Chapter Introduction and Summaries and Discussion Questions
TABLE OF CONTENTS
1 – INTRODUCTION TO LAW AND THE LEGAL SYSTEM ................................ 1
Summary............................................................................................................... 1
Discussion Questions............................................................................................. 2
2 – TORTS AND BUSINESS...................................................................................... 5
Summary............................................................................................................... 5
Discussion Questions............................................................................................. 6
3 – PRODUCTS LIABILITY ..................................................................................... 7
Summary............................................................................................................... 7
Discussion Questions............................................................................................. 8
4 – CONTRACT LAW.................................................................................................. 9
Summary............................................................................................................... 9
Discussion Questions............................................................................................. 9
5 – SALES LAW AND THE UNIFORM COMMERCIAL CODE .......................... 13
Summary............................................................................................................. 14
Discussion Questions........................................................................................... 15
6 – AGENCY AND EMPLOYMENT LAW............................................................. 17
Summary............................................................................................................. 17
Discussion Questions........................................................................................... 18
7 – BUSINESS ORGANIZATIONS.......................................................................... 19
Summary............................................................................................................. 19
Discussion Questions........................................................................................... 19
8 – COMMERCIAL PAPER AND BANKING TRANSACTIONS.......................... 21
Summary............................................................................................................. 21
Discussion Questions........................................................................................... 22
9 – CREDITORS AND DEBTORS – RIGHTS AND RESPONSIBILITIES......... 25
Summary............................................................................................................. 25
Discussion Questions........................................................................................... 25
10 – INTERNET LAW ............................................................................................. 27
Summary............................................................................................................. 27
Discussion Questions........................................................................................... 28
11 – INTELLECTUAL PROPERTY LAW............................................................. 29
Summary.............................................................................................................29
Discussion Questions............................................................................................30
12 – REAL PROPERTY LAW.................................................................................31
Summary.............................................................................................................31
Discussion Questions............................................................................................31
13 – INTERNATIONAL BUSINESS LAW..............................................................33
Summary.............................................................................................................33
Discussion Questions............................................................................................33
14 – LIABILITY OF ACCOUNTANTS AND OTHER PROFESSIONALS............35
Summary.............................................................................................................35
Discussion Questions:..........................................................................................36
15 – WILLS AND TRUSTS.......................................................................................37
Summary..............................................................................................................37
Discussion Questions............................................................................................37
16 – PERSONAL PROPERTY, GIFTS, AND BAILMENT....................................39
Summary..............................................................................................................39
Discussion Questions............................................................................................39
17 – CONCLUSION AND CASE PROBLEMS..........................................................40
BOOK CONCLUSION.................................................................................................40
CASE PROBLEMS AND DILEMMAS............................................................................42
APPENDICES...........................................................................................................42
AUTHOR BIOGRAPHIES............................................................................................42 1 – INTRODUCTION TO LAW AND THE LEGAL
SYSTEM
1 – INTRODUCTION TO LAW AND THE LEGAL SYSTEM
Entrepreneurs and aspiring managers deal with laws of the land every day and thus must be aware of its nuances and complexities in order for them to successfully and interdependently work with others in the community, industry, and country. Entrepreneurs and managers cannot be successful in the long-term if they are not aware of the laws impacting them as well as their employees, suppliers, vendors, and customers. As such, entrepreneurs and managers should become aware of the fundamental aspects of the legal system, so they can avoid legal problems and seek the help of experts when dealing with complex issues. This book is designed to provide the foundational aspects of the “American” legal system, as practiced in the
United States, for current and aspiring entrepreneurs and managers. By reading and
understanding the various chapters of this book, not only will business professionals
become aware of the complexities of the legal system, but entrepreneurs and
managers will also be better prepared to seek help from the right experts when they
need assistance. The “law” is complex, and it has many definitions. Fundamentally, the law is
the entire body of principles that govern conduct and which can be enforced by the courts or other government tribunals. If there were no society-made law, many people would still act in a “proper” manner based on societal norms, moral beliefs, conscience, or religion. However, not all people would act in such a “good” manner. Therefore, a basic purpose of the law is to provide a degree of order and control to
human activities. The law thus serves as an instrumentality of control by means of substantive legal rules, legal procedures, and mechanisms of legal promulgation, adjudication, implementation, and enforcement.
Summary
This chapter focused on the definition and nature of law, the delineation of the legal system in the U.S., and impact of the United States Constitutional Law on businesses. It focused on specific areas that can affect businesses, such as the regulation of commerce and taxation. Additionally, the first ten amendments to the
constitution, known as the Bill of Rights, has a strong influence on business practices in that it serves as a limitation against government power, especially when government attempts to restrict speech, including commercial speech. These laws are imperative to business entrepreneurs, managers, and leaders, as neglecting them can lead to serious penalties and consequences. Some of the rights which were covered in-
depth are Equal Protection, Freedom of Speech, Press and Association, Freedom of | Introduction to Law and the Legal System
2 Speech-Political Speech v. Commercial Speech, and the Fifth Amendment and Eminent Domain. This chapter also examined arbitration and mediation as alternatives to the traditional judicial system in resolving disputes.
