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Chapter 1

Law as a Foundation for Business

Learning Objectives

Thepurposeofthischapteristointroducethestudentstothesubjectoflawandtosomeclassificationsofitssubjectmatter.Inaddition,itisdesignedtoinstillinthemrespectfortheroleofthe“ruleoflaw”inthe societyandthatthejudicialsystemisthemostimportantstabilizingforceinsociety.Itshouldcreateanawarenessthatlawisafoundationfortheprivatemarketand“property”asalegalconceptunderpinsthatmarketandcontributestothemaximumwealthofnationsthroughproductivity.Thischapteralsodescribesstaredecisis,basicsourcesofthe American law,andsanctionsthatcanbeimposedwhenthelawisnotfollowed.

References

  • Bethell,Tom,TheNoblestTriumph(1999).
  • Bernstein,WilliamJ.,TheFirstofPlenty.McGraw-Hill(2004).
  • Driegel,Blandine,TheStateandtheRuleofLaw.PrincetonU.Press(1995).
  • Friedman,LawrenceM.,AmericanLaw,2ded.Norton(1998).
  • Harnett,Bertram,Law,LawyersandLaymen:MakingSenseoftheAmericanLegalSystem.SanDiego:HarcourtBraceJovanovich(1984).
  • Helpman,Elhanan,TheMysteryofEconomicGrowth.BelknapPress(2004).
  • Holmes,TheCommonLaw.Little,BrownandCompany(1922).
  • Kelman,M.,AGuidetoCriticalLegalStudies.Harvard(1988).
  • Pound,AnIntroductiontothePhilosophyofLaw.YaleUniversityPress(1922).
  • Reed,O.Lee,“Law,theRuleofLaw,andProperty,”AmericanBusinessLawJournal,Vol.38(2001).
  • Reed,O.Lee,“Nationbuilding101:ReductionisminProperty,Liberty,andCorporateGovernance,”36VanderbiltJournalofTransitionalLaw673(2003).
  • TheSpiritoftheCommonLaw.MarshallJonesCo.(1921).

Teaching Outline

I. Introduction

A. Why Law and Regulations Are Fundamental Foundations for Business(LO1-1)

Emphasize:

  • That by studying the legal and regulatory environment of business, students will gain an understanding of basic legal vocabulary and gain the ability to identify problematic situations that could result in liability.
  • That because of the positive role lawyers can play, they are increasingly being asked to join corporate boards.
  • Sidebar 1.1 titled ‘JPMorgan Chase & Co.’s Massive Legal Liability.’

II. Law, the Rule of Law, and Property

A. Law

Emphasize:

  • Thesimpledefinitionoflaw.It canbe elaboratedbyobservingthatlawisarule-based,state-enforcedformalorderingsystemwithmoralelements.
  • Thatadequatelawandlegalinstitutespromotethecertaintyandtrustnecessaryforcomplex,long-termbusinessarrangements.Inaneconomicsense,theylowerthecostsoftransactingbusiness.

AdditionalMattersforDiscussion:

  • Discussthatlawformalizesvaluesandtraditionsandthatlawismoreneededinalarge,heterogeneousmodernnationthaninasmaller,homogeneousnation.ComparetheU.S.andJapan.
  • Itisnottooearlyinthischaptertoaskstudentswhetherornotlackoflawandstrictregulationfacilitatedtheeconomiccrashandrecessionthatbeganin2008.
  • Askstudentstocommentonhowmistrustoflawandlawmakersprecipitatedthe“OccupyWallStreet”andother“Occupy…”movementsthatarosein2011.

B. TheRuleofLaw

Emphasize:

  • Thatunderaruleoflaw,lawsaregenerallyandequallyapplicable.
  • Thatlackoftheruleoflawinternationallyhasproducedhundredsofcallsforitinthelastseveralyearsbybusinessandpoliticalleaders.Getstudentstosearchforrule-of-lawreferencesincomputerdatabases.
  • Thatthecompleteruleoflawisanidealratherthanafactineventhemostdemocraticsocieties.

