Wren 626 shoes at&t commercial

Business Law

In the following situations, two parties claim the same goods. Who is most likely to prevail in each circumstance and be sure to explain why.

(a) Charlie steals David's Ultra HD TV and sells it to Eddie, an innocent purchaser, for value. David learns that Eddie has the tv set and demands its return.

(b) Gail takes her all terrain vehicle (ATV) for repair to Henry's Sales & Repair, a merchant who fixes and sometimes sells used ATVs. By accident, one of Henry's employees sells Gail's ATV to John, an innocent purchaser and customer, who takes possession. Gail wants her ATV back from John.

ETHICS & THE LAW Maybe a Little Too “LinkedIn” p. 6

Honesty, Lawyers, and BP Claims p. 25

Edward Snowden: Contractor with a Cause p. 39

The Veterans Affairs (VA) and the Queues p. 40

Ethics, Trust, and Markets p. 43

Lying to Get into a Top School p. 46

Pumping Up the SAT Scores for a Good Ranking p. 49

Toys Us and Horizontal/Vertical Controls on Distribution p. 76

IRS Employees Who Snoop p. 89

When Addictions Are Off and On Again p. 112

Patenting Genes? p. 168

Combating Bribery of Foreign Public Officials in International Business Transactions p. 196

Plumbing Consideration p. 269

Public Policy Issues Regarding Surrogacy Contracts p. 281

Restocking at Overstock p. 415

The $7 Renoir at the Flea Market p. 442

Executive App Promises, App Disclaimers p. 469

The Return Season p. 486

The 30-Day Grace Period That Is Now 120 Days p. 507

Medicaid Eligibility and Article 3 Negotiability p. 528

Having Your Mortgage Set Aside p. 538

The Corner Check Cashing Company and Good Faith p. 560

Getting Hit for SOOO Many Overdraft Fees p. 580

When the Creditors Rule the Debtor p. 612

Getting Into Debt and Getting Debt Relief—from the Same Company p. 635

Women, Children, and the Repo Guys p. 664

Bankruptcy Records p. 673

The Skies Are Not So Friendly to Employee Pensions p. 687

Are Terrorist Attacks an “Act of War?” p. 706

Is It Ethical to Use the Strategy of an Undisclosed Principal? p. 747

The S & L Crisis p. 879

Problem: Conflicts of Interest—Remedy: Commonsense Rules p. 949

The Feeder Fund and the Auditor p. 958

Executive Compensation p. 991

Spreading the Manure a Little Too Thick p. 1029

Screening Tenants for Criminal Records p. 1052

Preparing Your Client’s Will When You’re the Beneficiary p. 1073

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THINKING THINGS THROUGH

Why Do We Require Sworn Testimony? p. 24

Corrupt Climates: Good or Bad for Business? p. 37

Freedom of Speech and Our Headlights p. 67

Teeth Whitening and the Antitrust Laws p. 75

Can a Pharmacy’s License Be Revoked for Too Many Cash Sales of Oxycodone? p. 111

Torts and Public Policy p. 148

Access to Medicine versus Patent Protection p. 189

Twelve Years of Litigation p. 215

The Rules of Negotiations p. 226

Legality and Public Policy p. 279

Noncompete Clauses, Cause for Concern? p. 285

Delivering Dirt p. 413

Serving Up Title and Insurance at the Burned Bar p. 441

What’s Foreign to You … p. 467

When a Court Does Not Allow Performance p. 486

The Lululemon Yoga Pants That Were Lemons p. 501

When Your John Hancock Is Enough p. 524

The Minor with an Embezzling Conservator p. 544

The Corner Check Cashing Company and Thieves—Who Wins? p. 567

The Business Law Professor with the Lost Cashier’s Check p. 589

Pro Rata Shares for Co-Sureties p. 605

The Difference in Concussions and Football Helmet Ad Claims p. 626

Repossessing and Replacing Tires p. 664

Means Test Justifying the End of Debt p. 676

Rule No. 1: Take the Safe Course p. 751

Taking Chances or Shortcuts in Violation of OSHA Standards Is Bad Management p. 783

