Fundamentals of Business Law Today, 9E: Roger Leroy Miller

FUNDAMENTALS OF
BUSINESS LAW TODAY, 9E

ROGER LEROY MILLER
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website for classroom use.
THE LEGAL AND CONSTITUTIONAL
ENVIRONMENT OF BUSINESS
CHAPTER 1
LEARNING OBJECTIVES
1. What are four primary sources of law in the

United States?
2. What is the common law tradition?
3. What are some important differences between
civil law and criminal law?
LEARNING OBJECTIVES (CONT’D)
4. What constitutional clause gives the federal

government the power to regulate
commercial activities among the various
states?
5. What is the Bill of Rights? What freedoms
does the First Amendment guarantee?
WHAT IS LAW?
• Enforceable rules governing relationships

among individuals and between individuals
and their society.
WHY IS LAW IMPORTANT FOR
BUSINESS?
• Laws and government regulations affect all
business activities.
• Many different laws can affect a single business
transaction.
• Ex: hiring/firing, workplace safety, financing, etc.
• Various areas of the law can affect a business
decision (such as whether or not to enter into a
contract)
• A business person should know enough about
the law to know when to ask for advice!
SOURCES OF AMERICAN LAW
The four primary sources of law in the United

States are:
•Constitutional law
•Statutory law
•Administrative law
•Case law and common law doctrines
• Constitutional Law
• Constitutional law is expressed in the U.S.
Constitution and the various state constitutions.
• The U.S. Constitution is the supreme law of the
land.
• If any law contradicts, it will be found invalid
• Statutory Law
• Statutory law refers to statutes, or laws passed by
Congress and by state legislatures.
• Ex: United States Code (U.S.C.), Texas Penal Code,
local ordinances
• Administrative Law
• Administrative law consists of the rules, orders,
and regulations of federal or state government
administrative agencies.
• Ex: U.S. Food and Drug Administration (FDA),
Environmental Protection Agency (EPA), etc.
• Case Law and Common Law Doctrines

• Case law is a body of judge-made law including
interpretations of:
• Constitutional provisions
• Statutes enacted by legislatures
• Regulations created by administrative agencies
• Common law—the part of English law that is
derived from custom and judicial precedent rather
than statutes.
THE COMMON LAW TRADITION
• Early English Courts

• Established a body of general rules that applied
throughout the entire English realm
STARE DECISIS
• Stare Decisis
• Stare decisis is a doctrine where judges “stand on
decided cases”—follow the rule of precedent—in
deciding cases.
• Once a court has set forth a principle of law as being applicable to a
particular set of facts, that courts and courts of lower rank MUST adhere to
that principle and apply to any future cases with similar fact
• 2 aspects:
1. Decisions made by a higher court are binding on lower courts
2. A could should not overturn its own precedents unless there is a very strong
reason to do so
3. Example: Brown v. Board of Education which overturned segregation in
schools. (usually big, important cases if a court is going to overturn
precedent. )
• Controlling precedents in a jurisdiction are referred to as “binding
authorities” which is any source of law that a court must follow when
deciding a case.
WHEN THERE IS NO PRECEDENT
• These are called ”cases of first impression”

• Then the courts often look to precedents
established in other jurisdictions
• “persuasive authorities” (these are not binding)
REMEDIES
• A remedy is the means given to a party to
compensate for the violation of a right.
• Equitable remedies include those remedies other
than money, ie issuing an injunction to stop certain
behavior
CLASSIFICATIONS OF LAW
The law may be broken down into several

classification systems. One system:
•Substantive law—define, describe, regulate,
and create legal rights and obligations
•Procedural law—establish the methods (or
PROCEDURES) of enforcing the rights
established by substantive law
• Civil Law and Criminal Law

• Civil law spells out the rights and duties that exist
between persons and/or between persons and
government.
• Criminal law concerns wrongs committed against

society for which society demands redress.
• Ex: The State of Texas v. John Smith
• Civil Law – the object is to obtain a remedy
(such as money) to compensate the injured
party
• Criminal Law– the object is to punish the

wrongdoer (and to deter others from similar
actions)
• National and International Law

