizations are usually recognized and authorized by statutory law in many common law jurisdictions. These laws have determined that certain types of activities should be free from the burden of having to pay income taxes and decree that society should support and foster many such organizations.

In giving these organizations tax exempt status, however, the law has imposed specific requirements and limitations on their activities. The tax services tend to strictly enforce these rules. Failure can result in the organization losing its tax exempt status. There are many reasons for which an entity might wish to organize as a non-profit organization. For some it may be to attract donations that are tax deductible to the donors. Often these organizations provide a form of membership.

The types of non-profit organizations with which most of us are familiar are religious organizations and organizations which serve scientific, literary, educational, artistic or charitable purposes that benefit the public.

Most public benefit organizations survive on a combination of donated income, donated facilities and equipment, and low paid or volunteer staffs. In other words, their base activities do not generate sufficient income to meet their financial needs. Frequently they are struggling just to survive.

Examples of Concerns Covered by Tax Exempt Organizations Certain organizations organized and operated exclusively for:  Religion, Charity, Science, Literature, Education, Art  Health care and public health  National or international amateur sports competition  The prevention of cruelty to children or animals  Local associations of employees, Labor organizations  Agricultural or horticultural organizations  Chambers of commerce  Clubs organized for pleasure, recreation, and other non-profitable purposes  Certain fraternal beneficiary societies, orders, or associations  An organization of past or present members of the military or veterans  Legal services organizations

In the UK non-profit organizations are often incorporated as private companies limited by guarantee or more recently (under the Companies Act) as Community Interest Companies, or more traditionally, as an unincorporated charity, such as an association or a charitable trust. A trust is the traditional legal structure for a charity and is suitable for certain types of charities; larger non-profit organizations will usually opt for incorporation. Anglo-American Business Law Structures P.218

UK Insolvency Law

Insolvency law is an area of law which covers companies which run out of money to pay their creditors and employees. If an individual were in this position, he would be known as bankrupt. There are two different ways that a company can be classed as insolvent; these are balance sheet insolvency and cash flow insolvency. To be balance sheet insolvent means that what the business owes, exceeds its realisable assets. To be classified as cash flow insolvent means that the company cannot pay debts that are due straight away, and will be unlikely to be able to pay its debts on time in the future. In the UK there are four different ways that a company can go insolvent: administration, receivership, liquidation or winding up and a company voluntary arrangement.

In insolvency law, administration is the process in which an administrator tries to rescue a limited company. If a company chooses to go into administration, its assets will be protected. A company has to apply for administration directly from the court. An administrator will put a plan in place to try and recover the debts owed by the company. During the administration period, the administrator will run the company as opposed to the directors.

A second process of insolvency was known as administrative receivership and involved elements of administration. A creditor could ask to apply for security on a company’s assets to ensure his debt was repaid. Since the enterprise Act of 2002, Administrative receivership is no longer seen as an insolvency process, rather it is a debt collection process for the benefit of a secured creditor (usually the holder of a debenture).

Another process in insolvency law is liquidation or winding up. In this process, a liquidator is put in charge of collecting all the assets from the company and selling them off in order to pay the company's creditors.

The last option in insolvency law is to make a company voluntary arrangement. This is an agreement made between a limited company and its creditors to pay off their outstanding debts within a designated time period. This is usually around 1-5 years. In company voluntary arrangements, the company's creditors will usually accept a lower repayment for the debts that they are owed. A proposal for an agreement has to be made by the company in debt, not by the creditors. A company voluntary arrangement is a good option for companies which have just started out, and need time to build up a good level of trade. A company voluntary agreement also means that a company may avoid the shame that is associated with going into liquidation, which can be advantageous for companies who wish to change their unsuccessful business plan.

US Bankruptcy Law

Bankruptcy law in the United States provides for an arrangement that permits a debtor, who is unable to pay his or her debts as they become due, to find a legal solution to resolve his or her debts or liabilities, by distributing his or her assets among the creditors. This supervised distribution by the courts, also protects the interests of all creditors with some measure of equality. Some bankruptcy proceedings allow a debtor to continue in business and use the profits generated to help pay off his or her debts. A further purpose of US bankruptcy law is to permit certain debtors to be discharged of the financial obligations they have accumulated, after their assets are distributed, even if their debts have not been paid in full.

The source of Bankruptcy law is the US Bankruptcy Code, based on the U.S. Constitution under its authority to "establish... uniform laws on the subject of Bankruptcy throughout the United States." Anglo-American Business Law Structures P.219

States do not regulate bankruptcy law and proceedings are supervised by, and litigated only in, the United States Bankruptcy Courts. A bankruptcy proceeding can either be entered into voluntarily by a debtor or initiated by creditors. After a bankruptcy proceeding is filed, creditors, for the most part, may not seek to collect their debts outside of the proceeding. The debtor is not allowed to transfer property that has been declared part of the estate subject to proceedings.

There are two basic types of Bankruptcy proceedings in the US for businesses:

Chapter 7 Bankruptcy is called liquidation and named after the relevant chapter in the Bankruptcy Code. It is the most common type of bankruptcy proceeding. The business entity stops all operations and goes completely out of business. A trustee is appointed to liquidate the company's assets and the money is used to pay off the debts. Businesses that experience this form of bankruptcy are past the stage of any possible reorganization.

Chapters 11 Reorganization is the rehabilitation of the debtor to allow him or her to use future earnings to pay off creditors. It gives the debtor a fresh start, subject to the debtor's fulfillment of its obligations under its plan of reorganization. Chapter 11 reorganization is the most complex of all bankruptcy cases and generally the most expensive. Publicly held companies tend to try to file under Chapter 11, rather than Chapter 7 because it allows them to still run their businesses and control the bankruptcy process. Rather than simply turning over its assets to a trustee, a business undergoing Chapter 11 has the opportunity to restructure its financial framework and be profitable again. When a business files for Chapter 11, that business is assigned a committee that represents the interests of creditors and shareholders. This committee works with the business to develop a reorganization plan to get it out of debt, restructuring it into a profitable entity. If no suitable reorganization plan can be prepared by the committee and later confirmed by the Bankruptcy courts, shareholders may not be able to stop their company's assets from being sold off to pay creditors. If the plan later fails, then all assets are liquidated as in a Chapter 7 proceeding.

Distribution of Assets by Trustees Trustees do not have a free control in determining which creditors have priority. The trustee’s report and recommendations must comply with Federal Bankruptcy law procedures which sets forth the priority for payment to creditors. The priority can be summarized as follows:  Trustee administrative expenses;  Administrative costs related to processing bankruptcy estate (trustee fees, attorney fees, accountant fees, salaries of workers continuing during the procedure);  Secured creditors are allowed to reclaim or repossess their secured assets. (This includes collateral securing bank loans and government secured claims for taxes)  Employee salary claims;  Employee claims for contribution to retirement or pension or insurance plans;  Unsecured claims of governmental entities (taxes);  Unsecured claims;  Preferred shareholders claims;  Common or ordinary shareholders claims. Anglo-American Business Law Structures P.220

Sample UK Memorandum of Association (Now treated as a part of the articles of association) TRIGGER UK Ltd 1) The company's name is TRIGGER UK LTD (Hereafter referred to as "the Company”) 2) The company's registered office is to be situated in England & Wales. 3) The company's objects are: In furtherance of the objects the Company may exercise the following powers: a) to promote the interests, both economically and socially, of the members and those involved therein by means of education, advertising, publicity, alliances or other means to do all such other lawful things as will further the attainment of the Objects. b) to perform prudent and necessary business and legal functions, including entering into contractual obligations and to maintain organizational viability for the execution of its purposes. c) to purchase or otherwise acquire any licenses, and the like, conferring any exclusive or non-exclusive or limited right of use, or any secret or other information as to any invention, capable of being used for any of the purposes of the development of the business whether manufacturing or otherwise, which the company may think calculated directly or indirectly to achieve these objects. 4) TRIGGER UK LTD can be abbreviated to 'TUK' and is trading as "TRIGGER UK and Affiliated Countries". 5) The income and property of the Company shall be applied solely towards the promotion of the Objects as set forth in this Memorandum of Association and profits thereof shall be paid or transferred directly or indirectly by way of dividend or otherwise to the members of the Company. 6) The liability of the members is limited. 7) Every Director of the Company undertakes to contribute such amount as may be required to the Company assets if it should be wound up while he or she is a Director, to cover the costs of charges and expenses of winding up. 8) If the Company is wound up or dissolved and after all its debts and liabilities have been satisfied there remains any property it shall be paid to or distributed amongst the members of the Company. Anglo-American Business Law Structures P.221

Us “Corporation” By-laws

ARTICLE I – OFFICES Section 1. The registered office of the corporation shall be at: "Address" The registered agent in charge thereof shall be: "Name". Section 2. The corporation may also have offices at such other places as the Board of Directors may from time to time appoint or the business of the corporation may require.

ARTICLE II – SEAL Section 1. The corporate seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, "State"".

ARTICLE III – STOCKHOLDERS' MEETINGS Section 1. Meetings of stockholders shall be held at the registered office of the corporation in this state or at such place, either within or without this state, as may be selected from time to time by the Board of Directors. Section 2. Annual Meetings: The annual meeting of the stockholders shall be held on the 3rd Wednesday of February in each year if not a legal holiday, and if a legal holiday, then on the next secular day following at 10:00 o'clock A.M., when they shall elect a Board of Directors and transact such other business as may properly be brought before the meeting. If the annual meeting for election of directors is not held on the date designated therefore, the directors shall cause the meeting to be held as soon thereafter as convenient. Section 3. Election of Directors: Elections of the directors of the corporation shall be by written ballot. Section 4. Special Meetings: Special meetings of the stockholders may be called at any time by the Chairman, or the Board of Directors, or stockholders entitled to cast at least one-fifth of the votes which all stockholders are entitled to cast at the particular meeting. At any time, upon written request of any person or persons who have duly called a special meeting, it shall be the duty of the Secretary to fix the date of the meeting, to be held not more than sixty days after receipt of the request, and to give due notice thereof. If the Secretary shall neglect or refuse to fix the date of the meeting and give notice thereof, the person or persons calling the meeting may do so. Business transacted at all special meetings shall be confined to the objects stated in the call and matters germane thereto, unless all stockholders entitled to vote are present and consent. Written notice of a special meeting of stockholders stating the time and place and object thereof, shall be given to each stockholder entitled to vote thereat at least 30 days before such meeting, unless a greater period of notice is required by statute in a particular case. Section 5. Quorum: A majority of the outstanding shares of the corporation entitled to vote, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders. If less than a majority of the outstanding shares entitled to vote is represented at a meeting, a majority of the shares so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. Anglo-American Business Law Structures P.222

Section 6. Proxies: Each stockholder entitled to vote at a meeting of stockholders or to express consent or dissent to corporate action in writing without a meeting may authorize another person or persons to act for him by proxy, but no such proxy shall be voted or acted upon after three years from its date, unless the proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally. All proxies shall be filed with the Secretary of the meeting before being voted upon. Section 7. Notice of Meetings: Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given which shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. Unless otherwise provided by law, written notice of any meeting shall be given not less than ten nor more than sixty days before the date of the meeting to each stockholder entitled to vote at such meeting.

ARTICLE IV – DIRECTORS Section 1. The business and affairs of this corporation shall be managed by its Board of Directors, ____ in number. The directors need not be residents of this state or stockholders in the corporation. They shall be elected by the stockholders at the annual meeting of stockholders of the corporation, and each director shall be elected for the term of ore year, and until his successor shall be elected and shall qualify or until his earlier resignation or removal. Section 2. Regular Meetings: Regular meetings of the Board shall be held without notice, at least quarterly, at the registered office of the corporation, or at such other time and place as shall be determined by the Board. Section 3. Special Meetings: Special Meetings of the Board may be called by the Chairman on 2 days notice to each director, either personally or by mail, fax or by telegram; special meetings shall be called by the President or Secretary in like manner and on like notice on the written request of a majority of the directors in office. Section 4. Quorum: A majority of the total number of directors shall constitute a quorum for the transaction of business. Section 5. Compensation Directors as such, shall not receive any stated salary for their services, but by resolution of the Board, a fixed sum and expenses of attendance at each regular or special meeting of the Board PROVIDED, that nothing herein contained shall be construed to preclude any director from serving the corporation in any other capacity and receiving compensation therefore. Section 6. Removal: Any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of the shares then entitled to vote at an election of directors, except that when cumulative voting is permitted, if less than the entire Board is to be removed, no director may be removed without cause if the votes cast against his removal would be sufficient to elect him if then cumulatively voted at an election of the entire Board of Directors, or, if there be classes of directors, at an election of the class of directors of which he is a part.

ARTICLE V – OFFICERS Section 1. The executive officers of the corporation shall be chosen by the directors and shall be a Chairman, President, Secretary and Chief Financial Officer. The Board of Directors may also choose a one or more Vice Presidents and such other officers as it shall deem necessary. Any number of offices may be held by the same person. Section 2. Salaries: Salaries of all officers and agents of the corporation shall be fixed by the Board of Directors. Anglo-American Business Law Structures P.223

Section 3. Term of Office: The officers of the corporation shall hold office for one year and until their successors are chosen and have qualified. Any officer or agent elected or appointed by the Board may be removed by the Board of Directors whenever in its judgment the best interest of the corporation will be served thereby. Section 4. Chairman: The Chairman shall preside at all meetings of the stockholders and directors; he shall see that all orders and resolutions of the Board are carried into effect, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the Chairman, to any other officer or officers of the corporation. He shall execute bonds, mortgages and other contracts requiring a seal, under the seal of the corporation. Section 5. President: The President shall attend all sessions of the Board. The President shall be the chief executive officer of the corporation; he shall have general and active management of the business of the corporation, subject, however, to the right of the directors to delegate any specific powers, except such as may be by statute exclusively conferred on the President, to any other officer or officers of the corporation. He shall have the general power and duties of supervision and management usually vested in the office of President of a corporation. Section 6. Secretary: The Secretary shall attend all sessions of the Board and all meetings at the stockholders and act as clerk thereof, and record all the votes of the corporation and the minutes of all its transactions in a book to be kept for that purpose, and shall perform like duties for all committees of the Board of Directors when required. He shall give, or cause to be given, notice of all meetings of the stockholders and of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or President, and under whose supervision he shall be. He shall keep in safe custody the corporate seal of the corporation, and when authorized by the Board, affix the same to any instrument requiring it. Section 6. Chief Financial Officer: The Chief Financial Officer shall have custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation, and shall keep the moneys of the corporation in separate account to the credit of the corporation. He shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Chief Financial Officer and of the financial condition of the corporation.

ARTICLE VI – VACANCIES Section 1. Any vacancy occurring in any office of the corporation by death, resignation, removal or otherwise, shall be filled by the Board of Directors. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, although not less than a quorum, or by a sole remaining director. If at any time, by reason of death or resignation or other cause, the corporation should have no directors in office, then any officer or any stockholder or an executor, administrator, trustee or guardian of a stockholder, or other fiduciary entrusted with like responsibility for the person or estate of stockholder, may call a special meeting of stockholders in accordance with the provisions of these By-Laws.

ARTICLE VII – CORPORATE RECORDS Section 1. Any stockholder of record, in person or by attorney or other agent, shall, upon written demand under oath stating the purpose thereof, have the right during the usual hours for business to inspect for any proper purpose the corporation's stock ledger, a list of its stockholders, and its other books and records, and to make copies or extracts there from. A proper purpose shall mean a purpose reasonably related to such person's interest as a stockholder. In every instance where an attorney or other agent shall be the person who seeks the right to inspection, the demand under oath shall be accompanied by a power of attorney or such other writing which authorizes the attorney or other agent to so act on behalf of the stockholder. The demand under oath shall be directed to the corporation at its registered office in this state or at its principal place of business. Anglo-American Business Law Structures P.224

ARTICLE VIII – STOCK CERTIFICATES, DIVIDENDS, ETC. Section 1. The stock certificates of the corporation shall be numbered and registered in the share ledger and transfer books of the corporation as they are issued. They shall bear the corporate seal and shall be signed by the President. Section 2. Transfers: Transfers of shares shall be made on the books of the corporation upon surrender of the certificates therefore, endorsed by the person named in the certificate or by attorney, lawfully constituted in writing. No transfer shall be made which is inconsistent with law. Section 3. Lost Certificate: The Corporation may issue a new certificate of stock in the place of any certificate theretofore signed by it, alleged to have been lost, stolen or destroyed, and the corporation may require the owner of the lost, stolen or destroyed certificate, or his legal representative to give the corporation a bond sufficient to indemnify it against any claim that may be made against it on account of the alleged loss, 'theft or destruction of any such certificate or the issuance of such new certificate. Section 4. Record Date: In order that the corporation may determine the stockholders entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or the express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix, in advance, a record date, which shall not be more than sixty nor less than ten days before the date of such meeting, nor more than sixty days prior to any other action. Section 5. Dividends: The Board of Directors may declare and pay dividends upon the outstanding shares of the corporation from time to time and to such extent as they deem advisable, in the manner and upon the terms and conditions provided by the statute and the Certificate of Incorporation. Section 6. Reserves: Before payment of any dividend there may be set aside out of the net profits of the corporation such sum or sums as the directors, from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conducive to the interests of the corporation, and the directors may abolish any such reserve in the manner in which it was created.

ARTICLE IX – ANNUAL STATEMENT Section 1. The President and Board of Directors shall present at each annual meeting a full and complete statement of the business and affairs of the corporation for the preceding year. Such statement shall be prepared and presented in whatever manner the Board of Directors shall deem advisable and need not be verified by a certified public accountant.

ARTICLE XI – AMENDMENTS Section 1. These By-Laws may be amended or repealed by the vote of stockholders entitled to cast at least a majority of the votes which all stockholders are entitled to cast thereon, at any regular or special meeting of the stockholders, duly convened after notice to the stockholders of that purpose. Anglo-American Business Law Structures P.225

Definitions of Key Words

 Accountability: the principle that a person responsible for something must be able to explain and show records of action taken.

 Administration: procedure under the insolvency laws of a number of common law jurisdictions. It functions as a rescue mechanism for insolvent companies and allows them to carry on running their business.

 Agent: representative who acts on behalf of other persons or organizations.

 Annual meeting: a general meeting of shareholders of a corporation to elect directors and conduct general business; the meeting is required by law.

 Articles of incorporation: a document submitted to and approved by a state, which forms a corporation and establishes its rules; also called certificate of incorporation or corporate charter.

 Assets: everything of economic value that a person or company possesses.

 Association: a formal organization of people or groups of people.

 Beneficiaries: the person or persons who are entitled to the benefit of any trust arrangement.

 Benefits in kind: non-cash forms of pay or assistance.

 Board of directors: a committee elected as a governing body by the shareholders of a corporation.

 Business judgment rule: the principle, built on case law, that directors of a corporation cannot be held personally liable in court for decisions and mistakes made in good faith.

 Buyout: one partner or a new owner purchases the partnership shares of a departing partner.

 By-laws: precise internal rules governing business activities, adopted when a corporation is established and sometimes amended later.

 Capital: assets available for use in the production of further assets.

 Cash flow: movement of cash within a business; the analysis of how much cash is needed and when that money is required by a business within a period of time.

 Cast: to put forth.

 CEO: chief executive officer; (President).

 CFO: chief financial officer; (Treasurer).

 CLO: chief legal officer; (Corporate secretary). Anglo-American Business Law Structures P.226

 Chairperson: the person (still sometimes called chairman) elected to preside over the board of directors to determine the policies of a corporation; sometimes acts as the CEO to manage the day- to-day business.

 Chapter 7 Bankruptcy: classification that involves liquidation of a company's or individual's assets to settle debts with creditors.

 Chapter 11 Reorganization: reorganization of a bankrupt company under the supervision of a court or the appropriate regulator.

 Charter: the grant of authority or rights, stating that the granter formally recognizes the prerogative of the recipient to exercise the rights specified.

 Close corporation: a small corporation operating under specific statutes, with a limited number of shareholders and fewer legal formalities than other corporations.

 Collateral: in lending agreements, collateral is a borrower's pledge of specific property to a lender, to secure repayment of a loan.

 Corporate governance: the system by which limited liability companies are directed and controlled.

 Corporate secretary: the officer, usually reporting to the president, who organizes and supervises the work of the board of directors of a company in accordance with the law and with the by-laws of the corporation; may be a lawyer and serve as legal counsel (then often referred to as CLO).

 Corporation: a business organization which is charted by a U.S. state, owned by shareholders, governed by a board of directors, and considered a legal entity separate from its owners and officers.

 Cumulative shares: A type of preferred stock with a provision that stipulates that if any dividends have been omitted in the past, they must be paid out to preferred shareholders first, before common shareholders can receive dividends.

 Director: a member of the board of a corporation, elected by shareholders and responsible for the general policies of the company and the appointment of its officers.

 Disclosure: the act of providing information to others about a company’s business, either voluntarily or to comply with legal requirements.

 Dividend: part of the earnings of a corporation that is distributed to its shareholders.

 Draft: to compose a preliminary writing of a legal document.

 Draw: withdrawal: to remove or deduct.

 Due care: the attention and conduct that a reasonable and competent person would exercise in similar circumstances (as defined by case law).

 Equitable title: form of title to trust property held by the beneficiary, where legal title resides in the trustee. Anglo-American Business Law Structures P.227

 Estate tax: inheritance tax: a tax on the estate of the deceased person.

 Extraordinary shareholders meeting: meeting of members of an organisation, shareholders of a company, which occurs at an irregular time also known as a special meeting.

 Fiduciary: a person who has been given the power to act for others in a position of trust, especially in financial matters, and who has the ethical and legal duty to work in their bests interests.

 “Flow-through entity”: a business that pays no income taxes because its income goes directly to its owners, who report the sums received individually on their tax declarations.

