PowerPoint Slides to Accompany
ESSENTIALS OF BUSINESS AND
ONLINE COMMERCE LAW
1st Edition
by Henry R. Cheeseman
Chapter 2
Constitutional Law for Business
and Online Commerce
Slides developed by
Les Wiletzky
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved
The U.S. Constitution serves two
major functions:
1. It creates the three branches of government
(executive, legislative, and judicial) and
allocates powers to these branches
2. It protects individual rights by limiting the
government’s ability to restrict those rights
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 2
Federalism and Delegated Powers
(1 of 2)

Federalism is the U.S. form of government

The federal government and the 50 state
governments share powers

Enumerated powers – certain powers
delegated to the federal government by the
states
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 3
Federalism and Delegated Powers
(2 of 2)

Any powers that are not specifically delegated
to the federal government by the Constitution
are reserved to the state governments

State governments are empowered to deal
with local affairs
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 4
Doctrine of Separation of Powers (1 of
3)

Article I of the Constitution established the
legislative branch of government

The part of the government that consists of
Congress:


the Senate
the House of Representatives
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 5
Doctrine of Separation of Powers (2 of
3)

Article II of the Constitution establishes the
executive branch of government

The part of the government that consists of:



the President
the Vice President
The president is selected by the electoral
college, not elected by popular vote
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 6
Doctrine of Separation of Powers (3 of
3)

Article III of the Constitution establishes the
judicial branch of the government

The part of the government that consists of:


the Supreme Court
other federal courts that may be created by the
Congress
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 7
Checks and Balances:
Certain checks and balances are
built into the constitution to ensure
that no one branch of the federal
government becomes too powerful.
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 8
Checks and Balances in Our System of
Government: (1 of 2)

The judicial branch has authority to examine
the acts of the other two branches of
government and determine whether these
acts are constitutional

The executive branch can enter into treaties
with foreign governments only with the advice
and consent of the Senate
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 9
Checks and Balances in Our System of
Government: (2 of 2)

The legislative branch is authorized to
create federal courts and determine their
jurisdiction and to enact statutes that change
judicially made law
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 10
Supremacy Clause

Supremacy Clause – establishes that the
federal Constitution, treaties, federal laws,
and federal regulations are the supreme law
of the land

State and local laws that conflict with valid
federal law are unconstitutional
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 11
Preemption Doctrine
The concept that federal law
takes precedence over state or
local law.
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 12
The Commerce Clause

A clause of the U.S. Constitution that grants
Congress the power “to regulate commerce with
foreign nations, and among the several states,
and with Indian tribes.”

Because this clause authorizes the federal
government to regulate commerce, it has a
greater impact on business than any other
provision in the Constitution
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 13
Federal Regulation of Interstate
Commerce


The Commerce Clause also gives the federal
government the authority to regulate
interstate commerce
The federal government may regulate:


Interstate commerce that crosses state borders
Intrastate commerce that affects interstate
commerce
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 14
State and Local Government Regulation of
Business (1 of 2)

Police Power – the power of the states to
regulate private and business activity within
their borders

States may enact laws that protect or
promote the public health, safety, morals, and
general welfare as long as the law does not
unduly burden interstate commerce
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 15
State and Local Government Regulation of
Business (2 of 2)

State and local governments may regulate:



Interstate commerce
Intrastate commerce not exclusively regulated
by the federal government
Zoning ordinances, state environmental laws,
corporation and partnership laws, and
property laws are enacted under this power
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 16
International Law: The Foreign
Commerce Clause

The Commerce Clause of the U.S. Constitution
gives the federal government the exclusive
power to regulate commerce with foreign
nations

Direct and indirect regulation of foreign
commerce by state or local governments that
discriminates against foreign commerce
violates the Foreign Commerce Clause

It is therefore unconstitutional
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 17
The Bill of Rights and Business

The Bill of Rights provides certain freedoms
and protections to individuals and business:

Freedom of speech

Freedom of religion
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 18
Freedom of Speech

The right to engage in
oral, written, and
symbolic speech
protected by the First
Amendment

Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
The U.S. Supreme
Court places speech
into three categories:
1. Fully protected
2. Limited protected
3. Unprotected
02 - 19
Freedom of Religion

The U.S. Constitution requires federal, state,
and local governments to be neutral toward
religion:


The Establishment Clause – prohibits the
government from either establishing a state
religion or promoting one religion over another
The Free Exercise Clause – prohibits the
government from interfering with the free
exercise of religion in the United States
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 20
The Fourteenth Amendment



Added to the U.S. Constitution in 1868
Prohibits discriminatory and unfair action by
the government
Three clauses have important implications for
business:



Equal Protection Clause
Due Process Clause
Privileges and Immunities Clause
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 21
The Equal Protection Clause (1 of 3)

Provides that a state cannot “deny to any
person within its jurisdiction the equal
protection of the laws.”

The Supreme Court has held that it also
applies to federal government action
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 22
The Equal Protection Clause (2 of 3)

State, local, and federal governments are
prohibited from enacting laws that classify
and treat “similarly situated” persons
differently

Artificial persons, such as corporations, are
also protected
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 23
The Equal Protection Clause (3 of 3)

The Supreme Court has adopted three
different standards for reviewing equal
protection cases:
Strict Scrutiny Test – applied to classifications
based on race
 Intermediate Scrutiny Test – applied to
classifications based on protected classes other
than race (e.g., sex or age)
 Rational Basis Test – applied to classifications
not involving a suspect or protected class

Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 24
Due Process Clause




The Fifth and Fourteenth Amendments both
contain Due Process Clauses
These clauses provide that no person shall
be deprived of “life, liberty, or property”
without due process of the law
Fifth Amendment Clause – applies to federal
government action
Fourteenth Amendment Clause – applies to
state and local government action
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 25
Types of Due Process


Substantive Due Process
Requires government laws
to be clear and not overly
broad
The test is whether a
reasonable person could
understand the law

Procedural Due Process
Requires the government to
give a person proper notice
and hearing before
depriving that person of his
or her life, liberty, or
property
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 26
The Privileges and Immunities
Clause



Article IV of the Constitution and the
Fourteenth Amendment contain Privileges
and Immunities Clauses
Prohibit states from enacting laws that unduly
discriminate in favor of their residents
These clauses apply only to citizens

Corporations are not protected
Copyright © 2006 by Pearson Prentice-Hall. All rights reserved.
02 - 27