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โš–๏ธBusiness Law Unit 1 Review

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1.2 Sources and Types of Law

โš–๏ธBusiness Law
Unit 1 Review

1.2 Sources and Types of Law

Written by the Fiveable Content Team โ€ข Last updated September 2025
Written by the Fiveable Content Team โ€ข Last updated September 2025
โš–๏ธBusiness Law
Unit & Topic Study Guides

The American legal system is built on a complex hierarchy of laws, from the supreme U.S. Constitution to local ordinances. This structure ensures a balance of power between federal, state, and local governments, while protecting individual rights and maintaining order.

Common law, based on court decisions and precedent, plays a crucial role alongside statutory law. This dual system allows for both consistency through stare decisis and flexibility to address new legal challenges as they arise in society.

Hierarchy of American laws

  • U.S. Constitution
    • Serves as the supreme law of the land establishes framework for federal government
    • Grants and limits powers of federal government protects individual rights through amendments (Bill of Rights)
  • Federal statutes
    • Enacted by Congress must be consistent with Constitution
    • Take precedence over state laws and local ordinances (Supremacy Clause)
  • Treaties
    • Agreements between U.S. and other countries ratified by Senate
    • Have same authority as federal statutes can override conflicting state laws
  • State constitutions
    • Establish framework for state governments cannot conflict with U.S. Constitution or federal laws
    • Often include additional protections for individual rights (right to privacy)
  • State statutes
    • Enacted by state legislatures must comply with state constitution and federal law
    • Address issues not covered by federal law (property, contracts, family law)
  • Local ordinances
    • Enacted by cities, counties, or other local governments
    • Cannot conflict with state or federal laws regulate local matters (zoning, public health)
  • Executive orders
    • Issued by the President to direct federal agencies and officials
    • Have the force of law but can be overturned by Congress or the courts

Common law and case precedent

  • Common law
    • Derived from English legal tradition based on court decisions rather than statutes
    • Judges apply legal principles from prior cases to decide current cases (reasoning by analogy)
  • Stare decisis
    • Courts follow precedent to maintain consistency and stability in the law
    • Lower courts must adhere to decisions of higher courts in their jurisdiction (vertical stare decisis)
    • Courts generally follow their own prior decisions (horizontal stare decisis)
  • Case law
    • Reported court decisions serve as a source of legal authority and guidance
    • Helps interpret and apply statutes and regulations to specific situations
    • Develops legal doctrines and tests (strict scrutiny, reasonable person standard)
  • Equity
    • Principles of fairness and justice used by courts when legal remedies are inadequate
    • Originated in English common law system to provide flexible solutions

Laws vs regulations

  • Laws
    • Enacted by legislative bodies (Congress, state legislatures, city councils)
    • Establish general rules of conduct and policy broad in scope
    • Enforced by executive branch agencies (law enforcement) and the courts
  • Regulations
    • Created by administrative agencies to implement and enforce laws
    • Provide specific rules and procedures for compliance narrower in scope than laws
    • Carry the force of law but must not exceed the authority granted by enabling legislation
  • Rulemaking process
    • Agencies propose regulations based on statutory authority granted by laws
    • Proposed regulations undergo public comment period for input and feedback
    • Final regulations published in Federal Register (federal) or state equivalents
  • Enforcement
    • Laws enforced by police, prosecutors, and courts through civil and criminal proceedings
    • Regulations enforced by issuing agencies through administrative actions (fines, penalties, licenses)
    • Violations of laws or regulations can result in legal consequences (imprisonment, damages)
  • Civil law
    • Legal system based on codified laws rather than judicial precedent
    • Contrasts with common law systems found in many English-speaking countries
  • Administrative law
    • Governs the activities of administrative agencies of government
    • Includes rulemaking, adjudication, and enforcement of regulations
  • Jurisprudence
    • The philosophy and theory of law
    • Examines the nature of law, legal reasoning, and legal systems