AdditionalMattersforDiscussion:

  • GetstudentstodiscusswhythemanagingdirectorofJ.P.MorganandCo.calledtheruleoflaw“acornerstoneoffreetrade.”
  • Askstudentswhytheruleoflawtendstoproducerulesthatbenefiteveryone.Answer:Becauselawsapplygenerallyandequallytoeveryone,theonlywaylawmakerscanbenefitthemselvesisbybenefittingeveryone.Thisansweristheoretical,ofcourse.Lawmakersareoftenbenefitedindividuallyformakinglawsthatfavorspecialinterests.
  • Askstudentstoimaginehowsocietywouldbewithnolaws.Whatifthegovernorofone’s stateannouncedthattomorrowwouldbenolawdayandthatnothingwouldbepenalizedorenforced,nopolicewouldbepresentandnopenaltieswouldresultfromanyone’sactions.Whatwouldthestudentsdo?One is likelyto findthatafterafewfleetingandwhimsicalthoughts,theywouldagreethattheywouldprimarilyacttoprotecttheirrealandpersonalproperty.

C. Property (LO1-2)

Emphasize:

  • The two meanings of property.
  • Thatpropertyisnottheresourceorthingitself.Itisaright(orseriesofrights).
  • Thatthepropertyright gives a majorincentivetodevelopresources.
  • Thatthe exclusionary right of property provides a basis for the private market and modern business.

AdditionalMattersforDiscussion:

  • Askstudentstodiscusstheincentivetogrowandprosperandtheincentivetoinnovateandprogressunderasystemwitharighttoprivatepropertyownershipandacommunistsystemwhereprivateownershipofpropertyisgreatlydiminishedformost.Wouldtheyevenbeinschoolifaccumulationofpropertyrightswerenotattainable?

D. PropertyinitsBroadestSense

Emphasize:

  • Howinitsbroadestsense“property”isthecentralconceptofWesternlegalsystems.
  • Howpropertycanbethoughtofasthehubofawheelandthevariouslegaltopicsstudiedinthetextasspokesofthewheel.Lawandtheruleoflawprovidetheunifyingrimofthewheel. (Refer to Figure 1.1)
  • Thatfor Madison and other constitutional framers, property protected not only physical resources like land but also human rights like freedom of speech, freedom of religion, and freedom from unreasonable intrusion by the government.

AdditionalMattersforDiscussion:

  • Askstudentstodiscussthestatement:“BillGatesandyourprofessorhaveequalproperty.”Thepointistoexaminetheconfusionbetween“resources”and“property.”Arguably,althoughBillGatesandthe student mayhavevastlydifferentamountsofresources,heandthe student hasexactlythesamerighttotheserespectiveresources,thusthesame“property.”
  • InFederalistPaper10,Madisonwrote:“Property…initsparticularapplicationmeansthat‘dominationwhichonemanclaimsandexercisesovertheexternalthingsoftheworld,inexclusionofeveryotherindividual.’Initslargerandjustermeaning,itembraceseverythingtowhichamanmayattachavalueandhavearight;andwhichleavestoeveryoneelsealikeadvantage.Intheformersense,aman’sland,ormerchandise,ormoneyiscalledhisproperty.Inthelattersense,amanhaspropertyinhisopinionsandthefreecommunicationofthem.Hehasapropertyofpeculiarvalueinhisreligiousopinions,andintheprofessionandpracticedictatedbythem.Hehaspropertyverydeartohiminthesafetyandlibertyofhisperson.Hehasanequalpropertyinthefreeuseofhisfacultiesandfreechoiceoftheobjectsonwhichtoemploythem.Inaword,asamanissaidtohavearighttohisproperty,hemaybeequallysaidtohaveapropertyinhisrights.”
  • Madison’s“largerandjustermeaning”ofpropertyopensupallsortsofopportunitiesfordiscussionwithstudents.Notethatalthoughasystemofpropertyisbasictoprivatebusinessinthemodernnation,itdoesnotprecluderedistributionofresourcesforeducation,health,andreliefofpovertyandadversity,etc.EvenastheAmericanrevolutionariesmaintained“notaxation(ofourindividualresources)withoutrepresentation,”theyappreciatedthenecessityofappropriatetaxation(ofone’sresources)withdemocraticrepresentation.
  • TheimportanceofthebroadersenseofprivatepropertyinthecommonlawgrowsoutoftheMagnaCarta.Fromthe13ththroughthe18thcenturies,theimportanceofprivatepropertycreatedconstitutionaltensionbetweentheEnglishmonarchsandtheirsubjects.Themonarchsoftenclaimedinessencethattheyownedthenation,itsland,anditsproduce,yetinoppositiontothistherewasagrowingsensethatpeopleownedthingsprivatelyandcouldbetaxedonthisprivateownershiponlythroughtheirownrepresentativeconsent.Thus,theBritishcolonistsinthenewworldclaimedtheycouldnotbetaxedwithoutrepresentation.TheSonsofliberty,oneofthefirstrevolutionarygroups,hadastheirslogan“Liberty,PropertyandnoStamps.”

