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Basic Business Law Case Analysis

21e S T A N D A R D V O L U M E

ANDERSON’S BUSINESS LAW

And The Legal Environment

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21e S T A N D A R D V O L U M E

ANDERSON’S BUSINESS LAW

And The Legal Environment

DAVID P. TWOMEY Professor of Law

Carroll School of Management Boston College

Member of the Massachusetts and Florida Bars

MARIANNE MOODY JENNINGS Professor of Legal and Ethical Studies

W.P. Carey School of Business Arizona State University

Member of the Arizona Bar

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Anderson’s Business Law and The Legal Environment, 21e David P. Twomey, Marianne Moody Jennings

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CONNECT for

SUCCESS For today’s – and tomorrow’s – business leaders, a solid

understanding of the legal environment of business is

crucial. Students must be equipped with the knowledge of

basic legal concepts and the skills to apply these concepts

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CONNECT for LEARNING

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Legal Environment, helps students make the connection to what they are reading, what

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business managers and leaders.

Chapters open with a self-guided outline — helping students focus on key concepts.

Chapter content continues to provide just the right amount of detail, presented in

terminology students can grasp and relate to. As a learning and study tool, key

examples are highlighted in green throughout each chapter — spotlighting the

connection between chapter concepts and real-world experiences for students.

The self-guided outlines help

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presented in the chapter.

Examples are emphasized in every paragraph with green highlights – spotlighting the connection between legal concepts and real-world experiences for students.

Maximizing student success, the new Make the Connection section found at the end of each chapter begins with a revised and more thorough chapter summary recapping key chapter topics. New action-oriented Learning Outcomes direct students to utilize the existing text pedagogy by serving as a direct reference point for selected “For Example” callouts, case summaries, and feature boxes. A list of Key Terms gives students further opportunity to check their understanding of commonly-used business law terminology. The Questions and Case Problems off er students additional opportunities for students to connect legal concepts to real-world issues. And the CPA Questions provide excellent review for the CPA Exam.

In addition to textbook material, the Student Study Guide also integrates the Make the Connection methodology, including Chapter Outlines and questions related to Learning Outcomes.

Make the Connection helps students understand and retain legal concepts by explaining them in the context of real-world examples. The result: Students are better prepared to have success in class — and in their careers as business leaders.

NEW! End-of-chapter material has been thoroughly revised and expanded! New “Make the Connection” sections help students better understand — and connect — the relationship between legal concepts and how these concepts apply to real-life situations.

CONNECT for TEACHING

SUCCESS Instructor resources also integrate the text’s new Make the Connection learning system.

The Instructor’s Manual includes a thorough explanation of the system as well as

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Instructor’s Manual: This manual provides instructor

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brief contents

Preface xxix Acknowledgments xxxvi About the Authors xxxix

PART 1 THE LEGAL AND SOCIAL ENVIRONMENT OF BUSINESS 1

1 The Nature and Sources of Law 3 2 The Court System and Dispute Resolution 15 3 Business Ethics, Social Forces, and The Law 39 4 The Constitution as the Foundation of the Legal

Environment 66 5 Government Regulation of Competition and

Prices 87 6 Administrative Agencies 104 7 The Legal Environment of International Trade 126 8 Crimes 155 9 Torts 187

10 Intellectual Property Rights and the Internet 211 11 Cyberlaw 242

PART 2 CONTRACTS 265 12 Nature and Classes of Contracts: Contracting on

the Internet 267 13 Formation of Contracts: Offer and Acceptance 284 14 Capacity and Genuine Assent 307 15 Consideration 331 16 Legality and Public Policy 347 17 Writing, Electronic Forms, and Interpretation of

Contracts 367 18 Third Persons and Contracts 392 19 Discharge of Contracts 410 20 Breach of Contract and Remedies 433

PART 3 SALES AND LEASES OF GOODS 455 21 Personal Property and Bailments 457 22 Legal Aspects of Supply Chain Management 479 23 Nature and Form of Sales 503 24 Title and Risk of Loss 531

