1. © 2004 West Legal Studies in Business A Division of Thomson Learning 1 Chapter 1 Business and Its Legal Environment

2. © 2004 West Legal Studies in Business A Division of Thomson Learning 2 §1: Schools of Jurisprudential Thought At a minimum, law consists of enforceable rules governing relationships among persons and between persons and society. At a minimum, law consists of enforceable rules governing relationships among persons and between persons and society. There are several different “schools” of law: There are several different “schools” of law:  Natural Law.  Positivist view.  Historical view.  Legal Realism view. At a minimum, law consists of enforceable rules governing relationships among persons and between persons and society. At a minimum, law consists of enforceable rules governing relationships among persons and between persons and society. There are several different “schools” of law: There are several different “schools” of law:  Natural Law.  Positivist view.  Historical view.  Legal Realism view.

3. © 2004 West Legal Studies in Business A Division of Thomson Learning 3 The Natural Law School Assumes that law, rights and ethics are based on universal moral principals inherent in nature discoverable through the human reason. Assumes that law, rights and ethics are based on universal moral principals inherent in nature discoverable through the human reason. The oldest view of jurisprudence dating back to Aristotle. The oldest view of jurisprudence dating back to Aristotle. The Declaration of Independence assumes “the Laws of Nature.” The Declaration of Independence assumes “the Laws of Nature.” Assumes that law, rights and ethics are based on universal moral principals inherent in nature discoverable through the human reason. Assumes that law, rights and ethics are based on universal moral principals inherent in nature discoverable through the human reason. The oldest view of jurisprudence dating back to Aristotle. The oldest view of jurisprudence dating back to Aristotle. The Declaration of Independence assumes “the Laws of Nature.” The Declaration of Independence assumes “the Laws of Nature.”

4. © 2004 West Legal Studies in Business A Division of Thomson Learning 4 Natural Law Rev. Martin Luther King, Jr. Letter from the Birmingham Jail, April 16, 1963 “[T]here are two types of laws: just and unjust laws.... A just law is a man-made code that squares with the moral law.... An unjust law is a code that is out of harmony with the moral law.... An unjust law is a human law that is not rooted in eternal and natural law.” Letter from the Birmingham Jail, April 16, 1963 “[T]here are two types of laws: just and unjust laws.... A just law is a man-made code that squares with the moral law.... An unjust law is a code that is out of harmony with the moral law.... An unjust law is a human law that is not rooted in eternal and natural law.”

5. © 2004 West Legal Studies in Business A Division of Thomson Learning 5 The Positivist School Law is the supreme will of the State that applies only to the citizens of that nation at that time. Law is the supreme will of the State that applies only to the citizens of that nation at that time. Law, and therefore rights and ethics, are not universal. The morality of a law, or whether the law is “bad or good”, is irrelevant. Law, and therefore rights and ethics, are not universal. The morality of a law, or whether the law is “bad or good”, is irrelevant. Law is the supreme will of the State that applies only to the citizens of that nation at that time. Law is the supreme will of the State that applies only to the citizens of that nation at that time. Law, and therefore rights and ethics, are not universal. The morality of a law, or whether the law is “bad or good”, is irrelevant. Law, and therefore rights and ethics, are not universal. The morality of a law, or whether the law is “bad or good”, is irrelevant.

6. © 2004 West Legal Studies in Business A Division of Thomson Learning 6 The Historical School Emphasizes the evolutionary process of law. Emphasizes the evolutionary process of law. Concentrates on the origin and history of the legal system. Concentrates on the origin and history of the legal system. Law derives its legitimacy from the principles and standards that have proved historically workable. Law derives its legitimacy from the principles and standards that have proved historically workable. Emphasizes the evolutionary process of law. Emphasizes the evolutionary process of law. Concentrates on the origin and history of the legal system. Concentrates on the origin and history of the legal system. Law derives its legitimacy from the principles and standards that have proved historically workable. Law derives its legitimacy from the principles and standards that have proved historically workable.

