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The Legal Environment of Business 9th ed. Notes

by: Tiffany Notetaker

The Legal Environment of Business 9th ed. Notes MGMT 246 - 03

Marketplace > California State University - Fullerton > Business, management > MGMT 246 - 03 > The Legal Environment of Business 9th ed Notes
Tiffany Notetaker
Cal State Fullerton
GPA 3.62
Business and Its Legal Environment
Charles Smith

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Chapter 1, 2, 3, and 4 Textbook Notes.
Business and Its Legal Environment
Charles Smith
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Date Created: 09/28/15
Chapter 1 Business and Its Legal Environment 1 Business Activities and the Legal Environment A A basic knowledge of laws and government regulations is essential in almost all business activities Businesspersons are pressured to make ethical decisions thus involving an ethical dimension in the study of business law Many different laws may affect a single business decision The compartmentalization of laws allows for conceptual clarity but does not indicate the extent to the number of different laws that may apply to just one decision Avoid business disputes by thinking ahead and having an idea of what legal ramifications may result Ethics should also be taken into account when making business decisions because they are the principles governing what constitutes right or wrong behavior and can help determine whether the decision is profitable Sources of American Law A C D There are two main sources of American law primary sources that establish the law and secondary sources that summarize and clarify the primary sources The latter are often referred to by courts when interpreting and applying primary sources of law Constitutional law is the law as expressed in the US and individual state constitutions State constitutions are supreme in their respective states under the condition that they do not violate the US Constitution or federal laws 1 Statutory Laws are laws enacted by legislative bodies at any level of government federal state and local None of the laws may violate the US or respective state constitution Uniform Laws are laws created by a group of legal scholars and lawyers dubbed the National Conference of Commissioners on Uniform State Laws andor the American Law Institute They create laws that each state has the option of adopting or rejected all or part of the uniform law If adopted it becomes part of the statutory law in that state 2 The Uniform Commercial Code facilitates commerce among states by providing a uniform yet exible set of rules governing commercial transactions and has been adopted by all 50 states Administrative Laws are the rules orders and decisions of a federal state or local government agency established to perform a specific function They constitute a dominant element in the regulatory environment of business 1 FederalExecutive Agencies are at the national level and are subject to the authority of the president who holds the power to appoint and remove their officers Independent Regulatory Agencies are at the federal level and have officers who serve for fixed terms and cannot be removed by the president without just cause 2 State and local agencies parallel with federal agencies Federal agency regulations take precedence over con icting state regulations Another source of American law is case laws which include interpretations of constitutional provisions statutes enacted by legislatures and regulations created by administrative agencies Case laws are judgemade laws that Chapter 1 Business and Its Legal Environment governs areas not covered by statutory or administrative law It is part of our common law tradition 3 The Common Law Tradition A In order to understand the American legal system one must understand that much of American law is based on the English legal system B The US legal system originated from the English legal system which originated from Early English Courts The king39s courts sought to establish a uniform set of customs for the country as a whole and was the beginning of common law a body of general rules applied throughout England 1 The Courts of Law were courts that awarded compensation that came to be known as Remedies at Law which were land items of value or money Monetary damages are the most relevant today 2 Courts of Equity are a branch of law founded on notions of justice and fair dealing that seek to supply a remedy when no adequate remedy at law is available known as remedies in equity These remedies include specific performances injunctions which is an order for a part to cease engaging in a specific activity or undo some wrong or injury and rescission which is the cancellation of a contractual obligation 3 Equitable maxims are propositions or general statements of equitable rules that often guide judges in deciding appropriate remedies The equitable doctrine of laches can be used as a defense and therefore encourages people to bring lawsuits while evidence is fresh within statutes of limitations C Either or both legal and equitable remedies today can be granted in the same action by the trial court judge This is because most states in the US adopted rules of procedure that combined courts of law and equity in the 19th century D The doctrine of stare decisis calls for the practice of deciding new cases with reference to former decisions precedents 1 Cases in which judges make principle decisions are recorded in volumes called reporters or reports 2 Stare decisis has two aspects a court should not overturn its own precedents unless there is a compelling reason to do so and decisions made by a higher court are binding on lower courts 3 A binding authority is any source of law that a court must follow when deciding a case such as constitutions statutes and