Business Law

Business Law: An Introduction

1

Business Law: An

Introduction

by

TheBusinessProfessor.com

Authors: Jason M. Gordon, JD, MBA, LLM

& colleagues

BusinessProfessor, Inc., a 501(c)(3) - Nonprofit

Business Law: An Introduction

2

Dear Students,

If you are reading this introduction, you are either interested in or forced to learn about the legal environment of

business practice. It is our hope that this text makes your learning path easier to navigate. This text is for you. We

welcome your comments and feedback in hopes of making this a stronger learning tool. Before beginning, you may want

to know a bit more about the background and purpose of this text.

This text began with the objective of providing learning material to individuals who otherwise lack the means or

resources to purchase more expensive text or video resources. Specifically, the purpose of this text was to ease the

financial burden on college students taking business law courses. While maintaining this mission, the project quickly

expanded into a comprehensive approach to teaching general business-law topics that lays the groundwork for a new

model for higher education. Specifically, the text employs numerous pedagogical techniques to effectively transmit

information to the lector. The methods of communication include text, video lectures, defined vocabulary, situational

examples, discussion questions, practice questions with video explanation, appellate case references (briefs and

recommended full-text cases), and content outlines. The text flips the traditional classroom teaching model by introducing

the material in a fashion that reinforces the underlying learning objectives in multiple ways.

This project has grown far beyond the ability of a single individual to maintain. It now includes (or will soon include)

the contributions of many talented educators and legal professionals. It is their generosity and creativity that makes this

project possible. We will work to provide you with the most comprehensive and diverse legal text available for your

introduction to business law.

While this text has become a stand-along learning resource, it is most effective when used in conjunction with

classroom discussion and lecture. Classroom lecturers can spend time elaborating on legal concepts, introducing current

events that implicate legal principles, and digging deeper into the philosophy and beliefs that underpin the legal system.

We hope that you use this material to better your understanding of the law and business.

Best wishes,

Jason M. Gordon, JD, MBA, LLM

Director of BusinessProfessor, Inc.

Business Law: An Introduction

3

Contributing Authors

Prof. Jason M. Gordon, JD, MBA, LLM - Founding author and director of Business Professor, Inc.

(TheBusinessProfessor.com).

Prof. Jennifer Chapman, JD, MAcc - Editing and proofreading of Topic 10: Contract Law.

Prof. Benjamin Akins, JD, LLM - Editing and proofreading of Topic 12: Business Entities.

Ms. Tanya Tate, JD - Editing and proofreading Topic 15: Employment Laws and Topic 16: Employment

Discrimination

Mr. Wyatt Gordon, MBA, M.CS - Web development, software development, and database architecture.

Business Law: An Introduction

4

Overview

Access to Text - All of this material in this text is available in desktop and mobile browser or PDF format at

TheBusinessProfessor.com.

• Note: This PDF document allows you to expand the Table of Contents on the left-hand side of the page. You can

easily search, bookmark, highlight, and underline the text material.

Summary of Content

The material in this text is organized into subject-matter topics. Each topic is delivered as follows:

• Chapter Overview - Each chapter begins with a high-level overview of what you will learn about in the chapter.

The video explanation briefly introduces the key topics and explains how they come together to provide a

cohesive legal structure. This provides students with a holistic view of the material they will experience in the

following section. Presenting a high-level overview prior to diving into specific concepts has been shown to aid

learns in connecting material and increase proficiency. After watching the video, student should review the key

concepts and ask yourself if you recognize or understand these concepts.

• Questions and Answers - Each concept is presented as question and explanatory answer. This method is known as

“chunking”. It isolates key concepts and drives student comprehension. The explanation will generally include a

simple example of the concept. Following the explanation of the concept, in the grey-highlighted areas, you will

find discussion questions, practice questions, and resource videos. The resource video is a 1 to 6 - minute video

containing lecture and powerpoint presentation of the concept.

⁃ Discussion Question: The discussion question is designed to help you think about the conceptual

underpinnings of the covered concept.

⁃ Practice Question: The practice question is a sample of a type of question you may see on an exam that

tests the covered concept. It includes a video explanation of the question and an acceptable answer.

⁃ Resource Video: The resource video is short video lecture explaining the concept along with PowerPoint

slides. This is very useful if you did not fully understand the reading material.

