Sources of Laws
1. U.S. Constitution
a. Constitutional law is the branch of law that is based on the constitution for a particular
level of government.
b. Aconstitution is a body of principles that establishes the structure of government to the
people who are governed.
i. Combination of written document and the practices and customs that develop
with the passage of time and the emergence of new problems.
c. Two constitutions in force in each state: state constitution and federal Constitution
a. Statutory law includes legislative acts.
b. Both Congress and the state legislature enact statutory law.
i. Securities Act of 1933
iii. Bankruptcy laws
iv. Consumer credit protection provisions
c. State level statures govern:
i. Creation of corporations
ii. Probate of wills
iii. Transfer of title to property
d. U.S. Congress, all cities, counties, and other governmental subdivisions have some
power to adopt ordinances within their sphere of operation.
i. Traffic laws
ii. Zoning laws
iii. Pet and bicycle licensing laws
3. Administrative Law a. Administrative regulations are rules promulgated by state and federal administrative
agencies. (administrative agencies creted to pursuant to enabling legislation)
i. Securities and Exchange Commission
ii. National Labor Relation Board
iii. Department of labor
1. Wages, hours worked, and overtime pay
b. These regulations generally have the force of statutes
4. Case Law, Statutory Interpretation, and Precedent
a. Case laws include principles that are expressed for the first time in court decision.
i. Clarify the meaning of statues or providing statutory interpretation
ii. Creating precedent, which stands as the law in future cases that involve that
1. Use of precedent is called stare decisis
2. Precedent can be overruled by judge of presently trailing case
iii. Developing a body of laws that is not statutory but addresses long standing issues
1. Common law are time-honored rules of the community
5. Uniform State Laws
a. Drafted statues enacted state by state, uniform for convenience, awaits states to adopt
b. Uniform Commercial Code (UCC)
i. Regulates the sale and lease of goods, commercial paper (checks), fund transfer,
secured transaction in personal property, banking, and letters of credit.
ii. Having same principles of law on contracts for the sale of goods and makes in
doing business in 50 states makes business easier and less expensive.
6. Substantive law vs. Procedural law
a. Substantive law creates, defines, and regulates rights and liabilities.
i. Determines when a contract is formed
b. Procedural law specifies the steps that must be followed in enforcing those rights and
liabilities. 7. Court System
a. Original jurisdiction has the authority to hear the original proceedings in a case. (trial
b. Limited or special jurisdiction has the authority to hear only particular kinds of cases.
i. Disputes where damages are $10,000 or less
ii. Juvenile courts
iii. Probate courts
iv. Domestic relation courts
v. Very narrow authority for the type of cases they hear
vi. Federal court system: limited or special jurisdiction courts include bankruptcy
court and U.S. Tax Court
8. The Federal Court System
a. Federal district courts are the general trial courts of the federal system.
i. Original jurisdiction
ii. Civil and criminal cases
iii. Criminal cases in federal district courts are those in which the defendant is
charged with a violation of federal law (the U.S. Code)
1. Civil suits in which the United States is a party
2. Cases between citizens of different states that involve damages of
$75,000 or more
3. Cases that arise under the U.S. Constitution or federal laws or treaties
iv. 94 total, each state has at least one, 89 in U.S.
v. Federal court with limited jurisdiction: federal bankruptcy courts, Indian tribal
courts, Tax Court, Court of Federal Claims, Court of VeteranAppeals, Court of
b. U.S. Courts of Appeals are courts which the final decision in a federal district court can
be appealed to a court with appellate jurisdiction
i. 12 judicial circuits, each has an appellate court called the U.S. Court ofAppeals,
including one for the District of Columbia 1. Additionally, a thirteenth federal circuit, called the Federal Circuit, hears
certain types of appeals from all of the circuits, including specialty cases
such as patent appeals.
ii. Judges review the decision of the federal district courts
iii. Panel of three judges in that circuit
iv. En banc decisions- decisions made by the circuit’s full panel of judges
c. U.S. Supreme Court is the final court in the federal system.
i. has appellate jurisdiction over cases that are appealed from the federal courts of
appeals as well as from state supreme courts when a constitutional issue is
involved in the case or a state court has reversed a federal court ruling.
ii. Writ of certiorari is a preliminary review of those cases appealed to decide
whether a case will be heard or allowed to stand as ruled by the lower courts
iii. Only court expressly created in the U.S. Constitution
iv. Trial court for cases involving ambassadors, public ministers, or consul and for
cases in which two states are involved.
