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The Legal Environment of Business
A MANAGERIAL APPROACH: Theory to Practice

Third Edition

Sean P. Melvin
Elizabethtown College

F. E. Guerra-Pujol
University of Central Florida
THE LEGAL ENVIRONMENT OF BUSINESS: A MANAGERIAL APPROACH: THEORY TO PRACTICE,
THIRD EDITION

Published by McGraw-Hill Education, 2 Penn Plaza, New York, NY 10121. Copyright © 2018 by McGraw-Hill
Education. All rights reserved. Printed in the United States of America. Previous editions © 2015 and 2011.
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Library of Congress Cataloging-in-Publication Data

Names: Melvin, Sean P., author. | Guerra-Pujol, F. E., author.

Title: The legal environment of business : a managerial approach : theory to practice / Sean P. Melvin,
Elizabethtown College, F. E. Guerra-Pujol, University of Central Florida.
Description: Third edition. | Dubuque : McGraw-Hill Education, 2017.
Identifiers: LCCN 2016040831 | ISBN 9781259686207 (alk. paper)
Subjects: LCSH: Businesspeople—United States—Textbooks. | Commercial law—United States—Textbooks.
Classification: LCC KF390.B84 M45 2017 | DDC 346.7307—dc23
LC record available at https://lccn.loc.gov/2016040831

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 Education, and McGraw-Hill Education does not
guarantee the accuracy of the information presented at these sites.

mheducation.com/highered
Dedication
For Joanna, Sean, and Ally—always.
S.P.M.

For Sydjia, the love of my life.

F.E.G.P.

For our students: past, present, and future.

The Authors

DEDICATION iii
 about the authors

Sean P. Melvin is an associate professor of business law at

Elizabethtown College (Pennsylvania), where he served as department
chair for eight years, won the Delta Mu Delta Outstanding Teacher of
the Year award, and received several Faculty Merit awards for teaching
and scholarship. Prior to his appointment at Elizabethtown, he was an
assistant professor of business at a large state university where he taught
in both the undergraduate and MBA programs. Before his academic
career, Professor Melvin was a corporate lawyer in a large Philadelphia-
based law firm and went on to become vice president and general
counsel at a publicly traded technology company.
Professor Melvin is the author or co-author of eight books (­including
five textbooks), has contributed scholarly and professional articles and
case studies to over two dozen publications, and is a member of the
Academy of Legal Studies in Business (ALSB). His article “Case Study
of a Coffee War” was selected as Best International Case Study at the
86th annual ALSB conference.

F. E. Guerra-Pujol is a lecturer of business law at the

University of Central Florida (UCF), a large state university located
in Orlando, where he also serves as faculty editor of the UCF
Undergraduate Research Journal. Prior to his appointment at UCF, he
was an associate professor at the Pontifical Catholic University School
of Law in Ponce, Puerto Rico, and practiced corporate and tax law with
a large Latin American law firm. Professor Guerra-Pujol received his
BA from UC Santa Barbara and his JD from Yale Law School.
Professor Guerra-Pujol has published refereed articles, book
­chapters, and other scholarly works and is a member of the Academy of
Legal Studies in Business (ALSB). He is currently writing a book titled
Alternate Legal Worlds exploring law from a science fiction perspective,
and his work has been featured on Freakonomics Radio, Hacker News,
and the website io9.

iv ABOUT THE AUTHORS

 preface
Think of this textbook as a road map that guides you through the twists and turns of
the laws that impact business entities, owners, and managers. This road map will help
you understand ways in which business owners and managers can add value to their
companies by using legal insight for business planning and for limiting liability. We
have tailored the text, examples, cases, and teaching features to the needs of business
students by providing concise explanations of law (theory) and then supplying the tools
necessary for students to apply their knowledge in the business environment (practice).

MASTERING THE MATERIAL

The first step in mastering the material is to recognize that you must internalize the
concepts presented in your courses. This requires more than a casual reading of assign-
ments. For many years, we have asked students who earned an “A” in our courses to
write a few sentences of advice to future students on how to internalize the material and
achieve a top grade in the course. We offer you some of their collective wisdom:
■ At the beginning of the course, match the syllabus with the textbook. Note the areas
that the instructor is focused on by comparing the amount of coverage between
topics. For example, if it appears from the syllabus that you will be spending sev-
eral classes on constitutional law, that is an area that will undoubtedly be assessed
(through an examination, project, etc.) and requires more intense study and review.
■ The day before a class, study the assignment as follows: (1) read the major and minor
headings in the textbook to get a general sense of what the material covers; (2) go
back and read the text carefully, using a highlighter and pencil to mark important text
and make notes in the margins; and (3) review the concept summaries, flowcharts,
and self-checks to be sure you understand the material, and put question marks next
to any concept you do not understand.
■ The day of your class, if possible, take 15 minutes before your class to review the
highlighted text, margin notes, and concept summaries.
■ During class, be sure that your text is open and that your notes are tied to any assign-
ments in the text. For example, suppose your instructor takes time to go over the
concept of jurisdiction in some detail during class, draws a flowchart on the board,
and goes over the self-check answers. This is a clear sign that jurisdiction will be
assessed in some form (most commonly through an examination or quiz). In your
notes on jurisdiction, indicate that the concept is important (and requires more
intense study) and cross-reference it with page numbers in your textbook.
■ As soon as possible after class (ideally, immediately after class but no later than that
same evening), take 15 minutes to write out 10 note cards. First, write out five of
the most important concepts covered in class that day. Second, write out five terms
(words or short phrases) that were used by the instructor during class. This will give
you a convenient and portable resource for reviewing.
Finally, we offer you the same advice for success in your course that we have offered our
own students for more than a decade: The secret is that there is no secret. No methodol-
ogy, advice, or review cards substitute for a sustained and diligent study of the material.

PREFACE v
 A NOTE TO THE INSTRUCTOR
The instructor’s materials are based on a turnkey approach that provides a comprehensive
set of course materials along with the textbook. These materials have been developed with
an eye toward minimizing instructor preparation time while still allowing the instructor to
tailor the course in a way that meets the unique needs of instructors and students alike. In
addition to the traditional supplementary materials package that includes an Instructor’s
Manual (written by the authors), test bank, and PowerPoint slides, the instructor’s version
of the textbook package is also integrated with a robust package of online content includ-
ing McGraw-Hill’s unique interactive exercises via Connect, quizzes, links to streaming
videos, case updates, sample text-specific syllabi with alternatives for a variety of class-
room circumstances, multiple formats, teaching notes, sample questions, and assignment
sheets tied to the simulation materials and the Capstone case studies.

Sean P. Melvin
F. E. Guerra-Pujol

vi PREFACE

THEORY TO PRACTICE
Beginning-of-Chapter Features
Medical Instruments, Inc. (MII) required a larger ware-
house for its facilities. MII located a 10,000-square-foot
Each chapter begins with Learning
building in New Hampshire and signed a lease with
Commercial Properties (CP) for one year with a right
Objectives and a short3. overview that
to renew for five one-year terms upon 60 days’ notice.
After the first renewal, CP sent back a new lease with
provides students with
4. a map of the
substantially the same terms, except that the new lease
had a mandatory arbitration clause that required any
chapter. The Learning Objectives are
tenant to go through arbitration in CP’s home state of
California. MII signed the lease without objection. One
a point-by-point checklist
5. of the skills
month after taking occupancy, MII complained that a
leak in the warehouse roof was allowing water to drip
and learning goals that gives students a
into a corner of the warehouse and that MII had to
move its hardware equipment out of the warehouse
to protect it from water damage. CP did not fix the leak
convenient study guide6. for previewing
until one month later, and MII suffered losses because
its hardware was partially destroyed by the leak. MII
and reviewing material in the chapter.
also had additional out-of-pocket losses related to the
expense of moving the equipment to another location.
1. If MII sues CP in a state trial court for the losses it
incurred, what would CP’s likely defense be?
2. Discuss the significance of the fact that the original
lease did not have an arbitration clause but the new
LEGAL STRATEGY 101
Arbitration and Raiderettes
“Lacy T.” is a professional dancer. After moving to
California from Louisiana in 2009, she spent two years
as a cheerleader for the Golden State Warriors basket-
ball team. In 2013, after getting married and having a
daughter, she landed a coveted job as a Raiderette, a
cheerleader for the Oakland Raiders football team.
Lacy T. spent months training, rehearsing, and prac-
ticing for her rookie season as a Raiderette, but with no
paycheck! She eventually hired a lawyer and brought
a class-action lawsuit on behalf of all the Raiderettes,
alleging the Oakland Raiders routinely break California
labor law.13 (The team withholds the last names of its
cheerleaders for safety reasons; Lacy’s attorneys have
chosen to do the same.)
13
You can read Lacy T.’s original complaint for yourself here: http://
www.levyvinick.com/images/SKMBT_60014012209230.pdf.
CHAPTER FOUR | Resolving Disputes: Litigation and Alternative Dispute Resolution
meL86205_ch04_108-137.indd 131 Strategic Legal Solutions
In keeping with the text’s new
focus on strategy, Strategic Legal
Solutions provides practical answers
for legal problems faced by managers
and business owners. Strategic Legal
Solutions is structured in a problem and
solution format that allows students to
understand how a particular section’s
legal concepts may be used to solve real-
world business problems.
Rev. Confirming Pages
one did. Also, is it significant that the place of arbi-
tration would require MII to travel to California? Do After studying this chapter, students who have mastered the material will be able to:
these facts give a court any reason to invalidate the
arbitration clause?
What cases that you studied in this chapter help to 3-2
support your arguments in Question 2?
Assume that no arbitration clause exists in the new 3-4
lease. What are MII’s options in pursuing damages 3-5
if CP refuses to compensate MII for the losses it has
incurred?
Assume that MII files a lawsuit against CP. As part
of its case, MII wishes to show that CP had notice
of the leak and failed to fix it for one month. What 3-8
methods of discovery would be useful to obtain this 3-9
information from CP?
Suppose that CP refuses to turn over all phone
records and repair request forms to MII based on
the fact that the information is confidential and can-
not be disclosed in litigation. What standard will a
court use to judge whether the information is a trade
secret and therefore not subject to disclosure? Whatness. Business owners and managers should thus know
case supports your answer?
Oakland Raiders logo. © dean bertoncelj/Shutterstock
10/04/16 04:21 PM
CHAPTER 3
The American
Judicial System,
walkthrough
Jurisdiction,
and Venue
Learning Objectives
3-1 Explain the role of the judiciary in the American legal system.
Distinguish between federal courts and state courts.
3-3 Identify the main duties of trial courts versus appellate courts.
Articulate how the law evolves through the adjudication of cases.
3-6
Differentiate between subject matter jurisdiction and personal jurisdiction.
Explain original jurisdiction and how state and federal courts may have concurrent jurisdiction.
3-7 Recognize the types of controversies over which federal courts have subject matter jurisdiction
and those in which diversity jurisdiction applies.
Explain the role of long-arm statutes in determining personal jurisdiction.
Apply the minimum contacts test in both a traditional and an Internet setting.
T
he primary role of courts is to decide cases and both the dispute itself (subject matter jurisdiction) and
resolve legal disputes. Court decisions may also over the parties in the case (personal jurisdiction).
shape or create legal doctrines that impact busi- Accordingly, students will also learn:
■ The circumstances under which a court has the legal
how our court system works in practice, especially
authority to decide a case (jurisdiction).
since the risk of litigation is always present in the busi-
ness world.
In this chapter, students will learn: NEW
■ The appropriate location to resolve a dispute (venue).
■
■
Legal Strategy 101
ROLE AND STRUCTURE
The role and structure of the American judicial system.
OF THE JUDICIARY
The function and legal authority of state and federal
courts.
The American legal system is structured around a set
■
This new feature challenges
How the law develops through court decisions. students
of federal courts and state courts collectively known
In order for a court to render a binding decision, as the judiciary. The judiciary has two primary roles.
to apply their legal First,
a court must have jurisdiction or legal authority over knowledge
courts adjudicate cases.in
In itsa
adjudication role, a
74 UNITstrategic
ONE | Fundamentals context. Eachof Business
of the Legal Environment chapter reinforces
the opening chapter’s Strategic Legal
Solutions: The Big Picture by posing a
real-world legal/ethical dilemma Rev.
meL86205_ch03_074-107.indd 74
that 10/04/16 04:20 PM
Confirming Pages
has a strategic dimension and offering
questions/exercises to stimulate critical
thinking
Although ethicists have variousand discussion.
views on how an ideal ethical organization should oper-
ate, all effective values management programs share certain common traits:
■ Management articulates a clear vision of ethics and moral integrity through all levels of
131 the organization.
■ Management’s vision of ethics and integrity is implemented at all levels of the decision-
making process of the organization.
STRATEGIC LEGAL SOLUTIONS
Developing Codes of Ethics Examples of ethical values may include:
and Conduct ■ Trustworthiness: Honesty, integrity, promise-
PROBLEM While many organizations may have a
set of informal values and standards to which they ■
keeping, loyalty.
Respect: Autonomy, privacy, dignity, courtesy,
aspire to adhere (e.g., “Don’t be evil” in the case
of Google), such informal value systems may be too ■
tolerance, acceptance.
Responsibility: Accountability, pursuit of
vague and thus not very helpful in a practical context.
■
excellence.
Caring: Compassion, consideration, giving,
STRATEGIC SOLUTION Develop an effective code of
ethics and code of conduct for your business organi-
■
sharing, kindness.
Justice and fairness: Procedural fairness, impar-
zation. Such codes should be developed in coopera-
tion with (and not exclusively by) the organization’s
human resource manager and legal counsel. Ide- ■
tiality, consistency, equity, equality, due process.
Civic virtue and citizenship: Law abiding, com-
ally, the entire organization, not just management,
should play a role or have a say in the creation and
munity service, protection of the environment.
Codes of ethics are general guidelines to pro-
periodic affirmation of such codes.
mote ethical decision making. Codes of conduct,
by contrast, are specific rules stating what actions
Depending on the organization, a code of ethics
and code of conduct may be expressed in the same are prohibited in the workplace. Examples of top-
ics typically addressed by codes of conduct may
document. Here, they are examined separately.
For a code of ethics, consider the following include policies relating to dress codes, illegal drug
use, antidiscrimination, sexual harassment, confi-
guidelines:
dentiality rules, rules against accepting personal
■ Identify the ethical values needed to comply gifts from third parties as a result of a company role
with relevant laws and regulations. or action, other conflict-of-interest rules, compli-
■ Identify the ethical values most relevant to the ance with applicable laws and regulations, not using
main activities in each area of your organization. the organization’s property for personal use, and
For example, the chief financial officer may iden- reporting illegal or questionable activity.
tify objectivity and accuracy as important values. Managers should also think beyond these tra-
ditional legalistic expectations. It is important to
■ Identify the ethical values most relevant to your identify what’s ethically sensitive in your particu-
organization’s employees and workplace. Con- lar organization as well. Codes of conduct should
sider which of these issues are ethical in nature, be integrated into the various areas of the organi-
for example, issues relating to fairness and zation, including personnel matters, such as job
honesty. descriptions and performance appraisal forms,
Identify the ethical values that might be most management-by-objectives expectations, standard
vii
■
important to your organization’s primary and WALKTHROUGH
forms, checklists, budget report format, and other
secondary stakeholders, including employees, relevant control instruments to ensure conformance
clients, customers, suppliers, lenders, and mem- with the code of conduct. An effective code of con-
bers of the local community. duct also contains examples of appropriate behavior.
 GOOD FAITH PERFORMANCE AND DISCHARGE LO 7-3
If the promises to perform in an agreement are not conditional, the duty to perform is abso- Apply the doctrines
lute. Most commonly, the parties agree on terms and the parties perform the contractual related to good
obligations in good faith in order to complete the contract. This completion is known as faith performance,
discharge of a
discharge, because both parties have now “discharged” their obligation to the other by
contract, and
performing the agreed-upon duties. Performance may also be accomplished by delivering substantial
products to an agreed-upon location (such as a warehouse). This is known as tendering performance.

