Business Law 11th Edition PDF

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CONTENT

Part I LEGAL ENVIRONMENT, JUDICIAL

SYSTEM, DISPUTE RESOLUTION, AND
CONSTITUTIONAL LAW ..........1 1 LEGAL
HERITAGE AND THE INFORMATION
AGE ....................................2 Introduction to
Legal Heritage and the Information Age .......3
What is
Law? ...........................................................
..........3 Flexibility of the
Law ..........................................................5
Critical Legal Thinking • Brown v. Board of
Education ...........................5 Schools of
Jurisprudential
Thought ......................................6 History of
American
Law .....................................................8
Landmark Law • Adoption of English
Common Law in America ..............9 Global
Law • Civil Law System of France and
Germany .......................10 Sources of Law
in the United States .................................10
Contemporary Environment • How a Bill
Becomes Law ........................11 Doctrine of
Stare
Decisis ..................................................14
Law in the Information
Age ...............................................14 Ethics
• Apple Agrees to Pay $500 Million to Settle
Consumer Fraud
Lawsuit .......................................................
................................15 Critical Legal
Thinking ......................................................
15 Developing Skills for Your
Career ......................................17 Key
Terms and
Concepts ..................................................1
7 Critical Legal Thinking
Case .............................................17 Ethics
Cases ..........................................................
..........18
Notes ..........................................................
....................19 2 COURTS AND
JURISDICTION ...................20 Introduction
to Courts, Jurisdiction, and Administrative
Law .............................................................
....................21 State Court
Systems ......................................................
..21 Business Environment • Delaware
Courts Specialize in Business
Disputes ......................................................
................23 Federal Court
System .......................................................
25 Contemporary Environment • Foreign
Intelligence Surveillance
Court ..........................................................
................................25 Supreme Court of
the United States ..................................28
Contemporary Environment • Process of
Nominating and Confirming a U.S. Supreme
Court Justice ....................................28
Contemporary Environment • “I’ll Take You to
the U.S. Supreme
Court!” ........................................................
.................30 Jurisdiction of Federal and
State Courts ............................31 Case 2.1 •
U.S. Supreme Court Case • Full Faith and
Credit Clause .....33 Standing to Sue,
Jurisdiction, and Venue ...........................33
Critical Legal Thinking • International Shoe
Company v. State of
Washington .................................................
...............................35 Case 2.2 • U.S.
Supreme Court Case •
Jurisdiction .............................36 Case 2.3 •
Federal Court Case • Forum-Selection
Clause ....................38 Jurisdiction in Digital
Commerce .......................................39
Information Technology • Jurisdiction Over
an Internet eBay Seller ......40 Global Law •
Judicial System of
Japan ................................................41 Key
Terms and
Concepts ..................................................4
Cases ...........................................42 Ethics
Cases ..........................................................
..........44
Notes ..........................................................
....................44 3 JUDICIAL, ALTERNATIVE,
AND E-DISPUTE RESOLUTION ..................45
Introduction to Judicial, Alternative, and E-
Dispute
Resolution ...................................................
....................46 Attorney
Representation ............................................
......46 Pretrial Litigation
Process ................................................47
Pleadings ....................................................
.....................47 Contemporary Environment
• Cost–Benefit Analysis of a
Lawsuit .......................................................
................................49 Class
Action .........................................................
...........50 Business Environment • Class
Action Fairness Act ..............................50
Discovery ....................................................
.....................51 Ethics • Nondisclosure of
Evidence by Walmart .......................52 E-
Discovery ....................................................
..................52 Information Technology •
Cellphone Texts Are Discoverable Evidence
in an Automobile Accident
Case ...................................53 Information
Technology • Social Media Postings and
Photographs Are Discoverable
Evidence .....................................................
.....53 Pretrial
Motions .......................................................
........54 Case 3.1 • Federal Court Case •
Summary Judgment ..........................55
Settlement
Conference .................................................
....55 Information Technology • Facebook
Settles Algorithmic Discrimination
Lawsuits ......................................................
........56
Trial .............................................................
....................56 Case 3.2 • Federal Court
Case • Jury
Verdict .......................................58 E-
Courts and Information
Technology ................................59
Appeal ........................................................
.....................60 Alternative Dispute
Resolution .........................................61
Landmark Law • Federal Arbitration
Act ..............................................62 Case
3.3 • U.S. Supreme Court Case • Arbitration
Agreement ...................................................
...............................63 E-Dispute
Resolution ...................................................
.....64 Key Terms and
Concepts ..................................................6
Cases ...........................................65 Ethics
Cases ..........................................................
..........67
Notes ..........................................................
....................67 4 CONSTITUTIONAL LAW
FOR BUSINESS AND E-
COMMERCE ..................68 Introduction to
Constitutional Law for Business and E-
Commerce ..................................................
............69 Constitution of the United States
of America ....................69 Critical Legal
Thinking • Checks and
Balances .....................................71
Supremacy
Clause ........................................................
...72 Case 4.1 • U.S. Supreme Court Case •
Supremacy Clause ..................72
Commerce
Clause ........................................................
....73 Case 4.2 • U.S. Supreme Court Case •
Commerce Clause ...................75 E-
Commerce and the
Constitution .....................................76
Information Technology • E-Commerce and
the Commerce
Clause ........................................................
................................76 Bill Of Rights and
Other Amendments to the U.S.
Constitution ................................................
.....................77 Freedom of
Speech ........................................................
..78 Case 4.3 • U.S. Supreme Court Case •
Freedom of Speech .................78
Information Technology • Free Speech and
Video Games ....................81 Freedom of
Religion .......................................................
..81 Case 4.4 • U.S. Supreme Court Case •
Establishment Clause ..............82 Equal
Protection ...................................................
...........83 Due
Process .......................................................
.............84 CONTENTS vi Contents vii Case
4.5 • U.S. Supreme Court Case • Due
Process and Equal Protection
Clauses .......................................................
...............85 Government Taking of
Property .........................................86
Privileges and
Immunities .................................................
87 Key Terms and
Concepts ..................................................8
Cases ...........................................88 Ethics
Cases ..........................................................
..........89
Notes ..........................................................
....................90 Part II TORTS, CRIMES, AND
INTELLECTUAL PROPERTY ..........91 5
INTENTIONAL TORTS AND
NEGLIGENCE ..............................................
92 Introduction to Intentional Torts and
Negligence ...............93 Intentional
Torts ...........................................................
...93 Case 5.1 • State Court Case • False
Imprisonment ..............................94 Ethics •
Intentional Misrepresentation
(Fraud) ....................................97
Unintentional Torts
(Negligence) ......................................98
Case 5.2 • State Court Case •
Duty .....................................................99
Ethics • Ouch! McDonald’s Coffee Is Too
Hot! ...................................100 Case 5.3 •
State Court Case •
Negligence .........................................101
Information Technology • Apple Not Liable
for Accident Caused by Driver’s
Texting ........................................................
.............103 Special Negligence
Doctrines .........................................104
Contemporary Environment • Duty to Rescue
Laws ...........................105 Critical Legal
Thinking • Good Samaritan
Laws .................................106 Defenses
Against
Negligence .........................................107
Contributory and Comparative
Negligence .......................107 Case 5.4 •
Federal Court Case • Assumption of the
Risk .............................................................
.......................108 Strict
Liability .......................................................
.........109 Key Terms and
Concepts ................................................11
Cases .........................................110 Ethics
Cases ..........................................................
........112
Notes ..........................................................
