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Contents
Chapter 1 Following a State Court Case 53
Case 2.2: Brothers v. Winstead 56
Legal and Constitutional ◾◾ Adapting the Law to the Online Environment: Jurors’
Foundations of Business 1 Use of Wireless Devices and the Internet 60

Courts Online 62
Sources of American Law 2 Alternative Dispute Resolution 62
Common Law Tradition 4 Case 2.3: Cruise v. Kroger Co. 66
◾◾ Landmark in the Law: Equitable Principles and Maxims 7
Classifications of Law 7
◾◾ Beyond Our Borders: National Law Systems 9
Chapter 3
The Constitutional Powers of Government 10 Tort Law and Product Liability 73
Classic Case 1.1: Heart of Atlanta Motel v. United States 11
The Basis of Tort Law 73
Business and the Bill of Rights 13
Intentional Torts against Persons 75
Spotlight on Beer Labels:
◾◾ Adapting the Law to the Online Environment:
Case 1.2: Bad Frog Brewery, Inc. v. New York State Liquor Authority 17
Revenge Porn and Invasion of Privacy 80
◾◾ Adapting the Law to the Online Environment: Should
Case 3.1: Revell v. Guido 82
Threats Made on Facebook Be Considered Free Speech? 18
Case 1.3: Holt v. Hobbs 20 Intentional Torts against Property 84
Due Process and Equal Protection 20 Unintentional Torts (Negligence) 86

◾◾ Landmark in the Law: Palsgraf v. Long Island Railroad Co. (1928) 89
Privacy Rights 22
Spotlight on the Seattle Mariners:
◾◾ Managerial Strategy: Marriage Equality and the Constitution 23
Case 3.2: Taylor v. Baseball Club of Seattle, L.P. 90
◾◾ Business Application: Is “Pretexting” Illegal? 25
Strict Liability 93
Appendix to Chapter 1 30
Chapter 2
Courts and Alternative
Dispute Resolution 39
The Judiciary’s Role in American Government 40
Basic Judicial Requirements 40
◾◾ Landmark in the Law: Marbury v. Madison (1803) 41
Spotlight on Gucci:
Case 2.1: Gucci America, Inc. v. Wang Huoqing 46
iStockPhoto.com/Alina555
The State and Federal Court Systems 48

◾◾ Managerial Strategy: Budget Cuts for State
Courts Can Affect Businesses 49
◾◾ Beyond Our Borders: Islamic Law Courts
Abroad and at Home 50
vi
Copyright 2017 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s).
Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it.
Contents vii
Product Liability 94
◾◾ Beyond Our Borders: Imposing Product Liability
as Far Away as China 96
◾◾ Managerial Strategy: When Is a Warning Legally Bulletproof? 98
Case 3.3: VeRost v. Mitsubishi Caterpillar Forklift America, Inc. 99
◾◾ Business Application:
How Important Is Tort Liability to Business? 101
Chapter 4
Intellectual Property Rights 106
iStockPhoto.com/temizyurek
Trademarks 107
CLASSIC CASE 4.1: Coca-Cola Co. v. Koke Co. of America 107
Patents 113
Case 4.2: In re Imes 114
The Problem of Patent Trolls 116
Chapter 6
Copyrights 117
Case 4.3: Inhale, Inc. v. Starbuzz Tobacco, Inc. 118 Criminal Law and Cyber Crime 152
◾◾ Beyond Our Borders: The Resale of Textbooks
Civil Law and Criminal Law 152
Purchased Abroad 121
Criminal Liability 155
Trade Secrets 122
◾◾ Managerial Strategy: The Criminalization of American Business 157
International Protections 124
Types of Crimes 158
◾◾ Linking Business Law to Marketing:
Trademarks and Service Marks 126 Case 6.1: State of Minnesota v. Smith 159
Spotlight on White-Collar Crime:
Case 6.2: People v. Sisuphan 162
Chapter 5 Defenses to Criminal Liability 165
Internet Law, Social Media, and Privacy 130 Constitutional Safeguards and Criminal Procedures 167
Internet Law 130 Case 6.3: State of Oklahoma v. Marcum 168
Spotlight on Internet Porn: ◾◾ Landmark in the Law: Miranda v. Arizona (1966) 171
Case 5.1: Hasbro, Inc. v. Internet Entertainment Group, Ltd. 134 Cyber Crime 174
Copyrights in Digital Information 135 ◾◾ Beyond Our Borders: Hackers Hide in Plain Sight in Russia 176
◾◾ Landmark in the Law: The Digital Millennium Copyright Act 136 ◾◾ Adapting the Law to the Online Environment:
Malware Is Changing the Criminal Landscape 177
E-Mail Hacking at Sony Pictures— ◾◾ Business Application: Protecting Your Company
Can You Put the Cat Back into the Bag? 137 against Hacking of Its Bank Accounts 179
Social Media 139
Online Defamation 143 Chapter 7
Case 5.2: Yelp, Inc. v. Hadeed Carpet Cleaning, Inc. 143
Business Ethics 184
Privacy 145
◾◾ Beyond Our Borders: “The Right to Be Forgotten” Business Ethics 184
in the European Union 145 Case 7.1: Scott v. Carpanzano 187
Case 5.3: Nucci v. Target Corp. 146 Case 7.2: May v. Chrysler Group, LLC 188
viii Contents
Business Ethics and Social Media 189

Chapter 10
Approaches to Ethical Reasoning 190
Making Ethical Business Decisions 195 Contract Performance,
◾◾ Adapting the Law to the Online Environment: Breach, and Remedies 265
Should Employees Have a “Right of Disconnecting”? 196
Case 7.3: Al-Dabagh v. Case Western Reserve University 197 Assignment and Delegation 266
Case 10.1: Bass-Fineberg Leasing, Inc. v. Modern Auto Sales, Inc. 268
Global Business Ethics 198
◾◾ Beyond Our Borders: Bribery and the Foreign Third Party Beneficiaries 271
Corrupt Practices Act 200 Contract Discharge 272
◾◾ Linking Business Law to Accounting and Finance: ◾◾ Adapting the Law to the Online Environment:
Managing a Company’s Reputation 201 When Do Changes in Social Media Terms
of Service Constitute a Breach of Contract? 276
Chapter 8 Case 10.2: Kolodin v. Valenti 279
Damages 280
Agreement and Spotlight on Liquidated Damages:
Consideration in Contracts 207 Case 10.3: Kent State University v. Ford 283
Equitable Remedies 284
An Overview of Contract Law 208
Contract Provisions Limiting Remedies 287
Types of Contracts 209
Case 8.1: Vukanovich v. Kine 212
Agreement 214 Chapter 11
Classic Case 8.2: Lucy v. Zehmer 215 Sales and Lease Contracts 294
Can Your E-Mails or Instant Messages The Scope of Articles 2 and 2A 295
Create a Valid Contract? 220 ◾◾ Landmark in the Law: The Uniform Commercial Code 295
E-Contracts 222 Case 11.1: Nautilus Insurance Co. v. Cheran Investments LLC 296
Consideration 227 ◾◾ Adapting the Law to the Online Environment:
◾◾ Landmark in the Law: Hamer v. Sidway (1891) 228 Taxing Web Purchases 298
Spotlight on Nike: The Formation of Sales and Lease Contracts 300
Case 8.3: Already, LLC v. Nike, Inc. 231 Case 11.2: C. Mahendra (N.Y.), LLC v. National Gold &
Diamond Center, Inc. 304
Chapter 9
Capacity, Legality, and Enforceability 237
Contractual Capacity 237
Case 9.1: PAK Foods Houston, LLC v. Garcia 238
Legality 241
Case 9.2: Holmes v. Multimedia KSDK, Inc. 245
◾◾ Managerial Strategy: Creating Liability Waivers
That Are Not Unconscionable 246
Voluntary Consent 247
Case 9.3: Cronkelton v. Guaranteed Construction Services, LLC 251
◾◾ Adapting the Law to the Online Environment: “Catfishing”:
iStockPhoto.com/eyescar
Is That Online “Friend” for Real? 253

The Writing Requirement 254
◾◾ Beyond Our Borders: The Statute of Frauds
and International Sales Contracts 257
Contents ix
CLASSIC CASE 11.3: Jones v. Star Credit Corp. 310

