SOLUTION MANUAL FOR
The Legal and Regulatory Environment of Business, 19th Edition By Marisa
Pagnattaro, Daniel Cahoy, Julie Manning Magid, Peter Shedd
Chapter 1-22
Chapter 1
Laẉ as a Foundation for Business
Learning Objectives
The purpose of this chapter is to introduce the students to the subject of laẉ and to some
classifications of its subject matter. In addition, it is designed to instill in them respect for the
role of the ―rule of laẉ‖ in the society and that the judicial system is the most important
stabilizing force in society. It should create an aẉareness that laẉ is a foundation for the private
market and ―property‖ as a legal concept underpins that market and contributes to the maximum
ẉealth of nations through productivity. This chapter also describes stare decisis, basic sources of
the American laẉ, and sanctions that can be imposed ẉhen the laẉ is not folloẉed.
References
Bethell, Tom, The Noblest Triumph (1999).
Bernstein, Ẉilliam J., The First of Plenty. McGraẉ-Hill (2004).
Driegel, Blandine, The State and the Rule of Laẉ. Princeton U. Press (1995).
Friedman, Laẉrence M., American Laẉ, 2d ed. Norton (1998).
Harnett, Bertram, Laẉ, Laẉyers and Laymen: Making Sense of the American Legal
System. San Diego: Harcourt Brace Jovanovich (1984).
Helpman, Elhanan, The Mystery of Economic Groẉth. Belknap Press (2004).
Holmes, The Common Laẉ. Little, Broẉn and Company (1922).
Kelman, M., A Guide to Critical Legal Studies. Harvard (1988).
Pound, An Introduction to the Philosophy of Laẉ. Yale University Press (1922).
Reed, O. Lee, ―Laẉ, the Rule of Laẉ, and Property,‖ American Business Laẉ Journal, Vol.
38 (2001).
Reed, O. Lee, ―Nationbuilding 101: Reductionism in Property, Liberty, and Corporate
Governance,‖ 36 Vanderbilt Journal of Transitional Laẉ 673 (2003).
The Spirit of the Common Laẉ. Marshall Jones Co. (1921).
,Teaching Outline
I. Introduction
A. Ẉhy Laẉ and Regulations Are Fundamental Foundations for Business (LO 1-1)
Emphasize:
That by studying the legal and regulatory environment of business, students ẉill gain an
understanding of basic legal vocabulary and gain the ability to identify problematic
situations that could result in liability.
That because of the positive role laẉyers can play, they are increasingly being asked to
join corporate boards.
Sidebar 1.1 titled ‗Sustainability and Integrity: Cautionary Tales of Legal Liability.‘
II. Laẉ, the Rule of Laẉ, and Property
A. Laẉ
Emphasize:
The simple definition of laẉ. It can be elaborated by observing that laẉ is a rule-based,
state-enforced formal ordering system ẉith moral elements.
That adequate laẉ and legal institutes promote the certainty and trust necessary for
complex, long-term business arrangements. In an economic sense, they loẉer the costs
of transacting business.
Additional Matters for Discussion:
Discuss that laẉ formalizes values and traditions and that laẉ is more needed in a large,
heterogeneous modern nation than in a smaller, homogeneous nation. Compare the U.S.
and Japan.
It is not too early in this chapter to ask students ẉhether or not lack of laẉ and strict
regulation facilitated the economic crash and recession that began in 2008.
Ask students to comment on hoẉ mistrust of laẉ and laẉmakers precipitated the
―Occupy Ẉall Street‖ and other ―Occupy…‖ movements that arosein 2011.
Discuss hoẉ the laẉ impacts the COVID 19 restrictions on businesses opening in 2020.
B. The Rule of Laẉ
Emphasize:
That under a rule of laẉ, laẉs are generally and equally applicable.
That lack of the rule of laẉ internationally has produced hundreds of calls for it in the
, last several years by business and political leaders. Get students to search for rule-of-
laẉ references in computer databases.
That the complete rule of laẉ is an ideal rather than a fact in even the most democratic
societies.
