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Business Law: Legislation Common Law And Conventions

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Legislation. Legislation is another word for law created by the law-making branch of a government. Acts of Parliament are the most crucial piece of legislation. In the UK Parliament, the only body that possesses the power to pass legislation in England, Scotland, Wales, and Northern Ireland is the principal legislature. The two houses; the House of Commons and the House of Lords make up the UK Parliament.

Common-Law. Common law is a judge-made law that is based on the customs and social traditions of the UK. It is created by judges sitting in court and is completely separate from parliament. Since the UK is part of the EU, laws that are made by the European Union, therefore, EU law is followed rather than laws made by the supreme court

Conventions. Conventions are laws that are regarding how things should be done however it is not legally enforceable. The three major aspects of the convention include ‘the separation of power’, ‘the supremacy of parliament’ and ‘the rule of law’ (Honeyball, 2016). The separation of power involves the idea that state power consists of three levels of power; executive, legislative and judicial. The executive level is represented by the government, whereas the legislative level is represented by parliament. The judicial level is represented by judges.

The effects of non-compliance include the piercing of the corporate veil. If a company does not fulfill “its compliance requirements, a court might decide that the corporate veil has been pierced and that the individuals who own or oversee the business are personally accountable for the debts or legal wrongdoings of the company” (Akalp,2020) As a result, this calls for a full inspection of a company’s processes and financials. Besides this, financial penalties including fines, back taxes, interest, and other penalties will be given out and the company will face these heavy charges. Moreover, a company may be suspended or terminated as a result of non-compliance warrants and imprisoned if personal actions were unlawful or negligent (Akalp, 2020). Lastly, the reputation of the company will be damaged as a result of a company hurting customer and vendor confidence and limit future opportunities (Akalp, 2020).

The role of the government in lawmaking. For legislation to be passed it must go through the Houses of Parliament; House of Commons and House of Lords. In the House of Commons, there are six-hundred and fifty members of Parliament also known as MPs. Individuals in the UK use the first past of the post system to vote for an MP in their constituency. On the other hand, in the House of Lords, there are eight hundred members of parliament of which six hundred are appointed by the Queen herself. The remaining members of parliament in the House of Lords are people who inherited aristocratic titles.

In the UK all parliaments are involved in drafting legislation before it being adopted, recommending changes to draft laws. The lawmaking process is dependent on the type of parliamentary system. For Example, in British systems, the executive branch of the government creates the majority of draft laws and the main responsibility of the parliament is to review, amend and pass legislation. Besides this, Members of Parliament can introduce draft laws but a small minority of these draft laws will reach the committee stage and even less of these draft laws are passed.

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On the other hand, in presidential systems, Members of Parliament have a greater chance to create draft laws before the review, amend and passing stage. More hybrid systems have been introduced which give parliamentary committees the ability to create and present draft laws.

For a parliament to pass a law, it is Vital MPs are capable of understanding and assessing draft legislation, modifying the laws as well as analyzing new rules that have been put forward. Whereas the staff of parliament specifically the committee staff must be able to legally draft and review legislative processes.

The main difference between common law and statutory law is that common law are laws that have been developed via rulings by judges whereas statutory laws are written legislation that is adopted by the legislature., the country’s government as well as individuals who are part of society. Common law originates from “the judgments made in the past couple of hundred years whereas statutory laws have statuses as their base” (Diffen, 2020). Common law is of ‘two types’; the “one where judgments passed become new laws where there are no statutes and the other where judges interpret the existing law and determine new boundaries and distinctions” (Diffen, 2020). ‘Statutory laws’ can be adopted by several government agencies of a country, therefore “there are laws passed by federal and state governments, ordinances passed by towns and cities all having the power of the law” (Diffen, 2020).

Common law “begins with research analysis, location of previous relevant cases, extraction of statements and sentence passed to finally determine the common law applicable whereas statutory laws are already written and need just to be applied to a specific case” (Diffen, 2020). Statutory laws are adopted by the “government of a state or nation and these are organized and codified into law” code (Diffen, 2020).

Employment law is a law that refers to the contract of employment. It is “the agreement between an employer and employee that one will work for the other in return for financial remuneration” (SlaterGordon, 2020). It ensures that workers and employees are protected. Employment law covers a broad variety of areas concerning the work environment such as “age discrimination, bullying, and harassment, disability, discrimination based on race, religion, sexuality or gender, dismissal and employee grievances, employment contracts, equal pay, holiday pay, minimum wage, parental leave, redundancy and working hours” (Croner,2020) An example of employment law is the national minimum wage. It ensures that all workers are paid a minimum wage depending on their age. Employment law affects businesses as it can affect employee’s productivity. According to Kim & Jang who are professors of the Tourism and Hospitality industry, an increase in the minimum wage has resulted in increased productivity in the restaurant industry (Kim & Jang, 2018). As a result, they advise restaurants to continue increasing their minimum wage every two years to continue employee motivation and productivity. This benefits a business as increased productivity can directly affect a business's sales, brand reputation, and customer experience.

Moreover, contract Law refers to the law which “is an agreement between two or more parties”(Legal Career Path, 2020). According to a former solicitor, a contract that is ‘legally binding’ is a ‘voluntary agreement between the parties that is enforceable in law’ (Laver, 2020). Individuals are faced with contracts daily for example going to an off-license. A customer who enters and chooses to purchase something enters into a contract with the off-license; payment of money for alcohol and cigarettes. Besides this, businesses are in “commercial contracts with their suppliers for goods in exchange for money to enable them to fulfill customer orders” (Laver, 2020). Contract Law affects businesses as businesses must ensure all contracts they enter whether that is with other suppliers, employees or customers agrees. A contract or agreement can strengthen business relationships as it reassures a supplier that the businesses will agree to the terms and keep to them. This will boost supplier confidence, trust and encourage them to continue providing goods or services to a business.

Company law refers to “the body of laws, rules, regulations, and practices that govern the formation and operation of corporations” (Legal Career Path, 2020). It’s ‘the body of law that regulates legal entities’ that are in business with companies (Legal Career Path, 2020). The laws refer to the ‘rights’ and ‘obligations’ of all individuals who form, own, operate, and manage a company. Examples of company law include providing legal advice for sole traders, businesses, and corporations or paperwork when registering with a company (Axiomstone, 2015). Company Law affects businesses as legal advice helps business owners complete and file paperwork and facilitate the legal processes involved in attaining financing from private individuals (Axiomstone, 2015).

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Business Law: Legislation Common Law And Conventions. (2021, September 26). Edubirdie. Retrieved February 26, 2024, from
“Business Law: Legislation Common Law And Conventions.” Edubirdie, 26 Sept. 2021,
Business Law: Legislation Common Law And Conventions. [online]. Available at: <> [Accessed 26 Feb. 2024].
Business Law: Legislation Common Law And Conventions [Internet]. Edubirdie. 2021 Sept 26 [cited 2024 Feb 26]. Available from:
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