978-0077733735 Chapter 1 Lecture Notes

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Solution Manual

Book Title

Business Law with UCC Applications 14th Edition

ISBN 13

978-0077733735

978-0077733735 Chapter 1 Lecture Notes

April 10, 2019

Chapter 01 - Ethics, Social Responsibility, and the Law

Chapter 1

Ethics, Social Responsibility, and the Law

I. Key Terms

Appretiare (p. 25) Morals (p. 5)

Cost-benefit thinking (p. 19) Natural law (p. 5)

Descriptive theory (p. 12) Neoliberalism (p. 8)

Dyad (p. 16) Penumbra rights (p. 14)

Ethic of responsibility (p. 16) Positive law (p. 6)

Ethic of ultimate ends (p. 16) Prescriptive theory (p. 12)

Ethical relativism (p. 9) Rational ethics (p. 14)

Ethics (p. 5) Social contract ethics (p. 10)

Law (p. 4) Utilitarianism (p. 12)

Market value ethics (p. 8) Utility thinking (p. 12)

II. Learning Objectives

1. Define law and morality.

2. Distinguish among natural law, positive law, and negative rights.

3. Explain market value ethics.

4. Describe social contract theory.

5. Outline the steps in applying utilitarianism.

6. Define rational ethics.

7. Explain the dyadic nature of ethics in government.

8. Outline the arguments supporting social responsibility.

9. Explore the need for law in our society.

10. Explain how the law and ethics can sometimes benefit from anarchy.

III. Major Concepts

1.1 Defining the Law, Morality, and Ethics

The law consists of rules of conduct established by the government of a society to

maintain harmony, stability, and justice. Morals involve the values that govern a society’s

attitude toward right and wrong. Ethics, in contrast, attempts to develop a means for

determining what those values ought to be and for formulating and applying rules in line

with those values.

1.2 Ethical Theories

Market value ethics uses quantification as the primary tool for determining value and,

therefore, for determining whether an action is right or wrong. Having a market to gauge

the price of goods, real estate, investment opportunities, and services is one thing;

however, doing the same thing to the unquantifiable aspects of our lives is something else

entirely. Generally, most experts—economists, philosophers, theologians, politicians, and

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Chapter 01 - Ethics, Social Responsibility, and the Law

historians alike—refer to this concept as neoliberalism. Sandel warns that our tendency to

evaluate everything based on money creates two insidious results. First, it promotes

injustice, and second, it corrupts all other values.

1-3 Ethics and the Government

The government of a nation-state has two objectives that simultaneously justify its power

and enable the proper exercise of that power. Those two objectives are (1) to protect its

own existence and (2) to protect the lives, health, safety, and well-being of its own

citizens. To meet those two objectives, national leaders must recognize the conflict that

emerges from within a dyad or two-level system of morality: (a) the exercise of

individual morality, represented by the ethic of ultimate ends, and (b) the exercise of

national morality, represented by the ethic of responsibility.

1-4 Social Responsibility in the Corporate Sector

Corporations owe society a level of responsibility because the government has granted

certain legal advantages to corporations. Another reason for expecting socially

responsible decisions from corporate executives is that corporations have a great deal of

power in the economic structure, and with power comes responsibility. Finally,

corporations should act responsibly because it is in their own best interest to do so.

1-5 The Relationship between Law and Ethics

In a perfect society, ethics and the law would always coincide. Our society is not perfect

and is not likely to become so in the foreseeable future. Therefore, our society needs the

law and the legal system to give it structure, harmony, predictability, and justice.

IV. Outline

I. Defining the Law, Morality, and Ethics (1-1)

A. The Law and Morality

1. Law consists of rules of conduct established by the government of a society to

maintain harmony, stability, and justice.

2. Morals are values that govern a society’s attitude toward right and wrong and toward

good and evil.

B. Values and Ethics

1. Values come from ethics.

2. Ethics involves an attempt to develop a means of determining what values ought to be

and for formulating and applying rules that enforce those values.

C. Natural Law

1. Morality and the law are united in a common bond.

2. Law originates from an objective, superior force.

3. A law with an immoral purpose is not a law at all.

D. Positive Law

1. Law comes from social institutions.

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Chapter 01 - Ethics, Social Responsibility, and the Law

2. Law originates from an outside source that has emerged from within society.

3. The Law of Peoples brand of positive law saying that human decency will triumph

over human cruelty.

