Ebook Business law today (11/E): Part 2

(BQ) Part 1 book Business law today has contents: Agency relationships in business, employment law, creditors’ rights and bankruptcy, negotiable instruments, banking in the digital age, the entrepreneur’s options, personal property, bailments, and insurance,... and other contents.

www.downloadslide.net 14 CHAPTER OUTLINE ▪▪ Requirements for Negotiability ▪▪ Transfer of Instruments ▪▪ Holder in Due Course (HDC) ▪▪ Signature and Warranty Liability ▪▪ Defenses, Limitations, and Discharge iStockPhoto.com/bluestocking ▪▪ Types of Negotiable Instruments Negotiable Instruments LEARNING OBJECTIVES The five Learning Objectives below are designed to help improve your understanding of the chapter After reading this chapter, you should be able to answer the following questions: What requirements must an instrument meet to be negotiable? How does the negotiation of order instruments differ from the negotiation of bearer instruments? What are the requirements for attaining the status of a holder in due course (HDC)? What is the difference between signature liability and warranty liability? Name four defenses that can be used against an ordinary holder but are not effective against an HDC Negotiable Instrument  A signed writing (record) that contains an unconditional promise or order to pay an exact sum on demand or at a specified future time to a specific person or order, or to bearer Most commercial transactions would be inconceivable “It took many without negotiable instruments A negotiable instrument generations for people is a signed writing that contains an unconditional promise or order to pay an exact amount, either on demand or to feel comfortable at a specified future time Because negotiable instruments accepting paper in lieu originally were (and often still are) paper documents, of gold or silver.” they are sometimes referred to as commercial paper As indicated in the chapter-opening quotation, paper Alan Greenspan 1926–present was not fully accepted as a substitute for gold or silver (Chair of the Board of Governors in commerce for “many generations.” Today, people are of the Federal Reserve System, experiencing a similar transition as electronic records 1987–2006) substitute more and more for paper documents A negotiable instrument can function as a substitute for cash or as an extension of credit For a negotiable instrument to operate practically as either a substitute for cash or a credit device, or both, it is essential that the instrument be easily transferable without danger of being uncollectible Each rule described in this chapter can be examined in light of this essential function of negotiable instruments 14–1   Types of Negotiable Instruments The UCC specifies four types of negotiable instruments: drafts, checks, promissory notes, and certificates of deposit (CDs) These instruments, which are summarized briefly in Exhibit 14–1, are frequently divided into the two classifications that we will discuss in the following subsections: orders to pay (drafts and checks) and promises to pay (promissory notes and CDs) 376 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net 377 CHAPTER 14: Negotiable Instruments Negotiable instruments may also be classified as either demand instruments or time instruments A demand instrument is payable on demand In other words, it is payable immediately after it is issued and for a reasonable period of time thereafter A time instrument is payable at a future date Note that Section 3–104(b) of the Uniform Commercial Code (UCC) defines instrument as a “negotiable instrument.”1 For that reason, whenever the term instrument is used in this book, it refers to a negotiable instrument 14–1a  Drafts and Checks (Orders to Pay) A draft is an unconditional written order to pay rather than a promise to pay Drafts involve three parties The party creating the draft (the drawer) orders another party (the drawee) to pay funds, usually to a third party (the payee) The most common type of draft is a check, but drafts other than checks may be used in commercial transactions Draft  Any instrument drawn on a drawee that orders the drawee to pay a certain amount of funds, usually to a third party (the payee), on demand or at a definite future time Time Drafts versus Sight Drafts  A time draft is payable at a definite future time A sight draft (or demand draft) is payable on sight—that is, when it is presented to the drawee (usually a Drawer  The party that initiates bank or financial institution) for payment A draft can be both a time and a sight draft Such a draft (such as a check), thereby ordering the drawee to pay a draft is payable at a stated time after sight (a draft that states it is payable ninety days after Drawee  The party that is sight, for instance) Exhibit 14–2 shows a typical time draft For the drawee to be obligated to honor (pay) the ordered to pay a draft or check With a check, a bank or a financial order, the drawee must be obligated to the drawer either by agreement or through a debtor-­ institution is always the drawee creditor relationship EXAMPLE 14.1 On January 16, OurTown Real Estate orders $1,000 worth of office supplies from Eastman Supply Company, with payment due in ninety days Also on Payee  A person to whom an instrument is made payable January 16, OurTown sends Eastman a draft drawn on its account with the First National Bank of Whiteacre as payment In this scenario, the drawer is OurTown, the drawee is OurTown’s bank (First National Bank of Whiteacre), and the payee is Eastman Supply Company n Acceptances  A drawee’s written promise to pay a draft when it comes due is called an acceptance Usually, the drawee accepts the instrument by writing the word accepted on its face, with a signature and a date A drawee who has accepted an instrument becomes an acceptor A trade acceptance is a type of draft commonly used in the sale of goods In this draft, the seller is both the drawer and the payee The buyer to whom credit is extended is the Note that all of the references to Article of the UCC in this chapter are to the 1990 version of Article 3, which has been adopted by nearly every state Acceptance  In negotiable instruments law, a drawee’s signed agreement to pay a draft when it is presented Acceptor  A drawee that accepts, or promises to pay, an instrument when it is presented later for payment Exhibit 14–1  Basic Types of Negotiable Instruments INSTRUMENTS CHARACTERISTICS PARTIES Draft An order by one person to another person or to bearer [UCC 3–104(e)] Drawer—The person who signs or makes the order to pay [UCC 3–103(a)(3)] Check A draft drawn on a bank and payable on demand [UCC 3–104(f)] (With certain types of checks, such as cashier’s checks, the bank is both the drawer and the drawee.) Drawee—The person to whom the order to pay is made [UCC 3–103(a)(2)] Payee—The person to whom payment is ordered ORDERS TO PAY: PROMISES TO PAY: Promissory note A promise by one party to pay funds to another party or to bearer [UCC 3–104(e)] Certificate of deposit A note issued by a bank acknowledging a deposit of funds and made payable to the holder of the note [UCC 3–104(j)] Maker—The person who promises to pay [UCC 3–103(a)(5)] Payee—The person to whom the promise is made Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net 378 Business Law Today: The Essentials Exhibit 14–2  A Typical Time Draft Whiteacre, Minnesota Payee January 16 20 17 $ Ninety days after above date DRAFT PAY TO THE ORDER OF Eastman Supply Company One thousand and no/100 DOLLARS VALUE RECEIVED AND CHARGE THE SAME TO ACCOUNT OF Our Town Real Estate To First National Bank of Whiteacre By Whiteacre, Minnesota Drawee “The two most beautiful words in the English language are ‘check enclosed.’” Dorothy Parker 1893–1967 (American author and poet) Check  A draft drawn by a drawer ordering the drawee bank or financial institution to pay a certain amount of funds to the payee on demand Promissory Note  A written promise made by one person (the maker) to pay a fixed amount of funds to another person (the payee or a subsequent holder) on demand or on a specified date Maker  One who promises to pay a fixed amount of funds to the holder of a promissory note or a certificate of deposit (CD) Jane Adams Drawer drawee EXAMPLE 14.2 Jackson Street Bistro buys its restaurant supplies from Osaka Industries When Jackson requests supplies, Osaka creates a draft ordering Jackson to pay Osaka for the supplies within ninety days Jackson accepts the draft by signing its face, which obligates it to make the payment This is a trade acceptance, and Osaka can sell it to a third party at any time before the payment is due n A banker’s acceptance is a similar instrument that orders the buyer’s bank to pay Banker’s acceptances are often used in international trade Checks  As mentioned, the most commonly used type of draft is a check The writer of the check is the drawer, the bank on which the check is drawn is the drawee, and the person to whom the check is payable is the payee Checks are demand instruments because they are payable on demand 14–1b  Promissory Notes (Promises to Pay) A promissory note is a written promise made by one person (the maker of the promise to pay) to another (usually a payee) A promissory note, which is often referred to simply as a note, can be made payable at a definite time or on demand It can name a specific payee or merely be payable to bearer (bearer instruments will be discussed later in this chapter) EXAMPLE 14.3 On April 30, Laurence and Margaret Roberts sign a writing unconditionally promising to pay “to the order of” the First National Bank of Whiteacre $3,000 (with percent interest) on or before June 29 This writing is a promissory note n A typical promissory note is shown in Exhibit 14–3 Promissory notes are used in a variety of credit transactions Often, a promissory note will carry the name of the transaction involved A note secured by personal property, such as an automobile, is referred to as a collateral note because property pledged as security for the satisfaction of a debt is called collateral.2 A note payable in installments, such as installment payments for a large-screen television over a twelve-month period, is called an installment note To minimize the risk of loss when making a loan, a creditor often requires the debtor to provide some collateral, or security, beyond a promise that the debt will be repaid When this security takes the form of personal property (such as a motor vehicle), the creditor has an interest in the property known as a security interest Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net 379 CHAPTER 14: Negotiable Instruments Exhibit 14–3  A Typical Promissory Note $ 20 17 Whiteacre, Minnesota Due 6/29/17 after date for value received, the undersigned jointly and severally promise to pay to the order of THE FIRST NATIONAL BANK OF WHITEACRE at its office in Whiteacre, Minnesota, $ dollars with interest thereon from date hereof at the rate of percent per annum (computed on the basis of actual days and a year of 360 days) indicated in No EQUIP SAVINGS INSURANCE SECURITIES OTHER SEC AGREEMENT INV & ACCTS CONSUMER GOODS Payee NO OFFICER BY ACCRUAL NEW REN’L SECURED UNSECURED below INTEREST IS PAYABLE AT MATURITY INTEREST IS PAID TO MATURITY INTEREST IS PAYABLE BEGINNING ON SIGNATURE