BUS 670 Week 1 Assignment

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Law and the Business Person

Chapter 1

The Civil Law and Common Law Traditions Why should a business student study law? After all, you are not going to law school, and if you ever have a legal problem, you can always consult an attorney. Perhaps you have never sued anyone, been sued yourself, been arrested, or written a contract. If all this is true, the law probably seems like some foreign country that you have never been to and have no desire to visit. The truth is, as a businessperson, you can no longer view the law from a distance. Your life and the law, whether you like it or not, will be intertwined, and having a basic understanding of the law’s scope, application, and in�luence will serve you well, both in business and in your personal life.

If you are a manager, business owner, employee, or entrepreneur, the law will impact your daily decision making and have far-reaching consequences in all your business activities. Believe it or not, a law course is an integral part of your education. This will become clearer to you as you read cases and witness for yourself the unfortunate situations that people have gotten themselves into.

Whereas larger companies have in-house legal departments or have access to the expertise of large law �irms, small businesses often operate with little knowledge of the law and minimal access to legal counsel, making a legal background even more valuable in the marketplace. Regardless of size, any business can bene�it greatly from employing people at all levels who have at least a basic understanding of the law and a solid grasp of essential legal principles so that they can recognize potential legal problems and refer them to legal counsel before they become costly matters that threaten the health of a business. This is especially true in the United States, which has no uni�ied legal system but rather an overlay of federal, state, and local laws. Further, the trend toward more global commerce and trade, governed by international treaties such as the North American Free Trade Agreement, has implications for businesses of all sizes and types. Today, many business transactions involve two or more states and may even include parties separated by the full continent, so a much greater amount of business is conducted by various means across state lines.

While no textbook can become a comprehensive hands-on guide to American law (the legal encyclopedias that attempt to do so run tens of thousands of pages and still do not cover all aspects of the law), it is the purpose of this text to provide an accurate, easy-to-understand, useful guide to some areas of the law that have the greatest impact on business. Business law, as well as the legal environment of business and legal studies courses, will provide students with the skills to recognize and apply the proverbial ounce of prevention to their business careers and personal lives. This can prove more useful to employers and to themselves than pounds of competent, costly legal advice obtained too late to remedy a problem that could have been avoided.

Although this course will not "make you a lawyer," it will provide you with a number of advantages. First, you will better be able to recognize legal problems before they happen, a topic often referred to as preventive law. If you can prevent a situation or con�lict from developing into a lawsuit, you may save your business money and the embarrassment of a lawsuit, as well as maintain a lawful and ethical work environment. Second, in the event that you are involved in a controversy, you may be able to resolve the dispute outside of court through "alternative dispute resolution" techniques such as negotiations, mediation, or arbitration. You will learn about each of these and their advantages and disadvantages. If you do have to deal with a lawyer, this course will teach you many legal concepts and the vocabulary to effectively communicate with legal counsel. You will also learn how to hire an attorney, manage legal counsel, and deal with the legal profession.

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The United States Capitol in Washington, D.C., is the meeting place of Congress, the nation's federal legislative body.

1.1 Law: Its Scope and Origins No single course or textbook can address all of the complexities of law. If you stop to think about it, law—and legal systems—have been in effect since early civilization began. Thus, there have been many forms of law and legal systems, too many to enumerate. Suf�ice it to say that people need rules to maintain order; otherwise, society would revert to barbarism. Throughout the ages, philosophers, jurists, political scientists, political leaders, and common people from all walks of life have de�ined law in a number of ways. Cicero viewed law as "nothing but a correct principle drawn from the inspiration of the gods, commanding what is honest, and forbidding the contrary." For the eminent British jurist William Blackstone, law could be de�ined as "a rule of civil conduct, prescribed by the supreme power in a state, commanding what is right and prohibiting what is wrong." Saint Thomas Aquinas, on the other hand, de�ined law as "an ordinance of reason for the common good, made by him who has care of the community." Whatever our working de�inition, law is often what Justice Felix Frankfurter described as "all we have standing between us and the tyranny of mere will." We will see that this is true and, even more so, come to appreciate that law also allows us to conduct business, enter into formal relationships, depend on some predictability in our affairs, and create order in our lives.

