Business Law

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Business Law EthicsChapter 3
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What is Law?

• A system of social control it is concerned with
  controlling behavior
• A method for settling disputes settling
  conflicts peacefully
• A way to manage society from the top down

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Classification of Law

• Common Law body of law which developed based on
  court decisions
• Private Law deals with the relations between
  individuals
• Public Law deals with relationship between
  government and individuals
• Civil Law civil cases are brought to redress
  some private wrong, such as a personal injury
• Criminal Law part of public law in which
  government seeks to punish a person for harming
  public at large

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Sources of Law

• Constitution
• Federal
• State
• Legislation
• Federal
• State
• Judiciary Decisions interpret statutes and
  constitutions

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Legal Sanctions

• What a government or other agency seeks from a
  person or business as a result of legal action
• Compensatory intended to make injured party
  whole
• Punitive intended to punish a defendant that
  has acted egregiously
• Equitable Relief when plaintiff desires to have
  something done.

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What is the Purpose of a Lawsuit?

• To provide a remedy for some wrong
• Criminal cases government brings suit against
  individual who has injured public
• Civil cases brought when someone feels that his
  or her rights have been violated

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Terms

• Plaintiff party bringing the lawsuit in a civil
  case
• Defendant party against whom the lawsuit is
  brought
• Litigation process of bringing, maintaining,
  and defending a lawsuit

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Where do Lawsuits Begin?

• Trial Court
• One judge
• Often a jury
• Determines the facts of a particular dispute
• Facts are presented through use of evidence and
  witnesses
• Judge or jury decides issues of fact
• Judges responsibility is to determine the law
  that is to be applied to the facts

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What is the Next Level?

• Appellate Court (Court of Appeals)
• No juries
• Do not hear witnesses or taken new evidence
• Accepts findings of fact made by trial court
• Reviews trial court records to make sure trial
  court correctly applied law to the facts
• If appellate court finds errors of law made by
  trial court, trial courts decision may be
  reversed or modified.
• Decisions may result in published opinions which
  can be used as precedents in deciding future cases

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Federal Court System

• Established by Congress under authority of U.S.
  Constitution

Federal District Court
U.S. Court of Appeals
Supreme Court of the United States
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Federal District Court

• General trial court of the federal system
• At least one federal district court in each state
• Can hear cases
• In which the United States is a party
• That involve a federal question (claim based on
  Constitution, federal statute, federal treaty)
• In which parties are from different states and
  involves damages gt75,000
• Specialized courts to hear bankruptcy, tax
  matters, claims against the U.S., and
  international trade issues

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U.S. Court of Appeals

• Divided into circuits (geographical areas)
• Currently there are 11
• Court of Appeals for the District of Columbia
  only hears appeals from the district court of
  Washington, D.C.
• 13th Court of Appeals - only hears appeals from
  specialized district courts

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U.S. Supreme Court

• Highest court in the United States
• Located in Washington, D.C.
• Composed of 9 justices who are nominated by the
  president and confirmed by the senate
• Has power to hear appeals in any federal case and
  in certain cases that belong to state courts.
• Generally it is up to the Supreme Court to decide
  whether or not it will accept a case
• Courts decision is FINAL
• Its opinions are precedent for every other court
  in the country

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State Court System

• Limited-Jurisdiction Trial Court

General Jurisdiction Trial Court
Intermediate Appellate Courts
Supreme court
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Trial Courts

• Limited-jurisdiction
• Hears matters which are specialized, such as
  traffic courts, probate courts, and family law
  courts
• Small claims court hear matters involving very
  small damage claims
• General-jurisdiction
• Hears all other matters

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Intermediate Appellate Courts

• Hear appeals from trial courts

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State Supreme Courts

• Highest court in the state
• Decisions are final, unless a question of law is
  involved that may be appealed to U.S. Supreme
  Court

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Alternative Dispute Resolution

