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THE LEGAL ENVIRONMENT OF BUSINESS

© 2009 Pearson Education, Inc. publishing as Prentice Hall© 2009 Pearson Education, Inc. publishing as Prentice Hall Ch. 2-Ch. 2-11

The Legal Environment of BusinessThe Legal Environment of BusinessA Critical Thinking ApproachA Critical Thinking Approach55thth Edition Edition

Nancy K. KubasekNancy K. Kubasek

Bartley A. BrennanBartley A. Brennan

M. Neil BrowneM. Neil Browne




Introduction to Law and the Introduction to Law and the Legal Environment of Legal Environment of

BusinessBusiness

CHAPTER 2CHAPTER 2



Chapter 2 OverviewChapter 2 Overview

Definition of the legal environment of businessDefinition of the legal environment of business

Definition of law and jurisprudence Definition of law and jurisprudence

Sources of lawSources of law

Classifications of lawClassifications of law

International dimensions of the legal International dimensions of the legal environment of businessenvironment of business



Definition of the Legal Environment of BusinessDefinition of the Legal Environment of Business It develops critical thinking skills. It develops critical thinking skills.

The study of legal reasoning, critical thinking skills, ethical The study of legal reasoning, critical thinking skills, ethical norms, and schools of ethical thought that interact with the law.norms, and schools of ethical thought that interact with the law.

The study of the legal process and our present legal system, as The study of the legal process and our present legal system, as well as alternative dispute resolution systems.well as alternative dispute resolution systems.

The study of the administrative law process and the role of The study of the administrative law process and the role of business people in that process.business people in that process.

The study of selected areas of public and private law, consumer The study of selected areas of public and private law, consumer law, and environmental law. law, and environmental law.

The examination of the international dimensions of the legal The examination of the international dimensions of the legal environment of law.environment of law.



Why study the legal environment of law?Why study the legal environment of law?

It develops critical thinking skills. It develops critical thinking skills.

It helps to establish legal literacy. It helps to establish legal literacy.

It develops an understanding that the law is It develops an understanding that the law is dynamic not static. dynamic not static.

It deals with real-world problems. It deals with real-world problems.

It is interdisciplinary.It is interdisciplinary.



Top Ten Reasons for Studying the Top Ten Reasons for Studying the Legal Environment of BusinessLegal Environment of Business

Becoming aware of the rules of doing business.Becoming aware of the rules of doing business. Recognizing the legal limits on business freedom.Recognizing the legal limits on business freedom. Becoming aware of potential misconduct of competitors.Becoming aware of potential misconduct of competitors. Appreciating the limits of entrepreneurship.Appreciating the limits of entrepreneurship. Being able to communicate with your lawyer.Being able to communicate with your lawyer. Making you a more fully informed citizen.Making you a more fully informed citizen. Developing an employment-related skill.Developing an employment-related skill. Exploring the fascinating complexity of business decisions.Exploring the fascinating complexity of business decisions. Providing a heightened awareness of business ethics.Providing a heightened awareness of business ethics. Opening your eyes to the excitement of the law and business.Opening your eyes to the excitement of the law and business.



Plato:Plato: law is a form of social control;law is a form of social control;Aristotle:Aristotle: it is a rule of conduct, a contract, an ideal it is a rule of conduct, a contract, an ideal

of reason;of reason;Cicero:Cicero: it is the agreement of reason and nature, it is the agreement of reason and nature,

the distinction between the just and the the distinction between the just and the unjust;unjust;

Aquinas:Aquinas: it is an ordinance of reason for the common it is an ordinance of reason for the common good;good;

Bacon:Bacon: certainty is the prime necessity of law; certainty is the prime necessity of law;

Hobbes:Hobbes: law is the command of the sovereign;law is the command of the sovereign;

Hegel:Hegel: it is an unfolding or realizing of the idea of it is an unfolding or realizing of the idea of right. right.

Jurisprudence -Jurisprudence -science or philosophy of lawscience or philosophy of law



SOME CHARACTERISTICSSOME CHARACTERISTICS

Source of law is absolute (Nature, God, or Reason).Source of law is absolute (Nature, God, or Reason).

Source of law is the sovereign.Source of law is the sovereign.

Source of law is contemporary community opinion and customs.Source of law is contemporary community opinion and customs.

Source of law are actors in the legal system and scientific Source of law are actors in the legal system and scientific analysis of their actions.analysis of their actions.

Source of law is a cluster of legal and non-legal beliefs that must Source of law is a cluster of legal and non-legal beliefs that must be critiqued to bring about social and political change.be critiqued to bring about social and political change.

Jurisprudence reflects a male-dominated executive, legislative, Jurisprudence reflects a male-dominated executive, legislative, and judicial system in which women’s perspectives are ignored and judicial system in which women’s perspectives are ignored and women are victimized.and women are victimized.

