Questions and Answers of The Legal Environment

The rules of evidence determine what questions may be asked during trial, what testimony may be given, and what documents may be introduced.
The plaintiff’s burden of proof in a civil lawsuit is preponderance of the evidence, meaning that its version of the facts must be at least slightly more persuasive than the defendant’s. In a
Voir dire is the process of selecting jurors in order to obtain an impartial panel.
Generally, both plaintiff and defendant may demand a jury in any lawsuit for money damages.
Summary judgment is a ruling by the court that no trial is necessary because there are no essential facts in dispute.
A motion is a formal request to the court.
Discovery is the critical pre-trial opportunity for both parties to learn the strengths and weaknesses of the opponent’s case. Important forms of discovery include interrogatories, depositions,
A complaint and an answer are the two most important pleadings, that is, documents that start a lawsuit.
Trial courts determine facts and apply the law to the facts; appeals courts generally accept the facts found by the trial court and review the trial record for errors of law.
There are many systems of courts, one federal and one in each state. A federal court will hear a case only if it involves a federal question or diversity jurisdiction.
Alternative dispute resolution (ADR) is any formal or informal process to settle disputes without a trial. Mediation, arbitration, and other forms of ADR are growing in popularity.
Marvin asks Sheila, a qualified auto mechanic, to fix his engine, which constantly stalls (stops) while driving. When Marvin returns, Sheila informs him that the engine is now“perfect—runs like a
a. A decision by an appeals court affirming the trial court.b. A decision by an appeals court reversing a trial court.c. A theory of jurisprudence insisting that the law is what the sovereign says it
ROLE REVERSAL Each Practice Test contains one Role Reversal feature, in which we challenge you to create your own exam question.The goal is to think creatively and accurately.Crafting questions is a
In his most famous novel, The Red and the Black, the French author Stendhal (1783–1842) wrote:“There is no such thing as ‘natural law’: this expression is nothing but old nonsense. Prior to
YOU BE THE JUDGE WRITING PROBLEM Should trials be televised? Here are a few arguments to add to those in the chapter. You be the judge. Arguments against Live Television Coverage:We have tried this
Plaintiff Miss Universe, Inc., owns the trademark“Miss U.S.A.” For decades, the company has produced the Miss U.S.A. beauty pageant, seen by many millions of people in the United States. William
ETHICS Confucius did not esteem written laws, believing instead that good rulers were the best guarantee of justice. Does our legal system rely primarily on the rule of law or the rule of
Leslie Bergh and his two brothers, Milton and Raymond, formed a partnership to help build a fancy saloon and dance hall in Evanston, Wyoming. Later, Leslie met with his friend and drinking buddy,
The stock market crash of 1929 and the Great Depression that followed were caused in part because so many investors blindly put their money into stocks they knew nothing about.During the 1920s, it
Why does our law come from so many different sources?
Can one person really understand all the legal issues mentioned at the beginning of this chapter?For example, can a business executive know about insider trading and employment law and environmental
Jurisprudence is concerned with the basic nature of law. Three theories of jurisprudence are• Legal positivism: The law is what the sovereign says it is.• Natural law: An unjust law is no law at
Substantive law defines the rights of people.Procedural law describes the processes for settling disputes.
Criminal law concerns behavior so threatening to society that it is outlawed altogether. Civil law deals with duties and disputes between parties, not with outlawed behavior.
Other sources of contemporary law include• Treaties• Executive orders
The primary sources of contemporary law are:• the United States Constitution and state constitutions • Statutes, which are drafted by legislatures • Common law, which is the body of cases
The history of law foreshadows many current legal issues, including mediation, partnership liability, the jury system, the role of witnesses, the special value placed on land, the idea of precedent,
Our federal system of government means that law comes from a national government in Washington, D.C., and from 50 state governments.
A third party beneficiary is an intended beneficiary and may enforce a contract only if the parties intended her to benefit from the agreement and(1) enforcing the promise will satisfy a debt of the
An assignment transfers the assignor’s contract rights to the assignee. A delegation transfers the delegator’s duties to the delegatee.
A party generally may assign contract rights unless doing so would substantially change the obligor’s rights or duties; is forbidden by law; or is validly precluded by the contract.
Duties are delegable unless delegation would violate public policy; the contract prohibits delegation;or the obligee has a substantial interest in personal performance by the obligor.
Unless the obligee agrees otherwise, delegation does not discharge the delegator’s duty to perform.
Strict performance, which requires one party to fulfill its duties perfectly, is unusual. In construction and service contracts, substantial performance is generally sufficient to entitle the
Good faith performance is required in all contracts.