 Franchise: privilege to an individual or firm to be a provider of a good or service.

 Franchise tax: a tax or fee usually levied annually upon a corporation, limited liability company or similar business entity for the right to exist or do business in a particular state.

 General partnership: a partnership set up as a flow-through entity in which gains and losses are shared equally with no limit on personal liability.

 Gross negligence: irresponsible conduct that is extremely lacking in prudence and care; like ordinary negligence, it is treated as a civil or criminal tort at common law.

 HMRC: In the United Kingdom, the government department responsible for the administration and collection of all forms of tax, including VAT, income tax, and excise duties. HMRC combines the duties of two formerly separate departments, the Inland Revenue and HM Customs and Excise.

 Income tax: a sum of money paid by an individual or company to the government, based on total financial gain in a given period.

 Incorporate: to form a corporation by charter.

 Incur: to become subject to; become liable to.

 Indemnification: financial protection that a company may offer to its directors, officers or employees against legal action brought for negligent or wrongful conduct in business.

 Insider Director: a member of the Board of Directors of a corporation who is also a member of the corporation's management.

 Insolvent: unable to pay debts or financial obligations as they become due.

 Joint and Several liability: a legal rule which gives total liability to each partner in a business, whether or not that partner is responsible for a wrongful act.

 Keep the minutes: provide a record of the organization's meeting activities.

 Legal title: title placed in a trustee under a trust agreement.

 Levy: To impose and collect a tax or tariff. Anglo-American Business Law Structures P.228

 Liable: legally responsible for a debt, loss or injury.

 Liability: a legal or financial responsibility or obligation.

 License: a document or agreement giving permission for a certain activity.

 Liquidation or winding up: discharging of a corporation's liabilities and the distributing of its remaining assets to its shareholders in connection with its dissolution.

 Limited Liability Company: a small business structure owned by shareholders who, like partners, have certain rights and tax advantages and, being legally distinct from the entity, is not held liable for the debts of the company.

 Limited Liability Partnership: a business entity reserved for professionals, which offers the autonomy and tax advantages of a partnership as well as the restrictions on liability of a corporation.

 Limited Partnership: a business structure agreed upon by two different types of partners: the general partner(s) controlling the operations, managing the investment, and bearing unlimited liability; and the limited partner(s) protected by reduced liability but given less power and income.

 Listed stock: ownership, in the form of shares, in a corporation that fits the requirements to be on the list of a particular stock exchange; the corporation’s shares of stock are thus traded, bought and sold on the exchange.

 Malpractice: negligence or incompetence of a qualified person performing a professional act; this person may be sued for damages.

 Minutes: the official written record of what takes place at a formal meeting.

 National Insurance: social insurance program in the UK; based on contributions from employers and employees; provides payments to unemployed and sick and retired people as well as medical services.

 Nominal Partner: Person who has an interest in the success of a partnership firm but, legally, is not partner because he or she neither owns a part of the firm nor actively participates in its affairs.

 Non-profit corporation: an organization which is charted by a government to conduct business with a goal other than profit for example: education, community service, or charity.

 Officer: one of the managers chosen by the board of directors of a corporation to run the business activities.

 Ordinary meeting: meeting which is held usually on a regular basis to conduct business. (General meeting or Annual meeting)

 Ordinary shares: most common form of shares. Holders receive dividends which vary in accordance with the profitability of the company and the recommendations of the directors. The holders of ordinary shares are the owners of the company also known as common shares. Anglo-American Business Law Structures P.229

 Outside Director: (non-executive director) is a member of the board of directors of a company who is not an officer or does not form part of the executive management team.

 Over-the-counter-market: the system for buying and selling shares (or other financial instruments) that are not listed on a stock exchange.

 Parent Corporation: the corporation that controls a subsidiary company by share ownership or agreement.

 Partnership: a business formed by contract according to common law, in which two or more persons, called partners, share its management, profits and losses as agreed.

 Perpetrate: to commit or perform.

 Piercing (or lifting) the corporate veil: a court interpretation which concludes in a given case that limited liability does not apply because the defendant(s) used the corporate entity to hide or veil personal responsibility for wrongful conduct.

 Preferred shares: class of shares that entitles the holders to preferences over the holders of common shares, usually with regard to dividends and distributions of assets upon dissolution or liquidation.

 President: the highest-ranking executive in a company or corporation, responsible for carrying out the policies of the board of directors; usually synonymous with CEO or managing director/MD.

 Proxy: power of attorney document given by shareholders of a corporation authorizing a specific vote on their behalf at a corporate meeting;

 Public Benefit Corporation: a company that is created or owned and managed by the government.

 Publicly-held Corporation: a large corporation whose shares are bought and sold on a stock exchange.

 Quorum: minimum number of members required for a group to officially conduct business.

 Realisable asset: (UK) value of an asset for which it can be sold, minus the cost of selling it.

 Receivership: remedy that may be granted by a court of law in an appropriate case, whereby a person is appointed as a receiver to possess, manage, and protect money or property until the litigation involving the property is concluded.

 Redenominate: process whereby a country's currency is recalibrated due to significant inflation and currency devaluation.

 Resolution: a formal expression by a meeting; agreed to by a vote.

 Secured assets: specific assets that a protected or secured creditor has a priority claim over in case of failure of repayment of credit. Anglo-American Business Law Structures P.230

 Secured creditor: A creditor holding a claim against the debtor who has the right to take and hold or sell certain property of the debtor in satisfaction of some or the entire claim.

 Security: property that a creditor can claim in case of a default on an obligation.

 Stock exchange: an organized and regulated marketplace where shares of companies are bought and sold.

 ‘Second guess’: evaluate or criticize after the event or situation has occurred.

 Semi-public Corporation: a corporation which includes government funding and control as well as private investment and management of certain activities.

 Share: a unit (certificate) of ownership of the capital stock of a company.

 Share capital: capital of a company represented by different kinds of shares.

 Silent (or sleeping) partner: a limited partner in a limited partnership; given this name because the person’s role in the company is passive, limited mainly to providing initial investment capital.

 Sole proprietorship: (UK Sole Trader) a business that is owned and operated by a single individual.

 Stock option: a financial instrument which enables its holder to buy a company’s stock at a specific price; stock options can be awarded to managers or employees as compensation. Subsidiary: a company that is owned or controlled by another (called the parent corporation)

 Subscription: legal contract or an agreement to purchase a given number of shares at a specified price.

 Tax return: a form filled out by a person or entity giving the government information about income and expenses in order to determine taxes to be paid.

 Treasurer: the officer who controls the funds of an entity or organization (in a corporation often called the CFO).

 Trust: relationship or structure created at the direction of an individual or trustor, in which one or more persons (trustees) hold the individual's property subject to certain duties to use and protect it for the benefit of others (beneficiaries).

 Trustee: a person (or institution) to whom legal title to property is entrusted to use for another's benefit.

 Trustor: person who establishes a trust. The term trustor is used interchangeably with the terms "settlor" and "grantor."

 Turnover: income of a business entity received over a certain period through selling goods and (or) providing services.

 Undercapitalized: to lack sufficient capital. Anglo-American Business Law Structures P.231

Questions 1) What are the different types of business structures in the US or UK?

2) What are the differences between Directors and Officers?

3) What is a shareholder? List some of his rights and powers.

4) What are the various documents needed to create a business entity?

5) What does ‘to pierce the corporate veil’ mean ?

6) What is a business trust?

7) What is a Non-Profit organization?

8) What is the UK Companies Act of 2006?

Sources for this chapter:

1) The English of Law: U.S. Law & Politics / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Mohammedi, Michel Perdu, William Yeago et al. Editeur : Belin 2007

2) International Legal English / Lindner/Translegal – William Yeago Cambridge University Press 2006

3) Black’s Law Dictionary West Publishing – sixth edition

www.findlaw.com www.law.com www.dictionary.law.com www.freeadvice.com www.businesslink.gov.uk www.lawexperts.com www.thetimes100.co.uk www.corporationplus.com Anglo-American and European Union Competition (Antitrust) Law P.232

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY

Anglo-American and European Union Competition9 (Antitrust) L aw Anglo-American and European Union Competition (Antitrust) Law P.233

ANGLO-AMERICAN AND EUROPEAN UNION COMPETITION (ANTITRUST) LAW

9Competition (Antitrust) Law Origins and Purpose p. 234 United States Antitrust Law p. 235 Competition Law in the United Kingdom p. 242 European Union Competition Law p. 245 Articles of the European Union Treaty p. 247 « Microsoft v EU Commission » p. 248 Definitions of Key Words p. 251 Questions p. 255 Anglo-American and European Union Competition (Antitrust) Law P.234

Anglo-American and European Union Competition (Antitrust) L aw

After completing this lesson, one should:  Have an overview of the various competition laws in the US, UK and the EU  Understand the purpose of Competition Law and its origins  Appreciate the concepts of monopolization and abuse of dominant position  Be familiar with the various illegal agreements to restraint of trade  Comprehend the differences between horizontal and vertical markets 9 Analyze the notions of mergers and acquisitions and their effects on competition Competition (Antitrust) Law Origins and Purpose

The purpose of Competition (antitrust) Laws, in theory, is to ensure that consumers pay the lowest possible price for the highest quality of the goods and services they consume. This can be achieved through effective competition. Competition not only reduces particular prices of specific goods and services, but it encourages manufacturers and service providers to be more efficient, to better respond to the needs of their customers, to innovate, to initiate, to take business risks. It optimizes the allocation of resources (capital) so that consumers and businesses pay less for the same goods and services and, as a result, productivity and consumption grow to the benefit of all involved. The other beneficial effect is that competition eliminates failing businesses, those that are incompetent or inefficient or too slow to respond to change. Competitors pressure one another to be more efficient. This is the very essence of capitalism. It is not only the consumer that benefits; if a firm improves itself by modernizing its production processes, introducing new management techniques in order to fight the competition, it will benefit and be rewarded for its efforts. Competition benefits the economy (as a whole), the consumers and other producers by a process of natural economic selection, where only the most efficient, well managed entities survive. Those who do not, and lose money, will cease to exist, and as a result not waste the resources of labor and capital. Unfortunately, the first noticeable results of the introduction of free markets and competition are unemployment and business closures. Often people and firms lack the vision, the knowledge and the resources needed to support competition. Competition Laws aim to establish fairness of commercial conduct among entrepreneurs and competitors, which are the sources of innovation and originality. Competition Law originated in the USA during the 19th century and from there, spread to Germany and Japan, the defeated countries in the Second World War and the European Community (EC), which integrated a competition policy in the Rome Convention and in the Regulations of the Council of Ministers in 1962.

Some theorists say that the two most important economic blocks today, the EU and the USA, have different goals in mind when implementing competition policies:  They stress that the USA is more interested in economic results, while the EU emphasizes social and regional development, as well as political consequences.  The USA protects the producers, while the EU protects the consumers.  The USA is more interested in the maximization of economic output than the social cost, while the EU is interested in the creation of a just society, a sustainable community, even if the economic results will be less than optimal. Anglo-American and European Union Competition (Antitrust) Law P.235

United States Antitrust Law The United States’ economic system is based on capitalism and free enterprise, and its laws have traditionally been created to protect open competition in the marketplace. Antitrust Law originated in reaction to the corporate monopolies that dominated US manufacturing and mining in the late 19th century. The Industrial Revolution in the 1800s in the United States led to the growth of cartels and trusts in railroads, oil and steel; the process of merger and consolidation brought entire industries under the control of a few powerful people. The state legislatures and courts were unable to control these huge new concentrations of power. In response to this problem, beginning with the Sherman Act of 1890, the federal government began to enact the nation’s most important antitrust laws, designed to encourage free competition by regulating the various activities of businesses engaged in interstate commerce.

Antitrust Law refers to a system of federal and state law intended to promote competition and to prohibit monopolistic restraint of trade. Antitrust statutes and regulations try to ensure a system in which prices in a free and competitive market are the result of consumer demand, and not of monopolization and conspiracies among competitors. The efficient allocation of resources, lower prices, high quality products, and increased innovation are the benefits of such competition in a free and open market.

When consumers decide to purchase products or services, the aim of Antitrust Law is to make sure their choices are not unreasonably controlled. Consumer choice is a powerful inducement for sellers to keep their quality high and their prices low.

Federal legislation, which includes the Sherman Antitrust Act of 1890, the Clayton Act and the Federal Trade Commission Act, both of 1914, and the Robinson-Patman Act of 1936, provides the primary antitrust laws in the United States. These Federal antitrust laws, enacted by Congress over the past century, still apply to anyone involved in business – corporations, partnerships, sole proprietorships, associations, and even professionals such as doctors, accountants and lawyers.

These laws are enforced by the Antitrust Division of the US Department of Justice or by the Federal Trade Commission. Sanctions that may be imposed on violators include:  The seizure of property illegally shipped in interstate commerce;  Suspension of any right to engage in interstate commerce for at least a year;  For a corporation, fines of up to one million dollars or twice the amount of illegal profits for each offense;  For any other person, a fine of up to $100,000, imprisonment for as much as three years or both for each offense, and injunctions against further wrongful acts.

A private or legal person (including corporations) whose business or property is injured as a direct result of a violation of antitrust laws may also sue in civil court for monetary compensation. They may sue only if they purchased a product or service directly from the violator.

The primary purpose of these acts is to prohibit:  Monopolization;  Conspiracies to monopolize; (illegal agreements)  Attempts to monopolize. (by mergers and acquisitions) Anglo-American and European Union Competition (Antitrust) Law P.236

Economic studies have indicated that a monopolistic entity tends to use its powers to limit production and increase prices; thus a single entity is able to control both the supply and the price of a product or service, consequently a monopolistic market may produce fewer goods at a higher price than a competitive market.

The issue of monopolistic power requires defining what degree of market dominance constitutes a monopoly. Courts consider many factors in determining whether a firm has a monopoly to control prices or exclude competitors in a market. Some of the factors include:  the size of the market share,  whether the size of the firm was achieved through natural, internal growth or by acquiring competitors or assets,  the number of competitors, their financial strength, and the degree of concentration in that particular market,  whether the firm engaged in unlawful exclusionary practices, to prevent entry into the market by potential competitors,  the extent to the which the firm used illegal coercive tactics to suppress competition.

The prevalent test used by the FTC and courts is the market share test. A market share of 75% or greater generally indicates a monopoly exists, while a share of 50% may not. Key issues to be taken into consideration are the relevant product market consisting of products that are similar or interchangeable products that are available to the consumer and the relevant geographic market where the firm makes sales of its products and services.

The Federal Trade Commission (FTC) is an independent agency of the United States government, established in 1914 by the Federal Trade Commission Act. Its principal mission is the promotion of consumer protection and the elimination and prevention of what regulators perceive to be harmful anti-competitive business practices. It protects the rights of American consumers by promoting and protecting free and vigorous competition. The FTC:

 reviews mergers and acquisitions, and challenges those that would likely lead to higher prices, fewer choices, or less innovation;

 seeks out and challenges anticompetitive conduct in the marketplace, including monopolization and agreements between competitors;

 promotes competition in industries where consumer impact is high, such as health care, real estate, oil & gas, technology, and consumer goods;

 provides information, holds conferences and workshops for consumers, businesses and policy makers on competition issues and market analysis. Anglo-American and European Union Competition (Antitrust) Law P.237

Rule of Reason v Per Se

The courts generally apply the ‘rule of reason’ analysis, to abuse of dominant position and attempt to monopolize violations, weighing all the factors of a case such as its history, the restraint of trade and the unreasonableness, the actual harm and effects, the evil believed to exist, and the reason for the remedy sought.

The ‘per se rule’ analysis of illegality, applied by the courts in a number of antitrust cases, usually for ‘conspiracy to monopolize’ violations, presumes certain practices to be unreasonable in all contexts and the penalties may not only be fines but imprisonment as well.

The 'rule of reason' is a doctrine developed by the United States Supreme Court in its interpretation of the Sherman Antitrust Act. The rule, stated and applied in the case of Standard Oil Co. of New Jersey v. United States, 221 U.S. 1 (1911), is that only combinations and contracts 'unreasonably restraining trade' are subject to actions under the anti-trust laws and that size and possession of monopoly power are not illegal. Today, the US Supreme Court continues to reaffirm Standard Oil's conclusion that analysis under the Rule of Reason requires a case-by-case approach which sometimes cannot be easily defined. The test requires that the plaintiff show anticompetitive effects, or actual harm to competition. Supreme Court Justice Brandeis in the Standard Oil case stated the rule as follows: "The true test of illegality [under the Rule of Reason] is whether the restraint imposed is such as merely regulates and perhaps thereby promotes competition or whether it is such as may suppress or even destroy competition. In other words, we are instructed to weigh the pro-competitive aspects against the anti-competitive aspects. The court must ordinarily consider the facts peculiar to the business to which the restraint is applied; its condition before and after the restraint was imposed; the nature of the restraint and its effect, actual or probable. The history of the restraint, the evil believed to exist, the reason for adopting the particular remedy, the purpose or end sought to be attained, are all relevant facts." This rule was narrowed in later cases that held that certain kinds of restraints, such as price fixing agreements, group boycotts, and geographical market divisions, were illegal per se. These decisions followed up on Standard Oil's suggestion that courts can determine that certain restraints are unreasonable based simply upon the "nature and character" of the agreement.

The Per Se Rule vs. the Rule of Reason Violations under the Sherman Act take one of two forms - either as a per se violation or as a violation of the rule of reason. A per se violation requires no further inquiry into the practice's actual effect on the market or the intentions of those individuals who engaged in the practice. Some business practices, however, at times constitute anticompetitive behavior and at other times encourage competition within the market. For these cases the court applies the rule of reason and a "totality of the circumstances test" and asks whether the challenged practice promotes or suppresses market competition. Courts often find intent and motive relevant in predicting future consequences during a rule of reason analysis. Anglo-American and European Union Competition (Antitrust) Law P.238

Horizontal Restraints among Competitors

Horizontal restraints of trade are acts of collusion, among competing entities in actual or potential competition with each other on the same level of distribution. These have traditionally been considered the most serious of antitrust abuse and represent most of the violations susceptible to criminal penalties.

The three most important ‘per se’ violation categories are as follows:  Horizontal price fixing - Competitors that make agreements on prices for products or services commit a ‘per se’ offence. This applies to businesses of all sizes, in all economic sectors of trade and industry. They can be prosecuted, even if there is no written agreement signed by the parties involved. It would be highly unlikely that competitors would draft such a document. Therefore, "contract, combination or conspiracy", as stated in the Sherman Act, may be identified in court proceedings, using relevant facts and circumstantial evidence to determine whether price fixing is clearly implied.  Allocation of markets or customers - Competitors who divide markets between themselves according to geographical regions to determine where they each will sell, clearly creates lack of choice for consumers. This also includes, after combining and analyzing their data bases of customers, agreeing on which customers each business will sell to.  Horizontal boycott – is an agreement between two or more business entities not to sell to or to exclude an individual, a business, or a group. Free competition should be encouraged by unrestrained relationships between suppliers and clients.

Vertical Restraints

Vertical relationships exist between suppliers and customers; that is between the different levels of the vertical supply distribution chain. Antitrust Law generally considers vertical agreements between business entities on the different levels of distribution as less serious offenses than horizontal ones. Vertical agreements generally promote competition because they usually involve a combining of com- plements, for example, the manufactured product and distribution services. Although vertical agreements are generally pro-competitive, they can injure competition, under some circumstances, when they deny or raise the cost of a needed or valuable input such as distribution services to a rival. Consequently, certain practices are obviously detrimental to free market principles and may incur severe penalties. Anglo-American and European Union Competition (Antitrust) Law P.239

Vertical price fixing is an agreement between a seller and a buyer regarding the buyer’s price for resale. For over one hundred years, neither minimum nor maximum resale price agreements were permitted by Antitrust Law and were considered a ‘per se offense’ just as in horizontal price fixing. During this time, the supplier could ‘suggest’ a resale price, and the buyer ‘may possibly’ follow the suggestion, as long as it remained clear that there was no definite, predetermined fixing of the price. In 2007, the US Supreme Court overruled the precedent that established vertical price fixing as a ‘per se’ violation; therefore the ‘rule of reason’ is now to apply to cases in which this type of vertical agreement is contested.

In Leegin Creative Leather Products v. PSKS, Inc., the Supreme Court in the 2006-07 Supreme Court term, rejecting the 96 year-old Dr. Miles precedent, held that an agreement between a manufacturer and a retailer to set the price that the retailer will charge (called vertical resale price maintenance) should not be deemed per se illegal under Section 1 of the Sherman Act. Now, “Vertical price restraints are to be judged according to the rule of reason.”

An exclusive selling agreement is when a seller makes a contract with a particular dealer in a certain territory and agrees to sell only to that dealer. Even though this restraint is a limitation on the seller’s freedom, the courts apply the ‘rule of reason’ analysis and usually it is not considered anti-competitive.

The ‘rule of reason’ is also the measure used to scrutinize the legality of an exclusive dealing agreement. This occurs when a buyer agrees to obtain a product or service exclusively from a specific seller, which often might be inferred as just a harmless expression of customer satisfaction or loyalty. Exclusive dealing agreements are not ‘per se illegal’. Consideration is given to whether the agreement prevents competition from entering the market.

Tying or Tie-in agreements are one of the most common antitrust claims. Simply put, a tying arrangement is an agreement by a party to sell one product, but only on the condition that the buyer also purchases as well, another different product. The only way the buyer can get the one Anglo-American and European Union Competition (Antitrust) Law P.240

product is to also purchase another product that he or she may or may not want. Tying is a ‘per se’ or automatic violation. Nevertheless, tying arrangements may sometimes be justified subject to the rule of reason analysis. Vertical boycott agreements are often found to be harmful to competition, although the courts in recent years have become more moderate in their approach. As a general rule, a seller should not agree with any of its customers that it will not sell to another. If such an agreement can be shown, the refusal to deal is likely to be the subject of litigation. If there is also an agreement as to the prices or price levels they charge, a rule of ‘per se’ illegality can be applied. On the other hand, a seller has traditionally been afforded the right, acting independently, to select those with whom it will do business, using their own criteria to choose the customers they will deal with, as long as their choices remain independent.

