1. Law As the Foundation of Business
CHAPTER 1
Law As the Foundation of Business
McGraw-Hill/Irwin
© 2008 The McGraw-Hill Companies, Inc. All rights reserved.

2. Introduction provide a necessary foundation
Law, the rule of law, and property
provide a necessary foundation
for successful modern business and set
maximum conditions
for generating “wealth of nations.”

3. Example: China
Large population that needs to find employment to move the economy.
Local resources are not sufficient to find job for everyone
Experts recommend that Foreign Direct Investment (FDI) is the best solution for job creation, since labor cost is very cheap in China
But, the legal system has to be created to attract businesses
Within 23 years, it created a strong economy
Right now it is the ultimate destination for manufacturing

4. Why Nations are Weak or Strong?
Natural Resources- Exploitation
Education &Technology
Climate
Modern Private Market
Law & Legal System

5. Law is most significant because it can bind together diverse groups.
Law’s Role
Religion
Customs
Economics
One of the social forces that hold society together.
Law
Law is most significant because it can bind together diverse groups.

6. Law-Definition
LAW
Enforceable
Rules
Created by State

7. Importance of Enforcement
‘Without adequate enforcement,
the certainty and trust necessary to make complex, long-term business
transactions are absent.’

8. Rule Of Law Laws are made generally and equally applicable.
Apply to various groups in same way
Apply to all or most members of society

9. Rule Of Law Nations
Adopt laws supporting private marketplace (property).
Law applies to lawmakers as well as the rest of society.
This is in everyone’s interest.

10. pop QUIZ pop QUIZ pop QUIZ What is rule of law?
Answer: Laws that are generally and equally applicable to all.

11. Private, exclusive rights in resources.
Property
Property Means
Ownership
Private, exclusive rights in resources.
The legal right to exclude or keep others from interfering.

12. Property Rights
Owners can keep others from interfering through police and courts.
Provides incentive for development.
Western culture growth is connected to
legal recognition of property rights.

13. Acquisition of Resources
Gift
Exchange
Agreement
Acquisition of
Resources
Adverse Possession
Confusion
Original Possession

14. Property - Broad Sense
Property is the central concept underlying Western legal systems.

15. Property - Broad Sense Social prosperity and wealth of nations
Implementing
Legal System
Property Law

16. Classifications Of Law - Overview
Civil Law – Criminal Law
Private Law – Public Law

17. Civil Law – Criminal Law Classification
Law dealing with private rights between people.
Criminal Law
Law dealing with offenses against society at large.
Contracts
Damages
No punishment
Prosecuted by gov’t
Results in Punishment

18. Private Law – Public Law Classification
Law dealing with issues that concern private resource relationships.
Public Law
Law dealing with regulation of society.
Property Law
Contract Law
Tort Law
Constitutional Law
Administrative Law
Criminal Law

19. Cyber Law Software Creators = Property?
Internet Binding Agreements Internet Server
Monitor ? Hotmial / Yahoo / Google
Rights To Copies Of Intellectual Property?
Regulation Of Internet? Internet Banking
Interstate Commerce? Buying / selling
Exp. Amazon / Booking.com / hotels / airlines

20. Sources Of Law Constitutions Legislation Administrative Regulation
Laws by Congress or state
legislature.
Describe and empower
government
(constitution is a set of laws as a whole)
Legislation
legislature. (legislation has to do with a
particular area of the law)
Administrative Regulation
Rules or orders by federal, state. (allow government to work more effectively)
Court Decisions or Case Law
Decisions by courts that interpret and enforce laws.

21. Case Law Advantages — Disadvantages
Stare Decisis*
Judges follow patterns.
Gives certainty & predictability.
Volume of cases
Conflicting examples
Conflicts of law
*Stare decisis: is a legal principle by which judges are obliged to respect the examples established by prior decisions.

22. Importance of Legal Sanctions
Encourage/Force Compliance
Punishment  Prevention
Benefit of Society

23. Criminal Conduct Crime Punishment Public Wrong Court Punishes on
behalf of Society
Death
Imprisonment
Fine
Removal (firing / expel)
Disqualification (doctor)

24. Breach of Contract Breach of Contract Remedies Private Wrong
Failure to Perform
Damages (Money)
Compensation
Specific Performance

25. Tortious Conduct Tort Remedies
Civil Wrong (other than breach of contract)
Intentional
Negligence
Strict Liability
Compensatory Damages (Money)
Corrective Damages (warning damages)

26. pop QUIZ pop QUIZ pop QUIZ Statutory law comes into existence through
the courts
the legislature
Answer: B

27. think TANK think TANK think TANK Would you be comfortable to enter
into a business deal if you knew that
the contract you signed would not or
could not be adequately enforced?
Yes No