# BLAW 280 - Business Law I: Comprehensive Summary
## Part I: The Legal Environment of Business
### A. Introduction to Law and the Legal System
* **What is Law?** A set of enforceable rules governing relationships among individuals and
between individuals and their society.
* **Functions of Law:**
* Keeping the peace.
* Shaping moral standards.
* Promoting social justice.
* Maintaining the status quo.
* Facilitating orderly change.
* Facilitating planning.
* Providing a basis for compromise.
* Maximizing individual freedom.
* **Sources of American Law:**
1. **Constitutional Law:** The supreme law of the land (U.S. Constitution). State constitutions
are supreme within their borders, so long as they do not conflict with the U.S. Constitution.
2. **Statutory Law:** Laws enacted by legislative bodies (e.g., U.S. Congress, state
legislatures, city councils). Includes ordinances.
3. **Administrative Law:** Rules, orders, and decisions of federal, state, and local government
administrative agencies (e.g., SEC, FDA).
4. **Case Law and Common Law Doctrines:** Judge-made law. The body of law developed
from custom or judicial decisions in English and U.S. courts.
* **The Common Law Tradition:**
* **Stare Decisis:** A doctrine under which judges are obligated to follow the precedents
established in prior decisions. This makes the law more stable and predictable.
* **Precedent:** A court decision that furnishes an example or authority for deciding
subsequent cases involving identical or similar legal principles or facts.
* **Binding Authority:** Any source of law that a court must follow when deciding a case.
* **Classifications of Law:**
* **Substantive vs. Procedural Law:** Substantive law defines rights and obligations (e.g., the
right to move freely). Procedural law establishes the methods for enforcing those rights (e.g., the
steps to file a lawsuit).
* **Civil vs. Criminal Law:** Civil law deals with the rights and duties that exist between
persons and between persons and their governments. Criminal law is concerned with wrongs
committed against the public as a whole.
* **National vs. International Law:** National law pertains to a particular nation. International
law is a body of law, formed as a result of international customs, treaties, and organizations, that
governs relations among or between nations.
### B. Courts and Alternative Dispute Resolution (ADR)
* **Jurisdiction:** The authority of a court to hear and decide a specific case.
* **Jurisdiction over Persons or Property (*In Personam* or *In Rem*):** A court's power to
compel the presence of the parties (including corporations) to a dispute to appear before the
court and litigate.
* **Jurisdiction over Subject Matter:** A limitation on the types of cases a court can hear (e.g.,
bankruptcy court, probate court).
* **Original vs. Appellate Jurisdiction:** Original jurisdiction is for courts where the case is first
heard (trial courts). Appellate jurisdiction is for courts that review decisions from lower courts.
* **The Federal Court System:**
1. **U.S. District Courts:** Trial courts of general jurisdiction.
2. **U.S. Courts of Appeals:** Intermediate appellate courts.
3. **U.S. Supreme Court:** The highest court in the land.
* **Alternative Dispute Resolution (ADR):** Methods to resolve disputes outside of the
traditional judicial process.
* **Negotiation:** Informal discussion between parties to try to reach a resolution.
* **Mediation:** A neutral third party (mediator) works with both sides to facilitate a
resolution. The mediator does not make a decision.
* **Arbitration:** A neutral third party (arbitrator) hears a dispute and imposes a resolution
on the parties. The arbitrator's decision can be legally binding.
### C. Business Ethics and Social Responsibility
* **Ethics:** The study of what constitutes right or wrong behavior.
* **Business Ethics:** The application of moral and ethical principles in a business context.
* **Ethical Frameworks:**
* **Duty-Based Ethics (Deontology):** Focuses on the obligations of the corporation. People
have a duty to act in a certain way, regardless of the consequences.
* **Outcome-Based Ethics (Utilitarianism):** Focuses on the consequences of an action, not
on the nature of the action itself. The morally correct decision is the one that produces the
greatest good for the greatest number of people.
* **Corporate Social Responsibility (CSR):** The idea that corporations can and should act
ethically and be accountable to society for their actions.
