BUSINESS LAW

TEXT AND CASES

Fourteenth Edition

CLARKSON MILLER CROSS 

 


CHAPTER 1: LAW AND

LEGAL REASONING
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 §1: BUSINESS ACTIVITIES AND
THE LEGAL ENVIRONMENT (1 OF 2)
 Laws and regulations affect virtually all
business activities.
 Knowledge of “black-letter” law and

what conduct leads to liability not

enough - business now assumes an
ethical dimension.
 Many different laws may affect a single

business transaction. 
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 BUSINESS ACTIVITIES AND
THE LEGAL ENVIRONMENT (2 OF 2)

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§2: SOURCES OF AMERICAN LAW (1 OF
3)

 Primary sources of law are those that

establish the law such as constitutions,
statutes, and regulations.
 Secondary sources of law summarize

and clarify the primary sources of law.

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SOURCES OF AMERICAN LAW (2 OF 3)
 Constitutional Law.
 Statutory Law.

 Ordinances.
 Uniform Laws (NCCUSL).
 Uniform Commercial Code.

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SOURCES OF AMERICAN LAW (3 OF 3)
 Administrative Law.
 Federal Agencies.
 State and Local Agencies.
 Case Law and Common Law Doctrines.

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§3: THE COMMON LAW TRADITION (1
OF 5)

 American law is based largely on English

common law, which was a body of
general rules that applied throughout
the entire English realm.

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THE COMMON LAW TRADITION (2 OF 5)
 With English common law, there were
two separate court systems:
 Courts of law granted limited kinds of
(monetary) remedies such as land, items of
value, and money.
 Courts of equity awarded non-monetary
relief (remedies in equity) such as specific
performance, injunctions, and rescissions.

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THE COMMON LAW TRADITION (3 OF 5)

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THE COMMON LAW TRADITION (4 OF 5)
 Though the courts of law and equity have
merged in the most of the U.S., they still
recognize legal remedies and equitable
remedies.
 A party can request both legal and

equitable remedies in the same action,

and the trial court judge may grant either
or both forms of relief.
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THE COMMON LAW TRADITION (5 OF 5)

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 THE COMMON LAW TRADITION:
STARE DECISIS (1 OF 6)
 Stare Decisis (“stand on decided cases”) is
a common law doctrine under which
judges must follow the precedents
established in prior decisions.
 It helps the courts be more efficient and
makes the law more stable and predictable.

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 THE COMMON LAW TRADITION:
STARE DECISIS (2 OF 6)
 Stare decisis has two aspects:
 A court should not overturn its own
precedents unless there is a compelling
reason to do so.
 Decisions made by a higher court are
binding on lower courts.

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 THE COMMON LAW TRADITION:
STARE DECISIS (3 OF 6)
 Binding Authority: Any source of law a
court must follow when deciding a case.
 Includes constitutions, statutes, and
regulations.
 Controlling precedent: A binding authority
that requires a court to follow prior court
decisions in its jurisdiction.

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 THE COMMON LAW TRADITION:
STARE DECISIS (4 OF 6)
 Persuasive Authority: Any primary or
secondary source of law that a court may
consult for guidance but that is not
binding on the court.
 Sources include precedents from other
jurisdictions; issues of fairness, social values,
and customs; and unpublished opinions.

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 THE COMMON LAW TRADITION:
STARE DECISIS (5 OF 6)
 Pervasive authority is used in cases of first
impression, or those that have no
precedent.
 A prior judicial decision is a binding precedent
only when the subsequent court is applying
the same law as the prior court.

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 THE COMMON LAW TRADITION:
STARE DECISIS (6 OF 6)
 The highest court in a jurisdiction can
depart from precedent if it decides that:
 The precedent is incorrect, or
 The technological or social changes have
rendered the precedent inapplicable.

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 THE COMMON LAW TRADITION:
STARE DECISIS & LEGAL
REASONING (1 OF 3)
 IRAC Method: The legal reasoning
process that is used to decide cases
regardless of length and complexity.
 IRAC is an acronym for Issue, Rule,

Application, and Conclusion.

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 THE COMMON LAW TRADITION:
STARE DECISIS & LEGAL
REASONING (2 OF 3)
 1. Issue—What are the key facts and issues?
 2. Rule—What rule of law applies to the
case?
 3. Application—How does the rule of law
apply to the particular facts and
circumstances of this case?
 4. Conclusion—What conclusion should be
drawn?

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 THE COMMON LAW TRADITION:
STARE DECISIS & LEGAL
REASONING (3 OF 3)
 There is no one “right” answer to most
legal questions.
 Good arguments can be made to support
either side of the controversy.
 Judges have personal beliefs that can affect
decisions.
 Outcomes to lawsuits cannot be predicted
with certainty.
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 THE COMMON LAW TRADITION:
THE COMMON LAW TODAY (1 OF 3)
 Common law governs transactions not
covered by statutory law.
 Courts interpret statutes and regulations.
 Judges interpret and apply the law but do
not make laws.

