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Course Introduction | ||
1.1: Introduction to Law | Read this introductory section to Chapter 1. Note the shortcomings of self-regulation in business, and the impact that the legal issues surrounding business law had on the world economy during the financial crisis of 2008. Be sure to watch the short video explaining the credit crisis. Make a note of your overall goals of studying business law as part of an education in business administration. |
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1.1.1: What is Law? | Read Section 1, which addresses what laws are, and how laws are developed. This text will introduce you to jurisprudence, or the philosophy of law, and various theories related to it. Think about which theory or theories seem most true to you. Be sure to do the exercises at the end of the section. |
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Watch this video for an overview of the history of law and the lawmaking process in the United States. What provides the framework for law in the United States? What is the role of each of the three branches of government in making the law? |
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1.1.2: The Role of Law in Business in the United States | Read this section. Focus on how the rule of law provides guidance in all areas of businesses. Consider how law establishes rights and obligations in business transactions. Be sure to do the exercises at the end of the section. |
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Read this section. It would be foolish to operate in the business world in any capacity without being familiar with the application of law. The law impacts every area of business, from accounting and finance to management and marketing. As a business professional, you will be particularly interested in private law, since it sets forth legal requirements that allow parties to determine how they want to assign legal rights, duties, and obligations in their business dealings. Be sure to do the exercises at the end of the section. |
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1.2: Sources of Law: Legislative, Regulatory, Common, and Civil | Read this section, which focuses on several critical questions: What are the differences between social norms, customs, and law? What law is public and what law is private? How can you distinguish between substantive law and procedural law? Be sure to do the exercises at the end of the section. |
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Watch this video to get a sense of the legislative process and how a bill makes it through Congress to become law. Note the important role played by the executive in making law in the United States. |
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1.3: The Judicial System | Read this introduction to Chapter 2, which illustrates why it is important for business professionals to understand the court system. |
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Read this section, which discusses how the judicial branch fits into the United States' system of government. What authority does the court system have in the United States? Are the courts completely independent? How can the other branches of the government limit the judicial branch? Be sure to do the exercises at the end of the section. |
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Read this section, which discusses the jurisdiction of various courts in the United States. The judicial system of the United States involves complex webs of jurisdiction. For example, some courts can hold trials, while other courts only hear appeals from trial court decisions. In some situations, a case must be brought in a state court, and in others it can be brought in a federal court. Some courts have broad jurisdiction, and some courts are given only limited jurisdiction. This section covers these issues in more detail. |
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2.1: Litigation | Read this introduction to Chapter 3, which discusses the concept of litigation and its role in the business world. The litigation process is important, since it helps businesses resolve their disputes through the application of the law. Business professionals should have a firm understanding of how litigation can impact rights and obligations. |
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2.1.1: The Parties | Read this section. Litigation involves the bringing of a legal claim in court by one party or a group of parties against another party or parties. Several actors are key to the litigation process; be sure you understand the role of litigants, attorneys, and others involved in the trial process. Be sure to do the exercises at the end of the section. |
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2.1.2: Standing and Jurisdiction | Read this section. Earlier, we explored the jurisdiction of various courts within the American system. However, before a party to a lawsuit can even get into court, the suit must meet certain requirements. Who has the authority to bring a claim in court? How does a court determine this? The United States has 51 court systems. How does a court decide how much contact with the jurisdiction is required to bring a claim? These important considerations must be addressed before litigation begins. |
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2.1.3: Pretrial Procedures | Read this section. Litigation is a complex and time-consuming activity. Before the parties even get to trial, there is a great deal of preparation that must take place in order to have one's day in court. This section discusses the preparation of documents and exchange of information that must take place in order bring a lawsuit, and covers class-action lawsuits and the process of discovery, which is an investigative process through which the parties request and produce evidence. The discovery process is important, because it allows a party to ascertain their case's strong and weak points. Did you know that 54% of corporations were charged with a class-action lawsuit in 2014? According to the Manhattan Institute, "more than one in three such companies faced multiple lawsuits". With this in mind, you'll want to learn more about class action lawsuits and how they work. |