walkthrough
goods (discussed in detail in Chapter 8, “Contracts for the Sale of Goods”). The law also
imposes an affirmative duty of good faith in performing obligations. In every contract, the
LO 7-4
parties have the duty of good faith and fair dealing in performance and enforce-
ment.20 Although the good faith requirement is ordinarily met by the parties’ simply per- Identify the ethical
dilemmas that a
forming their obligations completely—a situation known as perfect performance—the law
manager faces in
recognizes that there are some cases in which one party does not perform completely yet the context of good
has still acted in good faith and is entitled to enforce the remaining obligations in the con- faith performance.
tract against the other party.
Rev. Confirming Pages

BUSINESS ETHICS PERSPECTIVE Business Ethics Perspective

Good Faith and the Nuclear Condition learns that WidgetCo is able to obtain financing
Option on extremely favorable terms according to industry
standards.
The coverage of can
expires that other companies business
begin producing andethics
selling genericreflects
versions, usually at a
dramatically lower price. Unfortunately, until the generic drugs appear, many people who
Note that while the law imposes a good faith
requirement on all contracting parties, as a practi-
1. Given that the contract requires that any financ-
ing terms must be acceptable to WidgetCo, what
its increasingly
might benefit from lowerimportant place
drug prices must use other, sometimes inlesstheeffective, alterna-
tives. As owners of the patent, the pharmaceutical companies are acting legally in setting
cal matter the law may also protect those who are
ostensibly acting in good faith but may have unethi-
are Manager’s legal obligations to go through
with the transaction? Does this differ from Man-
business world.
their drug prices. In some
Nevertheless, addition
people are harmed tobyChapter
the drug company’s5, pricing
cal motives. In some contracts, the parties agree to policies. Assuming it is profitable and stable, the pharmaceutical company could adopt
a conditional clause sometimes known as a nuclear
ager’s ethical obligations?
2. Is it possible for Manager to comply with the
“Business, Societal,
a “moral minimum” and
approach by lowering its Ethical
profit margin—whichContextsmight do good for
a greater number of people—or it could instead maximize profits by maintaining high
condition, that is, a clause whereby one party may
cancel the contract completely if a condition is not good faith requirement and still avoid the con-
tract with Owner?
of Law,” the
prices, which mighttextbook features
deny relief to a part of logically
society that it otherwise could help.
Businesses are confronted with such predicaments frequently. To minimize the risk of
met to that party’s subjective satisfaction. Consider
the case in which the president of WidgetCo assigns
Manager to purchase a piece of real estate. Manager
3. Recall the discussion of ethical decision-making
models in Chapter 5, “Business, Societal, and
placed boxes with discussion questions
fines and lawsuits, companies must ensure that compliance with the law remains a prior-
ity. To maintain goodwill, attract customers and top-quality employees, and avoid adverse
enters into a contract with Owner for the sale of a
piece of commercial real estate. Manager insists
Ethical Contexts of Law.” How could these mod-
els help guide Manager’s course of action?
intended to help
consequences-based approachesstudents understand
publicity, companies must also monitor their ethical conduct. The principles-based and
discussed earlier in this chapter guide managers when they
are making business decisions. In addition, viewed from a macro perspective, businesses
that the contract contain an “acceptable financing”
clause as follows: “As a specific condition prec-
4. Assume that the president orders Manager to lie
on the loan application, thereby ensuring that any
ethical decision making in
generally follow either a moral minimum or maximizing contemporary
profits ethical philosophy.
In summary, the moral minimum theory encourages a business to “do no harm” or,
edent to WidgetCo’s obligation to close, the parties
agree that WidgetCo must obtain financing for the
financial institution will reject the loan applica-
tion. Note that lying on a bank loan application contexts.
alternatively,Business
“do the least possible Ethics
harm.” As longPerspective
as the business remains profitable,
transaction on terms and conditions acceptable to the company strives to act as ethically as possible, even at the expense of some additional
WidgetCo in WidgetCo’s sole discretion.”
is a crime. What
point?
Rev.areConfirming Pagesat that
Manager’s options
boxes cover
profits. By contrast,a wide
a company variety
that follows a maximizing
much money as possible, as long as no laws are broken.
ofprofits
topics,
theory strives to make as
After entering into the agreement with Owner,
the president notifies Manager that WidgetCo is no
5. Is this a case where using the nuclear option is
simply a good, hard-nosed business practice? including an
For example, examination
suppose that a company is building of the
a factory in practices
a city, and it knows that
the factory will produce exhaust fumes in large quantities. The Environmental Protection
longer interested in the property and that Manager Are there any circumstances you could articulate
is to use all “legal means” necessary to break the
contract with Owner. Assume that Manager also
under which Manager has no legal obligation but of AIG, Countrywide Mortgage, and oth-
Agency (EPA) has established air quality standards that the company must adhere to. After
extensive research, the company finds that it can spend $5 million to purchase and install
does have an ethical obligation to Owner?
Substantial Performance ers involved in the financial
that will not affectcrisis
most of the that
equipment that will allow it to meet the EPA required standards exactly. This approach
will reduce the pollution to a level city’s citizens, but a
small percentage of those with lung or breathing problems could experience increased
In some situations, the parties agree to terms of a contract and pursue good faith per- began in 2008.
discomfort. Through its research, the company also learns that for $8 million it can install
formance,
20
but
Restatement one ofparty
(Second) cannot
Contracts, § 205. give perfect performance. The law recognizes a party’s equipment that will far exceed the minimum standards. This will provide the cleanest and
good faith effort to substantially perform her obligations by allowing the substantial healthiest environment for the entire city, creating no impact on the city’s air quality. Either
performance to satisfy the requirements ofSEVEN
CHAPTER the agreement
| Contract and trigger the
Enforceability andother party’s
Performance 211 choice results in a legal decision by the company. If the company chooses a moral mini-
mum approach, it will spend the $8 million to do no harm, while a maximizing profits
obligation to perform. In order to prevail in a substantial performance case, the party approach will save the company $3 million but put some people at risk.
Legal/Ethical Reflection
trying to enforce the contract must show that she acted in good faith and that any devia-
tion from the required performance was not material. In this context, material refers to
meL86205_ch07_200-237.indd 211
and Discussion
some deviation from the contract that results in a substantial change in the value of the
contract or that changes a fundamental basis of the agreement. Suppose that a retailer has
10/04/16 04:23 PM LEGAL/ETHICAL REFLECTION AND DISCUSSION
contracted to purchase 500 pairs of jeans and 500 T-shirts from a clothing manufacturer. ■ Why should it matter whether the foreign com-
Made in the USA
This feature is strategically placed in parts
Despite a good faith effort, only the jeans and 400 T-shirts can be delivered. Since the
delivered jeans and T-shirts can be sold without the missing 100 T-shirts, the missing A manager for WidgetCo is approached by a
pany is subject to the same quality-control and
labor safety regulations as the current USA
of the text where the instructor may wish
T-shirts will not be material to the overall contract and the contract will be considered
substantially performed.
foreign vendor who offers to supply widgets at
a substantial discount from what his company is
supplier?
■ Why should it matter whether the lower-priced
currently paying. When determining WidgetCo’s
to have students reflect on the ethical
Note that although the doctrine of substantial performance allows a party to meet her course of action, consider both the moral mini- widgets are more (or less) likely to be faulty or
substandard?
obligations in a contract through less-than-perfect performance, the innocent party is still mum and the maximizing profits approaches to
dimension of a legal problem. It starts
entitled to collect damages to compensate for the imperfect performance. Generally, courts business ethics: ■ Why should it matter whether faulty or sub-
standard widgets could make the company’s
allow the substantially performing party to be paid the full amount of the contract price
with a short narrative and ends with a
(or other performance due) less any costs suffered. Therefore, in the example discussed
■ Why should it matter whether the lower-priced
widgets are not made in the USA?
products more dangerous to users or to the
environment?
series of questions that fundamentally ask
above, the clothing manufacturer will be paid only for the jeans and 400 T-shirts. Land-
mark Case 7.3, known as the Reading Pipe case, has been used for decades as a guidepost
students: What would you do?
for applying the doctrine of substantial performance. 144 UNIT ONE | Fundamentals of the Legal Environment of Business

Self-Checks
meL86205_ch05_138-164.indd 144 10/04/16 04:22 PM

Self-Check Substantial Performance

Which of the following constitute substantial performance?
1. Wholesaler contracts with Delicatessen to deliver 50 cases of bottled beverages
Self-Check exercises offer students an
each week in exchange for a $3,000 monthly payment. Due to heavy holiday vol-
ume, the December shipment contains only 45 cases.
opportunity to reinforce and apply the
2. The Yellow Pages agrees to publish a half-page advertisement for Local Dry material being studied in the textbook.
Cleaner in exchange for $2,000. The advertisement is published, but one digit in
the telephone number is incorrect. Students use black-letter law and cases to
3. A vegetable cannery contracts with Farmer to buy 54 units of “fancy-grade” spin-
ach, defined as “dark green in color, firm in texture, and with a leaf/stem ratio of answer short hypothetical questions on a
less than 15 percent stem.” Farmer delivers spinach with a leaf/stem ratio of 25
percent stem. specific topic. Self-Checks appear in the
4. Widower contracts with Artist to paint a portrait of his late wife. The portrait is
done on time and professionally, but the likeness, while resembling her, does not
textbook after important legal concepts
look exactly like the woman. and are always keyed to problems faced by
5. Book publisher agrees to sell and deliver certain named textbooks to a college
bookstore with delivery on July 1, eight weeks before classes are to begin. Deliv- business managers and owners. Answers to
ery occurs on July 5.
the Self-Checks are provided at the end of
Answers to this Self-Check are provided at the end of the chapter.
the chapter.

UNIT TWO viii WALKTHROUGH

| Law and Commerce
 Rev. Confirming Pages

walkthrough
test narrowly and, thus far, only to cases involving intentional injurious acts (such as
defamation).11
In Case 3.2, a federal court uses an injurious effect analysis in a defamation case filed
by a professional athlete.

Cases CASE 3.2 Clemens v. McNamee, 615 F.3d 374 (5th Cir. 2010)

FACT SUMMARY In the summer of 2007, fed- contacts as required by the long-arm statute and
The textbook uses a hybrid format to eral agents contacted Brian McNamee in connec-
tion with a federal investigation into the illegal
due process. The court held that to support personal
jurisdiction in a defamation claim, the forum must
report case law rather than including manufacture and sale of performance-enhancing
drugs in professional sports. McNamee was an ath-
be the “focal point” of the story. Although the court
acknowledged that the defamation may cause dis-
lengthy excerpts from judicial letic trainer who had worked for both the Toronto
Blue Jays and the New York Yankees baseball
tress and damage to Clemens’s reputation in Texas,
it concluded that the alleged defamatory statement

opinions. Students are provided with clubs. After authorities convinced McNamee that
they had sufficient evidence to convict him for
was inadequately directed to Texas to satisfy the
minimum-contacts requirement.
injecting athletes with anabolic steroids, McNamee
(1) a summary of the facts, (2) a decision agreed to cooperate with investigators in exchange WORDS OF THE COURT: Minimal Contacts
for immunity from prosecution. During an inter- and Injurious Effect “In support of jurisdiction,
and opinion synopsis, (3) short view with investigators, McNamee admitted that he Clemens points to the harm he suffered in Texas and
had administered steroids to all-star pitcher Roger to McNamee’s knowledge of the likelihood of such
excerpts from the actual opinion, called Clemens in both Toronto and New York. McNamee
repeated this allegation to Major League Baseball
damage in the forum. Yet under [previous case law],
Clemens has not made a prima facie showing that
“Words of the Court,” to help students investigators and to a reporter during an interview
with Sports Illustrated. In 2008, Clemens, a citizen
McNamee made statements in which Texas was the
focal point: the statements did not concern activity
understand a key point in the case, and of Texas, filed a defamation suit against McNamee,
a citizen of New York, in federal court based on
in Texas; nor were they made in Texas or directed to
Texas residents any more than residents of any state.

(4) several case questions to facilitate diversity of citizenship. The trial court dismissed
the complaint due to lack of personal jurisdiction
over McNamee since his alleged defamatory state-
discussion. Students will find this format ments were made outside Texas. Clemens appealed
to the Court of Appeals.
useful for understanding legal cases in
SYNOPSIS OF DECISION AND OPINION The
a business context. Court of Appeals for the Fifth Circuit upheld
the trial court’s ruling in favor of McNamee and
affirmed the dismissal of Clemens’s defamation
complaint. The court rejected Clemens’s contention
that jurisdiction was proper in a Texas court because
Rev. Confirming Pages
he suffered harm from the defamation in Texas. The
court analyzed McNamee’s contacts with Texas in
the context of the defamation claim and concluded
that McNamee did not have sufficient minimum
As such, the district court did not err in dismissing
Clemens’ suit for lack of personal jurisdiction over
McNamee.”
Case Questions
1. Why is due process relevant to the outcome of
this case?
2. What is the practical implication of this decision?
Does it mean that Clemens cannot bring suit for
defamation in any court?
3. Focus on Critical Thinking: Why didn’t Clem-
ens sue McNamee in New York? Suppose that
McNamee claimed that he had injected Clem-
ens with steroids in Texas. Would this admission
change the outcome of this case? How?