• Arbitration
• Parties agree to present their case to an
  impartial third party
• Parties are required to accept arbitrators
  decision
• Mediation
• Parties choose a neutral third party to act as a
  mediator
• Mediator does not make a decision assists
  parties in trying to reach a settlement of the
  dispute

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International Law

• Law that governs affairs between nations
• Regulates transactions between individuals and
  businesses of different countries

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International Organizations

• The United Nations (UN)
• International Court of Justice (World Court)
• World Bank
• International Monetary Bank (IMF)
• European Bank (EU)

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United Nations (UN)

• Disputes between nations may be resolved through
  votes of the General Assembly (legislative body
  of the UN)
• Nations may refuse to be bound by those decisions
• Decisions are usually enforced through persuasion
  and use of economic and other sanctions

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International Court of Justice (World Court)

• Judicial branch of the UN
• Located in the Hague, the Netherlands
• Only nations, not individual or businesses, may
  have cases decided by this court
• Courts jurisdiction over nations is based on
  their consent
• Enforcement of its decisions depends on the
  goodwill of the parties involved

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World Bank

• Agency of the UN
• International bank that makes low-interest loans
  to countries for development of major projects
• Major source of advice and information for
  developing nations

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International Monetary Fund (IMF)

• Agency of the UN
• Created to promote trade through financial
  cooperation among member nations
• Makes emergency loans to financially troubled
  member nations, often in exchange for nations
  addressing the problems that led to the crises

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European Union (EU)

• Composed of 25 countries of Western Europe
• Goals include
• Single monetary and fiscal policies among member
  nations
• Common foreign policies
• Cooperation in the administration of justice
• Uniformity in law
• January 1999, Eurodollar introduced

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Treaty

• An agreement or contract between two or more
  nations on a subject of international law

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Tariff

• Tax imposed by a nation on imported goods
• Makes imported goods more costly
• Imported goods are less able to compete with
  domestic goods

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General Agreement on Tariffs and Trade (GATT)

• Purpose is to establish trade agreements and
  limit tariffs and trade restrictions among its
  more than 130 member nations.

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World Trade Organization (WTO)

• Created to promote and enforce trade agreements
  among member nations
• Primary objects are trade without discrimination
  and protection through tariffs
• Trade without discrimination is achieved through
  most-favored-nation clause

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North American Free Trade Agreement (NAFTA)

• Treaty that created a free-trade agreement among
  Canada, Mexico, and the U.S.
• Objective is to eliminate all tariffs among the
  three countries

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Foreign Corrupt Practices Act

• Makes it illegal for an American business person
  to bribe foreign officials
• Applies to business concerns that have their
  principal offices in the U.S.

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Administrative Agency Law

• Congress delegates much of the detail work of
  government to administrative agencies
• Agencies employ experts and use their knowledge
  to make rules

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Administrative Agencies

• Civil Aeronautics Board (CAB)
• Consumer Products Safety Commission (CPSC)
• Environmental Protection Agency (EPA)
• Federal Aviation Administration (FAA)
• Federal Communications commission (FCC)
• Nuclear Regulatory commission (NRC)
• National Transportation Safety Board (NTSB)

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Key Factors When Choosing a Form of Business

• Method of Creation What are the formalities and
  expenses involved?
• Legal Position Is business an entity separate
  and distinct from owners?
• Liability Do owners have unlimited liability
  for obligations of business?
• Duration How long will business stay in
  existence?
• Transferability of Interest Is ownership
  interest freely transferable?
• Management Can owners fully share in
  management?
• Taxation Is business taxed directly or are
  owners taxed?

