Law and it's Resources

1. LAW AND ITS SOURCES

2. What Is Law?
 As for law, some people think of it as police officers;
others as courts; still other as the product of a
legislature, a statute.
 All of these perceptions are at least partially accurate;
all are part of a legal system; and all of these and more
are part of law as an institution in society.

3. Law in Business
 A person who is involved in business is also involved in
the law concerning business.
 Making contracts and using negotiable instruments—
both of which are legal concepts—are the essence of
business.
 While business and law have traditionally been closely
associated.
 The importance of law to business has greatly
increased in the past several years.
 This is reflected in the rapid increased in the use of
lawyers by people in business.

4. The Nature of Law
 Legal philosophers and legal scholars do not agree on
a single definition of law.
 The term is sometimes applied to a legal system, as
when we speak of “the rule of law.” here we are
referring to a political system in which all people
within the system, including the most powerful rulers,
are required to follow the rules called “the law.”
 Furthermore, they are all answerable to a system of
courts that applied that body of law.

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 In the United States, the Constitution is the
foundation of such a legal system.
 A legal system involves processes for social control—
the framework within which people carry on their
activities.
 It also provides institutions such as legislature,
government agencies, courts, and police forces that
provide rules of behavior and means for enforcing
them and for settling disputes.

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 More commonly, when people speak of law, they refer
to the rules themselves.
 The following definition of law is useful.
 The law is a set of principles, rules, and standards of
conduct.
 (1) That have general application in the society.
 (2) That have been developed by an authority for that
society.
 (3) For the violation of which the society imposes a
penalty.

7. A Limited Meaning
 The term a law has a different and more limited
meaning.
 It usually is applied to a statute—a rule passed by a
legislature.
 As we shall see, legislatures such as congress are only
one source of law.
 Examples of well-known federal statutes relating to
business include the Sherman Act (antitrust law), the
Magnusson-moss consumer warranty Act, and the
Occupational Safety and Health Act.

8. Function of Law
 The basic functions of law are:
 (1) keeping the peace.
 (2) Enforcing standards of conduct and maintaining
order.
 (3) Facilitating planning.
 (4) Promoting social justice.

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 The first two functions---keeping the peace and enforcing
standards of conduct and maintaining order----help further
another function of law that is especially important to
business: facilitating planning.
 Contract and sales law are examples of this function. In
making the courts available to enforce contracts, the legal
system ensures that the parties to contracts will either carry
out their promises or be liable for damages.
 Promote social justice by protecting the disadvantaged.
Courts, in applying the law, also seem to be seeking to
balance the scales of benefit the little guy in dealing big
business and big government.

10. Classifications of Law
 There are many ways to subdivide the law as we have
just defined it.
 One way is to distinguish between substantive law
and procedural law.
 Substantive law sets out the rights and duties
governing people as they act in society.
 Duties tend to take the form of command: “Do this” or
“Don’t do that”
 Substantive law also establishes rights and privileges.
An example is the freedom of speech granted by the
U.S. constitution.

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 Procedural law establishes the rules under which the
substantive rules of law are enforced.
 Rules as to what cases a court can decide, how a trial is
conducted, and how a judgment by a court is to be
enforced are all part of procedural law.
 Another important distinction is between criminal
law and civil law.
 Criminal law defines breaches of duty to society at
large, it is the society, through government employees
called public prosecutors or district attorneys, that
brings court action against violators.

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 Duties owed by one person (including corporations) to
another are established by civil law.
 For example, we have a duty to carry out our
contractual promises. Tort law defines a host of duties
people owe to each other.
 The court does not seek to punish the wrongdoer but
rather to make the wronged party whole through a
money award called damages.
 For examples, if someone carelessly runs a car into
yours, that person has committed the civil wrong
(tort) of negligence.

