CHAPTER 1
INTRODUCTION TO LAW
CHAPTER OUTLINE
I.
INTRODUCTION
General rules. ► Law: (1) Blackstone: "Law is a rule of civil conduct, commanding what is right and
prohibiting what is wrong." (2) General definition: governmental rules that (a) govern conduct and (b) carry a
penalty for a violation. ► Business law: governmental rules that regulate business transactions. ► Religious
beliefs and social morals are not laws because (1) they are not adopted by the government and (2) they do not
impose a penalty for their violation.
Examples.
► Law: theft is forbidden by the state; it is punished by imprisonment. ► Moral: society
embraces belief that one should help the poor; there is no punishment for failing to do so.
Study hint.
Laws may change due to society's changing perception of right and wrong.
II.
OBJECTIVES OF LAW
The law establishes rules of conduct so that: (1) society can resolve disputes; (2) individuals and businesses can
know the standards to which they must conform their conduct; and (3) society can effectively function because
there is a stable, yet flexible, framework.
III.
ROOTS OF OUR LEGAL SYSTEM
The American legal system was primarily based on the English common law and equity.
IV.
THE COMMON LAW
General rule.
Example.
Study hint.
V.
Common law is the body of judge-made law originating from English custom.
Courts have generally adopted the rule that minors can set aside most contracts.
Common law is a source of many modern laws, such as contract and tort law.
EQUITY
General rules. ► Equity is a system of justice intended to provide (1) fairness and (2) judicial remedies other
than money damages. Equity courts decide a case on the basis of what in fairness and good conscience should be
done, not on the basis of fixed legal rules. ► Equity is carried out through certain equitable remedies including:
(1) specific performance (court order requiring performance of a contract); (2) restraining orders (court orders
temporarily prohibiting certain actions); and (3) injunctions (court orders permanently prohibiting certain
actions).
Limitation.
Equitable remedies are available only if there is no adequate remedy at law, i.e., damages
(money a wrongdoer must pay) will not adequately compensate a party for a loss.
Study hint.
In most states, every court can apply both legal and equitable principles.
VI.
SOURCES OF LAW
Sources of law are: (1) judicial decisions; (2) constitutions; (3) statutes; and (4) administrative agency rules.
A. JUDICIAL DECISIONS
General rules. ► A judicial decision or interpretation of law that is adopted by the highest (appellate)
courts is called a precedent. ► The doctrine of stare decisis generally requires lower courts in the same
jurisdiction to follow established precedents in future, similar cases.
Study hints.
► The court that adopts a precedent may change the precedent in a subsequent case.
► The U.S. Supreme Court can reverse any federal lower court decision and a state supreme court (or
equivalent) can generally reverse any decision by a lower court in that state.
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B. CONSTITUTIONS
General rules.
► Constitution: document that defines: (1) the relationship between the branches of a
amendments to the U.S. Constitution, which establishes fundamental constitutional rights of individuals and
states. ► The U.S. Constitution is the supreme law in the United States. No federal or state law may
conflict with the U.S. Constitution.
Examples.
► Bill of Rights: First Amendment generally guarantees individuals the freedom of
speech. ► State laws that discriminate against persons because of their race are invalid because they
conflict with the U.S. Constitution.
Study hints.
► The U.S. Supreme Court has the final authority to determine whether a federal or state
law violates the U.S. Constitution. ► A state supreme court has the final authority to determine whether a
state law violates a state constitution.
C. STATUTES
General rules. ► Statutes: written laws created by Congress, state legislatures, and city councils.
► Ordinances: written laws adopted by cities. ► A federal statute prevails over a conflicting state statute.
► A state constitution prevails over a conflicting state statute. ► A state statute prevails over a conflicting
municipal ordinance.
Example.
The Uniform Commercial Code (UCC) that regulates many business activities and that
has been adopted in whole or in part in all states, is an important statute in business law.
Study hint.
It is easier to change statutes than it is to change constitutions.
D. ADMINISTRATIVE AGENCY ORDERS
General rule.
Within their area of jurisdiction, federal and state administrative agencies may adopt rules
or regulations (and issue orders) that generally have the same force as other laws.
Limitations.
► An administrative agency can adopt laws only if it has been delegated this power by
the legislature. ► An agency regulation is invalid if it conflicts with a statute.
Study hint.
Improper administrative agency orders may be challenged in court.
VII.
CIVIL VERSUS CRIMINAL LAW
General rules.
► Civil laws relate to personal rights and duties of individuals and businesses.
