Business Law SECOND EDITION John E Adamson Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States 21st Century Business Business Law, 2nd Edition John E Adamson Editorial Director: Jack W Calhoun Vice President/Editor-in-Chief: Karen Schmohe Executive Editor: Eve Lewis Senior Developmental Editor: Penny Shank © 2011, 2002 South-Western, Cengage Learning ALL RIGHTS RESERVED No part of this work covered by the copyright herein may be reproduced, transmitted, stored or used in any form or by any means graphic, electronic, or mechanical, including but not limited to photocopying, recording, scanning, digitizing, taping, Web distribution, information networks, or information storage and retrieval systems, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without the prior written permission of the publisher Editorial Assistant: Anne Kelly Marketing Manager: Diane Morgan Technology Project Manager: Lysa Kosins Content Project Management: Pre-Press PMG Senior Manufacturing Buyer: Kevin Kluck For product information and technology assistance, contact us at Cengage Learning Customer & Sales Support, 1-800-354-9706 For permission to use material from this text or product, submit all requests online at www.cengage.com/permissions Further permissions questions can be emailed to permissionrequest@cengage.com Production Service: Pre-Press PMG Senior Art Director: Tippy McIntosh Internal Design: Pre-Press PMG Cover Designer: Lou Ann Thesing Cover Image: Getty Images, iStock ExamView® is a registered trademark of eInstruction Corp Windows is a registered trademark of the Microsoft Corporation used herein under license Macintosh and Power Macintosh are registered trademarks of Apple Computer, Inc used herein under license Permission Acquisitions Manager/Text: Mardell Glinkski-Schultz © 2008 Cengage Learning All Rights Reserved Permission Acquisitions Manager/Photo: Deanna Ettinger Student Edition ISBN 13: 978-0-538-74061-6 Library of Congress Control Number: 2009943304 Student Edition ISBN 10: 0-538-74061-2 Annotated Instructor’s Edition ISBN 13: 978-0-538-74065-4 Annotated Instructor’s Edition ISBN 10: 0-538-74065-5 South-Western Cengage Learning 5191 Natorp Boulevard Mason, OH 45040 USA Cengage Learning products are represented in Canada by Nelson Education, Ltd For your course and learning solutions, visit school.cengage.com Printed in the United States of America 13 12 11 10 HOW TO USE THIS BOOK The 21st Century Business Series is an innovative instructional program providing instructors with the greatest flexibility to deliver business content using a modular format Instructors can create their own business courses by combining several Learner Guides in the Series to form one-semester or two-semester courses The individual Learner Guides can also be used as enhancements to more traditional business courses or to tailor new courses to meet emerging needs The design and content of each Learner Guide in the 21st Century Business Series is engaging yet easy for students to use The content focuses on providing opportunities for applying 21st Century business skills while enabling innovative learning methods that integrate the use of supportive technology and creative problem-solving approaches in today’s business world The Business Law Learner Guide covers today’s most relevant business topics, including disposition of property after death or divorce Short case studies followed by critical thinking questions are included in each chapter allowing students to demonstrate their grasp each chapter’s topic de demo mons nstr trat atee th thei eirr gr gras asp p on eeac ach h ch chap apte ter’ r s to topi pic c ORGANIZED FOR SUCCESS Each chapter opens with a Project that incorporates information from each lesson within the chapter These Projects pull all of the information from the chapter together so students get a hands-on experience applying what they learned, making for a great group activity PROJECT The Influence of Property in Your Life Project Objectives • Develop a sense of what property is • Appreciate the importance of property in your life Getting Started Project Process Jump Start provides a scenario that introduces and entices the student about the lesson ahead Photodisc/Getty Images Read the Project Process below Decide how you will get the needed materials or information 3.1 Consider various types of property that you or your family owns How was this property acquired? Which family member actually owns it? Why does this family member have such a right? What would happen to the property upon the death or divorce of your parents? What role could property or life insurance play in protecting your family? 3.2 List the real property you and your family own What changes would occur in your life if this property were no longer yours? 3.3 List the bailments that you and your family use Which are dependent on financial resources and which are not? What are the sources for the gratuitous bailments you enjoy? Could you replace the bailments if they were not available? tion gal g in Net Bookmark gives chapter-related activities for students to complete using information found on the Internet JUMP STAR T Winston Blin tzki became a limited par to build and tner in a par run a new wat tnership org er park nea Carolina He anized r the beach invested $50 in Nags Hea 0,000 in it people were d, Nor th Soon after severely inju the park ope red when a separated from ned, four sec tion of the “mi the rest of the slide As le-high” slid into thin air e and fell 35 a consequen feet into a hal ce, the victims each awarde f foot of wat d damages slid er The victims of more tha far greater n $5 million than the valu The total am were e of the par coverage Can ount was tnership’s ass Blintzki be ets held liable par tnership? for unpaid liab and insurance Why or why ility claims not? against the under licen se from Shutterstock com hange y a Project Wrap-up Create a chart of your real, personal, intellectual, and bailed property Write a one-page report explaining which piece or type of property you own is most valuable to you and why 63 2009/Used mise, om Chapter Review ©Nikolay Okhi tin, e e on 3.4 Consider the various types of intellectual property Do you or your family have any property that is unprotected, such as songs, prose, poetry, inventions, or trademarks? How would you go about protecting this property? rd for the most riguez set a reco tenll player Alex Rod ed a $275 million, In 2007, baseba ory when he sign www.cengage contract in hist s Access kee lucrative sports Yan York d with the New for Chapter Rea link the on year agreement click wer: iness/21biz and g deal, then ans com/school/bus his record-settin the and is ez at rigu Wh t? Rod trac the story about s under this gors and obligee What is the consideration the Who are the obli ive? riguez is to rece consideration Rod ive? rece Yankees are to iness/21biz com/school/bus www.cengage Comstock Images/Jupiter Images s Partnershi p Basics REAL-WORLD FOCUS Cross-Cultural Rel ationships S OVERSEA U.S BUSINESSES ideas that have by taking business y has been made them elsewhere in A great deal of mone starting a copy of United States and pt, a multitude of succeeded in the AX Realty conce RE/M the e ries; Ben & ples includ the world Exam tes in over 119 count (McDonald’s opera Mart has 28 fast-food franchises ox retailers (Wal27 countries), big-b Jerry’s operates in more many and alone), supercenters in China to succeed think are most likely n businesses you to overthe businesses have What types of foreig ? What barriers would in the United States ssful? come to be succe Think Critically the sarily mean that des a ership does not neces hip agreement provi a partn Th di olution of Tech Literacy highlights how evolving technology plays a huge role in how business is conducted Cross-Cultural Relationships highlights the importance of understanding and respecting everyone’s point of view and thinking about the perspectives of others Tech Literacy CYBERCONTRACTING By a federal law passed in the year 2000, electronic signatures and contracting—such as those given or entered into over the Internet—were made as binding as though on paper Given the level of criminal activity by hackers and identity thieves on the Internet, the safety of such electronic commitments has been called into question THINK CRITICALLY Research the safeguards that are available to protect the consumer in electronic transactions Would you be willing to enter into a cybercontract? Why or