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External Factors> Legal Environment

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Estimated time: 14 minutes
CBSE: Class 12
Maharashtra State Board: Class 11

Introduction

  • Business in a country can be started, regulated, controlled, and expanded only within the legal framework of a country.
  • All countries have a separate set of laws for the control and direction of business.
  • All business managers should have knowledge of the law for taking decisions.
CBSE: Class 12
Maharashtra State Board: Class 11

Important Laws Influencing Business

Law Name Year Purpose Latest Amendment
Indian Contract Act 1872 Governs legal agreements/contracts in business 2017
Workmen’s Compensation Act 1923 Compensation to workers for job-related injuries 2010
Industrial Dispute Act 1947 Resolves disputes between employers & workers 2016
Standards of Weights and Measures Act 1969 Ensures accurate weights/measures in trade 2016
Consumer Protection Act 1986 Protects consumer rights from unfair trade 2018 (proposed)
Competition Act 2002 Prevents monopolies & unfair competition
CBSE: Class 12

Legal Environment

  • Legal environment includes legislation passed by the Government, administrative orders, court judgments, and decisions of commissions and agencies at the centre, state and local levels.
  • Every enterprise must obey the law of the land.
  • Adequate knowledge of government rules and regulations is a pre-requisite for better business performance.
  • Non-compliance with laws can lead to legal problems.
CBSE: Class 12

Impact of Legal Environment

  • Government regulations protect consumers' interests.
  • Advertisement of alcoholic beverages is prohibited.
  • Cigarette advertisements and packets carry the statutory warning "Cigarette smoking is injurious to health."
  • Baby food advertisements must state that mother's milk is the best.
  • These regulations must be followed by advertisers.
CBSE: Class 12
Maharashtra State Board: Class 11

Key Points: Legal Environment

  • Business can be started, regulated, controlled and expanded only within the legal framework of a country.
  • The legal environment includes laws, administrative orders, court judgments, and decisions of government agencies.
  • Business managers must have adequate knowledge of laws and regulations for effective decision-making and better business performance.
  • Non-compliance with laws can lead to legal problems and penalties for business enterprises.
  • Important business laws include the Indian Contract Act, Workmen's Compensation Act, Industrial Disputes Act, Consumer Protection Act, and Competition Act.
  • Government regulations protect consumers' interests, and businesses must comply with all legal requirements.

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