At its simplest, law comprises rules of behavior that a government imposes on its people for the bene�it of society as a whole. As such, it represents the governing body’s subjective views of what is best for that society, combined with precedent and tradition. And even though most legal systems attempt to protect society and promote the common good, there can be radical differences in the law from one country to another, and even in different regions within countries, the 50 United States being a prime example. Although federal and constitutional law serve to balance and put a check on state and local law, for example, and in turn, the federal government is limited in its powers to legislate and must give states the power to regulate certain matters, there is no "one" law, as in a country whose legal system is based on civil law (codi�ied statutes alone). Unlike the U.S. common law system, a civil law system, such as prevails in Europe and South America, is more ef�icient and stable, leaving little room for judicial interpretation and lawyers. Trial by jury is not an option, so judges apply the law in a highly predictable, relatively swift proceeding, and the law itself is slow to change. In common law jurisdictions like the United Kingdom and the United States, however, there is much more litigation, so you need to be prepared.

One of the reasons that studying law is dif�icult is that the numerous "factions" that constitute our legal system are all operating at the same time. There is state and federal law, statutory law, administrative law, local law, and so on. For example, each of the 50 states has a legislative body that passes state statutes. Each of the states also has a state court system ruling on cases and making state "case or judicial law." Operating at the same time is the federal legislative body—Congress, which makes federal statutes—and the federal courts, which make federal case law. These are just a few of the "places" making law. As you can imagine, there are thousands of volumes and treatises dealing with questions about what is the law and legal history, as well as reporting on all of the new law being made every day. The law is vast and complicated, no doubt, but understanding how it works and how the layers of lawmaking bodies �it together into the larger scheme is an essential part of your education.

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1.2 Sources of Law Table 1.1 lists the four major sources of law in the United States: judicial, statutory, constitutional, and administrative. Note that each source of law has both a federal and state component.

Table 1.1: The foundations of the American legal system

Judicial Law

Federal case law State case law

Statutory Law

Federal statutes State statutes

Constitutional Law

U.S. Constitution State constitutions

Administrative Law

Federal administrative agencies State administrative agencies

Judicial (Case) Law

The phrase judicial law is used interchangeably with case law. Judicial law is law made in courts, by judges, when they rule on a case and write an opinion; it had its origins in what is called the common law. When the early pilgrims immigrated to America, they brought with them their legal system, along with customs, traditions, and values that helped to shape our legal system. It is in the nature of common law, however, that it adapts to the local customs, traditions, and needs of a people. Thus, despite its English roots, American law has evolved to �it the needs of our federalist system and re�lects regional differences and values. As a result, law in the United States today resembles more the early English common law system, with its regional differences based on local customs and traditions, than it does the relatively uni�ied law of the modern-day United Kingdom.

Before a judge can "make law," there �irst must be a controversy brought to the courtroom for a decision. Such a controversy involves two parties: the plaintiff, or the person bringing the lawsuit, and the defendant, or the person being sued. A civil lawsuit is one in which the plaintiff is seeking money, or restitution. (This should be contrasted with a criminal action, which is being brought to punish and possibly incarcerate the defendant.) As more and more cases are decided, they form a body of law. These cases become precedent for cases that follow, building one upon the other. Judges rely on previous cases to form their opinions and so on down the line.

When a judge decides a case in court, the judge will often write an opinion that is published in case books, or compendiums of court opinions. In that way, others can look up and read the decisions to determine what the law is and how a judge ruled on a speci�ic topic. Figure 1.1 provides an example of a case as it appears in a case book.