25 Product Liability: Warranties and Torts 555 26 Obligations and Performance 580 27 Remedies for Breach of Sales Contracts 598

PART 4 NEGOTIABLE INSTRUMENTS 619 28 Kinds of Instruments, Parties, and

Negotiability 621 29 Transfers of Negotiable Instruments and

Warranties of Parties 641 30 Liability of the Parties Under Negotiable

Instruments 665 31 Checks and Funds Transfers 686

PART 5 DEBTOR-CREDITOR RELATIONSHIPS 715 32 Nature of the Debtor-Creditor Relationship 717 33 Consumer Protection 736 34 Secured Transactions in Personal Property 763 35 Bankruptcy 793 36 Insurance 821

PART 6 AGENCY AND EMPLOYMENT 847 37 Agency 849 38 Third Persons in Agency 874 39 Regulation of Employment 896 40 Equal Employment Opportunity Law 934

APPENDICES

1 How to Find the Law A–1 2 The Constitution of the United States A–4 3 Uniform Commercial Code A–14

GLOSSARY G–1

CASE INDEX CI –1

SUBJECT INDEX SI –1

xi

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contents

Preface xxix Acknowledgments xxxvi About the Authors xxxix

PART 1

THE LEGAL AND SOCIAL ENVIRONMENT OF BUSINESS

CHAPTER 1 THE NATURE AND SOURCES OF LAW 3

A. Nature of Law and Legal Rights 4 1. Legal Rights 4 2. Individual Rights 4 3. The Right of Privacy 4 CASE SUMMARY 5

4. Privacy and Technology 6 ETHICS & THE LAW 6

E-COMMERCE & CYBERLAW 7

B. Sources of Law 7 C. Uniform State Laws 9 D. Classifications of Law 9 SPORTS & ENTERTAINMENT LAW 10

LAW FLIX 11

CHAPTER 2 THE COURT SYSTEM AND DISPUTE RESOLUTION 15

A. The Court System 16 1. The Types of Courts 16 CASE SUMMARY 17

2. The Federal Court System 18 3. State Court Systems 21 B. Court Procedure 22 4. Participants in the Court System 22 5. Which Law Applies—Conflicts of Law 23 6. Initial Steps in a Lawsuit 23 7. The Trial 25 ETHICS & THE LAW 27

THINKING THINGS THROUGH 27

8. Posttrial Procedures 28

C. Alternative Dispute Resolution 28 9. Arbitration 29 10. Mediation 30 11. MedArb 30 12. Reference To a Third Person 31 13. Association Tribunals 31 14. Summary Jury Trial 31 15. Rent-A-Judge 31 E-COMMERCE & CYBERLAW 32

16. Minitrial 32 17. Judicial Triage 32 18. Contract Provisions 33 19. Disposition of Complaints and

Ombudsmen 33 LAW FLIX 33

CHAPTER 3 BUSINESS ETHICS, SOCIAL FORCES, AND THE LAW 39

A. What is Business Ethics? 40 1. The Law as the Standard for Business Ethics 40 2. The Notion of Universal Standards for Business

Ethics 41 3. The Standard of Situational Business Ethics or Moral

Relativism 41 THINKING THINGS THROUGH 42

4. The Business Stakeholder Standard of Behavior 42 ETHICS & THE LAW 44

B. Why is Business Ethics Important? 44 5. The Importance of Trust 44 6. Business Ethics and Financial Performance 45 ETHICS & THE LAW 46

7. The Importance of A Good Reputation 46 8. Business Ethics and Business Regulation: Public

Policy, Law, and Ethics 46 ETHICS & THE LAW 48

C. How to Recognize and Resolve Ethical Dilemmas 51

9. Categories of Ethical Behavior 51 ETHICS & THE LAW 52

SPORTS & ENTERTAINMENT LAW 53

E-COMMERCE & CYBERLAW 55

xiii

10. Resolving Ethical Dilemmas 55 ETHICS & THE LAW 57

LAW FLIX 58

CHAPTER 4 THE CONSTITUTION AS THE FOUNDATION OF THE LEGAL ENVIRONMENT 66

A. The U.S. Constitution and the Federal System 67 1. What a Constitution is 67 2. The Branches of Government 67 B. The U.S. Constitution and the States 67 3. Delegated and Shared Powers 68 4. Other Powers 68 5. Federal Supremacy 69 CASE SUMMARY 69