Retaliation – The Number One Risk for Employers p. 807

Don’t Finagle the Bagel! p. 833

How Many Plaintiffs Can There Be in a Class-Action Securities Litigation? How Many Defendants? p. 964

Responsible Corporate Officers—The Park Doctrine Revisited p. 992

The Dryer Vent That Dumped on the Doc p. 1003

Putting the Brakes on Eminent Domain p. 1016

The Leaking Barrels GE Sold p. 1031

The Rotting Balcony p. 1051

Close Enough for a Will? p. 1074

T

W

List of Features continues on inside back cover

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23rd Edi t ion

ANDERSON ’S

BUSINESS LAW and The Legal Environment Comprehensive Volume

DAVID P. TWOMEY Professor of Law Carroll School of Management Boston College Member of the Massachusetts and Florida Bars

MARIANNE MOODY JENNINGS Emeritus Professor of Legal and Ethical Studies W.P. Carey School of Business Arizona State University Member of the Arizona Bar

STEPHANIE M. GREENE Chair, Business Law Department Professor of Business Law Carroll School of Management Boston College Member of the Massachusetts Bar

Australia • Brazil • Mexico • Singapore • United Kingdom • United States

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WCN: 02-200-203

Brief Contents

PREFACE XVIII

ACKNOWLEDGMENTS XXIV

ABOUT THE AUTHORS XXVI

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 13 3 Business Ethics, Social Forces, and the Law 33 4 The Constitution as the Foundation of the Legal

Environment 54 5 Government Regulation of Competition and Prices 72 6 Administrative Agencies 86 7 Crimes 104 8 Torts 131 9 Intellectual Property Rights and the Internet 153 10 The Legal Environment of International Trade 181

PART 2 CONTRACTS 203 11 Nature and Classes of Contracts: Contracting

on the Internet 205 12 Formation of Contracts: Offer and Acceptance 221 13 Capacity and Genuine Assent 242 14 Consideration 262 15 Legality and Public Policy 275 16 Writing, Electronic Forms, and Interpretation

of Contracts 291 17 Third Persons and Contracts 311 18 Discharge of Contracts 327 19 Breach of Contract and Remedies 347

PART 3 SALES AND LEASES OF GOODS 365 20 Personal Property and Bailments 367 21 Legal Aspects of Supply Chain Management 387 22 Nature and Form of Sales 409 23 Title and Risk of Loss 435 24 Product Liability: Warranties and Torts 455 25 Obligations and Performance 477 26 Remedies for Breach of Sales Contracts 495

PART 4 NEGOTIABLE INSTRUMENTS 515 27 Kinds of Instruments, Parties, and Negotiability 517 28 Transfers of Negotiable Instruments and Warranties

of Parties 535

29 Liability of the Parties under Negotiable Instruments 555 30 Checks and Funds Transfers 573

PART 5 DEBTOR-CREDITOR RELATIONSHIPS 599 31 Nature of the Debtor-Creditor Relationship 601 32 Consumer Protection 618 33 Secured Transactions in Personal Property 642 34 Bankruptcy 671 35 Insurance 696

PART 6 AGENCY AND EMPLOYMENT 717 36 Agency 719 37 Third Persons in Agency 741 38 Regulation of Employment 761 39 Equal Employment Opportunity Law 794

PART 7 BUSINESS ORGANIZATIONS 821 40 Types of Business Organizations 823 41 Partnerships 840 42 LPs, LLCs, and LLPs 867 43 Corporation Formation 883 44 Shareholder Rights in Corporations 903 45 Securities Regulation 927 46 Accountants’ Liability and Malpractice 955 47 Management of Corporations 977

PART 8 REAL PROPERTY AND ESTATES 999 48 Real Property 1001 49 Environmental Law and Land Use Controls 1025 50 Leases 1045 51 Decedents’ Estates and Trusts 1063

APPENDICES 1 How to Find the Law A–1 2 The Constitution of the United States A–4 3 Uniform Commercial Code (Selected Sections) A–15

