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Business Law and the Legal Environment for a New Century
Alternate Edition
Quote of the Day
Progress everywhere today does
seem to come so very heavily
disguised as chaos.
Joyce Grenfell, British actor
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Business Law and the Legal Environment for a New Century
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Three Sources of Law
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Business Law and the Legal Environment for a New Century
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Common Law





Judge-made law; made up of all the decisions
made by appellate courts.
Two hundred years ago, almost all law was
common law; most new law is statutory.
Common law predominates in tort, contract,
and agency law; it is important in property and
employment law.
Based on stare decisis, meaning “let the
decision stand” (previous decisions are
generally upheld in similar cases.)
Incorporates predictability and flexibility.
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Business Law and the Legal Environment for a New Century
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Statutory Law
 Most new law is statutory, that is, it is
legislation passed by either a state
legislature or the Congress of the United
States.
 Citizens who vote have some control over
statutory law. We elect the state
congressional representatives and the
United States Senators and
Representatives.
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Business Law and the Legal Environment for a New Century
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How New Laws are Made
 Any member of Congress (Senator or
Representative) can initiate a bill, or
proposed law.
 A bill is debated in a committee in the house
where it was introduced.
 From the committee, it goes to the full house
for a vote.
 If it passes both houses this way, it goes to
the President for his signature.
 A President’s signature turns a bill into law.
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Business Law and the Legal Environment for a New Century
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How New Laws are Made
If vetoed,
it goes
to the
both houses
the
IfOnce
the second
Housepass
of Congress
made any changes, or amendments, to the bill,
it must go
to a back
Conference
Congress,
where
must pass
Ifcompromise
signed, themade
bill becomes
bill,
it up
is sent
tolaw. of both houses. Here, they work out compromises
Committee,
of members
between
theit two
both
by a 2/3 majority.
the President
to be
different
versions
of signed.
the bill. The compromise bill then goes back to both houses
for houses
a final vote.
House of
Representatives
Senate
Conference
Committee
it passes
committee,
IfAfter
it passes
there,
it goes tothe
the
bill goes
to the
full body
of that
other
house
(House
to Senate
house
for atovote.
or
Senate
House).
It is assigned to a
committee and the
process repeats.
Banking,
Finance, and
Urban Affairs
Education
and
Labor
Judiciary
Committee
Armed
Services
Agriculture
Ways and
Means
Judiciary
Committee
Foreign
Relations
Appropriation
A bill, or proposed law, is introduced in the House ofMajor
Representatives
or
Senate Committees
Major House Committees
the Senate and then assigned to a committee for Aeronautical
discussion and voting.
and Space
Sciences
Armed
Services
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Business Law and the Legal Environment for a New Century
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Statutory Interpretation
 Sometimes wording is ambiguous, either by
oversight, or intentional -- as a compromise.
 New laws must be interpreted by the courts.
• Plain Meaning Rule -- the courts must use the
common sense definition of words.
• Legislative History and Intent -- sometimes the court
can look to the reasons behind the law to determine
the legislators’ intent.
• Public Policy -- the courts will use accepted social
policies, such as reducing crime or providing
education to interpret a law.
 Once the law (statute) has been applied by the
courts, its interpretation becomes a precedent to
be used in future court cases.
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Business Law and the Legal Environment for a New Century
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The Other Player -- Money
$ In today’s political climate, running a campaign for
political office is an expensive endeavor.
$ Financial contributions to candidates or political parties
come from many sources. Some limits have been
placed on contributions, but loopholes exist.
$ Donors usually expect to receive some benefit, such as
favored treatment in future legislative issues.
$ Supporters of contribution limits aim to equalize the
access to politics for rich and poor; opponents claim that
the First Amendment guarantees their right to support
whomever they choose.
$ The very green bottom line is, MONEY TALKS -- and it
often talks loudly in the political arena!
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Business Law and the Legal Environment for a New Century
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Administrative Law

Federal agencies such as the Federal Aviation Agency
(FAA) and the Federal Trade Commission (FTC) and the
Bureau of Land Management, all have the power to make
regulations which affect citizens and businesses.

