Business'Law'Exam'Notes'
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Legal&and&Non&Legal&Rules:&
• What&is&law?&&We&can&define&law&as&rules&of&conduct&or&organisation&that&
are&recognised,&applied&and&enforced&by&the&government&of&a&state.&Non?
legal&rules&are&rules&of&conduct&or&organisation&that&are&enforced&by&things&
such&as&peer&pressure,&a&need&for&co?operation,&feelings&of&goodwill,&or&
convenience.&
• Non?legal&rules&are&derived&from&a&variety&of&sources,&e.g.&&
– Moral&or&philosophical&beliefs&&
– Religious&beliefs&
– The&‘laws’&of&nature&
– Social&values&&
– Rules&that&have&become&customary&in&a&community.&
• Non?legal&rules&work&well&enough&in&smaller&groups&and&communities.&&
• In&larger&groups,&non?legal&rules&become&inadequate.&Rules&enforced&by&
the&state&are&common&in&all&larger&societies&as&a&necessary&means&of&
regulating&conduct.&
• The&particular&rules&that&the&state&chooses&to&enforce&are&identified&and&
made&in&different&ways.&One&possibility&is&for&the&state&to&decide&to&enforce&
rules&that&originate&as&non?legal&rules,&e.g.&philosophical&beliefs,&or&
established&customs.&Another&possibility&is&for&new&rules&to&be&created&in&
response&to&a&perceived&need&for&regulation.&&
• This&raises&the&question:&who&has&the&authority&to&make&and&enforce&law?&
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Who&makes&law?&
Law&is&made&and&enforced&by&the&government&of&a&country.&&The&modern&world&is&
divided&into&about&200&independent&states,&each&with&its&own&territory&and&
government.&&The&law&that&applies&in&each&state&is&referred&to&as&its&national&law.&&&
We&will&be&studying&the&national&law&of&Australia.&
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There&is&more&than&one&government&in&Australia.&&Australia&is&a&federation&of&
states&and&territories.&
In&Australia,&the&power&to&make&law&is&exercised&by&the&various&governments&that&
exist&at&federal,&state&and&territory&level.&
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Governments&make&law&through&specified&organs,&following&recognised&
procedures&or&processes.&&The&main&organs&of&law&making&at&federal,&state&and&
territory&level&in&Australia&are:&
• Elected&legislatures&&
• The&courts&&
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The&organization&of&law:&
• Many&aspects&of&daily&life&are&governed&or&affected&by&the&law.&&Consider&
and&explain&each&of&the&terms&listed&below.&&Each&term&refers&to&a&
generally&recognised&‘division’,&‘area’&or&‘category’&of&law.&&
•
Contract&law&
•
&Tort&law&
•
&Property&law&&
•
&Agency&law&
•
Criminal&law&and&civil&law&
•
&Corporations&law&
•
&Constitutional&law&
•
&National&and&International&law&
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• By&organising&legal&rules&into&their&areas&helps&to&clarify&the&nature&and&
structure&of&the&law.&&
• It&is&important&to&notice&that&each&area&of&law&is&concerned&with&a&
particular&type&of&situation'or'conduct.&If&you&take&examples&of&particular&
situations&or&events,&you&should&be&able&to&identify&the&relevant&area&of&
law.&&For&example,&if&a&person&is&arrested&for&deliberately&setting&fire&to&a&
building,&the&facts&suggest&that&the&criminal&law&is&relevant,&because&this'
type'of'conduct&that&is&prohibited&and&punished&by&the&state.&Consider&
each&of&the&following&examples&and&identify&the&area&(or&areas)&of&law&
involved.&
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EXAMPLE&
– A&agrees&to&pay&$1,000,000&to&B&for&a&Picasso&painting.&
– A&reverses&his&car&out&of&his&driveway&without&looking&and&injures&
B,&a&passer?by.&&B&claims&damages&from&A.&
– Both&A&and&B&claim&to&be&the&owner&of&the&same&boat.&
– A,&who&owns&a&business,&authorizes&his&manager&to&purchase&
supplies.&
– A&is&arrested&by&the&police&and&charged&with&possession&of&