7. © 2004 West Legal Studies in Business A Division of Thomson Learning 7 Legal Realism Jurisprudence that holds law is not simply a result of the written law, but a product of the views of judicial decision makers, as well as social, economic, and contextual influences. Jurisprudence that holds law is not simply a result of the written law, but a product of the views of judicial decision makers, as well as social, economic, and contextual influences. Law is a tool to promote social justice. Law is a tool to promote social justice. Jurisprudence that holds law is not simply a result of the written law, but a product of the views of judicial decision makers, as well as social, economic, and contextual influences. Jurisprudence that holds law is not simply a result of the written law, but a product of the views of judicial decision makers, as well as social, economic, and contextual influences. Law is a tool to promote social justice. Law is a tool to promote social justice.

8. © 2004 West Legal Studies in Business A Division of Thomson Learning 8 § 2: Business Activities and the Legal Environment Law regulates many different areas of business. Law regulates many different areas of business. Study of business law also involves a knowledge of ethics in decision-making. Study of business law also involves a knowledge of ethics in decision-making. Many different laws may affect a single business transaction. Many different laws may affect a single business transaction. Law regulates many different areas of business. Law regulates many different areas of business. Study of business law also involves a knowledge of ethics in decision-making. Study of business law also involves a knowledge of ethics in decision-making. Many different laws may affect a single business transaction. Many different laws may affect a single business transaction.

9. © 2004 West Legal Studies in Business A Division of Thomson Learning 9 §3: Sources of American Law U.S. and State Constitutions. U.S. and State Constitutions. U.SState U.SState Statutory Law--federal and state statutes. Statutory Law--federal and state statutes.federalstatefederalstate  Uniform Commercial Code.  Restatements of the Law. Administrative Law. Administrative Law. Case Law and Common Law Doctrines. Case Law and Common Law Doctrines. U.S. and State Constitutions. U.S. and State Constitutions. U.SState U.SState Statutory Law--federal and state statutes. Statutory Law--federal and state statutes.federalstatefederalstate  Uniform Commercial Code.  Restatements of the Law. Administrative Law. Administrative Law. Case Law and Common Law Doctrines. Case Law and Common Law Doctrines.

10. © 2004 West Legal Studies in Business A Division of Thomson Learning 10 § 4: The Common Law Tradition American law is based largely on English Common Law originating in medieval England. American law is based largely on English Common Law originating in medieval England. The common law was based largely on traditions, social customs, rules and cases developed over hundreds of years after the Norman conquest in 1066. The common law was based largely on traditions, social customs, rules and cases developed over hundreds of years after the Norman conquest in 1066. American law is based largely on English Common Law originating in medieval England. American law is based largely on English Common Law originating in medieval England. The common law was based largely on traditions, social customs, rules and cases developed over hundreds of years after the Norman conquest in 1066. The common law was based largely on traditions, social customs, rules and cases developed over hundreds of years after the Norman conquest in 1066.

11. © 2004 West Legal Studies in Business A Division of Thomson Learning 11 Early English Courts At common law, there were two separate court systems with two different types of remedies: At common law, there were two separate court systems with two different types of remedies:  COURTS OF LAW (monetary relief).  COURTS OF EQUITY (non-monetary relief), based on “notions of justice and fair dealing.” At common law, there were two separate court systems with two different types of remedies: At common law, there were two separate court systems with two different types of remedies:  COURTS OF LAW (monetary relief).  COURTS OF EQUITY (non-monetary relief), based on “notions of justice and fair dealing.”

12. © 2004 West Legal Studies in Business A Division of Thomson Learning 12 Courts of Law Also called “king’s courts” where judges were appointed by the king. Also called “king’s courts” where judges were appointed by the king. Remedies limited to those provided at law, i.e., land, chattel, money. Remedies limited to those provided at law, i.e., land, chattel, money. Judges resolved disputes by application of rules of law to the facts of the case before the court. Judges resolved disputes by application of rules of law to the facts of the case before the court. Also called “king’s courts” where judges were appointed by the king. Also called “king’s courts” where judges were appointed by the king. Remedies limited to those provided at law, i.e., land, chattel, money. Remedies limited to those provided at law, i.e., land, chattel, money. Judges resolved disputes by application of rules of law to the facts of the case before the court. Judges resolved disputes by application of rules of law to the facts of the case before the court.

