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The Impact of Foreign Law on the United States Supreme Court 17

The United States Looks into International Bribery 58

Islamic Law Courts Abroad and at Home 74

“Libel Tourism” 102 The Anti-Counterfeiting Trade Agreement 146

An Absence of Codiﬁ ed Criminal Law:

The Pushtun Way 154 Russian Hackers to the Fore 183 The Statute of Frauds and International Sales Contracts 258

Impossibility or Impracticability

of Performance in Germany 283

The CISG’s Approach to Revocation

of Acceptance 351 Protecting U.S Consumers from Cross- Border Telemarketers 379

Islamic Law and Respondeat Superior 507

Sexual Harassment in Other Nations 540 Limited Liability Companies in Other Nations 560

Derivative Actions in Other Nations 598 Corporate Governance in Other Nations 629 The European Union’s Expanding Role in Antitrust Litigation 657

Arbitration versus Litigation 728

This feature provides

a perspective on

the global legal

environment,

international laws, and

laws of other nations

that relate to speciﬁ c

legal concepts or topics

discussed in a chapter.

Landmark in the Law

Equitable Principles and Maxims 10

Marbury v Madison (1803) 66

Palsgraf v Long Island Railroad Co. (1928) 116 The Digital Millennium Copyright Act of 1998 142

Miranda v Arizona (1966) 170

Hamer v Sidway (1891) 224 The Statute of Frauds 254

Hadley v Baxendale (1854) 287 The Uniform Commercial Code 301

MacPherson v Buick Motor Co. (1916) 367 Federal Trade Commission Rule 433 416 Check Clearing in the 21st Century Act (Check 21) 437

The Bankruptcy Reform Act of 2005 467

The Doctrine of Respondeat Superior 505

Limited Liability Company (LLC) Statutes 558

The Securities and Exchange Commission 612

The Sherman Antitrust Act of 1890 642

E

M

P R

T

C

This feature discusses

seminal cases,

statutes, or other legal

developments that have

had signiﬁ cant effects

on business law.

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(John Elk III/Lonely Planet Images/Getty Images)

Roger LeRoy Miller

Institute for University Studies Arlington, Texas

Gaylord A Jentz

Herbert D Kelleher Emeritus Professor in Business Law MSIS Department

University of Texas at Austin

Business Law Today

TEXT & SUMMARIZED CASES

E-Commerce, Legal, Ethical,

and Global Environment

N I N T H E D I T I O N

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Library of Congress Control Number: 2009937995 Student Edition ISBN-13: 978-0-324-78615-6 Student Edition ISBN-10: 0-324-78615-8 Instructor’s Edition ISBN-13: 978-0-324-58174-4 Instructor’s Edition ISBN-10: 0-324-58174-2

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1 2 3 4 5 6 7 13 12 11 10 09

TEXT & SUMMARIZED CASES

E-Commerce, Legal, Ethical,

and Global Environment

Parkwood Composition Service

Senior Art Director:

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Chapter 1 The Historical and

Constitutional Foundations 1

Chapter 2 Ethics and Business Decision Making 43

Alternative Dispute Resolution 64

Chapter 4 Torts and Cyber Torts 97

Chapter 5 Intellectual Property

and Internet Law 126

Chapter 8 Contracts: Nature, Classiﬁ cation,

Agreement, and Consideration 199

Chapter 9 Contracts: Capacity,

Legality, Assent, and Form 235

Chapter 10 Contracts: Third Party Rights,

Discharge, Breach, and Remedies 266

Chapter 11 Sales and Leases:

Formation, Title, and Risk 300

Performance and Breach 334

Chapter 13 Warranties, Product Liability,

and Consumer Law 358

Chapter 14 Negotiable Instruments 391

in the Digital Age 424

Chapter 16 Security Interests, Creditors’

Rights, and Bankruptcy 449

Chapter 19 The Entrepreneur’s Options 552

Chapter 21 Investor Protection, Insider Trading,

and Corporate Governance 610

Chapter 23 Personal Property,

Bailments, and Insurance 663

Chapter 24 Real Property

and Environmental Law 691

Chapter 25 International Law

in a Global Economy 717

Appendices

Appendix A How to Brief Cases

and Analyze Case Problems A–1

Appendix B The Constitution of the United States A–3

Appendix C Articles 2 and 2A of the

Uniform Commercial Code A–10

Appendix D The Sarbanes-Oxley Act of 2002

(Excerpts and Explanatory Comments) A–43

Appendix E Sample Answers for End-of-Chapter

Hypothetical Questions with Sample Answer A–49

Glossary G–1 Table of Cases TC–1 Index I–1

Appeeendiccees

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Chapter 1 The Historical and

Constitutional Foundations 1

Business Activities and the Legal Environment 2

Sources of American Law 3

The Common Law Tradition 7

Classiﬁ cations of Law 10

Landmark in the Law Equitable Principles and Maxims 10

The Constitutional Powers of Government 12

Heart of Atlanta Motel v United States (1964) 13

Business and the Bill of Rights 15

Beyond Our Borders The Impact of Foreign Law on the United States

Supreme Court 17

Bad Frog Brewery, Inc v New York State Liquor Authority (1998) 19

Adapting the Law to the Online Environment The Supreme Court

Upholds a Law That Prohibits Pandering Virtual Child Pornography 21

In re Episcopal Church Cases (2009) 22

Due Process and Equal Protection 23

Privacy Rights 25

Reviewing The Historical and Constitutional Foundations 27

Linking the Law to Management Dealing with Administrative Law 27

Key Terms • Chapter Summary • ExamPrep • For Review •

Hypothetical Scenarios and Case Problems • Critical Thinking and

Writing Assignments • Practical Internet Exercises

Appendix to Chapter 1: Finding and Analyzing the Law 33

Finding Statutory and Administrative Law 33

Finding Case Law 34

Reading and Understanding Case Law 36

Chapter 2 Ethics and Business Decision Making 43

Business Ethics 44

United States v Skilling (2009) 45

Preventing Legal Disputes 47

Ethical Transgressions by Financial Institutions 49

Approaches to Ethical Reasoning 51

Fog Cutter Capital Group, Inc v Securities and Exchange Commission (2007) 53

Making Ethical Business Decisions 55 Practical Solutions to Corporate Ethics Questions 55 Business Ethics on a Global Level 56

Adapting the Law to the Online Environment Corporate Reputations under Attack 57

Beyond Our Borders The United States Looks into International Bribery 58

Reviewing Ethics and Business Decision Making 59

Linking the Law to Managerial Accounting Managing a Company’s Reputation 59

Hypothetical Scenarios and Case Problems • Critical Thinking and Writing Assignments • Practical Internet Exercises

Chapter 3 Courts and

Alternative Dispute Resolution 64

The Judiciary’s Role in American Government 64 Basic Judicial Requirements 65

Landmark in the Law Marbury v Madison (1803) 66

Oregon v Legal Services Corp (2009) 71The State and Federal Court Systems 72

Beyond Our Borders Islamic Law Courts Abroad and at Home 74

Following a State Court Case 77

Adapting the Law to the Online Environment The Duty to Preserve Electronic Evidence for Discovery 81

Evans v Eaton Corp. (2008) 83The Courts Adapt to the Online World 84 Alternative Dispute Resolution 85

NCR Corp v Korala Associates, Ltd. (2008) 88

Reviewing Courts and Alternative Dispute Resolution 91

Business Application To Sue or Not to Sue? 91

* Consult the inside front and back covers of this book for

easy reference to the many special features in this textbook.

Chapter 1

Chapter 2

Chapter 3

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Chapter 4 Torts and Cyber Torts 97

The Basis of Tort Law 98

Intentional Torts against Persons 99

Beyond Our Borders “Libel Tourism” 102

McClain v Octagon Plaza, LLC (2008) 107

Intentional Torts against Property 109

Trustees of University of District of Columbia v Vossoughi (2009) 111

Unintentional Torts (Negligence) 112

Landmark in the Law Palsgraf v Long Island Railroad Co. (1928) 116

Strict Liability 118

Cyber Torts—Online Defamation 119

Fair Housing Council of San Fernando Valley v Roommate.com,

LLC (2008) 120

Adapting the Law to the Online Environment Should CDA Immunity

Extend to Negligence Claims against MySpace? 120

Reviewing Torts and Cyber Torts 121

Business Application How Important Is Tort Liability to Business? 121

Chapter 5 Intellectual Property

and Internet Law 126

Trademarks and Related Property 127

The Coca-Cola Co v Koke Co of America (1920) 127

Cyber Marks 132

George V Restauration S.A v Little Rest Twelve, Inc. (2009) 134

Patents 135

KSR International Co v Teleﬂ ex, Inc. (2007) 136

Copyrights 137

Adapting the Law to the Online Environment Should the Law

Continue to Allow Business Process Patents? 138

Landmark in the Law The Digital Millennium Copyright Act of 1998 142

Trade Secrets 143

International Protection for Intellectual Property 144

Beyond Our Borders The Anti-Counterfeiting Trade Agreement 146

Reviewing Intellectual Property and Internet Law 146

Linking the Law to Marketing Trademarks and Service Marks 147

Chapter 6 Criminal Law 152

Civil Law and Criminal Law 152

Beyond Our Borders An Absence of Codiﬁ ed Criminal Law: The Pushtun Way 154

Criminal Liability 154

Types of Crimes 157 Defenses to Criminal Liability 163 Constitutional Safeguards and Criminal Procedures 165

United States v Moon (2008) 167

Herring v United States (2009) 169

Landmark in the Law Miranda v Arizona (1966) 170

Criminal Process 171

Reviewing Criminal Law 173

Business Application Determining How Much Force You Can Use to Prevent Crimes on Business Premises 174

Chapter 7 Cyber Crime 179

Computer Crime and the Internet 179 Cyber Crimes against Persons and Property 180

Beyond Our Borders Russian Hackers to the Fore 183

State v Cline (2008) 185Cyber Crimes in the Business World 185 The Spread of Spam 189

Cyber Crimes against the Community—Gambling in Cyberspace 190

United States v $6,976,934.65, Plus Interest Deposited into Royal Bank of Scotland International (2009) 191