GLOSSARY G–1

CASE INDEX CI–1

SUBJECT INDEX SI–1

iii

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Contents

Preface xviii Acknowledgments xxiv About the Authors xxvi

PART 1

The Legal and Social Environment of Business Chapter 1 The Nature and Sources of Law 3

1-1 Nature of Law and Legal Rights 4 1-1a Legal Rights 4 1-1b Individual Rights 4 1-1c The Right of Privacy 4 1-1d Privacy and Technology 5

1-2 Sources of Law 7 1-2a Constitutional Law 7 1-2b Statutory Law 7 1-2c Administrative Law 7 1-2d Private Law 7 1-2e Case Law, Statutory Interpretation, and Precedent 7 1-2f Other Forms of Law: Treaties and Executive

Orders 8 1-2g Uniform State Laws 8

1-3 Classifications of Law 9 1-3a Substantive Law vs. Procedural Law 9 1-3b Criminal Law vs. Civil Law 9 1-3c Law vs. Equity 10

Chapter 2 The Court System and Dispute Resolution 13

2-1 The Court System 14 2-1a The Types of Courts 14 2-1b The Federal Court System 16 2-1c State Court Systems 18

2-2 Court Procedure 20 2-2a Participants in the Court System 20 2-2b Which Law Applies—Conflicts of Law 20 2-2c Initial Steps in a Lawsuit 21 2-2d The Trial 22 2-2e Post-trial Procedures 25

2-3 Alternative Dispute Resolution (ADR) 26 2-3a Arbitration 26 2-3b Mediation 27

2-3c MedArb 28 2-3d Expert Panel 28 2-3e Reference to a Third Person 28 2-3f Association Tribunals 28 2-3g Summary Jury Trial 28 2-3h Rent-A-Judge 29 2-3i Minitrial 29 2-3j Contract Provisions 29

Chapter 3 Business Ethics, Social Forces, and the Law 33

3-1 What Is Business Ethics? 34 3-1a The Law as the Standard for Business Ethics 34 3-1b The Notion of Universal Standards for Business

Ethics 34 3-1c Ethical Theories and Standards 35 3-1d The Business Stakeholder Standard of Behavior 38

3-2 Why Is Business Ethics Important? 39 3-2a The Importance of Trust 39 3-2b Business Ethics and Financial Performance 39 3-2c The Importance of a Good Reputation 41 3-2d Business Ethics and Business Regulation:

Public Policy, Law, and Ethics 41

3-3 How to Recognize and Resolve Ethical Dilemmas 44 3-3a Categories of Ethical Behavior 45 3-3b Resolving Ethical Dilemmas 47

Chapter 4 The Constitution as the Foundation of the Legal Environment 54

4-1 The U.S. Constitution and the Federal System 55 4-1a What a Constitution Is 55 4-1b The Branches of Government 55

4-2 The U.S. Constitution and the States 55 4-2a Delegated and Shared Powers 55 4-2b Other Powers 56 4-2c Federal Supremacy 57

4-3 Interpreting and Amending the Constitution 58 4-3a Conflicting Theories 58 4-3b Amending the Constitution 59 4-3c The Living Constitution 59

4-4 Federal Powers 60 4-4a The Power to Regulate Commerce 60 4-4b The Financial Powers 63

iv

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4-5 Constitutional Limitations on Government 64 4-5a Due Process 64 4-5b Equal Protection of the Law 65 4-5c Privileges and Immunities 65 4-5d Protection of the Person 66 4-5e The Bill of Rights and Businesses as Persons 66

Chapter 5 Government Regulation of Competition and Prices 72

5-1 Power to Regulate Business 73 5-1a Regulation, Free Enterprise, and Deregulation 73 5-1b Regulation of Unfair Competition 73

5-2 Regulation of Horizontal Markets and Competitors 73 5-2a Regulation of Prices 74 5-2b Monopolization 74 5-2c Boycotts and Refusals to Deal 76 5-2d Mergers among Competitors 76

5-3 Regulation of the Supply Chain and Vertical Trade Restraints 77 5-3a Price Discrimination 77 5-3b Exclusive Dealings and Territories 79 5-3c Resale Price Maintenance 79 5-3d Tying 80 5-3e Mergers along the Supply Chain 81

