Business Transaction Law Vocabulary You Should Know
If you're dealing with business transaction law issues, it's wise to have a basic understanding of the concepts that are used. Let's take a look at four bits of vocabulary you should know when working with business transaction law services.
1. Negotiable Instruments
Although you can certainly do things the old-fashioned way, handing someone cash and walking off with an item you paid for is a fairly rare occurrence in the business world these days. Transactions are often handled by providing what is called a document of title or some form of evidence of a debt that is transferred as a stand-in for cash. The simplest form of a negotiable instrument is a check, but there are many other such instruments, including promissory notes, bonds, and certificates. Generally, negotiable instruments are transferable, meaning they can be sold or given to another party.
2. Agency Relationship
Few business transactions are as simple as Person A dealing with Person B. Several other people may be involved; thus, one of the first questions, if there is an issue, will be whether those additional parties were agents. An agency relationship allows someone to act on behalf of a person or a business, subject to their consent and control. That means the agent can do basic things to effect requested actions for the principal, but they can't make decisions.
Employees are generally seen as agents. Designees generally have to have more documentation of the agency relationship, such as a contract designating their role. Similarly, many fiduciary roles are agency relationships.
3. Security Interest
While it's nice to trust others, the reality is that a seller securing their interest in a transaction is important to many processes. This makes them fundamentally a creditor if the transaction is completed immediately. A creditor has a legally enforceable claim against the property of the debtor if the interest is secured. Many types of debt obligations are secured this way. For example, payments of loans for commercial real estate might be enforced by allowing the creditor to take possession of the property and sell it if the arrangement goes sour.
4. Dispute Resolution
Most agreements include mechanisms for resolving disputes. Binding arbitration, for example, is a common arrangement where both sides agree to submit their disputes to an arbitrator and to accept the arbitrator's decision. Similarly, the legal framework should be laid out in the agreement, too. This includes determining what jurisdiction's laws will apply when resolving the dispute.