..................112 6 PRODUCT AND STRICT
LIABILITY ..........113 Introduction to Product
and Strict Liability ......................114 Product
Liability:
Negligence ..........................................114
Case 6.1 • Federal Court Case • Product
Liability ..............................115 Product
Liability:
Misrepresentation ................................115
Product Liability: Strict
Liability ......................................115 Critical
Legal Thinking • Strict Liability—Liability
Without
Fault ...........................................................
..............................116 Ethics • Punitive
Damages .....................................................
...........118 Product
Defects .......................................................
......118 Defect in
Manufacture ................................................
....118 Contemporary Environment • Risk–
Utility Test and Consumer Expectation
Test .............................................................
..........119 Defect in
Design .........................................................
...119 Case 6.2 • State Court Case • Defect in
Design .................................120 Failure to
Warn ...........................................................
...120 Case 6.3 • Federal Court Case •
Failure to Warn ................................121
Defect in
Packaging ....................................................
...122 Other
Defects .......................................................
.........122 Defenses to Product
Liability ..........................................122
Case 6.4 • State Court Case • Misuse of a
Product ...........................123 Business
Environment • Statute of
Repose .......................................124
Critical Legal Thinking • Comparative Fault
Doctrine .........................126 Key Terms and
Concepts ................................................12
Cases .........................................127 Ethics
Cases ..........................................................
........129
Notes ..........................................................
..................130 7 INTELLECTUAL PROPERTY
AND INFORMATION
TECHNOLOGY ...............131 Introduction to
Intellectual Property and Information
Technology ..................................................
..................132 Intellectual
Property ......................................................
.132 Trade
Secret .........................................................
.........133 Information Technology • Defend
Trade Secrets Act ..........................134
Patent .........................................................
..................135 Information Technology
Case 7.1 • U.S. Supreme Court Case • Patent
Infringement ................................................
..................138
Copyright ....................................................
...................139 Information Technology
Case 7.2 • Federal Court Case • Copyright
Infringement ................................................
.............142 Information Technology • Music
Modernization Act ...........................143
Information Technology • Digital Millennium
Copyright Act ................144
Trademark ...................................................
..................145 Information Technology •
“Google” Trademark Is Not a Generic
Name ..........................................................
..............150
Dilution .......................................................
...................151 Information Technology
Case 7.3 • Federal Court Case • Dilution of a
Trademark ...................................................
......................152 Global Law • International
Protection of Intellectual
Property ............153 Key Terms and
Concepts ................................................15
Cases .........................................154 Ethics
Cases ..........................................................
........155
Notes ..........................................................
..................155 8 CRIMINAL LAW AND
CYBERCRIME ........156 Introduction to
Criminal Law and
Cybercrime ..................157 Definition of a
Crime ......................................................15
7 Contemporary Environment • First Step
Act .......................................158
Contemporary Environment • Criminal Acts
as the Basis for Tort
Actions ........................................................
......................161 Criminal
Procedure ...................................................
......161 Ethics • Plea Bargain Agreements in
Criminal Cases .........................164 Criminal
Trial .............................................................
....164 Common
Crimes ........................................................
.....164 Business and White-Collar
Crimes ...................................167 Ethics •
Billion-Dollar Ponzi Scheme
Collapses .................................169
Business Environment • Corporate Criminal
Liability .........................171
Cybercrimes ................................................
...................171 Information Technology •
The Internet and Identity
Theft ...................172 Information
Technology • Electronic Communications
Privacy Act ........173 Fourth Amendment
Protection from Unreasonable Search and
Seizure ........................................................
.174 Case 8.1 • U.S. Supreme Court Case •
Search of Curtilage ................175
Information Technology • Search of
Cellphones Incident to
Arrest ..........................................................
.............................176 Information
Technology • CLOUD
Act ................................................176 Fifth
Amendment Privilege Against Self-
Incrimination ......177 Ethics • Immunity from
Prosecution .................................................
.179 Other Constitutional
Protections .....................................179 Key
Terms and
Concepts ................................................18
Cases .........................................181 Ethics
Cases ..........................................................
........183
Notes ..........................................................
..................183 Part III CONTRACTS AND E-
COMMERCE 185 9 NATURE OF TRADITIONAL
AND E-
CONTRACTS .........................................186
Introduction to Nature of Traditional and E-
Contracts ......187 Definition of a
Contract ..................................................18
7 Sources of Contract
Law ................................................188 viii
Contents Objective Theory of
Contracts .........................................189
Case 9.1 • Federal Court Case • Business
Contract ...........................190
Classifications of
Contracts ............................................190
Case 9.2 • State Court Case • Informal
Contract ...............................192 Express
and Implied
Contracts .......................................194
Information Technology Case 9.3 • Federal
Court Case • Express
Contract ......................................................
.................194
Equity ..........................................................
..................196 Critical Legal Thinking •
Equity .........................................................
196 E-
Commerce ..................................................
................197 Key Terms and
Concepts ................................................19
Cases .........................................198 Ethics
Cases ..........................................................
........199
Notes ..........................................................
..................199 10
AGREEMENT ............................................20
0 Introduction to
Agreement ..............................................20
1
Agreement ...................................................
..................201 Ethics • A Contract Is a
Contract Is a
Contract ..................................201 Case
10.1 • State Court Case • Meeting of the
Minds .......................202
Offer ...........................................................
...................203 Special
Offers ..........................................................
......204 Termination of an Offer by Act of the
Parties ...................205 Case 10.2 • State
Court Case •
Counteroffer ....................................206
Business Environment • Option
Contract ...........................................207
Termination of an Offer by Operation of
Law ....................207
Acceptance .................................................
..................209 Contemporary Environment
• Mirror Image Rule ................................210
Information Technology • Email Acceptance
Creates an Enforceable
Contract ......................................................
..........212 Key Terms and
Concepts ................................................21
Cases .........................................212 Ethics
Case ...........................................................
........213
Notes ..........................................................
..................214 11 CONSIDERATION AND
PROMISSORY
ESTOPPEL ................................................2
15 Introduction to Consideration and
Promissory
Estoppel ......................................................
..................216
Consideration ..............................................
..................216 Case 11.1 • State Court
Case •
Consideration ...................................217
Gift
Promise .......................................................
............217 Case 11.2 • State Court Case •
Gift Promise .....................................218
Promises That Lack
Consideration ..................................218
Case 11.3 • State Court Case • Lack of
Consideration .......................220 Special
Business
Contracts ............................................221
Settlement of
Claims ......................................................2
22 Equity: Promissory
Estoppel ...........................................222
Critical Legal Thinking • Doctrine of
Promissory Estoppel Requires a
Subcontractor to Honor Its
Bid ................................................223 Key
Terms and
Concepts ................................................22
Cases .........................................224 Ethics
Case ...........................................................
........224
Note ............................................................
..................225 12 CAPACITY AND
LEGALITY .......................226 Introduction to
Capacity and
Legality ..............................227
Minors .........................................................
• Special Types of Minors’
Contracts ....................................................
..............................230 Mentally
Incompetent
Persons .......................................230 Case
12.1 • State Court Case • Mental
Capacity ...............................230
Intoxicated
Persons .......................................................
232 Lawful and Illegal
Contracts ...........................................232
Case 12.2 • Federal Court Case • Illegal
Contract .............................233 Exculpatory
Agreements ................................................
235 Case 12.3 • State Court Case •
Exculpatory Agreement .....................236
Restrictive Agreements in Employment and
Business
Contracts ....................................................
..................237 Case 12.4 • State Court
Case • Covenant Not to
Compete ................239 Licensing
Statutes ......................................................
...240 Unconscionable
Contracts ..............................................241
Critical Legal Thinking • Interest Rates of
Over 1,000 Percent per Year on Consumer
Loans Found Unconscionable ................242
Key Terms and
Concepts ................................................24
Cases .........................................243 Ethics
Cases ..........................................................
