Chapter 1
An Introduction to Dynamic Business Law
Business Activities and the Legal Environment
o Law regulates many different areas of
business.
o Study of business law also involves a
knowledge of ethics in decision-making.
o Many different laws may affect a single
business transaction.
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Law vs. Ethics
o “Law” – rules which must be followed by everyone
in society.
o “Ethics” – your own rules, such as personal beliefs,
religious doctrine, moral code, cultural traditions,
etc.; may involve giving up a legal right.
o Ethics will give rise to law, but law does not
necessarily give rise to ethical behavior.
o Example of ethics becoming law – religious
doctrine re killing another person now found in
homicide laws.
o Example of following law without being ethical –
MLB team’s name change from Anaheim Angels
to Los Angeles Angels of Anaheim; contract
requires that “Anaheim” must be in team’s name,
but is new name what was contemplated by the
city or the Angels when contract signed back in
1996?
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Sources of American Law
o Constitutions – federal plus every state; everyone in U.S.
subject to federal constitution plus one state constitution at
all times; creates government powers/structure and
guarantees individual rights.
o Statutes – federal, state and local; also called ordinances,
regulations and codes.
o Common or case law – decisions by judges, who interpret
constitutions, statutes and/or prior cases (“precedent”) to
make decision of current dispute; stare decisis ordinarily
requires judges to follow past decisions, which creates
predictability and stability in legal and business matters.
o Administrative law – decisions and rules of federal, state
and local administrative entities (e.g., IRS, DMV); important
since many laws require a hearing by an administrative
agency before being able to file a case in court (note that
courts often give great deference to administrative
agency’s decision).
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The Common Law Tradition
o American law is based largely on English
Common Law originating in medieval
England.
o The common law was based largely on
traditions, social customs, rules and cases
developed over hundreds of years after
the Norman conquest in 1066.
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Early English Courts
o At common law, there were two
separate court systems with two
different types of remedies:
o COURTS OF LAW (monetary relief).
o COURTS OF EQUITY (non-monetary relief),
based on “notions of justice and fair
dealing.”
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Courts of Law
o Also called “king’s courts” where judges
were appointed by the king.
o Remedies limited to those provided at law,
i.e., land, chattel, money.
o Judges resolved disputes by application of
rules of law to the facts of the case before
the court.
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Courts of Equity
o Equitable relief was sometimes available
in instances where a strict application of
the law to the facts of the case compelled
a result that was legal but unjust.
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Legal and Equitable Remedies Today
o Today federal and state courts of general
jurisdiction have consolidated remedies at
law and remedies at equity.
o Generally, the same court can fashion a
remedy that includes both damages and
equitable or injunctive relief.
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The Doctrine of Stare Decisis
o Stare decisis is a Latin phrase meaning “to
stand on decided cases.”
o Makes the law stable and predictable.
o Increases judicial efficiency by relieving courts
of having to reinvent legal principles for each
case brought before them.
o Stare decisis is “judge made law” based
on precedent.
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Case Precedents and Case Reporters
o Precedents are judicial decisions that give rise to
legal principles that can be applied in future
cases based upon similar facts.
o Precedents and other forms of law, such as
statutes, constitutions, and regulations are
referred to as binding authorities and must be
followed.
o Today, cases are published or ‘reported’ in books
called reporters
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Departure from Precedent
o In cases of “first impression” where there is
no precedent, the court may refer to
positive law, public policy, and widely
held social values in order to craft the best
new precedent.
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Stare Decisis and Legal Reasoning
o Method used by judges to reach a decision.
o Many courts and attorneys frame decisions
and briefs using the IRAC format: Issue, Rule,
Application (Analysis) and Conclusion.
o What are the key facts and issues?
o What rules or laws apply?
o How do the rules of law apply to these facts?
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Categories of Law
o Substantive and procedural – substantive law defines
legal rights/limitations; procedural law provides the methods
for seeking or defending legal rights/limitations.
o Public and private – public law involves matters of public
interest; private law pertains to the parties to a dispute only.
o Civil and criminal – civil law relates to duties between
individuals, businesses and/or government; criminal law
relates to wrongs against society and is investigated,
prosecuted and administered by government.
o Law and equity – actions at law involve money; actions in
equity involve non-monetary relief (e.g., injunction, specific
performance); jury trial available in actions at law only.
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Civil vs. Criminal Law
o Civil law defines the rights between
individuals or individuals and
governments.
o Criminal law defines an individual’s
obligations to society as a whole.
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Civil Lawsuit - Terminology
o Parties in the trial court – plaintiff or petitioner,
defendant or respondent, cross-complainant, crossdefendant; party can be more than one.
o Parties in the appellate court - federal (appellant,
appellee, cross-appellant, cross-appellee, petitioner,
respondent); California (appellant, respondent,
cross-appellant, cross-respondent, petitioner,
respondent); party can be more than one.
o Pleadings filed by parties in the trial court – complaint
by plaintiff; answer or other responsive pleading by
defendant or cross-defendant; cross-complaint by
cross-complainant; petition by petitioner; response
by respondent; motion by any party.
o Briefs filed by parties in the appellate court – opening
brief(s); respondent’s or cross-respondent’s brief;
reply brief(s); petition for review (California Supreme
Court) or petition for writ of certiorari (United States
Supreme Court); petition for writ of mandate.
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Finding Primary Sources of Law
o Finding Statutory Law.
o United States Code (USC).
o State Statutes (California).
o Finding Administrative Law.
o Code of Federal Regulations (CFR).
o Finding Case Law.
o Supreme Court Cases at Findlaw.com.
o Federal Court Cases at Findlaw.com.
o State Court Cases at Findlaw.com.
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How to Read & Understand Case Law
o Legal cases are identified by a “legal
citation” (or a “cite”) as the example below:
D.A.B.E., Inc. v. City of Toledo, 393 F.3d
692 (6th Cir. 2005).
Title: First Party is Plaintiff, second
party is Defendant. The parties are
either italicized or underlined.
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How to Read & Understand Case Law
o Legal cases are identified by a “legal
citation” (or a “cite”) as the example below:
D.A.B.E., Inc. v. City of Toledo, 393 F.3d
692 (6th Cir. 2005).
Citation: Case is found in Federal
Supplement 3rd, Volume 393, page 692.
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How to Read & Understand Case Law
o Legal cases are identified by a “legal
citation” (or a “cite”) as the example below:
D.A.B.E., Inc. v. City of Toledo, 393 F.3d
692 (6th Cir. 2005).
Case was decided by the Sixth Circuit
Court of Appeals, 2005.
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