Martin Luther King Jr. There are just laws and there are unjust laws. I would be the first to advocate obeying just laws. One has not only a legal but moral responsibility to obey just laws. Conversely, one has a moral responsibility to disobey unjust laws. I would agree with Saint Augustine that “An unjust law is no law at all.” Applied Business Law UNIT ONE: THE LEGAL ENVIRONMENT OF BUSINESS WHY IS THIS IMPORTANT? A friend who is an A-student has offered to write your paper, which is worth 25% of your grade, for $50. You need the course to graduate because you only have a low C average. You hate writing, do it very poorly, and know others have had good results submitting this student’s papers as their own. Will you pay the money and submit the paper or submit your own paper and pray for a good result? This unit will help you learn how to act ethically when facing dilemmas in your business and personal life. This is important because the decisions you make will affect your own future and those of stakeholders of the organizations that employ you. Definition of the legal environment of business Sources of law Classifications of law International dimensions of the legal environment of business Why study the legal environment of law? It develops critical thinking skills. It helps to establish legal literacy. It develops an understanding that the law is dynamic not static. It deals with real-world problems. It is interdisciplinary. Top Ten Reasons for Studying the Legal Environment of Business 1. Becoming aware of the rules of doing business. 2. Familiarizing yourself with the legal limits on business freedom. 3. Forming an alertness to potential misconduct of competitors. 4. Appreciating the limits of entrepreneurship. 5. Being able to communicate with your lawyer. 6. Making you a more fully informed citizen. 7. Developing an employment-related skill. 8. Exploring the fascinating complexity of business decisions. 9. Providing a heightened awareness of business ethics. 10. Opening your eyes to the excitement of the law and business. Definition of the Legal Environment of Business It develops critical thinking skills. The study of legal reasoning, critical thinking skills, ethical norms, and schools of ethical thought that interact with the law. The study of the legal process and our present legal system, as well as alternative dispute resolution systems. The study of the administrative law process and the role of businesspeople in that process. The study of selected areas of public and private law, consumer law, and environmental law. The examination of the international dimensions of the legal environment of law. Where to Find the Law Level of Government Legislative Law Executive Orders FEDERAL • United States Code (U.S.C.) • United States Code Annotated (U.S.C.A.) • United States Statutes at Large (Stat.) • Title 3 of the Code of Federal Regulations • Codification of Presidential Proclamations and Executive Orders STATE LOCAL Common Law/Judicial Interpretations Administrative Regulations • United States Reports (U.S.) • Supreme Court Reporter (S. Ct.) • Federal Reporter (F., F.2d) • Federal Supplement (F. Supp.) • Federal agency reports (titled by agency; e.g., F.C.C. Reports) • Regional reporters • State reporters • Code of Federal Regulations (C.F.R.) • Federal Register (Fed. Reg.) • State code or state statutes (e.g., Ohio Revised Code Annotated, Baldwin’s) • Regional reporters • State reporters • State administrative code or state administrative regulations • Municipal ordinances • Varies; often difficult to find. Many municipalities do not publish case decisions but do preserve them on microfilm. Interested parties usually must contact the clerk’s office at the local courthouse. • Municipality administrative regulations Ch. 2-8 Global Aspects of the Legal Environment of Business Summary: Variables that have an impact on business decision making: Legal Financial Economic Legal Checkpoint 10 Why do we need to study Business ? the Legal Environment of Assignment will be graded! 11 Instructions: Please open a new document in your Google folder that you already shared with me. and complete assignment. Name your new document “THE LEGAL ENVIRONMENT OF BUSINESS “. Font: Arial, 14. Answers for each question should be 7 sentences or more. After completing your individual work, work with another student to compare your answers. 1. Think of a person who did something morally wrong, at least to your way of thinking. What was it? Explain to a friend of yours—or a classmate—why you think it was wrong. Does your friend agree? Why or why not? What is the basic principle that forms the basis for your judgment that it was wrong? 