300-word (not including in-text citation and references as word count) count minimum with two scholarly sources in APA format. For the two scholarly sources, one from the textbook that’s posted below and the other one from an outside source. Let’s be sure to write it in own work 100% and give credit appropriately when using someone’s else work. Explain the doctrine of stare decisis and the concept of precedent. Why are they important in the American legal system?
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SECOND EDITION
THE LEGAL ENVIRONMENT
R
OF BUSINESSIC
A
A MANAGERIAL APPROACH:
Theory to Practice
R
D
,
A
D
R
I Melvin
Sean P.
E
Elizabethtown College
N
N
Michael
A. Katz
E
Delaware State University
2
4
7
9
T
S
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R
I
C
A
R
D
,
UNIT ONE
Fundamentals
of the Legal
A
D
Environment
of Business
R
I
CHAPTER 1 Legal
E Foundations
N
APPENDIX TO A Business Student’s Guide to
N
CHAPTER 1 Understanding
Cases and Finding
E
the Law
CHAPTER 2 Business
2 and the Constitution
CHAPTER 3 The 4American Judicial System,
7
Jurisdiction,
and Venue
9
CHAPTER 4 Resolving
Disputes: Litigation and
T
Alternative
Dispute Resolution
S
Options
CHAPTER 5 Business, Societal, and Ethical
Contexts of Law
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1
CHAPTER
Legal
R Foundations
I
C
A
R
D
learning
,
objectives
After studying this chapter, students who have mastered
the material will be able to:
1-1
1-2
1-3
A the broad definition and origins of law.
Understand
D explain the purposes of law.
List and
R
Explain the importance and benefits of legal awareness
for business
owners and managers in creating strategy
I
and adding value to a company.
E
1-4
Articulate the role of counsel in legal decision making in
N
a business context.
1-5
Recognize, explain, and give examples of sources of
E law.
American
1-6
1-7
1-8
1-9
Understand the legal doctrine of stare decisis.
N
2 the law into several broad categories.
Classify
4
Differentiate
between the concepts of law and equity.
7 and apply important equitable maxims.
Identify
9
T
S
2
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R
I
C
A
R
ndertaking the study of law may seem overD
whelming. Legal doctrines and rules can be
complex and difficult to navigate. Yet the law
,
U
impacts many facets of our daily life both at home
and at work. This textbook is designed to make
studying the law more manageable by examining
A
legal issues that are most commonly encountered
D
in the business environment. In fact, studies have
shown that business owners and managers who have
R
a high level of legal insight create value for their
I
business and recognize legal challenges as business
planning opportunities. This legal awareness may
E
be gained only by understanding important legal
N
doctrines and processes. Applying this knowledge
N
allows managers to limit risk and incorporate the
law into their business strategies. This chapter introE
duces students to the foundations of the law and
explains why the application of legal doctrines is an
important part of the business environment. Specifi2
cally, in this chapter students will learn:



4
How legal issues impact business planning and
7
strategy.
9
The foundations, definitions, and scope of various primary and secondary sources of law. T
Categories of law.
INTRODUCTION TO LAW
S
LO 1-1
What Is Law?
The term law has been defined in a variety of ways
throughout recorded history. A generally accepted
generic definition of the law is a body of rules
of action or conduct prescribed by controlling
authority and having legal binding force.1 When
studying law in any context, it is important to think
of the law in broad terms. While many equate the
law with stacks of neatly bound volumes of codes
in a library, this is only one component of a much
larger body of law. Law may be set down in a
written code as prescribed by an elected legislative body, but also takes the form of judicial decisions and actions of government agencies. While
there are many sources of American law, the common characteristic of the current state of law is
that it creates duties, obligations, and rights that
reflect accepted views of a given society. Much of
the origins of the law dealt with issues related to
ownership of property, but modern legal doctrines
have evolved into a relatively complex system of
principles and protections. Most importantly, the
law also provides a mechanism to resolve disputes
arising from those duties and rights and allows
parties to enforce promises in a court of law. Law
is often classified by subject matter so that one
refers to certain rules regarding agreements as
contract law or certain laws that regulate certain
rights of employees as employment law.
