Legal Concepts In A Business Setting Information Technology Essay

The purpose of this project is to understand how legal concepts apply in an actual business setting. We have developed our project using the example of “Vasicos Center” in Romania. We have interviewed the owner of the business in order to identify main legal aspects and understand the connection with material we have studied during the class. This report will provide conclusions with a brief review of the project process and explanation of the usefulness of the project.

Background

Vasicos Center is one of the leading manufacturers of beech wood timber in Romania. The company was established in 1994 and ever since it has been motivated to broaden the business, offering more quality products, competitive prices and effective sales support.

The company is located in Romania, Craiovei Street No. 40 – 42 Pitesti – 0300, Arges and the Sawmill foresta.

Legal Status

The type of business entity is partnership. Partners are mutually legally responsible for the amounts outstanding and duties of the partnership and each partner can be individually responsible for the general debts and liabilities that are not fulfilled by the content of the partnership.

Partners contribute into creating partnership’s capital. These contributions can be in form of cash, real estate, equipment, or other property. Contributions are the assets of the partnership and generate its capital. According to Romanian laws, there are no maximum or minimum restrictions on the amount of capital and its form. These issues must be decided between the partners.

Company Law No.31/1990 in Romania defines five types of business entities and partnership (“societate în nume colectiv” (SNC)) is one of them. Based on the Law No.26/1990 (modified by Law No.12/1998) the company was registered with the National Trade Register Office, organized by the Romanian Chamber of Commerce and Industry. According to this law, business becomes legal from the date of registration. The company also needs to obtain a fiscal code in order to become a taxpayer (Embassy of Romania, n.d.).

Business Primary Customers

The main clients are the furniture factories, carpentry or joinery workshops. Up until now, the company is mainly works with wood trading companies within a wide area of distribution worldwide. Because of broadening the business, Vasicos Center covers now many overseas markets such as China, Saudi Arabia, Kuwait, Bahrain, Sultanate of Oman and United Arabian Emirates.

Business’ Statutory Liability to Customers

The customers sometimes come to the business’s premises, however, usually the business is done through the telephone and mail. When a client decides to come and visit the headquarters, all expenses are covered by Vasicos Center. That includes the transportation, the hotel where the client is staying and the meal. The client is invited to visit the factory, where a representative shows him the products and the factory facilities. After that, the client is invited to have business discussions with the Sales Manager and the C.E.O. in order to start a business relationship. Therefore, in case when clients are invited to the premises, they are considered invitees, since they are invited by the property owner for the purpose of business dealings (commercial benefit of the business) (Wikipedia, 2010). The business owner has a duty to provide safe atmosphere within the premises, therefore it is important to carry out reasonable check up of the property. There is also a duty to notify invitees in case of anything that can cause harm to them while they are visiting the place. Therefore, the business owner has a high level of responsibility for the invitees. However, if the invitee was injured in the places where he did not have an access to, it is no longer the liability to the invitee. The person was not invited to enter these parts of premises and, therefore, is not considered an invitee.

Tort Damages to the Business

Sometimes clients issue complaints about the goods or shipment, however the company always tries to sort things up in an amiable way and there never has been a tort case against the company. The client satisfaction is on the first place for Vasicos, even if that means to make discounts for a mistake from business’s part.

Types of Contracts the Business Regularly Enters Into

The company uses the following written contracts:

Sales Contract – for goods

Insurance Contracts – for goods

Commission Contracts – for services

Shipping Contracts – for services

All the contracts that are signed require certain elements such as:

Full details about the parties (ex. name, address, registration number etc.)

Object of the contract

Responsibilities of the parties

Delivery and quality provisions

Terms, method of payment and its guarantees

kind of payment instruments

Penalties

Signatures of both parties

If the contract is not fulfilled by any of the parties, it becomes a court case solved by Romanian Court.

Vasicos Center uses only written contracts, which is recommended by Romanian Contract Law, in order to always have a document proof of the transaction of goods or employment procedures. In addition, since the company has business with international clients it is important to have a written contract.

International Contracts

The company works with international contracts and most of the business is done through Letter of Credit, available with Romanian Commercial Bank, payable at sight or at 90 days, as seller.

