PowerPoint Slides to Accompany
CONTEMPORARY BUSINESS AND
ONLINE COMMERCE LAW
6th Edition
by Henry R. Cheeseman
Chapter 2
Constitutional Law for Business
and E-Commerce
Copyright © 2009 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.
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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: Any powers that are not
specifically delegated to the federal
government by the Constitution are
reserved to the states.
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Doctrine of Separation of Powers
(1 of 3)
 Article I of the Constitution establishes
the legislative branch of government.

The part of the government that consists of
Congress:


the Senate
the House of Representatives
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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.
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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
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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 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.
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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.
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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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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.
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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

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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.
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State and Local Government Regulation
of Business (2 of 2)
 State and local governments may
regulate:
Interstate commerce within their borders
 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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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.
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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
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Freedom of Speech
 The right to engage
 The U.S. Supreme
in oral, written, and
symbolic speech
protected by the First
Amendment.
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Court places speech
into three categories:
1. Fully protected
2. Limited protected
3. Unprotected
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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.

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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

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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.
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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.
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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.

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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.
 Fifth Amendment Clause – applies to
federal government action.
 Fourteenth Amendment Clause – applies
to state and local government action.
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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.
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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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