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ESSENTIALS OF BUSINESS LAW

reface xix U N I T 1 The Legal Environment 1 Chapter 1 Introduction to Law 2 1-1 Exploring the Law 3 1-1a The Role of Law in Society 3 1-1b Origins of Our Law 4 1-2 Sources of Contemporary Law 6 1-2a The United States Constitution 6 1-2b Statutes 9 1-2c Common Law 9 1-2d Court Orders 9 1-2e Administrative Law 10 1-2f Treaties 10 1-3 Classifications 10 1-3a Criminal and Civil Law 10 1-3b Law and Morality 11 1-4 Jurisprudence 12 1-4a Legal Positivism 12 1-4b Natural Law 12 1-4c Legal Realism 13 1-5 Working with the Book’s Features 13 1-5a Analyzing a Case 14 1-5b Exam Strategy 16 1-5c You Be the Judge 17 Chapter Conclusion 18 Exam Review 18 Multiple-Choice Questions 19 Case Questions 20 Discussion Questions 21 Chapter 2 Ethics and Corporate Social Responsibility 23 2-1 Why Study Ethics? 25 2-1a Ethics in Business 26 2-1b Why Be Ethical? 27 2-2 Theories of Ethics 29 2-2a Utilitarian Ethics 29 2-2b Deontological Ethics 30 2-2c Rawlsian Justice 30 2-2d Front Page Test 31 2-2e Moral Universalism and Relativism 31 2-2f Ethics Case: Up in Smoke 32 2-3 Ethics Traps 33 2-3a Money 33 2-3b Competition 33 2-3c Rationalization 34 2-3d We Cannot Be Objective about Ourselves 35 2-3e Moral Licensing 35 2-3f Conflicts of Interest 36 2-3g Conformity 36 2-3h Ethics Case: Diamonds in the Rough 36 2-3i Following Orders 37 2-3j Euphemisms and Reframing 37 2-3k Lost in a Crowd 38 2-3l Ethics Case: Man Down 38 2-3m Short-Term Perspective 39 2-3n Ethics Case: Wobbly Platform 39 2-3o Blind Spots 40 2-3p Avoiding Ethics Traps 40 2-3q Lying: A Special Case 41 2-3r Ethics Case: Truth (?) in Borrowing 41 2-4 Reacting to Unethical Behavior 42 2-4a Loyalty 42 2-4b Exit 42 2-4c Voice 43 2-4d Ethics Case: Truth or Consequences 43 2-5 Applying the Principles 45 2-5a Personal Ethics in the Workplace 45 2-5b Ethics Case: Weird Wierdsma 45 2-5c The Organization’s Responsibility to Society 46 2-5d Ethics Case: Breathing the Fumes 46 2-5e The Organization’s Responsibility to Its Employees 46 2-5f Ethics Case: The Storm after the Storm 47 2-5g The Organization’s Responsibility to Its Customers 47 2-5h Ethics Case: Mickey Weighs In 48 2-5i The Organization’s Responsibility to Overseas Workers 48 2-5j Ethics Case: A Worm in the Apple 49 2-5k Corporate Social Responsibility (CSR) 50 2-5l Ethics Case: The Beauty of a Well-Fed Child 50 Chapter Conclusion 51 Exam Review 51 v Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203vi CONTENTS Multiple-Choice Questions 53 Case Questions 54 Discussion Questions 55 Chapter 3 International Law 58 3-1 International Law: Public and Private 59 3-2 Actors in International Law 59 3-2a The United Nations 59 3-2b The International Court of Justice 60 3-2c International Chamber of Commerce 62 3-2d Sovereign Nations 62 3-3 The World’s Legal Systems 63 3-3a Common Law 63 3-3b Civil Law 64 3-3c Islamic Law 65 3-4 Sources and Applicability of International Law 67 3-4a Sources of International Law 67 3-4b Interaction of Foreign and Domestic Laws 73 3-4c Choosing the Applicable Law and Jurisdiction 77 Chapter Conclusion 77 Exam Review 78 Multiple-Choice Questions 80 Case Questions 81 Discussion Questions 82 Chapter 4 Common Law, Statutory Law, and Administrative Law 83 4-1 Common Law 84 4-1a Stare Decisis 84 4-1b Bystander Cases 84 4-2 Statutory Law 86 4-2a Bills 87 4-2b Discrimination: Congress and the Courts 88 4-2c Debate 88 4-2d Conference Committee 90 4-2e Statutory Interpretation 91 4-2f Changing Times 93 4-2g Voters’ Role 93 4-2h Congressional Override 93 4-3 Administrative Law 94 4-3a Creation of Agencies 95 4-3b Power of Agencies 96 4-3c Limits on Agency Power 99 Chapter Conclusion 103 Exam Review 103 Multiple-Choice Questions 105 Case Questions 106 Discussion Questions 107 Chapter 5 Constitutional Law 108 5-1 Who Will Have Power? 