PREFACE
PART I InTROduCTIOn 1
Chapter 1 Law: Importance, Purposes, and Sources 2Chapter 2 Legal Reasoning, Ethical Behavior, and Social Responsibility 24Chapter 3 Court Systems 56Chapter 4 Litigation 74Chapter 5 Alternatives for Resolving Controversies 96Chapter 6 Constitutional Grounds for Regulating Business 112
PART II fOundATIOnAl legAl COnCePTs 136
Chapter 7 Criminal Law and Business 138Chapter 8 Torts: Introduction and Intentional Torts 158Chapter 9 Torts: Negligence and Strict Liability 172Chapter 10 Property: Introduction, Personal Property, and Wills 188Chapter 11 Property: Real Property 208Chapter 12 Intellectual Property and Cyber Law 228
PART III COnTRACTuAl RelATIOnshIPs 270
Chapter 13 Nature of Contracts and Contract Remedies 272Chapter 14 Agreement: Offer and Acceptance 294Chapter 15 Consideration 318Chapter 16 Genuine Assent and Contractual Capacity 336Chapter 17 Illegality 356Chapter 18 Written Form 374Chapter 19 Rights of Third Parties 392Chapter 20 Performance 412
PART IV dOmesTIC And glOBAl sAles 440
Chapter 21 Sales Contracts: Domestic and Global Aspects of Formation, Title, and Risk of Loss 444
Chapter 22 Sales Contracts: Domestic and Global Aspects of Performance, Breach, and Remedies 464
Chapter 23 Sales Contracts: Domestic and Global Aspects of Product Warranties 480
PART V AgenCy And emPlOymenT 500
Chapter 24 Basic Principles of Agency 502Chapter 25 Agency Liability Concepts 520Chapter 26 Employment and Labor Law 540Chapter 27 Employment Discrimination 562
Brief Contents
iv Brief Contents
PART VI BusIness ORgAnIzATIOns 580
Chapter 28 Forms of Business Organization 582Chapter 29 Partnerships 602Chapter 30 Nature of Corporations 630Chapter 31 Financial and Operational Features of Corporations 652Chapter 32 Limited Liability Companies and Related Forms 678
PART VII negOTIABle InsTRumenTs 691
Chapter 33 Introduction to Negotiable Instruments 692Chapter 34 Creation and Negotiation 710Chapter 35 Holders in Due Course and Defenses 728Chapter 36 Liability of Parties to Negotiable Instruments 746
PART VIII CRedITORs And deBTORs 766
Chapter 37 Secured Transactions 768Chapter 38 Creditor Rights, Responsibilities, and Remedies 796Chapter 39 Bankruptcy 820
PART IX gOVeRnmenT RegulATIOn Of BusIness 848
Chapter 40 Administrative Law 850Chapter 41 Securities Regulation 870Chapter 42 Antitrust Law 900Chapter 43 Consumer Law 924Chapter 44 Environmental Regulation 948
PART X InTeRnATIOnAl And enTRePReneuRIAl ReAlms 968
Chapter 45 Legal Aspects of International Business 970Chapter 46 Law for the Aspiring Entrepreneur 988
APPENDIx A: The Constitution of the United States 1009
APPENDIx B: The Uniform Commercial Code 1015
APPENDIx C: Selected Revisions to the Uniform Commercial Code 1122
APPENDIx D: United Nations Convention on Contracts for the International Sale of Goods (1980) [CISG] 1151
GLOSSARy 1161
TABLE OF CASES 1181
INDEx 1185
Contents
PREFACE
PART I InTROduCTIOn …………… 1
1 lAw: ImPORTAnCe, PuRPOses, And sOuRCes …………………………… 21.1 Importance of law to Business ……… 3 1.1a Why Study the Legal Environment of
Business? ………………………………… 3 1.1b Addressing Risk and Achieving
Strategic Integration …………………… 6
CASE 1.1 Susette Kelo et al. v. City of New London, Connecticut, et al. ………… 7
1.2 An Overview of Our legal system …… 9 1.2a Defi nitions of Law …………………… 9 1.2b Objectives of a Legal System ……… 10
CASE 1.2 In the Matter of Julianne Delio, on Behalf of Daniel Delio v. Westchester County Medical Center, et al. …………… 11
1.2c Classifi cation of Legal Subjects …… 121.3 sources of law …………………………… 13 1.3a Four Sources of Law ………………… 13 1.3b Basic Constitutional Principles …… 13 1.3c Legislation …………………………… 14 1.3d Interpreting Legislation …………… 14 1.3e Uniform State Laws ………………… 15 1.3f Court Decisions ……………………… 161.4 Case law …………………………………… 17 1.4a Stare Decisis …………………………… 17 1.4b Problems Inherent in Case Law … 18 1.4c Rejection of Precedent ……………… 18 1.4d Confl ict of Laws …………………… 19
CASE 1.3 The Estee Lauder Companies, Inc. v. Shashi Batra ………………………………… 20
Chapter summary ……………………………… 22
Review Questions and Problems ………… 23
2 legAl ReAsOnIng, eThICAl BehAVIOR, And sOCIAl ResPOnsIBIlITy ………… 24
2.1 legal Reasoning ………………………… 25 2.1a Defi nition of Legal Reasoning …… 25 2.1b Principal Tools of Legal Reasoning 26 2.1c The Legal Reasoning Process ……… 28
CASE 2.1 Bammert v. Don’s Super Valu, Inc. …………………… 30
2.1d Jurisprudence ………………………… 31
CASE 2.2 The Case of the Speluncean Explorers ……………………… 33
2.2 ethical Behavior ………………………… 36 2.2a Signifi cance of Ethical Behavior … 36 2.2b Defi nition of Ethics ………………… 37 2.2c The Relationship of Ethics to Law 37 2.2d Ethical Theories ……………………… 39
CASE 2.3 Jeffrey K. Skilling v. United States ………………………………… 42
2.2e Framework for Making Ethical Decisions …………………… 43
2.2f Encouraging Ethical Behavior Within an Organization …………………… 45
2.3 social Responsibility …………………… 48 2.3a The Emergence of Social
Responsibility ……………………… 48 2.3b Competing Theories for Conducting
Business in a Socially Responsible Manner ……………………………… 49
2.3c Models of Corporate Social Responsibility ……………… 51
Chapter summary ……………………………… 52
Review Questions and Problems ………… 53
3 COuRT sysTems …………………… 563.1 Operating the Court system ………… 57 3.1a Trial Judges …………………………… 57 3.1b Reviewing Court Judges and Justices 57 3.1c The Jury ……………………………… 59
CASE 3.1 Colgrove v. Battin …………… 59
3.2 Court systems …………………………… 60 3.2a The State Structure ………………… 60 3.2b The Federal Structure ……………… 62 3.2c Federal District Courts ……………… 63
CASE 3.2 Hertz Corporation v. Friend 64
3.2d The Law in Federal Courts ………… 67
CASE 3.3 Erie Railroad v. Tompkins … 68
3.2e Federal Reviewing Courts ………… 693.3 law and equity …………………………… 69 3.3a Basic Distinction …………………… 69 3.3b Equitable Procedures ……………… 70
Chapter summary ……………………………… 71
Review Questions and Problems ………… 72
4 lITIgATIOn …………………………… 744.1 Basic Principles …………………………… 75 4.1a Parties ………………………………… 75 4.1b Standing to Sue ……………………… 75 4.1c Class Actions ………………………… 76
vi Contents
CASE 4.1 Wal-Mart Stores, Inc. v. Betty Dukes ………………………………… 77
4.2 The Place of litigation ………………… 80 4.2a Jurisdiction …………………………… 80 4.2b Long-Arm Statutes ………………… 80
CASE 4.2 Butler v. Beer Across America 81
4.2c Venue ………………………………… 834.3 Proceedings Prior to the Trial ……… 83 4.3a Pleadings ……………………………… 83 4.3b Motions Attacking Pleadings ……… 84 4.3c Discovery Procedures ……………… 84 4.3d Decisions Prior to a Trial …………… 854.4 The Trial …………………………………… 85 4.4a Jury Selection ………………………… 85
CASE 4.3 Edmonson v. Leesville Concrete Company, Inc. ……… 86
4.4b Proof …………………………………… 87 4.4c Motions During Trial ……………… 88 4.4d Jury Instructions …………………… 88 4.4e Verdicts and Judgments …………… 904.5 Proceedings After the Trial ………… 90 4.5a Post-Trial Motions ………………… 90 4.5b Appeals ……………………………… 90
Chapter summary ……………………………… 92
Internet Resources …………………………… 93
Review Questions and Problems ………… 94
5 AlTeRnATIVes fOR ResOlVIng COnTROVeRsIes …………………… 96
5.1 Compromises ……………………………… 97 5.1a Reasons to Compromise …………… 97
CASE 5.1 Burbach Broadcasting Company of Delaware v. Elkins Radio Corporation; Cat Radio Incorporated …………………… 98
5.1b Mediation …………………………… 995.2 Arbitration ………………………………… 100 5.2a Advantages …………………………… 100 5.2b Common-Law Arbitration ………… 101 5.2c Approaches to Arbitration ………… 101 5.2d General Aspects of
Arbitration Statutes ………………… 102
CASE 5.2 Marybeth Armendariz, et al. v. Foundation Health Psychcare Services, Inc. …………………… 103
5.2e The Submission ……………………… 104 5.2f The Award …………………………… 105 5.2g Procedures in Arbitration Hearings 105 5.2h Judicial Review of Arbitration Issues 105
CASE 5.3 Hall Street Associates, LLC v. Mattel, Inc. ………………………………… 107
Chapter summary ……………………………… 109
Review Questions and Problems ………… 110
6 COnsTITuTIOnAl gROunds fOR RegulATIng BusIness ……… 112
6.1 Overview …………………………………… 113 6.1a An Introduction to the Constitution
and Government Regulation ……… 1136.2 The federal form of government … 114 6.2a Separation of Powers ……………… 114
