978-1285428222 Chapter 23 Lecture Note Part 2

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Chapter 11: Domestic and International Sales

Answers to Select Case Questions

3. Marquette was not in good faith; Norcem was correct and could refuse to buy. “The contract

between the parties specifically states that the parties were to negotiate the sale price of certain

shipments of cement. Because every contract imposes an obligation of good faith in its

5. Besides the statements in the ad, Dresser’s contract stated assorted technical information

relevant to storm strength. Dresser’s contract also stated that there was an express warranty, in

lieu of any other warranty, giving a six month warranty that the tower was free from defects.

Dresser claimed this specific term eliminated liability for failure otherwise. “Although we agree

with Dresser that a seller cannot be held to be the insurer of its product, Dresser nevertheless

6. Affirmed. “Where the seller at the time of contracting has reason to know any particular

purpose for which the goods are required and that the buyer is relying on the seller’s skill or

judgment to select or furnish suitable goods, there is … an implied warranty that the goods shall

be fit for such purpose.” Leavitt established that he had detailed conversations with the dealer

Chapter 12: Business Organizations

Answers to Select Case Questions

2. Covalt and High were still both shareholders of CSI and partners in the building they rented to

CSI. Hence, even though Covalt was working for a competitor, he had a fiduciary duty both the

CSI and the partnership. When there is a dispute between two equal partners, neither has the

power to force a change; that is, in case of disagreement, the status quo has preference over the

4. The partners were under a fiduciary duty of full disclosure to all partners involved in the

business venture: “Appellants owed a fiduciary duty to plaintiff as the widow and executrix of

6. No, piercing the corporate shield was not warranted; Haff was due protection from personal

liability. To win the case, plaintiff must show that Haff misrepresented or concealed material

Chapter 13: Negotiable Instruments, Credit, and Bankruptcy

Answers to Select Case Questions

1. Judgment for defendant. “As opposed to instruments such as ordinary checks, which are

typically made payable to the order of a specific person and are therefore knows as ‘order paper,’

bearer paper is payable to the ‘bearer,’ i.e., whoever walks in carrying (or ‘bearing’) the

instrument.” As UCC § 3-111 states, “an instrument is payable to bearer when by its terms it is

3. No. The surety bond, in statute and in form, specifically states that it covers retail sales, that is,

final sales to customers. Elworth bought the motorcycles at wholesale and intended to resell

5. No, Moody was a co-maker of the notes, he was not a surety, and so he could not claim the

status of a surety. He was fully liable to the other makers who covered his share of the payments

due to the lender. His obligation was to the lender; any fight he has with the other makers of the

8. No, the Wisconsin lien for wages is void. The bankruptcy trustee controls the bankrupt estate

Chapter 14: Agency and the Employment Relationship

Answers to Select Case Questions

2. Hubco was a dealer for MAI, but their relationship was contractual, not agency. Agency “does

not mean that an agency relationship exists every time one party has a contractual right to control

some aspect of another party’s business.” The “dealership agreement gave MAI some degree of

control over the manner in which Hubco handled MAI products.” These controls concerned

4. Guardsmark is not liable. There was nothing in Kadah’s background or job record to indicate

any problem. It was not responsible for supervising his every move while he was on duty, so if

he was found guilty, that did not impute responsibility to his employer. The payment of his legal

6. The appeals court held it was for the jury to decide if National was liable in tort on the theory

of vicarious liability. “A master is liable for the negligence of his servant if at the time of the

negligent act the latter is acting within the scope of his employment, and this liability applies

Chapter 15: Employment and Labor Regulations

Answers to Select Case Questions

2. Certified question answered by the Virginia Supreme Court. The public policy exception to the

employment-at-will doctrine does not apply to a common law wrongful termination claim by an

employee who alleged that she was terminated, in violation of public policy, for refusing to drop

4. Yes they could sue for intentional tort. Workers compensation makes employers immune from

tort suits by employees, in Washington (as in most states) except in case of a “deliberate injury.”