9. Court Procedure
a. Plaintiff is the party that initiates the proceedings in a court of original jurisdiction.
i. In criminal case, would be called a prosecutor
b. Defendant is the party against whom the civil or criminal proceedings are brought.
c. Judge is the primary officer of the court and is either an elected or an appointed official
who presides over the matters brought before the court.
d. Attorney-client privilege is a privilege of confidentiality between lawyers and clients.
i. Cannot disclose what their clients tell them unless the client is committing, or
plans to commit, a crime.
e. Jury is a body of citizens sworn by a court to reach a verdict on the basis of the case
presented to them.
f. Conflict of laws is the principle that determines when a court applies the law of its own
state—the law of the forum—or some foreign law.
i. Law of state in which the court is located govern the case on procedural issues
and rules of evidence ii. In contract litigation, court applies the law of the state in which the contract was
made for determining issues of formation
iii. Performance disputes and damages for the state where the contract is to be
iv. More common to specify their choice of law in the contract.
10. Initial Steps in Lawsuit
a. Commencement of lawsuit
i. Lawsuit begins with the filing of a complaint, description of wrongful conduct
and a request for damages, such as monetary amount
b. Service of Process
i. Plaintiff has the responsibility of notifying the defendant that the lawsuit has
ii. Process, writ, notice, or summons is delivered to the defendant and includes a
copy of the complaint and notification that the defendant must appear and
respond to the allegations in the complaint
c. Defendant’s Response and the Pleading
i. Motion to dismiss is a request to the court to dismiss the lawsuit on the grounds
that, even if everything the plaintiff said in the complaint were true, there is still
no right of recovery.
1. Also called a demurrer
ii. Counterclaim is asking the court for damages as a result of the underlying
iii. Pleadings are all documents filed in this initial phase of the case
i. Discovery requires each side to name its potential witnesses and to provide each
side the chance to question those witnesses in advance to the trial.
1. Each party can examine all documents or material of other side.
ii. Deposition is a testimony of a witness taken under oath outside the courtroom; it
is transcribed by a court reporter.
1. If testimony is inconsistent with deposition, the prior testimony can be
used to impeach the credibility of witness. iii. Other types of discovery:
1. Medical exams
2. Written interrogations
3. Request for production of evidence
e. Motion for Summary Judgment
i. Motion for summary judgment meaning the court can find that there are no
factual issues and decide the case as a matter of the law
1. No material facts in dispute
f. Designate Expert Witness
i. Expert witness is a witness who has some special expertise.
1. Rules to prevent junk science
11. The Trial
a. Selecting a Jury
i. Voir dire examination is jury selection
ii. Challenged for cause meaning there is conflict of interest in the juror
b. Opening Statements
i. Opening statement the outline or frame of case by lawyer
c. Presentation of Evidence
i. Admissibility is the evidence that is allowed in the courtroom
ii. Direct examination is when plaintiff questions his witness
iii. Cross examination is when defense conducts questioning of plaintiff’s witness
iv. Redirect examination (just ask again)
v. Recross examination (just ask again)
vi. Vicer versa when the defense has its witnesses
d. Motion for a Direct Verdict
i. Direct Verdict asks court to grant verdict because even if all evidence presented,
there would be no basis of recovery or no defense to recovery 1. Party has not presented enough evidence to show some sort of recovery
e. ClosingArgument or Summation
i. Summation or closing argument is a summary of the case and urges jury to reach
a particular verdict.
f. Motion for Mistrial
i. Mistrial is a do-over to avoid great injustice usually due to jury or attorney
g. Jury Instruction and Verdict
i. Court gives instructions to jury to apply appropriate law to facts
ii. Hung jury or mistrial, the case is reset
h. Motion for New Trial; Motion for Judgment N.O.V.
i. Judgment non obstante verdict o or judgment n.o.v. (not withstanding verdict)
if verdict is clearly wrong as a matter of the law.