why not? TEAMWORK In small groups, brainstorm a list of pros and cons of starting a business as a sole proprietorship Identify types of businesses that could be organized effectively as sole proprietorships and those that should not be organized using this form iv Teamwork provides an activity that requires the students to work together as a team HOW TO USE THIS BOOK In each chapter, you will find a Use Your Judgm ent Anton Mllesevec had worked for 16 years as a machinist of origin After migra in his country ting to the United States and working dishwasher in a Miam as a i restaurant for three at a local machine years, he applied for a job shop As he and his American born neph walked in the door ew, Hariste, of the shop, he notic ed a sign that read Only.” Even after “English three years of living in America, Anto to speak English n’s ability was poor, so he had brought his neph translate for him ew along to With his nephew’s help, he filled out application The the employment shop’s manager then asked Anton to take test given to all appli the standard cants to determine his ability to perfo machinist The mana rm as a ger motioned to the other 16 applicants said that they had passed the test Anto and n was then given large gear to be prod a plan for a uced on the shop ’s equipment The including the mate specifications, rial to be used and the dimensions of written in English the gear, were but not in numbers When Anton asked Hariste translate, to have the shop’s owner said “no” because be with Anton on Hariste would not the job Anton had made many simil did not pass the test ar gears, but he as a result of being unable to read the plan THINK CRITICAL LY If you were Anto n’s lawyer in an EEO C discrimination part of Title VII woul heari ng, which d you allege the mach requirement of Engli ine shop violated by its sh only? What woul d be the shop’s defen se(s)? Use Your Judgment feature followed by Think Critically These features give students an example Individuals Prohibi ted from Working and questions that apply to thee material within the chapter and allow students to either answer the questions on their own or participate in a group discussion While some l HANDS-ON LEARNING Chapter Summa ry may legally nship whereby one created s establish a relatio A When two partie an agency has been words or actions, reimburse the bind the other by to compensate and ct The agent principal include the agency contra B Duties of the and e in good faith to adher funds y to and agenc agent to keep obedient and loyal, has a duty to be nable care and skill and to use reaso property separate, Agency 4.1 as compensation, cts cover such things notification A Employment contra on of employment, and advance fringe benefits, durati event of termination be the employee, to requirements in the are to compensate e a proper duties provid yer’s to and emplo job, B An ning the employee’s are to produce a satisfactory reasonable in defi duties be t An employee’s and regulations, rules work environmen lawful the employer’s on the job work product, obey nable care and skill yer, and utilize reaso loyal to the emplo Employer-Employee Relations 4.2 4.3 Each chapter ends with a comprehensive yet concise Assessment The Chapter Summary provides a quick review of each lesson covered in the chapter ASSESSMENT CHAPTER relationship, ne in the employment often seeks to interve yee A The government employer and emplo e the power of the major typically to balanc ining that leads to oversees the barga ry B The government and cts around the count employment contra r working conditions seeks to insure prope the job C The government who are injured on government treatment of those Security Act, the ion of the Social eligible D Under the provis to those who are ance assist l provides supplementa lations Employment Regu lder Vocabulary Bui er in letter of the answ nition Write the that best fits the defi Choose the term not be used Some terms may race, color, sex, the space provided g on the basis of argin disch or , Hiring, promoting nal origin er party by religion, or natio can legally bind anoth in which one party A relationship words or actions performance ly related to work direct not ent paym Forms of y authorization yees in a A written agenc on behalf of the emplo tive that bargains The representa session collective bargaining notice by either party be ended without can that act contr in order to Employment ular person or firm business with a partic A refusal to obtain concessions have lost their jobs ed workers who qualifi to paid y Mone The Apply What You Learned section contains open-ended questions that students complete so that they can apply what they learned with their own ideas and thoughts Vocabulary Builder is a quick way for students to match up definitions with the key terms that were highlighted throughout the chapter a agency b boycott ining c collective barga in d discrimination employment e employment f fringe benefits g labor union ey h power of attorn i terminable at will j unemployment compensation ices k unfair labor pract 18 List at least four unfair labo r practices OYMENT LAW Chapter • EMPL 116 AM 12/15/09 8:35:40 age.com/ www.cengusiness/21biz school/b roles pts ibe their Conce d descr ency an Review in an ag parties Name the two y? orne rs of att we t ar 10 Wha es of po ferent typ e the dif plain 11 Ex the differ een an tw ence be een an e plain th 12 Ex ce betw differen does t duties 13 Wha 14 ployee d an em agent an ties does What du e to his yer ow an emplo does t duties 15 Wha t owe to an agen s does t dutie 16 Wha m? otts remain illeg al? Why or why allowable in som e not? 23 Why is it important to the consumer discrimination to be sure that are prohibited? all forms of job e? employe or her 24 Why are work ers’ com pensation laws 25 Why are unem ploy ment benefits incipal? the pr supported by businesses? not paid to strik ing workers? Make Academic Connections e to his yee ow an emplo a labor Medicare syste 22 Should an employer who takes reasonabl notified of sexu e but ineffectiv al harassment e action upon by coworkers being be held liable? ractor 26 Environment Are government agents really agents? Find out what sort of latitude the Environmental Protection Agency gives its employees to settle disputes, cite offenders, and prosecute cases Present your findings in class r? employe ? onships es t role 17 Wha available unde r the You Learned 21 Should seco ndary boyc agent? e to the ipal ow the princ Apply What basic programs 20 Why are nonc ompete clauses in employment cases? contracts nt cont epende d an ind agent an 19 Describe the two Review Concepts can be used as a quiz to ensure students grasp all of the key concepts presented in the chapter ployer-e y in em union pla relati mployee 27 Problem Solving An employee for a woodworking business gains 375 pounds He then petitions the government under the ADA to require his employer to install an elevator to allow him access to his workstation Do you think being obese should be considered a disability? Should the elevator be provided even if the extra cost will hurt the competitiveness the7products? Would your answers be the same if an employee who has ntt of 11 en me sm ss es se ss As A smoked all his life has a lung removed and needs the elevator? 