1. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning Chapter 4 The Constitution as the Foundation of the Legal Environment Twomey Jennings Anderson’s Business Law and the Legal Environment, Comprehensive 20e Anderson’s Business Law and the Legal Environment, Standard 20e Business Law: Principles for Today’s Commercial Environment 2e

2. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 2 The U.S. Constitution and the Federal System The U.S. Constitution created the structure of our national government and gave it certain powers. It also placed limitations on those powers. It created a federal system with a tripartite (3-part) division of government and a bicameral (2-house) national legislature.

3. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 3 JUDICIAL BRANCH Courts ADMINISTRATIVE AGENCIES (Created by the executive or legislative branches to carry out a specific function.) Branches of Federal Government LEGISLATIVE BRANCH Bicameral Congress Senate House of Representatives EXECUTIVE BRANCH President

4. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 4 U.S. Constitution and the States Constitutional Powers: powers are possessed exclusively by the federal government. Delegated Powers: given by states to the national government.

5. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 5 U.S. Constitution and the States Shared Powers: delegated by states to national but shared with states. Federal Supremacy. –Express federal regulation. –“Silence of Congress”.

6. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 6 Federal Government State Government U.S. Constitution, which reserves some powers for the States, delegates some powers to the Federal government, and allows some powers to be shared, or exercised by both. The states, who ratified the… We, the People give power to… Delegation of Powers U.S. Constitution and the States

7. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 7 Interpreting and Amending the Constitution Conflicting Theories: –In the bedrock view, the purpose of a constitution is to state certain set principles. –In the living-document view, a constitution states goals and is intended to change with time. In recent years the use of the living- document interpretation has expanded the powers of the federal government.

8. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 8 Amending the U.S. Constitution The Constitution has been amended, or changed, in three ways: By Practice – In a few cases, the actions of government have established accepted practices which depart from the requirements of the Constitution. *Article V of the U.S. Constitution specifies the procedure for adopting amendments. Judicial Interpretation – The U.S. Supreme Court has been called upon to apply the Constitution to many new situations, unforeseen to the document’s original writers. * Formal Amendment - Only 27 formal amendments to the Constitution have been completed, though thousands have been proposed.

9. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 9 Federal Powers Commerce Clause Powers. –Became general welfare power (the “affectation” doctrine). –Commerce clause today. –Commerce power limits power of states. Financial Powers. –Tax, borrow, spend, and coin money.

10. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 10 Among the limitations on government that are most important to business are the requirements of: – Due Process. Substantive vs. Procedural. – Equal Protection of the law. Reasonable Classification. Constitutional Limitations on Government

11. Copyright © 2008 by West Legal Studies in Business A Division of Thomson Learning 11 The Bill of Rights and Business First Ten Amendments provide protection for individuals and corporations. Businesses enjoy free speech protections under the First Amendment. –Commercial Speech (advertising).