Law and Legal Reasoning

What does law consist of?

enforceable rules,

governing relationships among individuals,

and between individuals and their society

Rules

consists of written laws and court decisions created by modern legislative and judicial bodies.

regardless of how they’re created, they all have one feature in common: they establish rights, duties, and privileges that are consistent with the values and beliefs of a society or its ruling group.

How does law and government regulation affect ALMOST all business activities?

It affects hiring and firing decisions, workplace safety, the manufacturing and marketing of products, business financing and more.

How do you make good business decisions?

you need to understand the laws and regulations governing business activities. you must develop critical thinking and legal reasoning skills so you can evaluate how various laws might apply to a given situation and determine the best course of action. you’re also pressured to make ethical decisions.

Liability

the state of being legally responsible (liable) for something, such as a debt or obligation.

Areas of the law that may affect Business Decision Making

contracts, sales and e-commerce, negotiable instruments, creditors’ rights, intellectual property, professional liability, product liability, torts, agency, business organizations, environmental laws, courts and court procedures.

Sources of American Law

Primary Sources and Secondary Sources of Law

Primary Sources

a source that establishes the law on a particular issue.

sources include the following: U.S. Constitution and State Constitutions, Statutes/Statutory law (including laws passed by Congress, state legislatures, and local governing bodies), Regulations (Adminstrative law) created by administrative agencies(FDA), and Case law (court decided cases).

Secondary Sources of Law

only describe the rules. it’s a book or article that summarizes and clarifies a primary source of law.

sources include the following: Wikipedia, Legal Encyclopedia, Restatement of the Law (compilation), Treatises, Artificial Intelligence, Your Lawyer.

Constitutional law

the body of law derived from the U.S Constitution and the constitutions of the various states,

Statutory law

the body of law enacted by legislative bodies (as opposed to constitutional law, administrative law, or case law). whenever a legislature passes a statute, that statute ultimately is included in the federal code of laws or the relevant state code of laws. these laws also includes local ordinances.

Citation

a reference to a publication in which a legal authority—such as a statute or a court decision—or other source can be found.

Ordinance

a regulation passed by a municipal or county governing unit to deal with matters not covered by federal or state law. they commonly have to do with city or county land use (zoning ordinances), building and safety codes, and other matters affecting only the local governing unit.

Where do statutes apply?

a federal statute applies to all states. a state statute, in contrast, applies only within the state’s borders. because of this, state laws may vary from state to state. no federal statute may violate the U.S. Constitution, and no state statute or local ordinance may violate the U.S. Constitution or the relevant state constitution.

Why were uniform laws drafted in the first place during the 1800s?

the differences among state laws made it hard and frequently created difficulties for businesspersons to conduct trade and commerce among the states.

to counter this, a group of legal scholars and lawyers formed the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1892 to draft uniform laws for the states to consider adopting.

Can states accept a uniform law, if so can they change it?

each state has a option of adopting or rejecting a uniform law. only if state legislature adopts a uniform law does that law become part of the statutory law of that state.

furthermore, a state legislature may choose to adopt only part of a uniform law or to rewrite the sections that are adopted. that’s why even though many states may have adopted a uniform law, those laws may not be entirely “uniform.”

The Uniform Commercial Code (UCC)

first issued in 1952 and adopted in all fifty states, the UCC facilates commerce among the states by providing a uniform, yet flexible, set of rules governing commercial transactions.

Administrative law

the body of law created by administrative agencies in order to carry out their duties and responsibilities.

Administrative agency

a federal, state, or local government agency created by the legislature to perform a specific function, such as to make and enforce rules pertaining to the environment.

Executive agencies

exist within the cabinet departments of the executive branch and are subject to the authority of the president, who has the power to appoint and remove their officers.

examples include the Food and Drug Administration which is an agency within the U.S Department of Health and Human Services,

Independent regulatory agencies

the president’s power is less pronounced in regard to these agencies, whose officers serve for fixed terms and cannot be removed without just cause.

examples include the Federal Trade Commission, the Securities and Exchange Commission, and the Federal Communications Commission.

State and local administrative agencies.

commonly created as a parallel to a federal agency, like state pollution-control agency and. Environmental Protection Agency. just as federal statutes take precedence over conflicting state statutes, so do federal agency regulations take precedence over conflicting state regulations. B

Why and how are agencies created?

