"The law" is demonstrated by the authority that Luke Fletcher exerts. He owns the largest farm in town. He also has the power and ability to crush the smaller farms. Fletcher does not embrace competition. He seeks to destroy it. The law is with Fletcher because he has the economic power. In chapter 1, this becomes clear as Joe talks about the condition in which he and his family live with Fletcher looming over them. While Fletcher represents the force of the "law," in so far as he has the power, Shane comes to represent what justice resembles in a setting where there is little legal conception of it. Shane listens to the narrative that Joe lays out for him and reflects on the condition of what is and what should be. Shane will embrace the conflict between law and justice.
The law of the Wyoming territory of the farms is written by whoever has the power and whichever force is able to best exert itself. In chapter 1, Fletcher represents this. As the narrative progresses, there will be a collision between what is lawful in terms of what passes for power and what is just, in terms of what should be as opposed to what is.