C. Interpreting and Amending the Constitution 70 6. Conflicting Theories 70 7. Amending the Constitution 71 8. The Living Constitution 71 D. Federal Powers 72 9. The Power to Regulate Commerce 72 CASE SUMMARY 73, 74

10. The Financial Powers 75 CASE SUMMARY 76

E. Constitutional Limitations on Government 76 11. Due Process 76 12. Equal Protection of the Law 77 E-COMMERCE & CYBERLAW 77

13. Privileges and Immunities 78 14. Protection of the Person 78 15. The Bill of Rights and Businesses as Persons 79 CASE SUMMARY 80

THINKING THINGS THROUGH 80

LAW FLIX 81

CHAPTER 5 GOVERNMENT REGULATION OF COMPETITION AND PRICES 87

A. Power to Regulate Business 88 1. Regulation, Free Enterprise, and Deregulation 88 2. Regulation of Production, Distribution, and

Financing 88 3. Regulation of Unfair Competition 89 B. Regulation of Markets and Competition 89 4. Regulation of Prices 89 CASE SUMMARY 90, 91

5. Prevention of Monopolies and Combinations 92 ETHICS & THE LAW 93

CASE SUMMARY 94

SPORTS & ENTERTAINMENT LAW 95

E-COMMERCE & CYBERLAW 96

C. Power to Protect Business 97 6. Remedies for Anticompetitive Behavior 97 LAW FLIX 98

CHAPTER 6 ADMINISTRATIVE AGENCIES 104

A. Nature of the Administrative Agency 105 1. Purpose of Administrative Agencies 105 2. Uniqueness of Administrative Agencies 105 3. Open Operation of Administrative Agencies 106 B. Legislative Power of the Agency 107 4. Agency’s Regulations as Law 107 5. Agency Adoption of Regulations 108 ETHICS & THE LAW 109

CASE SUMMARY 110, 111

E-COMMERCE & CYBERLAW 112

C. Executive Power of the Agency 112 6. Enforcement or Execution of the Law 112 7. Constitutional Limitations on Administrative

Investigation 112 D. Judicial Power of the Agency 114 8. The Agency as a Specialized Court 114 9. Punishment and Enforcement Powers

of Agencies 116 10. Exhaustion of Administrative Remedies 116 11. Appeal from Administrative Action and Finality

of Administrative Determination 116 CASE SUMMARY 118, 119

12. Liability of the Agency 120 LAW FLIX 120

CHAPTER 7 THE LEGAL ENVIRONMENT OF INTERNATIONAL TRADE 126

A. General Principles 127 1. The Legal Background 127 2. International Trade Organizations, Conferences,

and Treaties 129 CASE SUMMARY 131

3. Forms of Business Organizations 132 CASE SUMMARY 134

B. Governmental Regulation 134 4. Export Regulations 134 5. Protection of Intellectual Property Rights 136

xiv Contents

CASE SUMMARY 137

6. Antitrust 137 7. Securities and Tax Fraud Regulation in an

International Environment 140 CASE SUMMARY 141, 142

8. Barriers to Trade 142 CASE SUMMARY 143

9. Relief Mechanisms for Economic Injury Caused by Foreign Trade 143

CASE SUMMARY 144

10. Expropriation 146 11. The Foreign Corrupt Practices Act 146 ETHICS & THE LAW 147

CASE SUMMARY 148

LAW FLIX 148

CHAPTER 8 CRIMES 155

A. General Principles 156 1. Nature and Classification of Crimes 156 2. Basis of Criminal Liability 156 CASE SUMMARY 157, 158