Fighting Cyber Crime 192

Adapting the Law to the Online Environment Can Students Who Gain Unauthorized Access to an Online Antiplagiarism Service Be Subject to the Computer Fraud and Abuse Act? 193

Reviewing Cyber Crime 194

Business Application How Can You Protect against Identity Theft? 195

Chapter 4

Chapter 5

Chapter 7 Chapter 6

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Chapter 8 Contracts: Nature, Classiﬁ cation,

Agreement, and Consideration 199

An Overview of Contract Law 200

Types of Contracts 202

Uhrhahn Construction & Design, Inc v Hopkins (2008) 205

Agreement 208

Lucy v Zehmer (1954) 209

T W Nickerson, Inc v Fleet National Bank (2009) 213

Agreement in E-Contracts 218

Consideration 223

Landmark in the Law Hamer v Sidway (1891) 224

Reviewing Contracts: Nature, Classiﬁ cation, Agreement, and

Consideration 227

Linking the Law to Marketing Customer Relationship

Management 228

Chapter 9 Contracts: Capacity,

Legality, Assent, and Form 235

Contractual Capacity 236

Legality 239

Comedy Club, Inc v Improv West Associates (2009) 241

Voluntary Consent 245

Inkel v Pride Chevrolet-Pontiac, Inc. (2008) 247

Adapting the Law to the Online Environment Online Personals—

Fraud and Misrepresentation Issues 249

Rosenzweig v Givens (2009) 251

Form 253

Landmark in the Law The Statute of Frauds 254

Beyond Our Borders The Statute of Frauds and International Sales

Contracts 258

Reviewing Contracts: Capacity, Legality, Assent, and Form 260

Linking the Law to Business Communication When E-Mails Become

Enforceable Contracts 260

Chapter 10 Contracts: Third Party Rights,

Discharge, Breach, and Remedies 266

Assignment and Delegation 267 Third Party Beneﬁ ciaries 272

Revels v Miss America Organization (2007) 274Contract Discharge 275

Wisconsin Electric Power Co v Union Paciﬁ c Railroad Co. (2009) 277

Beyond Our Borders Impossibility or Impracticability of Performance

in Germany 283

Damages 284

Landmark in the Law Hadley v Baxendale (1854) 287

Equitable Remedies 288

Drake v Hance (2009) 291Recovery Based on Quasi Contract 292 Election of Remedies 293

Reviewing Contracts: Third Party Rights, Discharge, Breach, and Remedies 293

Business Application What Do You Do When You Cannot Perform? 293

Chapter 11 Sales and Lease:

Formation, Title, and Risk 300

The Scope of the UCC and Articles 2 (Sales) and 2A (Leases) 301

Landmark in the Law The Uniform Commercial Code 301

Adapting the Law to the Online Environment The Thorny Issue of Taxing Internet Sales 303

Jannusch v Naffziger (2008) 304The Formation of Sales and Lease Contracts 306

Glacial Plains Cooperative v Lindgren (2009) 314

Jones v Star Credit Corp. (1969) 316Title and Risk of Loss 317 Contracts for the International Sale of Goods 322

Reviewing Sales and Leases: Formation, Title, and Risk 324

Business Application Who Bears the Risk of Loss—the Seller or the Buyer? 324

Appendix to Chapter 11: An Example of a Contract for the International Sale of Coffee 330

Chapter 9

Chapter 11

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Performance and Breach 334

Performance Obligations 334

Obligations of the Seller or Lessor 335

Maple Farms, Inc v City School District of Elmira (1974) 338

Obligations of the Buyer or Lessee 341

Anticipatory Repudiation 342

Remedies of the Seller or Lessor 343

Remedies of the Buyer or Lessee 346

Reviewing Sales and Leases: Performance and Breach 352

Business Application What Can You Do When a Contract Is

Breached? 352

Chapter 13 Warranties, Product Liability,

and Consumer Law 358

Warranties 359

Webster v Blue Ship Tea Room, Inc. (1964) 361

Product Liability 366

Strict Product Liability 366

Landmark in the Law MacPherson v Buick Motor Co. (1916) 367

Wyeth v Levine (2009) 370

Adapting the Law to the Online Environment Should Video Games Be

Required to Have Warning Labels? 372

Defenses to Product Liability 372

Consumer Law 375

Federal Trade Commission v QT, Inc. (2008) 376

Beyond Our Borders Protecting U.S Consumers from Cross-Border

Telemarketers 379

Reviewing Warranties, Product Liability, and Consumer Law 384

Linking the Law to Management Quality Control 385

Chapter 14 Negotiable Instruments 391

Types of Instruments 392 Requirements for Negotiability 395

Foundation Property Investments, LLC v CTP, LLC (2007) 399Transfer of Instruments 401

Holder in Due Course (HDC) 405

Georg v Metro Fixtures Contractors, Inc. (2008) 406

South Central Bank of Daviess County v Lynnville National Bank (2009) 407

Signature and Warranty Liability 409 Defenses, Limitations, and Discharge 414

Landmark in the Law Federal Trade Commission Rule 433 416

Reviewing Negotiable Instruments 417

Business Application Pitfalls When Writing and Indorsing Checks 417

Chapter 15 Checks and Banking

in the Digital Age 424

Checks 424

MidAmerica Bank, FSB v Charter One Bank (2009) 426The Bank-Customer Relationship 427 Bank’s Duty to Honor Checks 428

Auto-Owners Insurance Co v Bank One (2008) 431

Bank’s Duty to Accept Deposits 434

Landmark in the Law Check Clearing in the 21st Century Act (Check 21) 437

Bank One, N.A v Dunn (2006) 439Electronic Fund Transfers 440 E-Money and Online Banking 442

Reviewing Checks and Banking in the Digital Age 443

Linking the Law to Economics Banking in a Period of Crisis 444

Chapter 16 Security Interests,

Creditors’ Rights, and Bankruptcy 449

Security Interests in Personal Property 450

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Hicklin v Onyx Acceptance Corp. (2009) 458

Additional Laws Assisting Creditors 459

Capital Color Printing, Inc v Ahern (2008) 464

Laws Assisting Debtors 465

Bankruptcy Proceedings 466

Landmark in the Law The Bankruptcy Reform Act of 2005 467

In re Kuehn (2009) 471

Adapting the Law to the Online Environment The Debt That Never

Goes Away—It’s Discharged in Bankruptcy But Still on the Debtor’s

Credit Report 477

Reviewing Security Interests, Creditors’ Rights, and Bankruptcy 482

Linking the Law to Economics The Effects of Bankruptcy Law on

Consumers and Businesses 482

Chapter 17 Agency Relationships in Business 488

Agency Relationships 489

Lopez v El Palmar Taxi, Inc. (2009) 491

How Agency Relationships Are Formed 492

Duties of Agents and Principals 494

Agent’s Authority 497

Ermoian v Desert Hospital (2007) 499

Liability in Agency Relationships 500

Warner v Southwest Desert Images, LLC (2008) 503

Landmark in the Law The Doctrine of Respondeat Superior 505

How Agency Relationships Are Terminated 506

Beyond Our Borders Islamic Law and Respondeat Superior 507

Reviewing Agency 508

Business Application How Can an Employer Use Independent

Contractors? 509

Chapter 18 Employment Law 514

Employment at Will 514

Wage and Hour Laws 516

Layoffs 518

Family and Medical Leave 519

Worker Health and Safety 520

Income Security 521

Employee Privacy Rights 524

Immigration Law 528

Castellanos-Contreras v Decatur Hotels, LLC (2009) 531Employment Discrimination 531

Beyond Our Borders Sexual Harassment in Other Nations 540

Sprint/United Management Co v Mendelsohn (2008) 541

Rohr v Salt River Project Agricultural Improvement and Power District (2009) 543

Reviewing Employment Law 546

Linking the Law to Management Human Resource Management Comes to the Fore 547

Chapter 19 The Entrepreneur’s Options 552

Major Business Forms 552

1515 North Wells, LP v 1513 North Wells, LLC (2009) 555

Allen v Dackman (2009) 556

Landmark in the Law Limited Liability Company Statutes 558

Beyond Our Borders Limited Liability Companies in Other Nations 560

Special Business Forms 561 Private Franchises 564

Adapting the Law to the Online Environment Satisfying the FTC’s Franchise Rule in the Internet Age 566

LJL Transportation, Inc v Pilot Air Freight Corp. (2009) 567

Reviewing The Entrepreneur’s Options 568

Business Application What Problems Can a Franchisee Anticipate? 568

Chapter 20 Corporations 574

Corporate Nature and Classiﬁ cation 575

Adapting the Law to the Online Environment Economic Recession Fuels the Internet Taxation Debate 577

Williams v Stanford (2008) 580Corporate Formation and Powers 581

Brown v W.P Media, Inc. (2009) 583Corporate Financing 584 Corporate Management—Directors and Ofﬁ cers 586

Guth v Loft, Inc. (1939) 590

Chapter 17

Chapter 18

Chapter 19

Chapter 20

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Corporate Ownership—Shareholders 592

Beyond Our Borders Derivative Actions in Other Nations 598

Mergers and Acquisitions 598

Termination 601

Reviewing Corporations 603

Linking the Law to Finance Sources of Funds 603

Chapter 21 Investor Protection, Insider Trading,

and Corporate Governance 610

Securities Act of 1933 611

Landmark in the Law The Securities and Exchange Commission 612

Securities Exchange Act of 1934 618

Adapting the Law to the Online Environment Corporate Blogs and

Tweets Must Comply with the Securities Exchange Act 619

Securities and Exchange Commission v Texas Gulf Sulphur Co. (1968) 620

Stoneridge Investment Partners, LLC v Scientiﬁ c-Atlanta, Inc. (2008) 622

Stark Trading v Falconbridge, Ltd. (2009) 626

State Securities Laws 627

Corporate Governance 628

Beyond Our Borders Corporate Governance in Other Nations 629

Online Securities Fraud 632

Reviewing Investor Protection, Insider Trading, and Corporate

Governance 634

Linking the Law to Taxation The Tax Consequences of Deleveraging

during an Economic Crisis 634

Chapter 22 Promoting Competition 640

The Sherman Antitrust Act 641

Landmark in the Law The Sherman Antitrust Act of 1890 642

Section 1 of the Sherman Act 643

Leegin Creative Leather Products, Inc v PSKS, Inc. (2007) 646

Section 2 of the Sherman Act 646

Weyerhaeuser Co v Ross-Simmons Hardwood Lumber Co. (2007) 649

The Clayton Act 650

Chicago Bridge & Iron Co v Federal Trade Commission (2008) 653

Enforcement and Exemptions 654

U.S Antitrust Laws in the Global Context 655

Beyond Our Borders The European Union’s Expanding Role in Antitrust Litigation 657

