LGLS 1101 Faithful Construction Discussion Paper

In this book . . . STUDY TOOLSthat help you make the grade
SHIFT AWAY FROM MANDATORY SENTENCING In
2005, the United States Supreme Court held that
certain provisions of the federal sentencing guidelines were unconstitutional.
C A S E I N PO I NT Freddie Booker was arrested
with 92.5 grams of crack cocaine in his possession. Booker admitted to police that he had sold an
additional 566 grams of crack cocaine, but he was
never charged with, or tried for, possession of this
additional quantity. Nevertheless, under the federal sentencing guidelines the judge was required to
sentence Booker to twenty-two years in prison. The
Court ruled that this sentence was unconstitutional
because a jury did not ﬁnd beyond a reasonable
doubt that Booker had possessed the additional 566
grams of crack.24
Essentially, the Court’s ruling changed the federal
sentencing guidelines from mandatory to advisory.
Depending on the circumstances of the case, a federal trial judge may now depart from the guidelines
if she or he believes that it is reasonable to do so.
Short Case in Point examples
in every chapter make it easy to
remember important legal concepts.
Concept Summary boxes located at key points in the
chapters help you review more effectively for exams.
p
g
Type of Court
Description
Trial Courts
Trial courts are courts of original jurisdiction in which actions are initiated.
1. State courts—Courts of general jurisdiction can hear any case that has not been
speciﬁcally designated for another court; courts of limited jurisdiction include
domestic relations courts, probate courts, and small claims courts.
2. Federal courts—The federal district court is the equivalent of the state trial court.
Federal courts of limited jurisdiction include the bankruptcy courts and others
shown in Exhibit 2–2 on page 37.
Intermediate
Appellate Courts
Courts of appeals are reviewing courts; generally, appellate courts do not have original jurisdiction. About three-fourths of the states have intermediate appellate courts;
in the federal court system, the U.S. circuit courts of appeals are the intermediate
appellate courts.
Supreme Courts
The highest state court is that state’s supreme court (it may be called by another
name). Appeal from state supreme courts to the United States Supreme Court is
possible only if a federal question is involved. The United States Supreme Court
is the highest court in the federal court system and the ﬁnal arbiter of the
Constitution and federal law.
2–1. Discovery Rules In the past, the rules
of discovery were very restrictive, and
trials often turned on elements of surprise. For example,
a plaintiff would not necessarily know until the trial
what the defendant’s defense was going to be. In the last
several decades, however, new rules of discovery have
substantially changed this situation. Now each attorney
can access practically all of the evidence that the other
side intends to present at trial, with the exception of certain information—namely, the opposing attorney’s work
product. Work product is not a precise concept. Basically,
it includes all of the attorney’s thoughts on the case. Can
you see any reason why such information should not be
made available to the opposing attorney? Discuss fully.
2–2. QUESTION WITH SAMPLE ANSWER: Motions.
The defendant in a lawsuit is appealing the
issued its “Findings of Fact and Conclusions of Law.” The
court found that the two purchase orders “required BSH to
purchase 31,000 units of the burner at $28.25 per unit.” The
court ruled that Detroit was entitled to $418,261 for 18,114
unsold burners. BSH appealed to the U.S. Court of Appeals for
the Sixth Circuit. Can an appellate court set aside a trial
court’s ﬁndings of fact? Can an appellate court come to its
own conclusions of law? What should the court rule in this
case? Explain. [Detroit Radiant Products Co. v. BSH Home
Appliances Corp., 473 F.3d 623 (6th Cir. 2007)]
• To view a sample answer for Problem 2–4, go to this book’s Web
site at www.cengage.com/blaw/cross, select “Chapter 2,” and
click on “Case Problem with Sample Answer.”
2–5. Discovery In October 2004, Rita Peatie ﬁled a suit in
a Connecticut state court against Wal-Mart Stores, Inc.,
to recover for injuries to her head, neck, and shoulder.
P ti l i d th t h h d b
t kt
li
Sample answers to selected Questions and Case Problems are
available in this book’s Appendix F and at the Companion Web Site.
At the end of every chapter in this book, you’ll ﬁnd a great variety of
Questions and Case Problems that help you retain and apply what you’ve
learned. We’ve provided sample answers at the back of the book and at
www.cengage.com/blaw/cross to selected Questions and Case Problems so
you can compare the authors’ answers to yours.
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
In the STUDY GUIDE . . .
resources to ace every test
What better way to study for a test than with a
Study Guide prepared by the co-authors of this
textbook. Written by Roger LeRoy Miller and
William Eric Hollowell, this comprehensive
resource includes:
Study Guide
Brief introductions and outlines for every
chapter
True-false, ﬁll-in-the-blank, and multiple-choice
questions for every chapter, as well as short
essay problems to help you test yourself
Issue Spotters that focus your study
Sample CPA exam questions
An appendix at the end of the Study Guide
that contains answers to all questions and
Issue Spotters
Bookstore doesn’t carry the Study Guide?
You can get it online (ISBN: 0-538-46979-X)
at www.CengageBrain.com.
WILLIAM ERIC HOLLOWELL | ROGER LEROY MILLER
FREE RESOURCES!
Visit this book’s Companion Web Site
for many additional study tools at
www.cengage.com/blaw/cross
Answers to selected Case Problems from
this textbook
Video clips from the Business Law Digital
Video Library (You’ll need to view these
clips to help you answer Video Questions that
appear in selected chapters of this book.)
Interactive self-quizzes for every chapter
Practical Internet exercises for every chapter
Court case updates
Legal reference materials and much more!
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Australia • Brazil • Japan • Korea • Mexico • Singapore
Spain • United Kingdom • United States
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THE LEGAL
ENVIRONMENT
OF BUSINESS
TEXT AND CASES
Ethical, Regulatory, Global,
and Corporate Issues
EIGHTH EDITION
Frank B. Cross
Roger LeRoy Miller
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UNIT ONE
THE FOUNDATIONS 1
Chapter 1
Chapter 2
Chapter 3
Chapter 4
Business and Its Legal Environment 2
The Court System 28
Alternative and Online Dispute Resolution 57
Ethics and Business Decision Making 76
UNIT ONE FOCUS ON ETHICS: THE FOUNDATIONS 94
UNIT TWO
THE PUBLIC AND INTERNATIONAL ENVIRONMENT 97
Chapter 5
Chapter 6
Chapter 7
Chapter 8
Constitutional Law 98
Administrative Law 117
Criminal Law and Cyber Crime 137
International Law in a Global Economy 163
UNIT TWO FOCUS ON ETHICS: THE PUBLIC AND INTERNATIONAL ENVIRONMENT 179
UNIT THREE THE COMMERCIAL ENVIRONMENT 183
Chapter 9
Chapter 10
Chapter 11
Chapter 12
Chapter 13
Chapter 14
Chapter 15
Chapter 16
Contract Formation 184
Contract Performance, Breach, and Remedies 213
Sales, Leases, and E-Contracts 233
Torts and Cyber Torts 268
Strict Liability and Product Liability 294
Intellectual Property and Internet Law 3008
Creditor-Debtor Relations and Bankruptcy 331
Mortgages and Foreclosures after the Recession 359
UNIT THREE FOCUS ON ETHICS: THE COMMERCIAL ENVIRONMENT 374
UNIT FOUR
THE BUSINESS ENVIRONMENT 379
Chapter 17
Chapter 18
Chapter 19
Sole Proprietorships, Franchises, and Partnerships 380
Limited Liability Companies and Limited Partnerships 402
Corporations 417
UNIT FOUR FOCUS ON ETHICS: THE BUSINESS ENVIRONMENT 447
UNIT FIVE
THE EMPLOYMENT ENVIRONMENT 449
Chapter 20
Chapter 21
Chapter 22
Chapter 23
Agency 450
Employment Relationships 474
Employment Discrimination 493
Immigration and Labor Law 513
UNIT FIVE FOCUS ON ETHICS: THE EMPLOYMENT ENVIRONMENT 534
UNIT SIX
THE REGULATORY ENVIRONMENT 537
Chapter 24
Chapter 25
Consumer Protection 538
Environmental Law 555
iii
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iv
CO N T E N T S I N B R I E F
Chapter 26
Chapter 27
Chapter 28
Chapter 29
Real Property and Land-Use Control 571
Antitrust and Monopoly 593
Antitrust and Restraint of Trade 611
Investor Protection and Corporate Governance 627
UNIT SIX FOCUS ON ETHICS: THE REGULATORY ENVIRONMENT 652
APPENDICES
A How to Brief Cases and Analyze Case Problems A–1
B The Constitution of the United States A–4
C
The Uniform Commercial Code (Excerpts) A–12
D The United Nations Convention on Contracts for the International Sale of Goods (Excerpts) A–51
E
The Sarbanes-Oxley Act of 2002 (Excerpts and Explanatory Comments) A–55
F
Sample Answers for End-of-Chapter Questions with Sample Answer A–63
GLOSSARY G–1
TABLE OF CASES TC–1
INDEX I–1
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
UNIT ONE
THE FOUNDATIONS 1
CHAPTER 1
Business and Its Legal Environment 2
Business Activities and the Legal Environment 2
Sources of American Law 4
The Common Law Tradition 7
Schools of Jurisprudential Thought 13
Classiﬁcations of Law 14
How to Find Primary Sources of Law 15
How to Read and Understand Case Law 21
REVIEWING: BUSINESS AND ITS LEGAL ENVIRONMENT 26
TERMS AND CONCEPTS 26
QUESTIONS AND CASE PROBLEMS 26
LEGAL RESEARCH EXERCISES ON THE WEB 27
CHAPTER 2
The Court System 28
The Judiciary’s Role in American Government 28
Basic Judicial Requirements 29
EXTENDED CASE 2.1 Southern Prestige Industries, Inc.
