NDU Term Paper | Business Law by Naja Faysal

1. Business Law
Term Paper
Presented To:
Ms. Ghanji
NDU
Spring 2005

2. Outline
I. UP, LLC, and JSC
A. Introduction: Small brief and general background information
B. Unlimited partnership: Definition and Characteristics
C. Joint Stock Company: Definition and Characteristics
D. Limited Liability Company: Definition and Characteristics
II. Commission agent, Broker and Commercial Representative
A. Commission agent
B. Broker
C. Commercial representative
III. Promising notes, Check, and Bull of exchange
A. Promising notes: Definition and Characteristics
B. Check: Definition and Characteristics
C. Bull of exchange: Definition and Characteristics
IV. Pledge, Chattel, Mortgage, Garnishment and Bankruptcy procedures
A. Pledge
B. Chattel
C. Mortgage
D. Garnishment
E. Bankruptcy

3. I. UP, LLC, and JSC
Unlimited Partnership
Business operations operate under a variety of legal forms. Partnership is one of
these forms commonly used; it is the process when two or more partners joining their
assets and skills in order to run a business together for profit-making. They distribute
profits, bear losses proportionally to their contribution or participation in the capital.
Unlimited partnership is when there is not a maximum number of partners joining the
company. This kind of partnership has the following characteristics:
First, partners know and trust each other, they become more than just business
people, they become a one unit, one heart beat, and one soul for the sake of their
business. Each one of them has the responsibility in running and maintaining the success
of the company, thus, they should be capable for this mission. They have a joint and
unlimited liability in which their personal assets (not only their contribution assets) are
put for the company in case of need.
Second, the Capital is provided by the partner’s assets, in which there is no
minimum capital imposed by law. The capital can be provided in three kinds: Cash, Kind,
and Labor. The “cash” is an amount of money or a bank account allocated for the
company, the “kind” is any movable and/or unmovable property, and the “labor” is
allocating partner’s expertise, work experience, reputation, and time to the company. A
shareholding certificate is provided to the capital contributors defining their partnership
in the company. This certificate cannot be provided to outsiders contributors unless all
the partners of the business agree on this outsider.

4. Third, the trademark/ trade name by law should necessarily show partner’s
individual names. If they are numerous one name should appear followed by the
abbreviations: “and Co” or “and partners”.
Fourth, the management by law belongs to all partners unless it has been entrusted
by the partnership contract to one or more partners, or to a manager from outside the UP
appointed by a partner’s resolution. The partners can also choose a manger between them
if all partners agree. The power of the manager is limited to the kind of business running,
where he has to refer to the partners in taking decisions and making deals with external
party other wise he will be completely responsible from his personal interest.
Fifth, the UP contract should be written as an official document that should be
signed by each partner in front of the Notary Public or the Chief Clerk. Registration
should be done within one month of the contract. An abstraction of the contract should
also be deposited at the Chief Clerk, and should include all elements that maybe of
interest to 3rd parties such as: Capital, Nature of the business, head office, trade name,
partner’s names, manager’s name, the extent of his power…etc. Any new amendment
should be registered again such as appointment of a new manager, partner’s bankruptcy,
incapacity, death… etc. No publication is needed.
Sixth, Dissolution causes are common to all partnership companies but there are
some special causes for dissolution of UP: The death, withdrawal, or bankruptcy of an
active partner who has a tremendous, considerable, and important role in the partnership
may cause dissolution of the partnership.

5. Joint Stock Company
Joint Stock Company is a prototype of companies of Capital, it is an association
of fund. It has the following characteristics:
First, partners are not known to each other, there are no personal considerations.
Their liability is limited to the extent of contribution to the capital and not to the JSC
debts. The contribution to the capital can be “cash” and/or “kind”, where contributions by
“labor” are not allowed.
Second, the capital should have a minimum of 30 million L.L. or $20,000, where
banks and assurance companies have another minimum. The capital may increase and
may decrease under certain circumstances.
Third, it should be founded by at least 3 founders enjoying a good reputation in
the market. They have to draft the statutes that will become the charter of the company;
these statutes should include elements of interest to subscribers. They also have to
register and deposit the statutes before the Notary Public. They should insert a
notification in the official and local newspapers inviting public to subscribe to the whole
capital and providing necessary information about the co. subscription is an official
procedure by which subscribers buy a certain number of shares and pay their value as
required by law and statutes. They have to convene for a constituent meeting through
publication in the press 40 days before the meeting. There is a possibility to get the
money back to the subscribers if the co is not completely formed by 6 month. The
ordinary meeting for subscribers is yearly where their might be special meeting
considering extraordinary events.

6. Limited Liability Company
It is a combination of associations of persons and of funds; it has been created by
LD of 1967. It has the following characteristics:
First, partners are known; personal considerations and trust relationships take
place. Their number is limited to minimum of 3 and maximum of 20. They are not
necessary to be traders they can have their own business and be partners. Their liability is
limited to their contribution to the capital in which they are not related by their personal
debt.
Second, the capital is formed by shareholding or parts that cannot be materialized
through negotiable instruments. Parts can be sold to 3rd parties with the approval of
partners representing ¾ of the capital stock. The capital is a minimum of 5 million LPs;
however, this is very low and cannot attract banks. Contributions can be “cash” and
“kind” where “labor” is forbidden. The capital is fully paid at the formation stage where
10 % of the net profit should be added to the capital to be capable of absorbing losses.
Third, management belongs to all partners and managers are elected from inside
or outside the co. A statute should be formed signed by all partners; this statute include
all matters that may be of interest to the 3rd party. Dissolution causes are common
between UP, JSC, and LLC
Fourth, it can take any name not necessary the name of the partners.