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2.1.4: Trials and Appeals | Read this section. When the parties reach the trial stage of a lawsuit, important decisions must be made about the selection of a jury, opening and closing statements, and the examination of witnesses. This section covers these processes, the burden of proof in civil litigation, and the process of appeal when a party challenges a decision of the trial court. |
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2.2: Alternative Dispute Resolution (ADR) | Read this introductory material to Chapter 4. ADR encompasses a range of methods that do not involve formal litigation. Study Figure 4.1, which discusses the formality and consensual nature of each method. |
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2.2.1: Negotiation | Read this section. Negotiation is the most informal and consensual of the main ADR methods. While negotiation helps avoid the costs of litigation, it also has certain drawbacks. This will become apparent in this section. Pay attention to the concepts of BATNA and WATNA and how they fit into the "bargaining zone". Finally, remember to do the exercises at the end of the section. |
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2.2.2: Mediation | Read this section. Mediation is somewhat more adjudicative and formal than negotiation. With mediation, we introduce a neutral third party. Litigation also has a neutral third party: the judge. However, a mediator's authority is much more limited, and the parties still need to agree on a resolution. The voluntary nature of mediation can be both a strength and a weakness. Be sure to do the exercises at the end of the section. |
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2.2.3: Arbitration | Read this section. Arbitration is the method of ADR that looks most like litigation. While initial submission to arbitration may be voluntary, parties are generally bound by the decision of the arbitrator or arbitrators. Federal and state governments in the United States often have a preference for arbitration, particularly as a way of resolving contract disputes. Try to identify the relative strengths and weaknesses of arbitration. Don't forget to complete the exercises at the end of the section. |
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3.1: Tort Law | Watch this video, which explains the concepts and practice of torts, the different types of torts, and how torts impact business. |
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3.2: Introduction to Torts | Read this introductory material for Chapter 7. A tort is a civil wrong other than a breach of contract. Torts are distinguishable from contract and criminal law in how duty is created. With respect to torts, civil law creates duties that govern conduct. Under contract law, the parties determine what duties are owed. Criminal law governs conduct by prohibiting certain types of behaviors. As you read this section, note the overlap between torts and contracts as well as the overlap of torts and criminal law. Tort law is a way for an injured party to seek compensation for harm caused by another. If the state follows pure comparative negligence, a plaintiff's recovery will be reduced in proportion to her or her degree of fault. Even if the plaintiff is found to be at greater fault than the defendant, plaintiff will still be allowed to recover damages. If the state follows a modified comparative negligence rule, a plaintiff will not recover any damages, if the plaintiff is more than 50% at fault. |
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3.3: Negligence | Read this section. Have you ever been around someone who is being careless and ends up breaking something? If you become angry with them, they might answer that they didn't do it on purpose. Even so, the tort of negligence tells us that even when a person does not commit wrongs on purpose, he or she still may be held accountable if that person did not exercise proper care. The standard used in judging this is to ask what any reasonable person would do in the same situation. Familiarize yourself with the elements of negligence. If all of the elements of negligence are met, then it becomes necessary to determine what the damages were. There are defenses to a charge of negligence. Be sure to do the exercises at the end of the section, in which you will determine tort liability by applying elements of negligence law to hypothetical scenarios. |
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3.4: Intentional Torts | Read this section. Intentional torts are legal wrongs that require intent, in the sense that the individual (called a tortfeasor) intended the consequences of his or her actions, or that the tortfeasor knew with substantial certainty that particular consequences would result from his or her actions. Intentional torts may be committed against individuals or against property. Under the doctrine of respondeat superior, an employer can be held liable for an employee's intentional torts. Note the wide variety of intentional torts that are recognized. Be sure to complete the exercises at the end of the section. |
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3.5: Strict Liability | Read this section. The law recognizes that some torts require holding persons liable for their acts even when they have exercised reasonable care. How could this be? Note the various situations in which persons are held to strict liability. Do you agree that these situations require a stricter level of accountability? For businesses that engage in the manufacture or sale of goods, product liability has emerged as an important area of business law; pay particular attention to this discussion. Complete the exercises at the end of the section. |
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4.1: The Nature and Classification of Contracts | Read this introduction to Chapter 6. Note that the text defines a contract as "a legally enforceable promise". This unit will discuss what it takes to make a promise legally enforceable, as well as what happens when such a promise is broken and what remedies are available to the damaged party. |