v. Independence Plating Corp. 31
CASE 2.2 Oregon v. Legal Services Corp. 35
The State and Federal Court Systems 37
Judicial Procedures:
Following a Case Through the Court 40
CASE 2.3 Blankenship v. Collier 45
REVIEWING: THE COURT SYSTEM 54
TERMS AND CONCEPTS 54
QUESTIONS AND CASE PROBLEMS 55
LEGAL RESEARCH EXERCISES ON THE WEB 56
CHAPTER 3
Alternative and
Online Dispute Resolution 57
The Search for Alternatives to Litigation 57
Negotiation and Mediation 58
Arbitration 59
CASE 3.1 NCR Corp. v. Korala Associates, Ltd. 65
EXTENDED CASE 3.2 Lhotka v. Geographic Expeditions,
Inc. 66
The Integration of ADR and Formal Court
Procedures 70
ADR Forums and Services 71
International Dispute Resolution 72
REVIEWING: ALTERNATIVE AND
ONLINE DISPUTE RESOLUTION 73
TERMS AND CONCEPTS 74
QUESTIONS AND CASE PROBLEMS 74
LEGAL RESEARCH EXERCISES ON THE WEB 75
CHAPTER 4
Ethics and Business Decision Making 76
Business Ethics 76
CASE 4.1 Skilling v. United States 78
EXTENDED CASE 4.2 Krasner v. HSH Nordbank AG 80
Ethical Transgressions by Financial Institutions 82
Approaches to Ethical Reasoning 83
CASE 4.3 Fog Cutter Capital Group, Inc. v. Securities
and Exchange Commission 85
Making Ethical Business Decisions 87
Practical Solutions to Corporate Ethics Questions 86
Business Ethics on a Global Level 87
REVIEWING: ETHICS AND
BUSINESS DECISION MAKING 90
TERMS AND CONCEPTS 91
QUESTIONS AND CASE PROBLEMS 91
LEGAL RESEARCH EXERCISES ON THE WEB 91
UNIT ONE FOCUS ON ETHICS:
THE FOUNDATIONS 94
UNIT TWO
THE PUBLIC
AND INTERNATIONAL
ENVIRONMENT 97
CHAPTER 5
Constitutional Law 98
The Constitutional Powers of Government 98
EXTENDED CASE 5.1 Family Winemakers of California
v. Jenkins 101
Business and the Bill of Rights 103
v
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vi
CO N T E N TS
CASE 5.2 Bad Frog Brewery, Inc. v. New York State
Liquor Authority 105
CASE 5.3 In re Episcopal Church Cases 108
Due Process and Equal Protection 110
Privacy Rights 112
REVIEWING: CONSTITUTIONAL LAW 114
TERMS AND CONCEPTS 114
QUESTIONS AND CASE PROBLEMS 114
LEGAL RESEARCH EXERCISES ON THE WEB 116
CHAPTER 6
Administrative Law 117
The Practical Signiﬁcance
of Administrative Law 117
Agency Creation and Powers 118
The Administrative Procedure Act 121
EXTENDED CASE 6.1 Federal Communications
Commission v. Fox Television
Stations, Inc. 122
Judicial Deference to Agency Decisions 125
CASE 6.2 Citizens’ Committee to Save Our Canyons v.
Krueger 126
Enforcement and Adjudication 127
Public Accountability 130
CASE 6.3 United Technologies Corp. v. U.S. Department
of Defense 131
REVIEWING: ADMINISTRATIVE LAW 133
TERMS AND CONCEPTS 134
QUESTIONS AND CASE PROBLEMS 134
LEGAL RESEARCH EXERCISES ON THE WEB 136
CHAPTER 7
Crimial Law and Cyber Crime 137
Civil Law and Criminal Law 137
Criminal Liability 139
Types of Crimes 141
EXTENDED CASE 7.1 People v. Sisuphan 143
Defenses to Criminal Liability 149
Criminal Procedures 150
CASE 7.2 Herring v. United States 151
CASE 7.3 Miranda v. Arizona 153
Cyber Crime 156
REVIEWING: CRIMINAL LAW AND CYBER CRIME 159
TERMS AND CONCEPTS 160
QUESTIONS AND CASE PROBLEMS 160
LEGAL RESEARCH EXERCISES ON THE WEB 162
CHAPTER 8
International Law in a Global Economy 163
International Law 163
Doing Business Internationally 166
Regulation of Speciﬁc Business Activities 168
CASE 8.1 Fuji Photo Film Co. v. International Trade
Commission 169
CASE 8.2 United States v. Inn Foods, Inc. 171
U.S. Laws in a Global Context 173
EXTENDED CASE 8.3 Khulumani v. Barclay National
Bank, Ltd. 174
REVIEWING: INTERNATIONAL LAW
IN A GLOBAL ECONOMY 175
TERMS AND CONCEPTS 176
QUESTIONS AND CASE PROBLEMS 176
LEGAL RESEARCH EXERCISES ON THE WEB 178
UNIT TWO FOCUS ON ETHICS:
THE PUBLIC AND INTERNATIONAL ENVIRONMENT 179
UNIT THREE
THE COMMERCIAL
ENVIRONMENT 183
CHAPTER 9
Contract Formation 184
An Overview of Contract Law 184
Types of Contracts 186
Agreement 190
CASE 9.1 Lucy v. Zehmer 191
EXTENDED CASE 9.2 Alexander v. Lafayette Crime
Stoppers, Inc. 194
Consideration 199
Contractual Capacity 201
Legality 202
CASE 9.3 Comedy Club, Inc. v. Improv West
Associates 203
Voluntary Consent 205
Form—The Statute of Frauds 208
Third Party Rights 208
REVIEWING: CONTRACT FORMATION 210
TERMS AND CONCEPTS 210
QUESTIONS AND CASE PROBLEMS 210
LEGAL RESEARCH EXERCISES ON THE WEB 212
CHAPTER 10
Contract Performance,
Breach, and Remedies 213
Discharge by Performance 213
EXTENDED CASE 10.1 Jacob & Youngs v. Kent 215
Discharge by Agreement 217
Discharge by Operation of Law 218
CASE 10.2 Merry Homes, Inc. v. Chi Hung Luu 221
Remedies for Breach of Contract 223
CASE 10.3 Drake v. Hance 227
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
vii
CO N T E N TS
REVIEWING: CONTRACT PERFORMANCE,
BREACH, AND REMEDIES 230
TERMS AND CONCEPTS 230
QUESTIONS AND CASE PROBLEMS 231
LEGAL RESEARCH EXERCISES ON THE WEB 232
CHAPTER 11
Sales, Leases, and E-Contracts 233
The Scope of Article 2—The Sale of Goods 233
The Scope of Article 2A—Leases 235
The Formation of Sales and Lease Contracts 235
CASE 11.1 Glacial Plains Cooperative v. Lindgren 240
Title, Risk, and Insurable Interest 241
Performance of Sales and Lease Contracts 246
EXTENDED CASE 11.2 Romero v. Scoggin-Dickey
Chevrolet-Buick, Inc. 249
Remedies for Breach
of Sales and Lease Contracts 250
Sales and Lease Warranties 254
CASE 11.3 Webster v. Blue Ship Tea Room, Inc. 256
E-Contracts 257
International Sales Contracts 260
REVIEWING: SALES, LEASES, AND E-CONTRACTS 260
TERMS AND CONCEPTS 261
QUESTIONS AND CASE PROBLEMS 261
LEGAL RESEARCH EXERCISES ON THE WEB 263
APPENDIX TO CHAPTER 11: AN EXAMPLE OF A CONTRACT
FOR THE INTERNATIONAL SALE OF COFFEE 264
CHAPTER 12
Torts and Cyber Torts 268
The Basis of Tort Law 268
Intentional Torts against Persons 269
Business Torts 275
Intentional Torts against Property 276
CASE 12.1 Trustees of University of District of
Columbia v. Vossoughi 278
Negligence 279
CASE 12.2 Palsgraf v. Long Island Railroad Co. 283
Defenses to Negligence 284
EXTENDED CASE 12.3 Pfenning v. Lineman 285
Special Negligence Doctrines and Statutes 288
Cyber Torts 289
REVIEWING: TORTS AND CYBER TORTS 291
TERMS AND CONCEPTS 291
QUESTIONS AND CASE PROBLEMS 292
LEGAL RESEARCH EXERCISES ON THE WEB 293
CHAPTER 13
Strict Liability and Product Liability 294
Strict Liability 294
Product Liability 295
Strict Product Liability 295
CASE 13.1 Bullock v. Phillip Morris USA, Inc. 298
CASE 13.2 Wyeth v. Levine 299
Defenses to Product Liability 302
EXTENDED CASE 13.3 Boles v. Sun Ergoline, Inc. 302
REVIEWING: STRICT LIABILITY AND
PRODUCT LIABILITY 305
TERMS AND CONCEPTS 305
QUESTIONS AND CASE PROBLEMS 306
LEGAL RESEARCH EXERCISES ON THE WEB 307
CHAPTER 14
Intellectual Property and Internet Law 308
Trademarks and Related Property 308
CASE 14.1 The Coca-Cola Co. v. The Koke Co. of
America 309
Cyber Marks 313
Patents 315
EXTENDED CASE 14.2 KSR International Co. v., Teleﬂex,
Inc. 316
Copyrights 319
Copyrights in Digital Information 321
CASE 14.3 Maverick Recording Co. v. Harper 322
Trade Secrets 324
International Protection
for Intellectual Property 325
REVIEWING: INTELLECTUAL PROPERTY AND
INTERNET LAW 328
TERMS AND CONCEPTS 328
QUESTIONS AND CASE PROBLEMS 328
LEGAL RESEARCH EXERCISES ON THE WEB 330
CHAPTER 15
Creditor-Debtor Relations
and Bankruptcy 331
Laws Assisting Creditors 331
Suretyship and Guaranty 333
EXTENDED CASE 15.1 Overseas Private Investment Corp.
v. Kim 335
Protection for Debtors 337
Bankruptcy Law 338
Liquidation Proceedings 339
CASE 15.2 In re Kuehn 341
Reorganizations 349
Bankruptcy Relief under
Chapter 13 and Chapter 12 350
CASE 15.3 United Student Aid Funds, Inc. v.