• National law is the law of a particular nation, such
as the United States or Sweden.
• International law is a body of written and
unwritten laws observed by nations when they are
dealing with each other. In a global economy,
businesspersons need to have an understanding of
international law.
THE CONSTITUTION AND HOW IT
AFFECTS BUSINESS
THE COMMERCE CLAUSE
• The U.S. Constitution expressly permits Congress

“[t]o regulate Commerce with foreign Nations, and
among the several States, and with the Indian Tribes.”
(Art. 1 § 8).
• This commerce clause has had a greater impact on
business than any other provision in the Constitution.
• It gives Congress the power to regulate every
commercial enterprise in the U.S.
• Case example: Wikard v. Filburn (1942) – farmer wheat case
THE SUPREMACY CLAUSE
• Article VI of the Constitution says that the

Constitution, laws and treaties of the United
States are “the supreme law of the land.”
THE BILL OF RIGHTS
• The Bill of Rights is the first 10 amendments to

the U.S. Constitution (1791)and guarantee the
protection for individuals—and in some cases,
business entities—against various types of
interference by the federal government.
THE FIRST AMENDMENT – FREEDOM
OF SPEECH
• The First Amendment guarantees freedom of
speech, religion, the press, and the right to
assemble peaceably.
• Protects symbolic speech (ie gestures, clothing, conduct- think flag burning)
• Protects Corporate Political Speech
• Protects Commercial Speech (advertising and marketing)
• Speech that is NOT PROTECTED

- Speech that harms the good reputation of another, or defamatory speech
- Speech that violates criminal law, such as threatening speech
- “fighting words”
- Words that are likely to incite others to respond violently
DOE V. PROSECUTOR, MARION COUNTY, INDIANA
U.S. COURT OF APPEALS, 7TH CIRCUIT, 705 F.3D 694
(2013)
• Doe arrested/convicted of child exploitation

• Released from prison & not on parole, but
required to register as sex offender
• Told he was not allowed to used social
networking sites
• Sued for injunction to block enforcement of
the law
(2013)
• Court held regulation was narrowly tailored to

serve a significant state interest
• Doe appeals to 7th Circuit
• Issue: whether statute prohibiting social
networking sites violates First Amendment
• 7th Circuit reversed and remanded to enter
judgment for Doe
(2013)
• Why? Because it prohibits him from

expressing himself through social media as
well as limiting his right to receive
information
• Because communicating with minors is a tiny
part of social networking, the law targets more
activity than necessary. It wasn’t narrowly
tailored.
THE FIRST AMENDMENT – FREEDOM
OF RELIGION
• Government may neither establish any religion
nor prohibit the free exercise of religion.
• Establishment Clause- prohibits the govt from
“establishing any religion”
• Free Exercise Clause- guarantees that a person
can hold any religious belief that he/she wants
THE FIFTH AMENDMENT
• Due Process – No person shall be deprived of life,

liberty, or property, without the due process of law
• Also, must be indicted by Grand Jury
• Double Jeopardy
• Right to not incriminate oneself (plead the 5th)
FUNDAMENTAL RIGHTS
• Right to interstate travel

• Privacy
• Voting
• Marriage and family
• All First Amendment Rights
FOURTEENTH AMENDMENT
• A state may not ”deny to any person within its

jurisdiction the equal protection of the laws.”
• The equal protection clause applies to the
federal government through the due process
clause of the Fifth Amendment
EQUAL PROTECTION
• When a law or action limits the liberty of some

persons, but not others, it may violate the
equal protection clause.
• The Govt must treat similarly situated
individuals in a similar manner.
• If not, the basis for the distinction is examined
SCRUTINY
• In an equal protection question, when a law

distinguishes between individuals, the
distinction or classification is examined.
• The courts apply different levels of scrutiny or
“tests” to determine if the law violates the
equal protection clause.
STRICT SCRUTINY
• IF a law prohibits individuals from exercising a

