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  • 1. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-11 The Legal Environment of BusinessThe Legal Environment of Business A Critical Thinking ApproachA Critical Thinking Approach 55thth EditionEdition Nancy K. KubasekNancy K. Kubasek Bartley A. BrennanBartley A. Brennan M. Neil BrowneM. Neil Browne
  • 2. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-22 THE LEGAL ENVIRONMENT OF BUSINESS Introduction to Law and theIntroduction to Law and the Legal Environment ofLegal Environment of BusinessBusiness CHAPTER 2CHAPTER 2
  • 3. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-33 Chapter 2 OverviewChapter 2 Overview  Definition of the legal environment of businessDefinition of the legal environment of business  Definition of law and jurisprudenceDefinition of law and jurisprudence  Sources of lawSources of law  Classifications of lawClassifications of law  International dimensions of the legalInternational dimensions of the legal environment of businessenvironment of business
  • 4. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-44 Definition of the Legal Environment of BusinessDefinition of the Legal Environment of Business  It develops critical thinking skills.It develops critical thinking skills.  The study of legal reasoning, critical thinking skills, ethicalThe study of legal reasoning, critical thinking skills, ethical norms, and schools of ethical thought that interact with thenorms, and schools of ethical thought that interact with the law.law.  The study of the legal process and our present legalThe study of the legal process and our present legal system, as well as alternative dispute resolution systems.system, as well as alternative dispute resolution systems.  The study of the administrative law process and the role ofThe study of the administrative law process and the role of business people in that process.business people in that process.  The study of selected areas of public and private law,The study of selected areas of public and private law, consumer law, and environmental law.consumer law, and environmental law.  The examination of the international dimensions of theThe examination of the international dimensions of the legal environment of law.legal environment of law.
  • 5. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-55 Why study the legal environment of law?Why study the legal environment of law?  It develops critical thinking skills.It develops critical thinking skills.  It helps to establish legal literacy.It helps to establish legal literacy.  It develops an understanding that the law isIt develops an understanding that the law is dynamic not static.dynamic not static.  It deals with real-world problems.It deals with real-world problems.  It is interdisciplinary.It is interdisciplinary.
  • 6. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-66 Top Ten Reasons for Studying theTop Ten Reasons for Studying the Legal Environment of BusinessLegal Environment of Business  Becoming aware of the rules of doing business.Becoming aware of the rules of doing business.  Recognizing the legal limits on business freedom.Recognizing the legal limits on business freedom.  Becoming aware of potential misconduct of competitors.Becoming aware of potential misconduct of competitors.  Appreciating the limits of entrepreneurship.Appreciating the limits of entrepreneurship.  Being able to communicate with your lawyer.Being able to communicate with your lawyer.  Making you a more fully informed citizen.Making you a more fully informed citizen.  Developing an employment-related skill.Developing an employment-related skill.  Exploring the fascinating complexity of business decisions.Exploring the fascinating complexity of business decisions.  Providing a heightened awareness of business ethics.Providing a heightened awareness of business ethics.  Opening your eyes to the excitement of the law and business.Opening your eyes to the excitement of the law and business.