regulations 4 Stare decisis helps courts to be more efficient and makes law more stable and predictable 5 When there are no precedent cases they are called cases of first impression When deciding cases of first impression courts often look at persuasive authorities legal principles and policies fairness social values customs and public policy E Legal reasoning is the process of reasoning by which judges harmonize their decisions based on precedent Chapter 1 Business and Its Legal Environment F G 4 A B C D E 5 1 The basic steps in legal reasoning are defined as the quotIRAC methodquot issue rule application and conclusion 39 What are the key facts and issues 39 What rules of law apply to the case 39 How do the rules of law apply to the particular facts and circumstances of this case 39 What conclusion should be drawn In most legal controversies there is no single correct result Good arguments can be made to support either side of a controversy but the weight of the law will more often than not favor one party39s position Common law doctrines and principles today govern only areas not covered by statutory or administrative law 1 Judgemade law is still important in areas governed by statutory law For example many statutes codify existing common law rules and regulations issued by various administrative agencies are based in part on common law principles 2 The American Law Institute publish Restatements of the Law which generally summarizes the common law rules followed by most states They do not have the force of law but are an important source of legal analysis and opinion Schools of Legal Thought A judge39s function is to interpret and apply laws Courts play a significant role in defining laws thus judges have some exibility in interpreting and applying the law which is in uenced by the individual judge39s philosophical approach to law The Natural Law School is the oldest and most significant schools of jurisprudence study of law It is the theory of a higher or universal law existing that applies to all human beings Written laws should imitate these inherent principles such as quotnatural rightsquot The Positivist School adheres to legal positivism which preaches that there can be no higher law than a nation39s positive national law and that these laws only apply to its respective society Positive law does not believe in quotnatural rightsquot but that human rights only exist because of laws The Historical School emphasizes the evolutionary process of law and looks to the past to discover what the principles of contemporary laws should be Legal Realism was a rebellion against the historical approach to law It advocates a more realistic and pragmatic approach to law which includes taking into consideration certain circumstances and customary practices 1 The Sociological School was in uenced by legal realism which views law as a tool for promoting justice in society Classi cations of Law A The law can be broken down into several classification systems For example substantive law consists of all laws that define describe regulate Chapter 1 Business and Its Legal Environment 7 and create legal rights and obligations while procedural law consists of all laws that outline the methods of enforcing the rights established by substantive law Civil law spells out the rights and duties that exist between persons between persons and their governments and the relief available when a person39s rights are violated Criminal law is concerned with wrongs committed against the public as a whole Cyberlaw often refers to the emerging body of law that governs transactions conducted via the internet but is an informal term used to refer to both new laws and modifications of traditional laws that relate to the online environment How to Find Primary Sources of Law A B C A citation identifies the publication in which a legal authority can be found a statute court decision or other source When Congress passes laws they are collected in a publication called United States at Large Codified laws are compiled by subject 1 The United States Code USC arranges all existing federal laws by broad subject A citation to the USC includes both title and section numbers For example 15 USC Section 1 means that the statute can be found in Section 1 of Title 15 2 State codes follow the USC pattern of arranging law by subject called codes revisions compilations consolidations general statutes or statutes In some codes subjects are designated by number or name 3 Administrative rules and regulations are initially published in the Federal Register a daily publication of the US government and are later incorporated into the Codes of Federal Regulation CFR There are two types of court in the US federal and state courts Both consist of several levelstiers of courts Evidence is presented and testimony is given in the lowest court trial courts Decisions from a trial court can be appealed at an intermediate court of appealsappellate court Decisions from the appellate courts can be appealed to the highest court the state supreme court of the US Supreme Court 1 Most state trial courts are not published Written decisions of the appellate court are published in reports and distributed 39 State court opinions appear in regional units of the National Reporter System which divides the states into geographical areas 39 After appellate decisions have been published they are cited by name of case volume name and page number of state39s official reporter 2 Federal trial court decisions are published unofficially in the Federal Supplement Opinions from circuit court of appeals are reported unofficially in the Federal Reporter How to Read and Understand Case Law Chapter 1 Business and Its Legal Environment A It is essential that business persons know how to read and understand case law due to the fact that