E. Jurisprudence

Emphasize:

  • Thevariousschoolsofjurisprudence.
  • Howthevariousschoolsofjurisprudenceoverlap.
  • Thatthewordjurisprudencealsoreferstothegeneralbodyoflawinterpretedbyjudgesasopposedtolegislation.

II. ClassificationsofLaw

A. CommonLawandCivilLaw(LO1-3)

Emphasize:

  • Thatthe“commonlaw”countriesarethosethatwerecolonizedbyEnglandandtakethelegalapproachofthatnation.
  • Thatcommonlawemergedasjudge-madelawandeventodayemphasizestheimportanceofjudgesinthelegalsystem.
  • Thatcivillawreliesonthelegislationthanjudicial decisionstodetermine whatthelaw is.Undercivillaw,courtsareprimarilyfact-findingbodies.

B. PublicandPrivateLaw

Emphasize:

  • Thedistinctionbetweenpublicandprivatelaw.
  • Thatconstitutionallaw,administrativelaw, andcriminallawarethreeofthemainsourcesofpubliclaw.
  • Thatpropertylaw,contractlaw, andtortlawarethreeofthemaintypesofprivatelaw.

C. CivilLawandCriminalLaw

Emphasize:

  • That for administrative purposes, courts usually separate criminal actions from all other lawsuits.
  • Thatcivillawasaclassificationoflawisnotthesameascivillawasdiscussedpreviouslyasasystemoflaw.Thecontextoftheterm’susemustbeconsideredwhendefiningtheterm.

D. SubstantiveandProceduralLaw

Emphasize:

  • Thedistinctionbetweensubstantiveandprocedurallaws.
  • That substantive rules of law define rights and duties, while procedural rules of law provide the machinery for enforcing those rights and duties.

IV. SourcesofLaw (LO1-4)

A. FederalLaw

Emphasize:

  • That federal law is a very important source of law. It includes the U.S. Constitution, which is the supreme law of the nation.
  • That any law, federal or state, that conflicts with the Constitution is said to be void and has no legal effect.
  • That next in the hierarchy of federal law comes the legislation passed by Congress, also called “acts” or “statutes” (collections of legislation, often on the same subject, are codes).

B. StateLaw

Emphasize:

  • Thedistinctionbetweenastatute,acode,andanordinance.
  • ThebenefitsofuniformlegislationandespeciallytheUniformCommercialCode.

AdditionalMatterforDiscussion:

  • Theproblemofclear,concise,andaccuratestatutorydrafting.Havethestudentswriteadefinitionforalawprohibiting“conductunbecomingastudent.”

C. JudicialDecisionsorCaseLaw

Emphasize:

  • Howajudicialopinionbecomesaprecedentandhowacaseiscited.
  • Thedistinctionbetweenaholdingofacasethatestablishesprecedentanddicta.