Concept Summaries and Flowcharts

11
CONCEPT SUMMARY Jurisdiction The Court also applied the effects test in Keeton v. Hustler Magazine, 465 U.S. 770 (1984). The case
involved a libel claim filed by Kathy Keeton in federal district court in New Hampshire. Keeton chose
New Hampshire believing it to be a forum favorable to her case. Hustler’s only contact with the state was the
Federal Trial Courts State Trial Courts circulation of copies of its magazine in New Hampshire. The Supreme Court held that a “regular circulation
of magazines in the forum State is sufficient to support an assertion of jurisdiction in this case because of the
Personal
Jurisdiction
1. Residents and business
entities located in the state
1. Residents and business
entities located in the state; or
To help students with reinforcing and reviewing
potential for the injurious effect to be felt in New Hampshire.”

where the federal trial court

sits; or
2. Nonresidents owning
property in the state; or the applicationCHAPTER
of theTHREE |law in aJudicial
The American business context,
System, Jurisdiction, and Venue 89
2. Nonresidents with minimum 3. Nonresidents with minimum
contacts with the state in which
the federal trial court sits; or
contacts with the state
according to state long-arm
each major section within each chapter features a
3. Nonresidents owning property
in the state in which the federal
trial court sits; or
statute; or
4. Voluntary summary of the section. When a legal procedure
is involved, flowcharts are used to summarize the
meL86205_ch03_074-107.indd 89 10/04/16 04:20 PM
4. Voluntary
Subject Matter 1. Federal question; or State law matters (statutes,
Jurisdiction 2. United States is a party; or
3. Diversity of citizenship exists
common law, state constitutional
issues) process.
and amount in controversy
exceeds $75,000 (amount
required only in diversity cases)

Venue
While jurisdiction requires an analysis of whether a court has legal authority over a par-
ticular case, venue is a legal concept that defines the most appropriate location for the dis-
pute to be heard. Two or more courts will sometimes have jurisdiction over the very same
matter, but it might be more appropriate from a fairness perspective to hear the case in a
particular location. Many states have venue rules to determine where a case may be heard.
Typically, state statutes provide that venue in a civil case is where the defendant resides
or is headquartered, while in a criminal case the venue is ordinarily where the crime was
committed. While changes in venue for civil cases are rare, in high-profile criminal cases a
defense attorney may ask for a change of venue to help select a jury from outside the area
where the crime was committed, under the theory that the out-of-area jury will be more
impartial and less influenced by the media.
To understand how venue may be important in a business context, suppose two Florida-
based companies, Beta and Alpha, are involved in a breach of contract dispute in which
Beta sues Alpha. The transaction involves an order that took place over a website based in
Florida, and the order was shipped from Alpha’s warehouse in Georgia to Beta’s branch
office in South Carolina. Although a number of state and federal courts may have jurisdic-
tion over a dispute in this case, a Florida court may decide that Florida is the best venue for
the dispute to be litigated because both parties have their principal office located there and
assumedly it is the most convenient forum for the parties. It is likely that the witnesses and
records are in Florida as well. Note, however, that a state court cannot unilaterally declare
that venue exists in another jurisdiction. Courts apply venue statutes to determine whether
or not their court is the most appropriate venue.
In Case 3.3, a federal trial court orders a transfer of venue based on a forum selection
clause.

CHAPTER THREE | The American Judicial System, Jurisdiction, and Venue 91

WALKTHROUGH ix

meL86205_ch03_074-107.indd 91 10/04/16 04:20 PM

 walkthrough
Rev. Confirming Pages

THEORY TO PRACTICE

End-of-Chapter Features PART I PART II

Santiago Information Systems (Santiago) is a business
based in Baltimore, Maryland, that purchases old com-
Each chapter ends with several features puters, refurbishes them with new software and hardware
parts, and sells them in bulk for about half the price of a
crafted to help students review and new PC. For the past three years, Santiago has shipped
approximately 40 percent of its inventory to the same cli-
Assume that one of Santiago’s suppliers, Parts R Us
(Parts), is headquartered in Union City, New Jersey,
and has been shipping Santiago parts for approximately
four years in a row. Last year, Parts sold approximately
$7,000 in hardware to Santiago. In the past 10 years,
Parts R Us has shipped to businesses in Maryland,

connect the different sections of the ent. The client is the Wilmington School District (Wilm-
ington) in Wilmington, Delaware, and the school pays
approximately $80,000 to Santiago for the computers per
chapter by applying the material learned year. Santiago also visits each school to be sure that the
computers are installed correctly and that the school dis-
in the text in a practical way. trict is satisfied with the order. Santiago has a website that
gives contact information for the company, but the site is
only partially interactive because users can transact busi-
ness only by sending Santiago an e-mail via the website.
Recently, Wilmington discovered that large shipments of
New York, New Jersey, and Connecticut. Parts has also
e-mailed advertisements to potential leads in each of
the 50 states. Wilmington has determined that Parts
provided the defective components used in the com-
puter order described in Part I.
1. If Wilmington decides to file suit against Parts in
Delaware, will a Delaware court have personal
jurisdiction over Parts? Why or why not?
2. Suppose Parts has a website where customers can

Theory to Practice: Each chapter features a hypothetical legal problem faced by a manager that is Santiago’s products were defective, and it has been unable
to come to a resolution with Santiago over the matter.
order products, pay for them via credit card, and
have them delivered via a delivery service to any

related to specific material in that chapter. The hypothetical problem

1. If Wilmington wishesis followed
to sue byor questions that con-
Santiago, what court
U.S. city. How does this affect your jurisdiction
analysis?
courts would have jurisdiction over this matter?
nect the problem to several different sections in the chapter.
2. What would be the best venue and why?
3. If Parts’s only contact with Delaware is via its web-
site, what standard should the trial court apply to

Manager’s Challenge: This feature allows students to engage inmaywriting or a group

3. If a Delaware court decides that it does not have juris-
diction, how that affect Wilmington’s decision work assignment determine whether there are minimum contacts?

on whether or not to file a lawsuit?

that sets forth a manager’s task relating to the material in the chapter. Some challenges are designed for
teams, others for individuals.
LEGAL STRATEGY 101
Key Terms: Key terms for students are boldfaced in the text and listed as a group at the end of the chap-
ter with a definition and reference to the page number in theForum chapter
Shopping where the term isclauses” firstin mentioned.
business agreements. Let’s take a look at
a real-world instance of this preventive legal strategy.
Forum shopping refers to a common strategic tactic
Case Summaries: Several brief case summaries are included, by plaintiffs inwith a heading
civil litigation. It occurs when aforstrate- each that indicates
Consider a familiar website like Facebook. With
over one billion active users, the threat of litigation
gic plaintiff selects the most favorable legal forum in
its general topic reference to the chapter and with questionswhich toabout the case summary.istheThese
initiate a lawsuit. cases are
a daunting one. But to open a Facebook account in
first place, a user must agree to Facebook’s terms
Forum shopping is often maligned and criticized,
intended to reinforce students’ knowledge of how laws apply in different fact circumstances.
but it is a common legal strategy. In fact, forum shop-
of service. (You can check out Facebook’s user agree-
ment for yourself here: https://www.facebook.com/
ping provides a good illustration of the preventive
terms.) Among the many provisions in Facebook’s user
or risk-reduction legal strategy we saw at the end of
agreement is the following forum selection clause:
Chapter 1: the proactive practice of anticipating poten-
tial legal risks to one’s business and taking preventive You will resolve any claim, cause of action or
measures to reduce or manage those risks. dispute . . . you have with us arising out of or
Rev. Confirming Pages By way of example, perhaps the single-greatest or relating to this [user agreement] or Facebook
looming legal risk that all businesses face is the threat exclusively in the U.S. District Court for the
of litigation, and a common legal strategy to address Northern District of California or a state court
this risk is the use of well-drafted “forum selection located in San Mateo County, and you agree to

100 UNIT ONE | Fundamentals of the Legal Environment of Business

Jurisdiction and Business Strategy
Improvements in technology and in product and service delivery make jurisdiction and
Legal Speak >)) Other Textbook Features
venue essential to business planning. As with all legal decisions that business owners and Jurisdiction
managers make, jurisdiction must be considered in a cost-benefit context. For example,
consider a company like Facebook, with headquarters in northern California. Facebook
An English word
derived through Key Points briefly reinforce an important
meL86205_ch03_074-107.indd 100 10/04/16 04:20 PM

now has over a billion active users all over the world. This means that Facebook could the combination of
potentially be sued in any state and in other countries as well. With so many users world- two Latin words:
juris (“of law” or
concept; Legal Implications in Cyber-
wide, what can Facebook do to ensure that any lawsuit involving a Facebook user is
litigated in northern California? For the answer to this question, keep reading. We will
explore this issue in more depth later in the chapter and, in Case 3.3, examine an actual
“of right”) and
dictio (“speaking”).
space apply traditional legal concepts in
lawsuit brought against Facebook presenting the questions raised here.
For now, consider two hypothetical companies, Ultimate Widget Corporation (UWC)
Thus, jurisdiction
refers to a court’s the context of the Internet; Legal Speak
authority to speak
and Knock Off Stores, Inc. (Knock Off). Suppose UWC, a New York company, is consid-
ering suing Knock Off, a California company, over copyright infringement. UWC manage-
the law or render a
decision in a legal
presents instant definitions of important
ment must consider not only the merits of its potential lawsuit but also the costs involved
in pursuing the suit. Specifically, UWC’s management must consider (1) the total amount
dispute.
legal terms in the margins of the text.
of the possible recovery from Knock Off; (2) the actual benefits UWC will reap from the
prevention of Knock Off’s copyright infringement; and (3) any alternate dispute resolu-
tion methods available. If Knock Off is a small company and not likely to steal any of
UWC’s customers or markets, it may not be worth the costs of litigation to sue Knock Off
in California. Pursuing the infringement action would
expose UWC to the expense of traveling to California,
hiring local counsel in California, and losing produc- KEY POINT
tive hours of managers and other witnesses who would
be required to travel to testify and be deposed for the The cost-benefit analysis involving jurisdictional
case. However, if a New York court has jurisdiction restrictions may affect the managerial decision-making
process when a company or individual contemplates
over the dispute, this fact is likely to change the dynam-
filing a lawsuit. Litigating disputes in out-of-state
ics of the cost-benefit analysis for UWC because now courts increases the costs of litigation.
the expenses of the suit are markedly lower.

Overview of Jurisdiction
LO 3-6
The origins of jurisdiction are found in the U.S. Constitution, specifically, the Due Process
Explain original
Clause of the Fifth and the Fourteenth Amendments. In essence, the Constitution prohib-
jurisdiction and
its the deprivation of a property interest (usually money damages) without a fair process. how state and
While origins of jurisdiction lie in the Constitution, appellate courts and legislatures have federal courts may
also shaped the rules used by modern courts to analyze questions of jurisdiction. have concurrent
jurisdiction.

Two-Part Analysis
Jurisdiction requires a two-part analysis: A court must have both (1) subject matter
jurisdiction and (2) personal jurisdiction (also known as in personam jurisdiction). Sub-

x
ject matter jurisdiction is the court’s authority over the dispute between the parties, while
WALKTHROUGH
personal jurisdiction is the court’s authority over the parties involved in the dispute.
For example, suppose that Abel is employed by Auto Parts Company (APC) to drive
a delivery vehicle. One morning, Abel is on a delivery and due to his lack of care (called
negligence7), he hits Cain, a pedestrian who is crossing the street in a designated public
crosswalk located directly in front of the hotel where he has been staying. Cain is severely
injured, and he considers filing a lawsuit against Abel to recover the losses he has suffered

Business Law Simulation Exercises
The textbook features three business
law simulation exercises. In a simulation
exercise, students are provided with facts,
law, and cases related to a hypothetical
business dispute and are assigned to
analyze the material, understand the
legal and ethical issues presented, and
then work toward a resolution. The
simulations are also excellent for review
and reinforcement because the materials
involve cases directly related to one or
more topics covered in a particular unit of
the textbook.
capstone case study 1
COFFEE WARS: STARBUCKS V. CHARBUCKS1
OVERVIEW AND OBJECTIVES
Two years after opening their family-owned cof-
fee bean roastery, Jim and Annie Clark had become
accustomed to long workweeks and bootstrap financ-
ing. By 1997, their Black Bear Micro Roastery was
finally growing, and the Clarks were hopeful that
their new specialty blend, Charbucks, would give
their uniquely dark-roasted coffee bean a catchy name
to remember. Soon after launching the new blend,
Annie Clark received a phone call from an insistent
in-house lawyer at coffee giant Starbucks that threat-
ened the very existence of the Clarks’ company. Star-
bucks claimed that the Charbucks name and label
infringed on its trademark, and it demanded that the
Clarks cease the use of the name Charbucks and that
any existing products with that name be removed from
supermarket shelves. But the Clarks insisted that they
had been careful to design the label with Black Bear
Micro Roastery logos and that the name was tied to
the dark-roasting process and not to anything related
to the name Starbucks. Despite their beliefs that no
infringement had taken place, the Clarks entered into
settlement negotiations to avoid the legal costs asso-
ciated with defending a trademark lawsuit. After the
settlement negotiations failed, Starbucks sued Black
Bear Micro Roastery and the stage was set for a coffee
war that pitted a multinational powerhouse against a
Main Street merchant. This case study emphasizes use
of legal insight and business strategy, gives context
for evaluating business ethics, and requires the appli-
cation of trademark law.
Review Legal Concepts
Prior to reading the case, briefly review the follow-
ing legal concepts that were covered in the textbook:
legal insight and business strategy (Chapter 1), busi-
ness, societal, and ethical contexts of law (Chapter 5),
and trademark law (Chapter 24). Think of these
areas of the law as you read the case study facts and
questions.
1
An earlier version of this case study appeared in the Journal of
Legal Studies Education (29 J. Legal Stud. Educ. 27). Permission by
Sean P. Melvin.
822 CAPSTONE CASE STUDY 1 | Coffee Wars: Starbucks v. Charbucks
meL86205_cs01_822-825.indd 822
walkthrough Rev. Confirming Pages
BUSINESS LAW
SIMULATION
EXERCISE 1
Restrictive Covenants in Contracts: Neurology
Associates, LLP v. Elizabeth Blackwell, M.D.
Learning Objectives
After studying this chapter, students who have mastered the material will be able to:
1. Explain the legal doctrines that govern the use of restrictive covenants.
2. Interpret and apply the rules set forth in current case law.
3. Articulate a cogent argument for each party/side in the dispute.
4. Negotiate a tenable solution as an alternative to a judicial forum.
Chapters 6 and 7 provided you with a variety of legal
doctrines and rules governing contract formation and
■ Part 3 is an assignment sheet that will be provided
to you by your instructor to be used in conjunction
with this simulation.
performance and then illustrated how these doctrines
and rules apply in the corporate sector context. This
simulation is designed to help you understand how
the various topics covered in the contract law chapters Part 1: Stipulated Facts
connect. By focusing on a simulated legal dispute, you 1. In May 2015, Dr. Elizabeth Blackwell (Black-
Confirming Pageswill replicate a real-world experience by applying legal
well) had earned her medical doctor degree and
doctrines and using analytical and critical-thinking completed all necessary requirements to receive
skills. This simulation is a sequential decision-making a license to practice medicine in the state of
exercise structured around a model in which the par- Longville. She specialized in neurological medi-
ticipants assume a role in managing tasks and work cine. Although she was offered professional oppor-
toward a tenable solution. tunities in several large hospitals, she pursued an
The simulation is structured in three parts:
■
Capstone Case Studies
Part 1 is a hypothetical fact pattern describing events
employment offer with Neurological Associates
(NA), LLC. NA is a two-physician practice located
leading up to a legal dispute in the hypothetical U.S. in a small town in the southwestern area of the
■
state of Longville.
Capstone case studies center on the
Part 2 is a set of two hypothetical case summaries
state of Longville and 20 miles north of Galway,
the largest city in Longville. Although the pay was
THE BLACK BEAR MICRO ROASTERY dilemmas of actual corporations that were
from Longville appellate courts that provide a brief
set of facts, several legal points, and short excerpts
lower than that in the larger hospitals, Blackwell
wanted to be close to her family and did not wish
to engage in a practice that required the strenuous
Jim and Annie Clark were native New Englanders
who shared a passion for coffee and an entrepreneur- faced with a corporate crisis involving
from the opinion itself. While these cases are hypo-
thetical, they are based on actual cases from appel- schedules associated with larger medical providers.
ial spirit. After three years of research, they launched late courts in various states and represent the view 2. NA was managed by two partners, Dr. Rich-
Black Bear Micro Roastery in 1995 with a mission of legal and ethical issues. They are
of the majority of state courts in the United States. ard Cohn (Cohn) and Dr. Jean Valjean (Valjean).
creating a unique methodology for roasting gourmet
coffee beans through use of advanced technology and310
the “traditional Yankee work ethic.” The company was
intended
SIMULATION to help
EXERCISE | Restrictive students
Covenants in Contracts connect several
situated in the lakes region of New Hampshire and
targeted connoisseur coffee drinkers, primarily in the
different legal and ethical concepts in a
New England area, who appreciated the micro-roastery
approach of producing small, high-quality batches of
single case study. First, students reread
the Black Bear website, and through New England spe- concept summaries from specific chapters
coffee beans. The beans were sold via mail order, frommeL86205_ch09_274-316.indd 310 10/07/16 11:37 AM
cialty stores and supermarkets. Eventually, Black Bear
also sold its products through its own retail outlet and to reinforce their knowledge of specific
café in Portsmouth, New Hampshire.
True to their belief in the micro-roastery con- legal issues. Second, students study a
cept and their entrepreneurial courage, the Clarks
invested their life savings in the company. In order to
start the business, the couple sold many of their assets
narrative of facts of the case, dynamics
and refinanced the mortgage on their home for extra
cash. They enlisted their teenage daughters as their
of the marketplace, and important
labor force and committed to seven-day workweeks.
The family business was the centerpiece of their fam-
trends of the time. Discussion questions
ily’s livelihood.
As with many start-ups, business for Black Bear was are grouped by topical subject matter
slow and rocky at first. The price of green coffee beans
had fluctuated unexpectedly, and the 1997 Teamsters such as negligence, products liability,
strike at United Parcel Service had eaten into profit mar-
gins. Undeterred, Jim and Annie Clark kept the company administrative agency regulation, and
going until it began to grow ever so slowly. In order to
develop a niche in the gourmet coffee market, Black
Bear began to develop unique blends with catchy names
criminal law. Ethical decision-making
that were easy to remember. This included blends such
as “Country French,” “Kenya Safari,” and “Mocha Java.”
questions are integrated into each case.
The Capstone Case Study feature also
Charbucks
By April 1997, Black Bear had developed a loyal fol- provides a short exercise designed for
lowing from which it often solicited feedback and sug-
gestions for new products. One common theme from use as a writing assignment, small group
customers was a desire for a blend with a darker-roasted
bean that yielded a richer taste. Responding to that cus- work, or class discussion.
tomer demand, Black Bear developed a darker-roasted
WALKTHROUGH xi
10/12/16 01:14 PM
 support materials

