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iv Brief Contents
APPENDICES
A How to Brief Cases and Analyze Case Problems A–l
B The Constitution of the United States A–5
C Articles 2 and 2A of the Uniform Commercial Code A–13
D The Sarbanes-Oxley Act (Excerpts and Explanatory Comments) A–53
E Answers to the Issue Spotters A–61
F Sample Answers for Business Case Problems with Sample Answer A–67
GLOSSARY G–l
TABLE OF CASES TC–1
INDEX I–1
Copyright 2013 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
Unit One Case Analysis Case 3.3 Lhotka

The Foundations 1 v. Geographic Expeditions, Inc. (2010) 68
The Integration of ADR and
Formal Court Procedures 72
Chapter 1 ADR Forums and Services 73
Law and Legal Reasoning 2 International Dispute Resolution 74
Business Activities and the Legal Environment 2
Sources of American Law 3
The Common Law Tradition 6 Chapter 4
Schools of Legal Thought 11 Business Ethics 78
Classifications of Law 12 Business Ethics 78
How to Find Primary Sources of Law 13 Case 4.1 Johnson Construction Co.
How to Read and Understand Case Law 15 v. Shaffer (2012) 80
Case 4.2 May v. Chrysler Group, LLC (2012) 82
Business Ethics and Social Media 83
Chapter 2 Ethical Principles and Philosophies 84
The Court System 28 Making Ethical Business Decisions 87
The Judiciary’s Role in American Government 28 Case Analysis Case 4.3 Moseley v.
Basic Judicial Requirements 29 Pepco Energy Services, Inc. (2011) 88
Case Analysis Case 2.1 Mala v. Crown Bay Global Business Ethics 90
Marina, Inc. (2013) 31 Unit One Focus on Ethics: Ethics and the Legal
Spotlight on Gucci Environment of Business 96
Case 2.2 Gucci America, Inc. v.
Wang Huoqing (2011) 35
Unit Two
The State and Federal Court Systems 37
Judicial Procedures: Following a Case through the
The Public and International
Courts 41
Environment 99
Case 2.3 Espresso Disposition Corp. 1 v. Santana
Sales & Marketing Group, Inc. (2013) 47 Chapter 5
Business and the Constitution 100
Chapter 3 The Constitutional Powers of Government 100
Case Analysis Case 5.1 Family Winemakers of
Alternative and
California v. Jenkins (2010) 103
Online Dispute Resolution 60 Business and the Bill of Rights 105
Negotiation and Mediation 60 Case 5.2 Doe v. Prosecutor, Marion County,
Arbitration 62 Indiana (2013) 108
Case 3.1 Cleveland Construction, Inc. Spotlight on Beer Labels
v. Levco Construction, Inc. (2012)  63 Case 5.3 Bad Frog Brewery, Inc. v.
Case 3.2 NCR Corp. v. Korala Associates, Ltd. New York State Liquor Authority (1998) 110
(2008) 66 Due Process and Equal Protection 114
Privacy Rights 116
vi Contents
Chapter 6 Unit Two Focus on Ethics:

Administrative Agencies 121 Ethics and the Public and
International Environment 184
The Practical Significance of Administrative Law 121
Agency Creation and Powers 122
The Administrative Procedure Act 125 Unit Three
Case Analysis Case 6.1 Federal Communications the Commercial
Commission v. Fox Television Stations, Inc. Environment 187
(2009) 126
Judicial Deference to Agency Decisions 129
Chapter 9
Case 6.2 Mayo Foundation for Medical Education
and Research v. United States (2011) 130
Formation of Traditional
Enforcement and Adjudication 132 and E-Contracts 188
Case 6.3 Craker v. Drug Enforcement An Overview of Contract Law 188
Administration (2013) 134 Case 9.1 Pan Handle Realty, LLC
Public Accountability 136 v. Olins (2013) 189
Types of Contracts 191
Agreement 195
Chapter 7 Spotlight on A mazon.com
Criminal Law and Cyber Crime 140 Case 9.2 Basis Technology Corp.
v. Amazon.com, Inc. (2008) 197
Civil Law and Criminal Law 140 E-Contracts 203
Criminal Liability 142 Consideration 207
Types of Crimes 144 Case 9.3 Baugh v. Columbia Heart Clinic, P.A.
Case Analysis Case 7.1 People (2013) 209
v. Whitmer (2013) 146 Contractual Capacity 210
Defenses to Criminal Liability 150 Legality 211
Criminal Procedures 153 Form: The Writing Requirement
Case 7.2 Messerschmidt v. Millender (2012) 154 and Electronic Records 214
Classic Case 7.3 Miranda v. Arizona (1966) 155 Third Party Rights 214
Cyber Crime 158
C h a p t e r 10
Chapter 8
Contract Performance,
International Law
Breach, and Remedies 219
in a Global Economy 166
Voluntary Consent 219
International Law 166 Performance and Discharge 223
Case Analysis Case 8.1 Linde Classic Case 10.1 Jacob & Youngs v.
v. Arab Bank, PLC (2013) 170 Kent (1921) 224
Doing Business Internationally 172 Case Analysis Case 10.2 Kohel v.
Regulation of Specific Business Activities 173 Bergen Auto Enterprises, L.L.C. (2013) 226
International Dispute Resolution 176 Damages for Breach of Contract 230
Case 8.2 S & T Oil Equipment & Machinery, Ltd. Case 10.3 Hallmark Cards, Inc.
v. Juridica Investments, Ltd. (2012) 176 v. Murley (2013) 231
U.S. Laws in a Global Context 178 Equitable Remedies 235
Spotlight on International Torts
Waiver of Breach 237
Case 8.3 Kiobel v.
Contract Provisions Limiting Remedies 237
Royal Dutch Petroleum Co. (2013) 179
Appendix to Chapter 10:
Reading and Analyzing Contracts 242
Contents vii
C h a p t e r 11 C h a p t e r 14
Sales and Lease Contracts 248 Intellectual Property Rights 320
The Scope of Articles 2 (Sales) and 2A (Leases) 248 Trademarks and Related Property 320
The Formation of Sales and Lease Contracts 251 Classic Case 14.1 The Coca-Cola Co.
Case 11.1 WPS, Inc. v. The Koke Co. of America (1920) 320
v. Expro Americas, LLC (2012) 254 Patents 325
Title and Risk of Loss 258 Copyrights 328
Case Analysis Case 11.2 Person v. Case Analysis Case 14.2 Winstead
Bowman (2013) 259 v. Jackson (2013) 329
Performance of Sales and Lease Contracts 263 Trade Secrets 333
Remedies for Breach of Sales and Lease Contracts 266 International Protection for Intellectual Property 334
Spotlight on Baseball Cards Case 14.3 Golan v. Holder (2012) 335
Case 11.3 Fitl v. Strek (2005) 269
Sales and Lease Warranties 271
Contracts for the International Sale of Goods 273 C h a p t e r 15
Appendix to Chapter 11: An Example of a Contract for Internet Law,
the International Sale of Coffee 278
Social Media, and Privacy 341
Internet Law 341
C h a p t e r 12 Spotlight on Internet Porn
Torts 282 Case 15.1 Hasbro, Inc. v. Internet
Entertainment Group, Ltd. (1996) 344
The Basis of Tort Law 282 Copyrights in Digital Information 345
Intentional Torts against Persons 284 Case 15.2 Maverick Recording Co.
Case Analysis Case 12.1 McKee v. Harper (2010) 347
v. Laurion (2013) 287 Social Media 348
Business Torts 291 Case Analysis Case 15.3 In re O’Brien (2013) 349
Intentional Torts against Property 292 Online Defamation 352
Unintentional Torts (Negligence) 294 Privacy 353
Classic Case 12.2 Palsgraf
v. Long Island Railroad Co. (1928) 297
Defenses to Negligence 299 C h a p t e r 16
Spotlight on the Seattle Mariners Creditor-Debtor Relations
Case 12.3 Taylor v. Baseball Club of Seattle,
LP (2006) 299 and Bankruptcy 358
Laws Assisting Creditors 358
Mortgages 360
C h a p t e r 13 Case 16.1 McLean v.
Strict Liability and Product Liability 305 JPMorgan Chase Bank, N.A. (2012) 362
Suretyship and Guaranty 364
Strict Liability 305
Spotlight on Personal Guaranties
Product Liability 306 Case 16.2 Wilson Court Limited Partnership
Strict Product Liability 307 v. Tony Maroni’s, Inc. (1998) 365
Spotlight on Injuries from Vaccines Protection for Debtors 367
Case 13.1 Bruesewitz v. Wyeth, LLC (2011) 307
Bankruptcy Law 368
Case Analysis Case 13.2 Wilson Sporting Goods
Liquidation Proceedings 369
Co. v. Hickox (2013) 310
Reorganizations 378
Case 13.3 Johnson v. Medtronic, Inc. (2012) 312
Bankruptcy Relief under Chapter 13
Defenses to Product Liability 315
and Chapter 12 380
viii Contents
Case Analysis Case 16.3 In re Welsh (2013) 381 Major Business Forms Compared 457
Unit Three Focus on Ethics: Ethics and the Unit Four Focus on Ethics:
Commercial Environment 388 Ethics and the Business Environment 463
Unit Four Unit Five

the Business Environment 393 The Employment
Environment 465
C h a p t e r 17
Small Business Organizations 394 Chapter 20
Sole Proprietorships 394 Agency 466
Case 17.1 Quality Car & Truck Leasing, Inc. Agency Relationships 466
v. Sark (2013) 395 Case 20.1 Coker v. Pershad (2013) 468
Partnerships 396 Formation of the Agency Relationship 470
Case Analysis Case 17.2 Estate of Webster Duties of Agents and Principals 472
v. Thomas (2013) 405 Scope of Agent’s Authority 474
Franchises 406 Spotlight on Apparent Authority
Spotlight on Holiday Inns Case 20.2 Lundberg v. Church Farm, Inc.
Case 17.3 Holiday Inn Franchising, Inc. (1986) 476
v. Hotel Associates, Inc. (2011) 411 Liability for Contracts 478
Liability for Torts and Crimes 480
Case Analysis Case 20.3 Auer
C h a p t e r 18 v. Paliath (2013) 482
Limited Liability Business Forms 416 Termination of an Agency 484
The Limited Liability Company 416