Congress cannot possibly oversee the actual implementation of all the laws it enacts, so it delegates such tasks to agencies, which are formed by Congress enacting enabling legislation.

Enabling legislation

a statute enacted by Congress that authorizes that creation of an administrative agency and specifies the name, composition, and powers of the agency being created.

adjudicate

to render a judicial decision. adjudication is the trial-like proceeding in which an administrative law judge hears and resolves disputes involving an administrative agency’s regulations.

administrative process

the procedure used by administrative agencies in fulfilling their basic functions, rulemaking, enforcement, and adjudication.

rulemaking

the process by which an administrative agency formally adopts a new regulation or amend or removes an old one.

Legislative rules

an administrative agency rule that carries the same weight as a congressionally enacted statute.

What are the legislative rules?

1. Notice of the proposed rulemaking.

2. A comment period.

3. The final rule.

Interpretive rules

nonbinding rules or policy statements issued by an administrative agency that explain how it interprets and intends to apply the statutes it enforces

Administrative law judge (ALJ)

one who resides over an administrative agency hearing and has the power to administer oaths, take testimony, rule on questions of evidence, and making determinations of fact.

Case law

the rules of law announced in court decisions. interprets statutes, regulations, and constitutional provisions, and governs all areas not covered by statutory or administrative law. is a part of our common law tradition.

Where was the U.S. legal system (Common Law) inherited from?

England. Because of our colonial heritage, much of American law is stolen from the English legal system. U.S. judges still apply common law principles when deciding cases.

When did England start common law?

after the Normans conquered England in 1066, William the Conqueror and his successors began the process of unifying the country under their rule. one of the means they used to do this was the establishment of the king’s courts, or curiae regis. before being conquered, the regions of England’s disputes had been settled according to the local legal customs and traditions.

the king’s courts sought to establish a uniform set of rules for the country as a whole. what came of this was common law. eventually, the common law tradition became part of the heritage of all nations that were once British colonies, including the United States.

Common law

a body of general rules that’s applied throughout the entire English realm. the body of law developed from custom or judical decisions in English and U.S. courts, not attributable to a legislature.

Precedent

a court decision that furnishes an example or authority for deciding subsequent cases involving identical or similar facts.

Stare decisis

a common law doctrine under which judges are obligated to follow the precedents established in prior decisions.

the practice of deciding new cases with reference to former decisions, precedents, eventually became a cornerstone of the English and U.S. judicial systems forms this doctrine.

under this doctrine, judges are obligated to follow the precedents established within their jurisdiction. once a court has set forth a principle of law as being applicable to a certain set of facts, that court must apply the principle in future cases involving similar facts. courts of lower rank (within the same jurisdiction) must do likewise.

The 2 Aspects of stare decisis

1. a court shouldn’t overturn its own precedents unless there is a strong reason to do so.

2. decisions made by a higher court are binding on lower courts.

Controlling precedents

precedents that must be followed within a jurisdiction. they are also binding authorities.

a Binding Authority

any source of law that a court must follow when deciding a case. (constitutions, statutes, and regulations that govern the issue being decided, as well as court decisions that are controlling precedents within the jurisdiction.

United States Supreme Court case decisions, no matter how old, remain controlling until they are overruled by a subsequent decision of the Supreme Court, by a constitutional amendment, or by congressional legislation.

How does stare decisis help the courts be more efficient?

if other courts have carefully reasoned through a similar case, their legal reasoning and opinions can serve as guides. it also makes the law more stable and predictable. if the law on a given subject is well settled, someone bringing a case to court usually can rely on the court to make a decision based on what law has been.

Departures from Precedent

although courts are obligated to follow precedents, sometimes a court will depart from the rule of precedent. if a court decides that a precedent is simply incorrect or that technological or social changes have rendered the precedent inapplicable, the court may rule contrary to the precedent.

cases that overturn precedent often receive a great deal of publicity, like Brown v. Board of Education of Topeka.