Title and Risk of Loss 311
◾◾ Managerial Strategy: Commercial Use of Drones 313
Contracts for the International Sale of Goods 318
Who Bears the Risk of Loss—the Seller or the Buyer? 320
Chapter 12
Performance and Breach
iStockPhoto.com/Spaceliner
of Sales and Lease Contracts 329
Performance Obligations 330
Case 12.1: Garziano v. Louisiana Log Home Co. 331
Remedies for Breach 337
◾◾ Beyond Our Borders: The CISG’s Approach
to Revocation of Acceptance 343 Case 14.2: Charles R. Tips Family Trust v. PB Commercial LLC 386
Spotlight on Baseball Cards:
Transfer of Instruments 386
Case 12.2: Fitl v. Strek 344
Case 14.3: In re Bass 388
Warranties 345
◾◾ Beyond Our Borders: Severe Restrictions
CLASSIC CASE 12.3: Webster v. Blue Ship Tea Room, Inc. 348 on Check Indorsements in France 389
Holder in Due Course (HDC) 391
Chapter 13 Signature and Warranty Liability 394
Consumer Law 356 Defenses, Limitations, and Discharge

◾◾ Landmark in the Law: Federal Trade Commission Rule 433
399
401
Advertising, Marketing, and Sales 356
Case 13.1: POM Wonderful, LLC v. Federal Trade Commission
358
Chapter 15
The FTC’s Guideline Regulating Astroturfing 360 Banking in the Digital Age 407
Case 13.2: Lexmark International, Inc. v.
Static Control Components, Inc. 361 Checks 407
Labeling and Packaging 362 The Bank-Customer Relationship 410
Spotlight on Honda: Case 15.1: Royal Arcanum Hospital Association
Case 13.3: Paduano v. American Honda Motor Co. 363 of Kings County, Inc. v. Herrnkind 410
Protection of Health and Safety 364 The Bank’s Duty to Honor Checks 411
◾◾ Beyond Our Borders: Europe Bans Foods that Americans Eat 365 Case 15.2: Michigan Basic Property
Insurance Association v. Washington 416
Credit Protection 367
The Bank’s Duty to Accept Deposits 417
The Proper Approach to Using Credit Reporting Services 371 Case 15.3: Shahin v. Delaware Federal Credit Union 418
◾◾ Landmark in the Law: Check Clearing
in the 21st Century Act (Check 21) 419
Chapter 14 Electronic Fund Transfers 422
Negotiable Instruments 376 Online Banking and E-Money 423
Types of Negotiable Instruments 376 Pay with Your Smartphone 424
Requirements for Negotiability 380 ◾◾ Linking Business Law to Accounting and Finance:
Case 14.1: Alpacas of America, LLC v. Groome 382 Banking Risks 425
x Contents
Chapter 16
Creditors’ Rights and Bankruptcy 430
Laws Assisting Creditors 430
Case 16.1: Royal Jewelers Inc. v. Light 431
Spotlight on Foreclosures:
Case 16.2: McLean v. JPMorgan Chase Bank, N.A. 440
Laws Assisting Debtors 440
iStockPhoto.com/ericsphotography
The Bankruptcy Code 441
◾◾ Landmark in the Law: The Bankruptcy Abuse Prevention
and Consumer Protection Act 442
Chapter 7—Liquidation 443
Case 16.3: In re Cummings 451
Chapter 11—Reorganization 452
Bankruptcy Relief under Chapter 12 and Chapter 13 454
◾◾ Linking Business Law to Corporate Management: Case 18.1: Bailey v. TitleMax of Georgia, Inc. 494
What Can You Do to Prepare for a Chapter 11 Reorganization? 458
Health, Safety, and Income Security 496
Immigration Law 500
Chapter 17 Employment Discrimination 502
Agency Relationships in Business 463 ◾◾ Adapting the Law to the Online Environment:
Hiring Discrimination Based on Social Media Posts 506
Agency Relationships 464 Case 18.2: Young v. United Parcel Service, Inc. 508
Case 17.1: Asphalt & Concrete Services, Inc. v. Perry 466 Case 18.3: Roberts v. Mike’s Trucking, Ltd. 510
Formation of an Agency 468 ◾◾ Beyond Our Borders: Sexual Harassment in Other Nations 512
Duties of Agents and Principals 470 ◾◾ Linking Business Law to Corporate Management:
Human Resource Management 519
Agent’s Authority 472
What Happens When an Agent Breaches Company Policy Chapter 19
on the Use of Electronic Data? 474
Spotlight on Apparent Authority of Managers: The Entrepreneur’s Options 524
Case 17.2: Lundberg v. Church Farm, Inc. 475
Sole Proprietorships 525
Liability in Agency Relationships 476 ◾◾ Managerial Strategy: Cyber Thieves Empty
Case 17.3: Stonhard, Inc. v. Blue Ridge Farms, LLC 477 Small-Business Owners’ Bank Accounts 525
◾◾ Landmark in the Law: The Doctrine of Respondeat Superior 480 Case 19.1: Quality Car & Truck Leasing, Inc. v. Sark 527
Termination of an Agency 481 Partnerships 528
◾◾ Beyond Our Borders: Islamic Law and Respondeat Superior 482 ◾◾ Adapting the Law to the Online Environment:
◾◾ Business Application: How Can an Employer Use A Sole Proprietorship, Facebook Poker, and Bankruptcy 528
Independent Contractors? 485 Case 19.2: DeWine v. Valley View Enterprises, Inc. 535
Limited Liability Companies 536
Chapter 18 Case 19.3: Hodge v. Strong Built International, LLC 538
Employment Law 490 ◾◾ Beyond Our Borders: Limited Liability Companies

in Other Nations 539
Employment at Will 490 Special Business Forms 541
Wages, Hours, Layoffs, and Leave 492 Franchises 543
Contents xi
Chapter 20 State Securities Laws 597

Corporate Governance 598
Corporations 551 ◾◾ Beyond Our Borders: Corporate Governance in Other Nations 599
Nature and Classification 551
Case 20.1: Drake Manufacturing Co. v. Polyflow, Inc. 553 Chapter 22
Imposing a 1930s Regulatory Law on Broadband Operators 555
Antitrust Law and Promoting Competition 607
Formation and Financing 557 ◾◾ Landmark in the Law: The Sherman Antitrust Act 608
Corporate Powers 561 The Sherman Antitrust Act 608
Case 20.2: Dog House Investments, LLC v. Teal Properties, Inc. 563 Section 1 of the Sherman Act 610
Directors and Officers 563 ◾◾ Adapting the Law to the Online Environment:
The Justice Department Goes After E-Book Pricing 612
Classic Case 20.3: Guth v. Loft, Inc. 567
Section 2 of the Sherman Act 614
Shareholders 568
Case 22.1: McWane, Inc. v. Federal Trade Commission 616
◾◾ Beyond Our Borders: Derivative Actions in Other Nations 573
Spotlight on Weyerhaeuser:
Major Business Forms Compared 574
Case 22.2: Weyerhaeuser Co. v.
Ross-Simmons Hardwood Lumber Co. 618
Chapter 21 The Clayton Act 619
Case 22.3: Batson v. Live Nation Entertainment, Inc.
Investor Protection, Insider Trading, Enforcement and Exemptions
621
622
and Corporate Governance 581 U.S. Antitrust Laws in the Global Context 623
◾◾ Landmark in the Law: The Securities ◾◾ Beyond Our Borders: The EU’s Lengthy Antitrust Proceedings 625
and Exchange Commission 582
Securities Act of 1933 582 Chapter 23
Case 21.1: Omnicare, Inc. v. Laborers District Council
Construction Industry Pension Fund 589 Personal Property,
Securities Exchange Act of 1934 590 Bailments, and Insurance 630
Classic Case 21.2: Securities and Exchange Commission v.
Texas Gulf Sulphur Co. 592 Personal Property versus Real Property 630
Case 21.3: United States v. Newton 596 Case 23.1: Corbello v. DeVito 631
Acquiring Ownership of Personal Property 632
The Exploding World of Digital Property 633
Classic Case 23.2: In re Estate of Piper 635
Mislaid, Lost, and Abandoned Property 637
Bailments 639
Insurance 646
Case 23.3: Breeden v. Buchanan 647
Chapter 24
Real Property
iStockPhoto.com/GlobalStock
and Environmental Law 656

The Nature of Real Property 656
Ownership Interests and Leases 658
xii Contents
Doing Business Internationally 689