118 Chapter • EMP EM MPLOYM LOYME ENT 40612_04_CH0 4_092-119.indd 118 28 Marketing Watch at least 10 television commercials Keep a record on a spreadsheet of how many people with disabilities you see in the commercials Does8:35this fairly reflect the number of disabled people in the general :53 AM 12/15/09 population? Is this a form of discrimination? What federal statute(s) might provide a remedy? Make Academic Connections provides instructors with questions and problems that students need to solve that refer to other areas of study such as Economics, Math, Social Studies, Research, etc This enables students to see how all areas of academics work together in the business world and apply that knowledge LAW 29 Business Law Contact a representative of the Mexican government dealing with plant relocation Find out what kind of laws relating to disability, discrimination, and harassment the government applies to its industries Write a two-page report summarizing your conclusions Ethical Dilemma 30 You are a chemist working in a private laboratory that is under government contract to analyze water samples from around the state Water samples you analyzed last week at the largest recreational lake in the state show abnormally high levels of E coli Several of the samples are 20 to 30 times the allowable EPA limit The results of your tests are sent to the state’s Department of Health Almost a month later, no action has been taken to warn the public You know that tourist revenue is crucial to the lake’s businesses Making the report public could result in vacation cancellations and layoffs of hundreds of employees Should you blow the whistle on the cover-up and risk joining the ranks of those consequently losing their jobs? Why or why not? Assessment 119 The Ethical Dilemma section of the Chapter Assessment presents a situation where students must use their critical thinking skills to answer how they would handle the situation being presented This is an excellent chance for students to have open discussion about what they learned and how it applies to the situation at hand HOW TO USE THIS BOOK v ABOUT THE AUTHOR John E Adamson is Emeritus Professor of Business and Law in the Department of Finance and General Business at Missouri State University Adamson received a B.S from the U.S Military Academy at West Point, New York; an M.A in International Relations from Georgetown University; and an M.B.A and J.D from the University of Virginia at Charlottesville A decorated, disabled veteran and past four-term mayor and school board member of his hometown, Adamson is author of numerous business law texts, with a concentration on environmental law Reviewers vi Judith Kay Binns Business Instructor Bryant Public Schools Bryant, Arkansas Vicki Noss Business Teacher Beloit Memorial High School Beloit, Wisconsin Dawna Carter Business Education Teacher Puxico R-8 School Puxico, Missouri Kathy O’Neal Business and Computer Science Teacher Toombs County High School Lyons, Georgia Nancy M Everson Business Education Chair Sun Prairie High School Sun Prairie, Wisconsin Janice B Shelton Business Teacher Mills E Godwin High School Henrico, Virginia Catherine McDonald Business Senior Teacher Ridgefield High School Ridgefield, Connecticut Lynn M Taillon Business Teacher Cheshire High School Cheshire, Connecticut ABOUT THE AUTHOR CONTENTS CHAPTER Law and Justice CHAPTER Law of Contracts 30 CAREERS IN BUSINESS LAW U.S Department of Justice CAREERS IN BUSINESS LAW Cisco Systems Inc 30 PROJECT Visit Trials in Progress PROJECT Contracts In Your Life 31 1.1 Law, Justice, and Ethics 2.1 Contract Law Basics 32 1.2 Types of U.S Law 10 2.2 Offer and Acceptance 38 1.3 Federal and State Legal Systems 18 2.3 Capacity to Contract 45 2.4 Legality of Contracts 51 ASSESSMENT AND REVIEW Checkpoint Think Critically Make Academic Connections Chapter Assessment 6, 8, 14, 16, 21, 24 9, 17, 25 9, 17, 25, 29 26–29 Communicate Did You Know? Tech Literacy Teamwork Cross-Cultural Relationships Net Bookmark Use Your Judgment Checkpoint 33, 36, 40, 42, 43, 47, 49, 55, 56 Think Critically Make Academic Connections Chapter Assessment SPECIAL FEATURES Jump Start ASSESSMENT AND REVIEW 4, 10, 18 13, 22 21 7, 15, 20, 24 11 16 37, 44, 50, 57 37, 44, 50, 57, 61 58–61 SPECIAL FEATURES Jump Start 32, 38, 45, 51 Communicate Did You Know? 39 47, 52 Tech Literacy Teamwork 35 33, 40, 46, 56 Cross-Cultural Relationships 49 Net Bookmark 43 Use Your Judgment 55 CONTENTS vii CHAPTER The Law of Property 62 CAREERS IN BUSINESS LAW Blizzard Entertainment PROJECT The Influence of Property in Your Life CHAPTER Employment Law 92 62 63 CAREERS IN BUSINESS LAW RE/MAX Realty 92 PROJECT Employment Questionnaire 93 4.1 Agency 94 3.1 Introduction to Property 64 4.2 Employer-Employee Relations 100 3.2 Real Property 72 4.3 Employment Regulations 106 3.3 Bailments 77 3.4 Intellectual Property 83 ASSESSMENT AND REVIEW Checkpoint ASSESSMENT AND REVIEW Checkpoint 65, 70, 74, 75, 79, 81, 86 Think Critically Make Academic Connections Chapter Assessment 71, 76, 82, 87 71, 76, 82, 87, 91 88–91 SPECIAL FEATURES Jump Start Communicate Did You Know? Tech Literacy Teamwork Think Critically Make Academic Connections Chapter Assessment 81 73, 80 85 65, 75, 79, 84 116–119 94, 100, 106 103 Did You Know? 108 Tech Literacy 104 Teamwork Cross-Cultural Relationships 69 Net Bookmark Net Bookmark 79 Use Your Judgment Use Your Judgment 86 CONTENTS 99, 105, 115, 119 Communicate Cross-Cultural Relationships viii 99, 105, 115 SPECIAL FEATURES Jump Start 64, 72, 77, 83 96, 97, 98, 101, 104, 109, 111, 113, 114 97, 101, 109 112 96 109 CHAPTER Business Organizations 120 CHAPTER Law and Finance 150 CAREERS IN BUSINESS LAW Solar Turbines Incorporated 120 CAREERS IN BUSINESS LAW JPMorgan Chase 150 PROJECT Forms of Business Organization 121 PROJECT Law and Finance 151 5.1 Sole Proprietorships 122 6.1 Commercial Paper 152 5.2 Partnerships 126 6.2 Secured Transactions 160 5.3 Corporations 134 6.3 Debtor–Creditor Rights 165 ASSESSMENT AND REVIEW ASSESSMENT AND REVIEW Checkpoint Checkpoint 123, 124, 128, 132, 138, 142, 144 Think Critically 125, 133, 145 157, 158, 163, 167, 170 Think Critically 159, 164, 171 Make Academic Connections 125, 133, 145, 149 Make Academic Connections 159, 164, 171, 175 Chapter Assessment Chapter Assessment 146–149 SPECIAL FEATURES Jump Start 172–175 SPECIAL FEATURES 122, 126, 134 Jump Start 152, 160, 165 Communicate 128 Communicate 157 Did You Know? 135 Did You Know? 161 Tech Literacy 136 Tech Literacy 162 Teamwork 123, 130, 136 Teamwork 155, 162, 169 Cross-Cultural Relationships 131 Cross-Cultural Relationships 169 Net Bookmark 124 Net Bookmark 158 Use Your Judgment 137 Use Your Judgment 170 GLOSSARY 176 INDEX 178 CONTENTS Use Your Judgment The Richmonds were almost $20,000 in debt Nearly 90 percent of it was owed to credit card companies The trustee in the Richmond’s filing for Chapter liquidation pointed out to the court that the Richmond’s listing of their monthly expenses included voluntary payments to support their grandchildren If these payments were stopped and applied to their debts, nearly all of the Richmond’s credit card debt could be paid off in 36 months As a consequence, the trustee filed a motion to dismiss the Richmond’s case as an abuse of the bankruptcy laws THINK CRITICALLY How you think the bankruptcy court judge should rule? Given the trustee’s analysis, under what other bankruptcy law should the Richmonds have filed? used to pay the creditors If a secured creditor’s sale of the property exceeds the value of the security interest, the remainder is paid into the liquidation fund If the sale does not cover the amount owed, the secured party can file against the other liquidation proceeds as a general creditor The following is the order of priority for payout of the liquidation funds to claimants of general interest Unsecured claims for domestic support orders Administrative expenses, such as court costs and trustee’s and attorney’s fees Unpaid wages, salaries, and commissions up to a maximum of $10,950 per creditor Contributions to employee benefit plans up to $10,950 per employee Claims, up to $2,425 per claim, for unsecured deposits with the debtor for purchase or lease of property or for contracted services not provided Unsecured claims of governmental units for taxes and penalties Claims of all general unsecured creditors and those with residual unsatisfied claims from categories with higher priorities If any amount is left after all the above claimants have been satisfied, it is turned over to the debtor All eligible debts of the debtor are considered discharged The debtor cannot file a bankruptcy petition again until six years have elapsed Bankruptcy stays on a credit report for 10 years CheckPOINT Give five examples of exempt property under federal bankruptcy law 170 Chapter • LAW AND FINANCE 6.3 ASSESSMENT Think Critically Why is it necessary for the debtor’s property to be in the possession of the creditor/artisan for the artisan’s lien to be effective? What must the artisan if she or he gives up possession and is not paid? Do the laws governing debtor–creditor protections seem consistent? Why or why not? Dollar amounts in the bankruptcy statutes are subject to adjustment every three years based on the consumer price index Do you agree with Congress’s decision for such adjustment? Why or why not? Make Academic Connections Research Find out how many individuals file bankruptcy every month in your federal jurisdiction Interview local lenders and ask them what provision they make for uncollectible debts Report your findings to the class Government Search the Internet for information on the Consumer Credit Protection Act Find out when this law was enacted and