Case Analysis Case 18.1 ORX Resources, Inc.
C h a p t e r 21
v. MBW Exploration, LLC (2010) 417
LLC Management and Operation 420 Employment Relationships 490
Case 18.2 Polk v. Polk (2011) 420 Employment at Will 490
Dissociation and Dissolution of an LLC 422 Case Analysis Case 21.1 Ellis v. BlueSky Charter
Case 18.3 Venture Sales, LLC School (2010) 491
v. Perkins (2012) 423 Case 21.2 Waddell v. Boyce Thompson Institute
Limited Liability Partnerships 424 for Plant Research, Inc. (2012) 492
Limited Partnerships 425 Wages, Hours, and Layoffs 493
Family and Medical Leave 495
Worker Health and Safety 496
C h a p t e r 19 Income Security 497
Corporations 431 Employee Privacy Rights 499
Case 21.3 National Aeronautics and
The Nature and Classification of Corporations 431
Space Administration v. Nelson (2011) 501
Case Analysis Case 19.1 Belmont
v. MB Investment Partners, Inc. (2013) 432
Corporate Formation 437
Chapter 22
Corporate Powers 440
Piercing the Corporate Veil 441 Employment Discrimination 505
Case 19.2 Brennan’s, Inc. v. Colbert (2012) 442 Title VII of the Civil Rights Act of 1964 505
Directors and Officers 443 Case Analysis Case 22.1 Dees v. United Rentals
Classic Case 19.3 Guth v. Loft, Inc. (1939) 448 North America, Inc. (2013) 506
Shareholders 451
Contents ix
Case 22.2 Morales-Cruz Case Analysis Case 24.3 Jerman v. Carlisle,

v. University of Puerto Rico (2012) 513 McNellie, Rini, Kramer & Ulrich, LPA
Discrimination Based on Age 515 (2010) 558
Case 22.3 Mora v. Jackson Memorial Foundation,
Inc. (2010) 515
Discrimination Based on Disability 517 Chapter 25
Defenses to Employment Discrimination 519 Environmental Law 563
Affirmative Action 520
Common Law Actions 563
Federal, State, and Local Regulations 564
Chapter 23 Air Pollution 565
Water Pollution 567
Immigration and Labor Law 525 Case 25.1 Entergy Corp. v. Riverkeeper, Inc.
Immigration Law 525 (2009) 568
Case 23.1 Trollinger v. Tyson Foods, Inc. Case Analysis Case 25.2 United States
(2008) 526 v. Lucas (2008) 569
Federal Labor Laws 529 Case 25.3 Sackett v. Environmental Protection
Case Analysis Case 23.2 Services Employees Agency (2012) 571
International Union v. National Union of Toxic Chemicals 572
Healthcare Workers (2013) 531 Hazardous Wastes 573
Union Organization 532
Case 23.3 Local Joint Executive Board of Chapter 26
Las Vegas v. National Labor Relations Board Real Property and Land-Use Control 578
(2008) 534
The Nature of Real Property 578
Collective Bargaining 535
Ownership and Other Interests in Real Property 579
Strikes and Lockouts 536
Transfer of Ownership 584
Unfair Labor Practices 537
Spotlight on Sales of Haunted Houses
Unit Five Focus on Ethics: Ethics and the Case 26.1 Stambovsky v. Ackley (1991) 585
Employment Environment 542 Case 26.2 Scarborough v. Rollins (2010) 588
Limitations on the Rights of Property Owners 590
Unit Six Case Analysis Case 26.3 Town of Midland
The Regulatory v. Morris (2011) 590
Environment 545 Land-Use Control and Zoning 593
Chapter 24 Chapter 27
Consumer Protection 546 Antitrust Law 599
Deceptive Advertising 546 The Sherman Antitrust Act 599
Case 24.1 Hypertouch, Inc. v. ValueClick, Inc. Section 1 of the Sherman Act 600
(2011) 548 Case Analysis Case 27.1 Leegin Creative Leather
Labeling and Packaging Laws 551 Products, Inc. v. PSKS, Inc. (2007) 603
Spotlight on Honda Section 2 of the Sherman Act 604
Case 24.2 Paduano v. American Honda Case 27.2 E.I. DuPont de Nemours and Co.
Motor Co. (2009) 551
v. Kolon Industries (2011) 605
Sales 553
The Clayton Act 608
Protection of Health and Safety 553
Enforcement and Exemptions 611
Credit Protection 555
U.S. Antitrust Laws in the Global Context 611
Case 27.3 Carrier Corp. v. Outokumpu Oyj
(2012) 613
x Contents
Chapter 28 Appendices
Investor Protection A How to Brief Cases and Analyze Case Problems A–l
and Corporate Governance 618 B The Constitution of the United States A–5
The Securities and Exchange Commission 618 C Articles 2 and 2A of the
The Securities Act of 1933 619 Uniform Commercial Code A–13
Case 28.1 Litwin v. Blackstone Group, LP
D The Sarbanes-Oxley Act
(2011) 624
(Excerpts and Explanatory Comments) A–53
The Securities Exchange Act of 1934 625
Classic Case 28.2 SEC v. Texas Gulf Sulphur Co. E Answers to the Issue Spotters A–61
(1968) 626 F Sample Answers for Business Case Problems with
Case Analysis Case 28.3 City of Livonia Sample Answer A–67
Employees’ Retirement System and Local 295/
Local 851 v. Boeing Co. (2013) 630
State Securities Laws 632 Glossary G–l
Corporate Governance 632 Table of Cases TC–1
Online Securities Fraud 634
Unit Six Focus on Ethics: Ethics and the
Index I–1
Regulatory Environment 640
Concept Summaries
1.1 Sources of American Law 6 12.1 Intentional Torts against Persons 291
1.2 The Common Law Tradition 10 12.2 Intentional Torts against Property 294
1.3 Schools of Jurisprudential Thought 13 16.1 Remedies Available to Creditors 363
2.1 Jurisdiction 34 16.2 Forms of Bankruptcy Relief Compared 384
2.2 Types of Courts 42 19.1 Roles of Directors and Officers 446
2.3 Pretrial Procedures 52 20.1 Formation of the Agency Relationship 471
2.4 Trial Procedures 54 20.2 Authority of an Agent to Bind the Principal
7.1 Types of Crimes 151 and a Third Party 478
9.1 Types of Contracts 195 20.3 Termination of an Agency 486
9.2 Methods by Which an Offer Can 26.1 Interests in Real Property 583
Be Terminated 201
xi
Exhibits
1–1 Areas of the Law That May Affect Business 10–1 Mistakes of Fact 220
Decision Making 4 10–2 Contract Discharge 231
1–2 Equitable Maxims 7 10–3 Measurement of Damages—
1–3 Procedural Differences between an Breach of Construction Contracts 233
Action at Law and an Action in Equity 8 10–4 Remedies for Breach of Contract 236
1–4 National Reporter System—Regional/Federal 16 11–1 The Law Governing Contracts 249
1–5 How to Read Citations 17 11–2 Major Differences between Contract Law
1–6 A Sample Court Case 22 and Sales Law 257
2–1 Exclusive and Concurrent Jurisdiction 33 11–3 Contract Terms—Definitions 261
2–2 The State and Federal Court Systems 37 14–1 Forms of Intellectual Property 334
2–3 Geographic Boundaries of the U.S. Courts of 15–1 The Proposed Consumer Privacy Bill
Appeals and U.S. District Courts 40 of Rights 354
2–4 Stages in a Typical Lawsuit 43 16–1 Suretyship and Guaranty Parties 364
2–5 A Typical Complaint 45 16–2 Collection and Distribution of Property
2–6 Pretrial Motions 48 in Most Voluntary Bankruptcies 376
3–1 Basic Differences in the 17–1 Common Terms Included in a
Traditional Forms of ADR 62 Partnership Agreement 399
3–2 Sample Submission Form 65 18–1 A Comparison of General Partnerships
5–1 Protections Guaranteed by the Bill of Rights 106 and Limited Partnerships 426
6–1 Executive Departments and 19–1 Directors’ Management Responsibilities 444
Important Subagencies 123 19–2 Results of Cumulative Voting 453
6–2 Selected Independent Regulatory Agencies 124 19–3 Major Forms of Business Compared 457
6–3 The Process of Formal Administrative 23–1 Unfair Labor Practice Complaint Form 533
Adjudication 133
23–2 Basic Unfair Labor Practices 537
7–1 Key Differences between Civil Law
24–1 Selected Areas of Consumer Law Regulated
and Criminal Law 141
by Statutes 547
7–2 Civil (Tort) Lawsuit and Criminal Prosecution
25–1 Major Federal Environmental Statutes 565
for the Same Act 142
27–1 Exemptions to Antitrust Enforcement 612
7–3 Major Procedural Steps in a Criminal Case 157
28–1 Exemptions for Securities Offerings under
8–1 The Legal Systems of Selected Nations 168
the 1933 Securities Act 622
9–1 Classifications Based on Contract Formation 191
28–2 Comparison of Coverage, Application,
9–2 Enforceable, Voidable, Unenforceable, and Liability under SEC Rule 10b-5 and
and Void Contracts 194 Section 16(b) 629
9–3 A Sample Click-On Agreement 204 28–3 Some Key Provisions of the Sarbanes-Oxley Act
9–4 The E-SIGN Act and the UETA 207 Relating to Corporate Accountability 635
xii
Preface
The study of the legal environment of business tent and learning tools. MindTap offers instruc-
has universal applicability. A student entering any tors the ability to add their own content in the
field of business must have at least a passing under- Learning Path with apps that integrate into the
standing of business law in order to function in MindTap framework seamlessly with Learning
the real world. Management Systems (LMS).
Additionally, students preparing for a career
in accounting, government and political science,
economics, and even medicine can use much of CengageNOW for The Legal
the information that they learn in a legal environ- Environment of Business:
ment of business course. In fact, every individual
throughout his or her lifetime can benefit from a Interactive Assignment System
knowledge of contracts, employment relationships, CengageNOW™ is a powerful course management
real property law, land-use control, and other legal tool that provides control and customization to
topics. Consequently, we have fashioned this text optimize the student learning experience and pro-
as a useful “tool for living” for all of your students duce desired outcomes. The application features a
(including those taking the CPA exam). variety of question types to test simple reading com-
For the Ninth Edition, we have spent a great prehension, complex critical thinking, legal reason-
deal of effort making this book more contempo- ing, and case analysis skills. CengageNOW includes:
rary, exciting, and visually appealing than ever
• An Interactive Book.
before. We have also added many new features and
special pedagogical devices that focus on legal, • Auto-graded Homework with the follow-
ethical, global, and corporate issues, while addressing consistent question types:
ing core curriculum requirements. ° Worksheets—Interactive worksheets
prepare students for class by ensuring
reading and comprehension.
Unique New Digital ° Video Activities—Real-world video exer-
cises make business law engaging and
Learning Systems relevant.
° Brief Hypotheticals—These applications
Before we discuss the many new aspects of this provide students practice in spotting the
text, however, we wish to point out the exciting issue and applying the law in the context
new digital products offered in conjunction with of a short, factual scenario.
the text. Case Problem Blueprints—Promote
°
deeper critical thinking and legal
reasoning by guiding students step-by-
MindTap step through a case problem, building on
New for The Legal Environment of Business, Ninth acquired knowledge to truly assess their
Edition, MindTap is a fully online, highly per- understanding of legal principles.
sonalized learning experience built on Cengage • Personalized Student Plan with multime-
Learning content. MindTap combines student dia study tools and videos.
learning tools—such as readings, multimedia, • Test Bank.
activities, and assessments from CengageNOW™—
into a singular Learning Path that guides students • Reporting and Assessment options.
through their course. By using the optional CengageNOW system,
Instructors can personalize the experience by students can complete the assignments online
customizing authoritative Cengage Learning con- and can receive instant feedback on their answers.
xiii
xiv Preface
Instructors can utilize CengageNOW to upload Multi-language support, an equation editor,

