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The Legal Environment

and Business Law

v. 1.

This is the book The Legal Environment and Business Law (v. 1.0).

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ii

• About the Authors
• Acknowledgments
• Preface
• Chapter 1: Introduction to Law and Legal Systems
  • What Is Law?...................................................................................................................................................
  • Schools of Legal Thought
  • Basic Concepts and Categories of US Positive Law
  • Sources of Law and Their Priority..............................................................................................................
  • Legal and Political Systems of the World
  • A Sample Case...............................................................................................................................................
  • Summary and Exercises
• Chapter 2: Corporate Social Responsibility and Business Ethics
  • What Is Ethics?
  • Major Ethical Perspectives..........................................................................................................................
  • An Ethical Decision Model...........................................................................................................................
  • Corporations and Corporate Governance..................................................................................................
  • Summary and Exercises
• Chapter 3: Courts and the Legal Process
  • The Relationship between State and Federal Court Systems in the United States ...............................
  • The Problem of Jurisdiction
  • Motions and Discovery
  • The Pretrial and Trial Phase
  • Judgment, Appeal, and Execution
  • When Can Someone Bring a Lawsuit?......................................................................................................
  • Relations with Lawyers..............................................................................................................................
  • Alternative Means of Resolving Disputes
  • Cases
• Chapter 4: Constitutional Law and US Commerce
  • Basic Aspects of the US Constitution
  • The Commerce Clause
  • Dormant Commerce Clause.......................................................................................................................
  • Preemption: The Supremacy Clause
  • Business and the Bill of Rights..................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 5: Administrative Law
  • Administrative Agencies: Their Structure and Powers
  • Controlling Administrative Agencies.......................................................................................................
  • The Administrative Procedure Act
  • Administrative Burdens on Business Operations
  • The Scope of Judicial Review
  • Cases
  • Summary and Exercises
• Chapter 6: Criminal Law
  • The Nature of Criminal Law
  • Types of Crimes
  • The Nature of a Criminal Act
  • Responsibility
  • Procedure....................................................................................................................................................
  • Constitutional Rights of the Accused.......................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 7: Introduction to Tort Law
  • Purpose of Tort Laws
  • Intentional Torts
  • Negligence
  • Strict Liability.............................................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 8: Introduction to Contract Law
  • General Perspectives on Contracts
  • Sources of Contract Law
  • Basic Taxonomy of Contracts
  • Cases
  • Summary and Exercises
• Chapter 9: The Agreement
  • The Agreement in General
  • The Offer
  • The Acceptance
  • Cases
  • Summary and Exercises
• Chapter 10: Real Assent
  • Duress and Undue Influence
  • Misrepresentation......................................................................................................................................
  • Mistake........................................................................................................................................................
  • Capacity.......................................................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 11: Consideration
  • General Perspectives on Consideration
  • Legal Sufficiency
  • Promises Enforceable without Consideration.........................................................................................
  • Cases
  • Summary and Exercises
• Chapter 12: Legality
  • General Perspectives on Illegality............................................................................................................
  • Agreements in Violation of Statute
  • Bargains Made Illegal by Common Law
  • Effect of Illegality and Exceptions............................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 13: Form and Meaning
  • The Statute of Frauds
  • The Parol Evidence Rule............................................................................................................................
  • Interpretation of Agreements: Practicalities versus Legalities
  • Cases
  • Summary and Exercises
• Chapter 14: Third-Party Rights
  • Assignment of Contract Rights
  • Delegation of Duties...................................................................................................................................
  • Third-Party Beneficiaries..........................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 15: Discharge of Obligations
  • Discharge of Contract Duties
  • Cases
  • Summary and Exercises
• Chapter 16: Remedies
  • Theory of Contract Remedies
  • Promisee’s Interests Protected by Contract............................................................................................
  • Legal Remedies: Damages..........................................................................................................................
  • Equitable Remedies....................................................................................................................................
  • Limitations on Contract Remedies
