Assignment Title: The Juristic or Artificial Person in Legal Theory
Department: School of Law
Course Code and Title- LAW 101: The Jurisprudence of Legal
Concepts
Section:01
Group:05
Semester: Spring 2024
Names ID Numbers
Fariya Hossain Ambareen 24109024
Samia Rahman Titly 24109032
Nuhash Arafat Nafis 24109019
Ali Ahasan Sarkar 24109020
Ahsan Ullah Dhrubo 24109015
Ismail Hossain Emon 24109074
Rafikul Islam Jogot 24109075
Course Instructor: K Shamsuddin Mahmood
Date of Submission: 20.05.2024
Legal Note: The Juristic or Artificial Person in Legal Theory
Introduction
A fundamental idea in legal theory is the "juristic" or "artificial person," which uses legal fiction 1to
provide personality to things other than human beings. Apart from this, this creative leap expands
the bounds of legal inventiveness by establishing entities with rights and obligations. Most
importantly, it is much like the magical stories of Aladdin from Arabian Nights. Aside from this,
the necessity for such a notion stems from practical and functional requirements in business and
law. Moreover, it is related to the efficient functioning of economies and societies. Predominately,
this legal paper examines the rationale for the establishment of juristic people, their benefits, and
their crucial function in contemporary legal frameworks.
Historical Context and Evolution
The concept of the juristic person has deep historical roots. According to Roman law, corporations
(collegia) 2
were recognized as entities distinct from the individuals comprising those
(Kloppenborg & Wilson, 2002). In addition, Medieval Europe further developed this idea with the
rise of guilds and universities. Moreover, it required a legal identity to own property, enter into
contracts, and sues or is prosecuted. Aside from this, the development of joint-stock companies in
the 17th as well as 18th centuries marked a significant evolution. Besides, it necessitates a clear
legal status for these collective entities to function effectively in burgeoning capitalist economies.
Overview
This legal fiction makes it possible for organizations like governments, businesses, and NGOs to
have rights and responsibilities. In addition, it promotes effective social in addition to economic
processes. With their roots in Roman law and their evolution through medieval associations and
joint-stock firms, juristic people have historically addressed practical concerns related to asset
ownership, centralized management, continuity, in addition to collective action.
Economic efficiency, public and social welfare, legal clarity, in addition to innovation promotion
are some of the main advantages (Garoupa & Ulen, 2007). Aside from this, large-scale operations
1
Legal fiction: Constructed assumption or concept accepted as legal truth.
2
Corporations (collegia) in Roman law: recognized as distinct legal entities.
and long-term investments require efficient capital accumulation, resource allocation, and risk
management, all of which are streamlined by juristic people. Above and beyond, in transactions
and dispute settlement, they also provide legal responsibility and clarity, as demonstrated by
precedents such as Salomon v. Salomon and Lee v. Lee's Air Farming.
Notwithstanding their benefits, there are drawbacks counting moral hazard, agency issues, and
conflicts of interest. In particular, legal supervision3 can be rigorous because to ethical as well as
philosophical considerations regarding the rights and obligations of non-human creatures. Even
Nevertheless, the idea of juristic individuals is still essential to contemporary legal as well as
economic systems. Because it illustrates how flexible and inventive the law can be when tackling
challenging social issues.
Reasons for the Legal Fiction of Juristic Persons
Facilitation of Collective Activity: Promoting collective activity is one of the main goals of the
recognition of juristic people (Kuran, 2005). Moreover, to operate effectively, entities like
governments, businesses, and nonprofits need to have a single legal identity 4. In general, the law
permits these entities to function as a single unit rather than as a collection of people through giving
them personality.
Continuity and Perpetuity: Individuals with juristic status assurance that their operations will
continue long after their members have passed away. For instance, corporations are perpetual
entities that do not require modifications to their membership. Its eternal existence, which offers
stability and predictability, is essential for long-term investments and initiatives.
Limited Liability: One important benefit of the corporate structure is the notion of limited liability
(Freedman, 2000). Apart from this, a corporation's shareholders are only responsible for the
amount they invested. Through reducing individual financial risk, this protection promotes
investment. Besides, it is in turn branches economic expansion and innovation. The notion of
3
Legal supervision: Oversight ensuring compliance with laws, regulations, and ethical standards.
4
Single legal identity: Entity recognized as a unified legal person.
limited liability in addition to corporate personality was established in the seminal case 4 Salomon
v. A. Salomon & Co Ltd [1897] AC 22. Moreover, it also demonstrated how personal assets are
shielded from company obligations (Dignam & Oh, 2018).
Asset Ownership and Transferability: Legal entities have the ability to own and transfer assets
in their own names. It makes transactions easier in addition to marks ownership rights more
obvious. In addition, this capacity is essential for business operations as it enables organizations
to effectively manage assets and guarantees unambiguous legal accountability. Most importantly,
the case of Lee v. Lee's Air Farming Ltd [1961] AC 12 demonstrated how a business might hire its
main shareholder as a separate legal entity, highlighting the corporation's own legal personality
(Wilson, 1961).