their course syllabi, create and customize home- and unlimited metadata help ensure your
work assignments, and keep track of their students’ tests are complete and compliant.
progress. Instructors can also communicate with • Cross-compatible capability. Import and
their students about assignments and due dates, export content into other systems.
and create reports summarizing the data for an
individual student or for the whole class.
What Is New in
CourseMate the Ninth Edition
CourseMate for The Legal Environment of Business
brings business law concepts to life with interactive Instructors have come to rely on the coverage,
learning, study, and exam preparation tools that accuracy, and applicability of The Legal Environment
support the printed textbook. Built-in engagement of Business. To make sure that our text engages your
tracking tools allow you to assess the study activi- students, solidifies their understanding of legal con-
ties of your students. cepts, and provides the best teaching tools avail-
Additionally, The Legal Environment of Business able, we now offer the following items in the text.
CourseMate includes an interactive online text-
book, which contains the complete content of the
print textbook enhanced by the many advantages New Chapter on Internet Law,
of a digital environment. Social Media, and Privacy
For the Ninth Edition, we have included an entirely
new chapter (Chapter 15) entitled Internet Law,
Cengage Learning Testing Social Media, and Privacy. Social media have
Powered by Cognero entered the mainstream and become a part of every-
Cengage Learning Testing Powered by Cognero is a flexi- day life for many businesspersons. Throughout the
ble, online system that allows you to do the following: text, we recognize this trend by incorporating the
Internet and social media as they relate to the topics
• Author, edit, and manage Test Bank content under discussion.
from multiple Cengage Learning solutions. We also give the legal issues surrounding the
• Create multiple test versions in an instant. Internet, social media, and privacy special empha-
• Deliver tests from your LMS, your classroom, sis in this new chapter. This chapter examines some
or wherever you want. of the laws pertaining to the Internet, intellectual
property, and privacy. It also discusses recent legal
developments concerning the protection of social
Start Right Away! Cengage Learning Testing Powered
media passwords and the use of social media by
by Cognero works on any operating system or browser.
employers and law enforcement.
• No special installs or downloads are needed.
• Create tests from school, home, the coffee
shop—anywhere with Internet access.
New Managerial Strategy Features
For the Ninth Edition, we have created a new fea-
What Will You Find ture entitled Managerial Strategy that focuses
on the management aspects of business law. Special
• Simplicity at every step. A desktop-inspired emphasis is given to sustainability, ethical trends,
interface features drop-down menus and and changing managerial responsibilities.
familiar intuitive tools that take you through Each feature includes a short section entitled
content creation and management with ease. Managerial Implications that provides con-
• Full-featured test generator. Create ideal crete information for managers and connects the
assessments with your choice of fifteen ques- topic under discussion to operating a business.
tion types—including true/false, multiple Each feature also concludes with two Business
choice, opinion scale/Likert, and essay. Questions that prompt students to further exam-
Preface xv
ine the issues discussed. Suggested answers ing cases. Spotlight Cases and Spotlight Case
to all the Business Questions are included Problems are labeled either by the name of one of
in both the Instructor’s Manual and the the parties or by the subject involved. Some examples
Answers Manual for this text. include Spotlight on Amazon.com, Spotlight on Apple,
Topics examined in these features include: Spotlight on Beer Labels, Spotlight on Macy’s, Spotlight
on the Seattle Mariners, and Spotlight on Verizon.
• Budget Cuts for State Courts Can Affect
Instructors will find these Spotlight Cases use-
Businesses (Chapter 2).
ful to illustrate the legal concepts under discus-
• Many Companies Have to Revise Their Social sion. Students will enjoy studying these cases
Media Policies (Chapter 23). because the parties are often familiar and the
cases involve interesting and memorable facts.
Suggested answers to all case-ending ques-
New Appendix to Chapter 10
tions and case problems are included in
Focuses on Reading and both the Instructor’s Manual and the
Analyzing Contracts Answers Manual for this text.
Because reading and analyzing contracts is such
a crucial skill for businesspersons, a special new
Appendix to Chapter 10 has been added. This New ExamPrep Section
appendix follows the second contracts chapter and with Two Issue Spotters
explains how to read and analyze a contract. Then,
For this edition, we have added a new section called
it presents an example of an employee noncom-
ExamPrep at the conclusion of each chapter. The sec-
petition and nondisclosure agreement. The sample
tion includes two new Issue Spotters related to
contract is annotated so that students can quickly
the chapter’s topics that facilitate student learning
see what each contract provision means.
and review of the materials. Suggested answers to
the Issue Spotters in every chapter are pro-
New Highlighted and vided in Appendix E at the end of the text.
Numbered Examples and
Case in Point Illustrations New Legal Reasoning
Many instructors use cases and examples to illustrate Group Activities
how the law applies to business. For this edition, we
have expanded both our in-text examples and our dis- For instructors who want their students to engage
cussion of case law by adding highlighted numbered in group projects, each chapter of the Ninth Edition
Examples and Cases in Point in every chapter. includes a special new Legal Reasoning Group
These two features are uniquely designed and Activity. Each activity begins by describing a
consecutively numbered throughout each chapter business scenario and then requires each group
for easy reference. Examples illustrate how the law of students to answer a specific question pertain-
applies in a specific situation. Cases in Point pre- ing to the scenario based on the information that
sent the facts and issues of an actual case and then they learned in the chapter. These projects may be
describe the court’s decision and rationale. The used in class to spur discussion or as homework
numbered Examples and Cases in Point features are assignments. Suggested answers to the Legal
integrated throughout the text to help students Reasoning Group Activities are included
better understand how courts apply the principles in both the Instructor’s Manual and the
in the real world. Answers Manual for this text.
New Spotlight Cases and New Insight Features

Spotlight Case Problems For the Ninth Edition, we have created new
For the Ninth Edition of The Legal Environment Insight into [E-Commerce, Ethics, the Global
of Business, certain cases and case problems have Environment, or Social Media] features that
been carefully chosen as exceptionally good teach- appear in selected chapters. These features provide
xvi Preface
valuable insights into how the courts and the The emphasis on ethics is reiterated in mate-
law are dealing with specific issues. Each of these rials throughout the text, particularly the Insight
features ends with a Legal Critical Thinking into Ethics features, the Focus on Ethics features that
question that explores some cultural, environmen- conclude every unit, and the pedagogy that accom-
tal, or technological aspect of the issue. The fol- panies selected cases and features. We also dis-
lowing are some of the topics explored in these cuss corporate governance issues in Chapter
features: 28 and in the Focus on Ethics feature concluding
• Insight into E-Commerce—Do Computers Unit Four on the business environment. Finally,
Have Free Speech Rights? (Chapter 5). each chapter in the text includes A Question of
Ethics case problem that provides a modern-day
• Insight into Social Media—“Catfishing”:
example of the kinds of ethical issues faced by
Is That Online “Friend” Who You Think It Is?
businesspersons and explores the ways that courts
(Chapter 10).
can resolve them.
• Insight into Ethics—Warning Labels for
Video Games (Chapter 13).
• Insight into the Global Environment—
Is It Legal to Resell Textbooks Purchased Additional Features
Abroad? (Chapter 14). of This Text
Suggested answers to the Legal Critical
Thinking questions are included in both the The Legal Environment of Business, Ninth Edition,
Instructor’s Manual and the Answers Manual includes a number of pedagogical devices and spe-
for this text. cial features, including those discussed here.
New Case Analysis Cases with Emphasis on Business and

Four Legal Reasoning Questions on Critical Thinking
In every chapter of the Ninth Edition of The Legal For the Ninth Edition, we have focused on mak-
Environment of Business, we have included one lon- ing the text more business related. To that end, we
ger case excerpt—labeled Case Analysis Case— have carefully chosen cases, features, and prob-
followed by four Legal Reasoning Questions. lems that are relevant to operating a business.
The questions are designed to guide students’ In addition, we recognize that today’s busi-
analysis of the case and build their legal reason- ness leaders must often think “outside the box”
ing skills. when making business decisions. For this reason,
These Case Analysis Cases may be used for case- we have included numerous critical thinking and
briefing assignments and are also tied to the Special legal reasoning elements in this text. Almost all of
Case Analysis questions found in nearly every unit the features and cases presented in the text con-
of the text (one per unit). Suggested answers to clude with some type of critical thinking question.
the Legal Reasoning Questions are included Cases may include one or more of the follow-
in both the Instructor’s Manual and the ing critical thinking questions:
Answers Manual for this text.
• What If the Facts Were Different?
• The Ethical Dimension
Improved Ethics Coverage • The E-Commerce Dimension
For the Ninth Edition of The Legal Environment of • The Global Dimension
Business, we have significantly revised and updated • The Legal Environment Dimension
the chapter on ethics and business decision making
• The Social Dimension
(Chapter 4). The chapter now presents a more practi-
cal, realistic, case-study approach to business ethics Suggested answers to all questions following
and the dilemmas facing businesspersons today. It cases can be found in both the Instructor’s
also provides step-by-step guidance for making ethi- Manual and the Answers Manual for this
cal business decisions. text.
Preface xvii
Managerial Implications them for self-study prior to completing homework

in Selected Cases assignments. Suggested answers to the ques-
tions posed in the Reviewing features can
In addition to the critical thinking questions, we be found in both the Instructor’s Manual
have included special case pedagogy at the end of and the Answers Manual for this text.
selected cases that have particular importance for
business managers. This section, called Managerial
Implications, points out the significance of the
court’s ruling in the case for business owners and Concept Summaries
managers. When key areas of the law need additional empha-
sis, we provide a Concept Summary. These summa-
ries have always been a popular pedagogical tool
Special Case Analysis Questions in this text. It now includes nineteen of these sum-
For nearly every unit in the text, we also provide maries, many of which have been expanded or
a Special Case Analysis question that is based on revised.
the Case Analysis Case excerpt in that chapter. The
Special Case Analysis questions are designed to build
students’ analytical skills and appear in the Business Exhibits
Case Problems at the end of selected chapters.
The Special Case Analysis questions test stu- When appropriate, we also illustrate important
dents’ ability to perform IRAC (which stands for aspects of the law in graphic form in exhibits. In all,
Issue, Rule, Application, and Conclusion) case fifty exhibits are featured in The Legal Environment
analysis. Students must identify the legal issue of Business, Ninth Edition. Several of these exhibits
presented in the chapter’s Case Analysis Case, are new, and we have modified existing exhibits to
understand the rule of law, determine how the achieve better clarity.
rule applies to the facts of the case, and describe
the court’s conclusion. Instructors can assign these
questions as homework or use them in class to Case Problems
elicit student participation and teach case analy-
sis. Suggested answers to the Special Case Every chapter includes a 2012 or 2013 case prob-
Analysis questions can be found in both lem in the Business Case Problems that appear at the
the Instructor’s Manual and the Answers end of the chapter. These problems are designed to
Manual for this text. clarify how modern courts deal with the business
issues discussed in the chapter.
At the request of instructors, we have given
Reviewing Features every business scenario and case problem a label
that identifies the chapter topic to which the ques-
in Every Chapter tion relates. These labels make it easier for instruc-
In the Ninth Edition of The Legal Environment of tors who wish to assign only certain questions to
Business, we continue to offer a Reviewing feature at their students. In addition, for this edition, we
the end of every chapter to help solidify students’ have added page references to the text where the
understanding of the chapter materials. Each problem’s answer can be found.
Reviewing feature presents a hypothetical scenario We have also included two special prob-
and then asks a series of questions that require stu- lems—the Spotlight Case Problems (in selected
dents to identify the issues and apply the legal con- chapters, as mentioned earlier), which are based
cepts discussed in the chapter. on good teaching cases with interesting facts, and
These features are designed to help students the Business Case Problem with Sample Answer (dis-
review the chapter topics in a simple and interest- cussed next).
ing way and see how the legal principles discussed Suggested answers to all chapter-ending
in the chapter affect the world in which they live. business scenarios and case problems are
An instructor can use these features as the basis included in both the Instructor’s Manual
for in-class discussion or encourage students to use and the Answers Manual for this text.
xviii Preface
Business Case Problem with protected portion of the Instructor’s Companion