Espinosa 352
REVIEWING: CREDITOR-DEBTOR RELATIONS
AND BANKRUPTCY 355
TERMS AND CONCEPTS 356
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
viii
CO N T E N TS
QUESTIONS AND CASE PROBLEMS 356
LEGAL RESEARCH EXERCISES ON THE WEB 358
CHAPTER 16
Mortgages and Foreclosures
after the Recession 359
Mortgages 359
Real Estate Financing Law 362
CASE 16.1 Bank of New York v. Parnell 364
Foreclosures 365
EXTENDED CASE 16.2 Mitchell v. Valteau 368
REVIEWING: MORTGAGES AND FORECLOSURES
AFTER THE RECESSION 370
TERMS AND CONCEPTS 370
QUESTIONS AND CASE PROBLEMS 371
LEGAL RESEARCH EXERCISES ON THE WEB 373
UNIT THREE FOCUS ON ETHICS:
THE COMMERCIAL ENVIRONMENT 374
UNIT FOUR
THE BUSINESS
ENVIRONMENT 379
CHAPTER 17
Sole Proprietorships,
Franchises, and Partnerships 380
Sole Proprietorships 380
Franchises 381
CASE 17.1 LJL Transportation, Inc. v. Pilot Air Freight
Corp. 385
EXTENDED CASE 17.2 Mac’s Shell Service, Inc. v. Shell
Oil Products Co. 386
Partnerships 388
CASE 17.3 Meinhard v. Salmon 393
REVIEWING: SOLE PROPRIETORSHIPS, FRANCHISES,
AND PARTNERSHIPS 398
TERMS AND CONCEPTS 399
QUESTIONS AND CASE PROBLEMS 399
LEGAL RESEARCH EXERCISES ON THE WEB 401
CHAPTER 18
Limited Liability Companies
and Limited Partnerships 402
The Limited Liability Company 402
CASE 18.1 02 Development, LLC v. 607 South Park,
LLC 403
EXTENDED CASE 18.2 ORX Resources, Inc. v. MBW
Exploration, LLC 405
Management and Operation of an LLC 407
Dissociation and Dissolution of an LLC 408
Limited Liability Partnerships 409
Limited Partnerships 410
CASE 18.3 1515 North Wells, LP v. 1513 North Wells,
LLC 412
REVIEWING: LIMITED LIABILITY COMPANIES AND
LIMITED PARTNERSHIPS 414
TERMS AND CONCEPTS 414
QUESTIONS AND CASE PROBLEMS 415
LEGAL RESEARCH EXERCISES ON THE WEB 416
CHAPTER 19
Corporations 417
The Nature and Classiﬁcation of Corporations 417
Corporate Formation 422
CASE 19.1 Brown v. W. P. Media, Inc. 425
Corporate Powers 426
Piercing the Corporate Veil 427
EXTENDED CASE 19.2 Schultz v. General Electric
Healthcare Financial
Services 428
Directors and Ofﬁcers 430
CASE 19.3 Guth v. Loft, Inc. 434
Shareholders 436
Major Business Forms Compared 442
REVIEWING: CORPORATIONS 444
TERMS AND CONCEPTS 444
QUESTIONS AND CASE PROBLEMS 444
LEGAL RESEARCH EXERCISES ON THE WEB 446
UNIT FOUR FOCUS ON ETHICS:
THE BUSINESS ENVIRONMENT 447
UNIT FIVE
THE EMPLOYMENT
ENVIRONMENT 449
CHAPTER 20
Agency 450
Agency Relationships 450
Formation of the Agency Relationship 452
CASE 20.1 Laurel Creek Health Care Center v.
Bishop 453
Duties and Rights of Agents and Principals 455
EXTENDED CASE 20.2 Taser International, Inc. v.
Ward 456
Scope of Agent’s Authority 459
CASE 20.3 Azur v. Chase Bank, USA 461
Liability for Contracts 463
Liability for Torts and Crimes 465
Termination of an Agency 468
REVIEWING: AGENCY 470
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
ix
CO N T E N TS
TERMS AND CONCEPTS 471
QUESTIONS AND CASE PROBLEMS 471
LEGAL RESEARCH EXERCISES ON THE WEB 473
CHAPTER 21
Employment Relationships 474
Employment at Will 474
CASE 21.1 Ellis v. BlueSky Charter School 475
Wage and Hour Laws 478
EXTENDED CASE 21.2 Smith v. Johnson and
Johnson 479
Layoffs 480
Family and Medical Leave 481
CASE 21.3 Darst v. Interstate Brands Corp. 482
Worker Health and Safety 483
Income Security 484
Employee Privacy Rights 487
REVIEWING: EMPLOYMENT RELATIONSHIPS 489
TERMS AND CONCEPTS 490
QUESTIONS AND CASE PROBLEMS 490
LEGAL RESEARCH EXERCISES ON THE WEB 492
CHAPTER 22
Employment Discrimination 493
Title VII of the Civil Rights Act of 1964 493
EXTENDED CASE 22.1 Burlington Northern and Santa Fe
Railroad Co. v. White 498
Discrimination Based on Age 500
CASE 22.2 Mora v. Jackson Memorial Foundation,
Inc. 501
Discrimination Based on Disability 503
CASE 22.3 Rohr v. Salt River Project Agricultural
Improvement and Power District 504
Defenses to Employment Discrimination 507
Afﬁrmative Action 508
REVIEWING: EMPLOYMENT DISCRIMINATION 509
TERMS AND CONCEPTS 509
QUESTIONS AND CASE PROBLEMS 510
LEGAL RESEARCH EXERCISES ON THE WEB 512
CHAPTER 23
Immigration and Labor Law 513
Immigration Law 513
CASE 23.1 Trollinger v. Tyson Foods, Inc. 515
Federal Labor Laws 517
The Decision to Form or Select a Union 518
Union Election 520
CASE 23.2 Local Joint Executive Board of Las Vegas v.
National Labor Relations Board 522
Collective Bargaining 523
Strikes and Lockouts 524
Unfair Labor Practices 526
Rights of Nonunion Employees 528
CASE 23.3 National Labor Relations Board v. Hotel
Employees and Restaurant Employees
International Union Local 26,
AFL–CIO 529
REVIEWING: IMMIGRATION AND LABOR LAW 530
TERMS AND CONCEPTS 531
QUESTIONS AND CASE PROBLEMS 531
LEGAL RESEARCH EXERCISES ON THE WEB 533
UNIT FIVE FOCUS ON ETHICS:
THE EMPLOYMENT ENVIRONMENT 534
UNIT SIX
THE REGULATORY
ENVIRONMENT 537
CHAPTER 24
Consumer Protection 538
Deceptive Advertising 539
CASE 24.1 Federal Trade Commission v.
QT, Inc. 539
Labeling and Packaging Laws 542
CASE 24.2 Paduano v. American
Honda Motor Co. 542
Sales 544
Credit Protection 545
EXTENDED CASE 24.3 Jerman v. Carlisle, McNellie, Rini,
Kramer & Ulrich, LPA 548
Consumer Health and Safety 550
REVIEWING: CONSUMER PROTECTION 551
TERMS AND CONCEPTS 552
QUESTIONS AND CASE PROBLEMS 552
LEGAL RESEARCH EXERCISES ON THE WEB 554
CHAPTER 25
Environmental Law 555
Common Law Actions 555
Federal, State, and Local Regulations 556
Air Pollution 557
CASE 25.1 State of New Jersey v. Environmental
Protection Agency 558
Water Pollution 560
CASE 25.2 Entergy Corp. v.
Riverkeeper, Inc. 561
EXTENDED CASE 25.3 United States v.