109 5-1a Overview 109 5-1b Creating the Constitution: Important Principles 109 5-1c Powers Granted 110 5-2 Protected Rights 116 5-2a Incorporation 117 5-2b First Amendment: Free Speech 117 5-2c Fifth Amendment: Due Process and the Takings Clause 120 5-2d Fourteenth Amendment: Equal Protection Clause 125 Chapter Conclusion 127 Exam Review 127 Multiple-Choice Questions 130 Case Questions 131 Discussion Questions 131 Chapter 6 Dispute Resolution 133 6-1 Court Systems 134 6-1a State Courts 134 6-1b Federal Courts 138 6-2 Before Trial 141 6-2a Pleadings 141 6-2b Discovery 145 6-2c Summary Judgment 149 6-2d Final Preparation 151 6-3 The Anatomy of a Trial and Appeal 151 6-3a The Trial 151 6-3b Appeals 156 6-4 Alternative Dispute Resolution 157 6-4a Negotiation 157 6-4b Mediation 157 6-4c Arbitration 158 Chapter Conclusion 159 Exam Review 159 Multiple-Choice Questions 161 Case Questions 162 Discussion Questions 163 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203CONTENTS vii Chapter 7 Crime 164 7-1 Criminal Procedure 165 7-1a A Civil versus a Criminal Case 165 7-1b Conduct Outlawed 166 7-1c State of Mind 168 7-1d Gathering Evidence: The Fourth Amendment 169 7-1e After Arrest 174 7-2 Crimes That Harm Businesses (and Their Customers) 177 7-2a Larceny 177 7-2b Embezzlement 178 7-2c Fraud 178 7-2d Arson 181 7-2e Hacking 181 7-3 Crimes Committed by Business 182 7-3a Making False Statements 183 7-3b Workplace Crimes 183 7-3c RICO 184 7-3d Money Laundering 185 7-3e Hiring Illegal Workers 185 7-3f Foreign Corrupt Practices Act 185 7-3g Other Crimes 187 7-3h Punishing a Corporation 187 Chapter Conclusion 188 Exam Review 188 Multiple-Choice Questions 191 Case Questions 192 Discussion Questions 193 U N I T 2 Torts 195 Chapter 8 Intentional Torts and Business Torts 196 8-1 Intentional Torts 198 8-1a Defamation 198 8-1b False Imprisonment 200 8-1c Intentional Infliction of Emotional Distress 200 8-1d Battery and Assault 201 8-1e Trespass, Conversion, and Fraud 202 8-2 Damages 203 8-2a Compensatory Damages 203 8-2b Punitive Damages 204 8-2c Tort Reform and the Exxon Valdez 206 8-3 Business Torts 208 8-3a Tortious Interference with Business Relations 208 8-3b Tortious Interference with a Contract 208 8-3c Tortious Interference with a Prospective Advantage 209 8-3d The Lanham Act 210 Chapter Conclusion 211 Exam Review 211 Multiple-Choice Questions 213 Case Questions 214 Discussion Questions 215 Chapter 9 Negligence, Strict Liability, and Product Liability 217 9-1 Negligence 218 9-1a Duty of Due Care 219 9-1b Breach of Duty 221 9-1c Causation 221 9-1d Damages 225 9-1e Defenses 225 9-2 Strict Liability and Product Liability 228 9-2a Strict Liability 228 9-2b Product Liability 230 9-2c Contemporary Trends 232 Chapter Conclusion 234 Exam Review 234 Multiple-Choice Questions 236 Case Questions 238 Discussion Questions 239 Chapter 10 Privacy and Internet Law 240 10-1 Privacy in a Digital World 241 10-1a How We Lose Our Privacy in the Digital World 241 10-2 The Law of Privacy 243 10-2a Constitutional Law: The Fourth Amendment 243 10-2b Common Law: Privacy Torts 245 10-2c Privacy Statutes 247 10-2d European Privacy Law 251 10-3 Regulation in the Digital World 252 10-3a Net Neutrality 252 10-3b Regulation of User-Generated Content 252 10-3c Online Speech 253 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203viii CONTENTS 10-3d Liability of Internet Service Providers 255 10-3e Consumer Protection 256 Chapter Conclusion 258 Exam Review 258 Multiple-Choice Questions 261 Case Questions 262 Discussion Questions 263 U N I T 3 Contracts 265 Chapter 11 Introduction to Contracts 266 11-1 Contracts 267 11-1a All Shapes and Sizes 268 11-1b Contracts Defined 268 11-1c Development of Contract Law 268 11-1d Types of Contracts 270 11-2 Sources of Contract Law 273 11-2a Common Law 273 11-2b Uniform Commercial Code 273 11-3 Enforcing Non-Contracts 275 11-3a Promissory Estoppel 275 11-3b Quasi-Contract 276 Chapter Conclusion 279 Exam Review 279 Multiple-Choice Questions 281 Case Questions 282 Discussion Questions 