Regulation of Specific Business Activities 691
International Contracts 693
Case 25.2: Carlyle Investment Management LLC v.
Moonmouth Company SA 694
Payment Methods 696
U.S. Laws in a Global Context 698
Spotlight on International Torts:
Case 25.3: Daimler AG v. Bauman 699
APPENDICES
iStockPhoto.com/Rawpixel
A How to Brief Cases and Analyze Case Problems A-1
B The Constitution of the United States A-3
C Articles 2 and 2A of the Uniform Commercial Code A-11
D Answers to Issue Spotters A-47
Case 24.1: Main Omni Realty Corp. v. Matus 659 E Answers to Even-Numbered
Transfer of Ownership 663 Learning Objectives Check Questions A-51
F Sample Answers for Business
Spotlight on Sales of Haunted Houses:
Case 24.2: Stambovsky v. Ackley 664 Case Problems with Sample Answer A-57
Glossary G-1
Landlord-Tenant Relationships 668
Table of Cases TC-1
Protecting the Environment 670
Index I-1
Case 24.3: United States v. O’Malley 674
Chapter 25
International Law in a Global Economy 684
International Law 685
◾◾ Beyond Our Borders: Border Searches
of Your Electronic Devices 685
Case 25.1: Linde v. Arab Bank, PLC 687
Preface
T he study of business and the legal environment has universal applicability. A student
entering any field of business must have at least a passing understanding of business
law in order to function in the real world. Business Law Today, The Essentials, Eleventh
Edition, provides the information in an interesting and contemporary way. The Eleventh
Edition continues its established tradition of being the most up-to-date text on the market.
Instructors have come to rely on the coverage, accuracy, and applicability of Business Law
Today, The Essentials. This best-selling text engages your students, solidifies their under-
standing of legal concepts, and provides the best teaching tools available. I have spent a great
deal of effort making this edition more contemporary, exciting, and visually appealing than
ever before. Special pedagogical devices within the text focus on legal, ethical, global, and
corporate issues, while addressing core curriculum requirements.
The Eleventh Edition incorporates the latest legal developments and United States Supreme
Court decisions. It also includes more than forty new features and fifty-five new cases, over a
hundreds new examples and case examples, new exhibits, learning objectives, margin defini-
tions, and case problems.
New Chapter on Internet Law, Social Media, and Privacy

For the Eleventh Edition, I have included an entirely new chapter (Chapter 5) entitled Internet
Law, Social Media, and Privacy. Social media have entered the mainstream and become a
part of everyday life for many businesspersons. Throughout the text, I recognize this trend
by incorporating the Internet and social media as they relate to the topics under discussion.
New Features
The Eleventh Edition of Business Law Today, The Essentials, is filled with exciting new features
including the following:
• Nineteen Adapting the Law to the Online Environment features examine cutting-edge
cyberlaw issues. Sixteen of these are new and cover topics such as Facebook poker,
hacking, patent trolls, paying with smartphones, revenge porn, and social media.
• I have included fifteen new Ethical Issues that focus on the ethical aspects of a topic
being discussed in order to emphasize that ethics is an integral part of a business law
course.
• I have also added seven new Beyond Our Borders features (for a total of fifteen) that
focus on the global legal environment and illustrate how other nations deal with
specific legal concepts being discussed.
• For this edition, I have created a new feature entitled Managerial Strategy that
focuses on the management aspects of business law. There are seven of these new
features throughout the text, covering such topics as the commercial use of drones,
marriage equality, and the use of company e-mail systems to organize a union.
• Six Business Application features and five Linking Business Law to [one of the six
functional fields of business] features are included at the end of selected chapters. The
xiii
xiv Preface
Business Applications focus on practical considerations and offer checklists related to

the chapter’s contents, whereas the Linking Business Law features underscore how the
law relates to other fields of business.
• Thirteen Landmark in the Law features discuss a landmark case, statute, or other legal
development that has had a significant effect on business law.
New Cases and Case Problems

The Eleventh Edition of Business Law Today, The Essentials, has new cases and case problems
from 2015 and 2014 in every chapter. The new cases have been carefully selected to illustrate
important points of law and be of high interest to students and instructors. I have made it
a point to find recent cases that enhance learning and are simple enough for business law
students to understand.
Certain cases and case problems have been carefully chosen as good teaching cases and
are designated as Spotlight Cases and Spotlight Case Problems. Some examples include
Spotlight on Apple, Spotlight on Beer Labels, Spotlight on Nike, and Spotlight on the Seattle Mariners.
Instructors will find these Spotlight decisions useful to illustrate the legal concepts under
discussion, and students will enjoy studying these cases because they involve interesting and
memorable facts. Other cases have been chosen as Classic Cases because they establish a legal
precedent in the particular area of law.
Each case concludes with a question, which may be called Critical Thinking, What If the
Facts Were Different? or Why Is This Case Important? Classic Cases conclude with an Impact of
This Case on Today’s Law section that clarifies how the case has affected the legal environment.
Suggested answers to all case-ending questions can be found in the Solutions Manual for this text.
Many New Highlighted and Numbered Case Examples

Many instructors use cases and examples to illustrate how the law applies to business. For
this edition of Business Law Today, The Essentials, I have added seventy-six new highlighted
and numbered Examples, and eighty-one new highlighted and consecutively numbered
Case Examples. Examples illustrate how the law applies in a specific situation. Case Examples
present the facts and issues of an actual case and then describe the court’s decision and ratio-
nale. The numbered Examples and Case Examples features are integrated throughout the text to
help students better understand how courts apply the principles in the real world.
Critical Thinking and Legal Reasoning Elements

Critical thinking questions conclude most of the features and cases in this text. There is also a
Debate This question at the end of each chapter that requires students to think critically about
the rationale underlying the law on a particular topic.
Answers to all critical thinking questions, as well as to the Business Scenarios and Case
Problems at the end of every chapter, are presented in the Solutions Manual for the text. In
addition, the answers to one case problem in each chapter, called the Business Case Problem
with Sample Answer, appear in Appendix F.
The chapter-ending materials also include a separate section of questions that focus on
critical thinking and writing. This section always includes a Business Law Critical Thinking
Group Assignment and may also include the following:
• Critical Legal Thinking questions require students to think critically about some
aspect of the law discussed in the chapter.
• Business Law Writing questions require students to compose a written response to a
business-oriented critical-thinking question.
Preface xv
Other Pedagogical Devices within Each Chapter

• Learning Objectives (questions at the beginning of each chapter and in the margin of
the text provide a framework for the student).
• Preventing Legal Disputes (integrated text sections offer practical guidance on how
businesspersons can avoid legal disputes and litigation in a particular area).
• Chapter Outline (an outline of the chapter’s first-level headings).
• Margin definitions.
• Highlighted and numbered Examples and Case Examples (illustrate legal principles).
• Quotations and Know This (margin features).
• Exhibits.
• Photographs (with critical thinking questions) and cartoons.
Chapter-Ending Pedagogy
• Reviewing . . . features (in every chapter).
• Debate This (a statement or question at the end of the Reviewing feature).
• Key Terms (with appropriate page references).
• Chapter Summary (in table format).
• Issue Spotters (in every chapter with answers in Appendix D).
• Learning Objectives Check (The Learning Objectives questions are presented again to
aid students in reviewing the chapter. For this edition, answers to the even-numbered
questions for each chapter are provided in Appendix E.)
• Business Scenarios and Case Problems (Every chapter includes a Business Case Problem
with Sample Answer answered in Appendix F, A Question of Ethics, and a Business Law
Critical Thinking Group Assignment. Selected chapters include a Spotlight Case Problem.)
Supplements
Business Law Today, The Essentials, Eleventh Edition, provides a comprehensive supplements
package designed to make the tasks of teaching and learning more enjoyable and efficient. The
following supplements are available for instructors.
MindTap Business Law for Business Law Today,

The Essentials, Eleventh Edition
MindTap™ is a fully online, highly personalized learning experience built upon authoritative
Cengage Learning content. By combining readings, multimedia, activities, and assessments
into a singular Learning Path, MindTap guides students through their course with ease and
engagement. Instructors personalize the Learning Path by customizing Cengage Learning
resources and adding their own content via apps that integrate into the MindTap framework
seamlessly with Learning Management Systems.
The MindTap Business Law product provides a four-step Learning Path, Case Repository,
Adaptive Test Prep, and an Interactive eBook designed to meet instructors’ needs while also
allowing instructors to measure skills and outcomes with ease. Each and every item is assign-
able and gradable. This gives instructors the knowledge of class standings and concepts that
may be difficult. Additionally, students gain knowledge about where they stand—both indi-
vidually and compared to the highest performers in class.
xvi Preface
Cengage Learning Testing Powered by Cognero

