LAW AND JURISPRUDENCE
n Law: A body of enforceable rules governing relationships among individuals and between individuals and their society.
n Jurisprudence: The study of different schools of legal philosophy and how each can affect judicial decisionmaking.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
PRIMARY SOURCES OF AMERICAN LAW
n There are four primary sources of domestic law:
(1) Constitutions, setting forth the fundamental rights of the people living within the United States or a given state, describing and empowering the various branches of government, and prescribing limitations on that power;
(2) Statutes, enacted by Congress or the legislature of a given state and ordinances adopted by a given locality;
n A given state statute may be based on a uniform law (e.g., the Uniform Commercial Code) or on a model act (e.g., the Model Business Corporations Act). However, each state is free to depart from the uniform law or model act as it sees fit.
(3) Administrative Rules and Regulations promulgated by federal, state, and local regulatory agencies; and
(4) Case law, which is the body of judicial decisions that interpret and enforce any of the foregoing, as well as those relationships among individuals or between individuals and their society which are not subject to constitutional, statutory, or administrative law.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
ADMINISTRATIVE LAW
n Administrative Law is the body of rules, orders, and decisions issued by administrative agencies, such as the federal Securities and Exchange Commission or a state’s public utilities commission.
n Administrative Agencies: Agencies authorized by federal or state legislation to make and enforce rules to administer and enforce legislative acts (e.g., the Social Security Administration).
n Executive Agencies: Agencies formed to assist the President or, at the state level, the Governor, in carrying out executive functions (e.g., the Justice Department).
n Independent Regulatory Agencies: Agencies neither designed to aid nor directly accountable to the legislative or executive branches (e.g., the Securities and Exchange Commission).
n Enabling Legislation: Legislative action specifying the name, purpose(s), function(s), and power(s) of the agency created by the legislation.
n As a general rule, an agency lacks the power to act beyond the scope of its enabling legislation.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
ADMINISTRATIVE RULEMAKING
n Rulemaking: The process of formulating new regulations. Rulemaking by federal agencies typically occurs in the following steps:
n Notice of Proposed Rulemaking: A proposed rule and some discussion of its rationale are published by the agency in the Federal Register. The notice invites public comment and notifies the public of the times and places of any hearings on the proposed rule.
n Comment Period: Following publication in the Federal Register, the agency must allow ample time for public comment. The agency need not respond to all comments, but it must respond to any significant comments that bear directly on the proposed rule by either modifying the proposed rule or explaining why the modification was not made.
n Final Rule: Once the final version of the rule is decided upon by the agency, it will be published first in the Federal Register and then compiled annually in the Code of Federal Regulations.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
ADMINISTRATIVE INVESTIGATION
AND ADJUDICATION
n Both as part of the rulemaking process and as part of the enforcement of the rules, agencies conduct inspections of regulated entities’ facilities or business records.
n If an agency determines that an entity has violated one or more rules, the agency may take administrative action against the entity. When possible, the agency will seek to secure the entity’s voluntary compliance, thus avoiding the expense and inconvenience of full-blown judicial or quasi-judicial proceedings. If voluntary compliance is not forthcoming, agency adjudication proceeds as follows:
n Typically, the agency and the entity will appear before an administrative law judge (ALJ), who will conduct a quasi-judicial (or “court-like”) proceeding, the exact nature of which varies from agency to agency.
n The ALJ issues an initial order, which is subject to appeal to the agency’s governing board (e.g., the actual commissioners of the Federal Trade Commission).
n After disposing of any appeal, the agency issues a final order, which may be appealed to a designated court (e.g., the U.S. Court of Appeals for the D.C. Circuit)
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
STARE DECISIS
n Stare Decisis: The doctrine by which judges are obligated to follow precedents established within a particular jurisdiction.
n Precedent: The authority afforded to a prior judicial decision by judges deciding subsequent disputes involving the same or similar facts and the same jurisdiction’s substantive law.
n Binding Authority: Any primary source of law a court must follow when deciding a dispute. This includes all constitutional provisions, statutes, treaties, regulations, or ordinances that govern the issue being decided, as well as prior court decisions that constitute controlling precedent in the court’s jurisdiction.
n Persuasive Authority: Any primary or secondary source of law which a court may, but which the court is not bound to, rely upon for guidance in resolving a dispute.
n A prior judicial decision acts as binding precedent only when the subsequent court is applying the same law as the prior court. Otherwise, the prior decision is only persuasive authority.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
LAW VS. EQUITY
n From their origin in the late-Eleventh Century, common-law courts were typically classified as either “courts of law” or “courts of equity.”
n Courts of Law were empowered only to award wronged parties money or other valuable compensation for their injuries or other losses.
n Courts of Equity, by contrast, were empowered to award any manner of non-monetary relief, such as ordering a person to do something (a.k.a. “specific performance”) or to cease doing something (a.k.a. “injunction”).
n In most of the United States the courts of law and equity have merged. Nonetheless, American courts still recognize legal remedies and equitable remedies.
n Remedy: The means given to a party to enforce a right or to compensate for another’s violation of a right.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
EQUITABLE MAXIMS
n A party’s right to receive equitable relief and a court’s power to grant it depends upon the following:
n Whoever seeks equity must do equity;
n Where the equities favor both parties, the dispute must be decided according to the law;
n Whoever seeks equity must come to the court with “clean hands”;
n Equitable relief will be awarded only when there is no adequate remedy at law;
n Equity favors substance over form; and
n Whoever seeks equity must pursue the vindication of their rights vigilantly or risk having their claims barred.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
CLASSIFICATIONS OF LAW
n Substantive vs. Procedural Law
n Substantive law consists of all laws that define, describe, regulate, and create legal rights and obligations.
