CONTENTS IN BRIEF



CONTENTS IN BRIEF

Preface xv

Table of Cases xviii

Table of Illustrations xxviii

PART 1

The Legal Environment of Business 1

1 Introduction to Law 3

2 Business Ethics and the Social Responsibility of Business 14

3 Civil Dispute Resolution 43

4 Constitutional Law 67

5 Administrative Law 90

6 Criminal Law 106

7 Intentional Torts 124

8 Negligence and Strict Liability 145

PART 2

Contracts 169

9 Introduction to Contracts 171

10 Mutual Assent 186

11 Conduct Invalidating „Assent 204

12 Consideration 223

13 Illegal Bargains 241

14 Contractual Capacity 256

15 Contracts in Writing 271

16 Third Parties to Contracts 295

17 Performance, Breach, and Discharge 313

18 Contract Remedies 329

PART 3

Agency 349

19 “Relationship of Principal and Agent 351

20 Relationship with Third Parties 373

PART 4

Sales 397

21 Introduction to Sales and Leases 399

22 Performance 422

23 Transfer of Title and Risk of Loss 443

24 Products Liability: „Warranties and Strict Liability in Tort 461

25 Sales Remedies 488

PART 5

Negotiable Instruments 511

26 Form and Content 513

27 Transfer 529

28 Holder in Due Course 545

29 Liability of Parties 567

30 Bank Deposits, „Collections, and Funds Transfers 588

PART 6

Unincorporated Business Associations 613

31 Formation and Internal Relations of General Partnerships 615

32 Operation and Dissolution of General Partnerships 636

33 Limited Partnerships and Limited Liability Companies 663

PART 7

Corporations 685

34 Nature, Formation, and Powers 687

35 Financial Structure 710

36 Management Structure 731

37 Fundamental Changes 762

PART 8

Debtor and Creditor Relations 779

38 Secured Transactions and Suretyship 781

39 Bankruptcy 813

PART 9

Regulation of Business 841

40 Protection of Intellectual Property 843

41 Antitrus t 863

42 Consumer Protection 888

43 Employment Law 913

44 Securities Regulation 945

45 Accountants’ Legal „Liability 976

46 Environmental Law 990

47 International Business Law 1013

PART 10

Property 1031

48 Introduction to Property, Property Insurance, Bailments, and „Documents of Title 1033

49 Interests in Real Property 1057

50 Transfer and Control of Real Property 1078

51 Trusts and Decedents’ Estates 1095

PREFACE

The format of the Fourteenth Edition follows the tradition established by the thirteen prior editions, in that each chapter contains narrative text, cases consisting of selected court decisions, and problems.

TOPICAL COVERAGE

This text is designed for use in business law and legal environment courses generally offered in universities, colleges, and schools of business and commerce. By reason of the broad coverage and variety of the material, instructors may readily adapt this volume to specially designed courses in business law by assigning and emphasizing different combinations of the subject matter. The text covers all topics included in the CPA exam.

Emphasis has been placed upon the regulatory environment of business law: the first eight chapters introduce the legal environment of business, and Part Nine (chapters 40 through 47) addresses government regulation of business.

UP-TO DATE

Chapter 8 has been extensively revised to incorporate the new Restatement of the Law Third, Torts: Liability for Physical and Emotional Harm. Chapters 19 and 20 have been extensively revised to incorporate the new Restatement of the Law Third, Agency. The Contracts, Sales, and Negotiable Instruments chapters have been revised to reflect Revised Article 1 of the Uniform Commercial Code (UCC). Chapter 39 on Bankruptcy has been extensively revised to reflect the changes made by the U.S. Bankruptcy Abuse Prevention and Consumer Protection Act of 2005. The Sarbanes-Oxley Act is covered in chapters 2, 6, 36, 44, and 45. Chapter 44 on Securities Regulation has been updated to reflect recent SEC regulations regarding public offerings and disclosure of executive compensation. Chapter 41 on Antitrust has been revised to reflect the recent U.S. Supreme Court decision on vertical price fixing. Chapter 48 has been revised to cover UCC Revised Article 7. CyberLaw material has been integrated throughout the text including Chapters 6, 7, 13, 15, 19, 21, 40, and 44.

