Bonus Chapter A – Working within the Legal Environment
A-46
PPT A-4
Eve Wright Taylor
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.
PPT A-5
Name That Company
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!
Agency: The FTC
PPT A-6
The Need for Laws
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.
Bonus Chapter A – Working within the Legal Environment
A-47
PPT A-7
Types of Court
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.
PPT A-8
Types of Law
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.
It is important for students to understand that as business
people they must have knowledge of business law. Busi-
ness law provides a framework in which business must be
conducted. Failure to understand the law could have dire
consequences.
PPT A-9
Major Areas of Law
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.
Bonus Chapter A – Working within the Legal Environment
A-48
PPT A-10
Administrative Agencies
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
In addition to following the law, businesses must also fol-
low regulations set by administrative agencies.
PPT A-11
Administrative Agencies
ADMINISTRATIVE AGENCIES
A-11
LO A-1
In addition to following the law, businesses must also fol-
low regulations set by administrative agencies.
PPT A-12
Test Prep
TEST PREP
A-12
• What is business law?
• What is the difference between statutory and
common law?
• What is an administrative agency?
1. Business law refers to the rules, statutes, codes, and
regulations that provide a legal framework for the
conduct of business and that are enforceable.
2. Statutory law includes state and federal constitutions,
legislative enactments, treaties of the federal govern-
ment, and ordinances or written law. Common law is
the body of law that comes from decisions handed
down by courts. Common law is often referred to as
precedent.
3. Administrative agencies are federal and state institu-
tions and other government organizations created by
Congress or state legislatures with delegated power to
create rules and regulations within their given area of
authority.
Bonus Chapter A – Working within the Legal Environment
A-49
PPT A-13
What Is Tort Law?
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.
PPT A-14
Product Liability Laws
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.
PPT A-15
Major Product Liability Cases
MAJOR
PRODUCT LIABILITY CASES
A-15
LO A-2
This slide outlines major product liability cases with large
settlements from well known companies. If time allows,
have students research the details of these settlements or
have them find other large settlements and share their find-
ings with the class.
Bonus Chapter A – Working within the Legal Environment
A-50
PPT A-16
Patents, Copyrights, and Trademarks
• 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.
1. Copyright law is becoming more and more important
with the increase in publication using various media.
2. Copyrighted material is sometimes referred to as intel-
lectual property.
PPT A-17
Patent Facts
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.
PPT A-18
Patent Leaders in 2013
Source:IFIPatentIntelligence,www.ificlaims.com,accessedNovember2014.
PATENT LEADERS in 2013
A-18
Company # of Patents Home Country
IBM 6,809 USA
Samsung 4,676 Korea
Canon 3,825 Japan
Sony 3,098 Japan
Microsoft 2,660 USA
LO A-3
1. This slide presents the top patent recipient companies
in 2011.
2. IBM, for the 21st straight year, was the top company
granted the most patents by the U.S. Patent and
Trademark Office.
Bonus Chapter A – Working within the Legal Environment
A-51
PPT A-19
Test Prep
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?
1. Tort law is a wrongful act that causes injury to another
person’s body, property, or reputation.
2. Product liability holds businesses liable for harm that
results from production, design, or inadequate warn-
ings of products they market. Strict product liability
means having liability without regard to fault.
3. A patent is protected from infringements for 20 years.
4. A copyright protects a creator’s rights to materials,
such as books, articles, photos, paintings, and cartoons.
PPT A-20
What Is the Uniform Commercial Code?
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.
PPT A-21
Understanding Warranties
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.
Warranties can be full or limited.
Bonus Chapter A – Working within the Legal Environment
A-52
PPT A-22
Negotiable Instruments
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.
PPT A-23
Contract Law
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.
PPT A-24
Contract Requirements
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
Bonus Chapter A – Working within the Legal Environment
A-53
PPT A-25
Breached Contracts
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
PPT A-26
Test Prep
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?
1. UCC is a comprehensive commercial law that covers
sales laws and other commercial laws. The goal of the
UCC is to simplify commercial transactions across
state lines.
2. Express warranties are specific representations by the
seller that buyers rely on regarding the goods they pur-
chase. The warranty you receive in the box when you
buy a new TV or mobile phone is an express warranty.
