The area of human activities and the purposes of law are very different. Because of this difference, there are different kinds of law. The classification is based on different aspects or different points of view. This classification is made not because of the difference between the laws but because of the area of involvement or emphasis. Thus, the classifications are not entirely different to each other but complementary. And sometimes a particular type of law can be classified into different types or classes. Various jurists have made different classification of law that may create doubts to us. For our convenience, the law can be classified on the following basis:
1. On the basis of Territorial Limits of Operations
The law can be classified into two divisions: National law and international law.
a) National law: It is also known as municipal law which regulates the activities of people and the relations among the individual as well as relations between the individual and the concerned state. Basically, this law is operated and regulates the various activities of people within the state territory. The law which operates within the territory of a state is known as National or Municipal law. It is applicable to the organs of state, its citizens or other persons who happen to be in the state. For example, civil law, criminal law, administrative law, etc. But, sometimes in certain situations, these laws have extra-territorial jurisdiction and enforced beyond the territorial limit of the state.
b) International law: By contract with the national law, the international law operates and regulates the relations of the state themselves. It applies to the state. International law consists of bilateral, regional or universal treaties agreed by the states and the common customary practice of the states. For example, The Charter of United Nations Organization, 1947 International Treaty on Diplomatic Relations 1969, etc.
The international laws also operate within the state if the state ratifies the treaty. The Constitution of Nepal provides that the treaty to which Nepal is a party, shall be applicable as national laws and if there is conflicts between these two, the provisions of international law shall prevail. Thus, in this present situation, the distinction between national law and international law is becoming narrower and narrower.
In this book, law, generally, refers to the municipal or national law.
2. On the basis of Nature of Law
Law can be classified into two divisions: Substantive law and Procedural law
a) Substantive law: Law in the process of regulating human behaviors recognizes and confers certain rights and, imposes certain duties, and enforces such rights and duties in the name of justice. The law which creates, defines and enforces legal rights and duties is known as substantive law. So, it is related to the rights and duties of a people in society. For example, every person has the rights to make a profit from the legal business, notice to be given before making an arrest, a person has right to use the property which is in his lawful possession, etc.
Thus, the substantive law deals with:
Thus, the substantive law provides guarantees about the rights, duties and remedies.
b) Procedural law: By contrast to the substantive law, the procedural law creates and defines a mechanism or way by which the rights and duties are enforced by the legal institutions. To provide rights and remedies is not sufficient and has no effect if there is no effective way to achieve the remedies. The procedural law deals with the way and manner of achieving remedies, protecting rights and imposing the duties when the rights established by substantive law are broken. When the rights and duties are broken while providing remedies, then the procedural law guides us:
Thus, the procedural law deals with the process of achieving the remedies when our interests are jeopardized or put in stake or danger.
3. On the basis of Subject Matter of Law
Law can be classified into two divisions: Public law and Private law.
a) Public law: The law which regulates the relation of the state organs with the citizens is known as public law. Public law defines the various immunities, powers and duties of government, its organs and officials with the rights liberty, and duties of individuals. The obvious conflict between government's power and duties and individual's rights and duties is well settled by the public law. For example, the Constitution of Nepal guarantees that every person has right to earn from the business. It is the right of an individual or individuals but this right can be restricted under certain ground by the government being illegal business or affect the environment or any other reasonable ground. Such a balance between government's power and individuals' rights is regulated by public law. Administrative laws and constitutional law are the examples of public law.
b) Private law: Private law, by contrast with public law, regulates the relationship among the individuals in society. There are numbers of individuals with numbers of interests. Such individual interest are of conflicting nature and the private law in the process of creating, defining and regulating such interest established certain norms or rules. Such rules try to balance the conflicting interest to make a society peaceful and justifiable. For example, where A promise to sell his house to B for 5 lakhs within 7 days, but refused to sell according to their agreement. The conflict raised between two parties, then such conflict is solved by the private law where law compels 'A' to fulfill his promise otherwise he must face certain consequences. Law of contracts, law of property, partnership law, agency law are the example of private law. Private law is mostly concerned with business and commercial or economic activities. However, the public law also plays a vital role in the formulation of business and economic policy.