13. The American Legal System
 Law and government: law is made and enforced by
government. Law also defines and organizes the
government.
 The founders of the United States feared government
power, yet they realized that only a strong government
could keep the freedom they had just won in the
Revolutionary war.
 The founders also devised a system of checks and balances
within the federal government.
 They set up three equal branches of government---the
legislative, executive, and judicial branches—which have
different but complementary functions.

14. Constitutional Powers
 Under the constitution, laws passed by congress are
not valid if the constitution did not give congress the
power to pass that kind of law, or if the constitution
prohibits such a law.
 Most federal regulations that affect business are based
on power given by the constitution to congress under
the commerce clause, which permits congress to
regulate interstate and foreign commerce.
 Supreme court decisions since the 1930s have
interpreted that power very broadly.

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 The federal taxing power has also been used to
regulate business. For example, high import duties can
be used to shut off the importation of certain foreign
goods.
 Constitutional limitations: many of the
prohibitions against regulations are contained in the
Bill of Rights---the first 10 amendments to the
constitution, which were added as the constitution was
being ratified by the states.

16. Sources of Law
 Federal and states sources. There is a variety of sources
of law in each of the 51 systems and, generally there are
similar sources in each system.
 Constitutions.
 Treaties.
 Statutes.
 Administration rules and decisions.
 Executive orders.
 Court decisions.

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 Constitution: Each state has a constitution. These
constitutions are similar to the U.S. constitution in the
design of the government that is provided. However,
many of them are much specific and detailed in their
provisions.
 Treaties: The constitution declares that treaties made
by the president with foreign governments, and
ratified by at least two thirds of the senate are “the
supreme law of the land.”

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 Statutes: Within each legal system, federal or state,
statutes stand next in the hierarchy of sources of law. A
statute is the product of the lawmaking of a legislative.
Statutes may add details to the government
framework---for example, establishing a regulatory
agency to provide a public service such as medical
treatment.
 Administrative rules and decisions: congress and
the state legislatures can delegate some of their
lawmaking power to a government agency.

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 Executive Orders: Congress or a state legislature also may
delegate rule-making power to the president or a governor.
 Court Decisions: Courts make law in three ways:
 (1) Interpretation---they determine the meaning of statutes,
administrative rules, executive orders, and even treaties
and constitutions.
 (2) common law---they find or determine the law in setting
disputes where none of the other sources of law appears to
supply an applicable rule.
 (3) judicial review---they review the constitutionality of the
acts of the legislative and judicial branches.

20. How the Law Changes
 Predictability: There are several procedural
requirements imposed by law on legislatures that help
to make statutes knowable to the people.
 For example, all bills that are introduced are published
so that citizens as well as legislators can become aware
of them.
 A bill is assigned to a committee, which may hold a
public hearing on it.
 The constitution prohibits ex post facto law. This
means that a new statute applies only to actions taken
after it becomes effective.

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 Adaptability: All though the doctrine of stare decisis is
backward looking because it relies on prior decisions,
common or judge-made law is not rigid and unchanging.
 To understand how flexibility in the common law is
possible, one must understand more about the operation
of the doctrine of stare decisis.
 Three steps are involved in applying the doctrine of stare
decisis.
 (1) finding an earlier case or cases in the same jurisdiction
that had similar facts.
 (2) deriving from the decisions a rule of law.
 (3) applying the rule to the case presently before the court.

22. Preventive Law
 The use of lawyers by business people is called
preventive law.
 The objectives of preventive law are to arrange
business plans and methods to increase profits by
 (1) Avoiding losses through fines and damage
judgments.
 (2) Reaching business goals through enforceable
contracts while avoiding government prohibitions.
 By involving a lawyer in the business planning process,
an intended business objective can be reached with
less legal risk.

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 Almost every business activity involves legal risks and
consequences.
 To avoid costly judgments and to get that to which they are
legally entitled, business people generally need to be
familiar with the law applicable to their activities.
 The practice of preventive law requires a knowledgeable
client as well as a knowledgeable lawyer.
 The client needs to understand the legal system and the
applicable law well enough to be able to communicate with
the lawyer.