,TABLE OF CONTENTS
Chapter 1. Today’s Business Environment: Law and Ethics
Chapter 2. The Court Systems
Chapter 3. Trials and Resolving Disputes
Chapter 4. The Constitution: Focus on Application to Business
Chapter 5. Criminal Law and Business
Chapter 6. Elements of Torts
Chapter 7. Business Torts and Product Liability
Chapter 8. Real and Personal Property
Chapter 9. Intellectual Property
Chapter 10. Contracts
Chapter 11. Domestic and International Sales
Chapter 12. Business Organizations
Chapter 13. Negotiable Instruments, Credit, and Bankruptcy
Chapter 14. Agency and the Employment Relationship
Chapter 15. Employment and Labor Regulations
Chapter 16. Employment Discrimination
Chapter 17. The Regulatory Process
Chapter 18. Securities Regulation
Chapter 19. Consumer Protection
Chapter 20. Antitrust Law
Chapter 21. Environmental Law
Chapter 22. The International Legal Environment of Business
,CHAPTER 1
Table of Contents
Answer to Discussion Question ........................................................................................................... 1
Answers to Case Questions .............................................................................................................. 1
Answers to Ethics and Social Questions .............................................................................................. 3
Answer to Discussion Question
Should the common law maxim “Ignorance of the law is no excuse” apply to an immigrant who speakslittle English and
was not educated in the United States? How about for a tourist who does not speak English? Everyone knows criminal
acts are prohibited, but what about subtler rules that differ across countries and so may be misunderstood by foreigners?
Answer: It is generally true that ignorance of the law is no excuse. Citizens are deemed to have constructive
knowledge of the law. Yet, as well known as this rule is, it is surprising how often it is proffered as an excuse.
(A Westlaw search cases finds hundreds of examples). Examples include: Deluco v. Dezi (Conn. Super) (lack of
knowledge regarding the state‘s usury laws is no excuse for the inclusion of an illegal interest rate in a sales
contract); and Plumlee v. Paddock (ignorance of thefact that the subject matter of the contract was illegal was
not excuse). The courts have provided a small exception to the rule when it comes to people in lack of English
language skills. Consider Flanery v. Kuska, (defendant did not speak English was advised by a friend that an
answer to a complaint was not required); Ramon v. Dept. of Transportation, (no English and an inability to
understand the law required for an excuse); Yurechko v. County of Allegheny, (Ignorance and with the fact that
the municipality suffered no hardship in late lawsuit filing was an excuse).
Answers to Case Questions
1. Facts from an English judge’s decision in 1884: “The crew of an English yacht ........................ were cast away in
a storm on the high seas . . . and were compelled to put into an open boat ......................... They had no supply
of water and no supply of food. . . . That on the eighteenth day . . . they .................... suggested that one
should be sacrificed to save the rest. . . . That next day . . . they . . . went to the boy ......................... put a knife
into his throat and killed him . . . the three men fed upon the body ..................... of the boy for four days; [then]
the boat was picked up by a passing vessel, and [they] were rescued. . . . and committed for trial. . . .
if the men had not fed upon the body of the boy they would probably not have survived to be sopicked up
and rescued, but would ...................... have died of famine. The boy, being in a much weaker
condition, was likely to have died before them .................The real question in this case [is] whether killing
under the conditions set forth .............. be or be not murder.” Do you consider the acts to be immoral?
[Regina v. Dudley and Stephens, 14 Queens Bench Division 273 (1884)]
Answer: This points out that the legal system has limits. Its acceptability is dictated by legal culture--whichdetermines
whether law will be enforced, obeyed, avoided, or abused. It is limited by the informal rules of the society--its
customs and values. One limit is the extent to which society will allow the formal rules to be imposed when a
crime is committed in odd circumstances. Here there was an intentional murder. Does the motive for the murder,
the effort to save several lives by sacrificing one
, life, make it a crime that should be punished? Not all crimes are treated the same. It also raisesquestions about
the desirability of not giving judges flexibility in sentencing.
There was a precedent for a light sentence in this case in U.S. law: U.S. v. Holmes, 20 F. Cas. 360 (No. 15383)
(C.C.E.D. Pa. 1842). The case involved a sinking ocean liner. Several passengers madeit to the only lifeboat,
which was far too overcrowded. The captain decided to save the women and children and threw several men
overboard. The lifeboat was rescued. The grand jury refused to indict the captain from murder, only for
manslaughter. He got a six month sentence.
The British judge in the case here imposed the death penalty upon the person who survived. Thejudge found
it difficult to rule that every man on board had the right to make law by his own hand.The Crown reduced
the sentence to six months.
