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
Law as a Foundation for Business
Learning Objectives
The purpose of this chapter is to introduce the students to the subject of law 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 law‖ in the society and that the judicial system is the most important
stabilizing force in society. It should create an awareness that law is a foundation for the private
market and ―property‖ as a legal concept underpins that market and contributes to the maximum
wealth of nations through productivity. This chapter also describes stare decisis, basic sources of
the American law, and sanctions that can be imposed when the law is not followed.
References
Bethell, Tom, The Noblest Triumph (1999).
Bernstein, William J., The First of Plenty. McGraw-Hill (2004).
Driegel, Blandine, The State and the Rule of Law. Princeton U. Press (1995).
Friedman, Lawrence M., American Law, 2d ed. Norton (1998).
Harnett, Bertram, Law, Lawyers and Laymen: Making Sense of the American Legal
System. San Diego: Harcourt Brace Jovanovich (1984).
Helpman, Elhanan, The Mystery of Economic Growth. Belknap Press (2004).
Holmes, The Common Law. Little, Brown and Company (1922).
Kelman, M., A Guide to Critical Legal Studies. Harvard (1988).
Pound, An Introduction to the Philosophy of Law. Yale University Press (1922).
Reed, O. Lee, ―Law, the Rule of Law, and Property,‖ American Business Law Journal, Vol.
38 (2001).
Reed, O. Lee, ―Nationbuilding 101: Reductionism in Property, Liberty, and Corporate
Governance,‖ 36 Vanderbilt Journal of Transitional Law 673 (2003).
The Spirit of the Common Law. Marshall Jones Co. (1921).
,Teaching Outline
I. Introduction
A. Why Law and Regulations Are Fundamental Foundations for Business (LO 1-1)
Emphasize:
That by studying the legal and regulatory environment of business, students will 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 lawyers can play, they are increasingly being asked to
join corporate boards.
Sidebar 1.1 titled ‗Sustainability and Integrity: Cautionary Tales of Legal Liability.‘
II. Law, the Rule of Law, and Property
A. Law
Emphasize:
The simple definition of law. It can be elaborated by observing that law is a rule-based,
state-enforced formal ordering system with moral elements.
That adequate law and legal institutes promote the certainty and trust necessary for
complex, long-term business arrangements. In an economic sense, they lower the costs
of transacting business.
Additional Matters for Discussion:
Discuss that law formalizes values and traditions and that law 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 whether or not lack of law and strict
regulation facilitated the economic crash and recession that began in 2008.
Ask students to comment on how mistrust of law and lawmakers precipitated the
―Occupy Wall Street‖ and other ―Occupy…‖ movements that arosein 2011.
Discuss how the law impacts the COVID 19 restrictions on businesses opening in 2020.
B. The Rule of Law
Emphasize:
That under a rule of law, laws are generally and equallyapplicable.
That lack of the rule of law internationallyhas produced hundreds of calls for it in the
, last several years by business and political leaders. Get students to search for rule-of-
lawreferences in computer databases.
That the complete rule of law is an ideal rather than a fact in even the most
democraticS5societies.
AdditionalS5MattersS5forS5Discussion:
GetS5studentsS5toS5discussS5whyS5theS5managingS5directorS5ofS5J.P.S5MorganS5andS5C
o.S5calledS5theS5ruleS5ofS5lawS5―aS5cornerstoneS5ofS5freeS5trade.‖
AskS5studentsS5whyS5theS5ruleS5ofS5lawS5tendsS5toS5produceS5rulesS5thatS5benefitS5every
one.S5Answer:S5BecauseS5lawsS5applyS5generallyS5andS5equallytoS5everyone,S5theS5o
nlyS5waylawmakersS5canS5benefitS5themselvesS5isS5byS5benefittingS5everyone.S5ThisS5
answerS5isS5theoretical,S5ofS5course.S5LawmakersS5areS5oftenS5benefitedS5individuallyf
orS5makinglawsS5thatS5favorS5specialS5interests.
AskS5studentsS5toS5imagineS5howS5societyS5wouldS5beS5withS5noS5laws.S5WhatS5ifS5t
heS5governorS5ofS5one‘sS5stateS5announcedS5thatS5tomorrowS5wouldS5beS5no-
lawS5dayS5andS5thatS5nothingS5wouldS5be
penalizedS5orS5enforced,S5noS5policeS5wouldS5beS5presentS5andS5noS5penaltiesS5wouldS5
resultS5fromS5anyone‘sS5actions.S5WhatS5wouldS5theS5studentsS5do?S5OneS5isS5likelyS5t
oS5findS5thatS5afterS5aS5fewS5fleetingS5andS5whimsicalS5thoughts,S5theyS5wouldS5agreeS
5thatS5theyS5wouldS5primarilyS5actS5toS5protectS5theirS5realS5andS5personalS5property.
