Understanding Business & Personal Law

interactive student edition

Gordon W. Brown, J.D.

Member of the Massachusetts Bar

Professor Emeritus of Law

North Shore Community College

Beverly, Massachusetts

Paul A. Sukys, J.D.

Member of the Ohio Bar

Professor of Law and Legal Studies

North Central State College

Mansfield, Ohio

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Copyright © 2006 by The McGraw-Hill Companies, Inc. All rights reserved. Except as permitted

under the United States Copyright Act, no part of this publication may be reproduced or

distributed in any form or by any means, or stored in a database or retrieval system, without prior

written permission of the publisher.

Printed in the United States of America.

Send all inquiries to:

Glencoe/McGraw-Hill

21600 Oxnard Street

Suite 500

Woodland Hills, California 91367

ISBN: 0-07-861878-9

2 3 4 5 6 7 8 9 10 11 027 09 08 07 06 05

Program Components

Your Understanding Business and Personal Law program provides a rich and diverse offering of resources

for learning, teaching, reinforcing, and enriching the individual and classroom learning experience.

Program Resources

• Student Edition

• Teacher Wraparound Edition

Reinforcement

• Student Activity Workbook

• Supplemental Cases

• PuzzleMaker

Enrichment

• Enrichment Masters

• Internet Resources

• Ethics and Business Law Activities

• Business and Competitive Events in Law

• Poster Package

Teacher Resources

• Student Activity Workbook TAE

• Lesson Plans

• Transparency Binder

• Blackline Masters

• Reproducible Tests

Technology-Based Resources

• Interactive Lesson Planner (ILP) CD-ROM

• Assessment Binder (ExamView ® Pro Testmaker CD-ROM)

• PowerPoint® Presentation

• National Mock Trial Championship Video

• CourtTV Trial Stories Video Package

• Glencoe Business Video Package

• Understanding Business and Personal Law Web site

ubpl.glencoe.com

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Introducing Your Book iii

Learning

About the

Law

The Importance of

Understanding the Law

Have you ever made a prom￾ise and wondered what would

happen if you broke it? Have

you ever purchased clothing

and considered whether you

could get your money back if

you returned it to the store?

Have you ever dreamt of start￾ing your own business and

being your own boss, wanted to get married, buy

your own house, save for college, or plan for retire￾ment? These are important issues in business and

personal law, and they and countless others like

them affect your daily life and future. Learning

about these laws can be fun and exciting, and under￾standing these laws will greatly enrich your life—

not just as an individual who knows and obeys the

law, but as a contributing member of your school

and community, as a participant in the American

system, and as part of the world in which you live

and work with others.

The Structure of Your Book Your book has

been organized to make learning the law easy,

thought provoking, and enjoyable. It is divided into

seven units. The first unit introduces you to law and

ethics, civil and criminal law, and our legal system.

The next unit introduces you to the law of contracts,

which serves as the foundation of business and

employment law, and much of personal law. The

remaining units cover topics that you are likely to

encounter in your daily life and in your future. These

issues include renting or buying a home, getting mar￾ried, finding a job, starting a company, planning for

retirement, and writing a will, among others.

Personal law topics are covered with a life-cycle

approach, presenting the material chronologically as

it may arise in your life.

Connecting

the Law to

Your World

The law is a thriving real￾world enterprise that evolves

over time to meet the needs of

our diverse population and our

changing society. In this book,

you will be introduced to how

the law relates to your life and

the world. You will find many

fascinating features on commu￾nity involvement, cultural diver￾sity, international law, and the

practical issues and circumstances of your daily life.

You will also draw connections between what you learn

and other academic disciplines, from business to the

humanities, and discover features that challenge you to

think creatively, critically, and to explore new ideas. You

will even be asked to question the law itself, why it’s

important, to consider whether it is ethical or practical,

and to apply legal principles in a variety of situations,

both real and imaginary. And you will learn from real

people working in legal fields, both those profiled in

your book and people practicing in your community.