decisions made by courts establish boundaries of law as it applies in almost all business relationships B The case title Adams V Jones indicates the two parties participating in the lawsuit Adams is the plaintiff the person who filed the suit and Jones is the defendant However it is important to carefully read the facts of each case to ascertain which party is what 1 The terms judge and justice are usually synonymous and represent two designations given to judges in various courts 2 Most decisions reached by reviewing courts are explained in written opinions which contains the court39s reasons for its decision the rules that apply and the judgment 39 Unanimous opinion is when all the judges or justices agree on an opinion 39 Majority opinion is when there is not a unanimous opinion but the majority opinion outlines the views of the majority of the judges deciding the case 39 Concurring opinion is when a judge agrees with the result of the majority opinion but not the legal reasoning 39 Dissenting opinion presents the views of the other judges who disagree with the majority39s decision 39 Per curiam opinions do not indicate which judge wrote the opinion Chapter 2 The Court System 1 The J udiciary s Role in American Government A The essential role of the judiciary courts in the American governmental system is to interpret the laws and apply them to specific situations B The judiciary has the power of judicial review which allows them to decide whether the laws or actions of the other two branches are constitutional It enables the judicial branch to act as a check on the other two branches of government C Though Judicial Review is not found in the constitution it has remained unchallenged and the power is exercised in both federal and state courts as established in Marbury V Madison 2 Basic Judicial Requirements A Before a lawsuit can be brought to court it must meet the requirements of jurisdiction venue and standing to sue B Before any court can hear a case it must have jurisdiction over the defendant or property involved in the suit and subject matter of the dispute a In personam jurisdiction personal jurisdiction is over any person or business in a geographic area In rem jurisdiction is when a court has jurisdiction over property located within its boundaries i ii A court can exercise personal jurisdiction over certain outofstate defendants based on activities that took place in another state under a state long arm statute but before the courts can exercise jurisdiction the defendant must have had sufficientminimum contacts with the state to justify the jurisdiction Courts use the same principles to determine whether it is fair to exercise jurisdiction over a corporation The minimumcontacts requirement is usually if the corporation advertises or sells its products within the state or places its good into the stream of commerce with intent that the goods be sold in that state b Subject matter jurisdiction are the limitations on thee types of cases a court can hear i ii A court of general jurisdiction can decide cases involving a broad array of issues an example would be a state trial court or federal district court An example of where there is limited jurisdiction is in a probate court a state court that handles only the disposition of a person s assets and obligations after that person s death 1 A court s subject matter jurisdiction can be limited by subject of the lawsuit sum in controversy whether the case involves a felony or misdemeanor andor whether the proceeding is a trial or an appeal Courts of original jurisdiction are trial courts where lawsuits begin trial takes place and evidence in presented Courts of appellate jurisdiction act as reviewing courts on cases on appeal from order or judgment of trial or other lower courts 0 Federal courts have subjectmatter jurisdiction in two situations when a federal question is involved and when there is diversity of citizenship Chapter 2 The Court System i A case comes under judicial power of federal courts when a plaintiff s cause of action is based at least in part on the US Constitution a treaty or a federal law making it a federal question ii Diversity of citizenship jurisdiction is most commonly when the plaintiff and defendant are residents of different states and the dollar amount in controversy exceeds 75000 d Exclusive jurisdiction exists when cases can be tried only in federal courts or only in state courts Federal crimes bankruptcy most patent and copyright claims any lawsuits against the US etc are all examples of when exclusive jurisdiction would be exercised i Concurrent jurisdiction is when both federal and state courts have the power to hear a case When this happens a party may choose either court C The Internet s capacity to bypass political and geographic boundaries undercuts the traditional basis on which courts assert personal jurisdiction a A slidingscale standard has been developed in order to determine when they can exercise personal jurisdiction over an outofstate defendant based on their web activities i Jurisdiction is proper when the defendant conducts substantial business over the Internet ii Jurisdiction is sometime proper when there is some interactivity through a website iii Jurisdiction is not proper when a defendant engages in passive advertising on the web people have to voluntarily access it to read the message b The world s courts are developing a standard that echoes the requirement of minimum contacts applied by the US courts This enforces the standard that business firms need to comply with the laws in any jurisdiction in which it targets consumers for its products D Venue is concerned with the most appropriate location for a trial Venue in a civil case is typically held where the defendant lives whereas venue in a criminal case is typically held where the