Reviewing Promoting Competition 657

Business Application How Can You Avoid Antitrust Problems? 658

Chapter 23 Personal Property,

Bailments, and Insurance 663

Property Ownership 664 Acquiring Ownership of Personal Property 665

In re Estate of Piper (1984) 667Mislaid, Lost, and Abandoned Property 669 Bailments 670

LaPlace v Briere (2009) 675Insurance 677

Woo v Fireman’s Fund Insurance Co. (2007) 684

Reviewing Personal Property, Bailments, and Insurance 685

Business Application How Can You Manage Risk in Cyberspace? 685

Chapter 24 Real Property

and Environmental Law 691

The Nature of Real Property 691

Ownership Interests in Real Property 693

Roman Catholic Church of Our Lady of Sorrows v Prince Realty Management, LLC (2008) 695

Transfer of Ownership 696

Drake v Walton County (2009) 699Leasehold Estates 700 Landlord-Tenant Relationships 701 Environmental Law 703

Entergy Corp v Riverkeeper, Inc. (2009) 707

Reviewing Real Property and Environmental Law 711

Linking the Law to Economics Eminent Domain 711

Chapter 21

Chapter 22

Chapter 23

Chapter 24

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Chapter 25 International Law

in a Global Economy 717

International Law—Sources and Principles 718

Doing Business Internationally 720

Regulation of Speciﬁ c Business Activities 722

Fuji Photo Film Co v International Trade Commission (2007) 723

United States v Inn Foods, Inc. (2009) 724

Commercial Contracts in an International Setting 726

Beyond Our Borders Arbitration versus Litigation 728

Payment Methods for International Transactions 728

U.S Laws in a Global Context 729

Khulumani v Barclay National Bank, Ltd. (2007) 731

Reviewing International Law in a Global Economy 732

Linking the Law to Marketing Going Global 733

Appendices

Appendix A How to Brief Cases

and Analyze Case Problems A–1 Appendix B The Constitution of the United States A–3 Appendix C Articles 2 and 2A of the Uniform

Commercial Code A–10 Appendix D The Sarbanes-Oxley Act of 2002 (Excerpts

and Explanatory Comments) A–43 Appendix E Sample Answers for End-of-Chapter

Hypothetical Questions with Sample Answer A–49

Glossary G–1 Table of Cases TC–1 Index I–1

Chapter 25

Trang 16

Business law and the legal environment should be an exciting, contemporary, and

inter-esting course Business Law Today: The Essentials, Ninth Edition, imparts this excitement

to your students We have spent a great deal of effort in giving this book a visual appeal that will encourage students to learn the law By incorporating the latest research results,

Business Law Today: The Essentials continues its established tradition of being the most

up-to-date text on the market The law presented in the Ninth Edition of Business Law Today:

The Essentials includes new statutes, regulations, and cases, as well as the most recent

developments in cyberlaw

You will ﬁ nd that coverage of traditional business law has not been sacriﬁ ced in the

process of creating this text Additionally, Business Law Today: The Essentials explicitly

addresses the American Assembly of Collegiate Schools of Business’s (AACSB’s) broad array

of curriculum requirements For example, many of the features and special pedagogical devices in this text focus on the global, political, ethical, social, environmental, technologi-cal, and cultural contexts of business law In addition, critical-thinking skills are reinforced throughout the text

A New Chapter on Cyber Crime

Cyber crime has become an increasingly critical problem for businesses today We believe that this problem is important enough to warrant a separate chapter (Chapter 7), which is new to this edition In it, we examine such cyber crimes as hacking, identity theft, phish-ing, spamming, and online credit-card fraud We also discuss the difﬁ culties in prosecuting cyber criminals, many of whom reside in other countries

Practical and Effective Learning Tools

Instructors have come to rely on the coverage, accuracy, and applicability of Business Law

Today: The Essentials For this edition, we have included a number of features to make

the text even more applicable to today’s business environment and to promote thinking skills We have also signiﬁ cantly streamlined and reorganized the materials, and have focused on making the text more cohesive and understandable

critical-We have added a new Linking the Law feature to encourage interdisciplinary learning, as well as many new highlighted and numbered Case Examples to help students understand

how courts decide real-world disputes As in the last edition, we continue to provide a

variety of assessment tools, including the new ExamPrep section, plus sample questions and Reviewing features The following subsections outline the new and retained special

features of this text

New Feature Links the Law to Other Business School Disciplines

For the Ninth Edition of Business Law Today: The Essentials, we have added a special new

feature entitled Linking the Law to [Accounting, Economics, Finance, Management, Marketing, or Taxation] This special feature appears in selected chapters to underscore

how the law relates to various other disciplines in the typical business school curriculum This new feature not only enables instructors to meet AACSB teaching requirements but also provides vital and practical information to students on how the subjects they study

are interconnected In addition, each of these features concludes with a For Critical Analysis

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question that is designed to encourage students to engage in critical thinking and to

con-sider the implications of the topic under discussion Some of the new Linking the Law

features include:

• Linking the Law to Managerial Accounting: Managing a Company’s Reputation (Chapter 2)

• Linking the Law to Management: Quality Control (Chapter 13)

• Linking the Law to Economics: Banking in a Period of Crisis (Chapter 15)

• Linking the Law to Marketing: Going Global (Chapter 25)

New Highlighted and Numbered Case Examples

One of the most appreciated features of Business Law Today: The Essentials has always been

the highlighted numbered examples that appear throughout the book to illustrate the legal principles under discussion For this edition, rather than presenting more summarized

cases in each chapter, we have expanded the in-text numbered examples to include Case

Examples These Case Examples are integrated appropriately throughout the text and

pre-sent the facts, issues, and rulings from actual court cases Students can quickly read through the example to see how courts apply the legal principles under discussion

Business Application

Every chapter in the Ninth Edition concludes with either a Linking the Law feature or a

Business Application feature The Business Application focuses on practical considerations

related to the chapter’s contents and concludes with a checklist of tips for the

businessper-son For example, some of the topics include:

• Determining How Much Force You Can Use to Prevent Crimes on Business Premises (Chapter 6)

• What Can You Do When a Contract Is Breached? (Chapter 12)

• How Can an Employer Use Independent Contractors? (Chapter 17)

Preventing Legal Disputes

For this edition of Business Law Today: The Essentials, we continue our emphasis on

provid-ing practical information in every chapter through a special feature entitled Preventprovid-ing Legal

Disputes These brief, integrated sections offer sensible guidance on steps that businesspersons

can take in their daily transactions to avoid legal disputes and litigation in a particular area

Adapting the Law to the Online Environment

The Ninth Edition contains many new Adapting the Law to the Online Environment

fea-tures, which examine cutting-edge cyberlaw issues coming before today’s courts Here are some examples of these features:

• The Supreme Court Upholds a Law That Prohibits Pandering Virtual Child phy (Chapter 1)

Pornogra-• Should CDA Immunity Extend to Negligence Claims against MySpace? (Chapter 4)

• Should the Law Continue to Allow Business Process Patents? (Chapter 5)

• The Debt That Never Goes Away—It’s Discharged in Bankruptcy But Still on the Debtor’s Credit Report (Chapter 16)

(Chapter 21)

Each feature concludes with a For Critical Analysis section that asks the student to think

critically about some facet of the issues discussed in the feature Suggested answers to

these questions are included in both the Instructor’s Manual and the Answers Manual

that accompany this text.

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Critical–Thinking and Legal Reasoning Elements

Because today’s business leaders are often required to think “outside the box” when making business decisions, we offer many critical-thinking elements that challenge stu-dents’ understanding of the materials beyond simple retention Your students’ critical-thinking and legal reasoning skills will be increased as they work through the numerous pedagogical devices throughout the text Nearly every feature and every case presented

in the text conclude with some type of critical-thinking question These questions

include For Critical Analysis, What If the Facts Were Different? and Why Is This

Case Important?

In addition, in the chapter-ending materials, we include a separate section of questions that focus on critical thinking and writing

• Nearly every chapter includes a Critical Legal Thinking question that requires students

to think critically about some aspect of the law discussed in the chapter

• Selected chapters include a Critical Thinking and Writing Assignment for Business

question that focuses on critical thinking and writing in a business-oriented context

Additionally, for the Ninth Edition, we have completely revised and updated the Handbook

on Critical Thinking in Business Law and the Legal Environment This important revised

resource will enhance your students’ ability to think critically about issues in business law and the legal environment It is available on request as part of a bundle with the main text Ask your South-Western/Cengage Learning sales representative about this impressive package

Reviewing Features and ExamPrep Sections

At the end of each chapter in this text, we include a Reviewing feature that helps

solidify students’ understanding of the chapter materials Each of these features sents a hypothetical scenario and then asks a series of questions that require students

pre-to identify the issues and apply the legal concepts discussed in the chapter This feature

is intended to help students review the chapter materials in a simple and interesting way You can use this feature as the basis for a lively in-class discussion or encour-age students to use it for self-study and assessment before completing homework assignments

In every chapter, following the Chapter Summary, a new ExamPrep section appears

that includes two Issue Spotters related to the chapter’s topics These Issue Spotters

facilitate student learning and review of the chapter materials In addition, the section

refers students to the text’s Web site for the answers to the Issue Spotters and for additional study tools, such as Flashcards and Interactive Quizzes correlated to the chapter

Beyond Our Borders

This feature gives students an awareness of the global legal environment by indicating how international laws or the laws of other nations deal with speciﬁ c legal concepts or topics

being discussed in the chapter Each of these features concludes with a For Critical Analysis

question Suggested answers to these questions are included in both the Instructor’s

Manual and the Answers Manual that accompany this text.