Instructor’s Manual
The Instructor’s Manual, developed by one of the authors, Sean P. Melvin, is designed
to be an effective course management tool and an integral part of the turnkey approach
used throughout the supplementary material package. The features and format are
intended to give instructors maximum flexibility to determine and produce high-quality
course content. The IM also has a special “Day One” section addressing important fun-
damental course decisions for instructors who are new to the course.

Test Bank
The test bank allows instructors to custom design, save, and generate tests. The test
bank includes multiple-choice, true-false, fill-in-the-blank, and essay questions for
every chapter in the text. To help instructors meet the requirements of AACSB, each
question is tagged with the corresponding chapter learning objective and applicable
AACSB categories.

TestGen
TestGen is a complete, state-of-the-art test generator and editing application software
that allows instructors to quickly and easily select test items from McGraw Hill’s test­
bank content. The instructors can then organize, edit, and customize questions and
answers to rapidly generate tests for paper or online administration. Questions can
include stylized text, symbols, graphics, and equations that are inserted directly into
questions using built-in mathematical templates. TestGen’s random generator provides
the option to display different text or calculated number values each time questions are
used. With both quick-and-simple test creation and flexible robust editing tools, Test-
Gen is a complete test generator system for today’s educators.

Assurance of Learning Ready

Many educational institutions today are focused on the notion of assurance of learn-
ing, an important element of some accreditation standards. The Legal Environment of
Business is designed specifically to support your assurance of learning initiatives with
a simple, yet powerful solution. Each test bank question for The Legal Environment of
Business maps to a specific chapter learning objective listed in the text. You can use
our test bank software, TestGen, or Connect to easily query for learning objectives that
directly relate to the learning objectives for your course. You can then use the reporting
features of TestGen to aggregate student results in similar fashion, making the collec-
tion and presentation of assurance of learning data simple and easy.

AACSB Statement
McGraw-Hill Education is a proud corporate member of AACSB International. Under-
standing the importance and value of AACSB accreditation, The Legal Environment
of Business recognizes the curricula guidelines detailed in the AACSB standards for
business accreditation by connecting selected questions in the text and the test bank to
the six general knowledge and skill guidelines in the AACSB standards. The statements
contained in The Legal Environment of Business are provided only as a guide for the

xii SUPPORT MATERIALS

 support materials
users of this textbook. The AACSB leaves content coverage and assessment within the
purview of individual schools, the mission of the school, and the faculty. While The
Legal Environment of Business and the teaching package make no claim of any specific
AACSB qualification or evaluation, we have within the text and the test bank labeled
selected questions according to the six general knowledge and skills areas.

PowerPoint Presentation
Each chapter has a PowerPoint Presentation that offers additional support by providing
detailed teaching notes, particularly for more complex topics.

Connect
Study materials are located in the Student Resources section under the Connect Library
tab. Use the site to access the chapter review quizzes, key terms, legal resources, and
additional cases for discussion, in addition to online access to the Uniform Commercial
Code and U.S. Constitution, news updates, and other resources.

SUPPORT MATERIALS xiii

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 acknowledgments

We owe a great deal of gratitude to our entire team at McGraw-Hill Education. Although
many team members worked diligently with us in developing and strengthening this book
over the course of more than a decade, we are especially grateful for the efforts of our
Third Edition team. Our Managing Director Tim Vertovec, our Executive Brand Man-
ager Kathleen Klehr, our Product Developer Jaroslaw Szymanski, and our Content Project
Manager Lori Koetters are owed special thanks for their insight in traversing the ever-
changing landscape of traditional and digital publication. David Orozco and Robert Bird
provided inspiration for the new Legal Strategy sections of this book, and Sean J. Melvin
is owed thanks for his case research contribution.
Throughout the development of each edition of this book, we have been privileged to
have the candid and valuable advice of our reviewers and focus groups. Our reviewers pro-
vided us with priceless suggestions, feedback, and constructive criticism. The depth and
sincerity of their reviews indicate that they are a devoted group of teacher-scholars. The
content of the book was greatly enhanced because of their efforts.

Hakim Adjoua Tom Collins

Columbus State Community College University of Wisconsin–Platteville
Wayne Anderson Angelo Corpora
Missouri State University Palomar College
Linda Axelrod Rebecca Davis
Metropolitan State University University of Kentucky–Lexington
David Berkowitz Glenn Doolittle
Chapman University Santa Ana College
Perry Binder Craig Ehrlich
Georgia State University Babson College
Andrea Boggio Teressa Elliott
Bryant University Northern Kentucky University
Eli Bortman Tim Fogarty
Babson College Case Western Reserve University
Michael Bryant Michael Fore
Bryant University Eastern Kentucky University
Gretchen Carroll John Geary
Owens Community College Appalachian State University
Anita Cava Wendy Gelman
University of Miami Florida International University–Miami
Robert Cherry John Gergacz
Appalachian State University University of Kansas
Tracy Cole Jeane Gohl-Noice
Arkansas Tech University Parkland College

xvi ACKNOWLEDGMENTS
Marc Hall Steven Schamber
Auburn University–Montgomery St. Louis Community College
Eloise Hassell Julie Shadoan
University of North Carolina–Greensboro Western Kentucky University
Diane Hathaway Randy Skalberg
University of Cincinnati University of Minnesota–Duluth
Arlene Hibschweiler Cheryl Staley
State University of New York–Buffalo Lake Land College
Frederick Jones Kurt Stanberry
Kennesaw State University University of Houston–Downtown
Susan Kendall Connie Strain
Arapahoe Community College Arapahoe Community College
Cheryl Kirschner Frank Sullivan
Babson College University of Nevada–Las Vagas
Stan Leasure Greg Swan
Missouri State University Chandler-Gilbert Community College
Colleen Less Keith Swim
Johnson & Wales University Texas A&M University
Christine Lewis Mary Torma
Auburn University–Montgomery Lorain County Community College
Mark Lewis Michael Vasilou
Arkansas State University DeVry University–Chicago
Janice Loutzenhiser Glen Vogel
California State University–San Hofstra University
Bernardino
Ronald Washburn
Nancy Mansfield Bryant University
Georgia State University
Mark Whitaker
Ernest Mayo Hampton University
Johnson & Wales University
Glynda White
Martha Novy-Broderick College of Southern Nevada
University of Maine
Michael Wiggins
Les Nunn Georgia Southern University
University of Southern Indiana
Susan Willey
Tom Parrish Georgia State University
Liberty University
LeVon Wilson
Steven Popejoy Georgia Southern University
University of Central Missouri
John Wrieden
Brenda Rice Florida International University–Miami
Ozarks Technical Community College
Alan Roline
University of Minnesota–Duluth

ACKNOWLEDGMENTS xvii
 changes to
this edition
The authors embrace a commitment to continuous
improvement of the content, case selection, features,
and approach embodied in this textbook. We are privi-
leged to have candid review, suggestions, and guid-
ance from over 100 business law professors from a
wide variety of colleges and universities. Much of this
third edition is based on specific feedback from our
reviewers and students.
■ Full Integration of Strategic Approach: Chapter 1
provides an overview Strategic Legal Solutions:
The Big Picture and Legal Strategy 101 is featured
at the end of each chapter.
■ New Coverage for Current Controversies in
Business Ethics: Includes material on patent trolls,
Facebook’s secret psychology experiment, and
products liability for gun manufacturers.
■ Streamlined and Updated Contracts Content: Three
chapters converted to two chapters with new cases.
■ Expanded Fourth Amendment Material: Warrant
requirement and exceptions including “electronic
searches.”
■ New Chapter Review Questions: Plus Answers and
Explanations at the end of each chapter.
■ New Material: Includes coverage of crowdfunding,
peer-to-peer lending, the Affordable Care Act,
Deepwater Horizon, Uber’s legal challenges, insider
trading, whistleblowers, and the Dodd-Frank Act.
■ Over 50 New Business-Centered Cases that
Connect with Students
• EEOC v. Abercrombie (Employee head scarf)
• U.S. v. Ulbricht (Dread Pirate Roberts/Silk Road)
• NFL v. Tom Brady (Effect of binding arbitration)
• Franklin v. Facebook (Forum selection)
• Citizens United v. FEC (First Amendment)
• Yost v. Wabash College and Phi Kappa Psi
Fraternity (Liability for hazing)
• O’Bannon v. NCAA (Antitrust and NCAA
athletes)
■ Popular Features Expanded and Updated: Three
Business Law Simulations (hypothetical disputes)
centered on restrictive covenants, trademarks in
cyberspace, and ADA liability; Capstone Case
Studies (legal and ethical dilemmas faced by actual
xviii CHANGES TO THIS EDITION
companies) from a multidimensional perspective,
including an award-winning case: Coffee Wars:
Starbucks v. Charbucks; Self-Checks; Key Points;
Theory to Practice problems; and Manager’s
Challenge.
Chapter 1
■ Streamlined introductory material
■ New 2015 case: U.S. v. Ulbricht (Dread Pirate
Roberts/Silk Road)
■ New 2016 case: Specific Performance
as a Remedy
■ New Key Terms
■ Replaced Equitable Maxims section with new
“Table of Maxims”
■ New section: Strategic Legal Solutions: The
Big Picture
Chapter 2
■ New case: Citizens United v. FEC
■ New section: The Fourth Amendment
■ New case: U.S. v. Jones
■ New feature: Chapter Review Questions
■ New feature: Legal Strategy 101 (“The Strategic
Legal Battle for Equality”)
Chapter 3
■ Updated table: U.S. Supreme Court Acceptance
Rate
■ New case: Goodyear Dunlop Tires Operation v.
Brown
■ New figure: Facebook’s Forum Selection Clause
■ New case: Franklin v. Facebook
■ New section: Internet and E-mail Jurisdiction
Chapter 4
■ Updated Litigation section
■ New section on Labor Arbitration
■ New case: NFL v. Brady
■ New Key Points
■ New Critical Thinking case questions

