LAW AS A FOUNDATION

FOR BUSINESS
Chapter One
Professor Kaplan
  To understand that laws and regulations are
fundamental foundations for business
 To explain that property in the law refers not
to something that is owned but to the right
CHAPTER ONE of ownership itself, which gives incentive for
wealth creation
OBJECTIVES  To analyze why stare decisis is different in
common law nations than in civil law nations
 To classify what legal sources lawyers turn to
in answering legal questions from their
clients and the hierarchy of those sources
 Law reflects the social, economic, political, religious, and moral
philosophy of society
 Rights and duties of all individuals, as well as the safety and
security of all people and their property, depend on the law
 Right is the capacity of a person, with the aid of the law, to require
another person or persons to perform, or to refrain from performing,
a certain act
 Duty is the obligation the law imposes upon a person to perform, or
to refrain from performing, a certain act
 Law permits, forbids, or regulates practically every human
activity and affects all persons either directly or indirectly

THE LAW
 Prohibitory
 Certain acts must NOT be committed
 Mandatory
 Certain acts must be done or be done is a prescribed way
 Permissive
 Certain acts may be done

THE LAW IS PERVASIVE

 Primary function of law is to maintain stability in the social,
political, and economic system, while simultaneously
permitting change
 Dispute resolutions with societal remedies not private remedies
 Second critical function is to protect the private ownership of
property and to assist in the making of voluntary agreements
(contracts) regarding exchanges of property and services
 Third essential function of the law is preservation of the state
 Political action, rather than revolution, sedition, and rebellion

FUNCTIONS OF LAW
 Laws that are made are generally and equally applicable
 Law applies to lawmakers, as well as to the rest of society

RULE OF LAW
 Legal right that allows you to exclude others from your
resources
 Right to own, possess, use
 Foundation for business
 Public property
 Private Property
 Common Property
 Real Property
 Personal Property
 Tangible Property
 Intangible Property

PROPERTY
 Though law is affected by morals, law and morality are not the
Some actions have no moral same
Other actions have no legal
Some actions have both moral
implications but have legal sanctions but do have moral
impact and legal sanctions
sanctions implications

Law provides sanctions. Morals do not.

LAW AND MORALS

  Law and justice are distinct
but interrelated concepts
 Justice is the fair, equitable,
LAW AND and impartial treatment of
the competing interests and
JUSTICE desires of individuals and
groups, with due regard to
the common good
 Does the law guarantee
justice?
 Can laws be unjust?
DISTINGUISH
BETWEEN (A)
SUBSTANTIVE AND
PROCEDURAL LAW,
(B) PUBLIC AND
PRIVATE LAW, AND (C)
CIVIL AND CRIMINAL
LAW
  Substantive law creates, defines, and
SUBSTANTIVE regulates legal rights and duties
AND
PROCEDURAL  Procedural law sets forth the rules for
enforcing those rights that exist by
LAW reason of the substantive law
 Public law is a branch of substantive law that deals
with the government’s rights and powers and its
relationship to individuals or groups
 Constitutional, administrative, and criminal law
 Private law is that part of substantive law governing
individuals and legal entities such as corporations in
their relationships with one another
 Business law is primarily private law

PUBLIC AND PRIVATE LAW

 Civil law defines duties, the violation of which constitutes a wrong
against the party injured by the violation
 Private law
 Preponderance of the evidence
 Purpose is to compensate the injured party – Compensatory Damages
 Criminal law establishes duties, the violation of which is a wrong against
the whole community
 Public law
 Beyond a reasonable doubt
 Purpose is to punish the wrongdoer

CIVIL AND CRIMINAL LAW

COMPARISON OF CIVIL LAW AND
CRIMINAL LAW
 Public Constitutional
Law Law
Criminal Law
Substantiv Administrative
e Law Law
Privat
OR e
Law
Torts
Contracts
Procedural Sales
Commercial
Law Methods of Paper
enforcement Agency
(courts) Partnerships
Corporations
Property

CLASSIFICATION OF LAW
IDENTIFY AND
DESCRIBE THE
SOURCES OF LAW
  Federal and state constitutions
 Federal treaties
 Interstate compacts