SIGNATURE SIGNATURE SIGNATURE 20 Co-makers 14–1c  Certificates of Deposit (Promises to Pay) A certificate of deposit (CD) is a type of note issued when a party deposits funds with a bank that the bank promises to repay, with interest, on a certain date [UCC 3–104(j)] The bank is the maker of the note, and the depositor is the payee EXAMPLE 14.4 On February 15, Sara Levin deposits $5,000 with the First National Bank of Whiteacre The bank issues a CD, in which it promises to repay the $5,000, plus 1.85 percent annual interest, on August 15 n Because CDs are time deposits, the purchaser-payee typically is not allowed to withdraw the funds before the date of maturity (except in limited circumstances, such as disability or death) If a payee wants to access the funds prior to the maturity date, he or she can sell (negotiate) the CD to a third party Certificates of deposit in small denominations (for amounts up to $100,000) are often sold by savings and loan associations, savings banks, commercial banks, and credit unions Exhibit 14–4 shows an example of a small CD Certificate of Deposit (CD)  A note issued by a bank in which the bank acknowledges the receipt of funds from a party and promises to repay that amount, with interest, to the party on a certain date Exhibit 14–4  A Sample Certificate of Deposit 13992 THE FIRST NATIONAL BANK OF WHITEACRE NEGOTIABLE CERTIFICATE OF DEPOSIT Payee (Bearer) WHITEACRE, MINN 20 17 THIS CERTIFIES to the deposit in this Bank the sum of $ DOLLARS 17 against presentation and surrender of this certificate, and which is payable to bearer on the day of , 20 1.85 % per annum, to be computed (on the basis of 360 days and actual days elapsed) to, and payable at, bears interest at the rate of maturity No payment may be made prior to, and no interest runs after, that date Payable at maturity in federal funds, and if desired, at Manufacturers Hanover Trust Company, New York THE FIRST NATIONAL BANK OF WHITEACRE By S I G N AT U R E Maker Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net 380 Business Law Today: The Essentials 14–2   LEARNING OBJECTIVE What requirements must an instrument meet to be negotiable? Requirements for Negotiability For an instrument to be negotiable, it must meet the following requirements: Be in writing Be signed by the maker or the drawer Be an unconditional promise or order to pay State a fixed amount of money Be payable on demand or at a definite time Be payable to order or to bearer, unless the instrument is a check 14–2a  Written Form Negotiable instruments must be in written form (but may be evidenced by an electronic record) [UCC 3–103(a)(6), (9)].3 This is because negotiable instruments must possess the quality of certainty that only formal, written expression can give The writing must have the following qualities: The writing must be on material that lends itself to permanence Instruments carved in blocks of ice or recorded on other impermanent surfaces would not qualify as negotiable instruments EXAMPLE 14.5 Suzanne writes in the sand, “I promise to pay $500 to the order of Jack.” This cannot be a negotiable instrument, because it lacks permanence n The writing must also have portability Although the UCC does not explicitly state this requirement, if an instrument is not movable, it obviously cannot meet the requirement that it be freely transferable EXAMPLE 14.6 Charles writes on the side of a cow, “I promise to pay $500 to the order of Jason.” Technically, this would meet the requirements of a negotiable instrument—except for portability A cow cannot easily be transferred in the ordinary course of business Thus, the “instrument” is nonnegotiable n The UCC nevertheless gives considerable leeway as to what can be a negotiable instrument Courts have found checks and notes written on napkins, menus, tablecloths, shirts, and a variety of other materials to be negotiable iStockPhoto.com/Karpiyon 14–2b  Would a promise to pay written on the side of this calf be negotiable? Why or why not? “I’m a writer I write checks They’re not very good.” Signatures For an instrument to be negotiable, it must be signed by (1) the maker, if it is a note or a certificate of deposit, or (2) the drawer, if it is a draft or a check [UCC 3–103(a)(3)] If a person signs an instrument as an authorized agent of the maker or drawer, the maker or drawer has effectively signed the instrument The UCC is quite lenient with regard to what constitutes a signature Nearly any symbol executed or adopted by a person with the intent to authenticate a written or electronic document can be a signature [UCC 1–201(37)] A signature can be made by a device, such as a rubber stamp, or by a thumbprint, and can consist of any name, including a trade name, or a word, mark, or symbol [UCC 3–401(b)] If necessary, parol evidence is admissible to identify the signer The location of the signature on the document is unimportant, although the usual place is the lower right-hand corner A handwritten statement on the body of the instrument, such as “I, Jerome Garcia, promise to pay Elena Greer,” is sufficient to act as a signature Wendy Liebman 1961–present (American comedian) Under the Uniform Electronic Transactions Act (UETA), an electronic record may be sufficient to constitute a negotiable instrument (see UETA Section 16) A small number of states have also adopted amendments to Article that explicitly authorize electronic negotiable instruments Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net 381 CHAPTER 14: Negotiable Instruments Although there are almost no limitations on the manner in which a signature can be made, one should be careful about receiving an instrument that has been signed in an unusual way.  Oddities on a negotiable instrument can open the door to disputes and lead to litigation Furthermore, an unusual signature clearly decreases the marketability of an instrument because it creates uncertainty 14–2c  Unconditional Promise or Order to Pay For an instrument to be negotiable, it must contain an express order or promise to pay The terms of the promise or order must be included in the writing on the face of the instrument Furthermore, these terms must be unconditional Promise  The UCC requires that a promise be an affirmative (express) undertaking [UCC 3–103(a) (9)] A mere acknowledgment of a debt, such as an I.O.U., might logically imply a promise, but it is not sufficient under the UCC If such words as “to be paid on demand” or “due on demand” are added to an I.O.U., however, the need for an express promise to pay is satisfied.4 EXAMPLE 14.7 Kyra executes a promissory note that says “I promise to pay Alvarez $1,000 on demand for the purchase of these goods.” These words satisfy the promise-to-pay requirement. n KNOW THIS Negotiable instruments are classified as promises to pay or orders to pay Order  An order is associated with three-party instruments, such as checks, drafts, and trade acceptances An order directs a third party to pay the instrument as drawn In the typical check, for instance, the word “pay” (to the order of a payee) is a command to the drawee bank to pay the check when presented—thus, it is an order “Pay” signifies an order even if it is accompanied by courteous words, as in “Please pay” or “Kindly pay.” (In contrast, “I wish you would pay” is not an order.) An order may be addressed to one party or to more than one party, either jointly (“to A and B”) or alternatively (“to A or B”) [UCC 3–103(a)(6)] Unconditionality of Promise or Order  Only unconditional promises or orders can be negotiable [UCC 3–106(a)] A promise or order is conditional (and therefore not negotiable) if it states any of the following: A mere reference to another writing, however, does not make the promise or order conditional [UCC 3–106(a)] For instance, the words “As per contract” or “This debt arises from the sale of goods X and Y” not render an instrument nonnegotiable Similarly, a statement in the instrument that payment can be made only out of a particular fund or source will not render the instrument nonnegotiable [UCC 3–106(b)(ii)] EXAMPLE 14.8 The terms of Biggs’s note state that payment will be made out of the proceeds of next year’s cotton crop This does not make the note nonnegotiable The payee of such a note, however, may find the note commercially unacceptable and refuse to take it n iStockPhoto.com/PeterMuller An express condition to payment That the promise or order is subject to or governed by another writing or record That the rights or obligations with respect to the promise or order are stated in another writing or record If a note indicates that payment will be made out of the proceeds of the following year’s cotton crop, is that note still negotiable? A certificate of deposit (CD) is an exception in this respect A CD does not have to contain an express promise, because the bank’s acknowledgment of the deposit and the other terms of the instrument clearly indicate a promise by the bank to repay the funds [UCC 3–104(j)] Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net 382 Business Law Today: The Essentials In the following case, two notes signed to finance the purchase of a pair of alpacas contained references to the underlying contracts The court had to determine whether the notes qualified as negotiable instruments Case 14.1 Alpacas of America, LLC v Groome Court of Appeals of Washington, Division 2, 317 P.3d 1103 (2014) REASON  The Groomes argued that the notes contracts with Alpacas of America, LLC (AOA) to were not negotiable for three reasons First, each buy a pair of alpacas—“Phashion Model” and “Black note stated that its indebtedness arose “pursuant Thunder’s Midnight.” To finance the purchases, the to” one of the contracts UCC 3–106(a), however, buyers signed two notes, one for $18,750 and the provides that “a reference to another writing does other for $20,250 Each note included a reference not of itself make the promise or order condito a contract, outlined a payment schedule, and tional.” The words “pursuant to” were only part contained a security agreement that gave AOA an of a reference to another writing—they did not Is a note for funds to purchase interest in the alpacas Within a few months, the condition the promise to pay contained in the alpacas negotiable? Groomes stopped making payments notes Second, each note contained a security More than four years later, AOA filed a suit in a Washington state agreement that referred to its underlying contract as the source to court against the Groomes to collect the unpaid amounts The court be consulted to determine the property (collateral) covered by the ruled that the notes were not negotiable instruments but were part agreement But UCC 3–106(b) states that a promise is not made of the sales contracts It thus applied the four-year statute of limita- conditional by a “reference to another writing for a statement of tions on contract actions in UCC Article to dismiss the suit AOA rights with respect to collateral.” Finally, the note to finance the appealed, arguing that the notes were negotiable and thus fell within purchase of Black Thunder’s Midnight referred to the underlying the six-year limit on actions to collect under UCC Article contract as the source to be consulted to determine the procedure for giving notice to collect Again, though, this language did not conISSUE  Were the notes negotiable despite containing references to dition the promise to pay the underlying contracts? WHAT IF THE FACTS WERE DIFFERENT?  