Law 10 - Chapter 1 - Intro to Law and Legal Reasoning
from West Bus. Law - 7th edition

Introduction.
Civilized societies require order and some degree of certainty. The law generates both. If any society is to survive, its citizens must be able to determine what is legally right and legally wrong. When citizens believe that a legal wrong has occurred, they must have some idea of how to seek redress. The law provides such a vehicle.
In this introductory chapter, we first look at the nature of law and then examine the foundation and basic characteristics of the American legal system. We next describe the basic sources of American law and the distinction between civil law and criminal law. We conclude with sections offering practical guidance on several topics, including how to find the sources of law discussed in this chapter (and referred to throughout the text), how to read and understand court opinions, and legal reasoning.

Section 1: What is the Law.

There have been and will continue to be different definitions of law. Although the numerous definitions vary in their particulars, they all are based on the general observation that, at a minimum, law consists of enforceable rules governing relationships among individuals and between individuals and their society.
This broad statement may serve as a basic definition of law, but for those who embark on a study of law, it is only a starting point. It leaves unanswered some important questions concerning the nature of law. In this section, we examine some of those questions and how they have been answered in the past by legal philosophers and jurists. You may think that legal philosophy is far removed from the practical study of business law and the legal environment. In fact, it is not. As you will learn in the chapters of this text, how judges apply the law to specific disputes, including disputes relating to the business world, depends in part on their personal philosophical views.

NATURAL LAW AND POSITIVE LAW
An age-old question in regard to the nature of law has to do with the finality of positive law (the written law of a particular society at a particular point in time). For example, what if a positive law of a particular nation is deemed to be a “bad” law by a substantial number of that nation’s citizens? Must those citizens obey the law if it goes against their conscience to do so? Is there a higher or universal law to which they can appeal?

THE NATURAL LAW TRADITION One who adheres to the natural law tradition would answer this question in the affirmative. Natural law denotes a system of moral and ethical principles that are inherent in human nature and that can be discovered by humans through the use of their natural intelligence. The natural law tradition is one of the oldest and most significant schools of jurisprudence. It dates to the Greek philosopher Aristotle (384–322 b.c.e.), who distinguished between natural law (which applies universally to all humankind) and positive law. The notion that people have “natural rights” (expressed in the Declaration of Independence as “unalienable rights” to “life, liberty, and the pursuit of happiness”) stems from the natural law tradition. In essence, the natural law tradition presupposes that the legitimacy of positive, or conventional, law derives from a higher law—natural law. Whenever positive law conflicts with natural law, positive law loses its legitimacy.
Profile: Aristotle
Those who claim that a specific foreign government is depriving certain citizens of their human rights, notwithstanding the fact that the government’s actions are legal in that country, implicitly are appealing to a higher law that has universal applicability. The question of the universality of basic human rights also comes into play in the context of international business operations. Should rights that extend to workers in this country, such as the right to be free of discrimination in the workplace, be applied to a U.S. firm doing business in another country that does not provide for such rights? Implicitly, this questions is rooted in a concept of universal rights that has its origins in the natural law tradition.

LEGAL POSITIVISM At the other end of the spectrum are the legal positivists. Legal positivists believe that there can be no higher law than a nation’s positive law. Whether a particular law is bad or good is irrelevant. The merits or demerits of a given law can be discussed, and laws can be changed—in an orderly manner through a legitimate lawmaking process—but as long as a law exists, it must be obeyed.
From the positivist perspective, then, the significance of positive law is greater than in the natural law tradition. The positivist approach is rooted in the assumption that there is no such thing as “natural rights.” Rather, human rights exist solely because of laws. If the laws are not enforced, anarchy will result. A judge with positivist leanings probably would be more inclined to defer to an existing law than would a judge who adheres to the natural law tradition.

LEGAL REALISM
Another significant question about the nature of law can be phrased as follows: To what extent should changing social customs and practices affect the law? Prior to the 1920s, jurists and legal theorists commonly assumed that the law should change only slowly, if at all, and that sociological and economic data had little relevance in the making of judicial decisions. The idea was that the law should be applied impartially, logically, and uniformly to all similar situations, regardless of the social and economic context in which a particular dispute arose.
In the 1920s and 1930s, a number of jurists and scholars, known as legal realists, rebelled against this conception of the law. The legal realists pointed out that law is a human enterprise and not a set of abstract rules that can be applied uniformly to all cases involving similar facts. Given that judges are human beings with unique personalities, value systems, and intellects, it would be impossible for any two judges to engage in an identical reasoning process when evaluating the same case. Additionally, each case involves a unique set of circumstances—no two cases, no matter how similar, are ever exactly the same. Therefore, judges must take into account the specific circumstances of each case when making their decisions. When making decisions, judges also should consider extra-legal sources, such as economic and sociological data, to the extent that such sources can illuminate the circumstances and issues involved in specific cases. In other words, the law should take social and economic realities into account.
United States Supreme Court Justice Oliver Wendell Holmes, Jr. (1841–1935), and Karl Llewellyn (1893–1962) were both influential proponents of legal realism. Llewellyn is best known for his dominant role in drafting the Uniform Commercial Code (UCC), a set of rules for commercial transactions that will be discussed later in this chapter. The UCC reflects the influence of legal realism in its emphasis on practicality, flexibility, reasonability, and customary trade practices.
Profile: Oliver Wendell Holmes, Jr.