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Read this brief overview of contracts, which highlights what you should be aware of regarding the role of contracts in business law. Parties are free to choose the conditions of their contracts, and they can decide on the exact terms of the contract. Contracts are important to business transactions because they allow for flexibility and clarity. |
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Read this article for more information on negotiable instruments. Be sure to review Article 3 of the Uniform Commercial Code (UCC) for an explanation of the law in the United States that governs negotiable instruments. |
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4.2: Contract Formation | Read this section, which discusses the issue of legal capacity to contract. Capacity relates to a party's ability to understand the nature and effect of his or her actions. If a party lacks capacity to contract, he or she has the option to void the agreement. For this reason, most businesses are reluctant to enter into contracts with minors, because by law, minors lack capacity. |
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Read this article on the formalities of a contract. While the most basic contracts require few or no formalities, in certain situations formalities must be followed. Formalities are necessary to provide clarity. Formalities also serve to prevent fraud and/or unnecessary costs that may arise from disputes over terms and conditions of the agreement. |
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4.3: End of Contract and Enforcement | Read this section. Once a contract is formed and the parties are bound by the contract, they generally have a legal obligation to perform according to the terms of the contract. Be sure you understand when the performance required is only substantial versus strict performance. Also note the distinction between the prevalent "reasonable person" standard and the less common contractual standard of personal satisfaction. While one party's breach of a contract may result in damages, the party may have defenses against the claim. You should be aware of these defenses, and of the remedies available for a party that is the victim of a breach. |
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Watch this video, which explains breach of contract and the consequences of breach of contract. |
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Read this article on unenforceable contracts. Contracts become unenforceable when the court determines that they do not meet the necessary legal requirements. For example, an agreement may meet all of the basic requirements of contract law, but still not be enforceable because the statute of limitations has run out. |
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Watch this video, which defines oral contracts and explains how they differ from written contracts. Note the Statute of Frauds requirements for written contracts, which is important because it helps to prevent dishonesty in transactions and eliminates the likelihood of confusion. |
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5.1: Personal Property | Read this section. Books, cars, shares of stock, and accounts receivable are all personal property. How are these things the same? How are they different? Some items that are personal property can be considered real property under certain circumstances. What are these circumstances? We all know that property can be transferred, and it is important to understand the various ways that ownership of personal property can be transferred. It is also important to know what legal rights and obligations are at stake when possession, rather than ownership, of personal property is transferred. The exercises at the end of the section will help solidify your understanding. |
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5.2: Real Property | Read this section. You just learned about personal property and what distinguishes it from real property. Real property includes land and everything "attached" to the land. This concept is critical to whether we apply concepts related to personal property or to real property. Note the unique requirements involved in the transfer of ownership of real property, and the various ways in which such a transfer can be evidenced. You should become familiar with the concept of "adverse possession". Does adverse possession seem fair to you? When might it be fair, and when might it be unfair? Familiarize yourself with the various interests and duties that may go with the ownership of real property. Also, be aware of the scope of interests in real property. As with personal property, possession of real property may be transferred without transferring ownership. Make sure you are informed about the various possessory interests in real estate. Be sure to do the exercises at the end of the section. |
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6.1: Trademarks | Read the introductory materials for Chapter 9. What kind of property interest, as discussed in the last unit, would intellectual property be? Is it tangible or intangible? How are intellectual property rights important to businesses? While patents or copyrights are the often the first examples that come to mind when discussing intellectual property, there are other important intellectual property rights. However, they have one key drawback. Trade secret protections can be lost due to reverse engineering, which is the process through which an invention or system is broken down and analyzed in order to uncover its trade secret. Reverse engineering is legal. For this reason, many businesses choose to go the patent route to protect their intellectual property. This section goes into more detail about reverse engineering and how competitors can take advantage of that process. |