Discussion Questions
1. In common law systems such as the United States, why are the legal concepts of “precedent” and “stare decisis” critical? Provide business examples with brief explanations thereof.
2. What are the differences between case law and statutory law in the United States? What takes precedence and why? Provide examples and brief explanations thereof.
3. What are the steps that an attorney would use to analyze a legal situation? Why are they important analytical tools to the manager or entrepreneur? Apply the steps to a business controversy.
4. Common law legal systems have very general statutes and very great reliance on case law and the concept of precedent, whereas civil law legal systems have very detailed statutes and do not rigidly adhere to the concept of precedent. Which system is superior? Which system would you as a global business manager or entrepreneur prefer to do business in? Why?
5. What is the concept of federalism, such as in the United States, and why does federalism have such significant legal and practical ramifications for the manager and entrepreneur? Provide business examples with brief explanations thereof.
6. What is the difference between an action “at law” and one “at equity”? Provide an example of a legal and equitable remedy together with a brief explanation of each.
7. What is the concept of “jurisdiction” and why is it so very important in the U.S. or for that matter any legal system? Provide examples with brief explanations thereof.
8. How does jurisdiction differ from venue? Provide an example of each with a brief explanation thereof.
9. What is the distinction between jurisdiction in personam and in rem? Why is this differentiation critical in the law? Provide an example of each with a brief explanation thereof.
10. What are state Long Arm statutes and why are they very important in the obtaining of jurisdiction? Provide an example along with a brief explanation thereof.
11. What is meant by the term “conflicts of laws”? Why is this legal doctrine of potential extreme importance to the success or failure of a lawsuit? Provide a business example with a brief explanation thereof.
12. Explain and illustrate how the U.S. Constitution separates and divided power so as to protect the people of the U.S. from abuse by government and government tyranny.
Business Law for the Entrepreneur and Manager
3 13. Why is the constitutional concept of “interstate commerce” so critical in the U.S. government and regulatory system? Provide business examples with brief explanations thereof.
14. When and under what circumstances can a state in the U.S. regulate interstate commerce? Provide an example with a brief explanation thereof.
15. What are some of the fundamental provisions in the Bill of Rights that affect business? Provide examples with brief explanations thereof.
16. How does the “equal protection” clause affect the debate about affirmative action preference plans in education and in employment? Provide examples along with brief explanations thereof.
17. What are the “rational basis” and “compelling interest” standards in equal protection law? Illustrate how they operate. Why are they absolutely critical to legal analysis of government programs that classify people?
18. What is the distinction between “political speech” and “commercial speech” in the United States? Why does that distinction have very important ramifications for U.S. businesses? Provide examples with brief explanations thereof.
19. What is the power of eminent domain pursuant to U.S. law? How has that power been materially expanded by the U.S. Supreme Court? Provide business examples with brief explanations thereof.
20. What are the definitions of and distinctions between arbitration and medication? Provide an example of how each could be sued in a business context along with a brief explanation thereof.
2 – TORTS AND BUSINESS
In United States law, a tort is a wrongful act against a person or property for which a legal cause of action may be brought for the harm sustained. The term “tort” is a very old one, harkening back to the early common law in England, and even before that to the Norman-French conquest of England. A tort is a private wrong, the violation of private duty created by the law, and the violation of which results in a
private injury. To compare, a crime is a public wrong, the violation of a publicly created duty, and the violation of which results in harm to the “state.” Yet it is important to note initially that the same act may constitute both a tort and a crime, for example, an assault and battery, which the state can prosecute as a crime and the victim can also sue for intentional tort damages. A breach of contract is a private wrong too, resulting in a private injury, but the breach arises from the violation of a duty created consensually by the parties. Torts can be personal torts, arising from an injury to a person’s body, feelings, or reputation, for example; and torts can be property torts, arising from harm to land, real estate, or personal property, for
example. The purposes of tort law are to provide protection to certain legally recognizable interests, to afford a remedy if these interests are wrongfully harmed, and to allocate the risk and cost of injury on a just basis. Speaking very generally, people are free to act as they please in the United States so long as their actions do not infringe on or invade the interests of others.