• Review Outline - The review outline provides a summary of the material presented in the chapter. It allows

students to test their familiarity of the material by presenting key words and short statements that should spark the

student’s memory of the extended explanation of the material. Students can print this material for class and

handwrite notes from the classroom discussion of the topic. Handwriting has been shown to increase information

recall far better than typing notes.

• PowerPoint Slides - All of the powerpoint slides used in the Chapter Overview and Questions and Answers are

available for download. Professors may integrate these slides into classroom lectures and students can use these

Business Law: An Introduction

5

slides a study aids.

Recommended Teaching Methods

Pre-session Assignment and Preparation - Provide students with the dynamic text material prior to class. Students should

be instructed to begin by watching the chapter overview video, which provides a holistic overview of the entire chapter.

The video sets the stage for what students will learn. Students should then have a quick view of the key concepts that will

be covered in the chapter. The students should then read the material, which is structure in a question and answer format.

After reading the material, students should immediately read the theoretical discussion question and the practice question.

Students do not attempt the questions at this point. The practice question engages the student as to how the material

applies to a real-life problem; while, the discussion question explores the theoretical underpinnings of the law and seeks to

invoke and emotional reaction and opinion. The student should watch the resource video. Each resource video is 2-5

minutes long and is a recording of the lecturer teaching the relevant topic from PowerPoint slides. This reinforces the

short reading section and questions. The students repeat this process for every question in the topic material.

In-Class Session - When students arrive to the class, begin the class with a 10 minute recitation of the chapter overview.

At this point, students can ask general questions about the material. You may proceed to choose question from the material

at random. Call on students to briefly read the question and provide her answer (1-3 minutes). Allow other students to add

to the answer. Then reference a specific aspect of the discussion question and ask for volunteers. Students should now

have formed an opinion on the matter and readily volunteer to voice that opinion. Done correctly, this should engages a

discussion (2-10 minutes). Proceed with this method for the more challenging topics throughout the class session.

Students are active and engaged (and often passionate in their involvement) throughout the entire session. The instructor

should serve as a guide through the material and discussion moderator. Students are then instructed to review the study

outline to make certain they fully understand all concepts. The outline is constructed to allows students to quickly read the

outline and determine if they have a firm grasp of the material.

Recommended Methods of Evaluation

Homework Assessment - Following the in-class activity, students are required to individually attempt an answer to the

undiscussed practice questions. Students upload their attempts to an electronic system (D2L or Blackboard). Release a

video explanation of each question along with the assignment. Students may use this in answering the question; but

encourage them to attempt the question without reviewing the explanation first. Evaluate the student’s attempt rather than

grade the detailed content of the effort. More specifically, look to see that the student has identified the legal attribute that

applies to the situation. Do not judge whether the student has arrived at a legally accurate conclusion. This incentivizes

students to not just copy my explanation in an effort to record the correct answer; rather, students can test themselves to

see if they can identify the legal principles.

Examination - The recommended examination method consists of a combination of hybrid multiple-choice questions and

short answers. The multiple-choice format is to choose the best answer of A, B, C, All of the Above, or None of the

Above. Students have the opportunity to treat any multiple-choice question as a short-answer question. There is no limit

(other than time) on the student’s ability to make this election. This allows me to cover a breadth of topics while also

allowing students to demonstrate conceptual understanding beyond simple answer recognition. This reinforces the class

objectives of demonstrating understanding.

Business Law: An Introduction

6

In-Class Assessment - Lastly, a stated percentage of student grades may be based upon participation. Participation consists

of a combination of attendance and engagement in the classroom. The lecturer might note each student who answers a

practice question or otherwise volunteers to voice an opinion on the discussion question. (Note: This level of assessment

may be difficult larger sections.).