........244
Note ............................................................
..................244 13 GENUINENESS OF
ASSENT AND UNDUE
INFLUENCE ........................245 Introduction
to Genuineness of Assent and Undue
Influence .....................................................
..................246
Mistake .......................................................
..................246
Fraud ..........................................................
...................247 Types of
Fraud ..........................................................
.....248 Case 13.1 • Federal Court Case •
Fraud in the Inducement ...............249 Case
13.2 • State Court Case •
Fraud ...............................................251
Duress ........................................................
...................252 Equitable Doctrine: Undue
Influence ...............................252 Key Terms
and
Concepts ................................................25
Cases .........................................253 Ethics
Case ...........................................................
........254
Notes ..........................................................
..................254 14 STATUTE OF FRAUDS
AND EQUITABLE
EXCEPTIONS ............................................2
55 Introduction to Statute of Frauds and
Equitable
Exceptions ..................................................
...................256 Statute of Frauds for
Common Contracts ........................256
Contemporary Environment • Contracts That
Must Be in Writing Under the Statute of
Frauds ..........................................256
Ethics • Bonus Lost Because of the Statute of
Frauds .......................258 UCC Statute of
Fraud .....................................................260
Equitable Doctrine: Part
Performance .............................260 Critical
Legal Thinking • Doctrine of Part
Performance Used to Enforce Oral Promise
to Transfer Real Estate ........................261
Formality of the
Writing ..................................................261
Parol Evidence
Rule .......................................................262
Case 14.1 • Federal Court Case • Parol
Evidence Rule and Merger
Clause ........................................................
...........263 Case 14.2 • State Court Case •
Parol Evidence Rule ..........................264
Equitable Doctrine: Promissory
Estoppel .........................265 Key Terms and
Concepts ................................................26
Cases .........................................266 Ethics
Case ...........................................................
........266
Notes ..........................................................
..................267 15 THIRD-PARTY RIGHTS
AND
DISCHARGE .......................................268
Introduction to Third-Party Rights and
Discharge .............269 Assignment of a
Right ....................................................269
Delegation of a
Duty .......................................................27
3 Third-Party
Beneficiary ..................................................
.274 Case 15.1 • State Court Case • Third-
Party Beneficiary ......................275 Case
15.2 • Federal Court Case • Third-Party
Beneficiary ..................278
Covenants ...................................................
..................279
Conditions ..................................................
...................279 Business Environment •
“Time Is of the Essence”
Contract ......................................................
.............................280 Contents ix
Discharge of
Performance ..............................................2
81 Contemporary Environment •
Impossibility of Performance ...............282
Statute of
Limitations ..................................................
..283 Key Terms and
Concepts ................................................28
Cases .........................................284 Ethics
Case ...........................................................
........285
Notes ..........................................................
..................285 16 BREACH OF CONTRACT
AND
REMEDIES ........................................286
Introduction to Breach of Contract and
Remedies ...........287 Performance and
Breach ................................................287
Monetary
Damages .....................................................
...289 Compensatory
Damages .................................................28
9 Consequential
Damages .................................................29
1 Nominal
Damages .....................................................
.....292 Mitigation of
Damages ...................................................2
92 Liquidated
Damages .....................................................
..293 Business Environment • Liquidated
Damages Clause Limits Recovery of
Damages .....................................................
293 Case 16.1 • Federal Court Case •
Liquidated Damages .....................294
Rescission and
Restitution .............................................295
Equitable
Remedies ....................................................
...295 Case 16.2 • State Court Case •
Specific Performance .......................296
Arbitration of Contract
Disputes .....................................297 Case
16.3 • Federal Court Case • Arbitration of a
Contract Dispute ......298 Torts Associated
with Contracts .....................................298
Critical Legal Thinking • Implied Covenant of
Good Faith and Fair
Dealing ........................................................
......................299 Key Terms and
Concepts ................................................30
Cases .........................................300 Ethics
Cases ..........................................................
........301
Notes ..........................................................
..................302 17 DIGITAL LAW AND E-
COMMERCE .........303 Introduction to Digital
Law and E-Commerce ...................304 Email
and Text
Contracts ...............................................30
4 E-Commerce and Web
Contracts .....................................304
Information Technology Case 17.1 • State
Court Case • Web
Contract ......................................................
......................305 E-Sign
Act ..............................................................
........306 E-Licensing of Software and
Information Rights ...............307 Unfair
Business Practices in the Information
Age ............308 Information Technology
Case 17.2 • Federal Court Case • Email
Spam ..........................................................
....................311 Domain
Names ........................................................
.......311 Information Technology • Sale of
Domain Names ..............................314
Information Technology Case 17.3 • National
Arbitration Forum • Domain
Name ..........................................................
....316 Key Terms and
Concepts ................................................31
Cases .........................................317 Ethics
Cases ..........................................................
........318
Notes ..........................................................
..................318 Part IV SALES AND LEASE
CONTRACTS AND
WARRANTIES ....................319 18
FORMATION OF SALES AND LEASE
CONTRACTS ............................................32
0 Introduction to Formation of Sales and
Lease Contracts .....321 Uniform
Commercial
Code ..............................................321
Landmark Law • Uniform Commercial
Code ......................................321 Article 2
(Sales) .........................................................
....322 Case 18.1 • Federal Court Case •
Seller ............................................323
Article 2A
(Leases) ......................................................
..324 Formation of Sales and Lease
Contracts: Offer ................325 Business
Environment • UCC Firm Offer
Rule .....................................327 Formation
of Sales and Lease Contracts:
Acceptance .....327 Business Environment •
UCC Permits Additional
Terms .....................328 Business
Environment • UCC Battle of the
Forms ..............................328 UCC Statute
of
Frauds ...................................................329
Business Environment • UCC Written
Confirmation Rule ....................330
Electronic Sales and Lease
Contracts .............................331 Letters of
Credit ..........................................................
...332 Key Terms and
Concepts ................................................33
Cases .........................................334 Ethics
Cases ..........................................................
........335 19 TITLE TO GOODS AND RISK OF
LOSS ..................................................336
Introduction to Title to Goods and Risk of
Loss ...............337 Identification of Goods
and Passage of Title ....................337
Business Environment • Commonly Used
Shipping Terms .................339 Risk of Loss
Where There Is No Breach of the Sales
Contract ......................................................
.........339 Risk of Loss Where There Is a
Breach of the Sales
Contract ......................................................
..................341 Risk of Loss in Conditional
Sales ....................................341 Risk of
Loss in Lease
Contracts ......................................342
Business Environment • Insuring Goods
Against Risk of Loss ............343 Sale of
Goods by
Nonowners ...........................................343
Ethics • Entrustment
Rule ............................................................
......344 Case 19.1 • State Court Case •
Entrustment Rule .............................344
United Nations Convention on Contracts for
the International Sale of Goods
(CISG) ..................................345 Key Terms
and
Concepts ................................................34
Cases .........................................347 Ethics
Cases ..........................................................
........348 20 REMEDIES FOR BREACH OF
SALES AND LEASE
CONTRACTS .........................349
Introduction to Remedies for Breach of Sales
and Lease
Contracts ....................................................
..................350 Seller and Lessor
Performance ........................................350
Contemporary Environment • Seller’s and
Lessor’s Right to
Cure ............................................................
.........................351 Critical Legal Thinking •
UCC Imposes Duties of Good Faith and
Reasonableness ..........................................
......................352 Buyer and Lessee
Performance .......................................353
Case 20.1 • State Court Case • Acceptance
of Goods .......................354 Seller and
Lessor
Remedies ............................................355
Business Environment • Lost Volume
Seller ......................................357 Buyer
and Lessee
Remedies ...........................................357
Contemporary Environment • Buyer’s and
Lessee’s Right to
Cover ..........................................................