Lucas 562
Toxic Chemicals 564
Hazardous Wastes 565
REVIEWING: ENVIRONMENTAL LAW 567
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
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x
CO N T E N TS
TERMS AND CONCEPTS 567
QUESTIONS AND CASE PROBLEMS 568
LEGAL RESEARCH EXERCISES ON THE WEB 570
CASE 28.3 Illinois Tool Works, Inc. v. Independent Ink,
Inc. 620
CASE 28.4 Chicago Bridge & Iron Co. v. Federal Trade
Commission 622
CHAPTER 26
REVIEWING: ANTITRUST AND RESTRAINT OF TRADE 624
TERMS AND CONCEPTS 624
QUESTIONS AND CASE PROBLEMS 625
LEGAL RESEARCH EXERCISES ON THE WEB 626
Real Property and
Land-Use Control 571
The Nature of Real Property 571
Ownership and Other Interests
in Real Property 572
CASE 26.1 Biglane v. Under the Hill Corp. 573
Transfer of Ownership 577
CASE 26.2 Scarborough v. Rollins 582
Limitations on the Rights of Property Owners 583
EXTENDED CASE 26.3 Kelo v. City of New London,
Connecticut 584
Land-Use Control and Zoning 586
REVIEWING: REAL PROPERTY AND
LAND-USE CONTROL 590
TERMS AND CONCEPTS 590
QUESTIONS AND CASE PROBLEMS 591
LEGAL RESEARCH EXERCISES ON THE WEB 592
CHAPTER 27
Antitrust and Monopoly 593
Market Power 593
The Common Law and the Restraint of Trade 594
The Origins of Federal Antitrust Legislation 595
Overview of the Major Federal Antitrust Laws 596
Enforcement and Exemptions 598
EXTENDED CASE 27.1 Clarett v. National Football
League 599
U.S. Antitrust Laws in the Global Context 600
Monopolies 602
CASE 27.2 Newcal Industries, Inc. v. IKON Ofﬁce
Solutions 603
CASE 27.3 Weyerhaeuser Co. v. Ross-Simmons
Hardwood Lumber Co. 606
REVIEWING: ANTITRUST AND MONOPOLY 608
TERMS AND CONCEPTS 608
QUESTIONS AND CASE PROBLEMS 608
LEGAL RESEARCH EXERCISES ON THE WEB 610
CHAPTER 28
Antitrust and Restraint of Trade 611
Restraint of Trade: An Overview 611
CASE 28.1 American Needle, Inc. v. National Football
League 612
Horizontal Restraints 614
Vertical Restraints 616
EXTENDED CASE 28.2 Leegin Creative Leather Products,
Inc. v. PSKS, Inc. 617
CHAPTER 29
Investor Protection
and Corporate Governance 627
The Securities and Exchange Commission 627
The Securities Act of 1933 629
The Securities Exchange Act of 1934 635
CASE 29.1 SEC v. Texas Gulf Sulphur Co. 636
EXTENDED CASE 29.2 Gebhart v. SEC 640
CASE 29.3 Stark Trading v. Falconbridge, Ltd. 642
State Securities Laws 643
Corporate Governance 644
Online Securities Fraud 646
REVIEWING: INVESTOR PROTECTION
AND CORPORATE GOVERNANCE 648
TERMS AND CONCEPTS 649
QUESTIONS AND CASE PROBLEMS 649
LEGAL RESEARCH EXERCISES ON THE WEB 651
UNIT SIX FOCUS ON ETHICS:
THE REGULATORY ENVIRONMENT 652
APPENDICES
A How to Brief Cases
and Analyze Case Problems A–1
B The Constitution of the United States A–4
C
The Uniform Commercial Code
(Excerpts) A–12
D The United Nations Convention on
Contracts for the International Sale of Goods
(Excerpts) A–51
E
The Sarbanes-Oxley Act of 2002
(Excerpts and Explanatory Comments) A–55
F
Sample Answers for End-of-Chapter
Questions with Sample Answer A–63
GLOSSARY G–1
TABLE OF CASES TC–1
INDEX I–1
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xi
CO N T E N TS
1.1 Sources of American Law 7
9.2 Methods by Which
1.2 The Common Law Tradition 12
an Offer Can Be Terminated 197
12.1 Intentional Torts against Persons 275
12.2 Intentional Torts against Property 280
15.1 Remedies Available to Creditors 334
15.2 Forms of Bankruptcy Relief Compared 354
18.1 Equitable Remedies 344
19.1 Duties and Liabilities
of Directors and Ofﬁcers 436
20.1 Formation of the Agency Relationship 455
20.2 Termination of an Agency 470
1.3 Schools of Jurisprudential Thought 14
2.1 Jurisdiction 35
2.2 Types of Courts 40
2.3 Pretrial Procedures 49
2.4 Trial Procedures 51
3.3 Posttrial Options 70
7.1 Types of Crimes 148
9.1 Types of Contracts 190
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xii
CO N T E N TS
1–1 Areas of the Law That May
Affect Business Decision Making 3
1–2 Equitable Maxims 8
1–3 Procedural Differences between an
Action at Law and an Action in Equity 9
1–4 West’s National Reporter System—
Regional/Federal 17
1–5 How to Read Citations 18
1–6 A Sample Court Case 23
2–1 Exclusive and Concurrent Jurisdiction 33
2–2 The State and Federal Court Systems 37
2–3 Geographic Boundaries of the U.S. Courts
of Appeals and U.S. District Courts 39
2–4 A Typical Complaint 43
2–5 Stages in a Typical Lawsuit 53
3–1 Basic Differences in
the Traditional Forms of ADR 60
3–2 Sample Submission Form 64
5–1 Protections Guaranteed
by the Bill of Rights 104
6–1 Executive Departments
and Important Subagencies 119
6–2 Selected Independent
Regulatory Agencies 120
6–3 The Process of Formal
Administrative Adjudication 130
7–1 Key Differences between
Civil Law and Criminal Law 138
7–2 Civil (Tort) Lawsuit and Criminal
Prosecution for the Same Act 139
7–3 Major Procedural Steps
in a Criminal Case 155
8–1 The Legal Systems of Selected Nations 165
9–1 Classiﬁcations Based
on Contract Formation 186
9–2 Enforceable, Voidable,
Unenforceable, and Void Contracts 189
9–3 Mistakes of Fact 206
10–1 Contract Discharge 222
10–2 Measurement of Damages—
Breach of Construction Contracts 224
10–3 Remedies for Breach of Contract 229
11–1 The Law Governing Contracts 234
11–2 Major Differences between
Contract Law and Sales Law 242
Contract Terms—Deﬁnitions 244
Forms of Intellectual Property 326
Suretyship and Guaranty Parties 334
The Means Test to
Determine Chapter 7 Eligibility 340
17–1 Terms Commonly Included
in a Partnership Agreement 390
18–1 A Comparison of
Traditional and Limited Partnerships 411
19–1 Directors’ Management Responsibilities 430
19–2 Results of Cumulative Voting 439
19–3 Major Forms of Business Compared 442
20–1 A Sample General Power of Attorney 460
23–1 Unfair Labor Practice Complaint Form 519
23–2 Basic Unfair Labor Practices 526
24–1 Selected Areas of Consumer Law
Regulated by Statutes 538
25–1 Major Federal Environmental Statutes 557
26–1 Steps Involved in the Sale of Real Estate 578
27–1 Exemptions to Antitrust Enforcement 601
28–1 Backward and Forward
Vertical Integration 616
29–1 Exemptions for Securities Offerings
under the 1933 Securities Act 632
29–2 A Sample Restricted Stock Certiﬁcate 634
29–3 Comparison of Coverage,
Application, and Liability under
SEC Rule 10b-5 and Section 16(b) 639
29–4 Some Key Provisions of the
Sarbanes-Oxley Act of 2002
Relating to Corporate Accountability 647
11–3
14–1
15–1
15–2
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Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xiii
CO N T E N TS
Chapter 1 Sustainability and the Law 6
Chapter 2 The Duty to Preserve Electronic
Evidence for Discovery 48
Chapter 4 Corporate Social Responsibility and
“Outbehaving” the Competition 88
Chapter 7 Prosecuting White-Collar Crime with
the Honest-Services Fraud Law 146
Chapter 8 The National Export Initiative 168
Chapter 11 Fair Trade and
Environmental Sustainability 237
Chapter 14 The Anti-Counterfeiting Trade
Agreement 327
Chapter 2 How the Internet
Is Expanding Precedent 29
Chapter 3 Implications of an Increasingly
Private Justice System 61
Chapter 5 Is It Illegal to Distribute
Virtual Pornography? 107
Chapter 6 Should Pharmaceutical Companies
Be Allowed to Tweet? 128
Chapter 9 Is It Right for a Company to Change
the Prize Offered in a Contest? 187
Chapter 10 When Is Impossibility of
Performance a Valid Defense? 220
Chapter 19 The Latest Recession Re-Ignites
the Internet Taxation Debate 419
Chapter 21 The Online Creation
and Modiﬁcation of
Employment Contracts 477
Chapter 24 New Health-Care Law Requires
Caloric Information 544
Chapter 26 The Law of Building “Green”—
Sustainable Real Estate
Development 589
Chapter 29 SEC Disclosures
and Climate Change 628
Chapter 12 Some Consequences of Caps
on Medical Malpractice Awards 287
Chapter 13 Warning Labels
for Video Games 301
Chapter 15 The Debt That Never Goes Away 348
Chapter 17 Information on Potential Earnings
Provided by Franchisors 383
Chapter 18 Fiduciary Duties
of LLC Managers 408
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
The study of the legal environment of business has
universal applicability. A student entering any ﬁeld
of business must have at least a passing understanding of business law in order to function in the real
world. Additionally, students preparing for a career
in accounting, government and political science,
economics, and even medicine can use much of
the information that they learn in a legal environment of business course. In fact, every individual
throughout his or her lifetime can beneﬁt from a
knowledge of contracts, employment relationships,
real property law, land-use control, and other legal
topics. Consequently, we have fashioned this text
as a useful “tool for living” for all of your students
(including those taking the CPA exam).
For the Eighth Edition, we have spent a great
deal of effort making this book more contemporary,
exciting, and visually appealing than ever before.
We have also added many new features and special pedagogical devices that focus on legal, ethical,
global, and corporate issues, while addressing core
curriculum requirements.
WHAT IS NEW IN
THE EIGHTH EDITION
Instructors have come to rely on the coverage, accuracy, and applicability of The Legal
Environment of Business. To make sure that our
text engages your students, solidiﬁes their understanding of legal concepts, and provides the best
teaching tools available, we now offer the following items either in the text or in conjunction with
the text:
➢ New Shifting Legal
Priorities for Business Feature
For the Eighth Edition, we have created a new feature that shows students how legal priorities are
shifting in the business world. Special emphasis is
given to sustainability, ethical trends, and changing managerial responsibilities. Each discussion
ends with a short section entitled Managerial
Implications that points out why the changing
priorities examined are signiﬁcant to businesspersons. Topics examined include:
• Prosecuting White-Collar Crime with the
Honest-Services Fraud Law (Chapter 7)
• The National Export Initiative (Chapter 8)
• Fair Trade and Environmental Sustainability
(Chapter 11)
• The Law of Building “Green”—Sustainable Real
Estate Development (Chapter 26)
• SEC Disclosures and Climate Change
(Chapter 29)
➢ New Case in Point Feature
Many instructors use cases to illustrate how the
law applies to business. For this edition, we have
expanded our in-text discussion of case law by adding
at least one new Case in Point feature in every chapter.
This feature presents, in paragraph format, the facts
and issues of an actual case and then describes the
court’s decision and rationale. Citations to the cases
are included for further reference. The Case in Point
features are integrated throughout the text to help
students better understand how courts apply the
principles under discussion in the real world.
➢ New Debate This Feature
To encourage student participation and motivate
your students to think critically about the rationale underlying the law on a particular topic, we
have created a special new feature for the Eighth
Edition. Entitled Debate This, it consists of a brief
statement or question concerning the chapter
material that can be used to spur lively classroom
or small group discussions, or can be a written
assignment. This feature follows the Reviewing
feature (discussed shortly) at the end of each
chapter. Suggested pro and con responses
to the Debate This features can be found
in both the Instructor’s Manual and the
Answers Manual that accompany this text.