5-4 Remedies for Anticompetitive Behavior 82 5-4a Criminal Penalties 82 5-4b Civil Remedies 82

Chapter 6 Administrative Agencies 86

6-1 Nature of the Administrative Agency 87 6-1a Purpose of Administrative Agencies 87 6-1b Uniqueness of Administrative Agencies 87 6-1c Open Operation of Administrative Agencies 88

6-2 Legislative Power of the Agency 90 6-2a Agency’s Regulations as Law 90 6-2b Agency Adoption of Regulations 91

6-3 Executive Power of the Agency 94 6-3a Enforcement or Execution of the Law 94 6-3b Constitutional Limitations on Administrative

Investigation 94

6-4 Judicial Power of the Agency 95 6-4a The Agency as a Specialized Court 95 6-4b Punishment and Enforcement Powers of

Agencies 97 6-4c Exhaustion of Administrative Remedies 97 6-4d Appeal from an Administrative Agency Action 97

Chapter 7 Crimes 104

7-1 General Principles 105 7-1a Nature and Classification of Crimes 105 7-1b Basis of Criminal Liability 105 7-1c Responsibility for Criminal Acts 106 7-1d Indemnification of Crime Victims 112

7-2 White-Collar Crimes 113 7-2a Conspiracies 113 7-2b Money Laundering 113 7-2c Racketeering 113 7-2d Bribery 114 7-2e Commercial Bribery 115 7-2f Extortion and Blackmail 115 7-2g Corrupt Influence 115 7-2h Counterfeiting 116 7-2i Forgery 116 7-2j Perjury 116 7-2k False Claims and Pretenses 116 7-2l Bad Checks 117 7-2m Credit Card Crimes 118 7-2n Embezzlement 118 7-2o Obstruction of Justice: Sarbanes-Oxley (SOX) 118 7-2p Corporate Fraud: SOX 119 7-2q The Common Law Crimes 119

7-3 Criminal Law and the Computer 120 7-3a What Is a Computer Crime? 120 7-3b The Computer as Victim 120 7-3c Unauthorized Use of Computers 121 7-3d Computer Raiding 121 7-3e Diverted Delivery by Computer 122 7-3f Economic Espionage by Computer 122 7-3g Electronic Fund Transfer Crimes 123 7-3h Circumventing Copyright Protection

Devices Via Computer 123 7-3i Spamming 123

7-4 Criminal Procedure Rights for Businesses 124 7-4a Fourth Amendment Rights for Businesses 124 7-4b Fifth Amendment Self-Incrimination Rights for

Businesses 126 7-4c Due Process Rights for Businesses 126

Chapter 8 Torts 131

8-1 General Principles 132 8-1a What Is a Tort? 132 8-1b Tort and Crime Distinguished 132 8-1c Types of Torts 132

8-2 Intentional Torts 134 8-2a Assault 134

C ON T EN T S v

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8-2b Battery 134 8-2c False Imprisonment 134 8-2d Intentional Infliction of Emotional Distress 135 8-2e Invasion of Privacy 136 8-2f Defamation 138 8-2g Product Disparagement 141 8-2h Wrongful Interference with Contracts 141 8-2i Trespass 141

8-3 Negligence 142 8-3a Elements of Negligence 142 8-3b Defenses to Negligence 145

8-4 Strict Liability 147 8-4a What Is Strict Liability? 148 8-4b Imposing Strict Liability 148

Chapter 9 Intellectual Property Rights and the Internet 153

9-1 Trademarks and Service Marks 154 9-1a Introduction 154 9-1b International Registration 154 9-1c Registrable Marks 155 9-1d Proving Trademark Infringement 156 9-1e Remedies for Improper Use of Marks 157 9-1f Abandonment of Exclusive Right to Mark 157 9-1g Trade Dress Protection 157 9-1h Limited Lanham Act Protection of Product Design 158 9-1i Prevention of Dilution of Famous Marks 158 9-1j Internet Domain Names and Trademark Rights 159