Landmark in the Law

This feature discusses a landmark case, statute, or other legal development that has had a signiﬁ cant effect on business law Each of these features has a section titled

Application to Today’s World, which indicates how the law discussed in the feature

affects the legal landscape of today’s world In addition, a Relevant Web Sites section

directs students to the book’s Companion Web site for links to additional information available online

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Two Questions with Sample Answers in Each Chapter

For those instructors who would like students to have sample answers available for some

of the chapter-ending questions, we have included two such questions in every chapter

Each chapter includes a Hypothetical Question with Sample Answer that is answered in Appendix E of the text and a Case Problem with Sample Answer that is based on an actual

case and answered on the text’s Web site Students can compare their own answers with the answers provided to determine whether they have applied the law correctly and to learn what needs to be included when answering the end-of-chapter questions and case prob-lems The sample answers to both types of questions are posted on the text’s Companion Web site at www.cengage.com/blaw/blt for your convenience

Ethical Issues

In addition to a chapter on ethics, chapter-ending ethical questions, and the Ethical

Considerations in many of the For Critical Analysis questions in cases presented in this

text, we have included a special feature called Ethical Issue This feature, which is closely

integrated with the text, opens with a question addressing an ethical dimension of the topic being discussed The feature is intended to make sure students understand that ethics is an integral part of business law and the legal environment

Business Law Today: The Essentials on the Web

For this edition of Business Law Today: The Essentials, we have redesigned and

stream-lined the text’s Web site so that users can easily locate the resources they seek When you visit the text’s Web site at www.cengage.com/blaw/blt, you will ﬁ nd a broad array

of teaching/learning resources, including the following:

• Relevant Web Sites for all of the Landmark in the Law features and the Classic Cases that

are presented in this text

• Sample Answers to the Case Problems with Sample Answers and the Hypothetical Questions

with Sample Answers that appear at the end of every chapter

• Answers to the Issue Spotters referenced in the new ExamPrep sections of every

chapter

• Answers to the Even-Numbered For Review Questions that appear at the end of every

chapter

• Videos referenced in the Video Questions that appear at the ends of selected chapters

(available only with a passcode)

• Practical Internet Exercises for every chapter in the text (at least two per chapter) that

provide students with practical information on topics covered in the text and acquaint students with the legal resources that are available online

• An Interactive Quiz that includes a number of questions related to each chapter’s

contents

• Key Terms for every chapter in the text.

• Flashcards that provide students with an optional study tool to review the Key Terms in

every chapter

• Appendix A: How to Brief Cases and Analyze Case Problems is posted on the Web site.

• PowerPoint Slides revised for this edition.

• Legal reference materials that offer links to selected statutes referenced in the text, a

Spanish glossary, and other important legal resources

• Online Legal Research Guide: 2010–2011 Edition, which includes hyperlinks to

vari-ous Web sites and tips for evaluating the information provided

• Court Case Updates that present summaries of new cases from around the country that

speciﬁ cally relate to the topics covered in the chapters of this text

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Business Law Digital Video Library

Business Law Today: The Essentials includes Video Questions at the end of selected chapters

that can be used as homework assignments, discussion starters, or classroom tions Each of these questions directs students to the text’s Web site to view a video relevant

demonstra-to a demonstra-topic covered in the chapter This instruction is followed by a series of questions based

on the video The questions are repeated on the Web site, when the student accesses the

video Suggested answers for all of the Video Questions are given in both the

Instruc-tor’s Manual and the Answers Manual that accompany this text.

The videos are part of the Business Law Digital Video Library, a compendium of more

than sixty video scenarios and explanations An access code for the videos can be packaged

with each new copy of this textbook for no additional charge If Business Law Digital Video

Library access did not come packaged with the textbook, it can be purchased online at

www.cengage.com/blaw/dvl

Case Presentation and Special Pedagogy

In addition to the components of the Business Law Today: The Essentials teaching/learning

package described above, the Ninth Edition offers effective case presentation and a number

of special pedagogical devices, including those described here

Case Presentation and Format

For this edition, we have carefully selected recent cases for each chapter that not only vide on-point illustrations of the legal principles discussed in the chapter but also are of high interest to students The cases are numbered sequentially for easy referencing in class discussions, homework assignments, and examinations The vast majority of cases in this text are new to the Ninth Edition

pro-Each case is presented in a special format, which begins with the case title and citation (including parallel citations) Whenever possible, we also include a URL, just below the case citation, that can be used to access the case online (a footnote to the URL explains how

to fi nd the specifi c case at that Web site) We then briefl y outline the facts of the dispute, the legal issue presented, and the court’s decision To enhance student understanding, we paraphrase the reason for the court’s decision

Each case concludes with one of the following:

• For Critical Analysis These questions require students to think about the court’s

hold-ing from a variety of different perspectives For instance, a student might be asked to

consider the economic or social ramiﬁ cations of a particular ruling Suggested answers

to these questions are included in both the Instructor’s Manual and the Answers Manual that accompany this text.

• What If the Facts Were Different? These questions ask the student to decide whether

a speciﬁ ed change in the facts of the case would alter the outcome of the case and how

Suggested answers to these questions are included in both the Instructor’s Manual and the Answers Manual that accompany this text.

• Why Is This Case Important? These questions, which are answered in the text, clearly

set forth the importance of the court’s decision in the speciﬁ c case in the legal ment Some of these questions focus speciﬁ cally on why businesspersons today should heed the court’s ruling in a particular case

environ-• Impact of This Case on Today’s Law For every Classic Case, we have included these

sec-tions to clarify the relevance of the case to modern law We have also included a section

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titled Relevant Web Sites at the conclusion of each Classic Case that directs students to the

text’s Web site for additional online resources

Other Pedagogical Devices within Each Chapter

• Learning Objectives—A series of brief questions at the beginning of each chapter that

provide a framework for the student as he or she reads through the chapter

• Chapter Outline—An outline of the chapter’s ﬁ rst-level headings.

• Margin deﬁ nitions.

• On the Web feature—Located in the margins, this feature directs students to relevant

Web sites where they will ﬁ nd online articles, statutes, or other legal or information sources concerning a topic being discussed in the text

• Highlighted and numbered examples that illustrate legal principles

• Highlighted and numbered Case Examples that are new to this edition and provide

illustrations of legal principles in actual court cases

• URLs for cases—Whenever possible, we have included URLs just below the case

cita-tion that can be used to access the cases presented in the text

• Exhibits and forms.

• Concept Summaries—Whenever key areas of law need additional emphasis, we provide

a Concept Summary to add clarity.

• Photographs (with critical-thinking questions) and cartoons.

Chapter-Ending Pedagogy

• Key Terms (with appropriate page references).

• Chapter Summary (in graphic format with page references).

• ExamPrep (including two new Issue Spotters for each chapter).

• For Review—The questions set forth in the chapter-opening Learning Objectives section

are presented again to aid the student in reviewing the chapter Answers to the numbered questions for each chapter are provided on the text’s Web site

even-• Hypothetical Questions and Case Problems (which include a Hypothetical Question

with Sample Answer, a Case Problem with Sample Answer, and A Question of Ethics in every

chapter)

• Critical Thinking and Writing Assignments (including Critical Legal Thinking and Video

Questions in selected chapters)

• Case Problem with Sample Answer—Each chapter contains one of these case problems,

for which the answer has been provided on the text’s Web site

• Practical Internet Exercises for each chapter.

Supplemental Teaching Materials

This edition of Business Law Today: The Essentials is accompanied by an expansive number

of teaching and learning supplements Individually and in conjunction with a number of our colleagues, we have developed supplementary teaching materials that we believe are the best available today Each component of the supplements package is listed below

Printed Supplements

• Instructor’s Manual (includes at least one additional case on point per chapter,

answers to all For Critical Analysis questions, Reviewing features, and Video Questions The Instructor’s Manual is also available on the Instructor’s Resource CD-ROM, or IRCD,

described below)

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• Study Guide.

• A comprehensive Test Bank (also available on the IRCD).

• Answers Manual (includes answers to the Hypothetical Questions and Case Problems,

For Critical Analysis questions, and Video Questions in the text Also available on

the IRCD.)

• Handbook on Critical Thinking in Business Law and the Legal Environment (an

impor-tant resource that has been completely revised and updated for this edition)

Software, Video, and Multimedia Supplements

• Instructor’s Resource CD-ROM (IRCD)—The IRCD includes the following

supple-ments: Instructor’s Manual, Answers Manual, Test Bank, Case-Problem Cases, Case

Printouts, ExamView, PowerPoint slides, Lecture Outline System, transparency masters,

Instructor’s Manual for the Drama of the Law video series, Handbook of Landmark Cases and Statutes in Business Law and the Legal Environment, Handbook on Critical Thinking in Business Law and the Legal Environment, and A Guide to Personal Law.

• Business Law Digital Video Library—Provides access to more than sixty videos that

spark class discussion and clarify core legal concepts Access is available as an optional

package with each new text at no additional cost If Business Law Digital Video Library

access did not come packaged with the textbook, it can be purchased online at www.cengage.com/blaw/dvl

• Global Economic Watch—An online portal that addresses issues raised by the most

recent global economic crisis and includes a global issues database, an overview and timeline of events, and links to the latest news For more information on how you can access this new resource, please visit www.cengage.com/thewatch

For Users of the Eighth Edition

We thought that those of you who have been using Business Law Today: The Essentials

would like to know some of the major changes that have been made for the Ninth Edition In addition to the changes noted below, you will ﬁ nd that most of the cases

in this text are new to this edition Nearly every chapter has two new cases, and some chapters have three new cases Each chapter also has one, two, or even three new case problems

New Features and Special Pedagogy

We have added the following entirely new elements for the Ninth Edition:

• Linking the Law features that relate legal principles to other business disciplines.

• Case Examples that are highlighted and numbered consecutively with the other in-text

examples to illustrate legal principles, but are based on the facts and decisions of actual courts

• ExamPrep sections in every chapter that include two Issue Spotters as well as references

to the Interactive Quizzes and Flashcards available on the text’s Web site.