284 Chapter 12 The Agreement: Offers and Acceptances 285 12-1 Offer 286 12-1a Meeting of the Minds 286 12-1b Statements That Usually Do Not Amount to Offers 288 12-1c Problems with Definiteness 291 12-1d The UCC and Open Terms 293 12-1e Termination of Offers 294 12-2 Acceptance 295 12-2a Mirror Image Rule 296 12-2b UCC and the Battle of Forms 296 12-2c Clickwrap and Browsewrap Agreements 298 12-2d Communication of Acceptance 300 Chapter Conclusion 301 Exam Review 302 Multiple-Choice Questions 304 Case Questions 305 Discussion Questions 306 Chapter 13 Consideration 307 13-1 What Is Consideration? 308 13-1a What Is Value? 309 13-1b What Is a Bargained-For Exchange? 311 13-1c What Consideration Is Not 312 13-2 Special Consideration Cases 317 13-2a Settlement of Debts 317 13-2b Agreements Not to Compete 319 13-2c Moral Consideration 320 Chapter Conclusion 321 Exam Review 321 Multiple-Choice Questions 323 Case Questions 324 Discussion Questions 325 Chapter 14 Legality 327 14-1 Contracts That Violate a Statute 328 14-1a Wagers 328 14-1b Insurance 329 14-1c Licensing Statutes 329 14-1d Usury 330 14-2 Contracts That Violate Public Policy 332 14-2a Restraint of Trade: Non-compete Agreements 332 14-2b Exculpatory Clauses 336 14-2c Unconscionable Contracts 338 Chapter Conclusion 341 Exam Review 341 Multiple-Choice Questions 343 Case Questions 344 Discussion Questions 345 Chapter 15 Voidable Contracts: Capacity and Consent 347 15-1 Capacity 348 15-1a Minors 348 15-1b Mentally Impaired Persons 350 15-2 Reality of Consent 352 15-2a Fraud 352 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203CONTENTS ix 15-2b Mistake 357 15-2c Duress 360 15-2d Undue Influence 361 Chapter Conclusion 362 Exam Review 362 Multiple-Choice Questions 364 Case Questions 366 Discussion Questions 367 Chapter 16 Written Contracts 368 16-1 The Common Law Statute of Frauds: Contracts That Must Be in Writing 369 16-1a Agreements for an Interest in Land 370 16-1b Agreements That Cannot Be Performed within One Year 372 16-1c Promise to Pay the Debt of Another 374 16-1d Promise Made by an Executor of an Estate 375 16-1e Promise Made in Consideration of Marriage 375 16-2 The Common Law Statute of Frauds: What Is a “Writing”? 375 16-2a Signature 375 16-2b Reasonable Certainty 376 16-2c Vagueness 376 16-2d Incompleteness 376 16-3 The UCC’s Statute of Frauds 378 16-3a UCC §2-201(1)—The Basic Rule 378 16-4 Parol Evidence 381 16-4a Exception: An Incomplete or Ambiguous Contract 382 16-4b Fraud, Misrepresentation, or Duress 382 Chapter Conclusion 383 Exam Review 383 Multiple-Choice Questions 385 Case Questions 386 Discussion Questions 387 Chapter 17 Third Parties 388 17-1 Third Party Beneficiary 389 17-1a Intended Beneficiaries 389 17-1b Incidental Beneficiaries 391 17-2 Assignment and Delegation 392 17-2a Assignment 392 17-2b Delegation of Duties 398 Chapter Conclusion 401 Exam Review 401 Multiple-Choice Questions 403 Case Questions 404 Discussion Questions 405 Chapter 18 Contract Termination 407 18-1 Performance 408 18-1a Discharge 408 18-1b Conditions 408 18-1c Completion 412 18-2 Non-Performance 417 18-2a Breach 417 18-2b Impossibility 418 Chapter Conclusion 421 Exam Review 421 Multiple-Choice Questions 423 Case Questions 424 Discussion Questions 426 Chapter 19 Remedies 427 19-1 Identifying the “Interest” to Be Protected 428 19-2 Expectation Interest 429 19-2a Direct Damages 430 19-2b Consequential Damages 431 19-2c Incidental Damages 433 19-2d The UCC and Damages 433 19-3 Reliance Interest 435 19-3a Promissory Estoppel 435 19-4 Restitution Interest 437 19-4a Restitution in Cases of Contract Breach or Discharge 437 19-4b Restitution in Cases of a Voidable Contract 438 19-4c Restitution in Cases of a Quasi-Contract 438 19-5 Equitable Interest and Remedies 439 19-5a Specific Performance 439 19-5b Injunction 440 19-5c Reformation 441 19-6 Special Issues 441 19-6a Mitigation of Damages 441 19-6b Nominal Damages 442 19-6c Liquidated Damages 442 Chapter Conclusion 443 Exam Review 443 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203x CONTENTS Multiple-Choice Questions 445 Case Questions 446 Discussion Questions 447 Chapter 20 Practical Contracts 449 20-1 Creating a Contract 450 20-1a The Lawyer 450 20-1b Who Drafts the Contract? 