Business Law involves commercial operations and transactions that give the legal strength and validity of a transaction. Law remains one of the biggest foundations upon which businesses are built. This paper studies the Saudi Business Laws by comparing and contrasting the five primary segments of business law course as done below.
The Legal Business Environment
The legal business environment describes the whole avenue of studying and understanding the legal operation of businesses. All businesses as well as social organizations are expected to be conducted with some sense of liability and validity. It is through this sense of liability and validity that outline guidelines to which businesses are expected to be conducted. The legal business environment gives the dos and don’ts in business operations right from the onset of ideas to mature companies that operate. Such include the procedural study of business formation, operations, transactions, and dissolution as covered in this course below.
Introduction to Law and Legal Reasoning
Thomas Jefferson in acknowledging the importance of studying law stated that the study of law qualifies someone to be useful to himself, his neighbors, and the public. His statement just opens up the avenue to understanding the meaning of the law. Law remains one of the critical conceptual words that have failed to have a particular universal definition. However, universally, it is agreed upon on what constitutes to be a law by approved components that satisfy an assumption to be a law. The acceptable concepts that define law are:
- Law is agreed to be a set of general ideas
- When the general ideas are used, judges will at no time fit a case to suit a rule but instead must fit the rule to suit a case at hand.
- The judge must also apply legitimate reasoning on the case (Al-Zwaini & Peters, 2004, p. 37).
We can then make a general assumption that law is a set of agreed general ideas from which references in deciding a case are made but under application of legitimate reasoning. Law has to be flexible and not oppressive (Al-Zwaini & Peters, 2004, p. 38).
The classification and Branches of Law
Law is broadly classified depending on the nature, application, and origin of law. However, with reference to Saudi Law, we can classify law into four main groups as:
- Business/Commercial Law
- Civil Law
- Criminal Law
- International Law
Business or Commercial laws are laws that deal with legality of business and contractual operations. They look into the formality in undertaking contracts and other financial mandates by individuals, corporations, companies, and nations. Civil law is applied to help in arraigning and solving civil disputes while criminal laws are used against criminal cases and juries of crime. International laws are laws that apply on international mandates by businesses, individuals, corporations, and countries but are signed by countries or organizations on behalf of their correspondents. International laws are business, civil or even criminal laws in nature (Cassese, 2005, p. 41). The international bodies such as United Nationals, UNEP, European Unions, and many others are the custodians of these Laws. Their main concern is to bring peace and order in nations and settle disputes between world’s social, political, and economic segments.
Court Procedures and Alternative Dispute Resolution
All court proceedings before Saudi courts are presented in short hearings. The complainant makes the first step by making or filling a complaint. All parties involved are summoned to a hearing (Al-Zwaini & Peters, 2004, p. 51). They file documented submissions of their case, and do oral argument providing substantive evidence as available to them. Period on running the case is deciding upon by the judge in charge depending on the caseload he has. Finally, a case is drawn to judgments after series of hearing.
However, the judicial system of Saudi provides for alternative court hearings such as negotiation, mediation, and arbitration. Mediation assumes a neutral person not involved in the conflict to bring two disputing parties to a voluntary settlement agreed between themselves. However, arbitration takes the form of mediation but in this case; the arbitrator has the power to impose a settlement for the parties to comply with as a resolution. Negotiation is when parties in dispute agree within themselves to solve their dispute (Mann & Roberts, 2013, p. 47).
Islamic law sources
Islamic law has Sharia Law as the principal law that governs the country and its aggregate operations. The main sources of the Sharia law are:
- The Quran
- The Sunna
- Ijma or Consensus
- This refers to the principle of reasoning by analog.
Torts and Crimes
Comparison and Contrast between Laws of Torts and Crime
The basic concepts of tort laws and crime law can be understood based on the field coverage of the two laws. This begins from understanding the segmented definition of the two laws to the jurisdiction, purpose, and characteristics of the law of tort and crime.
