Law and Legal Reasoning - Vocabulary

Business Activities and the Legal Environment

• Law and government regulations impact almost all business activities.
• Knowledge of laws and regulations is beneficial, if not essential, for making sound business decisions.
• Knowing what conduct leads to legal liability is crucial.
• Liability: Being legally responsible for something, like a debt or obligation.
• Businesspersons should develop critical thinking and legal reasoning skills to evaluate how laws apply and determine the best actions.

Impact of Laws on Business Decisions

• Various areas of law can influence business decision-making.

Ethics and Business Decision Making

• Business decision-makers need to consider both legality and ethics.
• Ethics: Principles governing right and wrong behavior.
• Breach of ethical duties can lead to lawsuits.

Sources of American Law

• Classified as primary or secondary.
• Primary sources establish the law, including:
  • U.S. Constitution and state constitutions
  • Statutory law (laws passed by Congress, state legislatures, or local governing bodies)
  • Regulations from administrative agencies (e.g., Federal Trade Commission)
  • Case law and common law doctrines
• Secondary sources summarize and clarify primary sources.
  • Examples: Legal encyclopedias and treatises

Constitutional Law

• Constitutional law: Based on the U.S. Constitution and state constitutions.
• The U.S. Constitution is the supreme law of the land.
• A law violating the Constitution will be declared unconstitutional and not enforced.
• Each state has its own constitution.
• A state constitution is supreme within its borders unless it conflicts with the U.S. Constitution or federal law.

Statutory Law

• Statutory law: Law enacted by legislative bodies.
• Includes federal and state statutes.
  • Federal statute: Passed by Congress, applies to all states.
  • State statute: Passed by a state legislature, applies only within that state.
• Ordinances: Laws passed by local governing units (e.g., cities, counties).
  • Commonly related to land use (zoning), building codes, and local community matters.
• Statutory Conflicts: Tension can arise between federal, state, and local laws.

Uniform Laws

• Uniform law: A model law created for states to consider adopting.
• States can choose to adopt or reject all or part of a uniform law.
• If adopted, it becomes statutory law in that state.

Uniform Commercial Code (UCC)

• Facilitates commerce among states by providing a uniform set of rules for commercial transactions.

Administrative Law

• Administrative law: Law created by administrative agencies to carry out their duties.
• Administrative agency: A federal or state government agency created by the legislature to perform a specific function.
• Administrative law and procedures are a dominant element in business regulation.
• Regulations govern:
  • A business’s capital structure and financing
  • Hiring and firing procedures
  • Relations with employees and unions
  • Manufacturing and marketing of products

Federal Agencies

• Executive agencies: Within the executive branch of government.
  • Example: U.S. Food and Drug Administration (within the U.S. Department of Health and Human Services).
  • Subject to the authority of the president, who can appoint and remove officers.
• Independent regulatory agencies: Not part of the executive branch.
  • Examples: Federal Trade Commission, Securities and Exchange Commission.
  • Officials cannot be removed without cause.

State and Local Agencies

• Administrative agencies exist at the state and local levels.
• State agencies often parallel federal agencies.
  • Example: State pollution-control agency parallels the Environmental Protection Agency.

Case Law and Common Law Doctrines

• Case law: Rules of law announced in court decisions.
• Case law interprets statutes, regulations, constitutional provisions, and other case law.
• Case law governs areas not covered by statutory or administrative law and is part of the common law tradition.

The Common Law Tradition

• Much of American law is based on the English legal system due to colonial heritage.
• Judges in the United States still apply common law principles.

Early English Courts

• After the Norman Conquest of 1066, king’s courts established uniform customs for England.
• This led to the development of common law.
• Common law: Law developed from custom or judicial decisions in English and U.S. courts, not attributable to a legislature.
• Remedy: Relief given to an innocent party to enforce a right or compensate for a violation.

