The Legal Environment of Business
Legal environment of business refers to the collection of laws and regulations that are cornered by the government and govern how businesses are formed and function within society on a formal level. Your textbook and your professor may use different wording to describe it, but this concept can be thought of as the formal local, state, and federal government regulations that govern each local, state, and national business respectively. The legal environment, however, may not only include laws that are written and enacted by the legislature, but also the action or inaction of government regulatory agencies and the courts.
In this course, you will explore many aspects of the legal environment of business. Beginning with the nature and sources of business law, you will learn about how formal justice is enforced within a society. This includes a general overview of the United States legal system , including the organization of the court systems, the various types of courts, and how the Supreme Court fits within it.
You will also look at the impact of the Constitution on business, analyzing how the Constitution empowers and limits the government’s interactions with the private sector. Next, you will take a brief look at the structure of American law as well as the various influences that have shaped the system to where it is today. You will delve into the fundamental concepts of business law, such as commercial paper, agency, property, and contacts. Further, you will look at the regulations that govern our local, state, and federal governments, and those that keep an eye on interstate commerce. Lastly, you will review key concepts such as bankruptcy, security trade, anti-trust laws, and unfair competition.
Business Law Fundamentals
Contract Formation
The principles of contract formation are the heart of any business law course. Understanding what makes a contract valid is essential to success. Consideration, mutual assent, and capacity for parties to make a contract are the key ideas to grasp before taking the exam.
Agency
The concept of agency has been the subject of many business law questions in the past. Knowing the definitions for principal, agent, respondent superior, and independent contractor can help you as you tackle exam topics on this area.
Torts
The exam should contain several questions regarding property and torts. Knowing the different types of property and how they are treated by the law can be crucial to getting full credit on your exam. Similarly, tort law is increasingly an important topic on the LEB, as well as on other exams that touch on business law.
Key Exam 1 Topics
The following is a list of the most important topics for exam 1 (the first of three exams in this course). All of these topics have been discussed in class. Some of them I hit harder than others but all have been reviewed. The exam itself has 100 multiple choice questions and will be 50/50 real estate versus contracts for this exam. Generally all of these topics are in the first 47 chapters of the text, titled Legal and Regulatory Environment of Business. The highlighted chapters (in bold) are particularly important. If you have limited time for studying you should focus on these key chapters. Knowing the highlighted chapters really well will likely put you in the top 20%, if not higher, on the multiple choice portion of the exam. This is not intended as a comprehensive list of topics, just the major ones that we discussed in class. Module 1 Key Terms (Chapters 1-3, 12) Module 2 Key Terms (Chapters 4-10) Module 3 Key Terms (Chapters 11-18) Module 4 Key Terms (Chapters 29-38) Module 5 Key Terms (Chapters 19-28)
Effective Study Tips
In addition to the outline, one of the strategies that I found helpful for this class is to outline the lecture notes. If you’re familiar with the course’s textbook, you may note that the textbook readings are slightly different than what’s covered in class, and although they have some overlap, you don’t want to automatically assume that they are the same. For that reason, I generally recommend creating your outline based on lecture notes because you’ll be able to identify what the professor emphasized in class, which is likely to appear on the exam. In this class, there are selected chapters of the textbook that you will need to read, including the associated charts and graphs, but most of the questions on exam are based on lecture material. Another resource you may find helpful is looking up the slides that accompany the textbook reading on the publisher’s website. They are clearly stated, with definitions of key terms and easy-to-follow graphics. If you didn’t get a chance to take notes in class or use the slides as reference points for what should be on your study guide, I highly recommend using them as templates for what material is important.
Because part of this exam also covers the ethics of business law, which is an intro-to-law course, it is important to understand some of the key principles, and a few exam questions may ask you to recall relevant case law that touches upon these key concepts as well. The textbook introduces students to the meanings of ethics as well as a few primary approaches to ethical decision making and enforcement, and this may be where you want to focus your studying towards on this exam. A few websites that you may find helpful are the ABA’s Section of Business Law – Business Ethics, Compliance & White Collar Crime website, and the Ethics Resource Center’s Ethical Decision Making: A Process Guide.
In terms of time management for studying, I find that having study sessions with classmates works best, as well as working with someone who has taken the course before. I recommend setting a timer for 25 minutes and breaking your day up into four 25-minute study sessions for each subject. Many people think that they can cram information in a short period of time, but as recent studies on learned behavior have shown, books that enforce multiple breaks tend to yield better results than the periods that last upwards of an hour. A few other tips on studying I suggest are creating flash cards and leaving them in visible places, studying in a quiet area of your home (if you live with roommates, hang out in a closet or pantry if possible), and making an effort to make sure that you don’t study whatever it is that keeps your attention away from studying – this may be your smartphone or the television. I also recommend getting outside for at least five minutes for every 25 minutes of studying that you do because research has shown that our brains need fresh air -or something to break up the monotony of looking at a computer screen – to be mentally active.