4. On the basis of an Individual's Duty to Wards Society
Law can be classified into two divisions: Criminal law and Civil law.
a) Criminal law: The criminal law is defined conventionally as a body of specific rules regarding human conduct which has been promulgated (issued) by political authority, which apply uniformly to all members of the classes to which the rules refers, and which are enforced by punishment administered by the state. The main objective of criminal law is to protect the society from the acts which are regarded injurious and undesirable defined by the state as crime. Law dealing about crime is generally known as criminal law.
For example, if 'A' kills 'B' or hurts 'B', the criminal law defines such act as a crime not against B or his persons but against the society and law punishes A by imprisonment in jail. Criminal law treats such undesirable acts against the society as a whole and fixes the punishment. The state enforces criminal law in its own name against the criminals. Criminal law is a branch of public law and a type of national law.
b) Civil law: The acts which are not of criminal in nature regulated by Civil law. Civil law basically does not include the punishment imprisonment but imposes certain obligations – damages, compensation for non performance. Civil law creates defines and regulates an individual's rights and duties against another individual's rights and duties. It regulates the relations between the individuals in society. Individuals’ rights and duties regarding property, respect and dignity are the concern of civil law. The state enforces the civil law to protect individuals’ interest when they are violated by other. The acts which are against an individual's rights, not to social interest as a whole, are regulated by civil law. Civil law is a branch of private law and a type of national law. For example, Contract Act 2056, Companies Act 2063, Industrial Enterprises Act 1992, etc.
1. It creates and defines the rights and duties of an individual.
1. It states the way and manner to achieve remedies when the rights and duties are violated.
2. It is concerned with the end of law.
2. It is a means to achieve the end.
3. It tells what the rights and duties are.
3. It tells how we can enforce it.
4. It provides remedies in case of breach of rights.
4. It guides for the enforcement of such remedies.
5. Substantive law comes into operation first.
5. Procedural law follows the substantive law.
6. Substantive law cannot be used retrospectively but prospectively.
6. It can be used retrospectively.
The term sources generally indicate the point or place from where something can originate or begin. For example, the source of a river is lake or mountain or rain or waterfalls, etc. If there is an existence of something, there is an obvious source of it. The term source indicates two meanings. Firstly, the place from where the rule of law originate; and secondly, the authority from where the rules are acquired legal force. The term source, here, is used to indicate those agencies by which rules of human behavior acquire the character of law by becoming objectively definite, uniform, and above all compulsory as well as those sources which are commonly 'literary'.
In the business point of view, the sources of law can be classified into two broad divisions, viz., binding sources of law and persuasive sources of law. Binding sources of law includes Legislation, precedent, custom, agreement or conventions; and persuasive sources of law include decision of foreign courts, foreign laws, the opinion of legal experts or jurists, textbook, journals, moral and religious rules.
Legal Environment of Business in Nepal
A business being a social organization has to operate in society and with other organizations and people in the course of operation, a business firm is affected by other environmental factors or forces. Such factors and forces sometimes poses threats to the business and sometimes provides immense of opportunities for exploitation. In this sense, the environment is the influences that surround and affect the business. Environment factors or constraints are essentially the givers within which firms and their managements must operate in a specific country and vary from country to country. Among these factors, legal factor is the most important factor which constitutes a legal environment of business that provides incentives to the business for its development and controls it for greater happiness of the society or welfare of the people.