Cengage Learning Testing Powered by Cognero is a flexible, online system that allows instructors
to do the following:
• Author, edit, and manage Test Bank content from multiple Cengage Learning solutions.
• Create multiple test versions in an instant.
• Deliver tests from their Learning Management System (LMS), classroom, or wherever
they want.
Start Right Away! Cengage Learning Testing Powered by Cognero works on any operating
system or browser.
• Use your standard browser; no special installs or downloads are needed.
• Create tests from school, home, the coffee shop—anywhere with Internet access.
What Instructors Will Find
• Simplicity at every step. A desktop-inspired interface features drop-down menus and
familiar, intuitive tools that take instructors through content creation and management
with ease.
• Full-featured test generator. Create ideal assessments with a choice of fifteen question
types—including true/false, multiple choice, opinion scale/Likert, and essay. Multi-
language support, an equation editor, and unlimited metadata help ensure instructor
tests are complete and compliant.
• Cross-compatible capability. Import and export content into other systems.
Instructor’s Companion Web Site

The Instructor’s Companion Web Site contains the following supplements:
• Instructor’s Manual. Includes sections entitled “Additional Cases Addressing This Issue”
at the end of selected case synopses.
• Solutions Manual. Provides answers to all questions presented in the text, including
the Learning Objectives, the questions in each case and feature, the Issue Spotters, the
Business Scenarios and Case Problems, and Critical Thinking and Writing Assignments. New
for this edition, we also provide a set of Alternative Case Problems for every chapter.
• Test Bank. A comprehensive test bank contains multiple-choice, true/false, and short
essay questions.
• Case-Problem Cases.
• Case Printouts.
• PowerPoint Slides.
Turn the Light ON
with MindTap!
Through personalized paths of dynamic assignments and applications, MindTap is a digital learning solution
that turns cookie cutter into cutting edge, apathy into engagement, and memorizers into higher-level thinkers.
With MindTap’s carefully curated material, you get the right content and groundbreaking tools you need. You can
personalize every element of your course—from rearranging the Table of Contents to inserting videos, cases, and
activities. You’ll save time and improve workflow by having everything in one place. And, with MindTap’s Progress
App, you can monitor student progress in real time.
Specifically for this Edition, you’ll find:

A pre-built learning path in MindTap that guides students through consistent learning activities to prepare,
engage, apply, and analyze business law content.
Worksheets - interactive online “worksheets” PREPARE Video Activities - real-world video exercises make
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Preface xxi
Acknowledgments for Previous Editions

Since I began this project many years ago, numerous business law professors and users have been kind enough to help me revise
the book, including the following:
John J. Balek Peter Clapp Nancy L. Hart James K. Miersma

Morton College, Illinois St. Mary’s College, California Midland College, Texas Milwaukee Area Technical Institute, Wisconsin
John Jay Ballantine Dale Clark Mo Hassan Susan J. Mitchell
University of Colorado, Boulder Corning Community College, New York Cabrillo College, California Des Moines Area Community College, Iowa
Lorraine K. Bannai Tammy W. Cowart Andy E. Hendrick Jim Lee Morgan
Western Washington University University of Texas, Tyler Coastal Carolina University, South Carolina West Los Angeles College, California
Marlene E. Barken Stanley J. Dabrowski Janine S. Hiller Jack K. Morton
Ithaca College, New York Hudson County Community College, New Jersey Virginia Polytechnic Institute & State University University of Montana
Laura Barnard Sandra J. Defebaugh Karen A. Holmes Annie Laurie I. Myers
Lakeland Community College, Ohio Eastern Michigan University Hudson Valley Community College, New York Northampton Community College, Pennsylvania
Denise A. Bartles, J.D. Patricia L. DeFrain Fred Ittner Solange North
Missouri Western State University Glendale College, California College of Alameda, California Fox Valley Technical Institute, Wisconsin
Daryl Barton Julia G. Derrick Susan S. Jarvis Jamie L. O’Brien
Eastern Michigan University Brevard Community College, Florida University of Texas, Pan American South Dakota State University
Merlin Bauer Joe D. Dillsaver Jack E. Karns Ruth R. O’Keefe
Mid State Technical College, Wisconsin Northeastern State University, Oklahoma East Carolina University, North Carolina Jacksonville University, Florida
Donna E. Becker Claude W. Dotson Sarah Weiner Keidan Robert H. Orr
Frederick Community College, Maryland Northwest College, Wyoming Oakland Community College, Michigan Florida Community College at Jacksonville
Richard J. Bennet Larry R. Edwards Richard N. Kleeberg George Otto
Three Rivers Community College, Connecticut Tarrant County Junior College, Solano Community College, California Truman College, Illinois
South Campus, Texas
Dr. Anne Berre Bradley T. Lutz Thomas L. Palmer
Schreiner University, Texas Jacolin Eichelberger Hillsborough Community College, Florida Northern Arizona University
Hillsborough Community College, Florida
Robert C. Bird Diane MacDonald David W. Pan
University of Connecticut George E. Eigsti Pacific Lutheran University, Washington University of Tulsa, Oklahoma
Kansas City, Kansas, Community College
Bonnie S. Bolinger Darlene Mallick Victor C. Parker, Jr.
Ivy Tech Community College, Florence E. Elliott-Howard Anne Arundel Community College, Maryland North Georgia College and State University
Wabash Valley Region, Indiana Stephen F. Austin State University, Texas
John D. Mallonee Donald L. Petote
Brad Botz Tony Enerva Manatee Community College, Florida Genesee Community College, New York
Garden City Community College, Kansas Lakeland Community College, Ohio
Joseph D. Marcus Francis D. Polk
Teresa Brady Benjamin C. Fassberg Prince George’s Community College, Maryland Ocean County College, New Jersey
Holy Family College, Pennsylvania Prince George’s Community College, Maryland
Woodrow J. Maxwell Gregory Rabb
Dean Bredeson Joseph L. Flack Hudson Valley Community College, New York Jamestown Community College, New York
University of Texas at Austin Washtenaw Community College, Michigan
Diane May Brad Reid
Lee B. Burgunder Jerry Furniss Winona State University, Minnesota Abilene Christian University, Texas
California Polytechnic University, San Luis Obispo University of Montana
Beverly McCormick Anne Montgomery Ricketts
Thomas D. Cavenagh Joan Gabel Morehead State University, Kentucky University of Findlay, Ohio
North Central College, Illinois Florida State University
William J. McDevitt Donald A. Roark
Bradley D. Childs Elizabeth J. Guerriero Saint Joseph’s University, Pennsylvania University of West Florida
Belmont University, Tennessee Northeast Louisiana University
John W. McGee Hugh Rode
Corey Ciocchetti Phil Harmeson Aims Community College, Colorado Utah Valley State College
University of Denver, Colorado University of South Dakota
xxii Preface
Gerald M. Rogers Lou Ann Simpson Frederick J. Walsh Kay O. Wilburn

Front Range Community College, Colorado Drake University, Iowa Franklin Pierce College, New Hampshire The University of Alabama at Birmingham
Dr. William J. Russell Denise Smith James E. Walsh, Jr. John G. Williams, J.D.
Northwest Nazarene University, Idaho Missouri Western State College Tidewater Community College, Virginia Northwestern State University, Louisiana
William M. Rutledge Hugh M. Spall Randy Waterman James L. Wittenbach
Macomb Community College, Michigan Central Washington University Richland College, Texas University of Notre Dame, Indiana
Martha Wright Sartoris Catherine A. Stevens Jerry Wegman Eric D. Yordy
North Hennepin Community College, Minnesota College of Southern Maryland University of Idaho Northern Arizona University
Anne W. Schacherl Maurice Tonissi Edward L. Welsh, Jr. Joseph Zavaglia, Jr.
Madison Area Technical College, Wisconsin Quinsigamond Community College, Massachusetts Phoenix College, Arizona Brookdale Community College, New Jersey
Edward F. Shafer James D. Van Tassel Clark W. Wheeler
Rochester Community College, Minnesota Mission College, California Santa Fe Community College, Florida
Lance Shoemaker, J.D., Russell A. Waldon Lori Whisenant
M.C.P., M.A. College of the Canyons, California University of Houston, Texas
West Valley College, California
In addition, I give my thanks to the staff at Cengage Learning, especially Vicky True-Baker,
product manager; Michael Worls, product director; Rebecca von Gillern, managing content
developer; Leah Wuchnick, content developer; and Ann Borman, content project manager.
I also thank Katie Jergens in marketing; Michelle Kunkler, art director; and Anne Sheroff,
photo researcher. I would also like to thank the staff at Lachina, the compositor, for accurately
generating pages for this text and making it possible for me to meet my ambitious printing
schedule.
I give special thanks to Katherine Marie Silsbee for managing the project and providing
exceptional research and editorial skills. I also thank William Eric Hollowell, c o-author of
the Solutions Manual and Test Bank, for his excellent research efforts. I am grateful for the
copyediting services of Beverly Peavler and proofreading by Sue Bradley. I also thank Vickie
Reierson, Roxanna Lee, and Suzanne Jasin for their many efforts on this project and for helping
to ensure an error-free text.
Roger LeRoy Miller
Dedication
To Francette,
Thanks for putting

up with someone
addicted to work.
R.L.M.
1
CHAPTER OUTLINE
▪▪ Sources of American Law
▪▪ Common Law Tradition
▪▪ Classifications of Law
iStockPhoto.com/Feverpitched
▪▪ The Constitutional
Powers of Government
▪▪ Business and the Bill
of Rights
▪▪ Due Process and Equal
Protection
Legal and Constitutional