crime occurred E A party must have standing to sue sufficient stake in a matter to justify seeking relief through the court system in order to bring a lawsuit to court Standing is broken down into three elements harm causation and remedy a The party bringing the action must have already suffered or are going to suffer harm an invasion of a legally protected interest b There must be a causal connection between conduct complained of and injury c It must be likely that a favorable court decision will remedy the injury suffered 3 The State and Federal Court Systems Chapter 2 The Court System A A state court system includes several levelstiers of courts which may include trial courts of limited jurisdiction trial courts of general jurisdiction appellate courts and the state supreme court a Trial courts are courts in which trials are held and testimony is taken They have either general or limited jurisdiction i State trial courts that have general jurisdiction have jurisdiction over a wide variety of subjects including both civil disputes and criminal prosecutions ii Courts of limited jurisdiction are generally inferior trial courts or minor judiciary courts A small claims court is an inferior trial court that only hears civil cases involving claims of less than a certain amount iii Every state has at least one court of appeals where a panel of three or more judges reviews the record of the case on appeal They focus on questions of law rather than questions of fact b The highest appellate court in a state is usually called the supreme court The decisions of this court on all questions of state law are final B The federal court system is a 3tiered model consisting of US district courts and various courts of general jurisdiction US courts of appeals and the US Supreme Court These judges and justices are appointed by the president of the US and are subject to approval by the Senate a US district courts have original jurisdiction in matters involving federal questions and concurrent jurisdiction with state courts when diversity jurisdiction exists b There are 13 US court of appeals in the federal court system There are 12 regional appellate courts and 1 that only deals with certain types of cases such as patent law and in which the US government is a defendant c The highest level of the federal court system is the US Supreme Court which consists of 9 justices It mostly functions as an appellate court and has the final authority on the Constitution and federal law i A writ of certiorari is an order issued by the Supreme Court to a lower court requiring the latter to send it the record of the case for review ii The Court typically grants petitions in cases that raise important constitutional questions or when the lower courts have issued con icting decisions on a significant issue 4 Judicial Procedures Following a Case Through the Courts A American courts follow the adversarial system of justice where parties are allowed to represent themselves in court but they are also allowed to hire an attorney to represent them in court B The parties to a lawsuit must comply with the procedural rules of the court in which the lawsuit is filed Procedural rules provide a framework for every dispute and specify what must be done at each stage of the litigation process Chapter 2 The Court System C The litigation process has three phases pretrial trial and post trial Each phase involves specific procedure D The first step taken by most contemplating a lawsuit is to seek the guidance of a qualified attorney a An attorney may charge one type of fee or a combination of several types i A fixed fee can be charged for the performance of such services as drafting a simple will ii Hourly fees can be charged for matters that will involve an indeterminate period of time iii Contingency fees are fixed as a percentage of a client s recovery in certain types of lawsuits b One must take into consideration the funds required to hire an attorney and whether a lengthy trial or a settlement is more desirable Another important consideration is the defendant s ability to pay the damages sought E Pretrial litigation process involves filings of pleadings gathering of evidence discovery and potentially other procedures such as pretrial conference and jury selection a A pleading informs each party of the other s claims and specifies the issues involved in the case i A plaintiff s complaint is filed by their lawyer at the appropriate court The complaint contains a statement alleging the facts showing that the court has subjectmatter and personal jurisdiction the facts establishing the plaintiff s basis for relief and the remedy the plaintiff is seeking ii Service of process is when the defendant of a lawsuit is formally notified of the lawsuit The plaintiff must deliver a copy of the complaint and summons A default judgment in the plaintiff s favor would mean that they are awarded damages alleged to their complaint due to failure of defendant to respond to allegations iii How service of process occurs depends on rules of the court or jurisdiction in which the lawsuit is brought iv Defendants are allowed to waive their right to be served personally v The defendant s response to the complaint takes the form of an answer where the defendant either admits or denies each of the allegations filed in the complaint vi Affirmative defense is when the defendant admits the truth of the plaintiff s complaint but raises new facts to show that they should not be held liable for damages vii The defendant can also deny the plaintiff s allegations with a counterclaim Chapter 2 The Court System b Many suits don t make it to trial The parties may negotiate a settlement or 6 request a pretrial motion motion to dismiss motion for judgment on the pleadings motion for summary judgment etc Either party can file a motion