Contents List of Figures Preface Acknowledgments About the Author xxi xxiii xxvii xxix PART A LAWS AND COURTS CHAPTER 1. OUR LEGAL SYSTEM 3 1.1 Common Law versus Civil Law 4 1.1.1 Common Law 4 1.1.2 Civil Law 5 1.2 How Laws Are Made 5 1.2.1 Checks and Balances 7 1.3 Federal versus State Law 7 1.4 The U.S. Court System 9 1.4.1 Trial versus Appellate Courts 9 1.4.2 The Federal Court System 11 1.4.2.1 The Structure of the Federal Trial Courts 11 1.4.2.2 The Structure of the Federal Circuit Courts 12 1.4.2.3 The U.S. Supreme Court 13 1.4.3 State and Local Court Systems 13 1.4.4 Subject-Matter Jurisdiction 14 1.4.4.1 Diversity Jurisdiction 16 1.5 Administrative Agencies 18 1.5.1 Rulemaking 22 1.5.1.1 Rulemaking Process 23 1.5.2 Enforcement and Adjudication 23
xii Contents CHAPTER 2. RESOLVING DISPUTES 31 2.1 Settling Disputes Through Negotiations 32 2.1.1 Elements of a Settlement Agreement 33 2.2 Regulatory Environment of Dispute Resolution 36 2.3 Civil Litigation 37 2.3.1 Personal Jurisdiction 38 2.3.1.1 Venue 40 2.3.1.2 Personal Jurisdiction over Nonresidents 41 2.3.1.3 Personal Jurisdiction over Out-of-State Property 43 2.3.2 Standing to Sue 44 2.3.2.1 Standing to Sue in Contract Cases 44 2.3.2.2 Standing to Sue in Tort Cases 45 2.3.2.3 Standing to Sue in Criminal Cases 46 2.4 Civil Procedure 46 2.4.1 Commencing Civil Litigation 47 2.4.1.1 Complaint and Summons 47 2.4.1.2 Defendant s Answer 49 2.4.1.3 Cross-Claim and Third-Party Claims 50 2.4.2 Pretrial Motions 50 2.4.2.1 Motion for Default Judgment 51 2.4.2.2 Motion to Dismiss 51 2.4.2.3 Motion for Summary Judgment 52 2.4.3 Jury Selection 53 2.4.4 Opening Statements 54 2.4.5 Direct Examination, Cross-Examination, and Redirect Examination 54 2.4.5.1 Types of Evidence 55 2.4.5.2 Hearsay 56 2.4.6 Closing Arguments 57 2.4.7 Jury Instructions, Jury Deliberations, and Verdict 58 2.5 Alternative Dispute Resolution 59 2.5.1 Arbitration 59 2.5.1.1 Pros and Cons of Arbitration 60 2.5.2 Other Types of Alternative Dispute Resolution 61 2.5.2.1 Mediation 62 2.5.2.2 Minitrials 62 2.5.2.3 Summary Jury Trials 62
Contents xiii PART B CONTRACTS CHAPTER 3. CONTRACT FUNDAMENTALS 71 3.1 Regulatory Environment of Contract Law 71 3.2 Basic Legal Requirements of Contract Formation 72 3.2.1 The Contract Parties 73 3.2.2 The Writing Requirement 74 3.2.2.1 The Parol Evidence Rule 75 3.2.3 Void, Voidable, and Unenforceable Contracts 78 3.3 Agreement 79 3.3.1 Validity of Offer and Acceptance 79 3.3.2 Objective Theory of Contracts 80 3.3.3 Unilateral versus Bilateral Contracts 82 3.3.4 Examples of Offer and Acceptance 84 3.3.5 Rejection and Counteroffer 86 3.3.6 Termination of Offer by Operation of Law 87 3.3.7 Involuntary Assent 87 3.3.7.1 Duress 87 3.3.7.2 Fraud 88 3.3.7.3 Mistake 90 3.3.7.4 Undue Influence 90 3.3.8 Express Contracts versus Implied Contracts 90 3.4 Consideration 91 3.4.1 Gift Promises 93 3.4.2 Moral Obligations 93 3.4.3 Illusory Promises 94 3.4.3.1 Requirements Contracts and Output Contracts 94 3.4.4 Past Consideration 95 3.4.5 Preexisting Duties or Obligations 95 3.5 Legal Capacity 97 3.5.1 Minors 97 3.5.2 Intoxicated Persons 98 3.5.3 Mentally Incompetent Persons 98 3.5.4 Corporations and Legal Capacity 99 3.6 Lawful Purpose 99 3.6.1 Contracts That Restrain Trade 101 3.6.2 Exculpatory Clauses 102 3.6.2.1 Liability Waivers 102 3.6.2.2 Indemnification 103 3.6.3 Severing Illegal Provisions from the Contract 105