Significantly Revised Chapters

Every chapter of the Ninth Edition has been revised as necessary to incorporate new opments in the law or to streamline the presentations We have reorganized the chapters for the Ninth Edition to facilitate testing Other major changes and additions made for this edition include the following:

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devel-• Chapter 2 (Ethics and Business Decision Making)—This chapter has been stantially revised and refocused to be more pragmatic The chapter now includes a step-by-step approach to making ethical business decisions, as well as several new features discussing how companies and management can deal with attacks on a com-pany’s reputation.

sub-• Chapter 5 (Intellectual Property and Internet Law)—The materials on intellectual property rights in the online environment have been thoroughly revised and updated

A new subsection addresses the problem of counterfeit goods, and the discussion

of domain names and cybersquatting has been updated Several recent Supreme Court cases are discussed in the text and in the feature dealing with business process patents

• Chapter 7 (Cyber Crime)—This chapter is entirely new to this edition and deals with the growing problem of cyber crime, including many types of Internet fraud, identity theft, phishing, cyberstalking, credit-card crime, hackers, piracy, spam, and gambling The chapter also covers some of the difﬁ culties involved in prosecuting cyber crime

• Chapters 8 through 10 (the Contracts chapters)—We have merged our discussion of online contracting and electronic signatures with our coverage of traditional contracts

We have also added more examples, new Case Examples, and updates throughout, and

we have streamlined coverage

• Chapters 11 through 16—We have streamlined and reorganized the materials that deal with commercial transactions and aspects of the Uniform Commercial Code This includes the chapters on sales and lease law, negotiable instruments, banking, and security interests, creditors’ rights, and bankruptcy We have focused on making these materials more comprehensible and readable, particularly in the areas of negotiable instruments and secured transactions

thoroughly revised and updated to include discussions of legal issues facing ers today It includes an entirely new section on immigration law (a topic of increasing importance to employers), coverage of the 2009 changes to the Family and Medical Leave Act, and an updated discussion of electronic monitoring of employees The chapter covers the latest developments and United States Supreme Court decisions

employ-on cemploy-onstructive discharge, retaliatiemploy-on, religious discriminatiemploy-on, and age tion It also includes the 2009 equal pay legislation and the 2008 amendments to the Americans with Disabilities Act

discrimina-• Chapter 20 (Corporations)—This chapter provides an updated and streamlined tation of issues surrounding corporation formation and termination The chapter was revamped to include more on taxation, holding companies, venture capital, and private equity capital We have updated the materials and examples throughout and included a

presen-new Classic Case on the duty of loyalty, a discussion of directors’ committees, and

up-to-date information on e-proxy rules

• Chapter 21 (Investor Protection, Insider Trading, and Corporate Governance)—We have revised this chapter to discuss the simpliﬁ ed registration process for “well-known seasoned issuers” and provide recent examples of insider trading and online securities fraud New features discuss the disclosure of ﬁ nancial information on

corporate blogs and tweets, and the tax consequences of deleveraging during an

economic crisis

• Chapter 22 (Promoting Competition)—We have reworked the materials on relevant market somewhat and added more discussion of the Robinson-Patman Act and the Herﬁ ndahl-Hirschman Index The chapter includes updated interlocking directorate

ﬁ gures and an updated discussion of global antitrust law

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Numerous careful and conscientious users of Business Law Today: The Essentials were

kind enough to help us revise this book In addition, the staff at South-Western/Cengage Learning went out of their way to make sure that this edition came out early and in accu-rate form In particular, we wish to thank Rob Dewey and Vicky True for their countless new ideas, many of which have been incorporated into the Ninth Edition We also extend special thanks to Jan Lamar, our longtime developmental editor, for her many useful sug-gestions and for her efforts in coordinating reviews and ensuring the timely and accurate publication of all supplemental materials We are particularly indebted to Jennifer Garamy for her support and excellent marketing advice

Our production manager and designer, Bill Stryker, made sure that we came out with

an error-free, visually attractive edition We will always be in his debt We thank our photo researcher, Anne Sheroff, for providing us with an amazingly varied number of choices of photographs for this edition We are also indebted to the staff at Parkwood Composition, our compositor Their ability to generate the pages for this text quickly and accurately made it possible for us to meet our ambitious printing schedule

We must especially thank Vickie Reierson and Katherine Marie Silsbee for their agement of the project, as well as for the application of their superb research and editorial

man-skills We also wish to thank William Eric Hollowell, coauthor of the Instructor’s Manual,

Study Guide, Test Bank, and Online Legal Research Guide, for his excellent research efforts

The copyediting services of Pat Lewis and Mary Berry were invaluable, and the ing by Beverly Peavler and Loretta Palagi will not go unnoticed Finally, our appreciation goes to Roxanna Lee and Suzanne Jasin for their many special efforts on the project

proofread-Acknowledgments for Previous Editions

California Polytechnic University—

San Luis Obispo

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East Carolina University, North Carolina

Sarah Weiner Keidan

Oakland Community College, Michigan

Des Moines Area Community College, Iowa

Jim Lee Morgan

West Los Angeles College, California

Macomb Community College, Michigan

Martha Wright Sartoris

North Hennepin Community College, Minnesota

Anne W Schacherl

Madison Area Technical College, Wisconsin

Edward F Shafer

Rochester Community College, Minnesota

Lou Ann Simpson

Drake University, Iowa

Quinsigamond Community College, Massachusetts

James D Van Tassel

Mission College, California

Frederick J Walsh

Franklin Pierce College, New Hampshire

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Brookdale Community College, New Jersey

Acknowledgments for the Ninth Edition

North Georgia College and State University

Anne Montgomery Ricketts

University of Findlay, Ohio

Dr William J Russell

Northwest Nazarene University, Idaho

Lance Shoemaker, J.D., M.C.P., M.A.

West Valley College, California

Northwestern State University, Louisiana

We know that we are not perfect If you or your students ﬁ nd something you don't like

or want us to change, let us know Use the “Contact Us” button in the blue bar that runs across the Web site for this text In the alternative, pass along your thoughts to your South-

Western/Cengage Learning sales representative Your comments will help us make Business

Law Today: The Essentials an even better book in the future.

Roger LeRoy Miller

Gaylord A Jentz

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To Barry Zwick,

You remain so funny

in the face of adversity,

but that is because you

understand it all

R.L.M

To my wife, JoAnn; my children, Kathy,Gary, Lori, and Rory; and my grandchildren,Erin, Megan, Eric, Emily, Michelle, Javier,Carmen, and Steve

G.A.J

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C H A P T E R 1 The Historical and Constitutional Foundations

Clarence Darrow’s assertion in the chapter-opening quotation is that laws should be created

to serve the public Because you are part of the public, the law is of interest to you Those entering the world of business will fi nd themselves subject to numerous laws and govern-ment regulations A basic knowledge of these laws and regulations is benefi cial—if not essential—to anyone contemplating a successful career in today’s business environment.Although law has various defi nitions, they all are based on the general observation that

law consists of enforceable rules governing relationships among individuals and between

indi-viduals and their society In some societies, these enforceable rules consist of unwritten

prin-ciples of behavior, while in other societies they are set forth in ancient or contemporary law codes In the United States, our rules consist of written laws and court decisions created

by modern legislative and judicial bodies Regardless of how such rules are created, they

all have one feature in common: they establish rights, duties, and privileges that are consistent

with the values and beliefs of a society or its ruling group In the study of law, often referred to

as jurisprudence, these broad statements provide a point of departure for all legal scholars

and philosophers

In this introductory chapter, we fi rst look at the basic structures of U.S law, the mon law tradition, and some general classifi cations of law We then examine some impor-tant constitutional concepts and their signifi cance for business The chapter concludes

com-Learning Objectives After reading this chapter, you should be able to answer the following questions:

1. What are four primary sources of law in the United States?

2. What is the common law tradition?

3. What constitutional clause gives the federal government the power to regulate commercial activities among the various states?

4. What constitutional clause allows laws enacted

by the federal government to take priority over conﬂ icting state laws?

5. What is the Bill of Rights? What freedoms does the First Amendment guarantee?

clothes They should

be made to ﬁ t the people they are meant to serve ”

Law A body of enforceable rules

govern-ing relationships among individuals and

between individuals and their society.

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with a discussion of how fundamental freedoms guaranteed by the U.S Constitution affect businesspersons and the workplace.

Business Activities and the Legal Environment

As those entering the business world will learn, laws and government regulations affect all business activities—hiring and ﬁ ring decisions, workplace safety, and business ﬁ nancing,

to name just a few To make good business decisions, a basic knowledge of the laws and regulations governing these activities is essential Moreover, simply being aware of what conduct can lead to legal liability is not enough Businesspersons are also under increasing pressure to make ethical decisions and to consider the consequences of their decisions for stockholders and employees (as will be discussed in Chapter 2)

Many Different Laws May Affect a Single Business Transaction

Each chapter in this text covers a speciﬁ c area of the law and shows how the legal rules

in that area affect business activities Although compartmentalizing the law in this fashion facilitates learning, it does not indicate the extent to which many different laws may apply to just one transaction EXAMPLE 1.1 Suppose that you are the president of NetSys, Inc., a com-pany that creates and maintains computer network systems for other business ﬁ rms NetSys also markets software for internal computer networks One day, Janet Hernandez, an opera-tions ofﬁ cer for Southwest Distribution Corporation (SDC), contacts you by e-mail about

a possible contract involving SDC’s computer network In deciding whether to enter into a contract with SDC, you need to consider, among other things, the legal requirements for an enforceable contract Are the requirements different for a contract for services and a contract

for products? What are your options if SDC breaches (breaks, or fails to perform) the contract?

