Chapter 1 Introduction to Business Law
What is Business Law?
Business Law: consists of the enforceable rules of conduct that govern commercial relationships (“commercial” meaning “for the purpose of making profit”)
Classification of the Law
LO 1-4 Distinguish among types of law
Law is divided into:
national vs international law
Federal vs State Law
Public vs Private Law
Private Law: involves disputes between private individuals or groups. For example: if a business person owns a computer store and is delinquent in paying rent to the landlord, the dispute between them entails private law.
Public Law: involves disputes between private individuals/groups and their government. For example: if a computer store dumps waste behind its building in violation of local, state, or fed environmental regulations, the dispute is public law.
Civil Law: is about legal responsibilities and rights people have toward each other and toward the government.
for example:
Person to Person: you buy a car from someone, but they don’t give you the car after you paid. Civil Law can determine your rights and what the other person is responsible for.
Person to Business: A store sells you a defective product. Civil law can determine whether the business is responsible for your loss.
Person to Government: you own property and the government wants to take it. Civil law can determine your rights and the gov’t responsibilities
Criminal Law: When someone commits an act against the public as a whole. There are several business activities that can be considered criminal, such as money laundering, bribery, fraud, racketeering, price fixing, insurance fraud, embezzlement, theft of trade secrets.
Embezzlement: stealing or misuse of money/property that was entrusted to you. An employee is responsible for company car and damages while using for personal use.
Racketeering: running or participating in organized criminal operations often involving illegal activity like bribery, fraud, laundering etc.
Mail fraud: using the U.S. mail system (or certain private/commercial interstate delivery services) as part of a scheme to defraud someone of money or property. Someone mails fake investment documents to convince people to send them money.
Insurance fraud: Deliberately lying to an insurance company to obtain money or benefits you're not entitled to. Someone intentionally causes damage to their car and falsely claims it was an accident to get an insurance payout.
Criminal law is prosecuted by state or federal government, not individuals.
LO 1-5 Differentiate between sources of the Law
Sources of Business Law
The U.S. Constitution and state constitutions establish fundamental principles and rules by which the US and states are governed.
Constitutional Law: general limits and powers of the federal and state governments as stated by their written constitutions.
The U.S. Constitution is the Supreme Law of the Land, meaning it overrules all federal, state, and local laws that conflict with it and is the foundation for all laws in the United States.
Statutes
Statutes are legislative actions and important sources of law.
Statutory Law: assortment of rules and regulations put forth by legislatures. These legislative acts are found in US Code when they are passed by congress or in various state codes when they are enacted by state legislature.
It is important that businesses and managers are familiar with local city and county laws and ordinances that are not covered. by federal/state codes, since much business activity occurs within the jurisdiction of state courts. Includes local taxes, environmental standards, zoning ordinances, and building codes.
Uniform/Model Law: a proposed written law to encourage states to adopt the same rules on a particular subject.
Example: if every state has completely different rules for business contracts, companies operating across state lines would have a hard time knowing which rules apply. Uniform law makes more consistent.
National Conference of Commissioners on Uniform State Laws (NCC): Now commonly referred to as the Uniform Law Commission (ULC), this commissions job is to bring together legal experts from the states to develop uniform and model laws.
Example: the ULC helped develop the UCC
ULC/NCC → develops proposed uniform/model law → states adopt them → they become state law
Uniform Commercial Code (UCC): a major set of rules dealing with commercial/business transactions in the United States.
It covers things such as:
Sales of goods
Leases of goods
Negotiable instruments such as checks and promissory notes
Bank deposits and collections
Secured transactions
The UCC is not federal law. It has been adopted by the states, with some difference from state to state.
Cases
Case/Common Law: the collection of legal interpretations made by judges. An alternative name for case law is common law. These interpretations are law unless they are revoked later by new statutory law.
Courts issue judicial decisions that often include interpretations of statutes and administrative regulations. These decisions contain the reasoning the courts use to arrive at their decisions…. This decision relies heavily upon precedent
Precedent: a tool used by judges to make rulings on cases on the basis of key similarities to previous cases.
When courts rely on precedent, they are obeying Stare Decisis (“Standing by the decision”).
Following stare decisis creates greater predictability for both businesses and individuals that look to the courts for the rules on which they should rely when they engage in market exchanges
In the way that state statutes have been strongly influence by the suggestions of the NCC, common law evolves with the assistance of a mechanism called Restatements of the Law.