  • 7. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-77 Plato:Plato: law is a form of social control;law is a form of social control; Aristotle:Aristotle: it is a rule of conduct, a contract, an idealit is a rule of conduct, a contract, an ideal of reason;of reason; Cicero:Cicero: it is the agreement of reason and nature,it is the agreement of reason and nature, the distinction between the just and thethe distinction between the just and the unjust;unjust; Aquinas:Aquinas: it is an ordinance of reason for the commonit is an ordinance of reason for the common good;good; Bacon:Bacon: certainty is the prime necessity of law;certainty is the prime necessity of law; Hobbes:Hobbes: law is the command of the sovereign;law is the command of the sovereign; Hegel:Hegel: it is an unfolding or realizing of the idea ofit is an unfolding or realizing of the idea of right.right. Jurisprudence -Jurisprudence - science or philosophy of lawscience or philosophy of law
  • 8. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-88 SOME CHARACTERISTICSSOME CHARACTERISTICS Source of law is absolute (Nature, God, or Reason).Source of law is absolute (Nature, God, or Reason). Source of law is the sovereign.Source of law is the sovereign. Source of law is contemporary community opinion and customs.Source of law is contemporary community opinion and customs. Source of law are actors in the legal system and scientificSource of law are actors in the legal system and scientific analysis of their actions.analysis of their actions. Source of law is a cluster of legal and non-legal beliefs that mustSource of law is a cluster of legal and non-legal beliefs that must be critiqued to bring about social and political change.be critiqued to bring about social and political change. Jurisprudence reflects a male-dominated executive, legislative,Jurisprudence reflects a male-dominated executive, legislative, and judicial system in which women’s perspectives are ignoredand judicial system in which women’s perspectives are ignored and women are victimized.and women are victimized. Applies classical economic theory and empirical methods to allApplies classical economic theory and empirical methods to all areas of law in order to arrive at decisions.areas of law in order to arrive at decisions.Law and EconomicsLaw and Economics FeministFeminist Critical Legal TheoryCritical Legal Theory American RealistAmerican Realist SociologicalSociological PositivistPositivist Natural LawNatural Law Schools of JurisprudenceSchools of Jurisprudence SCHOOLSCHOOL
  • 9. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-99 Natural Law School –Natural Law School – Natural law has existed since 300 B.C. ItNatural law has existed since 300 B.C. It consists of the following concepts:consists of the following concepts:  There exist certain legal values or value judgmentsThere exist certain legal values or value judgments (e.g., a presumption of innocence until guilt is(e.g., a presumption of innocence until guilt is proved);proved);  these values or value judgments are unchangingthese values or value judgments are unchanging because their source is absolute (e.g., Nature, God, orbecause their source is absolute (e.g., Nature, God, or Reason);Reason);  these values or value judgments can be determined bythese values or value judgments can be determined by human reason; andhuman reason; and  once determined, they supersede any form of humanonce determined, they supersede any form of human law.law.
  • 10. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-1010 There are just laws and there are unjust laws. I wouldThere are just laws and there are unjust laws. I would be the first to advocate obeying just laws. One has notbe the first to advocate obeying just laws. One has not only a legal but moral responsibility to obey just laws.only a legal but moral responsibility to obey just laws. Conversely, one has the moral responsibility toConversely, one has the moral responsibility to disobey unjust laws. I would agree with St. Augustinedisobey unjust laws. I would agree with St. Augustine that “An unjust law is no law at all”.that “An unjust law is no law at all”. Martin Luther King Jr.Martin Luther King Jr. Natural Law School –Natural Law School –
  • 11. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-1111 Positivist SchoolPositivist School Followers of positivism, developed a schoolFollowers of positivism, developed a school of thought in opposition to the natural lawof thought in opposition to the natural law school in the 1800’s. Its chief tenets are:school in the 1800’s. Its chief tenets are:  Law is the expression of the will of the legislatorLaw is the expression of the will of the legislator or sovereign, which must be followed;or sovereign, which must be followed;  Morals are separate from law and should not beMorals are separate from law and should not be considered in making legal decisions;considered in making legal decisions;  Law is a “closed logical system” in which correctLaw is a “closed logical system” in which correct legal decisions are reached solely by logic andlegal decisions are reached solely by logic and the use of precedents.the use of precedents.
  • 12. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-1212 Sociological SchoolSociological School Followers of the sociological schoolFollowers of the sociological school propose three steps in determining law:propose three steps in determining law:  A legislator or a judge should make an inventory ofA legislator or a judge should make an inventory of community interests;community interests;  Judges and legislators should use this inventory toJudges and legislators should use this inventory to familiarize themselves with the community’sfamiliarize themselves with the community’s standards and mores; andstandards and mores; and  They should rule or legislate in conformity with thoseThey should rule or legislate in conformity with those standards and mores.standards and mores.