Jurisprudence
Jurisprudence, roughly defined as the science and
philosophy of law, defines several schools of
1
Black’s Law Dictionary.
CHAPTER ONE
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thought that are used to describe various approaches to the appropriate function of law and
how legal doctrines should be developed and applied. Most schools of jurisprudential thought
center on how legal rights are recognized. Natural law proponents argue that a system of
moral values, which are inherent in humankind, form the basis for all law and those certain
principles are of a higher authority than national laws (laws defined by a governing body).2
Positivists believe in a specific set of agreed-upon laws that are enforced uniformly and
strictly unless the law is changed expressly via the government. They reject the natural law
notion of a higher authority that surpasses national law. Legal realism began to take shape in
the United States after World War I and is based on the concept that law is a social institution
that should be used to promote fairness by taking into account social and economic realities
when arriving at legal conclusions. Perhaps the most dramatic example of the legal realism
school of thought in practice was the U.S. Supreme Court’s formal recognition during the
civil rights era of its role in achieving equality for all Americans by interpreting the ConstituR had previously never recognized.
tion as protecting certain rights that courts
LO 1-2
I
C
Although the most visible function of the law on a day-to-day basis is to provide for some
A levies punishment for violation of the crimes, there
system of order that defines crimes and
are many other purposes of recognizing
R a uniform system of laws. The origins of recorded
law were initially a collection of rules of powerful tribal chieftains intended to perpetuate
D with little consideration for rights of individuals.
domination and power of their authority
However, over the better part of three
, millennia, the purpose of law evolved substantially
Purposes of Law
into ensuring consistency and fairness. In the United States, lawmakers have increasingly
embraced legal mechanisms, such as antidiscrimination laws, to help promote equality and
justice in society and especially in education
and in the workplace. The law also sets out
A
a system for resolving disputes by providing a basis for deciding the legal interests and
D
rights of the parties. For purposes of studying
the impact of law on business, it is important
to recognize that the law also serves R
as an important catalyst for commerce by promoting
good faith dealing among merchants and consumers and giving some degree of reliability
I
that can be considered in business planning and commercial transactions.
For example, assume Clothing Manufacturing
Corporation (CMC) orders 100 bales of
E
wool from Woolpack, Inc., in anticipation of a large order for winter clothing from retail
N
outlets. The laws that govern the various transactions that arise from the CMC-Woolpack
N and provide both parties the confidence necessary
agreement set a standard of good faith
to set the business process in motion E
(e.g., financial, operations, marketing). Moreover, the
merchants may rely on the courts if either party needs to recoup any losses resulting from
the other party’s unlawful actions.
2
4
In order to maximize the value of interaction between business owners/managers and attor7
neys, a basic understanding of legal terminology
is useful. Students studying business law
face the task of learning legal syntax at the same
9time as they learn how to apply the legal doctrines
Tin a business context. This is analogous to learning
Sa complicated subject matter in a foreign language,
Language of the Law
yet it is manageable with careful study. Legal terms
are sometimes referred to as jargon or legalese, but
having a working knowledge of some common legal
terminology is an important step to mastering the material. Although much of the language
of the law has Latin roots, the terminology is primarily a combination of Latin, early and
2
Aristotle was perhaps the most famous advocate of the natural law theory.
4
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modern English, and French. The vocabulary of American law is drawn from the various
cultures and events that shaped American history. To facilitate your understanding of legal
expression, important legal terms are highlighted throughout the text, summarized at the
end of each chapter, and also featured alphabetically in the glossary. The authoritative
source for legal terms is Black’s Law Dictionary, first published in 1891. There are also
several websites that provide definitions and examples for legal terms.
