Ebook Business law and the legal environment (Sixth edition): Part 2

Ebook Business law and the legal environment (Sixth edition): Part 2 presents the following content: Unit 4 additional CPA topics, unit 5 agency and employment law, unit 6 business organizations, unit 7 government regulation, unit 8 property and cyberlaw, appendix a: the constitution of the United States, appendix b: uniform commercial code. Please refer to the documentation for more details.

UNIT © neelsky/Shutterstock.com Additional CPA Topics CHAPTER 24 SECURED TRANSACTIONS © neelsky/Shutterstock.com To: Allison@credit-help-for-all.com From: Sam12345@yahoo.com Hi, Allison Look, this just doesn’t make any sense When I got out of school, I paid a guy $18,000 for my Jeep I made every payment on my loan—every one—for over two years I paid out over 9,000 bucks for that thing Then I got laid off and I missed a few payments, and the bank repossessed the car And O.K., fair enough, I can see why they have to that So they auctioned off the Jeep and somebody else owns it But now the bank’s lawyer called me and said I still owe $5,000 What is that, a joke? I owe money for a Jeep I don’t even have anymore? That can’t be right I look forward to your advice Sam I owe money for a Jeep I don’t even have anymore? To: Sam12345@yahoo.com From: Allison@credit-help-for-all.com Dear Sam, I am sympathetic with your story, but unfortunately the bank is entitled to its money Here is how the law sees your plight When you bought the Jeep, you signed two documents: a note, in which you promised to pay the full balance owed, and a security agreement, which said that if you stopped making payments, the bank could repossess the vehicle and sell it There are two problems First, even after two years of writing checks, you might still have owed about $10,000 (because of interest) Second, cars depreciate quickly Your $18,000 vehicle probably had a market value of about $8,000 thirty months later The security agreement allowed the bank to sell the Jeep at auction, where prices are still lower Your car evidently fetched about $5,000 That leaves a deficiency of $5,000—for which you are legally responsible, regardless of who is driving the car I hope you have a good weekend Allison CHAPTER 24 ARTICLE 9: TERMS AND Secured Transactions 559 SCOPE We can sympathize with Sam, but the bank is entitled to its money The buyer and the bank entered into a secured transaction, meaning that one party gave credit to another, demanding in return an assurance of repayment Whether a used-car lot sells a car on credit for $18,000 or a bank takes collateral for a $600 million corporate loan, the parties have created a secured transaction Article of the Uniform Commercial Code (UCC) governs secured transactions in personal property It is essential to understand the basics of this law because we live and work in a world economy based on credit Gravity may cause the earth to spin, but it is secured transactions that keep the commercial world going ’round The quantity of disputes tells us how important this law is: about one-half of all UCC lawsuits involve Article This part of the Code employs terms not used elsewhere, so we must lead off with some definitions Article Vocabulary • Fixtures are goods that have become attached to real estate For example, heating Fixtures • Security interest means an interest in personal property or fixtures that secures the Security interest • Secured party is the person or company that holds the security interest The Secured party ducts are goods when a company manufactures them and also when it sells them to a retailer But when a contractor installs the ducts in a new house, they become fixtures performance of some obligation If an automobile dealer sells you a new car on credit and retains a security interest in the car, it means she is keeping legal rights in your car, including the right to drive it away if you fall behind in your payments Usually, your obligation is to pay money, such as the money due on the new car Occasionally, the obligation is to perform some other action, but in this chapter, we concentrate on the payment of money because that is what security interests are generally designed to ensure automobile dealer who sells you a car on credit is the secured party • Collateral is the property subject to a security interest When a dealer sells you a new car and keeps a security interest, the vehicle is the collateral • Debtor and obligor For our purposes, debtor refers to a person who has some original ownership interest in the collateral Having a security interest in the collateral does not make one a debtor If Alice borrows money from a bank and uses her Mercedes as collateral, she is the debtor because she owns the car Obligor means a person who must repay money, or perform some other task Throughout this chapter, the obligor and debtor will generally be the same person, but not always When Alice borrows money from a bank and uses her Mercedes as collateral, she is the obligor, because she must repay the loan; as we know, Alice is also the debtor However, suppose that Toby borrows money from a bank and provides no collateral; Jake co-signs the loan as a favor to Toby, using his Steinway piano as collateral Jake is the only debtor, because he owns the piano Both parties are obligors, because both have agreed to repay the loan • Security agreement is the contract in which the debtor gives a security interest to the secured party This agreement protects the secured party’s rights in the collateral • Default occurs when the debtor fails to pay money that is due, for example, on a loan or for a purchase made on credit Default also includes other failures by the debtor, such as failing to keep the collateral insured Goods that have become attached to real estate An interest in personal property or fixtures that secures the performance of an obligation A person or company that holds a security interest Collateral Property that is subject to a security interest Debtor A person who has original ownership interest in the collateral Obligor A person who must repay money or perform some other task to satisfy a debt Security agreement A contract in which the debtor gives a security interest to the secured party Default The failure of a debtor to pay money due on a loan or credit purchase 560 UNIT Additional CPA Topics Repossession Occurs when the secured party takes back collateral because the debtor has defaulted Perfection A series of steps that the secured party must take to protect its rights in the collateral against people other than the debtor Financing statement A document that the secured party files to give the general public notice that it has a secured interest in the collateral • Repossession occurs when the secured party takes back collateral because the debtor has defaulted Typically, the secured party will demand that the debtor deliver the collateral; if the debtor fails to so, the secured party may find the collateral and take it • Perfection is a series of steps the secured party must take to protect its rights in the collateral against people other than the debtor This is important because if the debtor cannot pay his debts, several creditors may attempt to seize the collateral, but only one may actually obtain it To perfect its rights in the collateral, the secured party will typically file specific papers with a state agency • Financing statement is a document that the secured party files to give the general public notice that it has a secured interest in the collateral • Record refers to information written on paper or stored in an electronic or other medium • Authenticate means to sign a document or to use any symbol or encryption method that identifies the person and clearly indicates she is adopting the record as her own You authenticate a security agreement when you sign papers at an auto dealership, for example A corporation electronically authenticates a loan agreement by using the Internet to transmit an encrypted signature An Example Here is an example using the terms just discussed A medical equipment company manufactures a CAT scan machine and sells it to a clinic for $2 million, taking $500,000 cash and the clinic’s promise to pay the rest over five years The clinic simultaneously authenticates a security agreement, giving the manufacturer a security interest in the CAT scan If the clinic fails to make its payments, the manufacturer can repossess the machine The manufacturer then electronically files a financing statement with an appropriate state agency This perfects the manufacturer’s rights, meaning that its security interest in the CAT scanner is now valid against all the world If the clinic goes bankrupt and many creditors try to seize its assets, the manufacturer has first claim to the CAT scan machine Exhibit 24.1 illustrates this transaction The clinic’s bankruptcy is of great importance When a debtor has money to pay all of its debts, there are no concerns about security interests But what if there is not enough money to go around? A creditor insists on a security interest to protect itself in the event the debtor cannot pay all of its debts The secured party intends (1) to give itself a legal interest in specific property of the debtor and (2) to establish a priority claim in that property, ahead of other creditors In this chapter, we look at a variety of issues that arise in secured transactions Scope of Article Article applies to any transaction intended to create a security interest in personal property or fixtures Types of Collateral The personal property used as collateral may be goods, such as cars or jewelry, but it may also be a variety of other things: • Instruments Drafts, checks, certificates of deposit, and notes may all be used as collateral, as may stocks, bonds, and other securities • Investment property, which refers primarily to securities and related rights • Documents of title These are papers used by an owner of goods who ships or stores them The documents are the owner’s proof that he owns goods no longer in his CHAPTER 24 Manufacturer Secured Transactions 561 Files Financing Statement State Agency (Secured Party) Sells CAT Scanner to © Cengage Learning 2013 Contr act Clinic Security Agreement (Debtor) EXHIBIT 24.1 A simple security agreement: (1) The manufacturer sells a CAT scan machine to a clinic, taking $500,000 and the clinic’s promise to pay the balance over five years (2) The clinic simultaneously authenticates a security agreement (3) The manufacturer perfects by electronically filing a financing statement possession For example, an owner sending goods by truck will obtain a bill of lading, a receipt indicating where the goods will be shipped and who gets them when they arrive Similarly, a warehouse receipt is the owner’s receipt for goods stored at a warehouse The owner may use these and other similar documents of title as collateral • Account means a right to receive payment for goods sold or leased This includes, for example, accounts receivable, indicating various buyers owe a merchant money for goods they have already received The category now includes health-insurance receivables • Deposit accounts Article now covers security interests in deposit accounts (money placed in banks) • Commercial tort claims An organization that has filed a tort suit may use its claim as collateral Personal injuries to individuals are not covered by this article • General intangibles This is a residual category, designed to include many kinds of collateral that not appear elsewhere on the list, such as copyrights, patents, trademarks, goodwill, and the right to payment of some loans 562 UNIT Additional CPA Topics • Chattel paper This is a record that indicates two things: (1) an obligor owes money and (2) a secured party has a security interest in specific goods