If AOA’s suit had fallen DECISION  Yes A state intermediate appellate court reversed the within the four-year statute of limitations of UCC Article 2, could the ruling of the lower court The notes contained unconditional promseller have filed its claim on either the contracts or the notes? Explain ises to pay Because the notes were negotiable, they were subject to Article 3’s six-year limit on actions to collect, and AOA could go forward with its claim iStockPhoto.com/terrasprite FACTS  Sam and Odalis Groome entered into two 14–2d  KNOW THIS Interest payable on an instrument normally cannot exceed the maximum limit on interest under a state’s usury statute A Fixed Amount of Money Negotiable instruments must state with certainty a fixed amount of money to be paid at any time the instrument is payable [UCC 3–104(a)] This requirement ensures that the value of the instrument can be determined with clarity and certainty The term fixed amount means an amount that is ascertainable from the face of the instrument A demand note payable with percent interest meets the requirement of a fixed amount because its amount can be determined at the time it is payable or at any time thereafter [UCC  3–104(a)] The rate of interest may also be determined from information that is not contained in the instrument itself but described by it, such as a formula or a source [UCC 3–112(b)] For instance, an instrument that is payable at the legal rate of interest (a rate of interest fixed by statute) is negotiable Mortgage notes tied to a variable rate of interest (a rate that fluctuates as a result of market conditions) are also negotiable UCC 3–104(a) provides that a fixed amount is to be payable in money The UCC defines money as “a medium of exchange authorized or adopted by a domestic or foreign government Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net 383 CHAPTER 14: Negotiable Instruments as a part of its currency” [UCC 1–201(24)] Gold is not a medium of exchange adopted by the U.S government, so a note payable in gold is nonnegotiable An instrument payable in the United States with a face amount stated in a foreign currency is negotiable, however, and can be paid in the foreign currency or in the equivalent amount of U.S dollars [UCC 3–107] 14–2e  Payable on Demand or at a Definite Time A negotiable instrument must “be payable on demand or at a definite time” [UCC 3–104(a) (2)] To determine the instrument’s value, it is necessary to know when the maker, drawee, or acceptor is required to pay It is also necessary to know when the obligations of secondary parties, such as indorsers,5 will arise Furthermore, it is necessary to know when an instrument is due in order to calculate when the statute of limitations may apply [UCC 3–118(a)] Finally, with an interest-bearing instrument, it is necessary to know the exact interval during which interest will accrue to determine the instrument’s present value Payable on Demand  Instruments that are payable on demand include those that contain the words “Payable at sight” or “Payable upon presentment.” Presentment is a demand made by or on behalf of a person entitled to enforce an instrument to either pay or accept the instrument [UCC 3–501] Thus, presentment occurs when a person offers the instrument to the appropriate party for payment or acceptance For instance, when a person brings to the bank a check to obtain cash, it is presented it for payment When a person brings to the bank a draft that states it is “payable ninety days after sight,” it is presented for acceptance Acceptance of the draft essentially guarantees that the person will receive payment after the ninety days has elapsed The very nature of the instrument may indicate that it is payable on demand For instance, a check, by definition, is payable on demand [UCC 3–104(f)] If no time for payment is specified and the person responsible for payment must pay on the instrument’s presentment, the instrument is payable on demand [UCC 3–108(a)] CASE EXAMPLE 14.9 National City Bank gave Reger Development, LLC, a line of credit to finance potential development opportunities Reger signed a promissory note requiring it to “pay this loan in full immediately upon Lender’s demand.” About a year later, the bank asked Reger to pay down the loan and stated that it would be reducing the amount of cash available through the line of credit Reger sued, alleging that the bank had breached the terms of the note The court ruled in the bank’s favor The promissory note was a demand instrument because it explicitly set forth the lender’s right to demand payment at any time Thus, National City had the right to collect payment from Reger at any time on demand.6 n Presentment  The act of presenting an instrument to the party liable on the instrument in order to collect payment Presentment also occurs when a person presents an instrument to a drawee for a required acceptance Payable at a Definite Time  If an instrument is not payable on demand, to be negotiable it must be payable at a definite time An instrument is payable at a definite time if it states any of the following: That it is payable on a specified date That it is payable within a definite period of time (such as thirty days) after presentment That it is payable on a date or time readily ascertainable at the time the promise or order is issued [UCC 3–108(b)] The maker or drawee in a time draft is under no obligation to pay until the specified time When an instrument is payable by the maker or drawer on or before a stated date, it is clearly payable at a definite time The maker or drawer has the option of paying before the stated maturity date, but the payee can still rely on payment being made by the maturity date EXAMPLE 14.10 Ari gives Ernesto an instrument dated May 1, 2016, that indicates on We should note that the UCC uses the spelling indorse (indorsement, and the like), rather than the more common spelling endorse (endorsement, and the like) We follow the UCC’s spelling here and in other chapters in this text Reger Development, LLC v National City Bank, 592 F.3d 759 (2010) Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net 384 Business Law Today: The Essentials its face that it is payable on or before May 1, 2017 This instrument satisfies the definite-time requirement n In contrast, an instrument that is undated and made payable “one month after date” is clearly nonnegotiable There is no way to determine the maturity date from the face of the instrument If the date is uncertain, the instrument is not payable at a definite time EXAMPLE 14.11 An instrument that states, “One year after the death of my grandfather, Jerome Adams, I promise to pay $5,000 to the order of Lucy Harmon [Signed] Jacqueline Wells,” is nonnegotiable The date on which the instrument becomes payable is uncertain n Acceleration Clause  A clause that allows a payee or other holder of a time instrument to demand payment of the entire amount due, with interest, if a certain event occurs, such as a default in the payment of an installment when due Holder  Any person in possession of an instrument drawn, issued, or indorsed to him or her, to his or her order, to bearer, or in blank Extension Clause  A clause in a time instrument that allows the instrument’s date of maturity to be extended into the future Acceleration Clause  An acceleration clause allows a payee or other holder of a time instrument to demand payment of the entire amount due, with interest, if a certain event occurs (A holder is any person in possession of an instrument drawn, issued, or indorsed to him or her, to his or her order, to bearer, or in blank [UCC 1–201(20)].) EXAMPLE 14.12 Marta lends $1,000 to Ruth, who makes a negotiable note promising to pay $100 per month (plus interest) for ten months The note contains an acceleration provision that permits Marta or any holder to immediately demand all the payments plus the interest owed to date if Ruth fails to pay an installment Ruth fails to make the third payment Marta accelerates the unpaid balance, and the note becomes due and payable in full Ruth owes Marta the remaining principal plus any unpaid interest to that date n Instruments that include acceleration clauses are negotiable because the exact value of the instrument can be ascertained In addition, the instrument will be payable on a specified date if the event allowing acceleration does not occur [UCC 3–108(b)(ii)] Thus, the specified date is the outside limit used to determine the value and negotiability of the instrument Extension Clause  The reverse of an acceleration clause is an extension clause, which allows the date of maturity to be extended into the future [UCC 3–108(b)(iii), (iv)] If the right to extend the time of payment is given to the maker or drawer, the interval of the extension must be specified to keep the instrument negotiable If, however, the holder can extend the time of payment, the extended maturity date need not be specified for the instrument to be negotiable EXAMPLE 14.13 Alek’s note reads, “The holder of this note at the date of maturity, January 1, 2017, can extend the time of payment until the following June or later, if the holder so wishes.” This note is negotiable The length of the extension does not have to be specified, because only the holder has the option to extend After January 1, 2017, the note is, in effect, a demand instrument n evp82/ShutterStock.com 14–2f  Payable to Order or to Bearer Because one of the functions of a negotiable instrument is to serve as a substitute for cash, freedom to transfer is essential To ensure a proper transfer, the instrument must be “payable to order or to bearer” at the time it is issued or first comes into the possession of the holder [UCC 3–104(a)(1)] An instrument is not negotiable unless it meets this requirement Order Instruments  An order instrument is an instrument that is payable (1) “to the order of an identified person” or (2) “to an identified person or order” [UCC 3–109(b)] An identified person is the person “to whom the instrument Can a note made in exchange for funds contain is initially payable” as determined by the intent of the maker or drawer [UCC an acceleration clause and still be negotiable? 3–110(a)] The identified person, in turn, may transfer the instrument to whomever he or she wishes In this way, the instrument retains its transferability Order Instrument  A negotiable Note that in an order instrument, the person specified must be identified with certainty, instrument that is payable “to the because the transfer of the instrument requires the indorsement, or signature, of the payee order of an identified person” or “to (indorsements will be discussed later in this chapter) An order instrument made “Payable an identified person or order.” Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net 385 CHAPTER 14: Negotiable Instruments to the order of my nicest cousin,” for instance, is not negotiable, because it does not clearly specify the payee Bearer Instruments  A bearer instrument is an instrument that does not designate a specific payee [UCC 3–109(a)] The term bearer refers to a person in possession of an instrument that is payable to bearer or indorsed in blank (with a signature only, as will be discussed shortly) [UCC 1–201(5), 3–109(a), 3–109(c)] This means that the maker or drawer agrees to pay anyone who presents the instrument for payment Any instrument containing terms such as the following is a bearer instrument: Bearer Instrument  Any instrument that is not payable to a specific person, including instruments payable to the bearer or to “cash.” Bearer  A person in possession of an instrument payable to bearer or indorsed in blank “Payable to the order of bearer.” “Payable to Simon Reed or bearer.” “Payable to bearer.” “Pay cash.” “Pay to the order of cash.” 14–2g  Factors That Do Not Affect Negotiability Certain ambiguities or omissions will not affect the negotiability of an instrument The UCC provides the following rules for clearing up ambiguous terms: Unless the date of an instrument is necessary to determine a definite time for payment, the fact that an instrument is undated does not affect its negotiability A typical example is an undated check, which is still negotiable If a check is not dated, its date is the date of its issue, meaning the date the maker first delivers the check to another person [UCC 3–113(b)] Antedating or postdating an instrument (using a date before or after the actual current date) does not affect the instrument’s negotiability [UCC 3–113(a)] EXAMPLE 14.15 Crenshaw draws a check on his account at First Bank, payable to Sirah Imports He postdates the check by fifteen days Sirah Imports can immediately negotiate the check, and, unless Crenshaw tells First Bank otherwise, the bank can charge the amount of the check to Crenshaw’s account [UCC 4–401(c)] n Handwritten terms outweigh typewritten and printed terms (preprinted terms on forms, for example), and typewritten terms outweigh printed terms [UCC 3–114] EXAMPLE 14.16 Most checks are preprinted “Pay to the order of” followed by a blank line, indicating an order instrument In handwriting, Chad inserts in the blank, “Anita Delgado or bearer.” The handwritten terms will outweigh the printed form, and the check will be a bearer instrument n nito/ShutterStock.com CASE EXAMPLE 14.14 Amine Nehme applied for credit at the Venetian Resort Hotel Casino in Las Vegas, Nevada, and was granted $500,000 in credit He signed a marker—that is, a promise to pay a debt—for $500,000 Nehme quickly lost that amount gambling The Venetian presented the marker for payment to Nehme’s bank, Bank of America, which returned it for insufficient funds The casino’s owner, Las Vegas Sands, LLC, filed a suit against Nehme for failure to pay a negotiable instrument The court held that the marker fit the UCC’s definitions of negotiable instrument and check It was a means for payment of $500,000 from Bank of America to the order of the Venetian It did not state a time for payment and thus was payable on demand It was also unconditional—that is, it stated no promise by Nehme other than the promise to pay a fixed amount of money.7 n Can a gambling marker be a negotiable instrument? KNOW THIS An instrument that purports to be payable both to order and to bearer contains a contradiction in terms Such an instrument is a bearer instrument Las Vegas Sands, LLC v Nehme, 632 F.3d 526 (9th Cir 2011) Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net I-16 Index Legal dispute prevention, continued preliminary agreements, 217 sales and lease contract terms, 302 securities definition, 583–584 seller’s representations, 252 Superfund liability, 678 Legal encyclopedias, Legal journals, Legality of contract, 209, 241–247 Legislative rules, 3–4 Lemon laws, 351 Lessees breach of contract, 318 defined, 300 examination of goods, 350–351 insurable interest, 318 performance obligations, 336–337 refusal to inspect, 350–351 rejection of goods, 343 remedies of, 340–344 Lessors breach of contract, 317–318 defined, 300 insurable interest, 318 performance obligations, 330–336 remedies of, 338–340 Letters of credit, 211, 696–697 Liability in agency relationships, 476–481 of bailees, 642, 644–645 of bank for wrongful payment, 413 civil, 154, 164 of common carriers, 644–645 contingent, 395–396 cooperative members, 542 of corporate directors and officers, 158, 565, 568 criminal, 155–158, 165–167, 552–553 defenses to See Defenses defined, 67 of hotel operators, 645–646 for insider trading, 591–597 of ISPs, 144–145 joint, 531–532 joint and several, 532, 678 limitation-of-liability clauses, 287–288 in limited liability companies, 537 of limited liability partners, 534 of limited partners, 535 negotiable instruments, 394–399 of partners, 531–532 product, 94–100 secondary, 395–396 of sole proprietors, 526–527 strict See Strict liability vicarious, 479, 480 waivers of, 246 of warehouse companies, 645 Libel, 77, 78 License, licensing contractual legality and, 242 defined, 112–113, 663 of foreign manufacturers, 690 of intellectual property, 112–113 Internet issues, 135 online contracts, 222 real property, 663 revocable, 85 Licensees, 85, 113 Licensors, 113 Liens artisan’s, 434–435, 642 bailee’s, 642 defined, 346, 434 judicial, 435 mechanic’s, 434 possessory, 641–642 warranty of title and, 346 Life estates, 659 Life insurance, 646, 649 Life tenants, 659 Lilly Ledbetter Fair Pay Act of 2009, 508–509 Limitation-of-liability clauses, 287–288 Limited defenses, 400 Limited jurisdiction, courts of, 42, 49–50 Limited liability companies (LLCs), 536–541 advantages/disadvantages, 537–539 defined, 536 dissolution of, 540–541 formation of, 537 jurisdictional requirements, 537 management options, 539 members, 537, 538 operating agreements, 539, 541 other business forms compared to, 574–575 Limited liability partnerships (LLPs), 533–534 advantages of, 533 defined, 533 formation of, 533–534 liability in, 534 other business forms compared to, 574–575 Limited partners, 534 Limited partnerships, 534–536 defined, 534 dissolution of, 535–536 formation of, 534 general partnerships vs., 536 liabilities in, 535 other business forms compared to, 574–575 Limited warranty deeds, 665 Liquidated damages, 283–284 Liquidated debt, 230 Liquidation Chapter bankruptcy, 443–452 defined, 443 Litigation See also Lawsuits abusive, 83 defined, 53 frivolous, 83 social media’s impact, 139 LLCs See Limited liability companies (LLCs) Lloyd, Henry Demarest, 608 LLPs See Limited liability partnerships (LLPs) Loans mortgage, 266, 438–440, 664 purchase-money, 401n student, 450–451 usury, 241 Local government, Long arm statute, 41–42 Long-run profit maximization, 185–186 Loss, risk of, 315–318 Lost property, 637–638, 643 Lotteries, 210 Loyalty defined, 566 duty of agent’s, 470–471 corporate directors and officers, 566–568 M MACT (maximum achievable control technology), 673 Madison, James, 40 Madrid Protocol, 124–125 Mail and wire fraud, 162 Mail Fraud Act of 1990, 162 Mail or Telephone Order Merchandise Rule, 362 Mailbox rule, 221 “Main purpose” rule, 256 Majority opinions, 36 Majority shareholders, 574 Makers defined, 378 liability of, 395 Malaysia, antitrust laws in, 625 Malice, actual, 79 Malicious prosecution, 83 Malpractice, 88 Malware, 176, 177 Management and managerial strategy See also Officers, corporate criminal penalties, 157 cyber theft, 525 drone use, 313 ethical leadership, 195–198 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net Index liability waivers, 246 limited liability companies, 539 marriage equality, 23 product warnings, 98 state court budget cut impact, 49 Managerial accounting, 201–202 Mandatory arbitration clauses, 65–66 Manslaughter, 156 Manufacturing abroad, 690–691 defects, 96 resale price maintenance agreements, 613–614 vertical restraints of trade, 613–614 Manufacturing arrangements (franchises), 543 Marijuana, medical, 11–12 Market concentration, 622 Market conditions, 620 Market divisions, 611–612 Market Place Fairness Act, 298 Market power, 609 Marketing, 126–127, 361–362 Marriage promises made in consideration of, 256–257 same-sex, 23 Massachusetts, business trust origins, 542 Material alteration discharge of contract by, 278 of negotiable instrument, 399, 401 Material misrepresentation, 591 Maturity date, 560 Maximum achievable control technology (MACT), 673 McAfee, John, 57–58 McCarran-Ferguson Act, 624 McDonald’s, 545 Means test, 444 Mechanic’s liens, 434 Mediation defined, 63 other forms of ADR vs., 64 Medical information, disclosure of, 515 Medicare, 498 Medicine, safety regulations, 364–366 Meetings of corporate directors, 564 of corporations to adopt bylaws, 558 creditors’, 448 of shareholders, 558, 569–571 Members (LLCs), 537, 538, 540 Mens rea, 155 Mental incompetence of bank customers, 413 and contractual capacity, 240–241 as defense to negotiable instrument liability, 400 Merchant buyers, rejection of goods, 343 Merchantability, implied warranty of, 347–348, 350 Merchantable food, 348 Merchantable goods, 347 Merchants contracts between, 304–305, 306–307 defined, 298–299 entrustment rule, 314–315 firm offer by, 302–303 Mergers, 569, 621–622 Meta tags, 134 Metadata, 57–58 Mexico, anticorruption law, 200 Michigan, social media password protections, 142 Microsoft, 467, 625 Military caregivers, leave for, 495 Mill, John Stuart, 192 Mind, state of, 155–156 Minimum contacts, 41–42 Minimum wage, 493 Mini-trials, 66 Minors age of majority, 238 contractual capacity, 213, 238–240 emancipation, 238 negotiable instrument liability, 400 Miranda rule, 171 Mirror image rule, 218, 303 Misappropriation of funds, 556 Misappropriation theory, 593 Misconduct, by employees, 517 Misdemeanors, 155 Mislaid property, 637 Misrepresentation by agent, 479 by conduct, 250 fraudulent, 81–83, 94, 249–252, 253 insurance, 650 justifiable reliance on, 251–252 of law, 250 product liability based on, 94–95 by silence, 250 Mississippi, de facto corporations in, 559 Misspellings, of names on negotiable instrument indorsements, 391 Mistakes bilateral (mutual), 248–249, 285 in contracts, 248–249 as defense to criminal liability, 166 of fact, 166, 248–249 of law, 166 unilateral, 248, 249 Mitigation of damages, 282–283 M’Naghten test, 166 Mobile sources of air pollution, 673 Model Business Corporation Act (MBCA), 551 Model Penal Code, 166 I-17 Monetary systems, 696 Money, defined, 382–383 Money laundering, 164 Monitoring, 600, 602 Monopolies, 609, 614–619 Monopolization, 614–619 Monopoly power, 609, 614–615 Monster.com, 175 Moral hazard, deposit insurance consequences, 426 Moral minimum, 187 Mortgage insurance, 438 Mortgage loans, 266, 438–440, 664 Mortgagees, 438 Mortgages, 438–440 Mortgagors, 438 Motion(s) for directed verdict, 59 to dismiss, 55 for judgment as matter of law, 59 for judgment n.o.v., 59 for judgment on the pleadings, 55 for new trial, 59 posttrial, 59 pretrial, 55 for summary judgment, 55 Motion Picture Association of America (MPAA), 138 Motorola, 194 Movie piracy, 138 MP3, 136–138 Multilateral agreements, 686 Multiple product orders, 359 Murder, 158, 166 Murray, Conrad, 156 Music industry, file sharing technology, 136, 138 Muslims, discrimination against, 506–507 Mutual agreement, agency termination by, 482 Mutual funds, 587 Mutual (bilateral) mistakes, 248–249, 285 Mutual rescission, discharge of contract by, 277 N NAFTA (North American Free Trade Agreement), 692, 693 Names corporate, 557–558 misspellings on negotiable instrument indorsements, 391 NASDAQ, 554 Nation, defined, 685 National Conference of Commissioners