Type
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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution
without the prior written consent of McGraw-Hill Education.
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.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution
without the prior written consent of McGraw-Hill Education.
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)
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution
without the prior written consent of McGraw-Hill Education.
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 Webers 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
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution
without the prior written consent of McGraw-Hill Education.
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?
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution
without the prior written consent of McGraw-Hill Education.
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.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution
without the prior written consent of McGraw-Hill Education.
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.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution
without the prior written consent of McGraw-Hill Education.
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.
Copyright © 2017 McGraw-Hill Education. All rights reserved. No reproduction or distribution
without the prior written consent of McGraw-Hill Education.

Subscribe Now

Sign up to view full document

View Document