..........................359 Additional Performance
Issues ........................................360 Ethics
• UCC Doctrine of
Unconscionability .......................................
361 Key Terms and
Concepts ................................................36
Cases .........................................362 Ethics
Cases ..........................................................
........363 21
WARRANTIES ...........................................36
4 Introduction to
Warranties ..............................................36
5 Express
Warranty .....................................................
......365 Contemporary Environment •
Statement of Opinion (Puffing) ............366
Implied
Warranties ..................................................
.......366 Implied Warranty of
Merchantability ...............................367 x
Contents Case 21.1 • Federal Court Case •
Implied Warranty of
Merchantability ...........................................
..............................367 Case 21.2 • Federal
Court Case • Implied Warranty of
..............................368 Implied Warranty of
Fitness for Human Consumption .......369
Case 21.3 • Federal Court Case • Implied
Warranty of
.............................370 Implied Warranty of
Fitness for a Particular Purpose ........370
Warranty
Disclaimers .................................................
....371 Case 21.4 • State Court Case • “As Is”
Disclaimer .............................372
Information Technology • Warranty
Disclaimers in Social Media Software
Licenses ......................................................
....373 Magnuson-Moss Warranty
Act ........................................374
Warranties of Title and
Possession .................................374 Key
Terms and
Concepts ................................................37
Cases .........................................376 Ethics
Cases ..........................................................
........377
Note ............................................................
..................377 Part V NEGOTIABLE
INSTRUMENTS, BANKING, AND ELECTRONIC
FINANCIAL TRANSACTIONS .......379 22
CREATION OF NEGOTIABLE
INSTRUMENTS .........................................38
0 Introduction to Creation of Negotiable
Instruments .........381 Negotiable
Instruments .................................................
.381 Types of Negotiable
Instruments .....................................382
Requirements for Creating a Negotiable
Instrument .........386 Case 22.1 • State Court
Case • Negotiable
Instrument ......................389 Case 22.2 •
Federal Court Case • Negotiable
Instrument ..................391 Prepayment,
Acceleration, and Extension
Clauses ..........392 Nonnegotiable
Contract ..................................................39
3 Key Terms and
Concepts ................................................39
Cases .........................................394 Ethics
Case ...........................................................
........394 23 HOLDER IN DUE COURSE AND
TRANSFERABILITY ...................................39
5 Introduction to Holder in Due Course and
Transferability ..396 Transfer of a
Nonnegotiable Contract by
Assignment .......396 Transfer of a Negotiable
Instrument by Negotiation .........396
Contemporary Environment • Converting
Order and Bearer Paper ......397 Case 23.1 •
State Court Case • Bearer
Paper ....................................398 Transfer of
a Negotiable Instrument by
Indorsement ........399 Types of
Indorsements ..............................................
.....400 Holder in Due
Course ......................................................4
04 Requirements for Holder in Due Course
Status ................405 Contemporary
Environment • Shelter
Principle ..................................407 Key
Terms and
Concepts ................................................40
Cases .........................................408 Ethics
Case ...........................................................
........408 24 LIABILITY, DEFENSES, AND
DISCHARGE .............................................40
9 Introduction to Liability, Defenses, and
Discharge ...........410 Signature Liability for
Negotiable Instruments .................410
Primary Liability for Negotiable
Instruments ....................411 Secondary
Liability for Negotiable
Instruments ................411 Forged
Indorsements ..............................................
........414 Ethics • Imposter
Rule ............................................................
..........415 Ethics • Fictitious Payee
Rule ............................................................
415 Warranty Liability for Negotiable
Instruments ..................415 Transfer
Warranties ..................................................
......415 Presentment
Warranties .................................................4
16 Defenses to Payment of Negotiable
Instruments .............417 Universal (Real)
Defenses ..............................................417
Personal
Defenses .....................................................
Holder in Due Course ....................419
Contemporary Environment • FTC Rule
Limits HDC Status in Consumer
Transactions ...............................................
..........420 Discharge of
Liability ......................................................
420 Key Terms and
Concepts ................................................42
Cases .........................................421 Ethics
Case ...........................................................
........421
Note ............................................................
..................422 25 BANKING SYSTEM AND
ELECTRONIC FINANCIAL
TRANSACTIONS ...................423
Introduction to the Banking System and
Electronic Financial
Transactions ...............................................
....424 The Bank–Customer
Relationship ...................................424
Ordinary
Checks ........................................................
.....425 Special Types of
Checks .................................................426
Honoring
Checks ........................................................
....427 Ethics • Federal Currency Reporting
Law ...........................................428 Forged
Signatures and Altered
Checks ............................428 Case 25.1 •
State Court Case • Series of Forgeries of
Checks ...........430 The Collection
Process ...................................................43
1 Bank Payment
Rules ......................................................43
2 Contemporary Environment • FDIC
Insurance of Bank Deposits .........433
Electronic Banking and E-
Money .....................................433
Information Technology • Consumer
Electronic Funds Transfers ........434
Information Technology • Commercial
Electronic Wire Transfers ........435
Information Technology •
Cryptocurrency ..........................................4
35 Bank
Reform ........................................................
..........436 Global Law • Hiding Money in
Offshore Banks ...................................436
Key Terms and
Concepts ................................................43
Cases .........................................437 Ethics
Case ...........................................................
........438
Notes ..........................................................
..................438 Part VI CREDIT, SECURED
TRANSACTIONS, AND
BANKRUPTCY ...................439 26 CREDIT,
REAL PROPERTY FINANCING, AND
DEBTORS’
RIGHTS ...................................440
Introduction To Credit, Real Property
Financing, and Debtors’
Rights .......................................................4
41
Credit ..........................................................
..................441 Unsecured
Credit ..........................................................
.441 Secured
Credit ..........................................................
.....442 Real Property
Financing .................................................44
2 Case 26.1 • State Court Case • Mortgages
and Liens ........................444 Contemporary
Environment • Anti-Deficiency
Statutes ......................445 Business
Environment • Construction Liens on Real
Property ............446 Surety and Guaranty
Arrangements .................................447
Case 26.2 • Federal Court Case • Personal
Guaranty ........................448 Collection
Remedies ....................................................
..449 Consumer Financial
Protection .......................................450
Contemporary Environment • Consumer
Financial Protection
Bureau ........................................................
.............................451 Ethics • Credit CARD
Act ..............................................................
.....452 Key Terms and
Concepts ................................................45
Cases .........................................455 Ethics
Cases ..........................................................
........456
Notes ..........................................................
..................456 Contents xi 27 SECURED
TRANSACTIONS ......................457
Introduction to Secured
Transactions ..............................458
Secured Transactions in Personal
Property ......................458 Landmark Law •
Article 9—Secured
Transactions ..............................458
Creating a Security
Interest ............................................462
Perfecting a Security
Interest .........................................464 Case
27.1 • State Court Case • Filing a Financing
Statement ............466 Contemporary
Environment • Certificate of Title
Statutes ..................468 Priority of
Claims ........................................................
...468 Contemporary Environment • Buyer in
the Ordinary Course of
Business .....................................................
..........................469 Default and
Remedies ....................................................
469 Case 27.2 • State Court Case •
Deficiency Judgment ........................471
Business Environment • Artisan’s Liens on
Personal Property ............473 Key Terms and
Concepts ................................................47
Cases .........................................474 Ethics
Cases ..........................................................
........475 28 BANKRUPTCY AND
REORGANIZATION ..................................47
6 Introduction to Bankruptcy and
Reorganization ...............477 Bankruptcy
Law .............................................................
477 Landmark Law • Bankruptcy
Code ....................................................478
Bankruptcy
Procedure ...................................................