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Taxation of Business

• Income taxes based on income received by
  individuals and businesses progressive tax
• Property taxes taxes that are assessed on real
  and personal property
• Payroll taxes employers share of Social
  Security taxes and federal and state unemployment
  taxes taxes are paid on wages, salaries, and
  commissions
• Sales taxes levied on goods when they are sold
  percentage of sales price
• Excise taxes imposed on specific items such as
  gas, alcohol, cigarettes, cars guns

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The Common Law of Contracts, Torts, Agency, and
Property

• Common Law developed in English courts and came
  to America with colonists
• Law of Contracts built upon the assumption that
  people should keep their promises
• Law of Torts built upon the assumption that
  people should be responsible for the harm that
  they cause
• Law of Agency built upon the assumption that an
  employee or agent should be faithful, obedient,
  and loyal in serving employer
• Law of Property regulates and protects
  ownership of property

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Law of Contracts

• Main functions is to decide which promises should
  be enforced
• A contract is a promise or set of promises that
  the law will enforce

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Elements of a Legally Enforceable Contract

• Mutual Assent there must be an offer and
  acceptance
• Consideration bargained-for exchange that is
  legally sufficient
• Legality of Object purpose of contract must be
  legal
• Capacity both parties must be capable of
  understanding what they are signing

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Defenses That Make A Contract Unenforceable

• Statute of Frauds - Requires that certain
  contracts must be in writing in order for the
  contract to be enforceable
• Consent must be genuine and not obtained as a
  result of duress (threat), undue influence
  (pressure), fraud (deceit or misrepresentation of
  the facts), or mistake

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Breach of Contract

• Occurs when one party fails to fulfill the terms
  of the agreement

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Legal Remedies for Breach of Contract

• Payment of damages award of monetary damages to
  party who was harmed
• Specific performance of the contract requires
  breaching party to perform duties under contract
• Restitution court cancels contract returns
  parties to position they were in before contract
  was made

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Uniform Commercial Code (UCC)

• Goal is to create a uniform system of commercial
  law among the fifty states
• Article 2 applies to contracts for the sale of
  goods

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Tort

• Civil, or private, act that harms other people or
  their property
• Purpose of tort law is to provide a remedy to
  party who has been injured

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Crime

• Public wrong
• Requires wrongdoer to pay a debt to society
  through a fine or by going to prison

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Intentional Torts

• Harm that is caused by a deliberate action
• Actor needs not have intended the harm only
  needs to have intended to commit the act

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Examples of Intentional Torts

• Battery harmful or offensive contact with a
  person
• Assault the threat of violence
• False Imprisonment intentional restraint of
  another person without reasonable cause and
  without consent
• Defamation of Character publication of untrue
  and damaging statements
• Interference with Contract asking party to
  breach contract with a third person
• Intentional Infliction of Emotional Distress
  bizarre and outrageous conduct that inflicts
  mental and possible physical harm on another
• Trespass to Land unauthorized use of another
  persons land

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Negligence

• The failure to act as a reasonable and prudent
  person would act under like circumstances
• Plaintiff must prove
• Defendant had a duty of due care to plaintiff
• Defendant breached his/her duty by failing to act
  as a reasonable person would act
• Plaintiffs suffered personal injury or property
  damage
• Defendant actually caused injury to plaintiff

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Defenses to Negligence

• Contributory Negligence defendant tries to
  prove plaintiff was partially responsible for
  causing his/her injuries
• Comparative Negligence jury determines level of
  fault for both plaintiff and defendant
• Assumption of Risk requires defendant to prove
  plaintiff knew there was a risk of injury but
  decided to go forward with conduct anyway

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Strict Liability

• Doctrine that imposes liability on defendant
  based on nature of activity defendant is engaged
  in
• Performing abnormally dangerous activities
• Keeping animals
• Products liability

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Law of Agency

• Concerned with your responsibility for the
  actions of others
• In an agency relationship, principal appoints an
  agent to act on behalf of the principal
• Fiduciary Duties imposes a duty on the agent to
  act in the principals best interest

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Employment Relationships

• Employer-employee employer hires an employee to
  perform some kind of physical service
• Principal-agent employer gives an employee
  authority to enter into contracts on behalf of
  employer
• Independent contractors persons and businesses
  who are not employees are hired to perform
  certain tasks
• NOTE principal is liable for torts an employee
  commits within scope of his/her employment but is
  ordinarily not liable for torts committed by an
  independent contractor