Chattel paper most commonly occurs in a consumer sale on credit If a dealer sells an air conditioner to a customer, who agrees in writing to make monthly payments and also agrees that the dealer has a security interest in the air conditioner, that agreement is chattel paper The same chattel paper may be collateral for a second security interest The dealer who sells the air conditioner could use the chattel paper to obtain a loan If the dealer gives the chattel paper to a bank as collateral for the loan, the bank has a security interest in the chattel paper, while the dealer continues to have a security interest in the air conditioner Electronic chattel paper is the same thing, except that it is an electronic record rather than a written one • Goods means movable things, including fixtures, crops, and manufactured homes For purposes of secured transactions, the Code divides goods into additional categories In some cases, the rights of the parties will depend upon what category the goods fall into These are the key categories: • Consumer goods are those used primarily for personal, family, or household purposes • Farm products are crops, livestock, or supplies used directly in farming operations (as opposed to the business aspects of farming) • Inventory consists of goods held by someone for sale or lease, such as all of the beds and chairs in a furniture store • Equipment refers to things used in running a business, such as the desks, telephones, and computers needed to operate a retail store Software Article takes into account the increasingly important role that computer software plays in all business The Code distinguishes software from goods, and this becomes important when competing creditors are fighting over both a computer system and the software inside it A program embedded in a computer counts as goods if it is customarily considered part of those goods or if, by purchasing the goods, the owner acquires the right to use the program A program that does not meet those criteria is termed software, and will be treated differently for some purposes In sum, Article applies anytime the parties intended to create a security interest in any of the items listed above ATTACHMENT Attachment A three-step process that creates an enforceable security interest OF A SECURITY INTEREST Attachment is a vital step in a secured transaction This means that the secured party has taken all of the following steps to create an enforceable security interest: • The two parties made a security agreement, and either the debtor has authenticated a security agreement describing the collateral or the secured party has obtained possession or control; • The secured party has given value to obtain the security agreement; and • The debtor has rights in the collateral.1 UCC §9-203 CHAPTER 24 Agreement Without an agreement, there can be no security interest Generally, the agreement will be in writing and signed by the debtor or electronically recorded and authenticated by the debtor The agreement must reasonably identify the collateral A description of collateral by type is often acceptable For example, a security agreement may properly describe the collateral as “all equipment in the store at 123 Periwinkle Street.”2 In a security agreement for consumer goods, however, a description by type is not sufficient, and more specificity is required A security agreement at a minimum might: • State that Happy Homes, Inc., and Martha agree that Martha is buying an Arctic Co refrigerator and identify the exact unit by its serial number; • Give the price, the down payment, the monthly payments, and interest rate; • State that because Happy Homes is selling Martha the refrigerator on credit, it has a security interest in the refrigerator; and • Provide that if Martha defaults on her payments, Happy Homes is entitled to repossess the refrigerator An actual security agreement will add many details, such as Martha’s obligation to keep the refrigerator in good condition and to deliver it to the store if she defaults; a precise definition of “default”; and how Happy Homes may go about repossessing if Martha defaults and fails to return the refrigerator Control and Possession In many cases, the security agreement need not be in writing if the parties have an oral agreement and the secured party has either control or possession For many kinds of collateral, it is safer for the secured party actually to take the item than to rely upon a security agreement The rules follow Control For deposit accounts, electronic chattel paper and certain other collateral, the security interest attaches if the secured party has control The UCC specifies exactly what the secured party must to obtain control for each type of collateral In a general sense, control means that the secured party has certain exclusive rights to dispose of the collateral • Deposit account (in a bank) The secured party has control if it is itself the bank holding the deposit or if the debtor has authorized the bank to dispose of funds according to the secured party’s instructions • Electronic chattel paper A secured party has control of electronic chattel paper when it possesses the only authoritative copy of it, and the record(s) designate the secured party as the assignee This means that the parties have agreed on an electronic method to verify the uniqueness of the record, so that any copies of the electronic original are clearly recognizable as reproductions • Investment property and letter-of-credit rights The Code specifies analogous methods of controlling investment properties and letter-of-credit rights.3 A security agreement may not use a super-generic term such as “all of Smith’s personal property.” We will see later that, by contrast, such a super-generic description is legally adequate in a financing statement Control is described in the following sections: 9-104 (deposit accounts), 9-105 (electronic chattel paper), 9-106 (investment property), and 9-107 (letter-of-credit rights) Secured Transactions 563 564 UNIT Additional CPA Topics Possession For most other forms of collateral, including goods, securities, and most other items, a security interest attaches if the secured party has possession For example, if you loan your neighbor $175,000 and he gives you a Winslow Homer watercolor as collateral, you have an attached security interest in the painting once it is in your possession It would still be wise to put the agreement in writing, to be certain both parties understand all terms and can prove them if necessary, but the writing is not legally required The following case is typical of Article disputes in that it was fought out in bankruptcy court A debtor claimed to have a security interest in property owned by a bankrupt company Had the parties made a security agreement? IN RE CFLC, INC 209 B.R 508, 1997 Bankr LEXIS 821 United States Bankruptcy Appellate Panel of the Ninth Circuit, 1997 Facts: Expeditors was a freight company that supervised importing and exporting for Everex Systems, Inc Expeditors negotiated rates and services for its client and frequently had possession of Everex’s goods During a 17-month period, Expeditors sent over 300 invoices to Everex Each invoice stated that the customer either had to accept all of the invoice’s terms or to pay cash, receiving no work on credit One of those terms gave Expeditors a general lien on all of the customer’s property in its possession In other words, if the customer failed to pay a bill, Expeditors claimed the right to retain the goods, auction them, and keep enough of the proceeds to pay its overdue bills Everex filed for bankruptcy Expeditors expedited its way into the court proceedings, claiming the right to sell Everex’s goods, worth about $81,000 The trial judge rejected the claim, ruling that Expeditors lacked a valid security interest Expeditors appealed Issue: Did Expeditors have a security interest in Everex’s goods? Excerpts from Judge Ollason’s Decision: Under the common law, silence in the face of an offer is not an acceptance, unless there is a relationship between the parties or a previous course of dealing pursuant to which silence would be understood as acceptance In this case, Expeditors and Everex had been doing business for about one and one-half years They had never discussed the terms of the invoice nor negotiated for a security interest Everex had never expressly acknowledged the invoice terms by accepting or objecting to them, nor did it take actions which acknowledged Expeditors’ alleged general lien on the goods Its only pertinent acts were its payment of the invoices and silence as to the added terms The evidence consisting of Everex’s receipt and payment of invoices containing terms for a general lien in the goods in favor of Expeditors did not amount to an agreement for such a security interest, pursuant to [revised section 9-102] As a matter of law, the repetitive sending by Expeditors to Everex of terms which Expeditors wished to be made part of the oral contract was not evidence of course of dealing because an agreement did not exist as to the security interest which could be supplemented by such evidence Affirmed EXAM Strategy Question: Hector needs money to keep his business afloat He asks his uncle for a $1 million loan The uncle agrees, but he insists that his nephew grant him a security interest in Hector’s splendid gold clarinet, worth over $2 million Hector agrees The uncle prepares a handwritten document summarizing the agreement and asks his CHAPTER 24 nephew to sign it Hector hands the clarinet to his uncle and receives his money, but he forgets to sign the document Has a security agreement attached? Strategy: Attachment occurs if the parties made a security agreement and there was authentication or possession; the secured party has given value; and the debtor had rights in the collateral Result: Hector agreed to give his uncle a security interest in the instrument He never authenticated (signed) the agreement, but the uncle did take possession of the clarinet The uncle gave Hector $1 million, and Hector owned the instrument Yes, the security interest attached Value For the security interest to attach, the secured party must give value Usually, the value will be apparent If a bank loans $400 million to an airline, that money is the value, and the bank, therefore, may obtain a security interest in the planes that the airline is buying If a store sells a living room set to a customer for a small down payment and two years of monthly payments, the value given is the furniture Future Value The parties may also agree that some of the value will be given in the future For example, a finance company might extend a $5 million line of credit to a retail store, even though the store initially takes only $1 million of the money The remaining credit is available whenever the store needs it to purchase inventory The Uniform Commercial Code considers the entire $5 million line of credit to be value.4 Debtor Rights in the Collateral The debtor can grant a security interest in goods only if he has some legal right to those goods himself Typically, the debtor owns the goods But a debtor may also give a security interest if he is leasing the goods or even if he is a bailee, meaning that he is lawfully holding them for someone else Suppose Importer receives a shipment of scallops on behalf of Seafood Wholesaler Wholesaler asks Importer to hold the scallops for three days as a favor, and to keep a customer happy, Importer agrees Importer then arranges a $150,000 loan from a bank, using the scallops as collateral Although Importer has acted unethically, it does have some right in the collateral—the right to hold them for three days That is enough to satisfy this rule By contrast, suppose Railroad is transporting 10 carloads of cattle on behalf of Walter, the owner A devious