  • Cases
  • Summary and Exercises
• Chapter 17: Introduction to Sales and Leases
  • Commercial Transactions: the Uniform Commercial Code
  • Goods Introduction to Sales and Lease Law, and the Convention on Contracts for the International Sale of
  • Sales Law Compared with Common-Law Contracts and the CISG
  • General Obligations under UCC Article
  • Cases
  • Summary and Exercises
• Chapter 18: Title and Risk of Loss
  • Transfer of Title
  • Title from Nonowners
  • Risk of Loss..................................................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 19: Performance and Remedies
  • Performance by the Seller.........................................................................................................................
  • Performance by Buyer...............................................................................................................................
  • Remedies
  • Excuses for Nonperformance....................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 20: Products Liability
  • Introduction: Why Products-Liability Law Is Important
  • Warranties
  • Negligence
  • Strict Liability in Tort................................................................................................................................
  • Tort Reform
  • Cases
  • Summary and Exercises
• Chapter 21: Bailments and the Storage, Shipment, and Leasing of Goods
  • Introduction to Bailment Law
  • Liability of the Parties to a Bailment
  • The Storage and Shipping of Goods
  • Negotiation and Transfer of Documents of Title (or Commodity Paper).............................................
  • Cases
  • Summary and Exercises
• Chapter 22: Nature and Form of Commercial Paper
  • Introduction to Commercial Paper
  • Scope of Article 3 and Types of Commercial Paper and Parties
  • Requirements for Negotiability
  • Cases
  • Summary and Exercises
• Chapter 23: Negotiation of Commercial Paper
  • Transfer and Negotiation of Commercial Paper
  • Indorsements..............................................................................................................................................
  • Problems and Issues in Negotiation
  • Cases
  • Summary and Exercises
• Chapter 24: Holder in Due Course and Defenses
  • Holder in Due Course
  • Defenses and Role in Consumer Transactions
  • Cases
  • Summary and Exercises
• Chapter 25: Liability and Discharge
  • Liability Imposed by Signature: Agents, Authorized and Unauthorized
  • Contract Liability of Parties
  • Warranty Liability of Parties
  • Discharge
  • Cases
  • Summary and Exercises
• Chapter 26: Legal Aspects of Banking
  • Banks and Their Customers
  • Electronic Funds Transfers
  • Wholesale Transactions and Letters of Credit
  • Cases
  • Summary and Exercises
• Chapter 27: Consumer Credit Transactions
  • Entering into a Credit Transaction
  • Consumer Protection Laws and Debt Collection Practices
  • Cases
  • Summary and Exercises
• Chapter 28: Secured Transactions and Suretyship
  • Introduction to Secured Transactions...................................................................................................
  • Priorities
  • Rights of Creditor on Default and Disposition after Repossession
  • Suretyship.................................................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 29: Mortgages and Nonconsensual Liens
  • Uses, History, and Creation of Mortgages
  • Priority, Termination of the Mortgage, and Other Methods of Using Real Estate as Security........
  • Nonconsensual Lien
  • Cases
  • Summary and Exercises
• Chapter 30: Bankruptcy
  • Introduction to Bankruptcy and Overview of the 2005 Bankruptcy Act
  • Estate Case Administration; Creditors’ Claims; Debtors’ Exemptions and Dischargeable Debts; Debtor’s
  • Chapter 7 Liquidation
  • Chapter 11 and Chapter 13 Bankruptcies
  • Alternatives to Bankruptcy.....................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 31: Introduction to Property: Personal Property and Fixtures
  • The General Nature of Property Rights
  • Personal Property
  • Fixtures
  • Case............................................................................................................................................................
  • Summary and Exercises
• Chapter 32: Intellectual Property
  • Patents.......................................................................................................................................................
  • Trade Secrets
  • Copyright
  • Trademarks...............................................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 33: The Nature and Regulation of Real Estate and the Environment
  • Estates
  • Rights Incident to Possession and Ownership of Real Estate
  • Easements: Rights in the Lands of Others
  • Regulation of Land Use............................................................................................................................
  • Environmental Law..................................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 34: The Transfer of Real Estate by Sale
  • Forms of Ownership.................................................................................................................................
  • Brokers, Contracts, Proof of Title, and Closing.....................................................................................
  • Adverse Possession
  • Cases
  • Summary and Exercises
• Chapter 35: Landlord and Tenant Law
  • Types and Creation of Leasehold Estates...............................................................................................
  • Rights and Duties of Landlords and Tenants
  • Transfer of Landlord’s or Tenant’s Interest
  • Landlord’s Tort Liability..........................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 36: Estate Planning: Wills, Estates, and Trusts
  • Wills and Estate Administration.............................................................................................................
  • Trusts.........................................................................................................................................................
