P A R T
1
Foundations of American Law
The Nature of Law
The Resolution of Private Disputes
Business and The Constitution
Business Ethics, Corporate Social
Responsibility, Corporate Governance,
and Critical Thinking
McGraw-Hill/Irwin Business Law, 13/e
© 2007 The McGraw-Hill Companies, Inc. All rights reserved.
C H A P T E R
3
Business & The Constitution
"The very idea of the power
and the right of the People to
establish government
presupposes the duty of
every Individual to obey the
established Government."
-- George Washington (Farewell
Address, September 19, 1796)
Learning Objectives
Basics of the Constitution and federalism
 Relationship between federal and state
powers
 Important legal principles: supremacy,
preemption
 Constitutional guarantees and limitations

3-4
Overview of the Constitution
Establishes a tripartite government to ensure
a separation of powers
 A system of checks and balances exists in
which no one branch may control another

3-5
The Power to Regulate

Federal government has exclusive power
to administer certain national concerns,
such as war and currency


3-6
Some powers are shared with the states
States possess exclusive power to enact
laws to protect general welfare, health,
and safety
Supremacy & Preemption
The Constitution and statutes enacted by
Congress, including treaties, are the supreme
law of the land
 Congress may enact laws on certain issues
and preempt state regulation of that issue

3-7
Testing Constitutionality

Courts apply a means-ends test to review
allegedly unconstitutional statute



3-8
Rational basis test (minimal scrutiny)
 if law has rational basis, it will stand
Intermediate scrutiny
 law must substantially relate to important
governmental objectives to stand
Strict scrutiny
 Law presumed invalid if, on its face, it is
based on race, ethnicity, and religion
The Commerce Power
Commerce clause (Article I, Section 8, Clause 3)
applies to interstate commerce
 Supreme Court has applied the power to
intrastate commerce when the activity affects
interstate commerce


3-9
See Gonzales v. Raich
The First Amendment
First Amendment guarantees freedoms of
religion, speech, press, assembly, and
petition to individuals (and corporations)
 Restriction on commercial speech is valid if
it (1) seeks to implement a substantial
government interest, (2) directly advances
interest, and (3) is least restrictive method of
achieving interest (see Kasky v. Nike)

3 - 10
Constitutional Limitations

Fifth Amendment prohibits federal
government from depriving “any person
of life, liberty, or property without due
process of law” (due process clause)


3 - 11
Protection from unreasonable procedures
or unreasonable laws
Applied to states through Fourteenth
Amendment
Constitutional Limitations

Equal protection clause of Fourteenth
Amendment prohibits a government from
treating one person differently than another
without reasonable grounds for differential


3 - 12
Basic test: rational basis (minimal)
“Suspect” classifications (race, gender,
ethnicity) require higher level of scrutiny
Constitutional Limitations
Phrase “depriving a person … of property”
known as the takings clause
 Requires government to pay compensation
to property owner for taking property for
public purpose through eminent domain

3 - 13
Test Your Knowledge

True=A, False = B





3 - 14
The Constitution establishes a tripartite
government
The federal government has exclusive power
over matters of war and taxation
States possess exclusive power to enact laws
to protect welfare, health, and safety
The Fifth Amendment prohibits depriving
any person of life, liberty or happiness
Federal supremacy means that the U.S.
Constitution is the supreme law of the land
Test Your Knowledge

True=A, False = B




3 - 15
The Federal government may not interfere
with interstate commerce
The federal government may not restrict
individual or commercial speech
Constitutional limitations on governmental
power includes the Fifth Amendment
The “takings clause” means that the federal
government cannot take away an
individual’s freedom
Test Your Knowledge

Multiple Choice

Courts apply a means-ends test to review
an allegedly unconstitutional statute.
Which level of scrutiny applies to a statute
that gives benefits to people based on their
religion?
(a)
 (b)
 (c)

3 - 16
Minimal scrutiny
Intermediate scrutiny
Strict scrutiny
Test Your Knowledge

Multiple Choice

Substantive due process refers to a
prohibition against:
(a)
 (b)
 (c)
 (d)
 (e)

3 - 17
Unreasonable procedures
Unreasonable laws
Unreasonable (unfair) results
Both A & B
All of the above
Thought Question
 What constitutional issues are important to
you?
3 - 18