The answers to these questions are part of contract law and sales law

Other questions might concern payment under the contract How can you guarantee that NetSys will be paid? For instance, if SDC pays with a check that is returned for insuf-

ﬁ cient funds, what are your options? Answers to these questions can be found in the laws that relate to negotiable instruments (such as checks) and creditors’ rights Also, a dispute may arise over the rights to NetSys’s software, or there may be a question of liability if the software is defective There may even be an issue as to whether you and Hernandez had the authority to make the deal in the ﬁ rst place Resolutions of these questions may be found

in the laws that relate to intellectual property, e-commerce, torts, product liability, agency, business organizations, or professional liability Finally, if any dispute cannot be resolved amicably, then the laws and the rules concerning courts and court procedures spell out the steps of a lawsuit.•

Linking the Law to Other Business School Disciplines

In all likelihood, you are taking a business law or legal environment course because you intend to enter the business world, though some of you may also plan to become full-time practicing attorneys Many of you are taking other business school courses, such as accounting, business communications, economics, ﬁ nance, management, and marketing One of our goals in this text is to show how legal concepts can be useful for managers and businesspersons, whether their activities focus on ﬁ nance, marketing, or some other busi-ness discipline To that end, several chapters in this text conclude with a special feature

called Linking the Law to [a speciﬁ c business course]

The Role of the Law in a Small Business

Some of you may end up working in a small business or even owning and running one yourselves The small-business owner/operator is the most general of managers When you seek additional ﬁ nancing, you become a ﬁ nance manager When you “go over the books,”

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you become an accountant When you decide on a new advertising campaign, you are suddenly the marketing manager When you hire employees and determine their salaries and beneﬁ ts, you become a human resources manager Finally, when you try to predict market trends, interest rates, and other macroeconomic phenomena, you take on the role

of a managerial economist

Just as the various business school disciplines are linked to the law, so are all of these different managerial roles that a small-business owner/operator must perform Exhibit 1–1

on the next page shows some of the legal issues that may arise as part of the management

of a small business Large businesses face many of these issues, too

Sources of American Law

There are numerous sources of American law Primary sources of law, or sources that

establish the law, include the following:

• The U.S Constitution and the constitutions of the various states

• Statutes, or laws, passed by Congress and by state legislatures

• Regulations created by administrative agencies, such as the Federal Trade Commission and the U.S Food and Drug Administration

• Case law (court decisions)

We describe each of these important primary sources of law in the following pages (See the appendix at the end of this chapter for a discussion of how to ﬁ nd statutes, regulations, and case law.)

Secondary sources of law are books and articles that summarize and clarify the

pri-mary sources of law Legal encyclopedias, compilations (such as Restatements of the Law,

which summarize court decisions on a particular topic), ofﬁ cial comments to statutes, tises, articles in law reviews published by law schools, and articles in other legal journals are examples of secondary sources of law Courts often refer to secondary sources of law for guidance in interpreting and applying the primary sources of law discussed here

trea-Constitutional Law

The federal government and the states have separate written constitutions that set forth the

general organization, powers, and limits of their respective governments Constitutional

law is the law as expressed in these constitutions.

The U.S Constitution is the supreme law of the land As such, it is the basis of all law

in the United States A law in violation of the Constitution, if challenged, will be declared unconstitutional and will not be enforced no matter what its source Because of its para-mount importance in the American legal system, we present the complete text of the U.S Constitution in Appendix B The Tenth Amendment to the U.S Constitution reserves to the states all powers not granted to the federal government Each state in the union has its own constitution Unless it conﬂ icts with the U.S Constitution or a federal law, a state constitu-tion is supreme within the state’s borders

Statutory Law

Laws enacted by legislative bodies at any level of government, such as the statutes passed

by Congress or by state legislatures, make up the body of law generally referred to as

statutory law When a legislature passes a statute, that statute ultimately is included

in the federal code of laws or the relevant state code of laws Whenever a particular

statute is mentioned in this text, we usually provide a footnote showing its citation (a

Primary Source of Law A document that

establishes the law on a particular issue,

such as a constitution, a statute, an

admin-istrative rule, or a court decision.

Statutory Law The body of law enacted

by legislative bodies (as opposed to

constitutional law, administrative law,

or case law).

Citation A reference to a publication in

which a legal authority—such as a statute

or a court decision—or other source can

be found.

Secondary Source of Law A

publica-tion that summarizes or interprets the

law, such as a legal encyclopedia, a legal

treatise, or an article in a law review.

Constitutional Law The body of law

derived from the U.S Constitution and

the constitutions of the various states.

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reference to a publication in which a legal authority—such as a statute or a court decision—or other source can be found)

In the appendix following this chapter, we explain how you can use these citations to

ﬁ nd statutory law

Statutory law also includes local

ordinances—statutes (laws, rules, or orders)

passed by municipal or county governing units to govern matters not covered by fed-eral or state law Ordinances commonly have

to do with city or county land use (zoning ordinances), building and safety codes, and other matters affecting only the local govern-ing unit

A federal statute, of course, applies to all states A state statute, in contrast, applies only within that state’s borders State laws thus may vary from state to state No federal statute may violate the U.S Constitution, and no state statute or local ordinance may violate the U.S Constitution or the relevant state constitution

UNIFORM LAWS During the 1800s, the differences among state laws frequently cre-ated difﬁ culties for businesspersons con-ducting trade and commerce among the states To counter these problems, a group

of legal scholars and lawyers formed the National Conference of Commissioners on Uniform State Laws (NCCUSL) in 1892 to

draft uniform laws (model statutes) for the

states to consider adopting The NCCUSL still exists and continues to issue uniform laws: it has issued more than two hundred uniform acts since its inception

Each state has the option of adopting or rejecting a uniform law Only if a state legislature

adopts a uniform law does that law become part of the statutory law of that state Note that a

state legislature may adopt all or part of a uniform law as it is written, or the legislature may rewrite the law however the legislature wishes Hence, even though many states may have adopted a uniform law, those states’ laws may not be entirely “uniform.”

THE UNIFORM COMMERCIAL CODE (UCC) One of the most important uniform acts is the Uniform Commercial Code (UCC), which was created through the joint efforts

of the NCCUSL and the American Law Institute.1 The UCC was fi rst issued in 1952 and has been adopted in all fi fty states,2 the District of Columbia, and the Virgin Islands The UCC facilitates commerce among the states by providing a uniform, yet fl exible, set of rules governing commercial transactions Because of its importance in the area of com-

Business Organization

What is the most appropriate business organizational form,

and what type of personal liability does it entail?

Taxation

How will the small business be taxed, and are there ways to reduce those taxes?

Intellectual Property

Does the small business have any patents or other intellectual

property that needs to be protected, and if so, what steps should the firm take?

Contracts, Sales, and Leases

Will the firm be regularly entering into contracts with others,

and if so, should it hire an attorney to review those contracts?

Ordinance A regulation enacted by a city

or county legislative body that becomes

part of that state’s statutory law.

Uniform Law A model law created by the

National Conference of Commissioners on

Uniform State Laws and/or the American

Law Institute for the states to consider

adopting Each state has the option of

adopting or rejecting all or part of a

uniform law If a state adopts the law,

it becomes statutory law in that state

1. This institute was formed in the 1920s and consists of practicing attorneys, legal scholars, and judges.

2. Louisiana has adopted only Articles 1, 3, 4, 5, 7, 8, and 9.

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mercial law, we cite the UCC frequently in this text We also present Articles 2 and 2A of

the UCC in Appendix C (For a discussion of the creation of the UCC, see the Landmark

in the Law feature in Chapter 11 on page 301.)

its products (See the Linking the Law to Management feature on pages 27 and 28.)

FEDERAL AGENCIES At the national level, numerous executive agencies exist within

the cabinet departments of the executive branch For example, the U.S Food and Drug Administration is within the U.S Department of Health and Human Services Executive agencies are subject to the authority of the president, who has the power to appoint and

remove ofﬁ cers of these agencies There are also major independent regulatory agencies at

the federal level, including the Federal Trade Commission, the Securities and Exchange Commission, and the Federal Communications Commission The president’s power is less pronounced in regard to independent agencies, whose ofﬁ cers serve for ﬁ xed terms and cannot be removed without just cause

STATE AND LOCAL AGENCIES There are administrative agencies at the state and local levels as well Commonly, a state agency (such as a state pollution-control agency) is cre-ated as a parallel to a federal agency (such as the Environmental Protection Agency) Just as federal statutes take precedence over conﬂ icting state statutes, so do federal agency regula-tions take precedence over conﬂ icting state regulations Because the rules of state and local agencies vary widely, we focus here exclusively on federal administrative law

AGENCY CREATION Because Congress cannot possibly oversee the actual tion of all the laws it enacts, it must delegate such tasks to agencies, especially when the legislation involves highly technical matters, such as air and water pollution Congress cre-

implementa-ates an administrative agency by enacting enabling legislation, which speciﬁ es the name,

composition, purpose, and powers of the agency being created

EXAMPLE 1.2 The Federal Trade Commission (FTC) was created in 1914 by the Federal Trade Commission Act.3 This act prohibits unfair and deceptive trade practices It also describes the procedures the agency must follow to charge persons or organizations with violations of the act, and it provides for judicial review (review by the courts) of agency orders Other portions of the act grant the agency powers to “make rules and regulations for the purpose of carrying out the Act,” conduct investigations of business practices, obtain reports from interstate corporations concerning their business practices, investigate possible violations of the act, publish ﬁ ndings of the agency’s investigations, and recom-mend new legislation The act also empowers the FTC to hold trial-like hearings and to

adjudicate (resolve judicially) certain kinds of disputes that involve FTC regulations.•

Note that the powers granted to the FTC incorporate functions associated with the lative branch of government (rulemaking), the executive branch (investigation and enforce-ment), and the judicial branch (adjudication) Taken together, these functions constitute

legis-administrative process, which is the administration of law by legis-administrative agencies.

O N T H E W E B For links to most

uni-form laws, go to the National Conference

of Commissioners on Uniform State Laws

Web site at www.nccusl.org.

Administrative Law The body of law

created by administrative agencies (in the

form of rules, regulations, orders, and

decisions) in order to carry out their duties

and responsibilities.

Administrative Agency A federal, state,

or local government agency established

to perform a speciﬁ c function

Administra-tive agencies are authorized by legislaAdministra-tive

acts to make and enforce rules in order to

administer and enforce the acts.

Enabling Legislation A statute enacted by

Congress that authorizes the creation of

an administrative agency and speciﬁ es the

name, composition, purpose, and powers

of the agency being created.

Adjudicate To render a judicial decision

In the administrative process,

adjudica-tion is the trial-like proceeding in which

an administrative law judge hears and

decides issues that arise when an

admin-istrative agency charges a person or a ﬁ rm

with violating a law or regulation enforced

by the agency.

Administrative Process The procedure

used by administrative agencies in

admin-istering the law.

3. 15 U.S.C Sections 45–58.

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Rulemaking The process undertaken by

an administrative agency when formally

adopting a new regulation or amending

an old one Rulemaking involves notifying

the public of a proposed rule or change

and receiving and considering the public’s

comments.

