Chapter 01: Introduction to Law

●​ What is law​
○​ According to Black’s Law Dictionary, law is “a body of rules of action or conduct prescribed by
controlling authority, and having binding legal force. That which must be obeyed and followed by
citizens subject to sanctions or legal consequence is a law”.
○​ In the United States, law is created by legislators, judges, administrative agencies, governors, and
presidents, with significant input from corporations, lobbyists, and various nongovernment
organizations (NGOs).
●​ Function of law​

○​ In a nation, the law can serve to:

1.​ Keep the peace.
2.​ Maintain the status quo.
3.​ Preserve individual rights.
4.​ Protect minorities against majorities.
5.​ Promote social justice.
6.​ Provide for orderly social change.
○​ The political landscape greatly influences how well a legal system serves these functions.
●​ Quo–exchanging role​

○​ The term "quo–exchanging role" is not explicitly defined in the provided sources. However, the
concept of "status quo" is mentioned as one of the functions of law, meaning to maintain the
existing state of affairs. The sources also discuss various "exchanges" in the context of contract
law, such as the exchange of goods and services and mutual promises for consideration.
●​ School of legal thought​

○​ The philosophy of law is also known as jurisprudence. Different schools or philosophies exist
regarding what law entails.
○​ The two main schools are legal positivism and natural law, which are the most influential in how
people perceive the law. Other schools include the historical school, legal realist school, and critical
legal studies (CLS).
○​ Legal Positivism: This school of thought, concisely put by John Austin, defines “Law is the
command of a sovereign”. It asserts that law is legitimate only if it originates from a recognized
authority (like a king, president, or dictator) and can be enforced by that authority within a defined
territory. From this perspective, questions about the morality of a law are not considered
important for its legitimacy. Legal positivists believe that one can most effectively learn about law
by examining what the written law states or how it has been applied.
○​ Natural Law: This school emphasizes that law should be based on a universal moral order,
discovered by humans through reason to distinguish between good and evil. It suggests that
certain principles are universal in application and involve a "superhuman legislator". Natural-law
thinkers argue that if a lawmaker's command violates natural law, citizens are morally justified in
engaging in civil disobedience, as it demonstrates the "highest respect for law".
○​ Historical School: Believes that legal decisions should be based on examples from the past,
prioritizing precedent over moral arguments.
○​ Legal Realist School: Flourished in the 1920s and 1930s, reacting against the historical school. Legal
realists argued that because society constantly changes, laws must be altered or modernized. They
emphasized the social context of law and observed that judges' decisions are influenced by their
own beliefs and social context, rather than being purely objective applications of rules.
○​ Critical Legal Studies (CLS) School: Influenced by legal realism, the "Crits" believe that the social
order and law are dominated by those with power, wealth, and influence. They argue that the
wealthy have historically oppressed those with less wealth and maintained social control through
 law, perpetuating an unjust distribution of rights and goods. CLS views law as political, not neutral,
and seeks to use law to overturn hierarchical structures of domination.
○​ Ecofeminist Legal Perspectives: Mentioned alongside CLS, these emphasize long-standing patterns
of domination, particularly of men over women.
●​ Types of law (Categorization of legal systems and laws)​

○​ US Positive Law: Most of the law discussed in the sources is US positive law.
○​ Common Law: This system originated in England and is based on judicial decisions (precedent)
rather than legislative acts (statutes). Judges record the facts of a case and their decisions, often
relying on prior written decisions through reasoning by analogy, known as stare decisis ("let the
decision stand"). Most judicial decisions that don't apply statutes fall into property, contract, or tort
law.
○​ Statutory Law: Laws passed by legislatures (like the US Congress or state legislatures) that provide
general rules for society. These have priority over common law.
○​ Constitutional Law: The US Constitution is the foundation for all US law, federal and state, taking
precedence over all statutes and judicial decisions inconsistent with its provisions.
○​ Administrative Law: Rules and decisions made by federal administrative agencies, often called
regulations, which differ from laws passed by Congress but have the effect of law.
○​ International Law: Includes treaties (agreements between states or countries) and customary
international law (judicial decisions from national court systems involving parties from two or
more nations).
○​ Civil-Law Systems: The main alternative to the common-law system, developed in Europe and
based on Roman and Napoleonic law. In civil-law systems, all legal rules are contained in one or
more comprehensive legislative enactments (codes). Judges in these systems typically decide cases
without a jury and are not required to follow decisions of other courts in similar cases, with the
legislature being the primary agent for change. Note that the "civil law" here refers to a legal
system, distinct from "civil cases" versus "criminal cases" in the US system.
●​ Basic concepts and categories (of US Positive Law)​

