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BUSINESS LAW TODAY Essentials 8 th Ed. Roger LeRoy Miller - Institute for University Studies, Arlington, Texas Gaylord A. Jentz - University of Texas at Austin, Emeritus. The Historical and Constitutional Foundations. Chapter 1. Learning Objectives. What is the common law tradition?

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BUSINESS LAW TODAYEssentials 8th Ed.Roger LeRoy Miller - Institute for University Studies, Arlington, TexasGaylord A. Jentz - University of Texas at Austin, Emeritus

The Historical and Constitutional Foundations

Chapter 1

Learning Objectives

  • What is the common law tradition?

  • What is a precedent? When might a court depart from precedent?

  • What is the difference between remedies at law and remedies in equity?

  • What constitutional clause gives the federal government the power to regulate commercial activities among the various states?

  • What is the Bill of Rights? What freedoms are guaranteed by the First Amendment?

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).

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.

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.

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.

Equitable Remedies & Courts

  • Remedy: means to enforce a right or 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).

Exhibit 1-1

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.

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.

Comparision of Legal Systems

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.

The Commerce Clause

  • 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.

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 e-commerce internet transactions.

Expansion of National Powers

  • Wickard v. Filburn (1942).

    • Purely local production, sale and consumption of wheat was subject to federal regulation.

  • CASE 2.1 Heart of Atlanta Motel v. U.S. (1964).

    • Motel that provided public accommo-dations to guests from other states was subject to federal civil rights legislation.

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).

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 

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.

  • CASE 2.2Granholm v. Heald (2005).

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.

Taxing and Spending Powers

  • Article I Section 8: Congress has the power to “lay and collect taxes, duties, imposts and excises.”

  • Today: if federal tax has a reasonable relationship to revenue production, it will be held constitutional.

  • Congress can spend tax revenues on any express or implied constitutional power.

Business and the Bill of Rights

  • 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.

First Amendment: Freedom of Speech

  • Right to Free Speech is the basis for our democratic government.

  • Free speech also includes “symbolic” speech, including gestures, movements, articles of clothing.

    • Texas v. Johnson (U.S. 1989).

    • Hodgkins v. Peterson (7th Cir. 2004).

Corporate Speech

  • Commercial speech (advertising) is given substantial protection. Government restrictions must:

    • Seek to implement substantial government interest,

    • Directly advance that interest, and

    • Must go no further than necessary to accomplish.

  • Corporations also have protected political speech (although not to the degree of a natural person).

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.

    • CASE 2.3 Lott v. Levitt (2007).

Online (Obscene) Speech

  • Protected or Unprotected?

    • Some of Congress’ attempts to protect children from online pornography have been ruled unconstitutional restriction on free speech.

      • 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?

Freedom of Religion

  • First Amendment guarantees that “Congress shall make no law respecting an establishment of religion, or prohibiting the free exercise thereof…”

  • Establishment clause: no state-sponsored religion or preference for one religion over another.

  • Free Exercise: person can believe what he wants, but actions may be unconstitutional.

  • What about freedom of religion and illegal drug use?

Due Process

  • Procedural: any government decision to take life, liberty or property must be fair. Requires: Notice and Fair Hearing.

  • Substantive: focuses on the content or the legislation (the right itself).

    • Fundamental Right: requires compelling state interest.

    • Non-Fundamental: rational relationship to state interest.

Equal Protection

  • 14th Amendment: A state may not “deny to any person within its jurisdiction the equal protection of the laws.”

  • Government must treat similarly situated individuals (or businesses) in the same manner.

  • Courts apply different tests:

    • Minimum scrutiny-economic rights.

    • Intermediate scrutiny.

    • Strict Scrutiny – fundamental rights.

Privacy Rights

  • Fourth amendment protects against unreasonable search and seizures.

  • Griswold v. Connecticut (1965) found a right to personal privacy implied in constitution, expanded in Roe v. Wade (1973).

  • Website privacy policies. What about private information on the internet?

  • What about USA PATRIOT ACT (2001)?

  • HIPAA (1996) (healthcare privacy).

Appendix to Chapter 1

  • Finding Statutory Law.

    • United States Code (USC).

    • State Statutes.

  • Finding Administrative Law.

    • Code of Federal Regulations (CFR).

  • Finding Case Law (Case Citations).

Exhibit 1A-1


  • Reading & Understanding Case Law

    • Legal cases are identified by a “legal citation” (or a “cite”) as the example below:

      Nunez v. Carabba’s Italian Grill, Inc.,448 Mass. 170, 859 N.E.2d 801 (2007).

Title: First Party is Plaintiff, second party is Defendant. The parties are either italicized or underlined.


  • Reading & Understanding Case Law

    • Legal cases are identified by a “legal citation” (or a “cite”) as the example below:

      Nunez v. Carabba’s Italian Grill, Inc., 448 Mass. 170, 859 N.E.2d 801 (2007).

This is a 2007 State Supreme Court Case found in volume 448, page 170 of the Massachussets Reports, OR volume 859, page 801 of the NorthEastern Reporter 2nd.

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