The Role and Functions of Law in Business and Society

Law plays a significant role in the successful operation of business and society. Laws regulate social behavior, which leads to a society that runs efficiently. Laws also supply ethical standards and expectations, while providing rules of conduct, measures to enforce those rules, and a means for settling disputes.

Other functions of law include: peacekeeping; checking government power and promoting personal freedom; facilitating planning and the realization of reasonable expectations; promoting economic growth through free competition; promoting social justice; and protecting the environment (Mallor, Barnes, Bowers, and Langvardt). It is important to note that without laws to govern the actions of people and businesses, society would not be able to function effectively, and commerce would likely collapse.

Although the general functions of law appear to be rather simple, the United States legal system is actually very complex. Laws are broken down into several different types. These include constitutions, statutes, common law, administrative regulations and decisions, treaties, ordinances, and executive orders.


A constitution is the overriding law, because it establishes the fundamental principles of a government at either the state or federal level. This includes creating the branches of the government, bestowing and refusing certain powers to each branch, and preventing other governmental units from passing certain laws, specifically those which limit individual rights.

Statutes and Common Law

A statute is a law enacted by elected representatives of the legislative branch of government. Administrative regulations are similar to statutes, but are enacted by administrative agencies instead of elected representatives. Common law, on the other hand, is based on prior court decisions. These laws are applied when cases are not governed by other types of law.

Treaties, Ordinances, and Executive Orders

Treaties are contracts between two or more political authorities, such as states or countries. An ordinance is a law created by counties and municipalities. Executive orders are laws enacted by the president or governors. The power to create an executive order is granted through legislative delegation.

Law Classifications

In addition to the different types of law, laws are also categorized into three general classifications: criminal law and civil law, substantive law and procedural law, and public law and private law. It is important to note that the different classifications of law are not mutually exclusive. As noted below, criminal law is also a public law.

Criminal law is concerned with the punishment of crimes. Under criminal law, the government prosecutes people or entities that commit crimes. The penalties for breaking criminal law include incarceration or fines. Civil law relates to responsibilities that private parties, organizations, or the governments owe to one another. Penalties for breaking civil law include compensation to the wronged party, such as monetary compensation.

Substantive law, as defined by a dictionary, is a "law that creates or defines rights, duties, obligations, and causes of action that can be enforced by law" (Substantive Law). Procedural law provides methods for government agents, such as courts, in creating and enforcing substantive laws. It also controls the actions of these agents during this process.

Public law deals with the government and its dealings with individuals. Examples of public law include constitutional law and criminal law. Conversely, private law deals with individuals and the relations they have with other individuals. Contracts are an example of private law.