what, besides Truth in Lending, the Act regulates Outline the important components of this Act Agriculture The Chapter 12 plan for bankruptcy covers “family farm owners” but excludes companies that run large agricultural operations Why you think Congress passed this plan? Do you think it was fair to exclude the farmers who own large agricultural enterprises? Why or why not? Use word processing software to write a paragraph explaining your answer 6.3 Debtor–Creditor Rights 171 CHAPTER ASSESSMENT Chapter Summary 6.1 Commercial Paper A Drafts, checks, promissory notes, and certificates of deposit are types of commercial paper in common use B Electronic funds transfers are initiated by use of an electronic terminal, computer, telephone, or magnetic tape They involve a financial institution debiting or crediting a user’s account 6.2 Secured Transactions A Secured transactions cut down greatly on the risk of issuing credit and, therefore, make credit cheaper for borrowers in the long run B A proper secured transaction must involve creating a security interest in the property of the debtor 6.3 Debtor–Creditor Rights A Laws protecting creditors allow involuntary liens, third-party suretyships and guaranty relationships, and garnishment of wages Laws protecting debtors set maximum interest rates, require full disclosure of terms, change or void unconscionable contracts, correct abuses, require notice of debt payoff, and allow overburdened debtors to declare bankruptcy B During bankruptcy procedure, a petition is filed, a trustee is selected, nonexempt assets are sold, the proceeds are used to pay creditors, and the court discharges the remaining debt Vocabulary Builder Choose the term that best fits the definition Write the letter of the answer in the space provided Some terms may not be used b cashier’s check State laws regulating business activities c certified check An unconditional written order by one person that directs another person to pay money to a third d collateral A check that a bank draws on itself A person with good credit who acts as a cosigner An unconditional written promise to pay money to another according to the terms of the instrument A third party agrees to be primarily liable for another’s debts Property that is subject to the security interest of the creditor A legal device that creates a security interest in personal property or fixtures An acknowledgment of full payment of a debt to the governmental office that has the related financing statement 10 An unconditional written promise or order to pay a sum of money 172 a accommodation party Chapter • LAW AND FINANCE e commercial paper f draft g garnishment h promissory note i secured transaction j suretyship k termination statement l Uniform Commercial Code (UCC) Review Concepts 11 Name six different types of commercial paper www.cengage.com/ school/business/21biz 12 How does a person become a holder in due course? 13 Name the requirements for negotiability 14 Explain the difference between a blank and a special indorsement 15 What are the requirements for a security agreement? 16 What are the categories of tangible goods used for collateral? 17 List three examples of intangible goods that can be used as collateral 18 Name three types of involuntary liens and describe how each handles unpaid debts 19 List five types of debts that cannot be discharged in bankruptcy Assessment 173 Apply What You Learned 20 A mere holder, who cannot qualify as an HDC, cannot acquire that status by transferring the paper to an HDC and reacquiring it from that party Why does the UCC not allow a person to improve his or her position as a holder in this way? 21 What is the purpose of giving notice of a security interest’s existence? 22 Can you think of any tangible or intangible goods that cannot be used as collateral? 23 Should we allow human organs, blood, or other bodily fluids to be collateral? Why or why not? 24 For what type of transactions are credit or debit cards more suitable than currency? Why? 25 Could knowledge be considered collateral? If not, why not? If so, under what circumstances? 174 Chapter • LAW AND FINANCE Make Academic Connections 26 Environment Under what circumstances would water be considered collateral? How about the air and/or sunshine? Is this a good or a bad idea? Write a paragraph explaining your views on this issue 27 Entertainment Law Bondholders often hold the key in potential bankruptcy reorganizations and liquidations, and such seems to be the case with MGM studios, which is currently saddled with over $3 billion in debt The famous 80-plus-year-old movie production house recently issued a plea to its bondholders for $20 million in short-term loans to cover overhead and for $150 million to complete or initiate several projects Bondholders are reportedly reluctant and would rather see the studio go through a Chapter 11 reorganization However, expert opinion says that MGM could lose its rights to the James Bond 007 film series in such a restructuring Further, it would delay the filming of The Hobbit, a potential blockbuster If you were an MGM bondholder, what factors would you consider in reaching a decision on this matter? Would you extend the necessary funds or recommend Chapter 11? Explain your answer 28 Marketing Go to your library and read newspapers from various parts of the country Compare the level of sophistication and subject matter in the financial ads Research the various ways the financial centers communicate with one another Describe your observations in a short report Ethical Dilemma 29 MGM’s motto from its founding has always been Ars Gratia Artis, which translates as “Art for Art’s Sake.” The motto circles the famed roaring lion shown at the beginning of its films and has been reflected over the years in the lavish wardrobes, expensive sets, and leading stars featured in its films American culture looks back to MGM productions such as Gone with the Wind and The Wizard of Oz with nostalgia If you were one of the bondholders referred to in Question 27, would you feel a moral obligation to preserve a studio with such a heritage, especially in a time when many traditional American businesses are disappearing? Why or why not? Assessment 175 GLOSSARY A Acceptance agreement by an offeree to the terms of the offer (p 42) Accommodation party cosigner of a loan who has a good credit rating (p 156) Copyright protects the expression of a creative work such as the work of an author, artist, or composer (p 83) Corporation a legal entity or artificial person created through the authority of federal or state law (p 134) Court of record an exact account of what went on at trial (p 22) Agency relationship in which one party may legally bind the other by words or actions (p 94) Criminal law governs offenses that violate citizens’ right to live in peace (p 15) B D Bailment the temporary transfer of possession and control of personal property subject to an agreement that typically calls for the subject property to be returned to the person creating the bailment at a later time or passed on to a specified third party (p 77) Deed document by which rights and interests in real property are transferred (p 73) Boycott a refusal to business with a particular person or firm in order to obtain concessions (p 110) Draft an unconditional written order by one person that directs another person to pay money to a third (p 153) Business judgment rule neither shareholders, directors, nor other officers can be held personally liable to parties outside the corporation for honest errors of judgment made in exercising their corporate powers (p 140) Business law the specific group of laws that regulates the establishment, operation, and termination of commercial enterprises (p 4) C Case law law created by judicial branch of government (p 14) Cashier’s check a check that a bank draws on itself (p 154) Certified check a personal check that has been accepted by a bank before payment (p 154) Civil law the group of laws within the common law that deal with wrongs against individual persons (p 15) Collateral the property that is subject to the security interest of the creditor (p 160) Collective bargaining negotiations over conditions and terms of employment between representatives of a work force and its employer (p 110) Commercial paper an unconditional written promise or order to pay a sum of money (p 153) Discrimination in employment hiring, promoting, or discharging on the basis of race, color, sex, religion, or national origin (p 