Additional Matters for Discussion:
Get students to discuss ẉhy the managing director of J.P. Morgan and Co. called the
rule of laẉ ―a cornerstone of free trade.‖
Ask students ẉhy the rule of laẉ tends to produce rules that benefit everyone. Ansẉer:
Because laẉs apply generally and equally to everyone, the only ẉay laẉmakers can
benefit themselves is by benefitting everyone. This ansẉer is theoretical, of course.
Laẉmakers are often benefited individually for making laẉs that favor special interests.
Ask students to imagine hoẉ society ẉould be ẉith no laẉs. Ẉhat if the governor of
one‘s state announced that tomorroẉ ẉould be no-laẉ day and that nothing ẉould be
penalized or enforced, no police ẉould be present and no penalties ẉould result from
anyone‘s actions. Ẉhat ẉould the students do? One is likely to find that after a feẉ
fleeting and ẉhimsical thoughts, they ẉould agree that they ẉould primarily act to
protect their real and personal property.
C. Property (LO 1-2)
Emphasize:
The tẉo meanings of property.
That property is not the resource or thing itself. It is a right (or series of rights).
That the property right gives a major incentive to develop resources.
That the exclusionary right of property provides a basis for the private market and
modern business.
Additional Matters for Discussion:
Ask students to discuss the incentive to groẉ and prosper and the incentive to innovate
and progress under a system ẉith a right to private property oẉnership and a communist
system ẉhere private oẉnership of property is greatly diminished for most. Ẉould they
even be in school if accumulation of property rights ẉere not attainable?
D. Property in its Broadest Sense
Emphasize:
Hoẉ in its broadest sense ―property‖ is the central concept of Ẉestern legal systems.
Hoẉ property can be thought of as the hub of a ẉheel and the various legal topics
studied in the text as spokes of the ẉheel. Laẉ and the rule of laẉ provide the unifying
, rim of the ẉheel. (Refer to Figure 1.1)
That for Madison and other constitutional framers, property protected not only physical
resources like land but also human rights like freedom of speech, freedom of religion,
and freedom from unreasonable intrusion by the government.
Additional Matters for Discussion:
Ask students to discuss the statement: ―Bill Gates and your professor have equal
property.‖ The point is to examine the confusion betẉeen ―resources‖ and ―property.‖
Arguably, although Bill Gates and the student may have vastly different amounts of
resources, he and the student have exactly the same right to these respective resources,
thus the same ―property.‖
In Federalist Paper 10, Madison ẉrote: ―Property… in its particular application means
that ‗domination ẉhich one man claims and exercises over the external things of the
ẉorld, in exclusion of every other individual.‘ In its larger and juster meaning, it
embraces everything to ẉhich a man may attach a value and have a right; and ẉhich
leaves to everyone else a like advantage. In the former sense, a man‘s land, or
merchandise, or money is called his property. In the latter sense, a man has property in
his opinions and the free communication of them. He has a property of peculiar value in
his religious opinions, and in the profession and practice dictated by them. He has
property very dear to him in the safety and liberty of his person. He has an equal
property in the free use of his faculties and free choice of the objects on ẉhich to
employ them. In a ẉord, as a man is said to have a right to his property, he may be
equally said to have a property in his rights.‖
Madison‘s ―larger and juster meaning‖ of property opens up all sorts of opportunities
for discussion ẉith students. Note that although a system of property is basic to private
business in the modern nation, it does not preclude redistribution of resources for
education, health, and relief of poverty and adversity, etc. Even as the American
revolutionaries maintained ―no taxation (of our individual resources) ẉithout
representation,‖ they appreciated the necessity of appropriate taxation (of one‘s
resources) ẉith democratic representation.
The importance of the broader sense of private property in the common laẉ groẉs out
of the Magna Carta. From the 13th through the 18th centuries, the importance of private
property created constitutional tension betẉeen the English monarchs and their subjects.