7. II. Commission agent, Broker and Commercial Representative
Commission agent
Commission agent is an agent who concludes contracts (commercial transactions)
in his own name (not in the name of the principal) even though for the account of a
principal. He receives merchandise in consignment which means he is entrusted with the
possession of merchandise to be sold, but he is not the owner of the merchandise. He is
the trader; he gets a commission proportional to the importance of the transactions or
quantity of products sold. All expenses and charges related to the transaction shall be due
to the commission agents. He has a lien upon the goods in his possession as a guarantee
for payment of the commission, expenses and charges. He can represent other principals
even though in competition with each other, unless there is a charge to the contrary in the
commercial representation. He is the one who deals directly with third parties purchases
of the principals products, he is also committed towards third parties and responsible for
any defect in the merchandise, but he gets his compensation back from the principal.
Then the commercial representatives who would have paid compensation to third parties
can go back to the principal to be refunded.
Broker
Broker is a person employed to make contracts with third persons on behalf of his
principal. The contracts involve trade, commerce, buying and selling for a fee called
brokerage or commission. A broker is an agent with a special limited authority to procure
a customer in order that the owner can affect a sale or exchange of property. A real estate

8. broker has authority to find a buyer for another’s real estate, but the real estate remains
under the control of the owner.
Commercial representative
This situation is governed by the LD of 1967 and it applies only if an exclusively
clause is provided for the commercial representation contract. Commercial agents are two
types:
A mere agent who carries out commercial transactions of sale usually for the name
and for the account a foreign firm of principal.
A trader who purchases the merchandise from the foreign firm in order to distribute
it in a local market.
III. Promising notes, Check, and Bull of exchange
Promising notes
Promising note is an unconditional promise written by a drawer to a beneficiary to
pay a certain amount of money at a specific period of time or upon presentation to the
drawer or at a certain number of days after presentation.
Bull of exchange
Bull of exchange is an unconditional order written by a drawer (debtor of the
drawer) to pay a certain amount of money to a beneficiary (holder) at a certain period or
upon presentation or at a certain number of days after presentation. The bull of exchange
implies the presence of a third party; the drawee where the drawer himself can be the
beneficiary. The drawee will become a party to the instrument by accepting and signing

9. the bull of exchange at the bottom but he has no claim on any one since he is the final
debtor.
Check
Check is a bull of exchange always issued at sight where the drawee is always a
bank. It is an unconditional order written by a drawer (depositor) to a drawee (bank) to
pay a certain amount of money to a beneficiary. The presentation for payment must take
place within 8 days as from the date of issuance of the check. If the check is issued in
Lebanon, the presentation for payment must take place within 20 days. If the check is
issued in France or neighboring countries, the presentation for payment must take place
in 70 days. In case of non-payment of a check, protest has to be submitted within the
time-limits of presentation.
In case of non payment of the Bull of exchange, Promising note, or check, the
holder of any of these 3 instruments has to protest the instrument to the Notary Public,
who attests the non payment of the instrument by an official document called a “protest”
allowing the holder to have recourses against all the endorsers and the drawer as from the
protest.
Legal action of a holder against drawer in case of non-payment is 3 years for the
bull of exchange and the check. Legal action of a holder against drawee in case of non-
payment is 3 years for the promising note, 1 year for the bull of exchange and 6 months
for the check. Legal action of a holder against endorser in case of non-payment is 6
months for the promising note, 1 year for the bull of exchange and 6 months for the
check.

10. IV. Pledge, Chattel, Mortgage, Garnishment and Bankruptcy
procedures
Pledge
Personal property, as security for a debt or other obligation, deposited or placed
with a person called pledge. The pledge has the implied power to sell the property if the
debt is not paid. If the debt is paid, the right to possession returns to the pledger.
Chattel
The term chattel is used to describe personal property generally, but chattels may
also be classified as chattels real and chattels personal. Chattels real describes an interest
in land. Chattels personal is applied to movable personal property.
Bankruptcy
Bankruptcy is a remedy granted not by the Code but by the federal bankruptcy
reform act of 1978. When a debtor (voluntarily or in voluntarily) is put into bankruptcy,
his nonexempt assets are required to be turned over to a trusty to be sold to satisfy the
claims of unsecured creditors. If a secured party has a security interest in some of these
assets, then the security interest is threatened. The bankruptcy trustee, created by the
federal law, is another third party who may defeat certain article 9 secured parties. It is
the trustee’s job to gather and liquidate the debtor’s estate, reduce it to cash, and make a
pro rata payment to the bankrupt’s unsecured creditors.
Garnishment
Garnishment is another important method used by judgment creditors to collect a
judgment. A judgment creditor can “garnish” the wages of the judgment debtor or his

11. bank account or any other obligation owing to him from a third party. In the process of
garnishment, the person owing the money to a judgment debtor – the employer, bank of
deposit, third party – will be directed to pay the money into court rather than to the
judgment debtor, and such money will be applied against the judgment debt.
Mortgages
A real estate mortgage is an interest in real property, an interest created for the
purpose of security the performance of an obligation, usually the payment of a debt. A
mortgage is not a debt – only security for a debt. The owner of the estate in land that is
being used as security for the debt is called mortgagor; the party to whom the security
interest in the real estate is conveyed is called the mortgagee.