Meat Dealer uses forged documents to trick Railroad into believing that Meat Dealer is entitled to the animals Meat Dealer trucks the cattle away and uses them to obtain a bank loan, giving the bank a security interest in the animals That “security interest” has never attached and is invalid because Dealer had no legal interest in the cattle When Walter, the rightful owner, locates his cattle, he may take them back The bank can only hope to find the deceitful Dealer, who in fact has probably disappeared Once the security interest has attached to the collateral, the secured party is protected against the debtor If the debtor fails to pay, the secured party may repossess the collateral UCC §9-204(c) Secured Transactions 565 566 UNIT Additional CPA Topics Attachment to Future Property The security agreement may specify that the security interest attaches to personal property that the debtor does not yet possess but might obtain in the future After-acquired property Items that the debtor obtains after the parties have made their security agreement After-Acquired Property After-acquired property refers to items that the debtor obtains after the parties have made their security agreement The parties may agree that the security interest attaches to after-acquired property.5 Basil is starting a catering business, but owns only a beat-up car He borrows $55,000 from the Pesto Bank, which takes a security interest in the car But Pesto also insists on an after-acquired clause When Basil purchases a commercial stove, cooking equipment, and freezer, Pesto’s security interest attaches to each item as Basil acquires it Proceeds Proceeds are whatever is obtained by a debtor who sells the collateral or otherwise disposes of it The secured party automatically obtains a security interest in the proceeds of the collateral, unless the security agreement states otherwise.6 Suppose the Pesto Bank obtains a security interest in Basil’s $4,000 freezer Basil then decides he needs a larger model and sells the original freezer to his neighbor for $3,000 The $3,000 cash is proceeds, in which Pesto automatically obtains a security interest PERFECTION Nothing Less than Perfection Once the security interest has attached to the collateral, the secured party is protected against the debtor, but it may not be protected against anyone else Pesto Bank loaned money to Basil and has a security interest in all of his property If Basil defaults on his loan, Pesto may insist he deliver the goods to the bank If he fails to that, the bank can seize the collateral But Pesto’s security interest is valid only against Basil; if a third person claims some interest in the goods, the bank may never get them For example, Basil might have taken out another loan, from his friend Olive, and used the same property as collateral Olive knew nothing about the bank’s original loan To protect itself against Olive, and all other parties, the bank must perfect its interest There are several kinds of perfection: • • • • Perfection by filing Perfection by possession Perfection of consumer goods Perfection of movable collateral and fixtures In some cases, the secured party will have a choice of which method to use; in other cases, only one method works UCC §9-204(a) UCC §9-203(f) INDEX contracts violating a statute, 296–300 insurance, 297 licensing statutes, 297–298 usury and, 299–300 wagers, 296–297 contracts violating public policy, 300–310 exculpatory clause, 304–307 noncompete agreements, 301–303 unconscionable contracts, 307–310 contract vs gift, 1123 contributory negligence, 168 control agency law and, 672 mandatory, 571 perfection and, 571 security agreement and, 563 trusts and, 1150 Controlled Commodities List, 207 Controlling the Assault of Non-Solicited Pornography and Marketing Act (CAN-SPAM), 1045–1046 control security, 900 conversion, 137 defined, 632 liability, 632 cooling off period, 749 cooperative strategies, 954–962 horizontal, 954–958 joint ventures, 962 mergers, 960–962 vertical, 958–960 Coordinated Equity Review (CER), 914 copyrights, 1066–1073 copyright term, 1068 digital music and movies, 1070–1073 fair use, 1069–1070 first sale document, 1069 infringement, 1068 international copyright treaties, 1073 corporate management, 839–861 business judgment rule, 843–850 managers vs shareholders, 840–843 stakeholders in, 840 takeovers, 850–856 corporate opportunity, 845–847 corporate raiders, 851 corporations, 764–768, 815–838, 831 See also incorporation advantages and disadvantages of, 764–766 close corporations, 767–768 defective incorporation, 817–818 incorporation process, 819–826 incorporation process, after piercing the cooperate veil, 831–834 promoter’s liability for, 816–817 S corporations, 766–767 termination, 834 counter-claim, 53 counteroffer, 261 countervailing duties, 209 course of dealing, perfect tender rule and, 533–534 course of performance, perfect tender rule and, 534 court orders, court systems, 43–51 federal courts, 48–51 state courts, 43–48 covenant, 438–439, 1102 cover, 410, 546–547 Credit Card Act, 986–987 credit cards, 985–989 debt and usury laws, 299–300 debt regulation, 986–987 disclosure in, 985–986 disputes with credit card company, 988–989 disputes with merchants, 987 liability, 987 stolen cards, 987 creditor rights of, 492–494 creditor beneficiary, 362 creditors Chapter and, 927 filing vs control or possession, 582 ordinary sales, 492 overview of, 581–582 priorities among, 581–584 protecting against, trusts and, 1150 purchase money security interest and, 582–584 returnable goods, 493–494 rights of, 493–494 creditors’ committee in Chapter 11, 937–938 credit reports, 990–992 access to credit reports and credit scores, 991 accuracy of, 990–991 identity theft, 992 credit score, 991 crimes, negotiable instruments and, 635–636 crimes committed by business, 194–199 hiring illegal workers as, 197 money laundering, 198 other, 199 overview of, 194–195 punishments for, 199 Racketeer Influenced and Corrupt Organizations Act, 197–198 workplace, 196 crimes that harm business, 191–194 arson, 194 embezzlement, 194 fraud, 191–193 larceny, 191 criminal law, 10, 179 criminal liability under Securities Act of 1933, 901 criminal procedure, 180–190 conduct outlawed, 180 evidence gathering and Fourth Amendment rights, 181–184 post arrest, 187–190 right to lawyer, 187 state of mind, 181 trial and Fifth Amendment rights, 185–186 cross-examine, 64 cruel and unusual punishment, 189–190 cumulative voting, 825–826 cure rights, 534 customers, allocating, 967 cyberlaw, 1033–1058 Communications Decency Act, 1046–1048 Internet crime, 1049–1052 overview, 1034–1035 privacy, 1036–1045 spam, 1045–1046 cybersquatting, 1078 D damages, 138–144, 678 compensatory, 138–140 in liability for registration statement, 901 mitigation of, 419 negligence and, 166–167 I5 punitive, 140–142 tort reform and Exxon Valdez, 143 dead-hand poison pills, 852 dealing agreements exclusive, 967–968 reciprocal, 958 death benefits, 872 death of promisor, as true impossibility cause, 395 death penalty, 189 debentures, 830 debit cards, 989–990 fees, 989–990 liability, 989 debt collection, 992–993 debt in incorporation process, issuing, 830 debtor, 559, 937 debt settlement, 284–287 different performance as, 285 liquidated debt and, 285 unliquidated debt and, 285–287 decedent, defined, 1141 deceptive marks, 1076 de facto corporation, 817 defamation, 132–134 elements of, 132 online, 134 opinion, 133 privilege, 134 public personalities, 133–134 tort law and, 704–705 defamatory statement, 132 default, 584–586 collateral possession, 584–585 defined, 559, 584 disposition of collateral, 585–586 judgment, 53 proceeding to judgment, 586 rules, 788 defective incorporation, 817–818 defects in bailment, liability for, 1131 holder in due course and, 605–607 defendant case, 65 defined, 15 defenses for negligence, 167–170 assumption of the risk, 169–170 contributory and comparative negligence, 167–169 I6 INDEX defensive lockout, 753 deferred annuity contract, 1160 deficiency, defined, 585 definiteness, problems with, 257–258 de jure corporation, 817 delegatee, 372 delegation, 444 delegation of duties, 371–375, 444 contract prohibition and, 373 defined, 365 improper, and repudiation, 374 novation and, 374 public policy and, 373 substantial interest in personal performance and, 373 delegator, 372 delivery of gifts, 1121 deontological ethics, 28–29 deponent, 55 deposit accounts as collateral, 561 control and, 563 depositions, 55 derivative lawsuits, 772, 880 derivative lawsuits in shareholders’ rights, 880 if demand is required, 882–883 making demand, 880–882 description of goods as express warranty, 507 descriptive marks, 1076 design patent, 1062 destination contract, risk of loss and, 495 destruction of goods, perfect tender rule and, 536 destruction of subject matter termination of offer and, 262 as true impossibility cause, 395 devisee, defined, 1141 different performance, debt settlement and, 285 different terms, 263–264, 464 Digital Millennium Copyright Act (DMCA), 1072–1073 digital music and movies copyrights, 1070–1073 Digital Millennium Copyright Act, 1072–1073 Family Entertainment and Copyright Act, 1072 No Electronic Theft Act, 1072 dilution, 823 direct damages, 407 directed verdict, motion for, 65 direct examination, 64 directors compensation for, 870–876 election of, 868–870 in incorporation process, 826–827 independent, 869 inside, 869 liability of, 824–825 removal of, 868–870 staggered board of, 853 direct public offerings (DPOs), 897–898 disability insurance, 1160 disabled person, defined, 723 disaffirm, 317 discharge, 932–937 by agreement, 382 in Chapter 7, 932–937 in Chapter 11, 939 in Chapter 13, 942 circumstances preventing debts from being discharged, 934–935 debts that cannot be discharged, 932–934 defined, 382, 932 of indorser, 637 by full performance, 382 of instrument liability, 636–637 of obligor, 636–637 reaffirmation, 936 disclaimers, 513–514 implied warranties, 514 of opinion, 647 oral express warranties, 513 written express warranties, 513 disclosure in credit cards, 985–986 disclosure in Truth in Lending Act, 982–983 in advertising, 983 in closed-end credit, 983 enforcing, 983 in TILA loans, 982–983 disclosure requirements, Section 13 of Securities Act of 1934, 902–903 discovery, 54–59, 188 arbitration and, 69 defined, 54 depositions, 55 e-discovery, 56–59 interrogatories, 55 other, 59 physical and mental examination, 55–56 production of documents and things, 55 dishonor, defined, 621 disparate impact, as proof of discrimination, 715–716 disparate treatment, as proof of discrimination, 713–714 dispute resolution, 42–74 alternative, 68–70 appeals, 66–68 court systems, 43–51 litigation, 51–61 trial, 61–66 dissociation, 802–804 defined, 775 rightful dissociation, 802–803 right vs wrongful dissociation, 802 wrongful dissociation, 803–804 dissolution, 805–806, 876 distributors, controlling, 967–968 allocating customers and territory, 967 exclusive dealing agreements, 967–968 diversity jurisdiction, 49 documents of title, as collateral, 560–561 Dodd-Frank Wall Street Reform and Consumer Protection Act, 706, 874–875, 913, 990 domain names, 1078–1079 cybersquatting, 1078 ICANN, 1079 theft of, 1079 trademarking, 1079 dominant tenement, 1095 donee beneficiary, 362 defined, 1120 property already in possession of, 1121 donor, defined, 1120, 1142 do-not-call registry, 980 door-to-door sales, 981 double forgery, 633 double jeopardy, 189 draft, 215, 596 dram act, 160 drawee, defined, 596, 622 drawer, defined, 596 due diligence, 658, 901–902 due process, criminal trial and, 185 due process, procedural, 117–119 academic suspension and, 119 attachment of property and, 118–119 defined, 118 government employment and, 119 liberty or property, government taking of, 118 neutral factfinder and, 118 process due, amount of, 118 due process, substantive, 121–122 dumping, 