E. Negative Rights

1. A minority position.

2. Holds that rights are a human invention designed to help people escape moral law.

F. Ethical Decision Making

1. Ethical decisions are made in a variety of ways

a. Some people act on instinct.

b. Some people try to do what they “believe” is right.

c. Some people act within set guidelines.

2. Some professions and businesses develop ethical guidelines which may be complex

and address professional, rather than moral, conduct.

II. Ethical Theories (1-2)

A. Market Value Ethics

1. Uses quantification as the primary tool for determining value and whether an action is

right or wrong.

2. Referred to as “neoliberalism.”

3. “Neoliberalism” may be defined as a vision of society in which competition for

wealth is the only recognized value, and almost all social decisions are left to

unregulated markets.

B. Neoliberalism and the New Ethical Relativism

1. Some argue that neoliberalism is the new ethical relativism.

2. Ethical relativism says that right and wrong have no intrinsic value but instead are

determined by circumstance, situation, or personal preference.

3. Results in a floating morality.

4. Promotes injustice and corrupts other values.

C. Social Contract Theory

1. Holds that right and wrong are measured by the obligations imposed on individuals

by an implied agreement within a social system.

2. Holds that people must give up certain freedoms to receive protections in return.

3. A problem is that the theory is arguably descriptive, not prescriptive.

D. Utilitarianism

1. Says that the morality of an action is determined by its ultimate effects.

2. Seeks the greatest good for the greatest number.

3. Can be confused with utility thinking which fails because it relies on market values to

make moral judgments.

E. Rational Ethics

1. Holds that ethical values can be determined by a proper application of human reason.

2. Assumes that because all human beings are rational, all human beings will have the

same ethical values.

3. Often referred to as objective ethics.

4. Premised on the belief that it is logical to establish rules supporting the continued

existence of society.

5. A difficulty lies within penumbra rights.

III. Ethics and the Government (1-3)

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Chapter 01 - Ethics, Social Responsibility, and the Law

A. A Governmental and Ethical Dyad

1. Weber suggests that a dyad system of morality exists with an “ethic of ultimate ends”

for individuals and an “ethic of responsibility” for national leaders.

2. Many national leaders fail to see this distinction.

B. Shortcomings of the Ethical Dyad

1. Primary shortcoming is the difficulty leaders have executing the ethic of

responsibility

2. Bromfield argues that American leaders have mishandled responsibilities by focusing

on world responsibility rather than national responsibility.

3. He suggests economic alliances between nations that are close in proximity.

C. The Threat of the Global Skybox

1. Something is wrong with the ethical dyad or at least Bromfield’s contribution.

2. Bromfield suggests that international decision making be based on economic

motivations.

3. The success of Bromfield’s plan depends upon the benevolence of the rich nations

although the basic rule of Weber’s ethical dyad is that leaders must think in terms of

national responsibility, not benevolently.

IV. Social Responsibility in the Corporate Sector

A. The Traditional Corporate Culture

1. The corporation, the multinational corporation in particular, is the greatest force in the

American industrial state.

2. Corporations are legal persons created under the authority of federal and state statutes

with certain rights based on that status.

3. The traditional view says that privately owned corporations are created solely to make

a profit for their shareholders.

4. A corporate manager using utility thinking asks if a contemplated action would

benefit shareholders more than it would cost the corporation.

B. Reasons for Social Responsibility

1. Because of legal rights granted to corporations, corporations owe a duty to act

responsibly and should not make decisions focused only on profits of shareholders.

2. Corporate decision making has an impact on more people than shareholders and

corporate managers, and these other groups should be taken into consideration.

3. Accepting social responsibility is in the long-term best interests of a corporation

based on goodwill and benefits to the community at large.

C. Efforts to Promote Social Responsibility

1. Under traditional rules, the primary role of corporations is to make a profit for

shareholders.

2. Many corporate statutes now permit managers to consider factors beyond profit in

making corporate decisions.

V. The Relationship Between Law and Ethics (1-5)

A. The Need for Law in our Society

1. Law consists of rules of conduct established by the government to maintain harmony,

stability, and justice in society.

