Chapter One Notes
Business Law
Section One
Laws and Legal Systems
Stages In the Growth of Law
Laws- enforceable rules of conduct in a society that reflect the culture and
circumstances that create them
Code- laws grouped into an organized form
Most societies go through four distinct stages in forming their legal systems:
1.
Individuals are free to take revenge for wrongs done to them
2.
A leader acquires enough power to be able to force revenge-minded
individuals to accept an award of goods or money instead
3.
The leader gives this power to a system of courts
4.
The leader or central authority acts to prevent and punish wrongs that
provoke individuals to seek revenge
Common Law vs. Positive Law
Common Law- law based on the current standards or
customs of the people
Positive Law- law set down by authority
 In any society laws should be both predictable and
flexible
What is the Origin of the U.S. Legal
System?
 49 of the 50 U.S. states have adopted the English
common law, while Louisiana has adopted the Roman
civil law.
 Roman civil law adopted well written, organized sets of
statutes that are typically only changed by the central
government and not the judge that administers them.
 English common law implemented the use of a jury to
interpret that region’s customs for the court. Citizens who
felt they were wrongly prosecuted in the trial could take
their appeal to the King/Queen’s Bench in hopes to find
justice for their case. This power to decide a case is
known as jurisdiction.
Equity: An Alternative to Common
Law
Equity- fairness in a court
Injunction- stopping an action from occurring
 Common law courts carefully follow precedent, the use
of prior cases as a guide for deciding similar new cases.
However, this can be a disadvantage in court cases
because of the rigid adherence to proper form (ex.
misplaced periods or misspelled words can void the
effect of a document).
 Today, law courts and equity courts are typically merged
and can award damages or issue orders or both.
Section two
Types of Laws
Sources of Law
Constitution- a document that sets forth the framework of a
government and its relationship to the people it governs.
 Laws in this country are created at three levels of
government; federal, state, and local.
 The forms these laws can take include constitutions,
statutes, case law, and administrative law.
Constitutions
 Constitutional law is made when constitutions are adopted or
amended, or when courts interpret constitutions.
 The federal Constitution is “the supreme law of the land” (no
federal, state, or local law is valid if it conflicts with the federal
Constitution).
Federal and state constitutions are concerned with defining and
allocating certain powers in our society including:
1.
Powers between the people and their governments
2.
Powers between state governments and the federal government
3.
Powers among the branches of the government
Allocation of Power Between People
and their Governments
 The federal Constitution allocates powers between
people and their governments through the Bill of Rightsthe first ten amendments of the Constitution which
protects people from actions of their governments.
Allocation of Power Between Federal
and State Governments
 The federal Constitution also allocates powers between
the federal and state governments. For example, the
Constitution gives the federal government the power to
regulate both foreign and interstate commerce-trades
between two or more states. Intrastate commerce deals
with trades within one state and is left to that state’s
government.
Allocation of Power Among the
Branches of Government
 State and federal constitutions also allocate
governmental powers among the three branches of
government: executive, legislative, and judicial.
 These powers are distributed to create a system of
checks and balances between the branches of
government.
Statutes
Statutes- laws enacted by legislatures who act for their
citizens
Ordinances- pieces of legislation created by a town, city
council, county board, or commission that are only effective
within the boundary of the local governments that enacted
them
Case Law
Case Law- appropriate rules to be used in deciding a
certain case and others like it due to the appellate court’s
opinion on that case
Stare Decisis- a requirement that lower courts must follow
established case law in deciding similar cases
Administrative Law
Administrative Agencies- governmental bodies formed to carry out
particular laws
 Federal, state, and local legislatures all create administrative
agencies
 Ex. Certain county’s zoning commissions
 Typically controlled by the executive branch of government (the
president, governor, or mayor).
 Agencies receive legislative power which allow them to create
administrative laws known as rules and regulations
 Some agencies are allowed judicial power to hold hearings, make
determinations of fact, and apply the law to cases.
Conflicting Laws
 Different types of laws created by the same level of
government may conflict
 During these situations, legal rules are used to determine
which statement of the law is superior to the other and
should be enforced.
 Federal Law>State Law>Local Law
 Constitutional Law>Statutory Law>Administrative Law
 Higher Court’s Decision>Lower Court’s Decision
Validity
 When laws are declared invalid by a state or federal
court because it conflicts with the constitution, it is said to
be unconstitutional
 The U.S. Supreme Court has the final say within the
federal system
 The people have the power to amend constitutions if
they disagree with the courts’ interpretations
 Statutes or ordinances must be constitutional to be valid
Validity Cont.
 Statutes or ordinances must be constitutional to be valid
 Courts may invalidate a rule or regulation of
administrative agencies if it is outside the scope of
powers delegated to the agency by the legislature that
created it
 Legislative bodies have the power to nullify a court’s
interpretation of a statute or ordinance by rewriting the
statute.
 Administrative agencies may revise their regulations
when challenged
Civil and Criminal Laws
Civil Law- group of laws that allows individuals to seek legal
remedies for wrongs done to them
Criminal Law- an offense against society rather than
individuals that disrupt the peace in a stable environment
 Crime and Civil Offenses may occur when private injuries
are inflicted and thus both civil and criminal laws may be
applied.
Procedural and Substantive Laws
Procedural Law- determine what remedies are available in a
lawsuit and how those remedies are to be secured (stare
decisis is a procedural law as well as determining the
supremacy of conflicting laws).
Substantive Law- defines rights and duties; is concerned with all
rules of conduct except those involved in enforcement
(murder, theft, breach of contract, and negligence).
Two types of procedural law:
1.
Civil Procedure- used when civil laws have been violated
2.
Criminal Procedure- used when someone has been
charged with a crime
Business Law
 Covers rules that apply to business situations and
transactions
 Most business transactions involve a merchant and a
consumer
 Mainly concerned with civil law, especially contracts
 Business activities are at times also governed by criminal
law
Business Law Cont.
 Laws of our various states do not have to be alike as long
as they are constitutionally valid
 Committees of legal experts have written model laws
covering areas such as sales, credit transactions, and
business forms
 Uniform Commercial Code (UCC) deals with sales of
goods, aspects of banking, and leases of goods.
Section Three
Ethical Bases for Laws
Ethics and the Law
Ethics- a practice of deciding what is right or wrong in a
reasoned, impartial manner
 Ethical decisions are reasoned out by referring to an
established authority that provides consistency
 Business ethics are the ethical principles used in making
business decisions
 Many times, ethics are not considered when making
business decisions due to the constant want of profit
maximization.
Ethics Reflected in Laws
Fidelity Bond- an insurance policy that pays the employer money in the
case of theft by employees
Civil Disobedience- an open, peaceful, violation of a law to protest its
alleged, or supposed, injustice (Dr. Martin Luther King Jr. engaged in
civil disobedience).
Many believe that civil disobedience is ethical when
1.
A written law is in conflict with ethical reasoning
2.
No effective political methods are available to change the law
3.
The civil disobedience is nonviolent
Ethics Reflected in Laws Cont.
4. The civil disobedience does not advance a person’s
immediate self-interest
5. The civil disobedience is public and one willingly
accepts the punishment for violating the law
Summary
Chapter One presents the basic terms set forth to create a
greater understanding of Business Law. It covers the many
extensive laws, legal systems, and ethics behind these laws
and regulations. One of the most important things I learned
in this chapter was the differences between civil and
criminal law and how someone can be charged through
either of those ways.