SOLUTION MANUAL FOR c c
The Legal and Regulatory Environment of Business, 19th Edition By Marisa Pag
c c c c c c c c c c c
nattaro, Daniel Cahoy, Julie Manning Magid, Peter Shedd
c c c c c c c
Chapter 1-22 c
Chapter 1 L c c
aw as a Foundation for Business
c c c c c
Learning Objectives
c
Thecpurposecofcthiscchaptercisctocintroducecthecstudentsctocthecsubjectcofclawcandctocsomecclassificati
onscofcitscsubjectcmatter.cIncaddition,citciscdesignedctocinstillcincthemcrespectcforcthecrolecofcthec―rul
ecofclaw‖cincthecsocietycandcthatcthecjudicialcsystemciscthecmostcimportantcstabilizingcforcecincsociety
.cItcshouldccreatecancawarenesscthatclawciscacfoundationcforcthecprivatecmarketcandc―property‖cascacl
egalcconceptcunderpinscthatcmarketcandccontributesctocthecmaximumcwealthcofcnationscthroughcprod
uctivity.cThiscchaptercalsocdescribescstarecdecisis,cbasiccsourcescofcthecAmericanclaw,candcsanctions
cthatccancbecimposedcwhenctheclawciscnotcfollowed.
References
Bethell,cTom,cThecNoblestcTriumphc(1999).
Bernstein,cWilliamcJ.,cThecFirstcofcPlenty.cMcGraw-Hillc(2004).
Driegel,cBlandine,cThecStatecandcthecRulecofcLaw.cPrincetoncU.cPressc(1995).
Friedman,cLawrencecM.,cAmericancLaw,c2dced.cNortonc(1998).
Harnett,cBertram,cLaw,cLawyerscandcLaymen:cMakingcSensecofcthecAmericancLegalcS
ystem.cSancDiego:cHarcourtcBracecJovanovichc(1984).
Helpman,cElhanan,cThecMysterycofcEconomiccGrowth.cBelknapcPressc(2004).
Holmes,cThecCommoncLaw.cLittle,cBrowncandcCompanyc(1922).
Kelman,cM.,cAcGuidectocCriticalcLegalcStudies.cHarvardc(1988).
Pound,cAncIntroductionctocthecPhilosophycofcLaw.cYalecUniversitycPressc(1922).
Reed,cO.cLee,c―Law,cthecRulecofcLaw,candcProperty,‖cAmericancBusinesscLawcJournal,cVol.c3
8c(2001).
Reed,cO.cLee,c―Nationbuildingc101:cReductionismcincProperty,cLiberty,candcCorporatec
Governance,‖c36cVanderbiltcJournalcofcTransitionalcLawc673c(2003).
ThecSpiritcofcthecCommoncLaw.cMarshallcJonescCo.c(1921).
1-1
Copyrightc©2022cMcGraw-HillcEducation.cAllcrightscreserved.cNocreproductioncorcdistributioncwithoutcthecpriorcwrittencconsentcofcMcGraw-
Hillc Education.
,Teaching Outline c
I. Introduction
A. cWhycLawcandcRegulationscArecFundamentalcFoundationscforcBusinessc(LOc1-1)
Emphasize:
Thatcbycstudyingctheclegalcandcregulatorycenvironmentcofcbusiness,cstudentscwillcgaincancu
nderstandingcofcbasicclegalcvocabularycandcgaincthecabilityctocidentifycproblematiccsituatio
nscthatccouldcresultcincliability.
Thatcbecausecofcthecpositivecroleclawyersccancplay,ctheycarecincreasinglycbeingcaskedctocjo
inccorporatecboards.
Sidebarc1.1ctitledc‗SustainabilitycandcIntegrity:cCautionarycTalescofcLegalcLiability.‘
II. Law,cthecRulecofcLaw,candcProperty
A. Law
Emphasize:
Thecsimplecdefinitioncofclaw.cItccancbecelaboratedcbycobservingcthatclawciscacrule-
based,cstate-enforcedcformalcorderingcsystemcwithcmoralcelements.
Thatcadequateclawcandclegalcinstitutescpromotectheccertaintycandctrustcnecessarycforccom
plex,clong-
termcbusinesscarrangements.cIncanceconomiccsense,ctheyclowerctheccostscofctransactingcbu
siness.
AdditionalcMatterscforcDiscussion:
Discusscthatclawcformalizescvaluescandctraditionscandcthatclawciscmorecneededcincaclarge,che
terogeneouscmoderncnationcthancincacsmaller,chomogeneouscnation.cComparecthecU.S.candc
Japan.