Since the employees contended that there was knowing exposure to toxic chemicals for several

years, they could have a claim for deliberate injury that would allow tort suit. “Employers who

engage in such egregious conduct should not burden and compromise the industrial insurance

7. The fictional film in question, “And Women Must Weep” showed alleged risks of

unionization. The court noted the film was high quality, professional anti-union propaganda

supposedly based on true stories. Managers told the workers that what happened in the film

could happen at their company if they unionized. It showed violence and the company eventually

Chapter 16: Employment Discrimination

Answers to Select Case Questions

1. White persons can sue under Title VII, so the fact that he is not a minority is not relevant to his

right to bring an action for employment discrimination based on race. When someone is

3. Reversed. Per curiam. “No reasonable person could have believed that the single incident

recounted above violated Title VII’s standard.” This was an isolated incident that could not be

considered “extremely serious” as would be needed to justify such a suit. Breeden even admitted

5. Reversed. Per curiam. “No reasonable person could have believed that the single incident

recounted above violated Title VII’s standard.” This was an isolated incident that could not be

considered “extremely serious” as would be needed to justify such a suit. Breeden even admitted

7. The school board loses. Title VII expressly protects seniority; that statutory right could not be

bargained away by the union in favor of more junior minority teachers. To adopt such a plan

because of a general assertion that minority teachers are needed role models is an inadequate

Chapter 17: The Regulatory Process

Answers to Select Case Questions

2. The FDA did not have to review the drugs. The Court held there is a presumption of

unreviewability of decisions of agencies not to undertake enforcement actions. Like other law

4. The court held the rule to not be consistent with the statute. While courts give deference to an

agency’s interpretation of a statute, when an agency clearly goes too far or not far enough, a rule

Chapter 18: Securities Regulation

Answers to Select Case Questions

1. The Court said that just because the shares sold in this housing cooperative were called

“stock,” the law looks to the reality of the situation, not the word that is used in a non_legal

manner. There was no evidence of an intent in this case to mislead anyone into believing that

3. In this case, the accounting firm Ernst & Ernst had audited the books of a Chicago investment

firm for twenty years. Those audits were prepared for filing with the SEC under the annual report

required of investment housing. The accountants never discovered that the president of the firm

5. District court granted summary judgment for the insiders, which was reversed on appeal. The

appeals court noted that economic forecasts and predictions may for the basis of securities fraud

action, even when such statements are couched in cautionary language. Given the inconclusive

7. Affirmed. The case is subject to the Private Securities Litigation Reform Act (PSLRA) which

was designed “to curb abuse in private securities lawsuits.” The Act mandates a more stringent

pleading standard for securities fraud actions, especially for scienter requirements. Other courts

agree that “plaintiffs can adequately plead scienter by setting forth facts raising a ‘strong

inference’ of intentional or reckless misconduct.” Plaintiffs have failed to show such recklessness

8. The SEC was correct that Gebhart could be barred for life. He acted recklessly, making false

statements promoting the security when he had no basis for doing so. As a professional, he could

not rely on the word of a friend, so there was scienter present and securities fraud existed. He did

Chapter 19: Consumer Protection

Answers to Select Case Questions

2. The Colorado Supreme Court remanded for new trial. It held that the first trial finding that the

drug caused the plaintiff’s injuries was sufficiently supported by the evidence. It is up to the jury

to determine the facts, the credibility of the witnesses, and weigh the evidence. Their finding in

that regard is not upset. The court cited the California supreme court which held that the jury

may find “a product is defective in design if 1) the plaintiff proves that the product failed to

perform as safely as an ordinary consumer would expect when used in an intended or reasonably

foreseeable manner, or 2) the plaintiff proves that the product’s design proximately caused injury

and the defendant fails to prove, in light of the relevant factors, that on balance the benefits of the

4. Yes, deceptive. “No reasonable fact finder could conclude that the solicitation was not likely to

deceive consumers acting reasonably under the circumstances.” Most people had no idea they