JUDICIAL INTERPRETATION OF THE LAW
Oliver Wendell Holmes, Jr., once stated that “the prophecies of what the courts will do in fact, and nothing more pretentious, are what I mean by the law.” The final question we explore has to do with the implications of this statement.
Clearly, judges are not free to decide cases solely on the basis of their personal philosophical views or their opinions on the issues before the court. A judge’s function is not to make the laws—that is the function of the legislative branch of government—but to interpret and apply them. From a practical point of view, however, the courts play a significant role in defining what the law is. This is because the law is not an exact science, and legal rules tend to be expressed in general terms. Judges thus have some flexibility in interpreting and applying the law. It is because of this flexibility that different courts can—and often do—arrive at different conclusions in cases that involve nearly identical issues, facts, and applicable laws. This flexibility also means that each judge’s unique personality, legal philosophy, set of values, and intellectual attributes necessarily frame the judicial decision-making process to some extent.
Part of the study of law is discovering how different approaches to law affect judicial decision making. As you read the cases presented and discussed in this book, keep in mind that how a particular judge or panel of judges approaches an issue in a particular case necessarily has an impact on the outcome of the case. Because of our common law tradition (discussed next), the courts—and thus the personal views and philosophies of judges—play a paramount role in the American legal system. This is particularly true of the United States Supreme Court, which has the final say on how a particular law or legal principle should be interpreted and applied.
Video: Justice O'Connor on Decision Making
Video: Justice Powell on Decision Making

Section 2: The Common Law Tradition.
Because of our colonial heritage, much of American law is based on the English legal system, which originated in medieval England and continued to evolve in the following centuries. A knowledge of this system is necessary to an understanding of the American legal system today.
Video: Justice O'Connor on the Role of the Law

EARLY ENGLISH COURTS
The origins of the English legal system—and the U.S. legal system—date to 1066, when the Normans conquered England. William the Conqueror and his successors began the process of unifying the country under their rule. One of the means they used to this end was the establishment of the king’s courts, or curia regis. Before the Norman Conquest, disputes had been settled according to the local legal customs and traditions in various regions of the country. The king’s courts sought to establish a uniform set of customs for the country as a whole. What evolved in these courts was the beginning of the common law—a body of general rules that prescribed social conduct and applied throughout the entire English realm.

COURTS OF LAW AND REMEDIES AT LAW In the early English king’s courts, the kinds of remedies (the legal means to recover a right or redress a wrong) that could be granted were severely restricted. If one person wronged another in some way, the king’s courts could award as compensation one or more of the following: (1) land, (2) items of value, or (3) money. The courts that awarded this compensation became known as courts of law, and the three remedies were called remedies at law. (Today, the remedy at law normally takes the form of damages—money given to a party whose legal interests have been injured.) Even though the system introduced uniformity in the settling of disputes, when a complaining party wanted a remedy other than economic compensation, the courts of law could do nothing, so “no remedy, no right.”

COURTS OF EQUITY AND REMEDIES IN EQUITY Equity is a branch of law, founded on what might be described as notions of justice and fair dealing, that seeks to supply a remedy when there is no adequate remedy available at law. When individuals could not obtain an adequate remedy in a court of law because of strict technicalities, they petitioned the king for relief. Most of these petitions were decided by an adviser to the king, called a chancellor, who was said to be the “keeper of the king's conscience.” When the chancellor thought that the claim was a fair one, new and unique remedies were granted. Eventually, formal chancery courts, or courts of equity, were established.
The remedies granted by equity courts became known as remedies in equity. Equitable remedies include specific performance (ordering a party to perform an agreement as promised), an injunction (ordering a party to cease engaging in a specific activity), and rescission (the cancellation of a contractual obligation). We discuss these and other equitable remedies in more detail at appropriate points in the chapters that follow. As a general rule, today’s courts, like the early English courts, will not grant equitable remedies unless the remedy at law—money damages—is inadequate.
In fashioning appropriate remedies, judges often were—and continue to be—guided by so-called equitable maxims—propositions or general statements of equitable rules. Exhibit 1–1 list some important equitable maxims. The last maxim listed in that exhibit—“Equity aids the vigilant, not those who rest on their rights”—merits special attention. It has become known as the equitable doctrine of laches, and it can be used as a defense. A defense is an argument raised by the defendant (the party being sued) indicating why the plaintiff (the suing party) should not obtain the remedy sought. The doctrine of laches arose to encourage people to bring lawsuits while the evidence was fresh. What constitutes a reasonable time, of course, varies according to the circumstances of the case. Time periods for different types of cases are now usually fixed by statutes of limitations. After the time allowed under a statute of limitations has expired, no action can be brought, no matter how strong the case was originally.
Landmark in the Law: Courts of Equity and Equitable Maxims

LEGAL AND EQUITABLE REMEDIES TODAY
The establishment of courts of equity in medieval England resulted in two distinct court systems: courts of law and courts of equity. The systems had different sets of judges and granted different types of remedies. Parties who sought legal remedies, or remedies at law, would bring their claims before courts of law. Parties seeking equitable relief, or remedies in equity, would bring their claims before courts of equity. During the nineteenth century, however, most states adopted rules of procedure that resulted in combined courts of law and equity—although some states, such as Arkansas, still retain the distinction. A party now may request both legal and equitable remedies in the same action, and the trial court judge may grant either form or both forms of relief.
The distinction between legal and equitable remedies remains relevant to students of business law, however, because these remedies differ. To seek the proper remedy for a wrong, one must know what remedies are available. Additionally, certain vestiges of the procedures used when there were separate courts of law and equity still exist. For example, a party has the right to demand a jury trial in an action at law, but not in an action in equity. In the old courts of equity, the chancellor heard both sides of an issue and decided what should be done. Juries were considered inappropriate. In actions at law, however, juries participated in determining the outcome of cases, including the amount of damages to be awarded. Exhibit 1–2 summarizes the procedural differences (applicable in most states) between an action at law and an action in equity.

THE DOCTRINE OF STARE DECISIS
A unique feature of the common law is that it is judge-made law. The body of principles and doctrines that form the common law emerged over time as judges decided actual legal controversies.