to dismiss which basically asks the court to dismiss the case i Either may make a motion for judgment on the pleadings which asks the court to decide the issue solely on the pleadings without proceeding to trial ii Either party can file a motion for summary judgment which asks the court to grant a judgment in that party s favor without a trial Discovery is the process of obtaining information from the opposing party or from witnesses prior to trial i Discovery rules attempt to protect witnesses and parties from undue harassment and to safeguard privileged or confidential material from being disclosed Only information that is relevant at hand is discoverable ii A deposition is sworn testimony iii Interrogatories are written questions for which written answers are prepared and signed under oath They are directed to a party to the lawsuit iv One party can serve the other with a written request for an admission of the truth of matters relating to the trial v A party can gain access to documents and other items not in their possession in order to inspect and examine them vi The opposing party can ask the court to order a physical or mental examination by an independent examiner if the physical or mental condition of one party is in question vii Eevidence consists of all computer generated or electronically recorded information and can be the object of a discovery request The Federal Rules of Civil Procedure deal specifically with the preservation retrieval and production of electronic data An expert must be hired to retrieve eevidence ix Ediscovery has its advantages but is also time consuming and expensive A pretrial conference hearing consists of an informal discussion between the judge and opposing attorneys after discovery has taken place The purpose is to explore the possibility of a settlement without trial plan the course of the trial and potentially set ground rules The Seventh Amendment guarantees the right to a jury trial for cases at law in federal courts when amount in controversy exceeds 20 The right does not need to be exercised and unless a party requests a jury the judge presumes the parties waive this right A panel of jurors must be selected before a trial commences this process is called voir dire viii Chapter 2 The Court System F Various rules and procedures govern the trial phase of the litigation process a b d Both attorneys are allowed to make opening statements setting forth the facts that they expect to prove during the trial Rules of evidence determine whether evidence will be admitted in court They are rules that ensure any evidence presented during a trial is fair and reliable i Relevant evidence is evidence that tends to prove or disprove a fact in question or establish the degree of probability of a fact or action Only relevant evidence is admissible ii Hearsay is a testimony someone gives in court about a statement made by someone else who was not under oath at the time of the statement Hearsay is inadmissible in court The plaintiff s attorney executes direct examination and the defendant s executes crossexamination The witness is subject to redirect and recross examination i An expert witness is a person who has scientific technical or otherwise specialized knowledge in a particular area beyond that of an average person by virtue of education training skill or experience Experts are allowed to present opinions based off facts ii A motion for a judgment as a matter of law is when the defendant s attorney asks the judge to direct a verdict for the defendant on the grounds that the plaintiff has presented no evidence to support his or her claim iii After the defendant s attorney has finished introducing evidence the plaintiff s attorney can present a rebuttal by offering additional evidence that refutes the defendant s case A rejoinder is when the defendant s attorney refutes the evidence Each attorney presents a closing argument summarizing the facts and evidence presented during the trial and indicates why the facts and evidence support their client s claim i Attorneys present closing statements regardless of whether or not there was a jury present Juries are told to take into consideration whether or not the plaintiff s factual claim is more likely to be true than the defendant s ii The jury then issues a verdict in favor of one party which specifies the jury s factual findings G After the jury has rendered its verdict either party may make a posttrial motion a The losing party may make a request for a motion for a new trial if the judge believes the jury was wrong new evidence was discovered misconduct by participants during the trial or an error by the judge A second motion for a judgment as a matter of law can be made which is called a motion for judgment nov meaning notwithstanding the verdict The motion will only be granted if the jury s verdict was unreasonable and erroneous Chapter 2 The Court System H Either party may appeal the jury s verdict and judge s ruling on any pretrial or posttrial motion a A brief is a formal legal document outlining the facts and issues of the case the judge s rulings or jury s findings that should be reversed or modified the applicable law and arguments on the defendant s behalf b A court of appeals issues a written opinion after listening to the attorney s oral arguments The court can affirm reverse remand send back affirmreverse the decision in part andor modify a lower court s decision c The losing party can decide to appeal the decision to the state s highest court but can only petition for one at the discretion of the court I A writ of execution is an order directing the sheriff to seize and sell the defendant s nonexempt assets or property Chapter 3 Alternative and Online Dispute Resolution 1 Negotiation and Mediation A The simplest form of ADR is negotiation which is a process