Legal Environment
Introduction to Business
The Meaning and Purpose of Law
The law is a set of rules of
conduct or procedure established
by customs, agreement or
authority.
• Refers to the entire body of rules
governing a community and
enforced by a political authority.
• Main purposes of laws are to
establish standards, maintain
order, resolve disputes, and
protect liberties and rights.
Statutory and Constitutional Law
The U.S. Constitution is
foundational; U.S.
statutory and common law
must be consistent with its
provisions. Congress
creates statutory law (with
the signature of the
president), and the courts
interpret both statutory
and constitutional law.
Common Law and Case Law
When there is neither constitutional law nor statutory law,
the courts function in the realm of common law.
Common law is a law developed by judges, courts, and
similar tribunals. Over time, the decisions in individual
cases establish precedents for future cases.
In common law systems, this principle is known as stare
decisis. Stare decisis holds that cases should be decided
according to consistent principled rules so that similar
facts will yield similar results.
Tort Law
In common law jurisdictions, a tort is a civil wrong that
unfairly causes someone else to suffer loss or harm,
resulting in legal liability for the person who commits the
tortious act. Torts may result from negligent as well as
intentional or criminal actions.
Damages in Tort Law
When someone pursues a
claim under a tort, the
goal (or legal remedy)
is usually the award of
damages.
Damages are an award,
typically of money, to be
paid to a person as
compensation for loss or
injury.
Product Liability
Product liability is the area
of tort law in which
product manufacturers,
distributors, and sellers are
held responsible for the
injuries caused by their
products.
Intellectual Property
Intellectual property refers to creative works or ideas
embodied in a form that can be shared or enable others
to recreate, emulate, or manufacture them.
There are three main ways to protect intellectual
property:
1. Patents
2. Trademarks
3. Copyrights
Warranties
There are two types of warranties:
1. Express warranty
2. Implied warranty
Uniform Commercial Code provides that the following two
warranties are implied unless they are explicitly
disclaimed (such as an “as is” statement):
3. Warranty of merchantability
4. Warranty of fitness for a particular purpose
Contract Law
Every transaction in business creates a contract
(agreement) between the parties.
To determine whether a valid, enforceable contract exists,
the following questions must be answered:
1. Did the parties reach an agreement?
2. Was consideration present?
3. Was the agreement legal?
4. Did the parties have the capacity to make a contract?
5. Was the agreement in the proper form?
Remedies for Breach of Contract
There are several remedies for when a party fails to live
up to its obligations under a contract:
• Specific performance
• Damages: general and consequential
• Discharge of duties
Consumer Protection Law
A range of laws regulate consumer affairs with the aim to
protect consumers from unscrupulous business practices
or potentially dangerous products.
Some of the most far-reaching consumer protection laws
include:
• Fair Credit Reporting Act
• Fair Debt Collection Practices Act
• Federal Food, Drug, and Cosmetics Act
• Uniform Deceptive Trade Practices Act
Antitrust Law
Antitrust legislation is a kind of consumer protection
that aims to prevent unfair business practices that limit
competition or control prices.
The three core federal antitrust laws are:
1. The Sherman Act
2. The Federal Trade Commission Act
3. The Clayton Act
Practice Question
How does the role of precedent and stare decisis
contribute to the business climate?
Quick Review
• What is the meaning and purpose of law?
• What is the difference between statutory and common
law?
• What is tort law? What is the role of product liability in
tort law?
• What is the purpose and characteristics of intellectual
property law?
• What are warranties?
• What are the elements of a legally enforceable contract
and the consequences of breach of contract?
• What do consumer protection and antitrust laws do?