Centralized Management: Centralized management and decision-making systems are made
possible by the legal recognition of juristic persons. For example, corporations have the authority
to designate boards of directors to supervise operations, ensuring competent and effective
governance that is in line with the interests of shareholders. The Dodge v. Ford Motor Co. (1919)
204 Mich 459 case brought to light the board's responsibility to decide in the best interests of the
company as a whole, not just certain stockholders (Rhee, 2023).
Advantages of Juristic Persons
Economic Efficiency: The contribution of juristic individuals to economic efficiency is
noteworthy. In particular, for large-scale corporate operations, they offer an organized framework
that makes capital accumulation, resource allocation, and risk management easier (Imai & Itami,
1984).
Social and Public Benefits: In addition to financial gains, legal professionals are essential in
providing social and public benefits. In general, recognized as legal entities, nonprofit
organizations and charity trusts carry out initiatives to advance social welfare, healthcare, and
4
Seminal case: Landmark legal decision setting precedent for future interpretations.
education (Hall, 2006). Moreover, public businesses offer necessary infrastructure and services as
state organizations.
Legal Clarity and Dispute Resolution: In transactions involving major entities, the idea of
juristic persons provides legal clarity. Mostly, it helps with dispute settlement and contract
enforcement by clearly defining rights and duties. Besides, in order to preserve order and
confidence in business interactions, this clarification is crucial. Moreover, in order to provide legal
clarity and protection under the law, the case of New York Times Co. v. Sullivan, 376 U.S. 254
(1964), highlighted the unique legal standing of businesses in defamation claims (Ennis, 1964).
Innovation and Development: The framework and protection that come with being a legal person
promote innovation. Apart from this, knowing they have the legal structure to support and defend
their activities, entrepreneurs and firms are more willing to take chances as well as engage in
innovative technology and enterprises.
Challenges and Criticisms
Even if the idea of juristic individuals has many advantages, there are drawbacks and objections
to it. Conflicts of interest and agency issues can arise in corporations due to the division of
ownership and control. Furthermore, even if it is advantageous, the limited liability protection5
occasionally leads to moral hazard, which occurs when people or organizations take risks without
fully accepting the consequences.
Furthermore, the legal fiction of juristic people presents philosophical and ethical problems about
the scope of rights and obligations assigned to non-human entities. Most significantly, sufficient
legal as well as regulatory oversight is necessary to know the benefits against any possible
downsides.
5
Limited liability protection: Shareholders' personal assets shielded from company obligations.
Conclusion
Legal theory's invention of artificial or juristic individuals is evidence of the creative and practical
character of law. In addition, beyond the confines of human life, this legal fiction attends to the
intricate requirements of contemporary economies as well as civilizations. Apart from this, the idea
is nonetheless essential to how modern legal and economic institutions operate. Additionally, the
creative imagination that supports juristic personhood will continue to be vital in determining the
direction of law. Mostly, there is in addition to business as legal frameworks change.
References
Dignam, A., & Oh, P. B. (2018). Disregarding the Salomon Principle: An Empirical Analysis,
1885–2014. Oxford Journal of Legal Studies, 39(1), 16–49. https://doi.org/10.1093/ojls/gqy027
Ennis, B. (1964). Montana Law Review Montana Law Review. 254.
https://scholarworks.umt.edu/cgi/viewcontent.cgi?article=1106&context=mlr
Freedman, J. (2000). Limited Liability: Large Company Theory and Small Firms. Modern Law
Review, 63(3), 317–354. https://doi.org/10.1111/1468-2230.00267
Garoupa, N., & Ulen, T. S. (2007). The Market for Legal Innovation: Law and Economics in
Europe and the United States. Alabama Law Review, 59, 1555.
https://heinonline.org/HOL/LandingPage?handle=hein.journals/bamalr59&div=49&id=&
page=
Hall, P. (2006). 2. A Historical Overview of Philanthropy, Voluntary Associations, and Nonprofit
Organizations in the United States, 1600–2000. 32–65.
https://doi.org/10.12987/9780300153439-005
Imai, K., & Itami, H. (1984). Interpenetration of organization and market. International Journal
of Industrial Organization, 2(4), 285–310. https://doi.org/10.1016/0167-7187(84)90001-8
Kloppenborg, J. S., & Wilson, S. G. (2002). Voluntary Associations in the Graeco-Roman
World. Routledge.
Kuran, T. (2005). The Absence of the Corporation in Islamic Law: Origins and Persistence. The
American Journal of Comparative Law, 53(4), 785–834.
https://doi.org/10.1093/ajcl/53.4.785
Rhee, R. J. (2023). The Neoliberal Corporate Purpose of Dodge v. Ford and Shareholder
Primacy: A Historical Context 1919-2019. Stanford Journal of Law, Business &
Finance, 28, 202.
https://heinonline.org/HOL/LandingPage?handle=hein.journals/stabf28&div=8&id=&pa
ge=
Wilson, A. (1961). Salomon’s Case deters Attempts to lift the Veil: Lee v. Lee’s Air Farming
Ltd. University of Malaya Law Review, 3(1), 115–118.
https://www.jstor.org/stable/24874789