.478 Contemporary Environment • Automatic
Stay ....................................480 Case 28.1 •
Federal Court Case • Bankruptcy
Discharge ...................481 Bankruptcy
Estate .........................................................
482 Ethics • Fraudulent Transfer of Property
Prior to Bankruptcy ..............483 Exempt
Property ......................................................
......483 Chapter 7—
Liquidation ..................................................
.485 Case 28.2 • U.S. Supreme Court Case •
Bankruptcy
Fraud ..........................................................
..............................488 Critical Legal
Thinking • Discharge of Student Loans in
Bankruptcy ..................................................
.............................489 Chapter 13—
Adjustment of Debts of an Individual With
Regular
Income ........................................................
......489 Chapter 11—
Reorganization ...........................................4
92 Business Environment • Executory
Contracts and Unexpired
Leases ........................................................
..............................493 Key Terms and
Concepts ................................................49
Cases .........................................496 Ethics
Cases ..........................................................
........497
Notes ..........................................................
..................498 Part VII AGENCY,
EMPLOYMENT, AND LABOR
LAW ..............................499 29 AGENCY
FORMATION AND
TERMINATION ................................500
Introduction to Agency Formation and
Termination .................................................
..................501 Employment and
Agency ................................................501
Independent
Contractor ..................................................
502 Formation of an
Agency ..................................................503
Contemporary Environment • Power of
Attorney ................................503 Case 29.1
• State Court Case • Scope of
Employment ......................504 Case 29.2 •
State Court Case • Agency
Relationship .........................505 Apparent
Agency ........................................................
Apparent Agency ...........................506
Principal’s
Duties .........................................................
..507 Agent’s
Duties .........................................................
......508 Termination of an
Agency ...............................................509
Key Terms and
Concepts ................................................51
Cases .........................................512 Ethics
Case ...........................................................
........513 30 LIABILITY OF PRINCIPALS,
AGENTS, AND INDEPENDENT
CONTRACTORS ......514 Introduction to
Liability of Principals, Agents, and
Independent
Contractors ..........................................515
Agent’s Duty of
Loyalty ..................................................515
Tort Liability of Principals and Agents to Third
Parties ........................................................
.................517 Liability for Intentional
Torts ...........................................518 Case
30.1 • State Court Case • Employee’s
Intentional Tort ..............519 Contract
Liability of Principals and Agents to Third
Parties ........................................................
..................521 Independent
Contractor ..................................................
523 Critical Legal Thinking • Are FedEx
Drivers Independent
Contractors? ...............................................
..............................524 Case 30.2 • State
Court Case • Independent
Contractor ...................526 Ethics • Are U.S.
Retailers Liable for Unsafe Working
Conditions of Suppliers Located in Foreign
Countries? ...............................526 Key
Terms and
Concepts ................................................52
Cases .........................................527 Ethics
Case ...........................................................
........529 31 EMPLOYMENT, WORKER
PROTECTION, AND IMMIGRATION
LAW .......................530 Introduction to
Employment, Worker Protection, and
Immigration
Law ......................................................531
Term Employment and Employment at
Will ......................531 Case 31.1 • State
Court Case • At-Will
Employment ..........................532 Workers’
Compensation .............................................
....533 Case 31.2 • State Court Case •
Workers’ Compensation ...................535
Occupational
Safety .......................................................5
35 Case 31.3 • Federal Court Case • General
Duty Standard ..................536 Fair Labor
Standards
Act ................................................537
Business Environment • State and Local
Government Minimum Wage and Living Wage
Laws .....................................................538
Critical Legal Thinking • Payment of Overtime
Pay to Workers ...........541 Family and
Medical Leave
Act ........................................541
Consolidated Omnibus Budget
Reconciliation Act ...........542 Employee
Retirement Income Security
Act ......................542 Unemployment
Compensation .........................................54
2 Social
Security .......................................................
........543 Immigration Law and
Employment ...................................543
Business Environment • Employment
Eligibility Verification ...............544 Key
Terms and
Concepts ................................................54
Cases .........................................547 Ethics
Cases ..........................................................
........548
Notes ..........................................................
..................549 32 LABOR
LAW ............................................550
Introduction to Labor
Law ...............................................551
Labor
Law .............................................................
.........551 Landmark Law • Federal Labor Law
Statutes .....................................552
Organizing a
Union .........................................................
552 Collective
Bargaining ...................................................
..554 Union Security
Agreements ............................................55
4 State Right-to-Work
Laws ...............................................555
Business Environment • State Right-to- Work
Laws ...........................................................
.....................556 Case 32.1 • U.S. Supreme
Court Case • Public-Sector
Unions ...........556
Strikes .........................................................
.................558
Picketing .....................................................
..................559 Case 32.2 • Federal Court
Case • Union
Picketing .............................559 Internal
Union
Affairs ......................................................56
1 Business Environment • Worker
Adjustment and Retraining Notification
Act ..............................................................
...........561 Key Terms and
Concepts ................................................56
Cases .........................................562 Ethics
Case ...........................................................
........563
Notes ..........................................................
..................563 xii Contents 33 EQUAL
OPPORTUNITY IN
EMPLOYMENT .........................................56
4 Introduction to Equal Opportunity in
Employment ................................................
...................565 Equal Employment
Opportunity Commission ....................565
Title VII of the Civil Rights Act of
1964 ...........................566 Landmark Law •
Title VII of the Civil Rights Act of
1964 ....................566 Race and Color
Discrimination ........................................56
8 Landmark Law • Civil Rights Act of
1866 ..........................................569
National Origin
Discrimination ........................................56
9 Gender
Discrimination .............................................
.......570 Sexual Orientation and Gender
Identity
Discrimination .............................................
...................571 Case 33.1 • U.S. Supreme
Court Case • Gay and Transgender
Discrimination .............................................
.........572
Harassment ................................................
Offensive Electronic Communications
Constitute Sexual and Racial
Harassment .................................577
Religious
Discrimination .............................................
....577 Defenses to a Title VII
Action .........................................578 Equal
Pay
Act ..............................................................
..579 Age
Discrimination .............................................
............580 Discrimination Against
Individuals with
Disabilities ..................................................
...................581 Landmark Law • Title I of the
Americans with Disabilities
Act ..............................................................
.............................581 Genetic Information
Discrimination .................................583
Protection from
Retaliation ............................................584
Veterans and Military
Personnel .....................................584
Affirmative
Action .........................................................
.585 Key Terms and
Concepts ................................................58
Cases .........................................587 Ethics
Cases ..........................................................
........588
Notes ..........................................................
..................589 Part VIII BUSINESS
ORGANIZATIONS, PARTNERSHIPS,
CORPORATIONS, LIMITED LIABILITY
COMPANIES, INVESTOR PROTECTION, AND
BUSINESS ETHICS ....................591 34
ENTREPRENEURSHIP, SOLE
PROPRIETORSHIPS, AND GENERAL
PARTNERSHIPS ........................................59
2 Introduction to Entrepreneurship, Sole
Proprietorships, and General
Partnerships ...............................................
593
Entrepreneurship .........................................
...................593 Sole
Proprietorship .............................................
............594 Business Environment • Using a
Trade Name ....................................594
General
Partnership .................................................
.......595 Landmark Laws • Uniform
Partnership Act and Revised Uniform
Partnership
Act ..............................................................
...........596 Business Environment • General
Partnership Agreement ...................598
Rights of General
Partners ..............................................599
Duties of General
Partners ..............................................601
Liability of General Partners and General
Partnerships .....604 Business Environment •
Liability of Incoming
Partners ......................606 Dissociation of a
Partner and the Dissolution and Winding Up
of a General
Partnership ...............................606
Business Environment • Liability of Outgoing
Partners ......................607 Business
Environment • Continuation
Agreement ..............................609 Key
Terms and
Concepts ................................................61
Cases .........................................610 Ethics
Case ...........................................................
