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Business law, on national and international levels, is continually evolving with new areas of law developing in relation to consumer protection, competition, and computers.

Source: Encyclopedia Britannica

The American Legal System

Sources of Law.

Constitutional Law is based on a formal document that defines broad powers. Federal constitutional law originates from the U.S. constitution. State constitutional law originates from the individual state constitutions.

Statutes and Ordinances are legislation passed on the federal, state, or local levels.

Common Law is based on the concept of precedence – on how the courts have interpreted the law. Under common law, the facts of a particular case are determined and compared to previous cases having similar facts in order to reach a decision by analogy. Common law applies mostly at the state level. It originated in the 13th century when royal judges began recording their decisions and the reasoning behind their decisions.

Administrative Law – federal, state and local level. Administrative law is made by administrative agencies that define the intent of the legislative body that passed the law.

The sources of law have both vertical and horizontal dimensions. Vertical dimensions include federal authority, state authority, and concurrent authority. Federalism refers to this form of government, in which there is national and local authority. Federal authority covers laws related to patents, pensions and profit sharing, and labor issues. State authority covers business association, contracts, and trade secrets. Concurrent authority covers security law, tax law and employment law. Note that employment law refers to non-union relationships; labor law refers to union relationships.

The horizontal dimension is related to the separation of power between the executive branch, which creates administrative law, the legislative branch, which creates statutes, and the judicial branch, which creates common law. The judicial system in the U.S. has a pyramid structure consisting of fewer higher level courts and more lower level courts:

Actually, there are two pyramid structures – one for federal courts and one for state courts. State courts may use different terminology; for example, trial courts may be called courts of common plea, appellate courts may be called superior courts or commonwealth courts.

Classification of Law.

Substantive law vs. procedural law: Substantive law creates, defines, and regulates legal rights and obligations. Procedural law defines the rules that are used to enforce substantive law.

Common law vs. statutory law: Common law is defined by judges. Statutory law is passed by legislatures. For example, the Securities Act of 1933 is statutory law.

Criminal law vs. civil law: Criminal law is between private parties and society. Civil law is between private parties only.

Jurisdiction.

Jurisdiction is the power of a court to hear a particular case. In order for a court to have jurisdiction, it must have both subject matter jurisdiction (the power to hear the type of claim being asserted) and personal jurisdiction (power over the person).

Subject Matter Jurisdiction

Article III of the U.S. constitution states that federal courts have only certain types of subject matter jurisdiction. To satisfy subject matter jurisdiction, a federal court must have either:

1. Federal question jurisdiction – federal courts have federal question jurisdiction in cases involving the federal constitution, federal statutes, or federal treaties.

Or

2. Diversity jurisdiction – diversity jurisdiction requires both a) $ 75,000 or more at issue, and b) the parties must be residents of different states. Diversity jurisdiction applies for example to a case in which a traveler passing through a different state from his/her home state is accused of a serious offense, and in which the plaintiff, attorneys, and judge may all be close friends.

Or

3. suit by or against the U.S. government.

Or

4. Miscellaneous – certain types of cases such as those related to patents, bankruptcy, admiralty (maritime cases), trademarks and copyrights, etc. Items 1) and 2) can be tried in either state or federal courts (concurrent state/federal jurisdiction). Items 3) and 4) may be heard only by federal courts.

Personal Jurisdiction.

Types of personal jurisdiction:

1. In personam – court has power over a particular person – in personam applies if minimum contact is established. For non-residents of a state, a state court may still have jurisdiction if the person travels regularly to the state on business or has a post office box in the state. Each state has its own definition of what constitutes doing business in the state, as determined by common law.

2. In Rem – a court has power if a particular piece of property is in the state.