Business Law and the Regulation of Business BU 385: Senior Outcomes Seminar

1. Business Law and the Regulation of BusinessBU 385: Senior Outcomes Seminar Definition of Law— “a rule of civil conduct prescribed by the supreme power in a state, commanding what is right, and prohibiting what is wrong” (Blackstone) Functions of Law—to allow a civilized society

2. Classification of Law • Substantive Law or Procedural Law • Substantive— law creating rights and duties • Procedural— rules for enforcing substantive law • Public Lawor Private Law • Public— law dealing with the relationship between government and individuals • Private— law governing the relationships among individuals and legal entities

3. Classification of Law (cont.) • Civil and Criminal Law • Civil— law dealing with rights and duties the violation of which constitutes a wrong against an individual or other legal entity • Criminal— law establishing duties which, if violated, constitute a wrong against the entire community

4. Public Law Constitutional LawCriminal LawAdministrative Law Substantive Law TortsContracts -- SalesCommercial PaperAgencyPartnershipsCorporationsProperty Private Law OR ProceduralLaw Methods of enforcement (courts) Classification of Law

5. Comparison of Civil & Criminal Law Civil Law Criminal Law Aggrieved individual State or federal government Commencement of action (plaintiff) sues prosecutes Compensation Punishment Purpose Deterrence Deterrence Rehabilitation Preservation of peace Burden of proof Preponderance of the Beyond a reasonable doubt evidence Liable/Not liable Guilty/Not guilty Outcome Monetary damages Capital punishment Principal sanctions Equitable remedies Imprisonment Fines

6. Five Sources of Law • Constitutional Law -- fundamental law of a government establishing its powers and limitations • Judicial Law --  • Common Law body of law developed by the courts • Equity based upon principles distinct from common law and providing remedies not available at law

7. Five Sources of Law • Legislative Law -- statutes adopted by legislative bodies includes Treaties and Executive Orders  • Administrative Law -- rules, regulations, orders, and decisions made by administrative agencies¤

8. Political System Review • Three branches of government create laws: • Legislative: elected representatives write specific laws (“statutes”) to deal with future problems • Executive: issues Executive Orders and recommends new laws to legislature • Judicial: judges decide existing cases based on laws, constitutions, administrative regulations • “Fourth Branch of Government” - Administrative Agencies

9. State: Legislative Trenton State Senators State Assembly Executive Governor Judicial Superior Courts State Courts of Appeal State Supreme Court Federal: Legislative Congress (D.C.) Senate House of Reps. Executive President Judicial Federal Dist. Courts Circuit Cts. of Appeal U.S. Supreme Court Dual System of Government

10. Constitutional Law • United States was the first to create • Preamble: • “…of the people, by the people, for the people.” • Purposes: • Establish system of government • Limit the role of government • Guarantee certain rights • Can be altered by Amendment process (rare) • 1 Federal and 50 State constitutions

11. Statutory Law • “Legislative” laws created by elected reps. • Designed to deal with frequently-arising problems or issues • Process: • Drafted by committees • Discussed and voted upon • Codified in orderly manner in statute books • Must be consistent with constitution • Cf: federal vs. state constitution

12. Exec. Orders, Admin. Rules • Executive Orders • President, Governor, Mayors, County Execs. • Limited on only by applicable constitution • Appoint administrative agencies • Administrative Agency Rules and Regs. • “The Fourth Branch of Government” • “In-your-face” government • Binding on all citizens, if properly adopted • APA: Administrative Procedures Act

13. Judicial Law: “Common Law” and Precedents • Concept of staredecisis: similar cases should be decided similarly • Purpose: promote fair outcomes • Creates ordered society • When confronted with a precedent, courts: • Accept precedent as binding authority • “Distinguish” precedent from present case • Modify in view of changing social norms • Over-rule in view of new law or social norms

14. Law of Equity • Evolved from the Chancellor’s Court • King’s court applied the common law • Common law: Specified remedies • When money damages will not work • Injunctions • Restitution • Specific performance • Habeas corpus

15. Lawsuits: Terminology • Parties • Plaintiff vs. Defendant • (State vs. Defendant) • Complaint, summons, pleadings • Motions to the court • Judgment • Appellant vs. Appellee or Respondent • Collecting on Judgment or Sentence

16. Jurisdiction • Subject Matter Jurisdiction– authority of a court to decide a particular kind of case. • Jurisdiction over the Parties– the power of a court to bind the parties to a suit .

17. Civil Procedure • The Pleadings– a series of statements that give notice and establish the issues of fact and law presented and disputed. • Complaint– initial pleading by the plaintiff stating his case. • Summons– notice given to inform a person of a lawsuit against her. • Answer– defendant's pleading in response to the plaintiff's complaint. • Reply– plaintiff's pleading in response to the defendant's answer.