► Criminal law prohibits offenses against society. ► Crime: offense against society punishable by fine,
imprisonment, or death. ► Crimes are generally classified as: (1) felonies (serious crimes generally punishable
by death or imprisonment for more than one year); or (2) misdemeanors (minor crimes punishable by a fine or
imprisonment for less than one year). ► In a few states, minor offenses that do not impose a significant penalty,
such as a minor traffic citation, are called violations or infractions. ► A “wobbler” is a crime that may be
classified as a misdemeanor or felony --- the sentence actually imposed determines which it is.
Examples.
► Civil laws: contract or tort laws. ► Felonies: murder; robbery; sexual assault.
► Misdemeanor: disorderly conduct.
Study hints.
► A criminal prosecution must be brought by a government, which is usually represented
by a prosecutor or district attorney. ► Statutes define the acts that are crimes, and criminal laws vary from state
to state. ►
VIII. TORT LAW
General rules.
► Tort: private wrong against an individual for which damages may be recovered. ► A
tort may be: (1) intentionally committed; or (2) caused by a person's negligence (i.e., failure to exercise
reasonable care toward another person).
Examples.
► Negligence: a worker carelessly hits a pedestrian with a board. ► Other torts: assault;
libel; slander; trespass.
Study hints.
► The party injured by the tort must bring a tort action. ► The same act may be both a
crime and a tort. However, the crime and tort are subject to separate punishments that are imposed as the result
of separate legal proceedings.
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IX.
ETHICS
Ethics is the study of the morality of conduct, its motives, and duties. Our laws are based on society's changing
concepts of right and wrong.
A. BASES FOR ETHICAL JUDGMENT
Ethical judgments, or personal opinions of what is right or wrong, are based on personal values. Values are
developed from experience, cultural background, religious beliefs, and scientific knowledge.
B. ETHICAL PRINCIPLES
Ethics sometimes influences the law. Three principles that often determine the way in which ethics relates to
the law are: (1) the seriousness of the consequences; (2) the consensus of the majority; and (3) changes in ethical
standards.
1. Seriousness Of Consequences
General rule.
Laws are usually enacted to regulate unethical behavior that has serious consequences.
Although less serious matters can involve what is right or wrong, they are not the subject of laws.
Examples.
► Society believes it is wrong for one person to kill another. Laws have been enacted
to try to deter and to punish those who commit murder. ► Society may believe it is right for a person to call
a restaurant to cancel dinner reservations that won't be kept, but the consequences of not doing so are not
serious enough for society to enact a law to regulate this behavior.
2. Consensus Of The Majority
General rule.
In a democracy, laws are designed to reflect the ethical view of the majority.
Limitation.
When there are strong conflicting views on a certain subject, there may be no laws
regulating the matter.
3. Change In Ethical Standards
General rule.
Society's view of what is ethical or right changes over time.
Example.
As society developed the viewpoint that discrimination based on sex, color, race,
national origin, or religious creed was wrong, civil rights and fair employment practices laws were enacted.
C. BUSINESS ETHICS
Businesspersons are expected to act in ways that make their firms profitable. Many businesses have also
adopted codes of ethics that guide the behavior of employees. Some of these codes are legally enforceable;
others are voluntary.
1. Legally Enforceable
Professions, such as law, often have legally enforceable codes of ethics or codes of professional
responsibility. Violators are subject to discipline and possible suspension from practice.
2. Voluntary
Voluntary codes of ethics encourage certain behavior, but provide no sanctions if not followed.
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CHAPTER REVIEW
REVIEW OF TERMS
Select the term that best matches a statement below. Each term is the best match for only one statement.
TERMS
a. Bill of Rights
b. Business ethics
c. Business law
d. Code of ethics
e. Crime
f.
g.
h.
i.
Damages
Equity
Ethics
Injunction
j. Law
k. Stare decisis
l. Tort
m. Value
STATEMENTS
Answer
____ 1.
System of justice that is premised on principles of fairness and that provides remedies other than money
damages.
____ 2.
Study of the morality of conduct, motives for conduct, and duties.
____ 3.
Collection of guidelines for behavior.
____ 4.
Doctrine by which precedents must be followed by lower courts in similar cases.
____ 5.
Court order permanently prohibiting an action.
____ 6.
First ten amendments to the U.S. Constitution which guarantee individual constitutional rights.
____ 7.
Private wrong for which damages may be recovered.
____ 8.
Punishable offense against society.
____ 9.
Any governmental rule that governs conduct and imposes a penalty for its violation.
____ 10.
Governmental rules that generally regulate business transactions.
____ 11.
Money a wrongdoer must pay to an injured party.
____ 12.
Principle or ideal based on religious beliefs, experience, culture, and scientific knowledge.
____ 13.
Behavioral standards that apply to business practices.
