1. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. West’s Business Law 10 th Edition Kenneth W. Clarkson, University of Miami Roger LeRoy Miller, Institute for University Studies, Arlington, Texas Gaylord A. Jentz, University of Texas, Austin, Emeritus Frank B. Cross, University of Texas, Austin CHAPTER 1 INTRODUCTION to LAW and LEGAL REASONING 1

2. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 2 §1: Schools of Jurisprudential Thought Natural Law view. Natural Law view. Positivist view. Positivist view. Historical view. Historical view. Legal Realism view. Legal Realism view. Natural Law view. Natural Law view. Positivist view. Positivist view. Historical view. Historical view. Legal Realism view. Legal Realism view.

3. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 3 The Natural Law School Assumes that law, rights and ethics are based on universal moral principals inherent in nature discoverable through the human reason. Assumes that law, rights and ethics are based on universal moral principals inherent in nature discoverable through the human reason. The oldest view of jurisprudence dating back to Aristotle. The oldest view of jurisprudence dating back to Aristotle. The Declaration assumes natural law, or what Jefferson called “the Laws of Nature.” The Declaration assumes natural law, or what Jefferson called “the Laws of Nature.” Assumes that law, rights and ethics are based on universal moral principals inherent in nature discoverable through the human reason. Assumes that law, rights and ethics are based on universal moral principals inherent in nature discoverable through the human reason. The oldest view of jurisprudence dating back to Aristotle. The oldest view of jurisprudence dating back to Aristotle. The Declaration assumes natural law, or what Jefferson called “the Laws of Nature.” The Declaration assumes natural law, or what Jefferson called “the Laws of Nature.”

4. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 4 Natural Law: Rev. Martin Luther King, Jr. Letter from the Birmingham Jail, April 16, 1963. “[T]here are two types of laws: just and unjust laws.... A just law is a man-made code that squares with the moral law.... An unjust law is a code that is out of harmony with the moral law.... An unjust law is a human law that is not rooted in eternal and natural law.” Letter from the Birmingham Jail, April 16, 1963. “[T]here are two types of laws: just and unjust laws.... A just law is a man-made code that squares with the moral law.... An unjust law is a code that is out of harmony with the moral law.... An unjust law is a human law that is not rooted in eternal and natural law.”

5. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 5 The Positivist School Law is the supreme will of the State that applies only to the citizens of that nation at that time. Law is the supreme will of the State that applies only to the citizens of that nation at that time. Law, and therefore rights and ethics, are not universal. The morality of a law, or whether the law is “bad or good,” is irrelevant. Law, and therefore rights and ethics, are not universal. The morality of a law, or whether the law is “bad or good,” is irrelevant. Law is the supreme will of the State that applies only to the citizens of that nation at that time. Law is the supreme will of the State that applies only to the citizens of that nation at that time. Law, and therefore rights and ethics, are not universal. The morality of a law, or whether the law is “bad or good,” is irrelevant. Law, and therefore rights and ethics, are not universal. The morality of a law, or whether the law is “bad or good,” is irrelevant.

6. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 6 The Historical School Emphasizes the evolutionary process of law. Emphasizes the evolutionary process of law. Concentrates on the origins of the legal system. Concentrates on the origins of the legal system. Law derives its legitimacy and authority from standards that have withstood the test of time. Law derives its legitimacy and authority from standards that have withstood the test of time. Follows decisions of earlier cases. Follows decisions of earlier cases. Emphasizes the evolutionary process of law. Emphasizes the evolutionary process of law. Concentrates on the origins of the legal system. Concentrates on the origins of the legal system. Law derives its legitimacy and authority from standards that have withstood the test of time. Law derives its legitimacy and authority from standards that have withstood the test of time. Follows decisions of earlier cases. Follows decisions of earlier cases.

7. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 7 Legal Realism Jurisprudence that holds law is not simply a result of the written law, but a product of the views of judicial decision makers, as well as social,economic, and contextual influences. Jurisprudence that holds law is not simply a result of the written law, but a product of the views of judicial decision makers, as well as social,economic, and contextual influences.

8. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 8 § 2: Business Activities and the Legal Environment Law regulates many different areas of business. Law regulates many different areas of business. Study of business law also involves a knowledge of ethics in decision-making. Study of business law also involves a knowledge of ethics in decision-making. Many different laws may affect a single business transaction. Many different laws may affect a single business transaction. Law regulates many different areas of business. Law regulates many different areas of business. Study of business law also involves a knowledge of ethics in decision-making. Study of business law also involves a knowledge of ethics in decision-making. Many different laws may affect a single business transaction. Many different laws may affect a single business transaction.

9. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 9 §3: Sources of American Law U.S. and State Constitutions. U.S. and State Constitutions. Statutory Law—federal, state and local. Statutory Law—federal, state and local. Administrative regulations and decisions. Administrative regulations and decisions. Case Law and Common Law Doctrines. Case Law and Common Law Doctrines. U.S. and State Constitutions. U.S. and State Constitutions. Statutory Law—federal, state and local. Statutory Law—federal, state and local. Administrative regulations and decisions. Administrative regulations and decisions. Case Law and Common Law Doctrines. Case Law and Common Law Doctrines.

10. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 10 §4: The Common Law Tradition American law is based largely on English Common Law which was based largely on traditions, social customs, rules, and cases developed over hundreds of years. American law is based largely on English Common Law which was based largely on traditions, social customs, rules, and cases developed over hundreds of years.

11. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 11 The Common Law Tradition [2] At common law, there were two separate court systems with two different types of remedies: At common law, there were two separate court systems with two different types of remedies:  COURTS OF LAW (monetary relief), and  COURTS OF EQUITY (non-monetary relief) based on “notions of justice and fair dealing.” At common law, there were two separate court systems with two different types of remedies: At common law, there were two separate court systems with two different types of remedies:  COURTS OF LAW (monetary relief), and  COURTS OF EQUITY (non-monetary relief) based on “notions of justice and fair dealing.”

12. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 12 Courts of Law Also called “king’s courts” where judges were appointed by the king. Also called “king’s courts” where judges were appointed by the king. Remedies limited to those provided at law, i.e., land, chattel, money. Remedies limited to those provided at law, i.e., land, chattel, money. Judges resolved disputes by application of rules of law to the facts of the case before the court. Judges resolved disputes by application of rules of law to the facts of the case before the court. Also called “king’s courts” where judges were appointed by the king. Also called “king’s courts” where judges were appointed by the king. Remedies limited to those provided at law, i.e., land, chattel, money. Remedies limited to those provided at law, i.e., land, chattel, money. Judges resolved disputes by application of rules of law to the facts of the case before the court. Judges resolved disputes by application of rules of law to the facts of the case before the court.

13. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 13 Courts of Equity Also called courts of chancery in Delaware. Also called courts of chancery in Delaware. Equitable relief was sometimes available in instances where a strict application of the law to the facts of the case compelled a result that was legal but unjust. Equitable relief was sometimes available in instances where a strict application of the law to the facts of the case compelled a result that was legal but unjust. Equitable Maxims. Equitable Maxims. Also called courts of chancery in Delaware. Also called courts of chancery in Delaware. Equitable relief was sometimes available in instances where a strict application of the law to the facts of the case compelled a result that was legal but unjust. Equitable relief was sometimes available in instances where a strict application of the law to the facts of the case compelled a result that was legal but unjust. Equitable Maxims. Equitable Maxims.

14. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 14 Legal and Equitable Remedies Today Today federal and state courts of general jurisdiction have consolidated remedies at law and remedies at equity. Today federal and state courts of general jurisdiction have consolidated remedies at law and remedies at equity. Generally, the same court can fashion a remedy that includes both damages and equitable or injunctive relief. Generally, the same court can fashion a remedy that includes both damages and equitable or injunctive relief. Today federal and state courts of general jurisdiction have consolidated remedies at law and remedies at equity. Today federal and state courts of general jurisdiction have consolidated remedies at law and remedies at equity. Generally, the same court can fashion a remedy that includes both damages and equitable or injunctive relief. Generally, the same court can fashion a remedy that includes both damages and equitable or injunctive relief.

15. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 15 Stare Decisis Stare decisis is a Latin phrase meaning “to stand on decided cases.” Stare decisis is a Latin phrase meaning “to stand on decided cases.”  Makes the law stable and predictable.  Increases judicial efficiency by relieving courts of having to reinvent legal principles for each case brought before them. Stare decisis is a Latin phrase meaning “to stand on decided cases.” Stare decisis is a Latin phrase meaning “to stand on decided cases.”  Makes the law stable and predictable.  Increases judicial efficiency by relieving courts of having to reinvent legal principles for each case brought before them.

16. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 16 Stare Decisis and Precedent Stare decisis is “judge made law” based on precedent. Stare decisis is “judge made law” based on precedent. Precedents are judicial decisions that give rise to legal principles that can be applied in future cases based upon similar facts. Precedents are judicial decisions that give rise to legal principles that can be applied in future cases based upon similar facts. Precedents and other forms of positive law, such as statutes, constitutions, and regulations, are referred to as binding authority and must be followed. Precedents and other forms of positive law, such as statutes, constitutions, and regulations, are referred to as binding authority and must be followed. Stare decisis is “judge made law” based on precedent. Stare decisis is “judge made law” based on precedent. Precedents are judicial decisions that give rise to legal principles that can be applied in future cases based upon similar facts. Precedents are judicial decisions that give rise to legal principles that can be applied in future cases based upon similar facts. Precedents and other forms of positive law, such as statutes, constitutions, and regulations, are referred to as binding authority and must be followed. Precedents and other forms of positive law, such as statutes, constitutions, and regulations, are referred to as binding authority and must be followed.

17. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 17 Departures from Precedent In cases of “first impression” where there is no precedent, the court may refer to positive law, public policy, and widely held social values in order to craft the best new precedent. In cases of “first impression” where there is no precedent, the court may refer to positive law, public policy, and widely held social values in order to craft the best new precedent.

18. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 18 Stare Decisis and Legal Reasoning Method used by judges to reach a decision. Method used by judges to reach a decision. Many courts and attorneys frame decisions and briefs using the IRAC format: Many courts and attorneys frame decisions and briefs using the IRAC format:  Issue (What is the question to be resolved?)  Rule (What law governs this matter?)  Application (Apply the law to the facts)  Conclusion (Decision or Verdict) Method used by judges to reach a decision. Method used by judges to reach a decision. Many courts and attorneys frame decisions and briefs using the IRAC format: Many courts and attorneys frame decisions and briefs using the IRAC format:  Issue (What is the question to be resolved?)  Rule (What law governs this matter?)  Application (Apply the law to the facts)  Conclusion (Decision or Verdict)

19. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 19 Forms of Legal Reasoning Deductive Reasoning: Makes use of syllogism, a type of logical relationship involving a major premise and a minor premise. Deductive Reasoning: Makes use of syllogism, a type of logical relationship involving a major premise and a minor premise. Linear Reasoning: Proceeds from point to point, with the final point being the conclusion. Linear Reasoning: Proceeds from point to point, with the final point being the conclusion. Reasoning by Analogy: Analysis that compares facts of present case with facts of similar previously-decided cases. Reasoning by Analogy: Analysis that compares facts of present case with facts of similar previously-decided cases. Deductive Reasoning: Makes use of syllogism, a type of logical relationship involving a major premise and a minor premise. Deductive Reasoning: Makes use of syllogism, a type of logical relationship involving a major premise and a minor premise. Linear Reasoning: Proceeds from point to point, with the final point being the conclusion. Linear Reasoning: Proceeds from point to point, with the final point being the conclusion. Reasoning by Analogy: Analysis that compares facts of present case with facts of similar previously-decided cases. Reasoning by Analogy: Analysis that compares facts of present case with facts of similar previously-decided cases.

20. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 20 § 5: The Common Law Today Common law today governs transactions not covered by statutory law. Common law today governs transactions not covered by statutory law. Restatements of the Law: Restatements of the Law:  American Law Institute.  Summarize the common law of most states. Common law today governs transactions not covered by statutory law. Common law today governs transactions not covered by statutory law. Restatements of the Law: Restatements of the Law:  American Law Institute.  Summarize the common law of most states.

21. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 21 §6: Classifications of Law Every type of law will be either: Every type of law will be either:  Civil or Criminal, and either  Substantive or Procedural, and either  Public or Private. Every type of law will be either: Every type of law will be either:  Civil or Criminal, and either  Substantive or Procedural, and either  Public or Private.

22. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 22 Civil vs. Criminal Civil law defines the rights between individuals or individuals and governments. Civil law defines the rights between individuals or individuals and governments. Criminal law defines an individual’s obligations to society as a whole. Criminal law defines an individual’s obligations to society as a whole. Civil law defines the rights between individuals or individuals and governments. Civil law defines the rights between individuals or individuals and governments. Criminal law defines an individual’s obligations to society as a whole. Criminal law defines an individual’s obligations to society as a whole.

23. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 23 Substantive vs. Procedural Substantive law defines or creates the rights and obligations of persons and governments. Substantive law defines or creates the rights and obligations of persons and governments. Procedural law provides the steps one must follow in order to avail oneself of one’s legal rights or enforce another’s legal obligations. Procedural law provides the steps one must follow in order to avail oneself of one’s legal rights or enforce another’s legal obligations. Substantive law defines or creates the rights and obligations of persons and governments. Substantive law defines or creates the rights and obligations of persons and governments. Procedural law provides the steps one must follow in order to avail oneself of one’s legal rights or enforce another’s legal obligations. Procedural law provides the steps one must follow in order to avail oneself of one’s legal rights or enforce another’s legal obligations.

24. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 24 CyberLaw Not really a new type of law. Not really a new type of law. Traditional legal rules applied to online transactions. Traditional legal rules applied to online transactions. Applies to advertising, contracting, banking, filing documents with courts, employment relations and other transactions. Applies to advertising, contracting, banking, filing documents with courts, employment relations and other transactions. Not really a new type of law. Not really a new type of law. Traditional legal rules applied to online transactions. Traditional legal rules applied to online transactions. Applies to advertising, contracting, banking, filing documents with courts, employment relations and other transactions. Applies to advertising, contracting, banking, filing documents with courts, employment relations and other transactions.

25. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 25 §7: Finding Primary Sources of Law Finding Statutory Law. Finding Statutory Law.  United States Code (USC).  http://uscode.house.gov/search/criteria.shtml  State Statutes. Finding Administrative Law. Finding Administrative Law.  Code of Federal Regulations (CFR).  http://www.access.gpo.gov/nara/cfr/cfr-table-search.html Finding Case Law (at Findlaw.com). Finding Case Law (at Findlaw.com).  Supreme Court: http://www.findlaw.com/casecode/supreme.html  Federal Courts: http://www.findlaw.com/casecode/courts/index.html  State Courts: http://www.findlaw.com/11stategov/index.html Finding Statutory Law. Finding Statutory Law.  United States Code (USC).  http://uscode.house.gov/search/criteria.shtml  State Statutes. Finding Administrative Law. Finding Administrative Law.  Code of Federal Regulations (CFR).  http://www.access.gpo.gov/nara/cfr/cfr-table-search.html Finding Case Law (at Findlaw.com). Finding Case Law (at Findlaw.com).  Supreme Court: http://www.findlaw.com/casecode/supreme.html  Federal Courts: http://www.findlaw.com/casecode/courts/index.html  State Courts: http://www.findlaw.com/11stategov/index.html

26. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 26 §8: How to Read & Understand Case Law Legal cases are identified by a “legal citation” (or a “cite”) as the sample below: D.A.B.E., Inc. v. City of Toledo, 393 F.3d 692 (6 th Cir. 2005). Legal cases are identified by a “legal citation” (or a “cite”) as the sample below: D.A.B.E., Inc. v. City of Toledo, 393 F.3d 692 (6 th Cir. 2005). Title: First Party is Plaintiff, second party is Defendant. The parties are either italicized or underlined.

27. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 27 §8: How to Read & Understand Case Law Legal cases are identified by a “legal citation” (or a “cite”) as the sample below: D.A.B.E., Inc. v. City of Toledo, 393 F.3d 692 (6 th Cir. 2005). Legal cases are identified by a “legal citation” (or a “cite”) as the sample below: D.A.B.E., Inc. v. City of Toledo, 393 F.3d 692 (6 th Cir. 2005). Case is found in Volume 393 of the Federal 3 rd Supplement at page 692.

28. COPYRIGHT © 2006 West Legal Studies in Business, a part of The Thomson Corporation. Thomson, the Star logo, and West Legal Studies in Business are trademarks used herein under license. 28 §8: How to Read & Understand Case Law Legal cases are identified by a “legal citation” (or a “cite”) as the sample below: D.A.B.E., Inc. v. City of Toledo, 393 F.3d 692 (6 th Cir. 2005). Legal cases are identified by a “legal citation” (or a “cite”) as the sample below: D.A.B.E., Inc. v. City of Toledo, 393 F.3d 692 (6 th Cir. 2005). Case was decided by the United States Sixth Circuit Court of Appeals in 2005.