The government’s sets the legal framework within which business operates.
Legislations defining property and business organizations, laws of contracts and
bankruptcy, mutual obligations of labour and management and a multitude of laws and regulations constraining the way business activities are carried out constitute legal environment of business.
Economic legislations, as these, are often called, have a direct bearing on the business.
Economic legislations can be classified into two categories:
Legislations which have a facilitatory role.
Ex: The Contract Act provides the rules for systematic exchange transactions.
Legislations which are restrictive in nature.
Ex: MRTP Act and FERA