Business Law: An Introduction

7

Table of Contents

Topic 1: Legal Theory & Foundations

Topic 2: US Constitution

Topic 3: Court System

Topic 4: Administrative Law

Topic 5: Criminal Law & Procedure

Topic 6: Civil Litigation Procedure

Topic 7: Alternative Dispute Resolution

Topic 8: The Property System

Topic 9: Tort Law

Topic 10: Contract Law

Topic 11: Agency & Liability

Topic 12: Business Entities

Topic 13: Corporate Governance

Topic 14: Securities Law

Topic 15: Employment Laws

Topic 16: Employment Discrimination

Topic 17: Consumer Protection

Topic 18: Antitrust Law

Topic 19: Secured Transactions

Topic 20: Commercial Paper

Topic 21: Bankruptcy

Topic 22: Environmental Law

Topic 23: Intellectual Property

Topic 24: Insurance Law

Topic 25: International Law

Business Law: An Introduction

8

Table of Questions

Topic 1: Legal Theory & Foundations

1. What is “law”?

2. What is “jurisprudence”?

3. When is a state economically strong or weak and what is the role of law in this determination?

4. What is the “rule of law”?

5. What is “property law” (or property rights)?

6. What is “ownership”?

7. Why would a system establish ownership of property rights?

8. How does law or the legal system protect or promote property rights?

9. What are the “common law” and “civil law” systems?

10. What is the difference between “public law” and “private law”?

11. What is “civil law” and “criminal law”?

12. What is “substantive law” and “procedural law”?

13. What are the sources of federal, state, and local law?

14. What is the role of the judiciary in the legal system?

15. What effect does the legal recognition of business entities have on the conduct of business?

Topic 2: US Constitution

1. What is included in the US Constitution?

2. What is the “Separation of Powers”?

3. What is “Federalism”?

4. What is the “Supremacy Clause” and “Preemption”?

5. What is the “Full Faith and Credit Clause”?

6. What is the “Privileges and Immunities Clause”?

7. What is the “Commerce Clause”?

8. What is the “Taxing and Spending Power”?

9. What is the “Contract Clause”?

10. What is the “1st Amendment”?

11. What are the “Establishment Clause” and “Free Exercise Clauses”?

12. How does freedom of religion affect business practice?

13. What conduct is protected pursuant to the 1st Amendment’s assurance of “freedom of speech”?

14. What type of speech is either not protected or receives limited protection?

15. What is “overbreadth” or an “overbroad” law affecting freedom of speech?

16. What is the “Freedom of Press” granted under the 1st Amendment?

17. What is the “Freedom of Assembly”?

18. What is the 5th Amendment to the Constitution?

19. What is “Due Process” of Law?

20. What is the 14th Amendment’s Due Process Clause - “Incorporation Doctrine” and “Equal Protection

Clauses”?

Business Law: An Introduction

9

21. What are the standards by which the government (through laws or actions) may infringe on individual

rights?

Topic 3: Court System

1. What is the authority for the federal and state judicial systems in the United States?

2. What is the authority for Article III federal courts?

3. What types of courts exist in the state judicial system?

4. What is “Subject-Matter Jurisdiction”?

5. What is the Federal Court’s Subject-Matter Jurisdiction?

6. What is the State Court’s Subject-matter Jurisdiction?

7. Can federal courts hear matters of state law? And vice versa?

8. What is “Personal Jurisdiction”?

9. How does a federal court get personal jurisdiction over someone in a civil case?

10. How does a state court get personal jurisdiction over someone in a civil case?

11. What is a state “Long-arm Statute”?

12. What is “Venue”?

13. Who are the primary players in the judicial system?

14. What types of judges are part of the judiciary?

15. What are the duties of trial judges in the legal system?

16. What are the duties of appellate court judges or justices?

17. How do cases arrive before the appellate courts?

18. What is the role of “Jurors” in the judicial system?

19. How many jurors and juror votes are required to find someone guilty in a criminal case or liable in a civil

case?