1. Think of a person who did something morally right, at least to your way of thinking. (This is not a matter of finding something they did well, like efficiently changing a tire, but something 12 good.) What was it? Explain to a friend of yours—or a classmate—why you think it was right. Does your friend agree? Why or why not? What is the basic principle that forms the basis for your judgment that it was right? 2. Think of an action by a business organization (sole proprietor, partnership, or corporation) that was legal but still strikes you as wrong. What was it? Why do you think It was wrong? 3. Think of an act by an individual or a corporation that is ethical but not legal. Compare your answer with those of your classmates: were you more likely to find an example from individual action or corporate action? Do you have any thoughts as to why? Judicial Branch Definition: is comprised of the federal courts and most state courts. Landmark case: Marbury v. Madison 1. Judicial Review – the power to determine whether a statute is constitutional was given to the courts in this case. 2. Case law precedents Executive Branch Definition: is composed of the President, President’s staff and the cabinet (heads of the executive departments). Treaty Making Executive Orders Administrative Agencies Congress delegates authority to these agencies to make rules governing the conduct of business and labor in certain areas. Examples of Federal Regulatory Agencies: SEC FTC OSHA EEOC Ch. 2-15 © 2009 Pearson Education, Inc. publishing as Prentice Hall Classifications of Law Case Law results from judicial interpretations of constitutions and statutes. Statutory Law made by the legislative branch of government. Criminal Law Civil Law composed of federal and state statutes prohibiting wrongful conduct ranging from murder to fraud. governs litigation between two private parties. Ch. 2-16 © 2009 Pearson Education, Inc. publishing as Prentice Hall Classifications of Law Public Law Private Law deals with the relationship of deals with the enforcement government to individual of private duties. citizens. Substantive Procedural creates and regulates legal rights sets out the rules for enforcing the legal rights. It is the “ Process”. Cyber law - is not a new type of law. It applies the traditional categories of law to a new form of communication (online). Hypothetical Tommy McCartney is a sixteen-year-old high school student. He has worked 18 forty hours per week at the local convenience store over the last year, and has diligently saved $6,000 for the purchase of his first car. While visiting a local car dealership, Tommy finds the “car of his dreams,” a used yellow Camaro. Tommy walks into the dealership, announces to the dealership owner that he is “ready to buy,” negotiates $6,000 as the purchase price, and leaves the dealership a proud car owner. Over the course of the next six months, Tommy drives the Camaro eight thousand miles, wears the tires thin, dents the left front fender, and regrets his purchase. He realizes that in two short years college will beckon, and he knows that his parents cannot afford to pay for his higher education. In short, he wants his money back. On a Saturday morning, Tommy returns to the car dealership, walks into the sales office, and hands the keys to the seller, asking for the return of his $6,000. The dealer chuckles, and then his look turns stern, saying “Son, I don’t owe you anything. You’ve just learned a lesson in the ‘School of Hard Knocks.’ The car is still yours, and the money is still mine!” Who will prevail? Is it legal and/or ethical to allow Tommy to escape his contractual obligations? Capacity Contractual Capacity. The legal ability to enter into a contractual relationship. 19 Legality. The agreement must not call for the performance of any act that is criminal, tortious, or otherwise opposed to public policy. Minors Capacity of Minors 20 Contracts with minors are voidable Can disaffirm the contract after reaching the age of majority Entire contract only, not part Exception Contract for necessaries Food, clothing, shelter, basic medical Ratification Once minor reaches age of majority, they can legally affirm the contract Parents generally not liable for their minor children Intoxication 21 Lack of contractual capacity at the time the contract is being made. Contract can be either voidable or valid. Courts look at objective indications to determine if contract is voidable. If voidable: Person has the option to disaffirm, or Person may ratify the contract expressly or impliedly. Mental Incompetence 22 Void. If a person has been adjudged mentally incompetent by a court of law and a guardian has been appointed. Voidable. If the person does