  • 13. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-1313 American Realist SchoolAmerican Realist School  The American realist school, focuses on theThe American realist school, focuses on the actors in the judicial system instead of on the largeractors in the judicial system instead of on the larger community to determine the meaning of law.community to determine the meaning of law.  This school sees law as a part of society and aThis school sees law as a part of society and a means of enforcing political and social values.means of enforcing political and social values. ““This doing of something about disputes, this doing itThis doing of something about disputes, this doing it reasonably, is the business of the law. And the peoplereasonably, is the business of the law. And the people who have the doing of it are in charge, whether they bewho have the doing of it are in charge, whether they be judges, or clerks, or jailers, or lawyers, they arejudges, or clerks, or jailers, or lawyers, they are officials of the law. What these officials do aboutofficials of the law. What these officials do about disputes is, to my mind, the law itself.”disputes is, to my mind, the law itself.” Karl LlewellynKarl Llewellyn in The Bramble BushThe Bramble Bush ““This doing of something about disputes, this doing itThis doing of something about disputes, this doing it reasonably, is the business of the law. And the peoplereasonably, is the business of the law. And the people who have the doing of it are in charge, whether they bewho have the doing of it are in charge, whether they be judges, or clerks, or jailers, or lawyers, they arejudges, or clerks, or jailers, or lawyers, they are officials of the law. What these officials do aboutofficials of the law. What these officials do about disputes is, to my mind, the law itself.”disputes is, to my mind, the law itself.” Karl LlewellynKarl Llewellyn in The Bramble BushThe Bramble Bush
  • 14. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-1414 Critical Legal Studies SchoolCritical Legal Studies School  Critical legal studies seek to connect whatCritical legal studies seek to connect what happens in the legal system to the political-happens in the legal system to the political- economic context within which it operates.economic context within which it operates.  Adherents believe that law reflects a cluster ofAdherents believe that law reflects a cluster of beliefs that convinces human beings that thebeliefs that convinces human beings that the hierarchical relations that they live and workhierarchical relations that they live and work under are natural and must be accommodated.under are natural and must be accommodated.  This cluster of beliefs has been constructed byThis cluster of beliefs has been constructed by elitists to rationalize their dominant power.elitists to rationalize their dominant power.
  • 15. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-1515 Feminist SchoolFeminist School  Most adherents of this school advocate lobbyingMost adherents of this school advocate lobbying legislatures and litigating in courts for changes inlegislatures and litigating in courts for changes in laws to accommodate women’s views.laws to accommodate women’s views.  They argue that our traditional common law reflectsThey argue that our traditional common law reflects a male emphasis on individual rights, which, ata male emphasis on individual rights, which, at times, is at odds with women’s views that the lawtimes, is at odds with women’s views that the law should be more reflective of a “culture of caring.”should be more reflective of a “culture of caring.”  To other adherents of this school of jurisprudence,To other adherents of this school of jurisprudence, the law is a means of male oppression.the law is a means of male oppression.
  • 16. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-1616 Law and Economics SchoolLaw and Economics School  It employs economics to explain andIt employs economics to explain and predict a judge’s decisions in certainpredict a judge’s decisions in certain areas.areas.  Most court decisions and legalMost court decisions and legal doctrines they depend on are efforts todoctrines they depend on are efforts to promote an efficient allocation ofpromote an efficient allocation of resources in society.resources in society.
