The Case of the Loose Keys

The Case of the Loose Keys

Differences between civil and criminal law

American society highly values ingenuity and entrepreneurship, but there are legal limits on the conduct of commerce. Some of those limits are statutory, which means a law-making body has enacted a specific law to regulate a specific activity (e.g. the Sherman Act statute regulating antitrust) and some are found in the common law (e.g. tort law imposing liability for an infinite variety of behaviors). Most of the legal limits on business fall into the category of “civil law.”

One big difference between civil and criminal law involves the potential penalties. Civil law liability carries penalties that are monetary – so called “damages.” The guilty party pays monetary damages in an amount the court believes would make the wronged party whole. This contrasts with criminal law – where the possible penalties are limits on personal freedom (such as incarceration and death), although monetary penalties are also possible in some criminal matters (such as a fine payable to the government or restitution to the victim).

Special exception: The government contractor

There is one major exception to the rule that business contracts do not involve criminal penalties for breach: government contracting. Because so many students at UMUC have employment that involves contracts with the U.S. government in some manner, we find that is often a point of confusion in the conferences. Government contracting is a special circumstance where the contracts involve civil law – yet breach of contract potentially involves criminal penalties. The criminal penalties can include jail time for serious violations. Those of you who work in this area probably will attend a professional development seminar about contract “compliance” where you will learn the particulars of your contractual obligations.

Trend developments in business law

The past twenty years have seen a rise in the criminalization of business law. While it’s still true that no one goes to prison for breaking the terms of a contract (notable exception: government contracting), there has been a marked increase in the number of business related activities that carry possible criminal penalties.

Business activities that are punishable by criminal penalties (in addition to fines and damages) are known as “white collar” crimes. We mention this because many of you will be familiar with some famous cases from the last several years involving business people– Martha Stewart (ImClone), Kenneth Lay (Enron), Dennis Kozlowski (Tyco), and, of course, Bernie Madoff. Those business people managed to get themselves into the criminal justice system by committing fraud, lying to federal authorities, or otherwise invoking specific laws to deter commercial crimes such as insider trading of stock. The possible penalties for white-collar crime do include imprisonment as well as fines and damages.

When you see a business person in handcuffs doing “the perp walk,” ask yourself, “What law has been allegedly broken?” Typically there will be a law (statute) or a regulation (e.g. Securities Exchange Commission rule) that has been allegedly transgressed.