CASE 6.1 Free Enterprise Fund and Beckstead and Watts, LLP v. Public Company Accounting Oversight Board et al. ……… 115
6.2b Checks and Balances ……………… 1176.3 federalism ………………………………… 118 6.3a Nature of Federalism ……………… 118 6.3b Distribution of Powers ……………… 118 6.3c Commerce Clause …………………… 119
CASE 6.2 Heart of Atlanta Motel, Inc. v. United States et al. ………………………… 120
6.3d Supremacy and Preemption ……… 1226.4 Checks on the Power
of government …………………………… 123 6.4a Basic Aspects of
Constitutional Limitations ………… 123 6.4b Freedom of Speech ………………… 125
CASE 6.3 Kasky v. Nike, Inc. …………… 127
6.4c Takings ……………………………… 129 6.4d Due Process ………………………… 130 6.4e Equal Protection …………………… 1306.5 Privacy ……………………………………… 132 6.5a Privacy Rights ……………………… 132
Chapter summary ……………………………… 133
Review Questions and Problems ………… 134
Internet Resources …………………………… 135
PART II fOundATIOnAl legAl COnCePTs ……………… 136
7 CRImInAl lAw And BusIness 1387.1 Basic Concepts …………………………… 139 7.1a Terminology ………………………… 139 7.1b Classification of Crimes …………… 139 7.1c Administrative Crimes ……………… 140 7.1d White-Collar Crimes ……………… 141 7.1e Damage Suits ………………………… 1437.2 essential elements ……………………… 144 7.2a Act and Intent ……………………… 144
CASE 7.1 Cheek v. United States ……… 145
7.2b Capacity ……………………………… 147 7.2c Corporate Liability ………………… 147
CASE 7.2 Arthur Andersen, LLP v. United States ………………………………… 147
7.2d Defenses to Criminal Prosecutions … 1497.3 Constitutional Protections …………… 150 7.3a General Principles …………………… 150
Contents vii
7.3b The Fourth Amendment …………… 151
CASE 7.3 Danny Lee Kyllo v. United States ………………………………… 151
7.3c The Fifth Amendment ……………… 153 7.3d The Sixth Amendment …………… 154 7.3e The Eighth Amendment …………… 155
Chapter summary ……………………………… 156
Review Questions and Problems ………… 157
8 TORTs: InTROduCTIOn And InTenTIOnAl TORTs …………… 158
8.1 Theories of Tort liability …………… 159 8.1a Overview ……………………………… 159 8.1b Damages ……………………………… 159
CASE 8.1 Ansell Healthcare Products, Inc., and Becton Dickinson & Co., Inc. v. Owens & Minor, Inc. and Owens & Minor Medical, Inc. …………… 161
8.2 Intentional Torts ………………………… 162 8.2a Introduction ………………………… 162 8.2b Interference with Personal Freedom 163
CASE 8.2 Jeff Roach et al. v. Howard Stern et al. ………………………… 163
8.2c Interference with Property Rights … 164
CASE 8.3 Gary Kremen and Online Classified, Inc. v. Stephen Michael Cohen, Ocean Fund International, LTD. et al. … 165
8.2d Interference with Economic Relations ……………………………… 167
8.2e Wrongful Communications ……… 168
Chapter summary ……………………………… 170
Review Questions and Problems ………… 171
9 TORTs: neglIgenCe And sTRICT lIABIlITy ……………… 172
9.1 negligence ………………………………… 173 9.1a Introduction ………………………… 173 9.1b Due Care ……………………………… 174 9.1c Reasonable-Person Test …………… 174 9.1d Degrees of Negligence ……………… 175
CASE 9.1 Helen Palsgraf v. the Long Island Railroad Company …… 175
9.1e Negligence by Professional Persons: Malpractice …………………………… 176
9.1f Special Doctrines That Show Negligence …………………… 176
9.1g Actual Cause ………………………… 177 9.1h Proximate Cause …………………… 177
CASE 9.2 Kathleen Delaney v. John M. Reynolds ………………………… 178
9.1i Defenses to Negligence …………… 179
9.2 strict liability …………………………… 180 9.2a Theory ………………………………… 180 9.2b Recent Trends in Products Liability 181
CASE 9.3 Leesa Bunch, a Minor, etc. v. Hoffinger Industries, Inc. and McMasker Enterprises, Inc. ……………… 183
9.2c Defenses ……………………………… 184
Chapter summary ……………………………… 185
Internet Resources …………………………… 185
Review Questions and Problems ………… 186
10 PROPeRTy: InTROduCTIOn, PeRsOnAl PROPeRTy, And wIlls ………………………………… 188
10.1 Classifications of Property …………… 189 10.1a Real Versus Personal Property …… 189 10.1b Real Property ………………………… 190 10.1c Personal Property …………………… 190 10.1d Reasons for Distinguishing Between
Real and Personal Property ………… 19010.2 fixtures ……………………………………… 191 10.2a What Is a Fixture? …………………… 191
CASE 10.1 Prospect Hill Acquisition, LLC v. Tyco Electronics Corporation ………… 191
10.2b Reasons for Determining Fixture Status ………………………… 193
10.3 Acquiring Title to Personal Property ……………………… 193
10.3a Methods of Transfer ………………… 193 10.3b Inter Vivos Gifts ……………………… 193 10.3c Abandoned, Lost, and
Mislaid Property …………………… 19510.4 Bailments of Personal Property …… 195 10.4a Required Elements ………………… 195 10.4b Types of Bailments ………………… 195 10.4c Degree of Care Owed by Bailees … 196 10.4d Common Carriers as Bailees ……… 196
CASE 10.2 Era Nunez, as personal representative of the Estate of Linda Brown v. Professional Transit Management of Tucson, Inc. and Grace Zoellner ……… 197
10.4e Innkeepers as Bailees ……………… 19810.5 documents of Title ……………………… 198 10.5a General Concepts and Definitions 198 10.5b Negotiation and Transfer ………… 19910.6 leases of Personal Property ………… 200 10.6a Basic Concepts ……………………… 200 10.6b Application of the UCC …………… 20010.7 Acquiring Title to Personal and
Real Property: wills and Intestate succession ………………………………… 201
10.7a Terminology ………………………… 201 10.7b Testamentary Capacity …………… 201 10.7c Formalities of Execution …………… 201
viii Contents
CASE 10.3 In the Matter of the Will of Marion L. Priddy, Deceased ……………… 202
10.7d Intestate Succession ………………… 203
Chapter summary ……………………………… 204
Review Questions and Problems ………… 206
11 PROPeRTy: ReAl PROPeRTy 20811.1 Real Property Ownership Interests 209 11.1a Bundle of Rights …………………… 209 11.1b Ownership Interests ………………… 209 11.1c Easements and Licenses …………… 210 11.1d Types of Multiple-Party Ownership 211 11.1e Restrictions on Ownership Interests 21211.2 Acquiring Title to Real Property … 214 11.2a Introduction ………………………… 214 11.2b Original Entry ……………………… 214 11.2c Transfer by Deed …………………… 214
CASE 11.1 Historic Blakeley Foundation, Inc. v. Williams …………………………………… 215
11.2d Types of Deeds ……………………… 216 11.2e Title by Adverse Possession ……… 21711.3 leases of Real Property ………………… 217 11.3a In General …………………………… 217 11.3b Classification of Leases …………… 217 11.3c Tenants: Rights and Duties ………… 218 11.3d Landlords: Rights and Duties ……… 219 11.3e Warranty of Habitability …………… 22011.4 Real Property as security …………… 220 11.4a Introduction ………………………… 220
CASE 11.2 Tiffany Childs et al. v. Samuel B. Purll, Jr. et al. ………………… 221
11.4b Rights and Duties of the Parties … 222 11.4c Alternative to the Mortgage:
Deed of Trust ………………………… 222 11.4d Foreclosure …………………………… 223 11.4e Priority to Proceeds ………………… 223
CASE 11.3 Cynthia young v. Kenneth Embley …………………………… 224
Chapter summary ……………………………… 225
Review Questions and Problems ………… 227
12 InTelleCTuAl PROPeRTy And CyBeR lAw ………………………… 228
12.1 Intellectual Property …………………… 229 12.1a What Is Intellectual Property? …… 229 12.1b Why Is the Protection of Intellectual
Property Important?………………… 23012.2 Patent law: Protecting Inventions
and methods ………………………………230 12.2a The Nature of a Patent……………… 230 12.2b Basic Requirements of a Patent …… 231
CASE 12.1 Association for Molecular Pathology v. Myriad Genetics …………… 232
12.2c Types of Patents …………………… 234 12.2d How Are Patents Obtained? ……… 236 12.2e Patent Infringement ………………… 239 12.2f Remedies ……………………………… 240 12.2g Strategic Aspects …………………… 24012.3 Trademark law: Protecting distinctive
Indicators of the source of Products and services ……………………………… 241
12.3a Essence of a Trademark …………… 241 12.3b Categories of Distinctiveness ……… 242 12.3c Creating and Keeping Legal Rights in a
Trademark …………………………… 243 12.3d Enforcing a Trademark …………… 245
CASE 12.2 Louis Vuitton Malletier S.A. v. Haute Diggity Dog, LLC ……………… 246
12.3e Strategic Aspects …………………… 24812.4 Copyright law: Protecting Original
expressions ………………………………… 249 12.4a Nature of a Copyright ……………… 249 12.4b Copyright Basics …………………… 249 12.4c Infringement, Defenses,
and Remedies ………………………… 251 12.4d Strategic Aspects …………………… 25212.5 Trade secrets law:
Protecting Valuable secrets ………… 253 12.5a Essence of a Trade Secret …………… 253
