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ESSENTIALS OF
BUSINESS LAW
Eleventh Edition
Anthony L. Liuzzo, J.D., MBA, Ph.D.

Wilkes University
Mesa, Arizona
Ruth C. Hughes, J.D.

Wilkes University
Wilkes-Barre, Pennsylvania
liu34544_fm_i-xxxvi.indd i 10/05/20 04:45 PM

ESSENTIALS OF BUSINESS LAW, ELEVENTH EDITION

Published by McGraw Hill LLC, 1325 Avenue of the Americas, New York, NY 10121. Copyright © 2022 by
McGraw Hill LLC. All rights reserved. Printed in the United States of America. Previous editions © 2019, 2016,
and 2013. No part of this publication may be reproduced or distributed in any form or by any means, or stored in
a database or retrieval system, without the prior written consent of McGraw Hill LLC, including, but not limited
to, in any network or other electronic storage or transmission, or broadcast for distance learning.
Some ancillaries, including electronic and print components, may not be available to customers outside the
United States.
This book is printed on acid-free paper.
1 2 3 4 5 6 7 8 9 LWI 25 24 23 22 21
ISBN 978-1-260-73454-6 (bound edition)
MHID 1-260-73454-4 (bound edition)
ISBN 978-1-264-12648-4 (loose-leaf edition)
MHID 1-264-12648-4 (loose-leaf edition)
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All credits appearing on page or at the end of the book are considered to be an
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Library of Congress Cataloging-in-Publication Data
Names: Liuzzo, Anthony, author. | Hughes, Ruth C., author.
Title: Essentials of business law / Anthony L. Liuzzo, J.D., MBA, Ph.D.,
Wilkes University, Mesa, Arizona; Ruth C. Hughes, J.D., Wilkes
University, Wilkes-Barre, Pennsylvania.
Description: Eleventh edition. | New York, NY : McGraw Hill LLC, [2021] |
Includes bibliographical references and index. | Audience: Ages 18+
Identifiers: LCCN 2020036833 (print) | LCCN 2020036834 (ebook) | ISBN
9781260734546 (paperback) | ISBN 1260734544 (bound edition) | ISBN
9781264126484 (loose-leaf edition) | ISBN 1264126484 (loose-leaf
edition) | ISBN 9781264126507 (epub)
Subjects: LCSH: Commercial law--United States. | LCGFT: Textbooks.
Classification: LCC KF889.85 .L58 2021 (print) | LCC KF889.85 (ebook) |
DDC 346.7307--dc23
LC record available at https://lccn.loc.gov/2020036833
LC ebook record available at https://lccn.loc.gov/2020036834
The Internet addresses listed in the text were accurate at the time of publication. The inclusion of a website does
not indicate an endorsement by the authors or McGraw Hill LLC, and McGraw Hill LLC does not guarantee the
accuracy of the information presented at these sites.
mheducation.com/highered
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Dedication
To our faculty colleagues at Wilkes University
who, for so many years, have
provided us with support,
encouragement and friendship
“A quality education has the power to transform

societies in a single generation: provide children
with the protection they need from the hazards
of poverty, labor exploitation and disease;
and give them the knowledge, skills,
and confidence to reach their full potential.”
Audrey Hepburn,
actress and humanitarian
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AUTHORS
ABOUT OUR
Anthony L. Liuzzo, J.D., MBA, Ph.D. Dr. Anthony L. Liuzzo is Professor Emeritus at
Wilkes University where he served as Professor of Business and Economics and Chairper-
son of the Business Programs of Arizona.
Dr. Liuzzo is a licensed attorney and economist. He earned his PhD in business
administration, Master of Philosophy in economics, and MBA in management and orga-
nizational behavior from New York University; his law degree from St. John’s University;
and his bachelor’s degree in marketing from Fordham University in New York City.
Specializing in public policy issues, employment law, and holiday retail sales fore-
casting, he has been cited on numerous occasions in hundreds of publications—including
Courtesy of Anthony L. Liuzzo CNN, Fox News, Forbes, The New York Times, USA Today, the Arizona Republic, the New
York Daily News, the Philadelphia Daily News, the Chicago Tribune, the Washington Times,
the Cincinnati Enquirer, the Pittsburgh Post-Gazette, the Detroit News, the Christian Science
Monitor, and the San Francisco Examiner—for his views on legal and business issues.
Dr. Liuzzo has been the author of several editions of the popular textbook, Essentials
of Business Law, and its accompanying assessment materials, mobile applications, and
instructor’s manual, published by McGraw-Hill.
Dr. Liuzzo is also the author of several books and numerous articles that
have appeared in scholarly and professional journals. He has served as editor of
a scholarly journal and has been instrumental in creating several successful small
businesses.
Dr. Liuzzo has testified as an expert witness in numerous civil and criminal
trials and has appeared before state legislatures for his insights into pending regu-
lations. He is an active member of many professional and community organiza-
©David B. Moore Photography tions and has served as a member and officer of several boards of directors.
Ruth Calhoun Hughes, J.D. Ruth Hughes serves as Associate Professor of Business
Law at Wilkes University in Wilkes-Barre, Pennsylvania.
Hughes is a licensed attorney and received her JD from Washington and Lee Uni-
versity in Lexington, Virginia, and her BA in economics from Tulane University in New
Orleans, Louisiana.
She began her career as an attorney specializing in corporate transactions in New
York City and Wilkes-Barre, Pennsylvania. She was director of the Small Business
Development Center in Wilkes-Barre for many years before joining the faculty of the Sidhu
School of Business and Leadership at Wilkes University in 2013.
Her research interests, publications, and presentations include the areas of environ-
Courtesy of Ruth Hughes mental sustainability in business, equity crowdfunding, and emerging trends in securities
laws. She serves as a reviewer for several academic publications.
Hughes is an active member of many university, professional and community organi-
zations. She is married to Richard Hughes and the proud mother of three children, Callie,
Ellen, and Richard.
iv
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Brief
CONTENTS
Preface xxiii
part 4 Commercial Paper 327
A Guided Tour xxx
Acknowledgment xxviii
22 Introduction to Commercial Paper 328
23 Transfer and Discharge
part 1 Introduction to Law 1 of Commercial Paper 347
1 Our System of Law 2

part 5 Property 365
2 Ethics and the Law 18
3 Criminal Law 32
24 Real and Personal Property 366
4 Tort Law 48
25 Bailments 385
5 Constitutional Law 66
26 Landlord–Tenant Relations 399
6 Administrative Law 83
27 Wills, Intestacy, and Trusts 415
part 2 Contracts 97
part 6 Business and Technology 429
7 Introduction to Contracts 98
28 Intellectual Property 430
8 Offer and Acceptance 115

29 Computer Privacy and Speech 448
9 Mutual Agreement 130

30 Social Media and the Law 466
10 Consideration 142
31 Conducting Business in Cyberspace 478
11 Competent Parties 156

part 7 Legal Environment of Business 494
12 Legal Purpose of Contracts 170
13 Form of Contracts 184 32 The Employer–Employee Relationship 495
14 Operation of Contracts 198 33 Employment Law 509
15 Discharge of Contracts 212 34 Product Liability 525
35 Professionals’ Liability 540
part 3 Sales, Agency, and Business 36 International Business Law 555
Organizations 231 37 Business and the Environment 571
16 Transfer of Title 232 38 Health Care Law 587
17 Sales 247 Appendix: The Constitution
18 Warranties 265 of the United States 605
19 Agency 279 Glossary 616
20 Business Organizations 296 Index 629
21 Creditor’s Rights and Bankruptcy 311
v
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Contents
Preface xxiii 2 Ethics and the Law 18
A Guided Tour xxx
Acknowledgment xxviii 2.1 UNETHICAL BEHAVIOR IN OUR WORLD 19
2.2 MORALS, ETHICS, AND VALUES 19
part 1 Introduction to Law 1 2.3 THE RELATIONSHIP BETWEEN LAW AND ETHICS 20
2.4 ETHICAL REASONING AND RESPONSES 21

1 Our System of Law 2 Approaches to Ethical Reasoning 21
Responses of Business Firms 21
1.1 THE LAW IN OUR WORLD 3 Responses of Educational Institutions 21
Responses of Governments 22
1.2 APPLICATIONS OF LAW 3 Responses of Trade and Professional Associations 22
Personal Applications of Law 4 2.5 WAYS TO ENSURE ETHICAL PRACTICES 22
Business Applications of Law 4
Government Applications of Law 4 Corporate Responsibility 23
Codes of Ethics 23
1.3 SOURCES OF LAW 4 Whistleblowing 24
Integration of Ethics into Business and Government 25
Constitutional Law 4
Executive Orders 5 CHAPTER SUMMARY 25
Treaties 5
Common Law 5 CHAPTER 2 ASSESSMENT 26
Precedent 5
Case Law 6 Matching Legal Terms 26
Statutory Law 6 True/False Quiz 26
Administrative Law 6 Discussion Questions 27
Thinking Critically about the Law 28
1.4 UNIFORM COMMERCIAL CODE 7 Case Questions 28
Case Analysis 29
1.5 CLASSIFICATION OF LAWS 7 Legal Research 31
1.6 MORAL LAW 8
1.7 A SYSTEM OF COURTS 8

Court Jurisdiction 9
Federal Courts 9
State Courts 10
CHAPTER SUMMARY 10
CHAPTER 1 ASSESSMENT 11
Matching Legal Terms 11
True/False Quiz 12
Discussion Questions 13
Case Questions 15 ©Ingram Publishing RF
Case Analysis 16
Legal Research 17
vi
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Contents vii
Unavoidable Accident 55
3 Criminal Law 32
The “Reasonable Person” 55
3.1 CRIME 33 Kinds of Negligence 55
4.8 LIABILITY 57
3.2 CLASSIFICATION OF CRIMES 33
Vicarious Liability 57
Treason 34 Strict Liability 57
Felony 34
Misdemeanor 34 CHAPTER SUMMARY 59
3.3 CRIMES IN THE BUSINESS WORLD 35 CHAPTER 4 ASSESSMENT 60

White-Collar Crime 36 Matching Legal Terms 60
Securities Fraud 36 True/False Quiz 60
Arson 37 Discussion Questions 61
Larceny/Robbery/Burglary 38 Thinking Critically about the Law 62
Bribery 38 Case Questions 63
False Pretenses 39 Case Analysis 64
Forgery 39 Legal Research 65
Perjury 39
Embezzlement 40
Extortion 40 5 Constitutional Law 66
Other Business-Related Crimes 40
5.1 THE UNITED STATES CONSTITUTION 67
CHAPTER SUMMARY 41
Constitutional Powers 67
CHAPTER 3 ASSESSMENT 41 Constitutional Amendments 67
Judicial Review 67
Matching Legal Terms 41 The Doctrine of Preemption 67
True/False Quiz 42
Case Questions 44
Case Analysis 45
Legal Research 47
4 Tort Law 48
4.1 THE NATURE OF TORTS 49
4.2 DEFAMATION 49
4.3 LIBEL AND SLANDER 49

Characteristics of Libel 50
Characteristics of Slander 51
Trade Libel 52
Humor and Slander 52
4.4 DEFENSES TO DEFAMATION 53
4.5 NUISANCE 53
4.6 CONVERSION 53
©Tetra Images/CORBIS
4.7 NEGLIGENCE 54
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viii Contents
5.2 THE COMMERCE CLAUSE, THE FULL FAITH 6.5 SIMILARITIES AND DIFFERENCES BETWEEN
AND CREDIT CLAUSE, AND THE SUPREMACY CLAUSE 68 ADMINISTRATIVE AGENCIES AND GOVERNMENTS 88
Article 1, Section 8, Clause 3: The Commerce Clause 68 Similarities 88
Article IV, Section 1: The Full Faith and Credit Clause 69 Differences 88
Article VI, Clause 2: The Supremacy Clause 69
6.6 CRITICISM OF ADMINISTRATIVE AGENCIES 90
5.3 THE FIRST AMENDMENT 69
The Establishment and Free Exercise Clauses CHAPTER SUMMARY 91
Relating to Religion 69
Freedom of Speech 70 CHAPTER 6 ASSESSMENT 91
Freedom of the Press 71 Matching Legal Terms 91
5.4 THE SECOND AMENDMENT 71 True/False Quiz 91
5.5 THE FOURTH AMENDMENT 72
Case Questions 93
Case Analysis 94
5.6 THE FIFTH AMENDMENT 72 Legal Research 96
5.7 THE EIGHTH AMENDMENT 73
5.8 THE FOURTEENTH AMENDMENT 74 part 2 Contracts 97
5.9 THE SIXTEENTH AMENDMENT 75
CHAPTER SUMMARY 75 7 Introduction to Contracts 98

7.1 THE NATURE OF A CONTRACT 99
Matching Legal Terms 76 7.2 SOURCES OF CONTRACT LAW 99
True/False Quiz 77
Discussion Questions 78 Agreements That Result in Contracts 99
Thinking Critically about the Law 79 7.3 PURPOSE OF A CONTRACT 99
Case Questions 80
Case Analysis 80
7.4 ELEMENTS OF AN ENFORCEABLE CONTRACT 100
Legal Research 82
Offer and Acceptance 100
Mutual Agreement 100
6 Administrative Law 83
6.1 ADMINISTRATIVE AGENCIES 84
6.2 ORGANIZATION OF GOVERNMENTS 85

Legislative Branch of Government 85
Executive Branch of Government 85
Judicial Branch of Government 85
6.3 FUNCTIONS OF ADMINISTRATIVE AGENCIES 85
Regulating Conduct 86
Fulfilling Government Requirements 86
Disbursing Benefits 86
Providing Goods and Services 86
6.4 WHY AND HOW AN ADMINISTRATIVE
AGENCY IS FORMED 86
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Contents ix
Consideration 100 8.5 TERMINATION OF AN OFFER 121

Competent Parties 100
Legality of Purpose 100 Termination by Lapse of Time 121
Termination by Revocation 121
Proper Form 100
Termination by Rejection 122
7.5 KINDS OF CONTRACTS 101 Termination by Death or Incapacity 122
Termination by Destruction or Illegality 122
Oral Contracts 101
Written Contracts 101 CHAPTER SUMMARY 123
Express Contracts 102
Implied Contracts 102 CHAPTER 8 ASSESSMENT 123
Formal Contracts 103
Simple Contracts 103 Matching Legal Terms 123
Entire Contracts 104 True/False Quiz 124
Divisible Contracts 104 Discussion Questions 125
7.6 STATUS OF CONTRACTS 104 Case Questions 126
Executory Contracts 104 Case Analysis 127
Legal Research 129
Executed Contracts 105
7.7 ENFORCEABILITY OF CONTRACTS 105
9 Mutual Agreement 130
Valid Contracts 105
Void Contracts 106 9.1 DEFECTIVE AGREEMENTS 131
Voidable Contracts 107
9.2 FRAUD 131
7.8 SMART CONTRACTS 107
CHAPTER SUMMARY 108 9.3 MISREPRESENTATION 132
CHAPTER 7 ASSESSMENT 108 9.4 MISTAKE 133
Matching Legal Terms 108 9.5 UNDUE INFLUENCE 133

True/False Quiz 109
9.6 DURESS 134
Case Questions 111
Case Analysis 112 9.7 CONTRACTS OF ADHESION 134
Legal Research 114
9.8 UNCONSCIONABLE CONTRACTS 135
8 Offer and Acceptance 115 CHAPTER SUMMARY 135

