THE LEGAL ENVIRONMENT

OF BUSINESS

A Critical Thinking Approach
Fourth Edition

Nancy K. Kubasek
Bartley A. Brennan
M. Neil Browne
© 2006 Prentice Hall

Ch. 2-1
2-1

THE LEGAL ENVIRONMENT OF BUSINESS

CHAPTER 2
Introduction to Law and the Legal
Environment of Business

© 2006 Prentice Hall

Ch 2-2
2-2

2-3 .THE LEGAL ENVIRONMENT OF BUSINESS Chapter 2 Overview Definition of the legal environment of business Definition of law and jurisprudence Sources of law Classifications of law International dimensions of the legal environment of business © 2006 Prentice Ch.

It is interdisciplinary. It helps to establish legal literacy. It develops an understanding that the law is dynamic not static. It deals with real-world problems. © 2006 Prentice Ch. 2-4 .THE LEGAL ENVIRONMENT OF BUSINESS Why study the legal environment of law? It develops critical thinking skills.

Forming an alertness to potential misconduct of competitors. 8. 10. Familiarizing yourself with the legal limits on business freedom. Appreciating the limits of entrepreneurship. Exploring the fascinating complexity of business decisions. 3. © 2006 Prentice Hall Ch 2-5 . Being able to communicate with your lawyer.Top Ten Reasons for Studying the Legal Environment of Business Becoming aware of the rules of doing business. EXHIBIT 2-1 1. Opening your eyes to the excitement of the law and business. 2. 6. 7. Making you a more fully informed citizen. 5. Providing a heightened awareness of business ethics. 4. Developing an employment-related skill. 9.

The examination of the international dimensions of the legal environment of law. consumer law. The study of selected areas of public and private law. ethical norms.THE LEGAL ENVIRONMENT OF BUSINESS Definition of the Legal Environment of Business It develops critical thinking skills. 2-6 . The study of the legal process and our present legal system. critical thinking skills. The study of legal reasoning. and schools of ethical thought that interact with the law. © 2006 Prentice Ch. and environmental law. as well as alternative dispute resolution systems. The study of the administrative law process and the role of businesspeople in that process.

Hegel that it is an unfolding or realizing of the idea of right. 2-7 . Cicero that it is the agreement of reason and nature. Aristotle that it is a rule of conduct. Aquinas that it is an ordinance of reason for the common good. We have been told by: Plato that law is a form of social control. the distinction between the just and the unjust.THE LEGAL ENVIRONMENT OF BUSINESS Definition of Law and Jurisprudence Jurisprudence Jurisprudence is is the the science science or or philosophy philosophy of of law. Bacon that certainty is the prime necessity of law. law. an ideal of reason. a contract. form. © 2006 Prentice Ch. Hobbes that law is the command of the sovereign. or or law law in in its its most most generalized generalized form.

Sociological Source of law is contemporary community opinion and customs. or Reason). Critical Legal Theory Source of law is a cluster of legal and nonlegal beliefs that must be critiqued to bring about social and political change. American Realist Source of law is actors in the legal system and scientific analysis of their actions. Feminist Jurisprudence reflects a male-dominated executive. Law and Economics Applies classical economic theory and empirical methods to all areas of law in order to arrive at decisions. legislative. God. and judicial system in which women’s perspectives are ignored and women are victimized. © 2006 Prentice Hall Ch 2-8 .TABLE 2-1 Schools of Jurisprudence SCHOOL SOME CHARACTERISTICS Natural Law Source of law is absolute (Nature. Positivist Source of law is the sovereign.

(3) these values or value judgments can be determined by human reason.C. (2) these values or value judgments are unchanging because their source is absolute (e. law consists of the following concepts: (1) There exist certain legal values or value judgments (e.g. and (4) once determined.THE LEGAL ENVIRONMENT OF BUSINESS Natural Law School For adherents of the natural law school. God.g. they supersede any form of human law. © 2006 Prentice Ch. Nature. a presumption of innocence until guilt is proved). which has existed since 300 B. or Reason)... 2-9 ..

2-10 . laws. There There are are just just laws laws and and there there are are unjust unjust laws. one one has has aa moral moral responsibility responsibility to to disobey disobey unjust unjust laws.” © 2006 Prentice Hall Ch. II would would be be the the first first to to advocate advocate obeying obeying just just laws.” all. laws. II would would agree agree with with Saint Saint Augustine Augustine that that “An “An unjust unjust law law is is no no law law at at all. Conversely.Martin Luther King Jr. Conversely. One One has has not not only only aa legal legal but but moral moral responsibility responsibility to to obey obey just just laws. laws. laws.

(2) morals are separate from law and should not be considered in making legal decisions (thus judges should not take into consideration extralegal factors such as contemporary community values in determining what constitutes a violation of law). Its chief tenets are: (1) Law is the expression of the will of the legislator or sovereign. and (3) law is a “closed logical system” in which correct legal decisions are reached solely by logic and the use of precedents (previous cases decided by the courts). © 2006 Prentice Ch. 2-11 .THE LEGAL ENVIRONMENT OF BUSINESS Positivist School Early in the 1800s. followers of positivism developed a school of thought in opposition to the natural law school. which must be followed.

