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Essentials of Business Law, 9th edition
INSTRUCTOR’S MANUAL
Chapter 4 Tort Law
LESSON OVERVIEW
In Chapter 3 we defined crime as a violation of the rights of society as a whole. Chapter 4 deals with
torts, which in contrast to a crime, are a violation of the rights of an identifiable individual or business
that has been wronged either intentionally or by negligence. This chapter defines and emphasizes the
difference between the common torts, such as defamation, nuisance, conversion, and negligence.
Chapter 4 provides several examples of each of these torts, and how they are viewed and judged in a
court of law. Finally, we strengthen our understanding of these torts with the help of end-of-chapter
quizzes, exercises, and case studies.
CHAPTER OUTLINE
A. THE NATURE OF TORTS (p. 52)
B. DEFAMATION (p. 52) C. LIBEL AND SLANDER (p. 52)
1. Characteristics of Libel (pp. 53-54)
2. Characteristics of Slander (pp. 54-55)
3. Trade Libel (p. 55)
4. Humor and Slander (p. 56)
D. DEFENSES TO DEFAMATION (p. 56)
E. NUISANCE (pp. 56-57)
F. CONVERSION (p. 57)
G. NEGLIGENCE (p. 57-58)
1. Unavoidable Accident (p. 58)
2. The “Reasonable Person” (p. 58)
3. Kinds of Negligence (pp. 59-60)
H. LIABILITY (pp. 60-61)
1. Vicarious Liability (p. 61)
2. Strict Liability (pp. 61-62)
I. CHAPTER SUMMARY (p. 63)
J. CHAPTER ASSESSMENT (p. 63)
1. Matching Key Terms (pp. 63-64)
2. True/False Quiz (pp. 64-65)
3. Discussion Questions (p. 65-66)
4. Thinking Critically About the Law (p. 66)
5. Case Questions (pp. 66-67)
6. Case Analysis (pp. 68-69)
7. Legal Research (p. 69)
KEY TERMS
Key terms are listed at the beginning of the chapter, posted in the student textbook margins, and placed
in bold in the copy. They are listed here for your quick reference.
defamation (p. 52)
libel (p. 52)
slander (p. 52)
trade libel (p. 55)
nuisance (p. 56)
conversion (p. 57)
negligence (p. 57)
reasonable person (p. 58)
vicarious negligence (p. 59)
contributory negligence (p. 59)
comparative negligence (p. 59)
negligence per se (p. 59)
assumption of risk (p. 60)
liable (p. 60)
vicarious liability (p. 61)
strict liability (p. 61)
LEARNING OUTCOMES
The chapter Learning Outcomes will help you and the students discover the concepts and information
that should be understood upon completion of the chapter. You may want to access the PowerPoint
(PPT) slides for Chapter 4 when you begin the study of the chapter and discuss each Learning
Outcome. Each Learning Outcome will be covered separately in the Instructor Notes, but they are
shown here in total as an overview of the sections being presented in Chapter 4. The corresponding text
page numbers and PPT slides are listed next to each outcome. These slides should be used to reinforce
the main points of the lecture.
After completing this chapter, the students will be able to:
1. Explain the nature of torts and identify some common torts. (p. 52, PPT slide 2)
2. Describe defamation. (p. 52, PPT slide 3)
3. Explain the differences between libel and slander. (pp. 52-56, PPT slides 4-7)
4. Explain the two common defenses to charges of defamation. (p. 56, PPT slide 8)
5. Define nuisance and the types of nuisance charges. (pp. 56-57, PPT slide 9)
6. Describe conversion and explain its main purpose. (p. 57, PPT slide 10)
7. Define negligence and distinguish between the different types of negligence. (pp. 57-60, PPT
slides 11-14)
8. Explain the legal concept of liability and provide examples. (pp. 60-62, PPT slides 15-19)
LECTURE OUTLINE
A. THE NATURE OF TORTS
A tort is a violation of the rights of an identifiable individual or business that has been wronged either
intentionally or by negligence. Whether acting as an individual or as an employee, a person has a
responsibility to consider the rights of others. The common torts all have some direct or indirect
bearing on an individual’s personal life and on how he or she performs his or her job. These common
torts include defamation, nuisance, conversion, and negligence.
B. DEFAMATION
Defamation is the harming of a person’s reputation and good name by the communication of a false
statement. For an act to be considered defamatory, it is necessary to show that the statement was made
in such a way that others hear or read it. A defamatory statement usually holds a person up to hatred,
ridicule, or contempt; or causes a person’s esteem, respect, or social position to be diminished.
Defamation also involves some suggestion of disgrace, and it tends to generate negative feelings about
the person who suffers the defamation. The charge of defamation has been separated into two torts:
libel and slander.
C. LIBEL AND SLANDER
Generally, libel is the spreading of damaging statements in written form—including pictures, cartoons,
and effigies (likenesses). Defamation on radio, television, and Web sites is also considered libel.
Slander is the spreading of damaging words or ideas about a person, directly or indirectly, in all other
forms not considered libel. Of course, the most common form of slander involves spoken words, but
slander also can be committed by means of gestures and actions.
