Operation of Law (Best Overview: Definition And Examples)

What is operation of law?

How do you define operation of law?

Can the law create rights or obligations automatically and by default?

We will look at the operation of law definition, how it works, how the law can operate a termination of rights, assignment or transfer, we’ll look at an agency by operation of law example, operation of law in real estate and more.

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Operation of law definition

According to Cornell Law School’s Legal Information Institute, operation of law is defined as:

A way in which someone gets certain rights (or sometimes responsibilities) automatically under the law without taking action, requiring cooperation from another person, or being the subject of a court order. 

What is notable with this definition is that certain “rights” or “responsibilities” will apply to a situation by default or automatically by applying the legal regime or statute.

What does operation of law mean

Operation of law or by operation of law means that a person’s rights and obligations are created by the application of the law, statute or regulation regardless of the person’s desire or intention.

In other words, a person may acquire certain rights or become liable for certain obligations through the application of legal rules without consideration of his or her intention.

The law can grant rights, impose restrictions or prohibitions on a person by operation of law or determine what a person can or cannot do.

For example:

If two people own a property as joint tenants with right of survivorship, in the event one dies, the other will acquire full title to the property by operation of law

In this example, the law operates a transfer of title of the property by the application of the joint tenancy rules.

Agency by operation of law

The rights, responsibilities and obligations of parties to an agency contract may be affected by the operation of law.

For instance, termination of agency by operation of law occurs when:

  • The parties expressly provide for termination by operation of law 
  • For defined cause
  • The agent’s performance is partially or fully executed

In a contract of agency, the principal does not have an obligation to remain in the contract and can terminate the agency by giving reasonable notice to the agent at any time.

This termination right is granted to the principal by ‘operation of law’.

Assignment by operation of law

Assignment by operation of law is when certain rights are assigned to another.

For example:

Title to a patent can be assigned in a financial transaction such as a merger or as a result of operation of law in the event of bankruptcy

Termination by operation of law

In contract law, a contract may be terminated by operation of law.

In the following situations, a contract may be terminated without consideration of the intention of the parties:

  • An offer may become null and void if the person dies
  • A contract may be terminated (or voided) if it was formed based on fraudulent acts
  • A contract may be terminated if a person did not have the capacity to sign
  • A contract may be deemed unenforceable and voided in full by operation of law

Discharge by operation of law 

Discharge by operation of the law is when a person is freed or liberated from certain obligations by operation of law.

For example:

When a person goes bankrupt, the person’s debts are discharged.

This means that the person is no longer legally bound to make any payments to his or her creditors.

Reset by operation of law

Reset by operation of law is when a court resets the case for a legal reason that it has identified.

When a case is reset, it means that the litigants will need to start the case from the beginning.

Typically, a case is reset by a judge exercising its judicial powers

Power of attorney operation of law

In a power of attorney, the person appointing an attorney can define that by operation of law, the power of attorney may lapse or not.

For example:

KNOW ALL PERSONS BY THESE PRESENTS that the undersigned hereby appoint John Doe as my attorney-in-fact. My attorney-in-fact shall have the power to act hereunder. The duration of such powers shall not be affected by the lapse of time, and all such powers shall remain in effect until express revocation of the present power of attorney, the execution of these same powers to any other individual, or expiration by operation of law.

Transfer by operation of law

What’s common is the transfer of property by operation of law.

In other words, by applying certain laws, statutes or rules, an asset will be transferred or titled conveyed by operation of law.

The common example is with respect to the following ownership rights:

  • Joint tenants with right of survivorship
  • Joint tenants in common
  • Intestate death

If two people own a property together as joint tenants with right of survivorship, in the event of the death of one, the survivor becomes the full owner of the property. 

In this case, the title to the property is transferred by operation of law.

Similarly, if a property is held by two people as tenants in common, in the event one dies, the deceased share in the property will be transferred to his or her estate.

In a case when a person dies without a will (intestate death), the law will determine the heirs and have the person’s assets transferred to those heirs.

Operation of law real estate

A typical example of how the operation of law works in real estate is with regard to the doctrine of adverse possession.

A non-owner of a property, by “operation of law”, may get title to land, property or real estate as he or she has been occupying the same for a certain period of time.

The rights granted to a non-owner of a property are granted regardless of the intention of the property owner or the non-owner.

Operation of law clause

The parties to a contract can include an operation of law clause where they define certain events to trigger certain legal consequences without the need of a party to act in any way.

For example:

“Operation of law” means the assignment of Party A’s assets by the court order in the context of a merger.

Operation of law examples

There are many examples where, by operation of law, a person acquires certain rights or obligations.

Here are examples of how a person may be impacted by the operation of the law:

  • If a person passes away without a will, the heirs will be determined by the operation of law
  • A person’s assets may be transferred upon death to his or her heirs without a will through the operation of law
  • The title of land can pass to a non-owner by operation of law through adverse possession
  • The title to a property or asset held by joint tenants with right of survivorship will be transferred to the survivor in the event one dies by operation of law
  • An easement by prescription rights occurs by operation of law
  • When a party fails to pursue a complaint will lead to its dismissal by operation of law
  • The assets of a bankrupt person or entity will be transferred to the trustee or bankruptcy estate by operation of law through the application of the bankruptcy laws
  • When a child turns 18, by operation of law the guardianship ends
  • Operation of law discharge happens when a person’s debt is discharged by filing for bankruptcy 
  • Operation of law agency occurs when the law creates a principal and agent relationship not because of an agreement but by application of the law

Operation of law FAQ

Operation of Law FAQ

What does operation of law mean?

The operation of law legal definition is when a person acquires legal rights or obligations automatically through the application of the law.

For example:

A contract may be void by operation of law if the person did not have the capacity to sign. 

In this example, for a contract to be legally formed in compliance with contract laws, you must strictly observe the contract formation elements which include capacity. 

Without capacity, by operation of law, the contract is void.

What does assignment by operation of law mean?

Assignment by operation of law means when certain rights, property or assets are assigned or transferred to another legally without the need of the property owner to act in any way.

For example:

In the event of bankruptcy, the assets of the bankrupt are assigned to the bankruptcy trustee by operation of law
In the event of a person’s death without a will, the assets of a person are assigned, by operation of law, to the heirs designated by law

Can a corporation be created by operation of law?

A de facto corporation or de jure corporation is an enterprise recognized by operation of law although it did not comply with every aspect of the law in regards to its formation.

The law creates a corporation or enterprise by operation of law to provide some protection against third parties.

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