  • Factors Affecting Estates and Trusts......................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 37: Insurance
  • Definitions and Types of Insurance
  • Property Insurance, Liability Insurance, and Life Insurance
  • Insurer’s Defenses
  • Case............................................................................................................................................................
  • Summary and Exercises
• Chapter 38: Relationships between Principal and Agent
  • Introduction to Agency and the Types of Agents
  • Duties between Agent and Principal......................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 39: Liability of Principal and Agent; Termination of Agency
  • Principal’s Contract Liability
  • Principal’s Tort and Criminal Liability
  • Agent’s Personal Liability for Torts and Contracts; Termination of Agency.....................................
  • Cases
  • Summary and Exercises
• Chapter 40: Partnerships: General Characteristics and Formation
  • Introduction to Partnerships and Entity Theory
  • Partnership Formation............................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 41: Partnership Operation and Termination
  • Operation: Relations among Partners....................................................................................................
  • Operation: The Partnership and Third Parties
  • Dissolution and Winding Up
  • Cases
  • Summary and Exercises
• Chapter 42: Hybrid Business Forms
  • Limited Partnerships
  • Limited Liability Companies
  • Other Forms..............................................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 43: Corporation: General Characteristics and Formation
  • Historical Background.............................................................................................................................
  • Partnerships versus Corporations..........................................................................................................
  • The Corporate Veil: The Corporation as a Legal Entity
  • Classifications of Corporations...............................................................................................................
  • Corporate Organization...........................................................................................................................
  • Effect of Organization..............................................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 44: Legal Aspects of Corporate Finance
  • General Sources of Corporate Funds......................................................................................................
  • Bonds
  • Types of Stock...........................................................................................................................................
  • Initial Public Offerings and Consideration for Stock
  • Dividends
  • The Winds of Change
  • Cases
  • Summary and Exercises
• Chapter 45: Corporate Powers and Management
  • Powers of a Corporation..........................................................................................................................
  • Rights of Shareholders
  • Duties and Powers of Directors and Officers.........................................................................................
  • Liability of Directors and Officers
  • Cases
  • Summary and Exercises
• Chapter 46: Securities Regulation
  • The Nature of Securities Regulation
  • Liability under Securities Law
  • Cases
  • Summary and Exercises
• Corporations, and Corporate Dissolution Chapter 47: Corporate Expansion, State and Federal Regulation of Foreign
  • Corporate Expansion
  • Foreign Corporations...............................................................................................................................
  • Dissolution
  • Cases
  • Summary and Exercises
• Chapter 48: Antitrust Law
  • History and Basic Framework of Antitrust Laws in the United States
  • Horizontal Restraints of Trade
  • Vertical Restraints of Trade....................................................................................................................
  • Price Discrimination: The Robinson-Patman Act
  • Exemptions
  • Sherman Act, Section 2: Concentrations of Market Power
  • Acquisitions and Mergers under Section 7 of the Clayton Act............................................................
  • Cases
  • Summary and Exercises
• Chapter 49: Unfair Trade Practices and the Federal Trade Commission
  • The Federal Trade Commission: Powers and Law Governing Deceptive Acts
  • Deceptive Acts and Practices
  • Unfair Trade Practices.............................................................................................................................
  • Remedies
  • Cases
  • Summary and Exercises
• Chapter 50: Employment Law
  • Federal Employment Discrimination Laws
  • Employment at Will
  • Other Employment-Related Laws...........................................................................................................
  • Cases
  • Summary and Exercises
• Chapter 51: Labor-Management Relations
  • A Brief History of Labor Legislation.......................................................................................................
  • The National Labor Relations Board: Organization and Functions
  • Labor and Management Rights under the Federal Labor Laws...........................................................
  • Case............................................................................................................................................................
  • Summary and Exercises
• Chapter 52: International Law
  • Introduction to International Law
  • Sources and Practice of International Law
  • Important Doctrines of Nation-State Judicial Decisions......................................................................
  • Regulating Trade......................................................................................................................................
  • Cases
  • Summary and Exercises

