American Legal System: Final Exam Review

This cheat sheet summarizes key concepts of the American Legal System, focusing on the structure of government, sources of law, legal principles, and business-related legal topics, designed for a final exam review.

Core Principles

• Governments can be categorized by their approach to power: self-governance versus consolidated power.
• Markets operate on a spectrum from free markets to collectivism, influencing economic interactions.
• Regulation is employed to prohibit harmful behaviors (e.g., fraud) and incentivize beneficial ones (e.g., health insurance).
• Laws are established through primary (mandatory) and secondary (persuasive) sources, with the Constitution as the supreme law.
• Federalism divides powers between federal and state governments, with the Supremacy Clause establishing federal law's precedence.
• Legal issues are analyzed using frameworks like IRAC (Issue, Rule, Application, Conclusion) for structured problem-solving.

Action Steps

• Review lecture discussions and slides for key concepts.
• Prioritize understanding the application of legal principles over rote memorization.
• Familiarize yourself with the course syllabus for exam scope and details.
• Prepare a one-page notes sheet (front and back) for quick reference during the exam.
• Ensure your laptop is charged for the exam, as it will be administered using LockDown Browser.

Key Terms

• IRAC: A method for organizing legal analysis: Issue, Rule, Application, Conclusion.
• Federalism: A system where power is divided between federal and state governments.
• Supremacy Clause: Article VI of the Constitution, stating the Constitution and federal laws are the supreme law of the land.
• Preemption: The principle that federal law overrides state law when they conflict.
• Standards of Proof: Levels of certainty required to prove a fact in legal proceedings (e.g., Preponderance of Evidence, Beyond a Reasonable Doubt).
• Freehold Estate: The right of title and ownership of property.
• Leasehold Estate: The right to use or possess property, typically through a lease or tenancy.
• Adverse Possession: Acquiring title to property by openly possessing it without the owner's permission for a statutory period.
• Pass-Through Taxation: Business income is taxed at the owner's individual rate, not at the entity level.
• Corporate Taxation: Business income is taxed at the entity level, and then dividends are taxed again at the owner level.
• Securities Act of 1933: Federal law governing the initial offering and registration of securities.
• Securities Exchange Act of 1934: Federal law governing the trading and secondary market of securities.
• Employee vs. Independent Contractor: Classification based on the degree of control exercised over the worker, impacting labor rights and compensation.
• Administrative Agencies: Government bodies created by legislation to implement and enforce specific laws.
• Antitrust Laws: Laws designed to promote fair competition and prevent monopolies.

Pro Tips

• Understand the hierarchy of laws: Constitution > Statutes > Regulations > Case Law.
• Distinguish between substantive and procedural law, and civil vs. criminal cases.
• Recognize the different standards of proof: Reasonable Suspicion, Probable Cause, Preponderance of Evidence, Beyond a Reasonable Doubt.
• Grasp the concept of 'legal fiction' in business entities.
• Differentiate between pass-through taxation and corporate taxation.

Pitfalls to Avoid

• Confusing primary and secondary sources of law.
• Over-reliance on memorization instead of application.
• Forgetting the distinction between civil and criminal burdens of proof.
• Misunderstanding the implications of 'limited liability'.
• Failing to account for both federal and state regulations.

Myth vs Reality

• All businesses are legal entities.: Not all businesses are considered separate legal entities; the law may sometimes disregard the distinction between a business and its owners.
• Corporate income is not taxed.: Corporate net income is taxable, and dividends paid to owners are also taxable, leading to 'double taxation'.

Real World Examples

• A company sells faulty products causing harm.: This could lead to negligence or strict liability tort claims.
• A startup needs funding to grow.: They might seek equity capital from founders, angels, venture capitalists, or private equity firms.
• A business wants to protect its brand name.: Registering a trademark is crucial for protecting intellectual property.

Statistics

• Exam Duration: 70 minutes
• Number of Questions: 34

Timeline

• 1791: First Ten Amendments (Bill of Rights) to the U.S. Constitution ratified.
• 1890: Sherman Antitrust Act passed to prohibit monopolies and restraints of trade.
• 1933: Securities Act of 1933 enacted to regulate the sale of securities.
• 1934: Securities Exchange Act of 1934 enacted to regulate trading of securities.
• May 8: Final Exam date (special time at 2:30 PM).