Legislative Rule An administrative agency

rule that carries the same weight as a

congressionally enacted statute.

Ethical Issue

RULEMAKING A major function of an administrative agency is

rulemaking—formu-lating new regulations In an agency’s enabling legislation, Congress confers the agency’s

power to make legislative rules, or substantive rules, which are legally binding on all

businesses The Administrative Procedure Act of 1946 (APA)4 imposes strict procedural requirements that agencies must follow in legislative rulemaking and other functions

EXAMPLE 1.3 The Occupational Safety and Health Act of 1970 authorized the Occupational Safety and Health Administration (OSHA) to develop and issue rules governing safety in the workplace When OSHA wants to formulate rules regarding safety in the steel industry,

it has to follow speciﬁ c procedures outlined by the APA.•

Legislative rulemaking commonly involves three steps First, the agency must give lic notice of the proposed rulemaking proceedings, where and when the proceedings will

pub-be held, the agency’s legal authority for the proceedings, and the terms or subject matter

of the proposed rule The notice must be published in the Federal Register, a daily

publica-tion of the U.S government Second, following this notice, the agency must allow ample time for interested parties to comment in writing on the proposed rule The agency takes these comments into consideration when drafting the ﬁ nal version of the regulation The

third and last step is the drafting of the ﬁ nal rule and its publication in the Federal Register.

(See the appendix at the end of this chapter for an explanation of how to ﬁ nd agency regulations.)

INVESTIGATION AND ENFORCEMENT Agencies have both investigatory and rial powers An agency can request that individuals or organizations hand over speciﬁ ed books, papers, electronic records, or other documents In addition, agencies may conduct on-site inspections, although a search warrant is normally required for such inspections Sometimes, a search of a home, an ofﬁ ce, or a factory is the only means of obtaining evi-dence needed to prove a regulatory violation Agencies investigate a wide range of activi-ties, including coal mining, automobile manufacturing, and the industrial discharge of pollutants into the environment

prosecuto-After investigating a suspected rule violation, an agency may decide to take action against an individual or a business Most administrative actions are resolved through nego-tiated settlement at their initial stages without the need for formal adjudication If a settle-ment cannot be reached, though, the agency may issue a formal complaint and proceed to adjudication

ADJUDICATION Agency adjudication involves a trial-like hearing before an

administra-tive law judge (ALJ) Hearing procedures vary widely from agency to agency After the

hearing, the ALJ renders a decision in the case The ALJ can compel the charged party to pay a fi ne or can prohibit the party from carrying on some specifi ed activity Either side may appeal the ALJ’s decision to the commission or board that governs the agency If the party fails to get relief there, it can appeal to a federal court If no party appeals the case, the ALJ’s decision becomes fi nal

D

o administrative agencies exercise too much authority? Administrative agencies, such as the Federal Trade Commission, combine in a single governmental entity functions normally divided among the three branches of government They create rules, conduct investigations, and prosecute and pass judgment on violators Yet administrative agencies’ powers often go unchecked by the other branches, causing some businesspersons to suggest that it is unethical to allow agencies—which were not even mentioned in the U.S Constitution—to wield so many powers

O N T H E W E B You can ﬁ nd proposed

and ﬁ nal rules issued by

administra-tive agencies by accessing the Federal

Register online at

Administrative Law Judge (ALJ) One

who presides over an administrative

agency hearing and has the power to

administer oaths, take testimony, rule on

questions of evidence, and make

determi-nations of fact.

4. 5 U.S.C Sections 551–706.

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Although agency rulemaking must comply with the requirements of the Administrative Procedure Act (APA), the act applies only to legislative, not interpretive, rulemaking In addition, the APA is largely procedural and aimed at preventing arbitrariness: it does little to ensure that the rules passed by agencies are fair or correct Even on those rare occasions when an agency’s ruling is challenged and later reviewed by a court, the court cannot reverse the agency’s decision unless the agency exceeded its authority or acted arbitrarily Courts typically are reluctant to second-guess an agency’s rules, interpretations, and decisions.5 Moreover, once an agency has ﬁ nal regulations in place, it is difﬁ cult to revoke or alter them President Barack Obama discovered this in 2009 when he tried to change some

of the rules that his predecessor, President George W Bush, had put into place in the last few months

of his administration

Case Law and Common Law Doctrines

The rules of law announced in court decisions constitute another basic source of can law These rules of law include interpretations of constitutional provisions, of statutes enacted by legislatures, and of regulations created by administrative agencies Today, this

Ameri-body of judge-made law is referred to as case law Case law—the doctrines and principles

announced in cases—governs all areas not covered by statutory law or administrative law and is part of our common law tradition We look at the origins and characteristics of the common law tradition in the pages that follow

The Common Law Tradition

Because of our colonial heritage, much of American law is based on the English legal system

A knowledge of this tradition is crucial to understanding our legal system today because judges in the United States still apply common law principles when deciding cases

Early English Courts

After the Normans conquered England in 1066, William the Conqueror and his successors began the process of unifying the country under their rule One of the means they used

to do this was the establishment of the king’s courts, or curiae regis Before the Norman

Conquest, disputes had been settled according to the local legal customs and traditions in various regions of the country The king’s courts sought to establish a uniform set of rules

for the country as a whole What evolved in these courts was the beginning of the common

law—a body of general rules that applied throughout the entire English realm Eventually,

the common law tradition became part of the heritage of all nations that were once British colonies, including the United States

Courts developed the common law rules from the principles underlying judges’ sions in actual legal controversies Judges attempted to be consistent, and whenever pos-sible, they based their decisions on the principles suggested by earlier cases They sought

deci-to decide similar cases in a similar way and considered new cases with care, because they knew that their decisions would make new law Each interpretation became part of the law

on the subject and served as a legal precedent—that is, a court decision that furnished

an example or authority for deciding subsequent cases involving identical or similar legal principles or facts

In the early years of the common law, there was no single place or publication where court opinions, or written decisions, could be found Beginning in the late thirteenth and early fourteenth centuries, however, portions of signiﬁ cant decisions from each year were

Case Law The rules of law announced

in court decisions Case law includes the

aggregate of reported cases that interpret

judicial precedents, statutes, regulations,

and constitutional provisions.

Common Law The body of law developed

from custom or judicial decisions in

English and U.S courts, not attributable to

a legislature.

Precedent A court decision that furnishes

an example or authority for deciding

subsequent cases involving identical or

similar facts.

5. See, for example, Citizens’ Committee to Save Our Canyons v Krueger, 513 F.3d 1169 (10th Cir 2008).

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gathered together and recorded in Year Books The Year Books were useful references for lawyers and judges In the sixteenth century, the Year Books were discontinued, and other

reports of cases became available (See the appendix to this chapter for a discussion of how cases are reported, or published, in the United States today.)

Stare Decisis

The practice of deciding new cases with reference to former decisions, or precedents, tually became a cornerstone of the English and U.S judicial systems The practice forms a

even-doctrine called stare decisis6(“to stand on decided cases”)

THE IMPORTANCE OF PRECEDENTS IN JUDICIAL DECISION MAKING Under the

doctrine of stare decisis, once a court has set forth a principle of law as being applicable to

a certain set of facts, that court and courts of lower rank must adhere to that principle and

apply it in future cases involving similar fact patterns Stare decisis has two aspects: ﬁ rst,

decisions made by a higher court are binding on lower courts; and second, a court should not overturn its own precedents unless there is a strong reason to do so

Controlling precedents in a jurisdiction (an area in which a court or courts have the

power to apply the law—see Chapter 3) are referred to as binding authorities A binding

authority is any source of law that a court must follow when deciding a case Binding

authorities include constitutions, statutes, and regulations that govern the issue being decided, as well as court decisions that are controlling precedents within the jurisdiction United States Supreme Court case decisions, no matter how old, remain controlling until they are overruled by a subsequent decision of the Supreme Court, by a constitutional amendment, or by congressional legislation

STARE DECISIS AND LEGAL STABILITY The doctrine of stare decisis helps the courts to

be more efﬁ cient because if other courts have carefully reasoned through a similar case, their

legal reasoning and opinions can serve as guides Stare decisis also makes the law more stable

and predictable If the law on a given subject is well settled, someone bringing a case to court can usually rely on the court to make a decision based on what the law has been

DEPARTURES FROM PRECEDENT Although courts are obligated to follow precedents, sometimes a court will depart from the rule of precedent if it decides that a given precedent should no longer be followed If a court decides that a precedent is simply incorrect or that technological or social changes have rendered the precedent inapplicable, the court might rule contrary to the precedent Cases that overturn precedent often receive a great deal of publicity

CASE EXAMPLE 1.4 In Brown v Board of Education of Topeka,7 the United States Supreme Court expressly overturned precedent when it concluded that separate educational facili-ties for whites and blacks, which had been upheld as constitutional in numerous previous cases,8 were inherently unequal The Supreme Court’s departure from precedent in the

Brown decision received a tremendous amount of publicity as people began to realize the

ramiﬁ cations of this change in the law.•

WHEN THERE IS NO PRECEDENT At times, cases arise for which there are no cedents within the jurisdiction When hearing such cases, called “cases of ﬁ rst impres-sion,” courts often look at precedents established in other jurisdictions for guidance

pre-Stare D ecisis A common law doctrine

under which judges are obligated to

follow the precedents established in

prior decisions.

Binding Authority Any source of law that

a court must follow when deciding a case

Binding authorities include constitutions,

statutes, and regulations that govern

the issue being decided, as well as court

decisions that are controlling precedents

within the jurisdiction.

6. Pronounced stahr-ee dih-si-sis.

7. 347 U.S 483, 74 S.Ct 686, 98 L.Ed 873 (1954) See the appendix at the end of this chapter for an tion of how to read legal citations.

explana-8. See Plessy v Ferguson, 163 U.S 537, 16 S.Ct 1138, 41 L.Ed 256 (1896).

In a 1954 photo, a woman sits on the

steps of the United States Supreme

Court building with her daughter after

the court’s landmark ruling in Brown

v Board of Education of Topeka

O N T H E W E B To learn how the

Supreme Court justiﬁ ed its departure

from precedent in the 1954 Brown

deci-sion, you can access the Court’s opinion

online by going to

entering “347” and “483” in the boxes

below the “Citation Search” heading,

and clicking on “get it.”

