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CHAPTER 2 Introduction to Law and the Legal Environment of Business © 2006 Prentice Hall Ch 2-2

Chapter 2 Overview Definition of the legal environment of business Definition of law and jurisprudence Sources of law Classifications of law International dimensions of the legal environment of business © 2006 Prentice Hall

Why study the legal environment of law? It develops critical thinking skills. It helps to establish legal literacy. It develops an understanding that the law is dynamic not static. It deals with real-world problems. It is interdisciplinary. © 2006 Prentice Hall

Top Ten Reasons for Studying the Legal Environment of Business EXHIBIT 2-1 Top Ten Reasons for Studying the Legal Environment of Business Becoming aware of the rules of doing business. Familiarizing yourself with the legal limits on business freedom. Forming an alertness to potential misconduct of competitors. Appreciating the limits of entrepreneurship. Being able to communicate with your lawyer. Making you a more fully informed citizen. Developing an employment-related skill. Exploring the fascinating complexity of business decisions. Providing a heightened awareness of business ethics. Opening your eyes to the excitement of the law and business. © 2006 Prentice Hall Ch 2-5

Definition of the Legal Environment of Business It develops critical thinking skills. The study of legal reasoning, critical thinking skills, ethical norms, and schools of ethical thought that interact with the law. The study of the legal process and our present legal system, as well as alternative dispute resolution systems. The study of the administrative law process and the role of businesspeople in that process. The study of selected areas of public and private law, consumer law, and environmental law. The examination of the international dimensions of the legal environment of law. © 2006 Prentice Hall

Definition of Law and Jurisprudence Jurisprudence is the science or philosophy of law, or law in its most generalized form. We have been told by: Plato that law is a form of social control; Aristotle that it is a rule of conduct, a contract, an ideal of reason; Cicero that it is the agreement of reason and nature, the distinction between the just and the unjust; Aquinas that it is an ordinance of reason for the common good; Bacon that certainty is the prime necessity of law; Hobbes that law is the command of the sovereign; Hegel that it is an unfolding or realizing of the idea of right. © 2006 Prentice Hall

Schools of Jurisprudence TABLE 2-1 Schools of Jurisprudence SCHOOL SOME CHARACTERISTICS Natural Law Source of law is absolute (Nature, God, or Reason). Positivist Source of law is the sovereign. Sociological Source of law is contemporary community opinion and customs. American Realist Source of law is actors in the legal system and scientific analysis of their actions. Critical Legal Theory Source of law is a cluster of legal and nonlegal beliefs that must be critiqued to bring about social and political change. Feminist Jurisprudence reflects a male-dominated executive, legislative, and judicial system in which women’s perspectives are ignored and women are victimized. Law and Economics Applies classical economic theory and empirical methods to all areas of law in order to arrive at decisions. © 2006 Prentice Hall Ch 2-8

Natural Law School For adherents of the natural law school, which has existed since 300 B.C., law consists of the following concepts: There exist certain legal values or value judgments (e.g., a presumption of innocence until guilt is proved); these values or value judgments are unchanging because their source is absolute (e.g., Nature, God, or Reason); these values or value judgments can be determined by human reason; and once determined, they supersede any form of human law. © 2006 Prentice Hall

Martin Luther King Jr. There are just laws and there are unjust laws. I would be the first to advocate obeying just laws. One has not only a legal but moral responsibility to obey just laws. Conversely, one has a moral responsibility to disobey unjust laws. I would agree with Saint Augustine that “An unjust law is no law at all.” © 2006 Prentice Hall Ch. 2-10

Positivist School Early in the 1800s, followers of positivism developed a school of thought in opposition to the natural law school. Its chief tenets are: Law is the expression of the will of the legislator or sovereign, which must be followed; morals are separate from law and should not be considered in making legal decisions (thus judges should not take into consideration extralegal factors such as contemporary community values in determining what constitutes a violation of law); and law is a “closed logical system” in which correct legal decisions are reached solely by logic and the use of precedents (previous cases decided by the courts). © 2006 Prentice Hall