Sample Answer in Each Chapter Web Site.
The complete teaching/learning package
In response to those instructors who would like stu- for the Ninth Edition includes the supplements
dents to have sample answers available for some listed next. For further information on The Legal
of the questions and case problems, we include a Environment of Business teaching/learning pack-
Business Case Problem with Sample Answer in each age, contact your local sales representative or visit
chapter. The Business Case Problem with Sample The Legal Environment of Business Web site.
Answer is based on an actual case, and students
can access a sample answer in Appendix F at the
end of the text. Instructor’s Companion Web Site
The Instructor’s Companion Web Site contains the
following supplements:
The Legal Environment • Instructor’s Manual. Includes sections

entitled “Additional Cases Addressing This
of Business on the Web Issue” at the end of selected case synopses.
• Answers Manual. Provides answers to all
The Web site for the Ninth Edition of The Legal questions presented in the text, including the
Environment of Business can be found by going questions in each case, feature, and unit-ending
to www.cengagebrain.com and entering ISBN feature.
9781285428949. The Web site offers a broad array • Test Bank. A comprehensive test bank that
of teaching/learning resources, including the contains multiple choice, true/false, and short
following: essay questions.
• Practice quizzes for every chapter in this text. • Case-Problem Cases.
• Flashcards and a Glossary for every • Case Printouts.
chapter in this text. • PowerPoint slides.
• Appendix A: How to Brief Cases and • Instructor’s Manual for the Drama of the
Analyze Case Problems that appears in the Law video series.
book is also posted on the Web site.
• Legal reference materials including a
“Statutes” page that offers links to the full Software, Video, and
text of selected statutes referenced in the text, Multimedia Supplements
a Spanish glossary, and other important legal
resources. • Business Law Digital Video Library—
• CourseMate, which students can purchase Provides access to ninety videos, including
access to, provides additional study tools, the Drama of the Law videos and video clips
including an e-book, additional quizzes, flash- from actual Hollywood movies. Access to
cards, key terms, and PowerPoint slides. our Digital Library is available in an optional
package with each new text at no additional
cost. You can access the Business Law Digital
Video Library, along with corresponding Video
The Most Complete Questions that are related to specific chapters in
the text, at www.cengagebrain.com.
Supplements Package • CengageNow (described on the first page of
Available Today this preface).
• MindTap (described on the first page of this
This edition of The Legal Environment of Business preface).
is accompanied by many teaching and learning • CourseMate (described on the second page
supplements, which are available on the password- of this preface).
Preface xix
• Westlaw® (ten free hours for qualified tions. Other major changes and additions for this
adopters). edition include the following:
• Chapter 4 (Business Ethics)—This
chapter has been thoroughly revised with
all new cases, business scenarios, and many
For Users of the new case problems. It includes a new sec-
Eighth Edition tion on business ethics and social media, as
well as an in-depth discussion of stakehold-
ers and corporate social responsibility. The
First of all, we want to thank you for helping chapter also provides step-by-step guidance
make The Legal Environment of Business the best- on making ethical business decisions and
selling legal environment text in America today. includes materials on global business ethics.
Second, we want to make you aware of the numer- An Insight into the Global Environment feature
ous additions and changes that we have made in examines bribery and the Foreign Corrupt
this edition—many in response to comments from Practices Act.
reviewers. • Chapter 5 (Business and the
Constitution)—The chapter has been
revised and updated to be more business
New Chapter and oriented. It has numerous new Examples and
Special Pedagogy Cases in Point, many of which are based on
United States Supreme Court decisions.
For this edition, we have added more material on
• Chapter 8 (International Law in a
Internet law and social media throughout the text.
Global Economy)—This chapter has been
We have also created an entire chapter (Chapter
thoroughly revised and updated. It now dis-
15) on Internet law, social media, and privacy.
cusses international dispute resolution and
We have also added the following entirely new
includes a feature on border searches of
elements for the Ninth Edition:
electronic devices. All three cases presented
• New highlighted and numbered Examples and in Chapter 8 are new, and an important
Cases in Point. 2013 United States Supreme Court deci-
• New Managerial Strategy features. sion has been selected as a Spotlight on
• New Insight into Social Media features. International Torts.
• New Spotlight Cases and Spotlight Case Problems. • Chapters 9 through 10 (the contracts
materials)—We have added many high-
• Classic Cases.
lighted and numbered Examples, Cases in
• Four Legal Reasoning Questions at the conclu- Point, and updates to clarify and enhance our
sion of Case Analysis Cases. already superb contract law coverage. The dis-
• Appendix to Chapter 10: Reading and Analyzing cussion of online contracting and electronic
Contracts. signatures has been merged with the coverage
• Issue Spotters in every chapter. of traditional contracts. Chapter 9 presents a
• Legal Reasoning Group Activities in every Spotlight on Amazon.com case and includes a
chapter. Spotlight on Taco Bell case problem.
• Appendix E (Answers to the Issue Spotters), • Chapter 11 (Sales and Lease Contracts)—
Appendix F (Sample Answers for Business Case We have streamlined and simplified our cover-
Problems with Sample Answer). age of the Uniform Commercial Code. We
have added numerous new Examples and Cases
in Point throughout the chapter to increase
student comprehension. The chapter includes
Significantly Revised Chapters an Insight into E-Commerce on Taxing Web
Every chapter of the Ninth Edition has been Purchases and a Spotlight on Apple case prob-
revised as necessary to incorporate new develop- lem. It also contains a classic case and a 2013
ments in the law or to streamline the presenta- Case Analysis Case.
xx Preface
• Chapter 12 (Torts) and Chapter 13 and partnerships—as well as issues affecting

(Strict Liability and Product owners of small businesses—are covered in
Liability)—Our torts coverage has been Chapter 17. Limited liability forms of business
substantially revised, reorganized, and are covered in Chapter 18, and corporations
streamlined. The materials are up to date and are discussed in Chapter 19. A new case and a
business oriented. Intentional torts and neg- new Case Analysis Case have been added in the
ligence are covered in one chapter, and strict corporate law chapter.
liability and product liability are covered in • Chapter 21 (Employment
the next. Each chapter includes a Spotlight Relationships)—This chapter discusses
Case, and Chapter 13 presents an Insight into many legal issues facing employers today and
Ethics feature discussing warning labels for includes updated minimum wage figures and
video games. Social Security and Medicare percentages.
• Chapter 14 (Intellectual Property We have also included a discussion of the
Rights)—The materials on intellectual prop- Affordable Care Act (Obamacare).
erty rights have been thoroughly revised and • Chapter 22 (Employment
updated to reflect the most current laws and Discrimination)—We have added Examples
trends. There is a discussion of the dispute and Cases in Point throughout this chapter,
between Apple, Inc., and Samsung Electronics as well as new numbered lists of elements,
Company over smartphones. A feature dis- and two new cases. A new Insight into Ethics
cusses a 2013 United States Supreme Court feature examines appearance-based discrimi-
decision on the resale on eBay of textbooks nation. We discuss relevant United States
purchased abroad. The case problems include Supreme Court decisions affecting employ-
a Spotlight on Macy’s. ment issues throughout both Chapter 21 and
• Chapter 15 (Internet Law, Social Media, this chapter.
and Privacy)—This chapter is all new and • Chapter 23 (Immigration and Labor
was created for the Ninth Edition to explore Law)—The materials on immigration law
timely topics. It discusses legal issues that are have been streamlined and updated and
unique to the Internet, such as spam, domain include a discussion of state immigration leg-
name disputes, cybersquatting, digital copy- islation and its constitutionality. A Managerial
right laws, and file-sharing. It also discusses Strategy feature covers changing social media
social media, company-wide social media policies, and there is a new Cases Analysis Case
networks, state legislation on social media, on labor law.
the Electronic Communications Privacy Act, • Chapter 24 (Consumer Protection)—This
and password protection. The chapter also chapter has been streamlined and updated.
covers online defamation, data collection and The chapter also includes a Spotlight on
cookies, and online privacy. Honda case and a Spotlight on McDonald’s case
• Chapter 16 (Creditor-Debtor Relations problem.
and Bankruptcy)—This chapter has been • Chapter 25 (Environmental Law)—The
revised to be more up to date and comprehen- materials on air pollution and water pollution
sible. We have streamlined the materials to have been updated, and a recent decision from
focus on those concepts that students need to the United States Supreme Court decision is
know, and included updated dollar amounts presented.
of various provisions of the Bankruptcy Code. • Chapter 26 (Real Property and Land-Use
An Insight into Social Media feature is included. Control)—Parts of this chapter have been
• Chapters 17 through 19 (the Business significantly revised. Several new terms were
Environment unit)—This unit has been added. The discussion of eminent domain
revised and updated to improve the flow and for economic development was updated. A
clarity. We provide more practical information Spotlight Case covers whether the buyer of an
and recent examples. Small-business organi- allegedly haunted house can seek rescission of
zational forms, including sole proprietorships the sale. The Case Analysis Case is on whether
Preface xxi
a town can use a condemnation action to coverage of leading cases, including a discus-
acquire rights-of-way for a natural gas pipeline sion of price fixing and e-books. Updated
that is not being built to furnish natural gas thresholds for interlocking directorates have
to the residents of that town. The discussion been incorporated.
of zoning laws has been reworked, and several • Chapter 28 (Investor Protection and
numbered lists explain permissible uses of land Corporate Governance)—This chapter
and requirements for variances. has been substantially revised, updated, and
• Chapter 27 (Antitrust Law)—We have simplified. It includes new numbered lists of
added several new examples and expanded elements, two new cases, and a Classic Case.
Acknowledgments for Previous Editions
Since we began this project many years ago, a sizable number of legal environment of business professors
and others have helped us in various phases of the undertaking. The following reviewers offered numer-
ous constructive criticisms, comments, and suggestions during the preparation of the previous editions.
Peter W. Allan David Cooper David Redle