452 20-1c How to Read a Contract 452 20-1d Mistakes 452 20-2 The Structure of a Contract 458 20-2a Terms That Vary by Contract 458 20-2b Boilerplate 463 Chapter Conclusion 468 Exam Review 468 Multiple-Choice Questions 471 Case Questions 472 Discussion Questions 472 U N I T 4 Sales 475 Chapter 21 Introduction to Sales 476 21-1 Development and Scope of the UCC 477 21-1a Noah and Nina, Revisited 479 21-1b This Unit and This Chapter 479 21-2 UCC Basics 480 21-2a Code’s Purpose 480 21-2b Scope of Article 2 480 21-2c Mixed Contracts 480 21-2d Merchants 481 21-2e Good Faith and Unconscionability 482 21-3 UCC Contract Formation 482 21-3a Formation Basics: Section 2-204 482 21-3b Statute of Frauds 484 21-3c Added Terms: Section 2-207 486 21-3d Open Terms: Sections 2-305 and 2-306 490 21-3e Output and Requirements Contracts 490 21-3f Modification 492 Chapter Conclusion 495 Exam Review 495 Multiple-Choice Questions 497 Case Questions 498 Discussion Questions 499 Chapter 22 Ownership, Risk, and Warranties 501 22-1 Legal Interest and Title 502 22-1a Existence and Identification 502 22-1b Passing of Title 504 22-1c Insurable Interest 504 22-1d Imperfect Title 506 22-2 Risk of Loss 508 22-2a Shipping Terms 509 22-2b When the Parties Fail to Allocate the Risk 509 22-3 Warranties 513 22-3a Express Warranties 513 22-3b Implied Warranties 515 22-3c Warranty Disclaimers 517 22-3d Remedy Limitations 519 22-3e Privity 520 22-3f Buyer’s Misuse 522 22-3g Statute of Limitations and Notice of Breach 522 Chapter Conclusion 522 Exam Review 522 Multiple-Choice Questions 525 Case Questions 526 Discussion Questions 528 Chapter 23 Performance and Remedies 529 23-1 Rights and Obligations of Contracting Parties 530 23-1a Obligation on All Parties: Good Faith 530 23-1b Seller’s Rights and Obligations 531 23-1c Buyer’s Rights and Obligations 536 23-2 Remedies of Contracting Parties 538 23-2a Seller’s Remedies 538 23-2b Buyer’s Remedies 541 Chapter Conclusion 546 Exam Review 546 Multiple-Choice Questions 549 Case Questions 550 Discussion Questions 551 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203CONTENTS xi U N I T 5 Additional CPA Topics 553 Chapter 24 Secured Transactions 554 24-1 Article 9: Terms and Scope 555 24-1a Article 9 Vocabulary 555 24-1b Scope of Article 9 556 24-2 Attachment of a Security Interest 559 24-2a Agreement 559 24-2b Control and Possession 560 24-2c Value 561 24-2d Debtor Rights in the Collateral 561 24-2e Attachment to Future Property 561 24-3 Perfection 562 24-3a Perfection by Filing 562 24-3b Perfection by Possession or Control 566 24-3c Perfection of Consumer Goods 567 24-3d Perfection of Movable Collateral and Fixtures 569 24-4 Protection of Buyers 570 24-4a Buyers in Ordinary Course of Business 570 24-4b Buyers of Consumer Goods 572 24-4c Buyers of Chattel Paper, Instruments, and Documents 573 24-4d Liens 573 24-5 Priorities Among Creditors 575 24-5a Filing versus Control or Possession 576 24-5b Priority Involving a Purchase Money Security Interest 576 24-6 Default and Termination 578 24-6a Default 578 24-6b Termination 581 Chapter Conclusion 582 Exam Review 582 Multiple-Choice Questions 585 Case Questions 586 Discussion Questions 587 Chapter 25 Creating a Negotiable Instrument 588 25-1 Negotiable Instruments 589 25-1a Commercial Paper 589 25-1b Types of Negotiable Instruments 590 25-1c Negotiability 592 25-1d Negotiation 596 25-2 Holder in Due Course 597 25-2a Requirements for Being a Holder in Due Course 597 25-2b Shelter Rule 600 25-2c Defenses against a Holder in Due Course 601 25-2d Consumer Exception 604 Chapter Conclusion 605 Exam Review 606 Multiple-Choice Questions 608 Case Questions 609 