(The full title of this manual is Answers to Questions
xv
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xvi
P R E FAC E
TO TH E I NSTR UCTOR
and Case Problems and Alternate Problem Sets with
Answers.)
➢ New Chapter on Mortgages and
Foreclosures after the Recession
For the Eighth Edition, we have included an
entirely new chapter (Chapter 16) titled Mortgages
and Foreclosures after the Recession. This chapter
examines some of the mortgage-lending practices
that contributed to the latest recession and discusses the legal reforms enacted in response to it.
➢ New Insight into Ethics Feature
For the Eighth Edition, we have created many
new Insight into Ethics features, which appear
in selected chapters and examine the ethical implications of various topics. This feature
provides valuable insights into how the courts
and the law are dealing with speciﬁc ethical
issues. Each discussion ends with a criticalthinking question that explores some cultural,
environmental, political, social, or technological
aspect of the issue. The following are some of the
topics explored in this feature:
• Should Pharmaceutical Companies Be
Allowed to Tweet? (Chapter 6)
• Some Consequences of Caps on Medical
Malpractice Awards (Chapter 12)
• Warning Labels for Video Games (Chapter 13)
• Fiduciary Duties of LLC Managers
(Chapter 18)
➢ Managerial Implications
in Selected Cases
We have devised a special new item of case pedagogy for this edition. At the end of selected cases
that have particular importance for business managers, we have included a new section entitled
Managerial Implications. This section points out
the signiﬁcance of the court’s ruling in the case
for business owners and managers.
➢ Emphasis on Critical
Thinking and Legal Reasoning
Today’s business leaders must often think “outside
the box” when making business decisions. For this
reason, we have included numerous criticalthinking elements in the Eighth Edition that
are designed to challenge students’ understand-
ing of the materials beyond simple retention.
Your students’ critical-thinking and legal reasoning skills will be increased as they work through
the numerous pedagogical aids in the book. The
new Debate This feature (discussed previously)
requires critical thinking. In addition, nearly
every feature and every case presented in the
text conclude with some type of critical-thinking
question.
For the Eighth Edition, we continue to offer one
longer excerpt—labeled an Extended Case—with
two critical-thinking questions in every chapter.
These Extended Cases may be used for case-brieﬁng
assignments and are also tied to the Special Case
Analysis questions found in every unit of this text.
Because of the popularity of the case-ending
questions, we’ve also included two questions for all
cases. These questions may include:
•
•
•
•
•
•
What If the Facts Were Different?
Impact of This Case on Today’s Law
The Ethical Dimension
The E-Commerce Dimension
The Global Dimension
The Legal Environment Dimension
Suggested answers to all questions following cases can be found in both the Instructor’s
Manual and the Answers Manual that accompany this text.
➢ Special Case Analysis Questions
Through the years, instructors have frequently
requested that we help them teach their legal
environment of business students how to analyze
case law. We discuss the fundamental topic of how
to read and understand case law in Chapter 1 and
cover How to Brief Cases and Analyze Case Problems
in Appendix A. For every unit in the text, in the
Questions and Case Problems at the end of selected
chapters, we also provide a Special Case Analysis
question that is based on the Extended Case excerpt
in that chapter. These questions are designed to
build students’ analytical skills.
The Special Case Analysis questions test students’
ability to perform IRAC (Issue, Rule, Application,
and Conclusion) case analysis. Students must identify the legal issue presented in the chapter’s Extended
Case, understand the rule of law, determine how the
rule applies to the facts of the case, and describe
the court’s conclusion. Instructors can assign these
questions as homework or use them in class to elicit
student participation and teach case analysis.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
P R E FAC E
TO TH E I NSTR UCTOR
➢ Reviewing Feature in Every Chapter
In the Eighth Edition of The Legal Environment
of Business, we continue to offer the Reviewing
feature at the end of every chapter to help solidify
students’ understanding of the chapter materials.
Each Reviewing feature presents a hypothetical
scenario and then asks a series of questions that
require students to identify the issues and apply
the legal concepts discussed in the chapter.
This feature is designed to help students review
the chapter topics in a simple and interesting way
and see how the legal principles discussed in the
chapter affect the world in which they live. You can
use this feature as the basis for in-class discussion or
can encourage students to use it for self-study prior
to completing homework assignments. Suggested
answers to the questions posed in the
Reviewing feature can be found in both the
Instructor’s Manual and the Answers Manual
that accompany this text.
The Reviewing feature is also tied to a set of
questions for each chapter in the Web-based
CengageNOW system, to be discussed next.
Students can read through the scenario in the text
and then answer the four questions online (called
Applications and Analysis questions). By using the
CengageNOW system, students can receive instant
feedback on their answers to these questions, and
instructors will obtain automatically graded assignments that enable them to assess students’ understanding of the materials.
➢ Improved CengageNOW for
The Legal Environment of Business:
Interactive Assignment System
To help students learn how to identify and apply
the legal principles they study, we have created an
easy-to-use Web-based product for this text. The
system provides interactive, automatically graded
assignments for every chapter and unit. For each
of the twenty-nine chapters, we have devised several categories of multiple-choice questions that
stress different aspects of the chapter materials.
By using the optional CengageNOW system,
students can complete the assignments from any
location via the Internet and can receive instant
feedback on why their answers to questions were
incorrect or correct (if the instructor wishes to
allow feedback). Instructors can customize the
system to meet their own speciﬁcations and can
track students’ progress. CengageNOW offers all
of the following:
xvii
• Chapter Review Questions—The ﬁrst set of
ten to ﬁfteen questions reviews the basic concepts
and principles discussed in the chapter. This set
often includes questions based on the cases presented in the text.
• Brief Hypotheticals—The next group of seven
to ten questions gives students practice in spotting the issue and rule of law in the context of a
short factual scenario.
• Legal Reasoning—The third set contains ﬁve
questions that require students to analyze the factual situation provided and apply the rules of law
discussed in the chapter to arrive at an answer.
• IRAC Case Analysis—The next set of four
questions for each chapter requires students to
perform all the basic elements of legal reasoning (identify the issue, determine the rule of law,
apply the rule to the facts presented, and arrive
at a conclusion). These questions are based on
the Extended Case excerpts that appear in each
chapter.
• Application and Analysis—The ﬁnal set of
four questions is linked to the Reviewing feature (discussed previously) that appears in every
chapter of the text. The student is required to
read through the hypothetical scenario, analyze
the facts presented, identify the issues in dispute,
and apply the rules discussed in the chapter to
answer the questions.
• Essay Questions—In addition to the multiplechoice questions, we now provide essay questions that allow students to compose and submit
essays online. Students’ essays are automatically
recorded to the gradebook so that instructors can
quickly and easily evaluate the essays and record
grades.
• Video Questions—CengageNOW also provides
links to the Business Law Digital Video Library
(discussed shortly) for The Legal Environment of
Business so that students can access and view the
video clips and answer questions related to the
topics in the chapter.
• Cumulative Questions for Each Unit—In
addition to the questions relating to each chapter, the CengageNOW system provides a set of
cumulative questions, entitled “Synthesizing
Legal Concepts,” for each of the six units in
the text.
• Additional Advantages of CengageNOW—
Instructors can utilize the system to upload their
course syllabi, create and customize homework
assignments, keep track of their students’ progress, communicate with their students about
assignments and due dates, and create reports
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xviii
P R E FAC E
TO TH E I NSTR UCTOR
summarizing the data for an individual student
or for the whole class.
➢ Aplia for The Legal Environment
of Business: Online Homework
and Gradebook System
Aplia is an online homework system dedicated to
improving learning by increasing student effort
and engagement. Aplia encourages legal environment of business students to read their text, stay
engaged with course material, and master criticalthinking and legal reasoning skills that will serve
them well in their future business careers.
Originally created by a professor to enhance
his own courses, Aplia has been specially tailored
to cover the topics in each chapter of this text.
Immediate, detailed feedback for every question
helps students learn and improves their performance.
Aplia’s numerous interactive features keep students
interested in the legal environment, prepare them
for classes, and connect the concepts they have
learned across chapters. Aplia also allows instructors
to spend more time teaching and less time reviewing
and grading assignments. As your students complete
assignments, their scores are imported automatically
into your gradebook, where you can easily track class
and individual student performance.
Aplia Text, an interactive textbook, contains
all the contents of the printed textbook but takes
advantage of the digital environment. Features such
as ﬂipbook-style navigation allow students to scan
through the text easily. They can also highlight the
text; listen to audio clips; and view movies, simulations, graphs, and slideshows.
➢ CourseMate
CourseMate brings the legal environment of business concepts to life with interactive learning,
study, and exam preparation tools that support
the printed textbook. Built-in engagement tracking tools allow you to assess the study activities of
your students. Additionally, CourseMate includes
an interactive online textbook, which contains
the complete content of the printed textbook
enhanced by the many advantages of a digital
environment.
ing (Chapter 4). The chapter now presents a more
practical, realistic case-study approach to business
ethics and the dilemmas facing businesspersons
today.
It also provides step-by-step guidance for making ethical business decisions. The emphasis on
ethics is reiterated in materials throughout the text,
particularly the Insight into Ethics feature, the Focus
on Ethics feature that concludes every unit, and
the pedagogy that accompanies selected cases and
features. We also discuss corporate governance
issues in the ethics chapter, the chapter on investor protection, and the Focus on Ethics feature at
the end of Unit Six. Finally, each chapter includes
a Question of Ethics case problem that provides a
modern-day example of the kinds of ethical issues
faced by businesspersons and explores the ways
that courts can resolve them.
➢ More on the
Sarbanes-Oxley Act of 2002
In a number of places in this text, we discuss the
Sarbanes-Oxley Act of 2002 and the corporate
scandals that led to the passage of that legislation.
