Chapter 1: The Legal and Constitutional Environment o f Business

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CHAPTER 1: THE LEGAL AND CONSTITUTIONAL

ENVIRONMENTOF BUSINESS

2© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Learning Objectives1. What is the common law tradition?2. What is the difference between

remedies at law and remedies at equity?

3. What constitutional clause gives the federal government the power to regulate commercial activities among the various states?


Learning Objectives4. What is the Bill of Rights? What

freedoms does the First Amendment guarantee?

5. Where in the U.S. Constitution can the due process clause be found?


Introduction At a minimum law consists of:– Enforceable rules governing relationships,–Among and between individuals and– Their society.


Introduction Different views of law have one thing

in common:–Duties, rights, and privileges that are

consistent with the values and traditions of that culture.


Business Activities andThe Legal Environment

Knowledge of “black letter” law is not enough.

Many different laws affect a single business transaction.

Ethics and business decision making: what constitutes right or wrong behavior?


Business Activities and The Legal Environment

• Many Different Activities Can Affect a Single Business Transaction.


Sources of American Law Constitutional Law.–Found in text and cases arising from

federal and state constitutions.–U.S. Constitution is the supreme law of

the land.


Sources of American Law Statutory Law.–Laws enacted by federal and state

legislatures.–Local ordinances.–Uniform Laws.–Uniform Commercial Code (UCC).


Sources of American Law Administrative Law.–Rulemaking--Rules, orders and decisions of

administrative agencies, federal, state and local.–Adjudication--agencies make rules, then

investigate and enforce the rules in administrative hearings.


Sources of American Law

• Case Law and Common Law Doctrines.– Much of the common law is still used today.– Common law governs all areas not specifically

covered by statutory or constitutional law.– Restatements of the Law: modern compilations of

common law principles found, e.g., in contracts, torts, property and agency.


The Common Law Tradition• Early English Courts.– King’s courts started after Norman conquest of

1066.– Established the common law—body of general

legal principles applied throughout the English empire.

– King’s courts used precedent to build the common law.


The Common Law Tradition• Stare Decisis.– Importance of Precedents: Practice of deciding

new cases based on precedent.• A higher court’s decision based on certain facts and

law, is a binding authority on lower courts.– Stare Decisis and Legal Stability.– Departures from Precedent.– When there is No Precedent.


The Common Law Tradition Equitable Remedies and Courts of

Equity.–Remedy: means to enforce a right or

compensate for injury to that right.–Remedy at Law: in king’s courts, remedies

were restricted to damages in either money or property.


The Common Law Tradition Equitable Remedies and Courts of

Equity.–Remedies in Equity: based on justice and

fair dealing a chancery court does what is right.–Merging of Law and Equity. Today, legal

and equitable remedies are found in the same court.


Classifications of Law• Substantive vs. Procedural Law.– Substantive: laws that define and regulate rights

and duties.– Procedural: laws that establish methods for

enforcing and protecting rights.• Civil Law and Criminal Law.– Civil: private rights and duties between persons

and government.– Criminal: public wrongs against society.


Classifications of Law National and International Law.–National: laws of a particular nation.–Civil vs. Common Law: Civil law countries

based on Roman code (e.g., Latin America).– International: body of written and unwritten

laws observed by nations when dealing with each other.

Cyberlaw: internet transactions.


The Constitutional As It Affects Business

• The Commerce Clause.– U.S. Constitution gives Congress the power to:

“regulate Commerce with foreign Nations, and among the several States, and with the Indian tribes” (Art. 1 § 8).

– Greatest impact on business than any other Constitutional provision.



• The Commerce Clause.– The Commerce Clause and the Expansion of

National Powers.• The national government had the exclusive power to

regulate interstate commerce. Gibbons v. Ogden (1824).



• The Commerce Clause.– Commerce Today: Commerce Clause applies to e-

commerce internet transactions.



• The Commerce Clause.– Regulatory Powers of the States: often referred to

as “police” powers. State laws enacted pursuant to a police power are given a strong presumption of constitutionality.



• The Commerce Clause.– The “Dormant” Commerce Clause.• State police powers or regulations that substantially

interfere with interstate commerce will be struck down.

