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Chapter 1 Book notes

by: Gabrielle Blados

Chapter 1 Book notes Law 3220

Marketplace > Clemson University > Law 3220 > Chapter 1 Book notes
Gabrielle Blados

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About this Document

These notes come directly from the textbook for chapter 1. I will be adding the summary of the cases and the end of chapter questions on the test study guides.
The Legal Environment of Business
John M. Hine
Class Notes
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This 5 page Class Notes was uploaded by Gabrielle Blados on Friday August 26, 2016. The Class Notes belongs to Law 3220 at Clemson University taught by John M. Hine in Fall 2016. Since its upload, it has received 3 views.


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Date Created: 08/26/16
Law 322 Chapter 1 Book Notes Law and the Key Functions of the Legal System • No generally accepted definition of law • Business Law: refers to the rules, standards, and principles defining behavioral boundaries • Law is a collection of rules or principles to direct human behavior • Formal rules—laws • Informal rules—society’s history, customs, commercial practices and ethics • Key roles the Legal System serves in society: 1. Influencing the behavior of the members of a society 2. Resolving disputes within society 3. Maintaining important social values 4. Providing a method for assisting social change Improving Social Stability by Influencing Behavior • Legal system helps define acceptable social behavior • Laws limit activities which could hurt the public interest • Prevent business from being unethical • Laws can require or encourage business that further social or political goals • State laws can conflict with federal laws - Example: Legalization of marijuana in some states • Different societies use law to enforce different social norms Conflict Resolution • Critical function of law • Court system was created to settle disputes formally - Private disputes: between members of society - Public disputes: between individuals and the government Social Stability and Change • Every society is shaped in part by its values and customs • Social attitudes change causing some laws to be amended • The legal system provides a way to bring about changes in “acceptable” behavior Sources of Law in the United States • The US and state constitutions created the three branches of government - All branches have the ability to make laws 1. Legislative—passes statutes 2. Executive—issues regulations under statutes 3. Judicial—create legal presidents through decisions Constitutions • A constitution is the fundamental law of a nation • Establishes and limits the power of government • Doesn’t need to be a written document The US constitution • Oldest written constitution in force in the world • As the highest legal authority the US constitution can override any state or federal laws • Creates the three branches as a framework of the US government • The division of power in government is called the separation of powers - This prevents one branch from becoming too powerful Legislatures and Statutes • Statutes that are created by legislation make up much of the law that significantly affects business behavior Administration Agencies and Regulations • Administration agencies are created by a delegation of legislative power to the executive branch The Judiciary and Common Law • Common law is a law made and applied by judges as they resolve disputes among private parties - Is a major part of the legal environment of business as it is the foundation of agency • The judiciary reviews actions taken by the executive branch and administrative agencies to make sure they comply with the constitution Case Law • A dispute comes to court in the form of a case - A case is a dispute between two or more parties that is resolved through the legal processes • Judges follow the rules of civil procedures in common law cases • Rulings in important cases have been published in books called case reports - These reports are public information • Judges look for guidance by studying previous decisions on similar matters, this is known as precedent • To settle unique or novel disputes judges create new common law • Common law is a state law, so some rulings may be different depending on location Doctrine of Stare Decisis • The use of precedent in deciding current cases is a doctrine called Stare Decisis meaning “to stand on decided cases” - Judges are expected to stand by established rules of law Value of Precedent • Stare decisis has many benefits 1. Consistency in the legal system improves the ability to plan business decisions 2. People become increasingly confident in that the rule will be followed in the resolution of future disputes and order business and personal affairs given the rules of law 3. Creates a legal system that is more just by neutralizing the prejudices of individual judges 4. Judges who act on precedent are less likely to act on bias Changes in Law and Society • An advantage of dispute resolution through the common law is its ability to adapt • As changes occur in technology or in social values the common law evolves - New rules are made to better fit the environment Reporting Court Cases • Reported cases are called “primary source” because they are law • Secondary sources are used by judges when giving decisions in cases • The American Law Institute (ALI) is the leading independent organization in the US to improve the law • Reporters are appointed to contribute to Restatements according to their area of expertise The Executive • Executive orders require agencies to do certain things within the executives scope of authority - Give an order to preference for buying recycled products or to restrict financial transactions by suspected terrorist organizations International Sources of Law • A firm doing business in another country is subject to its laws and is still subject to the laws of its home country Classification of Law • The organization of law can be thought of in several ways, whether it was organized from: - A constitution - A legislative body - The judiciary • Classify the law on the basis of: - Public/private - Civil/criminal - Procedural/substantive • Laws usually fall into more than one classification Public and Private Law • Public law concerns the legal relationship between members of society— businesses/individuals and the government • Private law sets forth rules governing the legal relationships among members of society - Primarily common law - Enforced mainly through state court system Civil and Criminal Law • The legislative body decides whether the law is to be civil or criminal or both • Unless a statute is expressed as criminal it is considered to be civil • Criminal law concerns legal wrongs or crimes committed against the state • A crime is classified as a felony or a misdemeanor - Misdemeanors are generally less serious crimes • If found guilty of a criminal offense you can be fined, imprisoned or both • To be found guilty of a crime the court must find evidence beyond a reasonable doubt • Civil law is concerned with the rights and responsibilities that exist among members of society or between individuals and the government in noncriminal manners • If found liable for a civil law you may be required to pay money damages to the injured party - To be found liable the court must find the preponderance of the evidence favors the injured party - Lower standard of proof than criminal cases Substantive and Procedural Law • Substantive law includes common law and statutory law that define and establish legal rights and regulate behavior • Procedural law determines how substantive law is enforced through the courts by determining: - How a lawsuit begins - What documents need to be filed - Which court can hear the case - How the trial proceeds Business Ethics and Social Responsibility • Surveys indicate the least trusted institutions are: - Law firms - Wall Street - Congress - Big companies - Labor unions - The media • When a firm suffers a scandal the lose of reputation can effect sales and the company can lose value • Trust is crucial in business relationships • Maintaining a reputation for ethical standards is valuable Ethics, Integrity, Morality, and the Law • Ethics has to do with the rules or standards governing the conduct of members of a profession and how standards are put into action • Integrity: living by a moral code and standards of ethics • Morality concerns conformity to rules of correct conduct within the context of a society, religion, or other institution • Bribes are illegal and unethical Perceptions of Ethics and Responses • Corporations that made a special effort to improve corporate ethics by placing more people purported to have a socially conscious perspective on their boards of directors Ethics Codes and Compliance Programs • Ethics codes matter little unless there is a serious effort to ensure compliance within an organization • The existence of an effective corporate compliance program is a key factor in the agency’s decision whether to prosecute an organization or to recommend leniency to a court when a legal problem arises • Compliance programs are internal management tools for helping to avoid legal problems


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