........611 35 LIMITED PARTNERSHIPS AND
SPECIAL
PARTNERSHIPS ........................................61
2 Introduction to Limited Partnerships,
Limited Liability Limited Partnerships, and
Special Partnerships ...............613 Limited
Partnership .................................................
.......613 Landmark Laws • Revised Uniform
Limited Partnership Act and Uniform Limited
Partnership Act
(2001) .............................615 Formation of a
Limited
Partnership .................................615
Business Environment • Limited Partnership
Agreement ...................616 Liability of
Limited Partnerships, General Partners, and
Limited
Partners ......................................................
......617 Business Environment • Master
Limited Partnership .........................619
Management of a Limited
Partnership .............................619 Rights
and Duties of General and Limited
Partners ..........620 Contemporary
Environment • Family Limited
Partnership ..................621 Case 35.1 •
State Court Case • Family Limited
Partnership ...............622 Dissociation,
Dissolution, and Winding Up of a Limited
Partnership .................................................
...................623 Limited Liability Limited
Partnership ...............................625 Key
Terms and
Concepts ................................................62
Cases .........................................626 Ethics
Case ...........................................................
........627 36 LIMITED LIABILITY COMPANIES
AND LIMITED LIABILITY
PARTNERSHIPS .........628 Introduction to
Limited Liability Companies and Limited
Liability
Partnerships ................................................
......629 Limited Liability Partnership
(LLP) ..................................629 Landmark
Law • Uniform Limited Liability Partnership
Amendments
(ULLPA) .......................................................
.............................629 Business
Environment • Limited Liability Partnership
Agreement .......630 Liability of an LLP and
Limited Liability of Partners ..........631
Limited Liability Company
(LLC) ......................................633 Landmark
Laws • Uniform Limited Liability Company
Act and Revised Uniform Limited Liability
Company Act .........................633 Formation
of an
LLC .......................................................634
Business Environment • Limited Liability
Company Operating
Agreement ...................................................
.............................636 Liability of an LLC
and Limited Liability of Members of an
LLC .............................................................
..............637 Case 36.1 • State Court Case •
Limited Liability Company ................638
Management of an
LLC ...................................................639
Fiduciary Duties of Members of an
LLC ...........................641 Business
Environment • Advantages of Operating a
Business as an
LLC .............................................................
....................642 Dissociation, Dissolution,
and Winding Up of an LLC ........643 Business
Environment • Professional Limited Liability
Company
(PLLC) .........................................................
.............645 Key Terms and
Concepts ................................................64
Cases .........................................646 Ethics
Cases ..........................................................
........646 37 CORPORATE FORMATION AND
FINANCING ..............................................6
48 Introduction to Corporate Formation and
Financing .........649 Nature of the
Corporation ...............................................6
49 Landmark Law • Model Business
Corporation Act (MBCA) .................649
Limited Liability of
Shareholders .....................................650
Case 37.1 • State Court Case •
Shareholder’s Limited Liability ..........651
Classifications of
Corporations .......................................652
Incorporation
Procedure .................................................6
54 Information Technology • Choosing a
Domain Name for a
Corporation .................................................
..........................655 Ethics • Benefit
Corporations ...............................................
.............657 Business Environment • Close
Corporation Election ..........................659
Business Environment • S Corporation
Election for Federal Tax
Purposes .....................................................
.......................662 Contents xiii Corporate
Powers ........................................................
..662 Financing the Corporation—Equity
Securities ..................663 Business
Environment • Preferred Stock
Preferences ........................664 Financing
the Corporation—Debt
Securities ....................667 Business
Environment • Delaware Corporation
Law ...........................668 Dissolution of a
Corporation ...........................................668
Key Terms and
Concepts ................................................66
Cases .........................................670 Ethics
Case ...........................................................
........671
Note ............................................................
..................671 38 CORPORATE
GOVERNANCE AND THE SARBANES-OXLEY
ACT ...........................672 Introduction to
Corporate Governance and the Sarbanes
Oxley
Act ..............................................................
.........673
Shareholders ...............................................
...................673 Business Environment •
Cumulative Voting for
Directors ...................676 Business
Environment • Derivative
Lawsuits ......................................678 Case
38.1 • State Court Case • Piercing the
Corporate Veil ...............679 Board of
Directors .....................................................
.....680 Information Technology • Corporate
E-Communications ....................683
Corporate
Officers .......................................................
...683 Duty of
Obedience ..................................................
........684 Duty of
Care ............................................................
......685 Business Environment • Business
Judgment Rule .............................685 Duty
of
Loyalty ........................................................
.......686 Sarbanes-Oxley
Act ........................................................688
Ethics • The Sarbanes-Oxley Act Improves
Corporate
Governance .................................................
.............................688 Key Terms and
Concepts ................................................68
Cases .........................................689 Ethics
Cases ..........................................................
........690
Note ............................................................
..................691 39 CORPORATE
ACQUISITIONS AND MULTINATIONAL
CORPORATIONS ........692 Introduction to
Corporate Acquisitions and Multinational
Corporations ...............................................
...................693 Proxy Solicitation and Proxy
Contests ............................693 Business
Environment • Proxy
Contest ..............................................694
Shareholder
Resolution ..................................................
695 Ethics • Coca-Cola Shareholder
Resolution on Sugar and Public
Health .........................................................
.............................696 Mergers and
Acquisitions ...............................................
697 Business Environment • Dissenting
Shareholder Appraisal Rights ........699 Case
39.1 • State Court Case • Dissenting
Shareholder Appraisal
Rights ..........................................................
.............................700 Tender
Offer ...........................................................
........700 State Antitakeover
Statutes ...........................................703
Global Law • Foreign Acquisitions of U.S.
Companies .......................704 Multinational
Corporations .............................................7
04 International Subsidiary
Corporation ................................................
705 Global Law • Foreign Corrupt Practices
Act .......................................706 Key Terms
and
Concepts ................................................70
Cases .........................................707 Ethics
Case ...........................................................
........708
Notes ..........................................................
..................708 40 FRANCHISES AND
SPECIAL FORMS OF
BUSINESS ...........................................709
Introduction to Franchises and Special
Forms of
Business .....................................................
...................710
Franchise ....................................................
...................710 Franchise Disclosure
Laws .............................................712
Franchise
Agreement ...................................................
..713 Business Environment • McDonald’s
Franchise .................................714 Liability
of Franchisor and
Franchisee .............................715 Case 40.1
• Federal Court Case • Franchise
Liability .........................715 Case 40.2 •
State Court Case • Franchise
Liability ............................716 Apparent
Agency ........................................................
....717 Case 40.3 • State Court Case •
Apparent Agency ..............................717
Termination of a
Franchise .............................................718
Licensing .....................................................
..................718 Joint
Venture .......................................................
..........719 Strategic
Alliance .......................................................
...720 Key Terms and
Concepts ................................................72
Cases .........................................721 Ethics
Case ...........................................................
........722
Note ............................................................
..................722 41 SECURITIES LAW AND
INVESTOR
PROTECTION ...........................................72
3 Introduction to Securities Law and Investor
Protection ...................................................
..................724 Securities
Law .............................................................
..724 Landmark Laws • Federal Securities
Laws .........................................724
Definition of
Security ......................................................
726 Initial Public Offering
(IPO) .............................................727
Emerging Growth
Company .............................................729
Regulation A Securities
Offering .....................................731
Business Environment • Small Company
Offering Registration ..........732 Well-Known
Seasoned
Investor .......................................732
Business Environment • Exempt
Securities .......................................732
Exempt
Transactions ...............................................