Victor Valley College Fullerton College University of Akron
William Dennis Ames Steven R. Donley Larry A. Strate
Indiana University of Pennsylvania Cypress College University of Nevada–Las Vegas
Thomas M. Apke Paul F. Dwyer Dawn Swink
California State University, Fullerton Siena College Minnesota State University, Mankato
Linda Axelrod Joan Gabel Brian Terry
Metropolitan State University Florida State University Johnson and Wales University
Jane Bennett Gamewell Gant John Theis
Orange Coast College Idaho State University Mesa State College
Robert C. Bird Arlene M. Hibschweiler Michael G. Walsh
University of Connecticut SUNY Fredonia Villanova University
Dean Bredeson Barbara W. Kincaid Glynda White
University of Texas at Austin Southern Methodist University Community College
Sam Cassidy Marty P. Ludlum of Southern Nevada
University of Denver Oklahoma City Community LeVon E. Wilson
Thomas D. Cavenagh College Western Carolina University
North Central College– Marty Salley McGee John A. Wrieden
Naperville, Illinois South Carolina State University Florida International University
Angela Cerino Robert Mitchum Eric D. Yordy
Villanova University Arkansas State University, Beebe Northern Arizona University
Corey Ciocchetti Kathleen A. Phillips Mary-Kathryn Zachary
University of Denver University of Houston State University of West Georgia
xxii Preface
We would also like to give credit to the following reviewers for their useful input during development of
CengageNOW for The Legal Environment of Business: Interactive Assignment System:
Nena Ellison Melanie Morris William H. Volz

Florida Atlantic University Raritan Valley Community College Wayne State University
Jacqueline Hagerott
Franklin University
We also wish to extend special thanks to Diane May, Winona State University, for her contributions to the
Ninth Edition, specifically for preparing the Blueprint Cases that are included in both CengageNOW and
MindTap for this edition.
As in all past editions, we owe a debt of extreme proofreading services of Pat Lewis. We are grate-
gratitude to the numerous individuals who worked ful for the efforts of Vickie Reierson and Roxanna
directly with us or at Cengage Learning. In par- Lee for their proofreading and other assistance,
ticular, we wish to thank Vicky True-Baker, Rob which helped to ensure an error-free text. Finally,
Dewey, and Michael Worls for their helpful advice we thank Suzanne Jasin of K & M Consulting for
and guidance during all of the stages of this new her many special efforts on this project.
edition. We extend our thanks to Jan Lamar, our In addition, we would like to give special
longtime content developer, for her many useful thanks to all of the individuals who were instru-
suggestions and for her efforts in coordinating mental in developing and implementing the new
reviews and ensuring the timely and accurate pub- CengageNOW for The Legal Environment of Business:
lication of all supplemental materials. We are also Interactive Assignment System. These include Rob
indebted to Kristen Hurd for her excellent market- Dewey, Vicky True-Baker, Jan Lamar, Kristen Hurd,
ing advice and Mike Worls for his support. and Kristen Meere at Cengage, and Katherine
Our content project manager, Ann Borman, and Marie Silsbee, Roger Meiners, Lavina Leed Miller,
our art director, Michelle Kunkler, made sure that William Eric Hollowell, Kimberly Wallan, Kristi
we came out with an error-free, visually attractive Wiswell, and Joseph Zavaleta who helped develop
Ninth Edition. We appreciate their efforts. We are the content for this unique Web-based product.
also indebted to the staff at Parkwood Composition, Through the years, we have enjoyed an ongo-
our compositor. Their ability to generate the pages ing correspondence with many of you who have
for this text quickly and accurately made it possible found points on which you wish to comment. We
for us to meet our ambitious printing schedule. continue to welcome all comments and promise to
We especially wish to thank Katherine Marie respond promptly. By incorporating your ideas, we
Silsbee for her management of the entire project, can continue to write a business law text that is
as well as for the application of her superb research best for you and best for your students.
and editorial skills. We also wish to thank William
Eric Hollowell, who co-authored the Instructor’s
Manual and the Test Bank for his excellent research F.B.C.
efforts. We were fortunate enough to have the R.L.M.
Dedication
To my parents and sisters.
F.B.C.
To Julian Kreeger,
Your professionalism only

gets better with time.
Thanks,
R.L.M.
Unit One
The Foundations
Contents
1 Law and Legal Reasoning
2 The Court System
3 Alternative and Online Dispute Resolution
4 Business Ethics
Chapter 1
Law and
Legal Reasoning
O
ne of the important func- Although law has various defini- privileges that are consistent with the
tions of law in any society tions, they are all based on the general values and beliefs of their society or its
is to provide stability, observation that law consists of enforce- ruling group.
predictability, and continuity so that able rules governing relationships among In this introductory chapter, we first
people can know how to order their individuals and between individuals and look at an important question for any
affairs. If any society is to survive, its their society. These “enforceable rules” student reading this text: How does
citizens must be able to determine what may consist of unwritten principles of the legal environment affect business
is legally right and legally wrong. They behavior established by a nomadic tribe. decision making? We next describe
must know what sanctions will be im- They may be set forth in a law code, such the major sources of American law, the
posed on them if they commit wrongful as the Code of Hammurabi in ancient common law tradition, and some basic
acts. If they suffer harm as a result of Babylon (c. 1780 b.c.e.) or the law code of schools of legal thought. We conclude
others’ wrongful acts, they must know one of today’s European nations. They the chapter with sections offering
how they can seek compensation. By may consist of written laws and court practical guidance on several topics,
setting forth the rights, obligations, and decisions created by modern legislative including how to find the sources of law
privileges of citizens, the law enables and judicial bodies, as in the United discussed in this chapter (and referred
individuals to go about their business States. Regardless of how such rules are to throughout the text) and how to
with confidence and a certain degree of created, they all have one thing in com- read and understand court opinions.
predictability. mon: they establish rights, duties, and
SECTION 1 Many Different Laws May

Business Activities and Affect a Single Business Decision
the Legal Environment As you will note, each chapter in this text covers specific
areas of the law and shows how the legal rules in each
area affect business activities. Though compartmental-
Laws and government regulations affect almost all
izing the law in this fashion promotes conceptual clar-
business activities—from hiring and firing decisions
ity, it does not indicate the extent to which a number
to workplace safety, the manufacturing and market-
of different laws may apply to just one decision.
ing of products, business financing, and more. To
make good business decisions, a basic knowledge of
Lessons from Facebook When Mark Zuckerberg
the laws and regulations governing these activities is
started Facebook as a Harvard student, he probably
beneficial—if not essential.
did not imagine all the legal challenges his company
Realize also that in today’s business world, a
would face as a result of his business decisions.
knowledge of “black-letter” law is not enough.
Businesspersons are also pressured to make ethical • As you may know from the movie, The Social Net-
decisions. Thus, the study of business law necessarily work, shortly after Facebook was launched, others
involves an ethical dimension. claimed that Zuckerberg had stolen their ideas for
Chapter 1 Law and Legal Reasoning 3
a social networking site. Their claims involved al- Today, business decision makers need to con-
leged theft of intellectual property (see Chapter sider not just whether a decision is legal, but also
14), fraudulent misrepresentation (see Chapter 10), whether it is ethical. Often, as in several of the
partnership law (see Chapter 17), and securities law claims against Facebook discussed above, disputes
(see Chapter 28). Facebook ultimately paid a signifi- arise in business because one party feels that he or
cant amount ($65 million) to settle those claims out she has been treated unfairly. Thus, the underly-
of court (see Chapter 3). ing reason for bringing some lawsuits is a breach of
• Facebook has also been sued repeatedly for violat- ethical duties (such as when a partner or employee
ing users’ privacy (such as by disseminating private attempts to secretly take advantage of a business
information to third parties for commercial pur- opportunity).
poses—see Chapters 5 and 15). Throughout this text, you will learn about the
• In 2012, a class-action lawsuit was filed against relationship between the law and ethics, as well
Facebook that seeks damages of $15 billion for vio- as about some of the types of ethical questions
lating users’ privacy (and federal wiretapping law) that often arise in business. For example, the unit-
by tracking their Web site usage. ending Focus on Ethics features are devoted solely to
• Facebook’s business decisions have also come un- the exploration of ethical questions pertaining to
der scrutiny by federal regulators, such as the Fed- topics treated within the unit. We have also included
eral Trade Commission (FTC) and the Securities Ethical Dimension questions for selected cases that
and Exchange Commission (SEC). focus on ethical considerations in today’s business
• In 2011, the company settled a complaint filed climate and Insight into Ethics features that appear
by the FTC alleging that Facebook failed to keep in selected chapters. A Question of Ethics case prob-
“friends” lists and other user information private. lem is included at the conclusion of every chapter
• In 2012, Facebook conducted a much-anticipated to introduce you to the ethical aspects of specific
initial public offering (IPO) of its stock. The IPO cases involving real-life situations. Additionally,
did not go well, however, and many investors suf- Chapter 4 offers a detailed look at the importance of
fered losses. Facebook is facing dozens of lawsuits business ethics.
(including class actions) related to business deci-
sions made with regard to the IPO and alleged vio- SECTION 2
lations of securities laws (see Chapter 28).
• The SEC is also investigating whether Facebook Sources of American Law
engaged in any wrongdoing with regard to its IPO
and trading of stock (see Chapter 28). There are numerous sources of American law. Primary
sources of law, or sources that establish the law, include
Points to Consider A key to avoiding business dis-
the following:
putes is to think ahead when starting or running a
business or entering a contract. Learn what you can 1. The U.S. Constitution and the constitutions of the
about the laws pertaining to that specific enterprise various states.
or transaction. Have some idea of the legal ramifica- 2. Statutory law—including laws passed by Congress,
tions of your business decisions and seek the advice state legislatures, or local governing bodies.
of counsel when in doubt. Exhibit 1–1 on the follow- 3. Regulations created by administrative agencies,
ing page illustrates the various areas of law that may such as the Food and Drug Administration.
influence business decision making. 4. Case law and common law doctrines.
We describe each of these important sources of law in
Ethics and the following pages.
Secondary sources of law are books and articles that
Business Decision Making summarize and clarify the primary sources of law.
Merely knowing the areas of law that may affect a Examples include legal encyclopedias, treatises, arti-
business decision is not sufficient in today’s business cles in law reviews, and compilations of law, such as
world. Businesspersons must also take ethics into the Restatements of the Law (which will be discussed
account. As you will learn in Chapter 4, ethics gener- shortly). Courts often refer to secondary sources of law
ally is defined as the principles governing what con- for guidance in interpreting and applying the primary
stitutes right or wrong behavior. sources of law discussed here.
4 Unit One The Foundations
E x h i b i t 1–1 Areas of the Law That May Affect Business Decision Making
Contracts
Courts and
Court Procedures Sales
Environmental Negotiable
Law and Sustainability Instruments
Business Business
Creditors’
Organizations Decision
Rights
Making
Intellectual
Agency
Property
Internet Law,
Torts Social Media,
and Privacy
Product
Liability
Constitutional Law Statutory Law