For example, Chapter 4 contains a section examining the requirements of the Sarbanes-Oxley
Act relating to conﬁdential reporting systems. In
Chapter 29, we discuss this act in the context of
securities law and present an exhibit (Exhibit 29–4)
containing some of the key provisions of the act
relating to corporate accountability with respect to
securities transactions.
Because the Sarbanes-Oxley Act is a topic of signiﬁcant concern in today’s business climate, we
include excerpts and explanatory comments on the
act as Appendix E. Students and instructors alike will
ﬁnd it useful to have the provisions of the act immediately available for reference.
THE LEGAL ENVIRONMENT
OF BUSINESS ON THE WEB
For the Eighth Edition of The Legal Environment of
Business, we offer a Companion Web site so that
users can easily locate the resources they seek.
➢ Improved Ethics Coverage
Resources at The Legal
Environment of Business Web Site
For the Eighth Edition of The Legal Environment of
Business, we have signiﬁcantly revised and updated
the chapter on ethics and business decision mak-
When you visit www.cengage.com/blaw/cross,
you will ﬁnd a broad array of teaching/learning
resources, including the following:
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
P R E FAC E
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TO TH E I NSTR UCTOR
• Sample answers to the Case Problem with
Sample Answer, which appears in the Questions
and Case Problems section at the end of every
chapter. This problem/answer set is designed
to help your students learn how to answer case
problems by acquainting them with model
answers to selected problems. In addition, we
offer the answers to the hypothetical Questions
with Sample Answers on the Web site, as well as in
the text (Appendix F).
• Videos referenced in the Video Questions that
appear in selected chapters.
• Internet exercises for every chapter in the
text (at least two per chapter). These exercises
have been refocused to provide more practical
information to legal environment of business
students on topics covered in the chapters and
to acquaint students with the resources that are
available online.
• Interactive quizzes for every chapter in
this text.
• Legal reference materials including a
“Statutes” page that offers links to the full text
of selected statutes referenced in the text, a
Spanish glossary, and links to other important
legal resources available for free on the Web.
• Law on the Web features that provide links to
URLs that discuss topics related to each chapter
in the text.
• Link to our Business Law Digital Video
Library that provides a compendium of more
than seventy-ﬁve video scenarios (see below).
• Online Legal Research Guide that offers
complete yet brief guidance to using the
Internet and evaluating information obtained
from the Internet, as well as hyperlinks to the
Web sites discussed.
• Court case updates that present summaries
of new cases from various legal publications are
continually updated and are speciﬁcally keyed
to chapters in this text.
Business Law Digital Video Library
Video Questions appear at the end of selected chapters of this text. In response to popular demand,
we have created some new Video Questions for this
edition. Each of these questions directs students
to the text’s Web site at www.cengage.com/blaw/cross
to view a video relevant to a topic covered in the
chapter. This instruction is followed by a series of
questions based on the video.
The videos can be used for homework assignments,
discussion starters, or classroom demonstrations, and
are useful for generating student interest. Some of the
new videos are clips from actual movies or television series, such as Field of Dreams, Midnight Run,
and Mary Tyler Moore. Others are from a new Real
World Legal series of videos. By watching a video
and answering the questions, students will gain an
understanding of how the legal concepts they have
studied in the chapter apply to the real-life situation
portrayed in the video.
The videos are part of our Business Law Digital
Video Library. An access code for the videos can
be packaged with each new copy of this textbook
for no additional charge. If Business Law Digital
Video Library access did not come packaged with
the textbook, students can purchase it online at
www.cengage.com/blaw/dvl.
Suggested answers for all of the Video
Questions are given in both the Instructor’s
Manual and the Answers Manual that accompany this text.
THE MOST COMPLETE
SUPPLEMENTS PACKAGE
AVAILABLE TODAY
This edition of The Legal Environment of Business
is accompanied by a vast number of teaching
and learning supplements. We have already mentioned CengageNOW, Aplia, CourseMate, and the
supplemental resources available on the text’s Web
site at www.cengage.com/blaw/cross. In addition,
the complete teaching/learning package for the
Eighth Edition contains numerous other supplements, including those listed below. For further
information on The Legal Environment of Business
teaching/learning package, contact your local
sales representative or visit the text’s Web site.
Printed Supplements
• Instructor’s Manual—Includes sections
titled “Additional Cases Addressing This Issue”
at the end of selected case synopses. (Also
available on the Instructor’s Resource CD-ROM,
or IRCD.)
• Study Guide—Includes essay questions and
sample CPA exam questions.
• Two comprehensive Test Banks—Offers
a complete set of questions for every chapter
to provide instructors with even greater ﬂexibility in teaching. Test Bank 1 and Test Bank 2
each contain multiple-choice questions with
answers, true/false questions with answers,
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xx
P R E FAC E
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and two short essay questions per chapter.
Additionally, there is one question for every
Shifting Legal Priorities for Business and Insight
into Ethics feature, and there are two multiplechoice questions for each Focus on Ethics. (Also
available on the IRCD.)
• Answers to Questions and Case Problems
and Alternate Problem Sets with Answers—
Provides answers to all questions presented
in the text, including the questions in each
Focus on Ethics, the Critical Thinking questions
concluding the Insight into Ethics feature, and
alternate problem sets. (Also available on
the IRCD.)
Software, Video, and
Multimedia Supplements
• Instructor’s Resource CD-ROM (IRCD)—
The IRCD includes the following supplements:
Instructor’s Manual, Answers Manual, Test Bank 1
and Test Bank 2, Case-Problem Cases, Case
Printouts, Lecture Outline System, PowerPoint
slides, ExamView, Instructor’s Manual for
the Drama of the Law video series, Handbook
of Landmark Cases and Statutes in Business
Law and the Legal Environment, Handbook on
Critical Thinking in Business Law and the Legal
Environment, and A Guide to Personal Law.
• ExamView Testing Software (also available on the IRCD).
• Lecture Outline System (also available on
the IRCD).
• PowerPoint slides (also available on
the IRCD).
• WebTutor Advantage and WebTutor
Toolbox—Feature chat, discussion groups,
testing, student progress tracking, and legal
environment of business course materials.
• Case-Problem Cases (available only on
the IRCD).
• Transparency acetates (available only on
the IRCD).
• Westlaw®—Ten free hours for qualiﬁed
adopters.
• Business Law Digital Video Library—
Provides access to more than seventy-ﬁve videos, including the Drama of the Law videos and
video clips from Hollywood movies. Access to
our Business Law Digital Video Library is available in an optional package with each new
text at no additional cost. If this access did not
come with the textbook, your students can
purchase it at www.cengage.com/blaw/dvl.
FOR USERS OF
THE SEVENTH EDITION
First of all, we want to thank you for helping make
The Legal Environment of Business the best-selling
legal environment text in America today. Second,
we want to make you aware of the numerous additions and changes that we have made in this new
edition—many in response to comments from
reviewers. For example, we have added more examples and new Case in Point features, and have incorporated the latest United States Supreme Court
decisions throughout the text as appropriate.
Signiﬁcantly Revised Chapters
Every chapter of the Eighth Edition has been
revised as necessary to incorporate new developments in the law or to streamline the presentations. New trends in the law are also addressed
in the cases and special features of the Eighth
Edition. Other major changes and additions for
this edition include the following:
• Chapter 4 (Ethics and Business Decision
Making)—This chapter has been signiﬁcantly
revised, and a new section on the ethical transgressions of ﬁnancial institutions discusses
well-known companies, such as American
International Group (AIG). The chapter also
provides step-by-step guidance on making
ethical business decisions, materials on global
business ethics, and a new video question concerning marketing strategies in the pharmaceutical industry. The 2010 United States Supreme
Court case involving Jeffrey Skilling, former
CEO of Enron Corporation, is presented in the
chapter. Other topics include recent bribery
scandals, bribery by foreign companies, and
Internet attacks on corporate reputations. A
new Shifting Legal Priorities for Business feature
titled Corporate Social Responsibility May Mean
Outbehaving the Competition has been added.
• Chapter 5 (Constitutional Law)—This chapter
has been thoroughly revised and updated to
be more business oriented. New Case in Point
examples have been added throughout, and
the privacy materials have been updated to
include a new subsection on pretexting.
• Chapter 6 (Administrative Law)—This chapter
has been reworked to underscore the practical
signiﬁcance of administrative law for businesspersons. We present the United States Supreme
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
P R E FAC E
•
•
•
•
•
•
TO TH E I NSTR UCTOR
Court case on ﬂeeting expletives in this chapter and an Insight into Ethics titled Should
Pharmaceutical Companies Be Allowed to Tweet?
Chapter 7 (Criminal Law and Cyber Crime)—
This chapter has been streamlined and updated.
We have added discussions of criminal negligence and strict liability. A Shifting Legal Priorities
for Business feature titled Prosecuting White-Collar
Crime with Honest-Services Fraud Law includes a
discussion of how the Supreme Court limited
the application of this federal law in 2010.
Chapter 11 (Sales, Leases, and E-Contracts)—We
have streamlined and simpliﬁed our coverage of
the Uniform Commercial Code. We have added
numerous new Case in Point features and examples throughout the chapter to increase student comprehension. We have also expanded
our discussion of international sales and lease
contracts.
Chapter 12 (Torts and Cyber Torts)—Our torts
coverage has been revised to be more up to date
and business oriented. We have added new
materials on tort reform, cyber torts, spam, and
the U.S. Safe Web Act. We also have reorganized
the presentation of causation and damages and
included additional coverage on comparative
negligence, as well as a new Insight into Ethics
feature titled Some Consequences of Caps on
Medical Malpractice Awards.
Chapter 14 (Intellectual Property and Internet
Law)—The materials on intellectual property rights have been thoroughly revised and
updated to reﬂect the most current laws and
trends. We have reworked our discussion of
descriptive, generic, and suggestive trademarks
for clarity and included an updated discussion
of software and business process patents. We
have also updated the materials on copyrights
in digital information and added a description of cloud computing. The chapter also
includes updates on international treaties
protecting intellectual property and a Shifting
Legal Priorities for Business feature on the AntiCounterfeiting Trade Agreement.