Merger and Acquisition Controls

A merger or acquisition (M&A) occurs when one firm buys the shares or assets of another firm. A merger is a combination of two companies to create a new company, while an acquisition is the purchase of one company by another with no new company being formed. From a Competition Law concern, these transactions may produce an increase in the concentration of economic power in the hands of fewer than before. The reasons for antitrust controls of economic concentrations are to restrict firms creating a monopoly (or a firm which could abuse a dominant position). The regulation of mergers and acquisitions attempts to deal with the problem before it arises, therefore preventing the creation of a dominant firm.

Competition Law requires that firms proposing to merge gain authorization from the relevant government authority. Failure to obtain this authorization may result in the prospect of legal difficulties should the concentration later be found to lessen competition. Merger control is about predicting what the market might be like and making a judgment.

The Federal Trade Commission investigates potential mergers and acquisitions, issues advisory opinions on the effects the deals would have on competition as part of its role in law enforcement.

The major purpose of Antitrust Law is to prohibit attempts to monopolize. Any merger or acquisition may be considered likely to reduce competition substantially or create monopolistic conditions as prohibited by the Clayton Act. Possible enforcement measures include prohibiting the transaction by an injunction or the courts may issue a post-closing order of divestiture. Criminal penalties are generally not enforced.

Horizontal Mergers

Mergers of large firms competing in the same market are most likely to have anticompetitive repercussions. The first step in analyzing the effects of a proposed merger is to define the relevant market to see whether the two companies compete. Assuming a given merger is between competitors, the tests of illegality are the market shares of the merged companies and the concentration in the market. Guidelines established by the FTC measure a market's concentration using the Herfindahl-Hirschman Index ("HHI"), which is an economic mathematical calculation which measures the concentration of the market, including the market share of the competitors. Anglo-American and European Union Competition (Antitrust) Law P.241

Depending on the HHI findings, if the index shows that after the proposed merger, the market would remain “unconcentrated”, there will be no reason to object to the transaction. If found to be ‘moderately concentrated’ or’ highly concentrated’ by the calculations in the HHI. The merger is said to raise a presumption of anticompetitive effect, which can nonetheless be rebutted by evidence showing that the merger is not likely to create opportunities for competition to raise prices. Because horizontal mergers pose a direct threat to competition, they have been regulated and controlled more aggressively by the FTC and the Department of Justice than vertical mergers.

Vertical Mergers

Vertical mergers are those between suppliers and customers. Here the number of decided cases is much smaller, and the attitude of the enforcement agencies is significantly less severe. Vertical integration by merger generally does not reduce the total number of economic entities operating at one level of the market, but it may change patterns of industry behavior. Suppliers may lose a market for their goods, retail outlets may be deprived of supplies, and competitors may find that both supplies and outlets are blocked. Vertical mergers may also be anticompetitive because their entrenched market power may discourage new businesses from entering the market. Insofar as it does not often cause substantial harm to competitors – sellers or buyers – the FTC shows limited concern for this type of deal, and there are fewer legal conflicts in this category than in the category of horizontal mergers.

The Sherman Antitrust Act of 1890 Sec. 1 Every contract, combination in the form of trust or otherwise; or conspiracy, in restraint of trade or commerce among the several States, or with foreign nations, is hereby declared to be illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court. Sec. 2 Every person who shall monopolize, or attempt to monopolize, or combine or conspire with any other person or persons, to monopolize any part of the trade or commerce among the several States, or with foreign nations, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court. Sec. 3 Every contract, combination in form of trust or otherwise, or conspiracy, in restraint of trade or commerce in any Territory of the United States or of the District of Columbia, or in restraint of trade or commerce between any such Territory and another, or between any such Territory or Territories and any State or States or the District of Columbia, or with foreign nations, or between the District of Columbia and any States or States or foreign nations, is hereby declared illegal. Every person who shall make any such contract or engage in any such combination or conspiracy, shall be deemed guilty of a misdemeanor, and, on conviction thereof, shall be punished by fine not exceeding five thousand dollars, or by imprisonment not exceeding one year, or by both said punishments, in the discretion of the court. Sec. 4 The several circuit courts of the United States are hereby invested with jurisdiction to prevent and restrain violations of this act; and it shall be the duty of the several district attorneys of the United States, in their institute proceedings in equity to prevent and restrain such violations. Such proceedings may be by way of petition setting forth the case and praying that such violation shall be enjoined or otherwise prohibited. When the parties complained of shall have been duly notified of such petition the courts shall proceed, as soon as may be, to the hearing and determination of the case; and pending such petition and before final decrees, the court many at any time make such temporary restraining order or prohibition as shall be deemed just in the premises. Anglo-American and European Union Competition (Antitrust) Law P.242

Sec. 5 Whenever it shall appear to the court before which any proceeding under Section four of this act may be pending, that the ends of justice require that other parties should be brought before the court, the court may cause them to be summoned, whether they reside in the district in which the court is held or not; and subpoenas to that end may be served in any district by the marshal thereof. Sec. 6 Any property owned under any contract or by any combination, or pursuant to any conspiracy (and being the subject thereof) mentioned in section one of this act, and being in the course of transportation from one State to another, or to a foreign country, shall be forfeited to the United States, and may be seized and condemned by like proceedings as those provided by law for the forfeiture, seizure, and condemnation of property imported into the United States contrary to law. Sec. 7 Any person who shall be injured in his business or property by any other person or corporation by reason of anything forbidden or declared to be unlawful by this act, may sue therefore in any circuit court of the United States in the district in which the defendant resides or is found, without respect to the amount in controversy, and shall recover threefold the damages by him sustained, and the costs of suit, including a reasonable attorney's fee. Sec. 8 That the word "person," or "persons," wherever used in this act shall be deemed to include corporations and associations existing under or authorized by the laws of either the United States, the laws of any of the Territories, and the laws of any State, or the laws of any foreign country.

Competition Law in the United Kingdom UK Competition Law is affected by both British and European elements. The Competition Act 1998 and the Enterprise Act 2002 are the most important statutes for cases with a purely national dimension. When the effect of anti-competitive behaviour extends beyond the UK to other EU- member states, it is prohibited by Articles 101 and 102 of the Treaty on the Functioning of the European Union (TFEU).

Even so, section 59 of the Competition Act 1998 provides that UK rules are to be applied in line with European jurisprudence. Like most competition laws, the UK has three main tasks.  Prohibiting agreements or practices that restrict free trading and competition between business entities. This includes in particular the repression of cartels.  Banning abusive behaviour by a firm dominating a market, or anti-competitive practices that tend to lead to such a dominant position. Practices controlled in this way may include predatory pricing, tying, and refusal to deal.  Supervising the mergers and acquisitions of large corporations, including some joint ventures. Transactions that are considered to threaten the competitive process can be prohibited altogether, or approved subject to "remedies" such as an obligation to divest part of the merged business or to offer licences or access to facilities to enable other businesses to continue competing.

The Office of Fair Trading (OFT) and the Competition Commission are the two primary regulatory bodies for Competition Waw enforcement. Consumer welfare is usually thought of as the dominant objective of Competition Law, and is closely connected with law on deregulation of access to markets, state aids and subsidies, the privatisation of state owned assets and the establishment of independent sector regulators.

Failure to comply with UK or EU Competition Law can have very serious consequences. Firms involved in anti-competitive behaviour may find their agreements to be unenforceable and risk being fined up to 10% of global group turnover for particularly damaging behaviour as well as exposing themselves to possible damages actions from customers. Furthermore, individuals could also find themselves facing director disqualification orders or even criminal sanctions for serious breaches of Competition Law. Anglo-American and European Union Competition (Antitrust) Law P.243

As such, any business, whatever its legal status, size and sector, needs to be aware of Competition Law, so that it can meet its obligations to avoid penalties but also, so it can assert its own rights and protect its position in the marketplace.

Types of Agreement Prohibited

Whether an arrangement is anti-competitive, is assessed on the basis of its objective, or its effect on competition, rather than its wording or form. This means that verbal and informal 'gentlemen's agreements' are equally capable of being found to be anti-competitive as formal, written agreements.

Examples of the types of arrangement which are generally prohibited under the UK Acts or the European Union Article 101 include:  agreements which directly or indirectly fix purchase or selling prices, or any other trading condition (for example, discounts or rebates, etc);  agreements which limit or control production, markets, technical development or investment (for example, setting quotas or levels of output);  agreements which share markets or sources of supply; and  agreements which apply dissimilar conditions to similar transactions, placing other trading parties at a disadvantage.

Cartels

Cartel behaviour between competitors is the most serious form of anti-competitive behaviour under UK/EU law and carries the highest penalties. A 'hardcore' cartel is one which involves price-fixing, market sharing, bid rigging or limiting the supply or production of goods or services. Individuals prosecuted for a cartel may be liable to imprisonment of up to five years and/or the imposition of unlimited fines.

Exemptions

The fact that an agreement is restrictive of competition does not mean that it is automatically prohibited and it may be that an agreement which appears to fall within the prohibitions under UK or EU law is excluded or exempted from the provisions of the competition rules.

For example, an agreement which would otherwise be illegal under Article 101 may be assumed to be harmless where the parties to it have market shares sufficiently low that there can be no real effect on trade between member states.

UK and EU law set out certain criteria (for example, relating to the market share of the parties and the types of restriction contained within the agreement) which must be met in order for an agreement to be block exempted. Even if an agreement does not fit exactly within a block exemption, it is still not automatically unlawful or unenforceable. An agreement may be individually exempted on the grounds that its restrictions of competition are outweighed by its beneficial effects. Anglo-American and European Union Competition (Antitrust) Law P.244

For example, an agreement between two pharmaceutical companies to develop a new drug might be subject to UK/EU prohibition, as the two companies working together could be seen to reduce the number of products being produced, and as a result, preventing each company from working on independent projects. However, the benefits for consumers resulting from such a co-operation might lead to better and more effective drugs, which may reach the market faster and therefore, may be considered sufficient to off-set any anti-competitive effects.

Abuse of a Dominant Market Position

Both UK and EU Competition Law prohibit businesses with significant market shares from unfairly exploiting their strong market positions.

Consequences of Breach

Contravention of Article 102 of the European Union or the UK Competition Acts can have serious consequences for a company:

 firms engaged in activities which breach these provisions can face fines of up to 10% of global group turnover;  conduct can be stopped by court injunction;  firms in breach also leave themselves exposed to actions from third parties who can show they have suffered loss as a result of the anti-competitive behaviour; and  breach of UK Directors Act can result in individuals being disqualified from being a company director.

Types of Behaviour Prohibited

To be in a position of dominance, a business must have the ability to act independently of its customers, competitors and consumers. Establishing if a company is dominant requires a complex assessment of a number of elements but, as a general rule, if a business has a 50% market share there is a presumption that it is dominant. However, dominance has been found to exist where market share is as low as 40%.

However, having a dominant position is not ‘in itself’ a breach of Competition Law. It is the abuse of that position that is prohibited. Examples of behaviour that could amount to an abuse by a business of its dominant position include:  imposing unfair trading terms, such as exclusivity;  excessive, predatory or discriminatory pricing;  refusal to supply or provide access to essential facilities; and  tying (i.e. stipulating that a buyer wishing to purchase one product must also purchase all or some of his requirements for a second product). Anglo-American and European Union Competition (Antitrust) Law P.245

Enforcement of Competition Law

UK competition authorities and courts are empowered to apply and enforce the entirety of Articles 101 and 102 of the EU treaty, in addition to their existing powers to enforce the Competition Act 1998. The Office of Fair Trading (OFT) is the principal Competition Law enforcement authority in the UK, although there are a number of regulatory authorities with similar powers to enforce competition laws in their respective sectors (for example, OFGEM for the electricity sector and OFWAT for the water sector).

The UK competition authorities have significant powers to investigate suspected anti-competitive behaviour (including entering and searching business and private premises with a warrant and to impose significant fines on businesses found to have infringed Competition Law. Criminal sanctions are also possible for the most serious breaches of Competition Law.

Directors' Disqualification

New provisions to the Company Directors Disqualification Act 1986 permit the disqualification of directors where the company of which they are a director has breached Competition Law and their conduct as a director makes them unfit to be involved in the management of a company. The OFT may seek disqualification (for a period of up to 15 years) where serious infringements of Competition Law are established.

European Union Competition Law

The United Kingdom joined the European Community (EC) with the European Community Act 1972, and through that became subject to EC Competition Law. Since the Maastricht Treaty of 1992, the EC was renamed the European Union (EU). Competition Law falls under the social and economic foundations of the treaties.

EU Competition Law is one of the areas of authority of the European Union which regulates the exercise of market power by large companies, governments or other economic entities. In the EU, it is an important part of ensuring the completion of the internal market, meaning the free flow of workers, goods, services and capital in a borderless Europe.

The Four main policy areas of EU regulation include:  Cartels, or control of collusion and other anti-competitive practices which have an effect on the EU (and since 1994, the European Economic Area). This is covered under Articles 101 of the Treaty on the Functioning of the European Union (TFEU).  Monopolies or preventing the abuse of firms' dominant market positions. This is governed by Article 102 TFEU.  Mergers, control of proposed mergers, acquisitions and joint ventures involving companies which have a certain, defined amount of turnover in the EU/EEA. This is governed by the Council Regulation 139/2004 EC (the Merger Regulation).  State aid, control of direct and indirect aid given by Member States of the European Union to companies. Covered under Article 107 of the Treaty on the Functioning of the European Union. Anglo-American and European Union Competition (Antitrust) Law P.246

State Aid Control

By giving certain firms or products/services favored treatment, to the detriment of other firms or products/services, state aid seriously disrupts normal competitive forces. Neither the beneficiaries of state aid nor their competitors prosper in the long term. Very often, all public subsidies achieve is to delay inevitable restructuring operations without helping the recipient to actually return to competitiveness. Unsubsidized firms who must compete with those receiving public support may ultimately run into difficulties, causing loss of competitiveness and endangering the jobs of their employees. Ultimately, the entire market will suffer from state aid, and the general competitiveness of the European economy is imperiled.

State aid that distorts competition in the Common Market is prohibited by the EC Treaty.

However there are exceptions to the prohibiting of state aid, where the proposed aid schemes may have a beneficial impact in overall Union terms. Article 107 of the EC Treaty allows the following forms of aid: a) Aid having a social character, granted to individual consumers; b) Aid to make good the damage caused by natural disasters or exceptional occurrences; c) Aid designed to:  promote the economic development of underdeveloped areas;  promote the execution of an important project of common European interest or  to remedy a serious disturbance in the economy of a Member State;  facilitate the development of certain activities or areas,  promote culture and heritage conservation;

Article 87 of the EC Treaty prohibits any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favoring certain firms or the production of certain goods. The aid in question can take a variety of forms, for instance:  state grants;  interest relief;  tax relief;  state guarantee or holding;  provision by the state of goods and services on preferential terms.

Exclusive authority for scrutinizing the state aid schemes of EU governments is conferred on the European Commission by the Member States and its role is to monitor proposed and existing state aid by Member States to ensure that they are compatible with EU state aid legislation and do not distort intra-community competition.

The Commission has the power to require that aid granted by Member States which is incompatible with the common market be repaid by recipients to the public authorities which granted it. The Member State must recover the aid immediately in accordance with domestic procedures. Anglo-American and European Union Competition (Antitrust) Law P.247

Guidelines Regarding State Aid Policy in Certain Fields

The Commission has adopted a number of "guidelines" to clarify its State aid policy in a number of areas, listed below:  Regions lagging behind in terms of development;  Research & development;  Employment;  Protection of the environment;  Rescue and restructuring of firms in difficulty.

The Commission has also adopted a number of "block exemption" regulations for state aid to:  Small and medium-sized enterprises  Aid for training  Aid for employment

Aid granted in conformity with all the conditions set out in these regulations is automatically considered compatible with the common market.

Treaty on European Union and the Treaty on the Functioning of the European Union

Article 101 (ex Article 81 TEC) 1. The following shall be prohibited as incompatible with the internal market: all agreements between undertakings, decisions by associations of undertakings and concerted practices which may affect trade between Member States and which have as their object or effect the prevention, restriction or distortion of competition within the internal market, and in particular those which: (a) directly or indirectly fix purchase or selling prices or any other trading conditions; (b) limit or control production, markets, technical development, or investment; (c) share markets or sources of supply; (d) apply dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (e) make the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts. 2. Any agreements or decisions prohibited pursuant to this Article shall be automatically void. 3. The provisions of paragraph 1 may, however, be declared inapplicable in the case of: - any agreement or category of agreements between undertakings, - any decision or category of decisions by associations of undertakings, - any concerted practice or category of concerted practices, which contributes to improving the production or distribution of goods or to promoting technical or economic progress, while allowing consumers a fair share of the resulting benefit, and which does not: (a) impose on the undertakings concerned restrictions which are not indispensable to the attainment of these objectives; (b) afford such undertakings the possibility of eliminating competition in respect of a substantial part of the products in question. Anglo-American and European Union Competition (Antitrust) Law P.248

Article 102 (ex Article 82 TEC) Any abuse by one or more undertakings of a dominant position within the internal market or in a substantial part of it shall be prohibited as incompatible with the internal market in so far as it may affect trade between Member States. Such abuse may, in particular, consist in: (a) directly or indirectly imposing unfair purchase or selling prices or other unfair trading conditions; (b) limiting production, markets or technical development to the prejudice of consumers; (c) applying dissimilar conditions to equivalent transactions with other trading parties, thereby placing them at a competitive disadvantage; (d) making the conclusion of contracts subject to acceptance by the other parties of supplementary obligations which, by their nature or according to commercial usage, have no connection with the subject of such contracts.

Microsoft Corp. v Commission of the European Communities

JUDGMENT OF THE COURT OF FIRST INSTANCE (Grand Chamber) (Abridged) 17 September 2007 (Competition – Abuse of dominant position – Client PC operating systems – Streaming media players – Decision finding infringements of Article 82 EC – Refusal of the dominant undertaking to supply and authorize the use of interoperability information – Supply by the dominant undertaking of its client PC operating system conditional on the simultaneous acquisition of its media player – Remedies – Fine – Determination of the amount – Proportionality) In Case T-201/04,

Judgment Background to the dispute Microsoft Corp., a company established in Redmond, Washington (United States), designs, develops and markets a wide variety of software products for different kinds of computing devices. Those software products include, in particular, operating systems for client personal computers (‘client PCs’), operating systems for work group servers and streaming media players. Microsoft also provides technical assistance for its various products. In February 2000, the European Commission, acting on its own initiative, launched an investigation relating, particularly, to Microsoft’s Windows 2000 generation of client PC and work group server operating systems and to the integration by Microsoft of its Windows Media Player in its Windows client PC operating system. The client PC operating system in the Windows 2000 range was intended for professional use and was called ‘Windows 2000 Professional’, whereas the server operating systems in that range were presented under the three following versions: Windows 2000 Server, Windows 2000 Advanced Server and Windows 2000 Datacenter Server. That investigation concluded on 29 August 2001, when the Commission sent Microsoft a statement of objections in which it stated various objections concerning client/server interoperability. The Commission also addressed certain questions relating to interoperability between work group servers (server/server interoperability). In addition, the Commission raised a number of questions concerning the integration of Windows Media Player in the Windows client PC operating system. On 24 March 2004, the Commission adopted Decision 2007/53/EC relating to a proceeding pursuant to Article 82 [EC] and Article 54 of the EEA Agreement against Microsoft Corp. (Case COMP/C-3.37.792 – Microsoft) (OJ 2007 L 32, p. 23; ‘the contested decision’). Anglo-American and European Union Competition (Antitrust) Law P.249

The Contested Decision In the contested decision, the Commission finds that Microsoft infringed Article 82 EC and Article 54 of the Agreement on the European Economic Area (EEA) by abusing a dominant position. The Commission first identifies three separate worldwide product markets and considers that Microsoft had a dominant position on two of them. It then finds that Microsoft had engaged in two kinds of abusive conduct. As a result it imposes a fine and a number of remedies on Microsoft.

Dominant Position In the contested decision, the Commission finds that Microsoft has had a dominant position on the client PC operating systems market since at least 1996 and also on the work group server operating systems market since 2002. As regards the client PC operating systems market, the Commission relies essentially on the following factors to arrive at that conclusion:  Microsoft’s market shares are over 90%;  Microsoft’s market power has ‘enjoyed an enduring stability and continuity’;  There are significant barriers to market entry, owing to indirect network effects;  those network effects derive, first, from the fact that users like platforms on which they can use a large number of applications and, second, from the fact that software designers write applications for the client PC operating systems that are the most popular among users. The Commission states to the contested decision that the dominant position presents ‘extraordinary features’ in that Windows is not only a dominant product on the market for client PC operating systems but, in addition, is the ‘de facto standard’ for those systems.

Abuse of a Dominant Position Refusal to supply and authorise the use of interoperability information The first abusive conduct in which Microsoft is found to have engaged consists in its refusal to supply its competitors with ‘interoperability information’ and to authorise the use of that information for the purpose of developing and distributing products competing with Microsoft’s own products on the work group server operating systems market, between October 1998 and the date of notification of the contested decision. For the purposes of the contested decision, ‘interoperability information’ is the ‘complete and accurate specifications for all the protocols [implemented] in Windows work group server operating systems and … used by Windows work group servers to deliver file and print services and group and user administrative services. A ‘protocol’ is defined as ‘a set of rules of interconnection and interaction between various instances of Windows work group server operating systems and Windows client PC operating systems running on different computers in a Windows work group network’.

