*

Bonus
Chapter A

*
Working
within the
Legal
Environment

McGraw-Hill/Irwin Copyright © 2010 by the McGraw-Hill Companies, Inc. All rights reserved.
 *
DAVID BOIES Profile
Boies, Schiller, and Flexner
*
• Often called the best trial
lawyer in the U.S., Boies
represented IBM, CBS,
Calvin Klein, the New York
Yankees and Wachovia.
• Didn’t learn to read until 3rd
grade because of a
learning disability.
• He now heads his own firm
of over 200 lawyers.
APPA-2
 *The Case for
The NEED for LAWS Laws

LG1
*
• Laws are a key part of a civilized society, but
must change with the times.

• Judiciary -- The branch of government chosen to

oversee the legal system through a system of courts.

• The U.S. courts system is organized at the

federal, state, and local levels.

APPA-3
 *The Case for
TYPES of COURT Laws

LG1
*
• Trial courts hear cases of criminal and civil law.

• Appellate courts hear appeals from the losing

party at the trial court level.

APPA-4
 *
The Case for
TYPES of LAW Laws

LG1
*
• Criminal law defines crimes, establishes
punishments, and regulates the investigation and
prosecution of people accused of committing crimes.

• Civil law proceedings cover non-criminal acts -

marriage, personal injury lawsuits and more.

• Business Law -- Refers to the rules, statutes,

codes and regulations that provide a legal framework
for the conduct of business.

APPA-5
 *Statutory and
MAJOR AREAS of LAW Common Law

LG1
*
• Statutory Law -- Includes state and federal
constitutions, legislative enactments, treaties of the
federal government and ordinances; written law.

• Common Law -- The body of law that comes from

decisions handed down by courts; unwritten law.

• Precedent -- Decisions judges have made in

previous cases to guide their handling of new cases.

APPA-6
 *Administrative
ADMINISTRATIVE AGENCIES Agencies

LG1
*
• Administrative Agencies -- Federal or state
institutions and other government organizations with
delegated power to create rules and regulations
within their given area of authority.

• Examples of Administrative Agencies:

- The Federal Reserve Board
- The Securities and Exchange Commission
- The Equal Employment Opportunity Commission
- The Federal Trade Commission
APPA-7
 *Progress
PROGRESS ASSESSMENT Assessment

*
• What’s business law?

• What’s the difference between statutory and

common law?

• What’s an administrative agency?

APPA-8
 *Tort Law
WHAT’S TORT LAW?
LG2
*
• Tort -- A wrongful act that
causes injury to another person’s
body, property or reputation.

• An intentional tort is a willful

act that results in injury.

• Negligence -- An unintentional
tort that causes harm or injury that
was not intended.

APPA-9
 *
PRODUCT LIABILITY LAWS Product Liability

LG2
*
• Product Liability -- Holds businesses liable for
harm that results from the production, design, or
inadequate warnings of products they market.

• Strict Product Liability -- Liability without regard

to fault; a company can be held liable for a defective
product even if they didn’t know of the defect.

APPA-10
 *
MAJOR Product Liability

PRODUCT LIABILITY CASES LG2

*
Company Year Settlement
$125 million in punitive damages
Ford Motor Company 1978 awarded after a boy was severely
burned during a rear end collision
Dalkon Shield recalled after eight
A.H. Robins 1987
separate punitive damage settlements
Assessed large damages after a child
Jack In the Box 1993
died of E. coli and others became ill
Paid $4.8 billion in damages in faulty
General Motors 1999
fuel-tank case
$130 billion sought by the federal
Major Tobacco Firms 2004 government for smoking cessation
programs (settled for $10 billion)

APPA-11
 *Legally Protecting
PATENTS, COPYRIGHTS, and Ideas: Patents,
Copyrights and
TRADEMARKS Trademarks
LG3
*
• Patent -- A document that gives inventors exclusive
rights to their inventions for 20 years.
• Copyright -- Protects a
creator’s rights to materials such
as books, articles, photos,
paintings, and cartoons.
• A trademark is a legally
protected name, symbol, or
design that identifies the goods
or services of a seller.
APPA-12
 *
Legally Protecting
PATENT FACTS Ideas: Patents,
Copyrights and
Trademarks
LG3
*
• Patent applicants should
seek the advice of a
lawyer.
• Foreign companies are
eligible to file for U.S.
patents.
• Patent owners have the
right to sell or license the
use of their patent to
others.
APPA-13
 *
Legally Protecting
Ideas: Patents,
U.S. PATENT LEADERS in 2008 Copyrights and
Trademarks
LG3
*
Company # of Patents

IBM 4,186

Samsung 3,515

Canon 2,114

Microsoft 2,030

Intel 1,776

Source: IFI Patent Intelligence.

APPA-14
 * Sales Law:
WHAT’S the The Uniform
Commercial
UNIFORM COMMERCIAL CODE? Code
LG4
*
• Uniform Commercial Code (UCC) -- A
comprehensive commercial law that covers sales
laws and other commercial laws.

• The UCC has 11 articles

that contain laws covering a
wide range of business
issues.

APPA-15
 *
Warranties
UNDERSTANDING WARRANTIES
LG4
*
• A warranty guarantees that the product sold will
be acceptable for the purpose for which the buyer
intends to use it.
• Express Warranties -- Specific representations
made by the seller that buyers rely on regarding the
goods they purchase.
• Implied Warranties -- Legally imposed on the
seller, who implies that a product will conform to the
standards of trade.