xiv Contents CHAPTER 4. CONTRACTS AT WORK 113 4.1 Discharge of Contract 114 4.1.1 Discharge by Performance 115 4.1.1.1 Substantial Performance 116 4.1.1.2 Defenses to Breach of Contract Claims 117 4.1.2 Discharge by Agreement 117 4.1.2.1 Accord and Satisfaction 118 4.1.2.2 Failure to Satisfy Conditions 119 4.1.2.3 Novation 119 4.1.2.4 Release 120 4.1.2.5 Rescission 122 4.1.3 Discharge by Operation of Law 122 4.1.3.1 Bankruptcy 122 4.1.3.2 Impossibility and Commercial Impracticability 123 4.1.3.3 Statute of Limitations 124 4.1.3.4 Supervening Illegality 125 4.2 Breach of Contract Remedies 126 4.2.1 Legal Remedies 128 4.2.1.1 Compensatory Damages 128 4.2.1.2 Other Damages 130 4.2.2 Equitable Remedies 131 4.2.2.1 Specific Performance 131 4.2.2.2 Injunctive Relief 132 4.2.2.3 Reformation and Quasi-Contract 133 4.2.2.4 Other Equitable Remedies 133 4.2.2.5 Equitable Defenses 134 4.2.3 Contractual Remedies 135 4.2.3.1 Liquidated Damages 136 4.2.3.2 Limited Warranties 138 4.2.3.3 Indemnification 139 4.2.3.4 Contractual Equitable Remedies 141 4.3 Third-Party Rights 141 4.3.1 Third-Party Beneficiaries 141 4.3.2 Assignment and Delegation 143 4.3.2.1 Assignment of Rights 143 4.3.2.2 Delegation of Duties 144
Contents xv PART C TORT LAW AND CRIMINAL LAW: AN INTRODUCTION TO TWO DISTINCT BUT RELATED AREAS OF LAW CHAPTER 5. TORT LAW 155 5.1 The Intersection of Tort Law and Criminal Law 156 5.1.1 Wrongful Death versus Criminal Homicide 156 5.2 Intentional Torts 157 5.2.1 Assault and Battery 158 5.2.2 Defamation 158 5.2.2.1 Trade Libel 159 5.2.3 False Imprisonment 160 5.2.4 Fraud 160 5.2.5 Intentional Infliction of Emotional Distress 161 5.2.6 Invasion of Privacy 161 5.2.7 Trespass 162 5.3 Unintentional or Negligent Torts 162 5.3.1 Elements of a Negligent Tort Claim 163 5.3.1.1 Actual Causation versus Proximate Causation 165 5.3.2 Defenses to a Negligent Tort Claim 165 5.4 Strict Liability Torts (Including Product Liability) 167 5.4.1 Elements of a Product Liability Claim (Strict Liability) 167 5.4.1.1 Types of Defects 169 5.4.2 Defenses to a Product Liability Claim (Strict Liability) 169 CHAPTER 6. CRIMINAL LAW 175 6.1 Regulatory Environment of Criminal Law 176 6.2 Categories of Crimes 177 6.3 Elements of a Crime 177 6.3.1 Criminal Conspiracy and Criminal Intent 179 6.3.2 Strict Liability Crimes 182 6.4 Criminal Procedure 182 6.4.1 Search and Seizure (Including Arrest) 183 6.4.1.1 Warrantless Search and Seizure 184 6.4.1.2 Indictment 184 6.4.1.3 The Miranda Warning 185 6.4.1.4 Extradition 185