---
## Part II: Torts and Crimes
### A. Torts
A **tort** is a civil wrong that unfairly causes someone else to suffer loss or harm, resulting in
legal liability for the person who commits the tortious act.
* **Intentional Torts:** The tortfeasor (one who commits a tort) must "intend" to commit the
act.
* **Assault:** Any intentional and unexcused threat of immediate harmful or offensive
contact.
* **Battery:** An unexcused and harmful or offensive physical contact intentionally
performed.
* **False Imprisonment:** The intentional confinement or restraint of another person's
activities without justification.
* **Defamation:** Anything published or publicly spoken that causes injury to another's good
name, reputation, or character.
* **Libel:** Defamation in writing or other permanent form.
* **Slander:** Defamation in oral form.
* **Invasion of Privacy:** Intrusion into an individual's affairs or seclusion, false light, public
disclosure of private facts, and appropriation of identity.
* **Fraudulent Misrepresentation:** Intentional deceit for personal gain.
* **Business Torts:** Wrongful interference with a contractual relationship or a business
relationship.
* **Negligence (Unintentional Tort):** The failure to exercise the standard of care that a
reasonable person would exercise in similar circumstances.
* **Four Elements of Negligence:**
1. **Duty:** The defendant owed a duty of care to the plaintiff.
2. **Breach:** The defendant breached that duty.
3. **Causation:** The defendant's breach caused the plaintiff's injury. (Includes both
causation in fact and proximate cause).
4. **Damages:** The plaintiff suffered a legally recognizable injury.
* **Defenses to Negligence:**
* **Assumption of Risk:** A plaintiff who voluntarily enters into a risky situation, knowing
the risk involved, will not be allowed to recover.
* **Contributory Negligence:** If the plaintiff is also negligent, it bars recovery. (Used in a
minority of states).
* **Comparative Negligence:** Reduces the plaintiff's recovery in proportion to the
plaintiff's degree of fault. (Used in a majority of states).
* **Strict Liability:** Liability without fault. Imposed on those engaged in abnormally dangerous
activities, or on manufacturers/sellers of defective and unreasonably dangerous products.
### B. Criminal Law
* **Crime:** A wrong against society proclaimed in a statute and punishable by society through
fines, imprisonment, or death.
* **Key Differences between Civil and Criminal Law:**
* **Burden of Proof:** In a civil case, it's a "preponderance of the evidence." In a criminal
case, it's "beyond a reasonable doubt."
* **Parties:** A civil case is person vs. person. A criminal case is the state/government vs. the
defendant.
* **Elements of a Crime:**
1. **Actus Reus:** The performance of a prohibited act.
2. **Mens Rea:** A specified state of mind, or intent, on the part of the actor.
* **Types of Business Crimes:**
* **Embezzlement:** The fraudulent appropriation of funds or other property by a person to
whom the funds or property have been entrusted.
* **Mail and Wire Fraud:** Devising a scheme that uses the U.S. Mail, commercial carriers, or
wire (telephone, TV, internet) with the intent to defraud the public.
* **Bribery:** Offering to give something of value to a person in an attempt to influence that
person in a way that serves a private interest.
* **Insider Trading:** The purchase or sale of securities on the basis of information that has
not been made available to the public.
---
## Part III: Contracts
A **contract** is a legally binding agreement between two or more parties who agree to
perform or to refrain from performing some act now or in the future.
### A. Elements of a Valid Contract
1. **Agreement:** An offer and an acceptance.
2. **Consideration:** Something of value received or promised to convince a person to make a
deal.
3. **Contractual Capacity:** Both parties must be legally competent to enter into the
agreement.
4. **Legality:** The contract's purpose must be to accomplish some goal that is legal and not
against public policy.
### B. Agreement
* **The Offer:** A promise or commitment to do or refrain from doing some specified action in
the future.
* **Requirements of the Offer:**
1. Serious intent by the offeror.
2. Terms must be reasonably certain or definite.
3. The offer must be communicated to the offeree.
* **Termination of the Offer:**
* **By Action of the Parties:** Revocation by the offeror, rejection by the offeree, or a
counteroffer by the offeree.