AdditionalMattersforDiscussion:

  • DiscusshowinAmerica’s property-basedlegalsystemresolvingdisputesoverthemeaningandapplicationofthelawisimperative.Judicialdecision-makingformerlyresolvesdisputes.Talkabouttheneedtohaveimpartialjudges.
  • Havethestudentsexpresstheirviewsonoriginalism.Dotheythinkthatoriginalismcanbefairandeffectiveover200yearsafteradocumentwasdrafted?

Advantages

Emphasize:

  • Theimportanceofstare decisis.
  • Theadvantagesofstaredecisis.

Disadvantages

Emphasize:

  • That the disadvantages of case law include—volume of cases, conflicting precedents, dicta, rejection of precedent, and conflicts of law.
  • Theproblemofconflictoflawsandtheattemptsatresolution.

D. SourcesofLawHierarchyinReview

Emphasize:

  • Thatlawcomesinahierarchy.
  • Lawhigherinthehierarchyoverrulesorpreemptslowerlaw.

E. LegalSanctions

Emphasize:

  • Thatsanctionsarenecessarytoencourageorforcecompliancewiththelaw.
  • ThattheFourteenthAmendmentmandatesthatindividualsreceivedueprocess.
  • Thatthe right of an individual to take another person’s resources (especially money) because that person has failed to meet the requirements of the law (e.g., the breach of a contract) is known as a remedy.

F. SanctionsforCriminalConduct

Emphasize:

  • Thatcriminalactionsmayresultinoneormoreofthefivesanctionslisted.
  • Thatthepurposesofsanctionsaretoprotectthepublicanddeterfurthercriminalconduct.
  • Thedistinctionbetweenfeloniesandmisdemeanors.

AdditionalMattersforDiscussion:

  • Drawattentiontothefactthatassocietychanges,criminallawchanges.Pointoutthatmiscegenationandhomosexualitywerebothonceconsideredcrimes.
  • Havethestudentsdebatewhetherornotcertainactionsthatarenowcriminalshouldbe.Forexample,druguse,alcoholism,gambling,andprostitution.
  • Thegrowthof“whitecollar”crimesuchasincometaxevasion,embezzlement,briberyofforeignofficials,computerfraud,andpricefixing.Havethestudentsdiscussappropriatepunishmentforthoseconvicted.
  • ThatChapter13willcovercriminallawindetail.

G. SanctionsforBreachofContract

Emphasize:

  • Theimportanceofcontractlawtothebusinesscommunity.
  • Thatwhen one party to a contract fails to do what he or she agreed to do, a breach of contract occurs.
  • That the usual remedy for a breach is a suit for dollar damages. These damages, called compensatory damages, are awarded to make the victim of the breach “whole” in the economic sense.
  • That in addition to compensatory damages, breach-of-contract cases may award consequential damages in some circumstances.
  • That in some circumstances, the remedy of an injured party may be a decree of specific performance—an order by the court commanding the other party actually to perform a bargain as agreed.

AdditionalMatterforDiscussion:

  • Thatcontractswillbediscussedindetailinchapters8and9.

H. SanctionsforTortiousConduct

Emphasize:

  • That a tort is a civil wrong other than a breach of contract.
  • Thetheoryofdamagesintortcases.
  • Thattherearethreetypesoftorts:intentional,negligence,andstrictliability.
  • That punitive damages—also called exemplary damages—are also appropriate when the tort is intentional or the unreasonable conduct is extremely severe.

AdditionalMatterforDiscussion:

  • Thattortlawwillbediscussedindetailinchapter10.

I. SanctionsforViolatingStatutesandRegulations

Emphasize:

  • Thatstatutes at both the federal and state levels of government impose a variety of sanctions for violating the statutes or regulations of administrative agencies adopted to accomplish statutory purposes.
  • Thatmoststatutesincludeprovisionsfortheimpositionoffinesandpenalties.
  • Thatthe sanctions imposed for violating statutes or administrative agency regulationsareanimportantpartofenforcingtheproperty-basedlegalsystem.

AdditionalMatterforDiscussion:

  • ReviewtheConceptSummarypertainingtoLegalSanctions.