Legal environment of business includes the legal condition, their influences and effects on business activities. It is generally concerned with the 'law' that affects the atmosphere or environment in which business activities are conducted and regulated; and with the fundamental legal institutions and their procedure which have a direct effect on business activities while conducting and regulating the business activities. Thus, the scope of the study of legal environment includes following aspects of law:
Business is the backbone of the national economy of every country. The trade and commerce has played a major role in the development of the country. Without an effective business activities no state can progress. To have a flourished and prosperous business, there must be a suitable, conductive and sound legal environment. The legal environment provides the legitimacy, security and peace to the business firms as well as the consumers. It provides the conditions for rewarding and punishing the business firms and it regulates the business activities by making various provisions. Where there is a sound legal environment of business, the business activities are increased and that may have a positive effect in the other areas of the nation. Thus, to have a sound and developed nation, the business must be in sound and for this, we must have an appropriate or sound legal environment of business. Here, we will examine, briefly, our Nepalese legal environment of business; its strengths and weaknesses.
Nepal, being an under-developed country, the business activities are small in numbers as well as in size. Because of lack of research in the area of trade and business law, we are failing to create a good legal environment for commercial activities. Our traditional concepts about trade and economy, political instability, corruption and land-locked situation are affecting and playing a negative role to formulate, to enforce or to develop commercial laws and its enforcement in a sound principle. After the restoration of democracy in 1990, there can be seen various attempt to reform the business laws along with modern and developed principles in aboard. Because of the globalization and privatization, we compel to open our market to the whole world and we can conduct and expand our business activities throughout the world. The access of our domestic market for others and our access to the other's market is becoming easier because of the provision and treaties of GATT or WTO and bilateral or regional treaties. This development poses threats to our products being expensive and not advance in quality and quantity. So, the business law must provide such a situation where our products can fight to the other's products and make profit and income to the nation also. For this, we have to create good environment through legal enactments. To have a competition and earn profits in the international market and to have an existence in the domestic market, our trade and industry must be in sound position. For that, our legal environment also must be suitable for business activities and appropriate for trade and commerce. To meet such challenge and to have a prosperous business, the Government of Nepal has enacted different rules, regulations and policies and the parliament has enacted different Acts (Laws), which are the important factors of our legal environment. The Constitution of Nepal, the fundamental law of the land, has provided significant provision for business activities. The Constitution guarantees that every person has right to earn money from lawful business. A person has right to establish any company or industry or business, conduct the business and make profit thereof. Except the constitutional provisions, we have other major Acts wherein some significant provisions are made for business activities. Some of them are:
These Acts are quite important for business because valuable and important regulations are made under these Acts.
Though there are numbers of Acts, rules, regulations and policies, these are not properly enforced in practice. Because of the inefficiency of the law enforcement agencies, our legal environment of business is not sound and conducive to the business activities. The lengthy procedures of courts, the indifference of government officials and department, lack of encouragement and disturbing security and peace further added difficulties. So to develop the national economy we should adopt modern and developed legal principles and, similarly, efficient law enforcement mechanism.
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Types of law
1) On the basis of territorial limits of operation
It is also known as municipal law which regulates the activities of people and the relations among the individual as well as relations between the individual and the concerned state.
The international law operates and regulates the relations of the state themselves. It applies to the state.
2) On the basis of nature of law
The law which creates, defines and enforces legal rights and duties is known as substantive law.
The procedural law creates and defines a mechanism or way by which the rights and duties are enforced by the legal institutions. To provide rights and remedies is not sufficient and has no effect if there is no effective way to achieve the remedies.
3) On the basis of subject matter of law
The law which regulates the relation of the state organs with the citizens is known as public law. Public law defines the various immunities, powers and duties of government, its organs and officials with the rights liberty, and duties of individuals.
Private law, by contrast with public law, regulates the relationship among the individuals in society.
4) On the basis of an individual's Duty to words society
The criminal law is defined conventionally as a body of specific rules regarding human conduct which has been promulgated (issued) by political authority, which apply uniformly to all members of the classes to which the rules refers, and which are enforced by punishment administered by the state.
The acts which are not of criminal in nature regulated by Civil law. Civil law basically does not include the punishment imprisonment but imposes certain obligations – damages, compensation for non performance. Civil law creates defines and regulates an individual's rights and duties against another individual's rights and duties.