107) E Employment a relationship in which the employer pays the employee to work under the control and direction of the employer (p 100) Estate bundle of rights (p 73) Ethical system a way of deciding what is right or wrong in a consistent, reasoned, impartial manner (p 7) Express contract contract with terms set down in a clear-cut fashion, either orally or in writing (p 33) F Fiduciary duty in a partnership, a partner acting in good faith and putting the partnership interest above her or his own (p 130) Fraud reckless or intentional misrepresentation of an existing, important fact (p 48) Fringe benefits forms of payment not directly related to work performance (p 101) Fungible there is no difference between one unit of the goods and another (p 79) G Common law law based on current customs practiced by most of the people (p 6) Garnishment a court-ordered method in which the employer withholds a portion of the debtor’s wages and pays it directly to the creditor (p 166) Consideration what the offeror demands, and generally must receive, in order to make the offer legally enforceable against the offeror (p 43) General partnership an association of two or more persons to carry on a business for profit as co-owners (p 126) Constitution a document that sets forth the framework of a government and its relationship to the people it governs (p 10) I Contract an agreement between two or more parties that creates an obligation of some type (p 32) 176 GLOSSARY Implied contract contract with terms determined from the surrounding circumstances or an established pattern of dealings (p 33) Insurance a contractual obligation taken on by one party to indemnify the loss incurred by another party (p 70) Intellectual property intangible property that one cannot see or touch, including copyrights, patents, trade secrets, service marks, and trademarks (p 83) R Ratification a person acts toward a contract as though he or she intends to be bound by it (p 46) Real property rights and interests in land, buildings, and fixtures (p 65) J S Jurisdiction the power to hear and decide cases (p 19) S corporation corporation organized under subchapter S of the Internal Revenue Code whose earnings are treated the same as a gain (or loss) from a partnership and taxed at the individual owner’s level (p 142) L Labor union representative organization for employees that sets up bargaining procedures with employers (p 110) Laws rules of conduct that a political authority will enforce (p 4) Limited liability corporation (LLC) corporation that offers limited liability protection and taxation as a partnership (p 143) Limited liability partnership (LLP) form of business organization that offers ease of conversion from an existing partnership, avoidance of double taxation, and partial limited liability protection (p 144) Limited partnership made up of one or more general partners with full personal liability and one or more limited partners whose liability for partnership obligations extends only to the amount of their investment in the business (p 127) M Misrepresentation an innocent misstatement of a significant fact by a party (p 48) N Necessaries things needed to maintain life and lifestyle, such as food, clothing, or shelter (p 46) O Offer proposal of a bargain or exchange to another party or parties (p 35) P Secured transaction a legal device that creates a security interest in personal property or fixtures (p 160) Shareholders owners of a corporation (p 138) Shares of stock units of ownership in a corporation (p 134) Sole proprietorship a business owned by one person (p 122) Statute of frauds a law that specifies the situations that require a writing (p 55) Statutes laws enacted by legislatures (p 13) Suretyship an agreement in which a third party (surety) is primarily liable for the debt or obligation of the debtor if payment or performance becomes overdue (p 166) T Terminable at will employment contracts that either party can end without notice at any time without involving the courts (p 101) Termination statement release document that acknowledges the full payment of the debt that is sent to the governmental office holding the financing statement (p 163) Trade secret commercially valuable information that the owner attempts to keep secret (p 86) Trademark a word, mark, symbol, or device that identifies a product of a particular manufacturer or merchant (p 84) U Unemployment compensation money paid to qualified workers who have lost their jobs (p 114) Patent a property right that excludes others from making, using, offering for sale, selling, or importing the invention (p 85) Unfair labor practices union or employer actions that violate the rights of employees with respect to union activity (p 110) Personal property rights and interests in basically anything that is not real property, tangible or intangible (p 65) Uniform Commercial Code (UCC) a set of state laws that governs business activities (p 155) Power of attorney a written agency authorization (p 95) Usury lending money at an interest rate higher than the maximum allowable rate set by state law (p 52) Promissory note an unconditional written promise by a person or persons to pay money according to the payee’s order or to pay money to the bearer of the instrument (p 154) V Property rights and interests in things that society allows people to claim (p 64) Valid contract contract that is legally binding and enforceable (p 34) GLOSSARY 177 INDEX A Acceptance of commercial paper, 153 defined, 42–43 Accession, in acquiring property, 67 Accommodation party, 156 Accord and satisfaction, 157 Actual bailment, 78 Administrative agencies, 13–14 Administrative regulations, 13–14 Adverse impact, 108 Adverse possession, of property, Advertisements, as invitation to negotiate, 39 Affirmative action plans, 108 Age Discrimination in Employment Act, 108 Agency apparent authority, 96 defined, 94 duties of the agent to the principal, 97 duty to adhere in good faith to the agency contract, 97 duty to compensate the agent, 96 duty to pay for the agent’s liabilities to third parties, 97 duty to reimburse the agent, 96 express authority and, 95 implied authority and, 95 independent contractor, 95 minors and, 96 principal-agent and employeremployee relationships, 94–95 termination of, 98 Agent, 94 Agreement, agency and, 98 Agreements not to compete, 104 Alien corporation, 137 Alimony, 69 Allocation of markets, 54 Amazon Kindle, 162 Amendments, to U.S Constitution (Bill of Rights), 12 Americans with Disabilities Act (ADA), 107 Annulment, 68 Antitrust laws, 142 Apparent authority, 96 Appellate jurisdiction, 20 of U.S Supreme Court, 20–21 Apple Inc., 84 Articles of Confederation, 18 Articles of incorporation, 138 Articles of organization, 143 Article VI, of U.S Constitution, 11 Artisan’s lien, 166 178 INDEX Assent, lack of genuine concealment, 48 misrepresentation and fraud, 48–49 mistake, 47–48 unconscionability, 49 Assent, to contract, 33 Assignment of the lease, 74 Associate circuit courts, 23 ATM, 158 At-will termination, exceptions to, 104 Auto insurance, 70 B Bailee, 78 Bailee’s lien, 81 Bailment, 65 ending, 81 defined, 77 duties associated with, 79–80 duty to return the goods, 81 ordinary care, 80 requirements of, 78–79 types of, 78 Bailor, 78 Bankruptcy exempt property, 169 in Great Britain, 169 liquidation and distribution of proceeds, 169–170 nondischargeable debts, 169 procedure, 169 types of, 168–170 Chapter liquidation, 168 Chapter 11 reorganization, 168 Chapter 12 plan, 168 Chapter 13 extended-time payment plan, 168 voluntary or involuntary, 168–170 Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA), 168 Beneficiary, 70 BFOQs See Bona fide occupational qualifications Bid rigging, 54 Bilateral contract, 35–36 Bilateral mistakes of law, 48 Bill of exchange, 153 Bill of Rights, 11, 12 Black’s Law Dictionary, Blank indorsement, 156 Blizzard Entertainment, 62 Board of directors, 138 Bona fide occupational qualifications (BFOQs), 108 Boycott, 110 Branches of government, lawmaking powers and, 13 Business ethics, 8–9 Business insurance, 70 Business invitee, 75 Business judgment rule, 140 Business law, defined, Business licenses, sole proprietorships and, 124 Business organization, forms of basic forms, 122 corporations, 134–142 partnerships, 126–133 project, 121 sole proprietorship, 123–124 C Canada, NAFTA and, 112 Capacity to contract, 33 See also Contractual capacity Careers in Business Law finance, collections, 150 government and public administration, paralegal