xvi Contents 6.4.2 Arraignment 186 6.4.2.1 Plea Bargaining 186 6.4.3 Criminal Trial 187 6.4.3.1 Jury Selection 187 6.4.3.2 Opening Statements 187 6.4.3.3 Direct Examination, Cross-Examination, and Redirect Examination 188 6.4.3.4 Closing Statements 188 6.4.3.5 Jury Instructions and Deliberation 188 6.4.3.6 The Verdict 189 6.5 Types of Crimes 189 6.5.1 Arson 189 6.5.2 Assault and Battery 190 6.5.3 Bribery 190 6.5.4 Burglary, Robbery and Larceny 191 6.5.5 Embezzlement 192 6.5.6 Extortion 192 6.5.7 Criminal Fraud 193 6.5.8 Unjustified Homicide 196 6.5.9 Racketeering 197 PART D PROPERTY CHAPTER 7. REAL PROPERTY 211 7.1 Regulatory Environment of Real Property 212 7.2 Types of Real Property Ownership 212 7.2.1 Fee Simple Absolute 214 7.2.2 Life Estate 214 7.2.3 Tenancy in Common versus Joint Tenancy 215 7.2.4 Tenancy by the Entirety 216 7.2.5 Single- versus Multiple-Unit Properties 216 7.2.5.1 Condominiums versus Cooperatives 217 7.3 Acquiring Ownership in Real Property 219 7.3.1 Sale and Purchase 220 7.3.1.1 Title 220 7.3.1.2 Deeds 221 7.3.1.3 Mortgages 222 7.3.2 Inheritance 223 7.3.3 Adverse Possession 224
Contents xvii 7.4 Leaseholds 224 7.4.1 Implied Warranty of Habitability 225 7.4.2 Security Deposit 226 7.4.3 Tenant s Right to Privacy 226 7.4.4 The Right to Sublease 226 7.4.5 The Right to Evict 227 7.4.6 Hold-Over Leases 228 7.4.7 Commercial Leases 228 7.5 Easements 229 7.5.1 Affirmative versus Negative Easements 230 7.5.2 Appurtenant versus In Gross Easements 231 7.6 Eminent Domain 231 7.6.1 Public Purpose 231 7.6.2 Just Compensation 232 7.7 Zoning and Land Use 232 7.7.1 Types of Zoning 233 7.7.2 Exceptions to Zoning Laws 233 CHAPTER 8. PERSONAL PROPERTY 243 8.1 Regulatory Environment of Tangible Personal Property Law 244 8.2 Categories of Personal Property 245 8.3 Sale of Goods 247 8.3.1 Sale of Goods Contracts Under the UCC 247 8.3.1.1 Offer and Acceptance 248 8.3.1.2 UCC Gap Fillers 250 8.3.1.3 Product Warranties 254 8.3.1.4 Breach of Sale of Goods Contracts 256 8.3.2 Impact of Non-UCC Law on Sale of Goods Contracts 261 8.4 Personal Property Leases 262 8.5 Bailments 262 8.5.1 Types of Bailments 263 8.5.1.1 Bailment for Mutual Benefit 263 8.5.1.2 Bailment for Bailor s Sole Benefit 265 8.5.1.3 Bailment for Bailee s Sole Benefit 266 8.5.2 Consignment 266 8.5.2.1 UCC Consignments 267
xviii Contents CHAPTER 9. INTELLECTUAL PROPERTY 275 9.1 Trade Secrets 276 9.1.1 Regulatory Environment of Trade Secrets 276 9.1.2 Trade Secret Requirements 277 9.1.3 Trade Secret Misappropriation 279 9.1.4 Trade Secrets versus Patents 281 9.2 Patents 283 9.2.1 Types of Patents 284 9.2.2 Regulatory Environment of Patents 284 9.2.3 Patent Application Requirements 285 9.2.3.1 Eligible Subject Matter for Patent Protection 286 9.2.3.2 Novelty and Nonobviousness 286 9.2.3.3 Priority 287 9.2.4 Patent Infringement 287 9.2.4.1 Non-practicing Entities (NPEs) 289 9.3 Trademarks 291 9.3.1 Certification Marks, Collective Marks, and Collective Membership Marks 292 9.3.2 Regulatory Environment of Trademarks 293 9.3.3 Trademark Requirements 293 9.3.4 Trademark Infringement and Trademark Dilution 295 9.4 Copyrights 296 9.4.1 Regulatory Environment of Copyrights 297 9.4.2 Copyright Requirements 297 9.4.3 Copyright Infringement 299 PART E RUNNING THE BUSINESS CHAPTER 10. BUSINESS ORGANIZATIONS 309 10.1 Regulatory Environment of Business Organizations 312 10.2 Sole Proprietorships 313 10.2.1 Setting Up and Operating a Sole Proprietorship 313 10.2.2 Liability of Owner 314 10.2.3 Tax Attributes 314 10.3 General Partnerships 317 10.3.1 Setting Up and Operating a General Partnership 317 10.3.2 Liability of Owners 318 10.3.2.1 Limited Liability Partnerships 319 10.3.3 Tax Attributes 319
