Bus law today 9th ed ch01

BUSINESS LAW TODAY
Essentials 9th Ed.

Roger LeRoy Miller - Institute for University Studies, Arlington, Texas
Gaylord A. Jentz - University of Texas at Austin, Emeritus

Chapter

1

The Historical and
Constitutional
Foundations

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Learning Objectives
 What are the four primary sources of law in the
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United States?
What is the common law tradition?
What constitutional clause gives the federal
government the power to regulate commercial

activities among the various states?
What constitutional clause allow slaws enacted
by the federal government to take priority over
conflicting state laws?
What is the Bill of Rights? What freedoms are
guaranteed by the First Amendment?

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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.
Ethics: what constitutes right or wrong behavior.

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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).

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Sources of American Law
 Administrative Law.
Rulemaking--Rules, orders and decisions of
administrative agencies, federal, state and local.
Administrative agencies can be independent
regulatory agency such as the Food and Drug
Administration.
Adjudication--agencies make rules, then
investigate and enforce the rules in
administrative hearings.

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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.

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Stare Decisis
 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.

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Equitable Remedies and Courts
of Equity
 Remedy: means to enforce a right or
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compensate for injury to that right.
Remedy at Law: in king’s courts, remedies
were restricted to damages in either money or
property.
Equitable Remedy: based on justice and fair
dealing a chancery court does what is right:
specific performance, injunction, rescission.
Plaintiffs (injured party initiating the lawsuit),
Defendants (allegedly caused injury).

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Exhibit 1-2 Procedural
Differences

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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.

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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.

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Constitutional Powers of
Government
 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.
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The Commerce Clause
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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.

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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 ecommerce internet transactions.

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Expansion of National Powers
 Wickard v. Filburn (1942).
Purely local production, sale and consumption
of wheat was subject to federal regulation.

 CLASSIC CASE 1.1

Heart of Atlanta

Motel v. U.S. (1964). Motel that provided
public accommodations to guests from other
states was subject to federal civil rights legislation.

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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).

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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 
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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.

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The Supremacy Clause
 Supremacy Clause: Article VI of the
Constitution provides that Constitution,
laws and treaties of the United States are
the “supreme law of the land.”
 Concurrent: in few areas, both states
and federal government share powers.
 Preemption: when Congress chooses to
act in a concurrent area, federal law
preempts state law.
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Business and the Bill of Rights
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1791: Ten written guarantees of protection
of individual liberties from government
interference.
Originally: Bill of Rights only applied to the
federal government.
Today: the Bill of Rights has been
“incorporated” and applied to the States as
well.
Some protections apply to businesses.

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First Amendment: Freedom of
Speech
 Right to Free Speech is the basis for our
democratic government.
 Symbolic Speech: includes gestures,
movements, articles of clothing.
Texas v. Johnson (U.S. 1989).
Hodgkins v. Peterson (7th Cir. 2004).

 Reasonable Restrictions: balance

government’s obligation to protect
community vs. individuals right to speech.
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Corporate Political Speech
 Corporations also have protected
political speech (although not to the
degree of a natural person).
 Supreme Court struck down campaignreform finance laws as unconstitutional
burden on corporate speech (FEC v.
Wisconsin Right to Life).

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Commercial Speech
 Commercial speech is given substantial
protection. Generally, government restrictions
must:
 Seek to implement substantial government interest,
 Directly advance that interest, and
 Must go no further than necessary to accomplish.

 CASE 1.2

Bad Frog Brewery, Inc. v. N.Y. State
Liquor Authority (1998). Denial of label on beer
lacked a “reasonable fit” with state’s interest in
shielding minors from vulgarity, and was therefore
unconstitutional.

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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.

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Online Obscenity
 Protected or Unprotected?
Some of Congress’ attempts to protect children
from online pornography have been ruled
unconstitutional restriction on free speech.
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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?

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