Remember to take care of yourself during this exam period – eat healthy and try not to skip meals, make sure you stay hydrated with plenty of water, and be sure that you’re getting enough sleep at night.
Exam Questions and Their Solutions
There are a number of types of questions I have seen in the past that students can expect to see on the exam.
Q: "Explain the concept in question X."
In many cases, I will ask students to explain the concept in question X. For example, a case discussed in class may focus on goods or services. I’ll use this as an example in the real world to assess how well you understand the concepts.
Q: "Explain the case in question A given the rule in question B."
These questions test your knowledge of a given case, and the rule of law from that case. You’ll be expected to give the deciding court’s reasoning, and the main take away.
Q: "How does the case in question A relate to the case in question B?"
To answer this question, look at the facts, what court decided it, review the rule of law, the reasoning, and finally, the decision. How similar are the cases? What differences are there? But just writing down similarities and differences is not enough . Argue your position, apply the law to your examples and answer the question.
Q: "What is the rule of law set in question X?"
When a case reaches court, it usually sets a rule of law that is based on the facts of that particular case. I’ll ask you to do research and discover other cases that may have built on the new rule of law set by the previous case.
Q: "Apply the factors to the case in question A."
The factors are the rules of law applied to the real world. They are the rules put forth in the case, and they will usually lead you to the answer.
Q: "Why did court X make their ruling under the facts given?"
Sometimes I ask students to explain in detail the reasoning for the decision given in court case X. Explain the rule of laws and factors they used to come to their decision. The wording is irrelevant. Just explain why they came to their decision using the law.
Cases to be Familiar with
In this section, you will find some of the legal cases that you will likely want to review to understand concepts that will be test on the exam.
JULIA A. PRICE V. ALPHA COMMUNITY ACTION GROUP, INC. – an agent affirmatively takes action to convey an impression that he or she is agent for another party creates an agency relationship
GRIGSBY V. SAMSON LODGING SCOTTSDALE, INC. – implied authority of a corporate officer includes authority to do those acts which are reasonably necessary and proper to carry out the corporation’s business
ANDERSON V. HAWGOOD – an agency can be terminated by operation of law if a specified time period for the agency to continue has expired
HAWKINS V. PODESTA PROPERTIES INC.- a third party is unaware that the agent has exceeded the authority given by the principal to the agent
BLALOCK V. NATURAL DISASTER CONSULTING, INC. – if the principal manifests no intention to restore the agency relationship then the agency is terminated by operation of law
PEES V. REYNOLDS & CARONE TRAVEL, INC. – a principal cannot be held liable for the torts of an employee committed outside the scope of his employment
ZADEK V. OAKBROOK JOINT VENTURE – an agent is always personally liable on a contract entered into with a third party, unless the contract provides otherwise
BASS V. SWISHER – a principal may be held liable for the acts of an independent contractor under a special exception, if the contractor (1) is engaged in a highly regulated occupation; (2) is performing a non-delegable duty; or (3) is doing an inherently dangerous activity that is dangerous per se
HINKLE SPECIALITY CO., INC. V. BANK OF NORTH CAROLINA – a principal can be liable for fraud and misrepresentation induced by an agent if the agent had actual authority to conduct the affairs of the principal or had ostensible authority that would make the fraud or misrepresentation appear authorized to a third party
NORELLI V. BODEGA – a general partnership is not recognized as a separate legal entity from its partners, must be able to sue and be sued; partners are personally liable for the obligations of a partnership
FISCHER V. CLARK – the reasonable person standard is used to determine negligence of agent and principal
Ethical Considerations
In addition to its coverage of legal principles and doctrines, the LEB exam may address ethical implications in business law and the legal environment. While not always officially included as a separate section of the examination, ethics forms a necessary part of how each question is formulated on the test. Ethics considerations do not exist separately from legal principles , the two are inseparable as they interact and inform the other.
The LEB exam has a wide variety of question styles and formats. Ethics questions may be staff members facing a dilemma regarding following company policies versus addressing a situation on a case-by-case basis—or they may be scenario based questions in the form of "What is the best course of action for the business XYZ Corp?" In either case, the ethics question will have a clear connection to a legal principle. To prepare for these questions, test takers should be familiar with widely respected codes of ethics, such as the American Bar Association Model Rules of Professional Conduct.