Itciscnotctoocearlycincthiscchapterctocaskcstudentscwhethercorcnotclackcofclawcandcstrictcre
gulationcfacilitatedcthececonomicccrashcandcrecessioncthatcbegancinc2008.
Askcstudentsctoccommentconchowcmistrustcofclawcandclawmakerscprecipitatedcthe
―OccupycWallcStreet‖candcotherc―Occupy…‖cmovementscthatcarosecinc2011.
DiscusschowctheclawcimpactscthecCOVIDc19crestrictionsconcbusinessescopeningcinc2020.
B. ThecRulecofcLaw
Emphasize:
Thatcundercacrulecofclaw,clawscarecgenerallycandcequallycapplicable.
1-2
Copyrightc©2022cMcGraw-HillcEducation.cAllcrightscreserved.cNocreproductioncorcdistributioncwithoutcthecpriorcwrittencconsentcofcMcGraw-
Hillc Education.
, Thatclackcofcthecrulecofclawcinternationallychascproducedchundredscofccallscforcitcincthe
1-3
Copyrightc©2022cMcGraw-HillcEducation.cAllcrightscreserved.cNocreproductioncorcdistributioncwithoutcthecpriorcwrittencconsentcofcMcGraw-
Hillc Education.
, lastcseveralcyearscbycbusinesscandcpoliticalcleaders.cGetcstudentsctocsearchcforcrule-of-
lawcreferencescinccomputercdatabases.
Thatctheccompletecrulecofclawciscancidealcrathercthancacfactcincevencthecmostcdemocraticcso
cieties.
AdditionalcMatterscforcDiscussion:
GetcstudentsctocdiscusscwhycthecmanagingcdirectorcofcJ.P.cMorgancandcCo.ccalledcthecru
lecofclawc―accornerstonecofcfreectrade.‖
Askcstudentscwhycthecrulecofclawctendsctocproducecrulescthatcbenefitceveryone.cAnswer:cBe
causeclawscapplycgenerallycandcequallyctoceveryone,ctheconlycwayclawmakersccancbenefitct
hemselvesciscbycbenefittingceveryone.cThiscanswercisctheoretical,cofccourse.cLawmakerscar
ecoftencbenefitedcindividuallycforcmakingclawscthatcfavorcspecialcinterests.
Askcstudentsctocimaginechowcsocietycwouldcbecwithcnoclaws.cWhatcifcthecgovernorcofcon
e‘scstatecannouncedcthatctomorrowcwouldcbecno-
lawcdaycandcthatcnothingcwouldcbecpenalizedcorcenforced,cnocpolicecwouldcbecpresentcan
dcnocpenaltiescwouldcresultcfromcanyone‘scactions.cWhatcwouldcthecstudentscdo?cOnecisc
likelyctocfindcthatcaftercacfewcfleetingcandcwhimsicalcthoughts,ctheycwouldcagreecthatcthe
ycwouldcprimarilycactctocprotectctheircrealcandcpersonalcproperty.
C. Propertyc(LOc1-2)
Emphasize:
Thectwocmeaningscofcproperty.
Thatcpropertyciscnotcthecresourcecorcthingcitself.cItciscacrightc(orcseriescofcrights).
Thatcthecpropertycrightcgivescacmajorcincentivectocdevelopcresources.
Thatcthecexclusionarycrightcofcpropertycprovidescacbasiscforcthecprivatecmarketcandcm
oderncbusiness.
AdditionalcMatterscforcDiscussion:
Askcstudentsctocdiscusscthecincentivectocgrowcandcprospercandcthecincentivectocinnovatecan
dcprogresscundercacsystemcwithcacrightctocprivatecpropertycownershipcandcaccommunistcsyst
emcwherecprivatecownershipcofcpropertyciscgreatlycdiminishedcforcmost.cWouldctheycevenc
becincschoolcifcaccumulationcofcpropertycrightscwerecnotcattainable?
D. PropertycincitscBroadestcSense
Emphasize:
Howcincitscbroadestcsensec―property‖cisctheccentralcconceptcofcWesternclegalcsystems.
Howcpropertyccancbecthoughtcofcascthechubcofcacwheelcandcthecvariousclegalctopicscstudied
cincthectextcascspokes cofcthecwheel.cLawcandcthecrulecofclawcprovidecthecunifying
1-4
Copyrightc©2022cMcGraw-HillcEducation.cAllcrightscreserved.cNocreproductioncorcdistributioncwithoutcthecpriorcwrittencconsentcofcMcGraw-
Hillc Education.