Cases of first impression

cases for which no precedents exist.

when deciding cases of first impression, courts often look at persuasive authorities

Persuasive authority

a legal authority that a court may consult for guidance but that is not binding on the court.

a court may consider precedents from other jurisdictions, for instance, although those precedents are not binding.

a court may also consider legal principles and policies underlying previous court decisions or existing statutes.

additionally, a court might look at fairness, social values and customs, and public policy (governmental policy based on widely held societal values). federal courts can also look at unpublished opinions (those not intended for publication in a printed legal reporter) as sources of persuasive authority.

Legal reasoning and stare decisis

in deciding what law applies to a given dispute and then applying that law to the fact or circumstance of the case, judges rely on the process of legal reasoning.

through the use of legal reasoning, judges harmonize their decisions with those that have been made before, as the doctrine of stare decisis requires.

the IRAC method of legal reasoning

Issue, Rule, Application, and Conclusion.

How to apply the IRAC method

1. Issue—What are the key facts and issues?

2. Rule—What rule of law applies to the case?

3. Application—How does the rule of law apply to the particular facts and circumstances of this case?

4. Conclusion—What conclusion should be drawn?

Case on point

a previous case involving factual circumstances and issues that are similar to those in the case before the court.

Plaintiff

one who initiates a lawsuit.

Defendant

one against whom a lawsuit is brought or the accused person in a criminal proceeding.

Remedy

the means given to a party to enforce a right or to compensate for the violation of a right.

How were the remedies available in the early king’s courts of England were severely restricted?

if one person wronged another, the king's courts could award either money or property, including land, as compensation. these courts became known as courts of law, and the remedies were called remedies at law.

even though this system introduced uniformity in the settling of disputes, when a person wanted a remedy other than property or economic compensation, the courts of law could do nothing, so "no remedy, no right."

Equity

a branch of law—founded on notions of justice and fair dealing—that seeks to supply a remedy when no adequate remedy at law is available.

What did individuals do when they couldn’t obtain an adequate remedy in a court of law?

they petitioned the king for relief. most of these petitions were referred to the chancellor, an adviser to the king who had the power to grant new and unique remedies.

eventually, formal chancery courts, or courts of equity, were established. the remedies granted by the chancery courts were called remedies in equity.

plaintiffs had to specify whether they were bringing an "action at law" or an "action in equity," and they chose their courts accordingly. a plaintiff might ask a court of equity to order the defendant to perform within the terms of a contract. a court of law could not issue such an order because its remedies were llimited to the payment of money or property as compensation for damages.

a court of equity, however, could issue a decree for specific performance-an order to perform what was promised. a court of equity could also issue an injunction, directing a party to do or refrain from doing a particular act. in certain cases, a court of equity could allow for the rescission (cancellation) of the contract, thereby returning the parties to the positions that they held prior to the contract's formation. equitable remedies will be discussed in greater detail in the chapters covering contracts.

The Merging of Law and Equity

today, in most states, the courts of law and equity have merged, and thus the distinction between the two courts has largely disappeared.

a plaintiff may now request both legal and equitable remedies in the same action, and the trial court judge may grant either formor both forms—of relief.

the distinction between legal and equitable remedies remains significant, however, because a court normally will grant an equitable remedy only when the remedy at law (property or monetary damages) is inadequate.

to request the proper remedy, a businessperson (or her or his attorney) must know what remedies are available for the specific kinds of harms suffered.

Procedural Difference between an Action at Law and an Action in Equity

Procedure Action

Initiation of lawsuit By filing a compliant

Decision By Jury

Result Judgment

Remedy Monetary damages or property

Equitable Maxims

general propositions or principles of law that have to do with fairness (equity).

over time, the courts have developed a number of equitable maxims that provide guidance in deciding whether plaintiffs should be granted equitable relief.

Some significant equitable maxims

1. whoever seeks equity must do equity. (anyone who wishes to be treated fairly must treat others fairly.)

2. where there is equal equity, the law must prevail. (the law will determine the outcome of a controversy in which the merits of both sides are equal.)

3. one seeking the aid of an equity court must come to the court with clean hands. (plaintiffs must have acted fairly and honestly.)

4. equity will not suffer a wrong to be without a remedy.
   (equitable relief will be awarded when there is a right to relief and there is no adequate remedy at law.)

5. equity regards substance rather than form. (equity is more concerned with fairness and justice than with legal technicalities.)