Torts can be defined as a wrongful act of one that injurers another or interferes with another person’s right to enjoy of his property. A tort law in itself undertakes a civil case proceeding (Shoult, 2006, p. 48). Such cases have the accused, a defendant and a plaintiff who is the victim who seeks compensation for damages caused to his by the accused. The module of the tort law is based on the terms of the type and level of damage caused to the plaintiff. If the case is ruled in favor of the plaintiff, then the defendant must pay the damages to the plaintiff equal to the damage caused to him/her.
On the contrary, a crime is a wrongful deed or act to which the state or government has identified through its judicial system as a crime. Crimes are handled in criminal proceedings unlike torts that under civil proceedings. The victim also still stands to be the person offended by the acts of the defendant; it can be an individual, a state or country, an organization or even a regional block. However, another differentiating factor between torts and crime is that the charges of a crime are brought forth before the court by the government through the prosecutor. In case the defendant loses the case, he/she must serve a sentence through a fine or a jail term. Nevertheless, there is chance that the case be re-evaluated through an appeal made by the defendant against the court’s decision.
Major differences in Tort and Crime Laws
- It is the responsibility of the state to prosecute violation of any criminal code. The prosecution looks into the case whether is sufficient to guarantee prosecution through looking at the evidence or not. If the case is worth prosecution through evidence available, the victim is arraigned in court. In short, for criminal law, the government does not necessarily need the consent of the victim to bring a case forth for prosecution. The government acts on its mandate as the custodian to every citizen. On the contrary, in tort law, it is the decision of the victim to take the case forth for prosecution or ignore it. Here, the weight of the case is dependent of the consent of the victim.
- Tort law would require evidential harm in physic or emotion for a remedy to be prescribed. Tort law on the contrary does not require harm for procedurals of the case. Criminal law punishes acts that are harmful to others and acts that do not create any harm to others or anyone but a cat or evil. Criminal law has even the capability of punishing intentions to cause harm to individuals or the country as a whole.
- The procedure of undertaking a case in criminal law are very extensive than that of tort. Criminal law imposes severe sanction to the perpetrators and other parties involved in an act of impunity. At times, it may just include cases of accusation of an act that the living or host community is immoral. In such cases, crime law requires that the act of victimization is proved guilty beyond any reasonable doubt. This explains the purpose of the prosecution in undertaking evidence examination to prove the authenticity of the case, in case it is worth or not.
- Criminal law is forerun based on the legal theories and frameworks that guide the judgments of the case. Such include use of precedence cases of the same nature to avoid making errors in judgment. The judge is required to issue a detailed statement on the strength of the case. These encompass giving the basis or reasons the decision made. However, in the case of tort laws, the decision made entire depends upon the agreement arrived upon between the victim and the defendant. They are guided by the level of damaged caused to the victim with no self-interest. Saudi law provides spaces for tort laws under family agreements. Such include local community and family courts that sit to decide on issues that pertain to the family without any criminal measure.
- Tort laws are socially effective than crime laws. Tort laws provide for avenues of reconciliation between the accused and the victim upon the agreement they make. On the other hand, the victim merely has no hand in the decision made by the court. It is merely a judicial process that does not provide room for the victim and the accused to reconcile and heal their differences. Such decisions as made by the crime laws have always resulted in retaliatory attacks by persons who are not satisfied with the judgment.
- Crime law will just need minimal level of crime to be approved as committed by the accused, which tort law does not. This is a holding point for case, which may be very faulty. In most cases of it, there is no surety that the accused committed the crime. If any case, criminal laws are based on mere allegation that the victim may just be making. It does not give allowance for looking into other party who might have committed the crime too. On the contrary, the tort law provides for definite accusation to which the accused has an idea about. The accused may want to avoid taking responsibility for the claim of damage made towards him but there idea is popular.
- Crime law does not pay necessary attention to the actual act committed by the accused, instead it focuses on the punishment due to the accused. This means that criminal law is based on the generalization of bringing wrongdoers before the law and punishing them without any attempt to transform their behaviors. Such acts of negligence are not considered forgivable in crime law, any act is chargeable. On the contrary, tort pays attention to both acts of negligence and conduct of the victim. Tort law is guided by the principle of social judgment and behavior change. In attempts to solving the issue of dispute in tort law, it also looks more into the conduct of both the victim and the accused. Tort law focuses to ensure that either of the parties does not repeat such conducts. It does not only look to punish but as well to change the behavior of the duo.