FUNDAMENTAL right, strict scrutiny test applies
• Also if race, national origin, or citizenship status at
issue
• Compelling Government Interest- the govt must have
CONVINCING reasons for passing any law
restricting fundamental rights
• Very few laws can pass strict scrutiny
INTERMEDIATE SCRUTINY
• Applied to cases involving discrimination

based on gender or legitimacy.
• Laws must be SUBSTANTIALLY RELATED
TO IMPORTANT GOVT INTERESTS
RATIONAL BASIS TEST
• Economic or social welfare matters

• A classification will be considered valid if
there is a rational basis related to a legitimate
government interest
• Almost impossible for a law or action to fail
rational basis test because such a low threshold
MAXWELL’S PIC-PAC , INC. V. DEHNER
• Facts: Kentucky Statute prohibits businesses that

sell mostly groceries or gasoline (at least 10% of
sales) from applying for wine/liquor license
• Grocers get together and sue, alleging statute is
unconstitutional under equal protection clause
• Court rules in favor of plaintiffs (grocers), and
defendants (commissioner) appealed
MAXWELL’S PIC-PAC , INC. V. DEHNER
• Issue: Whether the statute and regulation

RATIONALLY RELATED to a legitimate govt
interest?
• Decision (holding): YES! 6th Circuit reversed
decision of lower court, holding statute was
rationally related to govt interest in reducing
access to products with high alcohol content
WHY?
• Reason: Court cited the problems caused by

alcohol such as drunk driving, and noted
products with high alcohol content can make
these problems worse.
• State’s interest in limiting access to such
products to general public is RATIONALLY
RELATED to its interest in reducing alcohol
involved problems such as drunk driving
PRIVACY RIGHTS
• Federal Statutes Protecting Privacy Rights

• The U.S. Constitution does not specifically
guarantee a right to privacy, but such a right has
been derived from guarantees found in several
constitutional amendments.
• Supreme Court held there was a constitutional right to Privacy under
the First, Third, Fourth, Fifth, and Ninth Amendments
FEDERAL STATUTES
• 1966 Freedom of Information Act – allows any

person to request copies of any information on
him/her contained in federal government files
• 1974 Privacy Act – gives persons rights to
access such information
• 1994 Driver’s Privacy Protection Act –
governs privacy of info gathered by DMV
HIPPA
• Health Insurance Portability and

Accountability Act
• Protects the privacy of individual’s health
records
PATRIOT ACT
• Passed by Congress following 9/11

• Given govt officials increased authority to
monitor Internet activities
• Allows officials to access personal financial
information and student information
• Widely criticized by privacy advocates
• What do you think?

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FUNDAMENTALS OF

BUSINESS LAW TODAY, 9E

1. What are four primary sources of law in the

4. What constitutional clause gives the federal

• Enforceable rules governing relationships

The four primary sources of law in the United

• Case Law and Common Law Doctrines

• Early English Courts

• These are called ”cases of first impression”

The law may be broken down into several

• Civil Law and Criminal Law

• Criminal law concerns wrongs committed against

• Criminal Law– the object is to punish the

• National and International Law

• The U.S. Constitution expressly permits Congress

• Article VI of the Constitution says that the

• The Bill of Rights is the first 10 amendments to

• Speech that is NOT PROTECTED

• Doe arrested/convicted of child exploitation

• Court held regulation was narrowly tailored to

• Why? Because it prohibits him from

• Due Process – No person shall be deprived of life,

• Right to interstate travel

• A state may not ”deny to any person within its

• When a law or action limits the liberty of some

• In an equal protection question, when a law

• IF a law prohibits individuals from exercising a

• Applied to cases involving discrimination

• Economic or social welfare matters

• Facts: Kentucky Statute prohibits businesses that

• Issue: Whether the statute and regulation

• Reason: Court cited the problems caused by

• Federal Statutes Protecting Privacy Rights

• 1966 Freedom of Information Act – allows any

• Health Insurance Portability and

• Passed by Congress following 9/11

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