Published by Flat World Knowledge, Inc. © 2014 by Flat World Knowledge, Inc. All rights reserved. Your use of this work is subject to the License Agreement available here No part of this work may be used, modified, or reproduced in any form or by any means except as expressly permitted under the License Agreement.

EXPLORING BUSINESS V. 2.1 By Karen Collins

CHAPTER 16 THE LEGAL AND REGULATORY ENVIRONMENT OF BUSINESS

CHAPTER OBJECTIVES Define law and explain the concept of the rule of law. Discuss the primary functions of law in the United States. Distinguish between criminal law and civil law. Define a tort and explain the actions that fall under tort law. Discuss the requirements of an enforceable contract and describe the scope of employment standard. Define product liability and explain manufacturer’s negligence. Define a warranty and distinguish between express warranties and implied warranties. Distinguish between compensatory damages and punitive damages.

CHAPTER OBJECTIVES Discuss the requirements of an enforceable contract and describe the scope of employment standard. Define product liability and explain manufacturer’s negligence. Define a warranty and distinguish between express warranties and implied warranties. Distinguish between compensatory & punitive damages. Explain the difference between private law and public law. Define statutory law and give examples of statutory laws at various governmental levels. Explain externalities and show why taxation is used as a means of addressing them. Discuss the idea of market failure and the principle of efficiency as a foundation of law. Define administrative law and discuss the role of federal administrative agencies in making and enforcing administrative laws. Define case law and explain the concepts of precedent and judicial review.

CHAPTER OBJECTIVES Explain the difference between private law and public law. Define statutory law and give examples of statutory laws at various governmental levels. Explain externalities and show why taxation is used as a means of addressing them. Discuss the idea of market failure and the principle of efficiency as a foundation of law. Define administrative law and discuss the role of federal administrative agencies in making and enforcing administrative laws. Define case law and explain the concepts of precedent and judicial review.

THE LEGAL SYSTEM THE INSTITUTIONS AND PROCESSES THAT ACTUALLY ENFORCE OUR RULES AND PRINCIPLES

SYSTEM OF RULES AND PRINCIPLES Flexibility Fairness

FUNCTIONS OF LAW Keeping the peace Shaping moral standards Promoting social justice Maintaining the status quo Facilitating orderly change Facilitating planning Providing a basis for compromise Maximizing individual freedom

AREAS OF LAW Criminal Law Civil Law

LEGAL ENVIRONMENT OF BUSINESS Adjudicated: resolved in court. Tort: civil wrong, an injury to someone’s person or property. THE PLACE WHERE BUSINESS INTERACTS WITH THE LEGAL SYSTEM.

TYPES OF TORTS Intentional: an intentional act that poses harm to the plaintiff. Negligence: results from carelessness. Strict Liability: don’t have to prove negligence.

INTENTIONAL TORT Against property: –Entering another’s land or placing object on it without permission. –Interfering with another’s use or enjoyment of personal property. –Permanently removing property from owner’s possession. Against economic interest: –Making false statement of material fact about product. –Enticing someone to breach valid contract. –Going into business for sole purpose of taking business from another.

ELEMENTS OF NEGLIGENCE CLAIM Defendant owed a duty to care to plaintiff. Defendant breached duty to care. Defendant’s breach caused injury to plaintiff or property. Defendant’s action caused injury in question.

PARTIES TO CONTRACT

CONTRACT REQUIREMENTS Agreement Consideration Contractual capacity Lawful object

EMPLOYMENT CONTRACTS Respondeat superior Scope of employment

CONDITIONS OF SCOPE OF EMPLOYMENT Actions performed in order to fulfill employer’s contractual duties. Employer is/could be in some control, directly or indirectly, over employee’s actions.

PRODUCT LIABILITY AND “THEORIES OF RECOVERY” NEGLIGENCE Negligent failure to warn Negligent design Negligence per se STRICT LIABILITYBREACH OF WARRANTY Express warranties Implied warranties

REASONS FOR STRICT LIABILITY People at risk of injury no matter how much care is taken. Consumers have some means of seeking compensation if injured using products. The manufacturers can protect itself: –By anticipating/preventing hazardous features –By purchasing insurance and passing cost on to public in form of higher prices

NEGLIGENCE VS. STRICT LIABILITY

TYPES OF WARRANTIES Express Warranties Implied Warranties A WARRANTY IS A GUARANTEE THAT A PRODUCT MEETS CERTAIN STANDARDS OF PERFORMANCE

EXPRESS WARRANTIES The seller can make an express warranty in any of three ways: –By describing the product –By making a promise of fact about the product –By providing a model or sample of the product

IMPLIED WARRANTIES There are two types of implied warranties: –Implied warranty of merchantability –Implied warranty of fitness for a particular purpose

AGENCY RELATIONSHIP

THE GOALS OF TORT LAW RESTORING VICTIMS TO THE CONDITIONS THAT THEY WOULD HAVE BEEN IN HAD THEIR INJURIES NEVER TAKEN PLACE

COMPENSATORY DAMAGES MONETARY AWARDS INTENDED TO MEET THE PRIMARY GOAL OF LEGAL ACTION IN TORT CASES

PUNITIVE DAMAGES ARE INTENDED TO DETER SIMILAR INJURIOUS CONDUCT IN THE FUTURE

THE GOALS OF CONTRACT LAW Compensatory damages Punitive damages Remedies for breach

REMEDIES FOR A BREACH

GOVERNMENT INTERVENTION IN THE MARKETPLACE Market Failure: Theory v. Reality Law and Economic Decision Making Efficiency and the Law Contracting and the Law Ethics and the Law

THE CONTRACT GAME PARTY B PERFORMNOT PERFORM PARTY A PEFORM $X/$X-$X/$2X NOT PERFORM $0/$0

ADMINISTRATIVE AGENCIES

FEDERAL STATUTORY LAW OSHAct Administrative Law and Judicial Review Case Law Other federal statutes: –Americans with Disabilities Act –Rehabilitation Act of 1973 State laws.