CASE PRECEDENTS AND CASE REPORTERS When possible, judges attempted to be consistent and to base their decisions on the principles suggested by earlier cases. They sought to decide similar cases in a similar way and considered new cases with care, because they knew that their decisions would make new law. Each interpretation became part of the law on the subject and served as a legal precedent—that is, a decision that furnished an example or authority for deciding subsequent cases involving similar legal principles or facts.
By the early fourteenth century, portions of the more important decisions of each year were being gathered together and recorded in Year Books, which became useful references for lawyers and judges. In the sixteenth century, the Year Books were discontinued, and other types of publications of cases became available. Today, cases are published, or “reported,” in volumes called reporters, or reports. We describe today’s case reporting system in detail later in this chapter.
Video: Justice Powell on the Importance of Legal Precedent

STARE DECISIS AND THE COMMON LAW TRADITION The practice of deciding new cases with reference to former decisions, or precedents, became a cornerstone of the English and American judicial systems. The practice forms a doctrine called stare decisis (1) (a Latin phrase meaning “to stand on decided cases”). Under this doctrine, judges are obligated to follow the precedents established within their jurisdictions.
For example, if the Supreme Court of California (that state’s highest court) has ruled in a certain way on an issue, that decision will control the outcome of future cases on that issue brought before the California courts. Similarly, a decision on a given issue by the United States Supreme Court (the nation’s highest court) is binding on all inferior courts. Case precedents, as well as statutes and other laws that must be followed, are referred to as binding authorities. (Nonbinding legal authorities on which judges may rely for guidance, such as precedents established in other jurisdictions, are referred to as persuasive authorities.)
The doctrine of stare decisis helps the courts to be more efficient, because if other courts have carefully reasoned through a similar case, their legal reasoning and opinions can serve as guides. Stare decisis also makes the law more stable and predictable. If the law on a given subject is well settled, someone bringing a case to court can usually rely on the court to make a decision based on what the law has been.

DEPARTURES FROM PRECEDENT Although courts are obligated to follow precedents, sometimes a court will depart from the rule of precedent if it decides that the precedent should no longer be followed. If a court decides that a ruling precedent is simply incorrect or that technological or social changes have rendered the precedent inapplicable, the court might rule contrary to the precedent. Cases that overturn precedent often receive a great deal of publicity(2).

WHEN THERE IS NO PRECEDENT Occasionally, cases come before the courts for which no precedents exist. Such cases, called “cases of first impression,” often result when new practices or technological developments in society create new types of legal disputes. In the last several years, for example, the courts have had to deal with disputes involving transactions conducted via the Internet. When existing laws governing free speech, pornography, fraud, jurisdiction, and other areas were drafted, cyberspace did not exist. Although new laws are being created to govern such disputes, in the meantime the courts have to decide, on a case-by-case basis, what rules should be applied.
Generally, in deciding cases of first impression, courts may consider a number of factors, including legal principles and policies underlying previous court decisions or existing statutes, fairness, social values and customs, public policy (governmental policy based on widely held societal values), and data and concepts drawn from the social sciences. Which of these sources is chosen or receives the greatest emphasis depends on the nature of the case being considered and the particular judge or judges hearing the case. As mentioned previously, judges are not free to decide cases on the basis of their own personal views. In cases of first impression, as in all cases, judges must have legal reasons for deciding as they do on particular issues. When a court issues a written opinion on a case (we discuss court opinions later in this chapter), the opinion normally contains a carefully reasoned argument justifying the decision.

STARE DECISIS AND LEGAL REASONING
Legal reasoning is the reasoning process used by judges in deciding what law applies to a given dispute and then applying that law to the specific facts or circumstances of the case. Through the use of legal reasoning, judges harmonize their decisions with decisions that have been made before—which the doctrine of stare decisis requires.
Students of business law also engage in legal reasoning. For example, you may be asked to provide answers for some of the case problems that appear at the end of every chapter in this text. Each problem describes the facts of a particular dispute and the legal question at issue. If you are assigned a case problem, you will be asked to determine how a court would answer that question and why. In other words, you will need to give legal reasons for whatever conclusion you reach. We look here at the basic steps involved in legal reasoning and then describe some forms of reasoning commonly used by the courts in making their decisions.

BASIC STEPS IN LEGAL REASONING At times, the legal arguments set forth in court opinions are relatively simple and brief. At other times, the arguments are complex and lengthy. Regardless of the complexity or length of a legal argument, however, the basic steps of the legal reasoning process remain the same in all cases. These steps, which you also can follow when analyzing cases and case problems, can best be described as a series of questions:

1. What are the key facts and issues? For example, suppose that a plaintiff comes before the court alleging assault (a wrongful and intentional action, or tort, in which one person makes another fearful of immediate physical harm). The plaintiff claims that the defendant threatened her while she was sleeping. Although the plaintiff was unaware that she was being threatened, her roommate heard the defendant make the threat. The legal issue, or question, raised by these facts is whether the defendant’s actions in fact constitute the tort of assault, given that the plaintiff was not aware of those actions at the time they occurred.

2. What are the relevant rules of law? Because the plaintiff alleges (claims) that the defendant committed a tort, the applicable law is the common law of torts—specifically, tort law governing assault (see Chapter 6 for more detail on torts). Case precedents involving similar facts and issues thus would be relevant.

3. How do the relevant rules of law apply to the particular facts and circumstances of this case? This step is often the most difficult one, because each case presents a unique set of facts, circumstances, and parties. Although there may be similar cases, no two cases are ever identical in all respects. Normally, judges (and lawyers and law students) try to find cases on point—previously decided cases that are as similar as possible to the one under consideration. (Because of the difficulty—and importance—of this step in the legal reasoning process, we discuss it more detail in the next subsection.)

4. What conclusion should be drawn? This step normally presents few problems. Usually, the conclusion is evident if the previous three steps have been followed carefully.

FORMS OF LEGAL REASONING Judges use many types of reasoning when following the third step of the legal reasoning process—applying the law to the facts of a particular case. Three common forms of reasoning are deductive reasoning, linear reasoning, and reasoning by analogy.