CASE 12.3 E. I. duPont deNemours & Company, Inc. v. Rolfe and Gary Christopher……………… 254
12.5b Misappropriation of a Trade Secret 256 12.5c Remedies for Misappropriation …… 256 12.5d Strategic Aspects …………………… 25612.6 Cyber law ………………………………… 260 12.6a Introduction to Cyber Law ………… 260 12.6b Civil Law Aspects …………………… 261 12.6c Criminal Law Aspects ……………… 263
Chapter summary ……………………………… 265
Review Questions and Problems ………… 267
Internet Resources …………………………… 269
PART III COnTRACTuAl RelATIOnshIPs ……… 270
13 nATuRe Of COnTRACTs And COnTRACT RemedIes ………… 272
13.1 Basic Concepts …………………………… 273 13.1a Contract Defined …………………… 273 13.1b Elements Necessary to Create a
Contract ……………………………… 273 13.1c Sources of Contract Law …………… 274 13.1d Enforcement Theory Regarding
Contractual Obligations …………… 275
Contents ix
CASE 13.1 Ellen Chalk, et al. v. T-Mobile USA, Inc., a Delaware corporation, & Sony Ericsson Opinion Mobile Communications USA, Inc., a Delaware corporation ………………………………… 276
13.2 Contract Classification and Terminology ……………………………… 278
13.2a Bilateral and Unilateral Contracts 279 13.2b Express and Implied-in-Fact
Contracts …………………………… 280 13.2c Implied-in-Law Contracts
(Quasi-Contracts) …………………… 280 13.2d Enforcement Terminology ………… 281 13.2e Performance Terminology ………… 28113.3 legal Remedies for
Breach of Contract ……………………… 281 13.3a Introduction ………………………… 281 13.3b Nominal Damages ………………… 282 13.3c Compensatory Damages: Theory … 282 13.3d Compensatory Damages:
Special Aspects ……………………… 283 13.3e Consequential Damages …………… 283
CASE 13.2 Lewis Jorge Construction Management, Inc. v. Pomona Unified School District………… 284
13.3f Punitive Damages …………………… 286 13.3g Liquidated Damages Clause ……… 286
CASE 13.3 H&R Block Enterprises, Inc. v. Mary Short and AAA Tax Specialists, Inc. 287
13.4 equitable Remedies for Breach of Contract …………………………………… 288
13.4a Introduction ………………………… 288 13.4b Specific Performance ……………… 288 13.4c Rescission …………………………… 290 13.4d Restitution …………………………… 290
Chapter summary ……………………………… 291
Review Questions and Problems ………… 293
14 AgReemenT: OffeR And ACCePTAnCe ……………………… 294
14.1 Basic Concept ……………………………… 295 14.1a Objective Theory of Contracts …… 295
CASE 14.1 Pamela Dalton v. Robert Jahn Corporation, and Opal Jahn, et al. …………………………… 296
14.2 Offers ………………………………………… 297 14.2a Definition …………………………… 297 14.2b Test for Offer’s Existence …………… 298 14.2c Present Intention to Contract …… 298 14.2d Reasonably Definite Terms ………… 299 14.2e Omitted Terms: Gap Filling ……… 299 14.2f Vagueness …………………………… 300 14.2g To Whom Addressed ……………… 300
CASE 14.2 John D. R. Leonard v. PepsiCo, Inc. ………………………………… 301
14.2h An Offer Must Be Communicated 304 14.2i Auctions ……………………………… 30414.3 duration of Offers ……………………… 305 14.3a Introduction ………………………… 305 14.3b Lapse of Time ………………………… 305 14.3c Termination by Operation of Law 305 14.3d Rejection by Offeree ………………… 306 14.3e Revocation by Offeror ……………… 306 14.3f Counteroffer ………………………… 30614.4 Irrevocable Offers ……………………… 307 14.4a Option Contract …………………… 307 14.4b Firm Offers Under the Code ……… 307 14.4c Conduct of the Offeree …………… 30714.5 The law of Acceptance ………………… 308 14.5a Introduction ………………………… 308 14.5b Accepting a Bilateral Offer ………… 309 14.5c Counteroffers Under the
Mirror-Image Rule ………………… 309 14.5d Rejection of the Mirror-Image Rule
Under the Code ……………………… 310
CASE 14.3 Standard Bent Glass Corp. v. Glassrobots Oy, a corporation registered in Finland …………………………………… 310
14.5e Treatment of Additional Terms Under the Code ……………………… 312
14.5f Treatment of Different Terms Under the Code ……………………… 312
14.5g Silence as Assent …………………… 312 14.5h Communication of Acceptance … 313 14.5i Accepting a Unilateral Offer ……… 313
Chapter summary ……………………………… 315
Review Questions and Problems ………… 317
15 COnsIdeRATIOn ………………… 31815.1 Bargain Theory of Consideration … 319 15.1a Benefits and Detriments …………… 319 15.1b Elements of a Bargain ……………… 319 15.1c Adequacy of Consideration ……… 320 15.1d Recitals of Consideration ………… 320
CASE 15.1 Robert Apfel v. Prudential-Bache Securities ……………… 321
15.2 mutuality of Obligation ……………… 322 15.2a Introduction ………………………… 322 15.2b Illusory Promises …………………… 323 15.2c Requirement and
Output Contracts …………………… 324 15.2d Preexisting Duty …………………… 324 15.2e Modification of
Non-Code Contracts ……………… 325
CASE 15.2 Plante & Moran Cresa, LLC v. Kappa Enterprises, LLC, et al. …………… 326
15.2f Modification of Code Contracts … 327 15.2g Discharge of Liquidated Debts
and Claims …………………………… 328
x Contents
15.2h Exception for Composition Agreements …………………………… 328
15.2i Discharge of Unliquidated Debts and Claims …………………………… 328
CASE 15.3 Addison Express, LLC v. Medway Air Ambulance, Inc. …………… 329
15.2j Forbearance ………………………… 33015.3 Contracts Valid without
Consideration …………………………… 331 15.3a Promissory Estoppel ………………… 331 15.3b Moral Obligation …………………… 332 15.3c Firm Offers and Renunciations …… 333
Chapter summary ……………………………… 334
Review Questions and Problems ………… 335
16 genuIne AssenT And COnTRACTuAl CAPACITy …… 336
16.1 genuineness of Assent ………………… 337 16.1a Nature of Assent …………………… 337 16.1b Remedy of Rescission ……………… 33716.2 mistake ……………………………………… 338 16.2a Definitions …………………………… 338 16.2b Bilateral Mistake …………………… 338 16.2c Unilateral Mistake ………………… 339
CASE 16.1 Amerisourcebergen Drug Corp. v. Kohll’s Pharmacy & Homecare, Inc. … 340
16.2d Reformation of Written Contracts 34116.3 misrepresentation ……………………… 341 16.3a Types of Misrepresentation ……… 341 16.3b Scienter ………………………………… 342 16.3c False Representation………………… 342
CASE 16.2 Audrey E. Vokes v. Arthur Murray, Inc., A Corporation, J. P. Davenport, d/b/a Arthur Murray School of Dancing ………………………… 343
16.3d Silence as Fraud ……………………… 345 16.3e Justifiable Reliance ………………… 345 16.3f Injury or Damage …………………… 34616.4 lack of Voluntary Consent …………… 346 16.4a Undue Influence …………………… 346 16.4b Duress ………………………………… 347 16.4c Adhesion Contracts
and Unconscionability …………… 34716.5 Incapacity to Contract ………………… 348 16.5a Types of Incapacity ………………… 348 16.5b Minors’ Contracts …………………… 349 16.5c Avoiding Contracts by Minors …… 349 16.5d Ratification …………………………… 349 16.5e Liability for Necessaries …………… 350
CASE 16.3 yale Diagnostic Radiology v. Estate of Harun Fountain et al. ………… 350
16.5f Third-Party Rights …………………… 351
Chapter summary ……………………………… 352
Review Questions and Problems ………… 354
17 IllegAlITy ………………………… 35617.1 status of Illegal Contracts …………… 357 17.1a Litigation Disallowed ……………… 357
CASE 17.1 Massoud Bassidji v. Simon Soul Sun Goe ……………………… 358
17.1b Exceptions …………………………… 35917.2 Agreements in Violation of statutes 359 17.2a Introduction ………………………… 359 17.2b Violations of License Requirements 360 17.2c Usury ………………………………… 361
CASE 17.2 Renee N. Galloway v. Bluegreen Vacation Club ………………… 361
17.2d Agreements and Activities in Restraint of Trade …………………… 362
17.3 Agreements in Violation of Public Policy ……………………………… 364
17.3a Introduction ………………………… 364 17.3b Agreements Not to Compete ……… 364
CASE 17.3 Emerson Electric Co. v. Guy Rogers; Guy Rogers Sales, Inc. …… 366
17.3c Unconscionability ………………… 368 17.3d Contracts of Adhesion ……………… 369 17.3e Contracts Disclaiming Liability …… 369 17.3f Tickets Disclaiming Liability ……… 371
Chapter summary ……………………………… 372
Review Questions and Problems ………… 373
18 wRITTen fORm ………………… 37418.1 The writing Requirement …………… 375 18.1a Introduction to the
Statute of Frauds …………………… 375 18.1b Contracts Within the
Statute of Frauds …………………… 376 18.1c Contracts Involving Marriage …… 376 18.1d Guaranty Contracts ………………… 377 18.1e Contracts Involving
Interests in Land …………………… 377 18.1f Contracts That Cannot Be
Performed Within One Year ……… 378
CASE 18.1 Linda Velez v. Betsy Sanchez ……………………………… 379
18.1g Contracts for the Sale of Goods … 380 18.1h Contracts for the Sale of Personal