2. Laws define legal rights and duties of people.

3. Laws are needed because people do not always follow ethical principles.

B. Ethical and Legal Anarchy

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Chapter 01 - Ethics, Social Responsibility, and the Law

1. As is true of all institutions, the law is flawed.

2. A question is whether an imperfect but functioning legal system is preferable to

anarchy.

3. Kropotkin believes that a little anarchy is useful at times and introduces the human

forces of energy and justice.

4. Energy is found in a society that redirects the collective human will toward the

welfare of the entire species.

5. Justice is present when all are treated equally based on an intangible quality having

nothing to do with money.

6. There are problems with Kroptkin’s ethical and legal system.

7. Sometimes operating an imperfect but functioning legal system is preferable to

anarchy.

V. Background Information

A. Cross-Cultural Notes

1. In many traditional African societies, citizens would bring their disputes before a

council of village elders for resolution. Men in these societies would often spend their

leisure time debating ethical problems, honing the debate skills that might one day place

them among the elders. Riddles and ethical problems are still an important part of the

African oral tradition.

B. Historical Notes

1. “Augustine shares with the ancient philosophers the conception of ethics as an

inquiry into the supreme good: that which we seek for its own sake, never for the sake of

some further end, and which makes us happy. He also shares the conviction that all

human beings by nature want to be happy, agreeing that happiness is a condition of

objective well-being, not merely the pleasure a person might gain from satisfying

whatever desires she happens to have, however deluded or self-destructive.”

— Bonnie Kent, The Moral Life, In The Cambridge Companion to Medieval

Philosophy.

2. “Spinoza and Hobbes agree in making the selfish desire for self-preservation the

foundation of justice and duty. Without a strongly self-interested motive, they reasoned,

human beings would have little incentive to obey the rules of social morality, much less

restrain their desires to do whatever is in their power.”

— Steven B. Smith, Spinoza’s Book of Life: Freedom and Redemption in the

Ethics.

C. State Variations

1. Most states have Good Samaritan laws that grant immunity from civil liability to

people who provide emergency care to injured persons. There is no legal duty for a

person to stop and give aid, but is there a moral duty?

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Chapter 01 - Ethics, Social Responsibility, and the Law

2. The American Medical Association has promulgated the Principles of Medical Ethics,

which require that a physician must not divulge any information that should be kept

secret. Many states allow a patient to sue a physician who violates this ethical code for

damages.

D. Quotations

1. An eminent lawyer cannot be a dishonest man. Tell me a man is dishonest, and I will

answer he is no lawyer. He cannot be, because he is careless and reckless of justice; the

law is not in his heart, is not the standard and rule of his conduct.

— Daniel Webster (1782–1852), American statesman

2. Fair play is a jewel.

— Abraham Lincoln (1809–1865), American president

VI. Terms

1. Canon is similar to the Greek word “kanon,” which refers to a rule. Canon infers a

strictness that the word “rule” lacks, which is appropriate since it refers to norms of

behavior and practice.

VII. Related Cases

1. Attorneys are required to keep their clients’ funds that are held in trust in accounts

separate from their normal business accounts. An Indiana attorney was disbarred for

commingling his clients’ funds and his own personal funds. The attorney had spent at least

$20,000 of his clients’ funds for his personal use. In re Frosh, 643 N.E.2d 902 (Ind. 1994).

2. Paying the appropriate amount of taxes each year is difficult even for the most ethical

person. However, in an extreme case, a Connecticut man was convicted of willfully failing

to pay income taxes when, for two years in a row, he submitted nearly blank personal

income tax returns despite having received personal income. U.S. v. Schiff, 612 F.2d 73 (2d

Cir. 1979).

VIII. Teaching Tips and Additional Resources

1. The FCC provides its position on the Open Internet Order at

https://www.fcc.gov/openinternet.

2. Information regarding a new drug potentially in use by cyclists is available from The

New York Times at

http://www.nytimes.com/2015/07/30/sports/cycling/fabio-taborre-and-carlos-oyarzun-dr

ug-tests-suggest-use-of-chemical-meant-for-research.html.

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Chapter 01 - Ethics, Social Responsibility, and the Law

3. Information regarding a Massachusetts law, somewhat similar to the Ohio law discussed

in the text, making it illegal to knowingly lie in political campaign material is available

from The Boston Globe at

https://www.bostonglobe.com/metro/2015/05/06/will-defend-law-making-crime-lie-cam

paign-material/mTcCBqjsjOOeW5v3FvkoLI/story.html.