Deductive Reasoning Deductive reasoning is sometimes called syllogistic reasoning because it employs a syllogism—a logical relationship involving a major premise, a minor premise, and a conclusion. For example, consider the example given earlier, in which the plaintiff alleged that the defendant committed assault by threatening her while she was sleeping. The judge might point out that “under the common law of torts, an individual must be aware of a threat of danger for the threat to constitute civil assault” (major premise); “the plaintiff in this case was unaware of the threat at the time it occurred” (minor premise); and “therefore, the circumstances do not amount to a civil assault” (conclusion).

Linear Reasoning A second important form of commonly employed legal reasoning might be thought of as “linear” reasoning, because it proceeds from one point to another, with the final point being the conclusion. An analogy will help make this form of reasoning clear. Imagine a knotted rope, with each knot tying together separate pieces of rope to form a tight length. As a whole, the rope represents a linear progression of thought logically connecting various points, with the last point, or knot, representing the conclusion. For example, suppose that a tenant in an apartment building sues the landlord for damages for an injury resulting from an allegedly dimly lit stairway. The landlord, who was on the premises the evening the injury occurred, testifies that none of the other nine tenants who used the stairway that night complained about the lights. The court may engage in a reasoning process involving the following “pieces of rope”:

1. The landlord testifies that none of the tenants who used
the stairs on the evening in question complained about
the lights.
2. The fact that none of the tenants complained is the
same as if they had said the lighting was sufficient.
3. That there were no complaints does not prove that the
lighting was sufficient but proves that the landlord had
no reason to believe that it was not.
4. The landlord’s belief was reasonable, because no one
complained.
5. Therefore, the landlord acted reasonably and was not
negligent in respect to the lighting in the stairway.

On the basis of this reasoning, the court concludes that the tenant is not entitled to compensation on the basis of the stairway’s lighting.

Reasoning by Analogy Another important form of reasoning that judges use in deciding cases is reasoning by analogy. To reason by analogy is to compare the facts in the case at hand to the facts in other cases and, to the extent that the patterns are similar, to apply the same rule to the case at hand. To the extent that the facts are unique, or “distinguishable,” different rules may apply. For example, in case A, it is held that a driver who crosses a highway’s center line is negligent. In case B, a driver crosses the line to avoid hitting a child. In determining whether case A’s rule applies in case B, a judge would consider what the reasons were for the decision in A and whether B is sufficiently similar for those reasons to apply. If the judge holds that B’s driver is not liable, that judge must indicate why case A’s rule does not apply to the facts presented in case B.

THERE IS NO ONE “RIGHT” ANSWER
Many persons believe that there is one “right” answer to every legal question. In most situations involving a legal controversy, however, there is no single correct result. Good arguments can often be made to support either side of a legal controversy. Quite, often a case does not present the situation of a “good” person suing a “bad” person. In many cases, both parties have acted in good faith in some measure or have acted in bad faith to some degree.
Additionally, as already mentioned, each judge has his or her own personal beliefs and philosophy, which shape, at least to some extent, the process of legal reasoning. What this means is that the outcome of a particular lawsuit before a court can never be predicted with absolute certainty. In fact, in some cases, even though the weight of the law would seem to favor one party’s position, judges, through creative legal reasoning, have found ways to rule in favor of the other party in the interests of preventing injustice.
Concept Summary 1.1—The Common Law Tradition

Section 3: Sources of American Law.

There are numerous sources of American law. Primary sources of law, or sources that establish the law, include the following:

1. The U.S. Constitution and the constitutions of the
various states.
2. Statutes, or laws, passed by state legislatures.
3. Regulations created by administrative agencies, such as
the Food and Drug Administration.
4. Case law and common law doctrines.

We describe each of these important sources of law in the following pages.
Secondary sources of law are books and articles that summarize and clarify the primary sources of law. Examples are legal encyclopedias, treatises, and articles in law reviews. Courts often refer to secondary sources of law for guidance in interpreting and applying the primary sources of law discussed here.

CONSTITUTIONAL LAW
The federal government and the states have separate written constitutions that set forth the general organization, powers, and limits of their respective governments. Constitutional law is the law as expressed in these constitutions.
The U.S. Constitution is the supreme law of the land. As such, it is the basis of all law in the United States. A law in violation of the Constitution, no matter what its source, will be declared unconstitutional and will not be enforced. Because of its importance in the American legal system, we present the complete text of the U.S. Constitution in Appendix B.
The Tenth Amendment to the U.S. Constitution, which defines the powers and limitations of the federal government, reserves all powers not granted to the federal government to the states. Each state in the union has its own constitution. Unless it conflicts with the U.S. Constitution or a federal law, a state constitution is supreme within the state’s borders.
Video: Justice Brennan on the Greatness of the Constitution

STATUTORY LAW
Statutes enacted by legislative bodies at any level of government make up another source of law, which is generally referred to as statutory law. When a legislature passes a statute, that statute ultimately is included in the federal code of laws or the relevant state code of laws (these codes are discussed later in this chapter). Statutory law also includes local ordinances—statutes (laws, rules, or orders) passed by municipal or county governing units to govern matters not covered by federal or state law. Ordinances commonly have to do with city or county land use (zoning ordinances), building and safety codes, and other matters affecting the local unit.
A federal statute, of course, applies to all states. A state statute, in contrast, applies only within the state’s borders. State laws thus may vary from state to state. No federal statute may violate the U.S. Constitution, and no state statute or local ordinance may violate the U.S. Constitution or the relevant state constitution

UNIFORM LAWS The differences among state laws were particularly notable in the 1800s, when conflicting state statutes frequently made the rapidly developing trade and commerce among the states very difficult. To counter these problems, in 1892 a group of legal scholars and lawyers formed the National Conference of Commissioners (NCC) on Uniform State Laws to draft uniform laws, or model laws, for the states to consider adopting. The NCC still exists today and continues to issue uniform statutes.
Profile: National Conference of Commissioners on Uniform State Laws, ...
Each state has the option of adopting or rejecting a uniform law. Only if a state legislature adopts a uniform law does that law become part of the statutory law of that state. Note that a state legislature may adopt all or part of a uniform law as it is written, or the legislature may rewrite the law however the legislature wishes. Hence, even when a uniform law is said to have been adopted in many states, those states’ laws may not be entirely “uniform.”
The earliest uniform law, the Uniform Negotiable Instruments Law, had been completed by 1896 and adopted in every state by the early 1920s (although not all states used exactly the same wording). Over the following decades, other acts were drawn up in a similar manner. In all, over two hundred uniform acts have been issued by the NCC since its inception. The most ambitious uniform act of all, however, was the Uniform Commercial Code.