About the Authors

Don Mayer

Don Mayer teaches law, ethics, public policy, and sustainability at the Daniels College of Business, University of Denver, where he is professor in residence. His research focuses on the role of business in creating a more just, sustainable, peaceful, and productive world. With James O’Toole, Professor Mayer has coedited and contributed content to Good Business: Exercising Effective and Ethical Leadership (Routledge, 2010). He is also coauthor of International Business Law: Cases and Materials , which is in its fifth edition with Pearson Publishing Company. He recently served as the first Arsht Visiting Ethics Scholar at the University of Miami.

After earning a philosophy degree from Kenyon College and a law degree from Duke University Law School, Professor Mayer served as a Judge Advocate General’s (JAG) Corps officer in the United States Air Force during the Vietnam conflict and went into private practice in North Carolina. In 1985, he earned his LLM in international and comparative law at the Georgetown University Law Center. Later that year, he began his academic career at Western Carolina University and proceeded to become a full professor at Oakland University in Rochester, Michigan, where he taught for many years before moving to the University of Denver. He has taught as a visitor at California State Polytechnic University, the University of Michigan, the Manchester Business School Worldwide, and Antwerp Management School.

Professor Mayer has won numerous awards from the Academy of Legal Studies in Business, including the Hoeber Award for best article in the American Business Law Journal , the Maurer Award for best article on business ethics (twice), and the Ralph Bunche Award for best article on international business law (three times). His work has been published in many journals and law reviews but most often in American Business Law Journal , the Journal of Business Ethics , and the Business Ethics Quarterly.

International Business Education and Research selected a case written by Professor Siedel for its annual International Case Writing Award. His research has been cited by appellate courts in the United States and abroad, including the High Court of Australia.

Professor Siedel has served as visiting professor of business law at Stanford University, visiting professor of business administration at Harvard University, and Parsons fellow at the University of Sydney. He has been elected a visiting fellow at Cambridge University’s Wolfson College and a life fellow of the Michigan State Bar Foundation. As a Fulbright scholar, Professor Siedel held a distinguished chair in the humanities and social sciences.

Jethro K. Lieberman

Jethro K. Lieberman is professor of law and vice president for academic publishing at New York Law School, where he has taught for more than twenty-five years. He earned his BA in politics and economics from Yale University, his JD from Harvard Law School, and his PhD in political science from Columbia University. He began his teaching career at Fordham University School of Law. Before that, he was vice president at what is now the International Institute for Conflict Prevention and Resolution (CPR). For nearly ten years, he was legal affairs editor of Business Week magazine. He practiced antitrust and trade regulation law at a large Washington law firm and was on active duty as a member of the Navy’s Judge Advocate General’s (JAG) Corps during the Vietnam era. He is the author of The Litigious Society (Basic Books), the winner of the American Bar Association’s top literary prize, the Silver Gavel, and the author of A Practical Companion to the Constitution: How the Supreme Court Has Ruled on Issues from Abortion to Zoning (University of California Press), among many other books. He is a long-time letterpress printer and proprietor of The Press at James Pond, a private press, and owner of the historic Kelmscott-Goudy Press, an Albion handpress that was used to print the Kelmscott Press edition of Geoffrey Chaucer’s Canterbury Tales in the 1890s.