8.1 REACHING AGREEMENT 116
8.2 REQUIREMENTS FOR A VALID OFFER 116

An Offer Must Be Definite and Certain 116
An Offer Must Be Communicated 116
An Offer Must Intend an Enforceable Obligation 117
8.3 BIDS, ADVERTISING, AND PUBLIC OFFERS 117
Bids and Estimates 117
Advertising 117
Public Offers 118
8.4 REQUIREMENTS FOR A VALID ACCEPTANCE 119
An Acceptance Must Be Communicated 119
An Acceptance Must Be Unconditional 120
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x Contents
CHAPTER 9 ASSESSMENT 136 11.3 LIABILITY FOR MINORS’ TORTS AND CRIMES 161
True/False Quiz 136 11.4 CONTRACTS OF THE MENTALLY INCOMPETENT 161
Discussion Questions 137 Contracts of Persons Affected by Drugs or Alcohol 162
Case Questions 138 CHAPTER SUMMARY 163
Case Analysis 139
Legal Research 141 CHAPTER 11 ASSESSMENT 163
10 Consideration 142 True/False Quiz 164
10.1 THE NATURE OF CONSIDERATION 143 Thinking Critically about the Law 166
Case Questions 166
10.2 CHARACTERISTICS OF VALID CONSIDERATION 143 Case Analysis 167
Legal Research 169
Legality of Consideration 143
Adequacy of Consideration 144
Possibility of Performance 144 12 Legal Purpose of Contracts 170
10.3 KINDS OF VALID CONSIDERATION 144
12.1 LEGALITY AND THE PUBLIC INTEREST 171
A Promise for a Promise 144
Classification of Illegal Agreements 171
A Promise of Forbearance 145
Effect of Illegality 171
A Pledge or Subscription 145
10.4 CONSIDERATION AND THE 12.2 AGREEMENTS IN VIOLATION OF STATUTES 171
UNIFORM COMMERCIAL CODE 146 Agreements Made on Sundays or Legal Holidays 171
Gambling and Wagering Agreements 172
10.5 GENERAL RELEASE 146 Usurious Agreements 172
Unlicensed Transactions 173
10.6 AGREEMENTS THAT LACK CONSIDERATION 147
12.3 AGREEMENTS AGAINST PUBLIC POLICY 173
Barren Promises 147
Agreements That Obstruct or Pervert Justice 173
Gratuitous Promises 147
Agreements That Restrain Marriage 174
Illusory Promises 148
Agreements That Interfere with Public Service 174
Agreements Supported by Moral Consideration 148
Agreements to Defraud Creditors and Other Persons 175
Agreements Supported by Past Consideration 148
Exculpatory Clauses 175
CHAPTER SUMMARY 149

True/False Quiz 150
Case Questions 152
Case Analysis 153
Legal Research 155
11 Competent Parties 156

11.1 THE CAPACITY TO CONTRACT 157
11.2 MINORS’ CONTRACTS 157

Avoidance of Minors’ Contracts 157
Ratification of Minors’ Contracts 158
Disaffirmance of Minors’ Contracts 158
©in-future/iStockphoto/Getty Images RF
Minors’ Enforceable Contracts 159
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Contents xi
12.4 ILLEGAL RESTRAINTS OF TRADE 175 14.2 RIGHTS OF THIRD PARTIES 199
Sherman Antitrust Act 176 Third-Party Beneficiaries 199
Robinson-Patman Act 176 Incidental Beneficiaries 199
12.5 LEGAL RESTRAINTS OF TRADE 177 14.3 ASSIGNMENT OF RIGHTS 200
Government-Granted Monopolies 177 Form of Assignment 200
Private Franchises 177 Notice of Assignment 201
Zoning Regulations 177 Rights That May Be Transferred 201
Environmental and Safety Regulations 177 The Assignor’s Guaranty 201
CHAPTER SUMMARY 178 14.4 CONTRACTS THAT MAY NOT BE ASSIGNED 201
Contracts That Include Assignment Restrictions 202
CHAPTER 12 ASSESSMENT 178 Contracts for Which Assignments Are
Matching Legal Terms 178 Prohibited by Law or Public Policy 202
True/False Quiz 179 Contracts That Require Personal Services 202
14.5 DELEGATION OF DUTIES 202
Case Questions 181
Case Analysis 182 14.6 ASSIGNMENT AND DELEGATION BY LAW 203
Legal Research 183 Death of a Contracting Party 203
Bankruptcy of a Contracting Party 204
13 Form of Contracts 184 14.7 NOVATION 204
13.1 THE REQUIREMENT OF PROPER FORM 185 CHAPTER SUMMARY 204

When Contracts Should Be in Writing 185
13.2 THE PAROL EVIDENCE RULE 185
13.3 THE STATUTE OF FRAUDS 186 True/False Quiz 206
13.4 TYPES OF CONTRACTS THAT MUST BE IN WRITING 186 Thinking Critically about the Law 207
Case Questions 208
Agreements by an Executor or Administrator Case Analysis 209
to Pay the Debts of a Deceased Person 187 Legal Research 211
Agreements to Answer for the Debts of Another 187
Agreements That Cannot Be Completed in Less Than One Year 187
Agreements Made in Contemplation of Marriage 188 15 Discharge of Contracts 212
Agreements to Sell Any Interest in Real Property 188
Agreements to Sell Personal Property for $500 or More 189 15.1 TERMINATION OF CONTRACTS 213
13.5 INFORMATION INCLUDED IN A WRITTEN CONTRACT 190
15.2 TERMINATION BY AGREEMENT 213
CHAPTER SUMMARY 191

True/False Quiz 192
Case Questions 194
Case Analysis 195
Legal Research 197
14 Operation of Contracts 198 ©Brian A Jackson/Shutterstock
14.1 CONTRACTS INVOLVING THIRD PARTIES 199
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xii Contents
15.3 TERMINATION BY PERFORMANCE 213 16.4 WHEN TITLE PASSES 235

Substantial Performance 214 Intent 235
Performance by Payment of Money 214 Specific Time 235
Tender and Its Effect 214
16.5 CONDITIONAL SALES 236
15.4 TERMINATION BY IMPOSSIBILITY OF PERFORMANCE 215
Conditions Precedent 236
Personal-Service Contracts 216 Conditions Subsequent 236
Frustration of Purpose 217
16.6 LOST AND STOLEN GOODS 236
15.5 TERMINATION BY ALTERATION 217
16.7 TRANSFER OF TITLE BY ESTOPPEL 237
15.6 TERMINATION BY OPERATION OF LAW 217
Examples of Estoppel 237
15.7 TERMINATION BY BREACH OF CONTRACT 218 16.8 SALES BY PERSONS HAVING POSSESSION 238
Anticipatory Breach 218 Sales by Persons Having Rightful Possession 238
Breach Resulting from a Deliberate or Negligent Act 219 Sales by Persons Having Wrongful Possession 238
Failure to Perform an Obligation 219
16.9 TRANSFER OF TITLE TO FUNGIBLE GOODS 239
15.8 TERMINATION TO PROTECT A CONSUMER 219
CHAPTER SUMMARY 240
15.9 REMEDIES FOR BREACH OF CONTRACT 220
Punitive Damages 220 CHAPTER 16 ASSESSMENT 240
Liquidated Damages Clause 221 Matching Legal Terms 240
Specific Performance 221 True/False Quiz 241
Restraining Order or Injunction 221 Discussion Questions 242
CHAPTER SUMMARY 222 Thinking Critically about the Law 243
Case Questions 244
Case Analysis 245
CHAPTER 15 ASSESSMENT 223 Legal Research 246
True/False Quiz 223
Discussion Questions 224 17 Sales 247
Case Questions 226 17.1 THE LAW OF SALES 248
Case Analysis 227
Legal Research 229 17.2 CONTRACTS FOR SALE VERSUS
CONTRACTS TO SELL 248
part 3 Sales, Agency, and Business 17.3 ORAL, WRITTEN, EXPRESS, AND
IMPLIED CONTRACTS 249
Organizations 231
16 Transfer of Title 232

16.1 TITLE 233
The Right of Ownership 233
16.2 KINDS OF PROPERTY 233
Real Property 233
Personal Property 233
16.3 HOW TITLE PASSES 234
Bill of Sale 234
Bill of Lading 234 ©Image Source RF
Warehouse Receipt 235
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Contents xiii
17.4 ENTIRE AND DIVISIBLE SALES CONTRACTS 249 Remedies 272

Lemon Laws 272
17.5 CONTRACTS FOR LABOR AND MATERIALS 250 CHAPTER SUMMARY 272
17.6 TRIAL PERIODS AND RETURNS 250 CHAPTER 18 ASSESSMENT 273

Contract for Sale with Right of Return 250 Matching Legal Terms 273
Sale on Approval 251 True/False Quiz 274
Sale or Return 251 Discussion Questions 275
17.7 OTHER KINDS OF SALES 252 Thinking Critically about the Law 275
Case Questions 276
Auction Sales 252 Case Analysis 277
Conditional Sales 252 Legal Research 278
Consignment Sales 253
17.8 DELIVERY 253
19 Agency 279
Sales FOB Shipping Point 253
Sales FOB Destination 253 19.1 PRINCIPAL–AGENT RELATIONSHIPS 280
17.9 REMEDIES FOR BREACH OF SALES CONTRACTS 254 Who May Appoint an Agent 280
Who May Be Appointed as an Agent 280
Sellers’ Remedies 254
Buyers’ Remedies 255 19.2 CLASSES OF AGENTS 281
CHAPTER SUMMARY 258 General Agent 281

Special Agent 281
CHAPTER 17 ASSESSMENT 258 19.3 CREATION OF AGENCY 281
Matching Legal Terms 258 Agency by Agreement 281
True/False Quiz 259 Agency by Ratification 282
Discussion Questions 260 Agency by Necessity 282
Thinking Critically about the Law 261 Agency by Operation of Law 282
Case Questions 262
Case Analysis 263 19.4 AUTHORITY OF AN AGENT 283
Legal Research 264
Express or Implied Authority 283
Apparent Authority 283
Agent’s Torts and Crimes 284
18 Warranties 265 19.5 DUTIES OF AGENTS, PRINCIPALS, AND THIRD PARTIES 284
18.1 PROTECTING CONSUMERS AND THIRD PARTIES 266
18.2 THE LAW OF WARRANTIES 266
18.3 EXPRESS WARRANTIES 267

Express Warranty by Promise 267
Express Warranty by Description, Sample, or Model 267
The Timing of the Express Warranty 268
The Effect of Sellers’ “Puffing” 268
Disclaimers of Express Warranties 268
18.4 IMPLIED WARRANTIES 269
Title 269
Quality 269
Disclaimers of Implied Warranties 270
18.5 MAGNUSON-MOSS WARRANTY LEGISLATION 271 ©Banana Stock/age fotostock RF
Provisions of Magnuson-Moss 271

Distinction between Full and Limited Warranty 271
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xiv Contents
Duties of Agent to Principal 284 Case Analysis 309

Duties of Principal to Agent 285 Legal Research 310
Duties of Principal and Third Party to Each Other 286
Duties of Agent and Third Party to Each Other 286
21 Creditor’s Rights and Bankruptcy 311
19.6 TERMINATION OF AGENCY 287
21.1 INSOLVENCY AND DEFAULT 312
19.7 DIFFERENCES BETWEEN PRINCIPAL–AGENT
AND EMPLOYER–EMPLOYEE RELATIONSHIPS 288 21.2 CREDITOR’S RIGHTS 312
CHAPTER SUMMARY 289 21.3 THE LAW OF BANKRUPTCY 313
CHAPTER 19 ASSESSMENT 290 21.4 CHAPTER 7 OF THE FEDERAL BANKRUPTCY LAW 314
True/False Quiz 290 21.5 CHAPTER 13 OF THE FEDERAL BANKRUPTCY LAW 317
Thinking Critically about the Law 292 21.6 CHAPTERS 9, 11, 12, AND 15 OF THE
Case Questions 293 FEDERALBANKRUPTCY LAW 318
Case Analysis 294 Chapter 9 318
Legal Research 295 Chapter 11 318
Chapter 12 319
Chapter 15 319
20 Business Organizations 296
CHAPTER SUMMARY 320
20.1 ORGANIZATIONAL FORMS 297
20.2 SOLE PROPRIETORSHIP 297
Advantages of a Sole Proprietorship 297 True/False Quiz 321
Disadvantages of a Sole Proprietorship 297 Discussion Questions 322
20.3 PARTNERSHIP 298
Case Questions 323
Advantages of a Partnership 298 Case Analysis 324
Disadvantages of a Partnership 299 Legal Research 326
Limited Partnership 299
part 4
Limited Liability Partnership 300
20.4 CORPORATION 300 Commercial Paper 327
Advantages of a Corporation 300

Disadvantages of a Corporation 301 22 Introduction to Commercial Paper 328
Subchapter S Corporation 301
Corporate Directors and Officers 302 22.1 CHARACTERISTICS OF COMMERCIAL PAPER 329
Fiduciary Responsibility 302
20.5 LIMITED LIABILITY COMPANY 303
Advantages of a Limited Liability Company 303
Disadvantages of a Limited Liability Company 304
20.6 OTHER ORGANIZATIONAL FORMS 304
CHAPTER SUMMARY 304

True/False Quiz 305
Thinking Critically about the Law 307 ©narvikk/Getty Images RF
Case Questions 308
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Contents xv
Presumption of Consideration 329 Special Endorsement 349

Negotiability versus Assignability 329 Restrictive Endorsement 350
Qualified Endorsement 351
22.2 KINDS OF COMMERCIAL PAPER 329
23.3 OBLIGATIONS, WARRANTIES, AND
Promises to Pay 329 DISCHARGEOF ENDORSERS 351
Orders to Pay 330
The Meaning of “Pay to the Order of” 330 23.4 HOLDER IN DUE COURSE 353
22.3 PARTIES TO COMMERCIAL PAPER 331
23.5 DEFENSES AGAINST PAYMENT OF
22.4 ESSENTIALS FOR NEGOTIABILITY COMMERCIAL PAPER 354
OF COMMERCIAL PAPER 331 Personal Defenses 354
It Must Be in Writing and Signed by the Maker or Drawer 331 Real Defenses 355
It Must Contain an Unconditional Promise 23.6 PRESENTMENT OF COMMERCIAL PAPER 357
or Order to Pay a Definite Sum in Money 332
It Must Be Payable on Demand or at a Definite Time 332
23.7 DISHONOR OF COMMERCIAL PAPER 357
It Must Be Payable to Order, to Bearer, or to Cash 332
A Draft or Check Must Name or Indicate
the Drawee with Reasonable Certainty 332 CHAPTER SUMMARY 358
22.5 NONESSENTIALS FOR NEGOTIABILITY

OF COMMERCIAL PAPER 333
22.6 CHECKS 333 True/False Quiz 360
Relationship between Bank and Depositor 334 Thinking Critically about the Law 361
Payment of Checks 334 Case Questions 362
The Check Clearing for the 21st Century Act 334 Case Analysis 363
Certified Checks 334 Legal Research 364
Cashier’s Checks 335
Traveler’s Checks 336
Money Orders 336
Bad Checks 336
Forged and Raised Checks 336
Postdated Checks 337
Stopping Payment on Checks 338
22.7 ELECTRONIC FUNDS TRANSFER SYSTEMS 338
Applications of Electronic Funds Transfer Systems 338
The Electronic Funds Transfer Act 339
CHAPTER SUMMARY 339