2. Smoking is a serious health hazard. Cigarettes are legal. Should cigarette manufacturers be liable for the serious
illnesses and untimely deaths caused by their unavoidably dangerous products, eventhough they post a warning on
the package and consumers voluntarily assume the health risks by smoking? [Cipollone v. Liggett Group, Inc., 505
U.S. 504 (1992)]
Answer: The general rule that exists now is that since the government has ordered the posting of warninglabels on
cigarettes, and since the dangers of smoking are well known, consumers have been warned and are not due
compensation if they kill themselves by smoking. The Cippoline case, since reviewed by the Supreme Court,
appears to be of limited impact since the victim was adjudged to have become addicted to cigarettes before
the warning label was ordered in 1964. If cigarette makers were held responsible for all health problems
associated with cigarettes, then, like alcohol and other dangerous products, the damages would likely be so
high it would effectively ban the products. Presumably, in a free society if adults are clearly informed of the
risks of products that cannot be made safe, they accept the risk. Tobacco and alcohol producers cannot take
the dangers out of the products except at the margin by encouraging responsible drinking and the like. Are
drugs like cocaine different?
3. Two eight-year-old boys were seriously injured when riding Honda mini-trail bikes. The boys were riding on public
streets, ran a stop sign, and were hit by a truck. The bikes had clear warning labels on the front stating they were
only for off-road use. The manual stated the bikes were not to be usedon public streets. The parents sued Honda.
The supreme court of Washington said one basic issue existed: “Is a manufacturer liable when children are injured
while riding one of its mini-trail bikes on apublic road in violation of manufacturer and parental warnings?” Is it
unethical to make products like mini-trail bikes children will use when we know accidents like this will happen?
[Baughn v. Honda Motor Co., 727 P.2d 655 Sup. Ct, Wash., (1986)]
Answer: The court found no liability for the manufacturers. There was no defect; the product was safe for intended
use. Safety instructions were clear; the parents let the boys ride the bikes. Anything can bedangerous--
baseballs are dangerous when they hit the head, swings are dangerous when kids jumpout of them; there is
only so much that can be done to make the government the ―national nanny‖ asthe Washington Post once said
about excessive consumer protection. Parents must accept a high degree of responsible for their own children.
4. Johnson Controls adopted a “fetal protection policy” that women of childbearing age could not work in the
battery-making division of the company. Exposure to lead in the battery operation could causeharm to unborn
babies. The company was concerned about possible legal liability for injury sufferedby babies of mothers who had
worked in the battery division. The Supreme Court held the companypolicy was illegal. It was an “excuse for
denying women equal employment opportunities.” Is the Court forcing the company to be unethical by allowing
pregnant women who ignore the warnings to expose their babies to the lead? [United Auto Workers v. Johnson
Controls, 499 U.S. 187 (1991)]
Answer: The Court held it a form of sex discrimination to prevent women of child-bearing age from holding the
more dangerous jobs. The company argued that it did this to protect itself from possibleliability in case of
damage to babies and that the decision was ethical. The replacements for these workers were often men or
more senior women, who tended to be higher income workers, so this
Chapter 1. Today’s Business Environment: Law and Ethics
Chapter 2. The Court Systems
Chapter 3. Trials and Resolving Disputes
Chapter 4. The Constitution: Focus on Application to Business
Chapter 5. Criminal Law and Business
Chapter 6. Elements of Torts
Chapter 7. Business Torts and Product Liability
Chapter 8. Real and Personal Property
Chapter 9. Intellectual Property
Chapter 10. Contracts
Chapter 11. Domestic and International Sales
Chapter 12. Business Organizations
Chapter 13. Negotiable Instruments, Credit, and Bankruptcy
Chapter 14. Agency and the Employment Relationship
Chapter 15. Employment and Labor Regulations
Chapter 16. Employment Discrimination
Chapter 17. The Regulatory Process
Chapter 18. Securities Regulation
Chapter 19. Consumer Protection
Chapter 20. Antitrust Law
Chapter 21. Environmental Law
Chapter 22. The International Legal Environment of Business
,CHAPTER 1
Table of Contents
Answer to Discussion Question ........................................................................................................... 1
Answers to Case Questions .............................................................................................................. 1
Answers to Ethics and Social Questions .............................................................................................. 3
Answer to Discussion Question
Should the common law maxim “Ignorance of the law is no excuse” apply to an immigrant who speakslittle English and
was not educated in the United States? How about for a tourist who does not speak English? Everyone knows criminal
acts are prohibited, but what about subtler rules that differ across countries and so may be misunderstood by foreigners?
Answer: It is generally true that ignorance of the law is no excuse. Citizens are deemed to have constructive
knowledge of the law. Yet, as well known as this rule is, it is surprising how often it is proffered as an excuse.
(A Westlaw search cases finds hundreds of examples). Examples include: Deluco v. Dezi (Conn. Super) (lack of
knowledge regarding the state‘s usury laws is no excuse for the inclusion of an illegal interest rate in a sales
contract); and Plumlee v. Paddock (ignorance of thefact that the subject matter of the contract was illegal was
not excuse). The courts have provided a small exception to the rule when it comes to people in lack of English
language skills. Consider Flanery v. Kuska, (defendant did not speak English was advised by a friend that an
answer to a complaint was not required); Ramon v. Dept. of Transportation, (no English and an inability to
understand the law required for an excuse); Yurechko v. County of Allegheny, (Ignorance and with the fact that
the municipality suffered no hardship in late lawsuit filing was an excuse).
