# BLAW 280: Business Law I - Lecture Notes
## Module 1: Introduction to Law and the American Legal System
### 1.1 What is Law?
* **Definition:** A set of rules and principles that are recognized and enforced by a government
authority.
* **Functions of Law in Business:**
* Provides a framework for business transactions.
* Protects property and intellectual assets.
* Ensures contracts are enforceable.
* Resolves disputes.
* Establishes standards of conduct.
* Promotes social justice and stability.
### 1.2 Sources of American Law
1. **Constitutions:**
* **U.S. Constitution:** The supreme law of the land. Any federal or state law that conflicts
with the U.S. Constitution is unenforceable.
* **State Constitutions:** Each state has its own constitution, which is the supreme law within
that state's borders, unless it conflicts with the U.S. Constitution.
2. **Statutes:**
* Laws enacted by legislative bodies.
* **Federal Statutes:** Passed by the U.S. Congress (e.g., Civil Rights Act, Sarbanes-Oxley Act).
* **State Statutes:** Passed by state legislatures (e.g., Uniform Commercial Code, which
governs commercial transactions).
* **Ordinances:** Laws, rules, or orders passed by municipal or county governing units.
3. **Administrative Law:**
* Rules, orders, and decisions of administrative agencies.
* **Administrative Agencies:** Federal, state, or local government agencies established to
perform a specific function (e.g., Securities and Exchange Commission - SEC, Environmental
Protection Agency - EPA).
4. **Case Law and Common Law Doctrines:**
* Judge-made law.
* The body of law that has developed from court decisions.
* Based on the doctrine of *stare decisis* ("to stand on decided cases"), which means courts
are obligated to follow precedents established within their jurisdictions.
* **Precedent:** A court decision that furnishes an example or authority for deciding
subsequent cases involving identical or similar legal principles or facts.
### 1.3 The Court System
* **Jurisdiction:** The authority of a court to hear and decide a specific case. A court must have
jurisdiction over the person against whom the suit is brought or over the property involved in the
suit, as well as jurisdiction over the subject matter.
* **The Federal Court System:**
1. **U.S. District Courts:** Trial courts of general jurisdiction.
2. **U.S. Courts of Appeals:** Hear appeals from the federal district courts located within
their respective judicial circuits.
3. **U.S. Supreme Court:** The highest court in the federal system. Has final authority on the
Constitution and federal laws.
* **The State Court System:**
1. **Trial Courts:** Courts of general or limited jurisdiction where cases are first heard.
2. **Appellate Courts:** Review the proceedings of trial courts to determine whether the trial
was conducted in accordance with the procedural and substantive rules of law.
3. **State Supreme Court:** The highest appellate court in a state.
### 1.4 Civil Litigation and Alternative Dispute Resolution (ADR)
* **Civil Litigation Process:** The process of resolving private disputes through the court system.
1. **Pleadings:** Statements by the plaintiff and the defendant that detail the facts, charges,
and defenses of a case. (Complaint, Answer, Counterclaim).
2. **Discovery:** The process of obtaining information from the opposing party or from
witnesses prior to trial. (Depositions, Interrogatories, Requests for Documents).
3. **Trial:** The formal examination of evidence before a judge, and typically before a jury, in
order to decide the outcome of a case.
4. **Appeal:** A party may appeal the trial court's decision to a higher court.
* **Alternative Dispute Resolution (ADR):** Methods to resolve disputes outside of the
traditional judicial process.
* **Negotiation:** Informal settlement talks between the parties, with or without attorneys.
* **Mediation:** A neutral third party (mediator) acts as a communicating agent between the
parties and assists them in negotiating a settlement. The mediator does not make a decision on
the matter.
* **Arbitration:** A more formal method where a neutral third party or a panel of experts
hears a dispute and imposes a resolution on the parties. The arbitrator's decision (award) can be
legally binding.
## Module 2: Torts
### 2.1 Introduction to Torts
* **Definition:** A tort is a civil wrong that causes another person to suffer loss or harm,
resulting in legal liability for the person who commits the tortious act.
* **Purpose of Tort Law:** To provide remedies for the violation of certain protected interests.
* **Categories of Torts:**
1. Intentional Torts
2. Negligence (Unintentional Torts)
3. Strict Liability
### 2.2 Intentional Torts
* An intentional tort requires intent. The tortfeasor (one who commits a tort) must intend to
commit an act, the consequences of which interfere with another's personal or business interests
in a way not permitted by law.
