Chapter 4
Constitutional Law for Business
and Online Commerce
© 2007 Prentice Hall, Business Law, sixth edition, Henry R. Cheeseman
The U.S. Constitution serves two
major functions:
1.
2.
It creates the three branches
of government (executive,
legislative, and judicial) and
allocates powers to these
branches.
It protects individual rights by
limiting the government’s
ability to restrict those rights.
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Basic Constitutional Concepts
Federalism and
Delegated Powers
Separation of
Powers
Checks and
Balances
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Federalism and Delegated Powers
• 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.
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Federalism and Delegated Powers
(continued)
• Any powers not specifically
delegated to the federal
government by the
Constitution are reserved
to the states.
• State governments are
empowered to deal with
local affairs.
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Doctrines of Separations of
Powers
The federal government is
separated into three branches.
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The Doctrine of Separation of
Powers
• Article I of the Constitution
establishes the legislative
branch of government.
– Bicameral branch:
• the Senate
• the House of Representatives
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The Doctrine of Separation of
Powers (continued)
• Article II of the
Constitution establishes
the executive branch of
government.
– Provides for the election of:
• the President
• the Vice President
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The Doctrine of Separation of
Powers (continued)
• Article III of the
Constitution establishes
the judicial branch of the
government.
– Establishes:
• the Supreme Court
• other federal courts that may
be created by the Congress
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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.
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Checks and Balances
Some of the checks and
balances in our system of
government are:

The judicial branch has
authority to examine the acts
of the other two branches of
government and determine
whether these acts are
constitutional.
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Checks and Balances (continued)
2. The executive branch
can enter into treaties
with foreign
governments only with
the advice and consent
of the Senate.
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Checks and Balances (continued)
3. The legislative branch is
authorized to create
federal courts and
determine their
jurisdiction and to
enact statutes that
change judicially made
law.
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The 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.
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Preemption Doctrine
The concept that federal law
takes precedence over state or
local law.
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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.”
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The Commerce Clause (continued)
• Because this clause
authorizes the federal
government to regulate
commerce, it has a
greater impact on
business than any other
provision in the
Constitution.
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Federal Regulation of Interstate
Commerce
• The Commerce Clause
also gives the federal
government the authority
to regulate interstate
commerce.
– Commerce that moves
between states or that
affects commerce between
states.
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Federal Regulation of Interstate
Commerce (continued)
• The federal government
may regulate:
– Interstate commerce
that crosses state
borders.
– Intrastate commerce
that affects interstate
commerce.
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Federal Regulation of Interstate
Commerce (continued)
• Effects on interstate
commerce test
– Regulated activity does not
have to be in interstate
commerce
– Any intrastate activity that
effects interstate commerce
is subject to federal
regulation
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State and Local Government
Regulation of Business
• 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.
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State and Local Government
Regulation of Business (continued)
• 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.
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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.
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The Foreign Commerce Clause
(continued)
• Direct and indirect
regulation of foreign
commerce by state or
local governments that
discriminates against
foreign commerce violates
the Foreign Commerce
Clause is unconstitutional.
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The Bill of Rights
provides certain freedoms
and protections to
individuals and
businesses.
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Bill of Rights
• Ten amendments added in
1791
• Limited intrusive activity of
the federal government
• Due Process Clause of
Fourteenth Amendment
extended it to cover states
• Supreme Court added
incorporation doctrine
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Freedom of Speech
• Freedom of Speech – the
right to engage in oral,
written, and symbolic
speech.
– Fully Protected Speech
– Limited Protected Speech
– Unprotected Speech
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Freedom of Speech (continued)
• Fully Protected speech
– Cannot be regulated or
prohibited by government
• Oral
• Written
• Symbolic
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Freedom of Speech (continued)
• Limited Protected Speech
– May be subject to time,
place, and manner
restrictions
– Cannot be forbidden
• Offensive speech
• Commercial speech
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Freedom of Speech (continued)
• Unprotected speech
– May be forbidden
• Dangerous speech
• Fighting words intended to
provoke hostile reactions
• Speech that incites the violent
overthrow of the government
• Defamatory speech
• Child pornography
• Obscene speech
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Freedom of Religion – the
U.S. Constitution requires
federal, state, and local
governments to be neutral
toward religion.
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Freedom of Religion
• The Establishment Clause
– First Amendment clause
prohibiting the government
from either establishing a state
religion or promoting one
religion over another.
• The Free Exercise Clause
– First Amendment clause that
prohibits the government from
interfering with the free exercise
of religion.
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Equal Protection Clause
• Fourteenth Amendment
– Added to the U.S.
Constitution in 1868.
– Prohibits discriminatory and
unfair action by the
government.
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Equal Protection Clause
(continued)
• 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.
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Equal Protection Clause
(continued)
• 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.
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Equal Protection Clause
(continued)
• 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.
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Due Process Clause
• The Fifth and Fourteenth
Amendments both
contain a Due Process
Clause.
• These clauses provide
that no person shall be
deprived of “life, liberty,
or property” without due
process of the law.
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Due Process Clause (continued)
• Fifth Amendment Due
Process Clause
– Applies to federal
government action
• Fourteenth Amendment
Due Process Clause
– Applies to state and local
government action
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Substantive Due Process
•
•
•
Requires government
laws to be clear and not
overly broad.
The test is whether a
reasonable person could
understand the law.
Laws failing test are
declared void for
vagueness
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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.
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Procedural Due Process (continued)
• Eminent Domain
– Government may take
property for public purpose
after sufficient notice and
hearing
• Just Compensation Clause
– Government must pay fair
compensation for the taking
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The Privileges and Immunities
Clause
• Article IV of the Constitution and
the Fourteenth Amendment
contain a Privileges and
Immunities Clause.
• This clause prohibits states from
enacting laws that unduly
discriminate in favor of their
residents.
• This clause applies only to citizens.
– Corporations are not
protected.
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