LEGAL DECISIONS IN A BUSINESS ENVIRONMENT:
THEORY TO PRACTICE
LO 1-3
While an in-depth understanding of the various areas of law is a vast undertaking requiring years of intensive study, the primary objective of this textbook is to cover a variety
of legal topics that are most commonly encountered in the business environment. However, developing legal insight by understanding the fundamentals
of legal theory and how
R
they may impact business is only a first step in learning how legal decisions should be
I
made in a business context. The second step involves learning to apply legal theories in
practice and recognizing that having legal awarenessCmay present opportunities for proactive business planning, empowering business owners
A
and managers to limit liability, gain a competitive edge,
R KEY POINT
and add value to the business. Relying exclusively on
attorneys to drive the legal decision-making process D
in Learning to apply legal awareness in practice
the context of business both is expensive and involves involves recognizing opportunities for proactive
, business planning, limiting liability, gaining a
the significant risk that a decision will be made without
sufficient knowledge of business operations, objectives, competitive edge, and adding value to the business.
and current economic realities. Instead, studies and
A with their attorney, the results
research indicate that when managers work cooperatively
contribute to better strategic business decisions that add
Dvalue to the business. For example,
R
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N
E
2
4
7
9
T
S
Management teams with legal insight add value to their company by limiting
liability and identifying opportunities.
CHAPTER ONE
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recognizing that having a code of conduct for employees and creating a standardized procedure for hiring new employees are issues that a good manager should view as essential,
attorneys regularly play a part in ensuring compliance with applicable federal, state, and
local laws. Later in this chapter, we will discuss a mechanism that business owners and
managers may use to spot legal issues, apply an appropriate analysis, decide on alternative
solutions, and plan a legal and ethical course of action that limits liability and maximizes
business opportunities.
LO 1-4
Legal Speak >))
Retainer Fee Some
law firms handle
certain legal matters
on a retainer-fee
basis. Although the
practice is becoming
increasingly rare,
a retainer fee
is an advanced
payment by a client
that ensures the
availability of an
attorney to handle
general legal
matters. If a business
owner or manager
has legal questions
or requires
representation, the
attorney’s charges
are deducted
from the retainer
fee. While costs
exceeding the
retainer are due
from the client, any
unused retainer-fee
balance is either
rolled over into the
next billing cycle or
forfeited according
to the initial fee
agreement.
Legal Insight and Business Strategy
To understand the way various areas of the law impact business and the importance of
having legal insight in a business context, let’s examine a typical business planning process. Suppose that the management team at Indiana Printing Company (IPC) is planning to
expand its existing business into new markets. The team considers several options and will
R of the legal risks and business opportunities associhave to have a sufficient understanding
ated with each option. Table 1.1 sets Iout possible options for IPC’s expansion and some of
the potential legal impacts for each option.
The list of legal issues in Table 1.1C
is meant to be illustrative and not exhaustive. Indeed,
issues regarding negligence, criminalAlaw, administrative law, bankruptcy, consumer protection, agency, and many others may present themselves before, during, or after the transR
action is complete.
Role of Counsel
D
,
Although this textbook emphasizes understanding legal issues in the context of business
decision making, this is not to suggest that an attorney’s role in this process is
A content, features, and exercises contained in this
diminished—-quite the opposite. The
textbook emphasize that working closely
D with a business attorney results in business
opportunities, reduced costs, and limitation of risk and liability. Attorneys, particularly in
R to as counsel. Business owners and managers
a business context, may also be referred
work with counsel in one of two formats.
For larger companies or companies that have
I
extraordinary regulatory burdens (such as complying with securities or patent laws), counE or midlevel management team. These attorneys
sel may very well be a part of the executive
are referred to as in-house counsel and
Nusually have the title “general counsel” at the executive management level (e.g., vice president and general counsel). Depending on the size
N
and complexity of the company, the general counsel may also supervise one or more attorneys, usually with the title “associateEcounsel.” Additionally, the general counsel may also
serve as a corporate officer of the company, called the secretary, who is responsible for
record keeping and complying with notice and voting requirements for the board of direc2
tors.3 The general counsel is also responsible
for selecting and supervising lawyers from
outside law firms when a particular field
of
expertise
is needed, such as a trial lawyer (also
4
called a litigator).
