Nevertheless, some generally accepted knowledge includes that of constitutional document sometimes referred to as charter or agreement which is a certificate characterizing the existence of the entity which the law recognizes and allows acting as natural persons and regulating the structure and control of the entity and its members. It was generally accepted that the specific form of the constitutional documents depends upon the type of entity (Djankov, et al, 2002).
On one side of the fence, common law is a system of law whose sources are the decisions in cases by judges. Besides, every system will have a legislature that passes new laws and statutes, nevertheless, these do not modify a collected and codified body of law. Common law comes from England and was passed on to Commonwealth countries, and almost every former colony of the British Empire (except for Malta and Scotland ). Furthermore, it is currently observed in, United Kingdom (excluding Scotland), United States (excluding Louisiana) Canada (excluding Quebec), Ireland, Australia, India, South Africa, and Hong Kong and in some other countries. In addition to these countries, several others have adapted the common law system into a mixed system. For instance, India, Pakistan, and Nigeria function largely on a common law system, however, incorporate religious law (Coffee, 2001). Likewise, company refer to a separate legal entity, as in English law, or may simply refer to a business, as is the common use in the United States. In addition, a company may or may not be a separate legal entity. Any business or commercial economic activity may be referred to as a company; examples of this include "my company", "our company", "the company", and "their company". A corporation may accurately be called a company; nonetheless, a company should not necessarily be called a corporation, which has discrete characteristics. According to Black's Law Dictionary, in the U.S. a company could be a corporation, less commonly, an association, partnership or union, carrying industrial enterprise.
Contract is a legally required trade of promises or an accord between parties that the law will implement. Contract law is based on the Latin phrase "pacta sunt servanda" literally, promises must be held in reserve. Breach of a contract is acknowledged by the law and remedies can be provided as many people make contracts everyday. Most of the times, written contracts are mandatory such as when buying a house. On the other hand, the enormous majority of contracts can be and are made orally, like the process where a vendor guarantees the material bought by a customer. Contract law is classified as part of a general law of obligations under civil law systems (La Porta et al, 1998).
Therefore, it may be acceptable in China that constitutional documents in common law country may be seen as a contract between the company and the directors, but not in exact acceptable practices. This is so because one of the more prevalent reasons enterprises has second thoughts about doing business in China had been legal in context as there are no established laws that actually guard and protect the interests of investors (Ahlstrom, Nair, Young, 2003).
While some countries adopt common law legal systems, judges have the authority and