13. © 2004 West Legal Studies in Business A Division of Thomson Learning 13 Courts of Equity Equitable relief was sometimes available in instances where a strict application of the law to the facts of the case compelled a result that was legal but unjust. Equitable relief was sometimes available in instances where a strict application of the law to the facts of the case compelled a result that was legal but unjust. Equitable maxims. Equitable maxims. Equitable relief was sometimes available in instances where a strict application of the law to the facts of the case compelled a result that was legal but unjust. Equitable relief was sometimes available in instances where a strict application of the law to the facts of the case compelled a result that was legal but unjust. Equitable maxims. Equitable maxims.

14. © 2004 West Legal Studies in Business A Division of Thomson Learning 14 Legal and Equitable Remedies Today Today federal and state courts of general jurisdiction have consolidated remedies at law and remedies at equity. Today federal and state courts of general jurisdiction have consolidated remedies at law and remedies at equity. Generally, the same court can fashion a remedy that includes both damages and equitable or injunctive relief. Generally, the same court can fashion a remedy that includes both damages and equitable or injunctive relief. Today federal and state courts of general jurisdiction have consolidated remedies at law and remedies at equity. Today federal and state courts of general jurisdiction have consolidated remedies at law and remedies at equity. Generally, the same court can fashion a remedy that includes both damages and equitable or injunctive relief. Generally, the same court can fashion a remedy that includes both damages and equitable or injunctive relief.

15. © 2004 West Legal Studies in Business A Division of Thomson Learning 15 The Doctrine of Stare Decisis Stare decisis is a Latin phrase meaning “to stand on decided cases”. Stare decisis is a Latin phrase meaning “to stand on decided cases”.  Makes the law stable and predictable.  Increases judicial efficiency by relieving courts of having to reinvent legal principles for each case brought before them. Stare decisis is “judge made law” based on precedent. Stare decisis is “judge made law” based on precedent. Stare decisis is a Latin phrase meaning “to stand on decided cases”. Stare decisis is a Latin phrase meaning “to stand on decided cases”.  Makes the law stable and predictable.  Increases judicial efficiency by relieving courts of having to reinvent legal principles for each case brought before them. Stare decisis is “judge made law” based on precedent. Stare decisis is “judge made law” based on precedent.

16. © 2004 West Legal Studies in Business A Division of Thomson Learning 16 Case Precedents and Case Reporters Precedents are judicial decisions that give rise to legal principles that can be applied in future cases based upon similar facts. Precedents are judicial decisions that give rise to legal principles that can be applied in future cases based upon similar facts. Precedents and other forms of positive law, such as statutes, constitutions, and regulations are referred to as binding authorities and must be followed. Precedents and other forms of positive law, such as statutes, constitutions, and regulations are referred to as binding authorities and must be followed. Today, cases are published or ‘reported’ in books called reporters (see Appendix). Today, cases are published or ‘reported’ in books called reporters (see Appendix). Precedents are judicial decisions that give rise to legal principles that can be applied in future cases based upon similar facts. Precedents are judicial decisions that give rise to legal principles that can be applied in future cases based upon similar facts. Precedents and other forms of positive law, such as statutes, constitutions, and regulations are referred to as binding authorities and must be followed. Precedents and other forms of positive law, such as statutes, constitutions, and regulations are referred to as binding authorities and must be followed. Today, cases are published or ‘reported’ in books called reporters (see Appendix). Today, cases are published or ‘reported’ in books called reporters (see Appendix).

17. © 2004 West Legal Studies in Business A Division of Thomson Learning 17 Departure from Precedent In cases of “first impression” where there is no precedent, the court may refer to positive law, public policy, and widely held social values in order to craft the best new precedent. In cases of “first impression” where there is no precedent, the court may refer to positive law, public policy, and widely held social values in order to craft the best new precedent.