V. AProperty-BasedLegalSystemandCorporateGovernance

Emphasize:

  • Thatundertheruleoflawin a property-based legal system,allpersonshaveanequalrighttotheirresources.
  • Thatcorporationsareownedbyshareholdersbutcontrolledbytheboardstheyelectandthemanagersthattheboardsappoint.

A. TheSpecificSenseofCorporateGovernance

Emphasize:

  • Thatcorporategovernancedefines the legal relationship between corporate agents like managers or boards of directors and the shareholder owners of the corporation.
  • That due to the complexity of modern corporations, there are sometimes breakdowns in corporate governance.
  • That corporate governance can fail even when corporate managers do nothing illegal.

B .TheGeneralSenseofCorporateGovernance

Emphasize:

  • Thatinalargersensecorporategovernanceincludes the legal property relations that large businesses have with each other, with their customers, and with society.
  • Thatmostchaptersofthetextdealwithcorporategovernance,atleastinthelargersense.
  • Howtheeconomiccrashof2008wasinpartcausedbylackofadequatecorporategovernance.

AdditionalMatterforDiscussion:

  • Thatcorporategovernancewillbediscussedindetailinchapter14.

Answers to Review Questions and Problems

Introduction

1.WhyNationsareWeakorStrong?

a.Answershoulddiscussdependencytheory,naturalresources,education,technology,theprivatemarket,andthelegalsystem.

b.A“proper”legalsystemthatisadequatelyenforced.

Law,theRuleofLaw,andProperty

2.Law

a.Lawisaseriesofruleslaiddownbythestateandbackedupbyenforcement.Bothlawandcustommaintainorderinsociety,butlawismoreformalandeasiertochange,whereascustomusuallyprecedeslaw.

b.Therolethat courts and policy play in the legal system includeenforcement,application,andinterpretation.

3.TheRuleofLaw

a.Asystemoflawdefinedbygenerallyandequallyapplicablerules.Thegeneralandequalapplicationofrulesdifferentiatestheruleoflawfromlawasthecommandsofthestate.

b.The rule of law is “an ideal rather than a complete fact” becauselawmakersareoftensusceptibletofavoringspecialinterests.

4.Property

a.Eithera“bundleofrights,”orasinglerighttoexcludeothersfromone’sresources.Propertyisaright.Resourcesarewhatpeopleusetosatisfytheirwantsorneeds.

b.Propertyisthemethodthestateusestocreatethemaximumincentiveinsocietyforthegenerationofresources.Inheterogeneousmodernnations,propertyisthespecificlegalfoundationforprivateenterprise.

5.PropertyinitsBroadestSense

a.Therighttoexcludeothersfromone’s resourcesandtokeepthemfrominfringingonwhatisone’s resources pervadesWesternlegalsystems.Iftherightofpropertyisatthehuboftheselegalsystems,contractisthatimportantspokewhoserulesprovideforthetransferofanowner’sresources,tortisthatspokewhichprovidescompensationforwrongfulinjurytoone’sresources,criminalandadministrativelawbothprotectandregulatetheresourcesofowners,andevenconstitutionalrightsguaranteeonearighttoexcludethestateitselffromwhatJamesMadisontermedone’s“faculties”(facultativeresources).

b.Madisonmeansthatthe American constitutionalrightsthemselves—suchasfreedomofspeech—canbethoughtofassubsetsofthebroadrighttoexcludeothers,especiallythestate,fromone’sresources.

6.Jurisprudence

a.Thedefinitionshoulddiscussthephilosophyoflawandnaturallaw,positivelaw,historicaljurisprudence,andsociologicaljurisprudence(includeslegalrealism).

b.Naturallawspeaksofenduringprinciplesoflaw,whereassociologicaljurisprudencebelieveslawchangestomeetchangingconditions.

Classifications of Law

7.CommonLawandCivilLaw

a.The common law legal system emphasizes the role of judges in determiningthe meaning of laws and how they apply. BecausetheU.S.wascolonizedbyEnglandwherethe commonlaworiginated,the U.S. hascontinuedto use thesystem.

b.Theprimarydistinctionistheemphasisthatcommonlawplacesoncourtsinterpretinglaw,whereasincivillawtheemphasisisonthelegislatureinterpretinglaw.