209 dumping duty, 209 durable power, 1147 duration, corporations and, 764 duress analyzing claim of, 330 consent and, 330–331 defined, 330 as real defense, 609 duties, 208 duties of agents to principals, 673–678 breach of duty remedies for principal, 678 of care, 677 loyalty, 673–676 to obey instructions, 676–677 to provide information, 677 duties of loyalty, elements of, 673–676 appropriate behavior, 676 competition with principal, 675 confidential information, 674–675 conflict of interest between two principals, 675–676 outside benefits, 674 secretly dealing with principal, 676 duties of principals to agents, 678–680 to cooperate, 679 reimburse expenses, 678–679 duty of care in business judgment rule, 847–850 informed decision, 848–850 legality, 848 rational business purpose, 847–848 duty of care in trust administration, 1151 duty of due care, 158–162 dram act and, 160 hiring and retention, 161–162 landowners and, 160–161 professionals and, 161 INDEX duty of loyalty in business judgment rule, 843–847 corporate opportunity, 845–847 self-dealing, 844–845 duty of loyalty in partnerships, 799–801 competing with partnership, 799–800 conflict of interest, 800–801 taking a business opportunity, 800 using partnership property, 800 duty of loyalty in trust administration, 1151 dynasty, 1153 E easement in gross, 1095 easements, 1094–1096 creation of, 1095–1096 by grants, 1095 by implication, 1095–1096 by necessity, 1096 by prescription, 1096 by reservation, 1095 easements appurtenant, 1095 economic damage, 143 Economic Espionage Act of 1996, 1081 economic loss, privity and, 518 economic loss doctrine, 524 economic strike, replacement workers and, 750 e-discovery, 56–59 election, as union organizing stage, 740 election of directors, 868–870 electronic chattel paper as collateral, 562 control and, 563 Electronic Communications Privacy Act (ECPA), 709, 1042–1043 electronic monitoring of workplace, employee privacy and, 709 Electronic Signatures in Global and National Commerce Act (E-SIGN), 349 embezzlement, 194 emergencies, as search without warrant circumstance, 182 eminent domain, 119, 1101 emotional distress, intentional infliction of, 135 employee at will, 699 Employee Free Choice Act, 740 employee handbooks, contract law and, 704 employee indorsement rule, 633 employee privacy, 708–710 alcohol and drug testing, 708–709 electronic monitoring of workplace, 709 immigration, 710 lie detector tests, 709 off-duty conduct, 708 social media, 709–710 Employee Retirement Income Security Act (ERISA), 712 employees, as agent type, 687 employment agreements, consideration and, 287–288 employment contracts and noncompete agreements, 302–303 employment discrimination, 712–726 Age Discrimination in Employment Act, 721–723 Americans with Disabilities Act, 723–724 Equal Pay Act, 712–713 Genetic Information Nondiscrimination Act, 724–726 Title VII, 713–721 employment law, 698–726 employee privacy, 708–710 employment discrimination, 712–726 employment security, 700–707 financial protection, 711–712 introduction, 699 workplace safety, 707–708 employment security, 700–707 contract law, 703–704 Family and Medical Leave Act, 700 health insurance, 700–701 National Labor Relations Act, 700 tort law, 704–706 whistleblowing, 706–707 wrongful discharge, 701–703 enabling legislation, 89 Endangered Species Act (ESA), 1023–1026 engagement letter, 649 English roots of law, 5–7 “English rule,” 1104 entrapment, state of mind and, 181 entrustment, 490–491 environmental impact statement (EIS), 1021–1022 environmental law, 1005–1032 air pollution, 1007–1012 chemicals, 1020–1021 Environmental Protection Agency, 1006 natural resources, 1021–1026 waste disposal, 1017–1020 water pollution, 1012–1016 Environmental Protection Agency (EPA), 1006 Equal Credit Opportunity Act (ECOA), 994–995 equal dignities rule, 672 Equal Pay Act, 712–713 Equal Protection Clause, 122 equitable title, 1149 error of law, 47 E-signatures, 349 estate planning, 1140–1167 definitions in, 1141–1142 insurance and, 1153–1162 probate law and, 1142 purpose of, 1142 trusts and, 1149–1153 wills and, 1142–1149 estates, 1090–1094 concurrent estates, 1090–1093 defined, 1141 future interests and, 1094 estoppel, corporation by, 817–818 estray statutes, 1124 ethical business practices cost to businesses of unethical behavior, 27 happiness in people and, 26–27 society benefits of, 26 ethics, defined, 25 European Convention on Human Rights, 1044–1045 European Union (EU), 213 eviction, 1105 evidence gathering and Fourth Amendment rights, 181–184 warrant, 181–182 exclusionary rule, 182–183, 185–186 exclusion clause, 370 exclusive dealing agreements, 967–968 exclusivity, union organizing and, 738–739 I7 exculpatory clause in bailment, 1129 bailment cases, 306–307 in charter’s optional provision, 824–825 defined, 304 in landlord’s liability, 1112 unenforceable cases of, 304–305 executed contract, 235 executive-independent agencies, 88–89 executive power Constitution and, 108 defined, executor or executrix, defined, 1142 executory contract, 235 exempt property in bankruptcy estate, 929 exempt securities, 894 exempt transactions, 894–898 direct public offerings, 897–898 intrastate offering exemption, 895 Regulation A, 896–897 Regulation D, 895–896 existence, title and, 482 expectation damages, 404 expectation interest, 405–411 consequential damages, 407–408 direct damages, 407 incidental damages, 409–410 expelling shareholders, 879 expiration, termination of offer by, 261 Export Administration Act, 207 export controls, trade regulation and, 207 exporting, defined, 207 express authority, 682 express conditions, 383 express contract, 237 express warranty, 506–509 affirmation of fact or promise as, 506–507 basis of bargain and, 507–508 defined, 506 description of goods as, 507 sample or model as, 507 expropriation, as international trade issue, 218–219 investment insurance and, 219 sovereign immunity and, 219 extraterritoriality, 222 Exxon Valdez, tort reform and, 143 I8 F INDEX Facebook problem, 903 facilitating payment, 220 fact, intentional or reckless misrepresentation of, 322–323 factual cause, 163 Fair and Accurate Credit Transactions Act (FACTA), 990 Fair Credit Billing Act (FCBA), 988 Fair Credit Reporting Act (FCRA), 990–991 Fair Debt Collection Practices Act (FDCPA), 992–993 Fair Labor Standards Act (FLSA), 711 fair use doctrine, 1069–1070 parody, 1069–1070 False Claims Act, whistleblowers and, 706 false imprisonment, 134 falseness, 132 Family and Medical Leave Act (FMLA), 700 Family Entertainment and Copyright Act, 1072 fanciful marks, 1075 FAS (free alongside a ship), 495 fascination with law, 4–5 federal courts, 48–51 appellate courts, 49–51 diversity cases, 49 federal question cases, 49 trial courts, 49 Federal Food, Drug, and Cosmetic Act, 1021 Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), 1020–1021 federalist, 104 federal question, 49 Federal Sentencing Guidelines, 199 Federal Trade Commission (FTC), 977 See also sales Federal Trademark Dilution Act (FTDA), 1078 Federal Unemployment Tax Act (FUTA), 712 felony, 180 fictitious payee rule, 633 fiduciary, 911 fiduciary relationship, 651, 672 Fifth Amendment, 117–122 criminal trial and, 185–186 due process, 185 exclusionary rule, 185–186 Miranda rights, 186 procedural due process, 117–119 self-incrimination, 185 substantive due process, 121–122 Takings Clause, 119–120 final preparation, 61 financial protection, 711–712 Fair Labor Standards Act, 711 pension benefits, 712 social security, 711–712 workers’ compensation, 711 financing statement contents of, 568–570 defined, 560, 567 duration of filing, 570 place of filing, 570 finding statutes, 1124 fines, as corporation punishment, 199 firm commitment underwriting, 898 First Amendment, 112–116, 1037–1038 commercial speech, 115 morality and obscenity, 114–115 political speech, 113 time, place, manner of speech, 114 first sale document, 1069 fixtures defined, 559 perfection of, 575–576 as real property, 1088–1089 trade, 1110 flow-through tax entity, 763 FOB (free on board) place of destination, 494 place of shipment, 494 Food and Drug Administration (FDA), 1020 Food Quality Protection Act, 1021 forbearance, 276–277 forced share, defined, 1144 force majeure event, 446 foreign corporations, 830–831 Foreign Corrupt Practices Act (FCPA), 219–221 foreign policy, executive power and, 108 Foreign Sovereign Immunities Act (FSIA), 219 foreseeable doctrine, accountants liability and, 654–655 forfeiture, 190 forgery, 608, 636 formal rulemaking, 90–91 found property, 1124–1125 Fourteenth Amendment, Equal Protection Clause, 122–123 economic or social issues, minimal scrutiny and, 122 gender, intermediate scrutiny and, 122–123 race, ethnicity, fundamental rights, strict scrutiny and, 123 Fourth Amendment, 1038–1041 Framers, 103 franchises, 779–782 fraud, 137, 191–193 bad faith by insurer and, 1156 consent and, 322–326 disclosure and, 324–326 in execution, as real defense, 609 in inducement, as personal defense, 609 innocent misrepresentation, 324 Internet, 1050 justifiable reliance as element of, 323 in liability under Securities Act of 1933, 900 materiality as element of, 323 misrepresentation of fact as element of, 322–323 plaintiff’s remedies for, 323 transfers in bankruptcy estate, 930 Freedom of Information Act, 96 fresh start, 932 frustration of purpose, defined, 396 FTC Act, 1042 full warranty, 996–997 fully disclosed principal, 685 fundamental rights, 9, 123 future interests, 1094 remainder, 1094 reversion, 1094 future property attachment, 566 future value, attachment and, 565 G gap-filler provisions, 259–260 defined, 259 open price, 259 output contract, 259–260 requirements contract, 259–260 gap-fillers, 464 gap period, 931 GATT See General Agreement on Tariffs and Trade (GATT) General Agreement on Tariffs and Trade (GATT), 210–211 general exemption, 894 general intangibles, as collateral, 561 generally accepted accounting principles (GAAP), 646–647 generally accepted auditing standards (GAAS), 646–647 general partner, 774 generation-skipping trusts, 1150 generic trademarks, 1075–1076 Genetic Information Nondiscrimination Act (GINA), 724 geographic market, 963 gift causa mortis, 1121–1122 gifts, 1120–1123 acceptance of, 1122 causa mortis, 1121–1122 contract vs., 1123 defined, 1120 delivery of, 1121 elements in, 1120 intention to transfer ownership of, 1120–1121 inter vivos, 1121 global warming See greenhouse gases and global warning go effective date, 899 good, defined, 454, 456 good faith, 390, 440 contract performance and, 532 exception to exclusionary rule, 183 and fair dealing, covenant of, 704 holder in due course and, 604–605 merchant definition of, 457 non-merchant definition of, 457 goods as collateral, 562 defined, 242–243 government contracts, as affirmative action source, 718 government securities, 894 grand jury, 187 INDEX grantor, defined, 1142 gratuitous agent, 680 gratuitous assignment, 368–369 grease payment, 220 greenhouse gases and global warning, 1009–1011 automobile pollution, 1011 domestic regulation, 1010 international treaties, 1010 greenmail, 852 grievance, defined, 747 guilty, defined, 181 H Habitat Conservation Plan (HCP), 1026 hacking, 1049–1050 harmless error, 67 hazardous wastes identifying, 1019 tracking, 1019 health care proxy, 1148 health insurance, 1160 health maintenance organizations (HMOs), 1160 heir, defined, 1141 higher-priced mortgage loans, 984 hiring illegal workers as crimes committed by business, 197 history of, 951–953 holder, defined, 604 holder in due course, 603–612 consumer exception to, 611–612 defenses against, 608–610 defined, 604 requirements for, 604–607 shelter rule and, 608 holographic wills, 1144 home equity loans, 984–985 home loans, 984–985 home equity loans, 984–985 mortgage loans, 984 rescission, 985 horizontal cooperative strategies, 954–958 market division, 954 price fixing and bid rigging, 