Discussion Questions 610 Chapter 26 Liability for Negotiable Instruments 612 26-1 Introduction 613 26-1a The Contract versus the Instrument 613 26-1b Enforcing an Instrument 614 26-1c Primary versus Secondary Liability 614 26-1d The Payment Process 614 26-2 Signature Liability 615 26-2a Maker 615 26-2b Drawer 616 26-2c Drawee 616 26-2d Indorser 617 26-2e Accommodation Party 618 26-2f Agent 619 26-3 Warranty Liability 620 26-3a Basic Rules of Warranty Liability 620 26-3b Transfer Warranties 621 26-3c Comparison of Signature Liability and Transfer Warranties 623 26-3d Presentment Warranties 623 26-4 Other Liability Rules 625 26-4a Conversion Liability 625 26-4b Impostor Rule 625 26-4c Fictitious Payee Rule 626 26-4d Employee Indorsement Rule 626 26-4e Negligence 626 26-4f Crimes 628 26-5 Discharge 629 26-5a Discharge of the Obligor 629 26-5b Discharge of an Indorser or Accommodation Party 630 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203xii CONTENTS Chapter Conclusion 631 Exam Review 631 Multiple-Choice Questions 634 Case Questions 635 Discussion Questions 636 Chapter 27 Accountants’ Liability 637 27-1 Introduction 639 27-1a The Sarbanes-Oxley Act of 2002 (SOX) 639 27-1b Consolidation in the Accounting Profession 640 27-1c Audits 640 27-2 Liability to Clients 642 27-2a Contract 642 27-2b Negligence 642 27-2c Common Law Fraud 643 27-2d Breach of Trust 643 27-2e Fiduciary Duty 644 27-3 Liability to Third Parties 645 27-3a Negligence 646 27-3b Fraud 649 27-3c Liability for Qualified Opinions 649 27-3d Securities Act of 1933 649 27-3e Securities Exchange Act of 1934 650 27-4 Criminal Liability 652 27-5 Other Accountant–Client Issues 653 27-5a The Accountant–Client Relationship 653 27-5b Accountant–Client Privilege 653 Chapter Conclusion 654 Exam Review 654 Multiple-Choice Questions 658 Case Questions 658 Discussion Questions 659 U N I T 6 Agency and Employment Law 661 Chapter 28 Agency Law 662 28-1 The Agency Relationship 663 28-1a Creating an Agency Relationship 663 28-1b Duties of Agents to Principals 665 28-1c Duties of Principals to Agents 669 28-1d Terminating an Agency Relationship 670 28-2 Liability to Third Parties 672 28-2a Principal’s Liability for Contracts 672 28-2b Agent’s Liability for Contracts 675 28-2c Principal’s Liability for Negligent Physical Torts 677 28-2d Principal’s Liability for Intentional Physical Torts 682 28-2e Principal’s Liability for Nonphysical Torts 682 28-2f Agent’s Liability for Torts 683 Chapter Conclusion 683 Exam Review 683 Multiple-Choice Questions 686 Case Questions 687 Discussion Questions 688 Chapter 29 Employment and Labor Law 690 29-1 Employment at Will 691 29-2 Employment Security 692 29-2a Common Law Protections 692 29-2b Family and Medical Leave Act 696 29-2c Whistleblowing 697 29-3 Workplace Freedom 699 29-3a Off-Duty Activities 699 29-3b The Right to Free Speech 700 29-3c Polygraph Tests 702 29-4 Workplace Safety 703 29-4a OSHA 703 29-4b Employee Data 703 29-4c Guns 704 29-5 Financial Protection 704 29-5a Fair Labor Standards Act: Minimum Wage, Overtime, and Child Labor 704 29-5b Workers’ Compensation 705 29-5c Health Insurance 705 29-5d Social Security 705 29-5e Pension Benefits 706 29-6 Labor Unions 706 29-6a Key Pro-Union Statutes 706 29-6b Labor Unions Today 707 29-6c Organizing a Union 708 29-6d Collective Bargaining 709 29-6e Concerted Action 710 Chapter Conclusion 711 Exam Review 711 Multiple-Choice Questions 715 Case Questions 716 Discussion Questions 717 Chapter 30 Employment Discrimination 719 30-1 Employment Opportunity before 1964 720 30-1a The United States Constitution 721 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203CONTENTS xiii 30-1b The Civil Rights Act of 1866 721 30-1c Equal Pay Act of 1963 721 30-2 The Civil Rights Act of 1964 721 30-2a Prohibited Activities 721 30-2b Religion 728 30-2c Sex 728 30-2d Attractiveness 729 30-2e Family Responsibility Discrimination 730 30-2f Sexual Orientation 730 30-2g Gender