18. © 2004 West Legal Studies in Business A Division of Thomson Learning 18 Stare Decisis and Legal Reasoning Method used by judges to reach a decision. Method used by judges to reach a decision. Many courts and attorneys frame decisions and briefs using the IRAC format: Issue, Rule, Application (Analysis) and Conclusion. Many courts and attorneys frame decisions and briefs using the IRAC format: Issue, Rule, Application (Analysis) and Conclusion.  What are the key facts and issues?  What rules or laws apply?  How do the rules of law apply to these facts? Method used by judges to reach a decision. Method used by judges to reach a decision. Many courts and attorneys frame decisions and briefs using the IRAC format: Issue, Rule, Application (Analysis) and Conclusion. Many courts and attorneys frame decisions and briefs using the IRAC format: Issue, Rule, Application (Analysis) and Conclusion.  What are the key facts and issues?  What rules or laws apply?  How do the rules of law apply to these facts?

19. © 2004 West Legal Studies in Business A Division of Thomson Learning 19 Forms of Legal Reasoning Deductive Reasoning: Makes use of syllogism, a type of logical relationship involving a major premise and a minor premise Deductive Reasoning: Makes use of syllogism, a type of logical relationship involving a major premise and a minor premise Linear Reasoning: Proceeds from point to point, with the final point being the conclusion Linear Reasoning: Proceeds from point to point, with the final point being the conclusion Reasoning by Analogy: Analysis that compares facts of present case with facts of similar previously-decided cases. Reasoning by Analogy: Analysis that compares facts of present case with facts of similar previously-decided cases. Deductive Reasoning: Makes use of syllogism, a type of logical relationship involving a major premise and a minor premise Deductive Reasoning: Makes use of syllogism, a type of logical relationship involving a major premise and a minor premise Linear Reasoning: Proceeds from point to point, with the final point being the conclusion Linear Reasoning: Proceeds from point to point, with the final point being the conclusion Reasoning by Analogy: Analysis that compares facts of present case with facts of similar previously-decided cases. Reasoning by Analogy: Analysis that compares facts of present case with facts of similar previously-decided cases.

20. © 2004 West Legal Studies in Business A Division of Thomson Learning 20 § 5: The Common Law Today Common law today governs transactions not covered by statutory law. Common law today governs transactions not covered by statutory law. Restatements of the Law: Restatements of the Law:  By the American Law Institute,  Summarize the common law of most states. Common law today governs transactions not covered by statutory law. Common law today governs transactions not covered by statutory law. Restatements of the Law: Restatements of the Law:  By the American Law Institute,  Summarize the common law of most states.

21. © 2004 West Legal Studies in Business A Division of Thomson Learning 21 §6: Classifications of Law Every type of law will be either: Every type of law will be either:  Civil or Criminal (and either),  Substantive or Procedural (and either),  Public or Private. “Cyberlaw” is traditional law applied in the online forums. “Cyberlaw” is traditional law applied in the online forums. Every type of law will be either: Every type of law will be either:  Civil or Criminal (and either),  Substantive or Procedural (and either),  Public or Private. “Cyberlaw” is traditional law applied in the online forums. “Cyberlaw” is traditional law applied in the online forums.

22. © 2004 West Legal Studies in Business A Division of Thomson Learning 22 Civil vs. Criminal Law Civil law defines the rights between individuals or individuals and governments. Civil law defines the rights between individuals or individuals and governments. Criminal law defines an individual’s obligations to society as a whole. Criminal law defines an individual’s obligations to society as a whole. Civil law defines the rights between individuals or individuals and governments. Civil law defines the rights between individuals or individuals and governments. Criminal law defines an individual’s obligations to society as a whole. Criminal law defines an individual’s obligations to society as a whole.

23. © 2004 West Legal Studies in Business A Division of Thomson Learning 23 Substantive vs. Procedural Substantive law defines or creates the rights and obligations of persons and governments. Substantive law defines or creates the rights and obligations of persons and governments. Procedural law provides the steps one must follow in order to avail oneself of one’s legal rights or enforce another’s legal obligations. Procedural law provides the steps one must follow in order to avail oneself of one’s legal rights or enforce another’s legal obligations. Substantive law defines or creates the rights and obligations of persons and governments. Substantive law defines or creates the rights and obligations of persons and governments. Procedural law provides the steps one must follow in order to avail oneself of one’s legal rights or enforce another’s legal obligations. Procedural law provides the steps one must follow in order to avail oneself of one’s legal rights or enforce another’s legal obligations.

