Legal Environment of Business Chapter Summary

LEGAL ENVIRONMENT OF
BUSINESS: Online Commerce,
Business Ethics, and Global
Issues
Chapter 1
Legal Heritage and the
Digital Age

Learning Objectives
 Define law.
 Describe the functions of law.
 Explain the development of the U.S. legal system.
 List and describe the sources of law in the United
States.
 Discuss the importance of the U.S. Supreme
Court’s decision in Brown v. Board of Education.
© 2016 by Pearson Education, Inc.All rights reserved
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Law
 Body of rules of action or conduct prescribed by
controlling authority and having binding legal force
 Obeyed and followed by citizens subject to sanctions
or legal consequences
 Forbids persons from engaging in certain undesirable
activities
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Functions of Law
Keeping the peace
Shaping moral standards
Promoting social justice
Maintaining the status quo
Facilitating orderly change
Facilitating planning
Providing a basis for compromise
Maximizing individual freedom
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Fairness of the Law
 Misuses and oversights of the U.S. Legal system
allows some guilty parties to go unpunished
 Abuses of discretion and mistakes by judges and
juries
 Unequal applications of the law
 Procedural mishaps
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Jurisprudence
 Philosophy or science of the law
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Case 1.1: Moral Theory of Law and Ethics
 Case
 POM Wonderful LLC v. Coca-Cola Company
 Supreme Court of the United States
 Issue
 Can a private party bring an unfair competition
lawsuit under the Lanham Act against a competitor
that challenges the truthfulness of a food label?
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Schools of Jurisprudential Thought
• Law is based on what is “correct”
Natural Law
School
• Law is an aggregate of social traditions and customs
Historical
School
• Law is shaped by logic
Analytical
School
• Law is a means of achieving and advancing certain
sociological goals
Sociological
School
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Schools of Jurisprudential Thought (cont.)
• Law is a set of rules developed, communicated, and
enforced by the ruling party
• Legal rules are unnecessary and are used as an
obstacle by the powerful to maintain the status quo
• Promoting market efficiency should be the central
concern of legal decision making
• Otherwise known as Chicago School
Command School
Critical Legal
Studies School
Law and
Economics School
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English Common Law
 Developed by judges who issued their opinions when
deciding a case
 Principles announced in the cases became precedent
for later judges deciding similar cases
 Divided into cases decided by the:
 Law courts
 Formed to maintain one uniform system of law
to be accomplished by loyal followers
appointed as judges in local areas
 During this time, law tend to emphasize the
form over the substance of a case
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English Common Law (cont.)
 Equity courts
 Otherwise known as chancery courts
 Established due to unfair results and limited
remedies available in the law courts
 Administered under the authority of the lord
chancellor
 Inquired into the merits of the case rather than
emphasizing on legal procedure
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English Common Law (cont.)
 Merchant courts
 Established to administer the law merchant
 Law merchant: Rules developed by the
merchants who travelled around England and
Europe to solve their commercial disputes
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Constitutions
 Constitution of the United States of America
 States that any law whether federal, state, or local
conflicting with the U.S. Constitution is
unconstitutional and, therefore, unenforceable
 Established the structure of the federal government
 Created different branches of government and gave
specific powers
 Legislative branch (Congress) – makes the
law
 Executive branch (President) – enforces the
law
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Constitutions (cont.)
 Judicial branch (courts) – interprets and
determines the validity of the law
 State constitutions
 Establish the legislative, executive, and judicial
branches of state government and the powers of each
branch
 Provisions are valid unless they conflict with the U.S.
Constitution or any valid federal law
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Treaties
 Compact made between two or more nations
 Entered into by the president with the advice and
consent of two-thirds of the Senate
 Become part of the supreme law of the land
 Important source of law that will affect business in
the future
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Federal Statutes
 Statutes: Written laws that establish certain
courses of conduct that covered parties must
adhere to
 Enacted by the U.S. Congress with the
empowerment of Commerce Clause and other
provisions of the U.S. Constitution
 Regulate foreign and interstate commerce
 Organized by topic into code books
 Referred to as codified law
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State Statutes
 Enacted by state legislatures
 Placed in code books
 Assessed in the hardcopy code books or online
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Ordinances
 Law enacted by local government bodies
 Cities and municipalities, counties, school districts,
and water districts
 Codified
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Executive Orders
 Issued by the executive branch of government
 President of the United States
 State governors
 Derived from express delegation from the
legislative branch
 Implied from the U.S. Constitution and state
constitutions
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Regulations and Orders of Administrative
Agencies
 Administrative agencies
 Agencies that the legislative and executive branches
of federal and state governments are empowered to
establish
 Empowered by Congress or the state legislatures to
adopt administrative rules and regulations
 Consist of the power to hear and decide disputes
 Decisions are called orders
 Informally referred to as the fourth branch of
government
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Judicial Decisions
 Decision about an individual lawsuit issued by a
federal or state court
 Include written opinions in which a judge or justice
explains the legal reasoning used to decide the case
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Doctrine of Stare Decisis
 Adherence to precedent
 Precedent: Rule of law established in a court
decision
 Lower courts must follow the precedent
established by higher courts
 Promotes uniformity of law within a jurisdiction
 Makes the court system more efficient
 Makes the law more predictable for individuals
and businesses
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Priority of Law in the U.S.
 U.S. Constitution and treaties take precedence
over all other laws in the United States
 Federal statutes take precedence over federal
regulations
 Valid federal law takes precedence over any
conflicting state or local law
 State constitutions rank as the highest state law
 State statutes take precedence over state
regulations
 Valid state law takes precedence over local laws
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Critical Legal Thinking
 Consists of investigating, analyzing, evaluating,
and interpreting information to solve simple or
complex legal issues
 Improves a person’s problem solving skills
 Helps him or her make clear, logical, rational, and
well-reasoned conclusions and judgments
 Requires intellectually disciplined thinking
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Critical Legal Thinking
 Socratic method
 Process that consists of a series of questions and
answers and a give-and-take inquiry and debate
between a professor and students
 IRAC method
 Method used to examine a law case
 IRAC stands for issue, rule, application, and
conclusion
 Requires that the decision maker to analyze,
examine, evaluate, interpret, and apply the law to
the facts of the case
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Case 1.2: Voting Rights Act
 Case
 Shelby County, Texas v. Holder
 133 S.Ct. 2612 (2013) Supreme Court of the United
States
 Issue
 Is the coverage provision of the Voting Rights Act
that singles out several states for the federal
clearance requirement constitutional?
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