Tying of the Windows client PC operating system and Windows Media Player The second abusive conduct in which Microsoft is found to have engaged in consists in the fact that from May 1999 to the date of notification of the contested decision, Microsoft made the availability of the Windows client PC operating system, conditional on the simultaneous acquisition of the Windows Media Player software. In the contested decision, the Commission considers that that conduct satisfies the conditions for a finding of a tying abuse for the purposes of Article 82 EC. First, it reiterates that Microsoft has a dominant position on the client PC operating systems market. Second, it considers that streaming media players and client PC operating systems constitute separate products. Third, it asserts that Microsoft does not give consumers the opportunity to buy Windows without Windows Media Player. Fourth, it contends that the tying in question restricts competition on the media players market. Last, the Commission rejects Microsoft’s arguments to the effect that, first, the tying in question produces efficiency gains capable of offsetting the anti-competitive effects identified in the contested decision and, second, Microsoft had no interest in ‘anti-competitive’ tying. Anglo-American and European Union Competition (Antitrust) Law P.250

Fine and remedies In respect of the two abuses identified in the contested decision, a fine of €497 196 304 is imposed. Furthermore, the first paragraph of the contested decision requires that Microsoft bring an end to the infringement referred to in Article 2, in accordance with Articles 5 and 6 of that decision. Microsoft must also refrain from repeating any act or conduct that might have the same or equivalent object or effect to those abuses. By way of remedy for the abusive refusal referred to in Article 2(a) of the contested decision, Article 5 of that decision provides as follows: By way of remedy for the abusive tying referred to in Article 2(b) of the contested decision, Article 6 of that decision orders Microsoft to offer, within 90 days of the date of notification of that decision, a full-functioning version of the Windows client PC operating system which does not incorporate Windows Media Player, although Microsoft retains the right to offer a bundle of the Windows client PC operating system and Windows Media Player.

Summary of the Judgment Competition – Dominant position – Abuse – Definition – Obligations on the dominant undertaking Article 82 EC deals with the conduct of one or more economic operators involving the abuse of a position of economic strength which enables the operator concerned to hinder the maintenance of effective competition on the relevant market by allowing it to behave to an appreciable extent independently of its competitors, its customers and, ultimately, consumers. Furthermore, the correctness of this approach is not open to dispute. Article 82 EC deals with the conduct of one or more economic operators involving the abuse of a position of economic strength which enables the operator concerned to hinder the maintenance of effective competition on the relevant market by allowing it to behave to an appreciable extent independently of its competitors, its customers and, ultimately, consumers. Furthermore, whilst the finding of a dominant position does not in itself imply any criticism of the undertaking concerned, that undertaking has a special responsibility, irrespective of the causes of that position, not to allow its conduct to impair genuine undistorted competition on the common. Should it be established in the present case that the existing degree of interoperability does not enable developers of non-Microsoft work group server operating systems to remain viably on the market for those operating systems, it follows that the maintenance of effective competition on that market is being hindered. Anglo-American and European Union Competition (Antitrust) Law P.251

Definitions of Key Words

 Abuse of dominant position: anticompetitive conduct on the part of the firm with the largest market share in order to maintain or increase its advantage over competitors.

 Acquisition: the purchase of one company by another with no new company being formed.

 Allocation of markets or customers: agreement among competitors regarding the territory or customers reserved to each.

 Allocation of resources: distribution of productive assets which are limited in quantity.

 Antitrust Division of the US Department of Justice: agency of the United States Department of Justice (DOJ, established in 1870) which became a working unit in the 1930s and uses criminal and civil proceedings to enforce Antitrust Law.

 Antitrust Law: in the US; federal and state law prohibiting business conduct that endangers free competition and threatens to monopolize a market. In other countries, the term “Competition Law” is used.

 Attempt to monopolize: conduct or act aiming at complete control of a market.

 Bid rigging: Two ore more people agreeing not to bid against each other so as to deflate the value of the property; an unlawful practice.

 Block exemption: a legal exemption to competition regulations that is given to a particular class of business entities.

 Cartel: association of firms that engage in practices such as price fixing and together create a monopoly in their market.

 Clayton Act (1914): a law passed by Congress giving more details than the Sherman Act about what is considered anticompetitive or monopolistic behaviour.

 Collusion: illegal cooperation between competitors.

 Competition Act 1998: current major source of competition policy in the UK along with the Enterprise Act 2002. The act provides an updated framework for identifying and dealing with restrictive business practices and abuse of a dominant market position.

 Competition Commission: public body responsible for investigating mergers, markets and other inquiries related to regulated industries under Competition Law in the United Kingdom.

 Company Directors Disqualification Act 1986: Legislation brought in to consolidate enactments relating to the disqualification of persons from being directors of companies, and from being otherwise concerned with a company's affairs.

 Conspiracy to monopolize: agreement among firms to act together to force other competitors out of a market. Anglo-American and European Union Competition (Antitrust) Law P.252

 Council Regulation 139/2004 EC (the Merger Regulation): governs the control of mergers and other concentrations with an EU dimension.

 Divestiture: sale or liquidation of a business. (Verb is ‘to divest’)

 Enterprise Act 2002: UK statute reforming insolvency laws, merger control, market investigations and the respective roles of the Competition Commission and Competition Appeal Tribunal.

 European Community Act 1972: Act of the Parliament of the United Kingdom providing for the incorporation of European Community Law into the domestic law of the United Kingdom.

 European Economic Area: established on 1 January 1994 following an agreement between Norway, Iceland and Liechtenstein and the European Union (EU). It allows these countries to participate in the EU's single market without joining the EU.

 Exclusive dealing agreement: agreement in which a buyer will deal with only one supplier.

 Exclusive selling agreement: agreement in which a seller will deal with only one distributor for resale in a given area.

 Federal Trade Commission: independent government agency created in 1914 and given the power to order compliance with Antitrust Law and to initiate civil proceedings against violators. Congress has passed additional legislation extending its authority to regulate trade practices. Five Commissioners head what has become a large organization (over 1000 employees) with bureaus, divisions and regional offices dealing with Competition Law and consumer protection.

 Federal Trade Commission Act (1914): the statute that created the Federal Trade Commission, with five Commissioners authorized to enforce antitrust legislation.

 Gentlemen’s agreement: informal agreement between two or more parties. It may be written, oral, or simply understood as part of an unspoken agreement by convention or through mutually beneficial etiquette.

 Herfindahl-Hirschman Index ("HHI"): a measure of the size of firms in relation to the industry and an indicator of the amount of competition among them.

 Horizontal boycott: agreement among competitors to refuse to do business with a particular seller or buyer.

 Horizontal merger: transaction in which two or more competing firms are combined into one.

 Horizontal price fixing: agreement among competitors on prices or price levels.

 Horizontal restraint: agreement between actual or potential competitors aimed at increasing profits by limiting choice for customers.

 Interstate Commerce: trade or business that crosses state borders and thus can be regulated by Congress as provided in Article I Section 8 of the US Constitution.

 Lagging: fail to keep up, fall behind. Anglo-American and European Union Competition (Antitrust) Law P.253

 Maastricht Treaty of 1992: it created the European Union and led to the creation of the single European currency, the Euro. The Maastricht Treaty has been amended to a degree by later treaties.

 Market share test: an examination of market information to determine what percentage of the market for a particular product or service in a particular area is held by a certain supplier.

 Merger: The legal union of two or more corporations into a single entity, typically assets and liabilities being assumed by the buying party.

 Merger control: process of examining the terms and conditions of proposed mergers and acquisitions to check that they do not violate Antitrust Law. This is carried out by the Federal Trade Commission in the US.

 Office of Fair Trading (Oft): government department of the United Kingdom, established by the Fair Trading Act 1973, which enforces both consumer protection and Competition Law, acting as the UK's economic regulator.

 Per se rule: legal doctrine according to which a practice is considered illegal per se (i.e., in itself) without determining whether, in a given case, it can be justified or be shown to have no unreasonable results.

 Predatory pricing: a dominant firm’s use of price reductions to drive competitors out of the market. When it works it is followed by price increases.

 Relevant geographic market: the area or territory in which suppliers compete.

 Relevant product market: all the products that consumers would consider comparable or interchangeable and that should therefore logically compete with each other.

 Robinson-Patman Act (1936): an act of Congress prohibiting price discrimination on the part of suppliers, meant to protect small businesses such as groceries (food shops) against pressure from chain stores (supermarkets) seeking price reductions for their larger orders.

 Rule of Reason: a doctrine established by the historic Supreme Court decision in Standard Oil v. United States (1911) to interpret the broad provisions of the Sherman Act. Given that all businesses tend to do whatever they can to stop the competition, the Court declared that antitrust practices should be judged according to what might be considered reasonable or unacceptable (thus illegal) in the precise circumstances.

 Sherman Act (1890): the first federal antitrust statute in the US, prohibiting agreements to limit competition and attempts to monopolize.

 Tie-in: (tying) agreement in which a supplier sells a certain product by linking it to another product that is in greater demand.

 Treaty on the Functioning of the European Union (TFEU): Formerly known as the EC Treaty, the Treaty of Rome or the Treaty establishing the European Community. The TFEU was given its name and amended by the Lisbon Treaty. The TFEU sets out organisational and functional details of the European Union. Anglo-American and European Union Competition (Antitrust) Law P.254

 Trust: a cartel or monopoly. The term is the name that was given in the 19th century to any association of large companies in the US that eliminated competition and controlled prices, setting up a board of trustees to take all power away from shareholders. Federal antitrust legislation made such a business structure illegal.

 Vertical boycott: agreement between a seller and buyers in which the seller refuses to deal with some other buyer.

 Vertical merger: transaction in which two firms – supplier and customer – are combined into one.

 Vertical price fixing: agreement between supplier and customer on prices or price levels.

 Vertical restraint: agreement between supplier and customer that tends to limit competition.

 Warrant: a writ from a court commanding police to perform specified acts. Anglo-American and European Union Competition (Antitrust) Law P.255

Questions

1) What are the differences and similarities between EU, UK and US Competition Laws?

2) Explain when and how the ‘rule of reason’ is applied as compared to the ‘per se’ analysis?

3) What are horizontal and vertical agreements and how does Competition Law distinguish between them?

4) What is abuse of dominant position?

5) Is it legal to be a monopoly? – Discuss

6) What are various types of business agreements that are considered against the law?

7) What is the difference between a merger and an acquisition?

8) Is state aid possible in the EU? Explain.

Sources for this chapter:

1) The English of Law: U.S. Law & Politics / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Mohammedi, Michel Perdu, William Yeago et al. Editeur : Belin 2007

2) International Legal English / Lindner/Translegal William Yeago Cambridge University Press 2006

3) Black’s Law Dictionary West Publishing – sixth edition

www.ec.europa.eu www.stateaidlaw.eu www.justice.gov www.ftc.gov www.findlaw.com www.law.com www.translegal.com/legal-english-dictionary www.lawexperts.com www.out-law.com international and Anglo-American Intellectual Property Law P.256

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY

International and Anglo-American Intellectual10 Property L aw international and Anglo-American Intellectual Property Law P.257

international and Anglo-American Intellectual Property L aw

10Introduction to Intellectual Property p. 258 Copyright Law p. 259

International Law Relating to Intellectual Property p. 262

Patent Law p. 263

Trade Secret Law p. 269

Trademark Law p. 271

Geographical Indications p. 273

Licenses p. 274

Franchise Agreements p. 276

Definitions of Key Words p. 277

Questions p. 280 international and Anglo-American Intellectual Property Law P.258

International and Anglo-American Intellectual Property L aw

After completing this lesson, one should:  Have a general overview of International, US, UK and the EU Intellectual Property law  Understand why Intellectual Property laws were created  Distinguish the different concepts of Patent, Copyright and Trademark Law and what and who they protect  Identify the legal mechanisms of enforcement of Intellectual Property Law and the various civil and criminal remedies 10 Be familiar and comprehend the various international conventions and organizations  Be aware of the notions of trade secret and geographical indications  Recognize the importance of licenses in Intellectual Property of the American system.

Introduction to Intellectual Property

Intellectual Property law refers to the legal rights which result from intellectual activity in the industrial, scientific, literary and artistic fields. Countries have laws to protect intellectual property for the following reasons:  To give governmental expression to the moral and economic rights of creators in their creations;  To establish the rights of the public to have access to those creations;  To promote creativity and the distribution and application of its results, as an intentional act of Government policy, and  to encourage fair commerce which will contribute to economic and social development.

Generally speaking, intellectual property law aims at protecting creators and other producers of intellectual goods and services by granting them certain time-limited rights to control the use made of those productions. Intellectual Property law creates a type of monopoly and is therefore an exception to competition law, which protects against the unlawful restraint of trade.

Countries with innovative local industries almost always have laws to encourage innovation by regulating the copying of inventions, identifying symbols, and creative expressions. These laws encompass four separate and distinct types of intangible property – namely:  patents,  trademarks,  copyrights, and  trade secrets,

which collectively are referred to as "Intellectual Property’. Often in many countries and international treaties, “intellectual property” is traditionally divided into two branches, “industrial property” and “copyright.” international and Anglo-American Intellectual Property Law P.259

The industrial property branch of intellectual property constitutes areas such as inventions, industrial designs, scientific works, trademarks, service marks and commercial names and designations, while areas such as literary, artistic, and related works belong to the copyright branch of intellectual property.

Intellectual property shares many of the characteristics associated with real and personal property. For example, intellectual property is an asset, and as such it can be bought, sold, licensed, exchanged, or given away for free like any other form of property. Further, the intellectual property owner has the right to prevent the unauthorized use or sale of the property. The most noticeable difference between intellectual property and other forms of property, however, is that intellectual property is intangible, that is, it cannot be defined or identified by its own physical limitations.

A copyright seeks to promote literary and artistic creativity by protecting, for a limited time, works that include: literary, musical and dramatic works; pantomimes and choreographic works; pictorial, graphic and sculptural works (including the non-utilitarian design features of useful articles); motion pictures and other audiovisual works; sound recordings; computer programs; certain architectural works; and compilations of works and derivative works.

Copyright only protects particular expressions of ideas, not the ideas themselves. And a protectable work must be "original," that is not copied from another source. The work also must not be so elementary that it lacks sufficient creativity to be copyrightable.

Copyright laws are partially harmonized through international agreements such as the Berne Convention and the WIPO Copyright Treaty. However every jurisdiction has separate and distinct laws and regulations covering copyright. National copyright laws on licensing, transfer and assignment of copyright may differ significantly between countries. Some jurisdictions also recognize the moral rights of creators, as well as economic rights. France and the UK do while the United States does not.

Assignment of ‘Moral Rights’ Provision (Excerpts) Employment Agreement This Employment Agreement made and entered into by and between PIXAR, a California corporation (the "Company") and JOHN LASSETER ("Employee") effective as of February 24, 1997. Ownership The results and proceeds of Employee's services hereunder including, but not limited to, creating, designing, sketching, animation, writing and/or directing in connection with ideas, stories, screenplays and the Pictures, Productions or any other Pixar production's or works shall be deemed a ‘work-made-for-hire’ specially ordered or commissioned by Company. As between Employee and Company, Company shall exclusively own all now known or hereafter existing rights of every kind throughout the universe, in perpetuity and in all languages, pertaining to such Results and Proceeds, and all elements therein, for all now known or hereafter existing uses, media, and forms (including, without limitation, all copyrights and renewals and extension thereof), motion picture, television, sequel, remake, character and allied rights therein, and the foregoing is inclusive of a full assignment to Company thereof. In addition, Company shall have the right, throughout the world and in perpetuity, to use and reproduce, and license others to use and reproduce, Employee's name, likeness and biographical data relating to Employee in connection with the Picture and the advertising or exploitation thereof (including without limitation, in promotional films and features relating to any Pictures or projects); provided that in no event shall Employee be depicted as using or endorsing any product, commodity or service. The use of Employee's credit in a billing block shall not be deemed a use or endorsement of a product, commodity or service. Company shall have the right, but not the obligation, to use, adapt, change or revise any work or product of Artist or any part thereof or the title thereof and to combine the same with other material or works and Employee hereby expressly waives any so-called "moral rights" of authors in the world. international and Anglo-American Intellectual Property Law P.260

Rights of Copyright Owners

The creator basically has the exclusive rights to reproduce the work, to distribute the reproductions, to display and perform the work publicly and to authorize others to do any of these things. The creator of certain works of fine art also may have rights to control their attribution or modification.

In all countries that are members of the Berne Convention, copyright does not need to be registered with any government office. Once an idea has been reduced to tangible form, for example by securing it in a fixed medium (such as a drawing, sheet music, putting it on line, photograph, a videotape, or a computer file), the copyright holder, is entitled to enforce his or her exclusive rights. One can however; register the copyright of any published or unpublished work at the Copyright Office in their respective countries with an application and a small fee. Failure to register the copyright does not invalidate it, but registration is a good idea because if legal action is required, registration is the best way to preserve the necessary copyright information about the work.

The Berne Convention The full title is the Berne Convention for the Protection of Literary and Artistic Works. It was first adopted in 1886 as an agreement to honor the rights of all authors who are nationals of countries that are party to the convention. The convention is administered by the World Intellectual Property Organization, (WIPO).

The act provides protection for the work of authors who are nationals of one of the countries of the Union, or where the work is first published (or simultaneously published) in a country that is a member of the Union. The United States, France, the UK and the EU are all signatories. An author from any country that is a signatory of the convention is awarded the same rights in all other countries that are signatories to the Convention as they allow their own nationals, as well as any rights granted by the Convention.

For the period of copyright, the copyright owner has the following exclusive rights. None of the actions below can be carried out without permission:

 The right to authorize translations of the work;

 The exclusive right to reproduce the work, though some provisions are made under national laws which typically allow limited private and educational use without infringement;

 The right to authorize public performance or broadcast, and the communication of broadcasts and public performances;

 The right to authorize arrangements or other types of adaptation to the work. Recitation of the work, (or of a translation of the work). The exclusive right to adapt or alter the work.

Length of Copyright Protection

In most of the world, the length of copyright is the life of the author plus either 50 or 70 years. In the United States, France and the UK, the general rule is that the copyright lasts for the author’s lifetime plus 70 years after the author's death. In the United States the copyright in a "work made for hire" lasts for just 95 years.

The individual or joint authors of a work initially own the copyright. But the employer or party commissioning a work automatically is deemed to be the "author" of a "work made for hire" if either: the work was prepared by an employee within the scope of employment; or the work was specially international and Anglo-American Intellectual Property Law P.261

ordered or commissioned, and most importantly, is expressly agreed to be a "work made for hire" in a written instrument signed by both parties or an assignment provision in an employment contract. For example: the character Mickey Mouse belongs to the Disney Corporation or Nemo belongs to Pixar; and not to the individual artists who animate them. After 95 years they both can fall into the public domain in which anyone can create them.

Copyright infringement generally is the unauthorized use or copying of the work. Also, the law provides that those who facilitate or profit from the infringing conduct of another, may be liable as vicarious or contributory, for example Napster in the US, which facilitated infringing conduct by its users. It usually is difficult to prove copying, so the copyright owner normally tries to prove that the alleged infringer had "access" to the work and that the two works have "substantial similarity" from the viewpoint of an ordinary observer, after which the burden of proving independent creation shifts to the alleged infringer.

Fair Dealing/Fair Use Doctrine

Fair dealing is a limitation and exception to the exclusive right granted by copyright law to the author of a creative work, which is found in many of the common law jurisdictions like the UK, Canada, Australia and New Zealand and specifically known as the Fair Use Doctrine in the United States. It is a set of possible defenses against an action for infringement of copyright which allows limited use of copyrighted material without acquiring permission from the rights holders. It provides for the legal, non-licensed use of copyrighted material in another author's work, using a balancing test of criteria. In determining whether the use of a work in any particular case is fair dealing or fair use, the factors to be considered shall include:  the purpose and character of the use, including whether such use is of a commercial nature or is for nonprofit educational purposes;  the nature of the copyrighted work;  the amount and substantiality of the portion used in relation to the copyrighted work as a whole; and  the effect of the use upon the potential market for or value of the copyrighted work.

Remedies for Copyright Infringement

Article 3 of the TRIPS agreement states that governments have to ensure that intellectual property rights can be enforced under their national laws and that the penalties for infringement are tough enough to deter further violations. It points out that courts should have the right, under certain conditions, to order the disposal or destruction of pirated or counterfeit goods. Willful copyright piracy on a commercial scale shall be considered criminal offences. National governments should make sure that intellectual property rights owners can receive the assistance of customs authorities to prevent imports of counterfeit and pirated goods.

In the United States, federal law makes willful copyright infringement for profit, a crime, the penalties for which depend on both the number of copies reproduced or distributed during a given period of time, and whether it is a first or subsequent offense. Criminal penalties range from a fine of $25,000, or international and Anglo-American Intellectual Property Law P.262

imprisonment not exceeding one year, up to $250,000 for individuals and $500,000 for organizations, or 10 years, or both, for a second or subsequent offense of certain types. In addition, a court may order seizure, forfeiture and destruction or other disposition of all infringing reproductions and all equipment used in their manufacture.

Civil remedies are also available to the holder of any exclusive rights in the copyrighted work under US federal law: an injunction against future infringement; the actual monetary damages suffered by the copyright owner and/or including any additional profits of the infringer.

Copyright law in UK allows for criminal prosecution where there exists deliberate intent, and allows enforcement of imprisonment and fines. However, even if a criminal prosecution succeeds, a separate civil case will be necessary to recover financial losses caused by the infringement.