24. © 2004 West Legal Studies in Business A Division of Thomson Learning 24 Law on the Web Findlaw.com. Findlaw.com. Findlaw.com Legal Information Institute at Cornell Law School. Legal Information Institute at Cornell Law School. Legal Information Institute at Cornell Law School Legal Information Institute at Cornell Law School Library of Congress. Library of Congress. Library of Congress Library of Congress Villanova’s Center for Information Law and Policy. Villanova’s Center for Information Law and Policy. Villanova’s Center for Information Law and Policy Villanova’s Center for Information Law and Policy Virtual Law Library at Indiana U. Virtual Law Library at Indiana U. Virtual Law Library at Indiana U. Virtual Law Library at Indiana U. Legal Research Exercises on the Web. Legal Research Exercises on the Web. Legal Research Exercises on the Web. Legal Research Exercises on the Web. Findlaw.com. Findlaw.com. Findlaw.com Legal Information Institute at Cornell Law School. Legal Information Institute at Cornell Law School. Legal Information Institute at Cornell Law School Legal Information Institute at Cornell Law School Library of Congress. Library of Congress. Library of Congress Library of Congress Villanova’s Center for Information Law and Policy. Villanova’s Center for Information Law and Policy. Villanova’s Center for Information Law and Policy Villanova’s Center for Information Law and Policy Virtual Law Library at Indiana U. Virtual Law Library at Indiana U. Virtual Law Library at Indiana U. Virtual Law Library at Indiana U. Legal Research Exercises on the Web. Legal Research Exercises on the Web. Legal Research Exercises on the Web. Legal Research Exercises on the Web.

25. © 2004 West Legal Studies in Business A Division of Thomson Learning 25 Appendix: Finding Primary Sources of Law Finding Statutory Law. Finding Statutory Law.  United States Code (USC). United States Code United States Code  State Statutes (Texas). Texas Finding Administrative Law. Finding Administrative Law.  Code of Federal Regulations (CFR). Code of Federal Regulations Code of Federal Regulations Finding Case Law. Finding Case Law.  Supreme Court Cases at Findlaw.com. Supreme Court Cases Supreme Court Cases  Federal Court Cases at Findlaw.com. Federal Court Cases Federal Court Cases  State Court Cases at Findlaw.com. State Court Cases State Court Cases Finding Statutory Law. Finding Statutory Law.  United States Code (USC). United States Code United States Code  State Statutes (Texas). Texas Finding Administrative Law. Finding Administrative Law.  Code of Federal Regulations (CFR). Code of Federal Regulations Code of Federal Regulations Finding Case Law. Finding Case Law.  Supreme Court Cases at Findlaw.com. Supreme Court Cases Supreme Court Cases  Federal Court Cases at Findlaw.com. Federal Court Cases Federal Court Cases  State Court Cases at Findlaw.com. State Court Cases State Court Cases

26. © 2004 West Legal Studies in Business A Division of Thomson Learning 26 How to Read & Understand Case Law Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Toyota Motor Manufacturing, Kentucky, Inc., 534 U.S. 184 (2002). Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Toyota Motor Manufacturing, Kentucky, Inc., 534 U.S. 184 (2002). Title: First Party is Plaintiff, second party is Defendant. The parties are either italicized or underlined.

27. © 2004 West Legal Studies in Business A Division of Thomson Learning 27 How to Read & Understand Case Law [2] Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Toyota Motor Manufacturing, Kentucky, Inc., 534 U.S. 184 (2002). Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Legal cases are identified by a “legal citation” (or a “cite”) as the example below: Toyota Motor Manufacturing, Kentucky, Inc., 534 U.S. 184 (2002). This is a U.S. Supreme Court Case found in volume 534, page 184 of the U.S. Supreme Court reporter.