Legal Systems – What are they and how do they work?

The Function Of Law

The main function of law is to:

  • Keep the peace
  • Shape moral standards
  • Promote social justice
  • Aid orderly change
  • Provide a basis for compromise
  • Aid planning.

What Is A ‘Legal System’?

According to Cornell Law School, a ‘legal system’ is a procedure or process for interpreting and enforcing the law’.

Legal Systems provide rules and procedures to enable public and private institutions to carry out business operations using recognized and legitimate means (legally). It outlines the rights and responsibilities of business partners in different ways to establish the rules of a given society and the rights of the people who make up that society.

What Are The Main Legal Systems?

There are hundreds of legal systems in the world. At the global level, international law is of great importance. Differences in these various legal systems can greatly affect the key provisions of an international business contract and can significantly affect the rights of a party to an international business contract.

In an attempt to harmonize legal systems, there have been many agreements and treaties made between countries with the aim of promoting business operations between two or more sovereign states. For example, the European Union has its own legal system. There are over 180 sovereign states in the United Nations Organization.

What Are The Most Common Legal Systems?

There are five main legal systems in use today:

  1. Common Law
  2. Civil Law
  3. Customary Law
  4. Religious Law
  5. Mixed Law.

Note: There are many other legal systems in use in the world that may be locally, culturally, or religiously based.

Where Are The Main Systems Used?

  • The United States mainly uses the common law system.
  • England and Wales also operate a common law system.
  • Most Middle Eastern legal systems are based on civil law with the exception of Saudi Arabia and Oman.
  • Islamic law systems are found throughout parts of Africa, the Middle East, Central Asia, and South Asia.
  • The People’s Republic of China (PRC) is described by Chinese authorities as having a “socialist legal system”. This is mainly based on German Civil Law, English Common Law, Russian Socialist Law and Chinese Traditional Law.
  • The Japanese legal system is based on the civil law system.
  • India’s legal system is a mixture of civil law and common law along with Islamic ethics (religious law).
  • Civil Law Systems are found in much of continental Europe, Central America, South America, and several other regions
  • Customary Law Systems are mainly found in Africa and the Pacific Islands.

Religious and Secular Legal Systems

Religious and secular (non-spiritual) legal systems are quite different. The source of religious law is the holy being and is legislated through the prophets. An officer of that religion usually judges disputes which often means that the same person is both judge and priest. Currently, few countries use solely a religious legal system. Some countries operate a dual system where religious rules govern the people and religious courts judge disputes related to areas such as marriage, divorce, and family relationships.

Human beings as opposed to deities make secular law. The judge is separate and supported by legal independence. The Secular legal system also covers a wide area than the Religions System including public and commercial law.

Common Law

Common law comes from English history. The judge is of central importance in the development of law. Law is developed through the repetition of legal principles by the decisions of the courts. Common law systems are adversarial, rather than investigatory, with the judge moderating between two opposing parties. Courts interpret statutes to determine and apply the intent of the law.

This legal system generally relies on precedent and judicial decisions that have been made in previous judgements. The court develops a body of common law that applies alongside the statute. In Latin, this is known as “stare decisis” or “let the decision stand”.  Common law can be overruled by legislative law.

By requiring wrongdoers to pay compensation to those whom they intentionally or negligently injure, common law performs an important social and regulatory function: encouraging the adoption of reasonable safeguards to protect others.

Civil Law

This is the most widespread legal system in the world. It is a law system that is organized into written codes. Civil law originally came from the Roman legal tradition. Its practical application varies between nations and should be viewed on a national level as the legal codes are frequently updated locally.

The main source of law is a written code that aims to address specific areas of law through statute or codified rules. Judge-made law is not a central focus in civil, criminal, and commercial courts. Previous judicial decisions do not have a binding effect on courts in future trials. The Judge interprets and applies the rules to a case in a similar way to the common law system. Previous court decisions may only have an influence on future cases. Legislative acts (not judicial opinions) are considered binding.

Customary Law

These are based on the nation’s customs that have been accepted as rules and passed into law.  The legal system may not be formally codified (written). Customs govern social relations that are widely accepted by the community. The community seniors mainly pass them down through generations. The systems may be mixed with other legal systems practiced within the jurisdiction.

Religious Law

The law comes from religious texts, beliefs, and traditions.  Islamic (Sharia) law is based in whole or in part on the Quran. It is the most widespread religious law system. It rules over both public and private life. Laws vary widely between Muslim countries.

Mixed legal systems

These are legal systems where two or more legal systems work together. It may be a combination of elements of the legal systems described above.

Clever links (external)

The Cornell Law School Legal Information Institute describes the different Law Systems in detail here: Legal systems

The World Fact Book From the Central Intelligence Agency (CIA) provides a list of the world’s main legal systems: World Fact Book.



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Posted in Business Law, Business Law - Introduction.