Chapter 1 Presentation (Week 2)

Chapter 1: Legal Foundations and Thinking Strategically

Introduction

• Learning as a transformative process.

Chapter Learning Objectives

• Working Definition of Law: Understand the definition and basis for various laws.

• Law Categorization: Classify different types of laws and understand the functions of legal systems.

• Legal Awareness: Recognize the importance of legal awareness for business strategy and value addition.

• Primary vs. Secondary Sources: Differentiate and provide examples of these sources in American law.

• Stare Decisis Application: Apply the principle of stare decisis in business contexts.

What is Law?

• Definition: Binding rules of conduct established by a controlling authority.

• Establishment: Formulated by elected legislators and interpreted by the judiciary.

• Purpose: Creates duties, rights, and obligations.

• Classification by Subject Matter: E.g., contract law for agreements, employment law for employee rights.

Categories of Law

• Criminal Law

  • Purpose: Protect society.

  • Examples: Homicide, robbery, theft.

• Civil Law

  • Purpose: Compensate parties.

  • Examples: Negligence resulting in personal injury.

• Substantive Law

  • Purpose: Provide rights and duties.

  • Examples: State laws for business recovery in contracts.

• Procedural Law

  • Purpose: Set rules for ensuring rights.

  • Examples: Statutes for filing lawsuits.

• Public Law

  • Purpose: Established under government authority.

  • Examples: Federal statutes, state business laws.

• Private Law

  • Purpose: Arise from private agreements.

  • Examples: Vendor contracts with businesses.

The Language of Law

• Importance: Legal terminology has specific meanings crucial for understanding legal doctrines in business.

• Sources: English, French, and Latin terms used in American law.

• Resource: Black’s Law Dictionary for definitions.

Functions of Law

• System of Order: Defines conduct rules and punishes violations.

• Promotion of Justice: Ensures equality, especially in education and the workplace.

• Dispute Resolution: Establishes systems to resolve disputes involving legal interests.

• Catalyst for Commerce: Encourages good faith dealings and reliability in business transactions.

Defining Strategy in the Context of Law

• Trends in Business Law:

  • Increased regulation at national and international levels.

  • Variations in international trade laws and intellectual property.

  • Severe penalties for noncompliance.

  • Rising liabilities for officers and directors.

  • Growth in attorney positions on corporate boards.

  • Adaptations in legal landscapes due to COVID-19.

Using Strategy in Legal Decisions

• Business Strategy: Guides developed to achieve overall business objectives.

• Legal Environment: Characterized by uncertainty from scarce resources, opportunistic behavior, and unequal information.

• Categories of Legal Strategies:

  • Noncompliance.

  • Avoidance.

  • Prevention.

  • Value Creation or Competitive Advantage.

Role of Business Legal Counsel

• Responsibilities:

  • Review legality of management decisions.

  • Advise on compliance strategies.

  • Analyze impacts of legal changes.

  • Prepare and file legal documents.

  • Defend businesses in legal matters.

  • Seek court remedies for rights violations.

  • Lobby for public policy changes.

Primary Sources of American Law

1. Constitutional Law:

   • Establishes government structure and grants powers.

   • Includes state constitutions, which complement federal law as long they are consistent.

   • Constitution is the supreme law, addressing issues like congressional powers and limit state regulatory abilities.

2. Statutory Law:

   • Enacted by the legislature as per constitutional provisions.

   • Includes federal and state statutes and local ordinances.

3. Administrative Law:

   • Developed by delegated rule-making from governments.

   • Regulatory power granted to agencies handling the details of federal statutes.

   • Courts generally support agency decisions.

4. Common Law:

   • Based largely on English Common Law, prevalent in American legal systems.

   • Known as 'Judge Made Law' based on historical court decisions.

   • Precedents dictate the application of law in similar cases.

Examples of Laws Impacting Business

• Negligence: Statutory and common law, primarily state level.

• Employment Discrimination: Governed mainly by statutory law at federal and state levels.

• Intellectual Property: Statutory and administrative, primarily federal.

• Contract Law: Enforced through state statutory law and common law.

• Bankruptcy and Securities Law: Managed by federal statutes and administrative laws.

• Zoning and Tax Laws: Pertained primarily to local and state statutes.

Law and Equity

• Remedies: Judicial actions compensating for civil injuries.

  • Legal Remedies: Monetary compensation for wrongdoing.

  • Equitable Remedies: Injunctions, restraining orders, or specific performance when monetary damages are insufficient.

Secondary Sources of Law

• Courts reference secondary sources for interpreting or applying laws:

  • Restatements of the Law: Collections of standardized legal principles in various state laws.

  • Model Statutes: Drafted for state legislatures to adopt.

Stare Decisis and Precedent

• Stare Decisis: Principle where courts follow precedent for consistent decision-making.

• Precedent changes are rare and typically require significant justification for the sake of justice.

Thinking Strategically

• Examples of Strategies:

  • Noncompliance: Companies factoring in fines into operational costs.

  • Avoidance: Corporations merging to evade certain taxes.

  • Prevention: Using legal disclaimers in consumer contracts to avoid liability.

  • Value Creation: Protecting trade secrets like recipes or algorithms to maintain competitive advantages.