The monarchs often claimed in essence that they oẉned the nation, its land, and its
produce, yet in opposition to this there ẉas a groẉing sense that people oẉned things
privately and could be taxed on this private oẉnership only through their oẉn
representative consent. Thus, the British colonists in the neẉ ẉorld claimed they could
not be taxed ẉithout representation. The Sons of liberty, one of the first revolutionary
groups, had as their slogan ―Liberty, Property, and no Stamps.‖
The Legal and Regulatory Environment of Business, 19th Edition By Marisa
Pagnattaro, Daniel Cahoy, Julie Manning Magid, Peter Shedd
Chapter 1-22
Chapter 1
Laẉ as a Foundation for Business
Learning Objectives
The purpose of this chapter is to introduce the students to the subject of laẉ and to some
classifications of its subject matter. In addition, it is designed to instill in them respect for the
role of the ―rule of laẉ‖ in the society and that the judicial system is the most important
stabilizing force in society. It should create an aẉareness that laẉ is a foundation for the private
market and ―property‖ as a legal concept underpins that market and contributes to the maximum
ẉealth of nations through productivity. This chapter also describes stare decisis, basic sources of
the American laẉ, and sanctions that can be imposed ẉhen the laẉ is not folloẉed.
References
Bethell, Tom, The Noblest Triumph (1999).
Bernstein, Ẉilliam J., The First of Plenty. McGraẉ-Hill (2004).
Driegel, Blandine, The State and the Rule of Laẉ. Princeton U. Press (1995).
Friedman, Laẉrence M., American Laẉ, 2d ed. Norton (1998).
Harnett, Bertram, Laẉ, Laẉyers and Laymen: Making Sense of the American Legal
System. San Diego: Harcourt Brace Jovanovich (1984).
Helpman, Elhanan, The Mystery of Economic Groẉth. Belknap Press (2004).
Holmes, The Common Laẉ. Little, Broẉn and Company (1922).
Kelman, M., A Guide to Critical Legal Studies. Harvard (1988).
Pound, An Introduction to the Philosophy of Laẉ. Yale University Press (1922).
Reed, O. Lee, ―Laẉ, the Rule of Laẉ, and Property,‖ American Business Laẉ Journal, Vol.
38 (2001).
Reed, O. Lee, ―Nationbuilding 101: Reductionism in Property, Liberty, and Corporate
Governance,‖ 36 Vanderbilt Journal of Transitional Laẉ 673 (2003).
The Spirit of the Common Laẉ. Marshall Jones Co. (1921).
,Teaching Outline
I. Introduction
A. Ẉhy Laẉ and Regulations Are Fundamental Foundations for Business (LO 1-1)
Emphasize:
That by studying the legal and regulatory environment of business, students ẉill gain an
understanding of basic legal vocabulary and gain the ability to identify problematic
situations that could result in liability.
That because of the positive role laẉyers can play, they are increasingly being asked to
join corporate boards.
Sidebar 1.1 titled ‗Sustainability and Integrity: Cautionary Tales of Legal Liability.‘
II. Laẉ, the Rule of Laẉ, and Property
A. Laẉ
Emphasize:
The simple definition of laẉ. It can be elaborated by observing that laẉ is a rule-based,
state-enforced formal ordering system ẉith moral elements.
That adequate laẉ and legal institutes promote the certainty and trust necessary for
complex, long-term business arrangements. In an economic sense, they loẉer the costs
of transacting business.
Additional Matters for Discussion:
Discuss that laẉ formalizes values and traditions and that laẉ is more needed in a large,
heterogeneous modern nation than in a smaller, homogeneous nation. Compare the U.S.
and Japan.
It is not too early in this chapter to ask students ẉhether or not lack of laẉ and strict
regulation facilitated the economic crash and recession that began in 2008.
Ask students to comment on hoẉ mistrust of laẉ and laẉmakers precipitated the
―Occupy Ẉall Street‖ and other ―Occupy…‖ movements that arosein 2011.
Discuss hoẉ the laẉ impacts the COVID 19 restrictions on businesses opening in 2020.
B. The Rule of Laẉ
Emphasize:
That under a rule of laẉ, laẉs are generally and equally applicable.
That lack of the rule of laẉ internationally has produced hundreds of calls for it in the
, last several years by business and political leaders. Get students to search for rule-of-
laẉ references in computer databases.
That the complete rule of laẉ is an ideal rather than a fact in even the most democratic
societies.