THE UNIFORM COMMERCIAL CODE (UCC) The Uniform Commercial Code (UCC), which was created through the joint efforts of the NCC and the American Law Institute, was first issued in 1952. The UCC has been adopted in all fifty states(3), the District of Columbia, and the Virgin Islands. The UCC facilitates commerce among the states by providing a uniform, yet flexible, set of rules governing commercial transactions. The UCC assures businesspersons that their contracts, if validly entered into, normally will be enforced. Because of its importance in the area of commercial law, we cite the UCC frequently in this text. We also present the entire text of the latest version of the UCC in Appendix C.

ADMINISTRATIVE LAW
An important source of American law consists of administrative law—the rules, orders, and decisions of administrative agencies. An administrative agency is a federal, state, or local government agency established to perform a specific function. Administrative law and procedures, which will be examined in detail in Chapter 43, constitute a dominant element in the regulatory environment of business. Rules issued by various administrative agencies now affect virtually every aspect of a business’s operation, including the firm’s capital structure and financing, its hiring and firing procedures, its relations with employees and unions, and the way it manufactures and markets its products.
At the national level, numerous executive agencies exist within the cabinet departments of the executive branch. The Food and Drug Administration, for example, is an agency within the Department of Health and Human Services. Executive agencies are subject to the authority of the president, who has the power to appoint and remove officers of federal agencies. There are also major independent regulatory agencies at the federal level, such as the Federal Trade Commission, the Securities and Exchange Commission, and the Federal Communications Commission. The president’s power is less pronounced in regard to independent agencies, whose officers serve for fixed terms and cannot be removed without just cause.
There are administrative agencies at the state and local levels as well. Commonly, a state agency (such as a state pollution-control agency) is created as a parallel to a federal agency (such as the Environmental Protection Agency). Just as federal statutes take precedence over conflicting state statutes, so federal agency regulations take precedence over conflicting state regulations.

CASE LAW AND COMMON LAW DOCTRINES
As is evident from the earlier discussion of the common law tradition, another basic source of American law consists of the rules of law announced in court decisions. These rules of law include interpretations of constitutional provisions, of statutes enacted by legislatures, and of regulations created by administrative agencies. Today, this body of law is referred to variously as the common law, judge-made law, or case law.

THE RELATIONSHIP BETWEEN THE COMMON LAW AND STATUTORY LAW Common law doctrines and principles govern all areas not covered by statutory or administrative law. In a dispute concerning a particular employment practice, for example, if a statute regulates that practice, the statute will apply rather than the common law doctrine that applied prior to the enactment of the statute.
Even though the body of statutory law has expanded greatly since the beginning of this nation, thus narrowing the applicability of common law doctrines, there is a significant overlap between statutory law and the common law. For example, many statutes essentially codify existing common law rules, and thus the courts, in interpreting the statutes, often rely on the common law as a guide to what the legislators intended.
Additionally, how the courts interpret a particular statute determines how that statute will be applied. If you wanted to learn about the coverage and applicability of a particular statute, for example, you would, of course, need to locate the statute and study it. You would also need to see how the courts in your jurisdiction have interpreted the statute—in other words, what precedents have been established in regard to that statute. Often, the applicability of a newly enacted statute does not become clear until a body of case law develops to clarify how, when, and to whom the statute applies.

RESTATEMENTS OF THE LAW The American Law Institute(4) has drafted and published compilations of the common law called Restatements of the Law, which generally summarize the common law rules followed by most states. There are Restatements of the Law in the areas of contracts, torts, agency, trusts, property, restitution, security, judgments, and conflict of laws. The Restatements, like other secondary sources of law, do not in themselves have the force of law but are an important source of legal analysis and opinion on which judges often rely in making their decisions.
Many of the Restatements are now in their second or third editions. We refer to the Restatements frequently in subsequent chapters of this text, indicating in parentheses the edition to which we are referring. For example, we refer to the second edition of the Restatement of the Law of Contracts simply as the Restatement (Second) of Contracts.
Profile: American Law Institute
Profile: Restatements of the Law
Profile: Restatement (Second) of Contracts

Concept Summary 1.2—Sources of American Law

Section 4: Civil Law vs. Criminal Law.

The body of law is huge. To study it, one must break it down by some means of classification, and a number of classification systems have been devised. Here we look at one of the most significant classifications: the division of law into civil law and criminal law.

CIVIL LAW
Civil law is concerned with the duties that exist between persons or between citizens and their governments, excluding the duty not to commit crimes. Typically, in a civil case, a private party sues another private party (although the government can also sue a party for a civil law violation) to make that other party comply with a duty or pay for the damage caused by failure to comply with a duty. For example, if a seller breaches (fails to perform) a contract with a buyer, the buyer may bring a lawsuit against the seller either to compel performance or to obtain money damages for the seller’s failure to perform.
Each state court system, as well as the federal court system, has a set of rules governing civil procedures. You will read about these procedures in detail in Chapter 4. Generally, in a civil case, the plaintiff presents evidence (including the testimony of witnesses, documents, and so on) supporting his or her allegation to the court, and the defendant then offers evidence to show why the plaintiff should not obtain the remedy sought. Based on the evidence presented, the court makes its decision. Usually, the plaintiff must prove his or her case by a preponderance of the evidence. Under this standard, the plaintiff must convince the court that, based on the evidence presented by both parties, it is more likely than not that the plaintiff’s allegation is true.
Much of the law that we discuss in this text is civil law. Contract law, for example, which we discuss in Chapters 11 through 19, is civil law. The whole body of tort law, which is covered in Chapters 6 and 7, is civil law.