Property Other than Goods ……… 380 18.1i Writing Required by the
Statute of Frauds …………………… 381 18.1j Writing Required for
Code Contracts ……………………… 38118.2 Common law exceptions to the
writing Requirement ………………… 381 18.2a Introduction ………………………… 381 18.2b Part Performance …………………… 382 18.2c Promissory Estoppel ………………… 382
Contents xi
18.3 Code exceptions to the writing Requirement ………………… 382
18.3a Written Confirmation Between Merchants …………………………… 382
CASE 18.2 Central Illinois Light Company v. Consolidation Coal Company ……… 383
18.3b Specially Manufactured Goods …… 384 18.3c Judicial Admissions ………………… 384 18.3d Part Performance …………………… 38418.4 Parol evidence Rule …………………… 385 18.4a Theory and Application …………… 385 18.4b Exceptions to the
Parol Evidence Rule ………………… 385
CASE 18.3 Charles Cagin v. The McFarland Clinic, P.C. ……………… 386
18.4c Parol Evidence Rule and the Code 387
Chapter summary ……………………………… 388
Review Questions and Problems ………… 390
19 RIghTs Of ThIRd PARTIes … 39219.1 Third-Party Beneficiary Contracts … 393 19.1a Nature of Third-Party Beneficiary
Contracts …………………………… 393 19.1b Legal Requirements ………………… 394
CASE 19.1 @Wireless Enterprises, Inc. v. AI Consulting, LLC and Andrew Iorio … 395
19.2 Assignments ……………………………… 396 19.2a Terminology ………………………… 396 19.2b General Principles …………………… 396
CASE 19.2 In re xMH Corp., Debtor. Appeal of: Western Glove Works. ……… 397
19.2c Consent Required …………………… 399 19.2d Consent Required Under the Code 400 19.2e Anti-assignment Clauses …………… 400 19.2f Claims for Money …………………… 401 19.2g Rights of the Assignee ……………… 402 19.2h Obligations of the Parties ………… 402 19.2i Notice of Assignment ……………… 40319.3 delegations ………………………………… 404 19.3a General Principles …………………… 404 19.3b Duties that Cannot Be Delegated … 40419.4 novation …………………………………… 405 19.4a Meaning ……………………………… 405 19.4b Application …………………………… 405
CASE 19.3 James William Burgess and Georgia Burgess v. Jim Walter Homes, Inc.; First Union National Bank ……………… 406
Chapter summary ……………………………… 408
Review Questions and Problems ………… 410
20 PeRfORmAnCe …………………… 41220.1 Interpretation …………………………… 413 20.1a Tools for Determining Intent
of the Parties ………………………… 413
20.2 Conditions ………………………………… 415 20.2a Definition …………………………… 415 20.2b Types of Conditions ………………… 415 20.2c Express Conditions Generally …… 416 20.2d Express Conditions of
Personal Satisfaction ……………… 416
CASE 20.1 Michael Silvestri and Francisco Celestino v. Optus Software, Inc., A New Jersey Corp. and Joseph Avellino, Individually ………………………………… 417
20.2e Constructive Conditions…………… 41920.3 Performance of Conditions ………… 419 20.3a Tender of Performance …………… 419 20.3b Substantial Performance …………… 420 CASE 20.2 Jacob & youngs, Inc. v.
George E. Kent ……………………………… 421 20.3c Divisibility: Installment Contracts 422 20.3d Anticipatory Repudiation ………… 42220.4 excuses for nonperformance………… 423 20.4a Introduction ………………………… 423 20.4b Hindrance, Prevention, or
Noncooperation …………………… 424 20.4c Waiver ………………………………… 425 20.4d Impossibility of Performance ……… 425 20.4e Specific Cases of Impossibility …… 426 20.4f Commercial Frustration …………… 427 20.4g Commercial Impracticability
Under the Code ……………………… 428
CASE 20.3 Specialty Beverages, LLC v. Pabst Brewing Company ………………… 428
20.5 discharge of Contracts ………………… 432 20.5a Methods ……………………………… 432 20.5b Payment ……………………………… 432 20.5c Accord and Satisfaction …………… 433 20.5d Statute of Limitations ……………… 434
Chapter summary ……………………………… 435
Review Questions and Problems ………… 437
PART IV dOmesTIC And glOBAl sAles …………………… 440
21 sAles COnTRACTs: dOmesTIC And glOBAl AsPeCTs Of fORmATIOn, TITle, And RIsk Of lOss …… 444
21.1 Article 2 of the uCC …………………… 445 21.1a Summary of Common-Law
Changes ……………………………… 445 21.1b Scope ………………………………… 445 21.1c Definitions …………………………… 445
CASE 21.1 Leslie Adel and Joanne Adel v. Greensprings of Vermont, Inc., Dennis Glennon, Thomas Cross, and Robert Rubin ………………………………… 447
21.1d Abbreviations ………………………… 44921.2 The sales Contract ……………………… 449
xii Contents
21.2a Express Agreement ………………… 449 21.2b Documentary Transactions ……… 450 21.2c Course of Dealing, Usage of Trade,
Course of Performance …………… 450
CASE 21.2 Todd Heller, Inc. v. Indiana Department of Transportation 451
21.2d Gap Filling Under the Code ……… 45321.3 Title ………………………………………… 454 21.3a In General …………………………… 454 21.3b Identification to the Contract …… 455 21.3c Transfer of Title to Goods ………… 455 21.3d Good-Faith Purchasers ……………… 45521.4 Risk of loss ………………………………… 456 21.4a In Breach-of-Contract Cases ……… 456 21.4b If No Breach Exists ………………… 456
CASE 21.3 Jacq Wilson et al. v. Brawn of California, Inc. ………………… 457
21.5 global sales Contracts ………………… 459 21.5a Application of the CISG …………… 459 21.5b Significant CISG Provisions
Relating to Formation ……………… 459
Chapter summary ……………………………… 461
Internet Resources …………………………… 462
Review Questions and Problems ………… 463
22 sAles COnTRACTs: dOmesTIC And glOBAl AsPeCTs Of PeRfORmAnCe, BReACh, And RemedIes …………………………… 464
22.1 Overview of Code Remedies ………… 465 22.1a Checklist ……………………………… 465 22.1b Adequate Assurances ……………… 466
CASE 22.1 Al-Misehal Commercial Group, LTD. v. The Armored Group, LLC ……… 466
22.2 Buyer’s duties, Rights, and Remedies ……………………………… 467
22.2a Summary ……………………………… 467 22.2b Right to Inspect ……………………… 468 22.2c Right to Reject ……………………… 468 22.2d Notice of Rejection ………………… 469 22.2e Rights and Duties on Rejection …… 469 22.2f Right to Revoke Acceptance ……… 469 22.2g Right to Cover ……………………… 470 22.2h Right to Damages for Nondelivery 470
CASE 22.2 Jessica Mayberry v. Volkswagen of America, Inc. …………… 470
22.2i Right to the Goods ………………… 47222.3 seller’s duties, Rights,
and Remedies ……………………………… 472 22.3a Summary ……………………………… 472 22.3b Right to Cure ………………………… 472
22.3c Right to Reclaim Goods from an Insolvent Buyer ………………… 472
CASE 22.3 In re Trico Steel Company, LLC, Inc., et al., Debtors. Trico Steel Company, LLC v. Cargill Inc. ………………………… 473
22.3d Right to Reclaim Goods from a Solvent Buyer ……………… 474
22.3e Right to Resell Goods ……………… 474 22.3f Right to Collect Damages ………… 475 22.3g Right to Collect the Purchase Price 47522.4 global sales law ………………………… 476 22.4a Performance Aspects ……………… 476 22.4b Remedial Aspects …………………… 476
Chapter summary ……………………………… 477
Internet Resources …………………………… 478
Review Questions and Problems ………… 479
23 sAles COnTRACTs: dOmesTIC And glOBAl AsPeCTs Of PROduCT wARRAnTIes ……………………… 480
23.1 Types of warranties …………………… 481 23.1a Express Warranties ………………… 481
CASE 23.1 James Jelinek, et al. v. Land O’Lakes, Inc., Doing Business as Hytest Seeds. ………………………………… 482
23.1b Warranty of Title …………………… 486 23.1c Implied Warranty of
Merchantability ……………………… 484 23.1d Implied Warranty of Fitness for a
Particular Purpose …………………… 48623.2 limitations ……………………………… 486 23.2a Express Disclaimers of Warranties 486 23.2b Written Disclaimers of
Implied Warranties ………………… 487
CASE 23.2 Sandra Wilson v. Royal Motor Sales, Inc. …………………… 487
23.2c Other Exclusions of Implied Warranties ………………… 489
23.2d Remedies ……………………………… 48923.3 Other Aspects of warranties ………… 490 23.3a Notice ………………………………… 490 23.3b Third Parties ………………………… 491
CASE 23.3 Hyundai Motor America, Inc. v. Sandra Goodin …………………………… 492
23.3c Comparison of Strict Liability and Sales Warranty Law ……………………… 493
23.4 global sales law ………………………… 495 23.4a Warranty Aspects …………………… 495
Chapter summary ……………………………… 497
Review Questions and Problems ………… 498
Resources ………………………………………… 499
Contents xiii
PART V AgenCy And emPlOymenT ………… 500
24 BAsIC PRInCIPles Of AgenCy 50224.1 In general ………………………………… 503 24.1a Introduction ………………………… 503 24.1b Types of Principals ………………… 503 24.1c Types of Agents ……………………… 504 24.1d Capacity of Parties ………………… 505 24.1e Formal Requirements ……………… 50524.2 duties of Agents ………………………… 505 24.2a Introduction ………………………… 505
