This chapter of "Principles of School Business Management" explores the legal context in which school business officials and other school administrators operate. The chapter considers the legal sources for the power and authority of the district and its administrators and also examines the legal process as it affects schools and the performance of school business functions. The legal basis for the local school district's existence as a legal entity is examined first. The establishment of the district's authority and the legislative delegation of authority in different states are reviewed, as are administrative redelegation of authority (affecting contracts) and the sharing of authority with other agencies. Specific sources of authority or power are considered next, including federal and state constitutions, state boards of education, federal statutes, and contracts. A discussion of the district's legal liability concludes the chapter. State and federal court cases involving school business officials are cited and discussed as examples in relation to each of the topics addressed in the chapter. Eighty-eight notes, primarily citing the court cases discussed, are provided. (PGD)