2-12 . © 2006 Prentice Ch. (2) judges and legislators should use this inventory to familiarize themselves with the community’s standards and mores. and (3) they should rule or legislate in conformity with those standards and mores.THE LEGAL ENVIRONMENT OF BUSINESS Sociological School Followers of the sociological school propose three steps in determining law: (1) A legislator or a judge should make an inventory of community interests.

or or lawyers. or or clerks. or or jailers. judges. clerks. whether whether they they be be judges.And And the the people people who who have have the the doing doing of of itit are are in in charge. disputes. reasonably.THE LEGAL ENVIRONMENT OF BUSINESS American Realist School The American realist school. though close to the sociological school in its emphasis on people. focuses on the actors in the judicial system instead of on the larger community to determine the meaning of law. to to my my mind. is is the the business business of of the the law. charge. What What these these officials officials do do about about disputes disputes is.” © 2006 Prentice Ch. This school sees law as a part of society and a means of enforcing political and social values. lawyers. law. mind. this this doing doing itit reasonably. jailers. law.” itself. Karl Llewellyn wrote: “This “This doing doing of of something something about about disputes. they they are are officials officials of of the the law. is. In a book entitled The Bramble Bush. the the law law itself. 2-13 .

© 2006 Prentice Ch.THE LEGAL ENVIRONMENT OF BUSINESS Critical Legal Studies School A contemporary extension of American legal realism. 2-14 . critical legal studies seeks to connect what happens in the legal system to the political-economic context within which it operates. this cluster of beliefs has been constructed by elitists to rationalize their dominant power. Adherents of critical legal jurisprudence believe that law reflects a cluster of beliefs that convinces human beings that the hierarchal relations that they live and work under are natural and must be accommodated. According to this school.

the law is a means of male oppression.THE LEGAL ENVIRONMENT OF BUSINESS Feminist School Most adherents of this school. They argue that our traditional common law reflects a male emphasis on individual rights. 2-15 . which at times is at odds with women’s views that the law should be more reflective of a “culture of caring. believing that significant rights have been denied to women.” To other adherents of this school of jurisprudence. advocate lobbying legislatures and litigating in courts for changes in laws to accommodate women’s views. © 2006 Prentice Ch.

C. Reg.F. 2-16 2-16 .2d) • Federal Supplement (F. Ct. F. • Municipality administrative regulations Ch. e.R.C.C.A.) • Federal Reporter (F.S.S. Ohio Revised Code Annotated. often difficult to find. Reports) • Regional reporters • State reporters • Code of Federal Regulations (C.C. Supp.S.. Interested parties usually must contact the clerk’s office at the local courthouse.) • State code or state statutes (e..) • Federal Register (Fed.) • United States Statutes at Large (Stat.g.) • Federal agency reports (titled by agency.) • United States Code Annotated (U.. Many municipalities do not publish case decisions but do preserve them on microfilm.) • Supreme Court Reporter (S. Baldwin’s) • Regional reporters • State reporters • State administrative code or state administrative regulations • Municipal ordinances • Varies.g. F.) • Title 3 of the Code of Federal Regulations • Codification of Presidential Proclamations and Executive Orders STATE LOCAL © 2006 Prentice Hall Common Law/Judicial Interpretations Administrative Regulations • United States Reports (U.TABLE 2-2 Where to Find the Law Level of Government Legislative Law Executive Orders FEDERAL • United States Code (U.

vote on passage © 2006 Prentice Hall Rules committee action Floor Conference Action Action Senate debate. vote on passage Ch.EXHIBIT 2-2 How a Bill Becomes a Law Committee Action Introduction Introduction Committee Action Referred to House committee HR 1 Introduced in House S2 Introduced in Senate Referred to Senate committee Referred to subcommittee Referred to subcommittee Reported by full committee Reported by full committee Compromise Version Rules committee action Floor Action House debate. 2-17 2-17 .

2-18 .S. Law The Judicial Branch The Executive Branch Treaty Making Executive Orders Administrative Agencies © 2006 Prentice Ch.THE LEGAL ENVIRONMENT OF BUSINESS Sources of U.

Private Law .made by the legislative branch of government.results from judicial interpretations of constitutions and statutes. 2-19 . © 2006 Prentice Ch.governs litigation between two private parties. Civil Law .composed of federal and state statutes prohibiting wrongful conduct ranging from murder to fraud.THE LEGAL ENVIRONMENT OF BUSINESS Classifications of Law Statutory Law . Public Law . Case Law .deals with the relationship of government to individual citizens.deals with the enforcement of private duties. Criminal Law .

2-20 .THE LEGAL ENVIRONMENT OF BUSINESS Global Dimensions of the Legal Environment of Business Variables that have an impact on business decision making: Legal Financial Economic Legal © 2006 Prentice Ch.