Being an Active

Participant

Learning about business and personal law is a

participatory enterprise, and you will play an active

role, both individually and as part of a team. You will

learn by conducting library and real-world research

and sharing your findings with the class. You will

argue for or against a point of view, keep a Justice

Journal and write reports, and learn to organize and

chart your research findings in legal workshops. You

will take part in role-playing and advocacy activities

such as mock trials, and work with others, both in

cooperative and adversarial situations. The great

breadth, scope, and variety of learning activities mir￾rors the diversity in the law itself. It creates a com￾pelling, lively environment that makes learning about

the law fun, easy, and fulfilling.

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Studying Case Law

Applying What You Learn Understanding

business and personal law means not only knowing

what it is, but also knowing how to apply it. Toward

this goal, your book is full of dynamic, real-world

examples and cases for you to study. Each chapter

begins with an intriguing vignette that offers insight

into how the law may affect your life and that intro￾duces you to key legal issues covered in the chapter.

Chapters include numerous examples that illustrate

key concepts and ideas. Real and hypothetical cases

abound throughout your book and the Understanding

Business and Personal Law program—in section and

chapter assessments, supplements, the course Web

site, and videos, to name a few.

Landmark Cases You will not just study cases,

but also learn about important cases. At the end of

each unit, you will be introduced to a landmark case,

a significant milestone in the law that you will study

in depth. You will also be directed to the course Web

site, where you can access multimedia features

(including actual audio footage) for many of the

landmark cases. Throughout, you will be introduced

to how real cases are decided by real courts, learn

how courts reason and how cases are won and lost,

and learn about the important legal principles that

you study in each unit.

Using Technology

Technological innovations have had a profound

impact on the law and legal education. For this rea￾son, your Understanding Business and Personal Law

program makes extensive use of technology, technol￾ogy-related features, and technology resources.

These devices include:

• Technology-related activities that involve

using the Internet, software applications, and

other technology resources

• A course Web site (ubpl.glencoe.com) that

supplements, enriches, and expands upon the

material in your book

• Technology-related features covering the

legal issues involved in technology, including

intellectual property, e-commerce, e-business,

Internet privacy, and Internet crime

• Multimedia resources, including video and

CD-ROM supplements

• Internet-related study and assessment

opportunities, including an Internet Resources

supplement and additional activities in the

Student Activity Workbook

These and other technology resources not only

introduce you to the technology-related issues in

business and personal law, but also ensure that you

will have the basic skills necessary to use technology

to research and better understand the law.

Assessing

What You

Learn

Study Tools and

Passing Exams

Your book makes it

easy to study for and

pass exams. Each sec￾tion begins by emphasizing what you will learn and why

it is important, and identifies the key terms you will

learn. Reading strategies are suggested in each unit,

and every section and chapter concludes with extensive

study and assessment exercises. Chapter summaries

pinpoint important material from every section of the

book, and self-check quizzes are available on the course

Web site. Thorough assessment and study devices not

only test your understanding of the law, but also ask

you to use legal language, think critically about the

law, debate legal issues, and apply what you learn.

Enriching Your Life The ultimate measure of your

success in this course is the degree to which it enrich￾es your life and contributes to your involvement in

your school, community, nation, and the world.

Understanding Business and Personal Law provides

you with insight into the system in which you live and

teaches you how to help others, plan for the future,

and more easily reach your goals in life. It’s a fasci￾nating, fun, and exciting process—good luck!