Figure 1.1: Example of a case

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Judicial Law

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Stare Decisis and Precedent

SLIDE 1 OF 5

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Yet another name for a case or an opinion is precedent. Precedent also means a previous case. If you look at the case in Figure 1.1, you will see in the last paragraph a series of citations that begin like this:

Ciofalo v. Vic Tanney Gyms, supra, 10 N.Y.2d 297, 220 N.Y.S.2d 962, 177 N.E.2d 925;

The judge is using each of these cases to decide in the current case. Each one of these cases is precedent. The actual use of the case to form a decision in the current controversy is called stare decisis, which is Latin for "standing on previous decisions." Stare decisis is a fundamental principle of both English and American legal systems. The stability of common law depends on judges following legal precedent guided by the doctrine of stare decisis. This stability allows legal practitioners to predict how a given case will be decided by examining how similar cases were decided in the past. Judges don’t "invent" or "make up" the law, depending on whim; for the most part, they rely heavily on previous cases to write their opinions. Under the principle of stare decisis, a court should follow established legal precedent unless there is a compelling reason not to do so. This principle is crucial to common law; if judges did not follow established precedent, there would be little predictability to the legal system. Attorneys would have no solid guidelines upon which to base their advice to clients and no stable guideposts on which to base legal arguments and chart legal strategies for arguing cases in court.

Changing Precedent

Sometimes, however, the judge will reject a previous decision and refuse to follow it. Recall, for example, the U.S. Supreme Court decision of Roe v. Wade, which struck down state laws limiting abortion and held that abortion is legal. In doing so, the Court rejected previous cases that stated abortion was illegal. When do courts reject stare decisis? The decisions of a state’s highest court are binding on that state’s lower courts, which must follow it, but are only persuasive precedent on the courts of other states, which are free to follow or ignore such precedent. This means that if a case is being heard in New York and the attorney attempts to use a Pennsylvania case as precedent, the judge can refuse to recognize the Pennsylvania case. Thus, managers should be aware that state law is binding only within that state, and the law varies greatly from one state to another. This is important to you as a business manager because there may be instances in which "law" from another state is brought to your attention but does not apply to you at all. Thus, the doctrine of stare decisis is limited to decisions within the same jurisdiction, state, or region.

Another reason that stare decisis is not always followed is the result of a change in the political climate of the country. Sometimes opinion around an issue changes so much that the courts re�lect a change in attitude and reject well-established doctrine. Consider racial discrimination in the United States, which at one time was legal and upheld as constitutional by the U.S. Supreme Court. Over time, both the law and cases have changed to re�lect a different philosophy. This was true in 1954, when the Supreme Court found racial discrimination illegal in the case of Brown v. Board of Education. Until that time, the doctrine of "separate but equal" accommodations for blacks and whites had been applied by the courts. The Brown decision eradicated the doctrine and replaced it with a new "law." Here was an example of social mores changing to such a degree that the Court refused to follow previous cases.

In summary, case or judicial law is made in courts by judges rendering an opinion. Each state has at least one state court that is hearing controversies and rendering opinions. Thousands of opinions are being written each day from all of these states. All of these state court opinions form a body of law called case or judicial law because they are based on cases, or controversies between people. Thus, when you wonder, "What is the law?" remember that only one aspect of law includes state court opinions.

Statutory Law

Another key site for lawmaking is in both state and federal legislatures, which are governing bodies whose job is to make new laws. Law made by a legislature is called a statute. Legislatures gain consensus from their members to pass the bills making new laws, after which the bills are signed by the governor (for the state) or the president (for Congress). At any time in the United States, there are 50 state legislatures passing state statutes and a federal legislature (Congress) passing federal laws.

Federal

At the federal level, Congress can legislate over a broad range of areas through the exercise of its constitutionally granted powers. These powers are set out in the federal (U.S.) Constitution in Article I, Section 8. Whenever Congress legislates within its area of constitutionally granted power, the resulting legislation has the force of law, although its legality can be challenged in federal court, as will be discussed later on. Federal law is not some remote or arcane academic exercise; it affects each of us on a daily basis. This is especially true for people involved in business. As a manager, you will deal with many important federal laws. For example, the Americans with Disabilities Act of 1990 spells out how employers must accommodate disabled workers. This is a federal law that applies to all businesses, as opposed to a state law that applies only to businesses within that particular state. Other examples of federal statutory law include the Civil Rights Acts of 1964, which prohibits discrimination on the basis of race, and the Age Discrimination in Employment Act of 1967, which describes the rules for hiring and �iring employees above the age of 40. The Senate also plays a role in international agreements, or treaties, as it is empowered to ratify treaties negotiated by the president. These treaties (e.g., the North American Free Trade Agreement, or NAFTA, approved in 1994) impact businesses in all 50 states if they engage in international commerce. See also Timeline of Major Legal Developments That Affect Modern Businesses.