12. Post-trial Procedures
a. Recovery of Cost/Attorney Fee
b. Execution of Judgment
i. Execution is accomplished by the seizure and sale of the losing party’s assets by
the sheriff according to the writ of execution or a writ of possession
ii. Garnishment is a common method where a portion of employee’s wage is
garnished on a regular basis until judgment is paid.
a. Arbitration, arbitrators (disinterested persons selected by parties to the dispute) hear
evidence and determine a resolution.
i. Cheaper and less work
ii. Federal ArbitrationAct- meaning arbitration is valid, irrevocable, and
1. Bound by arbitration under state law
a. Mediation is when a neutral person acts as a messenger between opposing sides of a
dispute, carrying to each side the latest settlement offer made by the other. i. No authority to make decision, may make suggestions
ii. Keep discussions going when direct discussions become impossible
iii. Not binding
What is Business Ethics?
• Ethics is a branch of philosophy dealing with values that relate to the nature of human conduct
and values with that conduct.
• Business ethics is balancing the goal of profits with the values of individual and society.
1. The Law as the Standard for Business Ethics
a. Positive law is simply following what the law requires.
b. Codified law, or law created by governmental authority, is used as the standard for
i. Absent illegality, all behavior is ethical under this simple standard.
c. “AS IS” on a contract means by law there are no warranties for good being sold.
2. The Notion of Universal Standard for Business Ethics
a. Natural law imposes higher standards of behavior than those required by positive law
and they must be followed even if those higher standards run contrary to codified law.
i. Standards exist universally and cannot be changed or modified by law
ii. Stems from religious beliefs
b. Civil disobedience is the remedy natural law proponent use to change positive law.
3. Ethical Theories and Standards
a. The Categorical Imperative and Immanuel Kant
i. Kant’s categorical imperative says that humans cannot be used as a mean by
which others obtain benefits
1. Cannot use others to have a one-sided benefit
2. “One ought only to act such that the principle of one’s act could become
a universal law of human action in the world in which one would hope to
3. Not only be fair, but do things for the right reasons b. Contractarians and Justice
i. Theory of justice or social contract means to put rules in place with a social
contract. Under this theory we imagine what it would be like if we had no rules
or laws at all. If we started with a blank slate, or tabula rasa meaning that
rational people agree that there are certain universal rules that must apply.
1. John Locke and John Rawls
c. Rights Theory
i. Rights theory or entitlement theory by Robert Nozick
1. Everyone has a set of rights
2. It is up to the government to protect those rights
d. Ethical Egoism Theory: Ayn Rand andAtlas
i. Ethical Egoism holds that we all act in our own self-interest and that all of us
limit our judgment to our own ethical egos and not interfere with the exercise of
ethical egoism by others.
1. Everything determined by self-interest
2. “world would be better if we did not feel so guilty about the choices we
make in ethical dilemmas and just acknowledge that it is all self-interest.
e. Utilitarian Theory: Bentham and Mill
i. Utilitarian resolve ethical dilemmas by doing the most good for the most people.
f. Moral Relativist
i. Moral relativists resolve ethical dilemmas according to time and place.
g. Plato andAristotle: Virtue Ethics
i. Virtue is developed and to solve ethical dilemmas requires training.
ii. Honesty, justice, and fairness
4. The Business Stakeholder Standard of Behavior (Profitability)
a. Stakeholders wish that earning, and hence dividends, should be maximized.
i. Balance between stakeholder interests with ethics b. Stakeholder analysis measures the impact of a decision on various groups and then asks
whether public disclosure of that decision is defensible.
Why is Business Ethics Important?
5. The Importance of Trust
a. Investors provide capital for business because they believe the business will provide a
return on their investment.
b. Customers are willing to purchase products and service from businesses because they
believe the businesses will honor their commitments to deliver quality and then stand
behind their product or service.
c. Businesses are willing to purchase equipment and hire employees on the assumption that
investors will continue to honor their commitment to furnish the necessary funds and will
not withdraw their promise or fund.
d. Business investment, growth, and sales are a circle of trust
e. It is a reliance on promise, no the reliance on litigation, that produces good business
6. Business Ethics and Financial Performance
a. Companies with strongest value systems survive and do so successfully.
b. Poor value choices do have an effect on financial performance.Astudy of the impact of
just breaches of federal law by companies showed that for five years after their regulatory
or legal misstep, these companies were still struggling to recover the financial
performances they had achieved prior to the legal difficulties.
7. The Importance of Good Reputation
a. “Areputation, good, or bad, is thought to shake” –Richard Teerlink, CEO of Harley-
b. Breach of ethics also often carries with it a lasting memory that affects the business and
its sales for years to come.
c. Customers lose the component of trust important to customers’decision to buy and
8. Business Ethics and Business Regulation: Public Policy, Law, Ethics
• When business behavior results in complaints from employees, investors, or customers, laws or
regulations are often used to change the behavior.