▪▪ Privacy Rights
Foundations of Business LEARNING OBJECTIVES

The five Learning Objectives below
are designed to help improve your
understanding of the chapter. After
reading this chapter, you should be able
to answer the following questions:
“Laws should be like In the chapter-opening quotation, Clarence Darrow asserts
that law should be created to serve the public. Because 1. What are four primary sources
clothes. They should of law in the United States?
you are part of that public, the law is important to you.
be made to fit the In particular, those entering the world of business will find 2. What are some important
people they are themselves subject to numerous laws and government reg- differences between civil law
meant to serve.” ulations. A basic knowledge of these laws and regulations and criminal law?
is beneficial—if not essential—to anyone contemplating a 3. What constitutional clause
Clarence Darrow successful career in today’s business environment. gives the federal govern-
1857–1938 Although the law has various definitions, all of them ment the power to regulate
(American lawyer)
are based on the general observation that law consists of commercial activities among
enforceable rules governing relationships among individuals and the various states?
between individuals and their society. In some societies, these enforceable rules consist of 4. What is the Bill of Rights?
unwritten principles of behavior. In other societies, they are set forth in ancient or con- What freedoms does the
temporary law codes. In the United States, our rules consist of written laws and court First Amendment guarantee?
decisions created by modern legislative and judicial bodies. Regardless of how such rules 5. Where in the Constitution
are created, they all have one feature in common: they establish rights, duties, and privileges can the due process clause
that are consistent with the values and beliefs of a society or its ruling group. be found?
In this introductory chapter, the basic sources of American law, the common law tra-
Law A body of enforceable rules
dition, and some general classifications of law are discussed. The chapter then turns to governing relationships among
constitutional law and examines how certain fundamental freedoms guaranteed by the individuals and between individuals
U.S. Constitution affect businesspersons and the workplace. and their society.
2 Business Law Today: The Essentials
1–1 Sources of American Law

Primary Source of Law There are numerous sources of American law. Primary sources of law, or sources that estab-
A document that establishes the lish the law, include the following:
law on a particular issue, such
as a constitution, a statute, an • The U.S. Constitution and the constitutions of the various states.
administrative rule, or a court • Statutory law—including laws passed by Congress, state legislatures, and local
decision. governing bodies.
• Regulations created by administrative agencies, such as the federal Food and Drug
Administration.
LEARNING OBJECTIVE 1 • Case law (court decisions).
What are four primary sources
of law in the United States? We describe each of these important primary sources of law in the following pages. (See the
appendix at the end of this chapter for a discussion of how to find statutes, regulations, and
case law.)
Secondary Source of Law Secondary sources of law are books and articles that summarize and clarify the primary
A publication that summarizes or sources of law. Legal encyclopedias, compilations (such as Restatements of the Law, which sum-
interprets the law, such as a legal marize court decisions on a particular topic), official comments to statutes, treatises, articles
encyclopedia, a legal treatise, or an
in law reviews published by law schools, and articles in other legal journals are examples of
article in a law review.
secondary sources of law. Courts often refer to secondary sources of law for guidance in inter-
preting and applying the primary sources of law discussed here.
1–1a Constitutional Law

The federal government and the states have written constitutions that set forth the general
Constitutional Law The organization, powers, and limits of their respective governments. Constitutional law, which
body of law derived from the U.S. deals with the fundamental principles by which the government exercises its authority, is the
Constitution and the constitutions law as expressed in these constitutions.
of the various states.
As will be discussed later in this chapter, the U.S. Constitution is the basis of all law in the
United States. It provides a framework for statutes and regulations, and thus is the supreme
law of the land. A law in violation of the U.S. Constitution, if challenged, will be declared
unconstitutional and will not be enforced, no matter what its source. Because of its paramount
importance in the American legal system, the U.S. Constitution’s complete text is featured in
Appendix B.
1–1b Statutory Law

Laws enacted by legislative bodies at any level of government, such as the statutes passed by
Statutory Law The body of Congress or by state legislatures, make up the body of law generally referred to as statutory
law enacted by legislative bodies law. When a legislature passes a statute, that statute ultimately is included in the federal code
(as opposed to constitutional law, of laws or the relevant state code of laws.
administrative law, or case law).
Whenever a particular statute is mentioned in this text, we usually provide a footnote
Citation A reference to a showing its citation (a reference to a publication in which a legal authority—such as a statute
publication in which a legal or a court decision—or other source can be found). The appendix following this chapter
authority—such as a statute
or a court decision—or other
explains how you can use these citations to find statutory law.
source can be found. Statutory law also includes local ordinances—regulations passed by municipal or county
governing units to deal with matters not covered by federal or state law. Ordinances com-
Ordinance A regulation enacted
by a city or county legislative body
monly have to do with city or county land use (zoning ordinances), building and safety codes,
that becomes part of that state’s and other matters affecting only the local governing unit.
statutory law. A federal statute, of course, applies to all states. A state statute, in contrast, applies only
within the state’s borders. State laws thus may vary from state to state. No federal statute may
violate the U.S. Constitution, and no state statute or local ordinance may violate the U.S. Con-
stitution or the relevant state constitution.
CHAPTER 1: Legal and Constitutional Foundations of Business 3
Uniform Laws In 1892, a group of legal scholars and lawyers formed the National Confer-
ence of Commissioners on Uniform State Laws (NCCUSL) to draft uniform laws (“model Uniform Law A model law
statutes”) for the states to consider adopting. The NCCUSL still exists today and continues developed by the National
to issue uniform laws. Each state has the option of adopting or rejecting a uniform law. Only Conference of Commissioners on
Uniform State Laws for the states
if a state legislature adopts a uniform law does that law become part of the statutory law of that state.
to consider enacting into statute.
Furthermore, a state legislature may choose to adopt only part of a uniform law or to rewrite
the sections that are adopted. Hence, even though many states may have adopted a uniform
law, those laws may not be entirely “uniform.”
The Uniform Commercial Code (UCC) One of the most important uniform acts is the Uni-
form Commercial Code (UCC), which was created through the joint efforts of the NCCUSL
and the American Law Institute.1 The UCC was first issued in 1952 and has been adopted
in all fifty states,2 the District of Columbia, and the Virgin Islands.
The UCC facilitates commerce among the states by providing a uniform, yet flexible, set of
rules governing commercial transactions. Because of its importance in the area of commercial
law, we cite the UCC frequently in this text. We also present excerpts of the UCC in Appendix
C. From time to time, the NCCUSL revises the articles contained in the UCC and submits the
revised versions to the states for adoption.
1–1c Administrative Law

