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It is critical a business knows everything they can in regards to legal systems in a country before they enter business. The legal system of a country is the collection of governing principles (written or oral constitution) and the legislation and regulations that established the welfare of the country. Before doing international business, it is important companies understand the legal system of the country they are entering. There are three different legal systems in the world civil, common and religious. Civil law is the most widespread globally. The civil law approach relies on codification and is a collection of laws designed to cover all areas of concerns. In civil law, a judge applies conditions to law and does questioning. Most of the time the judge makes a decision without a jury. Common law relies on decision made by judges in previous cases along with statues and regulations made by legislatures. This environment can be more flexible and considers past cases. Religious law is a religious document that is the source of the basis of the legal system. The reasoning and opinions come from a religion in that county (Geringer et al., 2023).
As a business, one should understand the business laws in the country they are in and align with the business values. A common law system is less prescriiptive. As a result, all the terms that govern the relationship between the parties need clearly defined in the contract. Most everything in a contract is permitted, unless prohibited by law. If there is a question of legality, the courts decide. In civil law, the laws date back to the Roman legal system. There is less freedom of contract. Less importance is placed on setting all the terms between parties. The contracts are shorter than common law (Weaver, 2016).
Companies should be aware of the legal system they are working in when writing contracts and interpreting law to best conduct business. It is helpful to have an expert in the company to help through this. A business has a due diligence to know the country’s law and if they do not follow them, they risk losing all they have worked for.
Geringer, J. M., Mcnett, J.M., & Ball M. (2023). International Business (3rd Ed.) McGraw-Hill Higher
Education (New York, NY).
Weaver, Y. (2016 May 31). Basic differences between a common law system and a civil law system in
terms of contracts and business. Retrieved from https://lslcpas.com/basic-differences-common-law-system-civil-law-system-terms-contracts-business/
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