In the UK copyright infringement civil remedies are basically the same as the US and most EU countries.  Damages: The measure of damages is the depreciation of the value of the copyright caused by the infringement. If the defendant did not know and has no reason to believe that copyright subsisted in the work, the claimant is not entitled to damages. The court has the power to award ‘additional damages’. In doing so it will consider the flagrancy of the infringement and any benefit accruing to the Defendant by reason of the infringement.  Account of profits: An award to the Claimant of the profits that the Defendant wrongfully made from exploiting the copyrighted work.  Injunction and Seizure and Destruction of infringing articles.

International Law Relating to Intellectual Property

The growing international economic relations between States all over the world have given rise to global counterfeiting and piracy problems related to intellectual property. This has become a critical policy issue in trade relations due to the significant value of know-how embodied in commercialized products.

The lack of protection of Intellectual Property at the international level was the source of rising tensions in economic relations and has hindered technological transfer and innovation. In the past, existing agreements in the area did not have enforcement mechanisms or sanctions if the obligations were not met. Equally, there were concerns that measures and procedures to enforce intellectual property rights did not themselves become barriers to legitimate trade. It was to deal with these issues that the international community engaged in the development of a multilateral agreement on trade-related aspects of intellectual property rights.

The Trade Related Aspects of Intellectual Property Rights (TRIPS) is an agreement between countries that engage in international trade. The World Trade Organization regulates trade agreements between many nations and establishes rules for the protection of intellectual property rights. It was negotiated at the end of 1994 and the United Kingdom, France, the United States, the European Union, all signed and ratified it in January 1995.

The WTO’s TRIPS Agreement is an attempt to narrow the gaps in the way Intellectual Property rights are protected around the world, and to bring them under common international rules. It establishes minimum levels of protection that each government has to give to the intellectual property of fellow WTO international and Anglo-American Intellectual Property Law P.263

members. In doing so, it strikes a balance between the long term benefits and possible short term costs to society. Society benefits in the long term when intellectual property protection encourages creation and invention, especially when the period of protection expires and the creations and inventions enter the public domain. When there are international trade disputes over intellectual property rights, the WTO’s dispute settlement system of arbitration is available.

Because ratification of TRIPS is a compulsory requirement of World Trade Organization membership, any country seeking to obtain easy access to the numerous international markets opened by the World Trade Organization must enact the strict intellectual property laws mandated by TRIPS. For this reason, TRIPS is the most important multilateral instrument for the globalization of intellectual property laws.

The agreement covers:

 all forms of intellectual property  how basic principles of the trading system and other international intellectual property agreements should be applied  how to give adequate protection to intellectual property rights  how countries should enforce those rights adequately in their own territories  how to settle disputes on intellectual property between members of the WTO

Registration

TRIPs agreement removes the necessity for an intellectual property holder to register ownership rights in each nation that signs the treaty. Accordingly, members of the World Trade Organization must recognize rights such as patents, copyrights or trademarks if they are validly registered in another nation that has ratified these agreements. This saves the intellectual property holder the time and expense of registering their intellectual property in many different nations.

Patent Law

One might say that a patent is a contract between society as a whole and an individual inventor. Under the terms of this social contract, the inventor is given the exclusive right to prevent others from making, using, and selling a patented invention for a fixed period of time in return for the inventor's disclosing the details of the invention to the public. Thus, patent systems encourage the disclosure of information to the public by rewarding an inventor for his or her endeavors.

Although the word "patent" finds its origins from documents issued by the sovereign of England in the Middle Ages for granting a privilege, today the word is linked synonymously with this exclusive right granted to inventors. The WTO – TRIPS Agreement provides the international standard for duration of patent exclusivity, which is 20 years from the date of filing. Under all patent systems, once this period has expired, people are free to use the invention as they wish. It is said to fall into the ‘public domain’.

The benefits of an effective patent system can be partially illustrated as follows: A patent rewards the investment of time, money, and effort associated with research. international and Anglo-American Intellectual Property Law P.264

It stimulates further research as competitors invent alternatives to patented inventions, and it encourages innovation and investment in patented inventions by permitting companies and individuals to recover their research and development costs during the period of exclusive rights.

The limited term of a patent also furthers the public interest by encouraging quick commercialization of inventions, thereby making them available to the public sooner rather than later. Patents also allow for more latitude in the exchange of information between research groups, help avoid duplicative research, and, most importantly, increase the general pool of public knowledge.

Although the right conferred by a patent is a right to exclude others from making, using, or selling a patented invention during the term of the patent, it is important to understand that a patent does not necessarily give the patent owner the right to make, use, or sell the invention himself or herself. For example, the owner of a patent for an improved method of producing a chemical compound would not be free to sell the compound made using the patented method if the compound is itself patented by someone else.

Registration of Patents Although all WTO members are subject to patent provisions in the TRIPS Agreement, patents are granted under national laws and, therefore, the rights are also national in scope. Thus, for example, a U.S. patent can be asserted only against infringing conduct in the United States. In most countries these rights are enforceable by civil rather than criminal proceedings.

Depending upon the office at which a patent application is filed, that application could either be an application for a patent in a given country (national application), or may be an application for a patent in a range of countries.

National applications are generally filed at a national patent office, such as the United Kingdom Patent Office, to obtain a patent in the country of that office. A regional patent application is one which may have effect in a range of countries. The European Patent Office (EPO) is an example of a Regional patent office. The EPO grants patents which can take effect in some or all countries contracting to the European Patent Convention (EPC), following a single application process.

Filing and prosecuting an application at a regional granting office is advantageous as it allows patents in a number of countries to be obtained without having to prosecute applications in all of those countries. The cost and complexity of obtaining protection is therefore reduced.

Accordingly, enforcement falls solely to the patent owner. In general, any act of making, using, or selling the patented invention without permission infringes that patent, whether it is by the state, a corporation, or an individual. Any such infringing act will give rise to liability, regardless of the infringer’s intent or lack of knowledge of the patent. Remedies for patent infringement can include injunctions, orders to deliver up or destroy infringing articles, and compensation for damages suffered by the patentee or profits made by the infringer.

An issued patent remains open to attack for invalidity, and it is a common defense for an alleged infringer to assert that the patent is invalid. Typically, patents are challenged on the ground that the claimed invention was invented by someone other then the named inventor or that the invention would have been obvious to persons skilled in the relevant technology. international and Anglo-American Intellectual Property Law P.265

Types of Patent Applications

Article 27 of the TRIPS Agreement provides that WTO member states shall provide patents for any invention, either a product or a process for creating a product, "provided that they are new, involve an inventive step, and are capable of industrial application." In other words, to be patentable, an invention must be novel, useful, and non-obvious. A prerequisite to patentability is that the invention must be capable of some practical Application. This emphasizes the importance the patent system puts on usefulness. Although this principle remains constant, the phraseology used within the legislation of particular countries varies; for example, in the United States, patentable subject matter must be "useful," whereas in the United Kingdom it must be capable of "industrial application."

TRIPS: AGREEMENT ON TRADE-RELATED ASPECTS OF INTELLECTUAL PROPERTY RIGHTS Article 27 Patentable Subject Matter 1. Patents shall be available for any inventions, whether products or processes, in all fields of technology, provided that they are new, involve an inventive step and are capable of industrial application. Patents shall be available and patent rights enjoyable without discrimination as to the place of invention, the field of technology and whether products are imported or locally produced. 2. Members may exclude from patentability inventions, the prevention within their territory of the commercial exploitation of which is necessary to protect “ordre public” or morality, including to protect human, animal or plant life or health or to avoid serious prejudice to the environment, provided that such exclusion is not made merely because the exploitation is prohibited by their law. 3. Members may also exclude from patentability: (a) Diagnostic, therapeutic and surgical methods for the treatment of humans or animals; (b) Plants and animals other than micro-organisms, and essentially biological processes for the production of plants or animals other than non-biological and microbiological processes. However, Members shall provide for the protection of plant varieties either by patents or by an effective ‘sui generis’ system or by any combination thereof.

The invention must be new - that is, the subject matter of the invention is not or cannot be inferred to be part of what is already known. This is commonly referred to as the "novelty" requirement. New or novel in this context means "new to the public." Therefore, something that has previously been used or known but has not been made available to the public (for instance, if it has been kept a secret) is not a bar to patentability.

The invention must also be non-obvious. This prevents someone from taking advantage of the patent system and obtaining protection for something that is a mere extension or trivial variation of what is known. In general, the test for inventiveness, or “non-obviousness," is based on what a reasonable person skilled in the field to which the invention pertains, at the time the invention was made, would consider to be non-obvious.

The TRIPS Agreement provides a transitional period for developing economies that do not currently provide product patent protection in the areas of agro-chemicals or pharmaceuticals. In fact, most already do because of the development benefits to the biotechnology sector from full patent protection. international and Anglo-American Intellectual Property Law P.266

Process patent protection does not encourage investment because of the difficulty of enforcing a process patent. It is particularly difficult to enforce a process patent because the burden of proof to show that the patent has been infringed is on the patent owner. The patent owner must prove that a particular manufacturing process (that is, the process covered by the patent) was used to manufacture the particular chemical. This can be very difficult to show where there are many possible process variants and where access to the potential infringer’s facility is not available. In practice, this is done by looking for trace impurities that are characteristic of the manufacturing process. One can imagine how complex the issues can become if, for instance, a patent protects a pharmaceutical that is made in a country where there is no protection for pharmaceuticals and then is exported to a second country that provides protection only for manufacturing processes.

Not only are the utilitarian aspects of new and useful inventions patentable, but many countries have expanded patent protection to novel, ornamental industrial designs. In the United States, this form of protection is known as a design patent, while in many European countries, the property right in an industrial design is referred to as a design model.

In addition to such usual subjects of patent protection as devices, chemical compositions, and processes, some countries provide patent protection for living matter. For example, asexually reproduced varieties of plants can be protected, as can sexually reproduced plants (by seed). The TRIPS Agreement does not require protection for new living matter or plant varieties, but WTO members may join the International Union for the Protection of New Varieties of Plants, or UPOV.

Length of Patent Rights

Significant international harmonization of patent terms across national laws was provided in the 1990s by the implementation of the TRIPs Agreement Article 33.

Article 33 TRIPS Term of Protection: The term of protection available shall not end before the expiration of a period of twenty years counted from the filing date.

The European Patent Convention requires all jurisdictions to give a European patent a term of 20 years, from the actual date of filing an application for a European patent.

Although utility models are recognized as a means of protecting intellectual property rights in a number of European countries and Australia, this is not the case in the USA or in the UK. A design patent in the US will give protection for 14 years as from the date of filing. In the UK, design right, introduced by Copyright Designs and Patents Act 1988, is automatically granted to any 3-D design, and lasts for 15 years. A registered design (3-D and 2-D) will be protected for 25 years. international and Anglo-American Intellectual Property Law P.267

Patent Ownership/Registration

The one who is the first to conceive a patentable invention and develops it as a working device has the right to record it in a Patent registration office. Agreements can require the assignment of future inventions and Patents.  Patent laws require the identification of all individual inventors.  Failure to name an inventor, or naming a non-inventor as an inventor, can invalidate any patent that might issue from an application.  Only persons who contributed to the conception and/or the conversion of a conception to a practicality are inventors.  Persons who contribute financing, or marketing, or other auxiliary assistance only, are not inventors.

 Persons or businesses can acquire an ownership interest in a patent application by assignment from the inventor.  An inventor can assign a co-ownership interest by assignment to himself/herself and a non-inventor jointly.  A patent application is owned by the inventors if there is no assignment.  Joint inventors-owners of a patent application hold their rights as tenants in common, not joint tenants.

Patent Law Infringement

Patent law protects against the unauthorized manufacture, use, sale or offer of all devices or processes embodying the invention or of components intended for assembly abroad into such devices, whether they were copied from authorized devices or resulted from an independent act of invention. It also protects against the importation, use or sale of a product made from a patented process without authorization.

United Kingdom Patents Act 1977 60.- (1) a person infringes a patent for an invention if, but only if, while the patent is in force, he does any of the following things in the United Kingdom in relation to the invention without the consent of the proprietor of the patent, that is to say: (a) where the invention is a product, he makes, disposes of, offers to dispose of, uses or imports the product or keeps it whether for disposal or otherwise; (b) where the invention is a process, he uses the process or he offers it for use in the United Kingdom when he knows, or it is obvious to a reasonable person in the circumstances, that its use there without the consent of the proprietor would be an infringement of the patent; (c) where the invention is a process, he disposes of, offers to dispose of, uses or imports any product obtained directly by means of that process or keeps any such product whether for disposal or otherwise. (2) a person (other than the proprietor of the patent) also infringes a patent for an invention if, while the patent is in force and without the consent of the proprietor, he supplies or offers to supply in the United Kingdom a person other than a licensee or other person entitled to work the invention with any of the means, relating to an essential element of the invention, for putting the invention into effect when he knows, or it is obvious to a reasonable person in the circumstances, that those means are suitable for putting, and are intended to put, the invention into effect in the United Kingdom. international and Anglo-American Intellectual Property Law P.268

Remedies for Patent Infringement

TRIPS Part III — Enforcement of Intellectual Property Rights Article 41 1. Members shall ensure that enforcement procedures as specified in this Part are available under their law so as to permit effective action against any act of infringement of intellectual property rights covered by this Agreement, including expeditious remedies to prevent infringements and remedies which constitute a deterrent to further infringements. These procedures shall be applied in such a manner as to avoid the creation of barriers to legitimate trade and to provide for safeguards against their abuse. 2. Procedures concerning the enforcement of intellectual property rights shall be fair and equitable. They shall not be unnecessarily complicated or costly, or entail unreasonable time-limits or unwarranted delays. 3. Decisions on the merits of a case shall preferably be in writing and reasoned. They shall be made available at least to the parties to the proceeding without undue delay. Decisions on the merits of a case shall be based only on evidence in respect of which parties were offered the opportunity to be heard. 4. Parties to a proceeding shall have an opportunity for review by a judicial authority of final administrative decisions and, subject to jurisdictional provisions in a Member’s law concerning the importance of a case, of at least the legal aspects of initial judicial decisions on the merits of a case. However, there shall be no obligation to provide an opportunity for review of acquittals in criminal cases.

In the US there are no criminal penalties for patent infringement. The following civil remedies are available under the federal law:  Compensatory damages - A patent owner may recover lost profits for infringement;  Increased damages - Up to three times the compensatory damages can be recovered in cases of willful or deliberate infringement;  Preliminary injunctions - Court orders made in the early stages of a lawsuit or petitions which prohibit the parties from doing an act which is in dispute (e.g. manufacturing patented product);  Permanent injunctions -Final orders of a court that a person or entity discontinue doing certain activities permanently or take certain actions;  Costs and Attorneys' Fees are typically recoverable.

In the United Kingdom the following are remedies which an aggrieved patentee may claim in court based dispute resolution:  an injunction to prevent further infringements that led to the dispute in the first instance;  damages to compensate for loss suffered as a consequence of the infringement or an account of profits made by the infringer as a result of the infringement;  an order that the infringing articles that are the subject of the dispute be destroyed or delivered up;  a declaration that the patent was valid and infringed. international and Anglo-American Intellectual Property Law P.269

Trade Secret Law

The United States protects inventions and know-how that have been kept secret against unauthorized use or disclosure by anyone who is under an obligation of confidentiality to the owner. But this protection requires you to take measures to maintain the information's secrecy. Trade secrets may consist of any formula, idea, physical device, pattern, process, customer lists or other compilations and provides the owner of the information with a competitive advantage in a competitive market. A trade secret is protected in such a way that competitors gain knowledge of it only through acquisition or theft. Potential trade secrets are a secret recipe or a formula for a drink, a new invention for which a patent application has not yet been filed, marketing strategies, manufacturing techniques and computer algorithms.

Trade secrets are valuable intellectual property that are not protected by intellectual property laws such as patents, copyrights and trademarks laws. So, the best way to keep and protect trade secrets is:  By keeping a new idea or business concept secret in order to enjoy a competitive advantage as an early mover;  By keeping competitors from learning that a product or service is under development and from discovering its functional or technical attributes;  By protecting valuable business information such as marketing plans, cost and price information and customer lists;  By protecting any other information that has some value and is not generally known by your competitors.

Trade Secret Ownership Rights

In the United States, a company owning trade secrets can automatically bind any employee by a duty of confidentiality so as to prevent him or her from copying, using and benefiting from its trade secrets or disclosing them to others without permission.

A company owning trade secrets can prevent those who:  knowingly obtain trade secrets from people who have no right to disclose them, from copying, using and benefiting from its trade secrets or disclosing them to others without permission.  learn about a trade secret by accident or mistake, but had reason to know that the information was a protected trade secret, from copying, using and benefiting from its trade secrets or disclosing them to others without permission.  sign nondisclosure agreements ("confidentiality agreements") from copying, using and benefiting from its trade secrets or disclosing them to others without permission.

People who discover the trade secret independently, without using illegal means or violating agreements or state laws cannot be stopped from using information protected under trade secret law. It is not a violation of trade secret law to "reverse engineer" any lawfully obtained product and determine its trade secret. international and Anglo-American Intellectual Property Law P.270

Protection and Enforcement of Trade Secrets

There must be a clear demonstrated intention to keep any valuable business information a trade secret by marking documents containing trade secrets "Confidential," maintaining computer security and limiting access to secrets. Trade secrets are best protected through the use of nondisclosure agreements. US Courts have repeatedly reiterated that the use of nondisclosure agreements is the best demonstrated way to maintain the secrecy of confidential information.

Every US state has enacted a law prohibiting theft or disclosure of trade secrets. A trade secret owner can enforce rights against someone who steals confidential information by asking a court to issue an injunction preventing further disclosure. A trade secret owner can also collect damages for any economic injury suffered as a result of the trade secret's improper acquisition and use.

The Economic Espionage Act of 1996 (EEA) gives the U.S. Attorney General sweeping powers to prosecute any person or company involved in trade secret misappropriation and punishes intentional stealing, copying or receiving of trade secrets. Individuals may be fined up to $500,000 and corporations up to $5 million. A violator may also be sent to prison for up to ten years. All property used and proceeds derived from the theft can be seized and sold by the government.

French law recognizes three types of trade secrets: manufacturing trade secrets (secrets de fabrique), know-how (savoir-faire) and confidential business information. French law provides for penal sanctions against theft of manufacturing trade secrets. Companies that are victims of manufacturing trade secret theft may also file a complaint before the civil courts. The same applies when the wrongful acts have not been committed by an employee but by third parties using fraudulent devices. In this case the complaint is to be filed on the basis of unfair competition and injunctive relief, damages and third-party liability is available to the private litigant.

The UK provides broad and effective protection for trade secrets. Search and seizure orders may be issued to protect trade secrets and preserve evidence. There exists the full array of remedies for a "breach of confidence" including injunctive relief, damages and third-party liability.

Employment ‘Trade Secret’ agreement (Excerpts) AGREEMENT, dated as of February 21, 2001, by and between John Smith (the "Employee"), and The Coca-Cola Company (the "Company"). WHEREAS, the parties desire to enter into this agreement setting forth the terms and conditions of the employment relationship of the Employee with the Company; NOW, THEREFORE, in consideration of the mutual agreements set forth below, the parties hereby agree as follows: EMPLOYMENT - The Company hereby agrees to employ the Employee, and the Employee hereby accepts such employment, on the terms and conditions hereinafter set forth.

TRADE SECRETS (a) For purposes of this Section, "Trade Secret" means information including, but not limited to, any technical or non-technical data, soft drink formulas, process, financial data, financial plan, product plan, list of actual or potential customers or suppliers or other information similar to any of the foregoing, which (i) derives economic value, actual or potential, from not being generally known to, and not being readily ascertainable by proper means by, other persons who can derive economic value from its disclosure or use and (ii) is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. international and Anglo-American Intellectual Property Law P.271

(b) The Employee acknowledges he is employed by the Company in a confidential relationship wherein he, in the course of his employment with the Company, has received or will receive and has had or will have access to Trade Secrets of the Company, including, but not limited to, confidential and secret business and marketing plans, strategies and studies, detailed client/customer lists and information relating to the operations and business requirements of those clients/customers and accordingly, he is willing to enter into the covenants contained in this Agreement in order to provide the Company with what he considers to be reasonable protection for its interest. (c) The Employee hereby agrees that during the Employment Period and thereafter, he will hold in confidence all Confidential Information of the Company and its direct or indirect subsidiaries that came into his knowledge during his employment by the Company and shall not disclose, publish or make use of such Confidential Information without the prior written consent of the Company.

EQUITABLE REMEDY Because of the difficulty of measuring economic losses to the Company as a result of a breach of the covenants set forth in this agreement and because of the immediate and irreparable damage that would be caused to the Company for which monetary damages would not be a sufficient remedy, it is hereby agreed that in addition to all other remedies that may be available to the Company at law or equity, the Company shall be entitled to specific performance and any injunctive or other equitable relief as a remedy for my breach or threatened breach of the Employee's covenants.

Trademark Law

Trademark is a word, name, symbol, or device that is used in trade with goods to indicate the source of the goods and to distinguish them from the goods of others. A service mark is the same as a trademark except that it identifies and distinguishes the source of a service rather than a product.

Trademark rights may be used to prevent others from using a confusingly similar mark, but not to prevent others from making the same goods or from selling the same goods or services under a clearly different mark.

Trademark Registration

The major international system for facilitating the registration of trademarks in multiple jurisdictions is commonly known as the "Madrid system" after the Madrid Protocol. ‘Madrid’ provides a centrally administered system for securing trademark registrations in member jurisdictions by extending the protection of an "international registration" obtained through the World Intellectual Property Organization. This international registration is in turn based upon an application or registration obtained by a trademark applicant in its home jurisdiction. The primary advantage of the Madrid system is that it allows a trademark owner to obtain trademark protection in many national jurisdictions by filing one application in one jurisdiction with one set of fees.