Agencies were -- and are -- created to fulfill a need.
Someone needs to oversee changing technologies and
practices and their effects on society. An agency is
created when Congress passes enabling legislation, which
describes a problem and defines the agency’s powers.

Agencies often have considerable power in their areas of
specialty, sometimes leading to controversy. The
Administrative Procedure Act regulates how agencies
operate, in an attempt to reduce the controversy.
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Classification of Agencies
 Executive Federal Agency: Part of executive
branch, under the control of the President;
usually support the President’s policies.
Federal
Food
Nuclear
Internal
and
Bureau
Drug
Regulatory
Revenue
Administration
of Investigation
Service
Commission
(IRS)
(FDA)
(FBI)
 Independent Federal Agency: Not part of
executive branch; President does not have the
power to fire the head of the agency.
National
Labor
Relations
Board
Federal
Communications
Commission
(FCC)
Environmental
Protection
Agency
(EPA)
Securities
and
Exchange
Commission
Federal
Trade
Commission
(FTC)
 Are agencies too powerful??
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Business Law and the Legal Environment for a New Century
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Power of Agencies -Rulemaking
 Two types of rules
• Legislative rules -- require businesses and
people to act a certain way; have the effect of a
Congressional statute.
• Interpretive rules -- these do not change the
law; they define or apply the laws to new
situations.
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Business Law and the Legal Environment for a New Century
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Power of Agencies -Rulemaking
 Three types of rulemaking
• Informal rulemaking -- proposed rule must
be published and public allowed to
comment.
• Formal rulemaking -- must hold a public
hearing before establishing the rule.
• Hybrid rulemaking -- some elements of both
of the above -- perhaps the proposal and
comment, with cross-examination, but not a
full hearing.
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Power of Agencies -Investigation
 Voluntary -- Some businesses freely give
information and readily comply with agency
recommendations.
 Subpoena -- an order to appear at a hearing
and produce evidence, sometimes documents.
• Must be relevant to the investigation and under
the agency’s jurisdiction, or area of authority.
• Must not be unreasonably burdensome on the
business.
• Must not be privileged; this means that a
corporate officer may not be required to
incriminate himself.
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Power of Agencies -Investigation
 Search and Seizure -- a legal search of a
business, in order to take evidence of
wrongdoing.
• Most require a warrant before the search.
• Some industries are closely regulated and may
be searched at any time, with no warning.
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Power of Agencies -Adjudication
 Adjudicate -- means to hold a hearing, then decide
how to proceed with an issue.
 Procedures for adjudication
•
•
•
•
A hearing before an administrative law judge.
Parties have counsel, but there is no jury.
Informal; both sides present evidence.
Judge makes ruling on testimony and evidence.
 If parties are unhappy with results
• Loser may appeal to an appellate board.
• Appellate board may make a de novo decision, and
ignore the administrative law judge’s decision.
• Appeals go to a federal court.
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Limits on Agency Power
 Statutory Control
• The enabling legislation that created the agency
places controls on it through requirements and
restrictions.
 Political Control
• The President has control over agencies through
political pressure and through nominations of
agency heads.
• Congress controls the budgets of agencies. They
can eliminate funding for any program or an entire
agency.
• Congress can amend enabling legislation to place
limits.
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Limits on Agency Power
 Judicial Review
• A party injured by an agency decision is entitled to
an appeal in a federal court, after all appeal
options are exhausted within the agency itself.
 Informational Control and the Public
• The Freedom of Information Act (FOIA) -- allows
any citizen to request information from an agency.
• The Privacy Act -- prohibits agencies from giving
information about an individual to other agencies
without consent. There are some exceptions.
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Business Law and the Legal Environment for a New Century
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“Law is complex. The
subject becomes less
baffling if we understand
how society creates law.”
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Business Law and the Legal Environment for a New Century
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