9-2 Copyrights 160 9-2a Duration of Copyright 161 9-2b Copyright Notice 161 9-2c What Is Copyrightable? 162 9-2d Copyright Ownership and the Internet 162 9-2e Rights of Copyright Holders 162 9-2f Limitation on Exclusive Character of Copyright 163 9-2g Secondary Liability for Infringement 164 9-2h Digital Millennium Copyright Act 165

9-3 Patents 165 9-3a Types, Duration, and Notice 165 9-3b Patentability 166 9-3c Patentable Business Methods 168 9-3d Infringement 169

9-4 Secret Business Information 171 9-4a Trade Secrets 171 9-4b Loss of Protection 172 9-4c Defensive Measures 172 9-4d Criminal Sanctions 172

9-5 Protection of Computer Software and Mask Works 173 9-5a Copyright Protection of Computer

Programs 173 9-5b Patent Protection of Programs 173 9-5c Trade Secrets 174 9-5d Restrictive Licensing 174 9-5e Semiconductor Chip Protection 175

Chapter 10 The Legal Environment of International Trade 181

10-1 Conducting Business Internationally 182 10-1a Forms of International Business 182 10-1b The International Contract 183

10-2 International Trade 184 10-2a Tariffs and Barriers to Trade 185 10-2b The World Trade Organization 186 10-2c Agreements Administered under the WTO 186 10-2d Protecting Trademarks Worldwide 187 10-2e Copyright Protection 189 10-2f Patent Protection 189 10-2g Trade Secrets 190 10-2h The Dispute Settlement Understanding 191 10-2i The Doha Development Agenda 191 10-2j Regional Trade Agreements 191 10-2k Antidumping, Subsidies and Safeguards 192

10-3 Issues Confronting Companies Engaged in International Business 194 10-3a Export Regulations 194 10-3b The Foreign Corrupt Practices Act 194 10-3c Antitrust Issues 195 10-3d Securities Fraud Regulation in an International

Environment 198

PART 2

Contracts Chapter 11 Nature and Classes of Contracts:

Contracting on the Internet 205

11-1 Nature of Contracts 206 11-1a Definition of a Contract 206 11-1b Elements of a Contract 206 11-1c Subject Matter of Contracts 206 11-1d Parties to a Contract 206 11-1e How a Contract Arises 207

vi C ON T EN T S

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11-1f Intent to Make a Binding Agreement 207 11-1g Freedom of Contract 208

11-2 Classes of Contracts 208 11-2a Formal and Informal Contracts 208 11-2b Express and Implied Contracts 208 11-2c Valid and Voidable Contracts and Void

Agreements 209 11-2d Executed and Executory Contracts 210 11-2e Bilateral and Unilateral Contracts 210 11-2f Quasi Contracts 211

11-3 Contracting on the Internet 216

Chapter 12 Formation of Contracts: Offer and Acceptance 221

12-1 Requirements of an Offer 222 12-1a Contractual Intention 222 12-1b Definiteness 224 12-1c Communication of Offer to Offeree 228

12-2 Termination of Offer 229 12-2a Revocation of Offer by Offeror 229 12-2b Counteroffer by Offeree 230 12-2c Rejection of Offer by Offeree 231 12-2d Lapse of Time 231 12-2e Death or Disability of Either Party 232 12-2f Subsequent Illegality 232

12-3 Acceptance of Offer 232 12-3a What Constitutes an Acceptance? 232 12-3b Privilege of Offeree 232 12-3c Effect of Acceptance 232 12-3d Nature of Acceptance 233 12-3e Who May Accept? 233 12-3f Manner and Time of Acceptance 234 12-3g Communication of Acceptance 235 12-3h Auction Sales 237

Chapter 13 Capacity and Genuine Assent 242

13-1 Contractual Capacity 243 13-1a Contractual Capacity Defined 243 13-1b Minors 244 13-1c Mentally Incompetent Persons 247 13-1d Intoxicated Persons 248