True/False Quiz 341
Case Questions 343
Case Analysis 344
Legal Research 345
23 Transfer and Discharge of Commercial Paper 347
23.1 ENDORSING COMMERCIAL PAPER 348
23.2 KINDS OF ENDORSEMENTS 348 ©Ingram Publishing

Blank Endorsement 349
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xvi Contents
part 5 Property 365

Bailment Created by Possession of Goods
Bailee Must Intend to Possess Goods
Bailee Must Return Identical Goods
386
387
387
Termination of Bailments 387
24 Real and Personal Property 366 25.3 KINDS OF BAILMENTS AND CARE
DURING CUSTODY 388
24.1 CHARACTERISTICS OF PROPERTY 367 Bailments for the Sole Benefit of the Bailee 388
Bailments for the Sole Benefit of the Bailor 388
24.2 DISTINCTION BETWEEN REAL AND Mutual-Benefit Bailments 389
PERSONAL PROPERTY 367 Constructive Bailments 391
Real Property 367 CHAPTER SUMMARY 392
Personal Property 367
Real Property Can Become Personal Property 367
Personal Property Can Become Real Property 367
24.3 ACQUIRING TITLE TO PERSONAL PROPERTY 368 True/False Quiz 393
Finding Lost Personal Property 368 Discussion Questions 394
Abandoned Property 369 Thinking Critically about the Law 395
Gifts 369 Case Questions 395
Accession 371 Case Analysis 396
Legal Research 398
24.4 OWNERSHIP OF REAL OR
PERSONAL PROPERTY 371
Severalty Ownership 371
26 Landlord–Tenant Relations 399
Multiple Ownership 371
26.1 THE LANDLORD–TENANT RELATIONSHIP 400
24.5 REAL PROPERTY 372 The Difference between a Lease and a License 400
Land 372 Essential Elements of the Landlord–Tenant Relationship 400
Buildings and Fixtures 373 The Lease Is the Basis of the Relationship 400
Rights in Land Other Than Ownership 373 26.2 TYPES OF TENANT INTERESTS IN
24.6 INTERESTS IN REAL PROPERTY 374 REAL PROPERTY 401
Freehold Estates 374 Periodic Tenancy 401

Leasehold Estates 375 Tenancy for Years 401
Tenancy at Will 402
24.7 TRANSFER OF REAL PROPERTY 375 Tenancy at Sufferance 402
Types of Deeds 375
Delivery and Recording of Deeds 376
Other Transfers of Real Property 376
CHAPTER SUMMARY 377

True/False Quiz 379
Case Questions 381
Case Analysis 382
Legal Research 384
25 Bailments 385
25.1 BAILMENT DEFINED 386 ©Ingram Publishing RF
25.2 CHARACTERISTICS OF BAILMENTS 386
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Contents xvii
26.3 RIGHTS AND DUTIES OF THE PARTIES 402 Matching Legal Terms 422
True/False Quiz 423
Landlord’s Warranty of Habitability 402 Discussion Questions 424
Landlord’s Right to Rent, to Regain Possession, Thinking Critically about the Law 424
to Evict, and to Retain a Tenant’s Security Deposit 403
Case Questions 425
Landlord’s Right to Keep Fixtures and Permanent Case Analysis 426
Improvements 404 Legal Research 428
Landlord’s Duty to Mitigate Damages 404
Tenant’s Right to Quiet Enjoyment 404
Tenant’s Right to Acquire and Retain Possession
Tenant’s Right to Assign or Sublease
405
405 part 6 Business and Technology 429
26.4 TERMINATION OF LEASES 407

Lease Expiration 407 28 Intellectual Property 430
Tenant’s Abandonment 407
Termination by Forfeiture (Breach) 407 28.1 INTELLECTUAL PROPERTY DEFINED 431
26.5 TORT LIABILITY 407
28.2 TRADE SECRETS 431
CHAPTER SUMMARY 408 Protecting Trade Secrets 431
28.3 APPLICATION OF TRADE SECRET
CHAPTER 26 ASSESSMENT 408 LAW TO COMPUTER SOFTWARE 433
True/False Quiz 409 28.4 TRADEMARKS 433
Trade Dress 435
How Trademarks Are Lost 435
Case Questions 411
Protecting a Trademark 436
Case Analysis 412
Legal Research 414 28.5 APPLICATION OF TRADEMARK LAW TO CYBERSPACE 436
Domain Names 436
27 Wills, Intestacy, and Trusts 415
28.6 COPYRIGHTS 437
27.1 THE PURPOSE OF A WILL 416
Fair Use 438
27.2 THE LANGUAGE OF WILLS 416
27.3 TYPES OF GIFTS UNDER WILLS 416
27.4 REQUIREMENTS OF A VALID WILL 417

Requirement of Writing 417
Requirement of Witnesses 417
Testamentary Capacity 418
Undue Influence 418
27.5 REVISING AND REVOKING WILLS 418
Revisions 419
Revocations 419
27.6 INTESTACY 419
27.7 TRUSTS 420

Types of Trusts 420
The Role of the Trustee 421
CHAPTER SUMMARY 421
©ColorBlind Images/Blend Images LLC RF
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xviii Contents
28.7 APPLICATION OF COPYRIGHT LAW TO

SOFTWARE AND CYBERSPACE 438 30 Social Media and the Law 466
30.1 INTRODUCTION 467
28.8 PATENTS 439
30.2 PRIVACY IN SOCIAL MEDIA 467
28.9 APPLICATION OF PATENT LAW TO
COMPUTER HARDWARE AND SOFTWARE 440 Employer Access and Monitoring 467
Use in Employment Decisions 467
Design Patents 441
Evidence in Civil Trials 468
CHAPTER SUMMARY 441
30.3 CRIME AND SOCIAL MEDIA 468
CHAPTER 28 ASSESSMENT 442 Cyberstalking 468
Identity Theft and Fraud 468
True/False Quiz 442 30.4 SOCIAL MEDIA AND SPEECH 468
Defamatory and Offensive Speech 469
Intellectual Property Infringement 469
Case Questions 444
Deceptive Advertising 470
Case Analysis 445
Legal Research 447 30.5 EMERGING ISSUES IN SOCIAL MEDIA 471
Determining Creditworthiness 471
Securities Law Disclosure on Social Media 471
29 Computer Privacy and Speech 448
CHAPTER SUMMARY 471
29.1 COMPUTER PRIVACY 449
Cookies 449
Electronic Mail 450 Matching Legal Terms 472
Data Privacy 451 True/False Quiz 473
29.2 COMPUTER CRIME 451 Thinking Critically about the Law 474
Case Questions 475
29.3 COMPUTER CRIME LEGISLATION 452 Case Analysis 476
The Electronic Communications Privacy Act 453 Legal Research 477
The USA Patriot Act 453
The Computer Fraud and Abuse Act 453 31 Conducting Business in Cyberspace 478
The Electronic Funds Transfer Act 454
General Criminal Law 454 31.1 BUSINESS AND THE INTERNET 479
Computer Gambling 454
29.4 COMPUTER SPEECH 455 31.2 SELLING SECURITIES ON THE WEB 479
Harmful Speech 455

Liability of an Internet Service Provider 456
Obscenity 457
Spam 457
29.5 ADVERTISING ON THE WEB 458
CHAPTER SUMMARY 459

True/False Quiz 460
Case Questions 462
Case Analysis 463
Legal Research 465
liu34544_fm_i-xxxvi.indd xviii 10/05/20 04:45 PM

Contents xix
Securities Act of 1933 479 CHAPTER SUMMARY 502

Securities and Exchange Act of 1934 479
Insider Trading 481 CHAPTER 32 ASSESSMENT 503
Recent Trends in Financial Regulations 481
31.3 SELLING ENTERTAINMENT ON THE WEB 482 True/False Quiz 503
The Digital Millennium Copyright Act 483
31.4 ENTERING INTO CONTRACTS ON THE WEB 483 Case Questions 505
Case Analysis 506
Accepting Offers on the Web 483 Legal Research 508
Contracts of Adhesion on the Web 483
Electronic Signatures 484
31.5 SETTLING DISPUTES IN CYBERSPACE 485 33 Employment Law 509
33.1 WORKER SAFETY AND HEALTH 510
31.6 PAYING TAXES ON INTERNET SALES 486
Workers’ Compensation 510
Taxing Internet Access Services 486
Occupational Safety and Health Act 511
CHAPTER SUMMARY 487
33.2 DISCRIMINATION IN EMPLOYMENT 512
CHAPTER 31 ASSESSMENT 487 The Civil Rights Act of 1964 512

The Equal Pay Act of 1963 514
Matching Legal Terms 487 The Age Discrimination in Employment Act 514
True/False Quiz 488 The Pregnancy Discrimination Act 514
Discussion Questions 489 The Americans with Disabilities Act 515
Thinking Critically about the Law 490 The Civil Rights Act of 1991 516
Case Questions 490 Sexual Harassment 516
Case Analysis 491
Legal Research 493 33.3 LABOR UNIONS 516
Rights of Employees 517
Rights of the Union 517
part 7
Rights of the Employer 517
Legal Environment of Business 494 33.4 ADDITIONAL EMPLOYEE RIGHTS 517
Family and Medical Leave Act 517
32 The Employer–Employee Relationship 495

32.1 DUTIES OF EMPLOYER AND EMPLOYEE
TO EACH OTHER 496
32.2 EMPLOYEES VERSUS INDEPENDENT

CONTRACTORS 496
Independent Contractors 497
The Internal Revenue Service Test 498
32.3 THE DOCTRINE OF EMPLOYMENT AT WILL 498
32.4 EMPLOYMENT CONTRACTS 499
32.5 EMPLOYEE HANDBOOKS 499
32.6 EMPLOYEE REFERENCES 500

Invasion of Privacy 500
Defamation 501 ©rnl/Shutterstock RF
Negligent Misrepresentation 501
32.7 FAIR LABOR STANDARDS ACT OF 1938 502
liu34544_fm_i-xxxvi.indd xix 10/05/20 04:45 PM

xx Contents
Unemployment Benefits 518 35.3 ELEMENTS OF MALPRACTICE 541

CHAPTER SUMMARY 518
35.4 LIABILITY FOR PROFESSIONAL MALPRACTICE 542
CHAPTER 33 ASSESSMENT 519 Liability of Health Care Providers 542
Liability of Accountants 543
Matching Legal Terms 519 Liability of Financial Planners 544
True/False Quiz 519 Liability of Architects and Engineers 544
Discussion Questions 520 Liability of Attorneys 545
Thinking Critically about the Law 521 Liability of Insurance Agents and Brokers 546
Case Questions 522 Other Professionals’ Liability 547
Case Analysis 523
Legal Research 524 35.5 REDUCING PROFESSIONALS’
RISK OF LIABILITY 547
34 Product Liability 525 CHAPTER SUMMARY 548
34.1 PRODUCT LIABILITY AND TORT LAW 526 CHAPTER 35 ASSESSMENT 548
34.2 BASES FOR PRODUCT LIABILITY INJURY CLAIMS 526
True/False Quiz 549
Product Flaw 526 Discussion Questions 550
Failure to Warn 527 Thinking Critically about the Law 551
Design Defect 527 Case Questions 551
Case Analysis 552
34.3 WHO CAN BE HELD LIABLE FOR
PRODUCT-RELATEDINJURIES? 527 Legal Research 554
34.4 STRICT LIABILITY 528 36 International Business Law 555

34.5 PRODUCT SAFETY 528 36.1 GLOBAL BUSINESS 556
34.6 DRUGS 529 36.2 WHAT IS INTERNATIONAL LAW 556

Sources of International Law 556
34.7 CONSUMER PRODUCTS 530
36.3 APPLYING OTHER COUNTRIES’
34.8 TOBACCO 531 LAWS—THE DOCTRINE OF COMITY 556
34.9 AUTOMOBILES 531 36.4 INTERNATIONAL TRADE INSTITUTIONS 557
CHAPTER SUMMARY 532

True/False Quiz 534
Case Questions 536
Case Analysis 537
Legal Research 539
35 Professionals’ Liability 540

©Jacobs Stock Photography/Photodisc/Getty Images RF
35.1 PROFESSIONALS 541
35.2 MALPRACTICE 541
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Contents xxi
The World Trade Organization 557 Trespass 576

The International Monetary Fund 557
The World Bank 557 37.6 TYPES OF POLLUTION 576
Regional Trade Organizations and Agreements 558 Noise Pollution 576
36.5 THE INTERNATIONAL LEGAL Pesticide Control 576
ENVIRONMENT 559 Solid Waste Disposal 576
Toxic Substance Disposal 576
Trade Sanctions and Embargoes 560 Natural Resource Conservation 577
Export and Import Controls 560 Acid Rain 577
Governmental Actions 560
Boycotts 560 37.7 A CHANGING GLOBAL ENVIRONMENT 577
36.6 DOING BUSINESS IN FOREIGN The Greenhouse Effect 578
COUNTRIES 561 Destruction of Rain Forests 578
Destruction of the Ozone Layer 578
The Foreign Corrupt Practices Act 561
Contracts for the International Sale of Goods 561 37.8 OTHER ENVIRONMENTAL ISSUES 578
Foreign Sovereign Immunities Act 562
International Treatment of Bankruptcies 562 Biodiversity 578
Ocean Pollution 579
36.7 INTERNATIONAL LAW AND Space Pollution 579
INTELLECTUAL PROPERTY 562 Overpopulation 579
Copyrights 562 CHAPTER SUMMARY 579
Patents 563
Trademarks 563
CHAPTER SUMMARY 563
True/False Quiz 581
CHAPTER 36 ASSESSMENT 564 Discussion Questions 581
Matching Legal Terms 564 Thinking Critically about the Law 582
True/False Quiz 565 Case Questions 583
Discussion Questions 566 Case Analysis 584
Thinking Critically about the Law 566 Legal Research 586
Case Questions 567
Case Analysis 568
Legal Research 570 38 Health Care Law 587
38.1 INTRODUCTION 588
37 Business and the Environment 571
38.2 ADVANCE DIRECTIVES 588
37.1 THE DEVELOPMENT OF
ENVIRONMENTAL PROTECTION 572
37.2 GOVERNMENT’S REGULATION OVER ITSELF 572
37.3 GOVERNMENT REGULATION OF BUSINESS 573
37.4 MAJOR FEDERAL LEGISLATION

PROTECTING THE ENVIRONMENT 573
The Clean Air Act 573
The Clean Water Act 574
Superfund 574
©Image Source/Getty Images RF
37.5 LAWSUITS BY PRIVATE CITIZENS 575
Negligence 575
Nuisance 575
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xxii Contents
Living Wills 589 38.5 STATE AND FEDERAL REGULATION OF

