Учебное пособие для студентов вузов Допущено Министерством образования Республики Беларусь в качестве учебного пособия для студентов экономических специальностей высших учебных заведений

UNIT 14. Small business and the law

Understanding business law takes many years. No one expects a small business owner to get a law degree or to have a complete understanding of legal concepts related to business ownership and operation. Because you will deal with numerous people, products and companies, you should be aware of your rights and responsibilities. Common sense and caution are essential in business. A general under­standing of business law and insurance¹ go hand in hand with good business management.

Contracts. Agreements which a business owner makes in the course of carrying on a business may be called contracts. A contract is a legal agreement between two or more parties in which each has rights and obligations². Contracts may be enforced by the courts if they meet certain requirements. A contract must have the following characteristics to be legal: mutual agreement, consideration³, form, competency⁴ and legal subject matter⁵.

Since contracts can be enforced by law, it is important that people understand them. When an individual fails to honor a contract, the other parties to the contract can legally require that the contract be fulfilled or a satisfactory remedy⁵ be provided.

For an agreement to be mutual, there must be a clear, definite, and serious offer and an unqualified acceptance⁷. If there is to be mu­tual agreement, there is no need for a true meeting of the minds. This means that the parties involved need not to be thinking of the same thing. If a merchant offers to sell some goods for $55 and a customer accepts the offer, it does not really matter that the merchant intended to say $75. There is a binding contract at $55 if the party can prove the offer was made and accepted. This can be done by producing wit­nesses and documents. The subject matter of a contract must be stated in definite terms.

Parties to a contract must receive something of value and give something of value in return. This something of value is called con­sideration. The consideration may be cash, goods or a service, or it may even be a particular action.

A contract is made if there is an offer and acceptance, considera­tion, competent parties, and legal subject matter. The contract may be written or oral. A contract for the sale or transfer of land or real pro­perty must be in writing. Contracts which take more than one year to perform usually must be in writing. This includes leases⁸ of more than one year.

A competent party is one who has legal capacity to enter into a contract. A person must be of legal age and sane in order to be con­sidered competent.

The lease. Because of the greater capital required to own real property, most small business owners start out by renting or leasing business space. When an owner decides to rent, an agreement is made with the landlord specifying the amount of rent to be paid and other conditions. The conditions agreed upon, when put into written form and signed by both tenant⁹ and landlord, make up the lease.

A lease is a contract to rent land and/or buildings for a speci­fied time for a consideration. A lease is usually written and states the tenant's rights and obligations. A written lease is common business practice.

The lease usually states the term of the tenancy¹⁰ in months or years. However, sometimes in unwritten agreements nothing is said about the length of time the property is to be rented to the tenant. This type of tenancy is known as tenancy at will. When the landlord wants the tenant to move, 30 days written notice must be given. The tenant, on the other hand, does not have to give the landlord any notice.

The length of the lease is an important consideration. You may not want a long lease, especially if your business is not successful. On the other hand, an owner does not want an increase in rent if the busi­ness does well. It may be desirable to have a short-term lease with the option of renewing at the same rent. This is known as an optional term lease¹¹.

Leases may be classified according to the matter in which rent is paid. The term lease¹² is a popular type of lease. It states the amount of rent to be paid for a specified time. Other types give the landlord a percentage of business income instead of a rent. This is called a percentage lease¹³. Sometimes the rental agreement is a combination of the term lease and the percentage lease. With this agreement, the landlord receives a fixed rent in addition to a percentage of business income.

Notes: 1. страхование; 2. обязательство; 3. возмещение, компенса­ция; 4. компетенция, правомочность; 5. предмет; 6. средство; 7. акцепт, согласие на оплату денежных и товарных доку­ментов; 8. аренда, договор об аренде; 9. наниматель, арен­датор; 10. владение на правах аренды; 11. аренда с правом выбора срока; 12. аренда на срок; 13. аренда с правом получения процента прибыли.

COMPREHENSION

1. Answer the following questions.

1) What legal agreements are known to you?

2) What characteristics must a contract have to be legal?

3) What is consideration?

4) What is the procedure to conclude a contract?

5) When is the lease made up?

6) What types of lease are outlined in the text? Say some words about each one.