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Read this section. Trademark laws allow companies to secure a claim to a specific identifying item, such as a name or design. Think of trademarked items you might be familiar with: those used by restaurant chains, software companies, and mobile phone manufacturers. Trademarks set a company apart from similar companies, and allow consumers to readily identify the company. The US government has adopted a specific regimen of laws to protect trademarks. As you read, note the many identifying categories that can be trademarked, including even the shape of a bottle. Also note what cannot be trademarked under US law. Lastly, be aware of what remedies are available for infringement or dilution of a trademark and the defenses against these claims. Complete the exercises at the end of the section. |
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6.2: Patents | Read this section. Patent law is an increasingly complex area of law, and is filled with conflict and controversy. It creates a property right of the design of useful new inventions for a certain period, after which the patent expires. There are three types of patents; make note of what these are, and also of the kinds of things that cannot be patented. Patent holders have remedies when patents are infringed, which has led to the emergence of patent-holding companies, or patent trolls, that derive revenue solely from suing for patent infringement. Be sure to complete the exercises at the end of the section. |
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6.3: Copyrights | Read this section. Copyright is another area of intellectual property law that has grown more controversial over the last twenty years, particularly with the increased importance of the Internet in daily life. The Internet has vastly increased the availability of original written and creative material to the general public. For some, this easy access can cause confusion, creating the assumption that such material can be used by any person for any reason. Others have intentionally sought to bypass the protections available to such material. Some see the copyright protections available to creative work to be excessively restrictive; through various efforts, they attempt to promote the availability of creative works through open licenses. In this section, familiarize yourself with the protections that US law provides to copyright holders. Note also how digital copyright licenses can further restrict the use of digital media. As always, pay attention to the remedies for copyright infringement and the defenses to such a claim. Complete the exercises at the end of the section. |
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6.4: Trade Secrets | Read this section. Trade secret laws generally protect businesses that wish to maintain the confidentiality of their formulas, processes, or client lists, since they have important economic value. Be aware of both the civil and criminal penalties that go with stealing a trade secret, as well as potential defenses against such claims. Be sure to do the short exercise at the end of the section. |
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6.5: Intellectual Property in the Digital Age | Read this article, which discusses the Digital Millennium Copyright Act, a 1998 law that addresses copyright infringement and access controls to copyrighted materials given recent digital and other technological innovations. |
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Read this article, which discusses the Online Copyright Infringement Liability Limitation Act, a portion of the Digital Millennium Copyright Act of 1998. This portion of the law deals specifically with providing limitation of liability for online service providers that immediately take down content if someone alleges a copyright infringement. It also reflects the challenges to intellectual property rights inherent in the dissemination of information over the Internet. |
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Read this article, which discusses PRO-IP Act, a 2008 law that provided further civil and criminal penalties for trademark, patent, and copyright infringement. While it reflects government concerns regarding international enforcement of intellectual property laws, a significant part of the PRO-IP Act deals with issues related to file sharing, which was another step in government efforts to protect intellectual property rights subject to infringement through the Internet. |
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7.1: Employment at Will | Read this section, which deals with the predominant approach to employment in the United States, the employment-at-will doctrine. While this legal doctrine holds that an employee can be discharged for a good reason, a bad reason, or no reason at all, you will soon see that there are limits to the reasons for which an employer can terminate an employee. For instance, an employer cannot terminate an employee for refusing to break the law or for reporting an employer for breaking the law (whistleblowing). |
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7.2: Wage Law | Read this information from the Department of Labor on the minimum wage. In the United States, the federal government has set minimum wages that most employers are required to pay to their employees. In addition, some states have minimum wage laws that require employers within the state to pay higher minimum wages. This page provides answers to common questions about these laws. |
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Read this article. Prevailing wage laws require that certain government contracts can only be entered into if employees will paid a predetermined "prevailing wage" in the local area affected by the contract. What are the potential benefits and drawbacks to such a requirement? How should workers' rights to be fairly compensated be weighed against employers' wishes to manage costs? |
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7.3: Discrimination | Read the introductory materials for Chapter 12. The employment-at-will doctrine, which is prevalent in the United States, makes it relatively easy for an employer to fire an employee for any reason. However, specific federal and state laws protect employees from being fired for reasons that government and society have determined to be wrongful discrimination. In the past sixty years or so, laws have been passed in the United States that protect against discrimination based on race, ethnicity, religious practice, and disability, to name some of the most prominent examples. These laws change over time. As an example, review the Abercrombie & Fitch "look policy". In 2015, the courts held that the clothing company violated discrimination laws by refusing to hire a Muslim woman because she wore a hijab. |