specialist, information technology, contract negotiator, 30 information technology, copyright attorneys, 62 marketing, real estate, 92 public safety, corrections & security, senior paralegal, 120 Case law, 14 Cashier’s check, 154 Castro, Fidel, 69 Castro, Raul, 69 Casualty insurance, 70 Certificates of deposit, 153, 154 Certified check, 154 Chapter liquidation, 168 Chapter 11 reorganization, 168 Chapter 12 plan, 168 Chapter 13 extended-time payment plan, 168 Charter, 138 Charter, loss of, 141 Check, as commercial paper, 153–154 Child support, 69 Circuit courts, 21–22 Cisco Systems Inc., 30 City courts, 23 Civil Code, French, Civil laws, 15 Civil procedure, 15 Civil Rights Act of 1964, 53, 107 Closely held corporation, 137 Collateral, 160 Collective bargaining, 110, 112 Commercial paper, 152–155 accommodation parties, 156 collecting, 157 defined, 153 discharge of, 157 electronic funds transfers and, 158 proper transfer of, 155 risk if acceptance of, 155 specialized cashier’s check, 154 certified check, 154 money order, 154–155 teller’s check, 154 trade acceptance, 155 traveler’s check, 155 types of certificate of deposit, 154 checks, 153–154 draft, 153 promissory note, 154 time of payment, 153 Common law, Common stock, 139 Communicate bailment, 81 corporate bailouts, indorsements, 157 partnership agreements, 128 RE/MAX satellite network, 103 write advertisement as offer, 39 Communications Decency Act (CDA), 21 Community property, 68 Compensation, as duty of employer, 101 Competency licenses, 53 Completion insurance, 70 Compounding a crime, 53 Concealment, in contract law, 48 Conditional estate, 73 Confidential relationships, contract law and, 48 Consideration, 33, 43 Consolidation, 141–142 Constitution, as source of law, 10–12 Constitutional law, 10 Constitution of the United States, 10–11 Article I, Section 10, 32 Article III, 18 Constructive bailment, 78 Constructive delivery, 78 Constructive eviction, 74 Constructive notice, 162 Consumer Credit Protection Act (CCPA), 166 Consumer goods, as tangible property, 162 Contract law acquiring property by, 65 bilateral and unilateral, 35–36 capacity, 45–47 consequences of the contract, 46 consideration, 43 contract defined, 32 contract versus demand, 49 discrimination, illegal, 53 elements of a contract, 33 enforceable contracts, 51–52 executed and executory, 35 express, 33 gambling, 52–53 gambling, illegal, 52 implied, 33 implied-at-law, 34 lack of genuine assent, 47–49 See also Assent, lack of genuine lack of required competency license, 53 legality, of contracts, 51–53 negative effects on marriage, 54 obstruction of legal procedures, 53 offer and acceptance, 38–43 quasi, 34 rescinded, 35 restraint of trade, unreasonable, 54–55 understanding, 33–34 U.S Constitution, Article I Section 10, 32 valid, 34 void, 35 voidable, 34 written contracts, 55–56 Contract negotiator, as career, 30 Contractual capacity, 33, 45–46 intoxication, 47 mental incapacity, 46–47 minors, 46 Control, of property, 77, 78 Conveyance, 73 Copyright, 83–84 Copyright attorney, as career, 62 Corporate management, 139–140 Corporate powers, 140–141 Corporations, 134–142 advantages of capital, 136 limited liability, 135 perpetual life, 135 professional management, 136 transferability of ownership interests, 135–136 alternatives to limited liability, 143 limited liability partnerships, 144 S corporation, 142–143 creation, ownership, management and powers of, 138–141 defined, 134 disadvantages of, 136–137 stock, types of, 139 termination of bankruptcy, 142 charter, loss of, 141 court order, 142 incorporation specification or shareholder agreement, 141 mergers, 141–142 types of, 137–138 Counteroffer, 42 County courts, 23 Court of record, 22 Courts federal, 18–19 federal courts of appeal, 20 state and local, 21–24 U.S district, 19–20 U.S Supreme, 20–21 Courts of common pleas, 22 Covenants not to compete, 54–55 Creditor, 160 Creditor-debtor rights See Debtorcreditor rights Credit Repair Organizations Act, 167 Credit system, abuses of, 167 Crime, 15 Criminal law, 15 Criminal procedure, 15 Cross-Cultural Relationships bankruptcy in Great Britain, 169 contract versus demand, 49 foreign land ownership in communist Cuba, 69 Magna Carta, Petition of Right, and Bill of Rights, 11 NAFTA, 112 U.S businesses overseas, 131 Cuba, foreign land ownership in, 69 Curb Records, 96 Current Bankruptcy Code, 168 Custody, bailment and, 78 Cybercontracting, 35 Cyberslacking, 104 D Debit card, 158 Debt, 160 Debt collections, as career, 150 Debtor, 160 Debtor-creditor rights, 165–170 bankruptcy law, 168–170 garnishment of wages, 166 laws protecting creditors involuntary liens, 165–166 third parties, 166 laws protecting debtors abuses of credit system, 167 cancellation of debts, 167 clear disclosure of loan terms, 166–167 maximum interest rates, 166 notice of debt payment, 167 terms of unconscionable contracts, 167 INDEX 179 protection of, 165–167 Debt payment, notice of, 167 Debts, nondischargeable, in bankruptcy, 169 Decedent, 66 Decision making impartial decisions, 7–8 reasoned decisions, Dedication, offer of in property, 67 Deed, 73 Defenses in commercial paper, 157 Did You Know? corporations, 135 current legislation, 13 gambling, 52 judges, 22 mental capacity, 47 reasonable care, 80 secured parties, 161 sexual harassment in the workplace, 108 water rights, 73 Digital Millennium Copyright Act (DMCA), 85 Disability insurance, 113 Discharged for cause, 114 Discharged without cause, 114 Discrimination illegal in contracts, 53 in employment, 107, 108 reverse, 108 Dishonor, commercial paper, 154 Dissolution of the partnership, 130–131 See also Partnerships, ending District courts, 22 Dividends, 136, 139 Divorce, property ownership and, 68–69 Divorce decree, 69 Domestic corporation, 137 Donee, 66 Donor, 66 Dormant partners, 127 Double taxation, 136 Draft, 153 Drawee, 153 Drawer, 153 Duress, in contract law, 48–49 Duties of the agent to the principal, 97 of bailees, to return property, 81 bailments and extraordinary care, 79–80 minimal care, 80 ordinary care, 80 of employers and employees, 101–102 of landlords, 74 of principal to agent, 96–97 Duty to adhere in good faith to the agency contract, 97 to be loyal to the principal, 97 180 INDEX to be obedient, 97 to compensate the agent, 96 to keep agency funds and property separate, 97 to pay for the agent’s liabilities to third parties, 97 to reimburse the agent, 96 to use reasonable care and skill, 97 Exempt property, in bankruptcy, 169 Express authority, 95 Express contracts, 33 Expression, fixed and original, copyrights and, 84 Extraordinary bailments, 79 Extraordinary care, in bailments, 79–80 F E Easements, real property and, 75 EEOC See Equal Employment Opportunity Commission Electronic funds transfers (EFTs), 158 Electronic Fund Transfer Act (EFTA), 158 Electronic signature, 35 Eminent domain, real property and, 67 Employee defined, 100 duties of, 102–103 injury on the job, compensation and, 112–113 Employer defined, 100 duties of, 101–102 Employer-employee relationships, principal-agent and, 94–95 Employer identification numbers, 124 Employers and employees, duties of, 101–104 Employment defined, 100 legal aspects of, 100–101 Employment contract, negotiations Equal Pay Act of 1963, 110–111 Fair Labor Standards Act (FLSA), 110 National Labor Relations Act (NLRA), 110 Employment contract, termination of, 103 Employment questionnaire, 93 English common law, English documents of law, 11 Environment, proper work, 102 Equal Employment Opportunity Commission (EEOC), 107–108 Equal Pay Act 1963, 110–111 Equipment, as tangible property, 162 Escheat, 66 Estate, 66, 73 Estates in land, types of, 73–74 Ethical Dilemma, 29, 61, 91, 119, 149, 175 Ethical system, Ethics, law and, 7–8 business ethics, decision making, 7–8 Evict, 74 Execute, commercial paper, 153 Executive branch, of government, 13 Fair Labor Standards Act (FLSA), 110 Fair use, copyrights and, 84 Family and Medical Leave Act (FAMLA), 111 Farm products, as tangible property, 162 Federal administrative agencies, 13–14 Federal Circuit, 20 Federal constitution, as source of law, 11 Federal courts, 18–19 Federal courts of appeal, 20 Federal Equal Credit Opportunity Act, 167 Federal Fair Credit Reporting Act, 167 Federal Fair Debt Collection Practices Act, 167 Federal Judiciary Act, 18 Fee simple absolute, 73 Fiduciaries, 140 Fiduciary duty, in partnerships, 130 Financing statement, 162 Fixed expression, 84 Fixtures, real property and, 72 Foreign corporation, 137 Fraud in contract law, 48 in marriage, 68 Freedom of