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Law generally refers to rules created and enforced by governments (legislation or code law) and, particularly in common-law jurisdictions (Australia, Canada, Ireland, India, New Zealand, South Africa, the United Kingdom, the United States) also to principles, policies, and rules emerging from court decisions (case law). The purpose and justification of law is contested. Law may seek to protect fundamental rights, to facilitate peaceful interaction between people pursuing diverging goals, or to promote or achieve a particular understanding of what is good or worthy.

Law both inhibits and enables the actions of companies. Law may inhibit a company’s activities by forbidding or requiring particular courses of action. Law, in different ways, does both. Law may enable a company’s activities by providing templates or frameworks through which companies may pursue their goals. Contract law, for example, provides that by doing or saying certain things people can make binding agreements with one another that will be enforced by judicial authorities in the event that one or more parties fail to follow through on the agreement. Business associations law, for example, provides that by going through specific processes people can create companies whose equity owners have limited liability (corporations).

There is significant but incomplete overlap between law and ethics. Law and ethics possess a common vocabulary of rights, duties, obligations, considerations of the good, and so forth. However, it is a mistake to conclude that law and ethics are therefore the same. Some actions may be legal but not ethical. For instance, in most instances, lying is legal, but is generally considered unethical. Other actions may be ethical but not legal. For instance, exceeding the speed limit in order to get a very ill child to the hospital is illegal, but may be ethically justified.

Bodies of law that may be relevant to companies and business people include business associations law (which governs the formation and operation of corporations, partnerships, sole proprietorships, and other organizational forms), contract law (which governs the formation and performance of agreements between some companies or people and other companies or people), tort law (which governs liability for harms suffered between companies or people outside the bounds of contract), employment law (which governs the formation and conduct of employer-employee relationships), and the law of white-collar crimes (which governs financially motivated, non-violent conduct such as fraud and embezzlement). Companies generally have an obligation to conform their activities to law (though there may be exceptions, such as in the case of unjust laws).

See also in CEBE:

Further Reading:


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The Concise Encyclopedia of Business Ethics Copyright © 2023 by Chris MacDonald and Alexei Marcoux is licensed under a Creative Commons Attribution 4.0 International License, except where otherwise noted.

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