LEGL Test 1 Study Guide

• Law

  IRAC->Issue, Rule, Analysis, Conclusion
• Importance of studying law

  • Keeps us out of trouble
  • Provides certainty & predictability
• Rule of Law

  Laws are generally & equally applied, require solid, stable institutions (no one is above the rule of law)
• Importance of Rule of Law to business

  • Essential
  • Helps reduce at least one form of transaction costs (money spent to enter into/enforce contracts)
  • Provides certainty & predictability
• Ways people use knowledge of the legal environment beyond just staying out of trouble

  • Use law to our advantage->designed in a way that we can use (intellectual property, tax incentives, etc)
  • Develop new businesses around specific laws
  • Sales & Marketing->selling point
  • Professional Services
• Property

  Right to possess resources & shield from others
• You have same PROPERTY as Jeff Bezos
• Right to property is basis for private market & basis for modern day business
• Intangible property rights as well
• Common law

  Judge made, Precedent (stare-decisis)->let the prior decision stand, Case law
• Civil law

  Relies heavier on legislation, Judges told not to follow judge-made case law, just follow what is there
• Criminal law


  Commit a crime, Nature of act important
• Civil law

  Lawsuits against one person/company to another
• Sanctions in criminal law

  • Death
  • Imprisonment
  • Fines
  • Removal from office
  • Disqualification from holding office & voting
• Sanctions in civil law

  • Compensatory damages
  • Consequential damages
  • Punitive damages
  • Equitable remedies
• Hierarchy of law


  • US Constitution
  • Federal
  • State Local
• Specific hierarchy of law

  • US Constitution
  • Treaties & Federal Statues
  • Federal Admin Law
  • Federal Common Law
  • State Const
  • State Statutes
  • State Admin Law
  • State Common Law
• Deciding which law/regulation is controlling when there is a conflict

  1. US Constitutions & Amendments

  2. Federal Statues

  3. Federal Regulations

  4. State Constitutions

  5. State Statutes

  6. State Regulations

  7. Local Ordinances
• Corporate governance

  How business organizations are create & managed OR how various levels of gov't regulate business organizations as they transact business
• Corporate governance (specific sense)

  Laws, policies, procedures that protect the property interest that owners have in business, Try to prevent ppl inside company from abusing positions for own advantage or detriment of owners of company
• Corporate governance (general sense)

  Expand corporate governance to include responsibility of company to customers, vendors, society, etc
• Shareholder primacy

  Purpose of company is to maximize shareholder value
• Stakeholder theory

  You have responsibility to do right thing by shareholders, employees, environment, society, etc (expansive)
• Horizontal separation of powers

  Branches of Gov't: Legislative->Make, Executive->Enforce, Judiciary->Fair Process, Interpret & even invalidate laws
• Vertical separation of powers

  Federalism: Federal-State/Local, 10th Amendment->power not reserved for gov't given to ppl
• Supremacy Clause

  Constitution is supreme over all laws, Where the hierarchy of laws come from->concept of "preemption"
• Preemption: Express


  • Medical Devices: fed law in charge
• Preemption: Implied


  • Field: fed gov't will regulate category->not written in statutes
  • Conflict: impossible to comply w/ both->only one
• Commerce Clause

  Gives fed gov't right to control foreign commerce: treaties, tariffs, embargos
• Commerce Clause

  • Office Foreign Assets Control & other export/import issues
  • Monopoly on ferries in diff states (USC can't regulate bc interstate commerce)
  • Civil Rights movement->restaurant wouldn't let African Americans in->sued
• Dormant Commerce Clause

  Restricts states from passing certain laws even though there is not contradictory federal law->stop discriminating against other states
• Contract Clause


  No state should pass law impairing obligation of contracts
• Contract Clause

  • Private relief: creating laws to allow ppl to opt out of contracts
  • State laws passed during emergencies can be approved
• Bill of Rights: Prohibitions on gov't power->define citizen's personal rights (freedoms)
• Eminent Domain


  Gives gov't right to take land (just compensation for public use)
• Eminent Domain test

  1. A taking

  2. Public use (public purpose)

  3. Just compensation
• Free speech

  Protects the voice of the minority, Types of speech: verbal, symbolic, written, Restrictions: fighting words, obscenity, defamation, incitement to riot, time/place/manner restrictions, words that violate IPL
• Free speech (in workplace)


  Need state (gov't action)
• Commercial free speech


  Businesses do have free speech rights, but easier to restrict commercial speech than individual speech
• Compelling Commercial Speech


  Disclose certain info as long as disclosure requirements are reasonably related to state's interest in preventing deception