Implied warranties are legally imposed on the seller,
who implies that a product will conform to the cus-
tomary standards of the trade or industry in which it
competes.
3. The four elements of a negotiable instrument specified
in the UCC are: (1) be written and signed by the maker
or drawer, (2) be made payable on demand or at a cer-
tain time, (3) be made payable to the bearer to specific
order, and (4) contain an unconditional promise to pay
a specified amount of money.
4. The six conditions for a legally binding contract are:
(1) an offer is made, (2) there is voluntary acceptance
of the offer, (3) both parties give consideration, (4)
both parties are competent, (5) the contract covers a
legal act, and (6) the contract must be in proper form.
If the contract is breached specific performance may
be required, payment of damages or discharge of the
obligation may be ordered.
Bonus Chapter A – Working within the Legal Environment
A-54
PPT A-27
The Clayton Act of 1914
The CLAYTON ACT of 1914
A-27
LO A-6
• The Clayton Act prohibits:
– Exclusive dealing
– Tying contracts
– Interlocking directorates
The Clayton Act of 1914 was intended to deal with price
discrimination.
PPT A-28
Antitrust Legislation
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.
PPT A-29
History of High-Profile Antitrust Cases
HISTORY of HIGH PROFILE
ANTITRUST CASES
A-29
LO A-6
Bonus Chapter A – Working within the Legal Environment
A-55
PPT A-30
Consumer Protections
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.
PPT A-31
Number of Identity Theft Complaints
Source:FederalTradeCommission,www. c.gov,accessedJuly2011.
NUMBER of IDENTITY THEFT
COMPLAINTS
A-31
LO A-6
1. This slide highlights the rise in the number of identity
theft complaints according to the Federal Trade Com-
mission.
2. Ask students: What has given rise to the growing
number of identity theft complaints? Do you know
anyone who has experienced identity theft?
3. If you believe you have been a victim of identity theft
the Federal Trade Commission advises you to do the
following:
• File a police report.
• Check your credit reports.
• Notify creditors and dispute any unauthorized
transactions.
PPT A-32
Taxes
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
Taxes can be used to raise revenue or adjust behavior.
Bonus Chapter A – Working within the Legal Environment
A-56
PPT A-33
Sin Taxes
Source:TobaccoFreeKids,www.tobaccofreekids.org,accessedNovember2014.
SIN TAXES
State Tax Rates per Pack of Cigarettes
A-33
State(s) Rate per Pack
New York $4.35
Massachusetts $3.51
Rhode Island $3.50
Connecticut $3.40
Hawaii $3.20
Washington $3.025
Minnesota $2.83
LO A-7
1. This slide highlights the highest state tax rates per pack
on cigarettes.
2. Since the recent financial crisis, increasing sin taxes
has become a popular way for cash-starved states to
raise revenue.
3. Ask students: How do high taxes on certain items,
such as packs of cigarettes, discourage people from
purchasing them? Do you think this is an effective
way to get people to stop buying these products?
4. Have students investigate sin taxes in their own states.
How much tax is charged for a pack of cigarettes, al-
cohol, etc.? Have sales been affected by the increase in
these taxes?
PPT A-34
Do the Rich Pay Taxes?
Source:IRS,Sta s csofIncome,www.irs.gov,accessedNovember2014.
DO the RICH PAY TAXES?
A-34
Taxpayers % of Total Taxes
Top 1% 40% of total taxes
Top 5% 60% of total taxes
Top 25% 86% of total taxes
Top 50% 97% of total taxes
Bottom 50% 3% of total taxes
LO A-7
1. This slide illustrates the tax burden on various earnings
groups.
2. Most students will be surprised to learn that 97 percent
of total taxes are paid by the top 50 percent of taxpay-
ers; in fact, the top 5 percent pay more than half the to-
tal taxes.
3. Ask students: Should the rich pay more or less than
they do now? Why? Should there be a flat tax rate,
where all earners pay the same percentage of income
regardless of how much money they earn overall?
(These questions should start a healthy debate among
class members.)
PPT A-35
Bankruptcy Laws
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
1. Chapter 7 is the most popular form of bankruptcy
among individuals.
2. The recent financial crisis has pushed the number of
bankruptcies to over a million. Bankruptcies are ex-
pected to reach almost 1.5 million in 2011.