in which the parties attempt to settle their dispute informally with or without attorneys to represent them a Each party must carefully prepare their side of the case all the while taking into consideration the elements of the dispute b Facilitated negotiation assisted negotiation involves the assistance of a third party i A minitrial is a private proceeding in which each party s attorney brie y argues the party s case before the other party A third party is typically present and renders an opinion that would be similar to a court s ii In early neutral case evaluation the parties select a neutral third party to evaluate their respective positions iii Disputes may also be resolved through facilitation where a third party assists in reconciling the parties differences They are not to recommend solutions B A mediator is someone who acts as a neutral third party and works with both sides in the dispute to facilitate a resolution A mediator may propose a solution but they do not make an official decision a In binding mediation the parties agree that if they cannot resolve the dispute the mediator can make a legally binding decision on the issue b In mediationarbitration the parties first attempt to settle their dispute through mediation and if no settlement is reached the dispute will be arbitrated C Few procedural rules are involved in the mediation process and the proceedings can be tailored to fit the needs of the parties Disputes can be settled are more quickly with mediation than litigation a One advantage is that it is not as adversarial in nature The mediator takes an active role and attempts to bring parties together so that they can come to a mutually satisfactory resolution b Another advantage is that the parties get to choose the mediator whereas they cannot pick their judge D There are disadvantages to choosing mediation They will charge a fee and without a deadline it may cause the process to slow or even fail 2 Arbitration A An arbitrator is a neutral third party or a panel of experts who hears disputes and imposes resolutions on the parties The key difference in arbitration is that the third party s decision is legally binding B An arbitration clause is a written agreement specifying that any dispute arising under the contract will be resolved through arbitration rather than through the court system C Federal governments and many state governments prefer arbitration to litigation Chapter 3 Alternative and Online Dispute Resolution a The Federal Arbitration Act provides the means for enforcing the arbitration procedure that the parties have established for themselves It enforces arbitration clauses in contracts involving maritime activity and interstate commerce b Nearly all states follow the federal approach to voluntary arbitration The Uniform Arbitration Act supplements private arbitration agreements by providing explicit procedures and remedies for enforcing arbitration agreements D In the arbitration process parties present opening arguments and ask for specific remedies Both sides present evidence and may call and examine witnesses The arbitrator renders a decision a The process begins with a submission which is the act of referring a dispute to an arbitrator b The parties must specify the issues that will be submitted and the powers that the arbitrator will exercise c After each side has had an opportunity to present evidence and to argue its case the arbitrator reaches a decision an arbitrator s decision is called an award E A court may be called on to order one party to submit to arbitration under the terms of the agreement The court is basically interpreting a contract a The court must decide whether the matter is one that must be resolved through arbitration b Mandatory arbitration clauses in employment contracts are generally enforceable c Many creditcard companies include mandatory arbitration clauses in their contracts that also contain classaction waivers d Arbitration clauses in contracts for consumer goods and services have also been a source of controversy A contract or clause drafted by one party the dominant one and presented to the other party on a takeit orleaveit basis is referred to as an adhesion contract When enforcement of a contractual agreement is unfair or oppressive a court may deem the contract unconscionable contrary to public policy and refuse to enforce it F After the arbitration has been concluded the losing party may appeal the arbitrator s award to a court or the winning party may seek a court order compelling the other party to comply with the award a The arbitrator s factfinding and legal conclusions are normally final the parties agreed that the arbitrator would be the judge of the facts b No award will be enforced if compliance with the award would result in the commission of a crime or would con ict with some greater social policy mandated by statute c The Federal Arbitration Act provides four grounds on which an arbitration award may be set aside Chapter 3 Alternative and Online Dispute Resolution i The award was the result of corruption fraud or undue means ii The arbitrator exhibited bias or corruption iii The arbitrator refused to postpone the hearing despite sufficient cause refused to hear evidence pertinent and material to the dispute or otherwise acted to substantially prejudice the rights of one of the parties iv The arbitrator exceeded their powers or failed to use them to make a mutual final and definite award d A party sometimes forfeits the right to challenge an award by failing to object to the defect in a timely manner The party must object when they learn of the problem e An agreement to arbitrate may be governed by the FAA or one of the many state arbitration acts even though parties do not refer to a statute in their agreement f A choiceoflaw clause allows parties to