3. Responsibility for Criminal Acts 156 THINKING THINGS THROUGH 162

4. Indemnification of Crime Victims 162 B. White-Collar Crimes 163 5. Conspiracies 163 6. Crimes Related to Production, Competition,

and Marketing 164 7. Money Laundering 164 8. Racketeering 165 9. Bribery 166 10. Commercial Bribery 166 11. Extortion and Blackmail 166 12. Corrupt Influence 166 ETHICS & THE LAW 167

13. Counterfeiting 167 14. Forgery 168 15. Perjury 168 16. False Claims and Pretenses 168 17. Bad Checks 169 18. Credit Card Crimes 169 19. Embezzlement 170 20. Obstruction of Justice: Sarbanes-Oxley 170 21. Corporate Fraud: Sarbanes-Oxley 171 SPORTS & ENTERTAINMENT LAW 171

22. The Common Law Crimes 172 C. Criminal Law and the Computer 173

23. What is a Computer Crime? 173 24. The Computer as Victim 173 25. Unauthorized Use of Computers 174 26. Computer Raiding 174 27. Diverted Delivery by Computer 174 E-COMMERCE & CYBERLAW 175

28. Economic Espionage by Computer 175 29. Electronic Fund Transfer Crimes 175 ETHICS & THE LAW 176

30. Circumventing Copyright Protection Devices Via Computer 176

31. Spamming 177 D. Criminal Procedure Rights for Businesses 177 32. Fourth Amendment Rights for Businesses 177 CASE SUMMARY 178

33. Fifth Amendment Self-Incrimination Rights for Businesses 179

CASE SUMMARY 179

34. Due Process Rights for Businesses 180 CASE SUMMARY 180

LAW FLIX 181

CHAPTER 9 TORTS 187

A. General Principles 188 1. What is a Tort? 188 2. Tort and Crime Distinguished 188 3. Types of Torts 189 B. Intentional Torts 189 4. Assault 189 5. Battery 190 CASE SUMMARY 190

6. False Imprisonment 190 CASE SUMMARY 191

7. Intentional Infliction of Emotional Distress 192 8. Invasion of Privacy 192 CASE SUMMARY 193

9. Defamation 193 CASE SUMMARY 194, 195

10. Product Disparagement 196 11. Wrongful Interference with Contracts 196 12. Trespass 196 C. Negligence 197 13. Elements of Negligence 197 CASE SUMMARY 199

14. Defenses to Negligence 200 CASE SUMMARY 200

SPORTS & ENTERTAINMENT LAW 202

Contents xv

D. Strict Liability 203 THINKING THINGS THROUGH 203

15. What is Strict Liability? 204 16. Imposing Strict Liability 204 LAW FLIX 205

CHAPTER 10 INTELLECTUAL PROPERTY RIGHTS AND THE INTERNET 211

A. Trademarks and Service Marks 212 1. Introduction 212 2. International Registration 213 3. Registrable Marks 213 CASE SUMMARY 214

4. Remedies for Improper Use of Marks 215 CASE SUMMARY 215

5. Abandonment of Exclusive Right to Mark 216 6. Trade Dress Protection 216 7. Limited Lanham Act Protection of Product

Design 217 8. Prevention of Dilution of Famous Marks 218 9. Internet Domain Names and Trademark

Rights 218 E-COMMERCE & CYBERLAW 219

B. Copyrights 220 10. Duration of Copyright 221 11. Copyright Notice 221 12. What is Copyrightable? 221 13. Copyright Ownership and the Internet 222 14. Rights of Copyright Holders 222 15. Limitation on Exclusive Character

of Copyright 223 CASE SUMMARY 223

16. Secondary Liability for Infringement 224 ETHICS & THE LAW 224

17. Digital Millennium Copyright Act 225 C. Patents 225 18. Types, Duration, and Notice 225 19. Patentability 226 CASE SUMMARY 227

20. Patentable Business Methods 227 CASE SUMMARY 228

21. Infringement 229 CASE SUMMARY 229

D. Secret Business Information 230 22. Trade Secrets 230 23. Loss of Protection 231 24. Defensive Measures 231 25. Criminal Sanctions 231