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 THE COMMON LAW TRADITION:
THE COMMON LAW TODAY (2 OF 3)
 Restatements of the Law: Compilations
that generally summarize the common
law rules followed by most states.
 The American Law Institute (ALI) publishes
the Restatements.
 Restatements cover the areas of contracts,
torts, agency, trusts, property, restitution,
security, judgments, and conflict of laws.

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 THE COMMON LAW TRADITION:
THE COMMON LAW TODAY (3 OF 3)
 The Restatements are secondary sources
of law and are an important source of
legal analysis and opinion.
 Many Restatements are now in their

second, third, or fourth editions.

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§4: SCHOOLS OF LEGAL THOUGHT
 Natural Law School
 Positivist School

 Historical School

 Legal Realism

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 SCHOOLS OF LEGAL THOUGHT:
THE NATURAL LAW SCHOOL
 Assumes a higher, or universal, law
exists that applies to all human beings
and that written laws should reflect the
principles inherent in natural law.

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 SCHOOLS OF LEGAL THOUGHT:
THE POSITIVIST SCHOOL
 States that there is no law higher than
the laws created by a national
government.
 Laws must be obeyed to prevent

anarchy even if they are unjust.

 Legal positivism is the basis for positive

—or national—law.

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 SCHOOLS OF LEGAL THOUGHT:
THE HISTORICAL SCHOOL
 Emphasizes the evolutionary process of
law.
 Concentrates on the history and origins

of the legal system.

 Law derives its legitimacy and authority

from standards that have withstood the

test of time.

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 SCHOOLS OF LEGAL THOUGHT:
LEGAL REALISM & SOCIOLOGICAL
SCHOOL
 Based on the idea that law is shaped by
social forces and needs.
 Judges must account for economic and

social realities when deciding cases.

 Legal Realism influenced the growth of

the Sociological School, which views law

as a tool to promote social justice.

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 §5: CLASSIFICATIONS OF LAW
 Every type of law will be either:
 Substantive or Procedural.
 Civil or Criminal.

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 CLASSIFICATIONS OF LAW:
SUBSTANTIVE VS. PROCEDURAL
 Substantive law consists of all laws that
define, describe, regulate, and create
legal rights and obligations.
 Procedural law consists of all laws that

that outline the methods of enforcing

the rights established by substantive
law.

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 CLASSIFICATIONS OF LAW:
CIVIL VS. CRIMINAL (1 OF 2)
 Civil law spells out the rights and duties
that exist between persons and
between persons and their
governments, as well as the relief
available when a person’s rights are
violated.

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 CLASSIFICATIONS OF LAW:
CIVIL VS. CRIMINAL (2 OF 2)
 Criminal law is concerned with wrongs
committed against the public as a
whole.
 Criminal acts are defined and prohibited by
local, state, or federal government
statutes.

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 CLASSIFICATIONS OF LAW:
CYBERLAW
 Refers to all laws governing electronic
communications and transactions—
particularly those conducted via the
internet.
 Applies to just about all legal issues,

including copyright, contracts, banking,

etc.

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 §6: HOW TO FIND PRIMARY
SOURCES OF LAW (1 OF 4)
 Citation: A reference to a publication in
which a legal authority can be found. 
 Uncodified statutes passed by Congress

are reported in United States Statutes at

Large. Uncodified state statutes are
collected in similar state publications.

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 HOW TO FIND PRIMARY
SOURCES OF LAW (2 OF 4)
 Most laws are referenced by their
codified form—or the form in which they
appear in the federal and state codes—
and are compiled by subject.
 Codified statutes passed by Congress are

reported in the United States Code.

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 HOW TO FIND PRIMARY
SOURCES OF LAW (3 OF 4)
 Codified statutes passed by a state
legislature are typically reported by
subject in that state’s code.

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 HOW TO FIND PRIMARY
SOURCES OF LAW (4 OF 4)
 Rules and regulations from federal
administrative agencies appear first in
the Federal Register (published daily).
These are eventually incorporated into
the Code of Federal Regulations (C.F.R.).

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 HOW TO FIND PRIMARY
SOURCES OF LAW: CASE LAW (1 OF 9)
 Two types of courts in the U.S.: federal
courts and state courts.  
 Trial courts are those in which evidence

is presented and testimony is given.

 Trial court decisions can be appealed to

a higher court, typically an appellate

court (intermediate court of appeals).

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 HOW TO FIND PRIMARY
SOURCES OF LAW: CASE LAW (2 OF 9)
 Appellate court decisions may be
appealed to an even higher court, such
as a state supreme court or the U.S.
Supreme Court.