18. Stages in Civil Procedure Determine what facts are in dispute Complaint, Answer, Reply Pleadings Discover, Conference, Summary Judgment Discover what evidence there is to prove the facts in dispute Pretrial Jury Selection Opening StatementsIntroduction of Evidence Closing Arguments Judgment on Verdict Trial Determine what facts are provided by the evidence Review the lower court’s actions for prejudicial error Briefs and TranscriptOral Argument, Decision Appeal Implement the court’s judgment Enforcement Execution, Garnishment

19. Alternative Dispute Resolution • Arbitration– a nonjudicial proceeding in which a neutral party selected by the disputants renders a binding decision (award). • Conciliation– a nonbinding process in which a third party acts as an intermediary between the disputing parties. • Mediation– a nonbinding process in which a third party acts as an intermediary between the disputing parties and proposes solutions for them to consider.

20. Criminal Law • Definition– any act or omission forbidden by public law. • Essential Elements • Actus Reus – wrongful or overt act. • Mens Rea – criminal intent or mental fault. • Classification • Felony – a serious crime. • Misdemeanor – a less serious crime

21. Liability for Crimes • Vicarious Liability – liability imposed for acts of employees if the employer directed, participated in, or approved of the acts. • Liability of a Corporation – under certain circumstances a corporation may be convicted of crimes and punished by fines.

22. White-Collar Crime • Definition– nonviolent crime involving deceit, corruption, or breach of trust. • Computer Crime – use of a computer to commit a crime. • Racketeer Influenced and Corrupt Organizations Act (RICO) – federal law intended to stop organized crime from infiltrating legitimate businesses.

23. Crimes Against Business • Larceny = stealing • Embezzlement = larceny + breach of trust • False Pretenses = larceny + lie • Robbery = larceny + force • Burglary = larceny + breaking / entering • Extortion = larceny + threats • Bribery = undue influence • Forgery = falsifying documents

24. Defenses to Crimes • Defense of Person or Property– individuals may use reasonable force to protect themselves, other individuals, and their property. • Duress – coercion by threat of serious bodily harm; a defense to criminal conduct other than murder. • Mistake of Fact – honest and reasonable belief that conduct is not criminal. • Entrapment – inducement by a law enforcement official to commit a crime.

25. Tort Law I. Negligence A. Breach of Duty of Care B. Proximate Cause C. Injury D. Defenses to Negligence

26. Negligence • Definition of Negligence– conduct that falls below the standard established by law for the protection of others against unreasonable risk of harm. • Reasonable Person Standard – degree of care that a reasonable person would exercise in a given situation. • Duty to Act – except in special circumstances, no one is required to aid another in peril.

27. Defenses to Negligence • Contributory Negligence– failure of a plaintiff to exercise reasonable care for his own protection, which in a few States prevents the plaintiff from recovering anything. • Comparative Negligence – damages are divided between the parties in proportion to their degree of negligence; applies in almost all States. • Assumption of Risk – plaintiff's express consent to encounter a known danger, some states still apply implied assumption of the risk – negates negligence.

28. Strict Liability • Definition– liability for non-intentional and non-negligent conduct. • Activities Giving Rise to Strict Liability • Abnormally Dangerous Activities – involve a high degree of serious harm and are not matters of common usage. • Keeping of Animals – strict liability is imposed for wild animals and usually for trespassing domestic animals. • Products Liability – imposed upon manufacturers and merchants who sell goods in a defective condition unreasonably dangerous to the user.

29. Defenses to Strict Liability • Contributory Negligence– is NOT a defense to strict liability. • Comparative Negligence – most States apply this doctrine to products liability cases. • Assumption of Risk – is a defense to an action based upon strict liability.

30. Contracts • Definition of Contract– a binding agreement that the courts will enforce. • Governing Law: either • Common Law – most governed by common law (employment, services, insurance, real property, patents, and copyrights). • Article 2 of the Uniform Commercial Code (UCC) – for sale of goods over $500

31. Requirements of a Contract • Mutual Assent– the parties state by words or conduct that they have agreed to enter into a contract (offer + acceptance) • Consideration – each contracting party’s intentional exchange of a legal benefit for a legal detriment • Legality of Object – the purpose of a contract must not be criminal, tortious, or otherwise against public policy • Capacity – the parties to a contract must have contractual capacity

32. Classification of Contracts • Express and Implied Contracts • Express Contract – an agreement that is stated in words, either orally or in writing. • Implied in Fact Contract – a contract in which the agreement of the parties is inferred from their conduct. • Bilateral and Unilateral Contracts • Bilateral Contract – a contract in which both parties exchange promises. • Unilateral Contract – a contract in which only one party makes a promise.