Chapter 5
■ New Legal/Ethical Reflection and Discussion:
“The Trolley Problem”
■ New subsections: “Natural Law” and
“Contract-Based Approach”
■ Updated Legal/Ethical Reflection and Discussion
on “The Penn State Saga”
■ New Ethical Decision-Making Case Study:
“Facebook’s Secret Psychology Experiment: The
Law & Ethics of A/B Testing”
■ New Critical Thinking case questions
Chapter 6
■ Updated material on Advertisements as Contracts
■ Streamlined chapter by combining Overview and
Formation
■ New case: Capacity to Contract
■ New Key Point
■ New summary table
■ New Critical Thinking case questions
Chapter 7
■ Streamlined chapter by combining Enforceability
with Performance
■ Updated material on Anticipatory Breach
■ New case: Statute of Frauds
■ New Key Point
■ New Self-Check
■ New Critical Thinking case questions
Chapter 8
■ New Key Points
■ New sample form: Purchase Order
■ New 2016 case: Battle of the Forms
■ New material: Statute of Frauds
■ New material and new case: Risk of Loss
■ New Critical Thinking questions for cases
Chapter 9
■ New 2015 case: Defamation in Employment
References
■ New material for Defenses to Defamation
■ New section on Assumption of Duty
■ New 2014 case: Fraternity/College Liability for
Hazing
■ Updated Legal Implications in Cyberspace
■ New material for Inadequate Warning
■ New case: Lack of Warning
■ New Legal/Ethical Discussion on Products
Liability and Guns
■ New End-of-Chapter case summaries
■ New Critical Thinking case questions
Chapter 10
■ New material on ABC Test for Agency Status
■ New case: Employee vs. Independent Contractor
■ New material on Uber Controversies
■ New Critical Thinking case questions
■ Updated Strategic Legal Solutions
■ New 2014 case: Apparent Authority
■ New material on Going-and-Coming Rule
■ New 2013 case: Employer Liability for Agents
■ New case: Fiduciary Duty of Agents
Chapter 11
■ New case: Implied Employment Contracts
■ New Critical Thinking case questions
■ New material on Whistleblower Statutes
■ New 2014 case: Whistleblower Protection
■ New material: Affordable Care Act
■ New material: Family Medical Leave Act (FMLA)
■ New 2012 case: FMLA Retaliation
Chapter 12
■ New material on Disparate Treatment Theory
■ New 2015 case: EEOC v. Abercrombie (Employee
head scarf)
■ Expanded coverage of Sexual Harassment Claims
■ New 2012 case: Hostile Work Environment
■ New Strategic Legal Solutions: Preventing
Harassment
■ New flow chart: Title VII Analysis
■ New material on Americans with Disabilities
Act (ADA)
■ New 2014 case: Qualified Individuals under ADA
■ New material on Faragher/Ellerth Defense
Chapter 13
■ New 2012 case: Successor Liability of Sole
Proprietor
■ New material on Partnership at Will
■ New 2013 case: Wrong Dissociation of a Partner
CHANGES TO THIS EDITION xix
■ New Critical Thinking case questions
■ New Key Point
Chapter 14
■ Reorganized section on LLCs
■ New 2013 case: Breach of Fiduciary Duty by an
LLC Member
■ New Key Point
■ New Critical Thinking case questions
■ Revised Manager’s Challenge
Chapter 15
■ Updated Fiduciary Duties section
■ New material on the Corporate Opportunity
Doctrine
■ New Concept Summary
■ New 2012 case: Reasonable Expectations Test
■ New material on Piercing the Corporate Veil
■ New Critical Thinking case questions
Chapter 16
■ Streamlined material on Fundamentals of the
Securities Market and Howey Test
■ New material: Crowdfunding
■ New material: Peer-to-Peer Lending
■ New material: Stock Market Games
■ New material: Parties in a Securities Transaction
■ New Concept Summary (Categories of Securities)
■ New material: Process of a Public Offering
■ Streamlined material on Regulation D Exemptions
■ New table: Summary of Exemptions
■ New table: Crowdfunding Regulation
■ New material: Safe Harbors
■ New material: Insider Trading
■ New 2014 case: Tipper-Tippee Liability
■ New material: Personal Benefits Test
■ New 2015 case coverage: U.S. v. Newman
■ New 2013 case: Dodd-Frank Whistleblower
■ New material on Dodd-Frank Act
■ New table: Insider Trading Theories
Chapter 17
■ New Legal Implications in Cyberspace: Net
Neutrality
■ New material: Regulatory Flexibility Act
xx CHANGES TO THIS EDITION
■ New 2012 Case: Regulation of For-Profit
Universities
■ New Critical Thinking case questions
■ New 2016 case: VanHollen v. Federal Election
Commission (Arb. and Cap. Std.)
■ Updated Manager’s Challenge
■ Added Critical Thinking questions to cases
Chapter 18
■ Updated Strategic Legal Solutions for Managers
■ New material on Deepwater Horizon (BP) Oil
Spill
■ New 2014 case: BP Liability for Reckless Conduct
■ Updated Theory to Practice questions
■ Added Critical Thinking questions to cases
Chapter 19
■ New material: Rule of Reason
■ New 2015 case: O’Bannon v. NCAA –Rule of
Reason and NCAA Athletes
■ New 2015 case: FTCA–Monopoly Power
■ New Key Points
■ Updated “Search Bias” Investigation against Google
■ New Antitrust and Sports section
■ New Critical Thinking case questions
Chapter 20
■ Updated Bankruptcy Guidelines/Amounts to 2016
Regulations
■ New material on Bad Faith Filings
■ New 2014 case: Power of Trustees
■ New material on the Fraud Exception
■ New 2015 case: Preferential Transfers
■ New Critical Thinking case questions
Chapter 21
■ Increased coverage of Warranties
■ Added section on CFBP and New Rules as a
Result of Dodd-Frank
■ Added 2016 case: CFPB v. Pressler (Debt
Collection)
■ Updated section on Credit Transactions
■ Added Key Points
■ Added new Self-Check questions
■ Added Critical Thinking questions to cases

Chapter 22
■ New section on the Park Doctrine
■ Increased coverage of the Fourth Amendment
and the Impact of Technology on Warrants
Requirements
■ New Fourth Amendment summary table
■ New Business Ethics feature: Enforcement of
Insider Trading Laws
■ New section on Cardinals Hacking and CFAA
■ Added Critical Thinking questions to cases
Chapter 23
■ New section on Mislaid/Lost/Abandoned Property
■ New case on Treasure Troves
■ New Key Point
■ Updated Landlord/Tenant section
■ Updated Strategic Legal Solutions for Managers
Chapter 24
■ Updated Trade Secret section
■ New section on Strategic Use of Trademark
Product Design
■ New USPTO case: In re Hershey Chocolate and
Confectionary Corp.
■ New section on Enforcing and Maintaining a
Trademark
■ New section on First Amendment Concerns and
the “Slants” Test/Washington Redskins Mark
Cancellation
■ New section on Patents: Application Process
■ New SCOTUS case: Alice Corporation v. CLS
Bank International (Business Method/Software
Patents)
■ New Business Ethics feature: Patent Trolls
■ New Key Points
Chapter 25
■ Updated section on Comity
■ New section on “Foreign Official” and the FCPA
■ New 2015 case: Haiti Telco (Bribery)
■ Updated section on World Court and European
Court of Justice
CHANGES TO THIS EDITION xxi
 brief table
of contents
UNIT ONE Fundamentals of the Legal Environment of Business 1
Chapter 1 Legal Foundations 2
Appendix to Chapter 1 A Business Student’s Guide to Understanding Cases and Finding the Law 32
Chapter 2 Business and the Constitution 40
Chapter 3 The American Judicial System, Jurisdiction, and Venue 74
Chapter 4 Resolving Disputes: Litigation and Alternative Dispute Resolution 108
Chapter 5 Business, Societal, and Ethical Contexts of Law 138

UNIT TWO Law and Commerce 165

Chapter 6 Overview and Formation of Contracts 166
Chapter 7 Contract Enforceability and Performance 200
Chapter 8 Contracts for the Sale of Goods 238
Chapter 9 Torts and Products Liability 274
Business Law Simulation Exercise 1

UNIT THREE Regulation in the Workplace 317

Chapter 10 Agency 318
Chapter 11 Employment Relationships and Labor Law 354
Chapter 12 Employment Discrimination 396
Business Law Simulation Exercise 2

UNIT FOUR  usiness Entities, Securities ­Regulation, and Corporate Governance 441
B
Chapter 13 Choice of Business Entity, Sole Proprietorships, and Partnerships 442
Chapter 14 Limited Liability Companies and Limited Liability Partnerships 468
Chapter 15 Corporations 486
Chapter 16 Regulation of Securities, Corporate Governance, and Financial Markets 516

UNIT FIVE Regulatory Environment of Business 557

Chapter 17 Administrative Law 558
Chapter 18 Environmental Law 588
Chapter 19 Antitrust and Regulation of Competition 618
Chapter 20 Creditors’ Rights and Bankruptcy 642
Chapter 21 Warranties and Consumer Protection Law 666
Chapter 22 Criminal Law and Procedure in Business 694
Chapter 23 Personal Property, Real Property, and Land Use Law 728
Chapter 24 Intellectual Property 756
Chapter 25 International Law and Global Commerce 794
Business Law Simulation Exercise 3

CAPSTONE CASE STUDIES

1. Coffee Wars: Starbucks v. Charbucks 822
2. The Odwalla Juice Company Crisis 826
3. Fraud under the Arches: The McDonald’s Game Piece Scandal 830

APPENDIX A The Constitution of the United States of America 836

APPENDIX B Excerpts from the Sarbanes-Oxley Act of 2002 846

xxii BRIEF TABLE OF CONTENTS


\\ UNIT ONE
Fundamentals of the Legal
Environment of Business
CHAPTER 1 Legal Foundations
Introduction to Law 3
Purposes of Law 3
Language of the Law 4
Legal Decisions in A Business Environment:
Theory to Practice 4
Legal Insight and Business Strategy 5
Role of Counsel 5
Sources and Levels of American Law 7
Constitutional Law 8
Case 1.1 Arizona v. United States,
132 S.Ct. 2492 (2012) 8
Statutory Law 9
Interpreting Statutes 10
Finding Statutory Law 10
Case 1.2 U.S. v. Ulbricht, 31 F. Supp. 3d 540
(S.D.N.Y. 2014) 11
Common Law 12
Stare Decisis and Precedent 13
Stare Decisis and Business 13
Administrative Law 13
Landmark Case 1.3 Flagiello v. Pennsylvania Hospital,
208 A.2d 193 (Pa. 1965) 14
Secondary Sources of Law 15
Uniform Model Laws 15
Restatements of the Law 16
Categories of Law 18
Criminal Law versus Civil Law 18
Substantive Law versus Procedural Law 18
Law versus Equity 19
Case 1.4 Wilcox Investment, L.P. v. Brad Wooley
Auctioneers, Inc., et al., 454 S.W.3d 792
(Ct. of Appeals of Arkansas 2015) 19
Public Law versus Private Law 20
Strategic Legal Solutions: The Big Picture 21
Overview 21
Strategy #1—Noncompliance 22
Strategy #2—Avoidance 22
Strategy #3—Prevention 23
Strategy #4—Value Creation (or “Legal
Competitive Advantage”) 23
Summing Up 25
table of contents
Key Terms 25
Chapter Review Questions 26
Theory to Practice 27
Manager’s Challenge 27
Appendix to Chapter 1: A Business Student’s Guide
2 to Understanding Cases and Finding the Law 32
CHAPTER 2 Business and the
Constitution 40
Structure of the Constitution: Federal Powers 41
Structure of the Constitution 41
Amendments 42
Overview of Federal Powers 42
Article I—Congressional Powers 42
Article II—Executive Powers 43
Article III—Judicial Powers 43
Case 2.1 United States v. Alvarez,
132 S.Ct. 2537 (2012) 44
Separation of Powers 45
Applying the Constitution: Standards of Judicial
Review 45
Rational Basis Review 45
Intermediate-Level Scrutiny 45
Strict Scrutiny 46
Case 2.2 Brown v. Entertainment Merchants
Association, 131 S.Ct. 2729 (2011) 46
The Supremacy Clause and Preemption 47
Commerce Powers 48
Application of Commerce Powers 48
Interstate versus Intrastate Commercial Activity 48
Case 2.3 Gonzalez v. Raich, 545 U.S. 1 (2005) 48
The Commerce Clause and Civil Rights
Legislation 49
Noncommercial Activity 50
Constitutional Restrictions on State Regulation of
Commerce 51
Tax and Spend Powers 51
Necessary and Proper Clause 52
Constitutional Protections 54
The Bill of Rights and Business 54
The First Amendment 54
Limits on Free Speech 55
Commercial Speech 55
Case 2.4 R.J. Reynolds Tobacco Company v. Food and
Drug Administration, 696 F.3d 1205 (D.C. Cir. 2012) 56
Advertising and Obscenity Regulation 56
Political Speech by Corporations 57
TABLE OF CONTENTS xxiii
 Case 2.5 Citizens United v. Federal Election
Commission, 558 U.S. 310 (2010) 58
The Fourth Amendment 59
Exceptions 60
Reasonableness Requirement 61
Searches and Seizures 61
Case 2.6 United States v. Jones, 132 S.Ct.
945 (2012) 62
Postscript: The USA Patriot Act 62
Due Process Protections 64
Due Process 64
Equal Protection 64
Postscript: The Right to Privacy 65
Federal Statutes 66
Workplace Privacy 66
Key Terms 66
Chapter Review Questions 67
Theory to Practice 68
Legal Strategy 101 68
Manager’s Challenge 70
CHAPTER 3 The American Judicial
System, Jurisdiction, and Venue 74
Role and Structure of the Judiciary 74
State versus Federal Courts 75
State Courts 75
Federal Courts 78
How the Law Develops 80
Jurisdiction and Venue 82
Jurisdiction and Business Strategy 83
Overview of Jurisdiction 83
Two-Part Analysis 83
Subject Matter Jurisdiction:
Authority over the Dispute 84
Original versus Concurrent Jurisdiction 84
Choice of Forum 85
Jurisdiction over Property 86
Personal Jurisdiction 86
In-State Defendants 86
Out-of-State Defendants 87
Case 3.1 Goodyear Dunlop Tires Operation v.
Brown, 131 S.Ct. 2846 (2011) 87
Injurious Effect 88
Case 3.2 Clemens v. McNamee, 615 F.3d 374
(5th Cir. 2010) 89
Physical Presence 90
Voluntary 90
Venue 91
Case 3.3 Franklin v. Facebook, No. 1:15-CV-00655
(N.D. Georgia 2015) 92
Internet and E-Mail Jurisdiction 93
How the Law Develops in Real Time 93
International Jurisdiction in the Internet Age 96
Country of Origin Standard 97
xxiv TABLE OF CONTENTS
Other Theories of Jurisdiction in Electronic
Commerce 97
Key Terms 98
Chapter Review Questions 99
Theory to Practice 100
Legal Strategy 101 100
Manager’s Challenge 101
CHAPTER 4 Resolving Disputes:
Litigation and Alternative Dispute
Resolution 108
Civil Litigation 109
Dispute Resolution and Business Planning 109
Stages of Litigation 109
Prelawsuit: Demand and Prelitigation
Settlement Negotiations 109
Standing 110
Statute of Limitations 111
Pleadings Stage 111
Complaint and Summons 111
Answer 111
Counterclaim 114
Cross-Claim 114
Motions 114
Discovery Stage 114
Scope, Timing, and Methods of Discovery 115
Case 4.1 20/20 Financial Consulting, Inc. v. John
Does 1-5, 2010 U.S. Dist. LEXIS 55343 (D.C. Colo.
2010) 116
Case 4.2 Bridgestone Americas Holding, Inc. v.
Mayberry, 854 N.E.2d 355 (Ind. Ct. App. 2006) 118
Pretrial Conference 119
Trial 120
Jury Selection and Opening Statements 120
Testimony and Submission of Evidence 120
Closing Arguments and Charging
the Jury 120
Deliberations and Verdict 120
Posttrial Motions and Appeals 121
Collecting the Judgment 121
Alternative Dispute Resolution 122
Informal ADR 122
Formal ADR 123
Arbitration 123
Legally Mandated Arbitration 123
Federal Arbitration Act 124
Case 4.3 American Express v. Italian Colors
Restaurant, 133 S.Ct. 2304 (2013) 125
Employment and Labor Arbitration 125
Case 4.4 National Football League Management
Council v. Brady, No. 15-2801 (2d Cir. 2016) 126
Mediation 127
Expert Evaluation 127
Other Forms of ADR 128
Key Terms 129
Chapter Review Questions 130
Theory to Practice 131
Legal Strategy 101 131
Manager’s Challenge 132
CHAPTER 5 Business, Societal, and
Ethical Contexts of Law 138
What is Ethics? 139
Moral Philosophy and Ethical Decision
Making 139
Principles-Based Approach 139
Religion 139
Virtue 139
Natural Law 139
The Categorical Imperative 140
Consequences-Based Approach 140
Contract-Based Approach 141
Business Ethics Defined 142
Primary and Secondary Stakeholders 142
Moral Minimum versus Maximizing Profits 143
Case 5.1 Ypsilanti Township v. General Motors
Corporation, 506 N.W.2d 556, 201 Mich. App. 128
(1993) 145
Values Management and Challenges to
Business Ethics 146
Common Traits of Effective Values
Management 146
Strategic Advantages of Values Management 149
Cultivation of Strong Teamwork and
Productivity 149
Clarity in Business Operations 150
Public Image 150
Staying the Ethical Course in Turbulent
Times 150
Ethical Decision Making: A Manager’s
Paradigm 150
Ethical Decision-Making Case Studies 150
Facebook’s Secret Psychology Experiment:
The Law and Ethics of A/B Testing 151
Public Outcry 152
Ethical Analysis 152
Facebook’s Secret Psychology Experiment:
Questions for Discussion 153
AIG Bonusgate: Legal, Managerial, and Ethical
Perspectives 153
Political Reaction 153
Mounting Pressures 154
Cooler Heads 154
AIG Bonusgate: Questions for Discussion 154
Corporate Social Responsibility 155
The Narrow View: “Greed Is Good” 155
The Moderate View: Just Follow the Law 156
The Broad View: Good Corporate
Citizenship 156
Landmark Case 5.2 Grimshaw v. Ford Motor
Company, 119 Cal. App. 3d 757 (1981) 156
Key Terms 158
Chapter Review Questions 158
Theory to Practice 159
Legal Strategy 101 160
Manager’s Challenge 161
\\ UNIT TWO
Law and Commerce
CHAPTER 6 Overview and Formation
of Contracts 166
Definition of a Contract 167
Categories of Contracts 167
Written versus Oral Contracts 167
Bilateral versus Unilateral Contracts 167
Case 6.1 Augstein v. Leslie and NextSelection, Inc., 11
Civ. 7512 (HB) (S.D.N.Y. 2012) 168
Express versus Implied versus
Quasi-Contracts 169
Other Categories 170
Sources of Contract Law 171
Contract Transactions 172
Contract Formation 173
Offer 173
Advertisements as an Offer 174
Landmark Case 6.2 Lucy v. Zehmer, 84 S.E.2d 516
(Va. 1954) 175
Case 6.3 Leonard v. PepsiCo, Inc., 210 F.3d 88 (2d
Cir. 2000) [affirming lower court decision and
reasoning in 88 F. Supp. 2d 116 (S.D.N.Y. 1999)] 176
Acceptance 177
Termination of an Offer 177
Termination by Operation of Law 180
When Acceptance Is Effective: The Mailbox Rule 180
Silence as an Acceptance 182
Insufficient Agreement 182
Indefinite Terms 183
Mistake 183
Consideration 184
Legal Detriment 185
Amount and Type of Consideration 185
Preexisting Duty Rule 186
Bargained-for Exchange 186
Past Consideration 187
Promissory Estoppel 187
Capacity 188
Minors 188
Mental Incompetents 189
Case 6.4 Sparrow v. Demonico, Supreme Judicial
Court of Massachusetts, 461 Mass. 322 (2012) 189
Legality 190