choose to have the laws of a specific state govern their agreement by including this clause in their agreement G Arbitration has some disadvantages such as the fact that the result in any particular dispute can be unpredictable because arbitrators do not need to follow precedence of other cases 3 The Integration of ADR and Formal Court Procedures A Courts are increasingly requiring parties to attempt to settle their differences through a form of ADR before proceeding with litigation B Courtannexed arbitration arbitration mandated by the court is significantly different from voluntary arbitration processes a Either party may reject the award for any reason If a party does reject the award the case proceeds to trial The rejecting party can be penalized however b Discovery of evidence occurs before the hearing and in order for a party to seek to discover new evidence they must secure approval from the court first c The role of the arbitrator remains the same determining issues of both fact and law and make decisions concerning applications of the rules of procedure and evidence during the hearing d Most states impose the same rules of evidence on an arbitration hearing as on a trial Others allow all evidence relevant to the dispute regardless of whether the evidence would be admissible at trial e If a party fails to appear at courtannexed arbitration they waive the right to reject the award C Mediation is often used in disputes relating to employment law environmental law product liability or franchises D A summary jury trial is a mock trial that occurs in a courtroom before a judge and jury Evidence is presented in an abbreviated form along with each side s Chapter 3 Alternative and Online Dispute Resolution major contentions and then the jury presents a verdict The only difference is that the jury s verdict is only advisory 4 ADR Forums and Services A Government agencies private organizations and companies conducting business online provide services facilitating ADR B A major provider of ADR services is the American Arbitration Association AAA C An increasing number of companies and organizations are offering dispute resolution services using online forums known as online dispute resolutions ODR 5 International Dispute Resolution A Parties to international contracts often include special clauses in their contracts providing for how disputes arising under the contracts would be resolved B Forumselection and choiceoflaW clauses designate the jurisdiction Where any dispute arising under the contract Will be more complex and attended by much more uncertainty C International contracts often include arbitration clauses that require a neutral third party to decide any contract disputes the third party may be an entity a panel of individuals representing both parties interests or some other group or organization D International treaties sometimes stipulate arbitration for resolving disputes to help increase foreign investment Chapter 4 Business Ethics 1 Business Ethics A Business ethics concerns decisions businesses make or have to make and whether those decisions are right or wrong It is how businesspersons apply moral and ethical principles in making their decisions B Public perception of corporation shifted from an entity that generates revenues for its owners to an entity that participates in society as a corporate citizen a The profit maximization theory states that the only goal or duty of a corporation was to maximize profits Under this theory resources ow to where they are most highly valued by society and it would lead to the most efficient allocation of scarce resources b Resources were not sufficiently allocated to cover cost of social needs so investors began to look beyond profits They considered the triple bottom line a corporation s profits its impact on people and its impact on the planet C Corporations should strive to be good citizens A business should evaluate the legal implications of each decisions public relations impact safety risks for consumers and employees and financial implications when making business decisions a Business ethics is only consistent with longrun profit maximization Overemphasis on shortterm profit maximization is the most common reason ethical problems occur in business b The Internet has increased the potential for a major corporation to suffer damage to its reputation or lose profits through negative publicity c Unethical corporate decisionmaking can negatively affect suppliers consumers the community and society as a whole which can have a negative impact on the reputation of the company and the people who run it D Laws do not codify all ethical requirements of all persons Compliance with the law is not always enough to determine ethical behavior a The moral minimum is compliance with the law It is the lowest ethical level society will tolerate b Most companies attempt to enforcelink ethics and law through an internal code of ethics They typically outline the company s policies on particular issues and indicate how employees are expected to act However its effectiveness is determined by the commitment of the industry or company leadership to enforcing the codes 0 Ethics is highly subjective and subject to change over time without any formal process making it less certain than law It is based more on judgment than research the way a company acts ethically responsibly and in good faith can determine their success in a dispute 2 Business Ethics and Social Media A Employers used to only ask for references when looking to hire a prospective employee but in today s society it is likely that they will also conduct an Internet search to discover what potential employees may have posted on social media Chapter 4 Business Ethics B Many companies have provided strict guidelines about what is appropriate and what is not