20. What do attorneys do?

21. Who are some of the other players in the court system?

22. What are the theoretical (political) views toward judicial review?

Topic 4: Administrative Law

1. What are “Administrative Agencies”?

2. What are the functions of agencies?

3. What authority exists for creating and vesting authority in administrative agencies?

4. How are administrative agencies organized?

5. How are key agency personnel appointed and removed?

6. What is the administrative agency process for creating regulations?

7. What is the judiciary’s authority to review agency rule making?

8. What is the judiciary’s authority to review administrative court decisions?

9. What are the advantages of administrative agencies?

10. What are the disadvantages of administrative agencies and regulations?

Topic 5: Criminal Law & Procedure

Business Law: An Introduction

10

1. What is “criminal law”?

2. What are the elements of a crime?

3. What are the classifications of criminal conduct?

CRIMINAL LAW PROCESS

4. What is the process for initiating and processing criminal charges against a defendant?

5. What is the process for executing an arrest?

6. How does the government initiate criminal charges?

7. What is the “initial appearance” and the “arraignment”?

CONSTITUTIONAL PROTECTIONS IN CRIMINAL LAW PROCESS

8. What protections does the 4th Amendment provide to individuals subject to criminal charges?

9. What protections does the 5th Amendment provide to individuals subject to criminal charges?

10. What protections does the 6th Amendment provide to individuals subject to criminal charges?

11. What protections does the 8th Amendment provide to individuals subject to criminal charges?

12. What are some common crimes involving the property of others?

13. What type of activity constitutes fraud?

14. How does “good faith” affect fraud?

15. What are some common types of business fraud?

16. What is the crime of “Conspiracy”?

17. What is the crime of “Obstruction of Justice”?

18. What is the crime of providing a “False Statement”?

19. What is “Aiding and Abetting” criminal activity?

WHITE COLLAR AND BUSINESS CRIMES

20. What is a “White-collar Crime”?

21. What are crimes directed at conduct endangering workers?

22. What is bribery and other illegal payments (kickbacks)?

23. What is the “Racketeer Influenced and Corrupt Organizations Act” (RICO)?

24. What is the “False Claims Act”?

25. What is the “Sarbanes-Oxley Act”?

26. What is a “Cyber Crime”?

27. What defenses exist to criminal conduct?

THEORIES OF CRIMINAL PUNISHMENT

28. What types of punishment exist for criminal activity?

29. What are the theories for criminal punishment?

30. What are the “Federal Sentencing Guidelines”?

Topic 6: Civil Litigation Procedure

1. What is a “civil lawsuit” or “civil action”?

2. Who are the “parties” to a lawsuit?

3. What is “standing” to sue in a civil trial?

4. What is “personal jurisdiction” in a civil suit?

5. What is a “class action” lawsuit?

6. What are “pleadings” in a civil lawsuit?

Business Law: An Introduction

11

7. What is “discovery” in a civil lawsuit and how is it used?

8. What is the “scope of discovery” in a civil lawsuit?

9. What are “motions” and how are they used in a civil lawsuit?

10. What is a “frivolous case” and how are such cases regulated?

11. What is the process for selecting a jury (“jury selection”) in a civil case?

12. What is the general process or steps involved in a civil trial?

13. What is the “burden of proof” in a civil trial?

14. How is a civil trial decided?

15. What is “joint and several liability”?

16. What is the process and procedure for appealing (“appeal”) the decision in a civil trial?

17. How does a party enforce a civil judgment?

18. What is “res judicata” in civil trials?

Topic 7: Alternative Dispute Resolution

1. What is “settlement” of a legal dispute?

2. What is “Alternative Dispute Resolution” (ADR)?

3. What are the advantages of using ADR to resolve disputes?

MEDIATION

4. What is “Mediation”?

5. What are the advantages and disadvantages of mediation?

6. How do the parties initiate mediation?

7. What are the procedures for carrying out mediation?

8. Challenging the mediation agreement?

ARBITRATION

9. What is “Arbitration”?

10. What are the advantages and disadvantages of arbitration?

11. How do the parties initiate arbitration?

12. What are the procedures for carrying out an arbitration?

13. What rules govern the arbitration process?

14. Challenging the “arbitration award”?

15. How are arbitration awards enforced?

Topic 8: The Property System

1. What is “Property”?

2. What is the role of government with regard to individual ownership of property?

3. How are property rights linked to economic activity?

4. How do individuals acquire an “ownership” interest in property?

5. How is an ownership interest transferred between individuals?

OWNERSHIP INTERESTS IN REAL PROPERTY

6. How do individuals establish and document an ownership interest in real property?

7. What is a “fee simple” interest in real property?

8. What is a “life estate” interest in real property?

Business Law: An Introduction

12

9. What is a “leasehold estate” in real property?

10. What types of co-ownership interests exist in property?

11. What is an “easement interest” in real property?

PERSONAL PROPERTY

12. What is a “license” of real or personal property?

13. What is a “bailment”?

14. What is a “unilateral benefit bailment” and “mutual benefit bailment”?

LIMITATIONS ON PROPERTY RIGHTS

15. How are property ownership rights limited?

16. What is “Nuisance”?

17. What is “Zoning”?