on Uniform State Laws (NCCUSL), 3, 226, 528, 598, 668 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net I-18 Index National Credit Union Shares Insurance Fund (NCUSIF), 426 National Environmental Policy Act (NEPA), 671 National Labor Relations Board (NLRB), 189–190, 545 National law, 8, 9, 684–685 National origin, discrimination based on, 503, 505 National Pollutant Discharge Elimination System (NPDES), 675 National Reporter System, 31, 32 Natural disasters, 695 NAVEX Global, 198 NCCUSL (National Conference of Commissioners on Uniform State Laws), 3, 226, 528, 598, 668 NCUSIF (National Credit Union Shares Insurance Fund), 426 Necessaries, 239 Necessity, 165 Negligence, 86–93 of agent, 479–481 of bank, 414 of bank customer, 413–414, 416 causation, 88–89 comparative, 75, 91, 100 contributory, 91 criminal, 156 “danger invites rescue” doctrine, 92 defenses, 75, 90–91 defined, 86, 94 dram shop acts, 93 duty of care, 86–88, 94 environmental actions, 672 forged negotiable instrument signatures, 397 Good Samaritan statutes, 93 injury requirement, 90 per se, 92 product liability, 94 res ipsa loquitur, 92 as unintentional tort, 75 Negligent misrepresentation, 83 Negotiable instruments, 376–406 acceptance of, 377–378 alteration of, 399, 401 cancellation of, 400–401 dating of, 385 defined, 376 as formal contract, 211 fraud, 399, 400 holder in due course status, 387, 391–394, 400, 401, 417 indorsements, 386–391, 397–398 interest, 382, 386 liability defenses, 399–400 discharge from, 400–401 limitations, 400 signature, 394–398 warranty, 398–399 negotiability requirements, 380–386 presentment, 383, 395, 398–399 signatures, 380–381, 394–398, 399 transfers of, 386–391, 398 types of, 376–379 warranties, 398–399 writing requirements, 380, 385–386 Negotiation contracts, 216 defined, 63, 387 negotiable instruments transferred by, 387 other forms of ADR vs., 64 NEPA (National Environmental Policy Act), 671 Netflix, 140 New York, de facto corporations in, 559 New York Convention, 695–696 New York Police Department (NYPD), 140 New York Stock Exchange, 554 Nike, Inc., 111, 186, 194 Ninth Amendment, 14 NLRB (National Labor Relations Board), 189–190, 545 “No-asset” cases, 448 Nominal damages, 280, 282 Noncompete agreements, 242, 243, 286 Nonconforming goods, 303, 333, 342–344 Nondeadly force, 165 Nonmerchants, contract formation, 303–304 Nonpossessory interests, 662–663 Nonprofit corporations, 554 Normal trade relations (NTR) status, 692 North American Free Trade Agreement (NAFTA), 692, 693 Notary public, 473 Notes collateral, 378 installment, 378 promissory, 377, 378–379, 395 Notice agent’s duty of, 470 of assignment, 268–269 under Consumer Product Safety Act, 366 of dangerous conditions, 480–481 of dishonored instrument, 396 under Fair Credit Reporting Act, 369 by insurers, 649 OSHA requirements, 496–497 of proposed rulemaking, taking instruments without, 393–394 of termination of agency relationship, 483 Notice-and-command rulemaking, 3–4 Novation, 277 NPDES (National Pollutant Discharge Elimination System), 675 NTR (normal trade relations) status, 692 Nuclear Regulatory Commission, 670 Nuisance, 672 Nurses, code of ethics, 188 Nutrition Labeling and Education Act, 364 Nutritional content labels, 364 O O visas, 502 Obama, Barack automobile emission standards, 673 consumer privacy bill of rights, 147–148 ISP regulation, 555 Obamacare, 364, 366–367, 498, 500 Obedience, agent’s duty of, 471 Objective impossibility, 278 Objective theory of contracts, 208–209, 214 Obligees, 266, 269 Obligors, 266, 267 Occupational Safety and Health Act of 1970, 3, 496–497 Occupational Safety and Health Administration (OSHA), 3, 496–497 ODR (online dispute resolution), 67 Offer(s) acceptance of, 209, 219–222 communication of, 217 counteroffers, 218 defined, 214 firm, 219, 302–303 international contracts, 319 irrevocable, 219 online, 222–224 requirements of, 214–217 revocation of, 210–211, 218 sale and lease contracts, 300–302, 319 termination of, 217–219 Offerees counteroffers by, 218 death or incapacitation of, 219 defined, 209, 214 termination of offer by action of, 218 Offerors death or incapacitation of, 219 defined, 209, 214 termination of offer by action of, 218 Officers, corporate alignment of interests with shareholders, 599–600 certification of financial statements and reports, 602 compensation, 599–600 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net Index criminal liability of, 158 duties of, 552, 565–568 equal dignity rule exception, 473 liability of, 565, 568 powers of, 562 removal of, 565 role of, 565 stock options, 599 Ohio, de facto corporations in, 559 Oil industry, 608, 611, 624 Oil Pollution Act, 676 Oklahoma, de facto corporations in, 559 Old-age (retirement), survivors’, and disability insurance (OASDI), 497–498 On-demand workers, 492–493 One-year rule, 255, 256, 259 Online acceptances, 224–225 Online auction fraud, 174 Online banking, 423–424 Online contracts, 222–226 Online deceptive advertising, 359 Online defamation, 78–79, 143–145, 186 Online dispute resolution (ODR), 67 Online fraudulent misrepresentation, 253 Online harassment, 512 Online issues See Internet Online offers, 222–224 Online payment systems, 422 Online reputation management services, 144 Online retail fraud, 174 Online reviews, 360 Online sales, 298 Online securities fraud, 597 Open terms, 300–302 Opening arguments, 59 Operating agreements, 539, 541 Operation of law agency by, 469 agency termination by, 483–484 contract discharge by, 278–280 offer termination by, 218–219 Opinions concurring, 36 dissenting, 36 majority, 36 offers and, 216 per curiam, 36 plurality, 36 published, 31–33 reading and analyzing, 37–38 statements of, 77, 82, 250, 346–347 unpublished, 33 Oppressive conduct, 574 Option contracts, 219, 302 Oral contracts agency formation, 468 to answer for debt of another, 256 enforcement under promissory estoppel, 258 errors when putting into writing, 286 lawsuits for breach of, 278 to rescind, 277 sale or lease of goods, 307–308 for transfers of interest in land, 258 Order for relief, 445 Order instruments, 384–385, 387 Orders to pay, 381–382 Ordinances, Ordinary bailments, 640–644 Organized crime, 163–164 Original jurisdiction, 43 Ornamental designs, trademark protection, 126 OSHA (Occupational Safety and Health Administration), 3, 496–497 Outcome-based ethics, 190, 192–193 Output contracts, 302 Outrageous conduct, 77 Outside directors, 564, 599 Outsourcing, 194 Overcriminalization, 156 Overdrafts, 412 Overdue instruments, 393 Overlapping warranties, 349 Overtime, 196, 492–493 Ownership concurrent, 631, 660–661 of real property, 658–661, 663–668 transfers of, 663–668 P P2P (peer-to-peer) networking, 136–137 PACER (Public Access to Court Electronic Records), 62 Packaging, 362–364 Panama, free trade agreement with, 693 Parents emancipation of minors and, 238 liability for contracts made by minor children, 240 Pari delicto, 246 Parol evidence, 308–310 Partial acceptance, 336–337 Partial performance, 258, 334 Partially disclosed principals, 476 Parties to lawsuits, 36, 153 Partners authority of, 531 disassociation of, 532 duties of, 531 general, 534 liability of, 531–532 limited, 534 rights of, 530–531 I-19 Partnership(s), 528–536 See also Partners articles of, 530 at will, 530 defined, 528 dissolution, 533 essential elements of, 529 Fifth Amendment privilege against selfincrimination, 170 formation of, 530 general, 531–532, 536 laws governing, 528 limited See Limited partnerships limited liability See Limited liability partnerships (LLPs) operation of, 530–532 other business forms compared to, 574–575 taxation, 529–530 for a term, 530 Passive advertising, 45 Pass-through entities, 529–530 Past consideration, 229 Patent trolls, 116 Patents, 113–117, 123, 124 Patriot Act, USA, 24 Payable at definite time, 383–384 Payable on demand, 383 Payable to order/to bearer, 384–385 Payees alternative, 391 defined, 377, 408 fictitious, 397–398 joint, 391 Payment(s) acceleration clauses, 384 bankruptcy trustee’s power to recover, 447 buyer’s/lessee’s obligation to make, 336 defenses against in insurance cases, 650–651 down, 438 extension clauses, 384 international methods, 696–698 negotiable instrument liability and, 400 online contract provisions, 223 online systems, 422 open terms, 301 prepayment penalty clauses, 438 stop-payment orders, 412–413 surety and guarantor release by, 438 tender of, 438 wrongful, bank’s liability for, 413 Payor banks, 419, 421 PBGC (Pension Benefit Guaranty Corporation), 498 PCAOB (Public Company Accounting Oversight Board), 601 Peer-to-peer (P2P) networking, 136–137 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net I-20 Index Penalties Clean Air Act violations, 674 Clean Water Act violations, 675 under Computer Fraud and Abuse Act, 178 corporate crimes, 157 for counterfeiting, 112 defined, 283 under Economic Espionage Act, 163 Federal Insecticide, Fungicide, and Rodenticide Act violations, 676 under Foreign Corrupt Practices Act, 200 immigration law violations, 501 mail and wire fraud, 162 Resource Conservation and Recovery Act violations, 677 under RICO, 164 SEC violations, 589, 595 Pension Benefit Guaranty Corporation (PBGC), 498 Per curiam opinions, 36 Per se violations, 610, 611, 613, 614, 623–624 Perfect tender rule, 332–336 Perfection, of security interests, 432–433 Performance, 266–277 agent’s duty of, 470 assignment, 266–269 complete, 275 conditions of, 272–274 contract classification based on, 212 course of, 309 defined, 272 delegation of duties, 269–270 discharge of contract by, 272, 274–277 impossibility of, 278–280 partial, 258, 334 sales and lease contracts, 301, 329–337 to satisfaction of another, 275 specific, 6, 285, 341 substantial, 275 third party beneficiaries, 271–272 Periodic tenancy, 661 “Permalancers,” 467 Permits, NPDES, 675 Person(s) corporation defined as, 551 defined under Bankruptcy Code, 443 intentional torts against, 75–84 jurisdiction over, 40–42 Personal assets, 527 Personal defenses, 400 Personal property, 630–655 abandoned, 637, 638 acquisition of ownership, 632–637 bailments, 639–646 concurrent ownership, 631 conversion, 85–86 damaged, 643 defined, 84, 631 exemption from creditors’ actions, 441 insurance See Insurance intangible, 631 lost, 637–638, 643 mislaid, 637 real property converted to, 632 real property vs., 630–632 tangible, 631 taxation, 632 trespass to, 85 Personal-service contracts, 267, 269, 285 Personalty See Personal property Persuasive authorities, Peru, antitrust laws in, 625 Pesticides, 676 Petitioners, 36 Petitions, granted by Supreme Court, 53 Petty offenses, 155 Phishing, 175 Physical delivery, 640 Physical exams, preemployment, 516 Physical harm, 95 Physicians, duty of care, 88 Piercing the corporate veil, 562–563 Piracy, movie, 138 Place of delivery, 331 Plaintiffs, 6, 36, 54 Plan B (morning-after pill), 365–366 Plans of reorganization, 453–454 Plant life, 657 Plea bargaining, 167 Pleadings, 54 Plurality opinions, 36 PMI (private mortgage insurance), 438 PMSI (purchase-money security interest), 433 Point-of-sale systems, 422 Point-source emissions, 675 Police powers, 12 See also Law enforcement Policies (insurance), 646 ambiguities in, 649 applications, 647 cancellation, 649 coinsurance clauses, 648 defined, 646 duties and obligations of parties, 649–650 effective date, 647–648 incontestability clauses, 648–649 Political