Intentional torts and privacy
Intentional torts are also referred to as torts of knowledge. These are acts committed by individuals with full intention of infringement of their act to the pleasure and enjoyment of other rights. They do evil fully or partially knowing that their acts will interfere with the rights of others to enjoy their legal owning. For instance, nuisance is intentional torts that interfere with the leisure of others at the expense of their own enjoyment. Such include playing loud music without bothering to protect and respect the decision of your neighbor of not wanting to listen to your music. Trespass also makes owners of property such as land to sue individuals who engage in any act that outfits the right of the person enjoying or using his/her land. Such include passing through someone’s piece of land even after a noticeable demarcation such as fences. Negligence is an abuse of privacy.
Privacy is the patent right of an individual or nation to enjoy full rights of ownership to a property or an affair. Privacy is guarded by Saudi law by protecting the rights of people to act in self-made ways that are legal and do not abuse any legal tenure of the country or other people. Privacy laws ensure that people are free to act in legal private ways without any intimidation or abuse of any nature to their acts. Such include protection against tort laws of infringement. Intension and privacy are legally interrelated. One protects the other against infringement of the function of the other. All legal measures taken against intention protect her rights of privacy.
- Negligence and strict liability
Negligence is tort that originates from breach of duty assigned or expected by one individual to another. It is guided by the principle of rationality and reasonability of persons involved in a prior agreement. Most neglect laws of many nations emerge from social concerns rather than legal mandates. It is a legal measure set on as social concern. It was mainly used in the corporate complaints from organizations and institutions that felt that people or organizations were failing to perform agreed duties as targeted and realized on error is a leeway for their excuse. Nevertheless, even the Saudi law does not give a specific definition of the word negligence. It has been framed from the legal basis of cases handled under the case. However, a compounded definition of negligence can be derived from recognized elements. The elements determine the liability for negligence.
The major course of liability requires that the plaintiff play diligently duties required by him/her as per prior agreement held. Liability also occurs with breach of duty, when the tort feasor’s act directly caused the damaged, as a result, the victim suffered a loss from the tort feasors’ action, and that there was a proximate cause to prove that the damage was caused by the victim’s action. Generally, liability comes in tort law with the perpetrator of damage having the blame as well as the damage for his own action. It requires proof to be issued beyond doubt that the person accused caused the damage. Liability provides for peace of mind for the victim of an act of negligence from the tort feasor.
Intellectual Property and Internet law
Intellectual property rights are laws that give protection to self-invention against abuse by other parties that do not have actual ownership to the intention. Such applies to scientific and other forms of invention made by organizations and individuals. Such include patent rights issued to innovators for inventions of any kind. The Saudi business law requires that other parties not part to it protect inventions by businesses against unauthorized use. Every company or person with a new idea has a right to enjoy full benefits of the idea or issue right of share to another individual.
On the contrary, internet laws are formulated and implemented by the government and internet organizations to protect legal moral conduct in using the internet and other online-related activities. These laws gag hacking and cybercrime committed through the internet that abuse the valid code of conduct by the host, designer and other online regulatory authorities.
Criminal law and Cybercrimes
Criminal laws are jurisdictional laws that provide the procedure and enlighten process in solving criminal acts. Criminal law focuses to investigate on criminal accusations and ensures charging of the perpetrators. They work on moral codes declared crime by the constitution. On the other hand, cybercrimes are moral odds or crime conducts through the internet. It involves gagging of the internet and perpetrating evil acts that target to create loss and harm to others.
- Contracts and e-contracts
- Nature and terminology
- Agreement in Traditional and E-contracts
E-contract is a legal agreement created and signed with consent of parties concerned in electronic form. Such include use of email to send a contract to party and then the party considers the contract and rights back with electronic signatories in acceptance of the contract. The e-contract can also be in form of web-guided format when an individual follows instruction given in web by issuing command of accepting all through the stages of the application. Such is very common in job centers and other popular web creation points where there is mass application for the use of the site. The consent for proceeding with contract or acceptance is given by use of electronic signature indicators such as Cryptographic Signatures and XML-Based signatures.