.......733
Crowdfunding ..............................................
Regulation
Crowdfunding ..........................736 Initial
Coin Offering (ICO) and Security Token
Offering
(STO) ...........................................................
.....736 Liability for Violations of the
Securities Act of 1933 ........737 Trading in
Securities ....................................................
..738 Insider
Trading ........................................................
.......740 Case 41.1 • Federal Court Case •
Misappropriation Theory ...............741 Short-
Swing
Profits ........................................................
742 State “Blue-Sky”
Laws ...................................................743
Key Terms and
Concepts ................................................74
Cases .........................................744 Ethics
Cases ..........................................................
........746
Notes ..........................................................
..................746 42 ETHICS AND SOCIAL
RESPONSIBILITY OF
BUSINESS ...........................................747
Introduction to Ethics and Social
Responsibility of
Business .....................................................
...............748 Ethics and the
Law .........................................................74
8 Case 42.1 • U.S. Supreme Court Case •
Business Ethics ...................749 Business
Ethics ..........................................................
...749 Case 42.2 • Federal Court Case •
Ethics ...........................................750 Case
42.3 • Federal Court Case • Business
Ethics ............................751 Ethics • France
Fines Apple for Secretly Slowing Down Older
iPhones .......................................................
....................753 Case 42.4 • U.S. Supreme
Court Case • Nondisclosure of
Evidence .....................................................
..............................753 Social Responsibility
of Business ....................................754
Critical Legal Thinking • Volkswagen
Emissions Scandal ...................755 Ethics •
Sarbanes-Oxley Act Requires Public
Companies to Adopt Codes of
Ethics ..........................................................
.....756 Global Law • Outsourcing of U.S.
Jobs ..............................................757
Public Benefit
Corporations ............................................7
58 Key Terms and
Concepts ................................................75
8 Ethics
Cases ..........................................................
........759
Notes ..........................................................
..................760 xiv Contents Part IX
GOVERNMENT REGULATION ......761 43
ADMINISTRATIVE LAW AND REGULATORY
AGENCIES ........................762 Introduction
to Administrative Law and Regulatory
Agencies .....................................................
..................763 Administrative
Law .........................................................76
3 Cabinet-Level
Departments .............................................7
64 Landmark Law • U.S. Department of
Homeland Security ...................765 Federal
Administrative
Agencies .....................................766 State
and Local Administrative
Agencies ........................766 Administrative
Procedure ...............................................76
6 Landmark Law • Administrative Procedure
Act ..................................767 Powers of
Administrative
Agencies .................................767 Critical
Legal Thinking • Administrative Agency
Rulemaking ..............767 Judicial Review of
Administrative Agency Actions ...........770
Case 43.1 • U.S. Supreme Court Case •
Administrative Agency
Rule ............................................................
..............................770 Individual Rights and
Disclosures of Agency
Actions ........................................................
• Freedom of Information Act .................771
Key Terms and
Concepts ................................................77
Cases .........................................773 Ethics
Case ...........................................................
........773
Notes ..........................................................
..................774 44 CONSUMER
PROTECTION AND PRODUCT
SAFETY ...................................775
Introduction to Consumer Protection and
Product
Safety ..........................................................
..................776 Food Safety—U.S.
Department of Agriculture
(USDA) ........................................................
Case • Adulterated
Food ..........................777 Contemporary
Environment • Bioengineered Food
Disclosure
Law .............................................................
.............................778 Food, Drugs, and
Cosmetics Safety—Food and Drug
Administration
(FDA) ......................................................77
8 Landmark Law • Food, Drug, and Cosmetic
Act .................................779 Food and
Product
Labeling .............................................780
Contemporary Environment • Nutrition Facts
Label ...........................781 Ethics •
Regulation of Tobacco Products and
Electronic Nicotine Delivery
Systems ......................................................
...782 Product Safety—Consumer Product
Safety Commission
(CPSC) ........................................................
..................783 Automobile and Vehicle
Safety—National Highway Traffic Safety
Administration
(NHTSA) .............................783
Contemporary Environment • Federal Motor
Vehicle Safety Standards
(FMVSS) ......................................................
............784 Unfair and Deceptive Practices—
Federal Trade Commission
(FTC) ..........................................................
784 Ethics • False Product Claims and Fake
Reviews on
Amazon .......................................................
.............................785 State and Local
Consumer Protection Laws ....................785
Key Terms and
Concepts ................................................78
Cases .........................................786 Ethics
Case ...........................................................
........787
Notes ..........................................................
..................787 45 ENVIRONMENTAL
PROTECTION ............788 Introduction to
Environmental
Protection ........................789
Environmental
Protection ...............................................78
9 Air
Pollution .....................................................
..............790 Case 45.1 • U.S. Supreme
Court Case • Air
Pollution ........................791 Contemporary
Environment • Indoor Air
Pollution ..............................792 Water
Pollution .....................................................
.........792 Case 45.2 • Federal Court Case •
Environmental Pollution ................793
Ethics • BP Oil Spill in the Gulf of
Mexico ..........................................795 Toxic
Substances and Hazardous
Wastes ........................796 Landmark Law •
Superfund ...................................................
............797 Endangered
Species .......................................................
798 Critical Legal Thinking • Endangered
Species ...................................798 State
Environmental Protection
Laws ..............................799 Global Law •
International Environmental
Protection .........................799 Key Terms
and
Concepts ................................................80
Cases .........................................800 Ethics
Case ...........................................................
........801
Notes ..........................................................
..................801 46 ANTITRUST LAW AND
UNFAIR TRADE
PRACTICES ...................................802
Introduction to Antitrust Law and Unfair
Trade
Practices .....................................................
..................803 Federal Antitrust
Law .....................................................803
Landmark Laws • Federal Antitrust
Statutes ......................................803
Restraints of Trade: Section 1 of the Sherman
Act ..........804 Business Environment • Rule
of Reason and Per Se Rule ..................805
Ethics • Tech Companies Settle Lawsuit for
Agreeing Not to Solicit Each Other’s
Employees .................................................
806 Case 46.1 • U.S. Supreme Court Case •
Section 1 of the Sherman
Act ..............................................................
...............809 Business Environment •
Conscious
Parallelism .................................810
Monopolization: Section 2 of The Sherman
Act ................811 Mergers: Section 7 of the
Clayton Act ............................812 Business
Environment • Conglomerate
Merger ..................................815 Business
Environment • Premerger
Notification ................................816 Tying
Arrangements: Section 3 of the Clayton
Act ...........816 Price Discrimination: Section
2 of the Clayton Act ..........816 Federal Trade
Commission
Act .......................................818
Exemptions from Antitrust
Law .......................................818 State
Antitrust
Laws ......................................................819
Key Terms and
Concepts ................................................81
Cases .........................................820 Ethics
Case ...........................................................
........821
Notes ..........................................................
..................821 Part X PERSONAL
PROPERTY, REAL PROPERTY, AND
INSURANCE ....823 47 PERSONAL PROPERTY
AND
BAILMENT ...............................................82
4 Introduction to Personal Property and
Bailment ...............825 Personal
Property ......................................................
.....825 Ownership of Personal
Property ......................................825
Mislaid, Lost, And Abandoned Personal
Property .............828 Case 47.1 • State
Court Case • Mislaid or Abandoned
Property ......................................................
..............................829 Ethics • Estray
Statutes Promote Honesty in
Finders .........................830
Bailment .....................................................
...................831 Case 47.2 • State Court
Case •
Bailment ..........................................832
Ordinary
Bailments ....................................................
.....832 Special
Bailments ....................................................
