Having an understanding of the law is imperative. Often, people are inconvenienced or taken advantage of because they do not know the law. This applies to both those running businesses and consumers. On both sides of the commercial plane, law plays a central role. You do not necessarily need to be a lawyer to know the law. After all, when it gets complex, you can always engage qualified lawyers. You must at least know the basics or the core legal dynamics applicable to business. Here are some important legal terms in business you must know:
Intellectual Property
This refers to knowledge, creative ideas, or expressions of the human mind that have commercial value and can be protected by law. Examples are patents, copyrights, trademarks, or trade secrets.
Trademark
This is a unique graphical representation, words or both used to distinguish your business from others. Trademarks typically come in the form of logos, taglines, and designs. A trademark has to be registered for it to have legal standing. It is worth mentioning copyright here – the two are not the same.
Copyright
Copyright refers to rights of ownership of work which do not necessarily require formal registration. However, if it is possible to register the copyright, please do. What is important is that the owner of the work must be in a firm position to prove ownership in case of possible disputes. Examples of what can be copyrighted are music, art, films, broadcasts or publications, to mention a few. The principle is that copyrighting is normally done for original work.
NB: Remember, you cannot protect an idea. Rather what you can protect is the expression of the idea. To understand more regarding trademarks, copyright and more, you can get the necessary guidance from The Zimbabwe Intellectual Property Office, which falls under the Ministry of Justice, Legal & Parliamentary Affairs.
Implied Contract
This is an undocumented yet legally binding agreement that is assumed by the nature of the conduct and or intentions of the parties. For example, your business renders a service to a client, and they do not pay. You can take legal action because you have entered into an implied contract. It is important to appreciate that an implied contract may be difficult to prove. That is why it is essential to have a compelling paper trail to prove the implied contract.
Confidentiality Clause
This is a requirement under a contractual arrangement that some or all parties must keep the contract confidential. This may even span to them being required to keep the agreement for which the contract exists confidential.
Breach Of Contract
This is when a party to a contract fails or refuses to perform or honour its obligations under the respective contract. That is an umbrella for many possible scenarios. For instance, one party may do something that prevents the optimal performance of the contract. That is considered a breach of contract. The consequences of a breach of contract vary. One of the common ones is suing and demanding financial compensation.
NB: Closely related to contractual dynamics is the legal term force majeure. Force majeure refers to exempting parties to a contract from fulfilling their contractual obligations when an event is outside their control. Examples of such events are natural disasters and governmental actions.
Arbitration
This refers to a dispute settlement between parties to a contract by a neutral third party without taking any court action. The parties voluntarily appoint a neutral third party to the contract. Circumstances may vary since in some cases, arbitration can be a requirement by law. The decision the neutral third party, i.e. the arbitrator, will take is legally binding.
Indemnity
This is an undertaking in a contract where some or all parties commit to protect against or compensate each other for any harm, liability, or loss arising from the contract.
False Advertising
This entails marketing goods or services using false, inaccurate, or misleading details. For instance, when propagating an ad, you may indicate that you accept VISA card payments. Then when a customer engages you in paying using a VISA card, you indicate you do not accept it.
Warranty
The term has different meanings depending on the context it is being used. However, in the general business sense, warranty refers to the legally binding assurance that a product or service is usable, defect-free, and compliant with statutory or other specifications. It further outlines the conditions and period when the manufacturer or seller will repair, replace, or compensate for defectiveness with zero cost to the buyer or consumer.
Guaranty (Also guarantee)
This is a written undertaking that a product or service is of a specific benefit, content, and or quality and will provide satisfaction or perform an obligation or duty in a specified manner.
Insolvency
This scenario is where someone’s or a business’s liabilities outweigh their assets. This may also typically be regarded as a scenario where they cannot raise enough money to meet their obligations or to pay due debts.
Liquidation
This refers to the closure of a business by selling its unpledged assets. This will be to generate cash to pay its unsecured creditors. As for secured creditors, they assume control of the respective pledged assets. Any cash remaining afterwards is shared amongst the shareholders proportional to their shareholding. There is voluntary liquidation that shareholders initiate. Then there is compulsory liquidation following a court order.
This should give you a basic appreciation of some common legal terms in business. I would urge you to study more into the subject of business law and other related law areas. This will benefit you immensely in your business operations. Remember, it is a basic legal principle that ignorance of the law is not a defence. There may be exceptions, but it is better to be properly informed.