prohibited&drugs.&
– A&and&B&register&a&new&company&called&MoreTech&Pty&Ltd.&
– A&new&law&is&introduced&into&the&Federal&parliament&but&fails&to&
win&sufficient&votes&to&pass.&
– Australia&signs&the&Kyoto&protocol.&&
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What&is&Business&Law?&
• Business&law&consists&of&selected&rules&of&law&that&are&of&particular&
relevance&to&business&activities.&&For&example,&business&law&includes&
aspects&of&contract,&tort&law,&criminal&law,&plus&selected&topics&from&other&
traditional&divisions&of&law.&&&
• Knowledge&of&business&law&is&important&because&it&enables&a&person&to:&
– Recognise&the&legal&aspect&of&typical&business&situations&and&
understand&the&legal&rules&involved&
– Know&the&extent&to&which&they&can&rely&on&legal&rights&and&duties&
– Know&how&to&use&the&law&constructively&to&achieve&desired&
outcomes,&for&example:&
• Enforceable&agreements&for&goods&ands&services&can&be&
created&
• Property&rights&can&be&acquired&and&protected&
• Business&organisations&can&be&created&
• Finance&can&be&raised&&
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An&Anatomy&of&Law&&
• In&studying&law,&you&will&encounter&references&not&just&to&'the&law'&as&a&
whole&and&to&the&major&'areas&of&law',&but&also&to&things&such&as&legal&
'concepts',&'principles',&and&'rules'.&&&
• What&do&these&terms&mean?&See&the&table&on&the&following&screen.&
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Law&as&a&mechanism&of&organization&and&control&
• The&law&often&operates&as&a&mechanism&of&organisation&and&control.&&Find&
examples&in&the&case?study&of&how&the&law&does&the&following&things:&&
– Allows&people&to&plan&for&the&future&with&reasonable&certainty.&
– Lays&down&the&rights,&duties&and&powers&of&members&of&different&
classes&and&groups.&
– Permits,&encourages,&forbids&or&discourages&particular&activities.&
– Controls&the&use&of&force&and&forbids&unauthorised&violence.&
– Creates&rights&and&duties&that&can&be&enforced&and&provides&
remedies&when&rights&are&interfered&with&or&when&duties&are&not&
discharged.&
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EXAMPLES:&
– Allows'people'to'plan'for'the'future'with'reasonable'certainty.&
• Entering& into& contracts& for& goods& and& services;& entering&
into&a&lease;&entering&into&contracts&of&employment;&taking&
out&loans&
– Lays' down' the' rights,' duties' and' powers' of' members' of'
different'classes'and'groups.&
• The& following& classes& of& persons& are& represented& in& the&
case?study:&employers&and&employees;&lessors&and&lessees;&
borrowers&and&lenders;&suppliers&and&consumers;&etc&
– Permits,' encourages,' forbids' or' discourages' particular'
activities.&
• Examples& are:& acquiring& goods;& operating& as& a& company;&
having&dirty&kitchens;&having&unsafe&equipment&
– Controls'the'use'of'force'and'forbids'unauthorised'violence.&
• Legal&rights&must&be&enforced&through&the&courts&
– Creates' rights' and' duties' that' can' be' enforced' and' provides'
remedies'when'rights'are'interfered'with'or'when'duties'are'
not'discharged.&
• If&the&contracts&entered&into&are&not&performed.&&
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Legal&and&Non&Legal&Issues:&
• In&any&given&situation&it&is&likely&that&a&variety&of&different&questions&will&
arise.&For&example,&when&deciding&whether&to&buy&an&item&in&a&local&shop&
rather&than&by&bidding&in&an&on?line&auction,&there&may&be&financial&
questions&(the&cheapest&price);&practical&questions&(how&to&pay,&delay&in&
getting&delivery);&social&questions&(the&value&of&good&personal&
relationships&and&goodwill)&and&legal&questions&(non?delivery,&faulty&
goods,&etc).&&&&
• A&legal&question&(issue)&is&one&which&is&resolved&by&finding&and&applying&a&
rule&of&law.&&What&legal&issues&arise&from&facts&in&the&case?study?&