TABLE OF CONTENTS xxv

 Key Terms 191 Case 7.5 Emmelyn Logan-Baldwin et al. v. L.S.M.
Chapter Review Questions 193 General Contractors, Inc., et al., 942 N.Y.S.2d 718,
Theory to Practice 193 94 A.D.3d 1466 (N.Y. 2012) 227
Legal Strategy 101 194 Key Terms 228
Manager’s Challenge 195 Chapter Review Questions 230
Theory to Practice 231
CHAPTER 7 Contract Enforceability Legal Strategy 101 231
and Performance 200 Manager’s Challenge 232
Enforceability 200
Genuineness of Assent 200 CHAPTER 8 Contracts for the
Misrepresentation 201
Sale of Goods 238
Fraudulent Misrepresentation 201
Introduction to Article 2 of the UCC 239
Case 7.1 Italian Cowboy Partners, Ltd. v. The Prudential
UCC Coverage and Definitions 239
Insurance Company of America, 341 S.W.3d 323 (Tex.
Function of the UCC 239
Supr. Ct. 2011) 202
Agreement in a Sales Contract: Offer 240
Duress 204 Offers with Open Terms 241
Undue Influence 204 Quantity 241
Unconscionability 204 Other Open Terms 241
Statute of Frauds 205 Firm Offers by Merchants 242
Case 7.2 Holloway v. Dekkers and Twin Lakes Golf Agreement in Sales Contracts: Acceptance 242
Course, 380 S.W.3d 315 (Tx. Ct. of App. 2012) 206 Battle of the Forms 242
Interpretation Rules for Written Contracts 207 Nonmerchant Transactions 242
Nature and Effect of Conditions 209 Merchant Transactions 243
Categories of Conditions 209 Case 8.1 Hebberd-Kulow Enterprises v.
Good Faith Performance and Discharge 211 Kelomar, No. D066505, Court of Appeals
Substantial Performance 212 of California (2016) 244
Landmark Case 7.3 Jacob and Youngs v. Kent, 129 Consideration 245
N.E. 889 (Ct. App. N.Y. 1921) 213 Statute of Frauds 246
Other Events of Discharge 214 Title and Allocation of Risk 248
Mutual Consent 214 Title 248
Operation of Law 216 Risk of Loss 248
Impossibility 216 Goods Picked Up by the Buyer 249
Impracticability 217 Performance of Sales Contracts 251
Frustration of Purpose 217 Obligations of All Parties 251
Breach of Contract and Anticipatory Seller’s Obligations and Rights 251
Repudiation 218 Perfect Tender 252
Anticipatory Repudiation 219 Cure 252
Case 7.4 DiFolco v. MSNBC, 622 F.3d 104 Case 8.2 Car Transportation Brokerage Company v.
(2d Cir. 2010) 219 Blue Bird, No. 08-16103 (11th Cir. 2009) 253
Remedies at Law 221 Commercial Impracticability 253
Compensatory Damages 221 Buyer’s Rights and Obligations 255
Consequential Damages 222 Buyer’s Right of Inspection: Acceptance or
Restitution 222 Rejection 255
Liquidated Damages 223 Special Rules for Installment Contracts 256
Equitable Remedies 223 Breach and Remedies in Sales Agreements 257
Specific Performance 223 Anticipatory Repudiation in the UCC 257
Injunctive Relief 224 Remedies Available to the Seller 257
Reformation 224 Goods in Hands of Seller 257
Avoidance and Mitigation of Damages 224 Goods in Hands of Buyer 258
Clean Hands and Tender of Performance 224 Remedies Available to the Buyer 258
Contracts Involving Rights of a Third Party 225 Remedies Following Rejection of Goods 258
Assignment 225 Cover 258
Delegation 226 Lawsuit for Money Damages 259
Third-Party Beneficiaries 226 Specific Performance 259

xxvi TABLE OF CONTENTS

 Remedies Following Acceptance of Landmark Case 9.3 Palsgraf v. Long Island Railroad
Nonconforming Goods 259 Co., 162 N.E. 99 (N.Y. Ct. App. 1928) 291
Revocation of Acceptance 259 Actual Damages 292
Lawsuit for Money Damages 260 Defenses to Negligence Claims 293
Risk of Loss 260 Comparative Negligence 293
Case 8.3 3L Communications v. Merola d/b/a NY Assumption of the Risk 293
Telecom Supply, No. M2012-02163-COA-R3-CV, Court Case 9.4 Zeidman v. Fisher, 980 A. 2d 637
of Appeals of Tennessee (2013) 260 (Pa. Super. Ct. 2009) 294
Contracts for International Sales of Goods 262 Strict Liability Torts 295
U.N. Convention on Contracts for the Abnormally Dangerous Activities 295
International Sale of Goods 262 Products Liability 296
Coverage and Major Provisions of CISG 262 Negligence 296
No Writing Required 262 Warranty 296
Offer and Acceptance 263 Strict Liability 296
Remedies 263 Defining “Defect” 297
INCO: International Chamber of Commerce
Case 9.5 Bunch v. Hoffinger Industries, 20 Cal. Rptr.
Terms 263
3d 780 (Cal. App. 2004) 298
Key Terms 264
Chapter Review Questions 266 Causation and Damages 301
Theory to Practice 266 Seller’s Defenses 301
Legal Strategy 101 267 Key Terms 302
Manager’s Challenge 268 Chapter Review Questions 303
Theory to Practice 304
Legal Strategy 101 305
CHAPTER 9 Torts and Products Manager’s Challenge 305
Liability 274 BUSINESS LAW SIMULATION EXERCISE 1 Restrictive
Overview of Tort Law 275 Covenants in Contracts: Neurology Associates,
Sources of Law 275 LLP v. Elizabeth Blackwell, M.D. 310
Categories of Torts 275
Intentional Business-Related Torts 276
Defamation 276 \\ UNIT THREE
Public Figure Standard 276
Defenses to Defamation 277 Regulation in the Workplace
Truth 277
Privilege Defenses 277 CHAPTER 10 Agency 318
Case 9.1. Nelson v. Tradewind Aviation, No. AC34625, Definitions and Sources of Agency Law 318
Appellate Court of Connecticut (2015) 278 Classification of Agents 319
Trade Libel and Product Disparagement Employee Agents 319
Laws 279 Employee Agents versus Independent
Fraudulent Misrepresentation 279 Contractors: Direction and Control 319
False Imprisonment 281 State Law 320
Business Competition Torts 283 Case 10.1 Avanti Press v. Employment Dept. Tax Sec.,
Tortious Interference with Existing Contractual 274 P. 3d 190, Oregon Court of Appeals (2012) 321
Relationship 283 Uber Settlement 322
Tortious Interference with Prospective IRS’s Three-Prong Test 323
Advantage 283 Liability for Misclassification 323
Negligence 285 Overview of an Agency Transaction 326
Elements of Negligence 285 Creation of an Agency Relationship 326
Duty 285 Manifestations and Consent 326
Case 9.2 Yost v. Wabash College, Phi Kappa Control 326
Psi Fraternity, et al., 969 3 N.E.3d 509 (Indiana Formalities 326
2014) 287 Overlay of Agency Law with Other Areas of
Breach of Duty 288 Law 327
Cause in Fact 290 Case 10.2 Bosse v. Brinker Restaurant d/b/a Chili’s
Proximate (Legal) Cause 290 Grill and Bar, 2005 Mass. Super. LEXIS 372 327

TABLE OF CONTENTS xxvii

 Liability of the Principal for Acts of the Agent 328 Labor Contracts 356
Authority 329 Implied Contracts 356
Actual Authority 329 Case 11.1 Buttrick v. Intercity Alarms, 2009 Mass. App.
Apparent Authority 329 Div. 97 (Mass. Dist. Ct. App. 2009) 356
Ratification 329 Common Law Exceptions 357
Case 10.3 GGNSC Batesville, LLC d/b/a Golden Living Public Policy Exception 358
Center v. Johnson, 109 So.3d 562 (Miss. Supreme Statutory Exceptions 358
Court 2013) 330 State Whistle-Blower Statutes 358
Agent’s Contract Liability to Third Parties 330 Case 11.2 Wurtz v. Beecher Metro District, 848 NW 2d
Fully Disclosed Agency 331 121 (Mich. 2014) 359
Partially Disclosed Agency 331 Federal Whistle-Blower Statutes 360
Undisclosed Agency 331 Employment Regulation 361
Tort Liability to Third Parties 332 Wages and Hours 361
Physical Injury Requirement 332 Minimum Wage, Maximum Hours, and
Scope of Employment 332 Overtime 361
Case 10.4 Moradi v. Marsh USA, Inc., 219 Cal.App.4th Case 11.3 Integrity Staffing Solutions v. Busk, 135 S.Ct.
886 (California Ct. App. 2013) 333 513 (2014) 362
Intentional Torts 335 40-Hour Workweek 363
Negligent Hiring Doctrine 335 Exempt Employees 363
Independent Contractors 335 Case 11.4 Madden, et al. v. Lumber One Home Center,
Duties, Obligations, and Remedies of the Principal 745 F.3d 899 (8th Cir. 2014) 364
and Agent 337
Misclassification 366
Agent’s Duties to the Principal 337
Child Labor Laws 367
Loyalty 337
State Wage and Hour Laws 367
Obedience 337
Retirement 368
Case 10.5 SP Midtown, Ltd. v. Urban Storage, LP Regulation of Pensions and Retirement
(Tx. Ct. App, 14th Dist. 2008) 338 Accounts 368
Care 338 Social Security 368
Disclosure 339 Health Care 369
Accounting 339 Patient Protection and Affordable Care Act
Principal’s Remedies for Breach 340 of 2010 and Health Care and Education
Rescission and Disgorgement 340 Reconciliation Act of 2010 369
Unauthorized Acts of Agents 341 Sudden Job Loss 369
Duties and Obligations of the Principal to the Workplace Injuries 370
Agent 341 Defenses to Workers’ Compensation
Case 10.6 Romanelli v. Citibank, 60 A.D.3d 428 Claims 370
(2009) 341 Intentional Actions or Recklessness of the
Agent’s Remedies for Breach 342 Employer 370
Termination of The Agency Relationship 343 Course of Employment 370
Express Acts 343 Regulation of Workplace Safety 371
Operation of Law 344 Occupational Safety and Health
Key Terms 345 Administration 371
Chapter Review Questions 347 Family and Medical Leave Act 372
Theory to Practice 347 FMLA Scope and Coverage 372
Legal Strategy 101 348 FMLA Protections 373
Manager’s Challenge 349 Case 11.5 Jaszczyszyn v. Advantage Health
Physician Network, 2012 WL 5416616
(6th Cir. 2012) 373
CHAPTER 11 Employment
Key Employees 374
Relationships and Labor Law 354 Employee Privacy 375
Origins of Employment Regulation and Labor Monitoring of E-Mail and Internet Usage 375
Law 355 Employer Liability 376
Employment-At-Will Doctrine 355 Telephone and Voice Mail 376
Express Contracts 355 Drug and Alcohol Testing 376

xxviii TABLE OF CONTENTS

Another random document with
no related content on Scribd:
 Neger-Engelsch.
6. Te brafoe fájà, joe de téki
spoen de driéngi hem, ma
te a kóuroe, han sa wakka
na ini.
7. Joe sa kìbri óuwroe
mamá, ma joe no sa kìbri
hém froekóutoe.
8. Grabóe njanjám, ma no
grabóe taki.
9. Tángi foe boen da kódja.
10. Tóngo tjári hem mássra na
boen, atjári hem mássra
na ógri toe.
11. Tódo táki, iffi joe de táki
foe gogó, mi no kan piki,
mára iffi joe de taki foe
hai, mi kon piki.
12. Sáni móro keeskési, a
brasà makà.
Nederlandsche vertaling.
6. Als de soep heet is,
gebruikt men een lepel,
maar als zij koud is, steekt
men er de hand in. De zin
is: Den zachtzinnige durft
men aan, den driftige
ontziet men.[380]
7. Ge zult een oude bes
(vrouw) verbergen, maar
haren hoest kunt ge niet
verbergen; d.i. de aap
komt altijd uit de mouw.
8. Grabbel naar spijs, maar
niet naar praatjes.
9. Stank voor dank.
10. De tong voert haren
meester tot geluk, maar
brengt hem ook dikwerf in
het ongeluk.
11. De kikvorsch zegt: zoo er
van billen gesproken
wordt, kan ik niet
meespreken, maar als ge
over oogen handelt, zal ik
U te woord staan.
12. Als de aap in de
benauwdheid zit, omvat hij
den doornstruik.
 Neger-Engelsch.
13. Joe ha’ prasénsi, joe sa si
míra bére.
14. Bósi swíti, ma a tjári
sábiso.
15. Hattí-bron no de méki wan
boen pikíen.
16. Nanái de háli tetéi, tetéi de
háli nanái.
17. Móni kabà, kómpe kabà.
18. Te joe tráppoe na míra
hóso, joe sabi ho disi béti
joe.
19. Bégi móro bétre léki
foefóeroe, ma wróko da
bási.
20. Joe lóbi okró*, joe moe
lóbi hem síri toe.
Nederlandsche vertaling.
13. Als ge geduld hebt, kunt
ge de ingewanden van
een mier zien. De zin is:
geduld overwint alles.
14. Kussen is zoet, maar baart
wel eens berouw.
15. Gramschap brengt geen
goed kroost voort.[381]
16. De naald trekt de draad en
de draad trekt de naald.
De zin is: Wij hebben
elkander onderling noodig.
17. Als het geld op is, is ’t met
de vrienden gedaan.
18. Wanneer ge in een
mierennest trapt, weet ge
dan, welke mier u gebeten
heeft?
19. Bedelen is beter dan
stelen, maar werken is de
baas!
20. Houdt ge van de okra*,
dan moet ge ook van de
pitten houden. De zin is:
Zoo ge van mij houdt,
houdt ge ook van mijn
kinderen.
B. West-Afrika.

a. De Ewe-taal sprekende Negerstammen van de Goudkust.