• Voluntary change by businesses is less costly and is less intrusive. a. Protection of the State
i. U.S. PatriotAct
b. Protection of the Person
i. Criminal laws
ii. Civil suits
iii. Right of privacy
iv. Protection from defamation
v. Protect reputation, privacy, mental and physical well-being of individual
c. Protection of Public Health, Safety, and Morals.
i. Food-labeling regulations
ii. Food and restaurant inspections
iii. Mandatory inoculation
iv. Speed limit
v. Mandatory smoke detectors
vi. Sprinkler system
vii. Prohibition alcohol to minors
d. Protection of Property: Its Use and Title
e. Protection of Personal Rights
f. Enforcement of Individual Intent
i. When voluntarily entered in contract, there is a responsibility to fulfill the
promises made in that agreement
1. Honesty and honoring commitment
ii. If parties do not keep promise, the law does enforce transactions through sets of
rules governing requirements for them,
g. Protection from Exploitation, Fraud, and Oppression
i. Minors, or persons under legal age, are given special protections under contract
laws that permit them to disaffirm their contracts o they are not disadvantaged by excessive commitments without the benefit of wisdom of age and with the
oppressive presence of an adult party
ii. Federal law on disclosure in sales of securities and shareholder relation due to
stock market crash of 1929
h. Furtherance of Trade
i. Social forces seeking to simplify business and trade
i. Protection of Creditors and Rehabilitation of Debtors
i. Mortgages, security interests, and surety relationships are mechanisms created by
law to provide creditors the legal mechanisms for collecting their obligations.
ii. The Fair Debt Collection PracticesAct limited collection techniques.
j. Stability and Flexibility
i. When no former case bears on the point involved, a court will try to reach a
decision that is a logical extension of some former decision or that follows a
former decision by analogy rather than strike out on a new path to reach a
decision unrelated to the past.
How to Recognize and Resolve Ethical Dilemmas
9. Categories of Ethical Behavior
a. Integrity and Truthfulness
i. “Circumstances beyond your control will cause the truth to come out, no matter
ii. Integrity is the adherence to one’s values and principles despite the cost and
b. Promise Keeping
i. Keeping those promises, so, is a key component of being an ethical person and
practicing ethical business.
c. Loyalty—Avoiding Conflict of Interest
i. Conflict of interest is when loyalty comes in the way of another act.
1. An employee who works for a company owes allegiance to that
2. Aconflict of interest arises when a purchasing agent accepts gifts from
the supplier, vendors, or manufactures’representatives. 3. The purchasing agent has introduced into the buy-sell relationship an
element of quid pro quo, or the supplier’s expectations that the gif will
bring about a return from the agent in the form of a contract.
d. Doing No Harm
i. Peter Drucker’s advice on ethics for business is primum non nocere, or “above
all, do no harm”
e. Maintaining Confidentiality
i. Competitive edge
ii. Employees not only owe a duty of loyalty to their employers, but they also owe
an obligation of confidentiality.
iii. Providing customer lists or leads is a breach of emplyees’obligation of
iv. Managers have responsibility to workers’privacy
10. Resolving Ethical Dilemmas
a. Blanchard and Peale Three-Part Test
i. Dr. Kenneth Blanchard
ii. Dr. Norman Vincent Peale
1. Is it legal?
2. Is it balanced?
3. How does it make me feel?
iii. Look within and outside of company
iv. In the field of business ethics, there is little room for civil disobedience.
b. The Front-Page-Of-Newspaper-Test
c. Laura Nash Model
1. Have you defined the problem accurately?
2. How would you define the problem if you stood on the other side of the
3. How did this situation occur in the first place? 4. What is your intention in making this decision?
5. How does the intentions compare with the probable results?
6. Whom could your decision or action injure?
7. Can you discuss your decision with the affected parties?
8. Are you confident that your position will be as valid over a long period
of time as it seems now?
9. Could you discuss your decision with your supervisor, coworkers,
officers, board, friends, and family?
ii. Examine form all perspectives
iii. Importance of bringing in views of family and friends, not just business circle
The U.S. Constitution and the Federal System
• In a federal system, a central government has the power to address national concerns, while the
individual states retain the power to handle local concerns.
