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Chapter 2
Introduction to Law and the Legal Environment
of Business
Introduction
To promote an environment in which instructors and the students have a question-asking attitude,
instructors should present each chapter as one that address several questions.
Chapter Two addresses these questions:
• How can the legal environment of business be defined?
• How can law and jurisprudence be defined? Do alternative definitions of law exist?
• Where does law come from?
• What are the classifications of law?
• What are the global dimensions of the legal environment of business?
Chapter Two is significant because it provides background information that influences the
Achieving Teaching Excellence
Creating a Student-Centered Classroom That Promotes Students’ Intellectual Development
Instructors probably chose this textbook over others in part because they wanted to
encourage students to engage in critical thinking about the law. This goal is important. To
achieve this goal, instructors will want students and their intellectual development to be the focus
of what happens in class.
First, this section explains alternative perspectives on how to conduct class. Second, this
section will explain why a specific type of student-centered classroom is likely to help instructors
achieve their goal of encouraging their students to engage in critical thinking.
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assigned.
Axelrod explains that didactic teaching styles stress either knowledge acquired by
memorization, or skill mastery through repetition and practice. Evocative modes stress student
inquiry and discovery. A teaching style that encourages critical thinking is an evocative style.
Within the category of evocative styles, different teaching styles emphasize different
components. Some styles focus on the teacher, some on the learner, and some on the subject
Now the question arises as to how instructors will know whether they have created a
student-centered classroom that emphasizes intellectual development. First, they will be talking
less and listening to their students more. Second, they will be emphasizing on higher-order
Reference:
Chapter Overview, Topic Outline, and Discussion Questions
Chapter Overview
This book is about the legal environment in which the business community operates today.
Although the book concentrates on law and the legal variables that help shape business
decisions, it has not overlooked the ethical, political, and economic questions that often arise in
business decision making. This chapter is especially concerned with legal variables in the context
of critical thinking. In addition, it examines the international dimensions of several areas of law.
Instructors who want to encourage students to work with the material in class sometimes
realize they cannot always “cover” all the material in the book. After several years of not
covering everything, instructors should be comfortable knowing that the material actually
encourages students to work in class and is understood by most of them. Instructors can choose
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parts of each chapter that are especially challenging or confusing. This is the material that
deserves the most attention in class. Some chapter material is easy, and students pick it up well
on their own.
In Chapter Two, the material that is the most challenging or confusing falls into these
subsections:
• Definition of Law and Jurisprudence
Topic Outline
I. Definition of the Legal Environment of Business
II. Definition of Law and Jurisprudence
A. Natural Law School
B. Positivist School
C. Sociological School
III. Sources of Law
A. The Legislature as a Source of Statutory Law
B. The Judicial Branch as a Source of Case Law
1. Case Law Precedents and the Internet
C. The Executive Branch as a Source of Law
2. Executive Orders
D. Administrative Agencies as a Source of Law
IV. Classifications of Law
A. Criminal Law and Civil Law
B. Public and Private Law
V. Global Dimensions of the Legal Environment of Business
VI. Summary
Discussion Questions for Chapter Two
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1. In answering the question “What is law?”. Why is it appropriate to answer, “It depends?”
The question “What is law?” is not as straightforward as it appears. Most people would give
an answer that shows their understanding and acceptance of the positivist school of
jurisprudence. However, a person’s answer to the question “What is law?” depends on
2. How would an individual decide which school of jurisprudence a particular judge prefers?
3. Which schools of jurisprudence probably have the fewest followers within the legal
community?
4. Create a fact situation that could result in both a civil and a criminal lawsuit.
Instructors should encourage students to be creative with this one. For instance, a bank
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5. Explain how a court’s decision (case law) might lead to changes in legislation (statutory
law). Are there any situations in which this has happened?
A legislature (either state or federal) might be so concerned about a judge’s decision that it
Answers to Critical Thinking about the Law Questions, Review Questions,
Review Problems, and Case Problems
Suggested Answers to Critical Thinking about the Law Questions
1. Learning about relevant laws regarding business helps one understand what the law is, but
does not help one evaluate legal arguments. The critical thinking questions that help one
evaluate legal arguments are:
• Does the legal argument contain significant ambiguity?
• What ethical norms are fundamental to the court’s reasoning?
• How appropriate are the legal analogies?
• Is there relevant missing information?
2. Knowing the school of thought the judge prefers helps one critically evaluate a judge’s
reasoning because one can determine the assumptions the judge makes. For instance, if one
3. One might want to ask the lawyer whether their mutual respect for a particular school of
jurisprudence will bring about the action they want. For instance, mutual respect for natural
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Answers to Review Questions
2-1. According to the positivist school: a) law is the expression of the will of the legislator or
sovereign, which must be followed; b) morals are separate from law and should not be
considered in making legal decisions; and c) law is a closed logical system in which
2-2. The critical legal theorist school and the feminist school of jurisprudence are similar
2-3. The federal courts and most state courts make up the judicial branch of government. They
are charged by their respective constitutions with interpreting the constitution and
2-4. Statutory law is made by legislatures. Case law is made by judges.
2-5. If the president vetoes a bill passed by the House and the Senate, the bill can become a
law if two-thirds of the House and Senate membership vote to override the veto.
2-6. a. Public law is a classification of law that deals with the relationship of government
to individual citizens. Private law is generally concerned with the enforcement of
private duties.
b. In criminal law, a prosecutor aims to prove beyond a reasonable doubt that the
Answers to Review Problems
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2-7. Justice A belongs to the positivist school of jurisprudence. One knows that because this
justice is unwilling to look beyond statutes and case precedents in interpreting the law.
2-9. Justice C is a sociological thinker. This justice bases her decision on contemporary
community customs or thought.
2-10. A judge who follows the natural law school of thought would hear out the case and, based
2-11. Precedent refers to case law courts follow. Judges interpret legislation on a case-by-case
basis. These cases establish a line of authoritative cases on a particular subject that must
2-12. No, the California court does not have to follow decisions from North Dakota and Ohio.
Answers to Case Problems
2-13. Students should note that ethical issues such as the one raised in this case do not get
resolved necessarily by exploring the legal issue that brought the case before the court in
the first place. Rather than focusing on whether the practices of Myspace qualify as
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2-14. Yes, Vermont’s marriage license law violates same-sex couples’ rights under the
Vermont Constitution. The court ruled that the State had failed to provide a reasonable
2-15. The Supreme Court ruled that the Federal Arbitration Act does not permit courts to
2-16. The Supreme Court ruled in favor of the individual workers. Now, employees have the
2-18. The court ruled that Roommate.com was immune from the Fair Housing Act charges,
because of Section 230 of the Communications Decency Act. Section 230 states that
“interactive computer services” acting as “service providers” are not responsible for
Thinking Critically about Relevant Legal Issues
1. The issue here is framed in a very optimistic, naturalistic way. In an essay, one would focus
2. The author here seems to value justice, defined as moral absolutes that make clear what is
3. Good here means what is conventionally right. Evil means what is wrong. Both of these
4. Students would probably make a more realistic argument, citing differences in areas across