READABILITY

To make the text as readable as possible, all unnecessary “legalese” has been omitted and necessary legal terms have been printed in boldface and clearly defined, explained, and illustrated. The text is enriched by numerous illustrative hypothetical and case examples, which help students relate the material to real-life experiences. The end-of-chapter cases are cross-referenced in the text, as are related topics covered in other chapters.

CASE TREATMENT

From long classroom experience, we are of the opinion that fundamental legal principles can be learned more effectively from text and case materials having at least a degree of human interest. Accordingly, we have included a large number of recent cases including the following U.S. Supreme Court cases: Granholm v. Heald, Philip Morris USA v. Williams, Marrama v. Citizens Bank, Metro- Goldwyn-Mayer Studios Inc. v. Grokster, Ltd., Leegin Creative Leather Products, Inc. v. Psks, Inc., Burlington N. & S. F. R. Co. v. White, F. Hoffmann-La Roche Ltd. v. Empagran S.A., Massachusetts v. Environmental Protection Agency, and Kelo v. City of New London. Landmark cases, on the other hand, have not been neglected. All have been carefully edited to preserve the actual language of the court and to show the essential facts of the case, the issue or issues involved, the decision of the court, and the reason for its decision.

ILLUSTRATIONS

In this text, we have used more than 140 classroom-tested figures, charts, and diagrams. The diagrams help the students conceptualize the many abstract concepts in the law; the charts not only summarize prior discussions but also help to illustrate relationships among legal rules. In addition, each chapter has a summary in the form of an annotated outline of the entire chapter, including key terms.

END-OF-CHAPTER MATERIALS

Classroom-proven problems appear at the ends of chapters to test the student’s understanding of major concepts. We have used the problems, many of which are taken from reported court decisions, and consider them excellent stimulants to classroom discussion. Students, in turn, have found the problems helpful in enabling them to apply the basic rules of law to factual situations. In addition to the problems, which readily suggest other and related problems to the inquiring, analytical mind, we have included discussion questions to provide students another opportunity to assess their comprehension of the material.

APPENDICES

The text contains comprehensive appendices, including the Constitution of the United States (Appendix A); the Uniform Commercial Code (Appendix B); the Uniform Partnership Act (Appendix C); the Revised Uniform Partnership Act (Appendix D); and the Revised Model Business Corporation Act (Appendix E). A comprehensive Dictionary of Legal Terms appears in Appendix F.

PEDAGOGICAL BENEFITS

Classroom use and study of this book should provide for the student the following benefits and skills:

1. Perception and appreciation of the scope, extent, and importance of the law.

2. Basic knowledge of the fundamental concepts, principles, and rules of law that apply to business transactions.

3. Knowledge of the function and operation of courts and governmental administrative agencies.

4. Ability to recognize the potential legal problems which may arise in a doubtful or complicated situation, and the necessity of consulting a lawyer and obtaining competent professional legal advice.

5. Development of analytical skills and reasoning power.

SUPPLEMENTAL MATERIALS

Instructor’s Resource CD (ISBN: 0-324-65556-8): The IRCD includes:

• Instructor’s Manual (ISBN: 0-324-65577-0) by Richard Mann and Barry Roberts with Beth Woods. The IM contains part opening ethics questions, suggested activities, and research projects; chapter lecture outlines; answers to problems and discussion questions; briefs to cases page-referenced to the book; suggested case questions for students; recommendations for use of transparency acetates; and supplemental lectures.

• Test Bank (ISBN: 0-324-65794-3): offers approximately 3,900 questions. There are about 75 test questions per chapter: 35 true/false, 35 multiple choice, and 5 short essay.

• ExamView Testing Software (ISBN: 0-324-65795-1): allows the instructor to create, deliver, and customize tests and study guides (both print and online) in minutes with an easy-to-use assessment and tutorial system. ExamView offers both a Quick Test Wizard and an Online Test Wizard that guide you step-by-step through the process of creating tests, while its “what you see is what you get” interface allows you to see the test you are creating on the screen exactly as it will print or display online. You can build tests of up to 250 questions using up to 12 question types. Using ExamView’s complete word processing capabilities, you can enter an unlimited number of new questions or edit existing questions.

Microsoft PowerPoint™ Lecture Review Slides (ISBN: 0-324-65799-4): available for use by students as an aid to note-taking and by instructors for enhancing their lectures.