True impossibility means that some event has made it impossible to perform an agreement.Commercial impracticability means that some unexpected event has made it extraordinarily difficult and unfair
A remedy is the method a court uses to compensate an injured party.
The expectation interest puts the injured party in the position she would have been in had both sides fully performed. It has three components:compensatory, consequential, and incidental damages.
The reliance interest puts the injured party in the position he would have been in had the parties never entered into a contract.
The restitution interest returns to the injured party a benefit that she has conferred on the other party, which it would be unjust to leave with that person.
Specific performance, ordered only in cases of a unique asset, requires both parties to perform the contract.
An injunction is a court order that requires someone to do something or refrain from doing something.
Pizza of Gaithersburg, Maryland, owned five pizza shops. Pizza arranged with Virginia Coffee Service to install soft-drink machines in each of its stores and maintain them. The contract made no
Omega Concrete had a gravel pit and factory.Access was difficult, so Omega contracted with Union Pacific Railroad (UP) for the right to use a private road that crossed UP property and tracks. The
YOU BE THE JUDGE WRITING PROBLEM Kuhn Farm Machinery, a European company, signed an agreement with Scottsdale Plaza Resort, of Arizona, to rent 190 guest rooms for its North American dealers’
ROLE REVERSAL Write a short-answer question that highlights the difference between an assignment and a novation.
You represent a group of neighborhood residents in a large city who are protesting construction of a skyscraper that will violate building height limitations.Draft a complaint, requesting an
The Code is designed to modernize commercial law and make it uniform throughout the country. Article 2 applies to the sale of goods.
A merchant is someone who routinely deals in the particular goods involved, or who appears to have special knowledge or skill in those goods, or who uses agents with special knowledge or skill.
UCC §2-204 permits the parties to form a contract in any manner that shows agreement.
For the sale of goods worth $500 or more, UCC §2-201 requires some writing that indicates an agreement.
A merchant who receives a signed memo confirming an oral contract may become liable if he fails to object within 10 days.
UCC §2-207 governs an acceptance that does not “mirror” the offer. Additional terms usually become part of the contract. Different terms contradict the offer, and are generally replaced by the
An injured seller may resell the goods and obtain the difference between the contract and resale prices. An injured buyer may buy substitute goods and obtain the difference between the contract and
Product liability may arise in various ways:• A party may create an express warranty with words or actions. The Code may imply a warranty of merchantability or fitness for a particular purpose.•
The possessor of non-negotiable commercial paper has the same rights—no more, no less—as the person who made the original contract.The possessor of negotiable commercial paper has more rights
The possessor of a piece of commercial paper has an unconditional right to be paid, as long as:• The paper is negotiable;• It has been negotiated to the possessor;• The possessor is a holder in
To be negotiable, an instrument must:• Be in writing;• Be signed by the maker or drawer;• Contain an unconditional promise or order to pay;• State a definite amount of money;• Be payable on
To be negotiated, order paper must first be indorsed and then delivered to the transferee.Bearer paper must simply be delivered to the transferee; no indorsement is required.
A holder in due course is a holder who has given value for the instrument, in good faith, without notice of outstanding claims or other defects.
The Federal Trade Commission (FTC)requires all promissory notes in consumer credit contracts to contain language preventing any subsequent holder from being a holder in due course.
YOU BE THE JUDGE WRITING PROBLEM United Technologies advertised a used Beechcraft Baron airplane for sale in an aviation journal.Attorney Thompson Comerford spoke with a United agent who described
To satisfy the UCC statute of frauds regarding the sale of goods, which of the following must generally be in writing?a. Designation of the parties as buyer and sellerb. Delivery termsc. Quantity of
ETHICS Texaco, Inc., and other oil companies sold mineral spirits in bulk to distributors, which then resold to retailers. Mineral spirits are used for cleaning and are harmful or fatal if swallowed.
CPA QUESTION Which of the following factors is least important in determining whether a manufacturer is strictly liable in tort for a defective product?a. The negligence of the manufacturerb. The
Gary Culver, a farmer in Missouri, was having financial problems. He agreed to let Nasib Ed Kalliel assume control of the farm’s finances.After a few months, Culver urgently asked Kalliel for
In order to negotiate bearer paper, one must:a. Indorse the paperb. Indorse and deliver the paper with considerationc. Deliver the paperd. Deliver and indorse the paper
Gina and Douglas Felde purchased a Dodge Daytona with a 70,000-mile warranty. (Dodge is a division of Chrysler.) They signed a loan contract with the dealer to pay for the car in 48 monthly
ETHICS S. J. Littlegreen owned the Lookout Mountain Hotel. In financial trouble, he put the hotel on the market at a price of $850,000. C.Abbott Gardner was his real estate agent. To obtain more time
ROLE REVERSAL Write a multiple-choice question that contrasts the common-law rules of contract formation with those of UCC §2-204.
