What Is the Function of Law in Business?
In a free market system, business law plays an especially important function in the business environment. Companies rely on the enforcement of law to protect their business interests while conducting operations. Federal, state and local court systems can help companies enforce contractual obligations and ensure that the company does not face frivolous lawsuits from consumers, suppliers and vendors.
Facts
While most companies traditionally relied on external legal help for their business, changes in the business environment have made it possible for businesses to hire internal legal counsel. Prepaid legal services have also made it possible for companies to keep lawyers on retainer for business purposes. These changes in the business environment have increased business costs for many companies.
Considerations
Companies have begun using arbitration as an alternative form of business law. Arbitration allows the company to meet with other parties and discuss a dispute with an arbiter, attempting to get a legally binding agreement. Arbitration agreements are usually seen as final opinions on the legal issues involving the parties in the arbitration process. Companies often use arbitration when dealing with legal matters involving employees because it cuts the costs of doing business and shortens the amount of time spent on legal matters.
Function
Companies use legal advice when making important business decisions to avoid potential legal liabilities when selling goods and services. Business law also helps companies generate more sales through the use of contracts or agreements with other companies. These agreements may be needed to ensure that proper pricing and customer service is maintained during the business relationship. Changes to previous agreements or contracts may also need to be reviewed by the company's legal counsel to ensure it meets current contract law.
Benefits
Companies that protect themselves are less likely to face stiff financial penalties from the judicial system. Proper legal advice can also help companies create a competitive edge over their competitors in the market place. Business law counsel can also help companies avoid negative interactions with government regulators or government taxing authorities.
Warning
Creating a strict legal environment for business operations may cause companies to lose consumers who may view the use of legal counsel as unnecessary. Consumers usually do not like companies that are quick to use legal means for achieving business goals. Increasing negative goodwill with consumers can limit a company's ability to generate sales revenues and profits from the sales of goods and services.
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