E. Protection of Computer Software and Mask Works 232 26. Copyright Protection of Computer Programs 232 27. Patent Protection of Programs 233 28. Trade Secrets 233 29. Restrictive Licensing 233 30. Semiconductor Chip Protection 233 LAW FLIX 235

CHAPTER 11 CYBERLAW 242

A. Introduction to Cyberlaw 243 1. What is Cyberlaw? 243 2. What are the Issues in Cyberlaw? 243 B. Tort Issues in Cyberspace 244 3. Employer/Employee Privacy Issues in Cyberlaw 244 CASE SUMMARY 247

4. Web User Information and Privacy 247 E-COMMERCE & CYBERLAW 248

CASE SUMMARY 249

5. Appropriation in Cyberspace 250 6. Defamation in Cyberspace 250 ETHICS & THE LAW 251

C. Contract Issues in Cyberspace 252 7. Formation of Contracts in Cyberspace 252 8. Misrepresentation and Fraud in Cyberspace 252 D. Intellectual Property Issues in Cyberspace 253 E. Criminal Law Issues in Cyberspace 254 9. Nature and Types of Cyberspace Crimes 254 10. Criminal Procedure and Rights in Cyberspace 255 THINKING THINGS THROUGH 256

CASE SUMMARY 256

F. Constitutional Restraints and Protections in Cyberspace 257

11. First Amendment Rights in Cyberspace 257 12. Commerce Clause Issues in Cyberspace 258 13. Due Process Issues in Cyberspace 258 G. Securities Law Issues in Cyberspace 258 LAW FLIX 259

PART 2

CONTRACTS

CHAPTER 12 NATURE AND CLASSES OF CONTRACTS: CONTRACTING ON THE INTERNET 267

A. Nature of Contracts 268 1. Definition of a Contract 268

xvi Contents

2. Elements of a Contract 268 3. Subject Matter of Contracts 268 4. Parties to a Contract 268 5. How a Contract Arises 269 6. Intent to Make a Binding Agreement 269 7. Freedom of Contract 270 B. Classes of Contracts 270 8. Formal and Informal Contracts 270 9. Express and Implied Contracts 270 10. Valid and Voidable Contracts and Void

Agreements 271 11. Executed and Executory Contracts 272 12. Bilateral and Unilateral Contracts 272 CASE SUMMARY 273

13. Quasi Contracts 273 CASE SUMMARY 275, 276

THINKING THINGS THROUGH 277

C. Contracting on the Internet 278 LAW FLIX 279

CHAPTER 13 FORMATION OF CONTRACTS: OFFER AND ACCEPTANCE 284

A. Requirements of an Offer 285 1. Contractual Intention 285 2. Definiteness 286 CASE SUMMARY 286, 287

THINKING THINGS THROUGH 288

CASE SUMMARY 290

3. Communication of Offer to Offeree 291 B. Termination of Offer 291 4. Revocation of Offer by Offeror 292 5. Counteroffer by Offeree 293 6. Rejection of Offer by Offeree 293 7. Lapse of Time 293 8. Death or Disability of Either Party 294 9. Subsequent Illegality 294 C. Acceptance of Offer 294 10. What Constitutes an Acceptance? 294 11. Privilege of Offeree 294 12. Effect of Acceptance 295 13. Nature of Acceptance 295 14. Who May Accept? 295 CASE SUMMARY 296

15. Manner and Time of Acceptance 296 E-COMMERCE & CYBERLAW 297

16. Communication of Acceptance 298 CASE SUMMARY 298, 299

17. Auction Sales 300 LAW FLIX 301

CHAPTER 14 CAPACITY AND GENUINE ASSENT 307

A. Contractual Capacity 308 1. Contractual Capacity Defined 308 CASE SUMMARY 308

2. Minors 309 CASE SUMMARY 311

3. Mentally Incompetent Persons 312 CASE SUMMARY 313

4. Intoxicated Persons 313 ETHICS & THE LAW 314

B. Mistake 314 5. Unilateral Mistake 314 CASE SUMMARY 315

6. Mutual Mistake 315 7. Mistake in the Transcription or Printing of the

Contract: Reformation 316 C. Deception 317 8. Intentional Misrepresentation 317 9. Fraud 317 CASE SUMMARY 318