955–957 refusals to deal, 957–958 horizontal mergers, 960–962 hostile takeover, 851 hot cargo clauses, 745 I ICANN See Internet Corporation for Assigned Names and Numbers identification, title and, 483 identify goods to contract, 541–542 identity theft, 992, 1051 Identity Theft and Assumption Deterrence Act, 1051 illegality, as true impossibility cause, 395 illusory promises, 280 immediate power, 1147 immigration, employee privacy and, 710 imperfect title, 487–492 bona fide purchaser, 487–488 entrustment, 490–491 implied authority, 683, 792 implied conditions, 384 implied contract, 237 implied warranties, 509–512 defined, 510 disclaimers and, 514 of fitness for a particular purpose, 511–512 of habitability, 1106–1107 infringement, 512 of merchantability, 510 title, 512 importance of law, import controls, trade regulation and, 208–209 dumping and subsidizing, 209 tariffs, 208–209 importing, defined, 207 impossibility, 394–396 commercial impracticability and, 395–396 frustration of purpose and, 395–396 true, 394–395 imposter rule, 633 in camera inspection, 56 incidental beneficiary, 364–365 incidental damages, 409–410, 544 incompleteness, written contracts and, 348 incorporation, 112, 819–826 charter’s optional provisions, 824–826 charter’s required provisions, 820–824 corporation by estoppel, 817–818 de facto corporation, 817 defective, 817–818 de jure corporation, 817 where to incorporate, 819–820 incorporation process after, 826–831 bylaws, 828–829 directors and officers, 826–827 foreign corporations, 830–831 issuing debt, 830 shareholder agreements, 829–830 incorporators, 821 indemnification, 824 independent contractors, as agent type, 687 independent directors, 869 indictment, 187–188 individual rights, Constitution and, 104 indorsement, defined, 602 indorser, defined, 623 industrial discharges, 1014 inevitable discovery exception to exclusionary rule, 183 informal rulemaking, 90 information control, public and, 95–96 informed decision, 848–850 infringement copyrights, 1068 patents, 1064 trademark, 1076–1077 initial public offering (IPO), 898 injunction, 417–418 defined, 404, 417 injuries, landlord-tenant law and, 1111–1112 landlord’s liability, 1111–1112 tenant’s liability, 1111 injury, slander cases and, 132 innkeepers in bailment, 1132 innocent misrepresentation, 324 inside directors, 869 insider, 930 insider trading, 909–913 inspection and acceptance of goods, 539–540 partial acceptance, 539 rejection, 539–540 revocation, 539 installment contract, 540 instruments, as collateral, 560 insurable interest, 486, 1155 insurable interest in limiting claims by insured, 1155 insurance, 1153–1162 contract, 1154–1158 as contracts violating a statute, 297 estate planning and, 1153–1162 fraud, 193 I9 policies as exempt security, 894 terminology used in, 1153–1154 insurance contract, 1154–1158 bad faith by insurer, 1156–1158 limiting claims by insured, 1155–1156 offer and acceptance, 1154 insurance types, 1158–1162 automobile insurance, 1161–1162 disability insurance, 1160 health insurance, 1160 liability insurance, 1160–1161 life insurance, 1158–1160 property insurance, 1158 insured, defined, 1154 insurer, defined, 1154 integrated contract, 353 intellectual property, 1059–1086 copyrights, 1066–1073 introduction to, 1060 patents, 1060–1066 trademarks, 1074–1080 trade secrets, 1080–1082 intended beneficiary, 362–364 intentional infliction of emotional distress, 135, 705–706 intentional torts, 132–138, 690–691 battery and assault, 136 defamation, 132–134 defined, 132 false imprisonment, 134 intentional infliction of emotional distress, 135 trespass, conversion, fraud, 137 interest defined, 404, 481 of shareholders, 938 types of, 405 intermediary agent, 684 international copyright treaties, 1073 international financial reporting standards (IFRS), 647 international law, 206–223 international sales agreements, 213–217 international trade issues, 218–223 trade regulation, 207–213 international patent treaties, 1065–1066 I10 INDEX international sales agreements, 213–217 international trade issues, 218–223 expropriation, 218–219 extraterritoriality, 222 Foreign Corrupt Practices Act, 219–221 repatriation of profits, 218 international trademark treaties, 1080 international treaties on greenhouse gases and global warning, 1010 Internet Corporation for Assigned Names and Numbers (ICANN), 1079 Internet crime, 1049–1052 fraud, 1050 hacking, 1049–1050 Internet service providers (ISPs), 1043, 1046–1047 interpretive rules, 89–90 interrogatories, 55 interstate commerce, 105 inter vivos gifts, 1121 intestate, defined, 1141 intoxication, capacity and, 320–321 intrastate offering exemption, 895 introductory paragraph, contract, 437–438 intrusion, 148 inventory, defined, 582 investigation, administrative agencies and, 91–93 adjudication, 93 subpoenas, 91 investigative reports, 990 investment insurance, international trade and, 219 investment property as collateral, 560 control and, 563 invitations to bargain, 253 invitee, 161 involuntary petition, 926 irrevocable trust, 1151 issue, defined, 1145, 1146 issuer, 596, 893 J joint and several liability, 661 joint liability in paying debts, 793–794 joint tenancy, 1091–1093 joint ventures, 778–779, 954, 962 judges, federal court, 49 judgment non obstante veredicto (JNOV), 66 judgment rate, 601 judicial activism, 110 judicial admission exception, Uniform Commercial Code statute of frauds, 461 judicial power, Constitution and, 108–111 adjudicating cases, 109 judicial review, 109–111 judicial power, defined, judicial restraint, 110 judicial review, 93–94, 109–111 jurisdiction, 44 jurisprudence, 12–14 defined, 12 legal positivism, 12–13 legal realism, 13–14 natural law, 13 jury instructions, 66 justification, establishing, 145 K key person life insurance, 1155 L labor law, 733–754 collective bargaining, 744–748 concerted action, 749–754 union development and, 734–737 union organizing and, 738–744 Labor-Management Relations Act, 736 Labor-Management Reporting and Disclosure Act (LMRDA), 737 lack of consideration, as personal defense, 609 land, 1088 landlord defined, 1101 remedies for nonpayment of rent, 1109 landlord’s duties, 1104–1108 to deliver possession, 1104–1105 to maintain premises, 1106–1108 to mitigate damages, 1109–1110 to quiet enjoyment, 1105–1106 to return security deposit, 1107, 1108 landlord’s liability, injuries and, 1111–1112 common law rules, 1111 exculpatory clauses in, 1112 modern trend in, 1111 landlord’s lien, 581 landlord-tenant law, 1101–1112 injuries and, 1111–1112 landlord’s duties in, 1104–1108 lease and, 1102 legal areas combined in, 1102 tenancy and, types of, 1102–1104 tenant’s duties in, 1108–1110 landowners, duty of due care and, 160–161 invitee’s and, 161 licensee’s and, 161 trespassing adults and, 160 trespassing children and, 160 land use regulation, 1099–1101 eminent domain, 1101 nuisance law, 1099–1100 zoning, 1100–1101 Lanham Act, 149 larceny, 191 law, classifications of, 10–12 civil law, 10 criminal law, 10 law and morality, 12 law, ideas about, 3–5 fascination, 4–5 importance, power, 3–4 law, origins of, 5–7 English roots, 5–7 in United States, law, sources of contemporary, 7–10, 11 administrative law, 10, 11 common law, court orders, statutes, treaties, 10 United States Constitution, 7–9 lawful arrest, as search without warrant circumstance, 182 law merchant, 453 law of evidence, 64 laws, 953 lawyer, 428–430 clients and, 429 hiring, 429–430 leading object rule, 346 lease defined, 1102 duty to maintain premises and, 1106 legal age, defined, 1143 legal capacity in trust, 1149 legal positivism, 12–13 legal realism, 13–14 legal title, 1149 legislation, executive power and, 108 legislative history and intent, 84 legislative power, defined, legislative rules, 89 lemon laws, 525 less than fair value, 209 letter of credit, 215 letters of intent, 253–254 liability insurance, 1160–1161 liability insurance coverage, 1162 liability under Securities Act of 1933, 900–902 criminal liability, 901 fraud, 900 liability for registration statement, 901–902 for selling unregistered securities, 900 liability under Securities Act of 1934, 904–909 Private Securities Litigation Reform Act, 910 Section 10(b), 904–909 Section 18, 904 libel, 132 license, 1097 licensee, 161 licensing statutes, 297–298 lie detector tests, employee privacy and, 709 lien, defined, 579–580 life insurance, 1158–1160 annuities, 1159–1160 term insurance, 1159 universal life insurance, 1159 whole life insurance, 1159 limitation of remedy, 515–517 limited hours of work, age and, 711 limited liability, corporations and, 764 limited liability companies (LLCs), 768–774 changing forms, 771 vs corporation, 773–774 duration, 771 flexibility, 770 formation, 769–770 going public, 771 issues of law and, 772–773 limited liability, 768 shareholder liability, 771–772 tax status, 769 transferability of interests, 700 INDEX limited liability limited partnerships, 776–778 limited liability partnerships (LLP), 776 limited partnerships, 776–778 duration of, 777 formation, 777 liability and, 777 management, 777 structure of, 777 taxes, 777 transfer of ownership, 777 liquidated damages, 419–420, 548 liquidated damages clause, 404 liquidated debt, 285 liquidation, 924 litigation as affirmative action source, 718 defined, 43 pleadings, 51–61 litigator, 43 living organism patents, 1062 living trust, 1151 living wills, 1148–1149 lockouts, 752–754 logistics, corporations and, 765 long-arm statute, 46 lost property, 1124 Love Canal, 1017 low-sulfur coal, 1009 lying and business ethics, 36–37 M Madrid Agreement, 1080 Magnuson-Moss Warranty Act, 996–997 mail, merchandise bought by, 980 mailbox rule, 267–268 mail fraud, 192 majority voting system, 870 maker, defined, 596, 621 managed care plans, 1160 managers vs shareholders, 840–843 marital trust, 1150 market, 962–965 control of, 963–965 division, 954 geographic, 963 product, 962–963 marks, types of, 1074 material, 901, 905, 1156 material breach, 393–394, 440 materiality, 323 maximum achievable control technology (MACT), 1012 measurable value, consideration and, 276 mechanic’s lien, 580 mediator, 68 memorandum, 56 mental incapacity, as real defense, 609 mentally impaired persons, capacity and, 319–321 merchandise bought by mail, telephone, or online, 980 unorderd, 981 merchant, 457, 496 merchantable, 510 merchant exception, Uniform Commercial Code statute of frauds, 461 merchants’ exception, as element of UCC statute of frauds, 350–352 mergers, 876, 954, 960–962 horizontal, 960–962 vertical, 962 merit, as discrimination charge defense, 717 minority shareholders, excluding, 878–879 minors See also children capacity and, 317–319 defined, 317 disaffirmance and, 317 misrepresentation of age and, 318–319 necessaries and, 318 ratification and, 318 restitution and, 317–318 minute book, 827 Miranda rights, criminal trial and, 186 mirror image rule, 262–263 misappropriation, 912 misdemeanor, 180 mislaid property, 1124 misrepresentation of age as capacity exception, 318–319 in limiting claims by insured, 1156 mistake, consent and, 327–329 bilateral, 327 unilateral, 327–329 mistaken accession, 1126 mistakes, contract, 430–437 ambiguity, 433–434 preventing, 436–437 typos, 434–436 vagueness, 431–433 mitigate, 419 Model Act, 864 modification, as consideration exception, 282–283 modify, 67 money laundering, 198 monopolization, 962–965 control of market in, 963–965 geographic market in, 963 product market in, 962–963 morality First Amendment and, 114–115 law and, 12 mortgage, 1097 mortgagee, 1097 mortgage loans, 984 mortgagor, 1097 motion, 54 to compel answers to interrogatories, 56 to dismiss, 54 for a protective order, 56 motor vehicles, perfection of, 575 movable goods, perfection of, 575 N names, trademarks and, 1076 national ambient air quality standards (NAAQSs), 1007 National Emission Standards for Hazardous Air Pollutants (NESHAPS), 1011 National Environmental