Business Law

LECTURE 2
INTRODUCTION TO LAW AND LEGAL
REASONING

Focus of this Lecture

How does the legal environment affect business
decision making?
2. Sources of American Law
3. The common law tradition
4. Practical Guidance: (i). How to find sources of law;
(ii). How to read and understand court opinions.
1.

How does the legal environment affect business decision

making?
Law consists of enforceable rules governing

relationships among individuals and between

individuals and their society.
In the US, the law consists of written laws and court
decisions (i.e. Common law).
Law establishes rights, duties and privileges that are
consistent with the values and beliefs of their society
or its ruling group.
Law creates confidence and a certain degree of
predictability.

 In business practice, the law and government

regulations impact all business decisions.

One must have a basic knowledge of the laws and
regulations associated with business in order to
make proper legal and ethical decisions.
Many areas of law can affect business decision
making i.e. Contract law, tort law, internet law and
regulation, creditors rights, intellectual property law
etc.

Eg. Proctor & Gamble and The Hilton Hotel

A. Legal requirements of an enforceable contract?
B. What are your obligations vis a vis the contract?
C. What are your options if the Hilton breach the
contract?
D. What are your options if the Hilton fail to make
payment as agreed under the contract?
E. Who is liable if the product if faulty?

2. Sources of American Law

Primary Sources of Law:

(i). The US Constitution and constitutions of various

states;
(ii). Statutory law-including laws passed by
Congress, state legislatures, or local governing
bodies;
(iii). Regulations created by administrative agencies,
i.e. Food and Drug Administration;
(iv). Case law and common law doctrines.

Secondary sources of law

Books and articles that summarize and clarify the

primary sources of law:

Legal encyclopaedias, textbooks, treatises, articles in
law reviews, and compilations of law etc (Give more
examples...
Secondary sources are used by the Courts for
guidance in interpreting and applying the primary
sources of law, they are not binding.

(i). Constitutional Law

Supreme Law of the Land (Article VI US

Constitution)
Federal and State Constitutions
Deals with fundamental relations within society
including relations among the states, the states and
the federal government, the 3 branches of the federal
government (executive, legislative, judicial), and the
rights of individuals in relation to both federal and
state governments.
Supreme Court plays crucial role in interpreting the
Constitution.

(ii). Statutory Law

Laws enacted by legislative bodies at any level of

government on any issue i.e. Environmental issues,

Divorce, Trademarks etc.
Statutes are primary sources of law in the US
They are included in the federal code of laws or the
relevant state code of laws.
Uniform Laws: NCCUSL
The Uniform Commercial Code: Commercial
Transactions

(iii). Administrative Law

Governs creation and operation of administrative

agencies
Determines their powers and when an administrative

agency acts outside of those powers a case can be

brought against that agency.
Rules issued by these agencies affect many aspects of

the business environment i.e. Capital structure,

financing, employer-employee relations etc.

(iv). Common Law

Derived from the UK legal system
Judge made law-known as case law
Doctrines and principles announced in cases create case

law

Covers all areas not covered by statute or by

administrative law

Precedent and The Doctrine of Stare Decisis

(v). Equitable Maxims

1.

2.
3.

4.
5.

6.

Whoever seeks equity must do equity.

Where there is equal equity the law must prevail.
One seeking the aid of an equity court must come
to court with clean hands.
Equity will not suffer a wrong to be without a
remedy.
Equity regards substance rather than form.
Equity aids the vigilant, not those who rest on their
rights.

Stare Decisis and Legal Reasoning

Legal Reasoning is the reasoning process used by

judges in deciding what law applies to a given

dispute and then applying that law to the specific
facts or circumstances of the case.
Result: harmonisation of decisions
Involves: (i). Knowing the key issue in the case;
(ii). Identifying the relevant law;
(iii). Applying the law to the facts.
(iv). Conclusion
*(IRAC)

Donoghue v Stevenson (1932)

Facts: Donoghue sustained personal injuries after

she drank a bottle of ginger beer which had been

bought for her at a bar by a friend. The bottle
contained remnants of a decomposed snail.