Durable Power of Attorney for Health Care 590 HEALTH CARE INSURANCE 595
Matters Covered by Advance Directives 590
38.6 THE HEALTH INSURANCE PORTABILITY
38.3 TYPES OF MEDICAL INSURANCE 590 AND ACCOUNTABILITY ACT OF 1996 PRIVACY RULE 596
Community-Based Insurance 591
Major Medical 591 CHAPTER SUMMARY 597
Commercial Insurance 591
Self-Insurance 591 CHAPTER 38 ASSESSMENT 598
Health Maintenance Organization 592 Matching Legal Terms 598
Medicare 592 True/False Quiz 599
Medicaid 593 Discussion Questions 600
38.4 HEALTH-RELATED EMPLOYEE
BENEFITS 593 Case Questions 601
Case Analysis 602
Medical Insurance 593 Legal Research 604
Family Plans 594
Disability Insurance 594
Dental Insurance 594 Appendix: The Constitution of the United States 605
Vision Insurance 594 Glossary 616
Group Life Insurance 595 Index 629
©peterspiro/Getty Images RF
liu34544_fm_i-xxxvi.indd xxii 10/05/20 04:45 PM

Preface
WELCOME TO ESSENTIALS OF BUSINESS LAW
The new, eleventh edition of the Essentials of Business Law program is a practical, concise,
and broad-based introduction to the vibrant field of business law. While continuing to offer
all of the features that have made the ten prior editions successful, this new edition includes
a chapter on the areas of law affected by social media, updated content, and enhanced
support materials. Both the traditional areas of law, such as contracts and property, and
the emerging areas of law, such as e-commerce and environmental, are covered in short,
informative chapters written to capture the essence of each topic. The objective of the text
throughout its coverage is ease—ease of use, ease of teaching, ease of assessment, and ease
of understanding. It has been developed for those seeking a more fundamental overview of
the concepts and principles that are vital to the understanding of business law.
NOTE TO STUDENTS
The eleventh edition of Essentials of Business Law covers the latest developments in the legal
field. This text will help you discover a wealth of information and learning opportunities
that will give you a clear understanding of business law topics. The text will also help you
identify, explain, and apply the principles of business law in your daily life and in the larger
world in which you live. The world of business is continually changing, especially with the
advent and evolution of the global marketplace. The concepts and principles presented in
the text will assist you in understanding those changes as they relate to business law.
The chapters in Essentials of Business Law are organized in a concise and easy-to-read
way. Numerous examples applying the law to real-world situations will assist you in under-
standing important concepts, whereas key term definitions are provided throughout the text
for your reference. The end-of-chapter assessments will help you apply your knowledge and
gauge your understanding of the material as you progress, and the extra resources accom-
panying the text will provide useful and easy-to-use tools to supplement your appreciation
of the material.
NOTE TO INSTRUCTORS
What sets Essentials of Business Law apart from other programs available is its concise organi-
zational nature and supplementary materials. Chapters are succinct, making it simple for you
to plan presentations and teach the course. Each chapter offers an abundance of assessment
tools that will help you evaluate your students’ progress. The new edition offers expanded
coverage of current or emerging areas in the business law field, including legal ethics and laws
applying to social media, e-commerce and health care law. In addition, the number of key terms
has been increased to include both legal and nonlegal definitions. As a result, Essentials of Busi-
ness Law offers you and your students the coverage of essential topics that many larger, more
expensive book programs miss entirely. The eleventh edition has been expanded and updated
to include a variety of teaching tools that make it simple for you to organize your classroom
xxiii
liu34544_fm_i-xxxvi.indd xxiii 10/05/20 04:45 PM

xxiv Preface
discussions, effectively communicate the important business law concepts in each chapter,
and assess your students’ grasp of the material. The book is accompanied by an Instructor
Resource Center, complete with an Instructor’s Manual, a Test Bank, and PowerPoint slides
for each chapter. Each tool makes planning and teaching the course easier than ever.
CHANGES TO THIS EDITION

CHAPTER 1
Our System of Law has been revised to reflect recent updates in the jurisdictional limits of
state small claims courts. In addition, use of the second person has been removed in order
to provide grammatical consistency with other chapters.
New to this chapter:
• Modified wording to reflect recent changes in legislation relating to possession of
marijuana.
CHAPTER 2
Ethics and the Law has been revised with a different code of ethics example
CHAPTER 3
Criminal Law has been revised.
• A distinction drawn between federal and state crimes. Two figures (3.1 and 3.2)
added, providing the reader with 20 examples of federal crimes and 20 examples of
state crimes.
• Question 30 changed to reflect inclusion of the new material relating to federal crimes.
CHAPTER 4
Tort Law has been updated to incorporate posting on social media, and the relationship of
assumption of risk to negligence has been clarified.
• Inclusion of the number of states applying contributory negligence versus compara-
tive negligence.
CHAPTER 5
Constitutional Law has been revised to incorporate an updated Example 5.1 relating to the
doctrine of preemption.
• A new Example 5.10 covering the Fourteenth Amendment’s application to same-sex
marriage.
CHAPTER 7
Introduction to Contracts has been substantially revised to incorporate new technology
relating to the creation of contracts. It has also been updated to include current technology,
non-offensive terminology, and a new photo.
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Preface xxv

• An entire section (7.8) addressing the issues of smart contracts using blockchain
technology and cryptocurrency. Included are a new Learning Outcome, two
new legal terms, an addition to the Chapter Summary, and two new Assessment
questions.
CHAPTER 8
Offer and Acceptance has been modified to include the term “postal acceptance rule,” and
the mailbox rule has been updated to address voicemail, email, faxes, and text messaging.
CHAPTER 10
Consideration has been revised to include updated terminology and technology in Example
10.2. Also, Example 10.5 has been corrected and clarified.
CHAPTER 12
Legal Purpose of Contracts has added coverage relating to online gambling. In addition,
Example 12.11 has been rewritten for clarification.
CHAPTER 15
Discharge of Contracts has a modified opening quotation and a new photo. In addition,
Chapter Summary 15.8 has been modified to be more concise.
• A substantially revised Section 15.8 offering expanded coverage of Federal Trade
Commission regulations and the Truth in Lending Act.
• A new section entitled Punitive Damages and a new legal term.
• A new section entitled Liquidated Damages Clause, in which the definition of “pen-
alty or forfeiture” has been incorporated.
• Incorporation in the Assessment section of one new and two revised questions con-
sistent with the new coverage.
CHAPTER 16
Transfer of Title has been updated to include digital bills of sale.
• Revised question 47 in the Assessments.
CHAPTER 17
Changed opening quote and minor revisions to assessments
• Added Critical Thinking question 33 about software as “goods” under Article 2.
CHAPTER 20
Business Organizations has minor updates.
liu34544_fm_i-xxxvi.indd xxv 10/05/20 04:45 PM

xxvi Preface

• Eliminated reference to limited liability companies as relatively new.
• Added B Corporations to Section 20.6, Other Organizational Forms.
CHAPTER 21
Chapter 21 has been renamed Creditor’s Rights and Bankruptcy and has been substan-
tially revised to include an explanation of credits rights under Article 9 of the Uniform
Commercial Code.
• New Section 21.2, Creditor’s Rights, with corresponding learning outcome and chap-
ter summary.
• Streamlined chapter by eliminating separate section on the 2005 changes to the
Bankruptcy Code and incorporated those changes into the relevant sections.
• Added a Matching Legal Term on perfection.
• Eliminated Critical Thinking question on Chapter 9 Municipal Bankruptcy and
added a question on priority of state claims as new question 36.
CHAPTER 24
Updated quote at beginning of chapter
CHAPTER 26
Landlord–Tenant Relations has been revised to clarify the landlord’s right to keep fixtures
on termination of lease.
• New example 26.6. added to demonstrate the landlord’s right to keep fixtures.
CHAPTER 28
Intellectual Property had only minor changes in Assessments.
• Revised question 39, Working in Teams, to focus on trade names and generic use.
CHAPTER 29
Computer Privacy and Speech had minor updates.
• Updated Section 29.1, Computer Privacy, to include data privacy concerns.
• Changed question 31 in Question of Ethics to address data privacy instead of public
figures and privacy.
CHAPTER 32
The Employer–Employee Relationship had minor revisions in Section 32.3 to clarify that
employment at will cannot be exercised in contravention of an employment contract.
liu34544_fm_i-xxxvi.indd xxvi 10/05/20 04:45 PM

Preface xxvii
CHAPTER 33
Employment Law has been substantially revised to explain the methods of proving Title VII
discrimination
• Section 33.2 now gives a summary of the four methods of proving discrimination,
direct evidence, express policy, disparate treatment, and disparate impact.
• Three new examples were added to this chapter: example 33.6 for express policy,
example 33.7 for disparate treatment, and 33.8 for disparate impact.
• The subsection on Sexual Harassment was streamlined to contain a more consistent
level of detail with the other subsections by eliminating the detail on elements of a
sexual harassment program.
• Section 33.3 added an explanation of employees’ right to concerted action under
Section 7 of the National Labor Relations Act.
CHAPTER 34
Product Liability had only minor editorial changes.
CHAPTER 36
The opening quote for International Business Law was changed, and the chapter was
updated to reflect updated status of treaties and international organizations.
• Section 36.4 updated to explain the current renegotiation of NAFTA.
• The list of European Union members was updated to eliminate the United Kingdom
with a corresponding explanation of status in the text.
CHAPTER 37
Business and the Environment had minor updates and changes.
• Section 37.7 was updated to include the phase out of chlorofluorocarbons
• Table 37.1 was deleted.
OTHER SIGNIFICANT CHANGES

• The numbering of Chapter Summaries has been revised so as to tie each point with
the appropriate Learning Outcome and with the major section within the chapter
itself. This allows the student to more easily discern the organization of the chapter.
SUPPLEMENTARY MATERIALS
The Constitution of the United States can be found in the Appendix.
liu34544_fm_i-xxxvi.indd xxvii 10/05/20 04:45 PM

Acknowledgments
We would like to extend our sincere appreciation to the following individuals:

• To Mr. Henry Lowenstein, PhD, Coastal Carolina University, contributing editor for
instructor supplements.
• To the reviewers who have contributed their time and ideas to the development of the
eleventh edition:
Bonnie Bolinger Jill Jasperson

Ivy Tech Community College Utah Valley University
Joyce Brooks Steven Kaber

King’s College Baldwin-Wallace College
Jeff Bruns Jill Kingsbury

Bacone College Metropolitan Community
Colleges–Maple Woods
Murray Brunton
Central Ohio Technical College Gilbert Logan
Bryant & Stratton College
Barbara Desautels
Hesser College Kirsten Mast
The College of Idaho
Konstantinos Diamantis
Tunxis Community College Debra McCarthy
Central Lakes College
Donna Donathan
Huntington Junior College James McCord
Huntington Junior College
Richard Gendler
Florida Atlantic University Donna McCurley
Gadsden State Community College
John Gray
Faulkner University Victoria Miller
Piedmont Technical College
Denise Greaves
Herzing College Kristin Mueller
Ivy Tech Community College
Diane Hagan
Ohio Business College William Padley
Madison Area Technical College
Christie Highlander
Southwestern Illinois College Elisabeth Sperow
California Polytechnic State University
Thomas Hughes
University of South Carolina
xxviii
liu34544_fm_i-xxxvi.indd xxviii 10/05/20 04:45 PM

Acknowledgments xxix
Cathy Steiner Lori Whisenant

DuBois Business College C.T. Bauer College of Business University of
Houston
Fran Tannenbaum
NVCC Woodbridge Campus Robert Wible
Bradford School
Matthew Thisse
Dorsey Business Schools
Finally, this content was but a raw, unsold manuscript until the skilled publishing team
refined it. Our manuscript benefited immeasurably from the guidance of the multiple levels
of skill provided to us by McGraw Hill. We respect and honor our Managing Director, Tim
Vertovec; Executive Portfolio Manager, Kathleen Klehr; Product Developer, Allie Kukla;
Marketing Manager, Claire McLemore; and its Content Project Managers, Fran Simon and
Katie Reuter.
liu34544_fm_i-xxxvi.indd xxix 10/05/20 04:45 PM

chapter 1
Our System
TOUR
A GUIDED
of Law
L E A R N I N G O U TC O M E S
After studying this chapter and completing the assessment, you will be able to
The eleventh edition of Essentials of Business Law is designed to ensure that students will not
1.1 Discuss the application of law in today’s world.
only learn fundamental applications of business law, but also will be able to put those basics
1.2 Provide examples of how the application of law affects (a) one’s personal or social life, (b) business or business
into practice after reading a multitude of real-world examples and performing several skill
operations, and (c) governments.
assessment activities.
1.3 Identify the principal sources of law in the United States.
1.4 Explain the reasons for the preparation of the Uniform Commercial Code.
1.5 Cite and describe the major classifications of law.
“A concise,1.6
wellDistinguish
written, moral
introduction into Business Law
law from legal obligations.
that focuses1.7on Describe
essential knowledge regarding the vari-
the structure of our federal and state court systems.
ous topics. An excellent textbook for college students
embarking into the subject of Business Law.”
—Fran Tannenbaum, Northern Virginia
Community College: Woodbridge Campus
OUR SYSTEM OF LAW
terms Confirming Pages
“As long as I have any
plaintiff ordinance
choice, I will stay only
LEGAL
CHAPTER OPENINGdefendant
QUOTE administrative law
in a country where
chapter 1
Each chapter opens with a lighthearted
stare decisis Uniform Commercial
but thoughtful quote.
common lawquotes Code
The come(UCC) political liberty, tolera-
from a variety of moral law
sources, including
precedent tion, and equality of
case law
famous judges, lawyers, jurisdiction
entertainers, and all citizens before the
businesspeople. statutory law law are the rule.”
Albert Einstein,
Our System
noted scientist
of Law
Rubberball/Getty Images
2
liu34544_ch01_001-017.indd 2 06/09/20 03:11 PM
After studying this chapter and completing the assessment, you will be able to LEARNING OUTCOMES
Learning Outcomes outline the focus of the
1.2 chapteror business
Provide examples of how the application of law affects (a) one’s personal or social life, (b) business and provide a roadmap for the mate-
operations, and (c) governments. rial ahead. Each is tied directly to a main head-
1.3 Identify the principal sources of law in the United States. ing in the chapter, as well as a corresponding
1.4 Explain the reasons for the preparation of the Uniform Commercial Code. Chapter Summary point, to help reiterate im-
1.5 Cite and describe the major classifications of law. portant topics throughout.
1.6 Distinguish moral law from legal obligations.
1.7 Describe the structure of our federal and state court systems.
xxx
OUR SYSTEM OF LAW
terms “As long as I have any
plaintiff ordinance
LEGAL
defendant administrative law

in a country where
common law Code (UCC) political liberty, tolera-
liu34544_fm_i-xxxvi.indd xxx 10/05/20 04:45 PM
precedent moral law tion, and equality of
Download Complete eBook By email at1.1discountsmtb@hotmail.com

Discuss the application of law in today’s world.
1.2 Provide examples of how the application of law affects (a) one’s pers
1.4 Explain the reasons for the preparation of the Uniform Commercial C
OUR SY
LEGAL TERMS
Legal Terms are identified at the beginning of each terms Confirming Pages “As long
chapter, as well as in the margins where they first appear
plaintiff ordinance
choice, I
LEGAL
in the text. They offer expanded coverage to ensure stu-
dents are comfortable with the language after complet- defendant administrative law
in a coun
ing the course.
Chapter 2 Ethics and the Law 19
common law Code (UCC)
Confirming
political l
Pages
precedent moral law tion, and