APPA-16
 *
Negotiable
NEGOTIABLE INSTRUMENTS Instruments

LG4
*
• Negotiable Instruments -- Forms of commercial
paper that are transferable among businesses and
individuals.
• Four conditions for using negotiable instruments:
1. They must be written and signed by the maker or
drawer.
2. Be made payable on demand or at a certain time.
3. Be made payable to the bearer.
4. Contain an unconditional promise to pay a specified
amount.
APPA-17
 *
Contract Law
CONTRACT LAW
LG5
*
• Contract -- A legally
enforceable agreement
between two or more parties.

• Contract Law -- Specifies

what constitutes a legally
enforceable agreement.

• Breach of Contract --
When one party fails to follow
the terms of a contract.
APPA-18
 *
Contract Law
CONTRACT REQUIREMENTS
LG5
*
• A contract is legal and binding when:
1. An offer is made

2. There’s a voluntary acceptance of the offer

3. Both parties give consideration

4. Both parties are competent

5. The contract covers a legal act

6. The contract is in the proper form

APPA-19
 *
Contract Law
BREACHED CONTRACTS
LG5
*

• If a contract is breached the following may be

ordered:
- Specific performance

- Payment of damages

- Discharge of obligation

APPA-20
 *Progress
PROGRESS ASSESSMENT Assessment

*
• What’s the purpose of the Uniform Commercial
Code (UCC)?
• Compare express and implied warranties.
• What are the four elements of a negotiable
instrument specified in the UCC?
• What are the six conditions for a legally binding
contract? What could happen if it’s breached?

APPA-21
 *
The History of
The CLAYTON ACT of 1914 Antitrust
Legislation

LG6
*

• The Clayton Act prohibits:

- Exclusive dealing

- Tying contracts

- Interlocking directorates

APPA-22
 *The History of
Antitrust
ANTITRUST LEGISLATION Legislation

LG6
*
• The Federal Trade Commission Act of 1914
created the FTC and prohibits unfair methods of
competition in commerce.

• The Wheeler Lea Amendment gave the FTC

additional control over false and misleading ads.

• The Robinson-Patman Act of 1936 prohibits price

discrimination and applies to buyers and sellers.

APPA-23
 *
The History of
HISTORY of HIGH PROFILE Antitrust
Legislation
ANTITRUST CASES LG6
*
Case Year Outcome
U.S. v. Standard Oil 1911 Standard Oil broken into 34 companies
U.S. v. American 1911 American Tobacco split into 16
Tobacco companies
U.S. v. E. I. du Pont de 1961 DuPont ordered to divest its 23%
Nemours ownership in General Motors
U.S. v. AT&T 1982 Settled after Ma Bell spun off into regional
companies
U.S. v. Microsoft 2000 Microsoft ordered to halt prior
anticompetitive practices

APPA-24
 *Laws to
Protect
CONSUMER PROTECTIONS Consumers
LG6
*
• Consumerism -- A social movement that seeks to
increase and strengthen the rights and powers of
buyers in relationship to sellers.

• The Consumer Product Safety Commission

provides information concerning consumerism
and consumer protection.

APPA-25
 *Laws to
NUMBER of IDENTITY THEFT Protect
Consumers
COMPLAINTS LG6
*

Source: Federal Trade Commission, www.ftc.gov.

APPA-26
 *
TAXES Tax Laws

LG7
*
• Taxes -- The way federal, state, and local
governments raise money.

• Some forms of taxes:

- Income taxes

- Property taxes

- Sales taxes

- Excise taxes

APPA-27
 *
SIN TAXES Tax Laws

State Tax Rates per Pack of Cigarettes

LG7
*
State Rate per Pack

New York $2.75

New Jersey $2.58

Massachusetts $2.51

Rhode Island $2.46

Washington $2.03

Source: National Conference of State Legislators.

APPA-28
 *
DO the RICH PAY TAXES? Tax Laws
LG7
*
Taxpayers % of Total Taxes

Top 1% 40% of total taxes

Top 5% 60% of total taxes

Top 25% 86% of total taxes

Top 50% 97% of total taxes

Bottom 50% 3% of total taxes

Source: IRS, Statistics of Income 2008, www.irs.gov.

APPA-29
 *Bankruptcy
BANKRUPTCY LAWS Laws

LG8
*
• Bankruptcy -- The legal process by which a person,
business, or government entity, unable to meet
financial obligations, is relieved of those debts by a
court.

• Options of declaring bankruptcy:

- Chapter 7: Straight bankruptcy

- Chapter 11: Reorganization

- Chapter 13: Repayment plan

APPA-30
 *
GOING, GOING, GONE Tax Laws

Bankruptcies of 2008-2009
LG8
*
• Circuit City

• KB Toys

• Linens ‘n Things

• Steve & Barry’s

• Mrs. Field’s Cookies

APPA-31
 *Bankruptcy
How ASSETS are DIVIDED in Laws
BANKRUPTCY LG8
*

APPA-32
 *Deregulation
DEREGULATING COMMERCE vs. Regulation

LG9
*
• Deregulation -- The government withdraws certain
laws and regulations that seem to hinder competition.

• Deregulation efforts
were active in:
- The airline industry

- Telecommunication

- Some public utilities

APPA-33
 *Deregulation
HAMBURGER REGULATIONS vs. Regulation

LG9
*

APPA-34
 *Progress
PROGRESS ASSESSMENT Assessment

*
• What’s the purpose of antitrust law?

• Describe bankruptcy provisions under Chapters

7, 11, and 13.

• What’s deregulation? Give examples of

successful and unsuccessful deregulation.

APPA-35