10. Negligent Misrepresentation 320 11. Nondisclosure 320 CASE SUMMARY 320

D. Pressure 322 12. Undue Influence 322 CASE SUMMARY 322

13. Duress 323 LAW FLIX 324

CHAPTER 15 CONSIDERATION 331

A. General Principles 332 1. Consideration Defined and Explained 332 2. Gifts 332 CASE SUMMARY 333

3. Adequacy of Consideration 333 CASE SUMMARY 333, 334

4. Forbearance as Consideration 334 5. Illusory Promises 335 B. Special Situations 336 6. Preexisting Legal Obligation 336 CASE SUMMARY 337

7. Past Consideration 338 8. Moral Obligation 339

Contents xvii

ETHICS & THE LAW 339

C. Exceptions to the Laws of Consideration 340 9. Exceptions to Consideration 340 CASE SUMMARY 341

LAW FLIX 342

CHAPTER 16 LEGALITY AND PUBLIC POLICY 347

A. General Principles 348 1. Effect of Illegality 348 CASE SUMMARY 348

2. Exceptions to Effect of Illegality 349 3. Partial Illegality 349 4. Crimes and Civil Wrongs 349 5. Good Faith and Fairness 350 6. Unconscionable Clauses 350 CASE SUMMARY 352

B. Agreements Affecting Public Welfare 352 7. Agreements Contrary to Public Policy 353 CASE SUMMARY 353

8. Gambling, Wagers, and Lotteries 353 C. Regulation of Business 354 9. Effect of Violation 354 10. Statutory Regulation of Contracts 354 11. Licensed Callings or Dealings 354 CASE SUMMARY 355

12. Contracts in Restraint of Trade 355 13. Agreements Not to Compete 355 THINKING THINGS THROUGH 357

ETHICS & THE LAW 358

14. Usurious Agreements 358 THINKING THINGS THROUGH 359

CASE SUMMARY 359

LAW FLIX 360

CHAPTER 17 WRITING, ELECTRONIC FORMS, AND INTERPRETATION OF CONTRACTS 367

A. Statute of Frauds 368 1. Validity of Oral Contracts 368 2. Contracts that Must be Evidenced by a Writing 369 CASE SUMMARY 372

3. Note or Memorandum 374 E-COMMERCE & CYBERLAW 375

4. Effect of Noncompliance 377 CASE SUMMARY 377

B. Parol Evidence Rule 378 5. Exclusion of Parol Evidence 378

CASE SUMMARY 378

6. When the Parol Evidence Rule Does Not Apply 379 CASE SUMMARY 380

C. Rules of Construction and Interpretation 381 7. Intention of the Parties 381 CASE SUMMARY 382

8. Whole Contract 382 9. Contradictory and Ambiguous Terms 382 CASE SUMMARY 383

10. Implied Terms 384 11. Conduct and Custom 385 12. Avoidance of Hardship 385 CASE SUMMARY 386

LAW FLIX 386

CHAPTER 18 THIRD PERSONS AND CONTRACTS 392

A. Third-Party Beneficiary Contracts 393 1. Definition 393 CASE SUMMARY 394

2. Modification or Termination of Intended Third-Party Beneficiary Contract 394

3. Limitations on Intended Third-Party Beneficiary 395

4. Incidental Beneficiaries 395 CASE SUMMARY 396

B. Assignments 396 5. Definitions 396 6. Form of Assignment 397 7. Notice of Assignment 397 CASE SUMMARY 398

8. Assignment of Right to Money 399 9. Nonassignable Rights 399 10. Rights of Assignee 401 11. Continuing Liability of Assignor 401 12. Liability of Assignee 402 CASE SUMMARY 402