7 rely on attorneys employed by law firms for their
The majority of companies, however,
legal needs. These attorneys devote a 9
significant amount of their professional time to advising businesses on issues such as formation, governance, labor and employment laws, reguT
latory agency compliance, legal transactions
(such as an acquisition), intellectual property
(such as trademarks or patents), andSother legal issues important to business operations.
These attorneys (known as business lawyers or corporate lawyers) rarely if ever appear in
court or perform other tasks that are associated with lawyers in the minds of the general
public. Indeed, the law has become increasingly complex and specialized. Therefore, it
is not unusual that more than one attorney’s advice is needed when facing a significant
3
The legal structure of corporations and other business entities is discussed in detail in Unit Three.
6
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TABLE 1.1
Expansion Options and Potential Legal Impacts
Option
Area of Law
Potential Legal Impact
Expansion through acquisition
of another company. One
common way to expand is to
purchase an existing business
entity through an acquisition of
assets or of stock.
■ Contracts
■ Governs negotiations and agreements for the
acquisition.
■ If the acquisition involves any land purchase,
real estate law (such as zoning) and environmental law.
■ The hiring of new employees by IPC (even former employees of the target company) or the
layoff of IPC or target-company employees
must be done in conformance with state and
federal employment and labor laws.
■ The transaction may create tax liability under
local, state, and/or federal laws.
■ If the acquisition results in IPC’s gaining too
much market share, federal antitrust laws must
be considered and preacquisition approvals
may be needed from the government.
■ Property/
environmental
■ Employment
and labor
■ Tax
■ Antitrust
Expansion through introducing
and aggressively marketing a
new product line. Expanding
through marketing of a new
product line generally involves
raising sufficient capital to
properly develop, manufacture,
and go to market.
■ Securities law


Expansion through aggressive
integration of a highly
interactive website and
e-marketing campaigns
including international markets.
In light of the growth in
e-commerce, some companies
find this to be the most costefficient method of expansion.
R
I
C
A
R
D
,

A
Intellectual D
property
R
I
E
Administrative
N
law
N
Jurisdiction
E
■ International
2
law
■ Any solicitation by IPC to sell shares of its
business to the public is highly regulated by
securities laws.
■ In order to maintain its competitive edge, IPC
will need to put measures in place to help
guarantee protection of ideas and processes
by trade secret law; the final design may be
protected by patent law.
■ Federal regulatory agencies have guidelines
for advertising and labeling of products.
■ Website expansion may result in IPC’s being
subject to the jurisdiction of more out-of-state
courts than did the previous business model.
■ IPC may be subject to international
agreements and treaties regarding sales and
intellectual property.
4
7
9
T
S or when obtaining financing for
legal issue such as an employment discrimination lawsuit
a corporation from the general public through the sale of stock. Law firms vary greatly in
size, from those that have one or just a few lawyers in a local or regional practice to firms
that have hundreds of lawyers spread throughout the globe. In a business context, law firms
bill clients based on an hourly rate that is tied to an individual lawyer’s experience, her
reputation in the field, and the market being served (with large cities that are the center of
business operations having higher rates).
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Self-Check
Role of Counsel
What advice might Adams seek from an attorney in the following situations?
1. Adams sells custom-designed T-shirts from his basement apartment. The business
begins to turn a profit.
2. Adams wants to expand his T-shirt business by renting a kiosk in a local mall and hiring Baker.
3. Adams wants to obtain trademark protection for his products.
4. Baker offers Adams $50,000 to purchase the T-shirt business’s name and assets.
Answers to this Self-Check are provided at the end of the chapter.
LO 1-5
R
I OF AMERICAN LAW
SOURCES AND LEVELS
American law is composed of a unique
C blend from various sources based on U.S. historical
roots. Fundamentally, much of American law is derived from English legal doctrines that came
A
with the English settlers of the colonies. In the West and Southwest, land once controlled by
R while in Louisiana, once French territory, French
Mexico, there are strong Spanish influences,
civil law roots are evident. Modern law
D in the United States regulating businesses and individuals is generally a combination of con …
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