Chapter 15 (Creditor-Debtor Relations and
Bankruptcy)—This chapter has been revised to
be more up to date and streamlined to focus on
materials that students need to know. The bankruptcy law materials have been substantially
revised and include updated dollar amounts of
various provisions of the Bankruptcy Code.
Chapter 16 (Mortgages and Foreclosures after
the Recession)—This chapter is entirely new to
this edition and provides a timely look at the
xxi
mortgage crisis, predatory lending practices, and
the laws enacted to address some of the problems that became evident during the recession.
• Chapter 19 (Corporations)—This chapter
has been substantially revised and updated
to provide more practical information and
recent examples. We have reworked our
coverage to reﬂect modern trends in corporate law. The chapter includes a new Shifting
Legal Priorities for Business feature titled The
Latest Recession Re-Ignites the Internet Taxation
Debate. We have updated the materials on the
Sarbanes-Oxley Act and added discussions of
new e-proxy rules and shareholder access.
• Chapter 21 (Employment Relationships),
Chapter 22 (Employment Discrimination), and
Chapter 23 (Immigration and Labor Law)—
These three chapters covering employment law
have been thoroughly updated to include discussions of legal issues facing employers today.
• Chapter 21 includes a new section on layoffs
and the WARN Act and covers recent amendments to the FMLA. We have updated minimum wage ﬁgures, Social Security rates, and
Medicare percentages, and include current
information on privacy rights and genetic testing. The chapter also includes a new Shifting
Legal Priorities for Business feature titled The
Online Creation and Modiﬁcation of Employment
Contracts.
• Chapter 22 includes the latest developments
in age and disability discrimination and equal
pay legislation. We discuss relevant United
States Supreme Court decisions and have
reworked the text to simplify and add clarity.
• Chapter 23 includes coverage of labor law
and new material on immigration law, which
is of increasing importance to employers.
• Chapter 24 (Consumer Protection)—The materials on food labeling and credit cards have been
signiﬁcantly updated. This chapter discusses
the Consumer Financial Protection Bureau,
a new agency established by the 2010 ﬁnancial reform package. A Shifting Legal Priorities
for Business feature titled New Health-Care Law
Requires Caloric Information is also included.
• Chapter 25 (Environmental Law)—The materials on air pollution and water pollution have
been updated. New subsections discuss how
environmental self-audits can help businesses
minimize their liability and explain the innocent landowner, or third party, defense to
Superfund liability.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xxii
P R E FAC E
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• Chapter 26 (Real Property and Land-Use
Control)—This chapter has been revised to
include more discussion of zoning and includes
a new Shifting Legal Priorities for Business feature
titled The Law of Building “Green”—Sustainable
Real Estate Development.
• Chapter 28 (Antitrust and Restraint of
Trade)—We have added new examples and
coverage of leading cases throughout the chapter, particularly in the discussions of price ﬁx-
ing, relevant product market, and relevant
geographic market.
• Chapter 29 (Investor Protection and Corporate
Governance)—The materials on securities law
and investor protection were revamped to
make this difﬁcult topic more understandable
to students. The chapter now includes revised
materials on the registration process to account
for well-known seasoned issuers and updated
coverage of securities fraud.
Acknowledgments for Previous Editions
Since we began this project many years ago, a sizable number of legal environment of business professors and others have helped us in various phases of the undertaking. The following reviewers offered
numerous constructive criticisms, comments, and suggestions during the preparation of the previous
editions.
Peter W. Allan
Victor Valley College
Joan Gabel
Florida State University
William Dennis Ames
Indiana University of
Pennsylvania
Gamewell Gant
Idaho State University
Thomas M. Apke
California State University,
Fullerton
Linda Axelrod
Metropolitan State University
Jane Bennett
Orange Coast College
Sam Cassidy
University of Denver
Angela Cerino
Villanova University
David Cooper
Fullerton College
Steven R. Donley
Cypress College
Paul F. Dwyer
Siena College
Arlene M. Hibschweiler
SUNY Fredonia
Barbara W. Kincaid
Southern Methodist University
Marty P. Ludlum
Oklahoma City Community
College
Marty Salley McGee
South Carolina State University
Robert Mitchum
Arkansas State University, Beebe
Kathleen A. Phillips
University of Houston
David Redle
University of Akron
Dawn Swink
Minnesota State University,
Mankato
Brian Terry
Johnson and Wales University
John Theis
Mesa State College
Michael G. Walsh
Villanova University
Glynda White
Community College
of Southern Nevada
LeVon E. Wilson
Western Carolina University
John A. Wrieden
Florida International University
Mary-Kathryn Zachary
State University of West Georgia
Larry A. Strate
University of Nevada–Las Vegas
We would also like to give credit to the following reviewers for their useful input during development of
CengageNOW for The Legal Environment of Business: Interactive Assignment System:
Nena Ellison
Florida Atlantic University
Jacqueline Hagerott
Franklin University
Melanie Morris
Raritan Valley Community
College
William H. Volz
Wayne State University
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
P R E FAC E
xxiii
TO TH E I NSTR UCTOR
We also wish to extend special thanks to the following individuals for their contributions to the Eighth
Edition, speciﬁcally for their valuable input for new Chapter 16 and for helping revise Chapter 26:
Robert C. Bird
University of Connecticut
Corey Ciocchetti
University of Denver
Joan Gabel
Florida State University
Dean Bredeson
University of Texas at Austin
Thomas D. Cavenagh
North Central College–
Naperville, Illinois
Eric D. Yordy
Northern Arizona University
As in all past editions, we owe a debt of extreme
gratitude to the numerous individuals who
worked directly with us or at Cengage Learning.
In particular, we wish to thank Vicky True and
Rob Dewey for their helpful advice and guidance
during all of the stages of this new edition. We
extend our thanks to Jan Lamar, our longtime
developmental editor, for her many useful suggestions and for her efforts in coordinating reviews
and ensuring the timely and accurate publication of all supplemental materials. We are also
indebted to Laura-Aurora Stopa for her support
and excellent marketing advice.
Our production manager and designer, Bill
Stryker, made sure that we came out with an
error-free, visually attractive Eighth Edition.
We appreciate his efforts more than he can ever
imagine. We are also indebted to the staff at
Parkwood Composition, our compositor. Their
ability to generate the pages for this text quickly
and accurately made it possible for us to meet
our ambitious printing schedule. We also wish to
thank Joy Westberg for her creation of the visual
preface.
We especially wish to thank Katherine Marie
Silsbee for her management of the entire project,
as well as for the application of her superb research
and editorial skills. We also thank Lavina Leed
Miller for her case research and Roger Meiners for
his assistance in ﬁnding new case problems. We
also wish to thank William Eric Hollowell, who co-
authored the Instructor’s Manual, the Study Guide,
and the two Test Banks, for his excellent research
efforts. We were fortunate enough to have the copyediting of Jeanne Yost and the proofreading services
of Susan Bradley and Pat Lewis. We are grateful for
the efforts of Vickie Reierson and Roxanna Lee for
their proofreading and other assistance, which
helped to ensure an accurate text. Finally, we thank
Suzanne Jasin of K & M Consulting for her many
special efforts on this project.
In addition, we would like to give special
thanks to all of the individuals who were instrumental in developing and implementing the
new CengageNOW for The Legal Environment of
Business: Interactive Assignment System. These
include Rob Dewey, Vicky True, Jan Lamar, and
Kristen Meere at Cengage Learning, and Katherine
Marie Silsbee, Roger Meiners, Lavina Leed Miller,
William Eric Hollowell, Kimberly Wallan, Kristi
Wiswell, and Joseph Zavaleta.
Through the years, we have enjoyed an ongoing correspondence with many of you who have
found points on which you wish to comment. We
continue to welcome all comments and promise
to respond promptly. By incorporating your ideas,
we can continue to write a legal environment of
business text that is best for you and best for your
students.
F. B. C.
R. L. M.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Welcome to the legal environment of business.
You are about to embark on the study of one of the
more important topics you can master in today’s
changing world. A solid understanding of the
legal environment of business will, of course, help
you if you are going into the world of business. If
you decide on a career in accounting, economics,
ﬁnance, political science, or history, understanding how the legal environment works is crucial.
Moreover, in your role as a consumer, you will
be faced with some legal issues throughout your
lifetime—renting an apartment, buying a house,
obtaining a mortgage, and leasing a car, to mention only a few. In your role as an employee (if you
don’t go into business for yourself), you will need
to know what rights you have and what rights
you don’t have. Even when you contemplate
marriage, you will be faced with legal issues.
WHAT YOU WILL
FIND IN THIS TEXT
As you thumb through the pages in this text, you
will see that we have tried to make your study of
the legal environment of business as efﬁcient and
enjoyable as possible. To this end, you will ﬁnd
the following aids on how to:
• Master Terminology—through Key Terms that
are boldfaced, listed at the end of each chapter,
and explained fully in the Glossary at the end of
the book.
• Understand Concepts—through numerous
Concept Summaries and exhibits.
• Observe the Law in the Context of the Real
World—through new Case in Point examples
within each chapter’s text and the Reviewing feature at the end of every chapter.
• See How Legal Issues Can Arise—through
Video Questions based on Web-available short videos, including some from Hollywood movies.
• Figure out How the Law Is Evolving—
through a new feature called Shifting Legal
Priorities for Business.
• Determine How the Law Applies to
Business Managers—through the new Managerial Implications sections that appear in selected
features and cases.
• Gain Insight into How the Law Affects or
Is Affected by Ethical Issues—through the
Insight into Ethics feature.
The above list, of course, is representative only. You
will understand much more of what the legal environment of business is about as you read through the
court cases presented in this book, including Extended
Case excerpts, which will give you a feel for how the
courts really decide cases. We present them in the
courts’ language (and provide bracketed deﬁnitions
to clarify certain terms in the opinion).
