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A LAW is often used in the Generative Shape workbench to define geometric variation. One example is an offset curve on a cam where the offset is not a constant distance but is defined by a Law to vary. Another example is a corregated hose, where the hose radius is defined by a Law.
According to the online help: "A RULE is a set of instructions, generally based on conditional statements, whereby the relationship between parameters is controlled. In addition, depending on the context described by the rule instructions, CATIA macros can be executed and messages can be displayed."
An example of a Rule is: if the Width is greater than 100, the Number of holes equals 5.