2. In each of the following, select the word or phrase that best completes the statement or answers the question.

1) A buyer owns the goods purchased in an installment sales contract when the

a. sales contract is signed by both parties

b. goods are delivered

c. last payment is made

d. sale is recorded in the county clerk's office

2) The type of lease best suited for a new business is a

a. percentage lease

b. long-term-lease

c. renewable short-term lease

d. combination of fixed rent and percentage lease

3) Agreements which are made in the course of carrying on a busi­ness may be called

a. policies c. contracts

b. obligations d. checks

4) The consideration of the contract is

a. cash c. goods

b. service d. all of these

5) A competent party of the contract is one

a. who starts a new business

b. who has legal capacity to enter into a contract

c. who is a client of an insurance company

d. who has enough money

6) A lease usually states

a. the tenant's rights c. the tenant's obligations

b. the term of the tenancy d. all of these

7) A short-term lease with the option of renewing at the same rent is known as

a. a term lease c. an optional term lease

b. a percentage lease d. an offshore lease

8) Sometimes the rental agreement is a combination of

a. the short-term lease and the long-term lease

b. the term lease and the percentage lease

c. the optional term lease and the percentage lease

1) The right, need, or ability to choose between two or more alter­native courses of action.

2) A person or organization having the right to hold certain land or buildings, usually under a lease.

3) The business of insuring lives and property against harm, damage or loss in return for the payment of a sum of money according to the degree of risk.

4) The right of a person or organization to hold certain land or buildings under a lease.

5) The act of accepting, taking what is offered or given.

6) A trader who buys and sells goods or commodities in large quan­tities, usually at his own cost.

7) The owner of a property who allows a tenant to use his land or house in return for payment of rent, usually as stated formally in the lease.

8) Money paid for the use of land considered as a factor of produc­tion.

9) Something of material value given by a party to a contract in return for some duty taken upon himself by the other party.

10) An agreement in writing by which one person gives another the right to use property usually for a fixed number of years.

4. Supply the sentences with the missing words.

lease, tenancy, insurance, agreement, competence, owner, accepted, goods, do well, renew

1) I hoped that we might ... our business partnership.

2) ... about these decisions is extremely difficult.

3) These measures are believed to be a good ... against disorder.

4) Such an unwieldy banking system is unable to deliver the ... .

5) We didn't ... in our business last two months.

6) The ... had expired and would not be renewed.

7) He will be expected to show ... in the methods of market survey.

8) The average American car ... drives 10,000 miles per year.

9) The Postmaster-General ... the tender of the English Marconi Company.

Verb	Noun	Adjective
to decide
	risk
		creative
to deal
	producer
		required
to exchange
	transfer
		legal
to accept
	success
to deliver

1) to break into	a. on the ground
2) to learn from	b. your mistakes
3) to look	c. a feel for
4) to rely less	d. a market
5) to have a	e. budget
6) conservative	f. a presence
7) to establish	g. in detail
8) someone	h. customers
9) it counts	i. on agents
10) a much reduced	j. for a lot

a) One of the most pervasive ways that government affects business is through the legal system. The … protects both indi­viduals and businesses against those who threaten society. It also spells out accepted ways of performing many essential business functions – along with the penalties for failure to comply. In other words, like the average person, companies must obey the … or face the consequence. Although this fact limits a company's free­dom, it also provides protection from wrongdoers.

b) … is not static; it develops in response to changing condi­tions and social standards. The U.S. Constitution and the Bill of Rights are the foundation for the …, but they are general docu­ments. … offering specific answers to specific problems are con­stantly embellishing the basic principles of our society.

… originate in various ways: through legislative action (statu­tory …), through administrative rulings (administrative …), and through customs and judicial precedents (common …). To one degree or another, all three forms of law affect businesses.

1) It is compulsory to obey the law. You ... obey the law.

2) It is not a legal duty to report fraud. You ... report fraud.

3) It is a moral obligation to report fraud. You ... report fraud.

4) It is the prime duty of an auditor to respect a client's confiden­tiality. You ... respect a client's confidentiality.

5) Auditors are advised to follow the code. You ... follow the code.

6) Auditors are not allowed to be employed by a client. You ... be employed by a client.

9. Complete the following sentences by putting the verb in brackets into either the Present Perfect or Past Simple.

1) At the end of last year the dollar (stay) at 1.5.

2) Last January the dollar (fall) to a new low of 1.45.

3) Since then it (be stable) pretty.

4) As you can see on this graph, I (plot) domestic and export sales.

5) Export sales (fluctuate) pretty widely.

6) We yet (see) the full effect of the declining dollar.

7) Last quarter we (see) one of the best results.

8) We already (notice) a slight drop in orders.

9) The low profit margins (be reflected) in last year's figures.

10) We (receive) two big orders so far this quarter.

10. Complete the following sentences with

too

both

either

neither

2) He didn't think the results were good. I didn't ... .

3) ... of us had interest in Parkroll. We ... lost a lot of money.

4) ... companies grew rapidly. ... controlled their growth.

5) Which company are you going to invest in? – ..., I don't really mind.

6) Which company are you going to invest in? – ..., they are ... in unstable markets.

1. Discuss the conditions of a contract which make it legal.

2. In what situations a business owner should consult a lawyer?

WRITING

1. Write a summary of the text.