C. PropertyS5(LOS51-2)
Emphasize:
TheS5twoS5meaningsS5ofS5property.
ThatS5propertyisS5notS5theS5resourceS5orS5thingS5itself.S 5 ItS5isS5aS5rightS5(orS5seriesS5ofS5rights).
ThatS5theS5propertyrightS5givesS5aS5majorS5incentiveS5toS5developS5resources.
ThatS5theS5exclusionaryS5rightS5ofS5propertyprovidesS5aS5basisS5forS5theS5privateS5
marketS5andS5modernbusiness.
AdditionalS5MattersS5forS5Discussion:
AskS5studentsS5toS5discussS5theS5incentiveS5toS5growS5andS5prosperS5andS5theS5incentiv
eS5toS5innovateS5andS5progressS5underS5aS5systemS5withS5aS5rightS5toS5privateS5propertyS5
ownershipS5andS5aS5communist
systemS5whereS5privateS5ownershipS5ofS5propertyisS5greatlyS5diminishedS5forS5most.S5
WouldS5theyS5evenS5beS5inS5schoolS5ifS5accumulationS5ofS5propertyrightsS5wereS5notS5
attainable?
D. PropertyS5inS5itsS5BroadestS5Sense
Emphasize:
Howinitsbroadestsense―property‖isthecentralS 5 conceptofWesternlegalsystems.
HowS5propertyS5canS5beS5thoughtS5ofS5asS5theS5hubS5ofS5aS5wheelS5andS5theS5variou
sS5legalS5topicsS5studiedS5inS5theS5textS5asS5spokesS5ofS5theS5wheel.S5LawS5andS5theS5ru
, leS5ofS5lawS5provideS5theS5unifying
The Legal and Regulatory Environment of Business, 19th Edition By Marisa
Pagnattaro, Daniel Cahoy, Julie Manning Magid, Peter Shedd
Chapter 1-22
Chapter 1
Law as a Foundation for Business
Learning Objectives
The purpose of this chapter is to introduce the students to the subject of law 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 law‖ in the society and that the judicial system is the most important
stabilizing force in society. It should create an awareness that law is a foundation for the private
market and ―property‖ as a legal concept underpins that market and contributes to the maximum
wealth of nations through productivity. This chapter also describes stare decisis, basic sources of
the American law, and sanctions that can be imposed when the law is not followed.
References
Bethell, Tom, The Noblest Triumph (1999).
Bernstein, William J., The First of Plenty. McGraw-Hill (2004).
Driegel, Blandine, The State and the Rule of Law. Princeton U. Press (1995).
Friedman, Lawrence M., American Law, 2d ed. Norton (1998).
Harnett, Bertram, Law, Lawyers and Laymen: Making Sense of the American Legal
System. San Diego: Harcourt Brace Jovanovich (1984).
Helpman, Elhanan, The Mystery of Economic Growth. Belknap Press (2004).
Holmes, The Common Law. Little, Brown and Company (1922).
Kelman, M., A Guide to Critical Legal Studies. Harvard (1988).
Pound, An Introduction to the Philosophy of Law. Yale University Press (1922).
Reed, O. Lee, ―Law, the Rule of Law, and Property,‖ American Business Law Journal, Vol.
38 (2001).
Reed, O. Lee, ―Nationbuilding 101: Reductionism in Property, Liberty, and Corporate
Governance,‖ 36 Vanderbilt Journal of Transitional Law 673 (2003).
The Spirit of the Common Law. Marshall Jones Co. (1921).
,Teaching Outline
I. Introduction
A. Why Law and Regulations Are Fundamental Foundations for Business (LO 1-1)
Emphasize:
That by studying the legal and regulatory environment of business, students will 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 lawyers can play, they are increasingly being asked to
join corporate boards.
Sidebar 1.1 titled ‗Sustainability and Integrity: Cautionary Tales of Legal Liability.‘
II. Law, the Rule of Law, and Property
A. Law
Emphasize:
The simple definition of law. It can be elaborated by observing that law is a rule-based,
state-enforced formal ordering system with moral elements.