However, agreement in traditional sense are legal transaction agreements made between individuals, individual to company, company to company and so forth based on the analog paper agreement. It involves signing of papers and exchanging documents with physical representation of parties involved.
Capacity and legality
Capacity refers to the validity of a contract or an agreement that meets the required threshold for a contract. Such may also apply to the parties to the contract being required to attain certain weight in legal representation of the contract (O’Kane, 2013, p. 39). It is the basis for forming any contract, be it traditional contract or e-contract. On the other hand, legality measures that ability of an agreement or parties involved in the agreement to be able to follow the legal frameworks or guide for writing or signing a contract. For instance, we can say that the legality of a contract is the ability of the contract to meet all the legal requirements of it is satisfied before the onset of its signing. Business contracts are built on the foundation of their legality to business laws and acts and their capacity to meet the business needs in it.
Mistakes, Fraud, and Voluntary Consent
Mistakes are conceptual errors made in the onset of making an agreement or a contract. There are unintentional conducts that fault the legality or capacity of contract. Mistakes occur based either on legal formation of a contract or on just the business purpose of it such as overestimation and mathematical errors. Mistakes should be corrected before signing any contract. If not corrected, mistakes will lead to failure in projects and loss incurred in businesses.
Fraud is an intentional mistake made by parties during formation or signing the contract with an aim of gaining financially from the mistakes. Fraud can also be termed to be initiated to illegally gain form a business. It encompasses paper frauds, financial scams experienced in financial institutions and contracts, cybercrime taking to rob money from people and institutions and many others. Frauds are illegal acts and are dealt with under criminal laws in Saudi business laws.
Voluntary consent is the natural acceptance issued in contracts and agreements. It is when an individual or organization accepts or admits to proceed with an act without anyone luring his or her decision to move on with the agreement. It works with no incentive and bribery.
- Frauds-Writing Requirements and Electronic Records
Fraud writing requirements are documents of detailing faked contracts and agreements that target to make false representation of original document papers. These are illegal paperwork done under the implication of fore taken or planned crimes. They carry with them an economic value worth the loss incurred by business is a result of the fraud undertaken. On the other hand, electronic records are software documents and files that contain all details of contracts, agreements or any other soft copy work done. Their proof of validity is based on their documentation and proof of period and mode of existence through the electronic or technological detection.
- Legality of contracts
- Third party rights
Saudi Contract Laws provides for protection of the third party rights in contracts and agreements. This is more particularly in business contracts whose legality and capacity in questionable. The third parties to the contracts are hence protected against loss in cases where the terms of the contract have failed to stand to the maturity of the project. The laws ensure that people who subscribe to public and private agreements do not lose their loyalty to the contract by incurring loss due to frauds and other unique scams. These rights works against frauds.
Performance and Discharge
Contract performance is the ability of a contract to stand to its terms of agreement. It is also rather ensuring that contracts are valid and hold the business capacity intent with it. Contract discharge is the successful achievement of contract goals as planned and agreed in the terms of agreement (Kelsen, 2004, p. 53).
Breach of Contract and Remedies
Breach of contract is the failure of parties or one party to a contract to work to the terms of agreement as agreed prior. The Saudi laws provide that a breach of contract makes it invalid. The remedies are the damages given to the affected parties because of breach of the contract (Mann, & Roberts, 2013, p. 69). Saudi Courts provides damages as remedies to breached contract with respect to anticipated profits.
Warranties and Product Liabilities
Product liabilities are potential responsibilities issued under product manufacturing that the manufacturer become liable for injuries consumers or buyers incur from consumption of their products. The injuries obtained may call for a choice of remedies like warranties, negligence remedies, and strict liabilities. However, warranties are sureties that producers compensate damages incurred to consumers of their products for faultiness of the products within a specific point of time. Such include replacing the products with new ones.
