1. Chapter 1: The Legal Environment of Business
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Chapter 1:
The Legal Environment of Business

2. Learning Objectives
What are the four primary sources of law in the United States?
What is the common law tradition?
What is a precedent? When might a court depart from precedent?
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3. Learning Objectives
What is the difference between remedies at law and remedies in equity?
What are some of the important differences between civil law and criminal law?
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4. Business Activities and the Legal Environment
Many different laws affect a single business transaction. 
Linking Business Law to the Six Functional Fields of Business:
Corporate Management.
Production and Transportation.
Marketing. 
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5. Exhibit 1.1: Areas of Law that Affect Business Decision-making
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6. Business Activities and the Legal Environment
Linking Business Law to the Six Functional Fields of Business:
Research and Development.
Accounting and Finance.
Human Resource Management. 
The Role of Law in Small Business.
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7. Exhibit 1.2: Linking Business Law to Management of Small Business
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8. Sources of American Law
Constitutional Law.
Found in text and cases arising from federal and state constitutions.
U.S. Constitution is the supreme law of the land.
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9. Sources of American Law
Statutory Law.
Laws enacted by federal and state legislatures.
Local ordinances.
Uniform Laws (e.g.,Uniform Commercial Code).
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10. Sources of American Law
Administrative Law.
Federal or State agencies.
Agency Creation.
Administrative agencies can be independent regulatory agency such as the Food and Drug Administration.
Rulemaking: rules, orders and decisions of administrative agencies. 
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11. Sources of American Law
Administrative Law.
Interpretive Rules.
Investigation and Enforcement.
Agencies have broad authority to demand documents, evidence, and conduct on-site inspections. 
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12. Sources of American Law
Administrative Law.
Adjudication: agencies make rules, then investigate and enforce the rules in administrative hearings.
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13. The Common Law Tradition
Early English Courts.
King’s courts started after Norman conquest of 1066.
Established the common law—body of general legal principles applied throughout the English empire.
King’s courts used precedent to build the common law.
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14. The Common Law Tradition
Stare Decisis.
Practice of deciding new cases based on precedent.
A higher court’s decision based on certain facts and law, is a binding authority on lower courts.
Helps courts stay efficient. 
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15. The Common Law Tradition
Stare Decisis.
Stare Decisis and Legal Stability.
Departures from Precedent.
Brown v. Board of Education (1954): The U.S. Supreme Court overturned precedent when it held that ‘separate but equal’ facilities was unconstitutional.
When There is No Precedent.
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16. The Common Law Tradition
Equitable Remedies and Courts of Equity.
Remedy: means to enforce a right or compensate for injury to that right.
Remedies at Law: in king’s courts, remedies were restricted to damages in either money or property. 
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17. The Common Law Tradition
Equitable Remedies and Courts of Equity.
Remedies in Equity: based on justice and fair dealing a chancery court does what is right: specific performance, injunction, rescission.
Plaintiffs (injured party initiating the lawsuit), Defendants (allegedly caused injury).
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18. Exhibit 1-3: Differences Between Law and Equity
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19. The Common Law Tradition
Equitable Remedies and Courts of Equity.
Merging of Law and Equity.
A court will normally only grant an equitable remedy only when the remedy at law (monetary damages) is inadequate.
Equitable Principles and Maxims.
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20. Schools of Legal Thought
The Natural Law Tradition.
Oldest and most significant view of law.
Government and legal system should reflect universal moral and ethical principles; basis for natural rights.
These principles are inherent in human nature, can be discovered through right reason.
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21. Schools of Legal Thought
Legal Positivism.
Morality of a law is irrelevant.
Applies only to citizens of that nation or society.
No higher law than the nation’s highest governing body or court.
Laws must be obeyed regardless of whether they are just or unjust.
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22. Schools of Legal Thought
The Historical School.
Emphasizes the evolutionary process of law.
Concentrates on the origin and history of legal system.
Looks to the past to determine laws for present.
Law derives legitimacy from precedent.
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23. Schools of Legal Thought
Legal Realism.
Began in 1920’s; law must be viewed within the social context.
Judges should take economic and social realities into account.
Sociological jurisprudence tends to be activistic, e.g., civil rights decisions.
Not bound by past decisions.
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24. Classifications of Law
Substantive vs. Procedural Law.
Substantive: laws that define and regulate rights and duties.
Procedural: laws that establish methods for enforcing and protecting rights. 
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25. Classifications of Law
Civil Law and Criminal Law.
Civil: private rights and duties between persons and government.
Criminal: public wrongs against society.
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26. Classifications of Law
National and International Law.
National: laws of a particular nation.
Civil vs. Common Law: Civil law countries based on Roman code (e.g., Latin America).
International: body of written and unwritten laws observed by nations when dealing with each other.
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27. Exhibit 1.4: Legal Systems of Selected Nations
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28. Appendix to Chapter 1 Finding Statutory Law and Administrative Law.
United States Code (USC).
State Codes.
Code of Federal Regulations (CFR).
Administrative Rules.
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29. Appendix to Chapter 1 Finding Case Law.
State Court Decisions: most state trial court decisions are not printed and published.
Federal Court Decisions.
Unpublished Opinions.
Old Cases. 
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30. Exhibit 1A-1: West’s National Reporter System
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31. Reading and Understanding Case Law
Legal cases are identified by a “legal citation” (or a “cite”) as the example below:
United States v. Jones, 132 S.Ct. 945 (2012).
Title: First Party is Plaintiff, second party is Defendant. The parties are either italicized or underlined.
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32. Reading and Understanding Case Law
Legal cases are identified by a “legal citation” (or a “cite”) as the example below:
United States v. Jones, 132 S.Ct. 945 (2012).
This is a United States Supreme Court case, found in Volume 132, Page 945 of the U.S. Supreme Court Reporter.
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33. Reading and Understanding Case Law
Legal cases are identified by a “legal citation” (or a “cite”) as the example below:
United States v. Jones, 132 S.Ct. 945 (2012).
This case was decided in 2012.
© 2014 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.