Figure 1.2 provides an example of a federal statute. Notice that a federal statute looks completely different than a case. Federal statutes do not have parties, nor do they involve a controversy between people. Instead, they are a pronouncement of the law and therefore are sometimes much shorter and terse than a case, which involves people, a speci�ic controversy, and an explanation of events. Note the citation for where to �ind the statute in the U.S. Code books.

Figure 1.2: Example of a federal statute

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A Closer Look: Finding the Law on the Internet

During the course of your work, you may have occasion to research laws. Since you will most likely be accessing legal materials via the Internet, an excellent site that is free to all users is the Cornell University Law School Legal Information Institute (LII), which can be found at Cornell Law (http://www.law.cornell.edu/) . One advantage of online research is that you do not need an actual citation. For example, if you go to this website and type in "age discrimination law," the appropriate statute will appear. Please note the extensive legal materials that are available online for free.

Many times, �inding federal statutes is not useful because their language is overly complex and dif�icult to understand. In that case, be aware that there are many resources that will explain or interpret what a statute actually means in down-to-earth language along with the underlying reasons for passage of the law. For example, the Congressional Research Service located at Federation of American Scientists (http://www.fas.org/sgp/crs/misc/97-589.pdf) explains many complicated federal statutes.

Suppose, for example, that your supervisor asked you to rewrite part of the employee handbook pertaining to discrimination. Many reliable websites exist that can explain the law, from the more basic aspects to detailed and legally sophisticated information. While these do not take the place of utilizing an attorney, there are many daily tasks that you will perform as a manager for which access to law sites will be informative and helpful to your work.

State

Every state has its own legislature, which is usually patterned after Congress, with two chambers (often, house and senate) comprising elected members from the two main political parties, one of which forms a majority. These legislatures enact state laws in a wide range of areas, including civil and criminal law and procedure, business regulation, and, of course, taxation. The power of state legislatures to regulate both business and private conduct is far greater than that of the federal government, since most states reserve to themselves in their state constitutions broad powers to legislate in all areas touching on the welfare of their citizens. In addition, the Founding Fathers explicitly limited the powers of the federal government to regulate state matters. In general, states have the right to regulate all areas of private or public life as long as they do not infringe on any right protected by the U.S. Constitution (see Table 1.2).

State and local legislation that does not infringe on a constitutionally protected right is valid as long as it can pass a relatively �lexible rational relationship test, which simply means that any state law that is rationally related to the preservation of a valid societal interest is valid. This litmus test of constitutionality is a simple one to pass, since nearly any law can be rationally justi�ied as serving some valid purpose. The test is somewhat more stringent, however, when a vital interest or suspect classi�ication is involved; in such instances, the state must pass a strict scrutiny test of constitutionality, wherein the courts weigh the state’s interest against the infringement of protected rights in determining the validity of a statute. For purposes of the strict scrutiny test, a vital interest can be de�ined as any constitutionally protected right, such as the rights enumerated under the Bill of Rights. A suspect classi�ication would include a law that makes distinctions based on race, sex, color, religion, or national origin.

Figure 1.3 provides an example of what a state statute "looks like." Notice that it begins with a number, in this case 28-1381, which is a typical way to recognize that this is statutory law. Next, note that it has a title, in this case the sentence beginning with "Driving . . ." Notice that there are differences between the format of a case and a statute. Remember that cases begin with the name of the parties and are the result of a controversy between two people, whereas a statute is passed by a legislative body.