Sociological School Followers of the sociological school propose three steps in determining law: A legislator or a judge should make an inventory of community interests; judges and legislators should use this inventory to familiarize themselves with the community’s standards and mores; and they should rule or legislate in conformity with those standards and mores. © 2006 Prentice Hall

American Realist School The American realist school, though close to the sociological school in its emphasis on people, focuses on the actors in the judicial system instead of on the larger community to determine the meaning of law. This school sees law as a part of society and a means of enforcing political and social values. In a book entitled The Bramble Bush, Karl Llewellyn wrote: “This doing of something about disputes, this doing it reasonably, is the business of the law. And the people who have the doing of it are in charge, whether they be judges, or clerks, or jailers, or lawyers, they are officials of the law. What these officials do about disputes is, to my mind, the law itself.” © 2006 Prentice Hall

Critical Legal Studies School A contemporary extension of American legal realism, critical legal studies seeks to connect what happens in the legal system to the political-economic context within which it operates. Adherents of critical legal jurisprudence believe that law reflects a cluster of beliefs that convinces human beings that the hierarchal relations that they live and work under are natural and must be accommodated. According to this school, this cluster of beliefs has been constructed by elitists to rationalize their dominant power. © 2006 Prentice Hall

Feminist School Most adherents of this school, believing that significant rights have been denied to women, advocate lobbying legislatures and litigating in courts for changes in laws to accommodate women’s views. They argue that our traditional common law reflects a male emphasis on individual rights, which at times is at odds with women’s views that the law should be more reflective of a “culture of caring.” To other adherents of this school of jurisprudence, the law is a means of male oppression. © 2006 Prentice Hall

Common Law/Judicial Interpretations Administrative Regulations TABLE 2-2 Where to Find the Law Level of Government Legislative Law Executive Orders Common Law/Judicial Interpretations Administrative Regulations FEDERAL United States Code (U.S.C.) United States Code Annotated (U.S.C.A.) United States Statutes at Large (Stat.) Title 3 of the Code of Federal Regulations Codification of Presidential Proclamations and Executive Orders United States Reports (U.S.) Supreme Court Reporter (S. Ct.) Federal Reporter (F., F.2d) Federal Supplement (F. Supp.) Federal agency reports (titled by agency; e.g., F.C.C. Reports) Regional reporters State reporters Code of Federal Regulations (C.F.R.) Federal Register (Fed. Reg.) STATE State code or state statutes (e.g., Ohio Revised Code Annotated, Baldwin’s) Regional reporters State reporters State administrative code or state administrative regulations LOCAL Municipal ordinances Varies; often difficult to find. Many municipalities do not publish case decisions but do preserve them on microfilm. Interested parties usually must contact the clerk’s office at the local courthouse. Municipality administrative regulations © 2006 Prentice Hall Ch. 2-16

How a Bill Becomes a Law EXHIBIT 2-2 Committee Action Introduction HR 1 Introduced in House S 2 Introduced in Senate Referred to House committee Referred to Senate committee Referred to subcommittee Reported by full committee Compromise Version Rules committee action Floor Action House debate, vote on passage Senate debate, vote on passage Conference Action © 2006 Prentice Hall Ch. 2-17

Sources of U.S. Law The Judicial Branch The Executive Branch Treaty Making Executive Orders Administrative Agencies © 2006 Prentice Hall

Classifications of Law Statutory Law - made by the legislative branch of government. Case Law - results from judicial interpretations of constitutions and statutes. Criminal Law - composed of federal and state statutes prohibiting wrongful conduct ranging from murder to fraud. Civil Law - governs litigation between two private parties. Public Law - deals with the relationship of government to individual citizens. Private Law - deals with the enforcement of private duties. © 2006 Prentice Hall

Global Dimensions of the Legal Environment of Business Variables that have an impact on business decision making: Legal Financial Economic © 2006 Prentice Hall