Another important source of American law is administrative law, which consists of the rules, Administrative Law The body
orders, and decisions of administrative agencies. An administrative agency is a federal, state, or of law created by administrative
local government agency established to perform a specific function. Rules issued by various agencies in order to carry out their
duties and responsibilities.
administrative agencies affect almost every aspect of a business’s operations, including its cap-
ital structure and financing, its hiring and firing procedures, and the way it manufactures and
markets its products.
Because Congress cannot possibly oversee the actual implementation of all the laws it
enacts, it delegates such tasks to agencies. Congress creates an administrative agency by enact-
ing enabling legislation, which specifies the name, composition, purpose, and powers of the Enabling Legislation A statute
agency being created. Powers granted to agencies incorporate functions associated with the enacted by Congress that authorizes
legislative branch of government (rulemaking), the executive branch (investigation and the creation of an administrative
agency and specifies the name,
enforcement), and the judicial branch (adjudication or trial-like proceedings).
composition, purpose, and powers
Rulemaking A major function of an administrative agency is rulemaking—formulating new of the agency being created.
regulations. When Congress enacts an agency’s enabling legislation, it confers the power to Rulemaking The process by
make legislative rules, or substantive rules, which are legally binding on all businesses. which an administrative agency
formally adopts a new regulation
The Administrative Procedure Act. The Administrative Procedure Act (APA)3 imposes strict pro- or amends an old one.
cedural requirements that agencies must follow in legislative rulemaking and other functions. Legislative Rule An
EXAMPLE 1.1 The Occupational Safety and Health Act authorized the Occupational Safety and administrative agency rule that
Health Administration (OSHA) to develop and issue rules governing safety in the workplace. carries the same weight as a
When OSHA wants to formulate rules regarding safety in the steel industry, it has to follow spe- congressionally enacted statute.
cific procedures outlined by the APA. n
Legislative Rules. Legislative rulemaking under the APA typically involves the following three
steps (referred to as notice-and-comment rulemaking).
1. Notice of the proposed rulemaking. The notice must be published in the Federal Register, a
daily publication of the U.S. government.
1. This institute was formed in the 1920s and consists of practicing attorneys, legal scholars, and judges.
2. Louisiana has adopted only Articles 1, 3, 4, 5, 7, 8, and 9.
3. 5 U.S.C. Sections 551–706.
2. A comment period. The agency must allow ample time for interested parties
to comment in writing on the proposed rule. The agency takes these
comments into consideration when drafting the final version of the regulation.
3. The final rule. Once the agency has drafted the final rule, it is published in the
Federal Register.
Administrative agencies also issue interpretive rules that are not legally binding
but simply indicate how an agency plans to interpret and enforce its statutory
authority. The APA does not apply to interpretive rulemaking.
Enforcement and Investigation Agencies often enforce their own rules and have
iStockPhoto.com/TerryJ
both investigatory and prosecutorial powers. An agency can request that individu-
als or organizations hand over specified books, papers, electronic records, or other
documents. In addition, agencies may conduct on-site inspections. After investi-
gating a suspected rule violation, an agency may decide to take action against an
Which federal agency oversees worker safety? individual or a business. If a settlement cannot be reached, the agency may issue a
formal complaint and proceed to adjudication.
Interpretive Rule A nonbinding Adjudication Agency adjudication involves a trial-like hearing before an
rule or policy statement issued administrative law judge (ALJ). Hearing procedures vary widely from agency to
by an administrative agency that agency. After the hearing, the ALJ renders a decision in the case. The ALJ can fine the charged
explains how it interprets and party or prohibit the party from carrying on some specified activity.
intends to apply the statutes it
enforces.
Administrative Law Judge
1–1d Case Law and Common Law Doctrines
(ALJ) One who presides over an The rules of law announced in court decisions constitute another basic source of American
administrative agency hearing and law. These rules of law include interpretations of constitutional provisions, of statutes enacted
has the power to administer oaths,
by legislatures, and of regulations created by administrative agencies. Today, this body of
take testimony, rule on questions of
evidence, and make determinations judge-made law is referred to as case law. Case law—the doctrines and principles announced
of fact. in cases—governs all areas not covered by statutory law or administrative law and is part of
our common law tradition. We look at the origins and characteristics of the common law tra-
Case Law The rules of law
announced in court decisions. Case dition in some detail in the pages that follow.
law interprets statutes, regulations,
constitutional provisions, and other
case law. 1–2 Common Law Tradition
Because of our colonial heritage, much American law is based on the English legal system.
Knowledge of this tradition is crucial to understanding our legal system today because judges
in the United States still apply common law principles when deciding cases.
1–2a Early English Courts

After the Normans conquered England in 1066, William the Conqueror and his successors
established the king’s courts, or curiae regis. The king’s courts sought to provide a uniform
set of rules for the country as a whole. What evolved in these courts was the beginning of
Common Law The body of law the common law—a body of general rules that applied throughout the entire English realm.
developed from custom or judicial Eventually, the common law tradition became part of the heritage of all nations that were once
decisions in English and U.S. courts, British colonies, including the United States.
not attributable to a legislature.
Courts developed the common law rules from the principles underlying judges’ decisions
in actual legal controversies. Judges attempted to be consistent, and whenever possible, they
based their decisions on the principles suggested by earlier cases. They sought to decide sim-
ilar cases in a similar way and considered new cases with care because they knew that their
Precedent A court decision that
furnishes an example or authority decisions would make new law. Each interpretation became part of the law on the subject and
for deciding subsequent cases served as a legal precedent—that is, a court decision that furnished an example or authority
involving identical or similar facts. for deciding subsequent cases involving identical or similar legal principles or facts.
1–2b Stare Decisis

The practice of deciding new cases with reference to former decisions, or precedents, even-
tually became a cornerstone of the English and U.S. judicial systems. The practice forms a
doctrine called stare decisis4 (“to stand on decided cases”). Stare Decisis A common law
doctrine under which judges are
The Importance of Precedents in Judicial Decision Making Under the doctrine of stare decisis, obligated to follow the precedents
judges are obligated to follow the precedents established within their jurisdictions. (The term established in prior decisions.
jurisdiction refers to a geographic area in which a court or courts have the power to apply the
law—see Chapter 2.) Once a court has set forth a principle of law as being applicable to a certain
set of facts, that court must apply the principle in future cases involving similar facts. Courts of
lower rank (within the same jurisdiction) must do likewise. Thus, stare decisis has two aspects:
1. A court should not overturn its own precedents unless there is a strong reason to do so.
2. Decisions made by a higher court are binding on lower courts.
Controlling precedents in a jurisdiction are referred to as binding authorities. A binding Binding Authority Any source
authority is any source of law that a court must follow when deciding a case. Binding author- of law that a court must follow when
ities include constitutions, statutes, and regulations that govern the issue being decided, as deciding a case.
well as court decisions that are controlling precedents within the jurisdiction. United States
Supreme Court case decisions, no matter how old, remain controlling until they are overruled
by a subsequent decision of the Supreme Court, by a constitutional amendment, or by con-
gressional legislation.
KNOW THIS
Stare Decisis and Legal Stability The doctrine of stare decisis helps the courts to be more Courts normally must follow the
efficient because if other courts have carefully reasoned through a similar case, their legal rules set forth by higher courts in
reasoning and opinions can serve as guides. Stare decisis also makes the law more stable and
predictable. If the law on a given subject is well settled, someone bringing a case to court can deciding cases with similar fact
usually rely on the court to make a decision based on what the law has been. patterns.
Departures from Precedent Although courts are obligated to follow
precedents, sometimes a court will depart from the rule of precedent. If a
court decides that a precedent is simply incorrect or that technological or
social changes have rendered the precedent inapplicable, the court may
rule contrary to the precedent. Cases that overturn precedent often receive
a great deal of publicity.
CASE EXAMPLE 1.2 In Brown v. Board of Education of Topeka,5 the United
Staff/AFP/Getty Images
States Supreme Court expressly overturned precedent when it concluded

that separate educational facilities for whites and blacks, which had been
upheld as constitutional in numerous previous cases,6 were inherently
unequal. The Supreme Court’s departure from precedent in the Brown
decision received a tremendous amount of publicity as people began to
Why would this scene not have been likely before
realize the ramifications of this change in the law. n
1954?
When There Is No Precedent At times, a case may raise issues that have
not been raised before in that jurisdiction, so the court has no precedents
Persuasive Authority Any
on which to base its decision. When deciding such cases, called “cases of first impression,” legal authority or source of law that
courts often look at precedents established in other jurisdictions for guidance. Precedents a court may look to for guidance but
from other jurisdictions, because they are not binding on the court, are referred to as need not follow when making its
persuasive authorities. decision.
4. Pronounced stahr-ee dih-si-sis.