* **By Operation of Law:** Lapse of time, destruction of the subject matter, death or
incompetence of a party, or supervening illegality.
* **The Acceptance:** A voluntary act by the offeree that shows assent (agreement) to the
terms of an offer.
* **Mirror Image Rule:** Requires the offeree's acceptance to match the offeror's offer
exactly.
* **Mailbox Rule:** Acceptance is effective when the offeree sends or dispatches it, not when
it is received by the offeror.
### C. Consideration
* **Definition:** The value given in return for a promise or performance. It must be:
1. **Legally Sufficient Value:** A promise to do something one has no prior legal duty to do,
performance of an action one is not obligated to undertake, or refraining from an action one has
a legal right to undertake.
2. **Bargained-for Exchange:** The promise must be given by the promisor in return for the
promisee's promise, performance, or promise of performance.
* **Agreements that Lack Consideration:**
* **Preexisting Duty:** A promise to do what one already has a legal duty to do does not
constitute legally sufficient consideration.
* **Past Consideration:** Promises made in return for actions or events that have already
taken place are unenforceable.
### D. Capacity and Legality
* **Contractual Capacity:** The legal ability to enter into a contractual relationship.
* **Minors:** Generally, contracts entered into by minors are voidable at the option of the
minor.
* **Intoxicated Persons:** A contract entered into by an intoxicated person can be either
voidable or valid.
* **Mentally Incompetent Persons:** Contracts can be void, voidable, or valid, depending on
the person's mental state when the contract was formed.
* **Legality:** A contract must be formed for a legal purpose.
* **Contracts Contrary to Statute:** Contracts to commit a crime, usury (charging an illegal
interest rate), gambling, and contracts with an unlicensed professional.
* **Contracts Contrary to Public Policy:** Contracts in restraint of trade, unconscionable
contracts (so unfair they are "void of conscience").
### E. Genuineness of Assent and Form
* **Mistakes:**
* **Mistake of Fact:** May allow a contract to be avoided.
* **Unilateral Mistake:** Made by only one party. Generally does not give the mistaken
party any right to relief.
* **Bilateral (Mutual) Mistake:** Made by both parties. The contract can be rescinded by
either party.
* **Mistake of Value:** A mistake concerning the future market value or quality. Contract is
normally enforceable.
* **Fraudulent Misrepresentation:** When a party is fraudulently induced to enter a contract, it
can normally be avoided.
* **Undue Influence and Duress:**
* **Undue Influence:** Arises from relationships in which one party can greatly influence
another party, thus overcoming that party's free will.
* **Duress:** The use of threats to force a party to enter into a contract.
* **The Statute of Frauds:** A state statute under which certain types of contracts must be in
writing to be enforceable.
1. Contracts involving interests in **land**.
2. Contracts that cannot by their terms be performed within **one year** from the day after
the date of formation.
3. Collateral, or secondary, contracts, such as promises to answer for the debt of another.
4. Promises made in consideration of **marriage**.
5. Under the Uniform Commercial Code (UCC), contracts for the sale of **goods** priced at
$500 or more.
### F. Performance, Breach, and Remedies
* **Discharge of Contractual Duties:**
* **By Performance:** The contract comes to an end when both parties fulfill their respective
duties.
* **By Agreement:** The parties can agree to discharge their duties through rescission,
novation, or accord and satisfaction.
* **By Operation of Law:** Alteration of the contract, statute of limitations, bankruptcy, or
impossibility of performance.
* **Breach of Contract:** The nonperformance of a contractual duty.
* **Material Breach:** When performance is not at least substantial. The non-breaching party
is excused from performance and can sue for damages.
* **Remedies for Breach:**
* **Damages (Legal Remedies):**
* **Compensatory:** To cover direct losses and costs.
* **Consequential:** To cover indirect and foreseeable losses.
* **Punitive:** To punish and deter wrongdoing (rare in contract law).