ROLE REVERSAL Write a multiple-choice question that concerns a holder in due course.
Look at http://www.insure.com/auto/. Which cars are safer than average? Less safe? How important is auto safety to you? Are you willing to pay more for a safe car? Who should be the final judge of
Article 9 applies to any transaction intended to create a security interest in personal property or fixtures.
Attachment means that (1) the two parties made a security agreement and either the debtor has authenticated a security agreement describing the collateral or the secured party has obtained possession
Attachment protects against the debtor.Perfection of a security interest protects the secured party against parties other than the debtor.
Filing is the most common way to perfect. For many forms of collateral, the secured party may also perfect by obtaining either possession or control.
A purchase money security interest (PMSI) is one taken by the person who sells the collateral or advances money so the debtor can buy the collateral.
A buyer in ordinary course of business (BIOC)takes the goods free of a security interest created by his seller even though the security interest is perfected.
Priority among secured parties is generally as follows:a. A party with a perfected security interest takes priority over a party with an unperfected interest.b. If neither secured party has
When the debtor defaults, the secured party may take possession of the collateral on its own, without a court order, if it can do so without a breach of the peace.
A secured party may sell, lease, or otherwise dispose of the collateral in any commercially reasonable way, or it may ignore the collateral and sue the debtor for the full debt.
When the debtor pays the full debt, the secured party must complete a termination statement, notifying the public that it no longer claims a security interest in the collateral.
CPA QUESTION Under the UCC Secured Transactions Article, perfection of a security interest by a creditor provides added protection against other parties in the event the debtor does not pay its
Jerry Payne owed the First State Bank of Pflugerville $342,000. The loan was secured by a 9.25-carat diamond ring. The bank claimed a default on the loan and, without notifying Payne, sold the ring.
John and Clara Lockovich bought a 22-foot Chaparrel Villian II boat from Greene County Yacht Club for $32,500. They paid $6,000 cash and borrowed the rest of the purchase money from Gallatin National
McMann Golf Ball Co. manufactured, as you might suppose, golf balls. Barwell, Inc., sold McMann a “preformer,” a machine that makes golf balls, for $55,000. Barwell delivered the machine on
McMann paid $3,000 down, the remainder to be paid over several years, and signed an agreement giving Barwell a security interest in the preformer. Barwell did not perfect its interest. On March 1,
ETHICS On November 5, The Fred Hawes Organization, Inc., a small subcontractor, opened an account with Basic Distribution Corp., a supplier of construction materials. Hawes promised to pay its bills
Does the bankruptcy trustee have a right to recover this payment? Is it fair to Hawes’s other creditors if Basic is allowed to keep the $21,000 payment?
Mark Milbank built custom furniture in Port Chester, New York. His business was unsuccessful, and he repeatedly borrowed money from his wife and her father. He promised that the loans would enable
CPA QUESTION Decal Corp. incurred substantial operating losses for the past three years.Unable to meet its current obligations, Decal filed a petition of reorganization under Chapter 11 of the
A voluntary petition filed under the liquidation provisions of Chapter 7 of the federal Bankruptcy Code:a. Is not available to a corporation unless it has previously filed a petition under the
YOU BE THE JUDGE WRITING PROBLEM Lydia D’Ettore received a degree in computer programming at DeVry Institute of Technology, with a grade-point average of 2.51. To finance her education, she
ROLE REVERSAL Write a multiple-choice question that highlights the difference between Chapters 7 and 11.
Write a security agreement in which your friend gives you a security interest in her $20,000 home entertainment system, in exchange for a loan of$12,000. Because the collateral is something that she
In an agency relationship, a principal and an agent mutually consent that the agent will act on behalf of the principal and be subject to the principal’s control, thereby creating a fiduciary
An agent owes these duties to the principal:duty of loyalty, duty to obey instructions, duty of care, and duty to provide information.
The principal has three potential remedies when the agent breaches her duty: recovery of damages the breach has caused, recovery of any profits earned by the agent from the breach, and rescission of
The principal has two duties to the agent: to reimburse legitimate expenses, and to cooperate with the agent.

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