1. What a Constitution is
a. Aconstitution is the written document that establishes the structure of the
government and its relationship to the people.
i. U.S. Constitution in 1789
2. The Branches of Government
a. The U.S. Constitution established a tripartite (three-part) government:
i. Alegislative branch (Congress) to make the laws
1. Bicameral (two-house) body consisting of the Senate and the House
a. Senate has 6 year term
b. House of Rep. has 2 year terms
ii. An executive branch (the President) to execute or enforce the laws
1. Elected by an electoral college whose membership is popularly
2. Term of four years, eligible for re-election for second term iii. Ajudicial branch (courts) to interpret the laws.
1. Appointed by President, approved by Senate
2. Serve for life unless impeachment because of misconduct
The U.S. Constitution and the States
• The Constitution created certain powers within the national government that would have been
exercised by the individual states which are given their power by the people of the state.
• Likewise, the states, as the power-granting authorities, reserved certain powers for themselves.
3. Delegated and Shared Powers
a. Delegated Powers
i. Delegated powers are the powers delegated to the national government by
1. Some are given exclusively to the national government.
b. Shared Powers
i. Powers delegated to the national government may still be exercised by the
states are shared powers.
1. Impose tax
ii. In other cases, a state may provide regulation along with, but subject to the
supremacy of, federal law.
4. Other Powers
a. State Police Power
i. Police power is the power to adopt laws to protect the general welfare,
health, safety, and morals of the people.
1. Business license
2. Cannot interfere with federal regulation b. Prohibited Powers
i. The Constitution also prohibits both states and federal government from
doing certain things.
1. Can’t make ex post facto laws, which makes criminal an act that has
already been committed but was not criminal when it was
a. Laws that increase the penalty for an act already committed
above the penalty in force when the act was committed also
ex post facto.
5. Federal Supremacy
• Preemption means that the federal regulatory scheme is controlling
a. Express Federal Regulation
i. The Constitution and statutes passed by Congress are the supreme law of the
ii. When a direct conflict exists between federal and state statutes, federal law
iii. In such cases, the question becomes whether a state law can regulate the
areas not regulated by Congress or whether the partial regulation make by
Congress preempts, or takes over, the field so as to preclude legislation.
1. Wyeth v. Levine deals with federal preemption.
b. Silence of Congress
i. Silence in Congress in particular subjects means that Congress does not want
any laws on the matter
1. Sometimes when silenced because of national uniformity, it means
the topic has been preempted for practical reasons by Congress and
that no state law on the subject may adopt
c. Effect of Federal Deregulation
i. If silence-of-Congress doctrine the states cannot regulate, they are still barred
from regulating after deregulation
Interpreting and Amending the Constitution
• The Constitution as it is interpreted today has changed greatly from the Constitution as originally
written. The change has been brought about by interpretation, amendment, and practice. 6. Conflicting Theories
a. Bedrock view, or strict constructionist or originalist view, the purpose of the
constitution is to state certain fundamental principles for all time.
b. Living-document view, a constitution is merely a statement of goals and objectives
and is intended to grow and change with time.
7. Amending the Constitution
• The Constitution has been amended in three ways:
o By interpretation
o By practice
a. Constitutional Method ofAmending
i. Article V, formal process
1. Thousands proposes but only 27 amendments
b. Amendment by Judicial Interpretation
i. Greatest change thought U.S. Supreme Court interpretation
ii. Applied to new situation that wasn’t foreseen when constitution written
c. Amendment by Practice
i. Just not always followed
1. George Washington in 1793 refused to make treaties as stated in
Constitution with Senate’s approval
8. The Living Constitution
a. Strong Government
i. Business enterprises are highly regulated and the economy controlled
through monetary policy.
b. Strong President
c. Eclipse of the States
i. Center of gravity has shifted from states to the nation
ii. Article I, Section 8 federal was supposed to have limited power 1. Regulation of business was to be imposed by states
2. Now most by Congress
3. Moved from local economy to nationwide then international
a. States couldn’t regulate that scope, moved to central
d. Administrative Agencies
i. Fourth branch of government
ii. Head of agencies appointed by president and approved by Congress
• Desire to protect commerce from restrictions and barriers set up by the individual
• Congress was given Article I, Section 8, Clause 3—now known as the commerce
clause—the power “to regulate commerce with foreign nations, and among the
several states, and with Indian tribes.”
• Until 1937, the Supreme Court held th