Courts of Law and Remedies at Law

• Early English king’s courts could grant only land, items of value, or money as remedies.
• Courts awarding this compensation were known as courts of law.
• The remedies were called remedies at law.
• Court of law: A court where the only remedies granted are things of value, such as money damages.
• Remedy at law: A remedy available in a court of law.
• Damages: A monetary award sought as a remedy for breach of contract or a tortious act.

Courts of Equity

• Individuals unable to obtain an adequate remedy in a court of law petitioned the king for relief.
• A chancellor, an adviser to the king, decided these petitions and could grant new remedies.
• Formal chancellor courts, or courts of equity, were established.
• Court of equity: A court that decides controversies and administers justice according to the rules, principles, and precedents of equity.
• Equity: A branch of law founded on justice and fair dealing that seeks to supply a remedy when no adequate remedy at law is available.

Remedies in Equity

• Remedy in equity: Allowed by courts when remedies at law are not appropriate.
• Include injunction, specific performance, rescission and restitution, and reformation.
• Injunction: An order to cease engaging in a specific activity or to undo some wrong or injury.
• Specific performance: Ordering a party to perform an agreement as promised.
• Rescission: Cancellation of a contractual obligation.
• Courts generally will not grant equitable remedies unless the remedy at law (monetary damages) is inadequate.
• Breach: To violate a law or break a legal obligation.

Legal and Equitable Remedies Today

• Establishment of courts of equity led to two distinct court systems: courts of law and courts of equity.
• These courts had different judges and granted different remedies.
• Most states combined courts of law and equity in the nineteenth century.
• A party may request both legal and equitable remedies in the same action.
• The trial court judge may grant either or both forms of relief.
• Vestiges of the procedures from separate courts still exist.

The Doctrine of Stare Decisis

• Judges tried to be consistent and base decisions on earlier cases, considering new cases carefully.
• Each interpretation became part of the law, serving as a legal precedent.
• Precedent: A court decision that furnishes an example or authority for deciding subsequent cases with similar facts.
• Cases are published in volumes called reporters and online.
• Reporter: A publication in which court cases are published.

Stare Decisis and the Common Law Tradition

• Deciding new cases with reference to former decisions or precedents became a cornerstone of judicial systems.
• Stare decisis: A common law doctrine under which judges are obligated to follow precedents established in prior decisions.
• Judges must follow precedents within their jurisdictions.
• Jurisdiction: A geographic area in which a court has the power to apply the law.
• Stare decisis has two aspects:
  • A court should not overturn its own precedents unless there is a compelling reason.
  • Decisions made by a higher court are binding on lower courts.

Controlling Precedents

• Precedents that must be followed within a jurisdiction are called controlling precedents.
• Controlling precedents are a type of binding authority.
• Binding authority: Any source of law that a court must follow.
• Includes constitutions, statutes, regulations, and court decisions that are controlling precedents.
• The doctrine of stare decisis:
  • Helps courts be more efficient
  • Makes the law more stable and predictable

When There Is No Precedent

• Courts sometimes decide cases for which no precedents exist, called cases of first impression.
• Courts look at persuasive authorities in these cases.
• Persuasive authority: Any legal authority a court may look to for guidance but need not follow.
• Sources include:
  • Precedents from other jurisdictions
  • Legal principles underlying previous court decisions or statutes
  • Fairness, social values, customs, and public policy
  • Unpublished opinions

Stare Decisis and Legal Reasoning

• Judges rely on legal reasoning to decide what law applies to a dispute and how it applies to the facts.
• Legal reasoning: The process by which a judge harmonizes their opinion with previous judicial decisions.

Basic Steps in Legal Reasoning

• The I R A C (Issue, Rule, Application, and Conclusion) method:
  • Issue: What are the key facts and issues?
  • Rule: What rule of law applies?
  • Application: How does the rule apply to the facts?
  • Case on point: A previous case with similar facts and issues.
  • Conclusion: What conclusion should be drawn?

There Is No One “Right” Answer

• There is often no single “right” answer to every legal question.
• The outcome of a lawsuit cannot be predicted with certainty.
• Good arguments can be made for either side of a legal controversy.
• Each judge has personal beliefs and a philosophy that shapes the legal reasoning process.