* **Intentional Torts Against Persons:**
* **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 wrongfully published or publicly spoken that causes injury to
another's good name, reputation, or character.
* **Libel:** Defamation in writing or another permanent form.
* **Slander:** Defamation in oral form.
* **Invasion of Privacy:** A person's right to solitude and freedom from prying public eyes.
* **Intentional Infliction of Emotional Distress:** Extreme and outrageous conduct that results
in severe emotional distress to another.
* **Intentional Torts Against Property:**
* **Trespass to Land:** Occurs when a person, without permission, does any of the following:
enters onto, above, or below the surface of land that is owned by another; causes anything to
enter onto land owned by another; or remains on land owned by another or permits anything to
remain on it.
* **Trespass to Personal Property:** Wrongfully taking or harming the personal property of
another or otherwise interfering with the lawful owner's possession of personal property.
* **Conversion:** Wrongfully taking or retaining possession of an individual's personal
property and placing it in the service of another.
### 2.3 Negligence (Unintentional Torts)
* **Definition:** The failure to exercise the standard of care that a reasonably prudent person
would have exercised in a similar situation.
* **Elements of Negligence (Plaintiff must prove all four):**
1. **Duty:** The defendant owed a duty of care to the plaintiff.
* **Reasonable Person Standard:** The standard of behavior expected of a hypothetical
"reasonable person." It is the standard against which negligence is measured.
2. **Breach:** The defendant breached that duty.
3. **Causation:** The defendant's breach caused the plaintiff's injury.
* **Causation in Fact ("But for" test):** An act or omission without which an event would
not have occurred.
* **Proximate Cause (Legal Cause):** Exists when the connection between an act and an
injury is strong enough to justify imposing liability. Foreseeability is a key element.
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.
* **Comparative Negligence:** If the plaintiff is also negligent, their recovery is reduced by the
percentage of their fault.
* **Contributory Negligence:** (In a few states) If the plaintiff is even slightly negligent, they
are barred from recovering any damages.
### 2.4 Strict Liability
* Liability without fault.
* Imposed on those engaged in abnormally dangerous activities, and on persons who keep
dangerous animals.
* **Product Liability:** The legal liability of manufacturers, sellers, and lessors of goods to
consumers, users, and bystanders for injuries or damages that are caused by the goods.
* A product may be defective due to:
* Manufacturing defects.
* Design defects.
* Inadequate warnings.
## Module 3: Contracts
### 3.1 Introduction to Contract Law
* **Definition:** 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.
* **Sources of Contract Law:** Common law governs contracts except when it has been
modified or replaced by statutory law, such as the Uniform Commercial Code (UCC), or by
administrative agency regulations.
* **Types of Contracts:**
* **Bilateral vs. Unilateral:**
* **Bilateral:** A promise for a promise.
* **Unilateral:** A promise for an act.
* **Express vs. Implied:**
* **Express:** The terms of the agreement are fully and explicitly stated in words, oral or
written.
* **Implied:** A contract formed in whole or in part from the conduct of the parties.
### 3.2 Elements of a Valid Contract
1. **Agreement (Offer and Acceptance):**
* **Offer:** A promise or commitment to do or refrain from doing some specified action in the
future.
* Requirements of the Offer: Intent, definite terms, and communication to the offeree.
* **Acceptance:** The 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.
2. **Consideration:**
* The value given in return for a promise or performance.
* It must be something of legally sufficient value and there must be a bargained-for exchange.
3. **Contractual Capacity:**
* The legal ability to enter into a contractual relationship.
* Courts generally presume the existence of contractual capacity, but there are some situations
where capacity is lacking or may be questionable (e.g., minors, intoxicated persons, mentally
incompetent persons).
4. **Legality:**
* The contract's purpose must be to accomplish some goal that is legal and not against public
policy.
### 3.3 Defenses to Contract Enforceability
* **Genuineness of Assent:** The apparent consent of each party must be "genuine." Assent
may be lacking due to:
* **Mistake:** A mistake of fact might allow a contract to be avoided.
* **Fraudulent Misrepresentation:** Misrepresentation that is consciously false and is
intended to mislead another.
* **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.
* **Statute of Frauds:**
* A state statute under which certain types of contracts must be in writing to be enforceable.
* Contracts that generally require a writing include:
* Contracts involving interests in land.
* Contracts that cannot by their terms be performed within one year from the day after the
date of formation.