Applies classical economic theory and empirical methods to all Applies classical economic theory and empirical methods to all areas of law in order to arrive at decisions. areas of law in order to arrive at decisions. Law and EconomicsLaw and Economics

FeministFeminist

Critical Legal TheoryCritical Legal Theory

American RealistAmerican Realist

SociologicalSociological

PositivistPositivist

Natural LawNatural Law

Schools of JurisprudenceSchools of JurisprudenceSCHOOLSCHOOL



Natural Law School –Natural Law School –

Natural law has existed since 300 B.C. It Natural law has existed since 300 B.C. It consists of the following concepts: consists of the following concepts: There exist certain legal values or value judgments There exist certain legal values or value judgments

(e.g., a presumption of innocence until guilt is proved); (e.g., a presumption of innocence until guilt is proved); these values or value judgments are unchanging these values or value judgments are unchanging

because their source is absolute (e.g., Nature, God, or because their source is absolute (e.g., Nature, God, or Reason); Reason);

these values or value judgments can be determined by these values or value judgments can be determined by human reason; and human reason; and

once determined, they supersede any form of human once determined, they supersede any form of human law.law.



There are just laws and there are unjust laws. I would There are just laws and there are unjust laws. I would be the first to advocate obeying just laws. One has not be the first to advocate obeying just laws. One has not only a legal but moral responsibility to obey just laws. only a legal but moral responsibility to obey just laws. Conversely, one has the moral responsibility to Conversely, one has the moral responsibility to disobey unjust laws. I would agree with St. Augustine disobey unjust laws. I would agree with St. Augustine that “An unjust law is no law at all”.that “An unjust law is no law at all”.

Martin Luther King Jr.Martin Luther King Jr.

Natural Law School –Natural Law School –



Positivist SchoolPositivist SchoolFollowers of positivism, developed a school Followers of positivism, developed a school of thought in opposition to the natural law of thought in opposition to the natural law school in the 1800’s. Its chief tenets are:school in the 1800’s. Its chief tenets are: Law is the expression of the will of the legislator Law is the expression of the will of the legislator

or sovereign, which must be followed; or sovereign, which must be followed; Morals are separate from law and should not be Morals are separate from law and should not be

considered in making legal decisions;considered in making legal decisions; Law is a “closed logical system” in which correct Law is a “closed logical system” in which correct

legal decisions are reached solely by logic and legal decisions are reached solely by logic and the use of precedents.the use of precedents.



Sociological SchoolSociological SchoolFollowers of the sociological school Followers of the sociological school propose three steps in determining law:propose three steps in determining law: A legislator or a judge should make an inventory of A legislator or a judge should make an inventory of

community interests; community interests; Judges and legislators should use this inventory to Judges and legislators should use this inventory to

familiarize themselves with the community’s familiarize themselves with the community’s standards and mores; and standards and mores; and

They should rule or legislate in conformity with those They should rule or legislate in conformity with those standards and mores. standards and mores.



American Realist SchoolAmerican Realist School The American realist school, focuses on the The American realist school, focuses on the actors in the judicial system instead of on the larger actors in the judicial system instead of on the larger community to determine the meaning of law.community to determine the meaning of law. This school sees law as a part of society and a This school sees law as a part of society and a means of enforcing political and social values.means of enforcing political and social values.

““This doing of something about disputes, this doing it This doing of something about disputes, this doing it reasonably, is the business of the law. And the people reasonably, is the business of the law. And the people who have the doing of it are in charge, whether they be who have the doing of it are in charge, whether they be judges, or clerks, or jailers, or lawyers, they are judges, or clerks, or jailers, or lawyers, they are officials of the law. What these officials do about officials of the law. What these officials do about disputes is, to my mind, the law itself.” disputes is, to my mind, the law itself.” Karl LlewellynKarl Llewellyn in The Bramble BushThe Bramble Bush



Critical Legal Studies SchoolCritical Legal Studies School

Critical legal studies seek to connect what Critical legal studies seek to connect what happens in the legal system to the political-happens in the legal system to the political-economic context within which it operates. economic context within which it operates.

Adherents believe that law reflects a cluster of Adherents believe that law reflects a cluster of beliefs that convinces human beings that the beliefs that convinces human beings that the hierarchical relations that they live and work hierarchical relations that they live and work under are natural and must be accommodated. under are natural and must be accommodated.

This cluster of beliefs has been constructed by This cluster of beliefs has been constructed by elitists to rationalize their dominant power. elitists to rationalize their dominant power.



Feminist SchoolFeminist School Most adherents of this school advocate lobbying Most adherents of this school advocate lobbying

legislatures and litigating in courts for changes in legislatures and litigating in courts for changes in laws to accommodate women’s views. laws to accommodate women’s views.

They argue that our traditional common law reflects They argue that our traditional common law reflects a male emphasis on individual rights, which, at a male emphasis on individual rights, which, at times, is at odds with women’s views that the law times, is at odds with women’s views that the law should be more reflective of a “culture of caring.” should be more reflective of a “culture of caring.”

To other adherents of this school of jurisprudence, To other adherents of this school of jurisprudence, the law is a means of male oppression.the law is a means of male oppression.