REVIEW OF CONCEPTS
Directions: Indicate T for true and F for false in the answer column.
____ 1.
Religious beliefs and social morals are always laws.
____ 2.
Criminal law is a branch of the law that punishes wrongs against society, whereas civil law is a branch of the
law that generally punishes wrongs against individuals.
____ 3.
Violation of civil law is generally punished by imposition of a fine or imprisonment, or both.
____ 4.
Primary objectives of the law include creating a stable structure for society, and establishing rules to resolve
conflicts between individuals or between individuals and the government.
____ 5.
Common law is law that has been recently created by administrative agencies.
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____ 6.
Courts of equity traditionally decide cases according to rigid rules of law.
____ 7.
Courts of equity may order specific performance, restraining orders, or injunctions if damages are not
adequate to remedy a harm.
____ 8.
The Bill of Rights is state law that establishes certain fundamental individual rights.
____ 9.
The Uniform Commercial Code (UCC) has been adopted in whole or in part in all states.
____ 10. An individual does not have a legal duty to obey administrative agency rules or orders.
____ 11. A crime involves an offense against society, whereas a tort involves a wrong against an individual.
____ 12. Laws are based on society's judgment of what is right and wrong.
____ 13. Law regulates any unethical behavior that harms others.
____ 14. Ethical standards stay the same, even over long periods of time.
____ 15. Codes of ethics are not used in business since the only ethical standard applicable to businesspeople is to
maximize profit for the business.
____ 16. Codes of ethics are purely voluntary guidelines.
REVIEW OF CONCEPT APPLICATIONS
Answer
Directions: Indicate your choice in the answer column.
____ 1.
Cameron has filed a civil suit against Ann regarding a car accident. Cameron is suing Ann for money to
compensate him for the destruction of his car. What remedy should Cameron request?
a. Specific performance.
b. Restraining order.
c. Injunction.
d. Damages.
____ 2.
A state supreme court has adopted a precedent holding that a promise cannot be enforced unless it is made
pursuant to a contract. Kelly has filed a civil suit against Joan, suing Joan for breach of a promise that was
not made pursuant to a contract. In this case:
a. The doctrine of stare decisis requires the trial (lower) court to follow the precedent.
b. The doctrine of stare decisis does not require the trial court to follow the precedent..
c. The doctrine of stare decisis prohibits the supreme court from changing the precedent even if it is
appropriate to do so.
____ 3.
Assume that a federal law requires R&R Inc. to pay time and a half for hours worked by employees in
excess of 40 hours per week. However, a state law only requires overtime pay for hours worked in excess of
50 hours per week. R&R maintains that (1) the federal statute violates the U.S. Constitution and (2) the state
law prevails over the federal law. In this case:
a. The state statute prevails over the federal statute.
b. The federal statute prevails over the state statute.
c. If the state supreme court holds that the federal statute is invalid because it violates the U.S.
Constitution, this decision is final and cannot be reviewed by any other court.
d. a and c.
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____ 4.
Traditionally, which offense is classified as a felony?
a. Art negligently injures Jill while he is mowing his lawn. Art is liable to Jill for damages.
b. Michelle did not have her dog on a leash in violation of a city ordinance. This offense is punishable by
a $25 fine.
c. Lee stole a car. This offense is punishable by imprisonment for five to ten years.
d. Rick is guilty of disturbing the peace. This offense is punishable by imprisonment in jail for one day.
____ 5.
In which of the following situations would a law be likely to be passed?
a. The majority of people believe it is unethical to injure someone by playing with a loaded gun.
b. Many people believe it is unethical to consume a certain product; however, many other people disagree.
c. Most people believe it is wrong not to respond with an expression of thanks after accepting a gift.
d. a and c.
____ 6.
The state legislature is considering enactment of a law that would require businesses to install filtering
equipment to purify wastes before they are emitted into the air. There are conflicting views among the citizens
as to the need for this law, although serious lung problems have occurred in residents exposed to the unfiltered
emissions. Which statement best describes the reason favoring enactment of the law?
a. Businesses' obligation to maximize profit.
b. Changes in ethical standards.
c. Consensus of the majority.
d. Seriousness of the consequences of the behavior to be regulated.
CASE PROBLEM
Diane and Steven are in a car accident. Diane was daydreaming, and she violated a duty she owed Steven to drive with
reasonable care. Steven believes that he is entitled to be compensated for his losses resulting from the accident.
Answer the following questions, briefly explaining your answers:
1.
2.
3.
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Are Steven's rights against Diane determined according to criminal law or tort law?
Will Steven or the state prosecutor bring the action to obtain compensation for Steven?
What remedy will Steven request?