CASE 24.1 Lanna L. Lee, a/k/a Lanna Pai, and B. Lanna, Inc. v. Theodore Hasson, H. International Distribution, Inc. a/k/a Hasson International Distribution, Inc., and Diversified Financial Enterprises … 506
24.2b Duty of Loyalty ……………………… 507 24.2c Duty to Protect
Confidential Information ………… 508 24.2d Duty to Obey Instructions ………… 509 24.2e Duty to Inform ……………………… 509 24.2f Duty Not to Be Negligent ………… 509 24.2g Duty to Account …………………… 51024.3 duties of Principals …………………… 511 24.3a Introduction ………………………… 511 24.3b Duty to Compensate: In General … 511 24.3c Duty to Compensate:
Sales Representatives ……………… 512 24.3d Duty to Reimburse ………………… 512 24.3e Duty to Indemnify ………………… 512
CASE 24.2 Admiral Oriental Line v. United States ………………………………… 513
24.4 Termination by Operation of law … 514 24.4a In General …………………………… 514 24.4b Death ………………………………… 514
CASE 24.3 In re Estate of Eugene T. Capuzzi, M.D., Deceased, Michael Capuzzi and Eugene T. Capuzzi, Jr. v. Christina Fisher … 514
24.4c Insanity ……………………………… 515 24.4d Bankruptcy …………………………… 515 24.4e Destruction or Illegality of
Subject Matter ……………………… 51624.5 Termination by Parties’ Actions …… 516 24.5a Mutual Agreement ………………… 516 24.5b Unilateral Action …………………… 516
Chapter summary ……………………………… 517
Review Questions and Problems ………… 519
25 AgenCy lIABIlITy COnCePTs 52025.1 Basic Principles of
Contract liability ……………………… 521 25.1a Actual Authority …………………… 521
CASE 25.1 Board of Trustees of The City of Delray Beach Police and Firefighters Retirement System v. Citigroup Global Markets Inc., f.k.a. Salomon Smith Barney …………… 523
25.1b Apparent or Ostensible Authority 524 25.1c Ratification …………………………… 52625.2 Contract liability of Principals …… 527 25.2a Introduction ………………………… 527 25.2b Disclosed Principal’s Liability
to Agents ……………………………… 527 25.2c Disclosed Principal’s Liability
to Third Parties ……………………… 527 25.2d Undisclosed Principal’s Liability
to Agents ……………………………… 528 25.2e Undisclosed Principal’s Liability
to Third Parties ……………………… 52825.3 Tort liability Principles ……………… 529 25.3a Introduction ………………………… 529 25.3b Tort Liability of Agents, Employees,
and Independent Contractors …… 52925.4 Tort liability of employers ………… 530 25.4a Respondeat Superior ……………… 530 25.4b Expanding Vicarious Liability …… 531 25.4c Exceptions: Frolics and Detours … 532
CASE 25.2 Arthur F. Riley, an Infant, by Eleanor D. Riley, His Guardian Ad Litem v. The Standard Oil Company of New york 532
25.4d Intentional Torts …………………… 533
CASE 25.3 Kent Bodin v. Gregory S. Vagshenian, MD, et al. ……… 534
25.4e Tort Suits: Procedures ……………… 53425.5 Independent Contractors’ Torts …… 535 25.5a Control over Independent
Contractors …………………………… 535 25.5b General Rule: No Liability ………… 535 25.5c Exceptions: Liability Created ……… 536
Chapter summary ……………………………… 537
Review Questions and Problems ………… 539
26 emPlOymenT And lABOR lAw 54026.1 wrongful discharge …………………… 541 26.1a The Theory of Employment at Will 541 26.1b Statutory and Judicial Exceptions to
Employment at Will ………………… 542 26.1c The Public Policy Exception ……… 542
CASE 26.1 Steve Bastible, John Beyan, Douglas Rowan, Donald Payne, Larry Mullens, and Scott Darden v. Weyerhaeuser Company ………………… 543
26.1d The Good Cause Exception ……… 544 26.1e Ancillary Torts ……………………… 54526.2 Conditions of employment ………… 545 26.2a Determining Employment Status … 545 26.2b Pay and Benefits …………………… 547
xiv Contents
CASE 26.2 Michael Shane Christophe v. Smithkline Beecham Corporation DBA Glaxosmithkline …………………………… 547
26.2c Worker Safety ………………………… 551 26.2d Privacy ………………………………… 55226.3 labor law ………………………………… 554 26.3a Overview of Labor Law …………… 554 26.3b Collective Bargaining ……………… 556
CASE 26.3 National Labor Relations Board v. Curwood, Inc. …………………………… 556
26.3c Job Actions, Strikes, and Lockouts 558
Chapter summary ……………………………… 559
Review Questions and Problems ………… 560
Internet Resources …………………………… 561
27 emPlOymenT dIsCRImInATIOn 56227.1 Introduction ……………………………… 563 27.1a Laws Prohibiting
Employment Discrimination ……… 56327.2 Title VII ……………………………………… 564 27.2a Scope of Title VII …………………… 564 27.2b Proving Discrimination Under
Title VII ……………………………… 565
CASE 27.1 Price Waterhouse v. Hopkins 566
27.2c Constructive Discharge …………… 568 27.2d Retaliation …………………………… 568 27.2e Categories of Discrimination ……… 569
CASE 27.2 Brown v. Pena ……………… 570
27.2f Defenses to Discrimination ……… 57127.3 Age and disability discrimination 571 27.3a Age Discrimination ………………… 571 27.3b Disability Discrimination ………… 57127.4 harassment ………………………………… 574 27.4a Theoretical Aspects of Harassment 574 27.4b Hostile Environment
Sexual Harassment ………………… 574
CASE 27.3 Meritor Savings Bank v. Vinson ……………………………………… 575
27.4c Employer Liability for Harassment 576
Chapter summary ……………………………… 579
Review Questions and Problems ………… 579
Internet Resources …………………………… 579
PART VI AgenCy And emPlOymenT ………… 580
28 fORms Of BusIness ORgAnIzATIOn …………………… 582
28.1 Introduction ……………………………… 583 28.1a Proprietorships ……………………… 583 28.1b Franchising …………………………… 583 28.1c General Partnerships ……………… 584
CASE 28.1 David G. Byker v. Thomas J. Mannes ………………………… 585
28.1d Joint Venture ………………………… 586 28.1e Limited Partnership ………………… 58828.2 The Business Corporation …………… 588 28.2a Advantages and Disadvantages …… 588 28.2b Taxation of Corporate Income …… 589 28.2c Avoidance of Double Taxation …… 590 28.2d Subchapter S Corporations ………… 590
CASE 28.2 Watson v. Commissioner … 591
28.2e Professional Service Associations … 59228.3 limited liability Companies ………… 593 28.3a Nature of the Limited Liability
Company …………………………… 593 28.3b Advantages and Disadvantages …… 594
CASE 28.3 Peter A. Rapoza, M.D. v. Jonathan H. Talamo, M.D. et al.………… 594
28.4 making the decision …………………… 595 28.4a The Process of Selecting the
Most Appropriate Legal Form …… 595
Chapter summary ……………………………… 598
Review Questions and Problems ………… 600
29 PARTneRshIPs …………………… 60229.1 when does a Partnership exist? …… 603 29.1a Introduction ………………………… 603
CASE 29.1 Ted Norris, et al. v. Stafford P. Fontenot, et al. ……………… 604
29.1b Express Partnerships………………… 605 29.1c Implied Partnerships ……………… 605 29.1d Partnership by Estoppel …………… 60629.2 The Partnership Agreement ………… 606 29.2a Introduction ………………………… 606 29.2b Firm Name Provision ……………… 606 29.2c Capital Provision …………………… 607 29.2d Property Provision ………………… 607 29.2e Profit-and-Loss Provision ………… 608 29.2f Goodwill Provision ………………… 608 29.2g Buy-and-Sell Provision……………… 60929.3 The Rights of Partners ………………… 609 29.3a Terminology ………………………… 609 29.3b To Participate in Management …… 609 29.3c To Be Compensated for Services … 610 29.3d To Interest …………………………… 610 29.3e To Information and to Inspection
of Books ……………………………… 610 29.3f To an Accounting …………………… 611 29.3g To Partnership Property and
Interest in the Partnership ………… 61129.4 duties and Powers of Partners ……… 612 29.4a Duties ………………………………… 612 29.4b Power to Contract …………………… 613 29.4c Power to Impose Tort Liability …… 614
Contents xv
CASE 29.2 Martin Moren, as Parent and Guardian of Remington Moren, a Minor v. Jax Restaurant, John Doe, et al. and Jax Restaurant …………………………………… 614
29.4d Powers over Property ……………… 615 29.4e Financial Powers …………………… 61529.5 methods of dissolution ………………… 616 29.5a Terminology ………………………… 616 29.5b By Acts of Partners ………………… 616 29.5c By Operation of Law ……………… 617 29.5d By Court Decree …………………… 61729.6 The effect of dissolution ……………… 618 29.6a On Powers of Partners ……………… 618 29.6b On Rights of Partners ……………… 619 29.6c On New Partners …………………… 620
CASE 29.3 Moseley v. Commercial State Bank …………………… 620
29.6d On Third Parties …………………… 62129.7 distributions on Termination ……… 622 29.7a Solvent Partnerships ……………… 622 29.7b Insolvent Partnerships ……………… 622
Chapter summary ……………………………… 624
Review Questions and Problems ………… 627
30 nATuRe Of CORPORATIOns … 63030.1 Introduction ……………………………… 631 30.1a Corporation Defined ……………… 631