13. Warranties of Assignor 403 14. Delegation of Duties 403 CASE SUMMARY 404

LAW FLIX 405

CHAPTER 19 DISCHARGE OF CONTRACTS 410

A. Conditions Relating to Performance 411 1. Classifications of Conditions 411 CASE SUMMARY 411

SPORTS & ENTERTAINMENT LAW 412

xviii Contents

B. Discharge by Performance 413 2. Normal Discharge of Contracts 413 3. Nature of Performance 413 CASE SUMMARY 414

4. Time of Performance 414 5. Adequacy of Performance 415 CASE SUMMARY 417

C. Discharge by Action of Parties 418 6. Discharge by Unilateral Action 418 7. Discharge by Agreement 419 CASE SUMMARY 420

D. Discharge by External Causes 420 8. Discharge by Impossibility 420 9. Developing Doctrines 422 CASE SUMMARY 422, 423, 424

10. Temporary Impossibility 425 11. Discharge by Operation of Law 426 LAW FLIX 427

CHAPTER 20 BREACH OF CONTRACT AND REMEDIES 433

A. What Constitutes a Breach of Contract? 434 1. Definition of Breach 434 2. Anticipatory Breach 434 CASE SUMMARY 434

SPORTS & ENTERTAINMENT LAW 435

B. Waiver of Breach 436 3. Cure of Breach by Waiver 436 4. Existence and Scope of Waiver 436 CASE SUMMARY 436

5. Reservation of Rights 438 C. Remedies for Breach of Contract 438 6. Remedies Upon Anticipatory Repudiation 438 7. Remedies in General and the Measure of

Damages 438 8. Monetary Damages 440 CASE SUMMARY 440

9. Rescission 442 10. Action for Specific Performance 442 11. Action for an Injunction 443 12. Reformation of Contract by a Court 443 CASE SUMMARY 444

D. Contract Provisions Affecting Remedies and Damages 444

13. Limitation of Remedies 444 14. Liquidated Damages 444 CASE SUMMARY 445, 446

15. Attorneys’ Fees 446 16. Limitation of Liability Clauses 447 LAW FLIX 448

PART 3

SALES AND LEASES OF GOODS

CHAPTER 21 PERSONAL PROPERTY AND BAILMENTS 457

A. Personal Property 458 1. Personal Property in Context 458 2. Title to Personal Property 458 3. Gifts 458 CASE SUMMARY 460, 461, 462

4. Finding of Lost Property 463 5. Occupation of Personal Property 464 CASE SUMMARY 464, 465

6. Escheat 466 CASE SUMMARY 466

7. Multiple Ownership of Personal Property 466 CASE SUMMARY 467

8. Community Property 468 B. Bailments 469 9. Definition 469 10. Elements of Bailment 469 11. Nature of the Parties’ Interests 470 12. Classification of Ordinary Bailments 470 13. Renting of Space Distinguished 471 14. Duties and Rights of the Bailee 471 15. Breach of Duty of Care: Burden of Proof 472 CASE SUMMARY 472

16. Liability for Defects in Bailed Property 473 17. Contract Modification of Liability 473 LAW FLIX 474

CHAPTER 22 LEGAL ASPECTS OF SUPPLY CHAIN MANAGEMENT 479

A. Warehouses 480 1. Definitions 480 2. Rights and Duties of Warehouses 480 3. Warehouse Receipts 481 4. Rights of Holders of Warehouse Receipts 481 5. Field Warehousing 483

Contents xix

6. Limitation of Liability of Warehouses 485 B. Common Carriers 485 7. Definitions 485 CASE SUMMARY 486

8. Bills of Lading 487 CASE SUMMARY 488

9. Rights of Common Carrier 488 10. Duties of Common Carrier 488 11. Liabilities of Common Carrier 489 CASE SUMMARY 489, 490, 491

C. Factors and Consignments 493 12. Definitions 493 13. Effect of Factor Transaction 493 D. Hotelkeepers 494 14. Definitions 494 15. Duration of Guest Relationship 494 16. Hotelkeeper’s Liability for Guest’s Property 495 CASE SUMMARY 495

17. Hotelkeeper’s Lien 496 18. Boarders or Lodgers 496 LAW FLIX 496