CHAPTER 1
CHAPTER 1 QUIZ
Section A
DIRECTIONS: Following each statement below, indicate your answer by placing a “T” for “True” or an “F”
for “False” in the Answers column. The first statement is given as an example.
Answers
0. Law is a rule of civil conduct. ...........................................................................................
1.
2.
3.
4.
5.
6.
7.
8.
All administrative agencies have the power to enact law ..................................................
Only if a sovereign state issues a rule prescribing right and wrong can it be called a law.
A breach of a rule of law is always a crime. ......................................................................
The standard of proof in a criminal case is proof beyond the shadow of a doubt. ............
Laws may be modified to provide rules to deal with new circumstances. .........................
Common law is the source of much of our law. ................................................................
The only remedy available in courts of equity was a judgment for money damages. ........
Administrative agencies may be given almost the same power to decide cases as the
courts. ...............................................................................................................................
9. Only the court that makes a decision in a case may reverse that case. ............................
10. A state supreme court is the final judge as to whether a state law violates the state’s
constitution. .......................................................................................................................
11. Constitutions are more responsive to the changing demands of the people than are
statutes. ............................................................................................................................
12. A state statute prevails in a conflict with a federal statute. ................................................
13. Many governmental functions are carried on by administrative agencies. ........................
14. A tort is a private or civil wrong or injury. ........................................................................
15. One benefit of the Uniform Commercial Code is that it is the same in every state. ..........
For Scoring
T

________
_______ 2.
________
________
________
________
________
1. _______
________
3. _______
4. _______
5. _______
6. _______
7. _______
________
________
8. _______
9. _______
________ 10. _______
________
________
________
________
________
11.
12.
13.
14.
15.
_______
_______
_______
_______
_______
Score ________
Section B
DIRECTIONS: Complete each of the following statements by writing the missing word or words in the Answers
column. The first statement is given as an example.
Answers
For Scoring
0. An essential part of statutory law is the constitution. ........................................................
________
0. _______
1.
2.
3.
4.
5.
6.
7.
8.
________
________
________
________
________
________
________
1.
2.
3.
4.
5.
6.
7.
The sum of money a wrongdoer must pay to an injured party is a(n) ................................
A temporary order forbidding a certain action is a(n) .......................................................
A permanent order forbidding activities detrimental to others is a(n) ..............................
The supreme law of the land in the United States is the ...................................................
The most important statute in the field of business law is the ..........................................
An offense that tends to injure society as a whole is a(n) .................................................
The more serious crimes are..............................................................................................
The less serious criminal offenses, punishable by fine or imprisonment in the county
jail, or both, are called .....................................................................................................
9. Commissions that have the power to regulate particular matters or implement laws are ..
10. A tort may be intentional or it may be result from a person’s. ..........................................
_______
_______
_______
_______
_______
_______
_______
________ 8. _______
________ 9. _______
________ 10. _______
Score ________
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Section C
DIRECTIONS: In the Answers space in Column II, place the letter of the corresponding word or words from
Column I.
Column I
(a) administrative agency orders
(b) Bill of Rights
(c) English law
(d) civil law
(e) common law
(f) constitution
(g) criminal law
(h) equity
(i) injured person
(j) President
(k) ordinances
(l) private attorney
(m) prosecutor
(n) stare decisis
(o) statutes
(p) tort
Column II
Answers
For Scoring
1. The law dealing with the enforcement or protection of
private or personal rights .............................................
_______ 1. _______
2. Person who appoints the heads of federal
administrative agencies................................................
_______ 2. _______
3. A major root of American law .....................................
_______ 3. _______
4. Ten amendments to the U.S. Constitution
designed to protect citizens’ civil rights and
liberties. .......................................................................
_______ 4. _______
5. Custom which has come to be recognized by the
courts as binding on the community ............................
_______ 5. _______
6. When justice demands it, deciding a case not by
some rigid rule of law but by what one’s
conscience decides ......................................................
_______ 6. _______
7. Document that defines the relationships of the
parts of the government to each other ..........................
_______ 7. _______
8. Laws enacted by cities .................................................
_______ 8. _______
9. Person who brings the action in criminal cases ...........
_______ 9. _______
10. Private wrong for which there may be an action
for damages .................................................................
_______ 10. _______
11. Laws enacted by legislative bodies ..............................
_______ 11. _______
12. Decrees that have the force of law unless courts
set them aside after being challenged .........................
_______ 12. _______
13. The doctrine that makes higher court decisions
binding on lower courts ...............................................
_______ 13. _______
14. That branch of the law which has to do with the
punishment of wrongdoers .........................................
_______ 14. _______
15. The person who brings a tort action ............................
_______ 15. _______
Score ________
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