  • 17. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-1717 Sources of U.S. LawSources of U.S. Law  The Legislative Branch - creates the lawThe Legislative Branch - creates the law  The Judicial Branch - interprets the lawsThe Judicial Branch - interprets the laws  The Executive Branch - enforces the lawsThe Executive Branch - enforces the laws  Administrative AgenciesAdministrative Agencies
  • 18. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-1818 Where to Find the LawWhere to Find the Law • Municipality administrative regulations • 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. • Municipal ordinances • State administrative code or state administrative regulations • Regional reporters • State reporters • State code or state statutes (e.g., Ohio Revised Code Annotated, Baldwin’s) STATE • Code of Federal Regulations (C.F.R.) • Federal Register (Fed. Reg.) • 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 • Title 3 of the Code of Federal Regulations • Codification of Presidential Proclamations and Executive Orders • United States Code (U.S.C.) • United States Code Annotated (U.S.C.A.) • United States Statutes at Large (Stat.) FEDERAL Admin Regulations Common Law/Judicial Interpretations Executive Orders Legislative Law Level of Government FEDERAL
  • 19. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-1919 Introduction H.R.1 Introduced in House Sent to Clerk of House House Rules Committee Action Referred to Appropriate House Committee Referred to Subcommittee Reported by Full Committee House Floor Debate and Vote on Bill S.1 Introduced in Senate Sent to Clerk of Senate Introduction Referred to Appropriate House Committee Referred to Subcommittee Reported by Full Committee House Floor Debate and Vote on Bill Joint House – Senate Conference Committee House (H.R.I.) Senate (S.1) Legislation - How a Bill Becomes a LawLegislation - How a Bill Becomes a Law
  • 20. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-2020 Judicial BranchJudicial Branch Definition:Definition: is comprised of the federal courtsis comprised of the federal courts and most state courts.and most state courts. Landmark case:Landmark case: Marbury v. MadisonMarbury v. Madison 1.1. Judicial Review – the power to determineJudicial Review – the power to determine whether a statute is constitutional was given towhether a statute is constitutional was given to the courts in this case.the courts in this case. 2.2. Case law precedentsCase law precedents
  • 21. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-2121 Executive BranchExecutive Branch Definition:Definition: is composed of the President,is composed of the President, President’s staff and the cabinet (heads ofPresident’s staff and the cabinet (heads of the executive departments).the executive departments).  Treaty MakingTreaty Making  Executive OrdersExecutive Orders
  • 22. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-2222 Administrative AgenciesAdministrative Agencies Congress delegates authority to theseCongress delegates authority to these agencies to make rules governing theagencies to make rules governing the conduct of business and labor in certainconduct of business and labor in certain areas.areas. Examples of Federal Regulatory Agencies:Examples of Federal Regulatory Agencies:  SECSEC  FTCFTC  OSHAOSHA  EEOCEEOC
  • 23. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-2323 Classifications of LawClassifications of Law Case LawCase Law Statutory LawStatutory Law results from judicialresults from judicial interpretations ofinterpretations of constitutions and statutes.constitutions and statutes. made by the legislativemade by the legislative branch of government.branch of government. Criminal LawCriminal Law Civil LawCivil Law composed of federal andcomposed of federal and state statutes prohibitingstate statutes prohibiting wrongful conduct rangingwrongful conduct ranging from murder to fraud.from murder to fraud. governs litigation betweengoverns litigation between two private parties.two private parties.
  • 24. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-2424 Classifications of LawClassifications of Law Public LawPublic Law Private LawPrivate Law deals with the relationship ofdeals with the relationship of government to individualgovernment to individual citizens.citizens. deals with the enforcementdeals with the enforcement of private duties.of private duties. SubstantiveSubstantive ProceduralProcedural creates and regulates legalcreates and regulates legal rightsrights sets out the rules forsets out the rules for enforcing the legal rights.enforcing the legal rights. It is the “ Process”.It is the “ Process”. Cyber lawCyber law - is not a new type of law. It applies the traditional- is not a new type of law. It applies the traditional categories of law to a new form of communication (online).categories of law to a new form of communication (online).
  • 25. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-2525 SummarySummary Variables that have an impact onVariables that have an impact on business decision making:business decision making:  LegalLegal  FinancialFinancial  EconomicEconomic  EthicsEthics
  • 26. THE LEGAL ENVIRONMENT OF BUSINESS © 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-2626 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America. Copyright © 2009 Pearson Education, Inc.  Copyright © 2009 Pearson Education, Inc.   Publishing as Prentice HallPublishing as Prentice Hall