CASE 30.1 J&J Sports Productions, Inc. v. Coach’s, Inc. d/b/a Jock’s Sports Bar & Grill, Gilbert Duncan and Carol Ann Malone ………………………… 632
30.2 Procedure for Incorporation ………… 633 30.2a The Application for a Charter …… 633 30.2b Corporate Name …………………… 634 30.2c Corporate Powers …………………… 634 30.2d Bylaws ………………………………… 634 30.2e Domestic and Foreign Corporations 635 30.2f Promoters …………………………… 635 CASE 30.2 P.I.M.L., Inc., a Florida
Corp. v. Chain Link Graphix, LLC, Edwin W. Davidson, Christopher J. Hilburn, and John D. McKelvey …………………… 637
30.3 disregarding the Corporate entity 638 30.3a Piercing the Corporate Veil ……… 638 30.3b Alter Ego Theory …………………… 638 30.3c Promotion of Justice Theory ……… 63930.4 Voluntary dissolutions ………………… 639 30.4a Procedures …………………………… 639 30.4b Notice to Creditors ………………… 639 30.4c Distributions ………………………… 64030.5 Involuntary dissolutions ……………… 640 30.5a Commenced by the State ………… 640 30.5b Commenced by Shareholders …… 641 30.5c Commenced by Creditors ………… 642
30.5d Procedures …………………………… 642 30.5e Liability of Shareholders …………… 64230.6 Consolidations, mergers, and
Acquisitions ……………………………… 643 30.6a Definitions …………………………… 643 30.6b Procedures …………………………… 643 30.6c Rights of Dissenting Shareholders 643
CASE 30.3 Natcom Bankshares, Inc. v. Brenda L. Johnson, et al. ………………… 644
30.6d Liability of Successors ……………… 646 30.6e Antitrust Considerations …………… 647
Chapter summary ……………………………… 648
Review Questions and Problems ………… 650
31 fInAnCIAl And OPeRATIOnAl feATuRes Of CORPORATIOns 652
31.1 Corporate stock ………………………… 653 31.1a Stock Basics ………………………… 653 31.1b Stock Subscriptions ………………… 655 31.1c Right to Transfer Stock …………… 655 31.1d Mechanics of Transfer ……………… 65631.2 shareholders ……………………………… 656 31.2a Rights in General …………………… 656 31.2b Inspection …………………………… 657 31.2c Meetings ……………………………… 658 31.2d Voting ………………………………… 658 31.2e Preemptive Rights …………………… 659
CASE 31.1 Benihana of Tokyo, Inc., Individually and on Behalf of Benihana, Inc. v. Benihana, Inc., John E. Abdo, Norman Becker, Darwin Dornbush, Max Pine, yoshihiro Sano, Joel Schwartz, Robert B. Sturges, Takanori yoshimoto, and BFC Financial Corp. ………………… 660
31.2f Derivative Suits ……………………… 662
CASE 31.2 In re Citigroup Inc. Shareholder Derivative Litigation ……… 662
31.2g Dividends …………………………… 665
CASE 31.3 Dodge v. Ford Motor Co. … 665
31.2h Fiduciary Aspects …………………… 66631.3 directors …………………………………… 667 31.3a Powers ………………………………… 667 31.3b Meetings ……………………………… 668 31.3c Compensation ……………………… 66831.4 liability of Officers and directors … 669 31.4a In General …………………………… 669 31.4b The Business Judgment Rule ……… 670 31.4c Duty of Loyalty ……………………… 670 31.4d Duty of Due Care …………………… 671 31.4e Duty of Good Faith ………………… 672 31.4f Indemnification and Insurance …… 672
Chapter summary ……………………………… 673
Review Questions and Problems ………… 675
xvi Contents
32 lImITed lIABIlITy COmPAnIes And RelATed fORms ………… 678
32.1 limited liability Companies …………679 32.1a Background ………………………… 679 32.1b Comparing Forms …………………… 680 32.1c Formation …………………………… 681
CASE 32.1 Carrie Burkle v. Ronald Burkle ……………………………… 683
32.1d Management ………………………… 684
CASE 32.2 The People of the State of California v. Pacific Landmark, LLC, et al. …………… 684
32.2 Related forms …………………………… 686 32.2a Limited Partnerships ……………… 686
CASE 32.3 Gotham Partners, LP, v. Hallwood Realty Partners, LP, Hallwood Realty Corp., the Hallwood Group Inc., Anthony J. Gumbiner and William L. Guzzetti ………………………… 686
32.2b Limited Liability Partnerships …… 688
Chapter summary ……………………………… 689
Internet Resources …………………………… 689
Review Questions and Problems ………… 690
PART VII negOTIABle InsTRumenTs ……… 691
33 InTROduCTIOn TO negOTIABle InsTRumenTs … 692
33.1 The Concept of negotiability ……… 69333.2 kinds of Commercial Paper ………… 694 33.2a Terminology ………………………… 694 33.2b Notes ………………………………… 695 33.2c Certificates of Deposit ……………… 695 33.2d Drafts ………………………………… 695 33.2e Checks ………………………………… 69533.3 Bank deposits and Collections ……… 696 33.3a Terminology ………………………… 696
CASE 33.1 Chambers v. Miller and Others ………………………… 697
33.3b The Bank Collection Process ……… 698
CASE 33.2 Douglas Companies, Inc. v. Commercial National Bank of Texarkana ………………………………… 699
33.3c Collecting Banks …………………… 701 33.3d Payor Banks ………………………… 70133.4 Banks and Their Customers ………… 702 33.4a The Debtor-Creditor Relationship 702 33.4b Wrongful Dishonor ………………… 702 33.4c Stop-Payment Orders ……………… 702 33.4d Banks’ Rights and Duties ………… 703
CASE 33.3 Estate of Eugene Christian Freitag v. Frontier Bank ……………………………… 703
33.4e Depositors’ Rights and Duties …… 704 33.4f Funds Transfers ……………………… 705
Chapter summary ……………………………… 706
Review Questions and Problems ………… 708
34 CReATIOn And negOTIATIOn 71034.1 general Requirements ………………… 711 34.1a Writing Signed by a
Maker or Drawer …………………… 711 34.1b Necessity of a Promise or Order … 711 34.1c Unconditional Promise or Order … 712
CASE 34.1 In re Apponline.com, Inc. Island Mortgage Network, Inc., et al., Debtors, Broward Title Company v. Matrix Capital Bank and HSA Residential Mortgage Services of Texas, Inc.………… 713
34.1d The Particular Fund Concept ……… 714 34.1e Sum Certain in Money …………… 715 34.1f Certain Time of Payment ………… 715 34.1g Acceleration and Extension Clauses 71634.2 The magic words of negotiability … 716 34.2a Introduction ………………………… 716
CASE 34.2 First Investment Co. v. Andersen …………………………………… 716
34.2b Order Paper ………………………… 717
CASE 34.3 The Hyatt Corp. v. Palm Beach National Bank, et al. ……… 718
34.2c Bearer Paper ………………………… 71934.3 Other factors Affecting
negotiability ……………………………… 719 34.3a Terms and Omissions Not Affecting
Negotiability ………………………… 719 34.3b Incomplete Instruments …………… 720 34.3c Ambiguous Terms and Rules of
Construction ………………………… 72034.4 Transfer of Commercial Paper ……… 720 34.4a Introduction ………………………… 720 34.4b Transfer by Negotiation …………… 721 34.4c Types of Endorsements …………… 722 34.4d Blank Endorsements ……………… 722 34.4e Special Endorsements ……………… 723 34.4f Restrictive Endorsements ………… 723
Chapter summary ……………………………… 725
Review Questions and Problems ………… 727
35 hOldeRs In due COuRse …… 72835.1 status of Third Parties ………………… 729 35.1a Status Possibilities …………………… 729
CASE 35.1 Edwards v. Mesch ………… 730
35.1b Contract Provisions ………………… 73135.2 holder in due Course …………………… 732 35.2a Requirements ………………………… 732 35.2b Value ………………………………… 732 35.2c Good Faith …………………………… 732
Contents xvii
35.2d Without Notice ……………………… 733
CASE 35.2 Carl W. Henderson, Jr., Administrator of the Estate of David M. Henderson, Francisco Solis, Trustee of Messenger Trust One, and Michael S. Henderson, Successor Trustee of Messenger Trust One v. Metropolitan Bank & Trust Company ………………………… 734
35.2e Before Overdue ……………………… 736 35.2f Holder from a Holder in
Due Course …………………………… 73635.3 defenses …………………………………… 737 35.3a Classifications ……………………… 737
CASE 35.3 The Cadle Company v. Barbara E. Shearer and Barbara J. Couvion 738
35.3b Personal Defenses …………………… 740 35.3c Real Defenses ………………………… 74035.4 exceptions to holder-in-due-Course
status ………………………………………… 740 35.4a Introduction ………………………… 740 35.4b FTC Rule ……………………………… 741 35.4c Close-Connectedness Doctrine …… 742
Chapter summary ……………………………… 743
Review Questions and Problems ………… 744
36 lIABIlITy Of PARTIes TO negOTIABle InsTRumenTs … 746
36.1 liability Based on signatures ……… 747 36.1a In General …………………………… 747 36.1b Capacity of the Signature ………… 747 36.1c Agency Principles …………………… 747
CASE 36.1 Helmer, et al. v. Rumarson Technologies, Inc. …………… 748
36.1d Exceptions: Impostors and Fictitious Payees …………………… 748
36.1e Classification of Parties …………… 750 36.1f Liability of Primary Parties ………… 75036.2 Conditional liability …………………… 751 36.2a Introduction ………………………… 751 36.2b Presentment: In General …………… 751 36.2c Presentment: How and Where …… 751
CASE 36.2 Jeff E. Messing v. Bank of America, N.A. …………………… 752