The Legal and Regulatory Environment of Business, 19th Edition By Marisa Pag
c c c c c c c c c c c
nattaro, Daniel Cahoy, Julie Manning Magid, Peter Shedd
c c c c c c c
Chapter 1-22 c
Chapter 1 L c c
aw as a Foundation for Business
c c c c c
Learning Objectives
c
Thecpurposecofcthiscchaptercisctocintroducecthecstudentsctocthecsubjectcofclawcandctocsomecclassificati
onscofcitscsubjectcmatter.cIncaddition,citciscdesignedctocinstillcincthemcrespectcforcthecrolecofcthec―rul
ecofclaw‖cincthecsocietycandcthatcthecjudicialcsystemciscthecmostcimportantcstabilizingcforcecincsociety
.cItcshouldccreatecancawarenesscthatclawciscacfoundationcforcthecprivatecmarketcandc―property‖cascacl
egalcconceptcunderpinscthatcmarketcandccontributesctocthecmaximumcwealthcofcnationscthroughcprod
uctivity.cThiscchaptercalsocdescribescstarecdecisis,cbasiccsourcescofcthecAmericanclaw,candcsanctions
cthatccancbecimposedcwhenctheclawciscnotcfollowed.
References
Bethell,cTom,cThecNoblestcTriumphc(1999).
Bernstein,cWilliamcJ.,cThecFirstcofcPlenty.cMcGraw-Hillc(2004).
Driegel,cBlandine,cThecStatecandcthecRulecofcLaw.cPrincetoncU.cPressc(1995).
Friedman,cLawrencecM.,cAmericancLaw,c2dced.cNortonc(1998).
Harnett,cBertram,cLaw,cLawyerscandcLaymen:cMakingcSensecofcthecAmericancLegalcS
ystem.cSancDiego:cHarcourtcBracecJovanovichc(1984).
Helpman,cElhanan,cThecMysterycofcEconomiccGrowth.cBelknapcPressc(2004).
Holmes,cThecCommoncLaw.cLittle,cBrowncandcCompanyc(1922).
Kelman,cM.,cAcGuidectocCriticalcLegalcStudies.cHarvardc(1988).
Pound,cAncIntroductionctocthecPhilosophycofcLaw.cYalecUniversitycPressc(1922).
Reed,cO.cLee,c―Law,cthecRulecofcLaw,candcProperty,‖cAmericancBusinesscLawcJournal,cVol.c3
8c(2001).
Reed,cO.cLee,c―Nationbuildingc101:cReductionismcincProperty,cLiberty,candcCorporatec
Governance,‖c36cVanderbiltcJournalcofcTransitionalcLawc673c(2003).
ThecSpiritcofcthecCommoncLaw.cMarshallcJonescCo.c(1921).
1-1
Copyrightc©2022cMcGraw-HillcEducation.cAllcrightscreserved.cNocreproductioncorcdistributioncwithoutcthecpriorcwrittencconsentcofcMcGraw-
Hillc Education.
,Teaching Outline c
I. Introduction
A. cWhycLawcandcRegulationscArecFundamentalcFoundationscforcBusinessc(LOc1-1)
Emphasize:
Thatcbycstudyingctheclegalcandcregulatorycenvironmentcofcbusiness,cstudentscwillcgaincancu
nderstandingcofcbasicclegalcvocabularycandcgaincthecabilityctocidentifycproblematiccsituatio
nscthatccouldcresultcincliability.
Thatcbecausecofcthecpositivecroleclawyersccancplay,ctheycarecincreasinglycbeingcaskedctocjo
inccorporatecboards.
Sidebarc1.1ctitledc‗SustainabilitycandcIntegrity:cCautionarycTalescofcLegalcLiability.‘
II. Law,cthecRulecofcLaw,candcProperty
A. Law
Emphasize:
Thecsimplecdefinitioncofclaw.cItccancbecelaboratedcbycobservingcthatclawciscacrule-
based,cstate-enforcedcformalcorderingcsystemcwithcmoralcelements.
Thatcadequateclawcandclegalcinstitutescpromotectheccertaintycandctrustcnecessarycforccom
plex,clong-
termcbusinesscarrangements.cIncanceconomiccsense,ctheyclowerctheccostscofctransactingcbu
siness.
AdditionalcMatterscforcDiscussion:
Discusscthatclawcformalizescvaluescandctraditionscandcthatclawciscmorecneededcincaclarge,che
terogeneouscmoderncnationcthancincacsmaller,chomogeneouscnation.cComparecthecU.S.candc
Japan.