6. equity aids the vigilant, not those who rest on their rights.
   (equity will not help those who neglect their rights for an unreasonable period of time.)

the last maxim has come to be known as the equitable doctrine of laches. the doctrine arose to encourage people to bring lawsuits while the evidence was fresh. if they failed to do so, they would not be allowed to bring a lawsuit. What constitutes a reasonable time, of course, varies according to the circumstances of the case.

time periods for different types of cases are now usually fixed by statutes of limitations.

jurisprudence

the science or philosophy of law

natural law

the oldest school of legal thought, based on the belief that the legal system should reflect universal ("higher") moral and ethical principles that are inherent in human nature.

legal positivism

a school of legal thought centered on the assumption that there is no law higher than the laws created by a national government. laws must be obeyed, even if they are unjust, to prevent anarchy.

historical school

a school of legal thought that looks to the past to determine what the principles of contemporary law should be.

Legal realism

a school of legal thought that holds that the law is only one factor to be considered when deciding cases, and that social and economic circumstances should also be taken into account.

Classifications of laws

Substantive law and Procedural law

Substantive law

law that defines, describes, regulates, and creates legal rights and obligations.

Procedural law

law that establishes the method of enforcing the rights established by substantive law.

Other classifications systems

divides law into federal law and state law, and private law (dealing with relationships between persons) and public law (addressing the relationship between person and their governments).

Schools of Legal Thought

Natural law school, Legal positivism, Historical school of legal thought, and Legal realism

Civil law

spells out the rights and duties that exist between persons and between persons and their governments, as well as the relief available when a person's rights are violated.

typically, in a civil case, a private party sues another private party who has failed to comply with a duty. much of the law discussed in this text— including contract law and tort law—is civil law.

Criminal law

has to do with wrongs committed against society for which society demands redress. criminal acts are proscribed by local, state, or federal government statutes. thus, criminal defendants are prosecuted by public officials, such as a district attorney (D.A.), on behalf of the state, not by their victims or other private parties.

Difference of civil law and criminal law

in a civil case the object is to obtain a remedy (such as monetary damages) to compensate the injured party, in a criminal case the object is to punish the wrongdoer in an attempt to deter others from similar actions.

penalties for violations of criminal statutes consist of fines and/or imprisonment-and, in some cases, death.

The two types of predominate legal systems of the globe

Common law system and Civil law system.

Civil law system

based on Roman civil law, or "code law," which relies on legal principles enacted into law by a legislature or governing body. thus, in a civil law system, the primary source of law is a statutory code, and case precedents are not judicially binding, as they normally are in a common law system.

although judges in a civil law system often refer to previous decisions as sources of legal guidance, those decisions are not binding.

*civil law doesn't equal the civil law system.

Sharia law system

widespread in islamic countries, where the law is often influenced by sharia, the religious law of islam

National law

the law of a particular nation. varies from country to country because each country's law reflects the interests, customs, activities, and values that are unique to that nation's culture. even though the laws and legal systems of various countries differ substantially, broad similarities do exist.

International law

laws that apply to more than one nation. can be defined as a body of written and unwritten laws observed by independent nations and governing the acts of individuals as well as governments. it is a mixture of rules and constraints derived from a variety of sources, including the laws of individual nations, customs developed among nations, and international treaties and organizations.

The difference between national law and international law

government authorities can enforce national law.

if a nation violates an international law, however, enforcement is up to other countries or international organizations, which may or may not choose to act.

if persuasive tactics fail, the only option is to take coercive actions against the violating nation. coercive actions range from the severance of diplomatic relations and boycotts to sanctions and, as a last resort, war.

Personal property

All property that is not real property. Personal property can be tangible or intangible.

Tangible personal property

has physical substance. (examples: heavy construction equipment or car)

Intangible personal property

represents some set of rights and interests, but it has no physical existence. (examples: stocks and bonds, patents, trademarks, and copyrights—as well as digital and virtual property.

How can real property be turned into personal property?

by detaching it from the land. for instance, trees and plants are considered real property. once severed, however, they become personal property. thus, if trees are cut from the land, the timber is personal property.

Ownership

a bundle of rights. the right to use, possess, transfer, and destroy property.

Ways to acquire personal property

by will/inheritance, merely possessing it (hunting a deer or claiming abandoned property), gifts, bailment, and producing it (inventors or writers).

gift

a voluntary transfer of property made without consideration, past or present. the absence of consideration is what distinguishes a gift from a contractual obligation to transfer ownership of property.