Policy Act (NEPA), 1021–1022 nationalize, 218 National Labor Relations Act (NLRA), 700, 735–736 National Labor Relations Board (NLRB), 736 National Securities Markets Improvement Act (NSMIA), 914 national security letter (NSL), 184 natural law, 13 natural resources, 1021–1026 Endangered Species Act, 1023–1026 National Environmental Policy Act, 1021–1022 necessaries as capacity exception, 318 negligence, 157–167 accountants liability and, 649–651, 654–657 breach of duty, 162–163 causation, 163–166 I11 contributory and comparative, 167–169 damages, 166–167 defenses for, 167–170 duty of due care, 158–162 elements of, 158 negotiable instruments and, 634–635 warranty and, 520 negligence per se, 162–163 negotiability, requirements for, 598–600 negotiable bill of lading, 215 negotiable instruments, 593–612 commercial paper, 594–595 contract vs., 619 enforcing, 619–620 holder in due course, 603–612 negotiability of, 597–601 negotiation and, 601–603 payment process, 620–621 primary vs secondary liability and, 620 types of, 595–597 negotiable instruments, liability for, 618–637 discharge, 636–637 introduction to, 619–621 liability rules, other, 632–636 signature liability, 621–627 warranty liability, 627–632 negotiation, 601–603 no action letters, 892 No Electronic Theft Act, 1072 no expectation of privacy, as search without warrant circumstance, 182 no-lockout clause, 745 nominal damages, 419 noncompete agreements, 301–303 employment contracts and, 302–303 sale of business and, 301–302 noncompetition agreement, 234 nonconforming goods, 496 non-cumulative preferred stock, 823–824 non-delivery damages, 547 as personal defense, 610 nondisclosure, misrepresentation and, 324–326 non-economic damages, 143 nonphysical torts, 691 non-point sources, 1014 I12 INDEX nonpossessory interests, 1094–1097 easements, 1094–1096 license, 1097 mortgage, 1097 profit, 1096–1097 nonprofit issues, 894 Norris-LaGuardia Act, 735 North American Free Trade Agreement (NAFTA), 212 no-strike clause, 745, 749 notes, 830 notice of breach, warranty and, 519 novation, 374 Nuclear Regulatory Commission (NRC), 1020 nuisance law, 1099–1100 nuncupative wills, 1144 O obligor, 365, 559 obscenity, First Amendment and, 114–115 Occupational Safety and Health Act (OSHA), 196, 707–708, 1020 Ocean Dumping Act, 1016 Oculist’s Case, 6–7 off-duty conduct, employee privacy and, 708 offensive lockout, 753 offer, 252 See also contract offer offeree acceptance of offer and, 262 defined, 253 offeror, 253 officers See directors Oil Pollution Act, 1016 online, merchandise bought on, 980 online privacy, regulating, 1037–1045 Children’s Online Privacy Protection Act, 1044 Electronic Communications Privacy Act, 1042–1043 European law, 1044–1045 First Amendment, 1037–1038 Fourth Amendment, 1038–1041 FTC, 1042 self-regulation, 1037 spyware, 1045 state regulation, 1044 online service providers (OSPs), 1073 open-end credit, 985–986 opening statements, 63 operation of law, termination of offer by, 261–262 opinions accountants and, 647 fraud and, 322 oppression, unconscionable contract and, 307–308 oppressive child labor, 711 option contract, 261 oral express warranties, disclaimers and, 513 order for relief, 926 order paper, defined, 599 output contract, 259–260 outsourcing, defined, 31 outstanding claims, holder in due course and, 605–607 Overseas Private Investment Corporation (OPIC), 219 owner, defined, 1154 ownership and regulation trademarks, 1074 ownership and risk, 480–498 creditor’s rights, 492–494 existence, 482 identification, 483 imperfect title, 487–492 insurable interest, 486 legal interest, 481–482 risk of loss, 494–498 title, 482–484 P Paris Convention, 1065, 1080 parody, 1069–1070 parol evidence rule, 353–355 defined, 353 fraud, misrepresentation, duress and, 355 incomplete or ambiguous contract as exception to, 354–355 partial acceptance of goods, 539 partial strikes, 750 participating preferred stock, 824 partners See also partnerships authority and, 792–793 duties of care, 798–799 duty of loyalty, 799–801 financial rights, 795–797 good faith and fair dealing, 801–802 information and, 793 liability of partnership to outsiders, 792–793 management duties, 798–801 management rights, 797–798 and outsiders, relationship between, 792–795 partnership property, 796–797 paying debts of partnership, 793–795 payment for work done, 796 ratification and, 793 relationship among, 795–802 rights of, 797–798 rights to merge, 797 right to bind partnership, 797–798 right to know, 798 right to transfer partnership interest, 797 right to vote, 798 sharing losses, 795 sharing profits, 795 tort liability and, 793 partnerships, 787–814 See also partners competing with, 799–800 conflict of interest, 800–801 continuing partnership business after termination, 804–805 creating, 788–782 defined, 774 dissociation, 775, 802–804 dissolution, 805–806 duty of loyalty in, 799–801 factors that matter, 789–791 financial settlement, 804–805 formation of, 775–776 introduction, 788 joint and several liability, 793–794 liability, 774–775, 805 liability of incoming partners, 794–795 management of, 775 partnership by estoppel, 791–792 paying debts in, 793–795 taking a business opportunity, 800 taxes, 776 term, 802 terminating, 802–808 transfer of ownership, 775 using partnership property, 800 at will, 802 winding up, 806–807 par value, 821 passing of title, 484 patent defined, 1060 requirements, 1062–1063 Patent Cooperation Treaty (PCT), 1065–1066 Patent Law Treaty, 1065 Patent Prosecution Highway, 1066 patents application and issuance, 1063 design patent, 1062 duration of, 1064 infringement, 1064 international patent treaties, 1065–1066 patent trolls, 1064–1065 plant patent, 1062 priority between two inventors, 1063 prior sale, 1063 provisional patent application, 1064 types of, 1060–1062 utility patent, 1061–1062 patent trolls, 1064–1065 Patriot Act, 184 payable on demand, 596 payee, defined, 596 pay for service, 1160 payment, as discharge method, 636 payment plan, Chapter 13 and, 942 payment process, steps of, 620–621 per capita, defined, 1146 peremptory challenges, 62 perfection, secured transactions and, 566–576 of consumer goods, 573–574 control and, 571 defined, 560, 566 filing financing statement and, 567–570 of movable collateral and fixtures, 574–576 possession and, 571 perfect tender rule, 533–538 commercial impracticability and, 537 course of dealing restrictions on, 533–534 course of performance restrictions on, 534 cure rights and, 534 defined, 533 destruction of goods and, 536 parties agreement to limits of, 534 substantial impairment and, 536 usage of trade restrictions on, 533 INDEX performance, 387–392 good faith, 390 personal satisfaction contract, 389–390 strict, 387–388 substantial, 388–389 time of the essence clause, 392 period tenancy, 1102–1103 perks, 872 permanent injunction, 417 permanent objects as real property, 1089 perpetual trusts, 1153 per se violation, 953 person, defined, 1153 personal defenses against holder, 609–610 personal ethics in workplace, applying, 29–30 personal injury, privity and, 517 personal jurisdiction, 45–46 personal property, 1119–1126 accession, 1125–1126 bailment, 1126–1133 defined, 1120 found property, 1124–1125 gifts, 1120–1123 personal satisfaction contract, 389–390 personal services, assignment and, 367 per stirpes, defined, 1146 petition, as union organizing stage, 739–740 petition for Chapter 7, filing, 925–926 involuntary petition, 926 voluntary petition, 925–926 phishing, 1052 physical delivery of gifts, 1121 physical torts, 691 picketing, 752 piercing the cooperate veil, 831–834 plain meaning rule, 83 plaintiff, defined, 15 plaintiff’s case, 64 plain view, as search without warrant circumstance, 182 plant life as real property, 1088 plant patent, 1062 plea bargain, 188 pleadings, 51–61 answer, 52–53 class actions, 53–54 complaint, 51–52 counter-claim, 53 defined, 51 discovery, 54–59 final preparation, 61 judgment on, 54 service, 52 summary judgment, 59–60 pledge, defined, 571 pledgee, defined, 571 plurality voting, 869 point source, 1014 poison pills, 852–853 chewable, 852 dead-hand, 852 political control of administrative agency, 93 political speech, First Amendment and, 113 possession attachment and, 564–565 collateral and, 571 mandatory, 571 Post Chicago School, 952–953 power, 3–4 power of attorney wills and, 1147 precedent, 6, 67, 76 predatory pricing, 965–966 preexisting duty rule, consideration exceptions and, 282–284 additional work, 282 modification, 282–283 unforeseen circumstances, 284 preferences in bankruptcy estate, 929–930 preferred stock, 823–824 non-cumulative, 823–824 participating, 824 Pregnancy Discrimination Act, 721 preliminary injunction, 417 premium, defined, 1154 preponderance of the evidence, 63 presentment, defined, 620 presentment warranties, 631–632 pretermitted child, defined, 1145 prevention of significant deterioration (PSD), 1008 price discrimination, 959–960 price fixing, 955–957 price quotes, 253 primary liability, 620, 659–660 principal, defined, 671 priority, defined, 581 priority claims, 931–932 prior payment, as personal defense, 609 priorities among creditors, 581–584 filing vs control or possession, 582 overview of, 581–582 purchase money security interest and, 582–584 privacy, 1036–1045 online, regulating (see online privacy, regulating) tracking tools, 1036–1037 privacy, trusts and, 1150 Privacy Act, 96 private offering, 896 Private Securities Litigation Reform Act, 910 privity, 517–518 defined, 517 economic loss and, 518 personal injury and, 517 probable cause, 182 probate trusts and, 1150 wills and, 1147–1148 probate, defined, 1142 procedural due process, 117–119 academic suspension and, 119 attachment of property and, 118–119 defined, 118 government employment and, 119 liberty or property, government taking of, 118 neutral factfinder and, 118 process due, amount of, 118 proceeds, security interest and, 566 product liability, 506 product market, 962–963 professional corporations (PCs), 778 profit, 1096–1097 profits, 678 promise as consideration, 276 express warranty and, 506–507 leading object rule as exception to, 346 to pay debt of another, 345–346 promisee, 362 promisor, 362 promissory estoppel, 238–240 moral consideration and, 288–289 reliance interest and, 412–413 promissory note, defined, 595 promoter of corporation, 816–817 promulgate rules, 89 I13 proof of claim, 927 proof of discrimination, Title VII, 713–716 disparate impact, 715–716 disparate treatment, 713–714 property insurance, 1158 property not transferred by wills, 1148 prosecution of criminal case, 179–180 prospectus, 898 protected rights, Constitution and, 111–123 Fifth Amendment, 117–122 First Amendment, 112–116 Fourteenth Amendment, 122–123 incorporation, 112 protection from other shareholders, right to, 876–879 excluding minority shareholders, 878–879 expelling shareholders, 879 ordinary business transactions, 878 pro-union statutes, 735–737 provisional patent application (PPA), 1064 proxies, 866–867 proximate cause, 163 proxy access, 870 proxy requirements, Section 14 of Securities Act of 1934, 903–904 proxy rules, 874 proxy statement, 867 Public Company Accounting Oversight Board (PCAOB), 648 public offerings, 898–899 public policy, 84 public policy rule, wrongful discharge and, 701 puffery, fraud and, 322 punishment for corporations, 199 cruel and unusual, 189–190 punitive damages, 140–142 purchase money security interest (PMSI), 573–574 in inventory, 582–583 in noninventory collateral, 583–584 purchaser representative, 896 Q qualified opinion, 647 qualified privilege, defined, 704 I14 INDEX qualified purchaser, 914 qualifying to business, 830–831 quantum meruit, 240–241 quasi-contract, 240–241, 415–416 quid pro quo, defined, 719 quorum, 828, 866 R Racketeer Influenced and Corrupt Organizations Act (RICO), 197–198 racketeering acts, 197 ratification, 318, 793 rational business