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7.4: The Occupational Safety and Health Administration (OSHA) | Watch this video for an overview of the Occupational Safety and Health Administration, including its history and functions. Pay attention to the issues that led to the Occupational Safety and Health Act, and the issues OSHA has dealt with over its history. |
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7.5: Collective Bargaining | Workers have the right select a union to negotiate on their behalf. Explore this page, which describes how a bargaining unit is formed. Also note that, in addition to electing a union, there is another way in which workers can gain union representation. Union representation is formalized when an employer voluntarily recognizes the union as the workers' representative. |
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Read this article on collective bargaining. Note the interplay of private negotiation and agreement with federal and state law. Public policy takes a strong interest in how companies interact with their workers. While union membership and impact has declined over the past few decades, federal and state law still play a strong role in regulating the relationships between labor and management. |
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Explore these FAQs on the right of collective bargaining in the United States. With collective bargaining, employees have the right to organize into unions to represent themselves in negotiations with their employers. Note, in particular, how the National Labor Relations Act protects this right. |
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Explore this page for more information on on whistleblowing and retaliation procedures. |
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8.1: Burden of Proof | Read the introductory materials for Chapter 10. Prior units dealing with civil law and informal alternatives have covered the most typical interactions a business person will have with the law. Unfortunately, some businesses and businesspeople do end up becoming involved in the criminal justice system. The last decade in the United States has produced some very prominent examples, including the investment manager Bernie Madoff and Tyco International CEO Dennis Kozlowski. White collar and other business-related crime can have a major impact on the public's perception of a business, its executives, and its employees. For ethical as well as economic reasons, it is very important for business leaders to be aware of the potential for crime in the business world and to take steps to guard themselves and their businesses against it. This section gives an overview of the issues businesspeople may face related to crime. |
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Read this section, which discusses criminal law in general, including constitutional protections for criminal defendants, defenses to criminal allegations, and the nature of punishment in criminal law. Pay particular attention to the discussion of the burden of proof in criminal cases. Compare this burden of proof to the burden in civil cases, noting the apparent contradictions that can arise from these differences. Do exercise 2 at the end of the section. |
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8.2: White Collar Crime and Other Business-Related Crimes | Read this section. This section covers the more notable white collar crimes in business. Be aware, though, that business-related crimes can extend beyond common white collar crime. Property crimes can be committed by any employee. In addition, businesses sometimes violate regulatory statutes with criminal penalties, such as environmental laws. Familiarize yourself with the most common crimes, white collar and otherwise, seen in business settings. Complete the exercises at the end of the section. |
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9.1: Sole Proprietorship | Read the introductory materials for Chapter 11, which covers the various business entities found in the United States. Note the common characteristics of all businesses, as well as the great diversity found in the business world. To deal with the diverse needs of businesses, a multitude of business organization forms have been recognized. Note the importance of limited liability and tax consequences in choosing a business form. The law treats many business entities as if they are real persons in several important ways. |
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Watch this video, which describes the different types of businesses and how they are formed. Note the advantages and disadvantages of the various types of business. |
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Read this section. Sole proprietorships are the most common form of business organization, with good reason. There are no formal requirements to start a sole proprietorship. What other advantages and disadvantages are there to starting a business as a sole proprietorship? As this section notes, there are challenges of borrowing money as a sole proprietor. Be sure you understand the issue of liability in sole proprietorships, as this will provide a foundation for discussions of limited liability forms of organizations in the following subunits. |
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9.2: Partnerships | Read this section. For various reasons, individuals may decide that it is better to run a company with others than on their own. These individuals may decide to organize as a partnership in order to draw on the experience and expertise of others. There are several forms of business partnership, and these sections discuss some of them. |