1. Hij, die geen zitbankje vindt, moet op den grond zitten.

2. Als een mensch geen kleine mat tot zijn beschikking heeft, moet
hij staande slapen.

NB. Beide spreekwoorden worden gebruikt, om uit te drukken, dat

men zich naar de omstandigheden behoort te voegen. [382]

3. Hoewel men twee oogen heeft, ziet men toch geen twee dingen
tegelijk.

4. Men kan niet op twee vogels tegelijk jacht maken.

NB. Deze beide spreekwoorden behooren tot een groep, die moet
leeren, dat men nooit twee dingen tegelijk kan doen.

5. Rijken kunnen slaven koopen, doch niet hun leven.

6. Wanneer een jongen beweert, dat hij water met een touw wil
ophalen, vraag hem dan, of hij het water

NB. Dit spreekwoord wil zooveel zeggen als: Antwoord een dwaas
in overeenstemming met zijn dwaasheden.

7. De vogel in het hok is onbekend met den dag van zijn dood.

8. Geen menschenkind weet, wanneer hij sterven zal.

NB. Beide spreekwoorden werden eertijds gebruikt, om het volk er

aan te herinneren, dat zij er ieder oogenblik aan blootstonden, als
slaven verkocht te worden.
9. Kauris* maken den mensch.

10. De zoon van den vreemdeling maakt het volk toornig.

NB. Dit spreekwoord heeft betrekking op vreemdelingen, die

lachen om de gebruiken van den inboorling. De zoon doelt op de
ervaring, dat jongeren hiertoe eerder geneigd zijn dan menschen
van meer ondervinding.

11. Door babbelpraatjes in de woning blinkt de mensch niet uit.

NB. De zin is: Daden, geen woorden.

12. Hij, die voor zich zelf werkt, kan doen wat hem bevalt.

13. De mond zegt een menigte dingen, die het hart niet uitbrengen
kan. [383]

14. Steenen zijn zwaar, doch de steenen stamper is nog zwaarder.

NB. Daar de steen, waarmede het koren wordt gestampt, in

verhouding tot zijn grootte zeer zwaar is, beduidt dit spreekwoord:
Oordeel niet naar den schijn.

b. De Yoruba-taal sprekende stammen der slavenkust.

1. Hij die vergeeft, maakt een einde aan den twist.

2. Een scherp woord is even taai als een boogpees.

NB. De zin is: Een scherp woord kan niet geheeld worden, een
wond wel.

3. Begin niets, wat ge niet tot een goed einde kunt brengen.

4. Hij die een schoonheid huwt, trouwt verdriet en ellende. 1

5. Met fortuin kan men geboren worden, doch wijsheid komt eerst
later.

6. Waar de mensch ook heen trekt, altijd neemt hij zijn karakter meê.

7. Goud moest alleen verkocht kunnen worden aan hem, die de

waarde er van kent.

8. Wanneer ge niemand naar de markt zendt, zal de markt niemand

naar U zenden.

9. Datgene, waarvan een kind houdt, zal zijn maag geen kwaad
doen.

10. Wanneer ge te gauw een vrouw lief hebt, zult ge haar spoedig
niet meer beminnen. [384]

[Inhoud]

II. AVOND OP HET WATER

in Sierra Leone

naar

Florence M. Cronise en Henry W. Ward.

Sobah was een geboren handelsman en als zoodanig het type van
zijn stamgenooten, wier meest op den voorgrond tredende
eigenschappen koopmansgeest was.
Dikwijls had hij ver het land in tochten gemaakt, om waren te
verhandelen en hij had ook nu en dan een bootlading met produkten
naar de markt van Freetown 2 gebracht. Heden kwam de
handelsman weêr bij hem te voorschijn. Nadat hij zich van een
zestal mannen voor den boottocht had verzekerd, besteedde hij den
dag om zijn waren bijeen te brengen en in de boot te laden.

De lading bestond uit manden met rijst, palmolie, peper, kolanoten*,

kleedingstukken van het land, rubber en ivoor. Een witte vogel werd
voor in de boot geplaatst, in de vaste overtuiging, dat diens
tegenwoordigheid een voorspoedige reis zou kunnen verzekeren.

Laat in den namiddag, kort voordat de vloed voor eb plaats maakte

en de stroom meê werd, stak de boot van wal en namen de zes
sterke bootslieden de riemen op, om, den ganschen nacht
doorroeiende, de riviermonding te bereiken. Spoedig bewogen zij
hunne riemen in regelmatigen slag en door de eentonige melodie
van het roeilied schenen de boot, de stroom, de voor- en
achterwaartsche bewegingen der lichamen, en de slag der riemen
tot een onafscheidelijke harmonie van geluid en beweging samen te
smelten.

Wanneer deze eenvoudige zielen evenzoo op de schoone [385]en

verheven natuurtafereelen konden reageeren 3, als zij het doen op de
rythmische bewegingen en de melodieën van het bootgezang,
zouden zij zeker door het panorama zijn aangegrepen, dat bij een
plotselinge rivierbocht in het gezicht kwam.

Groote mangrove-boomen*, die aan beide oevers naar de rivierzijde

heenbogen, strengelden hunne stammen, gedragen door hunne op
stelten gelijkende luchtwortels, hier en daar tot een hoog gewelf
boven den stroom. Laag kreupelhout vulde overal de
tusschenruimten op. Op touwen gelijkende lianen kropen door alles
heen, boomen en struiken in rijken overdaad verstrikkend of in
sierlijke guirlandes uit het groen van de takken der boomen omlaag
hangend.

Waterlelies vormden langs den oever een dichte massa, landwaarts

in een verrukkelijke varen-vegetatie overgaande. Uit de
donkergroene massa op de zandbanken in de rivier verhief zich het
schitterende karmozijnrood van het jonge gebladerte, dat op
bloemen geleek, die de takuiteinden kroonden. Elders ontplooide
zich een wereld van bladeren, eindeloos verschillend in vorm en tint,
die soms aan bloemen deden denken.

Vogels, met de schitterendste kleuren getooid, zweefden hier en

daar tusschen de boomen; apen snapten en kijfden, terwijl hunne
slanke lichamen zich op hooge rietstengels in evenwicht hielden of
uitgestrekt lagen op een bed van mos. Krokodillen koesterden zich
vadzig in de avondzon.

Van de kromming de rivier benedenwaarts beschouwende, geleek

de stroom wel een onafgebroken laan van groen, waartusschen zich
hier en daar slechts een tikje kleur vertoonde. Wanneer de
onheilspellende gedachte aan de [386]tegenwoordigheid van slangen
en krokodillen niet onaangenaam had gestemd, zou deze plek een
stukje tooverland kunnen geweest zijn, zóó stil en zóó eenzaam,
alsof geen menschelijk wezen ooit deze heiligheid had betreden. Het
was voor den ontwikkelden sterveling een plek, om in stille vereering
te blijven wijlen bij den Geest der Oneindigheid.

Maar onze zwarte roeiers in hunne primitieve kleeding hadden nu

geen oog voor al de schoonheid, die zich hier ten toon spreidde,
geen ziel om in trilling te geraken tegenover dit geheiligde
natuurtafereel. Hun gemoed was te veel vervuld van vrees en
bijgeloovigen angst. Voor hun verduisterden geest scheen het een
plek te zijn, waar onzichtbare, booze geesten bij voorkeur ronddolen.
Een krokodil schoot met een zachten plons in het water, en
verdween uit het gezicht. De zon daalde in het Westen neêr en wierp
onheilspellende schaduwen in het dichte gebladerte. De bootslieden
werden van een naamlooze vrees vervuld; hun gezang 4, zoo lang
volgehouden, stierf eindelijk geheel weg, en terwijl zij een zilverstuk
in het water wierpen, om den Geest van de rivier gunstig te
stemmen 5, lichtten zij de riemen uit het water, opdat het geluid, dat
deze maakten, den Geest van deze plek niet zou verontrusten.
Daarop lieten zij zich te midden eener ademlooze stilte door den
stroom meêvoeren, totdat de boot verderop breeder water had
bereikt. Toen weêr vrijer ademend, gingen zij met roeien voort, eerst
langzaam, doch daarna met steeds toenemende kracht, totdat het
geluid der riemen met de echo van het bootgezang volkomen
harmonieerde. [387]

Terwijl bij de eerste teekenen van den aanbrekenden dag de

zandbanken aan de riviermonding bereikt waren, maakte een sterke
zeebries het onmogelijk vooruit te komen, zoodat het gezelschap
zich genoodzaakt zag, voor onbepaalden tijd te stoppen.

Vermoeid van het roeien, den langen nacht door, bereidden zij zich
twee aan twee in minder gemakkelijke houding tot den slaap voor,
waaruit zij eerst na vele uren ontwaakten. Op de met steenen
bedekte plaats vóór in de boot werd nu een vuur aangelegd, en
daarop een overvloedige hoeveelheid rijst en visch gereed gemaakt.
Nadat zij zich nu allen om den grooten rijstpot hadden neêrgezet,
begonnen zij het eten in zulke groote hoeveelheden naar binnen te
werken, als slechts een negermaag kan bevatten.

Gedurende het geheele verdere deel van den dag bleef de zeebries
met slechts een kleine vermindering voortduren, zoodat het hun
duidelijk werd, dat ook de nacht rustend zou moeten worden
doorgebracht, alvorens de reis kon worden hervat. Het avondeten
was een herhaling van den morgen, de hoeveelheid niet
uitgezonderd, en toen zij daarmede gereed waren, hielden zij zich op
hunne eigene bijzondere wijze bezig.

De volle maag bracht een beminnelijke gemoedsstemming te weeg,

en de toenemende schaduwen van den avond wekten bij het volk
een gevoel van saamhoorigheid en gezelligheid op, die de tongen
losmaakt. Het uur was nu gunstig voor vertellingen: het lichaam was
in rust, men verzuimde niets en de nachtelijke duisternis dreef den
geest daar vanzelf heen.

In zulke omstandigheden waren vertellingen onvermijdelijk, en er

was slechts een ingeving voor noodig, om er meê te beginnen.

De buitengewone ruimte, die Dogbah tot zijn beschikking had, om

zooveel rijst te kunnen bergen, waarvan [388]hij kort tevoren bij het
avondeten blijk had gegeven, was een ongezochte aanleiding, om
een korte grap te maken, waarover allen, het slachtoffer inbegrepen,
hartelijk moesten lachen.

Onwillekeurig bracht dit Sobah den ontzettenden eetlust van Heer

Spin in de gedachte, de personificatie van de deugden van den
Neger, maar ook van zijn ondeugden. Met een guitige flikkering in
zijn oog en met een veelzeggende schokschoudering nam Sobah
een meer bevelende houding aan, om zich voor zijn vertelling voor te
bereiden.

De mannen, gewoon, om de helft hunner gesprekken door meer of

minder geheime teekens te voeren, begrepen dadelijk, wat er komen
ging, en zetten zich in luisterende houdingen neêr.

De vertelling was vol leven en beweging, en bracht spoedig zoowel

den verteller als de luisteraars in de stemming, die de vertelavonden,
nog beter vertelnachten bij de negers kenmerkten.
Nadat Sobah een tweetal vertellingen had gedaan, waarnaar de
mannen met aandacht geluisterd hadden, en die hen herhaaldelijk in
onbedaarlijke lachbuien hadden doen uitbarsten, begon hij in zijn
geheugen naar een of anderen daad van vriend Spin te zoeken,
waardoor de weinig eervolle rol, die deze kleine held in de beide
vertellingen had gespeeld, eenigzins zou kunnen worden
goedgemaakt.

Met een „Wel! Spin, sterke kerel!” beantwoordde hij eenigzins vinnig
een minachtende opmerking van Dogbah, en als protest tegen diens
uitdagende bewering, begon hij het wonderbaarlijke heldenfeit van
Heer Spin te vertellen bij een wedstrijd in sterkte tusschen Olifant en
Hippopotamus 6: [389]

Spin, Olifant en Hippopotamus.

„In Afrika heerschte er hongersnood. Ook de dieren konden geen

voedsel vinden, want tengevolge van langdurige droogte was het
gras verschroeid, waren de planten verdord.

In die troostelooze wereld ontmoette Spin op zekeren dag Olifant.

„Wel! Hoe gaat het?” vroeg Spin. „Niet best”, antwoordde Olifant.
„Maar, wat ik zeggen wil, hoe kom jij aan den kost? Ik heb al in
dagen niets gegeten”.

Spin, die niets bezat en van den honger rammelde, wilde dit echter
niet laten blijken en zei dus: „Het is waar, alles ziet er dor en dood
uit, maar ik zal spoedig wel een gelegenheid vinden, om mij en mijn
gezin rijkelijk van voedsel te voorzien”. „Als je dus een plaats vind”—
liet Olifant er op volgen, „verzuim dan niet, mij dadelijk te roepen”.
Spin beloofde dit op zijn woord van waarachtig. „Het gaat mij aan het
hart, je zoo mager te zien” zei Spin, „je wordt met den dag kleiner.
Vroeger was je zoo reusachtig groot en dik en nu ben je haast van
mijn postuur. Je ziet er uit, of je te veel drinkt. Ik geloof stellig, dat ik
in staat ben, je van den wal in de rivier te trekken”.

Olifant begreep niet, dat Spin hem een poets wilde bakken en het op
zijn leven gemunt had; de goede slungel ging daarom gaarne op de
uitdaging van Spin in en riep uit: „Ik zal je toonen, wie sterker is; kom
maar op!”