6. Dismissal vacated; remanded for further proceedings. To recover on a false advertising claim

under the Lanham Act, the plaintiff must show: 1) that the defendant made false or misleading

descriptions of fact or representation of fact in commercial advertisements about its product; 2)

that this statement actually deceived or had a tendency to deceive a substantial segment of its

audience; 3) that this deception was material, in that it is likely to influence purchasing decisions;

Chapter 20: Antitrust Law

Answers to Select Case Questions

2. The court held that because there was a collective bargaining agreement between the NBA and

the players’ union, the antitrust laws could not apply to the terms of the agreement due to the

labor exemption from antitrust. Employers (teams) can bargain together with the players via their

4. The Supreme Court upheld the judgment against the larger ski company, holding it liable for

$2.5 million in damages which were trebled under the Sherman Act to $7.5 million. The Court

noted that it was common practice in the skiing industry for separate ski hills to share tickets.

The practice is not anti-competitive. By removing one of the four ski hills from the common

6. The government sued Syufy for unlawfully monopolizing the market for exhibiting first-run

movies in the Las Vegas area. The appellate court rejected the government’s suit. Although Syufy

did at one point acquire all of Las Vegas’s movie theaters devoted to first-run movies, the court

competitive exhibitors if the monopolist distributor refuses to charge competitive ticket prices.

7. Affirmed. Johnson lacked standing to maintain an antitrust claim. There was no antitrust injury

arising from the hospital’s decision not to grant her the money to start her own practice. The

initial oral discussions with the hospital recruiter did not form a contract. The hospital

9. Utah Pie won. The Supreme Court found that Robinson-Patman had been violated because

defendant large national frozen pie company sold frozen pies in the relevant Salt Lake City market at

Chapter 21: Environmental Law

Answers to Select Case Questions

2. The polluter was found liable under strict liability for abnormally dangerous materials, for

negligence, for trespass, and for nuisance. Compensatory damages were $5.3 million plus

interest. Punitive damages of $7.5 million were assessed due to the gross, willful, and wanton

disregard for human safety. The court found that the polluter has a duty to protect others from

unreasonable harm, so that they could recover for emotional distress, loss of property value, fear

4. EPA won in a 5-4 decision. The EPA, like other agencies administering statutes, is entitled to

considerable deference. To uphold the right of EPA to grant such variances (which are all over

6. Granted. The citizens gave the state the required 60-day notice of the suit and filed the suit

within 120 days of the date the notice was given to the state. The residents allegation that the

river smelled and looked polluted, and that they use the river less for recreational, aesthetic and

commercial purposes because the city violates its NPDES permit, sufficiently alleges injury in

Chapter 22: The International Legal Environment of Business

Answers to Select Case Questions

2. Seawinds sued Nedlloyd in California state court alleging in essence that Nedlloyd breached

express and implied obligations under the shareholders’ agreement. In resolving the dispute,

Nedlloyd contended that the shareholders’ agreement required the application of Hong Kong law

to Seawinds’ claims. In opposition, Seawinds argued that California law should be applied to its

causes of action. The Supreme Court of California held that a valid choice-of-law clause existed

in the contract between the parties. Since the clause is valid, it encompasses all causes of action

4. The Supreme Court held that the act of state doctrine prohibits a foreign judicial body from

ruling on the validity of the acts of a sovereign taken within the sovereign’s territory. The Cuban

government had the right to nationalize its sugar industry. Whether or not proper payments were

6. The court rejected the bank’s sovereign immunity and act of state arguments. “Foreign states

and their agencies and instrumentalities are generally immune from suit in United States courts.

Neither party disputes that the Bank of Jamaica, wholly owned by the government of Jamaica, is

included within this definition. Plaintiffs contend, however, that the Defendants’ activity falls

within the exception to sovereign immunity … the ‘commercial activity’ exception.

The next issue was whether the bank’s acts in dealing with Chisholm had sufficient jurisdictional

nexus with the U.S. In international commerce, much business is conducted through telephone

8. Affirmed. A tort based on negligence is not one of the exceptions allowed under the FSIA.

While the tort, if any, was probably the responsibility of the independent contractor doing the