not know he or she is entering into the contract or lacks the mental capacity to comprehend its nature, purpose, and consequences. Valid. If person is able to understand the nature and effect of entering into a contract yet lack capacity to engage in other activities. Lucid Interval. Legality 23 A contract to do something prohibited by federal or state statutory law is illegal and therefore void (never existed). Contract that calls for for a tortious act. Contract that calls for an act contrary to public policy. Restraints of trade – covenant not to compete Adhesion Contracts Licensing statutes People in certain fields must have a license to legally enter into an agreement to perform the service. Hypothetical For Greta Harrington and her husband Robert, it was love at first sight. The two were married for 52 years until cancer24took her husband at the age of 84. Greta is currently 83 years old, and her marriage produced three offspring: Samuel, 50 years old; Katherine, 45 years old; and Benjamin, 40 years old. In his will, Robert left all of his financial interests, a considerable sum valued at $5 million, entirely to his wife; in his will, he also expressed love and affection for his three children, as well as the desire that Greta devise the remainder of the couple’s estate to their children, in equal portions, upon her death. Greta has recently been “keeping company” with Gary Watson, a twicedivorced, 65-year-old bachelor with a reputation for “womanizing.” While visiting her mother one weekend, Katherine is shocked to see a fully-executed will on the desk in the living room, devising all of her mother’s estate to Gary Watson. She immediately calls Samuel and Benjamin, schedules an emergency “sibling meeting” for Sunday, and wonders what to do about her mother’s ill-advised decision. She has noticed in recent months that her mother is often forgetful, frequently calls her “Sharon” (her aunt’s name,) and often confuses the days of the week. Do the children have any legal rights in terms of successfully invalidating Greta Harrington’s will? From a legal and/or ethical standpoint, should a mother (even of adult children) be allowed to “disinherit” her offspring? Genuineness of Assent 25 Contract may be unenforceable if the parties have not genuinely assented to its terms by: Mistakes. Misrepresentation. Undue Duress. Influence. Mistakes 26 Only a Mistake of Fact allows a contract to be canceled. Mistake of Value is enforceable. Bilateral (Mutual) Mistakes can be rescinded by either party if all three elements are met: Basic assumption about the subject matter of the contract Material effect on the agreement Adverse effect on a party who did not agree to bear the risk of mistake at the time of the agreement – “as is” Mistakes 27 Unilateral Mistakes cannot be canceled unless: If other party to the contract knows or should have known that a mistake of fact was made. If mistake was due to mathematical mistake in addition, summation, subtraction, division, or multiplication and was made inadvertently and without gross negligence. Fraudulent Misrepresentation 28 Contract Voidable by Innocent Party. Elements: Misrepresentation of Material Fact. Intent to Deceive (Scienter). Reliance on Misrepresentation. Injury to the Innocent Party. Nonfraudulent Misrepresentation 29 Innocent Misrepresentation. Negligent Misrepresentation. Is treated as fraudulent misrepresentation, even though the misrepresentation was not purposeful. Undue Influence 30 Contract is Voidable. Confidential or Fiduciary Relationship. Relationship of dependence. Influence or Persuasion. Weak party talked into doing something not beneficial to him or herself. Presumption of Undue Influence. Duress 31 Forcing a party to enter into a contract under fear or threat makes the contract voidable. Threatened act must be wrongful or illegal. Exceptions: Threat to exercise legal rights (criminal or civil suit). Economic. Duress 32 One party threatens physical harm or extortion to gain consent to contract One party threatens to file criminal lawsuit unless consent given to terms of contract One party threatens to file frivolous civil lawsuit unless consent given to terms of contract One party threatens the other’s economic interests (although in many jurisdictions, recovery based on economic duress/pressure rarely granted) Adhesion Contracts and Unconscionability Adhesion Contracts. 33 Preprinted contract in which the adhering party has no opportunity to negotiate the terms of the contract. Unconscionability. One sided bargains in which one party has substantially superior bargaining power and can dictate the terms of the contract. “Standard-form.” “Take-it-or-leave-it” adhesion contracts.