These restatements are summaries of common law rules in a particular area of law that has been enacted by most states.
Administrative Law
Administrative Law: the collection of rules and decisions made by all these administrative agencies.
Independent Agencies:
Commodity Futures Trading Commission (CFTC)
Consumer Product Safety Commission (CPSC)
Equal Employment Opportunity Commission (EEOC)
Federal Trade Commission (FTC)
Federal Communications Commission (FCC)
National Labor Relations (NLRB)
Executive Agencies:
Occupational Safety and Health Administration (OSHA)
General Services Administration (GSA)
National Science Foundation (NSF)
Businesses function within the rules established by agencies like these. For example, OSHA oversees health and workplace safety and makes sure that employees are working in conditions that are not hazardous.
Treaties
Treaty: a binding agreement between two states or international organizations.
In the US, a treaty is typically negotiated by the executive branch.
For it to be binding, it must be approved by two-thirds of the Senate.
A treaty is similar to a contract in two important ways:
Both treaties and contracts are attempts by parties to determine rights and obligations among themselves.
When a party fails to obey a treaty, international law imposes liability on that party.
Executive Orders
The president and state governors can issue directives requiring officials in the executive branch to perform their functions in a particular manner.
The Code of Federal Regulations (CFR) contains all the executive orders created by the president
LO 1-6 Identify the Various schools of Jurisprudence
School of Legal Interpretation
Law makers or legislators typically use guides of legal interpretation to help them towards a particular legal solutions and beliefs about human nature.
The point of learning about these alternative methods for interpreting the implication of laws is to encourage you to see the law as a human creation shaped by many perspectives and approaches to what a court decision or statute means.
Identification with the Vulnerable: A school of jurisprudence that holds that society should be fair and law should be advanced on the basis of vulnerable individuals. Particular attention is therefore paid to the poor, the ill, and the elderly.
deeply rooted in the pursuit of fairness in our society. Our caring impulse as a human feels outrage in the face of injustice
Example: Minimum wage laws reflect the belief that workers should receive a minimum hourly wage and that employers should not pay them less.
Historical School: Tradition
One of the most often used guides for shaping law is tradition, or custom. This is the historical school of law.
Stare decisis is rooted in perspective, when we follow tradition we attempt to link our future behavior to the behavior of those who faced similar problems in earlier historical periods.
Originalism: a theory of interpretation of legal texts, particularly the Constitution, that believes that these texts should be interpreted according to their “original meanings”.
Some originalists argue that a text should be interpreted by the original authors (founding fathers constitution)
There are different shades of this belief, but the core belief is that when interpreting law you should use objectivity to avoid imposing modern interpretations of them.
Legal Realism
legal realism: based on the idea that when ruling cases judges need to consider more than just the law. Factors such as social and economic conditions should be considered when making judgement.
Argue that law should not be the sole factor in deciding a case since legal guidelines were designed by humans and exist in an ever changing society.
Judges that follow this are likely to depart from past court decisions due to ever changing societal conditions.
Also believe that law can never be enforced with complete consistency, due to judges still being human, and bringing different methods of reasoning to very similar cases.
Private Law vs Public Law
If a store dumps waste behind its building in violation of a federal environmental regulation, the resulting dispute focuses on: Public Law
The collection of legal interpretations made by judges is known as: Case Law
The Uniform Commercial Code is an example of a: Model Law
A court is obeying stare decisis if it: relies on a precedent
Summaries of the common law that have been enacted by most states are known as: Restatements of the Law
If the United States and France enter into an agreement regarding the taxation of each other’s businesses, the agreement is an example of a: Treaty
The ________ contains all the executive orders created by the president. : Code of Federal Regulations
Which school of jurisprudence dictates that judges consider other factors than just the law? : Legal Realism School
Stare decisis is rooted in the perspective of which school of jurisprudence? : Historical School
The assortment of rules and regulations put forth by legislatures is called __________. : Statutory law
Which of the following is a theory of interpretation of legal texts that believes that these texts should be interpreted according to the “original meanings”? : Originalist
Business law is the enforceable rules of conduct that govern: Commercial Relationships
What are the six functional areas of business? : management, production, transportation, marketing, research and development, accounting and finance, and human resource management.
Rules of conduct in any organized society that are enforced by the governing authority of the community are ________. : Law
A purpose of the law is to serve as a moral guide by indicating _______ expectations of citizens and organizations. Minimal