The federal government and the states have separate Laws enacted by legislative bodies at any level of gov-
written constitutions that set forth the general organi- ernment, such as statutes passed by Congress or by
zation, powers, and limits of their respective govern- state legislatures, make up the body of law known as
ments. Constitutional law is the law as expressed statutory law. When a legislature passes a statute,
in these constitutions. that statute ultimately is included in the federal code
According to Article VI of the U.S. Constitution, the of laws or the relevant state code of laws (discussed
Constitution is the supreme law of the land. As such, later in this chapter).
it is the basis of all law in the United States. A law in Statutory law also includes local ordinances—
violation of the Constitution, if challenged, will be statutes (laws, rules, or orders) passed by municipal or
declared unconstitutional and will not be enforced, county governing units to govern matters not covered
no matter what its source. Because of its importance by federal or state law. Ordinances commonly have to
in the American legal system, we present the com- do with city or county land use (zoning ordinances),
plete text of the U.S. Constitution in Appendix B and building and safety codes, and other matters affecting
discuss it in depth in Chapter 5. the local community.
The Tenth Amendment to the U.S. Constitution A federal statute, of course, applies to all states. A
reserves to the states all powers not granted to the state statute, in contrast, applies only within the state’s
federal government. Each state in the union has its borders. State laws thus may vary from state to state.
own constitution. Unless it conflicts with the U.S. No federal statute may violate the U.S. Constitution,
Constitution or a federal law, a state constitution is and no state statute or local ordinance may violate the
supreme within the state’s borders. U.S. Constitution or the relevant state constitution.
Uniform laws During the 1800s, the differences orders, and decisions of administrative agencies. An
among state laws frequently created difficulties for administrative agency is a federal, state, or local
businesspersons conducting trade and commerce government agency established to perform a specific
among the states. To counter these problems, a group function. Administrative law and procedures consti-
of legal scholars and lawyers formed the National tute a dominant element in the regulatory environ-
Conference of Commissioners on Uniform State Laws ment of business.
(NCCUSL, www.uniformlaws.org) in 1892 to draft Rules issued by various administrative agencies
uniform laws (model statutes) for the states to con- now affect almost every aspect of a business’s opera-
sider adopting. The NCCUSL still exists today and tions. Regulations govern a business’s capital struc-
continues to issue uniform laws. ture and financing, its hiring and firing procedures,
Each state has the option of adopting or rejecting a its relations with employees and unions, and the way
uniform law. Only if a state legislature adopts a uniform it manufactures and markets its products. Regulations
law does that law become part of the statutory law of that enacted to protect the environment also often play a
state. Note that a state legislature may adopt all or part significant role in business operations.
of a uniform law as it is written, or the legislature may
rewrite the law however the legislature wishes. Hence, Federal Agencies At the national level, the cabinet
even though many states may have adopted a uniform departments of the executive branch include numer-
law, those states’ laws may not be entirely “uniform.” ous executive agencies. The U.S. Food and Drug
The earliest uniform law, the Uniform Negotiable Administration, for example, is an agency within
Instruments Law, was completed by 1896 and adopted the U.S. Department of Health and Human Services.
in every state by the 1920s (although not all states Executive agencies are subject to the authority of the
used exactly the same wording). Over the following president, who has the power to appoint and remove
decades, other acts were drawn up in a similar man- their officers.
ner. In all, more than two hundred uniform acts have There are also major independent regulatory
been issued by the NCCUSL since its inception. The agencies at the federal level, such as the Federal Trade
most ambitious uniform act of all, however, is the Commission, the Securities and Exchange Commission,
Uniform Commercial Code. and the Federal Communications Commission. The
president’s power is less pronounced in regard to inde-
The Uniform Commercial Code One of the most pendent agencies, whose officers serve for fixed terms
important uniform acts is the Uniform Commercial and cannot be removed without just cause.
Code (UCC), which was created through the joint
efforts of the NCCUSL and the American Law State and Local Agencies There are administrative
Institute.1 The UCC was first issued in 1952 and agencies at the state and local levels as well. Commonly,
has been adopted in all fifty states,2 the District of a state agency (such as a state pollution-control agency)
Columbia, and the Virgin Islands. is created as a parallel to a federal agency (such as the
The UCC facilitates commerce among the states by Environmental Protection Agency). Just as federal stat-
providing a uniform, yet flexible, set of rules govern- utes take precedence over conflicting state statutes,
ing commercial transactions. Because of its impor- federal agency regulations take precedence over con-
tance in the area of commercial law, we cite the UCC flicting state regulations.
frequently in this text. We also present Article 2 of the
UCC in Appendix C. From time to time, the NCCUSL
revises the articles contained in the UCC and submits Case Law and
the revised versions to the states for adoption. Common Law Doctrines
The rules of law announced in court decisions consti-
Administrative Law tute another basic source of American law. These rules
Another important source of American law is include interpretations of constitutional provisions,
administrative law, which consists of the rules, of statutes enacted by legislatures, and of regulations
created by administrative agencies.
1. This institute was formed in the 1920s and consists of practicing Today, this body of judge-made law is referred to
attorneys, legal scholars, and judges.
2. Louisiana has not adopted Articles 2 and 2A (covering contracts for
as case law. Case law—the doctrines and principles
the sale and lease of goods), however. announced in cases—governs all areas not covered by
6 Unit One The Foundations
statutory law or administrative law and is part of our of general rules that applied throughout the entire
common law tradition. We look at the origins and English realm. Eventually, the common law tradition
characteristics of the common law tradition in some became part of the heritage of all nations that were
detail in the pages that follow. once British colonies, including the United States.
See Concept Summary 1.1 below for a review of the
sources of American law. Courts of law and remedies at law The early
English king’s courts could grant only very limited
kinds of remedies (the legal means to enforce a right
SECTION 3 or redress a wrong). If one person wronged another in
The Common Law Tradition some way, the king’s courts could award as compensa-
tion one or more of the following: (1) land, (2) items
of value, or (3) money.
Because of our colonial heritage, much of American law The courts that awarded this compensation became
is based on the English legal system, which originated known as courts of law, and the three remedies
in medieval England and continued to evolve in the were called remedies at law. (Today, the remedy at
following centuries. Knowledge of this system is neces- law normally takes the form of monetary damages—
sary to understanding the American legal system today. an amount given to a party whose legal interests have
been injured.) This system made the procedure for
settling disputes more uniform. When a complaining
Early English Courts party wanted a remedy other than economic compen-
The origins of the English legal system—and thus the sation, however, the courts of law could do nothing,
U.S. legal system as well—date back to 1066, when the so “no remedy, no right.”
Normans conquered England. William the Conqueror
and his successors began the process of unifying the Courts of equity Equity is a branch of law—
country under their rule. One of the means they used founded on notions of justice and fair dealing—that
to do this was the establishment of the king’s courts, seeks to supply a remedy when no adequate remedy at
or curiae regis. law is available. When individuals could not obtain an
Before the Norman Conquest, disputes had been adequate remedy in a court of law, they petitioned the
settled according to the local legal customs and tra- king for relief. Most of these petitions were decided
ditions in various regions of the country. The king’s by an adviser to the king, called a chancellor, who
courts sought to establish a uniform set of customs for had the power to grant new and unique remedies.
the country as a whole. What evolved in these courts Eventually, formal chancery courts, or courts of
was the beginning of the common law—a body equity, were established.
Concept
Concept Summary 8.1
Summary 1.1
Sources of American Law
Source Description
Constitutional Law The law as expressed in the U.S. Constitution and the state constitutions. The U.S. Constitution is
the supreme law of the land. State constitutions are supreme within state borders to the extent
that they do not violate a clause of the U.S. Constitution or a federal law.
Statutory Law Laws (statutes and ordinances) enacted by federal, state, and local legislatures and governing bod-
ies. None of these laws can violate the U.S. Constitution or the relevant state constitution. Uniform
laws, when adopted by a state, become statutory law in that state.
Administrative Law The rules, orders, and decisions of federal, state, and local government administrative agencies.
Case Law and Judge-made law, including interpretations of constitutional provisions, of statutes enacted by
Common Law Doctrines legislatures, and of regulations created by administrative agencies.
remedies in equity The remedies granted by the equitable doctrine of laches (a term derived from
equity courts became known as remedies in equity, the Latin laxus, meaning “lax” or “negligent”), and it
or equitable remedies. These remedies include specific can be used as a defense. A defense is an argument
performance, an injunction, and rescission. Specific raised by the defendant (the party being sued) indi-
performance involves ordering a party to perform an cating why the plaintiff (the suing party) should
agreement as promised. An injunction is an order to not obtain the remedy sought. (Note that in equity
a party to cease engaging in a specific activity or to proceedings, the party bringing a lawsuit is called the
undo some wrong or injury. Rescission is the cancella- petitioner, and the party being sued is referred to as
tion of a contractual obligation. We will discuss these the respondent.)
and other equitable remedies in more detail at appro- The doctrine of laches arose to encourage peo-
priate points in the chapters that follow, particularly ple to bring lawsuits while the evidence was fresh.
in Chapter 10. What constitutes a reasonable time, of course, varies
As a general rule, today’s courts, like the early according to the circumstances of the case. Time peri-
English courts, will not grant equitable remedies ods for different types of cases are now usually fixed
unless the remedy at law—monetary damages—is by statutes of limitations. After the time allowed
inadequate. ▶ Example 1.1 Ted forms a contract under a statute of limitations has expired, no action
(a legally binding agreement—see Chapter 9) to pur- (lawsuit) can be brought, no matter how strong the
chase a parcel of land that he thinks will be perfect case was originally.
for his future home. The seller breaches, or fails to
fulfill, this agreement. Ted could sue the seller for the Legal and
return of any deposits or down payment he might
have made on the land, but this is not the remedy he Equitable Remedies Today
really seeks. What Ted wants is to have the court order The establishment of courts of equity in medieval
the seller to perform the contract. In other words, England resulted in two distinct court systems: courts
Ted wants the court to grant the equitable remedy of of law and courts of equity. The courts had different
specific performance because monetary damages are sets of judges and granted different types of remedies.
inadequate in this situation. ◀ During the nineteenth century, however, most states
in the United States adopted rules of procedure that
Equitable Maxims In fashioning appropriate reme- resulted in the combining of courts of law and equity.
dies, judges often were (and continue to be) guided by A party now may request both legal and equitable
so-called equitable maxims—propositions or gen- remedies in the same action, and the trial court judge
eral statements of equitable rules. Exhibit 1–2 below may grant either or both forms of relief.
lists some important equitable maxims. The distinction between legal and equitable rem-
The last maxim listed in that exhibit—“Equity aids edies remains relevant to students of business law,
the vigilant, not those who rest on their rights”— however, because these remedies differ. To seek the
merits special attention. It has become known as the proper remedy for a wrong, one must know what
EXHIBIT 1–2 Equitable Maxims