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Precedents from other jurisdictions, because they are not binding on the court, are

referred to as persuasive authorities A court may also consider various other factors,

including legal principles and policies underlying previous court decisions or existing statutes, fairness, social values and customs, public policy, and data and concepts drawn from the social sciences

Equitable Remedies and Courts of Equity

A remedy is the means given to a party to enforce a right or to compensate for the

viola-tion of a right EXAMPLE 1.5 Shem is injured because of Rowan’s wrongdoing If Shem ﬁ les

a lawsuit and is successful, a court can order Rowan to compensate Shem for the harm by paying Shem a certain amount The compensation is Shem’s remedy.•

The kinds of remedies available in the early king’s courts of England were severely restricted If one person wronged another, the king’s courts could award as compensation

either money or property, including land These courts became known as courts of law, and the remedies were called remedies at law Even though this system introduced uniformity in

the settling of disputes, when plaintiffs wanted a remedy other than economic tion, the courts of law could do nothing, so “no remedy, no right.”

compensa-REMEDIES IN EQUITY Equity is a branch of law, founded on what might be described as

notions of justice and fair dealing, that seeks to supply a remedy when no adequate remedy

at law is available When individuals could not obtain an adequate remedy in a court of law, they petitioned the king for relief Most of these petitions were decided by an adviser to the

king, called a chancellor, who had the power to grant new and unique remedies Eventually, formal chancery courts, or courts of equity, were established The remedies granted by these courts were called remedies in equity.

Thus, two distinct court systems were created, each having its own set of judges and its

own set of remedies Plaintiffs (those bringing lawsuits) had to specify whether they were

bringing an “action at law” or an “action in equity,” and they chose their courts accordingly

EXAMPLE 1.6 A plaintiff might ask a court of equity to order the defendant (the person

against whom a lawsuit is brought) to perform within the terms of a contract A court of law could not issue such an order because its remedies were limited to payment of money or property as compensation for damages A court of equity, however, could issue a decree for

speciﬁ c performance—an order to perform what was promised A court of equity could also

issue an injunction, directing a party to do or refrain from doing a particular act In certain cases, a court of equity could allow for the rescission (cancellation) of the contract, thereby

returning the parties to the positions that they held prior to the contract’s formation.•

Equitable remedies will be discussed in Chapter 10

THE MERGING OF LAW AND EQUITY Today, in most states, the courts of law and equity have merged, and thus the distinction between the two courts has largely disap-peared A plaintiff may now request both legal and equitable remedies in the same action, and the trial court judge may grant either form—or both forms—of relief The distinction between remedies at law and equity remains signiﬁ cant, however, because a court normally will grant an equitable remedy only when the remedy at law (monetary damages) is inad-equate To request the proper remedy, a businessperson (or her or his attorney) must know what remedies are available for the speciﬁ c kinds of harms suffered Exhibit 1–2 on the following page summarizes the procedural differences (applicable in most states) between

an action at law and an action in equity

EQUITABLE PRINCIPLES AND MAXIMS Over time, the courts have developed a number

of equitable principles and maxims that provide guidance in deciding whether plaintiffs

should be granted equitable relief Because of their importance, both historically and in our

Remedy The relief given to an innocent

party to enforce a right or compensate

for the violation of a right.

Plaintiff One who initiates a lawsuit.

Defendant One against whom a lawsuit is

brought; the accused person in a criminal

proceeding.

Persuasive Authority Any legal authority

or source of law that a court may look to

for guidance but on which it need not rely

in making its decision Persuasive

authori-ties include cases from other jurisdictions

and secondary sources of law.

Equitable Principles and Maxims

General propositions or principles of law

that have to do with fairness (equity).

and equity have merged, the principles of

equity still apply, and courts will not grant

an equitable remedy unless the remedy at

law is inadequate.

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judicial system today, these principles and maxims are set forth in this chapter’s Landmark

in the Law feature.

Classifications of Law

The law may be broken down according to several classiﬁ cation systems For example,

one classiﬁ cation system divides law into substantive law (all laws that deﬁ ne, describe, regulate, and create legal rights and obligations) and procedural law (all laws that establish

the methods of enforcing the rights established by substantive law) Other classiﬁ cation systems divide law into federal law and state law or private law (dealing with relationships

Initiation of lawsuit By ﬁ ling a complaint By ﬁ ling a petition.

Decision By jury or judge By judge (no jury).

Remedy Monetary damages Injunction, speciﬁ c performance,

or rescission.

In medieval England, courts of equity were expected to use discretion in

supplementing the common law Even today, when the same court can

award both legal and equitable remedies, it must exercise discretion

Students of business law should know that courts often invoke equitable

principles and maxims when making their decisions Here are some of the

most signiﬁ cant equitable principles and maxims:

treated fairly must treat others fairly.)

2 Where there is equal equity, the law must prevail (The law will

determine the outcome of a controversy in which the merits of both

sides are equal.)

3 One seeking the aid of an equity court must come to the court with

4 Equity will not suffer a wrong to be without a remedy (Equitable

relief will be awarded when there is a right to relief and there is no

adequate remedy at law.)

5 Equity regards substance rather than form (Equity is more concerned

with fairness and justice than with legal technicalities.)

6 Equity aids the vigilant, not those who rest on their rights (Equity will not

help those who neglect their rights for an unreasonable period of time.)

The last maxim has come to be known as the equitable doctrine of

the evidence was fresh; if they failed to do so, they would not be allowed

to bring a lawsuit What constitutes a reasonable time, of course, varies according to the circumstances of the case Time periods for different types of cases are now usually ﬁ xed by statutes of limitations After

the time allowed under a statute of limitations has expired, no action can

be brought, no matter how strong the case was originally.

• Application to Today’s World The equitable maxims listed above underlie many of the legal rules and principles that are commonly applied by the courts today—and that you will read about in this

promissory estoppel Under this doctrine, a person who has reasonably

and substantially relied on the promise of another may be able to obtain some measure of recovery, even though no enforceable contract, or

the promise from asserting the lack of a valid contract as a defense The rationale underlying the doctrine of promissory estoppel is similar to that expressed in the fourth and ﬁ fth maxims on the left.

• Relevant Web Sites To locate information on the Web concerning equitable principles and maxims, go to this text’s Web site

at www.cengage.com/blaw/blt , select “Chapter 1,” and click on “URLs for Landmarks.”

Substantive Law Law that deﬁ nes,

describes, regulates, and creates legal

rights and obligations.

Procedural Law Law that establishes the

methods of enforcing the rights

estab-lished by substantive law.

Statute of Limitations A federal or state

statute setting the maximum time period

during which a certain action can be

brought or certain rights enforced.

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between persons) and public law (addressing the relationship between persons and their governments)

Frequently, people use the term cyberlaw to refer to the emerging body of law that

governs transactions conducted via the Internet Cyberlaw is not really a classiﬁ cation of

law, nor is it a new type of law Rather, it is an informal term used to describe traditional

legal principles that have been modifi ed and adapted to fi t situations that are unique to the online world Of course, in some areas new statutes have been enacted to cover specifi c types of problems stemming from online communications Throughout this book, you will read about how the law is evolving to govern specifi c legal issues that arise in the online context

Civil Law and Criminal Law

Civil law spells out the rights and duties that exist between persons and between persons

and their governments, as well as the relief available when a person’s rights are violated Typically, in a civil case, a private party sues another private party (although the govern-ment can also sue a party for a civil law violation) to make that other party comply with

a duty or pay for the damage caused by the failure to comply with a duty EXAMPLE 1.7 If

a seller fails to perform a contract with a buyer, the buyer may bring a lawsuit against the seller The purpose of the lawsuit will be either to compel the seller to perform as promised

or, more commonly, to obtain monetary damages for the seller’s failure to perform.•

Much of the law that we discuss in this text is civil law Contract law, for example, which

we will discuss in Chapters 8 through 10, is civil law Additionally, the whole body of tort law (see Chapter 4) is civil law

Criminal law has to do with wrongs committed against society for

which society demands redress Criminal acts are proscribed by local, state, or federal government statutes (see Chapter 6) Thus, criminal defendants are prosecuted by public ofﬁ cials, such as a district attorney (D.A.), on behalf of the state, not by their victims or other private parties Whereas in a civil case the object is to obtain a remedy (such as monetary damages) to compensate the injured party, in a criminal case the object

is to punish the wrongdoer in an attempt to deter others from similar actions Penalties for violations of criminal statutes consist of ﬁ nes and/

or imprisonment—and, in some cases, death We will discuss the ences between civil and criminal law in greater detail in Chapter 6

differ-National and International Law

The law of a particular nation, such as the United States or Sweden, is national law

Na-tional law, of course, varies from country to country because each country’s law reﬂ ects the interests, customs, activities, and values that are unique to that nation’s culture

In contrast to national law, international law applies to more than one nation

Interna-tional law can be deﬁ ned as a body of written and unwritten laws observed by independent

nations and governing the acts of individuals as well as governments International law is

an intermingling of rules and constraints derived from a variety of sources, including the laws of individual nations, the customs that have evolved among nations in their relations with one another, and treaties and international organizations In essence, international law

is the result of centuries-old attempts to reconcile the traditional need of each nation to be the ﬁ nal authority over its own affairs with the desire of nations to beneﬁ t economically from trade and harmonious relations with one another

Cyberlaw An informal term used to refer

to all laws governing electronic

communi-cations and transactions, particularly those

conducted via the Internet.

Trials in criminal courts often concern

charges of robbery and assault, as

is the case here in the Clark County

Regional Justice Center in Las Vegas,

Nevada, presided over by Judge Joe

Bonaventure, Jr.

Civil Law The branch of law dealing

with the deﬁ nition and enforcement of

all private or public rights, as opposed to

criminal matters.

Criminal Law Law that deﬁ nes and

gov-erns actions that constitute crimes

Gener-ally, criminal law has to do with wrongful

actions committed against society for

which society demands redress.

National Law Law that pertains to a

particular nation (as opposed to

interna-tional law).

International Law The law that governs

relations among nations National laws,

customs, treaties, and international

confer-ences and organizations are generally

considered to be the most important

sources of international law.

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