2.1 UNETHICAL BEHAVIOR IN OUR WORLD case law jurisdiction Chapter 2 Ethics and the Law 25 all citizen
The news abounds with examples of unethical behavior in business, including poor treatment
statutory law
The federal government and many states have statutes that protect whistleblowers from retali-
law are th
of employees, using insider information for personal gain, violation of consumer interests,
ation. Still, with the possible exception of certain individuals who may have a personal grudge,
and environmental damage from operations. the usual motivation behind whistleblowing is the outrage to a person’s sense of ethics.
The federal government has now enacted programs to encourage whistleblowing by
providing financial incentives for doing so. For example, the Securities and Exchange
EXAMPLE 2.1 EXAMPLES
Commission, in an effort to enhance its reputation, has established a program to reward
whistleblowers with a percentage of penalties imposed. The Internal Revenue Service also
BP Oil operated a drilling facility in the Gulf of Mexico that exploded, killing 11 workers and cre- Examples throughout the chapter
has a similar program to reward the reporting of illegal tax activities.
ating a devastating oil spill that had an enormous negative impact on the ecosystem of the Gulf.
INTEGRATION OF ETHICS INTO BUSINESS help students understand concepts
AND GOVERNMENT
BP Oil was accused of using shortcuts in its well capping system and also appears to have had Rubberball/Gett
an inadequate response system in place for the spill. 2 in a real-world context. Each cre-
In the abstract, there is agreement that business should be conducted in ways that will not
harm the consumer or the environment. What is the most effective way to achieve this? The
ates
corporation may indeed adhere to the highest a scenario
ethical practices, but athat tiesexecutive
new chief directly to a
officer (CEO) or board of directors may discontinue those practices if they reduce prof-
Examples of unethical behavior in professions or government may also affect business.

its or otherwise adversely affect the key topic, ensuring students will be
firm. Further government regulation
Technology and expansion of global markets have presented businesses with a new array could ensure compliance with ethical able to recognize and apply what Air traffic control whistleblower
Anne Whiteman. Whiteman
of ethical questions and corresponding unethical behavior. For example, advances in genet- standards, but such an arrangement
“I particularly likeand thesethe useexamples
of stem cells because they have are all raised ethical they have learned in their careers. was threatened and harassed
might require a costly and oppressive after reporting air traffic con-
ics, cloning technology, in medical science
bureaucracy. The ideal is for respon-
real-life cases that explain the material that the stu-
trollers allowing planes to fly in
issues that were unknown even a decade earlier. Internet, computer technology and social
sible individuals, industry organi- air space less than 1,000 feet
media have all prompted discussions of ethical issues surrounding privacy and free speech
dent just read.
29 and My
30). students have saidmarkets
the examples liu34544_ch01_001-017.indd
and watchdog groups to 2
zations, apart at the Dallas–Fort Worth
encourage corporations and govern- Airport, an illegal and danger-
(see Chapters The expansion of global has created new ethical issues
helpIs itthem
ethicalto
forunderstand the Principles
to do businessof Law.”
ous practice.
ments to reach mutually agreed-upon
as well. an American company with a company in an undemo- Novikov Aleksey/Shutterstock
ethical practices.
cratic country or one that engages in systemic racial segregation?
—Kristin Mueller, Ivy Tech Community College
EXAMPLE 2.2 CHAPTER

The Rev. Leon Sullivan was a director of the General Motors Corporation who proposed that
American companies should ensure that equal employment would be available regardless of
SUMMARY
race in its South Africa operations, even though South Africa had laws in place at that time 2.1 Examples of how ethics in our world have nega- ethical beliefs are the foundation of many of
requiring racial segregation. These principles were eventually adopted by several hundred tively affected business practices include investors our laws.
other companies doing business in South Africa.
acting on insider information, accounting scan- 2.4 Business firms respond to ethical concerns by acts
dals, investment fraud, businesses polluting our of corporate responsibility and the formulation of
natural habitat, and individuals acting unethically codes of ethics, or credos. Educational institutions
in the development of medical and electronic offer courses and workshops and expand their exist-
CHAPTER SUMMARIES
technology. The expansion of global markets also ing programs. Governments enact legislation and
2.2
raises some ethical predicaments for business create programs to protect consumers and the envi-
professionals.
MORALS, ETHICS,
Chapter Summaries AND VALUES
correspond to particular per- ronment and to ensure ethical behavior of business
2.2 Morals are concerned with an individual person’s firms and the government itself. Trade and profes-
formance objectives and chapter headings, making beliefs as to right and wrong. Ethics is about sional associations develop guidelines for business
and professional members.
While morals, ethics and values may seem synonymous, the three terms have different the standards and principles for the behavior of
quick reference and retention of key concepts easy.
meanings. individuals within a society. Values are beliefs or
standards considered worthwhile.
2.5 Some ways business can ensure ethical prac-
tices include integrating corporate codes of ethics
Morals are individual and societal beliefs as to what is right and wrong. Ethics consist
2.3 Legalmorals
mandates are imposed on individuals or and relying on whistleblowers. Corporate codes
of the standards and principles that govern the behavior of individuals within a society. groups Beliefs about behavior as judged
by authorities or governments. In con- of ethics vary from one firm or industry to
by society.
Both ethics and morals derive from values—that is, the beliefs or standards that underlie an trast, ethical considerations generally spring from another. Whistleblowing is the exposing of an
individual and society’s beliefs. within individuals or organizations. However,
ethics unethical situation to an authority or the media.
Individual and group values are influenced by religion, traditions, and customs. Values The philosophical study of
what is right and wrong, good
may be influenced by a variety of factors from one’s culture—those of a nation or an ethnic and bad.
group. The American culture, for example, holds that such characteristics as freedom, indi-
vidualism, family life, fair play, hard work, and honesty are important. On the other hand, values
liu34544_ch02_018-031.indd 25 06/08/20 08:17 PM
xxxi
Beliefs or standards considered
the values held by a subculture—for example, employees of a corporation or a department worthwhile, and from which a
within a company—may differ from those of the larger culture. society derives its moral rules.
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Confirming Pages

Chapter 1 Our System of Law 11
TOUR
1.2 Examples of how the application of law affects a
A GUIDED
is a set of laws that govern various commercial
person’s personal and social life can be seen every- transactions and are designed to bring uniformity
where from the foods eaten, the medicines used, to the laws of the states.
the goods purchased, to the clothing worn. Exam- 1.5 Law in the United States is typically classified as
ples of how the law affects business can be seen constitutional law, civil law, criminal law, admin-
in zoning ordinances, regulation of environmental istrative law, and international law.
pollution, and licensing laws. Examples of how the 1.6 Moral law is concerned with the unenforceable
law affects the federal government include laws obligations that people have to one another; legal
providing for funding for building highways or for obligations are those required by enacted statutes
low-income housing, or requiring that states, coun- and other laws.
ties, or municipalities maintain them.
1.7 The structure of the federal and state court sys-
1.3 The sources of law in the United States are the tems includes courts of original jurisdiction (fed-
Constitution, executive orders, treaties, com- eral district courts and state courts) and appeals
mon law, precedent, case law, statutory law, and courts (federal circuit courts of appeals, the U.S.
administrative law. Supreme Court, and state appellate courts).
1.4 To address conflicts in business law between
states, the UCC was prepared in 1952. The UCC
CHAPTER ONE
ASSESSMENT CHAPTER ASSESSMENTS
Chapter Assessments sharpen students’ critical think-
MATCHING LEGAL TERMS ing, decision making, teamwork, technology, and
Match each of the numbered definitions with the correct term in the following list. communication skills and aid in student retention.
a. administrative law g. executie order m. stare decisis Assessments include:
b. appellate court h. moral law n. trial court
c. civil law i. original jurisdiction o. Uniform Commercial • Matching Key Terms
d. common law j. plaintiffs Code
e. criminal law k. precedents • True/False Quiz
f. defendants l. statutory law
• Discussion Questions
1. A legally binding directive issued by the president. 1.
2. The portion of the law based on the decisions of the old • Thinking Critically about the Law
2.
•
English courts.
3. A judicial body that has original jurisdiction in cases

Case Questions
involving state law. 3.
• Case Analysis
4. Court decisions that later courts tend to follow. 4.
5. Those who bring suit against others. 5.

• Legal Research
6. A judicial body empowered by law to review the findings of a
lower judicial body. 6.
7. The practice of a court to follow previous decisions. 7.
liu34544_ch01_001-017.indd 11 06/09/20 03:11 PM
Confirming Pages
MCGRAW-HILL’S SMARTBOOK® 2.0

Available within Connect, SmartBook 2.0 is an
adaptive learning solution that provides personal- 36 Part 1 Introduction to Law
ized learning to individual student needs, continu-

WHITE-COLLAR CRIME
ally adapting to pinpoint knowledge gaps and focus white-collar crime
A term used to describe various
White-collar crime is the term used to describe various crimes that typically do not involve
force or violence committed by and against businesses. Originally white-collar crime
learning on concepts requiring additional study. crimes that typically do not
involve force or violence related only to nonviolent crimes against businesses, usually committed by their own
committed by and against employees. The most common white-collar crime was the theft of an employer’s funds by
SmartBook 2.0 fosters more productive learning, businesses.
employees with access to such funds (embezzlement). In recent years, however, this unof-
ficial category of illegal activity has been applied to nonviolent crimes committed by busi-
taking the guesswork out of what to study, and ness firms as well as against business firms. In this newer, broader application, white-collar
crime covers a wide range of crimes, including stock swindles, frauds against insurance
helps students better prepare for class. With the companies, credit card fraud, income tax evasion, cyberspace fraud and theft of computer
programs, agreements with competitors to fix prices, and others. Depending on its serious-
ReadAnywhere mobile app, students can now read ness, a white-collar crime can be either a felony or a misdemeanor and can violate federal
or state law.
and complete SmartBook 2.0 assignments both RICO
The Racketeer Influenced and Corrupt Organizations Act of 1970, also known as
RICO, is one of the most successful laws used to combat white-collar crime. Originally
online and off-line. For instructors, SmartBook 2.0 One of the most successful
laws used to combat white-
created to restrict the entry of organized crime into legitimate businesses, RICO prohib-
its an organization’s employees from engaging in a pattern of racketeering activity. Some
collar crime, RICO prohibits an
provides more granular control over assignments organization’s employees from
engaging in a pattern of rack-
examples of the wide variety of crimes considered to be racketeering activities are securities
fraud, mail fraud, wire fraud, bribery, acts of violence, and embezzlement from pension
eteering activity.
with content selection now available at the concept funds. Under the RICO act, it is easier to both prosecute corrupt organizations and seize
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level. SmartBook 2.0 also includes advanced report- ages to his or her business or property may sue for treble damages, an amount equal to three
times actual damages.
ing features that enable instructors to track student
SECURITIES FRAUD
progress with actionable insights that guide teach- securities fraud
A fraud that occurs when a per-
Securities fraud occurs when a person or company, such as a stockbroker or investment
firm, provides false information to potential investors to influence their decisions to buy or
ing strategies and advanced instruction, for a more son or company provides false
information to potential inves- sell securities. In addition, securities fraud encompasses theft of an investor’s assets, stock
tors to influence their decisions trading based on nonpublic information (see “insider trading” as discussed in Chapter 31),
dynamic class experience. to buy or sell securities.
and the wrongful manipulation of financial statements.
xxxii EXAMPLE 3.3

Updike, the chief executive officer of Coast-to-Coast Airlines, knew that FlyToday Airlines
intended to purchase all outstanding shares of Coast-to-Coast Airlines at a higher price than
its current market value. Using insider information, Updike bought as much stock in Coast-to-
Coast Airlines as he could afford and resold it to FlyToday Airlines at a huge profit. If discovered,
Updike could be charged with the crime of insider trading.
Ponzi scheme A Ponzi scheme is a type of securities fraud in which large gains are promised to
A type of securities fraud in
liu34544_fm_i-xxxvi.indd xxxii which large gains are promised 10/05/20
investors; but in reality, newer investments are used to provide a return on older04:45
invest- PM
to investors, but in reality, ments. These schemes inevitably collapse over time as older investments eventually
newer investments are used become too large to cover with new investments. For more information on Ponzi schemes,
ROGER CPA REVIEW
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ics (as ranked by instructors) in the business law course. These
unique activities are assignable and auto-gradable in Connect.
xxxiii
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Instructors: Student Success Starts with You

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liu34544_fm_i-xxxvi.indd xxxvi 10/05/20 04:45 PM

PA RT 1
1. Our System of Law
2. Ethics and the Law
Introduction 3. Criminal Law
to Law 4. Tort Law
5. Constitutional Law
6. Administrative Law
Hisham F. Ibrahim/Getty Images
liu34544_ch01_001-017.indd 1 06/09/20 03:11 PM

chapter 1
Our System
of Law
After studying this chapter and completing the assessment, you will be able to

1.2 Provide examples of how the application of law affects (a) one’s personal or social life, (b) business or business
1.4 Explain the reasons for the preparation of the Uniform Commercial Code.
OUR SYSTEM OF LAW

terms “As long as I have any
plaintiff ordinance
LEGAL
defendant administrative law

in a country where
common law Code (UCC) political liberty, tolera-
precedent moral law tion, and equality of
case law jurisdiction all citizens before the
statutory law law are the rule.”
Albert Einstein,
noted scientist
Rubberball/Getty Images
2
liu34544_ch01_001-017.indd 2 06/09/20 03:11 PM

1.1 THE LAW IN OUR WORLD

When students in their 20s were asked The US Supreme Court
to say the first thing that came to Building.
mind when they heard the word law, Pixtal/AGE Fotostock
responses included “cops and rob-

bers,” “courtroom,” “narcs,” “drug
raid,” “legislators,” “speed limit,” and
“traffic violation.” Without doubt, the
impressions that most people have of
the law are influenced not so much by
actual experience, but by the way the
law is portrayed on television and in
movies. Sometimes the picture is dis-
torted. Justice always seems to triumph, the “good guys” usually win, and the “bad guys”
ultimately are caught and punished—a view that society wishes were true.
Unfortunately, movies and television shows provide the only picture many people get
of the law. What people do not see are the many day-in, day-out applications of the law that
deal with such ordinary matters as an automobile driver charged with having caused injury
to another driver or one corporation suing another corporation over responsibility for defec-
tive merchandise. In real life, the administration of justice can be much less exciting than is
often portrayed. There are areas of the law that do not hinge on clear-cut “right” or “wrong”
but on an ill-defined middle ground. Still, justice and law are hallmarks of a free society in
today’s world.
The fact of the matter is that our system of law functions largely outside the spotlight of
public attention. Every business day, in every city, town, and village in this country, courts
are in session, juries are being selected, and attorneys are busy seeking favorable decisions
for their clients, who might be either a plaintiff, the person who brings a lawsuit against plaintiff
The party who begins a lawsuit
another, or a defendant, the person against whom a lawsuit is brought or who is charged by filing a complaint in the
with a violation of the law. appropriate court.
Although the ordinary applications of law are not quite as exciting as a television
defendant
drama, it is important to understand certain essential legal principles because they affect The party against whom a law-
both one’s business and one’s personal life. Accountants, for example, need to know that if suit is brought and from whom
they do their work carelessly and cause someone to sustain a loss, they could be sued. Just recovery is sought.
as important, a person who is planning to rent an apartment or buy a home needs to know
his or her legal rights as they relate to property.
No one person can possibly know the entire body of law. Even learned judges and law-
yers tend to specialize in certain fields of law. The average person should, however, strive
to understand some of the general principles of law, how to avoid common problems and
pitfalls, and when to seek professional help.
The law presented in this text deals primarily with the general principles of law and
their applications to business. Some chapters focus on personal applications of the law,
however, and others treat ethical aspects of personal and business behavior.
1.2 APPLICATIONS OF LAW