1. Whoever seeks equity must do equity. (Anyone who wishes to be treated fairly must treat others fairly.)
2. Where there is equal equity, the law must prevail. (The law will determine the outcome of a controversy in which
the merits of both sides are equal.)
3. One seeking the aid of an equity court must come to the court with clean hands. (The plaintiff must have acted fairly
and honestly.)
4. Equity will not suffer a wrong to be without a remedy. (Equitable relief will be awarded when there is a right to relief
and there is no adequate remedy at law.)
5. Equity regards substance rather than form. (Equity is more concerned with fairness and justice than with legal
technicalities.)
6. Equity aids the vigilant, not those who rest on their rights. (Equity will not help those who neglect their rights for an
unreasonable period of time.)
Another random document with
no related content on Scribd:
The Project Gutenberg eBook of Let's Get
Together
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
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you are located before using this eBook.
Title: Let's Get Together
Author: Isaac Asimov
Illustrator: Robert Engle
Release date: June 22, 2022 [eBook #68377]
Language: English
Original publication: United States: Royal Publications, Inc, 1956
Credits: Greg Weeks, Mary Meehan and the Online Distributed

Proofreading Team at http://www.pgdp.net.
*** START OF THE PROJECT GUTENBERG EBOOK LET'S GET

TOGETHER ***
LET'S GET TOGETHER
By ISAAC ASIMOV
Illustrated by ENGLE
[Transcriber's Note: This etext was produced from

Infinity, February 1957.
Extensive research did not uncover any evidence that
the U.S. copyright on this publication was renewed.]
A kind of peace had endured for a century and people had forgotten
what anything else was like. They would scarcely have known how to
react had they discovered that a kind of war had finally come.
Certainly, Elias Lynn, Chief of the Bureau of Robotics, wasn't sure
how he ought to react when he finally found out. The Bureau of
Robotics was headquartered in Cheyenne, in line with the century-old
trend toward decentralization, and Lynn stared dubiously at the young
Security officer from Washington who had brought the news.
Elias Lynn was a large man, almost charmingly homely, with pale
blue eyes that bulged a bit. Men weren't usually comfortable under
the stare of those eyes, but the Security officer remained calm.
Lynn decided that his first reaction ought to be incredulity. Hell, it was
incredulity! He just didn't believe it!
He eased himself back in his chair and said, "How certain is the
information?"
The Security officer, who had introduced himself as Ralph G.
Breckenridge and had presented credentials to match, had the
softness of youth about him; full lips, plump cheeks that flushed
easily, and guileless eyes. His clothing was out of line with Cheyenne
but it suited a universally air-conditioned Washington, where Security,
despite everything, was still centered.
Breckenridge flushed and said, "There's no doubt about it."
"You people know all about Them, I suppose," said Lynn and was
unable to keep a trace of sarcasm out of his tone. He was not
particularly aware of his use of a slightly-stressed pronoun in his
reference to the enemy, the equivalent of capitalization in print. It was
a cultural habit of this generation and the one preceding. No one said
the "East," or the "Reds" or the "Soviets" or the "Russians" any more.
That would have been too confusing, since some of Them weren't of
the East, weren't Reds, Soviets, and especially not Russians. It was
much simpler to say We and They, and much more precise.
Travelers had frequently reported that They did the same in reverse.
Over there, They were "We" (in the appropriate language) and We
were "They."
Scarcely anyone gave thought to such things any more. It was all
quite comfortable and casual. There was no hatred, even. At the
beginning, it had been called a Cold War. Now it was only a game,
almost a good-natured game, with unspoken rules and a kind of
decency about it.
Lynn said, abruptly, "Why should They want to disturb the situation?"
He rose and stood staring at a wall-map of the world, split into two
regions with faint edgings of color. An irregular portion on the left of
the map was edged in a mild green. A smaller, but just as irregular,
portion on the right of the map was bordered in a washed-out pink.
We and They.
The map hadn't changed much in a century. The loss of Formosa and
the gain of East Germany some eighty years before had been the last
territorial switch of importance.
There had been another change, though, that was significant enough
and that was in the colors. Two generations before, Their territory had
been a brooding, bloody red, Ours a pure and undefiled white. Now
there was a neutrality about the colors. Lynn had seen Their maps
and it was the same on Their side.
"They wouldn't do it," he said.
"They are doing it," said Breckenridge, "and you had better accustom
yourself to the fact. Of course, sir, I realize that it isn't pleasant to
think that they may be that far ahead of us in robotics."
His eyes remained as guileless as ever, but the hidden knife-edges of
the words plunged deep, and Lynn quivered at the impact.
Of course, that would account for why the Chief of Robotics learned
of this so late and through a Security officer at that. He had lost caste
in the eyes of the Government; if Robotics had really failed in the
struggle, Lynn could expect no political mercy.
Lynn said wearily, "Even if what you say is true, they're not far ahead
of us. We could build humanoid robots."
"Have we, sir?"
"Yes. As a matter of fact, we have built a few models for experimental
purposes."
"They were doing so ten years ago. They've made ten years'
progress since."
Lynn was disturbed. He wondered if his incredulity concerning the
whole business were really the result of wounded pride and fear for
his job and reputation. He was embarrassed by the possibility that
this might be so, and yet he was forced into defense.
He said, "Look, young man, the stalemate between Them and Us
was never perfect in every detail, you know. They have always been
ahead in one facet or another and We in some other facet or another.
If They're ahead of us right now in robotics, it's because They've
placed a greater proportion of Their effort into robotics than We have.
And that means that some other branch of endeavor has received a
greater share of Our efforts than it has of Theirs. It would mean We're
ahead in force-field research or in hyper-atomics, perhaps."
Lynn felt distressed at his own statement that the stalemate wasn't
perfect. It was true enough, but that was the one great danger
threatening the world. The world depended on the stalemate being as
perfect as possible. If the small unevennesses that always existed
over-balanced too far in one direction or the other—
Almost at the beginning of what had been the Cold War, both sides
had developed thermonuclear weapons, and war became
unthinkable. Competition switched from the military to the economic
and psychological and had stayed there ever since.
But always there was the driving effort on each side to break the
stalemate, to develop a parry for every possible thrust, to develop a
thrust that could not be parried in time—something that would make
war possible again. And that was not because either side wanted war
so desperately, but because both were afraid that the other side
would make the crucial discovery first.
For a hundred years each side had kept the struggle even. And in the
process, peace had been maintained for a hundred years while, as
byproducts of the continuously intensive research, force-fields had
been produced and solar energy and insect control and robots. Each
side was making a beginning in the understanding of mentalics,
which was the name given to the biochemistry and biophysics of
thought. Each side had its outposts on the Moon and on Mars.
Mankind was advancing in giant strides under forced draft.
It was even necessary for both sides to be as decent and humane as
possible among themselves, lest through cruelty and tyranny, friends
be made for the other side.
It couldn't be that the stalemate would now be broken and that there
would be war.
Lynn said, "I want to consult one of my men. I want his opinion."
"Is he trustworthy?"
Lynn looked disgusted. "Good Lord, what man in Robotics has not
been investigated and cleared to death by your people? Yes, I vouch
for him. If you can't trust a man like Humphrey Carl Laszlo, then we're
in no position to face the kind of attack you say They are launching,
no matter what else we do."
"I've heard of Laszlo," said Breckenridge.
"Good. Does he pass?"
"Yes."
"Then, I'll have him in and we'll find out what he thinks about the
possibility that robots could invade the U. S. A."
"Not exactly," said Breckenridge, softly. "You still don't accept the full
truth. Find out what he thinks about the fact that robots have already
invaded the U. S. A."
Laszlo was the grandson of a Hungarian who had broken through
what had then been called the Iron Curtain, and he had a comfortable
above-suspicion feeling about himself because of it. He was thick-set
and balding with a pugnacious look graven forever on his snub face,
but his accent was clear Harvard and he was almost excessively soft-
spoken.
To Lynn, who was conscious that after years of administration he was
no longer expert in the various phases of modern robotics, Laszlo
was a comforting receptacle for complete knowledge. Lynn felt better
because of the man's mere presence.
Lynn said, "What do you think?"
A scowl twisted Laszlo's face ferociously. "That They're that far ahead
of us. Completely incredible. It would mean They've produced
humanoids that could not be told from humans at close quarters. It
would mean a considerable advance in robo-mentalics."
"You're personally involved," said Breckenridge, coldly. "Leaving
professional pride out of account, exactly why is it impossible that
They be ahead of Us?"
Laszlo shrugged. "I assure you that I'm well acquainted with Their
literature on robotics. I know approximately where They are."
"You know approximately where They want you to think They are, is
what you really mean," corrected Breckenridge. "Have you ever
visited the other side?"
"I haven't," said Laszlo, shortly.
"Nor you, Dr. Lynn?"
Lynn said, "No, I haven't, either."
Breckenridge said, "Has any robotics man visited the other side in
twenty-five years?" He asked the question with a kind of confidence
that indicated he knew the answer.
For a matter of seconds, the atmosphere was heavy with thought.
Discomfort crossed Laszlo's broad face. He said, "As a matter of fact,
They haven't held any conferences on robotics in a long time."
"In twenty-five years," said Breckenridge. "Isn't that significant?"
"Maybe," said Laszlo, reluctantly. "Something else bothers me,
though. None of Them have ever come to Our conferences on
robotics. None that I can remember."
"Were They invited?" asked Breckenridge.
Lynn, staring and worried, interposed quickly, "Of course."
Breckenridge said, "Do They refuse attendance to any other types of
scientific conferences We hold?"
"I don't know," said Laszlo. He was pacing the floor now. "I haven't
heard of any cases. Have you, Chief?"
"No," said Lynn.
Breckenridge said, "Wouldn't you say it was as though They didn't
want to be put in the position of having to return any such invitation?
Or as though They were afraid one of Their men might talk too
much?"
That was exactly how it seemed, and Lynn felt a helpless conviction
that Security's story was true after all steal over him.
Why else had there been no contact between sides on robotics?
There had been a cross-fertilizing trickle of researchers moving in
both directions on a strictly one-for-one basis for years, dating back to
the days of Eisenhower and Khrushchev. There were a great many
good motives for that: an honest appreciation of the supra-national
character of science; impulses of friendliness that are hard to wipe
out completely in the individual human being; the desire to be
exposed to a fresh and interesting outlook and to have your own
slightly-stale notions greeted by others as fresh and interesting.
The governments themselves were anxious that this continue. There
was always the obvious thought that by learning all you could and
telling as little as you could, your own side would gain by the
exchange.
But not in the case of robotics. Not there.
Such a little thing to carry conviction. And a thing, moreover, they had
known all along. Lynn thought, darkly: We've taken the complacent
way out.
Because the other side had done nothing publicly on robotics, it had
been tempting to sit back smugly and be comfortable in the
assurance of superiority. Why hadn't it seemed possible, even likely,
that They were hiding superior cards, a trump hand, for the proper
time?
Laszlo said, shakenly, "What do we do?" It was obvious that the same
line of thought had carried the same conviction to him.
"Do?" parroted Lynn. It was hard to think right now of anything but of
the complete horror that came with conviction. There were ten
humanoid robots somewhere in the United States, each one carrying
a fragment of a TC bomb.
TC! The race for sheer horror in bomb-ery had ended there. TC! Total
Conversion! The sun was no longer a synonym one could use. Total
conversion made the sun a penny candle.
Ten humanoids, each completely harmless in separation, could, by
the simple act of coming together, exceed critical mass and—
Lynn rose to his feet heavily, the dark pouches under his eyes, which
ordinarily lent his ugly face a look of savage foreboding, more
prominent than ever. "It's going to be up to us to figure out ways and
means of telling a humanoid from a human and then finding the
humanoids."
"How quickly?" muttered Laszlo.
"Not later than five minutes before they get together," barked Lynn,
"and I don't know when that will be."
Breckenridge nodded. "I'm glad you're with us now, sir. I'm to bring
you back to Washington for conference, you know."
Lynn raised his eyebrows. "All right."
He wondered if, had he delayed longer in being convinced, he might
not have been replaced forthwith—if some other Chief of the Bureau
of Robotics might not be conferring in Washington. He suddenly
wished earnestly that exactly that had come to pass.
The First Presidential Assistant was there, the Secretary of Science,