IRAC
Issue: Because Donoghue did not buy the bottle of ginger

beer, she had no remedy under contract and therefore no

cause of action in negligence.
Relevant Law: Tort Law-Negligence
Application of the Law: The defendant was required to
take reasonable care to avoid acts or omissions which they
could have reasonably foreseen would be liable to injure their
neighbour. Donoghue satisfied the neighbour requirement
as she was so closely and directly affected by the act that the
def. ought to have reasonably to have contemplated that she
would have been so affected.
Conclusion: The def. owed Donoghue a duty of care not to
provide a product that caused her injury.

Common Law today in the US

Courts interpret Statutes
Restatements of the Law:
Summaries of the common law rules followed by most states
Published by The American Law Institute (ALI)
Secondary source of law (non-binding)
E.g. Restatement of the Law of Contracts (available at
http://law.scu.edu/facwebpage/neustadter/contractsebook/m
ain/Restatement/index.html)

Classifications of Law
1.

2.
3.
4.

5.
6.

Substantive v Procedural
Federal v State
Private v Public
National v International
Civil v Criminal
Cyberlaw

Practical Guidance
How to find primary sources of law
(i). Finding Statutory Law:
Federal Laws=United States Code (U.S.C.)
(www.gpoaccess.gov/uscode)
State Laws= Codes/Revisions/Compilations/
General Statutes
(ii). Finding Administrative Law:
Code of Federal Regulations (C.F.R.)
1.

Practical Guidance contd.

2. Finding Case Law:
(i). The Court System
Supreme Court

Court of Appeal/ Appellate Court

Trial Courts

(ii). State Court Decisions

Trial Court-filed in office of the clerk of the court.

They are available for public inspection.

Appeal Court- written decisions published and

distributed on the internet and in hard copy.

Reported Appellate Decisions- published in

reports/reporters.

(iii). Regional Reporters

State Court Opinions- regional units of the National

Reporter System
Most common are the West Reports

Divided into geographical areas (See exhibit 1-4, pg.

17)

(iv). Case citations

Appellate decisions:
(a). Name of case, volume, name, & page number of the
states official reporter (if different from Wests reporter)
(b). Volume, name, and page number of the National
Reporter
(c). Volume, name and page number of other selected
reporter
(d). Some states use a public domain citation system
(See exhibit 1-5 for examples)

(v). Federal Court Decisions

Trial Court (i.e. District Court)- published unofficially in
Wests Federal Supplement (F. Supp. or F. Supp. 2d)
Circuit Courts of Appeals Opinions- unofficially reported
in Wests Federal Reporter (F., F.2d, or F. 3d)
Bankruptcy Law cases- unofficially published in Wests
Bankruptcy Reporter ( Bankr. or B.R.)
Supreme Court decisions- official reports= United State
Reports (U.S.); unofficial reports= Wests Supreme
Court Reporter (S.Ct.) and Lawyers Edition of Supreme
Court Reports (L. Ed. or L. Ed. 2d).
Unpublished opinons-Westlaw (WL)

Case Titles
Trial Court:

Smith v. Ryan
Plaintiff (Plf.)

Defendant (Def.)

Case Titles contd.

Appellate Court:
Smith v. Ryan

Appellee/Respondent

Appellant/Petitioner

Judges and Justices

Judge/ Justice e.g. Byrne, J.

Justices e.g. Kennedy and Thomas, J.J.

Chief Justice e.g. Roberts, C.J.
Lord Justice e.g. Leveson L.J.

Decisions and Opinions

Decisions are explained in written opinions that contain

the reasons for the decision, the applicable laws and the
judgment.
Unanimous Opinion: all judges have the same
opinion
Majority Opinion: this outlines the views supported by
the majority of the judges
Concurring Opinion: A judge may agree with the final
decision of the other judges but for different reasons and
will emphasise these differences
Dissenting Opinion: One or more judges may disagree
with the majority.