„Goed”, zei Spin, „we zullen touwtrekken en ik zal voor een mooi, dik
touw zorgen”.

Hij ging nu naar het bosch op zoek naar een liaan*, een boschtouw,
en vond er al spoedig een, zoo dik als een krokodillenkop. Hij sneed
dit af en bracht het naar den rivieroever. Daar keek hij uit naar vriend
Hippopotamus*, en toen hij dezen zwemmende ontdekte, riep hij
hem toe: „Wedden, dat ik sterker ben dan jij en je uit het water trek?”
[390]

Hippopotamus begon te lachen en antwoordde: „Wat een bluffer ben

je toch; je bent immers veel te klein voor zoo iets. Met mijn kleinen
teen 7 trek ik jou met gemak van den kant in de rivier”.

„Best”, zei Spin. „We zullen zien. Wanneer zullen we de proef

nemen?”

„Morgen ochtend”, riep Hippopotamus terug.

„Afgesproken”, riep Spin, „ik zal het trektouw wel meêbrengen”.

Spin liep daarop het bosch in naar Olifant en maakte met hem
dezelfde afspraak voor den volgenden morgen.
De beide groote dieren hadden in het minst geen vermoeden, dat zij
tegen elkaar zouden moeten trekken.

Spin stond op de afgesproken plaats en was met het boschtouw

gereed, bond het eene einde daarvan om Olifant, het andere om
Hippopotamus, en zorgde dat zij elkander niet konden zien. Toen hij
nu zoover gereed was, riep hij de dieren, die met de koppen van
elkander afgewend stonden, toe: „houd je gereed; ik begin nu te
trekken!”

Spin plaatste zich nu in het midden van het touw, deed er een ruk
aan en kroop toen achter een boom weg.

De twee reusachtig sterke dieren begonnen nu met alle macht te

trekken. Zij trokken en rukten, tot zij bijna niet meer konden. Spin
vuurde hen voortdurend aan met zijn geschreeuw. Geen van beiden
wilde het opgeven en zij trokken zóó lang, tot zij buiten adem waren.
Hun ijdelheid belette hen te erkennen, dat Spin de sterkere was.

Maar de ijdelheid werd hen noodlottig, want na lang worstelen,

vielen zij beiden dood neêr”.— — — — — — — — — — — — — —
————————

Woorden alleen kunnen geen juisten indruk geven van [391]de

werkelijkheid. Sobah wist dezen ook niet bij zijn schildering van den
wonderlijken strijd teweeg te brengen, want, geheel medelevend met
de toenemende spanning van het verhaal, was hij overeind gaan
staan, en ging hij nu zóó geheel op in den strijd, dien hij schilderde,
dat hij door toon, blik en gebaar op ieder moment van den
verschrikkelijken strijd reageerde, totdat hij bij het van vermoeienis
dood neêrvallen der beide strijders eveneens op zijn zitbank uitgeput
neêrzonk.
Het was een zeldzaam stukje ongeoefende welsprekendheid. De
lange pauze, die de verteller op den dood der beide groote dieren
liet volgen, was noodig om de gespannen aandacht weder te
vestigen op het slot van het verhaal. Daarna ging hij tot een zachter
stemming over, toen hij aldus vervolgde:

„Spin was in zijn nopjes, toen hij de dieren zag bezwijken, en hij riep uit:
„Jullie heeten sterker dan ik, maar dat is mis hoor! Ik ben sterker, omdat ik
meer verstand heb”. 8 Toen nam hij de dieren op en bracht ze een voor
een naar een veilige plaats”.

Dit was een wonderbaarlijk heldenfeit, zelfs voor Heer Spin zelf, en
Sobah wierp een blik uit een zijner ooghoeken, om te zien, hoe dit
feit door zijn toehoorders ontvangen was geworden. Op hun gelaat
stond duidelijk te lezen: „hoe kan dat? Zoo’n kleine spin kan toch
geen olifant dragen!” De verteller had echter zijn antwoord dadelijk
gereed en zei:

„Toch is het zoo! Spin is te lui om te werken; de [392]lichtste taak valt hem
zwaar, maar geroofd voedsel kan hij altijd tillen. Spin droeg dus de dieren
naar een plaats, waar hij ze kon villen en in stukken hakken. Hij liet nu
dieren aanrukken, om hem bij te staan en het vleesch naar huis te
brengen. Zijn helpers beloonde hij op keurige wijze met afval van Olifant
en Spin en zijn gezin leefden nu rijkelijk van het door list verkregen
voedsel, totdat de hongersnood langzamerhand uit het land verdwenen
was”.

„Vóór dien tijd”, moeten jelui weten, „leefden er nog geen visschen in het
water. Toen Spin zijn gedoode dieren had afgehakt en het vleesch had
weggedragen, wierp hij de rest van den afval in de rivier en ziet, toen
kwamen er visschen te voorschijn. Zoo is dus Spin eigenlijk de schepper
der visschen geworden, en zoo heeft alles wat visch eet, veel aan hem te
danken”. 9

Deze geheel nieuwe verklaring van den oorsprong der in het water
zoo overvloedig voorkomende dieren, scheen voor het kinderlijke
brein der zwarte bootslieden niet zoo heel ongeloofelijk. Het water
rondom hun boot wemelde op dat oogenblik van visschen, 10 en als
Spin ze niet had voortgebracht, wie had het dan gedaan?

Hobahky, voor wiens neus de geur van een dampenden vischpot

een heerlijkheid was, uitte dadelijk zijn gevoelens met: „Spin, goed
man is; hij gemaakt heeft visch, en wij kan eet die!”

Oleemah was geneigd, geloof te schenken aan het verhaal van Spin,
en vereerde in stilte zijn Held, die door zijn behendigheid en list voor
zich en zijn familie gedurende den hongersnood aan eten had weten
te komen. [393]

In dien tusschentijd was de wind verminderd, en naar een gunstiger

kant gedraaid. De wolken, die de maan in den vroegen avond
verduisterd hadden, waren opgetrokken. De volle maan verspreidde
zijn zilveren glans over het water en Sobah, die met zijn geoefend
oog den toestand van weêr en water had geïnspecteerd, besliste,
dat het oogenblik nu gunstig was, om de reis voort te zetten.

De kleine mast werd nu omhoog gezet, het zeil geheschen en

onmiddellijk daarop joegen de mannen voort in de richting van
Freetown, hunne gedachten aan Spin voor minder inspannende uren
bewarende.

[Inhoud]

III. DIEREN-FABEL 11,

verteld door een Bantoe-neger van den Mpongwe-stam in Libreville,

hoofdplaats aan de Gaboon-rivier, naar den Engelschen tekst van
Robert H. Nassau (N.).

Wie zijn Krokodil’s verwanten?

Personen:

Ngando (Krokodil).
Sinyani (Vogels).
Sinyama (Beesten). 12

Krokodil was oud. Ten slotte stierf hij. Snel verspreidde zich het
nieuws van zijn dood onder de Beesten. Zijn verwanten en vrienden
begaven zich naar de Droefheid. Nadat een daartoe vastgesteld
aantal dagen was verstreken, werd de vraag omtrent de verdeeling
van zijn eigendommen besproken. Dadelijk reeds ontstond er
oneenigheid over de vraag, wie zijn naaste verwanten waren. [394]

De stam der Vogels zei: „Hij behoort tot den onzen en wij zijn dus de
eenigen, die op de eigendommen aanspraak maken”.

Hun eisch werd besproken, waarna de anderen vroegen:

„Waarop gronden jullie de verwantschap? Jullie dragen veêren, en

geen beschermende platen, zooals hij”.

De vogels antwoordden: „Het is waar, hij droeg onze veêren niet,

maar jullie moeten niet kijken naar wat hij bij zijn leven droeg.
Oordeel naar wat hij was, toen zijn leven begon. Kijk! Hij begon
immers net als wij. Wij gelooven in eieren. Zijn moeder bracht hem
als ei ter wereld. Hij is onze naaste verwante, en wij zijn dus zijne
erfgenamen”.
Maar de Beesten zeiden: „Niet waar! Wij zijn zijn verwanten, en zijn
eigendommen moeten onder ons verdeeld worden”.

Toen kwam de groote Dierenraad bijeen, en deze vroeg aan de

Beesten, op welken grond zij dan hunne verwantschap wilden
aantoonen en welk antwoord zij konden geven op het argument der
vogels met betrekking tot den oorsprong van den Krokodil uit een ei.

De Beesten zeiden: „Wij verklaren, dat het stamkenteeken in het

begin moet gezocht worden, niet in een ei. Want alle wezens vangen
als eieren aan. Leven is het oorspronkelijke begin. Kijk? Wanneer
het leven werkelijk in het ei begint, dan is het stamkenteeken
duidelijk. Toen Ngando’s leven begon, had hij vier pooten, evenals
wij. Wij oordeelen naar pooten, niet naar eieren. Alzoo is hij onze
verwante. En wij zullen zijne eigendommen nemen”.

Maar de Vogels antwoordden: „Jullie beweren, dat wij zijn verwanten

niet zijn, omdat wij veêren hebben en geen Ngando-platen. Maar,
jullie, kijk naar je zelf! Oordeel naar je eigen woorden. Ook jullie
dragen geen Ngando-platen, jullie met jelui haar en dik vel! Jelui
woorden zijn [395]niet juist. Het begin van zijn leven was niet, zooals
jelui zeggen, het oogenblik, toen de ledematen van de kleine
Ngando ontsproten. Reeds daarvóór was er al leven in het ei. En zijn
ei was geheel als ons ei, niet wat jullie eieren gelieven te noemen.
Jullie zijn dus zijn verwanten niet. Hij behoort bij ons”.

Maar de Beesten bleven redetwisten; het gekrakeel bleef heen en

weêr gaan en kwam nooit tot een einde 13. [396]

1 Dit spreekwoord komt merkwaardig overeen met het Fransche: Les belles
femmes, il faut les aimer, les épouser jamais. ↑
2 Hoofdstad van Sierra Leone. ↑
3 Dat hiermede niet bedoeld kan zijn de ongevoeligheid van den Neger voor de
schoonheden der natuur in algemeenen zin, weet hij wel beter, die met negers
dagen achtereen te midden eener weelderige tropische natuur verkeerd heeft. (C.
b. en f). ↑
4 Opgemerkt mag worden, dat de zang der Afrikaansche Negers, evenals die der
Surinaamsche Boschnegers (C.a.) van meer primitieven aard is dan die der
Negers van Jamaica, waarin de invloed van Engelsche melodieën vaak duidelijk te
herkennen is. (J.e. blz. 278–288). ↑
5 Zie blz. 29 en No. 19 en 31 van de Surinaamsche Stadsneger-vertellingen en
No. 18 der Indiaansche serie. ↑
6 Vergelijk No. 17 der Stadsneger-vertellingen. ↑
7 De vier van hoeven voorziene teenen zijn allen even groot, zoodat bij hem van
een kleinen teen geen sprake is. ↑
8 Hier brengt de Neger weder zijn overtuiging tot uiting, dat de mensch door zijn
verstand over de sterkste dieren het overwicht heeft verkregen (zie blz. 205). ↑
9 Met dergelijke eenvoudige verklaringen voor het ontstaan van het geschapene
is de kinderlijke neger volkomen tevreden. Dat het op andere wijze ontstaan
kan zijn, komt in zijn brein niet op. ↑
10 Dit doet denken aan den enormen vischrijkdom van de Surinaamsche rivieren
(C. b., blz. 43, 48, 90 en 93). ↑
11 In deze fabel wordt de vraag behandeld: Hoe is het leven begonnen? ↑
12 Opmerking verdient het, dat, evenals bij de Indianen (zie blz. 17), hier de vogels
tegenover de overige dieren worden geplaatst. ↑
13 De Afrikaansche inboorling is zeer gevoelig in kwesties van gelijkheid of
verschil in rang en leeftijd. ↑
[Inhoud]
 VERKLAREND REGISTER 1.

N.B. In dit register zijn de volgende afkortingen gebruikt:

A = Arowakken of Arowaksch. N = Negers.

B = Boschnegers. N.E. = Neger-Engelsch.
C = Caraïben of Caraïbisch. S = Suriname en Surinaamsch.
G = Guyana. Z = Zie.
I = Indianen of Indiaansch. a = aldaar.

De tusschen haakjes geplaatste letters hebben ook hier betrekking op

de geschriften, in het litteratuuroverzicht genoemd.

[Inhoud]

A.

Aardeten of geophagie is een ziekteverschijnsel, dat zich uit in het

eten van aarde, stukken griffels, krijt enz. In S. komt het veel voor bij
lijders aan mijnwormziekte (Anchylostomiasis). In den slaventijd
kregen de „grondvreters” maskers voor den mond. Dit grondeten is
vermoedelijk een verschijnsel der bedoelde mijnwormziekte,
veroorzaakt door een parasitischen rondworm (Anchylostoma
duodenalis). De lijders aan deze ziekte, die ook veel bij immigranten
voorkomt, en waaraan kinderen veelal sterven, worden bleek en
voelen zich zeer vermoeid. De hartwerking is verhoogd en de eetlust
gestoord.
Aars. Uitmonding van het darmkanaal, waardoor de faeces verwijderd
worden.

Aboma. N.E. naam voor Anaconda (Z. a.).

Abonjera. N.E. naam voor een plant (Sesamum indicum L.) uit de
fam. der Pedaliaceën, waarvan het zaad, in koekjes gebakken,
gegeten wordt. Ook olie wordt uit het zaad geperst (Sesam-olie).

Acouri, ook wel Agoeti (in het N.E. Koni-Koni) genoemd, is een
knaagdier (Dasyprocta agoeti), dat in holle boomen huist en van
wortels en vruchten leeft. Het vleesch is smakelijk.

Agoeti. Zie Acouri.

Alligator. In G. komen drie soorten van dit Krokodillengeslacht voor.

De soorten van dit geslacht, ook Kaaiman (Kaikoetji der A.) genoemd,
worden 1.20 M. tot 2.60 M. lang en zijn voor den mensch niet
gevaarlijk.

Amalivaca. Mythische Held, die door de C., meer in het bijzonder door
de Tamanaca’s, een oorspronkelijken stam der C., vereerd wordt.

Anaconda. De grootste slang van G., ook wel Waterboa genoemd. De

A. (Eunectes murinus) wordt 6–8 M., soms 10 M. lang en leeft in de
nabijheid van het water. Zie Aboma en Camoedi.

Ananas. Schijnvrucht van Ananas sativus, bevat geen zetmeel, doch

veel suiker. De I. Ananas heeft wit vleesch, is ronder en minder geurig.

Animisme is de bij primitieve volken heerschende voorstelling, dat alle

[397]natuurverschijnselen uitingen zijn van persoonlijke, denkende,
willende wezens. Alle bewerktuigde en onbewerktuigde wezens
hebben volgens hen een eigen ziel (anima) of geest. De zielen of
geesten hebben volgens dit geloof het vermogen, het dier, de plant of
het voorwerp, waarin zij huizen, te verlaten en vrij rond te dolen.