purpose, 847–848 real defenses against holder in due course, 608–609 real property, 1088–1101 adapted objects as, 1089 adverse possession in, 1097–1099 attached objects as, 1089 buildings as, 1088 estates in, 1090–1094 fixtures as, 1088–1089 land as, 1088 land use regulation and, 1099–1101 nature of, 1088–1090 nonpossessory interests in, 1094–1097 permanent objects as, 1089 plant life as, 1088 reasonable, 440 reasonable accommodation, 723 reasonable certainty, written contracts and, 347–349 incompleteness, 348 vagueness, 347–348 reasonable expectation of privacy, 708 reciprocal dealing agreements, 958 reciprocal promises, 442 recognition, union organizers and, 739 record, 560 record date, 866 recordkeeping, FCPA and, 220 redeem, defined, 586 reformation, 419 refusals to deal, 957–958 registration requirements in Securities Act of 1934, 902 registration statement, 898 Regulation A, 896–897 Regulation D, 895–896 regulations, 10 rehabilitation, 923 rejection, termination of offer by, 261 rejection of goods, 539–540 releases, Securities and Exchange Commission, 892 reliance damages, 412 justifiable, 323 reliance interest, 412–413 defined, 412 promissory estoppel and, 412–413 remainder in future interests, 1094 remedies, 403–421 breaching a contract, 404–405 for buyer’s, 544–548 defined, 404 expectation interest, 405–411 injunction, 417–418 reformation, 419 reliance interest, 412–413 restitution interest, 413–416 for seller’s, 541–544 special issues of damages, 419–421 specific performance, 416–417 Uniform Commercial Code and, 410–411 removal of directors, 868–870 reorganization plan, Chapter 11 and, 938 repatriation of profits, 218 replacement workers, 750–752 reply, 53 reporting agencies, 991 reporting company, 902 repossession, 560 representation, as NLRB task, 736 representations and warranties, 442 repudiated, 374 repudiates, 541 requirements contract, 259–260 resale price maintenance (RPM), 968, 970 rescind, 282, 317, 382, 678 rescission, 414, 985 res ipsa loquitur, 165 Resource Conservation and Recovery Act (RCRA), 1017–1019 identifying hazardous wastes, 1019 solid waste, 1017–1018 tracking hazardous wastes, 1019 underground storage tanks, 1018 respondeat superior, 687 Restatement doctrine, accountants liability and, 655 restitution, 179–180, 317, 321 restitution interest, 413–416 defined, 414 quasi-contract cases and, 415–416 voidable contract cases and, 414–415 restricted security, 900 restricted stock, 895 restrictive indorsement, 602 retailers, controlling, 967–968 allocating customers and territory, 967 exclusive dealing agreements, 967–968 retirement plans, 872 returnable goods, 493–494 sale on approval, 493 sale or return, 493–494 reverse, 67 reverse and remand, 67 reversed, 47 reversion, 1094 reversionary interest, 1102 revocable trust, 1151 revocation of goods, 539 revoked, 260 rider, 443 rightful dissociation, 802–803 rights and obligations, contract performance See also perfect tender rule for buyer’s, 539–541 for seller’s, 532–538 rights of shareholders See shareholders, rights of right to a lawyer, 187 right to jury in criminal case, 180 right to jury trial, 61–62 right to sue letter, 720 right to work laws, 745 right vs wrongful dissociation, 802 risk, parties fail to allocate, 495–498 neither party breaches, 495–496 one party breaches, 496–498 risk of loss, 494–498 parties fail to allocate risk and, 495–498 shipping terms and, 494–495 risk-utility test, strict liability and, 523 Robinson-Patman Act (RPA), 959 Rule Against Perpetuities, 1153 rulemaking, administrative agencies and, 89–91 process for, 90–91 types of rules, 89–90 rule of reason violation, 953 rules of evidence, 64–65 S Safe Drinking Water Act, 1016 safe harbor, 895 sale of business and noncompete agreements, 301–302 sale on approval, 493 sale or return, 493–494 sales, 978–981 of assets, 876 bait-and-switch, 980 deceptive acts or practices, 978 defined, 457 door-to-door sales, 981 merchandise bought by mail, telephone, or online, 980 telemarketing, 980–981 unfair practices, 979–980 unordered merchandise, 981 sales, introduction to, 452–472 commercial law development, 452–456 contract formation, 458–472 Uniform Commercial Code basics, 456–458 sales contracts, international, 214–216 forum choices, 214 governing law for, 214 language and currency choices, 214–215 letter of credit, 215–216 sample or model as express warranty, 507 Sarbanes-Oxley Act (SOX), 648–649, 706, 874, 913 scandalous/immoral marks, 1076 S corporations, 766–767 scrivener’s error, 435 scrubbers, 1009 scrutiny economic or social issues and minimal, 122 gender and intermediate, 122–123 race, ethnicity, fundamental rights, and strict, 123 INDEX search, 91 search without a warrant, 182 secondary boycotts, 736 secondary liability, 620 secondary meaning in marks, 1075 secondary offering, 898 Section 10(b) of Securities Act of 1934, 904–909 Section 18 of Securities Act of 1934, 904 secured claims, 931 secured party, 559 secured transactions, 558–587 attachment and, 562–566 buyers protection and, 576–581 default and, 584–586 perfection and, 566–576 priorities among creditors and, 581–584 termination and, 587 Uniform Commercial Code Article and, 559–562 securities exempt, 894 sales of restricted, 900 selling unregistered, 900 Securities Act of 1933, 657–659, 893–902 exempt securities, 894 exempt transactions, 894–898 general exemption, 894 liability under, 900–902 public offerings, 898–899 sales of restricted securities, 900 Securities Act of 1934, 902–913 disclosure requirementsSection 13, 902–903 Dodd-Frank Wall Street Reform and Consumer Protection Act, 913 Facebook problem, 903 insider trading, 909–913 liability under, 904–909 proxy requirements, Section 14, 903–904 registration requirements, 902 Sarbanes-Oxley Act, 913 short-swing trading, Section 16, 904 Securities and Exchange Commission (SEC), 892–893 Securities Exchange Act, 659–661 fraud and, 659–660 inaccurate disclosure in a required filing, liability for, 659–661 joint and several liability, 661 whistleblowing, 660–661 securities regulation, 891–921 blue sky laws, 914–915 introduction, 892–893 Securities Act of 1933, 893–902 Securities Act of 1934, 902–913 Securities and Exchange Commission, 892–893 security, defined, 893 security agreement, 559 control, 900 defined, 893 deposits, 1107, 1108 interests, 369–370, 559 restricted, 900 seize, 91 self-dealing, 844–845 self-incrimination, criminal trial and, 185 seller’s remedies for breach of contract, 541–544 damages for non-acceptance, 543 identify goods to contract, 541–542 recover contract price, 543 resale of goods, 542 stop delivery, 541 seniority, as discrimination charge defense, 717 separate property, 1093 separation of powers, Constitution and, 104 series, 822 served, 45 service, 52 service marks, 1074 servient tenement, 1095 settlement offer, refusing to accept, 1158 settlor, defined, 1142 several liability in paying debts, 793–794 sewage, 1015–1016 sexual harassment, 718–720 categories of, 718–719 defined, 718 shareholders, 862–890 activists, 870 agreements in incorporation process, 829–830 direct lawsuits, 884 interests of, 938 introduction, 863–864 meetings, 866 model, 31 proposals, 867–868 rights plan, 852–853 shareholders, rights of, 864–880 derivative lawsuits, 880 enforcing, 880–883 right to dissent, 876 right to information, 864–865 right to monitor, 879 right to protection from other shareholders, 876–879 right to vote, 866–876 shark repellents, 852 shelter rule, holder in due course and, 608 Sherman Act, 951–952 shilling, 1051 shipment contract, risk of loss and, 495 shipping terms, risk of loss and, 494–495 short-swing trading, Section 16 of Securities Act of 1934, 904 short-term notes, 894 shrinkwrap notice, 264–267 sight draft, 597 signatory, 214 signature liability, 621–627 accommodation party and, 624–625 agent and, 625–627 defined, 619 drawee and, 622–623 drawer and, 621–622 indorser and, 623–624 maker and, 621 single forgery, 633 single recovery principle, 138 sit-down strike, 750 slander, 132 slander per se, 132 small business bankruptcy, 939 small company offering registration (SCOR), 915 social media, employee privacy and, 709–710 social security, 711–712 sole discretion, 440 sole proprietorship, 763 solid waste, 1017–1018 soot particles, 1011 sophisticated investors, 895 sound mind, defined, 1143 sovereign, 12 sovereign immunity, 219 spam, 1045–1046 spear phishing, 1052 special appearance, 45 special circumstances, as element of UCC statute of frauds, 352 I15 special indorsement, 602 specialty goods exception, Uniform Commercial Code statute of frauds, 461 specific performance, 416–417, 545 defined, 404 specific performance remedies, 416–417 spouse’s share in wills, 1144 springing power, 1147 spyware, 1045 staggered board of directors, 853 stakeholder ethics, 30–36 debate, 31 definitions, 31 responsibility to customers, 32–34 responsibility to employees, 31–32 responsibility to overseas workers, 34–36 stakeholder model, 31 stakeholders, 840 stare decisis, 9, 76 state antitakeover statutes, 855–856 state courts, 43–48 appellate courts, 47–48 personal jurisdiction, 45–46 subject matter jurisdiction, 45 trial courts, 43–44 state implementation plans (SIPs), 1007 state laws, whistleblowers and, 707 state legislative power, 106–107 state of mind, criminal procedure and, 181 state regulation of online privacy, 1044 of takeovers, 852 state regulation in blue sky laws, 914–915 exemption from, 914 facilitating, 914–915 status quo rule, 317–318 Statute of Frauds, 341 statute of limitations, 394 tort cases and, 524 warranty and, 519 statute of repose, 524–525 statutes, statutory control of administrative agency, 93 statutory law, 79–87 bills, 80 Congressional override, 86 I16 INDEX statutory law (continued) conservative Supreme Court and, 85–86 debate, 81–83 discrimination, 80–81 interpretation, 83–85 voters’ role, 86 statutory prohibition, 749 statutory protection for federal employees, whistleblowers and, 706–707 stock authorized and issued, 822 authorized and unissued, 822 classes, 822 common, 824 options, 871–872 preferred, 823–824 series, 822 treasury, 822 stock, charter’s required provisions and, 821–824 classes and series, 822–824 number of shares, 821–822 par value, 821 stop and frisk, as search without warrant circumstance, 182 straight bankruptcy, 924 straight life insurance, 1159 strict liability, 170–172, 522–525 defined, 170 model guidelines, 522–523 statute of repose, 524–525 time limits, 524–525 tort reform, 524 trends in, 523 ultrahazardous activity, 170–171 strict performance, 387–388 strikes, 749–750 cooling off period, 749 partial, 750 statutory prohibition, 749 violent, 750 subagent, 684 subcontracting, defined, 744 subject matter jurisdiction, 45 subpoena, 91 subpoena duces tecum, 91 subprime loans, 984 subsidiaries, 222 subsidized goods, 209 substantial effect rule, 105–106 Affordable Healthcare Act and, 106 substantial impairment, 536 substantial performance, 388–389 substantive due process, 121–122 sufficient to indicate, writing, 460 suggestive marks, 1075 summary judgment, 59–60 summons, 45 Superfund, 1019–1020 supermajority voting, 853 Supremacy Clause, 107 surplus, defined, 585 surprise, unconscionable contract and, 308 T takeovers, 850–856, 912 common law of takeovers, 852–855 federal regulation of tender offers, 851–852 state antitakeover statutes, 855–856 state regulation of, 852 Takings Clause, 119–120 tariffs, 208–209 classification and, 208 defined, 208 valuation and, 209 taxes corporations and, 765–766 in partnerships, 776 trusts and, 1150 telemarketing, 980–981 telephone, merchandise bought by, 980 temporarily irrevocable contracts, 261 tenancy in common, 1090–1091 by the entirety, 1093 period tenancy, 1102–1103 tenancy at sufferance, 1103 tenancy at will, 1103 tenancy for years, 1102 types of, 1102–1104 tenant, defined, 1101 tenant’s duties, 1108–1110 to mitigate damages, 