* Contracts to answer for the debt or duty of another.
* Contracts made in consideration of marriage.
* Under the UCC, contracts for the sale of goods priced at $500 or more.
### 3.4 Breach of Contract and Remedies
* **Breach of Contract:** The failure, without legal excuse, of a promisor to perform the
obligations of a contract.
* **Remedies for Breach:**
* **Damages (Legal Remedies):**
* **Compensatory Damages:** To cover direct losses and costs.
* **Consequential (Special) Damages:** To cover indirect and foreseeable losses.
* **Punitive Damages:** To punish and deter wrongdoing (rare in contract law).
* **Nominal Damages:** To recognize wrongdoing when no monetary loss is shown.
* **Equitable Remedies:**
* **Rescission and Restitution:** Rescission is an action to undo, or terminate, a contract.
Restitution involves returning goods, property, or funds previously conveyed.
* **Specific Performance:** An equitable remedy calling for the performance of the act
promised in the contract.
* **Injunction:** A court order that requires a party to do or refrain from doing a specific
act.
## Module 4: Intellectual Property
### 4.1 Introduction to Intellectual Property
* **Definition:** Intellectual property (IP) consists of the products of an individual's mind. IP law
gives protection to these products.
* The main forms of IP are trademarks, patents, and copyrights.
### 4.2 Trademarks
* **Definition:** A distinctive mark, motto, device, or implement that a manufacturer stamps,
prints, or otherwise affixes to the goods it produces so that they can be identified on the market
and their origins made known.
* **Purpose:** To avoid consumer confusion.
* **Duration:** Can be renewed indefinitely as long as it is in use.
### 4.3 Patents
* **Definition:** A grant from the government that gives an inventor the exclusive right to make,
use, or sell his or her invention for a period of 20 years.
* **What is patentable?** An invention must be novel, useful, and not obvious in light of current
technology.
### 4.4 Copyrights
* **Definition:** An intangible property right granted by federal statute to the author or
originator of a literary or artistic production of a specified type.
* **What is protected?** Literary works, musical works, dramatic works, pictorial, graphic, and
sculptural works, motion pictures, and sound recordings.
* **Duration:** For works created after January 1, 1978, the copyright is for the life of the author
plus 70 years.
## Module 5: Business Organizations
### 5.1 Introduction to Business Structures
* When starting a business, one of the first decisions to be made is the form of business
organization to establish.
### 5.2 Sole Proprietorships
* **Definition:** The simplest form of business, in which the owner is the business. The owner
reports business income on his or her personal income tax return and is legally responsible for all
debts and obligations incurred by the business.
* **Advantages:**
* Easy to form.
* Owner receives all profits.
* Full control.
* **Disadvantages:**
* Unlimited personal liability.
* Business dies with the owner.
* Difficult to raise capital.
### 5.3 Partnerships
* **Definition:** An agreement by two or more persons to carry on, as co-owners, a business for
profit.
* **Types:** General Partnerships, Limited Partnerships (LPs), and Limited Liability Partnerships
(LLPs).
* **Advantages:**
* Shared financial commitment.
* Complementary skills.
* Pass-through taxation.
* **Disadvantages:**
* Joint and several liability (in a general partnership).
* Potential for disagreements.
### 5.4 Limited Liability Companies (LLCs)
* **Definition:** A hybrid form of business enterprise that offers the limited liability of the
corporation but the tax advantages of a partnership.
* **Advantages:**
* Limited personal liability for members.
* Flexibility in taxation (can be taxed as a partnership or corporation).
* Flexibility in management.
* **Disadvantages:**
* Can be more complex to set up than a sole proprietorship or partnership.
* State laws governing LLCs are not uniform.
### 5.5 Corporations
* **Definition:** A legal entity created and recognized by state law. It is a legal "person" and
enjoys many of the same rights and privileges as a natural person.
* **Key Characteristics:**
* **Limited Liability of Shareholders:** Shareholders are not personally liable for the debts of
the corporation beyond the extent of their investment.
* **Centralized Management:** Managed by a board of directors.
* **Perpetual Existence:** The corporation can continue indefinitely.
* **Types:** C-Corporations and S-Corporations (which have special tax status).
* **Advantages:**
* Limited liability for owners (shareholders).
* Ease of raising capital through the sale of stock.
* **Disadvantages:**
* Double taxation (for C-Corps): The corporation pays tax on its profits, and then shareholders
pay tax on dividends.
* Formalities and regulations.