Law and Economics SchoolLaw and Economics School

It employs economics to explain and It employs economics to explain and predict a judge’s decisions in certain predict a judge’s decisions in certain areas.areas.

Most court decisions and legal Most court decisions and legal doctrines they depend on are efforts to doctrines they depend on are efforts to promote an efficient allocation of promote an efficient allocation of resources in society.resources in society.



Sources of U.S. LawSources of U.S. Law

The Legislative Branch - creates the lawThe Legislative Branch - creates the law The Judicial Branch - interprets the lawsThe Judicial Branch - interprets the laws The Executive Branch - enforces the laws The Executive Branch - enforces the laws Administrative AgenciesAdministrative Agencies



Where to Find the LawWhere to Find the Law

• Municipality administrative regulations

• Varies; often difficult to find. Many municipalities do not publish case decisions but do preserve them on microfilm. Interested parties usually must contact the clerk’s office at the local courthouse.

• Municipal ordinances

• State administrative code or state administrative regulations

• Regional reporters• State reporters

• State code or state statutes (e.g., Ohio Revised Code Annotated, Baldwin’s)

STATE

• Code of Federal Regulations (C.F.R.)

• Federal Register (Fed. Reg.)

• United States Reports (U.S.)• Supreme Court Reporter (S.

Ct.)• Federal Reporter (F., F.2d)• Federal Supplement (F.

Supp.)• Federal agency reports

(titled by agency; e.g., F.C.C. Reports)

• Regional reporters• State reporters

• Title 3 of the Code of Federal Regulations

• Codification of Presidential Proclamations and Executive Orders

• United States Code (U.S.C.)

• United States Code Annotated (U.S.C.A.)

• United States Statutes at Large (Stat.)

FEDERAL

Admin Regulations

Common Law/Judicial

InterpretationsExecutive

OrdersLegislative

LawLevel of

Government

FEDERAL



IntroductionH.R.1

Introduced in HouseSent to Clerk of House

House Rules Committee Action

Referred to Appropriate House Committee

Referred to Subcommittee

Reported by Full Committee

House Floor Debate and Vote on Bill

S.1Introduced in Senate

Sent to Clerk of Senate

Introduction

Referred to Appropriate House Committee

Referred to Subcommittee

Reported by Full Committee

House Floor Debate and Vote on Bill

Joint House – SenateConference Committee

House (H.R.I.) Senate (S.1)

Legislation - How a Bill Becomes a LawLegislation - How a Bill Becomes a Law



Judicial BranchJudicial Branch Definition:Definition: is comprised of the federal courts is comprised of the federal courts and most state courts.and most state courts.

Landmark case: Landmark case: Marbury v. MadisonMarbury v. Madison1.1. Judicial Review – the power to determine Judicial Review – the power to determine

whether a statute is constitutional was given to whether a statute is constitutional was given to the courts in this case.the courts in this case.

2.2. Case law precedentsCase law precedents



Executive BranchExecutive BranchDefinition:Definition: is composed of the President, is composed of the President, President’s staff and the cabinet (heads of President’s staff and the cabinet (heads of the executive departments).the executive departments).

Treaty Making Treaty Making

Executive OrdersExecutive Orders



Administrative AgenciesAdministrative AgenciesCongress delegates authority to these Congress delegates authority to these agencies to make rules governing the agencies to make rules governing the conduct of business and labor in certain conduct of business and labor in certain areas.areas.

Examples of Federal Regulatory Agencies:Examples of Federal Regulatory Agencies: SECSEC FTCFTC OSHAOSHA EEOCEEOC



Classifications of LawClassifications of LawCase LawCase Law Statutory LawStatutory Lawresults from judicial results from judicial interpretations of interpretations of constitutions and statutes.constitutions and statutes.

made by the legislative made by the legislative branch of government.branch of government.

Criminal LawCriminal Law Civil LawCivil Law

composed of federal and composed of federal and state statutes prohibiting state statutes prohibiting wrongful conduct ranging wrongful conduct ranging from murder to fraud.from murder to fraud.

governs litigation between governs litigation between two private parties.two private parties.



Classifications of LawClassifications of LawPublic LawPublic Law Private LawPrivate Lawdeals with the relationship of deals with the relationship of government to individual government to individual citizens.citizens.

deals with the enforcement deals with the enforcement of private duties.of private duties.

SubstantiveSubstantive ProceduralProcedural

creates and regulates legal creates and regulates legal rightsrights

sets out the rules for sets out the rules for enforcing the legal rights. enforcing the legal rights. It is the “ Process”.It is the “ Process”.

Cyber lawCyber law - is not a new type of law. It applies the traditional - is not a new type of law. It applies the traditional categories of law to a new form of communication (online).categories of law to a new form of communication (online).



SummarySummary

Variables that have an impact on Variables that have an impact on business decision making:business decision making: LegalLegal Financial Financial EconomicEconomic EthicsEthics



All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic,

mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.

Copyright © 2009 Pearson Education, Inc. Copyright © 2009 Pearson Education, Inc. Publishing as Prentice HallPublishing as Prentice Hall

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