1109–1110 not to damage premises, 1110 not to disturb other tenants, 1110 to pay rent, 1108–1110 to use premises for proper purpose, 1110 tenant’s liability, injuries and, 1111 tender offers, 851–852 tender the goods, 532 termination of contract offer, 260–262 by expiration, 261 by operation of law, 261–262 by rejection, 261 by revocation, 260 temporarily irrevocable contracts and, 261 termination of corporation, 834 termination of partnership, 808 termination payments, 872 termination statement, 587 term partnership, 802 territory, allocating, 967 testamentary trust, 1151 testator or testatrix, defined, 1141 textual harassment, 719 theft of honest services, 192 third party beneficiary, 362–365 defined, 362 incidental beneficiary, 364–365 intended beneficiary, 362–364 tied product, 966 time, place, manner of speech, First Amendment and, 114 time draft, 597 time of the essence clause, 392 tippers and tippees, 911 title contract, 437 defined, 481 existence and, 482 identification and, 483 imperfect, 487–492 passing of, 484 voidable, 481, 488 Title VII of the Civil Rights Act, 713–721 affirmative action, 718 color, 716 defenses to discrimination charges, 717–718 parenthood, 721 pregnancy, 721 procedures and remedies, 720–721 proof of discrimination, 713–716 religion, 717 retaliation, 717 sexual harassment, 718–720 transgender, 716 tort, defined, 131 See also business torts; damages; intentional torts tort cases, statute of limitations in, 524 tortious interference with business relations, 145 with a contract, 145–147 with a prospective advantage, 147 tort law, employment, 704–706 defamation, 704–705 intentional infliction of emotional distress, 705–706 tort liability, 793 tort reform, 524 torts, agent’s liability for, 692 torts, principal’s liability for, 687–692 employee, 687–688 intentional torts, 690–691 physical or nonphysical harm, 691–692 scope of employment, 688–690 Toxic Substances Control Act (TSCA), 1021 tracing, defined, 646 tracking tools, 1036–1037 trade acceptance, 597 trade dress, 1075 trade fixtures, 1110 Trademark Law Treaty, 1080 trademarks, 1074–1080 defined, 1074 domain names, 1078–1079 Federal Trademark Dilution Act, 1078 infringement, 1076–1077 international trademark treaties, 1080 ownership and regulation, 1074 types of marks, 1074 valid, 1075–1076 trade regulation, 207–213 export controls, 207 import controls, 208–209 treaties, 210–213 trade secrets, 1080–1082 trading emissions allowances, 1009 transaction value, 209 transferability of interests, corporations and, 764 transfer warranties, liability and, 628–630 treasure trove, 1124 treasury stock, 822 treaties, 10 treaties, trade regulation and, 210–213 child labor, 211–212 European Union, 213 INDEX General Agreement on Tariffs and Trade, 210–211 North American Free Trade Agreement, 212 treble damages, 198 trespass, 137 trespasser, 160 trial, dispute resolution and, 61–66 adversary system, 61 burden of proof, 63–64 closing arguments, 66 defendant’s case, 65 directed verdict, motion for, 65 jury instructions, 66 motions after verdict, 66 opening statements, 63 plaintiff’s case, 64 right to jury trial, 61–62 rules of evidence, 64–65 verdict, 66 voir dire, 62 trial and appeal, 188 trial courts, 43–44 federal, 49 of general jurisdiction, 45 of limited jurisdiction, 45 true impossibility, 394–395 trustee, 927, 1149 trust property, 1149 trusts, 1149–1153 administration of, 1151 advantages and disadvantages of, 1150–1151 defined, 1149 termination of, 1153 types of, 1151 truth in hiring, contract law and, 703–704 Truth in Lending Act (TILA), 982–983 applicability, 982 disclosure in, 982–983 tying arrangements, 966–967 tying product, 966 typos, as common contract mistake, 434–436 U ultrahazardous activity, 170–171 Ultramares doctrine, accountants liability and, 654 ultra vires doctrine, 821 unauthorized agent, 686–687 unauthorized completion, as personal defense, 609 unconscionable, 457, 516 unconscionable contracts, 307–310 adhesion contracts and, 308–308 defined, 307 Uniform Commercial Code and, 309–310 underground storage tanks, 1018 undisclosed principal, 685–686 undue influence consent and, 331–333 defined, 1143 unenforceable agreement, 235 unfair labor practices NLRB and, 736 strike, replacement workers and, 750–751 unfair practices, 979–980 unforeseen circumstances, as consideration exception, 284 unidentified principal, 685 Uniform Anatomical Gift Act (UAGA), 1148 Uniform Commercial Code (UCC), 242–244, 456–472 accord and satisfaction using checks, 287 added terms, section 2-207, 462–466 additional or different contract terms and, 263–264 additional terms, 462–464 Article 9, 559–562 Article 2, scope of, 456–457 assignment of security interests, 369–371 basic rule, 350 buyer’s remedies for breach of contract, 410–411 consideration in output contract, 280–281 consideration in requirements contract, 280–281 contract formation, Section 2204, 458–460 different terms, 462, 464 enforceable only to quantity stated, 460 exceptions, 461 gap-filler provisions and, 259–260 good faith and, 532 good faith and unconscionability, 457–458 for goods worth $500 or more, 460 incorrect or omitted terms, 460 intention, 462 merchants, 457 merchants’ exception, 350–352 mixed contracts, 457 modification, 470–472 open prices, 466 open terms, 259–260, 466–469 output and requirements contracts, 468–469 perfect tender rule and, 533–538 purpose of code, 456 sellers obligations, 538 seller’s remedies for breach of contract, 410 special circumstances, 352 statute of frauds, 460–462 unconscionability law and, 309–310 writing sufficient to indicate, 460 written contract requirements, 349–353 Uniform Domain Name Dispute Resolution Policy (UDRP), 1079 Uniform Limited Offering Exemption, 915 Uniform Trade Secrets Act (UTSA), 1080 unilateral contract, 234–235 unilateral mistake, 327–329 uninsured motorist insurance coverage, 1162 union, organizing, 738–743 actions, 740–742 bargaining unit and, 743 employers rights, 741–742 exclusivity, 738–739 stages, 739–740 workers rights, 740 union shop, 745 United Nations Convention on Contracts for the International Sale of Goods (CISG), 214 United States Constitution as contemporary law, source, 7–9 United States court of appeals, 49–50 United States district court, 49 United States law, United States Supreme Court, 50–51 U.S Trustee, 927 unlimited hours of work, age and, 711 I17 unliquidated debt, debt settlement and, 285–287 accord and satisfaction by check, 285–286 Uniform Commercial Code and, 287 unorderd merchandise, 981 unqualified opinion, 647 unsecured claims, 932 usage of trade, perfect tender rule and, 533 usury, 299–300 utilitarian ethics, 28 utility patent, 1061–1062 business method patents, 1061–1062 living organism patents, 1062 utter, defined, 636 V vagueness as common contract mistake, 431–433 written contracts and, 347–348 valid contract, 235 valid trademarks, 1075–1076 value act as, 276 attachment and, 565 consideration and, 276–278 defined, 604 forbearance as, 276–277 holder in due course and, 604 verdict, 66 vertical cooperative strategies, 954, 958–960 price discrimination, 959–960 reciprocal dealing agreements, 958 vertical maximum price fixing, 970 vertical mergers, 962 vesting of benefits, 712 veto, 80 violation of international law, sovereign immunity and, 219 violent strikes, 750 voidable contract, 235 voidable contracts, 316–333 capacity and, 317–321 consent and, 321–333 restitution interest and, 414–415 voidable preferences in bankruptcy estate, 929–930 I18 INDEX voidable title, 481, 488 void agreement, 235 voir dire, 62 voluntarily action, as affirmative action source, 718 voluntary act, state of mind and, 181 voluntary petition, 925–926 voting, cumulative, 825–826 voting rights of shareholders, 866–876 compensation for officers and directors, 870–876 corporate changes, 876 election and removal of directors, 868–870 proxies, 866–867 shareholder meetings, 866 shareholder proposals, 867–868 vouching, defined, 646 W wagers as contracts violating a statute, 296–297 Wagner Act, 700 waiver, sovereign immunity and, 219 waiver clause, 370 warrant, Fourth Amendment rights and, 181–182 warranties and product liability, 505–525 disclaimers and defenses, 513–519 express warranties, 506–509 implied warranties, 509–512 negligence, 520–521 other legislation, 525 strict liability, 522–525 warranty, 506 warranty liability, 627–632 defined, 619 presentment warranties and, 631–632 rules of, 627–628 signature liability and, 630 transfer warranties and, 628–630 waste disposal, 1017–1020 Resource Conservation and Recovery Act, 1017–1019 Superfund, 1019–1020 water pollution, 1012–1016 Clean Water Act, 1013 Ocean Dumping Act, 1016 Oil Pollution Act, 1016 Safe Drinking Water Act, 1016 water quality standards, 1015 wetlands, 1015 whipsaw strike, 753 whistleblowing, 660–661, 706–707 white knight, 853 Williams Act, 851–852 wills, 1142–1149 amending, 1147 anatomical gifts and, 1148 children’s share, 1144–1146 holographic, 1144 intestacy and, 1147 legal technicalities in, 1143–114 living wills and, 1148–1149 nuncupative, 1144 power of attorney and, 1147 probate and, 1147–1148 property not transferred by, 1148 requirements for, 1143 spouse’s share, 1144 wire fraud, 192 with reserve, auctions, 256 workers’ compensation, 711 working papers and, 662–663 workplace crimes, 196 workplace safety, 707–708 World Trade Organization (WTO), 210 writ of certiorari, 50 written consent, 826–827 written contracts, 339–355 agreements for interest in land, 342–344 agreements that cannot be performed within one year, 344–345 components of, 347–349 electronic contracts and signatures, 349 parol evidence rule, 353–355 promise made by executor of estate, 346 promise made in consideration of marriage, 346–347 promise to pay debt of another, 345–346 reasonable certainty, 347–349 signature, 347 Uniform Commercial Code requirements, 349–353 written express warranties, disclaimers and, 513 wrongful accession, 1125–1126 wrongful discharge, 701–703 defined, 701 exercising a legal right as, 702 performing legal duty as, 702 refusing to violate the law as, 701–702 supporting societal values as, 702–703 wrongful dissociation, 803–804 Z zoning, 1100–1101 At Cengage Learning, we pride ourselves on being your Partner in Practice To support our mission of transforming learning in Business Law, we offer valuable teaching and learning tools, such as: CengageBrain offers Business Law students a variety of choices about how to purchase materials for this course The Digital Video Library helps students link their everyday experiences to legal ideas, spark classroom discussion, and reinforce core concepts CourseMate brings course concepts to life with interactive learning, study, and exam preparation tools that support the printed textbook www.cengagebrain.com http://wdvl.westbuslaw.com www.cengage.com/coursemate Bizlawupdate.com Bi l d Looking for new examples for class? Want to know the latest developments? Visit Bizlawupdate.com Organized by topic, easy to navigate, and maintained by author Susan Samuelson www.bizlawupdate.com If you have questions, your sales rep is here to support you, or feel free to reach the Business Law team directly on our Business Law hotline at 800-946-BLAW Visit our website at www.cengage.com/community/blaw ... fees: $28 .09 for the oil change, $20 for the returned check, $25 for the legal notice in the newspapers, $21 .24 per day for storage—plus, of course, the $550 repossession fee.30 Is that legal? ... first 31 UCC §9- 322 (a) (2) UCC §9- 322 (a)(3) 33 UCC §9- 322 (a)(1) 32 Secured Transactions 581 5 82 UNIT Additional CPA Topics March 1: April 2: May 3: The Winner: First Bank loans money and perfects... transferred to the holder by someone other than the issuer If the issuer has transferred the instrument to the holder, then it has not been negotiated and the issuer can refuse to pay the holder if there