4. An article titles “China and Russia Reach 30-Year Gas Deal” is available from The New

York Times at

http://www.nytimes.com/2014/05/22/world/asia/china-russia-gas-deal.html.

5. Additional information on philosopher Max Weber, referenced in the text, can be found

at http://plato.stanford.edu/entries/weber/ and additional information about Thomas

Hobbes can be found at http://plato.stanford.edu/entries/hobbes-moral/.

6. Information on a Corporate Social Responsibility Initiative involving Harvard

University and others can be found at

http://www.hks.harvard.edu/m-rcbg/CSRI/init_main.html

7. On the issue of reasons for social responsibility in the business sector, see Richard A.

Posner, Overcoming Law (Cambridge, MA; Harvard University Press), 285.

8. The tendency to complicate moral decision making is nothing new. In her essay, “The

Moral Life,” Bonnie Kent, a professor of philosophy at the University of California,

Irvine, reminds us that even medieval philosophers tended to complicate the rules of

moral judgment. Kent explains it this way, “Scholastics classified sins in many different

ways. They distinguished between the original sin all humans inherited from Adam and

the actual sins one commits strictly as an individual. They divided sins according to

seriousness and related punishment, distinguishing venial (‘pardonable’) sins from the

mortal sins that represent a decisive turning away from God, break the relationship with

him, and result in damnation unless God chooses to renew the relationship. They

distinguished between ignorance, passion, and malitia—in increasing order of gravity—

as internal, psychological sources of sin. Finally, they distinguished between sins and

vices, treating the first as actions and the second as the settled dispositions that incline a

person to such actions.”—Bonnie Kent, “The Moral Life,” In The Cambridge

Companion to Medieval Philosophy.

9. For an interesting discussion of various theories of morality and their applications in the

law, see Morality, Harm, and the Law, by Gerald Dworkin (Boulder: Westview Press,

1994).

10. The use of fetal tissue for medical treatment is at the center of a fiery debate. Discuss

the topic in class. Then ask the students to analyze it from a viewpoint of ethical theories

contained in the chapter.

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Chapter 01 - Ethics, Social Responsibility, and the Law

11. Discuss examples from recent events that involve moral atrocities committed by

individuals whose moral code should have forbidden such actions.

12. Discuss examples of social systems from which ethical systems appear absent or in

which they seem highly flawed. Ask students to address the following questions: What

brings about atrocities such as the genocide in Rwanda; the war crimes of former

Yugoslav president Slobodan Milosevic; North Korea’s unprovoked bombing of a South

Korea island; and the almost weekly suicide bombings that occur in Afghanistan? How

do individuals victimized by such horrors respond to a lack of morality in their society

or government? How do individuals act morally amid such widespread corruption or

lawlessness?

13. Discuss recent films and how ethical or unethical behavior is illustrated.

14. Discuss the following situation with students: A poor man’s wife is dying of an unusual

illness. Medication is available that will prevent her death and allow her to live a normal

life, but the man cannot afford to buy it. He appeals to doctors, pharmacists, church

groups, and government officials for money, but they all refuse him. As his wife’s health

continues to decline, the man, in desperation, breaks into a pharmacy and steals the

medication. Is his conduct ethically correct? Should he be prosecuted?

15. Explain to students that communication between an attorney and a client is strictly

confidential. There is one exception: When a client confides in his or her lawyer that he

or she is about to commit a crime, the attorney has a legal duty to disclose this

information to the police. Lead the class in a discussion of how serious a crime would

have to be before the attorney has an ethical duty to act. Would the attorney-client

privilege benefit proportionately if this exception were not in place?

16. Conduct a discussion with the class based on the following scenario: An employee at a

small grocery store takes home a bag of groceries each day without paying for them.

Who is harmed by this action? The employee? The employer? The owners of the store?

The community?

17. Politicians often speak about the United States’ loss of family values and ethics. Suggest

that students write a report expressing their opinion on whether or not the government

should attempt to change society’s values and ethics by passing laws. Ask them to back

up their opinions by including examples of how the government’s efforts have or have

not worked.

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Business Law with UCC Applications 14th Edition