1. Characteristics of Libel
The possibility of libel also exists in business and personal letters, memos, and catalogs.
The libel need not be direct. Subtle suggestion or implication is enough to bring about
legal charges. In recent years, the threat of a libel suit by former employees who are
unhappy with the references given by the former employer has gotten so serious that
many firms refuse to respond to any inquiry about former workers—even those who
have good records.
2. Characteristics of Slander
Slander is the term that describes almost all defamation that cannot be classified as libel.
Slander includes spoken words, gestures, actions, and even omissions. Most cases of
slander involve thoughtless statements that reflect on another person’s good name and
reputation. Since oral statements, unless recorded, cannot be reproduced as evidence,
some people tend to speak carelessly about others without realizing that anyone hearing
a slanderous statement can be called upon later to testify to having heard it.
3. Trade Libel
In conducting business, a firm and its owners have the right to remain free from false
and malicious statements by others that may cause a loss or damage to the reputation of
the firm, the owners, the products produced, or the merchandise carried or manufactured
by the firm. The tort of trade libel is similar to traditional defamation but deals with an
individual’s title to property, or to the quality or conduct of a business.
4. Humor and Slander
Most often a quick apology and a “sorry, just kidding” might be enough to avoid some
charges of slander, but not always. Thus, it is important to take care while discussing or
sharing information about anyone.
D. DEFENSES TO DEFAMATION
There are two common defenses to charges of defamation: (1) truth and (2) privilege. If a defamatory
statement can be proved to be true, the person who claims that he or she was defamed cannot recover
damages. However, a person engaged in business should still be careful, since it is often expensive to
go to court in order to prove the truth of a statement.
The expense can be avoided by being cautious in the first place. Similarly, if the person accused of
defamation had a special privilege in making the defamatory statement, such as an attorney in a court
proceeding who accuses a witness of lying, the defamed person cannot recover damages.
E. NUISANCE
An unlawful interference with the enjoyment of life or property constitutes a nuisance. The law gives
everyone the right to enjoy his or her land without unreasonable interference from others. A person who
acts in a way that denies this right to a specific person or persons has created a private nuisance. A
public nuisance, by comparison, affects the community or the general public. Creating a nuisance does
not mean taking another’s property—only detracting from the enjoyment of it.
F. CONVERSION
The law gives each person the right to own and use personal property without interference from others.
When this right is denied or abridged by another, the wrongdoer is said to have committed the tort of
conversion. This tort can involve a wrongful taking, a wrongful detention, or an illegal assumption of
ownership. Conversion may involve removal, damage, destruction, or unauthorized use of another
person’s property. A tort action for conversion is one way to help replace the money or property.
G. NEGLIGENCE
The tort of negligence is the failure to exercise reasonable care necessary to protect others from risk of
harm. The number of lawsuits charging negligence has grown tremendously in recent years, in part
because news accounts of large jury awards have encouraged others to sue. To avoid legal action either
as an individual or as an employee, each person must exercise reasonable care and good judgment to
avoid causing injury to others. Even so, good judgment and care will not prevent all accidents. It is also
important to carry adequate insurance coverage for protection against the financial losses that can result
from being adjudged liable for the tort of negligence.
1. Unavoidable Accident
In theory, all accidents are avoidable. But the concept of unavoidable accident is
intended to focus attention on whether an accident could have been avoided if the person
alleged to be responsible had acted reasonably.
2. The “Reasonable Person”
The law provides certain ways by which juries can determine if a person has acted
negligently. One of these ways is the doctrine of the “reasonable person of ordinary
prudence,” a completely fictitious individual who is assumed to have the judgment and
skill one would expect from a person with the strengths and limitations of the person
whose behavior is being judged. While there is no standard reasonable person, a jury is
asked to determine how the mythical person would have behaved under the same or
similar circumstances.
3. Kinds of Negligence
Many cases of negligence are complex, particularly when the law must decide if one or
more third parties also can be held responsible for the negligence.
a) Vicarious Negligence
The term vicarious as used in the law means essentially the same as when it is
used generally; that is, to describe an act performed by one person as a substitute
for another. Vicarious negligence, therefore, means charging a negligent act of
one person to another. In many cases that involve the negligence of an employee,
the employer is held responsible provided the employee was performing the
tasks he or she was hired to do.
b) Negligence per se
Negligence per se, which translates to “negligence in or of itself,”
occurs when a defendant in a case of negligence has violated a law that was
enacted in order to prevent the type of injury that occurred.
c) Contributory Negligence
Contributory negligence is not an accusation but rather a legal defense by the
party who is charged with negligence. In effect, the defendant admits to being
negligent, but argues that the plaintiff was negligent as well, and that the
plaintiff’s negligence contributed to his or her own injuries. Another term for this
principle is contributory fault. Under the doctrine of contributory negligence,
the injured party would not be able to sue successfully if he or she were partly
responsible, even in a minor way.
d) Comparative Negligence
Many legislatures and courts have now replaced the doctrine of contributory
negligence with the doctrine of comparative negligence. Under this latter
doctrine, the injured party bringing the lawsuit is not prevented from recovering
damages even if he or she was partly at fault. The jury determines how much the
plaintiff was at fault and reduces the verdict by that amount. For example, if the
plaintiff was found to be 10 percent negligent, he or she would get an award 10
percent less than the full damages as determined by the jury.
e) Negligence as a Result of Assumption of Risk
Assumption of risk is a defense raised by the defendant in a case of negligence
in which the defendant demonstrates that the plaintiff voluntarily assumed the
risk associated with the dangerous condition caused by the defendant.