What three elements are required for a gift to be effective:

1. Donative intent on the part of the donor (the one giving the gift). The donor must intend to transfer ownership of the property immediately, not at a later date.

2. Delivery. The donor must give up control over the property to the person receiving the gift. When the object itself cannot be physically delivered, a symbolic, or constructive, delivery will be sufficient.

3. Acceptance by the donee (the one receiving the gift). This rarely presents any problems, because most donees readily accept their gifts.

Until these three requirements are met, no effective gift has been made.

Mislaid property

property that has been voluntarily placed somewhere by the owner and then inadvertently forgotten. a person who finds mislaid property does not obtain title to the goods.

Lost property

property that is involuntarily left. a finder of lost property can claim title to the property against the whole world except the true owner.

if the true owner is identified and demands that the lost property be returned, the finder must return it.

in contrast, if a third party attempts to take possession of the lost property, the finder will have a better title than the third party.

Abandoned property

property that has been discarded by the true owner, who has no intention of reclaiming title to it. someone who finds abandoned property acquires title to it, and that title is good against the whole world, including the original owner.

if a person finds abandoned property while trespassing on another's property, however, the trespasser will not acquire title. an owner of lost property who eventually gives up any further attempt to find it is frequently held to have abandoned the property.

because a dog is considered personal property, a court may be tasked with determining whether a dog's owner abandoned it.

Bailment

a situation in which the personal property of one person (a bailor) is entrusted to another (a bailee), who is then obligated to return the bailed property to the bailor or dispose of it as directed. (examples: valet parking, dry cleaning, coat check, dog kennel, and lending a book)

Bailor

one who entrusts goods to a bailee.

Bailee

one to whom goods are entrusted by a bailor.

Bailee’s responsiblities

The bailee's duties are based on a mixture of tort law and contract law and include two basic responsibilities:

1. To take appropriate care of the property.

2. To surrender the property to the bailor or dispose of it in accordance with the bailor's instructions at the end of the bailment.

Rights of Bailee

Generally, the bailee has the right to take possession of the property and to use it to accomplish the purpose of the bailment. The bailee also has a right to receive compensation (unless the parties' agreed otherwise). In addition, the bailee may have the right to limit her or his liability for the bailed goods. These rights of the bailee are present (with some limitations) in varying degrees in all bailment transactions.

The extent to which bailees can use the property entrusted to them depends in part on the terms of the bailment contract. When no provision is made, as mentioned, the bailee can use the property to the extent necessary to fulfill the ordinary purpose of the bailment.

For instance, if you use valet parking at a hotel, the valet can drive your car to and from a parking space but cannot use it to go elsewhere.

The duty of care for Bailees

1. Bailment for the sole benefit of the bailor. This type of bailment involves no consideration and is thus often referred to as a gratuitous bailment. The bailment is created for the convenience and benefit of the bailor. Basically, the bailee is caring for the bailor's property as a favor. Therefore, the bailee owes only a slight duty of care and will be liable only for gross negligence in caring for the property.

2. Bailment for the mutual benefit of the bailee and the bailor. The most common kind of bailment is created for the mutual benefit of the bailee and the bailor. It is a contractual bailment that involves compensation and is often referred to as a bailment for hire or a commercial bailment. In a commercial bailment, the bailee must exercise ordinary care, which is the care that a reasonably prudent person would use under the circumstances. If the bailee fails to exercise reasonable care, he or she will be liable for ordinary negligence.

3. Bailment for the sole benefit of the bailee. This type of bailment is created when one person lends an item to another person (the bailee) solely for that person's convenience and benefit.Because the bailee is borrowing the item for her or his own benefit, the bailee has a duty to exercise extraordinary care and will be liable for even slight negligence.

Duties of the Bailor

The duties of a bailor are essentially the same as the rights of a bailee. A bailor has a duty to compensate the bailee, as discussed earlier. A bailor also has an all-encompassing duty to provide the bailee with goods that are free from known defects that could cause injury to the bailee. The bailor's duty to reveal defects is based on a negligence theory of tort law. In addition, a bailor can incur warranty liability under contract law for injuries resulting from the bailment of defective articles.