The Madrid Protocol enables owners of trademark applications and registrations to extend their rights to other member countries. These International rights are sought through the applicants’ home office using either the English or French language. A single filing fee is payable. This eliminates the need to process multiple filings in different countries. Over 65 countries are currently within the system including the United States, Australia, China, the European Union, France, Germany, Japan and the United Kingdom. international and Anglo-American Intellectual Property Law P.272

The owner of a registered trademark may commence legal proceedings for trademark infringement to prevent unauthorized use of that trademark. While registration is not required, it is advisable to establish ones rights by registering the mark in a national Trademark Office even before use. Trademark applications are subject to an examination process and registration may be refused. A trademark application can be opposed on the basis that registration of the mark is likely to cause confusion with a previously used mark, or is likely to diminish the distinctiveness of a famous mark.

Owning a trademark registration provides several advantages, including:  Public notice of your claim of ownership of the mark;  A legal presumption of ownership of the mark and one’s exclusive right to use the mark nationwide on or in connection with the goods/services listed in the registration;  The ability to bring an action concerning the mark in a national court;  The use of a national registration as a basis to obtain registration in foreign countries;  The ability to implore customs and border protection agencies to prevent importation of infringing foreign goods.

Trademark rights can continue indefinitely as long as the mark in being used and the registration is renewed every 10 years. In the US for example, the non-use of a mark for 3 consecutive years is ordinarily considered proof of an intention to abandon it, opening the way for someone else to claim exclusive rights in the mark. The owner of a trademark may license another to use it, but must control the nature and quality of the licensee's goods or services under the mark.

Infringement and Enforcement of Trademarks

Trademark infringement is one form of unfair competition. Trademark law protects against a likelihood of confusion, mistake or deception about the source, affiliation, sponsorship or approval of goods or services or commercial activities of another. It also protects against the use of any false or misleading statement of fact in commercial advertising or promotion which contains a misrepresentation about that person's or another's goods, services or commercial activities.

Passing Off The law in the UK and the US will prevent one trader passing off its goods as those of another. The three fundamental elements to passing off are therefore reputation, misrepresentation, and damage to goodwill, which are sometimes known as the classical trinity, as restated by the English House of Lords in the case of Reckitt & Colman Ltd v Borden Inc [1990] 1 RPC1 341 1 (the Jif Lemon case). Lord Oliver stated the matters which a successful plaintiff must establish as follows:

First, “he must establish a goodwill or reputation attached to the goods or services.”

Secondly, “he must demonstrate a misrepresentation by the defendant to the public whether intentional, leading or likely to lead the public to believe that the goods or services offered by him are goods or services of the plaintiff.”

Thirdly, “he must demonstrate that he suffers 'loss or damage as a consequence of the erroneous belief that the goods or services of the defendant are the goods or services of the plaintiff'.” international and Anglo-American Intellectual Property Law P.273

Remedies for Trademark Infringement

In the United States there are criminal penalties for certain forms of trademark infringement and also civil remedies such as an injunction against future infringement; disgorging the infringer's profits; damages for past infringement suffered by the owner of the mark, destruction of all materials bearing the infringing mark and sometimes the recall of infringing goods from the market; and the costs of the action, and often reasonable attorney's fees.

In the UK, in an infringement action, the registered owner may claim any of the following remedies:  Damages or an account of profits;  An order for the offending sign to be eliminated or removed or eradicated from any infringing goods, material or articles. If this is not reasonably practicable, an order may be sought for the infringing party to destroy or deliver the infringing goods to a person in the court direct;  Injunctive relief.

Geographical Indications

A number of treaties administered by the World Intellectual Property Organization (WIPO) provide for the protection of geographical indications, most notably Articles 22 to 24 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) deal with the international protection of geographical indications within the framework of the World Trade Organization (WTO).

Geographical indications have long been associated with Europe as an entity, where there is a tradition of associating certain food products with particular regions. The European Union has a protected designation of origin system which regulates geographical indications and France has its well known ‘appellation d'origine contrôlée’ (AOC).

A geographical indication is a sign used on goods that have a specific geographical origin and possess qualities or a reputation that are due to that place of origin. Most commonly, a geographical indication consists of the name of the place of origin of the goods. Agricultural products typically have qualities that derive from their place of production and are influenced by specific local factors, such as climate and soil.

« Champagne » for sparkling wine coming from the Champagne region of France, Scotch for Whiskey from Scotland, « Darjeeling » for tea coming from the Darjeeling region of West Bengal, “Bordeaux” for wine from Bordeaux, “Tuscany”, for olive oil produced in Tuscany; “Florida Oranges” for oranges from Florida, and “Roquefort”, for Cheese produced in the Combalou caves of Roquefort-sur-Soulzon.

The use of geographical indications is not limited to agricultural products. They may also highlight specific qualities of a product which are due to human factors that can be found in the place of origin of the products, such as specific manufacturing skills and traditions. That place of origin may be a village or town, a region or a country. An example is "Switzerland" or "Swiss," which is perceived as a geographical indication in many countries for products that are made in Switzerland and, in particular, for watches. international and Anglo-American Intellectual Property Law P.274

Geographical indications are understood by consumers to denote the origin and the quality of products. Many of them have acquired valuable reputations which, if not adequately protected, may be misrepresented by dishonest commercial operators. False use of geographical indications by unauthorized parties is detrimental to consumers and legitimate producers.

A trademark is a sign used by an enterprise to distinguish its goods and services from those of other enterprises. It gives its owner the right to exclude others from using the trademark. A geographical indication tells consumers that a product is produced in a certain place and has certain characteristics that are due to that place of production. It may be used by all producers who make their products in the place designated by a geographical indication and whose products share typical qualities.

Licenses

A licensing agreement is a partnership between an intellectual property rights owner (licensor) and one who is authorized to use such rights (licensee) in exchange for an agreed payment (fee or royalty). A variety of such licensing agreements are possible, which are usually classified as follows:  Technology License Agreement  Trademark Licensing and Franchising Agreement  Copyright License Agreement  Patent License Agreement

A patent, trademark, copyright or trade secret owner is entitled to exploit his or her intellectual property rights for this hir her own gain. One way to do so is to keep the exclusive rights and collect all of the financial benefits for himself, but in many situations the owner of the intellectual property rights does not have the business knowledge, finances, facilities or the time to develop this exclusive position.

The licensor can profit from the licensee's use in ways often not available to the licensor, such as access to overseas markets; and in return the licensee will obtain access to technology, without having the Research & Development (R&D) costs.

As a contract, the license defines the respective rights and obligations of the licensor and licensee. Licenses are usually controlled only by contract and intellectual property law. The licensee does not obtain any ownership of the patent, trademark, or copyright; it only obtains a limited right to use it as defined in the license agreement.

Licenses may be exclusive or non-exclusive. In an exclusive license, only the licensee can exploit the licensed property, either directly or through sublicenses to others. A non-exclusive license permits the licensor to issue equivalent licenses to many licensees, so that frequently licensees complete with each other in the marketplace.

Compensation to the licensor from the licensee is usually in the form of a monetary compensation in royalty payments. The amount of royalty payments is dependent on the market and the demand for the licensed intellectual property. Cross-licensing is also common, where each party licenses the other, usually for related technologies, and often to settle potential disputes.

In the international context, a formal licensing agreement is possible only if the intellectual property right one wishes to license, is also protected in the other countries of interest to the parties concerned. international and Anglo-American Intellectual Property Law P.275

If the intellectual property is not protected in those other countries, then it is not possible to license it, and one would therefore, have no legal right to put any restriction on its use by others.

Exclusive Patent License Agreement (Excerpts) This agreement is made and entered into between ______, a corporation established under ______law (hereinafter called Licensor) having its principle office at ______.

And

______a corporation organized under the laws of______(hereinafter called Licensee), having its principle office at ______.

Witnesseth that: 1. Whereas, Licensor has the right to grant licenses under the licensed patent rights acts and wishes to have the inventions covered by the licensed patent rights in the public interest; and 2. Whereas, Licensee wishes to obtain a license under the licensed patent rights acts upon the terms & conditions hereinafter set forth:

Now, therefore, in consideration of the premises and the faithful performance of the covenants herein contained it is agreed as follows:

Article I - DEFINITIONS

For the purpose of this agreement, the following definitions shall apply:

1. Licensed Patent Rights: Shall mean: a. Patent Application Serial No.______filed by ______. b. Any and all improvements developed by Licensor, whether patentable or not, relating to the Licensed Patent Rights, which Licensor may now or may hereafter develop, own or control.

2. Product(s): Shall mean any materials including techniques, devices, methods or inventions relating to or based on the Licensed Patent Rights, developed on the date of this agreement or in the future.

3. ¶Exclusive License: Shall mean a license, including the right to sublicense, whereby Licensee’s rights are sole and entire and operate to exclude all others, including Licensor and its affiliates except as otherwise expressly provided herein.

4. Know-how: Shall mean any and all technical data, information, materials, trade secrets, technology, formulas, processes, and ideas, including any improvements thereto, in any form in which the foregoing may exist, now owned or co-owned by or exclusively, semi-exclusively or non-exclusively licensed to any party prior to the date of this Agreement or hereafter acquired by any party during the term of this agreement.

5. Intellectual Property Rights: Shall mean any and all inventions, materials, Know-how, trade secrets, technology, formulas, processes, ideas or other discoveries conceived or reduced to practices, whether patentable or not.

6. Royalties: Shall mean revenues received in the form of cash and/or equity from holdings from Licensees as a result of licensing and using, selling, making, having made, sublicensing or leasing of Licensed Patent Rights. international and Anglo-American Intellectual Property Law P.276

ARTICLE II- GRANT OF EXCLUSIVE LICENSE

1. Licensor hereby grants to Licensee the exclusive (worldwide, option) license with the right to sublicense others, to make, have made, use, sell and lease the Products described in the Licensed Patent Rights.

2. Licensor retains the right to continue to use Licensed Patent Rights in any way for non-commercial purposes.

ARTICLE III- LICENSE PAYMENTS

1. Initial payment and royalty rate. For the licensed herein granted: a. Licensee agrees to pay a sign-up fee of ______. b. Licensee shall pay on earned royalty of _____percent ( %) of Licensee’s Gross Sales of Products and fifty percent (50%) of the sublicensing receipts.

2. Payments: All sums payable by Licensee hereunder shall be paid to Licensor in ______(name of country) and in the currency of the ______or in U.S. dollars.

3. Interest: In the event any royalties are not paid as specified herein, then a compound interest of eighteen percent (18%) shall be due in addition to the royalties accrued for the period of default.

Compulsory Licenses

Compulsory licenses are an essential government instrument to intervene in the market and limit patent and other intellectual property rights in order to correct market failures. Nations currently have the right to issue compulsory licenses on patents and copyrights. The World Trade Organization provisions on intellectual property are contained in the TRIPS in Article 31. Each country has its own priorities for compulsory licensing. In the United States and Europe, there is much interest in compulsory licensing for broad, biotechnology patents, research tools, dependent patents, and as a remedy for unreasonable prices. In developing countries there is much interest in the use of compulsory licensing to obtain lower prices in pharmaceuticals for AIDS and tropical illnesses, as well as various vaccines and other essential medicines.

The European Commission decision in the Microsoft case, imposing remedies and a fine, did much to refocus attention on compulsory licensing. The decision also ordered Microsoft Corporation to disclose interface information, enabling competitors to develop software that will be able to integrate with Windows. The Microsoft case in Europe (as well as the court judgment in the US), was the first European decision to order a compulsory license over a patent developed through the resources of a private entity, and the decision created the debate as to what extent it is desirable that competition law can destabilize the exclusive rights of intellectual property. The Microsoft decision established a clear principle on compulsory licensing in the context of intellectual property rights.

Franchise Agreements

The franchise relationship is generally a package including the intellectual property rights – such as the rights to use the trademark, trade names, logos; any inventions such as patents or designs, trade-secrets, and know-how of the business and any relevant brochures, advertising or copyrighted works relating to the manufacture, sale of goods or the provision of services to customers. Intellectual Property is unique to the business and provides the business with its competitive advantage and market position. A franchise agreement is really a more complicated and sophisticated arrangement of a license agreement. Franchising is the practice of using another firm's successful business model. international and Anglo-American Intellectual Property Law P.277

The franchisor has as a result of innovation, intensive system development and product refinement, gained market acceptance and customer loyalty. The franchisor can exploit his market position by sharing his knowledge with the franchisee in exchange for royalties. Well known examples include: McDonalds, KFC, Pizza Hut, Hilton Hotels, Subway, Hertz, Total, Sofitel, and Quick.

Definitions of Key Words

 Account of profits: an action taken against a defendant to recover profits.

 Bargain: a negotiation between two or more parties leading to an agreement.

 Berne Convention: The major multilateral copyright treaty, signed in 1886 which is adhered to by nearly 150 nations and The World Intellectual Property Organization which serves as the administering agency for the convention.

 Copyright: the economic rights enabling the creators to control the use of their material in a number of ways, such as by making copies, issuing copies to the public, performing in public, broadcasting and use on-line.

 Cross-licensing: An arrangement in which a firm grants a license to another firm to exploit proprietary rights in its patents, trademarks, or trade secrets, in exchange for similar licensing to use intellectual property rights of the recipient firm.

 Design patent or design model: A type of patent covering the shape characteristics of an object.

 Design registration: a registration which gives the owner the right for a limited period to stop others from using, making or selling a product, to which the design has been applied, or in which it has been incorporated, without their permission.

 Design right: a right which applies to original designs of the shape or configuration of articles to prevent deliberate copying.

 Disclosure: the revelation of something which was kept secret.

 Disgorgement: (to disgorge) - the forced giving up of profits obtained by illegal or unethical acts. A court may order wrongdoers to pay back illegal profits, with interest, to prevent unjust enrichment.

 Economic Espionage Act of 1996 (EEA): a US statute, adopted in 1996, which provides criminal penalties for the theft of trade secrets.

 Eradicate: to eliminate.

 European Patent Convention: multilateral treaty instituting the European Patent Organization and providing an autonomous legal system according to which European patents are granted.

 Fair Dealing: allows for a reasonable portion of copyright material to be reproduced without the permission of the owner, found in many of the common law jurisdictions of the Commonwealth of Nations. international and Anglo-American Intellectual Property Law P.278

 Fair Use: a doctrine in United States copyright law that allows limited use of copyrighted material without requiring permission from the rights holders, such as for commentary, criticism, news reporting, research, teaching or scholarship.

 Flagrancy: conspicuously and outrageously bad or reprehensible.

 Franchising: granting of a license for the use of intellectual property rights and the business model in a particular territory.

 Goodwill: An intangible asset, such as reputation or location of a business, that engenders the expectation of continued customer or client patronage if the business is sold to a potential buyer.

 Industrial design: is the ornamental or aesthetic aspect of an article produced by industry.

 Industrial property: Inventions, trademarks, industrial designs, and appellations of origin. Infringe: to act illegally against someone’s rights. Infringement: an action taken when a third party uses a sign identical or similar to a registered mark.

 Intangible property: personal property having no physical existence such as copyrights, patents, or trademarks.

 IP: Intellectual Property.

 Joint tenants: Ownership of a property in equal shares, where if one owner dies his/her share passes to the surviving owner.

 Know-How: Information that enables a person to accomplish a particular task or to operate a particular device or process.

 License: a legal document presenting the authorization for a party to own, use, or do something.

 Madrid Protocol: system for the international registration of marks, also conveniently known as the Madrid System, is the primary international system for facilitating the registration of trademarks in multiple jurisdictions around the world.

 Moral Rights: rights individual creators have in relation to copyright works or films they have created. Moral rights are separate from the economic rights of the copyright owner.

 Non-obvious: The inventive requirement present in most patent laws, according to which an invention should be sufficiently inventive, that is non-obvious in order to be patented. On-line: on the Internet.

 “Ordre Public” or Public Policy: It is a concept expressing a people's concept of morality, decency and justice.

 Passing off: the using of similar trademarks or images that illegally cause confusion with other protected trademarks. (Unfair competition)

 Patent: a right granted by the government for a limited period, allowing an inventor to own his or her invention and control its use. Personal property: property that can be moved from one location or another. international and Anglo-American Intellectual Property Law P.279

 Public domain: the status of what is available to everyone for use and possession. R&D: Research and development.

 Real Property: land and interests in land such as farms, houses, buildings and apartments.

 Recall: A request by the manufacturer of a product to return the product.

 Reverse Engineer: To ascertain the functional basis of something by taking it apart and studying how it works.

 Royalty: Payment to the holder of a patent, copyright or trademark for the right to use their property.

 Service Marks: Similar to trademarks, but applicable to services rather than actual products.

 Sui generis: Latin phrase meaning "of its own kind".

 Tenants in Common: Holding of property by two or more persons in specific shares and when one person dies, their share passes according to the terms of their will or agreement.

 Third party: Person who is involved in a situation other than the two main persons. Title: a legal document and right proving someone’s ownership of a piece of property. Trademark: a distinctive sign used so that customers may recognize the products of a particular business.

 Trade Secret: A secret method, formula or device that remains unpatented in order to keep it a secret.

 TRIPS: The WTO Agreement on "Trade-Related Aspects of Intellectual Property Rights".

 UPOV: (The International Union for the Protection of New Varieties of Plants) is an intergovernmental organization with the objective of protecting new varieties of plants by an intellectual property right.

 Utility Model: An intellectual property right to protect inventions. It is very similar to the patent, but usually has a shorter term (often 6 or 10 years) and less stringent patentability requirements.

 Willful: Done intentionally as distinguished from an act done carelessly or inadvertently.

 WIPO: World Intellectual Property Organization is one of the 16 specialized agencies of the United Nations. WIPO was created in 1967 "to encourage creative activity, to promote the protection of intellectual property throughout the world.

 WIPO Copyright treaty: An international treaty on copyright law adopted by the member states of the World Intellectual Property Organization (WIPO) in 1996.

 Work: A piece of copyright material.

 Work ‘made for hire’: A work prepared by an employee within the scope of his or her employment or a commissioned work. The real person, partnership, or corporation for whom the work was prepared is considered to be both the "author" and the owner of copyright from the moment of creation of the work.

 WTO - World Trade organization: An organization set up in 1995 designed to open up and ensure fair play in international trade. international and Anglo-American Intellectual Property Law P.280

Questions

1) Explain the various types of Intellectual Property and what they each try to protect.

2) Why is Intellectual Property protected?

3) What is infringement and how is it enforced?

4) How is International Law involved in Intellectual Property? What are the principal organizations and agreements?

5) What is a Trade Secret and how is it enforced?

6) Why are licenses or franchise agreements important regarding Intellectual Property?

7) What are Geographical indications? Moral rights?

Sources for this Chapter:

1) The English of Law: England and Wales / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Mohammedi, Michel Perdu, William Yeago et al. Editeur: Belin 2007

2) International Legal English / Lindner/Translegal – William Yeago Cambridge University Press 2006

3) Black’s Law Dictionary West Publishing – sixth edition

www.wipo.int www.epo.org www.findlaw.com www.wto.org www.uspto.gov www.noreklaw.com www.dictionary.law.com/ www.lawexperts.com www.translegal.com/legal-english-dictionary ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.281

ANGLO-AMERICAN

LEGAL ENGLISH, CONCEPTS and TERMINOLOGY

ANGLO-AMERICAN COMMON-LAW EMPLOYMENT11 AND LABOR LAW ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.282

ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW

11Historical Background P.283 Labor Law v Employment Law P.284

United States Employment and Labor Law P.286

UK Employment and Labor Law P.293

European Labor Law P.299

Employment Agreement P.300

Definitions of Key Words P.303

Questions P.306 ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.283

ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW

After completing this lesson, one should:  Understand the general fundamentals of Labor and Employment law  Have an overview of the evolution of labor unions, collective bargaining agreements and workers rights  Appreciate the various approaches to the regulations of the workplace and applicable remedies  Understand the concepts of social protection and employee benefits 11 Be familiar with the terms and conditions that may be expressed or implied in employment contracts  Be aware of the different types of employment dismissals and their consequences

Historical Background

Less than a century ago, there was little or no protection for employees. Employers were basically able to treat their employees however they wanted. They often paid them wages as low as possible, while making them work as much as they could. Working conditions were often absolutely filthy, sometimes hazardous and dangerous, and workers were offered no benefits such as health insurance or worker's compensation in the event of an accident on the job. Even children were subjected to this employment abuse.

As the Industrial Revolution expanded through North America, Europe, and the rest of the industrialized world, people increasingly left their rural lives to live in urban centers and work in factories. As the number of such employees rose and working conditions worsened, it became clear that governments would need to intervene in order to protect the rights of the workers. These initial efforts eventually gave way to modern labor and employment laws.

Employment law protects employees from any mistreatment by their employers. Due to these initial working conditions, laws to establish fair wages, limit the number of hours worked in a week, and prevent children from being exploited, were among the first components of employment law. Laws were also established to regulate the sanitation and hygiene of the workplace, and employers were required to take safety measures to protect their employees and prevent dangerous accidents. These preliminary efforts are still an important part of employment law, while they have been improved and expanded as required over the years.

Employment law protects other rights of employees, by establishing standards that employers must follow in providing benefits, such as health insurance, to their employees; this includes additional coverage for health problems that arise due to conditions of the job or workplace. Employment law also includes protection against discrimination in the workplace based on various factors including race, gender, religion, disability, and makes provisions for the employment of foreigners. It is a vital part of a government's efforts to protect human rights and to ensure that employees should not be overworked, placed in an unhealthy or dangerous environment, or rendered unable to work without appropriate compensation. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.284

Labor Law v Employment Law

Employment and labor (US) /labour (UK) law are two terms which are usually used interchangeably. Actually, there is a defined difference between the two terms.

‘Labor Law’ generally pertains to, and deals with, the relationship concerning the employer (or management) and organized labor such as a trade/labor union.