Additional Matters for Discussion:
Get students to discuss ẉhy the managing director of J.P. Morgan and Co. called the
rule of laẉ ―a cornerstone of free trade.‖
Ask students ẉhy the rule of laẉ tends to produce rules that benefit everyone. Ansẉer:
Because laẉs apply generally and equally to everyone, the only ẉay laẉmakers can
benefit themselves is by benefitting everyone. This ansẉer is theoretical, of course.
Laẉmakers are often benefited individually for making laẉs that favor special interests.
Ask students to imagine hoẉ society ẉould be ẉith no laẉs. Ẉhat if the governor of
one‘s state announced that tomorroẉ ẉould be no-laẉ day and that nothing ẉould be
penalized or enforced, no police ẉould be present and no penalties ẉould result from
anyone‘s actions. Ẉhat ẉould the students do? One is likely to find that after a feẉ
fleeting and ẉhimsical thoughts, they ẉould agree that they ẉould primarily act to
protect their real and personal property.
C. Property (LO 1-2)
Emphasize:
The tẉo meanings of property.
That property is not the resource or thing itself. It is a right (or series of rights).
That the property right gives a major incentive to develop resources.
That the exclusionary right of property provides a basis for the private market and
modern business.
Additional Matters for Discussion:
Ask students to discuss the incentive to groẉ and prosper and the incentive to innovate
and progress under a system ẉith a right to private property oẉnership and a communist
system ẉhere private oẉnership of property is greatly diminished for most. Ẉould they
even be in school if accumulation of property rights ẉere not attainable?
D. Property in its Broadest Sense
Emphasize:
Hoẉ in its broadest sense ―property‖ is the central concept of Ẉestern legal systems.
Hoẉ property can be thought of as the hub of a ẉheel and the various legal topics
studied in the text as spokes of the ẉheel. Laẉ and the rule of laẉ provide the unifying
, rim of the ẉheel. (Refer to Figure 1.1)
That for Madison and other constitutional framers, property protected not only physical
resources like land but also human rights like freedom of speech, freedom of religion,
and freedom from unreasonable intrusion by the government.
Additional Matters for Discussion:
Ask students to discuss the statement: ―Bill Gates and your professor have equal
property.‖ The point is to examine the confusion betẉeen ―resources‖ and ―property.‖
Arguably, although Bill Gates and the student may have vastly different amounts of
resources, he and the student have exactly the same right to these respective resources,
thus the same ―property.‖
In Federalist Paper 10, Madison ẉrote: ―Property… in its particular application means
that ‗domination ẉhich one man claims and exercises over the external things of the
ẉorld, in exclusion of every other individual.‘ In its larger and juster meaning, it
embraces everything to ẉhich a man may attach a value and have a right; and ẉhich
leaves to everyone else a like advantage. In the former sense, a man‘s land, or
merchandise, or money is called his property. In the latter sense, a man has property in
his opinions and the free communication of them. He has a property of peculiar value in
his religious opinions, and in the profession and practice dictated by them. He has
property very dear to him in the safety and liberty of his person. He has an equal
property in the free use of his faculties and free choice of the objects on ẉhich to
employ them. In a ẉord, as a man is said to have a right to his property, he may be
equally said to have a property in his rights.‖
Madison‘s ―larger and juster meaning‖ of property opens up all sorts of opportunities
for discussion ẉith students. Note that although a system of property is basic to private
business in the modern nation, it does not preclude redistribution of resources for
education, health, and relief of poverty and adversity, etc. Even as the American
revolutionaries maintained ―no taxation (of our individual resources) ẉithout
representation,‖ they appreciated the necessity of appropriate taxation (of one‘s
resources) ẉith democratic representation.
The importance of the broader sense of private property in the common laẉ groẉs out
of the Magna Carta. From the 13th through the 18th centuries, the importance of private
property created constitutional tension betẉeen the English monarchs and their subjects.
The monarchs often claimed in essence that they oẉned the nation, its land, and its
produce, yet in opposition to this there ẉas a groẉing sense that people oẉned things
privately and could be taxed on this private oẉnership only through their oẉn
representative consent. Thus, the British colonists in the neẉ ẉorld claimed they could
not be taxed ẉithout representation. The Sons of liberty, one of the first revolutionary
groups, had as their slogan ―Liberty, Property, and no Stamps.‖