the Secretary of Security, Lynn himself, and Breckenridge. Five of
them sitting about a table in the dungeons of an underground fortress
near Washington.
Presidential Assistant Jeffreys was an impressive man, handsome in
a white-haired and just-a-trifle-jowly fashion, solid, thoughtful and as
unobtrusive, politically, as a Presidential Assistant ought to be.
He spoke incisively. "There are three questions that face us as I see
it. First, when are the humanoids going to get together? Second,
where are they going to get together? Third, how do we stop them
before they get together?"
Secretary of Science Amberley nodded convulsively at that. He had
been Dean of Northwestern Engineering before his appointment. He
was thin, sharp-featured and noticeably edgy. His forefinger traced
slow circles on the table.
"As far as when they'll get together," he said. "I suppose it's definite
that it won't be for some time."
"Why do you say that?" asked Lynn, sharply.
"They've been in the U. S. at least a month already. So Security
says."
Lynn turned automatically to look at Breckenridge, and Secretary of
Security Macalaster intercepted the glance. Macalaster said, "The
information is reliable. Don't let Breckenridge's apparent youth fool
you, Dr. Lynn. That's part of his value to us. Actually, he's 34 and has
been with the department for ten years. He has been in Moscow for
nearly a year and without him, none of this terrible danger would be
known to us. As it is, we have most of the details."
"Not the crucial ones," said Lynn.
Macalaster of Security smiled frostily. His heavy chin and close-set
eyes were well-known to the public but almost nothing else about him
was. He said, "We are all finitely human, Dr. Lynn. Agent
Breckenridge has done a great deal."
Presidential Assistant Jeffreys cut in. "Let us say we have a certain
amount of time. If action at the instant were necessary, it would have
happened before this. It seems likely that they are waiting for a
specific time. If we knew the place, perhaps the time would become
self-evident.
"If they are going to TC a target, they will want to cripple us as much
as possible, so it would seem that a major city would have to be it. In
any case, a major metropolis is the only target worth a TC bomb. I
think there are four possibilities: Washington, as the administrative
center; New York, as the financial center; and Detroit and Pittsburgh
as the two chief industrial centers."
Macalaster of Security said, "I vote for New York. Administration and
industry have both been decentralized to the point where the
destruction of any one particular city won't prevent instant retaliation."
"Then why New York?" asked Amberly of Science, perhaps more
sharply than he intended. "Finance has been decentralized as well."
"A question of morale. It may be they intend to destroy our will to
resist, to induce surrender by the sheer horror of the first blow. The
greatest destruction of human life would be in the New York
Metropolitan area—"
"Pretty cold-blooded," muttered Lynn.
"I know," said Macalaster of Security, "but they're capable of it, if they
thought it would mean final victory at a stroke. Wouldn't we—"
Presidential Assistant Jeffreys brushed back his white hair. "Let's
assume the worst. Let's assume that New York will be destroyed
some time during the winter, preferably immediately after a serious
blizzard when communications are at their worst and the disruption of
utilities and food supplies in fringe areas will be most serious in their
effect. Now, how do we stop them?"
Amberley of Science could only say, "Finding ten men in two hundred
and twenty million is an awfully small needle in an awfully large
haystack."
Jeffreys shook his head. "You have it wrong. Ten humanoids among
two hundred twenty million humans."
"No difference," said Amberley of Science. "We don't know that a
humanoid can be differentiated from a human at sight. Probably not."
He looked at Lynn. They all did.
Lynn said heavily, "We in Cheyenne couldn't make one that would
pass as human in the daylight."
"But They can," said Macalaster of Security, "and not only physically.
We're sure of that. They've advanced mentalic procedures to the
point where they can reel off the micro-electronic pattern of the brain
and focus it on the positronic pathways of the robot."
Lynn stared. "Are you implying that they can create the replica of a
human being complete with personality and memory?"
"I do."
"Of specific human beings?"
"That's right."
"Is this also based on Agent Breckenridge's findings?"
"Yes. The evidence can't be disputed."
Lynn bent his head in thought for a moment. Then he said, "Then ten
men in the United States are not men but humanoids. But the
originals would have had to be available to them. They couldn't be
Orientals, who would be too easy to spot, so they would have to be
East Europeans. How would they be introduced into this country,
then? With the radar network over the entire world border as tight as
a drum, how could They introduce any individual, human or
humanoid, without our knowing it?"
Macalaster of Security said, "It can be done. There are certain
legitimate seepages across the border. Businessmen, pilots, even
tourists. They're watched, of course, on both sides. Still ten of them
might have been kidnapped and used as models for humanoids. The
humanoids would then be sent back in their place. Since we wouldn't
expect such a substitution, it would pass us by. If they were
Americans to begin with, there would be no difficulty in their getting
into this country. It's as simple as that."
"And even their friends and family could not tell the difference?"
"We must assume so. Believe me, we've been waiting for any report
that might imply sudden attacks of amnesia or troublesome changes
in personality. We've checked on thousands."
Amberley of Science stared at his finger-tips. "I think ordinary
measures won't work. The attack must come from the Bureau of
Robotics and I depend on the chief of that bureau."
Again eyes turned sharply, expectantly, on Lynn.
Lynn felt bitterness rise. It seemed to him that this was what the
conference came to and was intended for. Nothing that had been said
had not been said before. He was sure of that. There was no solution
to the problem, no pregnant suggestion. It was a device for the
record, a device on the part of men who gravely feared defeat and
who wished the responsibility for it placed clearly and unequivocally
on someone else.
And yet there was justice in it. It was in robotics that We had fallen
short. And Lynn was not Lynn merely. He was Lynn of Robotics and
the responsibility had to be his.
He said, "I will do what I can."
He spent a wakeful night and there was a haggardness about both

body and soul when he sought and attained another interview with
Presidential Assistant Jeffreys the next morning. Breckenridge was
there, and though Lynn would have preferred a private conference,
he could see the justice in the situation. It was obvious that
Breckenridge had attained enormous influence with the government
as a result of his successful Intelligence work. Well, why not?
Lynn said, "Sir, I am considering the possibility that we are hopping
uselessly to enemy piping."
"In what way?"
"I'm sure that however impatient the public may grow at times, and
however legislators sometimes find it expedient to talk, the
government at least recognizes the world stalemate to be beneficial.
They must recognize it also. Ten humanoids with one TC bomb is a
trivial way of breaking the stalemate."
"The destruction of fifteen million human beings is scarcely trivial."
"It is from the world power standpoint. It would not so demoralize us
as to make us surrender or so cripple us as to convince us we could
not win. There would just be the same old planetary death-war that
both sides have avoided so long and so successfully. And all They
would have accomplished is to force us to fight minus one city. It's not
enough."
"What do you suggest?" said Jeffreys, coldly. "That They do not have
ten humanoids in our country? That there is not a TC bomb waiting to
get together?"
"I'll agree that those things are here, but perhaps for some reason
greater than just mid-winter bomb-madness."
"Such as?"
"It may be that the physical destruction resulting from the humanoids
getting together is not the worst thing that can happen to us. What
about the moral and intellectual destruction that comes of their being
here at all? With all due respect to Agent Breckenridge, what if They
intended for us to find out about the humanoids; what if the
humanoids are never supposed to get together, but merely to remain
separate in order to give us something to worry about."
"Why?"
"Tell me this. What measures have already been taken against the
humanoids? I suppose that Security is going through the files of all
citizens who have ever been across the border or close enough to it
to make kidnapping possible. I know, since Macalaster mentioned it
yesterday, that they are following up suspicious psychiatric cases.
What else?"
Jeffreys said, "Small X-ray devices are being installed in key places in
the large cities. In the mass arenas, for instance—"
"Where ten humanoids might slip in among a hundred thousand
spectators of a football game or an air-polo match?"
"Exactly."
"And concert halls and churches?"
"We must start somewhere. We can't do it all at once."
"Particularly when panic must be avoided?" said Lynn. "Isn't that so?
It wouldn't do to have the public realize that at any unpredictable
moment, some unpredictable city and its human contents would
suddenly cease to exist."
"I suppose that's obvious. What are you driving at?"
Lynn said strenuously, "That a growing fraction of our national effort
will be diverted entirely into the nasty problem of what Amberley
called finding a very small needle in a very large haystack. We'll be
chasing our tails madly, while They increase their research lead to the
point where we find we can no longer catch up; when we must
surrender without the chance even of snapping our fingers in
retaliation.
"Consider further that this news will leak out as more and more
people become involved in our counter-measures and more and
more people begin to guess what we're doing. Then what? The panic
might do us more harm than any one TC bomb."
The Presidential Assistant said, irritably, "In Heaven's name, man,
what do you suggest we do, then?"
"Nothing," said Lynn. "Call their bluff. Live as we have lived and
gamble that They won't dare break the stalemate for the sake of a
one-bomb headstart."
"Impossible!" said Jeffreys. "Completely impossible. The welfare of all
of Us is very largely in my hands, and doing nothing is the one thing I

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The First Presidential Assistant was there, the Secretary of Science,

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