Companion Website: accessible via . blaw/mann. Select the Student Companion site for the book. There you will find a host of resources, including chapter quizzes, chapter summaries, and Internet links.

WebTutor (ISBN: 0-324-65875-3): features chat, discussion groups, testing, student progress tracking, and business law course materials.

Study Guide (ISBN: 0-324-65539-8): by Peter T. Kahn of the University of Minnesota, Twin Cities, provides for students a brief statement of purpose; chapter objectives; key terms; and true/false, multiple choice, and short essay questions for each chapter. Each part has a sample examination. The study guide also includes a CPA exam business law review.

TEACHING AND LEARNING RESOURCES

Examples of resources available with adoption of any West Legal Studies in Business textbook include:

West’s Digital Video Library. Featuring 60+ segments on the most important topics in Business Law, West’s Digital Video Library helps students make the connection between their textbook and the business world. Access to West’s Digital Video Library is free when bundled with a new text, and students with used books can purchase access to the video clips online. For more information about this product, visit . com

West Legal Studies in Business Resource Center. This Web site offers a unique, rich and robust online resource for instructors and students. . com provides customer service and product information, links to all text-supporting Web sites, and other cutting-edge resources such as Court Case Updates.

LegalTrac. An excellent resource for research and writing assignments, LegalTrac™ provides indexing for approximately 875 titles including major law reviews, legal newspapers, bar association journals, and international legal journals, and also contains law-related articles from over 1,000 additional business and general interest titles. LegalTrac™ is available as an optional package with a new text.

The Business and Company Resource Center. The Business & Company Resource Center (BCRC) is a premier online business research tool that allows you to seamlessly search thousands of periodicals, journals, references, financial information, industry reports, company histories and much more. Visit to learn more about this powerful tool. BCRC is available as an optional package with a new text.

A Handbook of Basic Law Terms, Black’s Law Dictionary Series. This paperback dictionary, prepared by the editor of the popular Black’s Law Dictionary, can be packaged for a small additional cost with any new South-Western’s Legal Studies in Business text.

Student Guide to the Sarbanes-Oxley Act. This brief overview for undergraduate business students explains the Sarbanes-Oxley Act, what is required of whom, and how it might affect students in their business life. Available as an optional package with the text.

WestLaw®. West Group’s vast online source of valueadded legal and business information, contains over 15,000 databases of information spanning a variety of jurisdictions, practice areas, and disciplines. Qualified instructors who adopt South-Western’s Studies in Business textbooks may receive ten complimentary hours of Westlaw for their courses (certain restrictions apply).

VHS Video Library. VHS videotapes on many business law issues are available (with some restrictions) to qualified adopters of South-Western’s Legal Studies in Business texts. For more detailed information about the videos, please visit .

ACKNOWLEDGMENTS

We express gratitude to the following professors for their helpful comments:

Robert Klepa, UCLA Extension Kenneth R. Davis, Fordham Schools of Business Dale A. Grossman, Cornell University Sebrena R. Moten, Troy University Donald H. Shoop, North Dakota State University Samuel B. Garber, DePaul University Nancy A. Wainwright, Eastern Washington University Michael G. Walsh, Villanova University Alex Devience, DePaul University. We are also grateful to those who provided us with comments regarding recent editions of the book: Miriam R. Albert, Fordham University; Mark Altieri, Cleveland State University; Albert Anderson, Mount Aloysius College; Albert Andrews, Jr., University of Minnesota; Denise A. Bartles, Missouri Western State College; Lois Yoder Beier, Kent State University; Robert Bing, William Paterson College; Joell Bjorke, Winona State University; William N. Bockanic, John Carroll University; Donald Boren, Bowling Green State University; Joe Boucher, University of Wisconsin–Madison; L. Brooks, Nichols College; Nicolaus Bruns, Jr., Lake Forest Graduate School of Management; Mark A. Buchanan, Boise State University; Deborah Lynn Bundy, Marquette University; Thomas J. Canavan, Long Island University–C. W. Post Campus; Donald Cantwell, University of Texas–Arlington; John P. Carnasiotis, University of Missouri; Albert L. Carter, Jr., University of the District of Columbia; Richard R. Clark, University of the District of Columbia; Mitchell F. Crusto, Washington University–St. Louis; Richard Dalebout, Brigham Young University; Arthur S. Davis, Long Island University; William Day, Cleveland State University; Alex DeVience, Jr., DePaul University; Craig Disbrow, Plymouth State College, New Hampshire; William G. Elliott, Saginaw Valley State University; Edward Eramus, State University of New York–Brockport; Kurt Erickson, South West Michigan College; Jay Ersling, University of St. Thomas, Minnesota; Joe W. Fowler, Oklahoma State University–Stillwater; Karla H. Fox, University of Connecticut; Stanley Fuchs, Fordham University; Nathan T. Garrett, Esq., North Carolina Central University; Michael J. Garrison, North Dakota State University; Sue Gragiano, Bowling Green State University; James Granito, Youngstown State University; Donald Haley, Cleveland State University; Marc Hall, Auburn University Montgomery; James V. Harrison, St. Peter’s State College; Edward J. Hartman, St. Ambrose University; Frances J. Hill, University of Wisconsin–Whitewater; Telford F. Hollman, University of Northern Iowa–Cedar Falls; Georgia L. Holmes, Mankato State University; James Holzinger, Muhlenberg College; Norman Hope, Tabor College; Sarah H. Hudwig, Mary Baldwin College; Velma Jesser, Lane Community College; Theresa Johnson, Cleveland State University; Marilee Jones-Confield, California State University–Long Beach; Al Joyner, Eastern Illinois University; Mary C. Keifer, Ohio University; Randall Kilbourne, Northwestern State University; Barbara Kirkpatrick, Virginia Intermont College; Edward M. Kissling, Ocean County College, New Jersey; Louise Knight, Bucknell University; Duane R. Lambert, California State University–Hayward; Andrew Liput, Felician College; Sarah H. Ludwig, Mary Baldwin College; Richard Luke, Ricks College; Pat Maroney, Florida State University; Michael A. Mass, American University; Cheryl Massingale, University of Tennessee–Knoxville; Greg K. McCann, Stetson University; Bruce McClain, Cleveland State University; Ann L. McClure, Fort Hays State University; Charles R. McGuire, Illinois State University; Herbert McLaughlin, Bryant College; James Molloy, University of Wisconsin–Whitewater; Donald Nelson, University of Denver; Carol L. Nielsen, Bemidji State University; L.K. O’Drudy, Jr., University of Virginia; Ann Morales Olazábal, University of Miami; Richard Paxton, San Diego Community College; James L. Porter, University of NewMexico; Elinor Rahm, Central Missouri State University; Samuel H. Ramsay, Jr., Bryant College; Lori K. Harris-Ransom, Caldwell College; Richard E. Regan, St. John Fisher College; Roger Reinsch, Emporia State University; L. Reppert, Marymount University; Caroline Rider, Marist College; George Roe, University of Illinois–Chicago; Stanford Rosenberg, La Roche College; Tim Rueth, Marquette University; Carol Wahle Smith, Central Florida Community College; Michael J. Sovansky, Saginaw Valley State University; Janis Stamm, Edinboro University of Pennsylvania; James Staruck, DePaul University; Al Stauber, Florida State University; David Steele, University of Wisconsin–Eau Claire; Peter Strohm, Georgian Court College; Al Talarczyk, Edgewood College; Kevin M. Teeven, Bradley University; Robert J. Tepper, University of New Mexico; Leonard Tripodi, St. Joseph’s College; Charles H. Walker, University of Mississippi; Peter M. Wasemiller, Fresno Pacific College; David Webster, University of South Florida– Tampa; Scott A. White, University of Wisconsin; E. Marshall Wick, Gallaudet University; Wells J. Wright, University of Minnesota; and James B. Zimarowski, University of Notre Dame.

We express our thanks and deep appreciation to Peggy Pickard for administrative assistance. For their support we extend our thanks to Karlene Fogelin Knebel and Joanne Erwick Roberts. And we are grateful to Steve Silverstein, Elizabeth Lowry, and Patrick Cosgrove of South-Western Legal Studies in Business for their invaluable assistance and cooperation in connection with the preparation of this text.

This text is dedicated to our children Lilli-Marie Knebel Mann, Justin Erwick Roberts, and Matthew Charles Roberts.

Richard A. Mann

Barry S. Roberts

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