13-2 Mistake 248 13-2a Unilateral Mistake 249 13-2b Mutual Mistake 249 13-2c Mistake in the Transcription or Printing

of the Contract: Reformation 250

13-3 Deception 250 13-3a Intentional Misrepresentation 251

13-3b Fraud 251 13-3c Negligent Misrepresentation 253 13-3d Nondisclosure 254

13-4 Pressure 255 13-4a Undue Influence 255 13-4b Duress 256

Chapter 14 Consideration 262

14-1 General Principles 263 14-1a Consideration Defined and Explained 263 14-1b Gifts 263 14-1c Adequacy of Consideration 264 14-1d Forbearance as Consideration 265 14-1e Illusory Promises 265

14-2 Special Situations 266 14-2a Preexisting Legal Obligation 266 14-2b Past Consideration 268 14-2c Moral Obligation 269

14-3 Exceptions to the Laws of Consideration 269 14-3a Exceptions to Consideration 269

Chapter 15 Legality and Public Policy 275

15-1 General Principles 276 15-1a Effect of Illegality 276 15-1b Exceptions to Effect of Illegality 276 15-1c Partial Illegality 277 15-1d Crimes and Civil Wrongs 277 15-1e Good Faith and Fairness 277 15-1f Unconscionable Clauses 278

15-2 Agreements Affecting Public Welfare 280 15-2a Agreements Contrary to Public Policy 280 15-2b Gambling, Wagers, and Lotteries 280

15-3 Regulation of Business 281 15-3a Effect of Violation 281 15-3b Statutory Regulation of Contracts 281 15-3c Licensed Callings or Dealings 282 15-3d Contracts in Restraint of Trade 283 15-3e Agreements Not to Compete 283 15-3f Usurious Agreements 285

Chapter 16 Writing, Electronic Forms, and Interpretation of Contracts 291

16-1 Statute of Frauds 292 16-1a Validity of Oral Contracts 292 16-1b Contracts That Must Be Evidenced by a Writing 292 16-1c Note or Memorandum 297 16-1d Effect of Noncompliance 299

C ON T EN T S vii

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16-2 Parol Evidence Rule 299 16-2a Exclusion of Parol Evidence 299 16-2b When the Parol Evidence Rule Does Not Apply 300

16-3 Rules of Construction and Interpretation 301 16-3a Intention of the Parties 301 16-3b Whole Contract 302 16-3c Contradictory and Ambiguous Terms 303 16-3d Implied Terms 305 16-3e Conduct and Custom 306 16-3f Avoidance of Hardship 306

Chapter 17 Third Persons and Contracts 311

17-1 Third-Party Beneficiary Contracts 312 17-1a Definition 312 17-1b Modification or Termination of Intended

Third-Party Beneficiary Contract 314 17-1c Limitations on Intended Third-Party Beneficiary 314 17-1d Incidental Beneficiaries 314

17-2 Assignments 315 17-2a Definitions 315 17-2b Form of Assignment 316 17-2c Notice of Assignment 316 17-2d Assignment of Right to Money 317 17-2e Nonassignable Rights 318 17-2f Rights of Assignee 319 17-2g Continuing Liability of Assignor 320 17-2h Liability of Assignee 321 17-2i Warranties of Assignor 321 17-2j Delegation of Duties 321

Chapter 18 Discharge of Contracts 327

18-1 Conditions Relating to Performance 328 18-1a Classifications of Conditions 328

18-2 Discharge by Performance 330 18-2a Normal Discharge of Contracts 330 18-2b Nature of Performance 330 18-2c Time of Performance 331 18-2d Adequacy of Performance 332

18-3 Discharge by Action of Parties 335 18-3a Discharge by Unilateral Action 335 18-3b Discharge by Agreement 335

18-4 Discharge by External Causes 337 18-4a Discharge by Impossibility 337 18-4b Developing Doctrines 339 18-4c Temporary Impossibility 340 18-4d Discharge by Operation of Law 341

Chapter 19 Breach of Contract and Remedies 347

19-1 What Constitutes a Breach of Contract? 348 19-1a Definition of Breach 348 19-1b Anticipatory Breach 348

19-2 Waiver of Breach 349 19-2a Cure of Breach by Waiver 349 19-2b Existence and Scope of Waiver 350 19-2c Reservation of Rights 351

19-3 Remedies for Breach of Contract 351 19-3a Remedies Upon Antic