18. What is “Eminent Domain”?

19. What is “taxation” of personal and real property?

Topic 9: Tort Law

1. What is a “Tort”?

2. What types of torts exist?

INTENTIONAL TORTS

3. What is “assault and battery”?

4. What is the “intentional infliction of mental distress”?

5. What is the tort - “invasion of privacy”?

6. What is “false imprisonment”?

7. What is “malicious prosecution”?

8. What is “trespass”?

9. What is “conversion”?

10. What is “defamation”?

11. What is “fraud”?

12. What is the “intentional interference with economic relations”?

NEGLIGENCE TORTS

13. What is “negligence”?

14. What is a “legal duty”?

15. What is “unreasonable behavior” that constitutes a breach of duty?

16. What is “Causation in Fact”?

17. What is “Proximate Causation”?

18. What are the common defenses to negligence actions?

STRICT LIABILITY TORTS

19. What is “strict liability”?

20. What is “strict products liability”?

21. What other common strict liability causes of action exist?

22. What defenses exist to strict product liability actions?

TORT DAMAGES

23. What are “compensatory damages”?

Business Law: An Introduction

13

24. What are “punitive damages”?

Topic 10: Contract Law

1. What is a “contract”?

2. What are the sources of contract law?

3. What are “unilateral contracts” and “bilateral contracts”?

4. What are “express contracts”, “implied-in-fact contracts”, and “implied-in-law contracts”?

5. What are “valid contracts”, “enforceable contracts”, “void contracts”, and “voidable contracts”?

CONTRACT FORMATION

6. What elements are required to form a valid contract?

7. What constitutes an “offer” to contract?

8. When does an offer to contract terminate?

9. What is “acceptance” of an offer?

10. What is “consideration” in the context of contract formation?

ENFORCEABLE, VOID, & VOIDABLE AGREEMENTS

11. What is “mental capacity” to contract?

12. What is the requirement that a contract have a “lawful purpose”?

13. What common situations give rise to a voidable contract?

14. When is a contract required to be in writing?

15. What type of writing is required to satisfy the “statute of frauds”?

16. What exceptions exist to the requirement that a contract be in writing to be enforceable?

INDIVIDUALS WITH RIGHTS UNDER THE CONTRACT

17. Who are the beneficiaries of the contract?

18. What is “assignment” and “delegation” of contracts?

CONTRACT PERFORMANCE

19. When is a party relieved from her obligations under a contract?

20. What are “executed contracts” and “executory contracts”?

21. What is performance of a contract?

22. What is performance of a “divisible contract”?

RELIEF FROM DUTIES UNDER THE CONTRACT

23. What situations relieve individuals from performing her duties under a contract?

24. What are “conditions” upon the duty to perform a contract?

25. What are the conditions regarding payment, delivery, and tender of performance?

26. What are “impossibility”, “impracticability”, and a “supervening frustration of purpose” of a contract?

27. What is “waiver” or “release” from a contract?

BREACH OF CONTRACT

28. What is a “breach of contract”?

29. What methods exist for resolving a breach of a contract?

30. What remedies exist for breach of a contract?

31. What is “efficient breach”?

INTERPRETING A CONTRACT

32. What rules or standards do courts apply when interpreting contracts?

Business Law: An Introduction

14

33. What is the “Parol Evidence Rule”?

34. What is a “complete integration” and “partial integration”?

35. When does the parol evidence rule not bar the consideration of extrinsic evidence to a contract?

36. What is a “patent ambiguity” and “latent ambiguity”?

Topic 11: Agency & Liability

1. What is “agency”?

2. What are the types of agent?

3. What is the agency status of an employee as compared to an independent contractor?

4. What are the types of principal?

5. What is required to form a principal-agent relationship?

6. What are the duties of a principal?

7. What are the duties of an agent?

8. To what extent is a principal bound in contract by the actions of the agent?

9. To what extent are agents liable in contract to third parties and to the principals they represent?

10. To what extent are principals liable for the torts committed by agents?

11. What is a “frolic and detour”?

12. When and how does the agency relationship terminate?

Topic 12: Business Entities

1. What are “business entities”?

2. Why is studying business entities important?

3. What is the difference between a “closely-held company” and a “publicly-held company”?

4. What are the main types of business entities?

5. What are the main characteristics of a particular business entity?

6. What is “creation” of a business entity?

7. What are the “maintenance” requirements for a business entity?

8. What is “continuity” of a business entity?

9. What is the “ownership structure” for a business entity?

10. What is “control” over a business entity?

11. What is the potential “personal liability” of owners of a business entity?

12. How is an owner of a business “compensated”?

13. How are business entities “taxed”?

14. What are the major characteristics of a “sole proprietorship”?

15. What are the major characteristics of a “general partnership”?

16. What is a “joint venture”?

17. What are the major characteristics of a “limited partnership”?

18. What are the main characteristics of a “limited liability partnership”?

19. What are the main characteristics of a “limited liability company”?

20. What are the main characteristics of a “corporation”?

21. What are the requirements to qualify as an “S corporation”?