That adequate law and legal institutes promote the certainty and trust necessary for
complex, long-term business arrangements. In an economic sense, they lower the costs
of transacting business.
Additional Matters for Discussion:
Discuss that law formalizes values and traditions and that law 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 whether or not lack of law and strict
regulation facilitated the economic crash and recession that began in 2008.
Ask students to comment on how mistrust of law and lawmakers precipitated the
―Occupy Wall Street‖ and other ―Occupy…‖ movements that arosein 2011.
Discuss how the law impacts the COVID 19 restrictions on businesses opening in 2020.
B. The Rule of Law
Emphasize:
That under a rule of law, laws are generally and equallyapplicable.
That lack of the rule of law internationallyhas produced hundreds of calls for it in the
, last several years by business and political leaders. Get students to search for rule-of-
lawreferences in computer databases.
That the complete rule of law is an ideal rather than a fact in even the most
democraticS5societies.
AdditionalS5MattersS5forS5Discussion:
GetS5studentsS5toS5discussS5whyS5theS5managingS5directorS5ofS5J.P.S5MorganS5andS5C
o.S5calledS5theS5ruleS5ofS5lawS5―aS5cornerstoneS5ofS5freeS5trade.‖
AskS5studentsS5whyS5theS5ruleS5ofS5lawS5tendsS5toS5produceS5rulesS5thatS5benefitS5every
one.S5Answer:S5BecauseS5lawsS5applyS5generallyS5andS5equallytoS5everyone,S5theS5o
nlyS5waylawmakersS5canS5benefitS5themselvesS5isS5byS5benefittingS5everyone.S5ThisS5
answerS5isS5theoretical,S5ofS5course.S5LawmakersS5areS5oftenS5benefitedS5individuallyf
orS5makinglawsS5thatS5favorS5specialS5interests.
AskS5studentsS5toS5imagineS5howS5societyS5wouldS5beS5withS5noS5laws.S5WhatS5ifS5t
heS5governorS5ofS5one‘sS5stateS5announcedS5thatS5tomorrowS5wouldS5beS5no-
lawS5dayS5andS5thatS5nothingS5wouldS5be
penalizedS5orS5enforced,S5noS5policeS5wouldS5beS5presentS5andS5noS5penaltiesS5wouldS5
resultS5fromS5anyone‘sS5actions.S5WhatS5wouldS5theS5studentsS5do?S5OneS5isS5likelyS5t
oS5findS5thatS5afterS5aS5fewS5fleetingS5andS5whimsicalS5thoughts,S5theyS5wouldS5agreeS
5thatS5theyS5wouldS5primarilyS5actS5toS5protectS5theirS5realS5andS5personalS5property.
C. PropertyS5(LOS51-2)
Emphasize:
TheS5twoS5meaningsS5ofS5property.
ThatS5propertyisS5notS5theS5resourceS5orS5thingS5itself.S 5 ItS5isS5aS5rightS5(orS5seriesS5ofS5rights).
ThatS5theS5propertyrightS5givesS5aS5majorS5incentiveS5toS5developS5resources.
ThatS5theS5exclusionaryS5rightS5ofS5propertyprovidesS5aS5basisS5forS5theS5privateS5
marketS5andS5modernbusiness.
AdditionalS5MattersS5forS5Discussion:
AskS5studentsS5toS5discussS5theS5incentiveS5toS5growS5andS5prosperS5andS5theS5incentiv
eS5toS5innovateS5andS5progressS5underS5aS5systemS5withS5aS5rightS5toS5privateS5propertyS5
ownershipS5andS5aS5communist
systemS5whereS5privateS5ownershipS5ofS5propertyisS5greatlyS5diminishedS5forS5most.S5
WouldS5theyS5evenS5beS5inS5schoolS5ifS5accumulationS5ofS5propertyrightsS5wereS5notS5
attainable?
D. PropertyS5inS5itsS5BroadestS5Sense
Emphasize:
Howinitsbroadestsense―property‖isthecentralS 5 conceptofWesternlegalsystems.
HowS5propertyS5canS5beS5thoughtS5ofS5asS5theS5hubS5ofS5aS5wheelS5andS5theS5variou
sS5legalS5topicsS5studiedS5inS5theS5textS5asS5spokesS5ofS5theS5wheel.S5LawS5andS5theS5ru
, leS5ofS5lawS5provideS5theS5unifying