36.2d Presentment: When ………………… 753 36.2e Dishonor ……………………………… 753 36.2f Notice of Dishonor ………………… 754 36.2g Protest ………………………………… 75436.3 liability of secondary Parties ……… 754 36.3a Introduction ………………………… 754 36.3b Accommodation Parties …………… 754 36.3c Guarantors …………………………… 756 36.3d Drawers ……………………………… 756 36.3e Endorsers……………………………… 756 36.3f Transferors Without Endorsement 759 36.3g Forgeries ……………………………… 759
CASE 36.3 Halifax Corporation v. Wachovia Bank …………………………… 759
36.3h Double Forgeries …………………… 76136.4 Additional Aspects of liability …… 761 36.4a Excuses for Failure to Perform
Conditions Precedent ……………… 761 36.4b Discharge of Liability ……………… 761
Chapter summary ……………………………… 762
Review Questions and Problems ………… 764
PART VIII CRedITORs And deBTORs ……………… 766
37 seCuRed TRAnsACTIOns …… 76837.1 Introduction ……………………………… 769 37.1a Unsecured Creditors ………………… 769 37.1b Secured Debt ………………………… 76937.2 scope of Article 9 ………………………… 770 37.2a In General …………………………… 770 37.2b Classifications of Collateral ……… 770
CASE 37.1 Jerke Construction, Inc. v. Home Federal Savings Bank and Matt Peck and Tank Testing, Inc. …………………… 771
37.2c Tangible Goods ……………………… 772 37.2d Documentary Collateral …………… 773 37.2e Intangible Collateral ……………… 77437.3 Creation of a security Interest ……… 774 37.3a Introduction ………………………… 774 37.3b The Security Agreement …………… 775 37.3c Debtor’s Rights in Collateral ……… 776 37.3d Creditor’s Value ……………………… 77637.4 Perfection of a security Interest …… 776 37.4a Introduction ………………………… 776 37.4b Perfection by Filing ………………… 777 37.4c Perfection by Possession …………… 778 37.4d Perfection by Attachment ………… 77837.5 floating liens …………………………… 779 37.5a In General …………………………… 779 37.5b After-Acquired Property …………… 780 37.5c Future Advances …………………… 780 37.5d Proceeds ……………………………… 780
CASE 37.2 In re Jim Lee Wiersma and Patricia Darlene Wiersma, Debtors. Jim Lee Wiersma; Patricia Darlene Wiersma v. O. H. Kruse Grain and Milling, NKA Ferndale Grain, et al. ………………… 781
37.6 Priority Issues in general …………… 78237.7 secured Party versus Buyers of
Collateral …………………………………… 783 37.7a General Rule ………………………… 783 37.7b Buyers in the Ordinary Course of
Business ……………………………… 783 37.7c Buyers of Consumer Goods ……… 783
CASE 37.3 John Meskell v. John Bertone, et al. ………………………… 784
xviii Contents
37.8 secured Party versus secured Party 785 37.8a General Rule ………………………… 785 37.8b PMSI in Inventory Collateral ……… 786 37.8c PMSI in Non-inventory Collateral 78637.9 secured Party versus lien Creditors 78637.10 Rights and duties on
debtor’s default ……………………… 787 37.10a Introduction ………………………… 787 37.10b Rights and Duties of
Secured Party in Possession ……… 787 37.10c Foreclosure Sale …………………… 787 37.10d Rights of Parties after Foreclosure 788 37.10e Strict Foreclosure …………………… 788 37.10f Debtor’s General Remedies ……… 789
Chapter summary ……………………………… 790
Review Questions and Problems ………… 793
38 CRedITORs RIghTs, ResPOnsIBIlITIes, And RemedIes ……………………………… 796
38.1 Artisan’s liens …………………………… 79738.2 suretyship in general ………………… 798 38.2a Introduction ………………………… 798 38.2b Terminology ………………………… 798
CASE 38.1 Flying J, Inc. v. Booth …… 799
38.2c Suretyship versus Indemnity ……… 801 38.2d Creation of Suretyship Contracts … 801
CASE 38.2 WRS, Inc., d/b/a WRS Motion Picture Laboratories, a Corp., v. Plaza Entertainment, Inc., a Corp., Eric Parkinson, Charles von Bernuth and John Herklotz ……………………………… 802
38.2e Liability of the Parties in General … 80438.3 Creditor-surety Relationship ……… 804 38.3a Fiduciary Aspects …………………… 804 38.3b Principal’s Default: Notice ………… 805 38.3c Surety’s Performance and
Subrogation Rights ………………… 80538.4 Creditor-Principal Relationship …… 806 38.4a Introduction ………………………… 806 38.4b Principal’s Defenses ………………… 806 38.4c Releases ……………………………… 807 38.4d Extensions of Time for Payment … 808 38.4e Other Modifications ………………… 80838.5 Principal-surety Relationship ……… 810 38.5a Surety’s Duty to Account ………… 810 38.5b Surety’s Right to Reimbursement … 810 38.5c Liability of Co-sureties ……………… 81038.6 mechanic’s liens ………………………… 811 38.6a Introduction ………………………… 811
CASE 38.3 Wesco Distribution, Inc. v. Westport Group, Inc. ……………………… 811
38.6b Potential Lienholders ……………… 812 38.6c Perfection and Enforcement ……… 813 38.6d Priorities ……………………………… 814
38.6e Protection against Liens …………… 81438.7 enforcement of Judgments
and decrees ………………………………… 818 38.7a Writ of Execution …………………… 818 38.7b Garnishment ………………………… 818 38.7c Citation Proceeding ………………… 816 38.7d Attachment ………………………… 816 38.7e Is It Worth It?………………………… 816Chapter summary ……………………………… 817
Review Questions and Problems ………… 819
39 BAnkRuPTCy ……………………… 82039.1 Terminology ……………………………… 82139.2 Types of Proceedings …………………… 821 39.2a In General …………………………… 821
CASE 39.1 Howard K. Stern, Executor of the Estate of Vickie Lynn Marshall v. Elaine T. Marshall, Executrix of the Estate of E. Pierce Marshall ……………………… 823
39.2b Liquidation Proceedings Under Chapter 7 …………………… 825
39.2c Reorganization Proceedings Under Chapter 11 …………………… 825
39.2d Adjustment of Individuals’ Debts Under Chapter 13 …………………… 828
39.3 general Principles ……………………… 828 39.3a Property of the Estate ……………… 828 39.3b Exemptions ………………………… 829 39.3c Debts That Are Not Discharged …… 830
CASE 39.2 In the Matter of Jonathon R. Gerhardt, Debtor: United States Department of Education v. Jonathon R. Gerhardt …………………… 831
39.3d Grounds for Denying Discharge … 83239.4 Procedural steps ………………………… 833 39.4a Introduction ………………………… 833 39.4b Voluntary Commencement ……… 833 39.4c Involuntary Commencement …… 834 39.4d Conversion of Cases ………………… 834 39.4e Automatic Stay ……………………… 834
CASE 39.3 Diana Adams, Acting United States Trustee v. Diana M. Finlay, et al. ………………………………… 835
39.4f Meeting of Creditors ……………… 83339.5 Trustee and Case Administration … 837 39.5a Trustee and the Estate ……………… 837 39.5b General Duties and Powers………… 837 39.5c Executory Contracts and
Unexpired Leases …………………… 838 39.5d Voidable Preferences ……………… 838 39.5e Fraudulent Transfers………………… 83939.6 Creditors …………………………………… 841 39.6a Creditors and Claims ……………… 841 39.6b Right of Setoff ……………………… 841 39.6c Priorities ……………………………… 842
Contents xix
Chapter summary ……………………………… 844
Internet Resources …………………………… 845
Review Questions and Problems ………… 846
PART IX gOVeRnmenT RegulATIOn Of BusIness ……………… 848
40 AdmInIsTRATIVe lAw ………… 85040.1 nature of Administrative Agencies 851 40.1a Role of Administrative Agencies … 851 40.1b Purposes of Administrative Agencies 852 40.1c Conceptual Framework for
Administrative Agencies …………… 854 40.1d Agency Types and Functions ……… 85540.2 Rulemaking ……………………………… 856 40.2a Types of Rules ……………………… 856 40.2b Types of Legislative Rulemaking … 856
CASE 40.1 National Tour Brokers Association v. United States of America and the Interstate Commerce Commission 857
40.3 enforcement function ………………… 859 40.3a Investigative Power ………………… 859 40.3b Constitutional Protections ………… 859
CASE 40.2 Marshall, Secretary of Labor, et al. v. Barlow’s, Inc. ……………………………… 860
40.4 Adjudicatory function ………………… 862 40.4a Elementary Aspects of Adjudication 862 40.4b Formal Adjudication ……………… 86240.5 Judicial Review of Agency Actions … 862 40.5a Basic Requirements ………………… 862 40.5b Legal Foundations for
Judicial Review ……………………… 863
CASE 40.3 Federal Communications Commission v. Fox Television Stations 864
40.5c Scope of Review ……………………… 86540.6 Public Access to Agency Information 865 40.6a Improving Public Accountability … 865
Chapter summary ……………………………… 868
Review Questions and Problems ………… 869
Internet Resources …………………………… 869
41 seCuRITIes RegulATIOn …… 87041.1 Overview of securities Regulation 871 41.1a Introduction ………………………… 871 41.1b Securities Regulation Landscape … 872 41.1c Securities and Exchange
Commission ………………………… 872
CASE 41.1 Securities and Exchange Commission v. Citigroup Global Markets, Inc. ………… 873