Figure 1.3: Example of a state statute

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Local

In addition to state and federal legislatures, "local" legislative bodies (e.g., city councils and various town boards and planning commissions) have the power to legislate in areas allowed them by their local charters. These local ordinances also carry the weight of law and form a part of the state’s statutory law. Often when doing business, these local laws are the �irst place to check when a question about the legality of a certain action arises, such as zoning. Local laws are frequently restrictive and much more narrow in scope and intent than either state or federal laws.

Constitutional Law

In addition to judicial and statutory law, 51 constitutions play a signi�icant role in formulating "the law." There are 51 constitutions because each state has a constitution (50) and there is one federal constitution, the U.S. Constitution. A country or state’s constitution is the most fundamental source of law. It delineates in general terms the sovereign state’s form of government and provides the basic framework for its laws. Article VI, Section 2, of the U.S. Constitution speci�ically sets the U.S. Constitution as the "supreme law of the land" (see Appendix A: The Constitution of the United States of America (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/appa#appA) ). As such, no other law passed by a state or the federal government can con�lict with it; any law that does can be found by the courts to be unconstitutional and void.

Constitutions are necessarily broad documents. In the United States, the job of interpreting the federal constitution and that of every state is left to the courts. Both state and federal courts have the power to interpret the U.S. Constitution, but the �inal word on the analysis of the federal constitution is reserved to the U.S. Supreme Court, whose interpretation of the Constitution is �inal and represents binding precedent on all lower courts, state and federal.

The U.S. Constitution serves as an important source of law in the areas of governmental power. It empowers states and the federal government to pass and enforce laws that regulate people’s interactions with one another and with their government while limiting the government’s ability to legislate in certain areas.

Under our Constitution, the federal government is one of limited powers. Congress has the power to legislate only in areas that it has been speci�ically granted the power to regulate by the U.S. Constitution. The powers of Congress are enumerated in Article I, Section 8 (see Table 1.2).

Table 1.2: Powers of Congress listed in Article I, Section 8, of the U.S. Constitution

Collect taxes and import duties, pay debts, and provide for the common defense and general welfare of the United States

Borrow money

Regulate commerce with foreign nations, among the states, and with the Indian tribes

Establish rules for naturalization and bankruptcy

Coin money, regulate its value, and �ix a standard of weights and measures

Punish counterfeiting

Establish post of�ices and post roads

Issue patents and copyrights

Set up federal courts inferior to the U.S. Supreme Court

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De�ine and punish crimes on the high seas and crimes against the United States

Declare war, grant letters of marque and reprisal, and make rules regarding the seizure of property under letters of marque and reprisal

Raise and support armies

Create a navy

Regulate the armed forces

Exercise control over the territory encompassing the seat of government

Under the U.S. Constitution, states are free to create legislation to regulate any area not speci�ically reserved to the federal government. Thus, states can adopt any laws they wish within their borders as long as they do not con�lict with a duly enacted federal law or transgress upon any right guaranteed by the U.S. Constitution, as interpreted in the courts.

While the Constitution gives broad regulatory powers to states and the federal government, it also preserves the rights of the individual in the Bill of Rights. The most signi�icant body of constitutional law concerns itself with the prohibitions on governmental powers enumerated in the Constitution—in particular, the guarantees provided to individuals by the Bill of Rights (the �irst 10 amendments to the U.S. Constitution), the Fourteenth Amendment, and the U.S. Supreme Court’s interpretation of the broad language in which they are framed.

But even the U.S. Constitution is not static. Under Article V of the Constitution, Congress may propose a constitutional amendment by a two-thirds vote by the House of Representatives and the Senate. If a proposed amendment is approved by Congress, it then goes to all the states’ legislatures. If three-quarters of the states’ legislatures approve the amendment, it becomes part of the Constitution and the preeminent law of the land. States may also propose amendments to the Constitution to Congress on their own initiative by votes for such a proposal in two-thirds of the states’ legislatures. If the states make the initiative, Congress must decide whether to allow rati�ication by constitutional conventions in three-quarters of the states; the change is then rati�ied upon its approval by three-quarters of the states’ legislatures, by a constitutional convention in three-quarters of the states, or by a vote for rati�ication by three-quarters of the states’ legislatures.

