Chapter One Notes

Business Law

Section OneLaws and Legal Systems

Stages In the Growth of Law

Laws- enforceable rules of conduct in a society that reflect the culture and circumstances that create them

Code- laws grouped into an organized form

Most societies go through four distinct stages in forming their legal systems:

1. Individuals are free to take revenge for wrongs done to them

2. A leader acquires enough power to be able to force revenge-minded individuals to accept an award of goods or money instead

3. The leader gives this power to a system of courts

4. The leader or central authority acts to prevent and punish wrongs that provoke individuals to seek revenge

Common Law vs. Positive Law

Common Law- law based on the current standards or customs of the people

Positive Law- law set down by authority

In any society laws should be both predictable and flexible

What is the Origin of the U.S. Legal System?

49 of the 50 U.S. states have adopted the English common law, while Louisiana has adopted the Roman civil law.

Roman civil law adopted well written, organized sets of statutes that are typically only changed by the central government and not the judge that administers them.

English common law implemented the use of a jury to interpret that region’s customs for the court. Citizens who felt they were wrongly prosecuted in the trial could take their appeal to the King/Queen’s Bench in hopes to find justice for their case. This power to decide a case is known as jurisdiction.

Equity: An Alternative to Common Law

Equity- fairness in a court

Injunction- stopping an action from occurring

Common law courts carefully follow precedent, the use of prior cases as a guide for deciding similar new cases. However, this can be a disadvantage in court cases because of the rigid adherence to proper form (ex. misplaced periods or misspelled words can void the effect of a document).

Today, law courts and equity courts are typically merged and can award damages or issue orders or both.

Section twoTypes of Laws

Sources of Law

Constitution- a document that sets forth the framework of a government and its relationship to the people it governs.

Laws in this country are created at three levels of government; federal, state, and local.

The forms these laws can take include constitutions, statutes, case law, and administrative law.

Constitutions

Constitutional law is made when constitutions are adopted or amended, or when courts interpret constitutions.

The federal Constitution is “the supreme law of the land” (no federal, state, or local law is valid if it conflicts with the federal Constitution).

Federal and state constitutions are concerned with defining and allocating certain powers in our society including:

1. Powers between the people and their governments

2. Powers between state governments and the federal government

3. Powers among the branches of the government

Allocation of Power Between People and their Governments

The federal Constitution allocates powers between people and their governments through the Bill of Rights-the first ten amendments of the Constitution which protects people from actions of their governments.

Allocation of Power Between Federal and State Governments

The federal Constitution also allocates powers between the federal and state governments. For example, the Constitution gives the federal government the power to regulate both foreign and interstate commerce-trades between two or more states. Intrastate commerce deals with trades within one state and is left to that state’s government.

Allocation of Power Among the Branches of Government

State and federal constitutions also allocate governmental powers among the three branches of government: executive, legislative, and judicial.

These powers are distributed to create a system of checks and balances between the branches of government.

Statutes

Statutes- laws enacted by legislatures who act for their citizens

Ordinances- pieces of legislation created by a town, city council, county board, or commission that are only effective within the boundary of the local governments that enacted them

Case Law

Case Law- appropriate rules to be used in deciding a certain case and others like it due to the appellate court’s opinion on that case

Stare Decisis- a requirement that lower courts must follow established case law in deciding similar cases

Administrative Law

Administrative Agencies- governmental bodies formed to carry out particular laws

Federal, state, and local legislatures all create administrative agencies

Ex. Certain county’s zoning commissions

Typically controlled by the executive branch of government (the president, governor, or mayor).

Agencies receive legislative power which allow them to create administrative laws known as rules and regulations

Some agencies are allowed judicial power to hold hearings, make determinations of fact, and apply the law to cases.

Conflicting Laws

Different types of laws created by the same level of government may conflict

During these situations, legal rules are used to determine which statement of the law is superior to the other and should be enforced.

Federal Law>State Law>Local Law

Constitutional Law>Statutory Law>Administrative Law

Higher Court’s Decision>Lower Court’s Decision

Validity

When laws are declared invalid by a state or federal court because it conflicts with the constitution, it is said to be unconstitutional

The U.S. Supreme Court has the final say within the federal system

The people have the power to amend constitutions if they disagree with the courts’ interpretations

Statutes or ordinances must be constitutional to be valid

Validity Cont.

Statutes or ordinances must be constitutional to be valid

Courts may invalidate a rule or regulation of administrative agencies if it is outside the scope of powers delegated to the agency by the legislature that created it

Legislative bodies have the power to nullify a court’s interpretation of a statute or ordinance by rewriting the statute.

Administrative agencies may revise their regulations when challenged

Civil and Criminal Laws

Civil Law- group of laws that allows individuals to seek legal remedies for wrongs done to them

Criminal Law- an offense against society rather than individuals that disrupt the peace in a stable environment

Crime and Civil Offenses may occur when private injuries are inflicted and thus both civil and criminal laws may be applied.

Procedural and Substantive Laws

Procedural Law- determine what remedies are available in a lawsuit and how those remedies are to be secured (stare decisis is a procedural law as well as determining the supremacy of conflicting laws).

Substantive Law- defines rights and duties; is concerned with all rules of conduct except those involved in enforcement (murder, theft, breach of contract, and negligence).

Two types of procedural law:

1. Civil Procedure- used when civil laws have been violated

2. Criminal Procedure- used when someone has been charged with a crime

Business Law

Covers rules that apply to business situations and transactions

Most business transactions involve a merchant and a consumer

Mainly concerned with civil law, especially contracts

Business activities are at times also governed by criminal law

Business Law Cont.

Laws of our various states do not have to be alike as long as they are constitutionally valid

Committees of legal experts have written model laws covering areas such as sales, credit transactions, and business forms

Uniform Commercial Code (UCC) deals with sales of goods, aspects of banking, and leases of goods.

Section ThreeEthical Bases for Laws

Ethics and the Law

Ethics- a practice of deciding what is right or wrong in a reasoned, impartial manner

Ethical decisions are reasoned out by referring to an established authority that provides consistency

Business ethics are the ethical principles used in making business decisions

Many times, ethics are not considered when making business decisions due to the constant want of profit maximization.

Ethics Reflected in Laws

Fidelity Bond- an insurance policy that pays the employer money in the case of theft by employees

Civil Disobedience- an open, peaceful, violation of a law to protest its alleged, or supposed, injustice (Dr. Martin Luther King Jr. engaged in civil disobedience).

Many believe that civil disobedience is ethical when

1. A written law is in conflict with ethical reasoning

2. No effective political methods are available to change the law

3. The civil disobedience is nonviolent

Ethics Reflected in Laws Cont.

4. The civil disobedience does not advance a person’s immediate self-interest

5. The civil disobedience is public and one willingly accepts the punishment for violating the law

Summary

Chapter One presents the basic terms set forth to create a greater understanding of Business Law. It covers the many extensive laws, legal systems, and ethics behind these laws and regulations. One of the most important things I learned in this chapter was the differences between civil and criminal law and how someone can be charged through either of those ways.