iv Introducing Your Book

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Table of Contents v

UNIT 1

Knowing About the Law 2

Ethics and the Law 4

SECTION 1.1 Defining Ethics 6

Section Assessment 13

SECTION 1.2 Sources of Law 14

Section Assessment 21

Chapter Assessment 22

The Court System 26

SECTION 2.1 A Dual Court System 28

Section Assessment 33

SECTION 2.2 Trial Procedures 34

Section Assessment 49

Chapter Assessment 50

Criminal Law 54

SECTION 3.1 What Is a Crime? 56

Section Assessment 61

SECTION 3.2 Particular Crimes 62

Section Assessment 73

Chapter Assessment 74

The Law of Torts 78

SECTION 4.1 Intentional Torts 80

Section Assessment 87

SECTION 4.2 Negligence and Strict Liability 88

Section Assessment 93

Chapter Assessment 94

CHAPTER 1 CHAPTER 1

CHAPTER 2 CHAPTER 2

CHAPTER 3 CHAPTER 3

CHAPTER 4 CHAPTER 4

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vi Table of Contents

UNIT 1 Law Workshop: Using Legal Tools 98

UNIT 1 Landmark Case 100

UNIT 2

Entering Into Contracts 102

How Contracts Arise 104

SECTION 5.1 Contracts 106

Section Assessment 113

SECTION 5.2 Offer and Acceptance 114

Section Assessment 121

Chapter Assessment 122

Genuine Agreement 126

SECTION 6.1 Fraud and Misrepresentation 128

Section Assessment 132

SECTION 6.2 Mistake, Duress, and Undue Influence 133

Section Assessment 139

Chapter Assessment 140

Contractual Capacity 144

SECTION 7.1 Contractual Capacity 146

Chapter Assessment 158

Consideration 162

SECTION 8.1 Consideration 164

Section Assessment 172

SECTION 8.2 Agreements Without Consideration 173

Section Assessment 179

Chapter Assessment 180

CHAPTER 7 CHAPTER 7

CHAPTER 8 CHAPTER 8

CHAPTER 5 CHAPTER 5

CHAPTER 6 CHAPTER 6

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Table of Contents vii

Legality 184

SECTION 9.1 Agreements that Violate Statutes 186

Section Assessment 193

SECTION 9.2 Agreements Contrary to Public Policy 194

Section Assessment 199

Chapter Assessment 200

Form of a Contract 204

SECTION 10.1 The Statute of Frauds 206

Section Assessment 214

SECTION 10.2 Special Rules and Formalities 215

Section Assessment 217

Chapter Assessment 218

How Contracts Come

to an End 222

SECTION 11.1 Performance and Agreement 224

Section Assessment 230

SECTION 11.2 Impossibility of Performance and

Operation of Law 231

Section Assessment 235

Chapter Assessment 236

Transfer of Contracts and

Remedies for Breach 240

SECTION 12.1 The Transfer of Contractual Rights and Duties 242

Section Assessment 249

SECTION 12.2 Remedies of the Injured Party 250

Section Assessment 255

Chapter Assessment 256

UNIT 2 Law Workshop: Using Legal Tools 260

UNIT 2 Landmark Case 262

CHAPTER 9 CHAPTER 9

CHAPTER 10 CHAPTER 10

CHAPTER 12 CHAPTER 12

CHAPTER 11 CHAPTER 11

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viii Table of Contents

UNIT 3

Understanding Consumer Law 264

Contracts for the Sale

of Goods 266

SECTION 13.1 The Sale and Lease of Goods 268

Section Assessment 275

SECTION 13.2 Ownership and Risk of Loss in Sales or Goods 276

Section Assessment 283

SECTION 13.3 E-Commerce and the Law 284

Section Assessment 287

Chapter Assessment 288

The Importance of Warranties 292

SECTION 14.1 Express and Implied Warranties 294

Section Assessment 304

SECTION 14.2 Exclusion of Warranties, Privity, and

Duty to Notify 305

Section Assessment 309

Chapter Assessment 310

Consumer Protection and

Product Liability 314

SECTION 15.1 Consumer Protection 316

Section Assessment 326

SECTION 15.2 Product Liability 327

Section Assessment 331

Chapter Assessment 332

Owning a Vehicle 336

SECTION 16.1 Acquiring a Vehicle 338

Section Assessment 350

SECTION 16.2 Motor Vehicle Insurance 351

Section Assessment 355

Chapter Assessment 356

CHAPTER 13 CHAPTER 13

CHAPTER 14 CHAPTER 14