Itciscnotctoocearlycincthiscchapterctocaskcstudentscwhethercorcnotclackcofclawcandcstrictcre
gulationcfacilitatedcthececonomicccrashcandcrecessioncthatcbegancinc2008.
Askcstudentsctoccommentconchowcmistrustcofclawcandclawmakerscprecipitatedcthe
―OccupycWallcStreet‖candcotherc―Occupy…‖cmovementscthatcarosecinc2011.
DiscusschowctheclawcimpactscthecCOVIDc19crestrictionsconcbusinessescopeningcinc2020.
B. ThecRulecofcLaw
Emphasize:
Thatcundercacrulecofclaw,clawscarecgenerallycandcequallycapplicable.
1-2
Copyrightc©2022cMcGraw-HillcEducation.cAllcrightscreserved.cNocreproductioncorcdistributioncwithoutcthecpriorcwrittencconsentcofcMcGraw-
Hillc Education.
, Thatclackcofcthecrulecofclawcinternationallychascproducedchundredscofccallscforcitcincthe
1-3
Copyrightc©2022cMcGraw-HillcEducation.cAllcrightscreserved.cNocreproductioncorcdistributioncwithoutcthecpriorcwrittencconsentcofcMcGraw-
Hillc Education.
, lastcseveralcyearscbycbusinesscandcpoliticalcleaders.cGetcstudentsctocsearchcforcrule-of-
lawcreferencescinccomputercdatabases.
Thatctheccompletecrulecofclawciscancidealcrathercthancacfactcincevencthecmostcdemocraticcso
cieties.
AdditionalcMatterscforcDiscussion:
GetcstudentsctocdiscusscwhycthecmanagingcdirectorcofcJ.P.cMorgancandcCo.ccalledcthecru
lecofclawc―accornerstonecofcfreectrade.‖
Askcstudentscwhycthecrulecofclawctendsctocproducecrulescthatcbenefitceveryone.cAnswer:cBe
causeclawscapplycgenerallycandcequallyctoceveryone,ctheconlycwayclawmakersccancbenefitct
hemselvesciscbycbenefittingceveryone.cThiscanswercisctheoretical,cofccourse.cLawmakerscar
ecoftencbenefitedcindividuallycforcmakingclawscthatcfavorcspecialcinterests.
Askcstudentsctocimaginechowcsocietycwouldcbecwithcnoclaws.cWhatcifcthecgovernorcofcon
e‘scstatecannouncedcthatctomorrowcwouldcbecno-
lawcdaycandcthatcnothingcwouldcbecpenalizedcorcenforced,cnocpolicecwouldcbecpresentcan
dcnocpenaltiescwouldcresultcfromcanyone‘scactions.cWhatcwouldcthecstudentscdo?cOnecisc
likelyctocfindcthatcaftercacfewcfleetingcandcwhimsicalcthoughts,ctheycwouldcagreecthatcthe
ycwouldcprimarilycactctocprotectctheircrealcandcpersonalcproperty.
C. Propertyc(LOc1-2)
Emphasize:
Thectwocmeaningscofcproperty.
Thatcpropertyciscnotcthecresourcecorcthingcitself.cItciscacrightc(orcseriescofcrights).
Thatcthecpropertycrightcgivescacmajorcincentivectocdevelopcresources.
Thatcthecexclusionarycrightcofcpropertycprovidescacbasiscforcthecprivatecmarketcandcm
oderncbusiness.
AdditionalcMatterscforcDiscussion:
Askcstudentsctocdiscusscthecincentivectocgrowcandcprospercandcthecincentivectocinnovatecan
dcprogresscundercacsystemcwithcacrightctocprivatecpropertycownershipcandcaccommunistcsyst
emcwherecprivatecownershipcofcpropertyciscgreatlycdiminishedcforcmost.cWouldctheycevenc
becincschoolcifcaccumulationcofcpropertycrightscwerecnotcattainable?
D. PropertycincitscBroadestcSense
Emphasize:
Howcincitscbroadestcsensec―property‖cisctheccentralcconceptcofcWesternclegalcsystems.
Howcpropertyccancbecthoughtcofcascthechubcofcacwheelcandcthecvariousclegalctopicscstudied
cincthectextcascspokes cofcthecwheel.cLawcandcthecrulecofclawcprovidecthecunifying
1-4
Copyrightc©2022cMcGraw-HillcEducation.cAllcrightscreserved.cNocreproductioncorcdistributioncwithoutcthecpriorcwrittencconsentcofcMcGraw-
Hillc Education.