CRIMINAL LAW
In contrast to civil law, 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. Criminal defendants thus are prosecuted by public officials, such as a district attorney (D.A.), on behalf of the state, not by their victims or other private parties. Whereas in a civil case the object is to obtain remedies (such as money damages) to compensate the injured party, in a criminal case the object is to punish the wrongdoer in an attempt to deter others from similar actions. Penalties for violations of criminal statutes consist of fines and/or imprisonment—and, in some cases, death.
Because the state has extensive resources at its disposal when prosecuting criminal cases, there are numerous procedural safeguards to protect the rights of defendants. One of these safeguards is the higher standard of proof that applies in criminal cases. As you can see in Exhibit 1–3, which summarizes some of the key differences between civil law and criminal law, in a criminal case the state must prove its case beyond a reasonable doubt, not just by a predonderance of the evidence. Every juror in a criminal case must be convinced, beyond a reasonable doubt, of the defendant's guilt. This safeguard and others will be discussed in more detail in Chapter 9, in the section discussing criminal procedures.
Although business law primarily has to do with civil law, as mentioned, criminal law is also an important component of the legal environment of business. This is because many of the statutes regulating the business world provide for both civil and criminal sanctions. Additionally, even though the corporate structure shields corporate directors and officers from personal liability for corporate crimes (as will be discussed in Chapter 39), increasingly the courts are finding ways to hold key corporate personnel personally liable for such crimes.

Section 5: How to find the Primary Sources of the Law.

This text includes numerous citations to primary sources of law—federal and state statutes, regulations issued by administrative agencies, and court cases. In this section, we explain how you can use these citations to find these sources.

FINDING STATUTORY LAW
When Congress passes laws, they are collected in a publication titled United States Statutes at Large. When state legislatures pass laws, they are collected in similar state publications. Most frequently, however, laws are referred to in their codified form—that is, the form in which they appear in the federal and state codes.
In these codes, laws are compiled by subject. The United States Code (U.S.C.) arranges all existing federal laws of a public and permanent nature by subject. Each of the fifty subjects into which the U.S.C. arranges the laws is given a title and a title number. For example, laws relating to commerce and trade are collected in Title 15, “Commerce and Trade.” Titles are subdivided by sections. A citation to the U.S.C. includes title and section numbers. (A citation is a reference to a publication in which a legal authority—such as a statute or a court decision—or other source can be found.) Thus, a reference to “15 U.S.C. Section 1” means that the statute can be found in Section 1 of Title 15. (“Section” may also be designated by the symbol §, and “Sections,” by §§.) Sometimes a citation includes the abbreviation et seq.—as in “15 U.S.C. Sections 1 et seq.” The term is an abbreviated form of et sequitur, which in Latin means “and the following”; when used in a citation, it refers to sections that concern the same subject as the numbered section and follow it in sequence.
Profile: United States Code
State codes follow the U.S.C. pattern of arranging law by subject. They may be called codes, revisions, compilations, consolidations, general statutes, or statutes, depending on the preference of the states. In some codes, subjects are designated by number. In others, they are designated by name. For example, “13 Pennsylvania Consolidated Statutes Section 1101” means that the statute can be found in Title 13, Section 1101, of the Pennsylvania code. “California Commercial Code Section 1101” means the statute can be found under the subject heading “Commercial Code” of the California code in Section 1101. Abbreviations may be used. For example, “13 Pennsylvania Consolidated Statutes Section 1101” may be abbreviated “13 Pa. C.S. §1101,” and “California Commercial Code Section 1101” may be abbreviated “Cal. Com. Code §1101.”
Commercial publications of these laws and regulations are available and are widely used. For example, West Publishing Company publishes the United States Code Annotated (U.S.C.A.). The U.S.C.A. contains the complete text of laws included in the U.S.C., as well as notes on court decisions that interpret and apply specific sections of the statutes, plus the text of presidential proclamations and executive orders. The U.S.C.A. also includes research aids, such as cross-references to related statutes, historical notes, and library references. A citation to the U.S.C.A. is similar to a citation to the U.S.C.: “15 U.S.C.A. Section 1.”
Profile: United States Code Annotated

FINDING ADMINISTRATIVE LAW
Rules and regulations adopted by federal administrative agencies are initially published in the Federal Register, a daily publication of the U.S. government. Later, they are incorporated into the Code of Federal Regulations (C.F.R.). Like the U.S.C., the C.F.R. is divided into fifty titles. Rules within each title are assigned section numbers. A full citation to the C.F.R. includes title and section numbers. For example, a reference to “17 C.F.R. Section 230.504” means that the rule can be found in Section 230.504 of Title 17.
Profile: Code of Federal Regulations

FINDING CASE LAW
To understand how to read citations to court cases, we need first to look briefly at the court system. As will be discussed in Chapter 3, there are two types of courts in the United States, federal courts and state courts. Both the federal and state court systems consist of several levels, or tiers, of courts.
Trial courts, in which evidence is presented and testimony given, are on the bottom tier (which also includes lower courts handling specialized issues). Decisions from a trial court can be appealed to a higher court, which commonly would be an intermediate court of appeals, or an appellate court. Appellate courts are known as reviewing courts, because they do not hear evidence or testimony, as trial courts do; rather, an appellate court reviews all of the records relating to a case to determine whether the trial court’s decision was correct. Decisions from these intermediate courts of appeals may be appealed to an even higher court, such as a state supreme court or the United States Supreme Court.