speech, 21 Freedoms, in Bill of Rights, 11 Fringe benefits, 101 Fungible, 79 G Gambling, contract law and, 52–53 Garnishment of wages, 166 General jurisdiction, 19 General partners, 127 General partnership, creation of, 128 General power of attorney, 95 Genuineness of assent See Assent, lack of genuine Gift, acquiring property by, 66 Government branches of, 13 federal, state, power and, 13 people, power and, 11 Government, employment regulations and, 106–117 affirmative action plans, 108 age discrimination, 108 bona fide occupational qualifications, 109 disabled employees, legislation in support of, 107 Equal Employment Opportunity Commission, 107 Equal Pay Act of 1963, 110–111 Fair Labor Standards Act (FLSA), 110 Family and Medical Leave Act (FAMLA), 111 individuals prohibited from working, 109 National Labor Relations Act (NLRA), 110 North American Agreement on Labor Cooperation, 112 North American Free Trade Agreement, 112 OSHA, 111 sexual harassment, 108 social insurance, 113–114 Government and public administration, as career, Grantee, 73 Grantor, 73 Gratuitous agency, 96, 98 Gratuitous bailment, 79 Great Depression, The, 101 Guarantor, 166 Guaranty relationship, 166 Guardian, 47 H Habitual drunkard, 47 Health insurance, 114 Heir, 66 Hinckley, John, 16 Holder, 155 Holder in due course (HDC), of commercial paper, 157 Holder through a holder in due course (HHDC), 157 Holdover tenant, 74 Homeowner’s insurance, 70 Honor, commercial paper, 154 Hotelkeeper’s lien, 166 Housing code, 74 I Illegal acts, contract law and, 51 Illegal monopoly, 142 Impartial decisions, 7–8 Impartiality, 7–8 Impeachment cases, 23 Implied-at-law contract, 34 Implied authority, 95 Implied contract, 33 Incorporation, 138 Incorporation specification, 141 Indemnify, 70 Independent contractor, agency and, 95 Indorsee, 155–156 Indorsement, of commercial paper, 155–156 Indorser, 155–156 Inferior jurisdiction, 24 Information technology, as career, 30 Infringement, on copyrights, 84 Inheritance, acquiring property by, 66 Injury, on the job See Safety, on the job Insurable interest, 70 Insurance casualty, 70 defined, 70 life, 70 social, 113–114 types of, 70 Insured, 70 Insurer, 70 Intangible property, 162–163 Intellectual property, 65 copyrights, 83–84 defined, 83 Interest, usury and, 52 Internet cybercontracting and, 35 cyberslacking and, 104 free speech on, 21 research current legislation on, 13 Twittering the stock market, 136 Intestate, 66 Intoxication, contract law and, 47 Inventory, as tangible property, 162 Involuntary bailment, 80 Involuntary bankruptcy, 168 Involuntary liens, 165–166 iPod, as trademark, Apple, 84 J Joint tenancy, 68 JP Morgan Chase, 150 Judicial branch of government, 13, 18–19 Jurisdiction appellate, 20, 22 defined, 19 inferior, 24 original, 19–20 Justice, Juvenile courts, 24 Juveniles, 24 K Kindle, electronic reader, 162 King’s Court, L Labor union, 110 Landlord, 73 Law(s) case law, 14 classifications of civil, 15 criminal, 15 procedural, 15 substantive, 16 defined, ethics and, finance and (project), 151 growth of, government, employment regulations and, 106–117 affirmative action plans, 108 age discrimination, 108 bona fide occupational qualifications, 109 disabled employees, legislation in support of, 107 Equal Employment Opportunity Commission, 107 Equal Pay Act of 1963, 110–111 Fair Labor Standards Act (FLSA), 110 Family and Medical Leave Act (FAMLA), 111 individuals prohibited from working, 109 National Labor Relations Act (NLRA), 110 North American Agreement on Labor Cooperation, 112 North American Free Trade Agreement, 112 OSHA, 111 sexual harassment, 108 social insurance, 113–114 how U.S developed, protecting creditors, 165–166 protecting debtors, 166–167 sources of administrative agencies, 12–13 constitutions, 10–12 statutes, 13 Lawmaking powers, of branches of government, 13 Leasehold, 73 Legal procedures, obstruction of in contracts, 53 Legislative branch, of government, 13 Legislative power, 14 Legislatures, 14 Lessor, 73 Liability in business partnerships, 130 in commercial paper, 156, 157 vicarious, 103 Licenses, real property and, 75 Liens, involuntary, 165–166 Liens, types of, 165–166 Life estate, 73 Life insurance, 70 Limited defenses, in commercial paper, 157 INDEX 181 Limited liability about, 127–128 corporations and, 134, 135 Limited liability corporation (LLC), 143 formation of, 143–144 Limited liability partnerships (LLP), 144 Limited partnership, 127–128 Limited power of attorney, 95 Linger, Dave, 92 Linger, Gail, 92 Liquidation, 139 distribution of proceeds, bankruptcy and, 169–170 Liquidation, Chapter bankruptcy, 168 LLC See Limited liability corporation LLP See Limited liability partnership Loan terms, disclosure of, 166–167 Lost property, 67 Louisiana, legal system in (Net Bookmark), Louisiana, Uniform Partnership Act (UPA) and, 126 Loyalty, as duty of employee, 102 Lucid, 47 M Magna Carta, 11 Make Academic Connections agriculture, 171 arts, 145 business law, 91, 119, 149 business math, 82, 145 careers, 145 communication, 9, 29, 61, 71, 99, 125, 159 ecology, 9, 44, 76, 105, 133, 164 entertainment law, 61, 175 environment, 29, 61, 91, 119, 149, 175 geography, 25, 37, 50, 71, 99, 159 government, 171 history, 17, 37, 105 marketing, 29, 44, 61, 76, 91, 119, 133, 149, 164, 175 math, 115 problem solving, 17, 91, 119 research, 9, 25, 29, 37, 50, 57, 71, 82, 87, 115, 125, 159, 171 social studies, 17 sociology, 57, 87, 125 sports and entertainment law, 99 sports law, 149 Market price, 139 Marriage, divorce and, 68–69 Maximum interest rates, 166 Mechanic’s lien, 165–166 Medicaid, 114 Medical conditions, of employees and their families, regulations for, 111 Medicare, 114 182 INDEX Mental incapacity, to contract, 46–47 Merger, 141–142 Mexico, NAFTA and, 112 Minimal care, 80 Minimum wage, 110 Minors agency and, 96 capacity, 46 contracts and, 35 employment and, 109 Miranda rights, 16 Mislaid property, 67 Misrepresentation, in contract law, 48 Mistakes, in contracts, 47–48 Model Business Corporation Act, 140 Money order, as commercial paper, 154–155 MP3, 84 Municipal courts, 23 Mutual benefit bailment, 80 N NAALC See North American Agreement on Labor Cooperation NAFTA See North American Free Trade Agreement Napoleon, Civil Code of, National Labor Relations Act (NLRA), 110 Necessaries, 46 Negligence, 80 Negotiable, commercial paper, 155 Negotiate, invitation to, contract law, 39 Negotiation commercial paper, 155 employment contract, 110–111 Net Bookmark bailments, 79 business licenses, 124 contracts, 96 electronic funds transfer, 158 English common law, sports contracts, 43 NLRA See National Labor Relations Act No par stock, 139 No-fault divorce, 68–69 Nominal partners, 127 Noncompete agreements, 54, 55 Noncompete clauses, 104 Nonfreehold estate, 73 Nonobvious, patents, 85–86 Nonprofit corporation, 138 North American Agreement on Labor Cooperation (NAALC), 112 North American Free Trade Agreement (NAFTA), 112 Note, as commercial paper, 152 Notice of termination, agency and, 98 Novation, in discharge of commercial paper, 157 Novel, patents, 85 O Obedience, as duty of employee, 102 Obligations, sole proprietorship and, 123 Obligee, 36 Obligor, 36 Occupational Safety and Health Administration (OSHA), 111 Offer, 35 communicated to offeree, 40 complete and definite complete, 39–40 definite, 40 defined, 38 intent to create legal obligation invitation to negotiate, 39 test of reasonable observer, 38–39 termination of before acceptance counteroffer, 42 expiration, 40–41 other circumstances, 42 rejection by offeree, 41 revocation, 40 Offer and acceptance, 33 Offeree, 35, 40 Offeree, rejection by, 41 Offeror, 35, 40 Operation of the law, agency and, 98 Operative, patents, 86 Option, buying a, 41 Oral contracts, 55 Oral wills, 66 Order paper, 155 Original expression, 84 Original jurisdiction, 19–20 OSHA See Occupational Safety and Health Administration Ownership in severalty, 68 P Paralegal Specialist, as a career, 2, 120 Participating preferred stock, 139 Partnership agreement, 128 Partnerships creation of general, 128 ending, 130–132 fiduciary duty, 130 general, 126 limited, 127 operation of, 129–130 types of partners, 127 Uniform Partnership Act, 126–127 Par value, 139 Patents, 85–86 Payee, 153 People power, government and, 11 Perfection, in tangible and intangible property, 162–163 Perfection, of security interest, 161–162 Periodic tenancy, 73 Perpetual life, of corporations, 135 Personal Identification Number (PIN), 158 Personal property, 65 Petition of Right, 11 Pledge, as secured