when using social media Today employees cannot be fired because of what they post on their social media outlets Employee ethics is just as important as business ethics There needs to be a balance between employees free right to expression against employers right to prevent inaccurate negative statements being spread on the Internet 3 Ethical Principles and Philosophies A Ethical reasoning is the application of morals and ethics to a situation and can be B applied to businesses just as it is to individuals The study of ethics is generally divided into two major categories duty based ethics and outcomebased ethics Dutybased ethics is rooted in the idea that every person has certain duties to others including both humans and the planet It focuses on the obligations of the corporation and deals with standards for behavior a Nearly every religion has principles or beliefs about how one should treat others which can be a unifying force for employees or a rallying point to increase employee motivation but it can also cause problems b The principles of rights is the belief that a key factor in determining whether a business decision is ethical is how that decision affects the right of others i A potential issue is that they may disagree on which rights are most important ii Rights theorists generally believe that whichever right is stronger in a particular circumstance takes precedence c Dutybased ethics may be derived from philosophical reasoning German philosopher Immanuel Kant believed that human beings are endowed with moral integrity and capacity to reason and conduct their affairs rationally i Kant believed that when people are treated as a means to an end they are being treated as the equivalent of an object and are being denied their basic humanity ii Kantian ethics is centralized around a theme that individuals should evaluate their actions in light of the consequences that would follow if everyone in society acted the same way C Outcomebased ethics focuses on the impacts of a decision on society or on key stakeholders The main philosophical theory of outcomebased decision is utilitarianism a Under this philosophy an action is morally correct when it produces the greatest amount of good for the greatest number or creates the least amount of harm for the fewest of the people it affects b An action that produces the greatest good for the most people may not be the most ethical Corporate social responsibility combines a commitment to good citizenship with a commitment to making ethical decisions improving society and minimizing environmental impact Chapter 4 Business Ethics a The social aspect of CSR requires that corporations demonstrate that they are promoting goals that society deems worthwhile and are moving toward solutions to social problems b Any socially responsible activity will benefit a corporation Corporate responsibility is most successful when a company undertakes activities that are significant and related to its business 0 One view of CSR is that corporations have a duty to stakeholders one or more of the groups not included in the shareholders have a greater stake in company decisions 4 Making Ethical Business Decisions A Those entering the global corporate community must be prepared to make hard decisions because there is not always a good answer to the questions that arise Therefore it is important to have tools to help in the decisionmaking process and a framework for organizing them Business decisions can be complex and involve legal concerns financial questions health and safety concerns and ethical components The first step in Leonard H Bucklin s Business Process Pragmatism is inquiry identify the parties involved stakeholders and collect relevant facts in order to list any relevant legal and ethical principles that will guide the decision Next the decisionmaker lists possible actions Then those participating in the decision making work together to craft a consensus decisionplan of action for the corporation The decision maker then articulates the reasons for proposed actions The final step is when the decision has been made and implemented Ethical business decisionmaking is meaningless if management does not set standards a One of the most important ways to create and maintain an ethical workplace is for top management to demonstrate its commitment to ethical decisionmaking b Business owners and managers sometimes foster unethical and illegal conduct indicating to their coowners comanagers employees and others that unethical business behavior will be tolerated c The SarbanesOxley Act of 2002 required companies to set up confidential systems so employees can voice their concerns about possible unethical behaviorspractices 5 Global Business Ethics A Regions and states have different ethical expectations and priorities which makes B making ethical business decisions more difficult US businesses today usually take steps to avoid bad publicity by either refusing to deal with certain suppliers or by arranging to monitor their suppliers workplaces to make sure employees are not being mistreated The Foreign Corrupt Practices Act of 1977 prohibited US businesspersons from bribing foreign officials to secure beneficial contracts a The FCPA does not prohibit payment of substantial sums to minor officials whose duties are routine such as process of paperwork with little Chapter 4 Business Ethics to no discretion involved in the action They are meant to accelerate the performance of administrative services b The FCPA states that all companies must keep detailed records that accurately and fairly re ect their financial activities in order to help detect illegal bribes c Business firms and officers or directors that violate the FCPA are subject to a monetary fine and imprisonment


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