5. 347 U.S. 483, 74 S.Ct. 686, 98 L.Ed. 873 (1954).
6. See Plessy v. Ferguson, 163 U.S. 537, 16 S.Ct. 1138, 41 L.Ed. 256 (1896).
A court may also consider other factors, including legal principles and policies underlying
previous court decisions or existing statutes, fairness, social values and customs, public policy,
and data and concepts drawn from the social sciences.
1–2c Equitable Remedies and Courts of Equity

Remedy The relief given to an A remedy is the means given to a party to enforce a right or to compensate for the violation of
innocent party to enforce a right a right. EXAMPLE 1.3 Elena is injured because of Rowan’s wrongdoing. If Elena files a lawsuit
or compensate for the violation of and is successful, a court can order Rowan to compensate Elena for the harm by paying her a
a right.
certain amount. The compensation is Elena’s remedy. n
The kinds of remedies available in the early king’s courts of England were severely
restricted. If one person wronged another, the king’s courts could award either money or
property, including land, as compensation. These courts became known as courts of law, and
the remedies were called remedies at law. Even though this system introduced uniformity in
the settling of disputes, when a person wanted a remedy other than economic compensation,
the courts of law could do nothing, so “no remedy, no right.”
Remedies in Equity Equity is a branch of law founded on notions of justice and fair dealing. It
seeks to supply a remedy when no adequate remedy at law is available. When individuals could
not obtain an adequate remedy in a court of law, they petitioned the king for relief. Most of these
petitions were referred to the chancellor, an adviser to the king who had the power to grant new
and unique remedies. Eventually, formal chancery courts, or courts of equity, were established.
The remedies granted by the chancery courts were called remedies in equity.
Plaintiff One who initiates a Plaintiffs (those bringing lawsuits) had to specify whether they were bringing an “action at
lawsuit. law” or an “action in equity,” and they chose their courts accordingly. For instance, a plaintiff
Defendant One against whom might ask a court of equity to order the defendant (the person against whom a lawsuit is brought)
a lawsuit is brought or the accused to perform within the terms of a contract. A court of law could not issue such an order because
person in a criminal proceeding. its remedies were limited to the payment of money or property as compensation for damages.
A court of equity, however, could issue a decree for specific performance—an order to per-
form what was promised. A court of equity could also issue an injunction, directing a party to
do or refrain from doing a particular act. In certain cases, a court of equity could allow for the
KNOW THIS rescission (cancellation) of the contract, thereby returning the parties to the positions that they
held prior to the contract’s formation.
Even though courts of law
and equity have merged, the The Merging of Law and Equity Today, in most states, the courts of law and equity have
principles of equity still apply, merged, and thus the distinction between the two courts has largely disappeared. A plaintiff
may now request both legal and equitable remedies in the same action, and the trial court
and courts will not grant an judge may grant either form—or both forms—of relief.
equitable remedy unless the The distinction between legal and equitable remedies remains significant, however, because
remedy at law is inadequate. a court normally will grant an equitable remedy only when the remedy at law (monetary dam-
ages) is inadequate. To request the proper remedy, a businessperson (or her or his attorney)
must know what remedies are available for the specific kinds of harms suffered. Exhibit 1–1
summarizes the procedural differences (applicable in most states) between an action at law
and an action in equity.
Equitable Principles and Maxims Over time, the courts have developed a number of
Equitable Principles and equitable principles and maxims that provide guidance in deciding whether plaintiffs
Maxims General propositions should be granted equitable relief. Because of their importance, both historically and in our
or principles of law that have to do judicial system today, these principles and maxims are set forth in this chapter’s Landmark
with fairness (equity).
in the Law feature.
Exhibit 1–1 P
rocedural Differences between an Action
at Law and an Action in Equity
PROCEDURE ACTION AT LAW ACTION IN EQUITY
Initiation of lawsuit By filing a complaint By filing a petition
Decision By jury or judge By judge (no jury)
Result Judgment Decree
Remedy Monetary damages Injunction, specific performance,
or rescission
Substantive Law Law that

1–3 Classifications of Law defines, describes, regulates, and
creates legal rights and obligations.
The law may be broken down according to several classification systems. One classification Procedural Law Law that
system divides law into substantive law (all laws that define, describe, regulate, and create establishes the methods of
legal rights and obligations) and procedural law (all laws that establish the methods of enforc- enforcing the rights established
ing the rights established by substantive law). by substantive law.
Landmark in the Law Equitable Principles and Maxims
(Plaintiffs must have acted fairly and limitations—that is, statutes that set the
honestly.) maximum time period during which a cer-
4. Equity will not suffer a wrong to be tain action can be brought. After the time
I n medieval England, courts of equity were

expected to use discretion in supplement-
ing the common law. Even today, when the
without a remedy. (Equitable relief will be
awarded when there is a right to relief
allowed under a statute of limitations has
expired, no action can be brought, no matter
how strong the case was originally.
and there is no adequate remedy at law.)
same court can award both legal and equi-
table remedies, it must exercise discretion. 5. Equity regards substance rather than form. Application to Today’s World The
Students of business law and the legal (Equity is more concerned with fairness equitable maxims listed here underlie many
environment should know that courts often and justice than with legal technicalities.) of the legal rules and principles that are com-
invoke equitable principles and maxims 6. Equity aids the vigilant, not those who rest monly applied by the courts today—and that
when making their decisions. Here are some on their rights. (Equity will not help those you will read about in this book. For instance,
of the most significant equitable principles who neglect their rights for an unreason- in the contracts materials you will read about
and maxims: able period of time.) the doctrine of promissory estoppel.
Under this doctrine, a person who has rea-
1. Whoever seeks equity must do equity. (Any- The last maxim has come to be known as
sonably and substantially relied on the promise
one who wishes to be treated fairly must the equitable doctrine of laches. The doctrine
of another may be able to obtain some mea-
treat others fairly.) arose to encourage people to bring lawsuits
sure of recovery, even though no enforceable
2. Where there is equal equity, the law must while the evidence was fresh. If they failed to
contract exists. The court will estop (bar) the
prevail. (The law will determine the do so, they would not be allowed to bring a
one making the promise from asserting the lack
outcome of a controversy in which the lawsuit. What constitutes a reasonable time,
of a valid contract as a defense. The rationale
merits of both sides are equal.) of course, varies according to the circum-
underlying the doctrine of promissory estoppel
stances of the case.
3. One seeking the aid of an equity court is similar to that expressed in the fourth and
Time periods for different types of
must come to the court with clean hands. fifth maxims listed.
cases are now usually fixed by statutes of
EXAMPLE 1.4 A state law that provides employees with the right to workers’ compensa-
tion benefits for any on-the-job injuries they sustain is a substantive law because it creates
legal rights (workers’ compensation laws will be discussed in Chapter 18). Procedural laws,
in contrast, establish the method by which an employee must notify the employer about
an on-the-job injury, prove the injury, and periodically submit additional proof to continue
receiving workers’ compensation benefits. Note that a law concerning workers’ compensation
may contain both substantive and procedural provisions. n
Another classification system divides law into federal law and state law. Still another system
distinguishes between private law (dealing with relationships between persons) and public
law (addressing the relationship between persons and their governments). Frequently, people
Cyberlaw An informal term use the term cyberlaw to refer to the emerging body of law that governs transactions con-
used to refer to all laws governing ducted via the Internet, but cyberlaw is not really a classification of law. Rather, it is an infor-
electronic communications and
mal term used to describe traditional legal principles that have been modified and adapted to
transactions, particularly those
conducted via the Internet.
fit situations that are unique to the online world.
1–3a Civil Law and Criminal Law

Civil Law The branch of law Civil law spells out the rights and duties that exist between persons and between persons and
dealing with the definition and their governments. It also specifies the relief available when a person’s rights are violated.
enforcement of all private or public Typically, in a civil case, a private party sues another private party to make sure that the other
rights, as opposed to criminal
party complies with a duty or pays for the damage caused by the failure to comply with a duty.
matters.
EXAMPLE 1.5 If a seller fails to perform a contract with a buyer, the buyer may bring a lawsuit
against the seller. The purpose of the lawsuit will be either to compel the seller to perform as
LEARNING OBJECTIVE 2 promised or, more commonly, to obtain monetary damages for the seller’s failure to perform. n
What are some important Much of the law that we discuss in this text—including contract law and tort law—is civil
differences between civil law law. Note that civil law is not the same as a civil law system. A civil law system is a legal system
and criminal law? based on a written code of laws. (See this chapter’s Beyond Our Borders feature for a discussion
of the different legal systems used in other nations.)
Criminal law has to do with wrongs committed against society for which society demands
Civil Law System A system of
redress. Criminal acts are proscribed by local, state, or federal government statutes. Thus,
law derived from Roman law that is
based on codified laws (rather than criminal defendants are prosecuted by public officials, such as a district attorney (D.A.), on
on case precedents). behalf of the state, not by their victims or other private parties.
Criminal Law The branch of law
Whereas in a civil case the object is to obtain a remedy (such as monetary damages) to
that defines and punishes wrongful compensate the injured party, in a criminal case the object is to punish the wrongdoer in an
actions committed against the attempt to deter others from similar actions. Penalties for violations of criminal statutes consist
public. of fines and/or imprisonment—and, in some cases, death.
1–3b National and International Law

Although the focus of this book is U.S. business law, increasingly businesspersons in this
country engage in transactions that extend beyond our national borders. In these situations,
the laws of other nations or the laws governing relationships among nations may come into
play. For this reason, those who pursue a career in business today should have an understand-
ing of the global legal environment.
National Law Law that pertains National Law The law of a particular nation, such as the United States or Sweden, is national
to a particular nation (as opposed to law. National law, of course, varies from country to country because each country’s law reflects
international law). the interests, customs, activities, and values that are unique to that nation’s culture. Even
though the laws and legal systems of various countries differ substantially, broad similarities
do exist.
International Law The law that International Law In contrast to national law, international law applies to more than one
governs relations among nations. nation. International law can be defined as a body of written and unwritten laws observed
by independent nations and governing the acts of individuals as well as governments.