33. Classification of Contracts (cont.) • Enforceability: • Valid Contract – one that meets all of the requirements of a binding contract. • Void Contract – no contract at all; agreement has no legal effect. • Voidable Contract – a contract capable of being made void. • Unenforceable Contract – a contract for the breach of which the law provides no remedy.

34. Essentials of an Offer • Communication – offeree must have knowledge of the offer and the offer must be made by the offeror to the offeree. • Intent– determined by an objective standard of what a reasonable offeree would have believed. • Definiteness – offer's terms must be clear enough to provide a court with a basis for giving an appropriate remedy.

35. Terminating an Offer • Acceptance • Lapse of Time– reasonable or stated time passes • Revocation –terminated before it is accepted • Rejection – refusal to accept an offer • Counteroffer – counterproposal • Death of Offeror or Offeree • Destruction of Subject Matterof the offer • Subsequent Illegality of subject matter of offer

36. Conduct Invalidating Assent • Duress • Undue Influence • Fraud • Fraud in the Inducement • Fraud in the Execution • Mutual Mistake

37. Consideration • Definition– the inducement to enter into a contract • Elements – • Legal Benefit – obtaining something to which one had no prior legal right. • Legal Detriment – doing an act one is not legally obligated to do or not doing an act that one has a legal right to do. • Adequacy – not required where the parties have freely agreed to the exchange.

38. Consideration: special cases • Past consideration: not valid • Illusory Promises: not valid • Outputs Contracts: (“I’ll buy whatever you produce”) = valid • Requirements Contracts: (“All I require, I’ll buy from you”) = valid • Accord & Satisfaction = valid

39. Illegal (unenforceable) bargains • Gambling Statutes • Usury Laws • Agreements to commit a crime or tort • Restraint of trade, with exceptions: • Non-compete agreements • Trade secrets • Unconscionable bargains • EFFECT: court leaves the parties as they were

40. Contractual Capacity Three exceptions to presumed capacity: • Minors – liable only for necessaries • Incompetent Persons – • Under guardian care: contracts void • No guardian: contracts voidable • Intoxicated Persons – must act promptly upon regaining sobriety EFFECT: must disaffirm or ratify when capable

41. Contracts in Writing: “my legs” • Marriage: contracts in consideration of marriage • Year: can’t possibly be performed in 1 year • Land: any agreement pertaining to land • Executor’s promise to personally pay for estate • Goods over $500 • Surety: promise to pay for the debt of another • EFFECT: court leaves the parties as they were; will not enforce the agreement

42. Third Parties to Contracts • Assignment of Rights: (“you get what I would have gotten”) • Consent of benefitting party is not needed • Delegation of Duties: (“you do what I was supposed to do”) • Requires consent of new acting party • Original party still bound unless novation (substitution) obtained • Third-Party Beneficiary Contracts:

43. 3.Third Party Beneficiary Contracts • Definition– a contract in which one party promises to render a performance to a third person (the beneficiary). • Intended Beneficiaries – third parties intended by the two contracting parties to receive a benefit from their contract (e.g., insurance contract). • Donee Beneficiary – a third party intended to receive a benefit from the contract as a gift (enforceable against promisor). • Creditor Beneficiary – a third person intended to receive a benefit from the agreement to satisfy a legal duty owed to her (enforceable against promisor and promisee).

44. Conditions: an event that affects duty or performance • Express Condition – contingency explicitly stated • Implied Conditions: • Implied-in-Fact Conditions – contingency understood by the parties to be part of the agreement, although not expressed. • Implied-in-Law Conditions – contingency not contained in the contract but imposed by law; also called a constructive condition. • Concurrent Conditions – conditions that are to take place at the same time. • Conditions Precedent – an event that must or must not occur before performance is due.

45. Discharge of Contracts • Discharge by performance • Discharge by agreement: • Rescission: mutual agreement to terminate • Substituted contract • Accord and satisfaction • Discharge by breach: • Material breach • Substantial performance • Anticipatory repudiation • Discharge by operation of law (bankruptcy, etc.)

46. Remedies • Monetary Damages: benefit of the bargain • Remedies in Equity: non-monetary • Restitution: restore to pre-contract position • Limitations on Remedies • Foreseeable • Certain • Mitigation of damages • Remember: do the math!

47. Statutes to know • Sarbanes-Oxley Act (“SOX”) • Sherman Anti-Trust Act • Uniform Partnership Act • Revised Model Business Act • Americans with Disabilities Act (“ADA”)

48. When in doubt … • Go with the plain meaning of words • Look for the outcome that promotes: A. regular course of business practices B. individual accountability Good luck!