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 HOW TO FIND PRIMARY
SOURCES OF LAW: CASE LAW (3 OF 9)
 State trial court decisions are typically
filed in the office of the clerk of the
court and are available for public
inspection.
 Written decisions of the appellate

courts are available in print and online.

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 HOW TO FIND PRIMARY
SOURCES OF LAW: CASE LAW (4 OF 9)
 The official reported appellate decisions
are published in volumes called reports
or reporters that are published by each
state.
 Unofficial reports are published by

nongovernment entities.

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 HOW TO FIND PRIMARY
SOURCES OF LAW: CASE LAW (5 OF 9)
 Regional Reporters: State court
opinions appear in regional units of the
West’s National Reporter System.
 Many states use the National Reporter
System instead of their own state reporters
because it reports cases more quickly and
distributes them more widely.

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 HOW TO FIND PRIMARY
SOURCES OF LAW: CASE LAW (6 OF 9)
 Federal district (trial) court decisions are
published unofficially in the Federal
Supplement (“F. Supp.” or “F. Supp. 2d”).

 Opinions from the circuit courts of

appeals are reported unofficially in the
Federal Reporter (F., F.2d, or F.3d).

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 HOW TO FIND PRIMARY
SOURCES OF LAW: CASE LAW (7 OF 9)
 The Bankruptcy Reporter (“Bankr” or
“B.R.”) reports bankruptcy decisions
from all federal courts.
 All opinions of the U.S. Supreme Court

are published in United States Reports

(“U.S.”) by the federal government.

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 HOW TO FIND PRIMARY
SOURCES OF LAW: CASE LAW (8 OF 9)
 Unofficial reports of Supreme Court
decisions can be found in the Supreme
Court Reporter (“S. Ct.”) and the United
States Reports: Lawyers Edition (“L. Ed.”
& “L. Ed. 2d”).

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 HOW TO FIND PRIMARY
SOURCES OF LAW: CASE LAW (9 OF 9)
 Many court opinions that are not yet
published or intended for publication
are accessible through Thomson
Reuters Westlaw®.
 Federal appellate court decisions that

are designated as unpublished may

appear in the Federal Appendix (Fed.
Appx.) of the National Reporter System.
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 §7: HOW TO READ &
UNDERSTAND CASE LAW (1 OF 2)
Legal cases are identified by a “legal
citation” (or a “cite”) as the sample below:
Rosa and Raymond Parks Institute for Self
Development v. Target Corporation,
812 F.3d 824 (2016).

Title: First Party is Plaintiff, second party is Defendant. The

parties are either italicized or underlined.

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 HOW TO READ &
UNDERSTAND CASE LAW (2 OF 2)
Legal cases are identified by a “legal
citation” (or a “cite”) as the sample below:
Rosa and Raymond Parks Institute for Self
Development v. Target Corporation,
812 F.3d 824 (2016).

This is a federal court case in 2016. It is published in volume 812

of the Federal Reporter Third Series beginning on page 824.

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HOW TO READ & UNDERSTAND CASE
LAW: SELECTED CASE TITLES &
TERMINOLOGY (1 OF 4)

 Plaintiff/Petitioner: The party who initiates a

lawsuit.
 Defendant/Respondent: The party against whom
the lawsuit is brought.
 Appellant/Petitioner: The party who takes an
appeal from one court to another.  
 Appellee/Respondent: The party against whom an
appeal is taken.
 Damages: A monetary award sought as a remedy
for a breach of contract or a tortious act.
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HOW TO READ & UNDERSTAND CASE
LAW: SELECTED CASE TITLES &
TERMINOLOGY (2 OF 4)

 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.
 Judge/Justice: The terms judge and justice are
usually synonymous and represent two
designations given to judges in various courts.

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HOW TO READ & UNDERSTAND CASE
LAW: SELECTED CASE TITLES &
TERMINOLOGY (3 OF 4)

 Opinion: The court’s reasons for its decision, the

rules of law that apply, and the judgment.
 Unanimous Opinion: An opinion that represents
the view of all the judges who heard a case.
 Majority Opinion: A court opinion that represents
the views of the majority (more than half) of the
judges or justices deciding the case. 

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HOW TO READ & UNDERSTAND CASE
LAW: SELECTED CASE TITLES &
TERMINOLOGY (4 OF 4)

 Concurring Opinion: A court opinion by one or

more judges who agree with the majority opinion
but not the legal reasoning behind the opinion.  
 Dissenting Opinion: An opinion by one or more
judges who disagree with the majority’s opinion.
 Plurality Opinion: An opinion that has the support
of the largest number of judges, but less than a
majority of them. 
 Per Curiam Opinion: A unanimous opinion that
does not indicate which judge wrote it. 
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