8.PublicandPrivateLaw

a.Publiclawinvolvestheregulationofsocietybythestate.Criminallaw,constitutionallaw,andadministrativelawarethreeexamples.

b.Privatelawregulatesrelationsbetweenandamongindividuals.Property,contracts,andtortlawarethreeexamples.

9.CivilLawandCriminalLaw

a.Civillawdoesnotapplyimprisonmenttopunishitsviolation,andcriminallaw,whichisanoffenseagainstthestate,does.

b.Civillawappliesbothtononcriminallawandtothesystemoflawthatemphasizeslegislativeactsandinterpretation.

10.SubstantiveLawandProceduralLaw

a.Substantivelawregulatestherightsandrelationshipsbetweenpeopleorpeopleandthestate,whereasprocedurallawspecifiesthemethodsandmeansbywhichsubstantiverulesaremadeandadministered.

b.Contractlawissubstantivelaw.Requiring30daystoansweracomplaintisprocedurallaw.

SourcesofLaw

11.FederalLaw

a.ItmeansthatallotherlawsaresubordinatetotheConstitution.

b.ThefederalconstitutionisthesupremelawoftheentireUnitedStatesandoverridesstateconstitutionswhentheyconflictwiththefederalconstitution.

12.StateLaw

a.Actsandstatutes are two additional terms for legislation.

b.Uniformity of law is important to business becauseitaddscertainty,stability,andpredictabilitytobusinessdecisionmaking.Codifyinglawisonewayofachievinguniformity;federalizingstatelaws,another.ThemostsignificantlawaffectingbusinessistheUniformCommercialCode.

c.Administrativeagenciesallowgroupsofdesignatedindividualstospecializeinnarrowareasandunderadelegationofappropriateauthority,tocreateregulationsinthoseareastoregulatebusinessandindustry.

13.JudicialDecisionsorCaseLaw

a.Stare decisis includes thedoctrine of priorprecedents.Itprovidescertainty,stability,andpredictability.Thereareoftenconflictingprecedentsinmultiplejurisdictionsand,overall,ahugenumberofprecedents.

b.Theprecedentiscreatedfromacaseopinion’sholding,whichaddressesthespecificissue(s)beforethecourt.Dictaconsistsofwhateverelseacourtmightwriteinitsopinion.Staredecisisobligatesfuturecourtstofollowonlyprecedent.

c.Students’ answers will vary.Conflictsoflawprinciplesusuallystatethatthelawsofthestatewheretheaccidentoccurredaretheapplicablesubstantivelaws.

14.SourcesofLawHierarchyinReview

a.Students’ answers will vary. Ifajudicialdecisioninterpretslegislationasmeaningacertainthing,canthelegislaturepassanewlawthatcontradictsthecourt’sinterpretation?

15.Legal Sanctions

a.Legal sanctions are important in a property-based legal system because law is enforced by taking a person’s life, freedom, or the resources that he or she owns.

b.Asanctionisamethodormeansthatencouragesorforcescompliancetothelaw.Aremedyrectifiesawrong.

16.Sanctions forCriminalConduct

a.The sanctions for criminal conduct include death,fine,imprisonment,removalfromoffice,andremovaloftherighttovote.

b.Criminal sanctions are set in place to protect the public, to bring justice to those who have been wronged, and todeter persons from wrongful conduct.

17.Sanctions forBreachofContract

a.Compensatorydamagesaredesignedtoplacethenon-breachingpartyinthesamepositionheorshewouldhavebeeninhadnotthecontractbeenbreached.

b.Aremedythatordersthebreachingpartytoperformthespecificobligationunderthecontract.

18.Sanctions forTortiousConduct

a.The two premises of tort liability include intentionalornegligentinjurytoothers.

b.Punitivedamagesareappropriateforintentionalorwillfulandwantoninjury.

19.Sanctions forViolatingStatutesandRegulations

a.The types of sanctions used for the violation of statutes and regulations include fines,imprisonment,injunction,anddamages.

b.Aninjunctionisanorderofthecourttodosomethingortorefrainfromdoingsomething.

