1. Chapter 1 The Legal and Constitutional Environment of Business

2. Learning Objectives What is the Uniform Commercial Code?
What is the common law tradition?
What is a precedent? When might a court depart from precedent?
What are some important differences between civil law and criminal law?
How does the U.S. Constitution affect business activities in the United States?

3. Nature of Law At a minimum law consists of:
Enforceable rules governing relationships,
Among and between individuals and
Their society.
Different views of law have one thing in common:
Duties, rights, and privileges that are consistent with the values and traditions of that culture.

4. Business Activities and the 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?

5. 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.
Statutory Law.
Laws enacted by federal and state legislatures.
Local ordinances.
Uniform Laws (e.g.,Uniform Commercial Code).

6. 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.
Case Law and Common Law Doctrines.

7. The Common Law Tradition
Early English Courts of Law.
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.

8. The Common Law Tradition
Stare Decisis.
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.
Helps courts stay efficient.

9. 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.
Remedies in Equity: based on justice and fair dealing a chancery court does what is right.
Today, legal and equitable remedies are found in the same court.

10. 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.

11. 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.

12. If someone causes physical injury to your body, you can sue them for compensation.
All lawsuits for physical injury must be brought within 3 years of the incident.

13. 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: governs internet transactions.

14. The Constitutional as It Affects Business
A Federal Form of Government: the federal constitution was a political compromise between advocates of state sovereignty and central government.
Separation of Powers: Executive, Legislative and Judicial. Provides checks and balances.
Legislative: enacts laws.
Executive: enforces laws.
Judicial: declares laws/actions unconstitutional.

15. 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.

16. The Commerce Clause Gibbons v. Ogden (1824).
To Chief Justice Marshall, commerce meant all business dealings that substantially affected more than one state.
The national government had the exclusive power to regulate interstate commerce.
Today: commerce clause applies to e-commerce internet transactions.

17. The Commerce Clause
Expansion of Federal Regulatory Powers under Commerce Clause:
Wickard v. Filburn (1942). Purely local production, sale and consumption of wheat was subject to federal regulation.
CASE 1.1: Heart of Atlanta Motel v. U.S. (1964).

18. The Commerce Clause Commerce Power Today:
Theoretically: the federal government has unlimited control over all business transactions since any enterprise (in the aggregate) can have a “substantial effect” on interstate commerce.
Practical Limits: Supreme Court has curbed federal regulatory powers in U.S. v. Lopez (1995) and U.S. v. Morrison (2000).

19. Regulatory Powers of the States
Tenth Amendment reserves all powers to the states that have not been expressly delegated to the national government.
State have inherent “police powers.”
Police powers include right to regulate health, safety, morals and general welfare.
Includes licensing, building codes, parking regulations and zoning restrictions.
“Dormant” Commerce Clause.
CASE 1.2: Granholm v. Heald (2005).

20. Dormant Commerce Clause
U.S Supreme Court has interpreted commerce clause to give national government exclusive power to regulate.
States only have a “dormant” (negative) power to regulate interstate commerce.
Dormant power comes into play when courts balance state’s interest vs. national interest, e.g., internet transactions

21. 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.
Later, the Bill of Rights was “incorporated” and applied to the States as well.
Some protections apply to businesses.

22. First Amendment: Freedom of Speech
Right to Free Speech is the basis for our democratic government.
Free speech also includes “symbolic” speech, including gestures, movements, articles of clothing.

23. Corporate Political 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.
Corporations also have protected political speech (although not to the degree of a natural person).

24. Unprotected Speech
U.S. Supreme Court has held that certain speech is NOT protected:
Defamatory speech.
Threatening speech that violates criminal laws.
Fighting Words.
Obscene Speech is patently offensive, violates community standards and has no literary, artistic, political or scientific merit.

25. Online Obscenity Protected or Unprotected?
Some of Congress’ attempts to protect children from online pornography have been ruled unconstitutional restriction on free speech.
Communications Decency Act (1996).
COPA (1998-challenged, in court).
Children’s Internet Protection Act (2000) which requires filters for computers in public libraries and public schools). Challenged, in court.
What about “hate” speech on the web?

26. 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…”
Establishment clause: no state-sponsored religion or preference for one religion over another.
Free Exercise clause: person can believe what he wants, but actions may be unconstitutional.

27. Due Process Due Process is both procedural and substantive.
Procedural: any government decision to take life, liberty or property must be fair. Requires: Notice and Fair Hearing.
Substantive: focuses on the content or the legislation (the right itself).
Fundamental Right: requires compelling state interest.
Non-Fundamental: rational relationship to state interest.

28. Appendix Finding Statutory Law. Finding Administrative Law.
United States Code (USC).
State Statutes.
Finding Administrative Law.
Code of Federal Regulations (CFR).
Finding Case Law (Case Citations).
Supreme Court Cases at Findlaw.com.
Federal Court Cases at Findlaw.com.
State Court Cases at Findlaw.com.

29. Appendix
Reading & Understanding Case Law
Legal cases are identified by a “legal citation” (or a “cite”) as the example below:
D.A.B.E., Inc. v. City of Toledo, 393 F.3d 692 (6th Cir. 2006).
Title: First Party is Plaintiff, second party is Defendant. The parties are either italicized or underlined.

30. Appendix
Reading & Understanding Case Law
Legal cases are identified by a “legal citation” (or a “cite”) as the example below:
D.A.B.E., Inc. v. City of Toledo, 393 F.3d 692 (6th Cir. 2006).
This is a federal court case from the Sixth Circuit of Appeals, found in Volume 393, Page 692 of the Federal Supplement 3rd. This case was decided in 2006.

31. Highest Court Appellate Appellate Appellate Trial Court Trial Court

32. 4th Dept.
3rd Dept.
2rd Dept.
1st Dept.