○​ Law as Moral Minimums: The law aims to curb the worst kinds of wrongs that violate society’s
"moral minimums," including criminal law, torts, and broken promises. There is a strong association
between ethical behavior and legal requirements.
○​ Common Law Areas: Historically, state law has had jurisdiction over key areas of business life,
including:
1.​ Contracts: Deals with enforceable promises.
2.​ Torts: Deals with harms or injuries between parties where no contract exists, such as libel
or a competitor lying about a product.
3.​ Property: Deals with rights and duties of owning land, its protection, transfer, and tenant
rights.
4.​ Other areas include corporations, partnerships, domestic matters, securities law,
environmental law, agency law, banking, and insurance.
○​ State vs. Federal Law: In the early US, state courts had jurisdiction over most aspects of business
life. Over the past eighty years, federal law has become increasingly important in areas like
banking, securities, and environmental law. State courts must honor federal law (supremacy
clause), and claims under federal statutes can sometimes be tried in state courts. State courts must
also respect final judgments from courts in other states (full faith and credit clause) and
sometimes apply other states' laws.
●​ Civil vs Criminal case​

○​ Criminal Cases: Involve a governmental decision (state or federal) to prosecute someone for
violating society’s laws. The law establishes a moral minimum, and penalties can include loss of
freedom (jail) or life.
○​ Civil Cases: Generally involve noncriminal disputes, usually between private parties (individuals or
corporations), to settle disputes peacefully. In civil actions, the defendant would not be imprisoned
 but could lose property (money or other assets).
○​ Key Differences (Table 1.1):
1.​ Parties: In civil cases, the plaintiff brings the case, and the defendant must answer or lose
by default. In criminal cases, the prosecutor brings the case, and the defendant may remain
silent.
2.​ Proof: Civil cases require a preponderance of evidence. Criminal cases require proof beyond
a reasonable doubt.
3.​ Reason/Purpose: Civil cases aim to settle disputes peacefully. Criminal cases aim to
maintain order in society, punish the blameworthy, and deter serious wrongdoing.
4.​ Remedies: Civil remedies include money damages (legal remedy), injunctions (equitable
remedy), and specific performance (equity). Criminal remedies include fines, jail, and
forfeitures.
○​ Governments can also bring civil actions (e.g., for unpaid taxes or boundary disputes) and can be
sued if they waive sovereign immunity.
●​ Substantive vs Procedural law​

○​ Substantive Laws: These are rules of conduct or behavior that tell citizens how to act with one
another and with the government. Examples include laws on speed limits or environmental
discharge permits.
○​ Procedural Laws: These are the rules of courts and administrative agencies that dictate how to
proceed if there is a substantive-law problem. They govern processes like who goes first in a trial,
the right to legal counsel, time limits for trials, and types of admissible evidence. In the US, both
state and federal procedural laws must be fair due to the Due Process clauses of the Fourteenth
and Fifth Amendments, respectively.
●​ Sources of law​

○​ In the United States, the main sources of law are:

1.​ Constitutions: Both state and federal. The US Constitution is the supreme law, preempting
inconsistent statutes and judicial decisions.
2.​ Statutes and Agency Regulations: Statutes are laws passed by legislatures (Congress or
state legislatures). Administrative agencies also create regulations that have the force of
law.
3.​ Judicial Decisions (Common Law): Decisions by courts that do not involve interpreting
statutes, regulations, treaties, or the Constitution. Common law is based on precedent
(prior judicial decisions) and the doctrine of stare decisis ("let the decision stand"), aiming
for predictable and consistent rulings.
○​ Chief executives (the president and governors) can also issue executive orders that have the effect
of law.
○​ International Legal Systems: Sources include treaties (agreements between states/countries) and
customary international law (judicial decisions in disputes between parties from different nations).
○​ Laws have a priority hierarchy: Constitutional law has priority over statutory law, which has priority
over common law.
 Chapter 02: Ethics and Governance
●​ Ethics / Morality​
○​ Most ethicists do not make a clear distinction between ethics and morality, often using them as
equivalent terms.
○​ Ethics is generally defined as the study of morality—what is “right” and “wrong”—in the context
of everyday life, organizational behaviors, and how society operates and is governed. While
morality is sometimes considered personal, ethics is viewed as having wider social implications.
●​ Difference between law and ethics​