speech, 16 Pollution, 672–676 See also Environmental law Pool of applicants, 504 Possession adverse, 666–667 debtor in (DIP), 453 delivery of, 639–640 of goods by bailee, 641 of goods by buyer or lessee, 340 of goods by seller or lessor, 338–339 of personal property, 632–633 by tenants, 661–662, 668 Possessory liens, 641–642 Postdated checks, 412 Posteffective period, 585 Posttrial motions, 59 Potentially responsible parties (PRPs), 678 Power(s) of avoidance, 447 corporations, 561–563 shareholders, 569 strong-arm, 447 Power of attorney, 473 Precedents, 4–6 Predatory bidding, 618–619 Predatory pricing, 614, 618 Predominant-factor test, 297 Preemption, 13 Preemptive rights, 571–572 Preexisting duty, 229 Preferences, 447 Preferred stock, 560 Prefiling period, 584 Pregnancy Discrimination Act of 1978, 507–508 Preliminary agreements, 216–217 Preliminary negotiations, 216 Premiums, 646 Prenuptial agreements, 256–257 Prepayment penalty clauses, 438 Preponderance of the evidence, 153 Presentment, 383, 395, 398–399, 421 Presentment warranty, 398 Press, freedom of, 14 Pretexting, 25 Pretrial conferences, 58 Pretrial motions, 55 Price discrimination, 619–620 Price lists, 216 Price maintenance agreements, 613–614 Price terms, 301 Price-fixing agreements, 611, 612 Pricing, predatory, 614, 618 Prima facie cases, 503–504, 513–514 Primary liability, 395 Primary obligation, 255 Primary sources of law, Principals defined, 463 disclosed, 476 duties to agents, 471–472 liability of, 463, 476–481 partially disclosed, 476 tortious conduct, 478 undisclosed, 476, 477–478 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net Index Principle of rights, 191 Prior dealings, implied warranty of, 349 Priority, 433, 448–449 Privacy Act, 24 Privacy rights constitutional protections, 22–23, 168–169 data collection by retailers, 299 federal laws, 24 Internet, 145–148 invasion of, 80–81 online contracts, 223 pretexting and, 25 Private corporations, 554 Private equity capital, 561 Private law, Private mortgage insurance (PMI), 438 Private placement exemption, 587–588 Private Securities Litigation Reform Act of 1995, 594 Privilege defined, 79 to detain, 76 Privileged communications, 78, 79 Privity of contract, 94, 265 Probable cause, 168, 172 Probate courts, 42 Procedural due process, 20–21, 169 Procedural law, 7–8 Procedural unconscionability, 243–244 Processing-plant arrangements, 543 Product(s) See also Good(s) relevant market, 615–616 safety regulations, 366 trademarks See Trademarks unreasonably dangerous, 95, 96 Product liability, 94–100 defenses to, 99–100 defined, 94 misrepresentation, 94–95 negligence, 94 strict, 95–99 Product misuse, 100 Production, 633 Professionals, duty of care, 88 See also Accountants; Attorney(s) Profit(s) corporations, 552 defined, 662 maximization, 185–186 partnerships, 529 property ownership, 657, 662–663 short-swing, 593–594 Promise(s) collateral, 255–256, 259 defined, 207 illusory, 229–230 made in consideration of marriage, 256–257 to pay, 381–382 of performance, 272–274 unconditional, 381–382 Promisees, 207 Promisors, 207 Promissory estoppel defined, 231–232 irrevocable offers, 219 Statute of Frauds exception, 258 Promissory notes, 377, 378–379, 395 See also Negotiable instruments Proof of claim, 448 Property abandoned, 637, 638 community, 446, 661 crimes involving, 159–161 defined, 630 digital, 630, 633 disparagement of, 86 distribution in bankruptcy cases, 448–449 intangible, 297 intellectual See Intellectual property intentional torts against, 84–86 joint ownership of, 529 joint stock companies, 542 jurisdiction over, 40–42 lost, 637–638, 643 mislaid, 637 personal See Personal property real See Real property tangible, 297 Property insurance, 646–647 Prosecution, malicious, 83 Prospectus, 584–585 Protected classes, 247, 503 Protected expression, 118–119 Proxies, 569–570, 595 Proximate cause, 88–89, 95 PRPs (potentially responsible parties), 678 Public Company Accounting Oversight Board (PCAOB), 601 Public corporations, 554 Public disclosure of private facts, 81 Public domain, 117 Public figures, 79 Public law, Public officials, bribery of, 163, 199–200 Public order crime, 161 Public policy adverse possession doctrine, 667 bailee limitation of liability contrary to, 642 contracts contrary to, 242–246 employment-at-will doctrine exceptions based on, 491–492 exculpatory clauses in violation of, 244–245 Publication, defamation and, 77–78 I-21 Publicly held corporations, 554 Publishing industry, 612 Puffery, 82, 250, 347, 357 Punitive damages breach of contract, 280, 282 defined, 74–75 electronic fund transfer violations, 423 employment discrimination, 512 fraudulent misrepresentation, 252 Purchase-money loans, 401n Purchase-money security interest (PMSI), 433 Purpose frustration of, 280 “main purpose” rule, 256 Q Qualcomm, Inc., 625 Qualified indorsements, 389–390 Qualified privilege, 79 Quality, slander of, 86 Quality control, 545 Quantity, open terms, 301–302 Quantum meruit, 214 Quasi contracts, 213–214, 286–287 Questions of fact, 50–51 Questions of law, 51 Quid pro quo harassment, 509 Quitclaim deeds, 666 Quorum, 270, 564 Quotas (trade), 691, 692 R Race-based discrimination, 503, 505 Racketeer Influenced and Corrupt Organizations Act (RICO) of 1970, 164 Ralph Lauren, 111 Ratification agency by, 469, 475–476 of contracts, 240 negotiable instrument signatures, 397 Rational basis test, 22 Reaffirmation agreements, 452 Real estate See Land; Real property Real property, 656–670 concurrent ownership, 631 conversion to personal property, 632 defined, 84, 630–631 exemption from creditors’ actions, 441 goods associated with, 297 landlord-tenant relationships, 668–670 leasehold estates, 661–662, 663 nature of, 656–658 nonpossessory interests, 662–663 ownership interests, 658–661, 663 personal property vs., 630–632 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net I-22 Index Real property, continued sales of, 663–664 taxation, 632 transfers of ownership, 663–668 Realty See Real property Reasonable accommodation, 505–507, 515–516 Reasonable duty of care, 85 Reasonable expectation of privacy, 168–169 Reasonable person standard, 87 Reasonable restrictions of speech, 15–16 Receivers, in corporate liquidation, 561 Recklessness, 155 Recording statutes, 666 Records See also Inspection, right of defined, 226 OSHA requirements, 496–497 Recourse, right of, 401 Reformation, 243, 285–286 Regional reporters, 31, 32 Registration copyrights, 117 securities, 584–588 trademarks, 108–109 Registration statements, 584–585 Regulation A offerings, 585–587 Regulation CC, 417–418, 421 Regulation D offerings, 587–588 Regulation E, 422 Regulation Z, 367 Reimbursement, principal’s duty of, 472 Rejection of goods, 342–343 of offer, 218 Releases, 230 Relevant market, 615–617 Reliance, 251–252, 591 Religion discrimination based on, 503, 505–507 ethics based on, 190–191 freedom of, 14, 19–20 Religious displays, 19 Remedy(ies) for breach of contract, 280–288 for breach of sales/lease contracts, 337–345 in civil vs criminal cases, 153 for copyright infringement, 119, 123 credit reporting violations, 369 damages See Damages debtor’s default, 433–434 deceptive advertising, 359–360 defined, employment discrimination, 512, 514 equitable, 6–7, 284–287 at law, limitations in online contracts, 223 for patent infringement, 116–117, 123 plaintiff’s complaint contents, 54 securities violations, 589 for trade secret infringement, 123 for trademark infringement, 123 Rent, 669 Renunciation, agency termination by, 482 Reorganization, Chapter 11, 452–454, 458 Repayment plans (Chapter 13 bankruptcy), 455–457 Replevin, 342 Replies, 54 Reporters, 31, 32, 33 Reports citizenship, 202 credit, 369, 371–372 OSHA requirements, 496–497 Repossession, 433–434 Repudiation, anticipatory, 276–277, 337 Reputation management, 144, 186, 201–202 Requests for other information, 57 Requirements contracts, 209, 302 Res ipsa loquitur, 92 Resale of securities, 588 Resale price maintenance agreements, 613–614 Rescission See also Cancellation defined, 6, 229 discharge of contract by mutual, 277 duress as grounds for, 254 as equitable remedy, 284 injury to innocent party, 252 oral contracts, 277 of sales or lease contracts, 338, 341 Resolutions, 570 Resource Conservation and Recovery Act (RCRA), 677 Respondeat superior, 479, 480, 481, 482, 552 Respondents, 36 Responsible corporate officer doctrine, 158 Restatement (Third) of Agency, 464, 476nn, 480 Restatement (Second) of Contracts, 211n, 216n, 217n, 224, 224n, 229n, 248nn, 249nn, 250n, 254n, 256n, 258, 267n, 270n, 274n, 275n, 277n, 278n, 280nn, 283n, 284n, 285n Restatement of Torts, 122 Restatement (Second) of Torts, 95 Restatement (Third) of Torts, 35, 96–98 Restatements of the Law, See also individual restatements Restaurants, caloric content labels, 364 Restitution, 284 Restraint of trade, contracts in, 242–243 Restrictive indorsements, 390 Retail sales, 299 Retained earnings, 552 Retaliation by employers, 511 Retirement accounts, 450, 498–499 Return policies, online contracts, 223 Revenge porn, 80 Reverse discrimination, 505 Reviewing courts, 50–51 Revised Model Business Corporation Act (RMBCA), 551, 554–555, 558, 559, 564, 565, 568, 569, 570, 571, 572, 573 Revised Uniform Limited Partnership Act (RULPA), 534–536 Revocable licenses, 85 Revocation of acceptance, 318, 343 defined, 218 of offers, 210–211, 218 RICO (Racketeer Influenced and Corrupt Organizations Act) of 1970, 164 Right(s) airspace, 657 assignment See Assignment(s) of assurance, 335 under Bill of Rights, 13–20 of corporate directors, 564–565 human, 698–699 to indemnification, 565 of inspection See Inspection, right of of participation, 564–565 of partners, 530–531 preemptive, 571–572 principle of, 191 privacy See Privacy rights of publicity, 81 of recourse, 401 of sellers or lessors, 338–340 subsurface, 657 of survivorship, 660 “to be forgotten,” 145 to trial, 14, 58, 170 voidable, 447 Risk(s) assumption of, 90–91, 100 duty to warn business invitees of, 87–88 of loss, 315–318 management of, 646 Robbery, 158 Robinson-Patman Act, 619 Royalties, 116 Rule(s) administrative, 3–4, 31 of construction, 309–310 of four, 53 law defined as, legislative, 3–4 of priority, 433 of reason, 610, 613 Rule 144, 588 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net Index Rule 144A, 588 Rule 504, 587 Rule 505, 587 Rule 506, 587–588 Rulemaking, 3–4 Russia, hackers in, 176 S S corporations, 556 Safe Drinking Water Act, 676 Safe harbor rules, 588 Safe Web Act, 131–132 Safe working conditions, principal’s duty to agent, 472 Safety, occupational, 496–497 Sale(s) consumer protection laws, 362 defined, 296 first sale doctrine, 121 by nonowners, 313–315 online, 298 retail, 299 short, 440 Sales contracts, 294–325 See also Buyer(s); Seller(s) acceptance, 303–306, 319, 336–337 anticipatory repudiation of, 337 assignment, 268 breach of by anticipatory repudiation, 337 remedies, 281, 288, 337–345 risk of loss, 317–318 statutes of limitations, 278, 345 consideration in, 306 crops, 657 defined, 295 destination contracts, 312, 316, 332 formation of, 300–310 installment, 333–334 insurable interest, 318 international, 257, 318–319, 325–328, 343 laws governing, 208, 295–299 lemon laws, 351 minors, 239 offers, 300–303, 319 parol evidence, 308–310 performance, 301, 329–337 product liability See Product liability risk of loss, 315–318 shipment contracts, 312, 