Other than the right to each state’s equal representation in the Senate, there is no limit to what changes can be written into the Constitution. To date, the Constitution has been amended 27 times. In the case of the Eighteenth Amendment (1919) (better known as Prohibition), which outlawed the manufacturing, sale, or transportation of intoxicating liquors in the United States, Congress changed its mind and repealed Prohibition in the Twenty-First Amendment (1933), leaving it up to the individual states to prohibit the sale of alcoholic beverages as they saw �it.

Administrative Law

One of the least visible entities that "makes law" is the state or federal administrative agency, whose members are appointed by government leaders but who operate quasi-independently, reporting to Congress and the public. When Congress decided to regulate nuclear energy, for example, it created the Nuclear Regulatory Commission and empowered it with the ability to both create and enforce rules for the safe civil use of nuclear energy. Although Congress could have created and enforced these rules itself, individual members of Congress have neither the necessary expertise nor time to engage in such micromanagement of the regulatory environment. The same holds true for other agencies whose primary purpose is the regulation of business and industry, including the Federal Aviation Administration, the Securities and Exchange Commission, the National Labor Relations Board, the Federal Trade Commission, and the Federal Communications Commission, among many others.

At the state level, state legislatures and governors also set up administrative agencies to help them regulate business and carry out other important governmental functions. Taken together, the rules that all federal and state agencies promulgate are quasi-judicial and quasi-legislative. That is, they have the force of law and form the most important component of administrative law. Like statutes, however, most administrative rules and many administrative agency decisions are subject to judicial review, the process whereby statutes, administrative rules, and administrative agency decisions are reviewed by courts when challenged. (See Chapter 5, Administrative Law (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/sec5.1#sec5.1) , for a fuller discussion.)

All agencies have this in common: a need to regulate a highly technical industry or business environment in order to ensure safety and fair practices. Administrative agencies are empowered by either the executive or legislative branches of the state or federal government to assist them in carrying out necessary governmental functions that they lack either the time or expertise to carry out themselves.

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John Marshall was the �irst chief justice to enact the power of judicial review.

1.3 The Three Branches of Government and the Balance of Power The U.S. government comprises three branches: judicial, executive, and legislative. These branches were designed to balance each other so that one cannot become too powerful. For example, the courts can review the actions by the legislative and executive branches.

No matter how clear the language of a statute or how plain its import, it is generally impossible in a common law jurisdiction to interpret a statute, or the federal or state constitutions, at face value. Ultimately, the validity of any statute is determined by the courts, as is its meaning. A case in point is the Second Amendment to the U.S. Constitution, which reads: "A well-regulated militia being necessary to the security of a free state, the right of the people to keep and bear arms shall not be infringed." Any reasonable interpretation of that amendment that looks at the plain meaning of the language used, particularly when viewed with its revolutionary framers’ inherent distrust of government, leads one to believe that the U.S. Constitution guarantees the right of citizens to own and bear guns. Nevertheless, the amendment has been interpreted to mean only that individual states can raise their own militias (e.g., national guards) if they so choose.

Regardless of the wisdom of such an interpretation, one message is clear: any statute, including the U.S. Constitution, means only what the courts ultimately decide it means. This has been the case ever since Marbury v. Madison (5 U.S. 137 [1803]), when Chief Justice John Marshall �irst announced the power of judicial review (the power of courts to declare the acts of legislative bodies, including the U.S. Congress, void if they violate the courts’ interpretation of the Constitution). In what is arguably the greatest act of judicial activism in the history of U.S. jurisprudence, Chief Justice Marshall argued, "It is a proposition too plain to be contested that the Constitution controls any legislative act repugnant to it, or that the legislature may not alter the Constitution by an ordinary act. . . ." This novel proposition was not challenged. The power of the courts generally, and ultimately of the U.S. Supreme Court, to declare any act of the U.S. Congress or any federal or state law unconstitutional has now been well established by more than 200 years of legal precedent. Nothing in the U.S. Constitution itself explicitly reserves this right to the courts, and British courts did not historically enjoy a similar privilege (only the king, queen, or Parliament itself could invalidate a royal edict or Act of Parliament). Arguably, the chief justice could have been successfully impeached for overstepping his bounds and infringing on congressional legislative privilege. By not challenging the decision, Congress left the courts as the ultimate authority on the Constitution, empowering the judicial branch of government to curb the actions of legislative and executive branches when these, in its view, transgressed the U.S. Constitution.