STATE COURT DECISIONS Most state trial court decisions are not published. Except in New York and a few other states that publish selected opinions of their trial courts, decisions from the state trial courts are merely filed in the office of the clerk of the court, where they are available for public inspection. Written decisions of the appellate, or reviewing, courts are published and distributed. The reported appellate decisions are published in volumes called Reports, which are numbered consecutively.

Reporters Containing State Court Decisions Decisions of the appellate courts of a particular state are found in the state reports of that state. A few states—including those with intermediate appellate courts, such as California, Illinois, and New York—have more than one reporter for opinions given by their courts.
Additionally, state court opinions appear in regional units of the National Reporter System, published by West Publishing Company. Most lawyers and libraries have the West reporters because they report cases more quickly, and are distributed more widely, than the state-published reports. In fact, many states have eliminated their own reporters in favor of West’s National Reporter System. The National Reporter System divides the states into the following geographical areas: Atlantic (A. or A.2d), South Eastern (S.E. or S.E.2d), South Western (S.W. or S.W.2d), North Western (N.W. or N.W.2d), North Eastern (N.E. or N.E.2d), Southern (So. or So.2d), and Pacific (P. or P.2d). (The 2d in the preceding abbreviations refers to Second Series.) The states included in each of these regional divisions are indicated in Exhibit 1–4, which illustrates West’s National Reporter System.
Profile: West's Reporter System

Case Citations After an appellate decision has been published, it is normally referred to (cited) by the name of the case (called the style of the case); the volume, name, and page of the state’s official reporter (if different from West’s National Reporter System); the volume, unit, and page number of the National Reporter; and the volume, name, and page number of any other selected reporter. (Citing a reporter by volume number, name, and page number, in that order, is common to all citations.) When more than one reporter is cited for the same case, each reference is called a parallel citation.
For example, consider the following case citation: J-Mart Jewelry Outlets, Inc. v. Standard Design, 218 Ga.App. 459, 462 S.E.2d 406 (1995). We see that the opinion in this case may be found in Volume 218 of the official Georgia Appeals Reports, on page 459. The parallel citation is to Volume 462 of the South Eastern Reporter, Second Series, page 406. In reprinting appellate opinions in this text, in addition to the reporter, we give the name of the court hearing the case and the year of the court’s decision.
Sample citations to state court decisions are listed and explained in Exhibit 1–5. (Exhibit 1–5a and Exhibit 1–5b)
Image: Westlaw User

FEDERAL COURT DECISIONS
Federal district (trial) court decisions are published unofficially in West’s Federal Supplement (F.Supp.), and opinions from the circuit courts of appeals are reported unofficially in West’s Federal Reporter (F. or F.2d or F.3d). Cases concerning federal bankruptcy law are published unofficially in West’s Bankruptcy Reporter (Bankr.).
The official edition of all decisions of the United States Supreme Court for which there are written opinions is the United States Reports (U.S.), which is published by the federal government. The series includes reports of Supreme Court cases dating from the August term of 1791, although many of the Supreme Court’s decisions were not reported in the early volumes.
Unofficial editions of Supreme Court cases include West’s Supreme Court Reporter (S.Ct.), which includes cases dating from the Court’s term in October 1882; and the Lawyers’ Edition of the Supreme Court Reports (L.Ed.), published by the Lawyers Cooperative Publishing Company. The latter contains many of the decisions not reported in the early volumes of the United States Reports.
Sample citations for federal court decisions are listed and explained in Exhibit 1–5. (Exhibit 1–5a and Exhibit 1–5b)

OLD CASE LAW On a few occasions, this text cites opinions from old, classic cases dating to the nineteenth century or earlier; some of these are from the English courts. The citations to these cases appear not to conform to the descriptions given above, because the reporters in which they were published have since been replaced. Whenever we cite an unfamiliar reporter in this text, we include with the citation a brief description of that reporter’s full name and the time period it covers.

CASE DIGESTS AND LEGAL ENCYCLOPEDIAS The body of American case law consists of nearly five million decisions, to which more than forty thousand decisions are added each year. Because judicial decisions are published in chronological order, finding relevant precedents would be a Herculean task if it were not for case digests, legal encyclopedias, and many other publications that classify decisions according to subject. These and other resources for the legal researcher are discussed in Appendix R at the end of this book

Section 6: How to read and understand the law.

The decisions made by the courts establish the boundaries of the law as it applies to business firms and business relationships. It thus is essential that businesspersons understand how to read and understand case law. The cases that we present in this text have been condensed from the full text of the courts’ opinions—that is, in each case we have summarized the background and facts, as well as the court’s decision, in our own words and have included only selected portions of the court’s opinion (“in the language of the court”). For those who wish to review court cases to perform research projects or to gain additional legal information, however, the following sections will provide useful insights into how to read and understand case law.

CASE TITLES
The title of a case, such as Adams v. Jones, indicates the names of the parties to the lawsuit. The v. in the case title stands for versus, which means “against.” In the trial court, Adams was the plaintiff—the person who filed the suit. Jones was the defendant. If the case is appealed, however, the appellate court will sometimes place the name of the party appealing the decision first, so that the case may be called Jones v. Adams if Jones is appealing. Because some appellate courts retain the trial court order of names, it is often impossible to distinguish the plaintiff from the defendant in the title of a reported appellate court decision. You must carefully read the facts of each case to identify the parties. Otherwise, the discussion by the appellate court will be difficult to understand.

TERMINOLOGY
The following terms, phrases, and abbreviations are frequently encountered in court opinions and legal publications. Because it is important to understand what is meant by these terms, phrases, and abbreviations, we define and discuss them here.

PARTIES TO LAWSUITS As mentioned previously, the party initiating a lawsuit is referred to as the plaintiff, and the party against whom a lawsuit is brought is the defendant. Lawsuits frequently involve more than one plaintiff and/or defendant. When a case is appealed from the original court or jurisdiction to another court or jurisdiction, the party appealing the case is called the appellant. The appellee is the party against whom the appeal is taken. Sometimes, an appellant that appeals a lower court’s decision is referred to as the petitioner, and the appellee is referred to as the respondent.