316, 332 Statute of Frauds, 306–308, 319 title, 311–315 unconscionability, 310 warranties, 345–351 writing requirements, 257, 258, 259 Same-gender harassment, 511 Same-sex marriage, 23, 526 Samsung Electronics Company, 106, 115–116 Sanctions, in criminal cases, 153 Sarbanes-Oxley Act of 2002 certification and monitoring requirements, 602 corporate accountability, 601–602 enactment of, 601 exemptions for smaller companies, 602 securities violations, 595 sentencing guidelines, 174 Web-based reporting systems, 198 Satisfaction accord and, 230, 277–278 performance to satisfaction of another, 275 Scienter, 251, 591, 595 Search warrants, 167–168 Searches and seizures, 14, 167–169, 171 Seasonably, defined, 303 SEC See Securities and Exchange Commission (SEC) SEC Rule 10b-5, 590–594, 595 SEC Rule 16(b), 593–594, 595 Second Amendment, 14, 15 Secondary liability, 395–396 Secondary meaning, 110 Secondary obligation, 256 Secondary sources of law, Section 12 companies, 590–597 Secured creditors, 444, 448–449 Secured party(ies) remedies for debtor’s default, 433–434 requirements, 431 Secured transactions, 430–434 Securities bonds, 560 defined, 559–560, 581, 583–584 exempt from registration requirements, 585–588 federal laws regulating, 582–597 fraud, 588–590, 591, 595–597 insider trading, 591–597 registration statements, 584–585 resales of, 588 sentencing guidelines for violations, 174 state laws regulating, 597–598 stocks See Stocks Securities Act of 1933, 582–590 Securities and Exchange Commission (SEC) creation of, 582 crowdfunding, 561 EDGAR, 584 expanding regulatory powers, 598 registration statements, 584–585 Regulation A offerings, 585–586 Regulation D offerings, 587–588 I-23 role of, 582 Rule 10b-5, 590–594, 595 Rule 16(b), 593–594, 595 Securities Exchange Act of 1934, 582, 590–592 Securities Litigation Uniform Standards Act (SLUSA) of 1998, 594 Security interests creation, 431 defaults and, 431 defined, 431 perfection, 432–433 Seilhan, Keith, 581–582 Self-defense, 165 “Self-help” provision, 433–434 Self-incrimination, 14, 167, 169–170 Self-insurance, 497 Selleck, Tom, 250 Seller(s) breach of contract, 317–318 duty to disclose hidden defects in real property sales, 664 goods held by, 316–317 insurable interest, 318 letters of credit, 697 performance obligations, 330–336 remedies of, 338–340 representations, 252 Seller marketing co-ops, 542 Seller’s talk, 82, 347, 357 Seniority systems, 517 Sentencing guidelines, 172–174 Sentencing Reform Act of 1984, 172 Separation of powers, 10 September 11, 2001, 24 Service contracts (personal), 267, 269, 285 Service marks, 111, 123, 126–127 Service of process, 54 Service-based hacking, 176–177 Services, goods combined with, 297 Settlement agreements, 139, 220, 230–231 Seventh Amendment, 14, 58 Severable (divisible) contracts, 247 Sexual harassment, 509–512 Sexual orientation harassment, 511–512 Shapes, trademark protection, 126 Shareholders alignment of interests with officers, 599–600 approval of mergers, 569 close corporations, 555–556 defined, 552 derivative suits, 568, 573 dissolution of company, 561, 569 equitable interests, 568 liability of, 552 majority, 574 meetings of, 558, 569–571 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net I-24 Index Shareholders, continued powers of, 569 proposals by, 569–570 proxies, 569–570, 595 rights of, 571–573 voting, 552, 564, 569, 570–571 Sharia, 9, 49–50, 482 Shelter principle, 394 Sherman Antitrust Act of 1890, 608–619 enforcement, 622–623 exemptions, 623, 624 extraterritorial application of, 623–624, 698 jurisdictional requirements, 609 legislative history, 607, 608 major provisions, 608–609 Section 1, 609, 610–614 Section 2, 609, 614–619 violations of, 617 Shipment contracts, 312, 316, 332 Shoplifters, false imprisonment of, 76 Short sales, 440 Short-run profit maximization, 185–186 Short-swing profits, 593–594 Shrink-wrap agreements, 224–225 Signatures electronic, 225–226 forgery, 161, 397, 399, 413–415 on negotiable instruments, 380–381, 394–398, 399 unauthorized, 396–397 Signs, for trespass establishment, 84 Silence as acceptance, 220–221 misrepresentation by, 250 Similar marks, 108 Simple (informal) contracts, 211 Sixth Amendment, 14, 170 SJTs (summary jury trials), 66 Slander, 77, 78 Slander of quality, 86 Slander of title, 86 Sliding-scale standard, 44–45 Small business Chapter 11 bankruptcy, 458 cooperative research, 624 hacking threat, 179–180 “permalancers,” 467 Sarbanes-Oxley Act exemptions, 602 Superfund liability, 678 Small Business Administration Act, 624 Small claims courts, 49 Smart cards, 425 Smartphones Flame malware threat, 177 payments with, 424 Social hosts, 93 Social media See also Facebook business ethics and, 189–190 defined, 139 ECPA protections, 141–142 employer policies, 140–142, 189–190 free speech issues, 16, 18 hiring discrimination based on posts, 506 internal company systems, 142 legal process impact, 139–141 password disclosure protections, 142 terms of service, 276 time spent on, 139 Social Security, 497–498 Social Security Act of 1935, 497–498 Software browse-wrap terms, 225 copyrights, 122 licensing, 135 patents, 116 shrink-wrap agreements, 224–225 Sole proprietorships, 525–528 advantages/disadvantages of, 526–527 defined, 525 other business forms compared to, 574–575 prevalence of, 525 Sony Corporation, 176 Sony Pictures, 137 Sounds, trademark protection, 126 South Korea, antitrust laws in, 625 Sovereign immunity, 689 Spam, 131–132 Spanish language, “cooling-off” law requirements, 362 Special (consequential) damages, 74, 78, 280, 282, 345 Special indorsements, 389 Special qualified indorsements, 389–390 Special warranty deeds, 665 Specially manufactured goods, 307 Specific performance, 6, 285, 341 Speech commercial, 17 freedom of, 14, 15–18, 77 political speech by corporations, 16 reasonable restrictions of, 15–16 unprotected, 18 Spouses agency by operation of law, 469 community property, 446 promises made in consideration of marriage, 256–257 same-sex, 23 shared ownership of real property, 660–661 Stakeholders, 194 Stale checks, 412 Standard Oil Trust, 608 Standing to sue, 47 Stare decisis, 5–6 State(s) actions exempt from antitrust laws, 624 administrative agencies, Bill of Rights application, 14–15 codes of, 30–31 corporate law, 551, 557, 559, 600 crimes, 156 employees, 514 franchise regulation, 544 immigration law, 502 lawmaking authority, 10 police powers, 12 regulatory power, 12 securities laws, 597–598 spam regulations, 131 statutes, 2, 41–42, 64–65, 159, 491, 497 trade secret protections, 122 uniform laws, workers’ compensation laws, 497 State courts appellate courts, 50–51 budget cuts, 49 citations, 34 cyber courts, 62 decisions of, 31–33 electronic filing with, 62 following case through, 53–61 jurisdiction See Jurisdiction levels of, 48–51 supreme courts, 51 trial courts, 48–50, 51 State of mind, 155–156 Statement(s) of fact, 77, 82, 346 of opinion, 77, 82, 250, 346–347 of value, 346–347 Stationary sources of air pollution, 673 Statute(s) See also Law(s) arbitration, 64–65 assignments prohibited by, 267 contracts contrary to, 241–242 dram shop, 93 estray, 638 of Fraud See Statute of Frauds Good Samaritan, 93 of limitations See Statute of limitations long arm, 41–42 recording, 666 state, 2, 41–42, 64–65, 159, 491, 497 trademark protection, 108 Statute of Frauds collateral promises, 255–256, 259 contracts involving interests in land, 254–255, 259 contracts made in consideration of marriage, 256–257 defined, 254 English origins, 254 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net Index exceptions to, 257–259 one-year rule, 255, 256, 259 sale of goods contracts, 257, 258, 259 sales and lease contracts, 306–308 sufficiency of writing or electronic record, 259–260 UCC–CISG comparison, 319 Statute of limitations breach of contract, 278 for crimes, 167 defined, 22 sales and lease contracts, 278, 345 torts, 75 Statutory law, 2–3, 30–31, 35 Stewart, Jon, 130 Stewart, Martha, 596 Stock certificates, 571 Stock options, 599 Stocks bonds vs., 560 close corporations, 555–556 common, 560 defined, 560 initial sales of, 582–590 preferred, 560 transfers of, 573 Stolen goods, receipt of, 160 Stone, Sly, 253–254 Stop Counterfeiting in Manufactured Goods Act (SCMGA) of 2006, 111–112 Stop-payment orders, 412–413 Stored Communications Act (SCA), 141 Stored-value cards, 424 Strict liability applications of, 93 common carriers, 644 criminal sanctions for crimes, 156 defined, 93 environmental actions, 672 potentially responsible parties under Superfund, 678 product, 95–100 Strict product liability, 95–99 Strict scrutiny, 21–22 Strong marks, 109–110 Strong-arm power, 447 Student loans, 450–451 Subject matter, court’s jurisdiction over, 42–43 Subjective impossibility, 278 Subleases, 670 Subsidiaries, 690 Substantial abuse, 444 Substantial effect, 623–624, 698 Substantial performance, 275 Substantive due process, 21, 169 Substantive law, 7–8 Substantive rules, 3–4 Substantive unconscionability, 244 Substitution of carriers, 333 Subsurface rights, 657 Sufferance, tenancy at, 662 Suggestive trademarks, 110 Summary jury trials (SJTs), 66 Summons, 54 Superfund, 677–678 Superseding cause, 91 Supervisors, harassment by, 510–511 Suppliers, monitoring employment practices of, 199 Supremacy clause, 13 Supreme Court Reporter, 33 Supreme Court, U.S See United States Supreme Court Supreme courts (state), 51 Surety, 436–438 Suretyship, 436–438 Survivorship, right of, 660 Symantec Corporation, 193 Symbolic speech, 15 Syndicates, 542 T Tainted foods, 364–365 Taking defined, 667 of land owned by private party for public use, 667 of negotiable instruments, 392–393 of private property by foreign government, 688–689 Tangible employment actions, 510 Tangible personal property, 631 Tangible property, 297 Target Corporation, 175, 299 Tariffs, 692 Tax, taxation corporations, 552 discharge exception in bankruptcy, 449, 457 FICA, 498 on imports, 692 independent contractors, 485 joint ventures, 541 limited liability companies, 539 Medicare, 498 partnerships, 529–530 personal vs real property, 632 S corporations, 556 Web purchases, 298 Telecommunications Act of 1996, 555 Telemarketing and Consumer Fraud and Abuse Prevention Act, 362 Telemarketing Sales Rule (TSR), 362 Telephone Consumer Protection Act (TCPA), 361–362 Telephone solicitation, 361–362 Temporary impossibility, 280 Tenancy in common, 312, 660 by the entirety, 660 fixed-term, 661 joint, 660 periodic, 661 at sufferance, 662 at will, 661 Tenant-landlord relationships, 283, 668–669 Tender defined, 274 of delivery, 330 of payment, 438 perfect tender rule, 332–336 Tenth Amendment, 12, 14 Termination See also Dissolution of agency, 481–484 of easement or profit, 662–663 franchises, 545–546 of joint tenancy, 660 of offer, 217–219 Terms additional, 303–306 browse-wrap, 225 definiteness, 217 delivery, 301, 316 online contracts, 223 open, 300–302 of service, 276 Territorial restrictions, 613 Terrorism, 24, 177–178 “Testing the waters,” 587 Textbooks, 121 Theft crimes, 160 cyber, 174–175, 525 identity, 175, 178 torts, 85 of trade secrets, 163 Third Amendment, 14 Third parties assignment of rights to See Assignment(s) beneficiaries, 271–272, 273 delegation of duties to, 269–270 Time drafts, 377, 378 Time instruments, 377, 393, 396 Time/timing bank liability for paying check with forged customer signature, 415 bank statement examination, 