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Key Terms

Click on each key term to see the de�inition.

administrative agency (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A governmental entity established to regulate a particularly complex, technical area of business or industry (e.g., nuclear power, communications, securities exchanges) that relies on special expertise.

administrative law (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Law made by a state or federal administrative agency.

Bill of Rights (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The �irst 10 amendments to the U.S. Constitution, enumerating the individual rights and powers of citizens.

case law (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Law made by a judge (or panel of judges) as the result of a controversy between two parties. Also called judicial law.

citation (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The abbreviations following legal sources that tell the reader where to �ind the original text of the law.

common law (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The name given to the body of law established by the English and brought to the United States as the �irst law established in the colonies. Can also mean case law or the aggregate body of case law.

Congress (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The federal legislative body that enacts federal statutes.

controversy (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A dispute between two or more parties that may be decided in court.

federal (U.S.) Constitution (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The "supreme law of the land" to whose standards all laws must be submitted.

federal statute (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A law passed by Congress and signed into law by the president.

judicial law (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

See case law.

judicial review (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The power of courts to declare the acts of legislative bodies, including the U.S. Congress, void if they violate the courts’ interpretation of the U.S. Constitution.

lawsuit (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

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A controversy brought to court by litigants: the plaintiff and defendant.

litigation (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The act of suing someone in court; a plaintiff bringing a lawsuit against a defendant.

precedent (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A previous case or body of cases that holds sway over current legal decisions in a common law system.

quasi-judicial (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

In the context of administrative agencies, describes the process of adjudicating disputes over agency rules or their application in hearings similar to trials, presided over by administrative law judges—that is, when an agency acts "like a court."

quasi-legislative (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Describes the process of creating one’s own rules (such as when an administrative agency exercises a legislative power).

stare decisis (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The use by a judge of previous decisions (precedent) to make a legal decision or ruling.

state constitution (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

Each state’s governing document that sets the standard for all laws within its borders. State constitutions are established, written, and amended by the state legislature.

state statute (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A law passed by a state legislature and signed into law by the governor.

statute (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

A law passed by either a state or federal legislature.

U.S. Code (U.S.C.) (http://content.thuzelearning.com/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/sections/fm/books/AUBUS670.12.2/section

The set of books that contains all the federal statutes passed by Congress.

Chapter 1 Flashcards

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Critical Thinking and Discussion Questions

1. Why do business managers and others need to understand the foundations, origins, and scope of the law?

2. What is the advantage to the American legal system of using stare decisis?

3. How does the concept of judicial review empower the court system?

4. Locate the website for your state’s legislature. Find a recent law passed by your state legislature and give the citation for the statute as well as a brief summary of the legislation.

5. Locate a case on the Internet. What is the citation for the case? What happened in the case? How did you go about �inding the case? Does the case use stare decisis in its decision, and if so, how?

6. Why were administrative agencies created? Find the website for an administrative agency and explain what types of issues the agency deals with and whether it holds hearings. If the agency does hold hearings, describe the types of opinions it issues.

7. Suppose that Judge Harrison is hearing a case in her court and that the attorneys present her with two disparate cases to use in her decision. Based on the concept of stare decisis, how would the judge go about making her decision? Does Judge Harrison have to use previous cases to make a ruling in the current case?

A governmental entity established to regulate a particularly complex, technical area of business or industry (e.g., nuclear power, communications, securities exchanges) that relies on special expertise.

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