* **Nominal:** To recognize wrongdoing when no monetary loss is shown.
* **Equitable Remedies:**
* **Rescission and Restitution:** The contract is terminated, and the parties are returned to
their original positions.
* **Specific Performance:** An order to perform what was promised in the contract. Used
for unique goods or land.
* **Injunction:** A court order requiring a person to do or cease doing a specific action.
---
## Part IV: Agency and Employment
### A. Agency Relationships
* **Agency:** A relationship between two parties in which one party (the **agent**) agrees to
represent or act for the other (the **principal**).
* **Formation:** Can be by agreement, ratification, estoppel, or operation of law.
* **Duties of Agent to Principal:** Performance, Notification, Loyalty, Obedience, and
Accounting.
* **Duties of Principal to Agent:** Compensation, Reimbursement and Indemnification,
Cooperation.
* **Agent's Authority:**
* **Actual Authority (Express or Implied):** Authority declared in clear, direct, and definite
terms, or authority to do what is reasonably necessary to carry out express authority.
* **Apparent Authority:** When the principal causes a third party to reasonably believe that
the agent has authority to act.
### B. Employment Law
* **Employment-at-Will:** A common law doctrine under which either party may terminate an
employment relationship at any time for any reason, unless a contract specifies otherwise.
* **Exceptions to Employment-at-Will:** Contract theory, tort theory, and public policy.
* **Federal Labor Laws:**
* **Fair Labor Standards Act (FLSA):** Regulates child labor, minimum wage, and overtime pay.
* **Family and Medical Leave Act (FMLA):** Allows employees to take time off from work for
family or medical reasons.
* **Employment Discrimination:** Federal laws prohibit discrimination based on race, color,
religion, national origin, gender, age, or disability.
---
## Part V: Business Organizations (Introduction)
* **Sole Proprietorship:** The simplest form of business; the owner is the business.
* **Advantages:** Owner receives all profits, easy to create, flexible.
* **Disadvantages:** Owner is personally liable for all business debts (unlimited liability),
business dies with the owner.
* **Partnership:** An agreement by two or more persons to carry on, as co-owners, a business
for profit.
* **Advantages:** Easy to create, shared financial commitment, complementary skills.
* **Disadvantages:** Partners have unlimited liability for partnership debts, joint and several
liability.
* **Corporation:** A legal entity created and recognized by state law. It is a legal "person"
separate from its owners (shareholders).
* **Advantages:** Limited liability for shareholders, ability to raise capital by selling stock,
perpetual existence.
* **Disadvantages:** More complex to set up and maintain, potential for double taxation
(corporate profits and dividends).
* **Limited Liability Company (LLC):** A hybrid form that combines the limited liability aspects
of a corporation and the tax advantages of a partnership.
* **Advantages:** Limited liability, tax flexibility (can be taxed as a partnership or corporation),
flexible management.
* **Disadvantages:** State laws are not uniform.
---
## Part VI: Property Law (Introduction)
### A. Personal and Real Property
* **Property:** The legally protected rights and interests a person has in anything with an
ascertainable value that is subject to ownership.
* **Real Property:** Land and everything permanently attached to it (buildings, trees, etc.).
* **Personal Property (Chattel):** Property that is movable.
* **Tangible:** Has physical substance (e.g., a car).
* **Intangible:** Represents a set of rights and interests but has no physical existence (e.g.,
stocks, copyrights).
### B. Intellectual Property
Intangible property resulting from intellectual and creative processes.
* **Trademark:** A distinctive mark, motto, device, or emblem that a manufacturer stamps,
prints, or otherwise affixes to the goods it produces so that they may be identified on the market.
* **Patent:** A government grant that gives an inventor the exclusive right or privilege to make,
use, or sell his or her invention for a limited time period. The invention must be novel, useful, and
not obvious.
* **Copyright:** The exclusive right of an author or originator of a literary or artistic production
to publish, print, sell, or otherwise use that production for a statutory period of time.
* **Trade Secret:** Information of commercial value, such as customer lists, plans, and research
and development.