41.2 Initial sales of securities: The securities Act of 1933 …………… 876
41.2a Purpose of the 1933 Act …………… 876 41.2b Definition of a Security …………… 877 41.2c Registration Statement and
Prospectus …………………………… 877 41.2d Exempt Securities …………………… 878 41.2e Exempt Transactions: Background 879
CASE 41.2 SEC v. Ralston Purina Company …………………………………… 879
41.2f Exempt Transactions: Categories … 880 41.2g Integration and Resale ……………… 881 41.2h Liability and Due Diligence Defense 88241.3 secondary securities Transfers:
The securities and exchange Act of 1934 ……………………………………… 884
41.3a Purpose of the 1934 Act …………… 884 41.3b Registration and Reporting
Requirements ………………………… 884 41.3c Proxy Solicitation …………………… 885 41.3d Insider Trading—Fraud Liability:
Basics ………………………………… 885
CASE 41.3 SEC v. Texas Gulf Sulphur Co. ………………………………… 886
41.3e Insider Trading—Fraud Liability: Elements ……………………………… 889
41.3f Insider Trading—Short-Swing Profit Liability ……………………… 890
41.4 Recent securities Regulation legislation ……………………………………… 891 41.4a Sarbanes-Oxley Act of 2002 ……… 891 41.4b Dodd-Frank Act of 2010 …………… 892 41.4c JOBS Act of 2012 …………………… 893
Chapter summary ……………………………… 896
Review Questions and Problems ………… 898
Internet Resources …………………………… 899
42 AnTITRusT lAw ………………… 90042.1 Background ……………………………… 901 42.1a History ………………………………… 901 42.1b Schools of Thought ………………… 902 42.1c Basic Principles ……………………… 903 42.1d Enforcement ………………………… 90442.2 monopolization ………………………… 905 42.2a Nature of a Monopoly ……………… 905 42.2b Monopoly Power …………………… 905 42.2c Relevant Market …………………… 905 42.2d Intent ………………………………… 906
CASE 42.1 Weyerhaeuser Company v. Ross-Simmons Hardwood Lumber Company, Inc. ……………………………… 906
42.2e Attempting to Monopolize ………… 90842.3 Restraints of Trade—Basic
Provisions ………………………………… 908
xx Contents
42.3a Concerted Action …………………… 908 42.3b Per Se and Rule of Reason
Violations …………………………… 910 42.3c Horizontal Restraints Under the
Sherman Act ………………………… 911 42.3d Vertical Restraints Under the
Sherman Act ………………………… 912
CASE 42.2 Continental T.V., Inc., et al. v. GTE Sylvania Inc. ………………………… 912
42.4 Restraints of Trade—Advanced Provisions ………………………………… 914
42.4a Exclusionary Contracts Under the Clayton Act ………………………… 914
42.4b Mergers Under the Clayton Act … 915 42.4c Price Discrimination Fundamentals 916 42.4d Price Discrimination Defenses …… 916
CASE 42.3 Water Craft Management LLC, Douglas Wayne Glascock, Nick A. Martrain v. Mercury Marine, a Division of Brunswick Corp., et al. …………………… 917
42.5 International Considerations ……… 918 42.5a Reach of United States Laws ……… 918 42.5b Reach of Foreign Laws ……………… 920
Chapter summary ……………………………… 921
Internet sources ………………………………… 922
Review Questions and Problems ………… 923
43 COnsumeR lAw ………………… 92443.1 Protecting the Purchaser …………… 925 43.1a Labeling and Packaging …………… 926 43.1b Advertising …………………………… 926
CASE 43.1 Federal Trade Commission v. QT, Inc.; Q-Ray Company, Bio-Metal, Inc.; Que Te Park, a.k.a. Andrew Q. Park; and Jung Joo Park ……………………………… 927
43.1c Sales …………………………………… 93043.2 Protecting the debtor ………………… 930 43.2a Attaining Credit …………………… 931
CASE 43.2 Chase Bank USA, N.A., v. James A. McCoy, individually and on behalf of all others similarly situated ………………… 932
43.2b Reporting Credit Information …… 934 43.2c Electronic Funds Transfers ………… 936 43.2d Identity Theft ………………………… 937 43.2e Collecting the Debt ………………… 937
CASE 43.3 Elizabeth Brown, on behalf of herself and all others similarly situated, f/k/a Elizabeth Schenck v. Card Service Center; Cardholder Management Services …………………… 939
43.2f Understanding the New Regulatory Environment ………………………… 940
Chapter summary ……………………………… 945
Internet Resources …………………………… 945
Review Questions and Problems ………… 946
44 enVIROnmenTAl RegulATIOn 94844.1 Introduction ……………………………… 949 44.1a Business, Law, and the Environment:
An Overview ………………………… 94944.2 governmental Regulation of the
environment …………………………………951 44.2a The National Environmental
Policy Act …………………………… 951 44.2b Regulatory Agencies ………………… 95244.3 Air Pollution ……………………………… 953 44.3a Air Pollution Regulatory Principles 953 44.3b Enforcement of the Clean Air Act 953 44.3c Current Issues in Air Pollution
Control ……………………………… 954
CASE 44.1 Coalition for Responsible Regulation, Inc., et al., v. Environmental Protection Agency ………………………… 954
44.4 water Pollution ………………………… 958 44.4a Water Pollution Regulatory
Principles …………………………… 958
CASE 44.2 Colvin v. United States …… 959
44.4b Enforcement of the Clean Water Act …………………… 960
44.5 waste management ……………………… 961 44.5a Solid Waste …………………………… 961 44.5b Hazardous and Toxic Waste ……… 962
CASE 44.3 United States v. Timmons Corporation, Donald W. Stone Sr., and Real Property Located at 191 Watervliet Shaker Road, Colonie, Albany County, New york ……………… 964
44.6 Toxic substances ………………………… 965 44.6a The Toxic Substances Control Act 965
Chapter summary ……………………………… 966
Internet sources ………………………………… 966
Review Questions and Problems ………… 967
PART X InTeRnATIOnAl And enTRePReneuRIAl ReAlms …………………… 968
45 legAl AsPeCTs Of InTeRnATIOnAl BusIness … 970
45.1 International Business Transactions 971 45.1a Comparative Legal Systems and
International Law …………………… 971 45.1b Conflict-of-Laws Principles and
International Litigation …………… 972
Contents xxi
CASE 45.1 Af-Cap Inc. v. Chevron Overseas (Congo) Limited, The Republic of Congo, et al. …………… 972
45.1c Methods of Conducting International Business ……………… 973
45.1d International Contracts …………… 975 45.1e The Multinational Enterprise……… 97645.2 Regulating International Business 976 45.2a Introduction ………………………… 976 45.2b International Controls …………… 977 45.2c Host Country Regulations ………… 978 45.2d Regional Regulation:
The European Community ………… 979
CASE 45.2 Johann Gruber v. BayWa AG 979
45.3 united states Regulation Impacting International Commerce …………… 981
45.3a Nature of Extraterritorial United States Laws ………………… 981
CASE 45.3 Esther Kiobel, Individually and on Behalf of Her Late Husband, Dr. Barinem Kiobel, v. Royal Dutch Petroleum Co. ……………………………… 981
45.3b Import Controls …………………… 982 45.3c Export Controls ……………………… 983 45.3d Antitrust Laws ……………………… 983 45.3e Foreign Corrupt Practices Act …… 984 45.3f Anti-boycott Laws …………………… 985
Chapter summary ……………………………… 986
Review Questions and Problems ………… 987
Internet Resources …………………………… 987
46 lAw fOR The AsPIRIng enTRePReneuR ………………… 988
46.1 law and the entrepreneur …………… 989 46.1a The Importance of Law
to the Entrepreneur ………………… 98946.2 engaging an Attorney ………………… 990 46.2a The Role of the Attorney ………… 990
CASE 46.1 The Facebook, Inc.; Mark Zuckerberg; Divya Narendra; Cameron Winklevoss; Tyler Winklevoss v. Pacific Northwest Software, Inc.; Wayne Chang; Winston Williams ………………………… 992
46.2b Finding Capable Legal Counsel …… 993 46.2c The Attorney-Client Privilege …… 99346.3 leaving employment …………………… 995 46.3a Common Law and Contractual Duties
of Current Employees ……………… 995 46.3b Common Law and Contractual Duties
of Former Employees (Post Employment) ………………… 996
CASE 46.2 KGB, Inc., v. Ted Giannoulas …………………………… 998
46.3c Ancillary Issue: Hiring Restrictions 1001
46.4 selecting the Appropriate legal form ……………………………… 1001
46.4a Preliminary Matters ……………… 1001 46.4b The Limited Liability Company 1003
CASE 46.3 Kaycee Land and Livestock, a Wyoming Partnership v. Roger Flahive 1003
46.4c The Corporation ………………… 1007
Chapter summary …………………………… 1006
sources for further Reading: …………… 1006
Review Questions and Problems ……… 1007
APPENDIx A: The Constitution of the United States ……………… 1009
APPENDIx B: The Uniform Commercial Code …………………………… 1015
APPENDIx C: Selected Revisions to the Uniform Commercial Code 1122
APPENDIx D: United Nations Convention on Contracts for the International Sale of Goods (1980) [CISG] ………………………… 1151
GLOSSARy ……………………………………… 1161
TABLE OF CASES ……………………………… 1181
INDEx …………………………………………… 1185