Chapter 1: Business and Its Legal Environment

Key Terms

Law – a body of enforceable rules governing relationships among individuals and

between individuals and their society.

Jurisprudence – the science of philosophy of law.

Natural Law – the belief that government and the legal system should reflect universal
model and ethical principles that are inherent in human nature. The natural law school is
the oldest and one of the most significant schools of legal thought.

Positive Law – the body of conventional, or written, law of a particular society at a

particular point in time.

Legal Positivism – a school of legal thought centered on the assumption that there is no
law higher than the laws created by a national government. Laws must be obeyed, even if
they are unjust, to prevent anarchy.

Historical School – a school of legal thought that emphasizes the evolutionary process of
law and looks to the past to discover what the principles of contemporary law should be.

Legal Realism – a school of legal thought of the 1920’s and 1930’s that generally
advocated a less abstract and more realistic approach to the law, an approach that takes
into account customary practices and the circumstances in which transactions take place.
This school left a lasting imprint on American jurisprudence.

Sociological School – a school of legal thought that views the law as a tool for promoting
justice in society.

Breach – the failure to perform a legal obligation.

Primary Source of Law – a document that establishes the law on a particular issue, such
as a constitution, a statute, an administrative rule, or a court decision.

Secondary Source of Law – a publication that summarizes or interprets the law, such as a
legal encyclopedia, a legal treatise, or an article in a law review.

Constitutional Law – the body of law derived from the US Constitution and the
constitutions of various states.

Statutory Law - the body of law enacted by legislative bodies (as opposed to
constitutional law, administrative law, or case law).

Citation – a reference to a publication in which a legal authority – such as a statute or a

court decision – or other source can be found.
Ordinance – a regulation enacted by a city or county legislative body to govern matters
not covered by state or federal law.

Uniform Law – a model law created by the National Conference of Commissioners on

Uniform State Laws and/or the American Law Institute for the states consider adopting.
If a state adopts a law, it becomes statutory law in that state. Each state has the opinion of
adopting or rejecting all or part of a uniform law.

Administrative Law – the body of law created by administrative agencies (in the form of
rules, regulations, orders, and decisions) in order to carry out their duties and
responsibilities.

Administrative Agency – a federal or state government agency established to perform a

specific function. Administrative agencies are authorized by legislative acts to make and
enforce rules in order to administer and enforce the acts.

Executive Agency – an administrative agency within the executive branch of

government. At the federal level, executive agencies are those within the cabinet
department.

Independent Regulatory Agency – an administrative agency that is not considered part of

the government’s executive branch and is not subject to the authority of the president.
Independent agency officials cannot be removed without cause.

Enabling Legislation – a statue enacted by Congress that authorizes the creation of an

administrative agency and specifies the name, composition, purpose, and powers of the
agency being created.

Adjudicate – to render a judicial decision. In the administrative process, adjudication is

the trail-like proceeding in which administrative law judge hears and decides issue that
arise when an administrative agency charges a person or a firm with violating a law or
regulation enforced by the agency.

Administrative Process – the procedure used by administrative agencies in the

administration of law.

Rulemaking – the process undertaken by an administrative agency when formally

adopting a new regulation or amending an old one. Rulemaking involves notifying the
public of a proposed rule or change and receiving and considering the public’s comments.

Administrative Law Judge (ALJ) – one who presides over an administrative agency
hearing and has the power to administer oaths, take testimony, rule on questions of
evidence, and make determinations of fact.
Case Law - the rules of law announced in court decisions. Case law includes the
aggregate of reported cause that interpret judicial precedents, statutes, regulations, and
constitutional provisions.

Common Law – the body of law developed from custom or judicial decisions in English
and US courts, not attributable to a legislature.

Precedent – a court decision that furnishes an example or authority for deciding

subsequent cases involving identical or similar facts.

Stare Decisis – a common law doctrine under which judges are obligated to follow the
precedents established in prior decisions.

Binding Authority – any source of law that a court must follow when deciding a case.
Binding authorities include constitutions, statues, and regulations that govern the issue
being decided, as well as court decisions that are controlling precedents within the
jurisdiction.

Persuasive Authority – any legal authority or source of law that a court may look to for
guidance but on which it need not rely in making its decision. Persuasive authorities
include cases from other jurisdictions and secondary sources of law.

Remedy – the relief given to an innocent party to enforce a right or compensate for the
violation of a right.

Plaintiff – one who initiates a lawsuit.

Defendant – one against whom a lawsuit is brought; the accused person in a criminal
proceeding.

Equitable Principles and Maxims – general propositions or principles of law that have to
do with fairness (equity).

Statute of Limitations – a federal or state statute setting the maximum time period during
which a certain action can be brought or certain rights enforced.

Substantive Law – law that defines, describes, regulates, and creates legal rights and
obligations.

Procedural Law – law that established the methods of enforcing the rights established by
substantive law.

Cyberlaw – an informal term used to refer to all laws governing electronic

communications and transactions, particularly, those conducted via the Internet.

Civil Law – the branch of law dealing with the definition and enforcement of all private
and public rights, as opposed to criminal matters.
Civil Law System – a system of law derived from that of the Roman Empire and based
on a code rather than case law; the predominant system of law in the nationals of
continental Europe and the nations that were once their colonies. In the US, Louisiana,
because of its historical ties to France, has in part of civil law system.

Criminal Law – law that defines and governs actions that constitute crimes. Generally,
criminal law has to do with wrongful actions committed against society for which society
demands redress.

National Law – law that pertains to a particular nation (as opposed to international law).

International Law – the law that governs relations among nations. National laws,
customs, treaties, and international conferences and organizations are generally
considered to be the most important sources of international law.

For Review:

1. The primary sources of law are constitutional law, statutory law, administrative
law, and case and common law doctrines.
2. The common law tradition is the body of general rules that applied throughout the
entire English realm.
3. A precedent is a court decision that furnishes an example or authority for deciding
subsequent cases involving identical or similar facts. A court might not use a
precedent when it may not apply to this particular case or if the judge thinks that
the precedent is incorrect.
4. The difference is that remedies at law are money or something else of value and
remedies in equity are remedies that are granted when the remedies at law are
unavailable or inadequate.
5. Civil law is a crime against a person, whereas criminal law is a crime against
society.