Identity and Expression 731 30-2h Background and Credit Checks 731 30-2i Immigration 732 30-2j Reverse Discrimination 732 30-2k Defenses to Charges of Discrimination 733 30-3 Pregnancy Discrimination Act 734 30-4 Age Discrimination in Employment Act 734 30-4a Disparate Treatment 734 30-4b Disparate Impact 736 30-4c Hostile Work Environment 736 30-4d Bona Fide Occupational Qualification 736 30-5 Discrimination on the Basis of Disability 737 30-5a The Rehabilitation Act of 1973 737 30-5b The Americans with Disabilities Act 737 30-6 Genetic Information Nondiscrimination Act 741 30-7 Hiring Practices 741 30-7a Interviews 742 30-7b Social Media 742 30-8 Enforcement 743 30-8a Constitutional Claims 743 30-8b The Civil Rights Act of 1866 743 30-8c The Rehabilitation Act of 1973 743 30-8d Other Statutory Claims 743 Chapter Conclusion 744 Exam Review 745 Multiple-Choice Questions 749 Case Questions 750 Discussion Questions 751 U N I T 7 Business Organizations 753 Chapter 31 Starting a Business: LLCS and Other Options 754 31-1 Sole Proprietorships 755 31-2 Corporations 756 31-2a Corporations in General 756 31-2b Special Types of Corporations 758 31-3 Limited Liability Companies 760 31-3a Formation 761 31-3b Flexibility 762 31-3c Transferability of Interests 762 31-3d Duration 763 31-3e Going Public 763 31-3f Changing Forms 763 31-3g Piercing the Company Veil 763 31-3h Legal Uncertainty 764 31-3i Choices: LLC versus Corporation 764 31-4 Social Enterprises 765 31-5 General Partnerships 766 31-5a Tax Status 766 31-5b Liability 766 31-5c Formation 766 31-5d Management 766 31-5e Raising Capital 766 31-5f Transfer of Ownership 766 31-5g Dissociation 767 31-6 Limited Liability Partnerships 767 31-7 Professional Corporations 767 31-8 Joint Ventures 768 31-9 Franchises 768 31-9a Advantages of a Franchise 768 31-9b The Drawbacks of a Franchise 769 31-9c Legal Requirements 770 Chapter Conclusion 771 Exam Review 772 Multiple-Choice Questions 773 Case Questions 774 Discussion Questions 775 Chapter 32 Partnerships 776 32-1 Creating a Partnership 777 32-1a Is This a Partnership? 778 32-1b Partnership by Estoppel 780 32-2 The Partnership and Outsiders 780 32-2a Liability of the Partnership to Outsiders 780 32-2b Paying the Debts of the Partnership 782 32-3 The Relationship among Partners 783 32-3a Financial Rights 783 32-3b Management Rights 786 32-3c Management Duties 786 32-4 Terminating a Partnership 789 32-4a Dissociation 790 32-4b Continuation of the Partnership Business 792 32-4c Termination of the Partnership Business 793 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203xiv CONTENTS Chapter Conclusion 795 Exam Review 795 Multiple-Choice Questions 799 Case Questions 800 Discussion Questions 801 Chapter 33 Life and Death of a Corporation 802 33-1 Before the Corporation Is Formed 803 33-1a Promoter’s Liability 803 33-1b Defective Incorporation 804 33-2 Incorporation Process 806 33-2a Where to Incorporate? 806 33-2b Charter’s Required Provisions 807 33-2c Charter’s Optional Provisions 812 33-3 After Incorporation 814 33-3a Directors and Officers 815 33-3b Bylaws 816 33-3c Shareholder Agreements 817 33-3d Foreign Corporations 817 33-4 Death of the Corporation 818 33-4a Voluntary Termination by the Shareholders 818 33-4b Termination by the State 819 33-4c Piercing the Corporate Veil 820 Chapter Conclusion 821 Exam Review 822 Multiple-Choice Questions 823 Case Questions 824 Discussion Questions 825 Chapter 34 Management Duties 827 34-1 Conflict 828 34-1a What the Parties Want 828 34-1b The Business Judgment Rule 830 34-1c Applications of the Business Judgment Rule 831 34-2 More Conflict: Takeovers 837 34-2a Takeovers: The Basics 837 34-2b Takeover Defenses 837 34-2c Takeovers: The Business Judgment Rule 839 34-2d Takeover Legislation 840 Chapter Conclusion 842 Exam Review 842 Multiple-Choice Questions 845 Case Questions 846 Discussion Questions 847 Chapter 35 Shareholder Rights 848 35-1 Introduction 850 35-1a Who Are the Shareholders? 