Summary
This chapter described the tort law of the United States, including several subcategories associated with it. The law itself was originally created to protect victims faced with physical harm, as well as to prevent future unjust cases. Its purpose continues to serve today; and it is also expanding into several areas, including the
manufacturing business. Countries around the world have followed in the “footsteps” of the United States by developing product liability laws, tort laws, etc. in order to protect consumers. In addition, the laws are also created to protect businesses and manufacturers from consumers that are willing to take advantage of products and the laws. It is for this reason that managers and entrepreneurs are often forced to develop
strategies to avoid legal problems with tort law. Firms should provide thorough training programs for their staff, including management with the proper training and examination of all laws, specifically those pertaining to their type of business. This should be done to not only protect the image of the firm, but also the consumers. In essence, entrepreneurs and managers are obligated to acknowledge, understand, and
abide by the various tort laws that exist in countries around the world in order to achieve their goals.
| Torts and Business
6 Discussion Questions
1. What is an intentional tort? Explain and illustrate how an intentional tort to the person could be committed in a business context. Explain and illustrate how an intentional tort to property could be committed in a business context.
2. What is the intentional tort of defamation? How can the intentional tort of defamation arise in a business context? Provide an example and a brief explanation thereof.
3. What is the tort of negligence? Explain and illustrate how the tort of negligence could be committed in a business context.
4. How is the standard of care and its contravention ascertained in the U.S. legal system? Provide business examples with brief explanations thereof.
5. Describe and illustrate the types of damages that are available in intentional tort and negligence cases.
6. What is the doctrine of res ipsa loquitur in U.S. negligence law? Why is it a potentially very valuable legal doctrine to a consumer injured by a product? Provide an example with a brief explanation thereof.
7. What is the doctrine of proximate cause? Why has it been called the careless person’s (or business’) “best friend”? Provide an example with a brief explanation thereof.
8. What is the distinction between misfeasance and nonfeasance in U.S. law? Why is that distinction very important in the U.S. legal system? Provide examples with brief explanations thereof. Can one have a moral duty to rescue and come to another’s aid even if one does not have a legal obligation to do so? Why or why not? Provide an example, preferably a business-related one, with a brief explanation thereof.
9. How might an employer commit tort violations in discharging an employee that the employer has the legal right to terminate? Provide examples along with brief explanations thereof.
Business Law for the Entrepreneur and Manager
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3 – PRODUCTS LIABILITY
Product safety emerges as a very important legal challenge for the manager of a manufacturing, distribution, and sales company. What is the extent of a company’s legal obligation to consumer safety? What is a firm’s legal responsibility for the products it produces, distributes, and/or sells? Should a company legally guarantee the safety of those who buy and use its products? This chapter examines various views regarding the legal duties of business to consumers; and seeks to ascertain the legal responsibilities of various entities on the product manufacturing and marketing chain toward the consumer. The corpus of law dealing with products
safety typically is designated as “products liability” law. There are a variety of product liability legal theories in U.S. law. Where does a company’s duty to protect consumers begin, and where does it end – legally and in a global marketing and legal environment? This chapter seeks to answer these important questions.
Summary
The use of any product involves some degree of risk; and accordingly a key legal question under U.S. common law, statutory law, as well as regulatory principles, is to ascertain the acceptable level of known risk. No one reasonably expects a manufacturer to make a product completely safe or to reduce the risk of harm to zero. Generally speaking, a product will be legally safe if it complies with the applicable
legal standards for product safety; and if there are still risks attendant to the use of the product it nevertheless will be deemed legally safe if the risks are known and judged acceptable and reasonable to a rational person in view of the benefits to be derived from the use of such a “risky” product. Products are made for the purposes of engaging and fulfilling consumers’ needs, as well as creating profits for businesses. However, the liability that comes with the development of new products can be very high, depending upon the product
itself. Therefore, businesses are forced to seek ways of developing harmless products, as they are likely to face major lawsuits should their products cause harm to the consumers. In the previous chapter, torts and businesses were discussed, where the term tort was defined as a wrongful act against a person which may cause a legal action. The term itself is applicable to the production of products, as they too can be harmful, even if used in the correct manner. Therefore, tort laws were initially established in the products field to help consumers attain justice due to the caused harm. They were also developed in order to create pressure on manufacturers to develop safe products. In essence, the tort laws, products liability laws, lawsuits, and
other legal mechanism have allowed manufacturing firms to create efficient and
| Products Liability
8 effective products that are beneficial to all, while protecting consumers from products that cause harm.
Discussion Questions
1. How can the legal doctrines of negligence, fraud, and warranty be used by an injured consumer in a products liability lawsuit? Provide examples of each with a brief explanation thereof.
2. What is the doctrine of strict tort liability in the United States? What makes a product defective pursuant to this doctrine? Provide examples with brief explanations thereof.
3. What is the warning component to the “defect” test to strict liability? Why do you think that manufacturers now “err on the side of caution” and warn of risks that a reasonable person would be aware of? Provide examples with brief explanations thereof.
