Business Law
Chapter 1 Outline: Laws and their Ethical Foundation
1-1 VOCABULARY:
Laws: Enforceable rules of conduct in a society
Code: Laws grouped into an organized form
Jurisdiction:
Equity:
The power to decide a case
Fairness
Section 1-1: Laws and Legal Systems
a. Stages in the Growth of Law:
1. Individuals are free to take revenge for the wrongs done
to them(Gang mentality)
2. Leader acquires power to be able to force an award of
goods/money instead of revenge (After the crime/wrong
has been committed)
3. Leader gives this power to a court system (To help ease
the burden)
4. Leader/Authority acts to prevent and punish wrongs
(Sets rules to keep wrongs from occurring in the first
place)
b. Common Law vs. Positive Law
Common law is law based on the current standards or
customs of the people. Usually formed by rules used by
judges to settle people’s disputes.
Positive law is law passed down from a central authority to
prevent wrongs from occurring in the first place.
c. English Common Law
1. King’s Bench: King Henry II in 1150 gave power to a
group to judges and render $ verdicts in disputes.
Would go into the country and hold “court” in
various villages. They heard the most important
cases. In “bad weather” they would hear appeals in
London of earlier cases.
2. Jury: King Henry came up with this
EXAMPLE:
See Page 7 about
3. Advantages: Uniform set of law developed across
the country. Allowed for changes as interpreted by
the courts to reflect the changes in society.
Precedent: Using prior cases as a guide for deciding similar,
new cases
d. Equity: An Alternative to Common Law
No jury, only a judge to rule. Could grant “injunction” to
prevent something from happening. You could now give
orders instead of only granting remedies.
Section 1-2: Types of Laws
1-2 VOCABULARY:
Constitution: Document that sets forth the framework of a
govt. and its relationship to its people
Statutes:
Laws enacted by legislatures
Ordinance:Legislation enacted at the local level
Case law: Law made after a trial has ended and one of the
parties has appealed the result to a higher court
Stare Decisis: Legal doctrine that REQUIRES lower courts
to follow established case law in deciding similar cases
Administrative Agencies: Govt. bodies created by federal,
state, and local legislatures to carry out particular laws
Civil Law: Group of laws that make up for wrongs against
individual persons
Criminal Law: Laws governing the citizens’ right to live in
peace
Substantive Law: Laws defining rights and duties of conduct
except those involved in enforcement
a. Sources of Law
1. Constitutions: Highest source of law. Federal
constitution rules state constitutions. These are
concerned with defining and allocating powers in
society.
2. Statutes: Laws created by Federal and State
governments. These have power over local ordinances
which are only effective within the local government
boundaries.
3. Case Law: Created by judicial branches (courts) of
governments. Made after appeals are heard and are
basis for Stare Decisis. Stare Decisis does not bind
Supreme Courts.
4. Administrative Law: Laws carried out by
governmental agencies, like the IRS or Social Security
Administration, Division of Unemployment, etc.
Usually have power to create rules and regulations
and hold specific, relevant hearings.
b.When Laws Conflict: Generally supremacy (higher
power) rules when there is conflict.
1. Constitutions and Validity: No law can conflict with
U.S. Constitution. Supreme Court determines if it
does. People can overturn ruling by passing an
amendment. Same concept works on state level with
State Supreme Courts.
2. Statutes and Validity: Must follow Federal and State
constitutions or will be overturned.
3. Administrative Regulations and Validity: Can be
reviewed and overturned if they are determined to be
outside of “scope” of the agency that created it.
4. Case Law and Validity: If invalid, the agency that
passed the law can re-write it.
c. Main Types of Laws
1. Civil and Criminal Laws: Civil laws allow individual
to seek remedies for wrongs done to them, usually is $.
No jail time!!! Civil wrongs are usually called “torts”.
Crime is an offense against society. Government
enforces criminal laws and can fine, imprison, or
execute violators.
A crime can be both civil and criminal and two
different trials can be heard. (OJ Case)
2. Procedural and Substantive Laws
Procedural law tells how rights and responsibilities can be
legally exercised and enforced through legal system. They
determine what remedies are available.
Substantive laws define rights and duties and is concerned
with all rules of conduct. They define offenses, such as
murder and theft.
3. Business Law and the Uniform Commercial Code
Business Law covers rules that apply to business situations
and transactions and is mainly concerned with civil law and
contracts.
Uniform Commercial Code (UCC) governs the sale of goods.
Section 1-3: Ethical Bases for Laws
1-3 VOCABULARY:
Impartiality: The idea that the same ethical standards are
applied to everyone.
Universalizing: Test to determine wrong and right by
picturing what would happen if everyone did this action.
Ethics: The practice of deciding what is right or wrong in a
reasoned, impartial manner.
Civil Disobedience:
Open, peaceful violation of a law to
protest its alleged or supposed injustice.
Integrity: Capacity to do what is right in the face of
temptation or pressure to do otherwise
a. Basic Forms of Ethical Reasoning
1. Consequences-based Reasoning
Looks at alternative ways to alter the situation and
forecasts the consequences of each. Then, select the
alternative that creates the greatest good.
2. Rule-based Reasoning
Acts themselves are judged as right or wrong, either
based on authority or human reasoning. Authority is
often religious.
b.Ethics Reflected in Laws: Since U.S. uses a “majority
rules” government, most of its laws reflect consequence
based reasoning. However, the Bill of Rights and other
laws (such as those protecting minority interests) do
reflect “human reasoning”.
1. Fidelity Bond: An insurance policy that pays the
employer money in the case of theft by an employee.
2. Scofflaws: Person who does not respect the law, but
assess the risk of being caught and punished against
the benefit to be gained. Never can ethically justify
breaking the law.
3. 5 factors determining Civil Disobedience
a. Written law is in conflict with ethical reasoning.
b. Effective political means are not available to
change law.
c. Civil disobedience is nonviolent
d. Civil disobedience does not advance a person’s
immediate self-interest (personal gain)
e. Is public and one willingly accepts the punishment
for violating the law