850 35-1b The Relationship between Shareholders and Managers 850 35-2 Rights of Shareholders 851 35-2a Right to Information 851 35-2b Corporate Changes 853 35-2c Protection of Minority Shareholders 853 35-2d Right to Vote 855 35-3 Enforcing Shareholder Rights 865 35-3a Direct Lawsuits 865 35-3b Derivative Lawsuits 865 Chapter Conclusion 869 Exam Review 870 Multiple-Choice Questions 872 Case Questions 873 Discussion Questions 874 Chapter 36 Bankruptcy 875 36-1 Overview of the Bankruptcy Code 876 36-1a Chapter Description 877 36-1b Goals 877 36-2 Chapter 7 Liquidation 877 36-2a Filing a Petition 878 36-2b Trustee 879 36-2c Creditors 879 36-2d Automatic Stay 880 36-2e Bankruptcy Estate 881 36-2f Payment of Claims 883 36-2g Discharge 885 36-3 Chapter 11 Reorganization 891 36-3a Debtor in Possession 891 36-3b Creditors’ Committee 891 36-3c Plan of Reorganization 892 36-3d Confirmation of the Plan 892 36-3e Discharge 892 36-3f Small-Business Bankruptcy 893 36-4 Chapter 13 Consumer Reorganizations 893 36-4a Beginning a Chapter 13 Case 895 36-4b Plan of Payment 895 36-4c Discharge 895 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203CONTENTS xv Chapter Conclusion 896 Exam Review 896 Multiple-Choice Questions 898 Case Questions 899 Discussion Questions 900 U N I T 8 Government Regulation 901 Chapter 37 Securities Regulation 902 37-1 Federal Securities Laws 903 37-1a The Securities and Exchange Commission 903 37-1b What Is a Security? 903 37-2 Securities Act of 1933 904 37-2a Exempt Securities 904 37-2b Exempt Transactions 905 37-2c Public Offerings 908 37-2d Sales of Restricted Securities 910 37-2e Liability under the 1933 Act 910 37-3 Securities Exchange Act of 1934 912 37-3a Registration Requirements 912 37-3b Disclosure Requirements 912 37-3c Liability under the 1934 Act 913 37-3d Insider Trading: §§16 and 10(b) 918 37-4 Blue Sky Laws 923 37-4a Exemption from State Regulation 923 37-4b State Regulation 923 Chapter Conclusion 923 Exam Review 923 Multiple-Choice Questions 927 Case Questions 928 Discussion Questions 928 Chapter 38 Antitrust 931 38-1 Overview of Antitrust Laws 932 38-1a History 932 38-1b Provisions of the Antitrust Laws 934 38-2 Cooperative Strategies 935 38-2a Horizontal Cooperative Strategies 935 38-2b Vertical Cooperative Strategies 938 38-2c Mergers and Joint Ventures 940 38-3 Aggressive Strategies 941 38-3a Monopolization 941 38-3b Predatory Pricing 944 38-3c Tying Arrangements 945 38-3d Controlling Distributors and Retailers 946 38-3e Vertical Price-Fixing 947 Chapter Conclusion 948 Exam Review 948 Multiple-Choice Questions 951 Case Questions 952 Discussion Questions 953 Chapter 39 Consumer Protection 954 39-1 Sales 955 39-1a Deceptive Acts or Practices 955 39-1b Unfair Practices 956 39-1c Abusive Acts 957 39-1d Additional Sales Rules 957 39-2 Consumer Credit 959 39-2a Payday Loans 960 39-2b Truth in Lending Act— General Provisions 960 39-2c Home Loans 961 39-2d Plastic: Credit, Debit, and ATM Cards 963 39-2e Electronic Fund Transfers 965 39-2f Credit Reports 967 39-2g Debt Collection 969 39-2h Equal Credit Opportunity Act 971 39-3 Magnuson-Moss Warranty Act 972 39-4 Consumer Product Safety 973 Chapter Conclusion 974 Exam Review 974 Multiple-Choice Questions 978 Case Questions 979 Discussion Questions 980 Chapter 40 Environmental Law 981 40-1 Introduction 982 40-1a Environmental Awareness 982 40-1b The Cost–Benefit Trade-Off 982 40-1c Environmental Protection Agency 982 40-2 Air Pollution 983 40-2a Clean Air Act 983 40-2b Climate Change 986 40-2c Automobile Pollution 988 40-3 Water Pollution 989 40-3a Clean Water Act 989 40-3b Other Water Pollution Statutes 992 40-4 Waste Disposal 993 40-4a Resource Conservation and Recovery Act 993 40-4b Superfund 995 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203xvi CONTENTS 40-5 Chemicals 996 40-5a Toxic Substances Control Act 996 40-5b Pesticides 997 40-6 Natural Resources 997 40-6a National Environmental