Alyssa Rose Martina (Contributing Author)

Alyssa Rose Martina is an entrepreneur, businesswoman, professional writer, and educator. She started her first company, Metro Parent Magazine , in 1986, after serving for five years as legal counsel for Wayne County Circuit Court, one of the

About the Authors

nation’s largest state judicial circuits. As a dedicated entrepreneur, she saw an opportunity to fill a void for parents and established a family magazine. Today, more than 263,000 readers rely on Metro Parent as their “parenting bible.” Alyssa’s company, Metro Parent Publishing Group, also produces several ancillary publications: Metro Baby , a biannual pregnancy resource guide; Going Places , a biannual guide to family fun in Southeast Michigan; Party Book , an event planning resource guide; and Special Edition , a resource for parents regarding children with special needs. To offer support and resources to African American families, Alyssa saw an opportunity to establish a second publishing company catered to the African American market. In 1999, the company was launched and today, BLAC Magazine , which covers “Black Life, Arts and Culture,” reaches over sixty thousand readers in the Detroit region. This monthly lifestyle publication explores and celebrates the rich cultural fabric of African American life in southeast Michigan, under the guidance of African American community leaders and educators and a distinguished panel of advisors who form an advisory council.

Alyssa presents lectures and workshops to various business and community groups around the country on topics such as innovation, strategy, entrepreneurship, and next-level thinking. She also serves as a consultant on events marketing for several of her sister publications throughout the country. In April 2010, Alyssa received her MBA with highest distinction from the University of Michigan’s Ross School of Business. She has guest-lectured on entrepreneurial/legal issues at Ross and has also served as a teaching assistant. She has written a number of parenting articles and a children’s book, and she was a weekly columnist for the Detroit News. Alyssa has served as an editor and reviewer for several business law articles and manuscripts. Alyssa teaches at Walsh School of Business as an adjunct professor. Her course is focused on legal issues in business for MBA students.

About the Authors

Preface

Our goal is to provide students with a textbook that is up to date and comprehensive in its coverage of legal and regulatory issues—and organized to permit instructors to tailor the materials to their particular approach. This book engages students by relating law to everyday events with which they are already familiar (or with which they are familiarizing themselves in other business courses) and by its clear, concise, and readable style. (An earlier business law text by authors Lieberman and Siedel was hailed “the best written text in a very crowded field.”)

This textbook provides context and essential concepts across the entire range of legal issues with which managers and business executives must grapple. The text provides the vocabulary and legal acumen necessary for businesspeople to talk in an educated way to their customers, employees, suppliers, government officials—and to their own lawyers.

Traditional publishers often create confusion among customers in the text selection process by offering a huge array of publications. Once a text is selected, customers might still have to customize the text to meet their needs. For example, publishers usually offer books that include either case summaries or excerpted cases, but some instructors prefer to combine case summaries with a few excerpted cases so that students can experience reading original material. Likewise, the manner in which most conventional texts incorporate video is cumbersome because the videos are contained in a separate library, which makes access more complicating for instructors and students.

The Unnamed Publisher model eliminates the need for “families” of books (such as the ten Miller texts mentioned below) and greatly simplifies text selection. Instructors have only to select between our Business Law and Legal Environment volumes of the text and then click on the features they want (as opposed to trying to compare the large number of texts and packages offered by other publishers). In addition to the features inherent in any Flat World publication, this book offers these unique features:

• Cases are available in excerpted and summarized format, thus enabling instructors to easily “mix and match” excerpted cases with case summaries.
• Links to forms and uniform laws are embedded in the text. For example, the chapters on contract law incorporate discussion of

various sections of the Uniform Commercial Code, which is available at http://www.law.cornell.edu/ucc/ucc.table.html.

• Likewise, many sample legal forms are readily available online. For example, the chapter on employment law refers to the type of terms commonly found in a standard employment agreement, examples of which can be found at http://www.rocketlawyer.com/popular-legal- forms.rl?utm_source=103&campaign= Alpha+Search&keyword=online%2520legal%2520forms&mtype=e&ad= 2516463025&docCategoryId=none&gclid= CI3Wgeiz7q8CFSoZQgodIjdn2g.
• Every chapter contains overviews that include the organization and coverage, a list of key terms, chapter summaries, and self-test questions in multiple-choice format (along with answers) that are followed by additional problems with answers available in the Instructors’ Manual.
• In addition to standard supplementary materials offered by other texts, students have access to electronic flash cards, proactive quizzes, and audio study guides.

Preface