○​ There is a clear distinction: what is legal is not necessarily ethical, and conversely, what is ethical is
not necessarily legal.
○​ Legal compliance only prescribes a minimum of morality. Many professional ethics codes exist
because individuals and professions recognize that law alone does not ensure excellent service or
behavior.
○​ Laws themselves often express society's moral views; for example, prohibitions against cheating
Medicare or assisting suicide reflect collective moral decisions.
○​ Reputation (individual or organizational) is tied to ethical behavior and goodwill from stakeholders
(suppliers, customers, employees, the community, investors, government officials). Protecting
goodwill often requires acting ethically, beyond mere legal compliance.
●​ Ethical perspective and terms​

○​ Several well-respected ways of approaching ethical issues exist, including:

■​ Utilitarianism: Emphasizes results. An action is considered good or right if it maximizes
happiness or pleasure throughout society. Originally for legislators seeking the greatest
good, it can be applied individually or corporately.
■​ Deontology (Duty-based ethics): Based on the writings of Immanuel Kant, this view posits
that having a moral intent and following the right rules is superior to achieving the right
results. Ethical action arises from doing one's duty, defined by rational thought and owed
universally to all human beings, treating all as inherently equal.
■​ Social Justice and Social Contract Theory:
■​ Social Justice Theory focuses on "distributive justice"—the fair distribution of goods
among people. Marxist thought, for example, suggests goods should be given
according to needs, requiring a governing power for redistribution.
■​ Social Contract Theory proposes that people in a civil society voluntarily give up
some freedoms to have ordered liberty, assisted by a government that supports
that liberty. This theory connects with the idea of rights and corresponding duties;
for example, the government has a duty to respect the right to free expression but
can set reasonable limits.
■​ Virtue Theory: While mentioned as a major perspective, the sources do not provide a
detailed definition within "Major Ethical Perspectives". However, it is an underlying concept
for "Josephson's Core Values Model".
●​ 14 virtues​

○​ The provided sources do not explicitly mention "14 virtues." The closest concept is "Core Values" as
part of Josephson's model.
●​ Core values​

○​ Josephson's Core Values Model suggests that when making ethical judgments, one should first
gather all relevant facts and then consider decision-making based on core values.
○​ Examples of core values listed include:
■​ Respect: Judging people on their merits, being courteous, accepting differences, and not
 abusing or exploiting others.
■​ Responsibility: Being accountable, considering consequences, being reliable, performing
duties, taking responsibility for choices, setting a good example, and exercising
self-restraint.
■​ Pursue excellence: Doing one's best, persevering, being diligent, and making efforts worthy
of pride.
●​ Corporate and governance​

○​ This section introduces the role of business in society and whether corporations have social
responsibilities beyond maximizing shareholder value.
○​ Business organizations risk peril if they ignore the ethical and social expectations of various
stakeholders (consumers, employees, media, NGOs, government officials, socially responsible
investors).
○​ Legal compliance alone may not serve the long-term interests of companies; sustainable
profitability often requires considering "people and the planet as well as profits".
○​ Federal Sentencing Guidelines (enacted in 1991) aim to correct lenient treatment of white-collar
criminals by requiring judges to consider aggravating and mitigating factors for sentences and
fines. Corporations can show they are "tending their orchard well" by demonstrating:
■​ A viable, active code of ethics.
■​ A way for employees to report violations of law or ethics code.
■​ An ethics ombudsman to oversee the code.
○​ Conscious Capitalism: Mentioned as differing from stakeholder theory.
●​ Shareholder and stakeholder approach​

○​ The sources highlight the difference between the shareholder profit-maximization model and
stakeholder theory in ethical corporate governance.
○​ Shareholder Profit-Maximization Model: This traditional view, associated with economists like
Milton Friedman, emphasizes that a corporation's primary duty is to maximize shareholder value.
○​ Stakeholder Theory: This approach suggests that a business organization's reputation and success
are built on the goodwill that various stakeholders feel toward it. Stakeholders include:
■​ Customers or clients.
■​ Suppliers.
■​ The community.
■​ Employees.
■​ Government officials.
■​ Socially responsible investors.
○​ Ignoring the ethical and social expectations of these stakeholders can be perilous for companies,
as sustainable profitability requires considering their interests alongside profits.