Legal Environment of Business II Exam 1

University of South Alabama MCOB Dr. Franks Summer 2026 Online

Law

a body of rules of action or conduct prescribed by controlling authority, and having legal binding force.

Black’s Law Dictionary (First published in 1891)

The leading legal dictionary

Counsel

Another name for an attourney

Constitutional law

The body of law interpreting state and federal constitutions

Statutory law

The body of law created by the legislature and approved by the executive branch of state and federal governments

Common law

Law that has not been passed by the legislature, but rather is made by the courts and is based on the fundamentals of previous cases with similar facts

Administrative (regulatory) law

Law made by government administrative agencies

Ordinances

Laws made by government administrative agencies

Precedent

When courts apply the law of a previous case to current cases with similar facts

Remedies

The relief mechanisms by which courts compensate a nonbreaching party for the losses that result from the other party’s breach of contract

Equitable relief

Relief granted in the form of either specific performance

Case precedent

The opinion of an appellate court, which is binding on all trial courts from that point in time onward so that any similar case would be decided according to the precedent

Doctrine of stare decisis

The principle that similar cases with similar facts under similar circumstances should have a similar outcomes

Model state statutes

Statutes drafted by legal experts to be used as a model for state legislatures to adopt in their individual jurisdictions in order to increase the level of uniformity and fairness across courts in all states

Restatements of the Law

A collection of uniform legal principles focused in a particular area of the law that contains statements of common law legal principles and rules in a given area of law

Secondary sources

Sources of law that have no independent authority or legally binding effect but can be used to illustrate a point or clarity a legal issue

Private laws

Laws recognized as binding between two parties even though no specific statute or regulation provides for the rights of the parties

Public laws

Laws derived from a government entity

Procedural laws

Laws that provide a structure and set out rules for pursuing substantive rights

Substantive laws

Laws that provide individuals with rights and create certain duties

Civil laws

Laws designed to compensate parties for money lost as a result of another’s conduct

Criminal laws

Laws designed to protect society that result in penalties to the violator such as fines or imprisonment

Ethics

The set of moral principles or core values for deciding between right and wrong

Norms of behavior

Well-accepted standards of action given a particular circumstance

Morals

Generally accepted standards of right and wrong in a given society or community

Utilitarian

An ethical framework whereby an action is ethically sound if it produces positive results or the least harm for the most people

Corporate social responsibility (CSR)

A broad-based identification or important business and social issues and a critique of business organizations and practices

Social license to operate

The demands on, and expectations for, a business that emerge from neighborhoods, environmental groups, community members and other elements of civil society

Triple bottom line

A CSR approach that emphasizes not only the conventional creation of economic value (profits) but also a company’s creation (or destruction) of environmental and social value

Values management

A system of business ethics in the workplace that prioritizes moral values for the organization and ensures that employee and manager behaviors are aligned with those values

Compliance department

A unit within the organization staffed by lawyers and nonlawyers that helps an organization follow rules and regulations and maintain the company’s culture of values and ethics

Community-based nonprofits

a tax-exempt entity created for the purpose of serving the community

Benefit corporation

A corporation whose performance is based on social, environmental, and financial performance

Federalism

The existence of a dual form of government in which there are two levels of government in a single political system: a central or “federal” government as well as multiple regional governments

Separation of powers

The existence of multiple power centers within a single level of government

Article I, Section 8

The main provision of the Constitution that enumerates the limited powers of Congress

Executive order

An order made by the president that carries the full force of law; issued to enforce or interpret federal statutes and treaties

Judicial review

The implied power of the courts to declare unconstitutional any law that is inconsistent with the Constitution

Commerce Clause

That part of the constitution that grants to Congress the power to regulate interstate and foreign commerce

Bill of Rights

the first ten amendments to the United States Constitution

Probable cause

A reasonable amount of suspicion supported by circumstances sufficiently strong to justify a belief that a person has committed a crime

Common law

Law that has not been passed by the legislature, but rather is made by the courts and is based on the fundamentals of previous cases with similar facts

Procedural due process

The idea that any government decision to take life, liberty, or property must be made using fair procedures; at a minimum, the government must give a person reasonable notice, a fair hearing, and an opportunity to be heard

Substantive due process

The idea that laws must not be vague, overly broad, or arbitrary

Equal protection

The idea that people who are similarly situated should be treated equally

Rational basis test

Under the rational basis test, a government action is constitutional (1) if its action advances a legitimate government objective (such as health, safety, or welfare) and (2) if the action is in come way related to the government’s objective

Strict scrutiny

The most stringent standard of judicial review. Whenever a government action impairs a fundamental constitutional right or is based on a suspect classification, courts will uphold the action only if (1) the government’s objective is compelling, (2) the means chosen by the government to advance that objective are narrowly tailored or necessary to achieve that compelling end, and (3) no less restrictive alternatives exist

Originalism

The conservative view that the meaning of the Constitution is fixed and stable. With this view, the only way to change the Constitution is by formally amending it under Article V

Living Constitution

The progressive view that the meaning of the Constitution is dynamic and flexible

Commitment device

Any method or manner of effectively reducing one’s options or choices ahead of time

Capacity

For the formation of a valid contract, the requirement that both parties have the power to contract. Certain classes of persons have only limited powers to contract, including minors and those with mental incapacity

Minors

Category of individuals who have limited capacity to enter into a contract because they are younger than the majority age of 18. Until a person reaches majority age, any contract entered into is voidable at the minor’s option

Ratification (contracts)

Any act that indicates that a minor intends to be bound by his promise

Disaffirmance

The taking of some affirmative action to avoid obligation under a contract; disaffirmance is required when a contract has already been performed or partially performed by the minor

Mental incompetents

Category of individuals who have limited capacity to enter into a contract; includes anyone who is unable to understand the nature and consequences of the contract and anyone who is unable to act in a reasonable manner in relation to the transaction when the other party as reason to know of his condition

Lucid

Sane; able to think clearly

Legality

For the formation of a valid contract, the requirement that both the subject matter and performance of the contract must be legal

Public policy

Part of the legality requirement for a valid contract; necessitates that the terms be consistent with public policy objectives

Enforceability

The ability of a properly formed contract to be enforceable in a court of law; determined by examining whether the contract is a product of genuine assent and is in writing (under certain circumstances)

Genuine assent

The knowing, voluntary, and mutual approval of the terms of a contract by each party; required for a contract to be enforceable

Misrepresentations

Situations in which one party to an agreement makes a promise or representation about a material fact that is not trye; basis for avoiding a contract

Fraudulent misrepresentation

Situation in which one party has engaged in conduct that meets the standards for misrepresentation and that party has actual knowledge that the representation is not true; basis for avoiding a contract and claimin