•CASE 1.1 FAMILY WINEMAKERS OF CALIFORNIA V. JENKINS (2010). Did the State of Massachusetts discriminate against out-of-state wineries?



• Business and the Bill of Rights.– 1791: Ten written guarantees of protection of

individual liberties from government interference. Originally, Bill of Rights only applied to the federal government.

– Recently, the Bill of Rights was “incorporated” and applied to the States as well.

– Some protections apply to businesses.



• Business and the Bill of Rights.– First Amendment—Freedom of Speech.

• Symbolic Speech: Free speech also includes “symbolic” speech, including gestures, movements, articles of clothing. • Reasonable Restrictions.• Corporate Political Speech. Corporations and unions

now have broader rights to support candidates. See Citizens United v. FEC (2010).



• Business and the Bill of Rights.– First Amendment—Freedom of Speech.• Commercial Speech (advertising) is given substantial

protection. Government restrictions must seek to implement substantial government interest, directly advance that interest, and must go no further than necessary to accomplish.



• Business and the Bill of Rights.– First Amendment—Freedom of Speech.• Commercial Speech.

– CASE 1.2 BAD FROG BREWERY, INC. V. NEW YORK STATE LIQUOR AUTHORITY (2003). Did the State unconstitutionally restrict commercial speech when it prohibited a certain gesture (illustration) on beer labels?



• Business and the Bill of Rights.– First Amendment—Freedom of Speech.• Unprotected Speech. U.S. Supreme Court

has held that certain speech is NOT protected:–Defamatory speech.–Threatening speech that violates criminal

laws.



• Business and the Bill of Rights.– First Amendment—Freedom of Speech.• Unprotected Speech. U.S. Supreme Court

has held that certain speech is NOT protected:–Fighting Words.–Obscene Speech is patently offensive, violates

community standards and has no literary, artistic, political or scientific merit.



• Business and the Bill of Rights.– First Amendment—Freedom of Speech.

• Online Obscenity. Some of Congress’ attempts to protect children from online pornography have been ruled unconstitutional restrictions on free speech.– Communications Decency Act (1996).– COPA (1998-challenged, in court).– Children’s Internet Protection Act-CIPA-(2000) requires

filters for computers in public libraries and public schools. Court held it is constitutional.



• Business and the Bill of Rights.– First Amendment—Freedom of Religion.

• First amendment guarantees that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…”



• Business and the Bill of Rights.– First Amendment—Freedom of Religion.

• Establishment Clause: no state-sponsored religion or preference for one religion over another.–CASE 1.3 TRUNK V. CITY OF SAN DIEGO

(2011). What was the Supreme Court’s rationale for ordering the cross removed?

• Free Exercise clause: person can believe what he wants, but actions may be unconstitutional.



• Business and the Bill of Rights.– Fifth and Fourteenth Amendments.• Due Process: both guarantee that “no person shall be

deprived of life, liberty, or property without due process of law.”–Procedural: any government decision to take

life, liberty or property must be fair. Requires: Notice and Fair Hearing.



• Business and the Bill of Rights.– Fifth and Fourteenth Amendments.• Due Process.

–Substantive: focuses on the content or the legislation (the right itself).»Fundamental Right: requires compelling

state interest.»Non-Fundamental: rational relationship to

state interest.


Appendix Finding Statutory and Administrative

Law.–United States Code (USC).–State Statutes.–Code of Federal Regulations (CFR).


Appendix Finding Case Law (Case Citations).–Supreme Court Cases at Findlaw.com.–Federal Court Cases at Findlaw.com.–State Court Cases at Findlaw.com.

http://www.findlaw.com/casecode/supreme.html

http://www.findlaw.com/casecode/courts/index.html

http://www.findlaw.com/11stategov/index.html

© 2013 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part, except for use as permitted in a license distributed with a certain product or service or otherwise on a password-protected website for classroom use.

Legal cases are identified by a “legal citation” (or a “cite”) as the sample below:Fehr v. Algard, ___ N.J. Super ___, A.3d (2011).

Title: First Party is Plaintiff, second party is Defendant. The parties are

either italicized or underlined.

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Appendix: Finding and Analyzing the Law



The case is from the Superior Court of New Jersey and is not numbered as of

the date of this printing.

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The case was decided in 2011.

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Documents

Chapter 1: The Legal and Constitutional Environment o f Business