On the other hand, ‘Employment law’ is a term that commonly refers to the relationship between individual employees and their employers, as governed by a variety of laws that prohibit for example; discrimination and ‘wrongful discharge’ or ‘wrongful dismissal’.

Labor Law therefore is the body of laws, administrative rulings, and precedents which address the legal rights of, and restrictions on, workers and their organizations. Labor law has been categorized into two divisions: one is collective labor law and relates to the relationship between employee, employer and union, and the second is individual labor law and concerns employees' rights at work through a contract for work. The labor movement has been vital to social and economic development reforms in the workplace since the Industrial Revolution. Governments today enforce employment standards and social norms of acceptable work conditions through legislative statutes, regulatory rules, or judicial case law.

Before the Industrial Revolution, the workday varied between 11 and 14 hours. With the growth of industrialism and the introduction of machinery, longer hours became even more common, with 14–16 hours per day being typical. Use of child labor was quite common and routine in factories. In England and Scotland in 1788, about two-thirds of persons working in the textile factories were children. The eight-hour movement's struggle led to the first law on the length of a working day, passed in 1833 in England, limiting miners to 12 hours, and children to 8 hours. The 10-hour day was established in 1848, and shorter hours with the same pay were gradually accepted thereafter. The 1802 Factory Act was the first labor law in the UK.

After England, Germany was the first European country to pass labor laws to placate the working class; enacting a variety of social reforms, which became the first variety of social security. The passage of the Health Insurance Act was in 1883, which entitled workers to health insurance, where the worker paid two-thirds and the employer one-third of the premiums. Work accident insurance was provided in 1884 and then later old age pensions and disability insurance were established in 1889. Other laws restricted the employment of women and children.

Trade Unions

A trade union is an organization of members consisting mainly of workers. One of a trade union's main purposes is to protect and advance the interests of its members in the workplace.

Most trade unions are independent of any employer, but try to develop close working relationships with employers. Trade unions:  negotiate agreements with employers on pay and conditions;  discuss major changes to the workplace such as large scale redundancy;  discuss their members' concerns with employers;  accompany their members in disciplinary and grievance meetings; ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.285

 provide their members with legal and financial advice;  provide education facilities and certain consumer benefits such as discounted insurance.

Some countries require unions to follow particular procedures before taking certain actions like requiring that union members vote to approve a strike or to approve using members' dues for political projects. Laws may guarantee the right to join a union or remain silent in this respect. In most countries today, one is not required, however to join or financially support a union as a condition of hiring or continued employment.

Strikes and Pickets

Strike action is the weapon of the workers most associated with labor disputes and it is undoubtedly very potent. In most countries, strikes are legal under a circumscribed set of conditions. Among them may be that:  The strike is decided on by an established democratic process. (Wildcat strikes are illegal).  Sympathy strikes, against a company by which workers are not directly employed, may be prohibited.  General strikes may be forbidden by a public order.  Certain categories of persons in certain countries may be forbidden to strike (public service workers, which provide water or electricity, health care personnel, telecommunication employees, teachers, police or firemen, etc.)

Picketing is a tactic which is often used by workers during strikes. They may assemble outside the business they are striking against, to express their discontentment and prevent strike breakers from entering the workplace. In many countries, this activity is restricted by labor law as there may be laws against obstructing others from entering the picketed establishment (scabbing, for example, is lawful); and in some countries, there may be court orders issued against pickets being in particular places at particular times, or behaving in abusive and violent ways.

Collective Bargaining Agreements

A collective bargaining agreement functions as a labor contract between an employer and one or more labor unions. It is the contractual agreement that governs wages, hours, and working conditions for employees and which can be enforced against both the employer and the union for failure to comply with its terms. Such an agreement is ordinarily reached following the process of collective bargaining, where a union may negotiate with a single employer, (who is typically representing a company's management or owners) or may negotiate with a group of businesses, to reach an industry wide agreement. Most collective bargaining agreements require that dismissals of employees be supported by 'just cause'. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.286

France - Collective Bargaining Agreements In the "Code du Travail", there are provisions known as "Conventions Collectives de Travail". Collective Bargaining Agreements may be applicable nationally, throughout the whole of French territory, or at local levels. In general terms, Collective Bargaining Agreements relate to a particular sector of industry or commerce and establish in detail the scope of the relationship between employer and employee.

The terms of the agreements reflect local or national negotiation between organizations representing the employers and representatives of the employees.

However, the "Conventions Collectives de Travail" are in many cases binding upon employers who took no part in any collective bargaining, nor were members of any employers' representative grouping which was party to the negotiations.

United States Employment and Labor Law

In the United States, Employment and Labor Law, both exist at the state and federal levels and therefore consist of thousands of federal and state statutes, administrative regulations, and judicial decisions. Federal law basically organizes the standards that govern workers' rights to organize (Labor Law) and therefore prevails over most state and local laws that attempt to regulate this area (Supremacy clause of the Constitution). Federal law does not apply, for example to employees of state and local governments or agricultural workers. This relationship is even more complex in the area of wages and working conditions. Federal law establishes minimum wages and overtime rights for most workers in the private and public sectors; provides minimum workplace safety standards, but allows the states to provide more strict standards, if they wish to do so. Finally, both federal and state laws protect workers from employment discrimination.

Employment Relationships in the US

‘Employment at Will’ Doctrine In general, employees in the United States are ‘employed at will’. An employer can dismiss an at-will employee at any time for any reason or for no reason and employees can terminate their employment at any time for any reason or for no reason. The rule of at-will employment does not apply, however when there is a contract between an employer and employee, that establishes a definite period of employment. The employee can only be terminated according to the terms of the agreement, and an employer will be liable for breach of contract, if it does not comply with the contractual terms.

Traditionally, U.S. employers have possessed the right to discharge or dismiss their employees at will for any reason, whether good or bad. This "at-will" grouping covers all employees who are not protected by express employment contracts, which indicate that they may be fired only for good cause. "Good cause" requirements are typically a part of collective bargaining agreements negotiated by employee unions; non-union workers hardly ever have this form of protection.

The United States is the only major industrial power that maintains a general employment-at-will rule. Canada, France, Germany, Great Britain, Italy, and Japan for example all have statutory provisions that require employers to show good cause before discharging employees. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.287

The courts in several states have created exceptions to the employment-at-will practice. Thus far, the courts have recognized two broad categories: an employer may not terminate an employee  who has received an explicit or implied promise that termination would only occur for good cause.  for reasons that violate public policy.

In practice the at-will doctrine often overrides conventional contract law, with which it is incompatible, in employment conflict. The courts have started to consider that under certain circumstances, contract law will apply to at-will employees and that discharged employees can therefore claim wrongful discharge (that is breach of contract) if their employment is brought to an end.

Oral Agreements in Employment Law

Oral employment contracts or “verbal contracts” for employment have generally been enforced by US courts under the legal doctrine of “implied contract” for employment, however; many state statutes invoke the common law rule of contracts, the “statutes of frauds” which bar oral employment agreements that are incapable of being performed within one year.

Employee v Independent Contractor

The distinction between an employee and an independent contractor is significant under many employment laws. Typically, employers are obligated to withhold payroll taxes from the compensation of employees, but not independent contractors, and independent contractors, unlike employees, are not entitled to employee benefits. An employer's classification of an individual as an independent contractor is based on various factors, including and most importantly, the amount of control exercised by the employer, the skill and initiative required in performing the job, and the permanency of the relationship. Independent contractors for example, usually maintain control over their schedule, the number of hours worked, the work accepted and the performance of their job.

Typical independent contractors include: accountants, authors, hair stylists, doctors, consultants, entertainers, lawyers, nurses, professional athletes, real estate agents, stock brokers, taxi drivers, translators and tutors.

Discrimination

In the United States, employment discrimination on the basis of race, color, religion, sex (including pregnancy), national origin, disability, sexual orientation, marital status and age is unlawful.

Employment discrimination (or workplace discrimination) is discrimination in hiring, promotion, job assignment, termination, compensation and harassment. Discrimination often takes subtler forms, such as wage discrimination or retaliation for reporting employment law violations to the authorities. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.288

Sexual Harassment Sexual harassment is a form of prohibited sex discrimination. There are two types of sexual harassment recognized:  Conduct that explicitly or implicitly renders a job and benefits conditional on an employee's acceptance of sexual conduct.  Conduct that is sufficient to change the terms or conditions of employment and create an abusive or hostile work environment.

The Equal Pay Act of 1963 prohibits employers from paying unequal wages to male and female employees who perform substantially the same jobs.

Age Discrimination Employees aged 40 or older, are protected by The Age Discrimination in Employment Act. Practices that are prohibited by the act include the following:  to fail or refuse to hire or to discharge any individual, or otherwise discriminate against any individual with respect to compensation, terms, conditions or privileges of employment, because of that individual's age;  to limit, segregate or classify in any way that would deprive or tend to deprive any individual of employment opportunities or otherwise adversely affect his or her status as an employee, because of that individual's age; and  to print or publish, or cause to be printed or published, any notice or advertisement relating to employment that indicates a preference, limitation, specification or discrimination based on age.

Disability Discrimination The Americans with Disabilities Act of 1990 prohibits discrimination against a qualified individual with a disability in regard to:  job application procedures;  the hiring, advancement or discharge of employees;  employee compensation;  job training; and  conditions and privileges of employment.

Bona Fide Occupational Qualification Bona fide occupational qualification or requirement is a quality or an attribute that employers are allowed to consider when making decisions on the hiring and retention of employees – qualities that when considered in other contexts would constitute discrimination and thus be in violation of civil rights employment law. Such qualifications must be specifically indicated in the employment offering.

Bona fide occupational qualifications generally only apply to occupations where it is considered necessary to that profession. Examples of bona fide occupational qualifications might be the mandatory retirement ages for police or fire department employees, bus drivers, and airline pilots, ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.289

for safety reasons. A fashion show designer may require only female models. Religious beliefs may also be considered a bona fide qualification; for example, a religious school may lawfully require that members of its faculty be members of that religion, and may lawfully not accept to employ anyone who is not a member. However, membership in a particular religion at that school would generally not be considered a bono fide qualification for occupations such as support staff and janitorial positions.

Remedies for Discrimination

Remedies available under US law include equitable relief such as reinstatement or hiring, back pay, front pay and injunctive relief. The courts may also award monetary compensatory damages, which may include emotional pain and suffering. Punitive damages may also be granted as well attorney's fees, including litigation expenses and costs, to the prevailing party.

Employee Rights

Family and Medical Leave Act The Family and Medical Leave Act of 1993 is the federal law that provides for unpaid leaves of absence and reinstatement rights for employees who have been employed by their employer for at least 12 months and who have worked for the employer at least 1,250 hours in the previous 12 months.

The act provides 12 weeks of unpaid leave in a 12-month period for:  the birth or adoption of a child;  an employee's own serious health condition; or  the care of a family member with a serious health condition.

The act requires that an employee returning from such leave be reinstated to the position he or she held immediately prior to taking the leave or to an equivalent position.

Whistleblower Protection Some provisions of federal and state laws prohibit employers from taking adverse action against whistleblowing employees. 'Whistleblowing' generally refers to disclosing, objecting to, or refusing to participate in, the unlawful activity of the employer.

Investigation of Applicants and Employees Many states prohibit or otherwise restrict the use of an arrest and conviction of an individual by a perspective employer. It is legal to perform criminal history checks and to choose not to hire someone based on the results provided that:  The crime relates to the position (for example, it is acceptable to choose not to hire a convicted embezzler for an auditing position).  Thoughtful consideration has to be given to the nature of the crime, how long it has been since the crime was committed, what kind of rehabilitation efforts were made, as well as the candidate’s work history and references. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.290

Termination of Employment

Voluntary termination is a decision made by the employee to leave his or her work. This decision is frequently known as "resignation," "quitting," or "leaving". Some common reasons for voluntary termination include:  Personal dissatisfaction with the job.  Personal life considerations such as family obligations, education, health, or moving to a new location.  Getting a new job, or career change, or better pay.  Retirement.

Generally, employers prefer that a departing employee provide at least some notice to the employer, often a minimum of two weeks.

Involuntary Termination Involuntary termination is the employee's removal by the employer. In the United States there are two basic types of involuntary termination, commonly referred to as being "fired" and "laid off." Dismissal or being terminated is the employer's choice to discharge the employee for a reason which is the fault of the employee.

Layoff (Economic Termination) A layoff is not usually related to personal performance, but instead due to economic reasons, restructuring, going out of business, or where a certain type of product or service is no longer offered by the company, and therefore jobs related to that product or service are no longer needed, also commonly known as "downsizing", "reduction in force" or "redundancy".

Some companies resort to attrition or voluntary redundancy where those who do depart voluntarily are not replaced and are given the option to resign in exchange for a fixed amount of money, frequently a few years of their salary.

France - dismissal Employment in France is not ‘at will’ and the decision to terminate an employment contract must be based on justifiable grounds. The grounds for the dismissal must be "real and serious”, for example, personal grounds (directly attributable to the employee) or economic grounds (not directly attributable to the employee, but in particular to economic difficulties, technological changes, or the need to maintain competitiveness). Certain employees have varying levels of protection against dismissal, including: pregnant women; employees on sick leave as a result of a work-related illness or accident; employee representatives.

The dismissal procedure is strictly organized by the French Labor Code and will differ according to the grounds for dismissal. Generally, an employee whose dismissal is contemplated will be convened to a preliminary meeting, where he or she will be given the reasons for his or her dismissal, and given the opportunity to explain him or herself. The employee will then be given a written notice of his or her dismissal by registered mail with return receipt requested. Dismissal or redundancy procedures are strictly defined within specific legal time periods. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.291

Restrictive Covenants in Employment Agreements

Every business has information that it considers both integral and invaluable to its success. Restricting the use of this information by employees after their term of employment may be vital to the protection of a market position. An employer may seek to protect the use of this information through the inclusion of a restrictive covenant in the contract of employment. The covenants must be designed to protect the employers legitimate business interests.

Non-competition Non-competition agreements prohibit employees from competing with their employers for a period of time after the termination of their employment. They are often disfavored by the courts, but may be upheld if they are narrowly tailored to protect the employer's legitimate interests. They must be reasonable in time and geographic scope.

Non-solicitation

Non-solicitation agreements prohibit employees from soliciting a former employer's employees and/or customers. Because non-solicitation agreements are less intrusive than non-competition agreements, courts are generally more inclined to enforce them.

Confidentiality

Confidentiality agreements require employees, during and after their employment, to maintain the confidentiality of trade secrets and other proprietary and confidential information of their employers. These agreements generally reinforce employer's rights under Common Law principles and are routinely upheld by the courts.

Wage and Hour Laws

The Fair Labor Standards Act requires that employees be paid a minimum hourly wage and receive additional ‘overtime’ pay for hours worked in excess of 40 hours during any working week or 8 hours in a day. The act requires that employees be paid a minimum of $7.25 per hour, and one-and-a-half times their hourly rates for all hours worked overtime.

Taxation of Wages Employers in the US are required to withhold payroll taxes from the paychecks of their employees. The withholding requirement includes federal income tax, state and local income tax, unemployment insurance, social security tax and Medicare tax. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.292

Employee Benefits

Employers in the United States are not generally required to offer benefits to employees. Employers that offer benefits, however, may claim them as expenses and deduct them from their taxes. Types of benefits that may be offered include:  health benefits;  retirement benefits;  severance benefits;  disability benefits;  stock options;  vacation and holiday pay;  life insurance benefits.

Temporary Disability Laws

Several states provide temporary disability benefits to employees who are unable to work due to their own disability. Eligible employees generally receive a portion of their wages for the period of disability.

Unemployment Compensation

Unemployment insurance, which is governed by state law, is intended to ease the hardship of involuntary unemployment. Covered employees receive a portion of their wages for a specified period of unemployment, usually six months.

Worker's Compensation

Worker's compensation, which is governed by state law, is the exclusive remedy for employees injured in the workplace. Injured workers receive compensation without regard to issues of fault. Employers are required to maintain worker's compensation insurance for their employees.

Occupational Safety and Health Act

The Occupational Safety and Health Act of 1970, which covers almost all employers and their employees, established a multitude of safety and health standards in the workplace. It requires that employers eliminate dangerous conditions, and take action to achieve safe and healthy working conditions. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.293

Company-Employee Handbooks and Policies

Employee handbooks are a simple way of organizing and summarizing the main points of the larger body of information about the company. Typically, they are used to consolidate the information that a new employee would need to know about compensation, benefits, rights, and the company’s rules and policies. It is usually considered part of an employee’s terms and conditions of employment.

Some of the Subjects Covered in Company Handbook

Confidentiality Maternity Leave Dismissal Retirement Plans Dress Code Safety and Accident Rules Breaks Sexual Harassment Employment Classification Sick Leave Family Medical Leave Act Substance Abuse Health and Life Insurance Travel Expenses Holidays Time off Hourly Paid Employees/Overtime Use of Company Computers Lunch Periods Use of Company Property Personal Time off Workman's Compensation Probationary Period Vacations Resignation

UK Employment and Labor Law Contract of Employment

All employees are entitled to a basic statement of their terms and conditions of employment which must be provided within 2 months of commencing employment. The statement or contract should include:  General – place of work, job title and description, hours of work.  Salary – Salary is usually paid in 12 equal, monthly instalments. It is compulsory for tax and national insurance payments to be deducted at source under a Pay As You Earn (PAYE) scheme. Individuals must be paid at least the minimum wage and there are different levels depending on the age and if one is an apprentice. The current rate, for example is £5.93 for workers aged 21 and over.  Sick Leave – Employees are not legally entitled to be paid whilst off sick. However, if the employee is ill for 4 or more days, he would be entitled to statutory Sick Pay  Holidays – 28 working days holiday inclusive of 8 public holidays per year must be provided as a legal minimum. In some industries custom and practice may assume longer holidays. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.294

 Notice Period – both employees and employers are under an obligation to provide each other with some notice upon terminating the employment agreement. Statutory minimum notice periods range from 1 week to 12 weeks depending on length of employment.  Disciplinary and Grievance procedure – In addition, the business should have a disciplinary procedure and a grievance procedure in place.  Other issues which could be included – probationary period; job description; reporting structure; benefits (such as private health insurance/death in service/pension contributions) details of incentives, bonuses or commissions should also be clearly defined. Confidentiality provisions, restrictions following termination and protecting the goodwill of the business should be considered and incorporated.  Pensions – if a business employs 5 or more individuals, it is legally obliged to set up a stakeholder pension scheme for employees. The company does not have to contribute to this scheme, however.  Redundancy: It is possible to terminate an individual’s contract if the business is not making money, or there is insufficient work. If the individual has been employed for 2 or more years he will be entitled to a statutory redundancy payment as well as notice monies. A redundancy payment is based on an individual’s age, length of employment and capped at a maximum weekly wage.  Maternity/Paternity leave: Maternity leave of up to 52 weeks is allowed, for up to 39 weeks of which the employee will be entitled to be paid. Paternity leave of up to 2 weeks can be taken as well.

Implied Terms in Employment Contracts

Some terms in employment contracts are implied and do not need to be written into the contract. For example: an employer must provide a secure, safe and healthy working environment and the employee has a duty to be honest and loyal. It is implied that there will be mutual trust and confidence between the employer and the employee and that neither will act in a way to breach that trust.

France - Employment Contract An employment contract can generally be oral or written, but the employer must provide the employee with a written statement of the essential terms governing the employment relationship. However, a written contract is necessary: if an applicable collective bargaining agreement requires it; for fixed-term contracts; for part-time contracts; and for apprenticeship employment contracts. Employees are entitled to a minimum of five weeks of paid holiday/vacation a year. In addition, there are about ten public holidays every year. The law grants additional paid leave for family- related events.

Employees who are absent due to illness or injury must obtain a medical certificate covering the period of sick leave. They may receive daily indemnities from the social security system.

The statutory gross monthly minimum wage is currently €1,308.88 for a full-time employee. Collective bargaining agreements often provide for their own minimum wage, which will apply if more favorable, and which may be higher than the statutory minimum wage. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.295

Bullying

Workplace bullying is the 'repeated less favourable treatment of a person by another or others, which may be considered unreasonable and inappropriate workplace practice'. It is behaviour that can intimidate, offend, degrade or humiliate an employee. Bullying, or an employer tolerating bullying, typically breaches the implied term in an employment contract of having a legal duty of trust and confidence to each other. Such a breach creates circumstances entitling an employee to terminate his or her contract of employment without notice, which can lead to a finding by an Employment Tribunal of unfair dismissal, or constructive dismissal. Noteworthy precedent cases have held that an employer is vicariously liable for one employee's harassment of another. Where a person is bullied on grounds of sex, race or disability, it is illegal under anti-discrimination laws. One may receive compensation for injury to feelings and financial loss for a successful discriminatory dismissal claim.

Pay Statement

An employee has the right to receive an individual, detailed written pay statement from their employer, either when they are paid or shortly before. Every pay statement must contain the following information:  amount of your wages before any deductions (gross wages)  individual amount of any deductions (such as trade union subscriptions or taxes)  net amount of your wages (this is the total after deductions)  National Insurance number  tax codes  pay rate (either annual or hourly)  additional payments like overtime, tips or bonuses.

Dismissals

A dismissal may take different forms. It occurs both

 when an employer terminates the employee’s contract or  when a fixed term contract ends and is not renewed

In both cases, the dismissal may be considered to be fair or unfair. Constructive dismissal occurs when an employee resigns because his or her employer has broken a significant term of his or her contract.

Under common law, expiry of a fixed term contract simply brings the contract to an end ‘by performance”. Under current legislation however, if an employer wishes not to renew the contract of an employee under a fixed term contract when the term of that contract expires, then he must follow strictly a fixed procedure (a written invitation to attend a consultation, followed by a meeting and offer the employee a right to appeal). If this procedure is not followed, then the employee will automatically be considered to have been unfairly dismissed. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.296

Unfair Dismissal

Reasons for a fair dismissal must lie among the following categories:  Reasons related to the capability or qualifications of the employee,  Reasons related to the conduct of the employee,  Redundancy,  Where the employee’s continued employment would involve the employee or the employer contravening a duty or restriction imposed by law.