Classifications of Law

• The law can be classified in several ways:
  • Substantive law and procedural law
    • Substantive law: Defines, describes, regulates, and creates legal rights and obligations.
    • Procedural law: Establishes methods of enforcing rights established by substantive law.
  • Federal law and state law
  • Private law and public law
    • Private law: Deals with relationships between private entities.
    • Public law: Addresses the relationship between persons and their governments.
  • National law and international law
  • Criminal law and civil law

Civil Law and Criminal Law

• Civil law: Deals with the definition and enforcement of private or public rights.
  • Spells out rights and duties between persons and between persons and their governments.
  • Relief is available when a person’s rights are violated.
  • Typically, a private party sues another private party for failing to comply with a duty.
• Criminal law: Defines and punishes wrongful actions committed against the public.
  • Criminal acts are prohibited by local, state, or federal government statutes.
  • Criminal defendants are prosecuted by public officials (e.g., district attorney) on behalf of the state.

Cyber Law

• Cyber law: An informal term referring to laws governing electronic communications and transactions, particularly via the Internet.

How to Find Primary Sources of Law

• Citation: A reference to a publication where a legal authority can be found.
• Federal and state laws and case decisions are available online and in books.

Finding Statutory and Administrative Law

• Laws are often referred to in their codified form in federal and state codes.
• Laws are compiled by subject in these codes.

United States Code

• All federal laws passed by Congress are arranged by subject in the United States Code (U.S.C.).

State Codes

• State codes passed by state legislatures are collected in state publications and follow the U.S.C. pattern.

Administrative Rules

• Rules and regulations adopted by federal administrative agencies are initially published in the Federal Register and later in the Code of Federal Regulations (C.F.R.).

How to Read and Understand Case Law

• Court decisions establish the boundaries of the law for almost all business relationships.
• It is essential for businesspersons to know how to read and understand case law.

Case Titles and Terminology

• The title of a case (e.g., Adams v. Jones) indicates the names of the parties.
• The v. stands for versus, meaning “against.”
• In trial courts, the first name listed is the plaintiff, and the second is the defendant.
• Appellate courts sometimes list the appealing party first.
• The facts of the case must be read to identify the parties.

Parties to Lawsuits

• Plaintiff or petitioner: The party initiating a lawsuit.
• Defendant or respondent: The party against whom a lawsuit is brought.
• Appellant: The party who takes an appeal from one court to another.
• Appellee: The party against whom an appeal is taken.

Judges and Justices

• “Judge” and “justice” are usually synonymous.
• Members of the United States Supreme Court are referred to as justices.
• Justice is abbreviated to J., and justices to JJ.

Decisions and Opinions

• Reviewing or appellate courts explain their decisions in written opinions.
• Opinion: A statement by a court expressing the reasons for its decision.

Types of Opinions

• Unanimous opinion: Represents the views of all judges or justices deciding the case.
• Majority opinion: Represents the views of the majority (more than half) of the judges or justices.
• Concurring opinion: Agrees with the majority but wants to make or emphasize a point.
• Dissenting opinion: Disagrees with the majority’s decision.
• Plurality opinion: Joined by the largest number of judges, but fewer than half.
• Per curiam opinion: Written by the court as a whole instead of by a single judge or justice.

Sexual Harassment Case Example

• Sexual harassment can consist of offensive language or conduct creating a hostile environment.
• Example: A university expelled a student for severe, pervasive, and objectively offensive conduct and tweets that interfered with another student's academic performance.
• The expelled student contested the expulsion, claiming a violation of First Amendment rights.
• First Amendment rights include freedom of speech without government interference.
• The court considered the tension between free-speech rights and students' rights to an education absent sexual harassment.
• Colleges and universities are not immune from the First Amendment.
• The court affirmed the lower court's decision to dismiss the student’s claim, concluding that the university did not violate clearly established law.