Policy Act 997 40-6b Endangered Species Act 998 Chapter Conclusion 1000 Exam Review 1000 Multiple-Choice Questions 1003 Case Questions 1004 Discussion Questions 1005 U N I T 9 Property 1007 Chapter 41 Intellectual Property 1008 41-1 Patents 1009 41-1a Types of Patents 1009 41-1b Requirements for a Utility Patent 1010 41-1c Patent Application and Issuance 1013 41-1d Patent Infringement 1014 41-1e International Patent Treaties 1014 41-2 Copyrights 1015 41-2a Copyright Term 1016 41-2b Copyright Infringement 1016 41-2c Defenses to Copyright Infringement 1017 41-2d Digital Music and Movies 1019 41-2e The Digital Millennium Copyright Act 1020 41-2f International Copyright Treaties 1021 41-3 Trademarks 1022 41-3a Types of Marks 1022 41-3b Trademark Registration 1022 41-3c Valid Trademarks 1023 41-3d Infringement and Dilution 1024 41-3e International Trademark Treaties 1026 41-4 Trade Secrets 1026 Chapter Conclusion 1028 Exam Review 1028 Multiple-Choice Questions 1030 Case Questions 1031 Discussion Questions 1032 Chapter 42 Real Property and Landlord–Tenant Law 1033 42-1 Nature of Real Property 1034 42-2 Interests in Real Property 1035 42-2a Concurrent Estates 1035 42-2b Future Interests 1038 42-2c Nonpossessory Interests 1039 42-3 Adverse Possession 1041 42-3a Entry and Exclusive Possession 1041 42-3b Open and Notorious Possession 1041 42-3c A Claim Adverse or Hostile to the Owner 1041 42-3d Continuous Possession for the Statutory Period 1041 42-4 Land Use Regulation 1043 42-4a Nuisance Law 1043 42-4b Zoning 1043 42-4c Eminent Domain 1044 42-5 Landlord–Tenant Law 1044 42-5a Types of Tenancy 1045 42-5b Landlord’s Duties 1046 42-5c Tenant’s Duties 1049 42-5d Liability of Landlords and Tenants 1051 Chapter Conclusion 1053 Exam Review 1053 Multiple-Choice Questions 1056 Case Questions 1057 Discussion Questions 1058 Chapter 43 Personal Property and Bailment 1060 43-1 Acquiring Personal Property 1061 43-1a Gifts 1061 43-1b Found Property 1065 43-1c Accession 1066 43-2 Bailment 1067 43-2a Control 1067 43-2b Rights of the Bailee 1069 43-2c Duties of the Bailee 1069 43-2d Exculpatory Clauses 1070 43-2e Rights and Duties of the Bailor 1071 43-2f Liability for Defects 1071 43-2g Common Carriers and Contract Carriers 1072 43-2h Innkeepers 1073 Copyright 2019 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. Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. WCN 02-200-203CONTENTS xvii Chapter Conclusion 1073 Exam Review 1074 Multiple-Choice Questions 1076 Case Questions 1077 Discussion Questions 1079 Chapter 44 Planning for the Future: Wills, Trusts, and Insurance 1080 44-1 Introduction to Estate Planning 1081 44-1a Definitions 1081 44-1b Purpose 1082 44-1c Probate Law 1082 44-2 Wills 1082 44-2a Requirements for a Valid Will 1083 44-2b Spouse’s Share 1085 44-2c Children’s Share 1086 44-2d Digital Assets 1087 44-2e Amending a Will 1088 44-2f Intestacy 1088 44-2g Power of Attorney 1089 44-2h Probate 1089 44-2i Property Not Transferred by Will 1089 44-2j Anatomical Gifts 1089 44-2k End of Life Health Issues 1089 44-3 Trusts 1090 44-3a Advantages and Disadvantages 1091 44-3b Types of Trusts 1092 44-3c Trust Administration 1092 44-3d A Trust’s Term 1092 44-4 Introduction to Insurance 1093 44-5 Insurance Contract 1094 44-5a Offer and Acceptance 1094 44-5b Limiting Claims by the Insured 1095 44-5c Bad Faith by the Insurer 1097 44-6 Types of Insurance 1099 44-6a Property Insurance 1099 44-6b Life Insurance 1099 44-6c Health Insurance 1101 44-6d Disability Insurance 1101 44-6e Liability Insurance 1101 44-6f Automobile Insurance 1102 Chapter Conclusion 1102 Exam Review 1102 Multiple-Choice Questions 1105 Case Questions 1106 Discussion Questions 1107 Appendix A The Constitution of the United States A1 Appendix B Uniform Commercial Code (Selected Provisions) B1 Appendix C Answers to Selected End-of-Chapter Questions C1 Glossary G1 Table of Cases T1 Index

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