n Procedural law consists of all laws that establish and regulate the manner of enforcing or vindicating the rights established by substantive law.
n Civil vs. Criminal Law
n Civil law defines and enforces the duties or obligations of persons to one another.
n Criminal law, by contrast, defines and enforces the obligations of persons to society as a whole.
n Cyberlaw: A growing body of law that deals specifically with issues raised by cyberspace transactions.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
NATIONAL AND INTERNATIONAL LAW
n National Law: The system of laws that govern rights and obligations of persons within a particular country. The various legal systems employed by the 200-plus nations of today’s world can be roughly characterized as either “civil” or “common” law systems.
n International Law: The body of written and unwritten laws, including treaties, governing the relations between and among nations and between nations and the citizens of one or more other sovereign nations (e.g., the Geneva Convention on the Treatment of Prisoners of War, the Warsaw Convention on International Air Travel, the General Agreement on Tariffs and Trade, the Nuclear Test Ban Treaty).
n Key questions raised by international law, which are less present with respect to national law, are:
(1) who will enforce the rights and obligations created by a particular international law; and
(2) how will they enforce those rights and obligations?
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
FEDERALISM & CHECKS AND BALANCES
n Federal Government: A form of government where states form a union and the sovereign power is divided between the national government and the various states.
n Separation of Powers: The national government of the United States of America is composed of three separate branches, each of which acts as a check on the others’ power:
n The Legislative Branch (i.e., Congress), which may override the President’s veto and which may define the jurisdiction of the Judiciary and must confirm Judiciary appointees;
n The Executive Branch (i.e., the President), which has the power to veto legislation passed by Congress and to appoint the members of the Judiciary; and
n The Judicial Branch (i.e., the Supreme Court and the lower federal courts), which has the power to void the acts of the Executive and Legislative branches because they are unconstitutional.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
THE COMMERCE CLAUSE
n Commerce Clause: Article I, Section 8 of the U.S. Constitution empowers Congress “[t]o regulate Commerce with foreign nations, and among the several States, and with the Indian Tribes.”
n Since 1824, the Supreme Court has interpreted the Commerce Clause to permit Congress to regulate both
n interstate commerce (i.e., commerce between two or more states) and
n intrastate commerce (i.e., commerce within a single state),
as long as the intrastate commerce at issue “substantially affects” interstate commerce.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
THE REGULATORY POWERS
OF THE STATES
n Police Powers: As part of their sovereign powers, states possess the power to regulate private activities in order to protect or promote public order, health, safety, morals, and general welfare.
n Balancing the Commerce Clause with the States’ Police Powers: When state regulations impinge on interstate commerce, courts must balance the state’s interest in the merits and purposes of the regulation against the burden that the regulation places on interstate commerce. Generally speaking,
n state laws enacted pursuant to the state’s police powers are presumed to be valid notwithstanding their effect on interstate commerce; however,
n if the state law substantially interferes with interstate commerce, it will most likely be held to violate the Commerce Clause (i.e., to be unconstitutional).
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
THE SUPREMACY CLAUSE
AND PREEMPTION
n Federal constitutional and statutory law and treaties supersede their state counterparts due to the Supremacy Clause, Article VI, Section 2 of the U.S. Constitution:
This Constitution, and the Laws of the United States which shall be made in Pursuance thereof; and all Treaties made, or which shall be made, under the Authority of the United States, shall be the Supreme Law of the Land; and the Judges in every State shall be bound thereby, any Thing in the Constitution or Laws of any State to the Contrary notwithstanding.
n Preemption: Federal law is said to preempt a conflicting state or local law, regulation, or ordinance if
n federal law is so pervasive, comprehensive, or detailed that it leaves state and local law no room to supplement it, or
n federal law creates a federal regulatory agency that is empowered to enforce federal law.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
THE BILL OF RIGHTS
n The first ten amendments to the U.S. Constitution comprise the Bill of Rights – a series of protections for individuals against various types of government action.
n The Bill of Rights, with certain notable exceptions, protects legal persons, such as corporations and sole proprietorships, as well as natural persons.
n The protections afforded by the Bill of Rights are only against action by the federal government.
n In order to extend the same protections against actions by state and local governments, the U.S. Supreme Court has incorporated the protections afforded by the Bill of Rights into the following language of the Fourteenth Amendment:
. . . . No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
THE BILL OF RIGHTS IN A NUTSHELL
n Most significantly, for our purposes, the Bill of Rights:
n guarantees freedom of religion, speech, and the press, as well as the rights to peaceably assemble, and to petition the government [Amend. 1];
n guarantees the right to keep and bear arms [Amend. 2];
n prohibits unreasonable searches and seizures of persons or property [Amend. 4] and guarantees fair payment for property taken for public use [Amend. 5];
n guarantees the rights to due process of law, including indictment by grand jury [Amend. 5], as well as the rights to a speedy and public (criminal) trial with the assistance of counsel and to cross-examine witnesses and to solicit favorable testimony [Amend. 6];
n guarantees the right to trial by jury in both criminal cases [Amend. 6] and civil cases involving more than $20 [Amend. 7]; and
n prohibits excessive bails and fines, as well as cruel and unusual punishment [Amend. 8].
Ch. 1: The Historical and Constitutional Foundations - No. 22
Business Law Today: The Essentials (8th ed.)
FREEDOM OF SPEECH
n The First Amendment safeguards freedom of speech, including corporate political speech and symbolic speech.
n Symbolic speech includes all forms of expressive conduct, including gestures, movements, and clothing.
n Commercial speech (i.e., advertising) may be restricted as long as the restriction