SOURCES OF
 Federal and state statutes
 Executive orders
LAW  Ordinances of local municipal governments
 Rules and regulations of federal and state
administrative agencies
 Federal and state court decisions
 U.S. Constitution

Treaties Federal Statutes

Federal Administrative Law

Federal Common Law

State Constitution

State Statutes

State Administrative Law

State Common Law

HIERARCHY OF LAW
 Constitution is the fundamental law of a particular level of government
 Establishes the governmental structure and allocates power among
governmental levels, thereby defining political relationships
 Restricts the powers of government and specifies the right and liberties of
the people
 United States Constitution is the supreme law of the land
 State constitutions cannot deprive citizens of federal constitutional
rights, but they can guarantee rights beyond those provided in the U.S.
Constitution
 More specific
 Separation of powers
 Executive branch, legislative branch, and judicial branch
 Judicial review to determine the constitutionality of all laws

CONSTITUTIONAL LAW
 Common • Developed in England
• Judiciary is a source of law
• Adversary system used to settle disputes
Law • Parties initiate and conduct litigation, not the court

Civil Law
• Relies more on legislation
• Louisiana

COMMON LAW V. CIVIL LAW

 Body of law that serves as precedent for determining later
controversies
 Stare decisis means “to stand by the decisions”
 Courts adhere to or rely on rules of law that they or superior courts relied
on and applied in prior similar decisions
 Does not preclude courts from correcting erroneous decisions or from
choosing among conflicting precedents
 Judicial decisions have two uses:
 1. To determine with finality the case currently being decided
 2. To indicate how the court will decide similar cases in the future
 Contracts, agency, property, and trusts

COMMON LAW, CASE LAW, OR

JUDGE-MADE LAW
 Body of law based upon principles distinct from common law and
providing remedies not available at law
 Based upon rules of fairness, justice, and honesty.
 Available remedies in equity:
 Specific performance – perform aspect of contract
 Injunction – required to act or refrain from acting
 Reformation – change in contract due to a mutual mistake
 Rescission – invalidate a contract
 In most jurisdictions, a single court administers both common law and
equity

EQUITY
 Legislatures have the freedom to choose the issues that they
want to address and can make or change laws relatively
quickly
 Courts may only address issues that are presented in actual cases
 Most areas of commercial law including partnerships,
corporations, sales, commercial paper, secured transactions,
insurance, securities regulation, antitrust, and bankruptcy are
largely statutory
 Uniform Commercial Code (UCC) – model statute covering
things such as the sale of goods, credit, bank transactions,
conduct of business, warranties, negotiable instruments, loans
secured by personal property, and other commercial matters

LEGISLATIVE LAW
 Treaty is an agreement between or among independent nations
 U.S. Constitution authorizes the President to enter into treaties with the
advice and consent of the Senate, “providing two-thirds of the Senators
present concur”
 Paris Agreement
 Trade agreements must be approved by both chambers of Congress
 U.S. Constitution grants Congress the power “to regulate Commerce with
foreign Nations”
 United States-Mexico-Canada Agreement
 Tariff is a tax or duty to be paid on a particular class of imports or
exports
 Over time, Congress has given the President the authority to impose
tariffs

TREATIES, TRADE AGREEMENTS,

AND TARIFFS
 President of the United States has the authority to issue laws
called executive orders
 This authority typically derives from specific delegation by
federal legislation
 President Johnson prohibited discrimination by federal contractors
 President Obama provided “Dreamers” with protection from
deportation
 President Trump’s first executive order weakened regulations and
procedures associated with the Patient Protection and Affordable
Care Act (Obamacare)

EXECUTIVE ORDERS
 Administrative law is the branch of public law that governs the
powers and procedures of governmental entities
 Administrative law is created by administrative agencies in the
form of rules, regulations, orders, and decisions to carry out
the regulatory powers and duties of those agencies
 Often involves public health, safety, and welfare
 The scope of administrative law has expanded due to the
increase in the size of government

ADMINISTRATIVE LAW
  Legal rules that structure and regulate the
agents (board of directors and managers) of
CORPORATE corporations and define their relationship to
the owners
GOVERNANCE  Protects the property interest that owners
have in corporations