CHAPTER 15 CHAPTER 15

CHAPTER 16 CHAPTER 16

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Table of Contents ix

Personal Property and

Bailments 360

SECTION 17.1 Personal Property 362

Section Assessment 367

SECTION 17.2 Bailments 368

Section Assessment 379

Chapter Assessment 380

UNIT 3 Law Workshop: Using Legal Tools 384

UNIT 3 Landmark Case 386

UNIT 4

Being an Agent and Getting a Job 388

Creation of an Agency 390

SECTION 18.1 Agency Relationships 392

Section Assessment 401

SECTION 18.2 Creation and Types of Agents 402

Section Assessment 407

Chapter Assessment 408

Agency Relationships and

Their Termination 412

SECTION 19.1 Authority and Duties 414

Section Assessment 423

SECTION 19.2 Termination of Agency Relationships 424

Section Assessment 427

Chapter Assessment 428

Employment Law 432

SECTION 20.1 Employment Relationships 434

Section Assessment 441

SECTION 20.2 Legislation Affecting Employment 442

Section Assessment 447

Chapter Assessment 448

CHAPTER 17 CHAPTER 17

CHAPTER 18 CHAPTER 18

CHAPTER 19 CHAPTER 19

CHAPTER 20 CHAPTER 20

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x Table of Contents

Employment Protection and

Equal Opportunity 452

SECTION 21.1 Laws Relating to Employment

Conditions and Benefits 454

Section Assessment 464

SECTION 21.2 Laws Regulating Employment Discrimination 465

Section Assessment 471

Chapter Assessment 472

UNIT 4 Law Workshop: Using Legal Tools 476

UNIT 4 Landmark Case 478

UNIT 5

Using Your Purchasing Power 480

Borrowing Money and

Buying on Credit 482

SECTION 22.1 What Is Credit? 484

Section Assessment 492

SECTION 22.2 Credit Protection Laws 493

Section Assessment 495

SECTION 22.3 Managing Your Debts 496

Section Assessment 499

Chapter Assessment 500

Negotiable Instruments 504

SECTION 23.1 Purpose and Types of Negotiable Instruments 506

Section Assessment 510

SECTION 23.2 Requirements of Negotiability 511

Section Assessment 515

Chapter Assessment 516

Writing Checks 520

SECTION 24.1 Checking Accounts 522

Section Assessment 528

SECTION 24.2 Other Payment Methods 529

Section Assessment 535

Chapter Assessment 536

CHAPTER 21 CHAPTER 21

CHAPTER 22 CHAPTER 22

CHAPTER 23 CHAPTER 23

CHAPTER 24 CHAPTER 24

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Table of Contents xi

Transferring Negotiable

Instruments 540

SECTION 25.1 Transferring Instruments 542

Section Assessment 544

SECTION 25.2 Indorsements 545

Section Assessment 553

Chapter Assessment 554

Collecting Negotiable

Instruments 558

SECTION 26.1 Holders of Instruments and Defenses 560

Section Assessment 567

SECTION 26.2 Liabilities of Parties 568

Section Assessment 571

Chapter Assessment 572

UNIT 5 Law Workshop: Using Legal Tools 576

UNIT 5 Landmark Case 578

UNIT 6

Starting a Business 580

Sole Proprietorship and

Partnership 582

SECTION 27.1 Sole Proprietorship 584

Section Assessment 587

SECTION 27.2 The Partnership 588

Section Assessment 599

Chapter Assessment 600

Forming and Financing a

Corporation 604

SECTION 28.1 Corporations 606

Chapter Assessment 620

CHAPTER 25 CHAPTER 25

CHAPTER 26 CHAPTER 26

CHAPTER 27 CHAPTER 27

CHAPTER 28 CHAPTER 28

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xii Table of Contents

Operating a Corporation 624

SECTION 29.1 Managing the Corporation 626

Section Assessment 632

SECTION 29.2 Management Responsibilities 633

Section Assessment 639

Chapter Assessment 640

Corporate Regulation

and Expansion 644

SECTION 30.1 Government Regulation of a Corporation 646

Section Assessment 653

SECTION 30.2 Corporate Expansion and Dissolution 654

Section Assessment 661

Chapter Assessment 662

UNIT 6 Law Workshop: Using Legal Tools 666

UNIT 6 Landmark Case 668

UNIT 7

Planning for the Future 670

Marriage 672

SECTION 31.1 Marriage Formalities and Restrictions 674