First the beneficiary (Vasicos) issues the Proforma Invoice (details should be the same as on other shipping documents) for the client and based on it the contract is signed between the company and the client (fax signatures are not permitted). Next step is issuing the Commercial Invoice that should be presented in original and four copies. This invoice requires providing full description of the goods. In addition, the Certificate of Origin is required that has to be presented in original and supplied by five to ten copies. This certificate needs to be in the same language as the contract, it needs to be legalized and certified by official authority. There are no specific conditions about the Bill of Lading, however the original copy should be signed and then copied four times.

Lease of premises and equipment

Vasicos Center does not lease any premises or equipment. The company is the full owner of all the assets.

Is the business a licensee or licensor of any property?

Vasicos Center has licenses for all the computer software. Many businesses have their computer software under a license, it allows them to get the work done in a faster and more efficient way. 

Vasicos Center uses an Application Software since they are required to do negotiations worldwide and this is one of the broadest softwares for businesses. These are some of the applications which are included in this specific software: industrial automation, databases, decision making software and many more. 

Of course, in this case the owner of the software is still in charge of the main rights of the license, this is why it is important to put in place specific using rights between the end user and the owner. The company paid a fee to the owner of the software in order to use it to their own advantage even though they still have to respect some specific rules and regulations since they are only granted the right to use the software and not to own it. 

Bailment relationships

The business does not engage in any bailment relationships.

Negotiable instruments

Since December 2008, National Bank of Romania forbidden using and issuing such negotiable instruments as checks, bills of exchange and promissory notes in the old format and ever since advises businesses to use Documentary Letters of Credit, Documentary Incasso and Letters of Bank Guarantees (ProCredit Bank, 2009).

Vasicos Center uses Letter of Credit at sight or payable at 60 days of 90 days, or documentary incasso with traditional clients.

Documentary Incasso is a “collection order: the exporter orders its bank to send the submitted documents to the importer’s bank, for the payment and/or acceptance of documents” (ProCredit Bank, 2009). In this case, Vasicos Center sends trade documents through the bank channels. These documents might or might not be joined by financial documents.

As it was mentioned by the business owner, this type of negotiable instrument is quite simple in usage and it is not expensive.

The company never had any problems collecting payment.

Insurance

Company insures the goods with the Documentary Incasso. The law does not oblige the insurance, but based on the personal interests of the company the goods are always insured.

Employment process

The Romania law states that employees, who require hiring, must have the following inscriptions:

– employment application

– identity card

– labor book

– research papers

– certificate of employment / seniority from previous employer

– permits, licenses, certificates needed to perform the job / profession

– medical certificate

– criminal record

– notice of liquidation

In Romania, the individual labor contract is based on the facts of an employee working under full responsibility of the employer in exchange of compensation, salary. It is mainly an open-ended contract and the minimum age to be able to sign one of these contracts is sixteen years old. Each employee has a trial period but the duration of that period depends on the level within the business, it can vary from five days up to six months. The maximum working time in Romania is 40 hours a week with 8 hours a day, maximum time is 48 hours. 

The minimum wage in Romania is approximately 110 Euros but this varies, for example within the private sector it is 124 Euros and 248 Euros for employees with a university degree (Romania National Agency for Employment, n.d.). 

No employee action made has adversely affect business and there was no sues against the company.

Property owned by a business

The company owns the trade name, building where the headquarters are located, the wood factory, all the machines and several cars.

Conclusion

In order to proceed with the project, first of all, we have interviewed the business owner. The interview was on Skype, since the locations are different. Every member of the group was present during the interview and to make it more efficient we have divided all the questions between the group members and each person was responsible to summarize the answers of their section. In the end, one person was responsible for formatting the whole project in order to ensure the text float, grammar and draw conclusions of the final project.

During the process of doing the project, all the group members agreed that it definitely contributed in better understanding of legal concepts of the business. Moreover, it was more interesting to have some practical experience, see the legal issues that we covered in class on the real example. For instance, we had to do an additional research as how the business must be registered in Romania, how does the employment process goes and see what law apply to that. In addition, we could see the real example of how the letter of credit is used and how it differs in Romania. Unfortunately, the business does not enter any bailment or lease relationships; therefore, we could not apply learned material in practice in this case. Nevertheless, the information that was received during the interview and additional research was very helpful in the learning process.

In conclusion, we think that the project was very useful and good structured, it covers all the issues we studied in class. We also think that as a way of improvement, this project might require some general information about country’s legal system, its specialties and differences from what we have covered in class as an introduction, therefore all other legal concepts that we worked through during the project will become clearer for both, the team members and the reader of the report. For this purpose, we have combined the information we got from the interview and our own research on certain issues where we though more information was needed.