The effects of law are felt throughout society. Indeed, some aspects of the law apply to all
persons, institutions, and organizations.
liu34544_ch01_001-017.indd 3 06/09/20 03:11 PM

4 Part 1 Introduction to law
PERSONAL APPLICATIONS OF LAW

Imagine, for a moment, how the law affects just one day in people’s lives. The alarm clock
that awakens them in the morning is set to a time that is regulated by a law establishing
standard time zones. Various federal and state laws regulate the purity and wholesomeness
of their breakfast foods. The clothing they wear is labeled in compliance with governmental
regulations. Their right to drive a car is regulated by state laws, and speed limits and other
traffic laws are often the responsibility of state or local officials. People are assured that no
one else may occupy their homes while they are away at school or work because the law pro-
tects their property rights. The safety and freedom they enjoy are possible because they live
in a nation of order—and that order is a result of laws passed for the benefit of the people
and the protection of their rights.
BUSINESS APPLICATIONS OF LAW

If people’s personal lives are influenced by law, think of how much more businesses, and
those who work for businesses, are affected by law. Every business must comply with many
federal, state, and local laws that are primarily aimed at regulating business activity. A firm
that wishes to set up business in a particular community may find that there are laws that
prohibit such activities. For example, local zoning ordinances might prohibit the operation
of a noisy factory in a residential area. State and federal laws prohibit or regulate the opera-
tion of certain businesses that might pollute the environment. Still other laws require that
businesses provide safe working conditions for employees or demand that only qualified
persons perform certain jobs. State laws, for instance, require that barbers and pharmacists
pass examinations to be licensed.
GOVERNMENT APPLICATIONS OF LAW

Legislatures at all levels of government pass many laws that apply only to businesses
and individuals, but some laws apply specifically to governments. For example, the
federal government may pass a law that provides funding for building highways or for
low-income housing. The same law may require that states, counties, or municipalities
maintain them.
1.3 SOURCES OF LAW

The ever-changing body of law that affects everyone in our country has arisen from a num-
ber of sources. As a result, laws sometimes conflict with one another. The way these con-
flicts are resolved will be discussed in this chapter.
CONSTITUTIONAL LAW
In our country, the principles and ideals that protect individual liberty and freedom are
incorporated in the Constitution of the United States (the federal Constitution). This
historic document gives the federal government certain reasonable powers and, at the
same time, clearly limits the use of those powers. In addition, each state has a consti-
tution of its own that gives certain powers to the various levels of government within
that state. Like the federal Constitution, state constitutions provide safeguards for the
liu34544_ch01_001-017.indd 4 06/09/20 03:11 PM

rights of individuals within that particular state. You will learn

more about the Constitution of the United States and the impor-
tant foundation it provides to our legal system in Chapter 5
(see Appendix).
EXECUTIVE ORDERS
An executive order is a legally binding directive issued by the
president with the intent to change the manner in which federal
agencies and officials operate so as to improve the practices of
the federal government. Perhaps the most historically significant
example of an executive order was President Lincoln’s Emancipa-
tion Proclamation, an order issued on January 1, 1863, proclaiming
all those enslaved to be forever free, and ordering all segments of
the executive branch to treat these persons as free. Other exec-
utive orders include those issued in response to the COVID-19
pandemic.
TREATIES
A treaty is a written agreement between two or more countries
that serves to establish terms of an international relationship.
Treaties become legally binding when they are approved by two-
thirds of the Senate (see Chapter 36).
The United States

COMMON LAW Constitution.
After the Revolutionary War, one of the most difficult tasks faced by our newly indepen- Comstock/Getty Images
dent nation was to establish a system of law. Because the original states were formerly
English colonies, it is not surprising that the new states adopted the system of laws
that had been used in England for hundreds of years—that is, relying on previous legal
decisions when similar disputes arose. This practice of relying on previous decisions
is known as stare decisis, which means “to stand on decided cases.” The English sys-
tem is known as the common law and still influences legal decisions in the United stare decisis
The practice of relying on
States today. previous decisions in which
similar disputes arose.
PRECEDENT common law

The body of recorded decisions
A precedent is a court decision on which later courts rely in similar cases. In some that courts refer to and rely
instances, a court may be influenced by precedent; in other cases it may not. Whether a upon when making later legal
court follows a precedent, or decides to overrule it, depends on the court that has ruled decisions.
on the case and whether the previous case was decided by the highest court in the same precedent
state. Decisions made by the U.S. Supreme Court, for example, must be followed by A model case that a court can
other courts. follow when facing a similar
situation.
Court decisions are recorded in writing so that lawyers and judges can refer to them
in preparing or hearing a case. These decisions are published in books called reporters,
and many of these decisions are available online. Each case decision is identified by a cita-
tion, which includes the names of the parties involved followed by the volume number, the
name of the reporter, and the beginning page number of the case. For example, the case of
Milkovich v. News-Herald, 473 N.E.2d 1191, is reported in volume 473 of the Northeastern
Reporter, Second Series, beginning on page 1191.
liu34544_ch01_001-017.indd 5 06/09/20 03:11 PM

Court decisions are published

in books called reporters.
Jim Sugar/Corbis Documentary/
Getty Images
CASE LAW
Sometimes a statute or a common law precedent may be difficult to apply to certain cases
or, with the passing of time, may take on different meaning. An existing statute or an
accepted precedent may be based on outmoded standards of justice. In such cases, a court
may disregard earlier interpretations of a statute or a principle of common law, or it may
interpret them differently. The court’s decisions in these cases influence later cases because
they too become precedents that may be followed in similar cases. The effects of these deci-
case law sions have been called case law.
The effects of court decisions
that involve the same or similar
facts.
STATUTORY LAW
Both federal and state constitutions are general statements of the powers of governments
and the rights of individuals. The specific applications of powers and rights are provided
for in laws enacted by federal, state, and local governments. Each state constitution provides for
a legislature that represents the people. These legislatures have the power to enact laws so
long as they do not conflict with either the federal or the state constitution. The laws passed
by Congress and by state legislatures are called statutes, and the field of the law that deals
statutory law with these statutes is known as statutory law. A law that is passed by a local government,
The field of law involving
statutes, which are laws
such as a city council, is often called an ordinance.
passed by Congress or by state Not only do statutes provide the specific applications of the powers and rights in the
legislatures. constitutions, they also allow governments to respond to particular circumstances. For
ordinance
example, when the federal and state constitutions were written, cellular telephones and
A law that is passed by a local automobiles were not even imagined, much less matters to be regulated. Yet after these were
government, such as a city developed, various legislatures passed statutes that restricted the use of cellular telephones
council.
while driving.
ADMINISTRATIVE LAW
Protection of the rights and freedom of individuals and organizations is well established by
the federal and state constitutions, by statutory law, and by common law. Still, today’s com-
plex society and system of justice present special needs that require certain laws that include
liu34544_ch01_001-017.indd 6 06/09/20 03:11 PM

their own administrative machinery. Sometimes when a federal, state, or local legislative body
enacts a law, it also sets up an organization to establish rules and enforce them. Administrative administrative law
The body of rules, regulations,
law is the body of rules, regulations, and decisions created by administrative agencies. and decisions created by admin-
The practice of establishing specialized administrative agencies has several advantages. For istrative agencies.
example, it relieves the police and the courts from having to establish and enforce regulations
that are often highly technical. Administrative agencies include federal agencies such as the
National Labor Relations Board, state agencies such as public service commissions, and local
agencies such as boards of health. These agencies have in common the authority to establish
rules that have the force of law, to maintain “courts” that are often called appeal boards, and
to conduct “trials” that are often called hearings. Because administrative law has become such
an important part of our legal system, an entire chapter will be devoted to it (see Chapter 6).
1.4 UNIFORM COMMERCIAL CODE

When the United States was primarily a farming nation and there was relatively little com-
merce between states, it did not matter that the state constitutions and statutes differed
from state to state. As trade between the states increased, however, so did the problems
caused by the conflict in business laws among the different states. For example, a business-
person knowing the laws of his or her state had little difficulty so long as customers were all
from the same state. But when business was conducted with customers in many states, he or
she had to know the law in all of them.
To help solve this problem, the Uniform Commercial Code (UCC) was prepared in Uniform Commercial
1952 by the National Conference of Commissioners on Uniform State Laws. The UCC is a Code (UCC)
A set of laws that governs vari-
set of laws that governs various commercial transactions and is designed to bring uniformity ous commercial transactions
to the laws of the states. Over a period of 15 years, 49 states adopted the UCC as part of and that is designed to bring
their state law. Not every state has adopted the entire UCC, and often state courts have dif- uniformity to the laws of the
states.
fering interpretations of their UCC sections. For example, Louisiana, having been a French
territory and therefore greatly influenced by French civil law, has adopted only parts of the
Code. Because the UCC is so widely accepted, this book is based on it.
1.5 CLASSIFICATION OF LAWS

The various laws, regardless of origin, can be grouped into several broad classifications, each
of which represents a legal specialty. Frequently a lawyer will specialize in one of these areas.
▸ Constitutional law is the study of the federal Constitution, its interpretation by the
federal courts, and its relationship to existing laws.
▸ Civil law is the study of the rights and obligations of individuals and includes the law
of property, the law of contracts, and the law of torts.
▸ Criminal law is concerned with acts against society (criminal acts) and the regulation
of criminal activity.
▸ Administrative law is concerned with the conduct of governmental administrative
agencies and their regulations. Examples are tax laws and laws dealing with transpor-
tation and trade.
▸ International law is concerned with the conduct of nations in their relations with
other nations.
liu34544_ch01_001-017.indd 7 06/09/20 03:11 PM

1.6 MORAL LAW

Since earliest times, people have recognized that they are to a certain extent responsible
for one another and have obligations to one another beyond those required by the law. For
example, a person who sees someone drowning has a moral obligation to try to save him or
her, and a person who hears someone screaming for help in the night has a moral duty to at
moral law least call the police. Such obligations are based on moral law—that is, the “law” concerned
The “law” concerned with the
unenforceable obligations that
with the unenforceable obligations that people have to one another. Many legal obligations
people have to one another. are based on moral obligations, but not all moral obligations are legally enforceable; a per-
son’s conscience is often the only means of enforcement.
Moral law refers to the

unenforceable obligations
that people have to one
another.
MC3 Dylan McCord/US Navy
1.7 A SYSTEM OF COURTS

Some of our laws came from sources that were not originally concerned with human free-
dom. However, most legal scholars agree that today’s laws provide adequate protection of
the rights of the individual. But the mere existence of laws is not enough.
There must be a means of administering the law to protect the rights of individuals and
businesses and to curtail the activities of wrongdoers. In this country, courts and govern-
mental agencies have been established to administer the law. The federal and state constitu-
tions and the entire body of written law would be of little value to individuals and businesses
if there were no provision for enforcing the law. Police alone cannot fulfill this function.
The federal and state constitutions provide for the establishment of a system of courts that
ensure citizens’ rights and enforce federal and state statutes.
liu34544_ch01_001-017.indd 8 06/09/20 03:11 PM

Another random document with
no related content on Scribd:
Provided she held her tongue as to her movements, suspicion was most
unlikely to fall upon her, at any rate for some time, and the danger of her
being sought for as Lady Holt was remote; and, if she were, she would
certainly not be a consenting party to the identification, because of the
consequent inevitable exposure of her bigamous marriage and the rupture
with Sir Ross Buchanan which that exposure would entail.
Melville looked at his companion lying huddled at the bottom of the

boat. Could he rely upon her not betraying him? What line should he take
with her when presently the scene that had to be got over between them
should begin? He could not quite decide; it was difficult to do so until he
saw her face. But for the moment he was glad that she should cower down
as she was doing; it rendered her chance of being recognised so much the
less, and already boat-loads of soaked holiday-makers were passing them.
Melville paused as a favourable opportunity offered, and surreptitiously
dropped his revolver into the river-bed. If—anything—should happen, that
must not be found amongst his possessions, for the bullet it had held would
certainly be kept, and such a coincidence as his possessing a weapon which
it fitted must be prevented. He kept his head down as he sculled and looked
neither to the right nor to the left. To the lock-keeper from whom he had
hired the boat he was a stranger, and all he had to do was to avoid being
recognised himself by any acquaintance who might chance to be in the
crowd that now was nearing the lock simultaneously.
He drew in to the left bank and let the lock fill up. The rain, which had
been savage and relentless while they were on the river, was abating now
they were within easy reach of shelter; the intervals between the peals of
thunder were lengthening, and, most noticeable of all, the terrible
oppression was relieved. Melville hooked the boat on to the stakes below
the lock and backed her gently up the stream until he came to a spot where
they could land easily.
"Sit up, Lavender," he said softly, but peremptorily.
She raised herself on one arm and looked round. Hopelessness stared
from her large eyes, but Melville saw with relief that the insane terror had
departed from them; he was anxious to get her into the train without
exciting remark, and it was something that she had regained her self-
control. That her frock was dripping wet and stained red from the cushions
would not attract attention here where everyone was wet, and before they
reached Waterloo she would not look so deplorable, however cold and
uncomfortable she might feel.
"We won't go through the lock," he said. "I'm going to pay the man for
the boat and say he'll find her here. Pull yourself together as much as you
can before I come back. If we are quick I think we can just catch a train,
and we shall get away before all the people get out of the lock and crowd up
the station. Do you feel better now?"
"Yes," she answered dully.
"I can depend upon you until we get home?" he asked, with some
anxiety.
She nodded a vacant assent, and with that he had to be satisfied. He got
out of the boat and went to the lock to pay for its hire and tell the man
where to find it. Meantime, Lavender, realising that whatever the future
might have in store for her, no good could be done by a scene at St. Martin's
Lock, made an effort to pull herself together, and tried to readjust her
bedraggled costume. With one of the napkins from the hamper she dried her
face and hands, and wringing some of the water from her skirts and rubbing
her patent shoes, she succeeded in making herself a little more presentable.
Melville was pleased. They hurried to the station and were fortunate enough
to catch an up train and secure an empty carriage.
But as soon as the train moved away his manner changed. Even if they
were left alone during the whole journey they only had fifty-five minutes in
which to arrive at an understanding, for he was quite clear he could not go
back with her to The Vale. He took the corner seat immediately opposite to
her.
"Why did you leave the boat at Fairbridge?"
The question sprang sharply from his lips, insisting on an immediate

reply.
"The storm was so awful—so appalling," she said faintly. "It was like
the end of the world."
It was obvious to Melville that she was frightened of him, and he was
content that it should be so, for only by terrorising her could he hope to
maintain his ascendency over her; any woman might be nervous at being
shut up in a railway carriage with a murderer, but it was not of that
precisely that she was afraid, for she stood in no fear of violence at his
hands. There was something despotic about him that compelled obedience,
and even if she had not been naturally as truthful as she was she would not
have attempted to prevaricate.
"Now tell me," Melville rapped out in the same peremptory way, "did
you hear what we were saying in that room?"
"Some of it," she replied; "enough, at any rate, to know what you have
been doing to get money."
"You don't know what my position was," Melville said. "You remember
my leaving Monte Carlo—ruined?" Lavender nodded. "I went down to see
my uncle a few days after I got home and he refused to help me. I don't
know why. He had always been lavish to my brother, and had never refused
me anything before. I was in absolute need of shillings, and had to get them
somehow. After I heard of your marriage with him, I told him I knew and
got something from him."
"But you got it on the ground that I was in need of it," she said
indignantly.
"It was the only way I could get it at all," he retorted.
"It was an outrage," she said, with suppressed passion. "I resent that as
much as anything else. After all the years I never touched a penny of his
money for you to tell him I was starving and pocket the money for yourself
is a thing you can't expect me not to be mad about."
Her eyes blazed from her white face, and Melville grew apprehensive.
"What do you think Sir Geoffrey's answer was?" he asked.
"What?"
"He gave me ten pounds as an act of charity, and said if you needed any
more you could apply to the people you'd been living with all those years.
So you see, if you had been starving, you need not have looked for much
help from him."
A flush shot over her neck and cheeks and ebbed again.
"It only makes it worse that your villainy provoked such a message—
such a gratuitous affront. Oh, what an incredible fool I have been! But I am
beginning to see you in your true colours now."
Melville looked at her, shading his eyes with his hand; it might not be
so easy to silence her after all.
"What are you going to do?"
"How can I say?" she protested. "I must have time. I can't even think
yet."
"You must think," he retorted curtly. "You must make up your mind
between this and Waterloo, and stick to it afterwards."
"I can't," she repeated. "What's more, I won't try." Her thoughts flashed
back from themselves to the dead man. "Why did you do it?" she sobbed.
"Why, in the name of heaven, did you do it?"
For just one moment a pang of remorse stabbed Melville's heart.
"Only the devil knows," he groaned; but the train was travelling rapidly,
and this was no time for vain reflection. "You must assure me, Lavender. I
must know that I can have confidence in you. After all, we're in this thing
together."
A look of fear came into her face, to be noted instantly by him.