It is a mixture of rules and constraints derived from a variety of sources, including the laws
of individual nations, customs developed among nations, and international treaties and
organizations.
BEYOND OUR BORDERS

National Law Systems
of legal guidance, those decisions are not of Islam. Islam is both a religion and a way of
binding precedents (stare decisis does not life. Sharia is a comprehensive code of princi-
D espite their varying cultures and cus-

toms, almost all countries have laws
governing torts, contracts, employment,
apply).
Common Law and

ples that governs the public and private lives
of Islamic persons and directs many aspects
of their day-to-day lives, including politics,
and other areas. Two types of legal systems Civil Law Systems Today economics, banking, business law, contract
predominate around the globe today. One is Exhibit 1–2 lists some countries that follow law, and social issues.
the common law system of England and the either the common law system or the civil Although sharia affects the legal codes
United States, which we have discussed else- law system. Generally, countries that were of many Muslim countries, the extent of its
where. The other system is based on Roman once colonies of Great Britain have retained impact and its interpretation vary widely.
civil law, or “code law,” which relies on the their English common law heritage. The civil In some Middle Eastern nations, aspects of
legal principles enacted into law by a legisla- law system, which is used in most conti- sharia have been codified in modern legal
ture or governing body. nental European nations, has been retained codes and are enforced by national judicial
in the countries that were once colonies of systems.
Civil Law Systems those nations. In the United States, the state
Although national law systems share many of Louisiana, because of its historical ties to
commonalities, they also have distinct dif- France, has in part a civil law system, as do Cri ti ca l T h i nk ing
ferences. In a civil law system, the primary Haiti, Québec, and Scotland.
source of law is a statutory code, and case ▪▪ Does the civil law system offer any
precedents are not judicially binding, as Islamic Legal Systems advantages over the common law system,
they normally are in a common law system. A third, less prevalent legal system is com- or vice versa? Explain.
Although judges in a civil law system common in Islamic countries, where the law is
monly refer to previous decisions as sources often influenced by sharia, the religious law
Exhibit 1–2 The Legal Systems of Selected Nations

CIVIL LAW COMMON LAW
Argentina Indonesia Australia Nigeria
Austria Iran Bangladesh Singapore
Brazil Italy Canada United Kingdom
Chile Japan Ghana United States
China Mexico India Zambia
Egypt Poland Israel
Finland South Korea Jamaica
France Sweden Kenya
Germany Tunisia Malaysia
Greece Venezuela New Zealand
Another random document with
no related content on Scribd:
The Project Gutenberg eBook of A visit from St.
Nicholas
This ebook is for the use of anyone anywhere in the United
States and most other parts of the world at no cost and with
almost no restrictions whatsoever. You may copy it, give it away
or re-use it under the terms of the Project Gutenberg License
included with this ebook or online at www.gutenberg.org. If you
are not located in the United States, you will have to check the
laws of the country where you are located before using this
eBook.
Title: A visit from St. Nicholas
Author: Clement Clarke Moore
Illustrator: Florence Wyman Ivins
Other: Bruce Rogers
Release date: July 28, 2022 [eBook #68631]
Language: English
Original publication: United States: The Atlantic Monthly Press,

1921
Credits: hekula03 and the Online Distributed Proofreading Team

at https://www.pgdp.net (This book was produced from
images made available by the HathiTrust Digital
Library.)
*** START OF THE PROJECT GUTENBERG EBOOK A VISIT

FROM ST. NICHOLAS ***
This little Book conveys the Greetings of
............................................................
to
............................................................
A
VISIT
from
St. NICHOLAS
∵
By Clement C. Moore
Boston
The Atlantic Monthly Press
1921
’Twas the night before Christmas, when all through the house
Not a creature was stirring, not even a mouse;
The stockings were hung by the chimney with care,
In hopes that St. Nicholas soon would be there;
The children were nestled all snug in their beds
While visions of sugar-plums danced through their heads;
And Mamma in her ’kerchief, and I in my cap,
Had just settled our brains for a long winter’s nap,
When out on the lawn there arose such a clatter,
I sprang from my bed to see what was the matter.
Away to the window I flew like a flash,
Tore open the shutters and threw up the sash.
The moon on the breast of the new-fallen snow
Gave a lustre of midday to objects below,
When what to my wondering eyes did appear,
But a miniature sleigh and eight tiny rein-deer,
With a little old driver so lively and quick,
I knew in a moment he must be St. Nick.
More rapid than eagles his coursers they came,
And he whistled, and shouted, and called them by name:
“Now, Dasher! now, Dancer! now, Prancer and Vixen!
On, Comet! on, Cupid! on, Donder and Blixen!
To the top of the porch! to the top of the wall!
Now dash away! dash away! dash away, all!”
As leaves that before the wild hurricane fly,
When they meet with an obstacle, mount to the sky,
So up to the housetop the coursers they flew,
With the sleigh full of toys, and St. Nicholas too—
And then, in a twinkling, I heard on the roof
The prancing and pawing of each little hoof.
As I drew in my head, and was turning around,
Down the chimney St. Nicholas came with a bound.
He was dressed all in fur, from his head to his foot,
And his clothes were all tarnished with ashes and soot;
A bundle of toys he had flung on his back,
And he looked like a pedler just opening his pack.
His eyes—how they twinkled! his dimples, how merry!
His cheeks were like roses, his nose like a cherry!
His droll little mouth was drawn up like a bow,
And the beard on his chin was as white as the snow;
The stump of a pipe he held tight in his teeth,
And the smoke, it encircled his head like a wreath;
He had a broad face and a little round belly
That shook when he laughed, like a bowl full of jelly.
He was chubby and plump, a right jolly old elf,
And I laughed when I saw him in spite of myself;
A wink of his eye and a twist of his head
Soon gave me to know I had nothing to dread;
He spoke not a word, but went straight to his work,
And filled all the stockings; then turned with a jerk,
And laying his finger aside of his nose,
And giving a nod, up the chimney he rose.
He sprang to his sleigh, to his team gave a whistle,
And away they all flew like the down of a thistle.
But I heard him exclaim ere he drove out of sight—
“HAPPY CHRISTMAS TO ALL
AND TO ALL A GOOD NIGHT!”
⸿Designed by Bruce Rogers and printed by William Edwin Rudge,
Mount Vernon, N. Y. The text is that of the original (1837) edition.
The woodcuts are by Florence Wyman Ivins.
*** END OF THE PROJECT GUTENBERG EBOOK A VISIT FROM
ST. NICHOLAS ***
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Business Law Today, Standard: Text & Summarized Cases

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eTextbook 978-1285428567 Law and Ethics in the Business

Foundations of Business 1 Use of Wireless Devices and the Internet 60

Due Process and Equal Protection 20 Unintentional Torts (Negligence) 86

The State and Federal Court Systems 48

Business Ethics and Social Media 189

Is That Online “Friend” for Real? 253

CLASSIC CASE 11.3: Jones v. Star Credit Corp. 310

Consumer Law 356 Defenses, Limitations, and Discharge

Employment Law 490 ◾◾ Beyond Our Borders: Limited Liability Companies

Chapter 20 State Securities Laws 597

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Doing Business Internationally 689

New Chapter on Internet Law, Social Media, and Privacy

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Acknowledgments for Previous Editions

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Gerald M. Rogers Lou Ann Simpson Frederick J. Walsh Kay O. Wilburn

Thanks for putting

Legal and Constitutional

Foundations of Business LEARNING OBJECTIVES

1–1 Sources of American Law

1–1a Constitutional Law

1–1b Statutory Law

1–1c Administrative Law

1–2a Early English Courts

1–2b Stare Decisis

States Supreme Court expressly overturned precedent when it concluded

4. Pronounced stahr-ee dih-si-sis.

1–2c Equitable Remedies and Courts of Equity

Substantive Law Law that

Landmark in the Law Equitable Principles and Maxims

I n medieval England, courts of equity were

1–3a Civil Law and Criminal Law

1–3b National and International Law

by independent nations and governing the acts of individuals as well as governments.

BEYOND OUR BORDERS

D espite their varying cultures and cus-

Common Law and

Exhibit 1–2 The Legal Systems of Selected Nations

Title: A visit from St. Nicholas