IMPROVE YOUR
ABILITY TO PERFORM LEGAL
REASONING AND ANALYSIS
Although the legal environment of business may
seem to be a mass of facts, your goal in taking this
course should also be an increased ability to use
legal reasoning and analysis to ﬁgure out how legal
situations will be resolved. To this end, you will
ﬁnd the following key learning features to assist
you in mastering legal reasoning and analysis:
• Find and Analyze Case Law—In Chapter 1,
you will ﬁnd a section with this title that
explains:
• Legal citations.
• The standard elements of a case.
• The different types of opinions a court can
issue.
• How to read and understand cases.
• Brief a Case—In Appendix A, you will see
how to brief and analyze case problems. This
explanation will teach you how to break down
the elements of a case and will improve your
ability to answer the Case Problems in each
chapter.
xxv
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
xxvi
P R E FAC E
TO TH E STU DE NT
• Questions with Sample Answers—At the
end of each chapter, there is one hypothetical factual scenario that presents a legal question for which you can access a sample answer
in Appendix F (and also on the text’s Web
site). This allows you to practice and to see if
you are answering the hypothetical questions
correctly.
• Case Problems with Sample Answers—
Each chapter has a series of chapter-ending
Case Problems. You can ﬁnd an answer to
one problem in each chapter on this book’s
Companion Student Web site (discussed
below). You can easily compare your answer
to the court’s opinion in each real case.
• Impact of This Case on Today’s Law—
Each case that is considered a landmark concludes with a short section that explains the
relevance of older case law to the way courts
reason today.
• What If the Facts Were Different?—This
section, found at the end of selected cases,
encourages you to think about how the outcome of a case might be different if the facts
were altered.
• The Ethical [E-Commerce, Global, or Legal
Environment] Dimension—Every case in
this text concludes with two critical-thinking
questions. These Dimension questions ask you
to explore the law in a variety of contexts to
help you meet the speciﬁc curriculum requirements for legal environment students.
• Managerial Implications—When a case has
particular importance for business managers,
we point out its signiﬁcance in these special
sections.
THE COMPANION
STUDENT WEB SITE
The Companion Student Web site at www.cengage.
com/blaw/cross provides you with short videos on
various legal topics and with sample answers to
selected case problems. In addition, you will ﬁnd
the following:
• Interactive quizzes for every chapter.
• Appendix A: How to Brief and Analyze
Case Problems that will help you analyze
•
•
•
•
•
cases. This useful appendix in the book can
also be downloaded from the Web site.
Legal reference materials including a
“Statutes” page that offers links to the full text
of selected statutes referenced in the text, a
Spanish glossary, and links to other important
legal resources available free on the Web.
Internet exercises for every chapter in the
text (at least two per chapter) that help you
learn how to research the law online.
Law on the Web features that provide links
to Web sites that discuss topics related to each
chapter in the text.
Online Legal Research Guide that offers
complete yet brief guidance to using the
Internet and evaluating information obtained
from the Internet, as well as hyperlinks to the
Web sites discussed.
Court case updates that follow up on decisions presented in the text.
INTERACTIVE
ASSIGNMENTS ON THE WEB
Some of you may have instructors who provide
assignments using either of our interactive Webbased systems: Aplia or CengageNOW for The
Legal Environment of Business: Interactive
Assignment System.
Both Aplia and CengageNOW allow you to
improve your mastery of legal concepts and terminology, legal reasoning and analysis, and much
more. Your instructor will give you further information if she or he decides to use a Web-based
system.
Of course, whether or not you are using Aplia or
CengageNOW, you will wish to consider purchasing
the Study Guide, which can help you get a better grade
in your course (see the inside cover for details).
The law is all around you—and will be for the
rest of your life. We hope that you begin your ﬁrst
course in the legal environment of business with
the same high degree of excitement that we, the
authors, always have when we work on improving this text, now in its Eighth Edition. The Legal
Environment of Business has withstood the test of
time—hundreds of thousands of students before
you have already used and beneﬁted from it.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Dedication
To my parents and sisters.
F. B. C.
To Dave VanHoose,
You represent the highest
level of professionalism
and dedication to academic
standards that I have ever
encountered.
Thanks,
R. L. M.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
O
ne of the important functions
of law in any society is to
provide stability, predictability,
and continuity so that people can know
how to order their affairs. If any society
is to survive, its citizens must be able
to determine what is legally right and
legally wrong. They must know what
sanctions will be imposed on them if they
commit wrongful acts. If they suffer harm
as a result of others’ wrongful acts, they
must know how they can seek redress.
By setting forth the rights, obligations,
and privileges of citizens, the law enables
individuals to go about their business
with conﬁdence and a certain degree of
predictability. The stability and predictability created by the law provide an
essential framework for all civilized
activities, including business activities.
What do we mean when we speak
of “the law”? Although the law has
various deﬁnitions, they are all based
on the general observation that law
consists of enforceable rules governing
relationships among individuals and
between individuals and their society.
These “enforceable rules” may consist
of unwritten principles of behavior established by a nomadic tribe. They may
be set forth in a law code, such as the
Code of Hammurabi in ancient Babylon
(c. 1780 B.C.E.) or the law code of one
of today’s European nations. They
may consist of written laws and court
decisions created by modern legislative
and judicial bodies, as in the United
States. Regardless of how such rules
are created, they all have one thing in
common: they establish rights, duties,
SECTION 1
BUSINESS ACTIVITIES AND
THE LEGAL ENVIRONMENT
As those entering the world of business will learn,
laws and government regulations affect virtually all
business activities—from hiring and ﬁring decisions
to workplace safety, the manufacturing and marketing of products, business ﬁnancing, and more. To
make good business decisions, a basic knowledge
of the laws and regulations governing these activities is beneﬁcial—if not essential. Realize also that
in today’s world, a knowledge of “black-letter” law
is not enough. Businesspersons are also pressured to
and privileges that are consistent with
the values and beliefs of their society
or its ruling group.
In this introductory chapter, we ﬁrst
look at an important question for any
student reading this text: How does
the legal environment affect business
decision making? We next describe the
major sources of American law, the
common law tradition, and some basic
schools of legal thought. We conclude
the chapter with sections offering
practical guidance on several topics, including how to ﬁnd the sources of law
discussed in this chapter (and referred
to throughout the text) and how to
read and understand court opinions.
make ethical decisions. Thus, the study of business
law necessarily involves an ethical dimension.
Many Different Laws May
Affect a Single Business Transaction
As you will note, each chapter in this text covers a
speciﬁc area of the law and shows how the legal rules
in that area affect business activities. Though compartmentalizing the law in this fashion promotes
conceptual clarity, it does not indicate the extent to
which a number of different laws may apply to just
one transaction.
Consider an example. Suppose that you are the
president of NetSys, Inc., a company that creates
2
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
C HAPTE R 1
3
Business and Its Legal Environment
and maintains computer network systems for business ﬁrms, and also markets related software. One
day, Hernandez, an operations ofﬁcer for Southwest
Distribution Corporation (SDC), contacts you by
e-mail about a possible contract concerning SDC’s
computer network. In deciding whether to enter into
a contract with SDC, you should consider, among
other things, the legal requirements for an enforceable contract. Are there different requirements for
a contract for services and a contract for products?
What are your options if SDC breaches (breaks, or
fails to perform) the contract? The answers to these
questions are part of contract law and sales law.
Other questions might concern payment under
the contract. How can you ensure that NetSys will be
paid? For example, if payment is made with a check
that is returned for insufﬁcient funds, what are your
options? Answers to these questions can be found in
the laws that relate to negotiable instruments (such
as checks) and creditors’ rights. Also, a dispute may
occur over the rights to NetSys’s software, or there
may be a question of liability if the software is defective. Questions may even be raised as to whether
you and Hernandez had the authority to make the
deal in the ﬁrst place. A disagreement may arise from
other circumstances, such as an accountant’s evaluation of the contract. Resolutions of these questions
may be found in areas of the law that relate to intellectual property, e-commerce, torts, product liability, agency, business organizations, or professional
liability.
Finally, if any dispute cannot be resolved amicably, then the laws and the rules concerning courts
and court procedures spell out the steps of a lawsuit.
Exhibit 1–1 below illustrates the various areas of law
that may inﬂuence business decision making.
Ethics and Business Decision Making
Merely knowing the areas of law that may affect a
business decision is not sufﬁcient in today’s business
world. Businesspersons must also take ethics into
account. As you will learn in Chapter 4, ethics generally is deﬁned as the study of what constitutes right
or wrong behavior. Today, business decision makers
need to consider not just whether a decision is legal,
but also whether it is ethical.
Throughout this text, you will learn about the
relationship between the law and ethics, as well as
about some of the types of ethical questions that
E X H I B I T 1–1 • Areas of the Law That May Affect Business Decision Making
Contracts
Courts and
Court Procedures
Sales
Negotiable
Instruments
Professional
Liability
Business
Decision
Making
Business
Organizations
Creditors’
Rights
Intellectual
Property
Agency
E- Commerce
Torts
Product
Liability
Copyright 2010 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
4
UNIT ONE
TH E FOU N DATIONS
often arise in the business context. For example,
the unit-ending Focus on Ethics features are devoted
solely to the exploration of ethical questions pertaining to topics treated within the unit. We have also
included Ethical Dimension questions for selected
cases that stress the importance of ethical considerations in today’s business climate and Insight into
Ethics features that appear in selected chapters. A
Question of Ethics case problem is included at the
conclusion of every chapter to introduce the ethical
aspects of speciﬁc cases involving real-life situations.
Additionally, Chapter 4 offers a detailed look at the
importance of ethical considerations in business
decision making.
SECTION 2
SOURCES OF AMERICAN LAW
There are numerous sources of American law.
Primary sources of law, or sources that establish the
law, include the following:
1. The U.S. Constitution and the constitutions of
the various states.
2. Statutory law—including laws passed by Congress,
state legislatures, or local governin…

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