In all cases, the employer's decision to dismiss must satisfy a test of fairness. If the employer has not followed a fair procedure in making the decision to dismiss an employee, the dismissal will usually be ruled to be unfair.

A tribunal will look at all the circumstances of a dismissal in order to decide whether the decision to dismiss was a reasonable response to the circumstances, and the facts known to the employer at the time. As well as awarding compensation, a tribunal may also order the employer to give the employee his or her job back, or re-engage him or her in a similar job.

Automatic Unfair Dismissal

A dismissal will be automatically unfair for the following reasons:  Dismissal for asserting a legal right;  Dismissal for a health and safety related reason;  Dismissal for a maternity related reason;  Dismissal in connection with function as an employee representative or a special negotiating body;  Dismissal in connection with refusal of Sunday work by a shop worker or in connection with working hours;  Dismissal in connection with assertion of right to the National Minimum Wage;  Dismissal in connection with making a protected disclosure (whistleblowing);  Dismissal in connection with Trade Union Recognition or bargaining arrangements;  Dismissal in connection with exercising the right to be accompanied to a disciplinary or grievance hearing;  Dismissal in connection with taking part in protected industrial action (official strikes for example);  Dismissal because of taking time off for dependants or maternity, paternity, adoption or parental leave;  Dismissal in connection with being absent for, or selected for, jury service. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.297

Wrongful Dismissal

Every employee is entitled to reasonable notice of the termination of their employment unless employed on a fixed term contract. This is a common law concept, independent of the statutory right on unfair dismissal. Most contracts of employment specify the notice either party must give the other. An employee dismissed without notice may be able to sue his or her former employer for wrongful dismissal and claim damages equivalent to what he or she has lost as a result.

Retirement Dismissals

The Employment Equality (Age) Regulations 2006 removed the upper age limit on unfair dismissal claims and introduced the fair reason examination for dismissal of retirement. Retirement ages of less than 65 have to be objectively justified and employees have the right to apply to work beyond their planned retirement date. There is a statutory procedure where employees should be informed of their planned retirement date and of their right to apply to continue working. The Employment Equality (Age) Regulations Act 2006 has been superseded by the Equality Act 2010.

Redundancy

Redundancy occurs when an employee is dismissed because the business that employs him or her closes down, or closes the location where he or she works; or if he or she becomes surplus to the requirements of the business.

The Transfer of Undertaking Protection of Employment Regulations (TUPE), apply when there is a transfer of a trade or business or part of a business, to a new owner. Employees who are employed by the undertaking at the time of the transfer automatically become the employees of the new owner, effectively as if their contract of employment was made originally with the new employer. If either the old or new employers dismiss an employee because of the transfer of undertakings, the dismissal may be considered unfair.

France - Redundancy According to the French Labor Code, where an employer cites economic difficulties to support the redundancy, the legitimacy of the redundancy is dependent on the ‘real and serious’ nature of the economic difficulties at the time of the redundancies and is assessed at the company level, with regard to the economic difficulties based on the particular economic sector business, in which the company operates. In general, the loss of a market, a slowdown in sales, or lower turnover or profits during the year prior to the redundancy, does not qualify as economic difficulties. However, recently the courts have considered that where redundancy proceedings are necessary to safeguard competitiveness, the redundancy proceedings are founded on a ‘real and serious’ ground. Better management or the interests of the company invoked by a financially healthy company are not considered valid grounds to demonstrate that the restructuring is necessary to preserve the company's competitiveness. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.298

Human Rights Act in the United Kingdom

The Human Rights Act 1998 means that UK Courts and the Employment Tribunals have to interpret UK domestic law in accordance with the European Convention on Human Rights. Human rights issues are always relevant and affect the relationship between employers and employees in the law and in the decisions which courts have to make.

United Kingdom Employment Tribunal Process

An employee (called “the Claimant”) can make an application to an employment tribunal as soon as the employer (called “the Respondent”) has given the notice of dismissal. This application should give particulars of the grounds of the complaint and must normally be received within three months of the employee's effective date of termination.

The office of the employment tribunals dealing with the employee's application form will send the employer a copy of the application and a form called a Notice of Appearance. The employer should fill in this form, stating whether or not he or she wishes to contest the case, and if so, giving particulars of the grounds for doing so. The employer and the employee may each request further particulars of the other's case.

Settling a Dispute

An employee who believes that he or she is entitled to make a complaint to an employment tribunal should first seek to resolve the dispute by mutual agreement with the employer, perhaps through the business's own grievance or appeals procedure, or the employee and the employer may also seek advice from a conciliator of the Advisory, Conciliation and Arbitration Service.

Employment Tribunal Hearings

Each tribunal normally consists of a chairman who is a lawyer and two other members, one from a panel of members representing employers, and the other from a panel of members representing employees.

If the complaint is not settled by mutual agreement, conciliation, or withdrawn at an earlier stage, it proceeds to a full hearing by an employment tribunal. Tribunals try to keep their proceedings as simple and informal as possible. Many claimants and respondents still argue their own cases before the tribunal, although many now choose to have a representative, who may be a lawyer, trade union official, or representative of an employers' organisation.

The tribunal will normally give both parties the opportunity to present their respective cases and question their own and the other party's witnesses. The tribunal panel may ask questions of the parties or their witnesses.

Tribunal hearings are generally completed in one day, and decisions may be by majority vote, but in fact nearly all are unanimous. The tribunal may announce its decision and the reasons immediately with a written decision generally sent within three to six weeks. Both parties have a right to ask for a review of the decision and a right to appeal to the Employment Appeal Tribunal. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.299

France - Employment Tribunal Process The ‘Conseil de Prud’Hommes’ is the specific French court jurisdiction dealing with all Labor/Employment Law matters. Its bench is composed of elected judges representing the employees and the employers. Its decisions are susceptible to Appeal before the ‘Cour d’Appel.’

European Labor Law

While each European country has its own specific labor laws, the European Union (EU) establishes requirements that each of its member countries must respect. The EU's legislation protects and ensures workers' rights. Individual member countries transform and implement this legislation into their laws. The EU monitors to make sure the laws are correctly implemented. Disputes regarding the interpretation of the law are handled by the European Court of Justice.

Working Time

EU law says workers should work no more than 48 hours per week and have the right to a minimum of 11 hours of rest per day with at least one break for every six hours of work. Workers are guaranteed paid leave for at least four weeks a year. This does not include sick days or maternity leave.

Worker Protection

The EU requires that part-time or temporary workers be entitled to the same treatment as full-time workers. Employees of a company that is bought by another company, still retain certain rights of employment. The new employer does not have grounds to dismiss the employees, unless for some economic or organizational issue. The employee's contract with the previous employer should be honored for at least one year or until the contract is expired. The EU's Child Labor Laws state that children under 15, or who are full-time students, are not allowed to work, unless for exceptional purposes such as athletics or artistic endeavors.

Freedom of Movement

The ‘freedom of movement’ laws recognized by the European Union are intended to make it easy for a worker in one nation of the EU to move and work in another EU nation and to be entitled to the same rights and protection of the host country's workers.

This can become complicated as some of the members of the European Union have additional laws or requirements when it comes to individuals from another country applying for work visas. However, in general most nations in the EU will more easily accept a worker from another EU country, with fewer barriers than a worker who comes from a nation outside the EU. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.300

EMPLOYMENT AGREEMENT

This Agreement made and entered into this ____ day of, 20 ____, by and between ______("employer"), and ______("employee"). The parties recite that: A. Employer is engaged in ______and maintains business premises at ______. B. Employee is willing to be employed by employer, and employer is willing to employ employee, on the terms and conditions hereinafter set forth. For the reasons set forth above, and in consideration of the mutual covenants and promises of the parties hereto, employer and employee covenant and agree as follows:

1. AGREEMENT TO EMPLOY AND BE EMPLOYED Employer hereby employs employee at the above-mentioned premises, and employee hereby accepts and agrees to such employment.

2. DESCRIPTION OF EMPLOYEE'S DUTIES Subject to the supervision and pursuant to the orders, advice, and direction of employer, employee shall perform such duties as are customarily performed by one holding such position in other businesses or enterprises of the same or similar nature as that engaged in by employer. Employee shall additionally render such other and unrelated services and duties as may be assigned to him from time to time by employer.

3. MANNER OF PERFORMANCE OF EMPLOYEE'S DUTES Employee shall at all times faithfully, industriously, and to the best of his ability, experience, and talent, perform all duties that may be required of and from him pursuant to the express and implicit terms hereof, to the reasonable satisfaction of employer. Such duties shall be rendered at the abovementioned premises and at such other place or places as employer shall in good faith require or as the interests, needs, business, and opportunities of employer shall require or make advisable.

4. DURATION OF EMPLOYMENT The term of employment shall be ____ years, commencing on 20 __, and terminating 20__ subject, however, to prior termination as otherwise provided herein.

5. COMPENSATION; REIMBURSEMENT Employer shall pay employee and employee agrees to accept from employer, in full payment for employee's services hereunder, compensation at the rate of ___ Dollars per annum, payable ______. In addition to the foregoing, employer will reimburse employee for any and all necessary, customary, and usual expenses incurred by him while traveling for and on behalf of the employer pursuant to employer's directions.

6. EMPLOYEE'S LOYALTY TO EMPLOYER'S INTERESTS Employee shall devote all of his time, attention, knowledge, and skill solely and exclusively to the business and interests of employer, and employer shall he entitled to all benefits, emoluments, profits, or other issues arising from or incident to any and all work, services, and advice of employee. Employee expressly agrees that during the term hereof he will not be interested, directly or indirectly, in any form, fashion, or manner, as partner, officer, director, stockholder, advisor, employee, or in any other form or capacity, in any other business similar to employer's business or any allied trade, except that nothing herein contained shall be deemed to prevent or limit the right of employee to invest any of his surplus funds in the capital stock or other securities of any corporation whose stock or securities are publicly owned or are regularly traded on any public exchange, nor shall anything herein contained by deemed to prevent employee from investing or limit employee's right to invest his surplus funds in real estate. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.301

7. NON-DISCLOSURE OF INFORMATION CONCERNING BUSINESS Employee will not at any time, in any fashion, form, or manner, either directly or indirectly divulge, disclose, or communicate to any person, firm, or corporation in any manner whatsoever any information of any kind, nature, or description concerning any matters affecting or relating to the business of employer, including, without limitation, the names of any its customers, the prices it obtains or has obtained, or at which it sells or has sold its products, or any other information concerning the business of employer, its manner of operation, or its plans, processes, or other date of any kind, nature, or description without regard to whether any or all of the foregoing matters would be deemed confidential, material, or important. The parties hereby stipulate that, as between them, the foregoing matters are important, material, and confidential, and gravely affect the effective and successful conduct of the business of employer, and its good will, and that any breach of the terms of this section is a material breach of this agreement.

8. OPTION TO TERMINATE ON PERMANENT DISABILITY OF EMPLOYEE Notwithstanding anything in this agreement to the contrary, employer is hereby given the option to terminate this agreement in the event that during the term hereof employee shall become permanently disabled, as the term "permanently disabled" is hereinafter fixed and defined. Such option shall be exercised by employer giving notice to employee by registered mail, addressed to him in care of employer at the above stated address, or at such other address as employee shall designate in writing, of its intention to terminate this agreement on the last day of the month during which such notice is mailed. On the giving of such notice this agreement and the term hereof shall cease and come to an end on the last day of the month in which the notice is mailed, with the same force and effect as if such last day of the month were the date originally set forth as the termination date. For purposes of this agreement, employee shall be deemed to have become permanently disabled if, during any year of the term hereof, because of ill health, physical or mental disability, or for other causes beyond his control, he shall have been continuously unable or unwilling or have failed to perform his duties hereunder for thirty (30) consecutive days, or if, during any year of the term hereof, he shall have been unable or unwilling or have failed to perform his duties for a total period of thirty (30) days, whether consecutive or not. For the purposes hereof, the term "any year of the term hereof' is defined to mean any period of 12 calendar months commencing on the first day of __ and terminating on the last day of _____ of the following year during the term hereof.

9. DISCONTINUANCE OF BUSINESS AS TERMINATION OF EMPLOYMENT Anything herein contained to the contrary notwithstanding, in the event that employer shall discontinue operations at the premises mentioned above, then this agreement shall cease and terminate as of the last day of the month in which operations cease with the same force and effect as if such last day of the month were originally set forth as the termination date hereof.

10. EMPLOYEE'S COMMITMENTS BINDING ON EMPLOYER ONLY ON 'WRITTEN CONSENT Employee shall not have the right to make any contracts or other commitments for or on behalf of employer without the written consent of employer.

11. CONTRACT TERMS TO BE EXCLUSIVE This written agreement contains the sole and entire agreement between the parties, and supersedes any and all other agreements between them. The parties acknowledge and agree that neither of them has made any representation with respect to the subject matter of this agreement or any representations inducing the execution and delivery hereof except such representations as are specifically set forth herein, and each party acknowledges that he or it has relied on his or its own judgment in entering into the agreement. The parties further acknowledge that any statements or representations that may have heretofore been made by either of them to the other are void and of no effect and that neither of them has relied thereon in connection with his or its dealings with the other. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.302

12. WAVIER OR MODIFICATION INEFFECTIVE UNLESS IN WRITING No waiver or modification of this agreement or of any covenant, condition, or limitation herein contained shall be valid unless in writing and duly executed by the party to be charged therewith. Furthermore, no evidence of any waiver or modification shall be offered or received in evidence in any proceeding, arbitration, or litigation between the parties arising out of or affecting this agreement, or the rights or obligations of any party hereunder, unless such waiver or modification is in writing, duly executed as aforesaid. The provisions of this paragraph may not be waived except as herein set forth.

13. CONTRACT GOVERNED BY LAW This agreement and performance hereunder shall be construed in accordance with the laws of the State or country of ______.

14. BINDING EFFECT OF AGREEMENT This agreement shall be binding on and inure to the benefit of the respective parties and their respective heirs, legal representatives, successors, and assigns.

Executed on ______. ______, Employer ______, Employee ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.303

Definitions of Key Words

 Advisory, Conciliation and Arbitration Service: A Crown non-departmental public body of the Government of the United Kingdom. Its purpose is to improve organisations and working life through the promotion and facilitation of strong business relations practice.

 Apprentice: One who works for an expert to learn a trade.

 Attrition: Gradual, natural reduction of employees, as through retirement, resignation, or death.

 Back pay: Pay that is owed to an employee for work carried out before the current payment period or is overdue.

 Bona Fide Qualification: When an employer is allowed to hire employees based on qualities or attributes that would be discrimination when considered in other contexts.

 Bullying: A form of abuse which may comprise repeated acts over time that involves a real or perceived imbalance of power, with the more powerful individual or group abusing those who are less powerful.

 Collective bargaining: Methods of determining wages, hours and other conditions of employment through direct negotiations between the union and the employer.

 Collective labor law: The laws governing the relationship between an employer and trade union.

 Constructive dismissal: Claim an employee has left a job because the employer's conduct has breached the contract of employment and led the employee to regard the contract as having ended.

 Contract for services: A contract which is used for appointing a self-employed individual (or a profession or business run by that individual) to perform services for another party where the relationship between the parties is not that of employer and employee. Contract of service/ contract of employment: a contract between an employer and an employee regarding service or apprenticeship, either express or implied and, if express, either oral or in writing.

 Covenant: Promise to engage in or refrain from a specified action.

 Discharge (dismissal): The termination of one's employment.

 Dues: Membership fees.

 Embezzler: One who steals money of which they have been trusted with, especially from one's employer.

 Employment ‘at will’: Doctrine of American law that defines an employment relationship in which either party can break the relationship with no liability, provided there was no express contract for a definite term governing the employment relationship.

 Employment Tribunals: Independent judicial bodies who determine disputes between employers and employees over employment rights.

 Fire: To terminate the employment of. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.304

 Front pay: Money awarded for lost compensation during the period between judgment and reinstatement.

 Gender: Concept of the biological differences between men and women.

 Good faith: Honesty and without fraud.

 Good cause: Adequate or substantial grounds or reason to take a certain action.

 Goodwill: Intangible asset, such as reputation or location of a business.

 Grievance: Something which causes grief; a complaint or annoyance; also a formal complaint.

 Gross standard pay/wages: Salary before taxes removed. Harassment: the unwanted conduct which violates the dignity of a person or creates a hostile, intimidating, degrading or offensive environment.

 Human Rights Act 1998: Act of Parliament of the United Kingdom giving further effect in UK law to the rights contained in the European Convention on Human Rights.

 Implied term: A term in a contract which is not expressly indicated in the agreement but which the courts will assume to exist.

 Just cause: A legal and lawful reason to bring a legal action.

 Leave: The period of time during which you are absent from work or duty.

 Maternity leave: The right to take paid or unpaid time off work to take care of one’s child.

 Medicare Act: Provides US federal health insurance for the elderly (over 65) and for poor families.

 Minimum wage: A rate of pay established by statute as the lowest wage below which employers may not legally pay employees.

 National Insurance number: Number used in the United Kingdom in the administration of the National Insurance or social security system. It is also used for some purposes in the UK tax system.

 Notice monies: Payment to an UK employee instead of a notice period, consequently ending the employment immediately.

 Notice of Appearance: A document telling an employer that they must respond to your application to have a claim heard by an employment tribunal.

 Overtime: Amount of time someone works beyond normal working hours.

 Particulars: Detailed information of the alleged facts.

 PAYE: Pay-As-You-Earn system: a tax collected at the source of wages and salaries by employers on behalf of the Inland Revenue. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.305

 Pension: A sum of money paid on a regular basis as a retirement benefit.

 Premium: Payment that is required to fund an insurance policy.

 Probation: Period of time when a person occupies a position only conditionally and may easily be removed for poor performance.

 Public policy: Set of policies (laws, plans, actions, behaviors) of a government to establish plans and methods of action that will govern that society.

 Redundancy: Dismissal occurring when a company reduces the size of its workforce or closes down a workplace.

 Reinstatement: To restore somebody to a former position.

 Restructuring: Corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable.

 Scab: Worker who refuses to join co workers in a strike and continues to work.

 Severance: Money paid as compensation to someone whose employment is ended.

 Sick pay: A sum of money paid to an employee who is on sick leave.

 Social Security: A social insurance program in the US providing social protection, including poverty, old age retirement, disability and unemployment.

 Stakeholder’s pension scheme: Plan set up by an employer to provide employees with income during retirement.

 Statutes of Fraud: Law which refers to the requirement that certain kinds of contracts be formalized in a signed writing.

 Strike: Stop work in order to press demands.

 Strike breakers: (sometimes derogatorily called a scab) is a person who works despite an ongoing strike.

 Supremacy clause: Clause in the US Constitution that establishes that Federal Statutes are "the supreme law of the land”.

 Termination: The cancellation of the relationship between the employee and the employer.

 Transfer of Undertakings (Protection of Employment) Regulations (TUPE): When a business is transferred from one owner to another the employees of the previous owner automatically become employees of the new employer on the same terms and conditions.

 Turnover: Revenue from sale of goods and services.

 Unemployment benefits/insurance: A sum of money given to the unemployed by the government. ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.306

 Union: (Trade union or Labor union) an organization of employees formed to bargain with the employer.

 Vicarious liability: The liability of an employer who is held responsible for the damages caused by his employee in the course of the employment.

 Wages: An amount of money paid to a worker for a specified quantity of work, usually expressed on an hourly basis.

 Whistleblowing: Act of an employee to report criminal acts of employer to proper authorities.

 Wildcat strike: A strike undertaken by workers without approval from the officials of their union.

 Withholding payroll taxes: A government requirement for the payer of income to withhold or deduct tax from the payment and pay that tax to the government.

 Worker’s Compensation: A form of insurance that provides compensation medical care for employees who are injured in the course of employment, in exchange for mandatory relinquishment of the employee's right to sue his employer.

 Wrongful discharge: Also called wrongful termination or wrongful dismissal, describes the situation in which an employee's contract of employment has been terminated by the employer in circumstances where the termination breaches one or more terms of the contract.

Questions

1) What are the differences and similarities between Labor and Employment laws?

2) Explain the rationale of a trade union and a collective bargaining agreement.

3) What is the employment “at-will” doctrine and exceptions to this doctrine?

4) What are some of the various concepts that need to be included in an employment contract?

5) What are some of the various social protections or employee benefits provided in the UK, the US or the EU?

6) Discuss the different types of workplace discrimination and the notion of bona fide qualification.

7) How are employment or labor disputes legally resolved?

8) What are the different classifications of dismissal or termination of employment? ANGLO-AMERICAN COMMON-LAW EMPLOYMENT AND LABOR LAW P.307

Sources for this Chapter:

1) The English of Law: England and Wales / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Mohamme, Michel Perdu, William Yeago et al. Editeur: Belin 2007

2) International Legal English / Lindner/Translegal William Yeago Cambridge University Press 2006

3) Black’s Law Dictionary West Publishing sixth edition

4) Introduction to Legal English / Lindner, Firth, (Translegal) Yeago Cambridge Press 2008

5) The English of Law: U.S. Law & Politics” / Anne Brunon-Ernst, Nicki Chaudoir, Yasmine Mohammedi, Michel Perdu, William Yeago et al. Editeur : Belin 2007

www.findlaw.com www.triplet.com www.direct.gov.uk/en/Employment www.translegal.com/legal-english-dictionary www.wisegeek.com www.out-law.com www.wragge.com www.roydens.co.uk www.internationallawoffice.com www.ouryclark.com/uk-employment-law