4. What are some of the emerging areas in strict liability design defect law? Why? Provide examples with brief explanations thereof.
5. Is it morally fair to hold a retailer liable under strict liability for selling a defectively designed product when the product came to the retailer from the manufacturer in a sealed package which the retailer was not allowed to open? Provide an example with a brief explanation thereof.
6. Is it morally fair to hold a manufacturer legally liable for harms caused by a product that has complied with all federal and state regulatory safety, operational, warning, and design standards? Why or why not? Provide an example with a brief discussion thereof.
Business Law for the Entrepreneur and Manager
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4 – CONTRACT LAW
A contract is an agreement between two or more persons that is enforceable at law. Business transactions are based on such agreements, wherein each party to the agreement obtains certain rights and assumes certain obligations. When an agreement between the parties meets all the requirements of a contract, the law makes the agreement binding on the parties thereto. As a result, if one party fails or refuses to perform (that is, breaches the contract), the other aggrieved party now has a legal action for damages or enforcement of performance. Contracts, accordingly, are the foundation of all business, because business – locally, nationally, and globally – consists of making and performing contracts. Business people thus can rely on
agreements and the promises therein being fulfilled, because they are legally binding obligations.
Summary
This chapter provides an in depth analysis of contract law and its associated elements, including legal definitions, classifications, remedies for breach of contract, the requirements of a valid contract, and rights and obligations of all parties. The popular use of contracts is mostly seen in the international business arena, specifically by “westernized” nations, such as the United States. However, as industrialized nations continue to work with developing countries in terms of exporting and importing, and manufacturing of goods, contracts are highly recommended. The vitality of contract law has become a significant factor for all global industries. Thus, managers, entrepreneurs, and employees are now encouraged and expected to understand the variations in laws that exist among different countries when entering into an agreement. As the world continues to turn global, managers, entrepreneurs, employees, as well as organizations and countries are depending on contracts in order to ensure successful business negotiations.
Discussion Questions
1. What are the requirements that convert a mere promise into a legally binding one, that is, a contract? Provide a business example with a brief explanation thereof.
2. What are the distinctions among valid, void, and voidable contracts under the common law of contracts? Why are those differentiations very important to contract law analysis? Provide examples along with brief explanations thereof.
| Contracts Law
10
3. What are the types of damages that an aggrieved party may be able to obtain for a breach of contract? Provide business examples with a brief explanation thereof.
4. What is the “mitigation” rule? Explain and illustrate how it would operate in a breach of contract for the sale of goods and a breach of an employment contract.
5. What is the “offer” and how are offers terminated? Provide business examples along with brief explanations thereof.
6. What is an “acceptance” and how may it be legally effectuated? Provide business examples along with brief explanations thereof.
7. What is the old common law contract “mirror image” rule? Why is it still a very important legal doctrine today? Provide a business example with a brief explanation thereof.
8. What is the old common law concept of “consideration” and why is it still a very important contract law rule? Provide a business example with a brief explanation thereof.
9. What is the “legal detriment to the promisee” test in consideration law? Why is it so important? Provide an example with a brief explanation of such legal “detriment.”
10. How do consideration rules operate in the area of repayment of debts? Provide examples along with brief explanations thereof.
11. What are some of the major exceptions to consideration? Provide examples
with brief explanations thereof.
12. Why is the type of licensing statute involved in a transaction a critical factor in determining the legality of a contract by an unlicensed business or person? Provide examples with a brief explanation thereof.
13. What are some of the types of contracts that must be evidenced by a writing to be enforceable? Provide examples with a brief explanation thereof.
14. Why is it critical to distinguish between the two types of mistake in contract law? Provide business examples of each with a brief explanation thereof.
15. Define, explain, and illustrate the major exception to the unilateral mistake doctrine.
16. What are the elements of a lawsuit for fraud (in the form of deceit or intentional misrepresentation)? Provide a business example with a brief explanation. Why is it so difficult to establish a legal cause of action for fraud/deceit?
17. What is the difference between assignment and delegation? Provide business examples of each with a brief explanation thereof. Why do two these two legal doctrines typically go “hand-in-hand” in the “real world” of business?
18. What contract duties cannot be assigned? Conversely, what contract duties cannot be delegated? Provide examples with brief explanations for both categories.
19. What is the doctrine of “substantial performance”? Provide a business example with a brief explanation thereof. Why is this doctrine informally known as the contractor’s “best friend”? Business Law for the Entrepreneur and Manager
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20. Compare and contrast “conditions subsequent” and “conditions precedent.” Provide a business example of each with a brief explanation. How can they be used contractually by the shrewd business person to protect himself or herself from potentially harmful contingencies. Provide examples.
21. Compare and contrast the three main types of “impossibility” doctrines; and provide a business example of each with a brief explanation thereof.
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