......834 Business Environment • Warehouse
Receipt .....................................834
Business Environment • Bill of
Lading ...............................................836
Case 47.3 • Federal Court Case • Common
Carrier
Shipment ....................................................
..............................836 Key Terms and
Concepts ................................................83
Cases .........................................838 Ethics
Cases ..........................................................
........839
Notes ..........................................................
..................839 Contents xv 48 REAL
PROPERTY ......................................840
Introduction to Real Property and Land Use
Regulation ...841 Real
Property ......................................................
...........841 Contemporary Environment • Air
Rights ............................................842
Freehold Estates in
Land ................................................842
Concurrent
Ownership ...................................................
.843 Contemporary Environment •
Community Property ............................844
Future
Interests ......................................................
.......846 Transfer of Ownership of Real
Property ............................846
Contemporary Environment • Recording
Statutes ..............................848 Marketable
Title to Real
Property ...................................849 Adverse
Possession ..................................................
.....850 Case 48.1 • State Court Case •
Adverse Possession ..........................851
Easements ..................................................
...................852 Liability of
Landowners ................................................
Attractive Nuisance Doctrine ............858
Zoning .........................................................
..................858 Key Terms and
Concepts ................................................85
Cases .........................................860 Ethics
Case ...........................................................
........861 49 LANDLORD–TENANT LAW AND
LAND USE
REGULATION ...................................862
Introduction to Landlord–Tenant Law and
Land Use
Regulation ...................................................
..................863 Landlord–Tenant
Relationship .........................................863
Landlord’s Duties to a
Tenant .........................................865
Implied Warranty of
Habitability ......................................866
Case 49.1 • State Court Case • Landlord’s
Liability ...........................867 Tenant’s
Duties to a
Landlord .........................................868
Transfer of Leased Property by
Landlords ........................869 Assignment
and Sublease of a Lease by
Tenants .............869 Government Regulation
of Real Property .........................871
Contemporary Environment • Rent
Control ........................................871
Antidiscrimination Laws and Real
Property ......................871 Landmark Law •
Fair Housing
Act .....................................................871
Government Taking of Real
Property ...............................873 Critical
Legal Thinking • Eminent Domain and the
Taking of Real
Property ......................................................
......................873 Key Terms and
Concepts ................................................87
Cases .........................................874 Ethics
Cases ..........................................................
........875
Notes ..........................................................
..................875 50
INSURANCE .............................................87
6 Introduction to
Insurance ...............................................87
7 Principles of
Insurance ...................................................
877 Contemporary Environment • Insurable
Interest ................................877 Common
Clauses in Insurance
Policies ...........................878 Ethics •
Incontestability
Clauses .......................................................
879 Life
Insurance ....................................................
............879 Health and Disability
Insurance .......................................881 Fire
and Homeowners’
Insurance ....................................882 Case
50.1 • Federal Court Case • Insurance
Fraud ............................883 Automobile,
Vehicle, and Vessel
Insurance .....................884 Case 50.2 •
Federal Court Case • Automobile
Insurance ...................885 Contemporary
Environment • No-Fault Automobile Liability
Insurance ....................................................
.............................887 Business
Insurance ....................................................
....888 Cyber
Insurance ....................................................
.........890 Umbrella
Insurance ....................................................
....890 Key Terms and
Concepts ................................................89
Cases .........................................891 Ethics
Case ...........................................................
........892 Part XI THE ACCOUNTING
PROFESSION 893 51 ACCOUNTANTS’
DUTIES AND
LIABILITY .................................................89
4 Introduction to Accountants’ Duties and
Liability ............895 Public
Accounting ..................................................
........895 Accounting Standards and
Principles ..............................896 Audit and
Auditor’s
Opinions ...........................................897
Accountants’ Liability to Their
Clients .............................898 Case 51.1 •
State Court Case • Liability to a
Client ...........................899 Accountants’
Liability to Third
Parties ............................900 Case 51.2 •
State Court Case • Privity-Like
Relationship ...................901 Case 51.3 •
State Court Case • Accountants’ Liability to a
Third
Party ...........................................................
..................903 Securities Law
Violations ...............................................90
5 Ethics • Accountants’ Duty to Report a
Client’s Illegal
Activity ........................................................
.............................907 Criminal Liability of
Accountants ....................................907
Sarbanes-Oxley
Act ........................................................908
Business Environment • Public Company
Accounting Oversight
Board ..........................................................
..............909 Business Environment • Audit
Committee .........................................910
Accountants’ Privilege and Work
Papers .........................910 Key Terms and
Concepts ................................................91
Cases .........................................911 Ethics
Cases ..........................................................
........912
Notes ..........................................................
..................913 Part XII PERSONAL
LAW .......................915 52 WILLS, TRUSTS,
AND ESTATES ................916 Introduction to
Wills, Trusts, and Estates .......................917
Will .............................................................
..................917
Probate .......................................................
..................920 Case 52.1 • State Court
Case • Slayer’s
Statute ................................921
Testamentary
Gifts .........................................................9
21 Intestate
Succession ..................................................
Intestacy Statute ..............................925
Irrevocable
Trusts ..........................................................
925 Special Types of
Trust ....................................................927
Living
Trust ...........................................................
.........928 Undue
Influence .....................................................
........929 Case 52.3 • State Court Case •
Undue Influence ...............................930
Living Will and Health Care
Directive ..............................931 Critical
Legal Thinking • Medical Aid in
Dying ...................................931 Key Terms
and
Concepts ................................................93
Cases .........................................932 Ethics
Case ...........................................................
........933
Notes ..........................................................
..................933 53 FAMILY
LAW ...........................................934
Introduction to Family
Law .............................................935
Premarriage
Issues ........................................................
935
Marriage ......................................................
..................936 Same-Sex
Marriage ......................................................
..937 Contemporary Environment • Same-
Sex Marriage Is Protected by the U.S.
Constitution ............................................93
7 Parents and
Children ......................................................
938 Marriage
Termination .................................................
....938 Prenuptial
Agreement ...................................................
..940 Contemporary Environment •
Prenuptial Agreement ..........................940
Case 53.1 • State Court Case • Prenuptial
Agreement .......................941 Case 53.2 •
State Court Case • Prenuptial
Agreement .......................942 Division of
Assets .........................................................
.943 xvi Contents Spousal and Child
Support ..............................................945
Landmark Law • Family Support
Act .................................................946
Child
Custody ......................................................
..........946 Key Terms and
Concepts ................................................94
Cases .........................................948 Ethics
Case ...........................................................
........948
Notes ..........................................................
..................948 Part XIII GLOBAL
ENVIRONMENT ...........949 54
INTERNATIONAL AND WORLD TRADE
LAW .............................................950
Introduction to International and World Trade
Law ...........951 The United States and
Foreign Affairs .............................951 United
Nations .......................................................
........953 Global Law • World
Bank ...........................................................
.......954 Global Law • International Monetary
Fund ........................................954 Bilateral
and Regional Trade
Agreements ........................955 European
Union ..........................................................
....956 United States–Mexico–Canada
Agreement (USMCA) .......958 Asian and
Indo-Pacific Trade
Organizations .....................960
Organization of the Petroleum Exporting
Countries ....................................................
...................962 South American, Central
American, and Caribbean Trade
Organizations ..............................................
.........962 African Trade
Organizations ............................................9
63 World Trade
Organization ................................................
964 Jurisdiction of U.S. Courts to Decide
International
Disputes ......................................................
Case • Act of State
Doctrine .....................966 Case 54.2 •
Federal Court Case • Sovereign
Immunity ......................967 Key Terms and
Concepts ................................................96
Cases .........................................969 Ethics
Case ...........................................................
........970 Notes
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