"What have I to do with it?" she said defiantly.
"Nothing," he answered swiftly. "I want your oath that you know
nothing of it."
She threw out her hands with a pathetic gesture.
"I can't give it. I'm not sure of myself. I can't live and be sure of not
betraying it. I shall never sleep—never know peace again."
"I want your oath," Melville said doggedly. "After all, you stand to gain
more by Sir Geoffrey's death than I do."
"What do you mean?" she asked, surprised.
"You are free to marry Sir Ross."
She looked at him, not quite grasping the purport of his words, but even
as he said them they gave him confidence. If she was recalcitrant, he might
threaten her.
"Except yourself, no one can ever throw light upon Sir Geoffrey's death.
You must swear that you will throw none on it."
She did not answer, but sat like a statue of despair, as white as marble
and as motionless. Already they were drawing near to Clapham Junction;
ten or twelve minutes were all that were left for him to get the oath he must
obtain.
"Think," he said swiftly. "Think what it might mean if a living soul

knew that you were at that boathouse to-day. You—Sir Geoffrey's wife—
living on money derived from a man whom you had feloniously married,
engaged to be married again to a man who is twice a millionaire! What
would be said? That you had everything to gain by the death of Sir Geoffrey
Holt, supposing your identity became known, as it must be then: that you
could hope for no help or forgiveness from him, and that as the wife of Sir
Ross you would be rich beyond the dreams of avarice—and safe. They
would find there motive enough for the crime, and would say that your
hand fired the shot. And if you told the truth, and swore I did it, why should
they believe you? Why should I, who have lived all my life upon Sir
Geoffrey's bounty, kill the man upon whom I actually depend for my daily
bread?"
Lavender stared at him with increasing horror. Could he possibly intend

to shift suspicion on to her, or was he only putting into words what would
be the general opinion if her presence at Fairbridge that afternoon became
known? Melville read the doubt in her mind, and, with his fiendish
cleverness, allayed her first uncertainty. To let that rankle might be to goad
her too far, but he must appeal to her self-interest too.
"If it got to that, of course that would be the end of me," he said, "for I
should have to confess that the deed was only mine, and I could not be
taken alive. But think what you stand to lose: the income you have, the
fortune you may have, your name, your reputation, possibly your freedom.
You would be so involved in a scandal of bigamy and murder that in self-
defence you would have to disappear. Lavender, it isn't only for my sake
that I'm putting it all like this; I'm not asking you to do anything. I'm only
imploring you for both our sakes to do nothing. Will you give me your
solemn promise to hold your tongue for ever about to-day's work? Will you
swear not to say one word of where we have been, or anything else, to any
living soul? Will you, Lavender—will you?"
In sheer despair she retired from the unequal contest.
"I promise," she said. "I will be silent."
Melville could not repress a sigh of relief. It never occurred to him to

doubt her reliability. She would keep her promise, he knew, and he would
be safe. But there was no opportunity for further converse. They were at
Vauxhall, and the man who collected their tickets got into the compartment
and travelled with them to Waterloo.
At the terminus Melville put Lavender into a hansom.
"Don't write to me or call," he said. "I must go home at once, and I shall
probably have to go down again to Fairbridge. They are sure to send for me.
I will write to you as soon as I can and fix up an appointment."
She looked at him in wonder. He had courage of its kind, and courage of
any kind appeals to women.
"You need not be afraid," she murmured. "I will keep my promise," and
as he told the cabman where to go, she leaned back and closed her eyes in
utter exhaustion.
Left by himself, Melville, too, could have collapsed; there was a

physical reaction that left all his joints weak, and he shivered with cold. But
danger was not over yet; much would depend upon his getting into his
rooms unnoticed. So he hailed another hansom and drove to Piccadilly
Circus.
"What sort of storm have you had here?" he asked, as he paid the
cabman.
"Bad, sir; very heavy about four o'clock."
"Ah, well," Melville said, "it's good for your business, I daresay."
He walked round the corner into Jermyn Street erect and steady,
although he felt so excited. How would things work out? The street was
almost empty, for London was dressing for dinner, and the commissionaire
was not standing by the front door of the chambers. A swift glance into the
office showed Melville that that was empty too, and rapidly he walked
along the thickly-carpeted passage. Opposite the lift he paused to scan the
names upon the letters stuck in the letter rack, and his heart leaped as he
caught sight of the orange envelope of a telegram addressed to himself. So
it had come! He put out his hand involuntarily to take it, but checked the
impulse and silently ran up the staircase and gained his rooms. Once there
he tore off all his clothes and hung them in a wardrobe, which he locked.
He changed his linen, dried and brushed his hair, and then, putting on a pair
of flannel trousers and a smoking jacket, rang the bell and lay down on the
sofa, a cigarette in his mouth, a paper in his hand.
After an interval the bell was answered by the manager.

"Where's Jervis to-day, then?" Melville asked pleasantly.
"Went off duty, sir, at twelve. He'll be back at eight. Can I do anything
for you?"
"I wanted some tea," said Melville. "I'm ashamed to say I've been
asleep."
"I'll bring it to you," the manager said.
"Thanks," Melville answered. "You might see if there are any letters for
me," and he rose and stretched himself.
Tea arrived, and on the tray there lay a couple of letters and the
telegram. Melville tore it open, and an exclamation of surprise and horror
broke from him.
"When did this come?" he asked. "Half an hour ago! Oh, why wasn't it
brought up to me at once?"
"I'm very sorry," the manager said, "but I really didn't know you were
in."
"I've been in all the afternoon," said Melville. "Who would go out in
such a storm if they could help it? But, in any case, I think someone should
bring up telegrams to see if I am at home. It's awful—awful!"
"Bad news, sir?" asked the manager.
"Awful," said Melville again. "Sir Geoffrey Holt is dead. I must go

down at once."
CHAPTER XVI.
AN UNEXPECTED WILL.
That Sir Geoffrey's violent end should have an almost paralysing effect
upon the household that loved him so much was, of course, only to be
expected, but it is impossible to tell beforehand how great grief will
manifest itself in different people. Thus Ralph, who enjoyed a reputation of
being bright and frank and open-hearted beyond the common, became
morose and even sullen, nursing his wrath against the unknown murderer
and allowing the iron to enter into his soul. Melville, on the contrary,
hitherto self-centred and indifferent to the happiness of others, seemed to be
softened by the tragedy, and in many little ways displayed an eagerness to
comfort the rest and a regard for their sorrow that was very winning. The
inquest which was held two days after the outrage was ineffective: a verdict
of wilful murder was returned against some person unknown, and the case
was recommended by the coroner to the attention of the police. So far they
preserved a sphinx-like silence, and although conjecture was rife in the
neighbourhood it received no assistance or corroboration from the
detectives engaged.
The evidence given at the inquest was little more than formal; the
doctor's testimony was brevity itself, Ralph's was concise to the point of
curtness, and the police inspector had no suggestions to offer; the facts were
self-evident, and of the only details that seemed to promise any interest,
namely, the bloodstains upon Ralph's jacket and in the water in the basin,
his explanation was so obviously simple that comment was superfluous. Yet
upon the people in the court Ralph's manner had an effect not wholly
favourable. He appeared to resent their natural curiosity, was brusque, and
even in bowing to the coroner, when that functionary gave expression to the
sympathy felt by his court for Sir Geoffrey's relatives, did not err upon the
side of graciousness. But if Ralph thus failed to maintain the family
traditions of courtesy, Melville atoned for it. He was merely asked whether
he could throw any light upon the crime by suggesting any motive which
might have prompted it, and this, it is needless to say, he could not do. But
his quiet dignity in this moment of sorrow and his air of engaging candour
won all hearts, and he quitted the scene in full possession of the sympathy
of the audience.
There followed two most miserable days, during which Ralph smoked
in solitude upon his houseboat, and Melville, for the most part, idled at The
Grange. Music fits every mood, and there was no disrespect to the uncle by
the nephew turning to his Amati for comfort in this dark hour, and so he
played—played as if inspired by Saint Cecilia—and stole a little further into
Gwendolen's heart.
It was with a sense of genuine relief that the two brothers returned to the
Manor House after the funeral. There was a certain restraint between them
and an odd embarrassment as to their mutual attitude in the small matters of
daily life; thus Sir Geoffrey's chair at the head of the table was left empty
by consent, but it stood as a constant reminder that for one of them it
symbolised possession, and now that its late tenant was laid to rest with his
fathers, the question as to which of the two should sit in it by right was
about to be decided.
With the closing of the inquest Melville's first fears of detection were
allayed, and his mind was engaged almost exclusively with the problem of
his future. He took it for granted that his uncle had died intestate, and the
only complication he could foresee in the division of the estate was brought
about by the existence of Lavender, of which he believed he was the only
person who knew. Mr. Tracy might know, and if he did, Melville supposed
that half the estate would be held, pending Lady Holt's instructions, and that
the other half would be divided between his brother and himself without
undue delay. What action he should take with regard to Lavender it was too
early to decide, but in a vague way he was beginning to incline to the policy
of persuading her never to come forward, which he was confident he could
do, and, by-and-bye, her share, too, might be obtainable for himself, or, at
any rate, half of it.
The brothers were standing in the hall, both feeling rather aimless and
self-conscious, when Martin joined them.
"Mr. Tracy mentioned that he had to return to London soon after the
funeral, so I have taken some luncheon into the library. I thought, perhaps,
you would have business to do before he left."
The butler directed his remarks diplomatically between the two young
men. He assumed that the Manor House would be left to Ralph, as being the
elder, but he did not wish to make any invidious distinctions between them
at present. They looked at each other and went into the library, where they
found Mr. Tracy contemplating a substantial pie as if wondering what
description of animal food it might contain. The old lawyer looked up at
them with a smile, and settled all difficulties of precedence by sitting down
in the nearest chair, which happened to be at the head of the table. He knew
the utility of a meal as a preparation for an unpleasant discussion, and
although as Sir Geoffrey's solicitor he was only the mouthpiece by which
the dead man's disposition of his property was to be communicated, he felt
uncomfortable.
"I'm not ashamed to say that I am particularly hungry," he remarked.

"With your permission, I will discuss this pie before discussing business,"
and he proceeded to make an excellent luncheon, talking all the while of
everything except that which was uppermost in all their minds.
But, luncheon disposed of, his manner changed.
"I have had two copies of Sir Geoffrey's will prepared," he said, "and
perhaps you would like to look at them while I read the original. It is not a
long document, but the technical phraseology may, perhaps, seem confusing
to the lay mind."
He turned to a table in the window, where he had placed a bag

containing his papers, and so did not observe the slight start of surprise
which Melville could not repress. So there was a will after all! Was fortune
about to play him a scurvy trick after he had dared so much? He lighted a
cigarette and sat down in a chair where the light would not fall upon his
face.
"In its main features," continued Mr. Tracy, who seemed to be taking an
unconscionable time fumbling in his bag, "the will, as I have said, is
sufficiently simple, but it contains at least one element of surprise. I will
read it without further comment, and you can follow from the copies," and,
giving a type-written copy of the will to Ralph and another to Melville, he
read the original clearly and distinctly.
Beginning with legacies to the servants, ranging from a year's wages to
the youngest maid to life provision for Martin Somers, the will ordained
that a charge should be made upon the estate sufficient to give an annuity of
four hundred pounds a year to the testator's widow, Dame Lavinia Holt, to
be paid quarterly to her in person, on application at Mr. Tracy's office, the
first instalment to be paid upon her first making such personal application,
and not necessarily to accrue from the date of her husband's death; subject
only to these legacies and this one charge, everything real and personal was
bequeathed to "my dear nephew, Ralph Ashley," for his uncontrolled use
and enjoyment. Of Melville's name no mention whatever was made.
Mr. Tracy folded up the document and waited. The silence grew painful.
Ralph did not know what to say, and Melville could not trust himself to
speak. He was white with mortification and rage, and could have cursed
himself for having with his own hand destroyed his last chance for the
future. He cleared his throat and tried to speak, but the words would not
come. Ralph looked enquiringly at the solicitor.
"I suppose there can be no mistake," he said; "but this lady—who is

she? I have never heard until this minute that my uncle ever married."
"I can throw no light upon the mystery," Mr. Tracy said. "Sir Geoffrey
was not the man to give confidences. He drafted this will himself, less than
a month ago, and all I have done is to engross it and procure his signature. I
should like to say that I ventured to ask certain questions and even make
certain suggestions, but they were received with unmistakable disapproval,
and, of course, I could not pursue the matter."
"It is iniquitous," said Melville hoarsely. He rose abruptly from his chair
and faced his brother. "This is your work, you scoundrel! For years you
have left nothing undone to estrange Sir Geoffrey from me. You have
schemed and plotted for this, and at the last minute, curse you, you have
succeeded. Well, you may be hugging yourself now, but I swear you will
live to be sorry."
Mr. Tracy tried to pacify him, but in his heart he was not a little sorry
for him. It must be a terrible shock to find himself thus ignored by the uncle
from whom, for all the lawyer knew to the contrary, he had every right to
expect munificent provision. And the lawyer spoke the truth when he said
he had ventured to plead Melville's cause with Sir Geoffrey, although he
reduced to the lowest possible terms the substance of the old man's answer
to his pleading; yet even at that interview, when Sir Geoffrey might
reasonably have been expected to confide entirely in the lawyer engaged to
give legal effect to his last testament, he had refrained; his native pride
forbade him to dilate upon his story, and kindly, but quite firmly, he
declared his intention not to swerve from the course which he had chosen.
Now that the thing was done, however, Mr. Tracy preferred that the possible
quarrel between the two young men should be deferred until after his own
departure, so he reverted to the matter immediately in hand.
"Subject to your approval," he said, addressing Ralph, whom alone it