transaction, 161 Policy, 70 Possession, in security interests, 161 Possession, of property, 77, 78 Power branches of government and, 13 federal and state governments and, 13 legislative, 14 people and government, 11 Power of attorney, 95 Precedents, 14 Preferred stock, 139 Pregnancy Discrimination Act, 107 Premium, 70 Price fixing, 54, 142 Principal, in agency, 94 duties of principal to agent, 96–97 Principal-agent and employer-employee relationships, 94–95 Private corporation, 137 Probate courts, 24 Procedural laws, 15 Production, as duty of employee, 102 Profit-making corporation, 137 Project contracts in your life, 31 employment questionnaire, 93 forms of business organization, 121 influence of property in your life, 63 law and finance, 150 visit trials in progress, Promisee, 36 Promisor, 36 Promissory note as commercial paper, 154 as unconditional commercial paper, 153 Proper transfer, of commercial paper, 155 Property acquiring by contract, 65 adverse possession, 67 bailments and personal, 77–81 dedication, 67 defined, 64 eminent domain, 67 forms of ownership, 68 gift, acquiring by, 66 influence of in your life, 63 inheritance, acquiring by, 66 insuring, 70 intellectual, 83–86 copyrights, 83–84 patents, 85–86 trademarks and servicemarks, 84–85 trade secrets, 86 real, 72 rights and interests, 64–65 rights in business partnerships, 129 types of, 65 Pro rata, 139 Psychiatric exam, criminal charges and, 16 Public corporation, 137 Public service corporation, 138 Public utility, 138 Q Qualified indorsement, 156 Quasi contract, 34 Quid pro quo, 108 Quitclaim deed, 73 Quotas, 108 R Ratification, 46, 96 Reagan, Ronald (President), 16, 68 Real estate agent, as career, 92 Real property, 65 conditional estate, 73 defined, 72 estates in land, 73–74 fee simple absolute, 73 life estate, 73 means of acquiring, 65–67 powers and limitations of ownership of, 73 restrictions on, 75 tenancy, types of, 73–74 Realty See Real Property Reasonable care and skill, as duty of employee, 102–103 Reasonable observer, test of in contracts, 38–39 Reasoned decisions, Regulations administrative, 13–14 employment, 106–117 job safety (OSHA), 111 Rehabilitation Act, of 1973, 107 RE/Max Realty, 92, 103, 131 Reno v ACLU, 21 Reorganization, Chapter 11 bankruptcy, 168 Resale price maintenance, 54 Rescinded contract, 35 Rescission, of contract, 48 Respondeat superior, 103 Restraint of trade, unreasonable allocation of markets, 54 covenants not to compete, 54–55 price fixing, 54 resale price maintenance, 54 Restrictive covenants, real property and, 75 Restrictive indorsement, 156 Retirement, Survivors’ Disability, and Health Insurance (RSHDI), 113 Revenue licenses, 53 Reverse discrimination, 108 Revised Uniform Limited Partnership Act (RULPA), 127–128 Revocation, of offer, 40 Right of partition, 68 Right of repossession, 160 Right of survivorship, 68 Right-to-work, 110 Rimes, LeAnne, 96 Rodriguez, Alex, 43 Royalty, on copyrighted works, 84 RSHDI See Retirement, Survivors’ Disability, and Health Insurance Rules and regulations, as administrative laws, 14 S S corporation, 142–143 Safety, on the job, 102 absences due to injuries, 112–113 OSHA, 111 Scope of authority, 94 Secondary boycott, 110 Secondary liability, in commercial paper, 156 Secret partners, 127 Secured party, 161 Secured transaction defined, 160 perfection of security interest, 161–162 perfection of tangible and intangible property, 162–163 security interests, 160–161 termination of, 163 types of, 161 Security agreement, as secured transaction, 161 Security interests, 160–161 Separation, legal, from marriage, 69 Separation of powers, 13 Service mark, 84–85 Sexual harassment, in the workplace, 108 Shareholder agreement, 141 Shareholders, 138, 139 Shares of stock, 134 Sight draft, as commercial paper, 153 Silent partners, 127 Small claims courts, 24 Social insurance, 113 Social Security Act, 113 Social Security Administration, 13, 14 Solar Turbines, 120 Sole proprietorship, 122–124 Sovereign, Special indorsement, 156 Special jurisdiction, 19 INDEX 183 Sports contracts, (Net Bookmark), 43 Stare decisis, 14, 15 State administrative agencies, 13–14 State constitutions power and, 13 as sources of law, 10–11 State courts, 21–24 associate circuit, 23 courts of appeal, 22 diagram, 23 juvenile, 24 municipal, 23 probate, 24 small claims, 24 supreme, 22–23 trial courts, 21–22 Statute of frauds, 55–56 Statutes, 13 Stock, shares of, in corporations, 134 Stock, types of, 139 Stock market, Twitter and, 136 Stop-payment order, on commercial paper, 154 Straight bankruptcy, 168 Strike, 110 Subletting, 74 Substantive law, 16 Superior courts, 22 Supreme Court, U.S See U.S Supreme Court (USSC) Surety, 166 Survivor’s insurance, 113 Symbol, of personal property, 78 T Tangible property, 162 Tax numbers, 124 Teamwork agency relationships, 97 bankruptcy exemptions, 169 commercial paper, 155 contracts, 33 copyright, 84 court systems, 20 decision making, discrimination, 109 fiduciary duty, 130 find sources of laws, 15 fringe benefits, 101 fungible goods, 79 investing in the stock market, 136 juvenile courts, 24 necessaries and nonnecessaries, 46 offer role-play, 40 property, 65 restrictions on real property, 75 secure interest in property, 162 sole proprietorship, 123 written contracts, 56 184 INDEX Tech Literacy Amazon Kindle, 162 cybercontracting, 35 cyberslacking, 104 Digital Millennium Copyright Act (DMCA), 85 freedom of speech, 21 Twittering the stock market, 136 Teller’s check, as commercial paper, 154 Tenancies, 73–74 Tenancy at sufferance, 74 Tenancy at will, 74 Tenancy by the entireties, 68 Tenancy for years, 73 Tenancy in common, 68 Tenancy in partnership, 129 Terminable at will, 101 Termination of employment contract, 103–104 exceptions to at-will, 104 notice of in agency, 98 of a secured transaction, 163 Termination statement, 163 Test of the reasonable observer, 38–39 Testate, 66 Testator, 66 Testatrix, 66 Third parties, in debt protection, 166 Time draft, as commercial paper, 153 Time of payment, as commercial paper, 153 Title, to property, 64–65 Trade acceptance, as commercial paper, 155 Trade fixtures, 72 Trade secrets, 86 Trademark, 84–85 Transcript, of trial, 20 Traveler’s check, as commercial paper, 155 Trespasser, 75 Trial court, 19 state, 21–22 Trials in progress, visit, Truth in Lending Act, 166–167 Twittering, the stock market, 136 U UCC See Uniformed Commercial Code Unconditional commercial paper, 153 Unconscionability, 49 Unconscionable contract, 40, 167 Undue influence, in contract law, 48 Unemployment compensation, 114 Unemployment insurance, 114 Unfair labor practices, 110 Uniform Commercial Code (UCC), 155 Uniform Partnership Act (UPA), 1, 126– 127, 129 Unilateral contract, 35–36 Unilateral mistakes of law, 47–48 Union, labor, 110 Universal defenses, in commercial paper, 157 Unsecured claim, 161 UPA See Uniform Partnership Act U.S businesses overseas, 131 U.S Constitution See Constitution of the United States U.S copyright law, 85 U.S Copyright Office, 84 U.S Department of Justice, U.S District Courts, 19–20 U.S laws development of, types of, 10–13 U.S Patent and Trademark office, 85 U.S Supreme Court (USSC), 18, 20–21 U.S Tax Court, 19 USCC See U.S Supreme Court Useful, patents, 86 Use Your Judgment assassination attempt on Reagan, 16 bankruptcy, 170 discrimination, 109 incorporating partnerships, 137 noncompete agreements, 55 patents and trade secrets, 86 Usurious interest, 52 Usury, 52 Usury laws, 166 V Valid contract, 34 Variances, real property and, 75 Vault.com, 104 Vicarious liability, 103 Vocational rehabilitation, 112 Void contract, 35 Voidable contract, 34 Voluntary bankruptcy, 168 W Warranty deed, 73 Washington, George (President), 18 Whistleblowers, 104 Wills, 66 Winding up, partnerships, 132 Work, proper environment for, 102 Workers’ compensation, 112–113 World of Warcraft, 62 Writing contract in, 33, 55–56 obligations in, 167 Writ of certiorari, 20 Z Zoning, 75 .. .Business Law SECOND EDITION John E Adamson Australia • Brazil • Japan • Korea • Mexico • Singapore • Spain • United Kingdom • United States 21st Century Business Business Law, 2nd Edition... • LAW AND JUSTICE Classifications of Laws Laws may be classified in various ways Commonly used classifications include civil laws, criminal laws, procedural laws, and substantive laws Civil Laws... 109 CHAPTER Business Organizations 120 CHAPTER Law and Finance 150 CAREERS IN BUSINESS LAW Solar Turbines Incorporated 120 CAREERS IN BUSINESS LAW JPMorgan Chase 150 PROJECT Forms of Business Organization