AProperty-BasedLegalSystemandCorporateGovernance

20.TheSpecificSenseofCorporateGovernance

a.Ina“specific”sense,corporategovernancereferstotherulesregulatingthelegalrelationshipbetweencorporateshareholdersandcorporateagentsliketheboardofdirectorsandseniorexecutivemanagers.

b.Some managers try to artificially raise or “puff up” the marketprice of their stocksin order to raise their incomes by millions of dollars even as they mislead the owners about the true value of the corporation and risk corporate collapse when the true situation is disclosed. Other ways include managers’ engaging in insider trading of stock, running up stock prices in order to exercise stock options, and taking advantage of business opportunities that rightfully belong to the corporation and its shareholders.

21.TheGeneralSenseofCorporateGovernance

a.Ina“general”sense,corporategovernancereferstotheregulationofbusinessactivitiesastheymightharmpublicresourcesliketheairandwaterortheprivateresourcesofothers.

b.Effectivecorporategovernancecontributestothecreationofeconomicwealthbyencouraginginvestmentincorporateownershipinspiteofthefactthatcorporateownershavelittlecontrolovercorporateassets.

Business Discussion #1

1.Doyouknoweverythingyouneedtomakeaninvestmentdecision?

No,there is a lackof fundamentalinformationcriticaltounderstandingtheriskandlikelychanceofsuccessifthe companyinvestsinRussia.Howwillthe investmentprofitsbetaxed,howwillthestateprotectresources,willthestateexpropriatethe investment,isthereadequateenforcementofcontracts?Lawisthefoundationofprivateenterpriseinthemodernnationbecauseiflawanditsenforcementisinadequate,therisksofdoingbusinessaretoogreat.

2.Ifnot,whatelsedoyouneedtoknowaboutinvestmentinforeigncountries?

One needstounderstandwhetherornotthecountryhaslegalinstitutionsconducivetosuccessfulbusinessinvestmentsuchaswhetherthecountryhasadequatelyenforcedlegalfencesthatwillprotectwhatone needs,includingtheactionsone musttake,inordertodobusinesssuccessfully.

3.Whatdoesitmeantosaythatlawisthefoundationoftheprivateenterprisesystem?

Itmeansthattheprivatemarketinmodernnationsdependsonthestate’sprotectionofprivatelyownedresources(propertysystem)throughtheadequateenforcementofresourceexchanges(contract),criminallawsagainsttheftandfraud,andcompensationforwrongfulinjuriestoresources(tortlaw).Justcompensationforstateexpropriationofanowner’sresourcesisalsoanecessaryfoundationtogiveincentiveformaximuminvestmentandproductioninprivateenterprise.

Business Discussion #2

1.Whatislaw?

Lawisaseriesofrulesenforcedbythestate.Inademocracy,itwillhaveamoralbasis.

2.WhatdoesitmeantosaythatDardenhas“property”intheland?Thatthehunterhas“property”inhimself?

Section4assertsthattheessenceofpropertyistherighttoexcludeothers,includingthestateitself.Infringementson(ortrespassto)anowner’slandcanleadtocompensationorpunishment.Inthebroad,Madisoniansenseofproperty,thesameanalysisappliestothehunter’s“ownership”ofhimself.Discussthisconceptofself-ownershipwiththestudents.Justbecausepeople cannotsellthemselvesintoslaverydoesnotmeanthatpeople havenopropertyinthemselvesorthatpeople cannotselltheir services,giveawayakidney,orexcludeothersfrominfringingonthem.

3.WhatsourcesoflawwilltheattorneyhavetounderstandinordertoadviseDardenabouttheproposedgreenway?Thecompany’spotentialresponsibilitytothehunter?

Discussthe sectiononconstitutionallaw.Mentioneminentdomain,justcompensation,andreferenceChapter7(Property)andChapter10(Torts).ItmustbepointedouttothestudentsthatbeingatrespasserdoesnotfreeDardenfromitsresponsibilitynottoharmindividuals.

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