Section Assessment 680

SECTION 31.2 Marriage Laws 681

Section Assessment 687

Chapter Assessment 688

Divorce and Its Legal

Consequences 692

SECTION 32.1 Ending a Marriage 694

Section Assessment 701

SECTION 32.2 Divorce Settlement 702

Section Assessment 705

Chapter Assessment 706

CHAPTER 29 CHAPTER 29

CHAPTER 30 CHAPTER 30

CHAPTER 31 CHAPTER 31

CHAPTER 32 CHAPTER 32

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Table of Contents xiii

Renting A Place to Live 710

SECTION 33.1 The Rental Agreement 712

Section Assessment 718

SECTION 33.2 Responsibilities of Landlord and Tenant 719

Section Assessment 723

Chapter Assessment 724

Buying a Home 728

SECTION 34.1 Evaluating Housing Alternatives 730

Section Assessment 735

SECTION 34.2 The Home Buying Process 736

Section Assessment 745

Chapter Assessment 746

Insurance Protection 750

SECTION 35.1 The Insurance Contract 752

Section Assessment 754

SECTION 35.2 Life and Health Insurance 755

Section Assessment 761

SECTION 35.3 Property Insurance 762

Section Assessment 765

Chapter Assessment 766

Retirement and Wills 770

SECTION 36.1 Retirement Income 772

Section Assessment 778

SECTION 36.2 Estate Planning 779

Section Assessment 785

Chapter Assessment 786

UNIT 7 Law Workshop: Using Legal Tools 790

UNIT 7 Landmark Case 792

Appendix A: The Constitution of the United States 794

Appendix B: The Declaration of Independence 810

Glossary 814

Case Index 832

Index 833

CHAPTER 33 CHAPTER 33

CHAPTER 34 CHAPTER 34

CHAPTER 35 CHAPTER 35

CHAPTER 36 CHAPTER 36

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xiv Exploring Your Book

Exploring the Unit

Understanding Business and Personal Law is organized into seven units,

each beginning with a unit opener. The unit opener uses visuals and activities

created to simulate thinking about the topics that will be covered in the

upcoming chapters.

UNIT OVERVIEW

Getting married, pur￾chasing your first home,

and planning for your

retirement are important

life events that many

anticipate. It is neces￾sary to know your legal

rights and responsibili￾ties when you reach

these life events so that

you can plan accord￾ingly. In this unit, you

will learn about the laws

that govern the follow￾ing topics:

l Marriage and divorce,

and their legal

consequences

l Renting and buying a

residence

l Insurance protection

l Retirement and wills

UNIT UNIT

Unit 7: Planning for the Future 671

Planning for

the Future

Moving DayYou are about to rent

your first apartment. You have packed

your furniture, purchased necessary

household items, and changed your

mailing address. Before you move

in, you must sign the lease.

In your Justice Journal, write

about what you should know

before you sign. Is the lease a

legal document? Explain your

answer.

To get the most out of your reading:

PREDICT what the section will be

about.

CONNECT what you read with your

own life.

QUESTION as you read to make sure

you understand the content.

RESPOND to what you’ve read.

Planning for

the Future

Unit Overview

The Unit Overview offers a brief

summary of the topics covered in

the unit and provides insight into

how these concepts affect your life.

Your Justice Journal

This feature presents the opportunity for

you to reflect on specific legal, ethical, and

civil situations through written activities.

The Unit Opening Photograph

This photograph appeals to the visual learners

in your class, providing connections to daily

life that will stimulate memory and reinforce

concepts that are covered in the chapter.

Power Reading Strategies

These strategies challenge you to

strengthen your active reading skills to

increase retention, generate interest, and

foster creative and critical thinking.

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