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Legal&Decision&Making:&
• In&basic&terms,&legal&decision&making&involves&applying&particular&rules&to&
specified&facts&in&order&to&decide&the&appropriate&outcome.&In&other&
words,&the&proper&outcome&or&result&of&a&case&is&deduced&by&applying&the&
relevant&rules&of&law&to&the&proved&facts.&For&example:&
Facts:&Peter,&who&is&34&years&old,&has&stolen&$1000.&
Issue:&&How&should&Peter&be&punished?&
Rule:&All&persons&found&guilty&of&serious&theft&must&go&to&prison.&
Decision:&Peter&must&go&to&prison.&
• Deciding&questions&in&this&way&is&a&logical,&deductive&approach.&The&
correct&decision&is&presumed&to&result&from&the&logical&process.&&
• Generally,&as&well&as&being&logical,&legal&decisions&ought&to&be&‘just’.&One&
element&of&justice&is&that&everybody&should&be&treated&in&the&same&way.&&
That&means&that&if&another&case&were&to&arise&with&essentially&the&same&
facts&as&in&Peter’s&case,&that&other&person&should&be&treated&in&the&same&
way&as&Peter.&
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However,&if&case&were&to&arise&which&involved&significantly'different'
facts&from&Peter’s&case,&applying&the&same&rule&might&lead&to&an&outcome&
that&seems&harsh&and&unfair.&&&For&example:&
– Facts:&William,&who&is&12&years&old,&has&stolen&$1000.&
– Issue:&How&should&William&be&punished?&
– Would&it&be&fair&to&apply&the&rule&that&all&persons&found&guilty&of&
serious&theft&must&go&to&prison?&&Obviously&not.&&To&send&a&child&to&
prison&would&be&in&an&obviously&harsh&outcome,&and&justice&
requires&that&outcomes&should&not&be&unduly&harsh&or&unfair.&&&
We&need&to&decide&William’s&case&differently&from&Peter’s,&taking&account&
of&the&important&fact&that&William&is&only&a&child.&&The&original&rule&needs&
to&be&restated&more&narrowly,&to&say:&'All&adult&persons&found&guilty&of&
serious&theft&must&go&to&prison'.&&A&different&rule&'Children&found&guilty&of&
serious&theft&must&be&placed&on&probation'.&&This&latter&rule&should&be&
applied&in&all&future&cases&of&serious&theft&by&children.&&
The&strictly&logical&application&of&existing&rules&promotes&certainty&and&
predictability.&The&fair&and&just&nature&of&judicial&decisions&promotes&
respect&and&support&for&the&law.&&&&
By&taking&proper&account&of&significant&differences&of&fact,&and&finding&
appropriate&rules&to&apply&to&each&type&of&case,&the&courts&can&strike&a&
balance&between&the&strict&application&of&established&rules&and&the&pursuit&
of&fair&outcomes.&&
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CASE&STUDY:&Law&as&a&mechanism&of&organisation&and&regulation&
Stella&decides&to&open&a&coffee&shop&in&Melbourne.&Rather&than&operate&as&a&sole&
trader,&she&registers&a&company&as&the&owner&of&the&business.&Acting&on&behalf&of&
the&company,&Stella&leases&business&premises,&employs&waiters,&gets&a&loan&from&
the&bank&and&purchases&equipment&and&supplies.&She&gets&permission&from&the&
local&council&to&put&chairs,&tables&and&umbrellas&on&the&pavement&outside&the&
coffee&shop.&When&she&opens&for&business&the&following&things&happen:&
• Stella&does&not&properly&secure&one&of&the&umbrellas&and&a&
customer&is&injured&when&it&blows&over&in&a&gust&of&wind.&The&
customer&demands&compensation.&
• &&&The&espresso&machine&she&bought&to&make&coffee&turns&out&to&be&
defective.&Stella&wants&to&return&it.&
• &&&A&person&(Peter)&enters&the&shop&and&steals&$1000&from&the&cash&
register.&&He&is&caught&by&the&police.&
• &&&John&owns&the&shop&next&door&to&the&coffee&shop.&&He&claims&that&
Stella’s&tables&are&encroaching&on&his&space&and&starts&pushing&the&
tables&out&of&the&way&each&day.&
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Finding&Legal&Issues:&
• Various&legal&questions&arise&from&the&facts&of&the&case&study.&&For&
example:&