was now necessary to consult, "I will take steps to ascertain Lady Holt's
address. Sir Geoffrey told me he knew she was alive, but did not know
where she was to be found. I rather inferred that she was in London, and in
poor circumstances."
"Act as you think right," said Ralph. He was so surprised by the

revelation that he was impatient to learn the whole story. "Make all possible
enquiries, and if they fail, why not advertise a reward for information about
her? Why should Sir Geoffrey's wife be in poor circumstances at all?"
"Perhaps she was misrepresented to her husband," Melville said bitterly.
"Well, I will see about it," said Mr. Tracy, "and let you know the result.
Now I must really hurry away. I ventured to ask the butler to order a
conveyance to take me up to the station. Good-bye, Mr. Melville. I quite
understand your very natural disappointment, and I do not hesitate to say I
am sorry about it. If I can be of any service to you at any time do not
hesitate to command me."
Ralph walked to the door with Mr. Tracy.
"I'm all at sixes and sevens for the minute," he said, "but I should like to
see you again soon. Uncle Geoffrey may have left Melville nothing, but he
has made no conditions in leaving me so much. You can, doubtless, advise
me what would be the best thing to do about my brother."
"I shall be particularly glad to do so," the old lawyer replied heartily.
"Give me time to confirm any appointment, as I am very busy just now, but,
within reason, I can come here or see you in the Fields at any time."
"I suppose I'm in for a quarrel with Melville," Ralph continued

seriously, "so I should just like to add this. He's not likely to agree to accept
anything from me, but if he turns up later on to consult you, can't you let
him have a hundred or so without saying too precisely where it comes
from? You can make it right with me afterwards."
"Of course I can," said Mr. Tracy. "Very delicate of you, I'm sure. I shall
be delighted to take part in so amiable a conspiracy," and, shaking the new
master of the Manor House warmly by the hand, he got into the carriage
and drove away.
Ralph watched the carriage disappear, and turned back into the house
with a sigh. How was he to deal with his brother in this moment of
humiliation, which Melville would with difficulty be persuaded was not due
to him? Although they were brothers and so nearly of an age, the difference
in their temperaments was such that Ralph felt certain beforehand that he
could not hope to appeal successfully to the better part of Melville's
character, which surely must exist. If Sir Geoffrey, with all the authority of
age and wealth, could not control his younger nephew, how could Ralph
hope to succeed? He lingered in the hall, reluctant to open what would be a
painful interview, and as he looked at the familiar things, with their
evidence of wealth and cultured taste, and realised that they were all his, he
became conscious for the first time of the duties and responsibilities which
he had inherited with his rights and privileges. There was no mental
reservation in the inarticulate expression of regret at his uncle's death that
escaped him. Even if it had come in the ordinary course of nature, he would
fain have postponed the day, and lived content and happy with the dear old
man, as he had done for so many years; but for the end to come so
tragically, so treacherously, increased the bitterness a thousandfold, and
Ralph's first emotion as he looked upon his goodly heritage was one of
unmitigated grief at having thus entered upon his own.
But after a little while he raised his head with a new expression of peace
and high purpose on his face. He would strive to be as good a master of the
fine old Manor as Sir Geoffrey had ever been, and the moment to begin his
duties had arrived. He must offer the hand of brotherhood to Melville, and
enlist his help in tracking their uncle's murderer to his doom. More
hopefully he went slowly from the hall to join his brother in the library; but
as he opened the door a feeling of chill disappointment stole over him, for
Melville, too, had shirked the interview and the room was empty. As Ralph
turned to the window with a sigh he saw his brother, looking tall and slight
in his sombre mourning, moving slowly over the sunlit turf and making
evidently in the direction of The Grange.
CHAPTER XVII.
AN ARREST.
It was the fact that Melville shirked a conversation with his brother
immediately after the reading of the will; the mental strain had been so
great that he could not be sure of his temper or judgment, and that being so,
common prudence dictated a delay which would enable him to consider the
new situation in all its bearings before risking a final rupture with the new
lord of the Manor. He sought a temporary refuge at The Grange, where he
knew he would receive commiseration upon his terrible disappointment,
and where he might derive some sardonic satisfaction from the knowledge
that his presence by Gwendolen's side would involve Ralph's absence from
the same desirable spot. Mrs. Austen was quite frank in her condemnation
of Sir Geoffrey's action.
"Whatever Melville may or may not have done, it is unfair to allow a

young fellow to grow up without any profession or occupation, in the belief
that he will inherit a considerable fortune, and then to ignore his existence
in this way."
Gwendolen agreed with the abstract proposition, but could not believe
that Sir Geoffrey would have taken such drastic measures without good
reason; she hinted as much, but her mother would have none of it.
"I dare say Sir Geoffrey had plenty to put up with from Melville," she
said, "but that is the penalty of having children, whether they are your own
or adopted by you. What makes this will so inexplicable is that it was made
such a little while ago, for just lately Melville seemed to be on better terms
with his uncle than he had been for years. I'm sure there is some mischief-
maker at the bottom of it all, and if it had not been for this terrible murder
Sir Geoffrey would have got at the rights of the story, whatever it was, and
made a new will."
"Melville is fortunate in having such a brother as Ralph," said

Gwendolen; "it isn't as if the money were left to strangers. I don't suppose
there will be any difference really."
"What nonsense!" said Mrs. Austen testily. "Ralph is a very charming

young man, and I'm delighted you're going to be his wife, but I have a very
warm place in my heart for Melville, and I think it's quite possible he has
been misjudged; and your most excellent Ralph goes about with the
cheerful expression of a professional mute whenever Melville comes down.
Lately, for instance, since Melville has been here so frequently we haven't
seen half so much of Ralph."
Gwendolen sighed. She had not failed to observe the fact, but she could
throw no light upon the reason of it. Ralph resembled Sir Geoffrey in being
very taciturn where his private feelings were concerned; she remembered
the day when Sir Geoffrey said he had a bone to pick with Ralph. The
discussion ended satisfactorily, but she connected the slight trouble in some
way with Melville, who, as she afterwards learned, had seen his uncle the
previous night, and Ralph's championship of his brother's cause had been
discontinued from that time; since then, indeed, he never talked about him.
It was all very puzzling and sad.
In the meantime, Melville forsook the neighbourhood. He accepted Mrs.

Austen's hospitality for a couple of nights, and then, frankly confessing that
the proximity of the Manor House with its associations was intolerable to
him in his present frame of mind, returned to London, outwardly calm
enough, but inwardly consumed by a raging fire of evil passions. As he
paced his chambers, secure from prying eyes, hate and fear, chagrin and lust
for revenge swept across his pallid face, and sometimes, as he caught sight
of his reflection in the mirror, he thought the whole world must be able to
read his secret in the careworn lines, which in reality it ascribed to laudable
grief and natural disappointment. It is a kind-hearted place, this same world
of ours, provided its patience and generosity are not unduly taxed, and just
now it laid itself out to make things easier for Melville. He accepted the
proffered sympathy gratefully, and won a new sort of popularity by his
quiet pluck and his gentle air of resignation. Old people thought he was
chastened by his trouble; young ones thought he was to be pitied; and
Melville made the most of this occasion to make new friends among the
children of this world.
But he did not forget his vow that Ralph should live to be sorry for
having contributed, however indirectly, to his disinheritance, and wherever
he went he sowed scandal with both hands. It is an invisible seed, of which
the fruit is more deadly than the upas tree, and in sowing it as he did it is
possible that Melville himself had no idea of what the harvest would be.
Society knew little of Sir Geoffrey, who lived a comparatively retired life in
his fine old Surrey home, but the mystery attaching to the unknown Lady
Holt tickled its palate, and the murder of a man who was one of its order
was not lightly to be forgotten. Thus at many a dinner party, where the
subject was delicately broached, and at many a little luncheon in the clubs,
where the conversation veered upon the question of undetected criminals,
remarks were made—no one could afterwards precisely say by whom—
which went to direct the general suspicion towards one point.
"What is the good of all this parrot-talk about motives," he said on one
occasion. "When once you set to work imputing motives you need never
stop. Anybody can tell you that half the murders in the world are due to
drink or jealousy. Neither comes into this case. And England isn't like Sicily
or Corsica, where vendetta is an institution. Sir Geoffrey could not have had
an enemy in the world, so you may rule out revenge as well."
"How about the lady?" someone suggested, but Melville disposed of the
idea.
"She can't have got her knife into him, or she would not have lain so
low all these years. Besides, it looks as if Sir Geoffrey believed her to be
dead, for he made some funny arrangements about her annuity. Anyhow, all
that is pretty certain to come to light, for I believe there is a big reward
offered to anyone who will produce her. No; I don't see much use in fooling
after motives."
That was as far as he allowed himself to go then, but elsewhere, and to

another audience, he took a different line and seemed interested in hearing
the general opinion on this same subject of motives. He sat silent until the
end of the conversation, when he appeared disinclined to endorse the
verdict of the rest.
"It's too jolly dangerous," he said gravely, "to go about suggesting

people who might commit a crime, and then inventing reasons why they
should do it. It's very easy to vary the amusement, until you begin to believe
you have found the motive and the man by a process of exhaustion. Why,
Sir Geoffrey once told me he had made no will; is there sufficient motive
there for me to kill him so that I might benefit under an intestacy? On the
other hand, my brother knew he had made one, though I don't suppose he
knew its tenour. Is there sufficient motive there for him to kill the old man
on the chance of coming in? The thing is absurd on the face of it. We were
both dependent on him, and I venture to say that no two fellows were ever
fonder of their father than we were of our uncle."
It was not often he was as precise as that. For the most part he contented
himself with the vaguest remarks, all harmless individually, but totalling up
to an incredible strength when put together by skilful brains; and skilful
brains were doing it, brains owned by men who, in spite of all detractors,
are marvellously shrewd, and who do not often have to confess themselves
beaten in the end, although they may sometimes take a long time upon the
journey, and even make errors by the way. Whose business it was to gather
these rumours and carry them to the detectives engaged upon the case, it
matters not to enquire; popular opinion is no evidence, but it is often useful
as indicating where evidence may be found, and, Melville's expressed
opinion notwithstanding, all lawyers attach importance to motive in arguing
for or against the criminality of individuals. At any rate, they agreed in the
advisability of making an arrest upon suspicion, and their selection of the
individual was partly influenced by some of these random and irresponsible
remarks.
The Manor House was looking its best in the mellow light of an ideal
summer evening. It had been one of those days when it is impossible not to
feel delight in life, and Ralph awoke to full consciousness of the fact that he
had youth and love and wealth to comfort himself withal. He spent the
morning at The Grange, and after luncheon punted Gwendolen up the river,
arranging for Mrs. Austen to join them at the Manor House. There was no
flaw in his happiness that day, and, perhaps because of the violent contrast
between its morning and its night, it always stood out afterwards with
particular distinctness in his memory. Returning from Longbridge, he put
on his evening clothes and went to The Grange to fetch Gwendolen and her
mother; they strolled leisurely down to the Manor House and lingered over
dinner, discussing idly many little plans for alterations to be made in the old
place for the fuller satisfaction of its new mistress.
Martin hovered about them, anticipating their every want, and when at
last they left the dining-room they resumed the discontinued custom, and
decided to have their coffee brought to them on the houseboat. It seemed to
mark the closing of a tragedy and the resumption of the pleasant routine of
their country life.
And as on that evening—which now seemed so long ago—when the last

of the guests, summoned to congratulate them on their betrothal, had
departed, and Sir Geoffrey and Mrs. Austen joined Ralph and Gwendolen,
so now the sound of music was borne to them from other houseboats on the
river, so now a stray punt was poled swiftly down the stream, and the swans
floated out from their nooks under the willows and rocked gracefully in its
wake. Everything goes on just the same, although the best and greatest of us
die.
Mrs. Austen was dozing comfortably in her chair, and Ralph sat close to
Gwendolen, smoking in perfect content. Both were seeing visions of the
future, a future of unbroken peace and happiness spent in each other's
company, and the interruption of their waking dream by the sound of
footsteps coming on board was not unwelcome, as it only suggested another
little touch in the picture of material prosperity of which they themselves
furnished the human interest.
Martin deposited his tray in the kitchen in the tender, and came up to
Ralph.
"May I speak to you for a moment, sir?" he said almost in a whisper.
Ralph looked up surprised.
"What is it, Martin? Anything the matter?"
"I should like to speak to you alone, sir, if I may."
Martin followed him to the top of the ladder.
"A gentleman has come—in connection with the murder," he said, an

odd look of embarrassment upon his face, "and he says he must see you at
once; he won't be denied."
"Of course I must see him at once," said Ralph. "Why should he be
denied?"
The look on Martin's face was pitiful.
"I can't tell you what I mean, Mr. Ralph," he said, "but I'm sure there is
some hideous mistake. I think—I think he thinks you know something
about it."
Ralph stared at the old servant in blank astonishment, utterly failing to

comprehend his meaning.
"Where is the gentleman?" he said, but the question was answered for
Martin. A tall figure was standing at the foot of the stairway, and bowed to
Ralph as he reached the bottom step.
"Mr. Ralph Ashley?"

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Essentials of Business Law - eBook

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Anthony L. Liuzzo, J.D., MBA, Ph.D.

Ruth C. Hughes, J.D.

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ESSENTIALS OF BUSINESS LAW, ELEVENTH EDITION

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“A quality education has the power to transform

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1 Our System of Law 2

8 Offer and Acceptance 115

9 Mutual Agreement 130

11 Competent Parties 156

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2.2 MORALS, ETHICS, AND VALUES 19

2.4 ETHICAL REASONING AND RESPONSES 21

1.6 MORAL LAW 8

1.7 A SYSTEM OF COURTS 8

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3.3 CRIMES IN THE BUSINESS WORLD 35 CHAPTER 4 ASSESSMENT 60

4.3 LIBEL AND SLANDER 49

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5.7 THE EIGHTH AMENDMENT 73

5.8 THE FOURTEENTH AMENDMENT 74 part 2 Contracts 97

5.9 THE SIXTEENTH AMENDMENT 75

CHAPTER SUMMARY 75 7 Introduction to Contracts 98

6.2 ORGANIZATION OF GOVERNMENTS 85

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Consideration 100 8.5 TERMINATION OF AN OFFER 121

CHAPTER SUMMARY 108 9.3 MISREPRESENTATION 132

CHAPTER 7 ASSESSMENT 108 9.4 MISTAKE 133

Matching Legal Terms 108 9.5 UNDUE INFLUENCE 133

8 Offer and Acceptance 115 CHAPTER SUMMARY 135

8.2 REQUIREMENTS FOR A VALID OFFER 116

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CHAPTER 10 ASSESSMENT 149

11 Competent Parties 156

11.2 MINORS’ CONTRACTS 157

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13.1 THE REQUIREMENT OF PROPER FORM 185 CHAPTER SUMMARY 204

CHAPTER 13 ASSESSMENT 191

14 Operation of Contracts 198 ©Brian A Jackson/Shutterstock

14.1 CONTRACTS INVOLVING THIRD PARTIES 199

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15.3 TERMINATION BY PERFORMANCE 213 16.4 WHEN TITLE PASSES 235

16 Transfer of Title 232

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17.4 ENTIRE AND DIVISIBLE SALES CONTRACTS 249 Remedies 272

17.6 TRIAL PERIODS AND RETURNS 250 CHAPTER 18 ASSESSMENT 273

CHAPTER SUMMARY 258 General Agent 281

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