1. Copyright © 2015 by the McGraw-Hill Companies, Inc. All rights reserved. McGraw-Hill/Irwin Working within the Legal Environment BONUS CHAPTER A

2. LEARNING OBJECTIVES A-2 1. Define business law, distinguish between statutory and common law, and explain the role of administrative agencies. 2. Define tort law and explain the role of product liability in tort law. 3. Identify the purposes and conditions of patents, copyrights, and trademarks. 4. Describe warranties and negotiable instruments as covered in the Uniform Commercial Code. 5. List and describe the conditions necessary to make a legally enforceable contract, and describe the possible consequences if such a contract is violated.

3. LEARNING OBJECTIVES A-3 6. Summarize several laws that regulate competition and protect consumers in the United States. 7. Explain the role of tax laws in generating income for the government and as a method of discouraging or encouraging certain behaviors among taxpayers. 8. Distinguish among the various types of bankruptcy as outlined by the Bankruptcy Code. 9. Explain the role of deregulation as a tool to encourage competition.

4. EVE WRIGHT TAYLOR Miami Heat A-4 Attended law school at the University of Indiana and worked for the LPGA before heading into the male- dominated NBA. With the Miami Heat, Taylor may be asked for legal advice on issues regarding the stadium, marketing, sales, and player-related matters.

5. NAME that COMPANY A-5 As a federal government agency, we have a key role in mergers and acquisitions in the United States business community. Without our approval, mergers or acquisitions can be rejected. For example, we approved the merger of American Airlines with U.S. Airways, but rejected a merger between AT&T and T-Mobile. Name that organization!

6. The NEED for LAWS A-6 LO A-1 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.

7. TYPES of COURT A-7 LO A-1 Trial courts hear cases of criminal and civil law. Appellate courts hear appeals from the losing party at the trial court level.

8. TYPES of LAW A-8 LO A-1 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 - divorce, 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.

9. MAJOR AREAS of LAW A-9 LO A-1 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.

10. ADMINISTRATIVE AGENCIES A-10 LO A-1 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

11. ADMINISTRATIVE AGENCIES A-11 LO A-1

12. TEST PREP A-12 What is business law? What is the difference between statutory and common law? What is an administrative agency?

13. WHAT is TORT LAW? A-13 LO A-2 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 – Behavior that causes unintentional harm or injury.

14. PRODUCT LIABILITY LAWS A-14 LO A-2 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.

15. MAJOR PRODUCT LIABILITY CASES A-15 LO A-2

16. Patent -- A document that gives inventors exclusive rights to their inventions for 20 years. PATENTS, COPYRIGHTS, and TRADEMARKS A-16 LO A-3 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.

17. PATENT FACTS A-17 LO A-3 Patent applicants should seek the advice of a lawyer. Foreign applicants are eligible to file for U.S. patents. Patent owners have the right to sell or license the use of their patent to others.

18. Source: IFI Patent Intelligence, www.ificlaims.com, accessed November 2014.www.ificlaims.com PATENT LEADERS in 2013 A-18 LO A-3

19. TEST PREP A-19 What is tort law? What is product liability? What is strict product liability? How many years is a patent protected from infringement? What is a copyright?

20. WHAT is the UNIFORM COMMERCIAL CODE? A-20 LO A-4 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.UCC

21. UNDERSTANDING WARRANTIES A-21 LO A-4 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.

22. NEGOTIABLE INSTRUMENTS A-22 LO A-4 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.

23. CONTRACT LAW A-23 LO A-5 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.

24. CONTRACT REQUIREMENTS A-24 LO A-5 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

25. BREACHED CONTRACTS A-25 LO A-5 If a contract is breached the following may be ordered:  Specific performance  Payment of damages  Discharge of obligation

26. TEST PREP A-26 What Is 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?

27. The CLAYTON ACT of 1914 A-27 LO A-6 The Clayton Act prohibits:  Exclusive dealing  Tying contracts  Interlocking directorates

28. ANTITRUST LEGISLATION A-28 LO A-6 The Federal Trade Commission Act of 1914 created the FTC and prohibits unfair methods of competition in commerce. The Wheeler Lea Amendment of 1938 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.

29. HISTORY of HIGH PROFILE ANTITRUST CASES A-29 LO A-6

30. CONSUMER PROTECTIONS A-30 LO A-6 Consumerism -- A social movement that seeks to increase and strengthen the rights and powers of buyers in relations to sellers. The collapse of the real estate market and crisis in the banking industry led to the Dodd-Frank Wall Street Reform and Consumer Protection Act. Dodd-Frank created the Consumer Financial Protection Bureau.

31. Source: Federal Trade Commission, www.ftc.gov, accessed July 2011.www.ftc.gov NUMBER of IDENTITY THEFT COMPLAINTS A-31 LO A-6

32. TAXES A-32 LO A-7 Taxes -- The way federal, state, and local governments raise money. Some forms of taxes:  Income taxes  Property taxes  Sales taxes  Excise taxes

33. Source: Tobacco Free Kids, www.tobaccofreekids.org, accessed November 2014.www.tobaccofreekids.org SIN TAXES State Tax Rates per Pack of Cigarettes A-33 LO A-7

34. Source: IRS, Statistics of Income, www.irs.gov, accessed November 2014.www.irs.gov DO the RICH PAY TAXES? A-34 LO A-7

35. BANKRUPTCY LAWS A-35 LO A-8 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

36. CHAPTER 7 BANKRUPTCY A-36 LO A-8 Creditors with secured claims receive their collateral or repossess the asset. Unsecured claims are paid in this order: 1) Costs of the bankruptcy case 2) Any business costs after filing 3) Wages, salaries, commissions 4) Contributions to employee benefits 5) Refunds to consumers for products not delivered 6) Federal and state taxes

37. How ASSETS are DIVIDED in BANKRUPTCY A-37 LO A-8

38. GOING, GOING, GONE Big Bankruptcies of 2008-2014 A-38 LO A-8 Circuit City KB Toys Linens N Things Borders City of Detroit

39. Deregulation -- The government withdraws certain laws and regulations that seem to hinder competition. DEREGULATING COMMERCE A-39 LO A-9 Deregulation efforts were active in:  The airline industry  Telecommunication  Some public utilities

40. HAMBURGER REGULATIONS A-40 LO A-9

41. TEST PREP A-41 What is the primary purpose of antitrust law? Describe the different bankruptcy provisions under Chapters 7, 11, and 13. What is deregulation? Give examples of successful and unsuccessful deregulation.