Business organizations under Saudi law
Saudi law provides for establishment of business organizations as guided in the law. Such entities provided for by the law include establishing a corporate entity, partnership, branch office, representative office, and service gender in the case of foreigner investment to Saudi. Indigenous investment is not restricted to any entity so long as it is within the law. Saudi law identifies several forms of business organizations such as:
- Sole Proprietorship
- Limited Companies
Sole proprietorships are business organizations owned by single individuals. The Saudi law provides that the companies are registered under the owner’s name and the proprietor assumes full liabilities to the business. Partnerships are business associations formed with a minimum of two people but the business assumes responsibility of its liability. Such partners provided by the law include general partners, partnership by limited shares, and limited partnership among many others. Limited companies are the larger business organizations whose role and liability are board-traded.
Formation and financing of companies
Formation of Companies
Saudi law provides for the legal procedure for forming a company within the country. The start-up has not been very simple even though the government reduced on the time spent and least capital required starting a company during the 2007 Business Law Amendment. This differs from the financing procedure for companies. Formation of a company is the entire legal process from preparation of registration documents by Saudi consulate to the registration of a company at the General Organization of Social Insurance. The law requires that a dully-registered company should be able to run its operation at the beginning under requirements as detailed in the eleven-step registration process.
Financing of companies
Just as other states, the legal business orders only provide for financing alternatives and the required legal procedure a company may follow in accessing finance to the company. Otherwise, companies sort finance from usual financial sources to companies such as:
- Contribution from shareholders
- Bank loans
- Funding from Government Corporative Societies such Saudi Industrial Development Fund (SIDF)
- Selling of Company shares
- Issuing of Bonds
Commercial and Civil Companies
The difference between civil companies and commercial companies depends on the primary intentions to trade. The difference between the two is explained in relation to the distinction between an investor and a merchant. A merchant is an individual who engages his name and accounts in business transactions, with intent of making profession out of the transactions engaged in. Commercial companies are hence considered under the intension of merchants and have in many cases been referred to as a merchant. A complete commercial company is recognized upon the company complying with business laws of Saudi by obtaining a legal registration, declarations of its commercial intention, paying taxes from proceeds of sales and subjected to all commercial laws including bankruptcy.
An investor is distinct by lack of an intention to trade as a profession irrespective of the mode of commercial transaction engaged in. Civil companies are hence companies held with no intention to trade as by self, do not keep books of record and do not have commercial laws pegged to them as does with commercial companies.
Mergers, Consolidation, and Termination
Mergers are legal combination of two or more companies from which only one corporation is formed. Mergers would require selling of shares by one company and buying by another, amendments of the articles of incorporation used to form an article of merger that incorporates the interest of all the companies merged.
Consolidation is the legal process by which two or more corporations join to form one complete new corporation. It requires closure of the former corporation and succession of the new corporation legally assumes all the assets of the former corporations.
On the other hand, termination is the legal process of dissolving a corporation with proof of shareholders through a unanimous vote or on action taken by the authority in charge of corporation as guided by the law.
International law in a global economy
These are paper money or payable notes used in transactions. These include promissory notes, bills of exchange, and cheques payable to make orders or clear bills by the company. They are mainly used in international trade where transaction is mainly cross-currency.
Liability, Defenses, and Discharge
Liability is the legal state of an infidel being held responsible for forgery in negotiable instruments under proof of his/her signature on the instrument. Liability can either be primary or secondary liability.
Defenses refer to the point of a bank denying transaction in money transfer with proof of invalidity and anomalies in the process. Defenses are caused by a breach of contract or proof of fraud in inducement.
Checks and Banking in the Digital Age
Checks are special kind of a draft made to a bank or other financial institutions that orders the bank or institution to pay certain distinct amount of money demanded. Banking in the digital age is also referred to as the e-money and online banking. E banking uses plastic money such as smart cards that are linked to bank accounts. Digital banking makes use of computerized microchip that holds all information to allow for e-banking services such as transfer of funds, loan application, and change of account details.
Secured Transactions and Bankruptcy law
Secured transactions are legal legislations that allow for asset-backed loans in business attractions. This gives the bank powers to transfer possession of the asset used to secure the transaction in case the loaner fails to comply with the terms of transaction. It is contained in the article of Commercial Code. However, bankruptcy laws are set of commercial regulations that define the process to be undertaken in solving bankruptcy. They are universal hence shared among banks worldwide.