H. LIABILITY
When a person has been judged to be responsible for a loss, he or she is said to be liable (not to be
confused with libel, covered earlier). In most lawsuits, the court must decide if the defendant is liable
for the damages as charged. In some instances, the law shields certain persons. In other instances,
liability is automatically assumed.
It would be easy to state that all liability results from negligence and all negligence creates liability, but
this is not the case. There are instances in which a person is liable even though no negligence has been
proved.
1. Vicarious Liability
In some cases, the law holds persons liable for the acts of others, such as when an
employer is held responsible for the acts of employees, or when a general contractor is
held responsible for acts of a subcontractor. The term for this shifting of responsibility is
vicarious liability, and it is related to vicarious negligence, discussed earlier.
2. Strict Liability
Under a doctrine known as strict liability, people may be liable for
injuries to others whether or not they have done something wrong. Examples include
damage caused by inherently dangerous activities, events, or animals and might involve
domestic pets, fire, water, explosives, or dangerous chemicals. The broad range of
injuries suffered by employees on the job is another example of strict liability.
In recent years, the doctrine of strict liability also has been applied to cases involving
injury or death caused by manufactured products. A purchaser who is injured by a
product has a cause of action by merely demonstrating that (1) the product was
defective, (2) the defect was the cause of the injury, and (3) the defect caused the
product to be unreasonably dangerous.
Strict liability has been recognized and applied in at least two-thirds of the states in this
country. Proponents of strict liability claim that eliminating the need to prove negligence
on the part of the manufacturer will encourage manufacturers and sellers to be more
concerned with producing safer products. Others argue that the application of strict
liability will inhibit the development of new products because of the fear of product
liability lawsuits and the high cost of product liability insurance.
INSTRUCTOR NOTES
A resulting answer or explanation is provided below for each Learning Outcome in Chapter 4. Every
outcome is also mapped to corresponding text page numbers, PPT slides, and relevant chapter
assessment exercises and activities for ease of reference and use.
LO1. Explain the nature of torts and identify some common torts.
A tort is a violation of the rights of an identifiable individual or business that has been wronged either
intentionally or by negligence. Common torts include the following: defamation, nuisance, conversion,
and negligence.
Text Pages: 52
PowerPoint: Slide 2
Discussion Questions: 26, 28
Case Questions: 37
LO2. Describe defamation.
Defamation is the harming of a person’s reputation and good name by the communication of a false
statement.
Text Pages: 52
PowerPoint: Slide 3
Discussion Questions: 31
Case Analysis: 40, 43
LO3. Explain the differences between libel and slander.
Libel is the spreading of damaging statements in written form, which include pictures, cartoons,
effigies, and any type of media communication. Slander is spreading damaging words or ideas about a
person, directly or indirectly, in all other forms not considered libel.
Text Pages: 52-56
PowerPoint: Slides 4-7
Thinking Critically About the Law: 32
Case Questions: 36
Case Analysis: 42
LO4. Explain the two common defenses to charges of defamation.
Two common defenses to charges of defamation are (1) truth and (2) privilege.
Text Pages: 56
PowerPoint: Slide 8
Thinking Critically About the Law: 31
Case Analysis: 40, 43
LO5. Define nuisance and the types of nuisance charges.
Nuisance is an unlawful interference with the enjoyment of life or property. There are two types of
nuisance charges in the U.S. system: private and public. A private nuisance occurs when a person acts
in a way that denies the right of enjoyment to a specific person or persons. A public nuisance occurs
when an entire community or the general public is denied enjoyment as a result of an act.
Text Pages: 56-57
PowerPoint: Slide 9
Thinking Critically About the Law: 33
LO6. Describe conversion and explain its main purpose.
Conversion is a wrongful act against a person’s right to own and use personal property. This act can
include removal, damage, destruction, or unauthorized use of another person’s property. Conversion is
one way to help replace the money or property the victim lost.
Text Pages: 57
PowerPoint: Slide 10
Thinking Critically About the Law: 34
Case Questions: 39
Case Analysis: 41
LO7. Define negligence and distinguish between the different types of negligence.
Negligence is the failure to exercise reasonable care to protect others from risk of harm. Types of
negligence include vicarious negligence, contributory negligence, and comparative negligence.
Text Pages: 57-60
PowerPoint: Slides 11-14
Discussion Questions: 28
Case Questions: 37-38
LO8. Explain the legal concept of liability and provide examples.
The legal concept of liability involves judging a party legally responsible for a loss or wrong. Examples
include being found liable for any of the torts mentioned in this chapter, including defamation,
nuisance, conversion, or negligence.
Text Pages: 60-62
PowerPoint: Slides 15-19
Discussion Questions: 27, 29, 30