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Law of Property

• The right to use property, to sell it, to possess
  it, and to control to whom it shall pass on the
  death of the owner.
• Real Property
• Personal Property
• Tangible personal property
• Intangible personal property
• Fixtures

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Products Liability

• Warranties contractual promises made when a
  product is sold
• Implied Warranty of Merchantability merchant
  seller can be held liable for a defect even in
  the absence of a written or oral promise if the
  product is not fit for its intended purpose

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Negligence

• Law of negligence applies in the area of products
  as well
• Often hard to establish in product cases

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Strict Product Liability

• Liability without fault
• Injured consumer need not establish that the
  defendant in a product case was negligent in
  order to prevail in a lawsuit

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Fair Labor Standards Act (FLSA)

• Minimum wage
• Overtime covered employees who work in excess
  of 40 hours/week are entitled to receive
  time-and-one-half pay for excess hours
• Child labor Restricts type of work that workers
  16 17 may do restricts type of work as well as
  number of hours for workers under 16
• Equal pay for women and men

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Occupational Safety and Health Act (OSHA)

• Purpose of this act is to provide a safe working
  environment for employees.
• To assure so far as possible every working man
  and woman in the nation safe and healthful
  working conditions and to preserve our human
  resources

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Workers Compensation Statutes

• No fault insurance policies for workers
• Employee who is injured on job does not need to
  prove employer was negligent
• Employee need only establish injury was accident
  and occurred in scope of employment
• Whether injury occurred as a result of employees
  own negligence is immaterial

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Family and Medical leave act (FMLA)

• Requires companies with fifty or more employees
  to provide twelve weeks leave each year for
  medical or family reasons
• Employee is not entitled to receive pay for leave
  time
• Employees medical benefits must continue
• Same or equivalent job must be available for
  employee upon her or his return

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Unemployment Compensation

• Purpose is to assist those who are involuntarily
  terminated from their jobs, are able to work, and
  are actively seeing employment
• Amount received is tied to average amount earned
  by individual during months preceding termination
• Benefits in most states are limited to 26 weeks

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Social Security Legislation

• Act was passed to help remedy problems of
  retiring and elderly persons
• Provides survivors insurance, disability
  benefits, and Medicare

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Pensions

• An arrangement whereby an employer can provide
  for retirement benefits for employees in
  recognition of their service to the company
• Employment Retirement Income Security Act
  establishes certain fiduciary duties
  participation, vesting, and funding rules,
  reporting and disclosure requirements, etc.

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Fourteenth Amendment Equal Protection Clause

• No state shall deny any person equal protection
  under the law
• Brown v. Board of Education school districts
  were sued because they had separate schools for
  blacks and whites Supreme Court ruled separate
  but equal schools violated the Equal Protection
  Clause

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Title VII of the Civil Rights Act of 1964

• Designed to prevent discrimination by employers
  in the private sector
• Employers who employ 15 or more employees for 20
  or more calendar weeks/year cannot discriminate
  on basis of race, color, religion, sex, or
  national origin

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Age Discrimination in Employment Act (ADEA)

• Prevents discrimination against employees over
  forty years of age

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Americans with Disabilities Act (ADA)

• Prohibits discrimination against disabled people
  who can perform the main functions of a job with
  or without reasonable accommodations

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Ethics

• The set of rules, norms and values by which each
  person judges the actions of others and of
  himself or herself
• The set of commonly held beliefs, rules, norms,
  and values of a particular groups or society

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Ethical Theories

• Utilitarianism holds that a right action is one
  that leads to the greatest good for the greatest
  number of people
• Categorical Imperative we should act in such a
  way that our actions could become universal
• Aristotle believed there are certain virtues
  that would make us good people virtues include
  generosity, courage, and loyalty

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Ethical Dilemmas

• Exists when a person has to choose between two or
  more ethical notions

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Ethical Culture

• One that holds up under stress involves several
  components
• Good Leadership
• Existence of a code of ethics
• Ethics offices and hotlines

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The End