JUDGES AND JUSTICES The terms judge and justice are usually synonymous and represent two designations given to judges in various courts. All members of the United States Supreme Court, for example, are referred to as justices, and justice is the formal title usually given to judges of appellate courts, although this is not always the case. In New York, a justice is a judge of the trial court (which is called the Supreme Court), and a member of the Court of Appeals (the state’s highest court) is called a judge. The term justice is commonly abbreviated to J., and justices, to JJ. A Supreme Court case might refer to Justice Kennedy as Kennedy, J., or to Chief Justice Rehnquist as Rehnquist, C.J.
Profile: William H. Rehnquist

DECISIONS AND OPINIONS Most decisions reached by reviewing, or appellate, courts are explained in written opinions. The opinion contains the court’s reasons for its decision, the rules of law that apply, and the judgment.
When all judges or justices unanimously agree on an opinion, the opinion is written for the entire court and can be deemed a unanimous opinion. When there is not a unanimous opinion, a majority opinion is written; it outlines the views of the majority of the judges or justices deciding the case. If a judge agrees, or concurs, with the majority’s decision, but for different reasons, that judge may write a concurring opinion. A dissenting opinion is written by one or more judges who disagree with the majority’s decision. The dissenting opinion is important because it may form the basis of the arguments used years later in overruling the precedential majority opinion.
Occasionally, a court issues a per curiam opinion. Per curiam is a Latin phrase meaning “of the court.” In per curiam opinions, there is no indication of which judge or justice authored the opinion. This term may also be used for an announcement of a court’s disposition of a case that is not accompanied by a written opinion. Sometimes, the cases presented in this text are en banc decisions. When an appellate court reviews a case en banc, which is Latin for “in the bench,” generally all of the judges sitting on the bench of that court review the case.

A SAMPLE COURT CASE
To illustrate the various elements contained in a court opinion, we present a sample annotated court opinion.

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Sample

ROBINSON v. SHELL OIL COMPANY
Supreme Court of the United States, 1997.
___U.S.___,
117 S.CT. 843,
___L.Ed.2d___.

(1) Justice THOMAS delivered the opinion of the Court.

(2) Section 704(a) of (3) Title VII of the Civil Rights Act of 1964 makes it unlawful "for an employer to discriminate against any of his employees or applicants for employment" who have either availed themselves of Title VII's protections or assisted others in so doing. We are asked to decide in this case whether the term "employees," as used in [Section] 704(a), includes former employees, such that petitioner may bring suit against his former employer for postemployment actions allegedly taken in retaliation for petitioner's having filed a charge with the (4) Equal Employment Opportunity Commission (EEOC).
* * *
(5) I
(6) Respondent Shell Oil Co. fired (7) petitioner Charles T. Robinson, Sr., in 1991. Shortly thereafter, petitioner filed a charge with the EEOC, alleging that respondent had discharged him because of his race. While that charge was pending, petitioner applied for a job with another company. That company contacted respondent, as petitioner's former employer, for an employment reference. Petitioner claims that respondent gave him a negative reference in retaliation for his having filed the EEOC charge.
Petitioner subsequently sued under [Section] 704(a) * * *. [T]he (8) District Court dismissed the action, adhering to previous (9) Fourth Circuit precedent holding that [Section] 704(a) does not apply to former employees. Petitioner appealed and a divided panel of the Fourth Circuit (10) reversed the District Court. The Fourth Circuit granted rehearing * * * and thereafter (11) affirmed the District Court's determination that former employees may not bring suit under [Section] 704(a) for retaliation occurring after termination of their employment.
We granted (12) certiorari in order to resolve a conflict among the Circuits on this issue.
(13) II
A. Our first step in interpreting a stature is to determine whether the language at issue has a (14) plain and unambiguous meaning with regard to the particular dispute in the case. Our inquiry must cease if the statutory language is unambiguous and "the statutory scheme is coherent and consistent."
* * * *
B. Finding that the term "employees" in [Section] 704(a) is ambiguous, we are left to resolve that ambiguity. The broader context provided by other sections of the statute provides considerable assistance in this regard. * * * [S]everal sections of the statute plainly contemplate that former employees will make use of the (15) remedial mechanisms of Title VII. Indeed, [Section] 703(a) expressly includes discriminatory "discharge" as one of the unlawful employment practices against which Title VII is directed. Insofar as [Section] 704(a) expressly protects employees from retaliation for filing a "charge" under Title VII, and a charge under [Section] 703(a) alleging unlawful discharge would necessarily be brought by a former employee, it is far more consistent to include former employees within the scope of "employee" protected by [Section] 704(a).
* * * *
(16) III
We hold that the term "employees," as used in [Section] 704(a) of Title VII, is ambiguous as to whether it includes former employees. It being more consistent with the broader context of Title VII and the primary purpose of [Section] 704(a), we hold that former employees are included within [Section] 704(a)'s coverage. Accordingly, the decision of the Fourth Circuit is reversed.

It is so ordered.
Full text of case
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You will note that triple asterisks (* * *) and quadruple asterisks (* * * *) frequently appear in the opinion. The triple asterisks indicate that we have deleted a few words or sentences from the opinion for the sake of readability or brevity. Quadruple asterisks mean that an entire paragraph (or more) has been omitted. Additionally, when the opinion cites another case or legal source, the citation to the case or other source has been omitted to save space and to improve the flow of the text. These editorial practices are continued in the other court opinions presented in this text. In addition, whenever a court opinion presented in this text includes a term or phrase that may not be readily understandable, we have added a bracketed definition or paraphrase.
Knowing how to read and understand court opinions and the legal reasoning used by the courts is an essential step in undertaking accurate legal research. Yet a further step is “briefing,” or summarizing, the case. Legal researchers routinely brief cases by reducing the texts of the opinions to their essential elements. Instructions on how to brief a case are given in Appendix A, which also includes selected cases for briefing.