law refers to the rules and regulations that govern the conduct of business. Problems in this area come from the failure to keep promises, misunderstandings, disagreements about expectations,
or, in some cases, attempts to take advantage of others.
The regulatory environment offers a framework and enforcement system in order to provide a fair playing field for all
Sources of law
Laws are classified as either criminal or civil.
Criminal law not only prohibits a specific kind of action but also imposes a fine or imprisonment
as punishment for violating the law.
Civil law defines all the laws not classified as criminal, and it specifies the rights and duties
of individuals and organizations. Violations of civil law may result in fines
but not imprisonment.
Criminal and civil laws are derived from four sources:
1. the Constitution (Constitutional law)
established by judges (common law)
and state statutes (statutory law), and
and state administrative agencies (administrative law).
The law of contracts
Virtually every business transaction is carried out by means of a contract, a mutual agreement between
two or more parties that can be enforced in a court if one party chooses not to comply with the terms of the contract. The following contracts must be in writing:
a. contracts involving the sale of land or an interest in land
b. contracts to pay somebody else’s debt
c. contracts that cannot be fulfilled within one year, and
d. contracts for the sale of goods that cost more than $500
The law of agency
1. An agency is a common business relationship created when one person acts on behalf of another and under that person’s
2. The principal is the one who wishes to have a specific task accomplished.
3. The agent is the one who acts on behalf of the principal to accomplish the task.
4. An agency relationship
a. is created by the mutual agreement of the principal and the agent,
b. does not necessarily have to be in writing, although that is advisable,
c. continues as long as both the principal and agent so desire,
d. can be terminated by mutual agreement, by fulfillment of the purpose of the agency, by the refusal of either party to continue in the relationship, or by the death of either
The law of property
law is extremely broad in scope because it covers the ownership and transfer of all kinds of real, personal, and intellectual
Real property consists of real estate and everything
permanently attached to it.
Personal property basically is everything else. It can be subdivided into tangible property (items that have a physical existence)
and intangible property (which consists of rights and duties, e.g. accounts receivable, stock in a corporation, goodwill,
Intellectual property refers to property, such as musical
works, artwork, books, and computer software, that is generated by a person’s creative activities.
Copyrights, patents, and trademarks provide protection
to the owners of property by giving them the exclusive right to use it