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Read this section. Limited liability partnerships (LLPs) are discussed in the last paragraph of this section, and you should be aware of their function. LLPs are organizations that provide limited liability and tax advantages to professional partnerships, such as law firms and accounting firms. Limited liability limited partnerships (LLLPs) include both general and limited partners. Both the general and limited partners are allowed to manage the partnership. It is a unique type of business formation, in that both general and limited partners enjoy limited liability and are not held personally liable for the partnership’s debt. To form a limited liability limited partnership, articles of limited liability limited partnership must be filed with the secretary of state's office along with the required filing fee. |
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9.3: Corporations | Read this section. The corporate structure is very attractive to businesses, particularly large and growing companies. Public corporations are listed on stock exchanges, offer their shares to the public, and are subject to the highest level of regulation. Private corporations are often owned by a small group of investors with a pre-existing relationship. These private corporations are also referred to as "closely held corporations". Because corporations get significant protections under the law, they must also be formed in strict accordance with the state statutes that govern corporate formation in the United States. Because corporate law is a function of state government, corporations have choices about where to incorporate, and what corporate formation requirements they wish to conform to. The state of Delaware, in particular, plays a very important role in the formation of corporations. |
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Read this section, which introduces the many aspects of mergers and acquisitions of corporations in the United States, including the purchase of assets, successor liability, purchase of stock, and state and federal laws governing mergers and acquisitions. |
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Read the Securities and Exchange Commission's material on corporate bankruptcy. When a corporation is unable to pay its debts, it is said to be insolvent. In the United States, bankruptcy laws help to protect creditors while allowing the debtor to start over. Corporations in the United States may reorganize and reach agreements with creditors as to how debts will be paid, if at all. Additionally, a corporation may just stop operating and liquidate all of its assets to satisfy a portion of its debts. Be aware of the distinctions between the two major types of bankruptcy. |
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9.4: Limited Liability Companies | Read this section. Limited liability companies (LLCs) are a relatively new form of business organization in the United States, but they have already been widely adopted, particularly by small businesses. With the many formalities and structural requirements required of corporations, LLCs offer a simpler alternative that is more suited to small businesses. Note, in particular, the similarities and differences of LLCs versus sole proprietorships and corporations. Why does the text refer to LLCs as a "hybrid form of business organization"? Be sure to familiarize yourself with the requirements needed to form and organize an LLC. It is important to note that the single member LLC business form is more preferable than a sole proprietorship because it offers the business owner limited liability coverage. Thus, the business owner may not be personally liable for business debt. The business owner also has the option to be taxed either as a corporation or a sole proprietorship. To form a single member LLC, the business owner must file articles of organization with the secretary of state and pay the required filing fee. Lastly, do the exercises at the end of the section. |
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10.1: Securities Regulation | Watch this lecture, which provides an overview of securities law as administered by the United States federal government. Due to the federal structure of the United States, securities regulation takes place both at the federal and the state level. Pay particular attention to the discussion on the definition of a security and the requirements for companies to offer securities for sale publicly in the United States. |
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Watch this video on the role of states in the regulation of securities in the United States. States first regulated securities in the United States, and continue to play a key role in securities regulation to this day. Pay particular attention to states' approach to securities registration and the role of uniform acts in attempting to foster coordination among the states and the federal government with regard to securities regulation. |
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10.2: Sarbanes-Oxley | Watch this video, which deals with the adoption and details of the Sarbanes-Oxley Act. The Act, often referred to as SOX, came about in the wake of several scandals involving large public corporations in the United States. Note the role played by leading corporate executives, accountants, auditors, and legal counsel. What problems did SOX attempt to address, and what specific changes did it make to address those problems? |
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10.3: Antitrust Law | Read this introduction to the history and basics of antitrust law. In many countries, antitrust laws are referred to as competition laws. Pay special attention to the discussion of the Sherman Antitrust Act and its development. |
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10.4: Administrative Law | Watch this video, which deals with the interaction of administrative law with business in the United States. Administrative agencies usually have the authority to create rules that have the force of law. In essence, a legislative body gives an administrative agency a limited amount of that legislature's power to make law. Pay attention to the reasons that this is done, and note the roles that several agencies in the United States government play in regulating businesses and the environment in which they operate. |
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