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Business and its Legal
Theories and Sources of Law
Law: Rules enacted and enforced by the
Rule of Law: Laws are applied generally
and equally to everyone.
Definition of Law
Rules of conduct
“Pledge that
citizens of a state
will do justice to
one another.”
Greek Philosopher
(384-322 BC)
Definition of Law
A form of social
Greek Philosopher
(427-347 BCE)
Definition of Law
The command of the
“a rule of civil conduct
prescribed by the supreme
power in a state,
commanding what is right,
and prohibiting what is
Sir William Blackstone
English Jurist
Definition of Law
A set of rules that
allows one to
predict how a court
will resolve a
particular dispute.
Oliver Wendel Holmes
Supreme Court Justice.
1841- 1935.
 At a minimum, law consists of enforceable
rules governing relationships among persons
and between persons and society.
 There are several different “schools” of law:
Natural Law.
Positivist view.
Historical view.
Legal Realism view.
Schools of Legal Philosophy
Natural Law School :
A system of moral and ethical principles that are inherent in human
nature and can be discovered by humans through the use of their
natural intelligence.
Unchanging value judgments:
That can be determined by human reason.
That supersede any form of human law.
Criticism: Whose moral precepts are to be included in the moral law?
Declaration of Independence
 When in the Course of human events, it
becomes necessary for one people to
dissolve the political bands which have
connected them with another, and to assume
among the powers of the earth, the separate
and equal station to which the Laws of
Nature and of Nature's God entitle them, a
decent respect to the opinions of mankind
requires that they should declare the causes
which impel them to the separation.
Schools of Legal Philosophy
Positivist School: The laws created by a particular
society at a particular point in time
Law is the expression of the will of the sovereign.
Law and morals are separate.
Correct legal decisions can be reached solely by the
use of logic and precedent.
Criticism: Refusal to consider social and ethical
factors leads to negative results for society.
 Law, and therefore rights and ethics, are not
universal. The morality of a law, or whether
the law is “bad or good”, is irrelevant.
Legislature as a Source of Law
 Bill introduced by one or more legislators in house (or senate).
 Referred to the appropriate committee and subcommittee.
 Hearings held by subcommittee.
 Bill is marked up (drafted in precise form), referred to subcommittee for
If affirmative vote, forwarded to committee.
If accepted, reported back to house (or senate).
If passed by one house, sent to other house. If passed there, sent to
conference committee to iron out differences.
When identical bill passed by both houses, sent to President for his
If President signs (or allows 10 days to go by without taking action) bill
becomes law.
If President vetoes, back to Congress to see if they can override with
2/3 majority of both houses.
Judicial Branch as a Source
of Case Law
 Interpretation of statutes necessary when deciding
Use of legislative history.
 Cases as precedents.(Stare Decisis)
 Lower courts must follow previous cases.
 Even higher courts usually follow their previous
 (However,will sometimes overrule precedent)
 They usually accept previous interpretations of
 They usually follow previous decisions of courts
when there is no relevant statute.
Stare Decisis (Precedent)
Justice Musmanno: Bosely v. Andrews (1958)
Stare Decisis is the viaduct over which the law travels in
transporting the precious cargo of justice. Prudence and a sense of
safety dictate that the piers of that viaduct should be examined and
tested from time to time to make certain that they are sound strong
and capable of supporting the weight above.
A precedent…should appeal to logic and a genuine sense of
A precedent cannot, and should not, control, if its strength depends
alone on the fact that it is old, but may crumble at the slightest
probing touch of instinctive reason and natural justice.
Stare Decisis (Precedent)
(Justice Wanamaker: Adams Express v. Beckwith)
“A decided case is worth as much as it weights
in reason and righteousness, and no more”
Executive Branch as a Source of Law
 The President
 Treaty making.
 Executive orders.
 The President giving orders to the officials who work for
him in federal agencies.
Administrative Agencies
 Administrative Agencies
 Congress delegates rule-making authority to agencies.
 Examples of administrative agencies:
 Securities and Exchange Commission
 Federal Trade Commission
 Equal Employment Opportunity Commission
 Occupational Safety and Health Administration
 Available when money damages are not
 Equitable remedies
Specific performance