Answers to Case Questions
1. Facts from an English judge’s decision in 1884: “The crew of an English yacht ........................ were cast away in
a storm on the high seas . . . and were compelled to put into an open boat ......................... They had no supply
of water and no supply of food. . . . That on the eighteenth day . . . they .................... suggested that one
should be sacrificed to save the rest. . . . That next day . . . they . . . went to the boy ......................... put a knife
into his throat and killed him . . . the three men fed upon the body ..................... of the boy for four days; [then]
the boat was picked up by a passing vessel, and [they] were rescued. . . . and committed for trial. . . .
if the men had not fed upon the body of the boy they would probably not have survived to be sopicked up
and rescued, but would ...................... have died of famine. The boy, being in a much weaker
condition, was likely to have died before them .................The real question in this case [is] whether killing
under the conditions set forth .............. be or be not murder.” Do you consider the acts to be immoral?
[Regina v. Dudley and Stephens, 14 Queens Bench Division 273 (1884)]
Answer: This points out that the legal system has limits. Its acceptability is dictated by legal culture--whichdetermines
whether law will be enforced, obeyed, avoided, or abused. It is limited by the informal rules of the society--its
customs and values. One limit is the extent to which society will allow the formal rules to be imposed when a
crime is committed in odd circumstances. Here there was an intentional murder. Does the motive for the murder,
the effort to save several lives by sacrificing one
, life, make it a crime that should be punished? Not all crimes are treated the same. It also raisesquestions about
the desirability of not giving judges flexibility in sentencing.
There was a precedent for a light sentence in this case in U.S. law: U.S. v. Holmes, 20 F. Cas. 360 (No. 15383)
(C.C.E.D. Pa. 1842). The case involved a sinking ocean liner. Several passengers madeit to the only lifeboat,
which was far too overcrowded. The captain decided to save the women and children and threw several men
overboard. The lifeboat was rescued. The grand jury refused to indict the captain from murder, only for
manslaughter. He got a six month sentence.
The British judge in the case here imposed the death penalty upon the person who survived. Thejudge found
it difficult to rule that every man on board had the right to make law by his own hand.The Crown reduced
the sentence to six months.
2. Smoking is a serious health hazard. Cigarettes are legal. Should cigarette manufacturers be liable for the serious
illnesses and untimely deaths caused by their unavoidably dangerous products, eventhough they post a warning on
the package and consumers voluntarily assume the health risks by smoking? [Cipollone v. Liggett Group, Inc., 505
U.S. 504 (1992)]
Answer: The general rule that exists now is that since the government has ordered the posting of warninglabels on
cigarettes, and since the dangers of smoking are well known, consumers have been warned and are not due
compensation if they kill themselves by smoking. The Cippoline case, since reviewed by the Supreme Court,
appears to be of limited impact since the victim was adjudged to have become addicted to cigarettes before
the warning label was ordered in 1964. If cigarette makers were held responsible for all health problems
associated with cigarettes, then, like alcohol and other dangerous products, the damages would likely be so
high it would effectively ban the products. Presumably, in a free society if adults are clearly informed of the
risks of products that cannot be made safe, they accept the risk. Tobacco and alcohol producers cannot take
the dangers out of the products except at the margin by encouraging responsible drinking and the like. Are
drugs like cocaine different?
3. Two eight-year-old boys were seriously injured when riding Honda mini-trail bikes. The boys were riding on public
streets, ran a stop sign, and were hit by a truck. The bikes had clear warning labels on the front stating they were
only for off-road use. The manual stated the bikes were not to be usedon public streets. The parents sued Honda.
The supreme court of Washington said one basic issue existed: “Is a manufacturer liable when children are injured
while riding one of its mini-trail bikes on apublic road in violation of manufacturer and parental warnings?” Is it
unethical to make products like mini-trail bikes children will use when we know accidents like this will happen?
[Baughn v. Honda Motor Co., 727 P.2d 655 Sup. Ct, Wash., (1986)]
Answer: The court found no liability for the manufacturers. There was no defect; the product was safe for intended
use. Safety instructions were clear; the parents let the boys ride the bikes. Anything can bedangerous--
baseballs are dangerous when they hit the head, swings are dangerous when kids jumpout of them; there is
only so much that can be done to make the government the ―national nanny‖ asthe Washington Post once said
about excessive consumer protection. Parents must accept a high degree of responsible for their own children.
4. Johnson Controls adopted a “fetal protection policy” that women of childbearing age could not work in the
battery-making division of the company. Exposure to lead in the battery operation could causeharm to unborn
babies. The company was concerned about possible legal liability for injury sufferedby babies of mothers who had
worked in the battery division. The Supreme Court held the companypolicy was illegal. It was an “excuse for
denying women equal employment opportunities.” Is the Court forcing the company to be unethical by allowing
pregnant women who ignore the warnings to expose their babies to the lead? [United Auto Workers v. Johnson
Controls, 499 U.S. 187 (1991)]
Answer: The Court held it a form of sex discrimination to prevent women of child-bearing age from holding the
more dangerous jobs. The company argued that it did this to protect itself from possibleliability in case of
damage to babies and that the decision was ethical. The replacements for these workers were often men or
more senior women, who tended to be higher income workers, so this
