Chapter 1 Law: Importance, Purpose, and Sources

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Chapter 1:
Law: Importance, Purposes,
and Sources

2. Business Law, Sixth Edition
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Learning Objectives
• Discuss the importance of law to business.
• Understand the definitions of law.
• Describe the objectives of the legal system.
• Explain the sources of law in the United
States.
• Recognize uniform state laws.
• Discern the importance of case law.

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1.0 In the News
Trump’s executive order on immigration: a ban
or not a ban? (5:32) http://bvtlab.com/8aQw6
Executive Order 13769, titled Protecting the Nation
from Foreign Terrorist Entry into the United States,
was an executive order issued by United States
President Donald Trump.
•
• Discuss the rationale of the various court decisions
from Executive Order 13769.
•
• Explain the sources of law being utilized.

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1.1a Legal Environment of Business
Why Study the Legal Environment
of Business?
• Law controls the relationships between
parties.
• Law provides the mechanism by which
government regulates business behavior.

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1.1b Strategic Integration
Knowledge of the law allows one to
identify legal risks and effectively
reduce or eliminate liability.
• Use law to strategic advantage

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1.1b Critical Thinking
Case: Kelo
• Based on the majority and minority opinions,
what should be the role of the law?
• What should be the role of the courts and the
legislature?
• What respect is there for history?
• What is the possible impact of the majority
decision on business?
Eminent Domain – Supreme Court Case (:48)
http://bvtlab.com/76829

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1.2a Definitions of Law
Legislative law – laws passed by legislative
bodies (federal and state constitutions)
Judicial pronouncements – legal statements
made by courts
Procedural law – determine how lawsuits are
handled in courts

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1.2b Objectives of a Legal System
• Promote order
• Allow justice to be attained
• Cultivate a sense of reasonableness
in society

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1.3a Hierarchy of Sources of Law
• Constitutions
• Legislation
• Judicial decisions
• Administrative rules

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1.3b Basic Constitutional Principles
• Highest priority in the system
• Doctrine of separation of powers
- Legislative, executive and judicial
branches function separately
• Doctrine of judicial review
- Power of courts to decide laws and
executive actions are unconstitutional

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1.3c Legislation
Statutes – laws passed by Congress or
state legislature
Ordinances – legislative acts passed
by municipalities
Codes – a collection of statutes on a
particular subject

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1.3d Interpreting Legislation
What would the will or intent be today,
given the current problem?
• Examine legislative history
• Narrow construction of criminal and tax laws
• Remedial statutes liberally construed
• Plain or usual meaning
• Role of context

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1.3e Uniform State Laws
Each state has its own constitution,
statutes, and case law.
Two methods of achieving uniformity in
business law:
• Having federal legislation govern
business law
• Having states’ legislatures adopt uniform
laws

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1.3f Court Decisions
Elemental aspects of court decisions:
• Common law: Decided cases are the
source of law.
• Civil law (used differently from
criminal-civil distinction): law developed
by legislatures and reduced to statutes

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1.4a Stare Decisis
Definition: “Let the decision stand”
• Advantages: certainty, predictability,
expediency
• Contrast with res judicata—once a
dispute is litigated and resolved, these
parties are forever barred from litigating
the same matter again
Stare Decisis Doctrine: Definition and Example
Cases (4:08) http://bvtlab.com/3Y9vn

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1.4b Problems with Case Law
• Complex
• Conflicting precedents
• Rejection of precedent
• Conflict of laws
• Public law subjects

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1.4c Critical Thinking
Case: Kimble
• Why did the court apply stare decisis
principles in this case?
• Who should change the law, according to
the court, if it needs to be changed?
Stephen Kimble v Marvel Entertainment, LLC
(2:27) http://bvtlab.com/6K8wH

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1.4d Critical Thinking
Case: Estee Lauder
• Would a court sitting in California
have reached the same conclusion?
• Did the conflict of laws’ principles
work in this case?
Estee Lauder v Shashi Batra (3:34)
http://bvtlab.com/8QP77