Contents xix 10.4 Limited Partnerships 320 10.4.1 Setting Up and Operating a Limited Partnership 321 10.4.2 Liability of Owners 322 10.4.3 Tax Attributes 322 10.5 Corporations 324 10.5.1 Types of Corporations 325 10.5.1.1 For-Profit versus Nonprofit Corporations 326 10.5.1.2 Privately Held versus Publicly Listed Corporations 326 10.5.1.3 Publicly Listed Corporations versus Public Corporations 327 10.5.2 Setting Up a Corporation 328 10.5.2.1 Key Documents 330 10.5.2.2 Basic Corporate Finance 332 10.5.3 Running a Corporation 334 10.5.3.1 The Board of Directors 335 10.5.3.2 Corporate Officers 336 10.5.3.3 Duties of Care and Loyalty 336 10.5.4 Liability of Owners 338 10.5.4.1 Exceptions to Limited Liability 338 10.5.4.2 Impact of Personal Guaranty on Limited Liability 340 10.5.5 Tax Attributes 340 10.5.6 Subchapter S Corporation 342 10.6 Limited Liability Company 344 10.6.1 Setting Up and Operating a Limited Liability Company 344 10.6.1.1 Flexible Management 346 10.6.2 Liability of Owners 347 10.6.3 Tax Attributes 347 CHAPTER 11. FINANCING THE BUSINESS BUSINESS LOANS 357 11.1 Regulatory Environment for Lenders and Borrowers 362 11.2 Basic Types of Business Loans 363 11.2.1 Uncommitted versus Committed Loans 365 11.2.1.1 Term Loans 365 11.2.1.2 Revolving Loans 366 11.2.2 Cash Flow-Based Loans 370 11.2.3 Asset-Based Loans 370 11.3 Security Interests 373 11.3.1 Other Types of Liens 375 11.3.2 Security Interests in Real Property 377 11.3.3 Security Interests in Personal Property 379
xx Contents 11.3.3.1 Attachment of Security Interest 380 11.3.3.2 Perfection of Security Interest 380 11.4 Bankruptcy 383 11.4.1 Regulatory Environment of Bankruptcy 385 11.4.1.1 Participants in the Bankruptcy Process 386 11.4.2 Chapter 7 versus Chapter 11 Bankruptcy 388 11.4.2.1 Chapter 7 Bankruptcy 389 11.4.2.2 Chapter 11 Bankruptcy 399 CHAPTER 12. AGENCY LAW AND EMPLOYMENT-RELATED LAW 399 12.1 Agency Law 400 12.1.1 Regulatory Environment of Agency Law 403 12.1.2 Formation of Agency Relationships 405 12.1.2.1 Express Agency 406 12.1.2.2 Implied Agency 407 12.1.2.3 Apparent Agency 407 12.1.2.4 Agency by Ratification 408 12.1.2.5 Agency by Operation of Law 408 12.1.3 Termination of Agency Relationships 408 12.1.4 Liability of Principals and Agents 409 12.1.4.1 Liability of Principals and Agents to Each Other 410 12.1.4.2 Contractual Liability of Principals and Agents to Third-Party Counterparties 410 12.1.4.3 Tort Liability of Principals and Agents to Third Parties 412 12.2 Employment-Related Laws 414 12.2.1 At-Will Nature of Employment Relationship 414 12.2.2 Differences Between Employees and Independent Contractors 415 12.2.3 Anti-Discrimination 419 12.2.3.1 Title VII of the Civil Rights Act of 1964 419 12.2.3.2 Other Anti-Discrimination Laws 421 12.2.3.3 Affirmative Action 422 12.2.4 Workplace Safety 423 12.2.4.1 Occupational Safety and Health 424 12.2.4.2 Workers Compensation 425 12.2.5 Labor Unions 426 12.2.5.1 The Collective Bargaining Process 429 12.2.5.2 The Right to Strike 430 12.2.6 Other Worker Laws 430 GLOSSARY 000 INDEX 000