414 contract writing requirement, 255 lapse of agency termination, 482 and offer termination, 219 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-25 www.downloadslide.net I-26 Index Time/timing, continued negotiable instruments payable at definite time, 383–384 offer acceptance, 221–222 presentment of negotiable instrument, 395 rejection of goods, 342 stop-payment orders, 413 Tippees, 592–593 Tipper/tippee theory, 592–593 Title(s) cases, 36 defined, 311 documents of, 312–313, 645 good, 346 identification of goods, 311–312 passage of, 312–315, 665–666 slander of, 86 void, 313–314 voidable, 314 warranties of, 345–346 Title VII of Civil Rights Act, 503–512, 516 Tobacco products, 364 Tolling, 167 Tortfeasors, 75 Tortious conduct, 478 Torts, 73–105 agency relationship liability, 466–467, 478–481, 485 classifications of, 75 corporate liability, 552–553 cyber, 143 damages, 74–75 defenses, 75 defined, 73 employment-at-will doctrine exceptions, 491 intentional against persons, 75–84 intentional against property, 84–86 international claims, 698–699 law of, 73–75 lawsuit and criminal prosecution for same act, 154 product liability, 94–100 strict liability, 93 unintentional, 86–93 Toxic chemicals, 676–678 Toxic Substances Control Act, 676–677 Toyota, 545 Trade barriers, 692–693 exports and export controls, 689–690, 691 horizontal restraint of, 611–612 import controls, 691–692 usage of, 309 vertical restraint of, 613–614 Trade acceptance, 377–378 Trade associations, 612 Trade custom, implied warranty of, 349 Trade dress, 111, 123 Trade libel, 86 Trade names, 108 Trade secrets, 122–123, 163 Trademark Dilution Revision Act (TDRA) of 2006, 108 Trademarks acquisition process, 123 certification marks, 111 collective marks, 111 counterfeit goods, 111–112 cybersquatting lawsuits, 133 defined, 107 dilution, 108, 134–135 distinctiveness of mark, 109–111 duration, 123 infringement, 109, 123 international protections, 124–125 Internet issues, 134–135 licensing, 112–113 marketing issues, 126–127 overview of, 123 registration, 108–109 service marks, 111 statutory protection, 108 trade dress, 111 Trading with the Enemy Act, 691 Training, employee, 197–198 Transaction, defined, 226 Transfer(s) before bankruptcy filing, 447 consumer fund, 422–423 electronic fund, 422–423 fraudulent, 447 of negotiable instruments, 386–391, 398 warranties, 398 Transferred intent, 75 Transparency, of benefit corporations, 557 Traveler’s checks, 409 Treaties, 686 Treatises, Treble damages, 117, 623 Trespass to land, 84–85 to personal property, 85 Trial(s) criminal, 172, 173 by jury, right to, 14, 58, 170 motion for new, 59 procedures, 59 public, right to, 170 speedy trial, right to, 14, 170 summary jury trials (SJTs), 66 Trial courts, 31, 43, 48–50, 51 Triple bottom line, 185 TRIPS Agreement of 1994, 124 Trucking companies, 692 Trust indorsements, 390 Trustees, in bankruptcy cases, 443, 446–447, 455 Trusts, business, 542 Truth-in-Lending Act (TILA), 367–369 TSR (Telemarketing Sales Rule), 362 Tying arrangements, 620–621 Typosquatting, 133 U UCC See Uniform Commercial Code (UCC) Unanimous opinions, 36 Unauthorized acts, 478 Unauthorized signatures, 396–397 Unconditional promises, 381–382 Unconscionability, 243–244, 246, 310 Undertaking Spam, Spyware, and Fraud Enforcement with Enforcers Beyond Borders Act, 131–132 Undisclosed principals, 476, 477–478 Undue hardship, 507, 516 Undue influence, 247, 252–254 Unemployment insurance, 499 Unenforceable contracts, 213 Unequivocal acceptance, 219–220 Unforeseen difficulties, 229 Uniform Commercial Code (UCC) acceleration clauses, 384 adoption of, 3, 294 Article (Sales Contracts), 295–299, 543 See also Sales contracts Article 2A (Leases), 299–300 See also Lease agreements Article (Negotiable Instruments), 376–377, 407 See also Negotiable instruments Article (Bank Deposits and Collections), 407 Article (Secured Transactions), 431 changes and updates, 295 choice-of-law clauses, 695 CISG comparison, 319 citations, 35 crop sales, 657 fictitious payee rule, 397–398 good faith provision, 302, 330 imposter rule, 397 limitation-of-liability clauses, 288 online acceptances, 224 oral contracts, 258 origins of, 295 parol evidence rule, 308–309 purpose of, 3, 294 scope of, 208, 295 secured transactions, 430 securities, 597–598 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net Index Statute of Fraud provisions, 257, 258, 259 unconscionability, 243 warranties under, 398–399 Uniform Electronic Transactions Act (UETA), 221, 226, 380n Uniform laws, Uniform Limited Liability Company Act (ULLCA), 537–540 Uniform Partnership Act (UPA), 528–534 Uniform Rapid Suspension (URS) system, 133 Uniform Residential Landlord and Tenant Act (URLTA), 668 Uniform Securities Act, 598 Uniform Trade Secrets Act, 122 Unilateral contracts, 210–211 Unilateral mistakes, 248, 249 Unilateral refusals to deal, 617 Unintentional discrimination, 504–505 Unintentional torts, 86–93 Unions and unionization, 196, 624 United Kingdom See Great Britain United Nations Commission on International Trade Law, 686–687 Convention on Contracts for the International Sale of Goods (CISG), 318–319, 343, 687 Convention on the Recognition and Enforcement of Foreign Arbitral Awards, 695–696 United States Code (U.S.C.), 30, 35 United States Constitution bankruptcy, 441 Bill of Rights, 13–20 commerce clause, 10–13 criminal protections, 167–171 due process clause, 14, 20–21, 75 equal protection clause, 21–22 establishment clause, 19 export controls, 691 federal judicial power, 43 federal sentencing guidelines, 172–173 federal vs state powers, 10 free exercise clause, 19–20 intellectual property protections, 106 as primary source of law, privacy rights, 22–23 separation of powers, 10 supremacy clause, 13 treaties, 686 United States Copyright Office, 117 United States Courts of Appeals, 51–52, 62 United States Department of Agriculture (USDA), 364 United States Department of Defense, 670 United States Department of Interior, 670 United States Department of Justice, 174, 589, 611, 612, 622–623 United States Department of Labor, 498 United States district courts, 43, 51, 52 United States Patent and Trademark Office, 108–109, 113 United States Reports (U.S.), 33 United States Safe Web Act, 131–132 United States Supreme Court appeals to, 52–53, 61 Bill of Rights application to states, 14–15 binding authority, decisions by, 33 justices, 52 petitions granted by, 53 powers, 52 rule of four, 53 Universal defenses, 399–400 Unjust enrichment, 213–214, 246 Unliquidated debt, 230 Unprotected speech, 18 Unpublished opinions, 33 Unreasonable searches and seizures, 14 Unreasonably dangerous products, 95, 96 Unsecured creditors, 444, 449, 453 URS (Uniform Rapid Suspension) system, 133 USA Patriot Act, 24 Usage of trade, 309 Usury, 241 Utilitarianism, 192–193 V Valid contracts, 212–213, 220 Value statements of, 346–347 taking instruments for, 393–394 Vegetation, 657 Venture capital, 561 Venue, 47 Verdict, 153, 172 Vertical mergers, 622 Vertical restraints, 613–614 Vertically integrated firms, 613 Vesting, 272, 498–499 Vicarious liability, 479, 480 Vick, Michael, 169 Video conferencing, 62 Vietnam, antitrust laws in, 625 Violent crime, 158–159 Virtual property, 630, 633 Viruses, 176 Visas, 501–502 Void contracts, 213, 240, 246–247 Void titles, 313–314 Voidable contracts, 213, 238–239, 240 Voidable rights, 447 I-27 Voidable titles, 314 Voir dire, 58 Voluntary bankruptcy, 443–445 Voluntary consent, 209, 247–254 Voting, of shareholders, 552, 564, 569, 570–571 W Wages discrimination, 508–509 laws governing, 492, 493–494 minimum, 493 overtime, 196, 492–493 Waiting period, 585 Waivers of liability, 246 Walmart, 186 Walsh-Healey Act of 1936, 492 Walt Disney Company, 194 War, agency termination by, 484 Warehouse companies, 645 Warehouse receipts, 312, 645 Warn, warnings duty to, 87–88 inadequate, 97–98 Warrentless searches, 170–171 Warrants, 167–168 Warranty(ies) bailor’s duties, 644 breach of, 400 disclaimers, 349–351 express, 346–347, 350 implied See Implied warranties negotiable instruments, 398–399 overlapping, 349 presentment, 398 of title, 345–346 transfer, 398 Warranty deeds, 665 Waste, 659 Water pollution, 675–676 Web sites See also Internet courts, 62 patent databases, 113 proxy materials posted on, 569 Webb-Pomerene Act, 624 Well-known seasoned issuers (WKSIs), 585 Wells Fargo Bank, 175 Westlaw® citations, 35 West’s Bankruptcy Reporter, 33 West’s National Reporter System, 31 West’s Supreme Court Reporter, 33 Whistleblowing, 198, 491–492 White-collar crime, 161–163, 174 Wild animals, 632–633 Wills, property transferred by, 666 Winding up, 533, 540–541, 561 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net I-28 Index WIPO (World Intellectual Property Organization), 136 Wire transfers, 423 Wireless devices, jurors’ use of, 60 Wiretapping, 141–142 Wisconsin, video conferencing laws, 62 Withdrawal from illegal agreement, 247 Witnesses, trials, 59, 170 WKSIs (well-known seasoned issuers), 585 Women employment discrimination, 503, 507–512 sexual harassment, 509–512 Worker Adjustment and Retraining Notification (WARN) Act of 1988, 492, 494–495 Workers’ compensation laws, 497 Workout agreements, 440 Workplace health and safety, 472 “Works for hire,” 467–468 World Intellectual Property Organization (WIPO), 136 World Trade Organization (WTO), 692 Worms, 176 Writ(s) of attachment, 435 of certiorari, 52–53, 61 of execution, 435 Writing requirements See also Statute of Frauds agency relationship formation, 468 agent’s authority, 472–473 contracts, 209, 254–260 negotiable instruments, 380, 385–386 Wrongful discharge, 492 Wrongful interference, 83–84 Wrongful termination, 482 WTO (World Trade Organization), 692 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it www.downloadslide.net Landmark in the Law Equitable Principles and Maxims  Federal Trade Commission Rule 433  401 Marbury v Madison (1803)  41 Check Clearing in the 21st Century Act (Check 21)  419 Palsgraf v Long Island Railroad Co (1928)  89 The Digital Millennium Copyright Act  136 Miranda v Arizona (1966)  171 The Bankruptcy Abuse Prevention and Consumer Protection Act  442 The Doctrine of Respondeat Superior 480 Hamer v Sidway (1891)  228 The Securities and Exchange Commission  582 The Uniform Commercial Code  295 The Sherman Antitrust Act  608 Linking Business Law to . .  Linking Business Law to Marketing: Trademarks and Service Marks  126 Linking Business Law to Accounting and Finance: Managing a Company’s Reputation  201 Linking Business Law to Corporate Management: What Can You Do to Prepare for a Chapter 11 Reorganization? 458 Linking Business Law to Corporate Management: Human Resource Management  519 Linking Business Law to Accounting and Finance: Banking Risks  425 Copyright 2017 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it ... www.downloadslide.net 416 Business Law Today: The Essentials Case 15 .2 Michigan Basic Property Insurance Association v Washington Court of Appeals of Michigan, 20 12 WL 20 5753 (20 12) DECISION  No The... follows:  9 12 U.S.C Sections 4001–4010 10 12 C.F.R Sections 22 9.1? ?22 9. 42 Copyright 20 17 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to... Insurance Co v Bank One, 879 N.E.2d 1086 (Ind.Sup.Ct 20 08) Espresso Roma Corp v Bank of America, N.A., 100 Cal.App.4th 525 , 124 Cal.Rptr.2d 549 (20 02) Copyright 20 17 Cengage Learning All Rights