Management 211 Final Review

Chapter 1
1. Two major roles of law in the business world
a. Dispute Resolution- Gives people/businesses a forum to settle their differences
b. Regulatory Role- directs and standardizes activities that would otherwise be considered purely
private interactions of individuals (involves government intervention)
2. Law:
a. Very broad concept, abstract term
b. Means different things to different people
c. Collection of rules and regulations that determines how the government will treat its citizens, as
well as how, in turn, its citizens will treat the government; and, how those citizens will treat each
other
d. Sets the parameter of acceptable and unacceptable behavior both between citizens and between
citizens and the government
e. No set definition of law; enforcement leads to stability and predictability
3. Sources of Law:
a. Constitutional Law:
i. Constitution is the supreme law of the land; all laws need to be found constitutional to
exist and be enforced
ii. Derived from The US Constitution-most important source
b. Statutory Law (Legislative):
i. Congress has the power to pass laws (statutes) that constrain business behavior
ii. Bill must be approved in its final form by a majority of both Houses of Congress and the
President must either sign the bill or have his veto overridden by 2/3 vote of both Houses
iii. State legislatures (& municipal ruling bodies or other governmental entities can also pass
statutory laws*)
c. Executive
i. Executive Order- law by the President to control the policies of the Executive Branch
1. Affirmative Action/dont ask dont tell- punishment in military for sexual
orientation
2. President controls executive-branch agencies and bureaus
a. (Oversees spending and appoints leaders)
b. Executive Order 11246- Johnson, affirmative action to make sure that
their employment practices are not discriminatory
3. Appoints Federal Judge*
a. Normally nominates someone with similar political ideology (but once
confirmed, doesnt need to follow)
4. Congress appropriates funds for the governmental uses, its the president who
mostly through administrative agencies that actually spends the funds
d. Judiciary(Courts)
i. Two Basic Functions:
1. Interprets the law
2. Determines the fact IF no jury
ii. Common Law (Judge-made Law):
1. Stare Decisis Doctrine- Follow previously decided case unless there is a good,
legal reason to change; sets precedent (can change precedent, but rarely)
2. Leads to predictability and uniformity
iii. Interpretation of Constitutions, Statutes and Review of Agency Decisions:
 1. Courts Interpret Statutes:
a. Federal Judges Constitutional Judges, serve for life
b. Statutes are typically written in general terms, giving the courts
freedom to judicial interpretation- flexibility to respond to unforeseen
circumstances and to adapt to changing conditions over time
c. Legislative Intent- Legislative body expects the courts to attempt
interpreting statutes and constitutions according to the intent of the
legislative body; look to the legislative histories of statutes for guidance
in interpreting statutes accordingly (judicially passive)
i. BUT, judges do not have to follow legislative intent, can
change the legislative intent- judicial activism
d. Reviews and interprets AGENCY decisions
iv. Judicial Review- the power of the courts to declare an act of Congress/President
unconstitutional
1. Constitution does NOT give the courts the power to interpret the Constitution,
the Supreme Court assumed the power of judicial review in Marbury v Madison
2. Traditionally, strong presumption by the court that a statute in constitutional
3. Can be overruled by a constitutional amendment
e. Administrative Law:
i. Law created by regulatory agencies
ii. State Law- each state has its own constitution, state legislatures are free to pass statutory
laws as long as they dont violate the Constitution, vast majority of litigation
iii. Police Powers- power of the state to place restraints on the personal freedom and property
rights of persons for the protection of the public safety, health, and morals, or the
promotion of the public convenience and general prosperity
1. 10th amendment
iv. Each state has its own Constitution, Legislature and Courts&can create administrative laws
v. Business Regulation- [power to regulate business to protect the public health and safety
and to promote for public welfare can be:
1. Federal
2. State (not supposed to interfere with the interstate commerce)
3. Municipal (part of state government)
4. Classification of Law
a. Federal Law:
i. Includes all laws developed under the authority of the Constitution by Congress, the
President, and Federal regulatory agencies
ii. Most important provision concerning the federal government regulation of business if the
Commerce Law (Interstate Commerce Law)
iii. The US constitution is based on the principle of federalism
b. State Law:
i. Municipal ordinances, state legislators, state regulatory agencies (sometimes county gvts)
ii. Getting more uniform (due to codification- making common law into statutory law)
1. Uniform Commercial Code
c. Civil Law:
i. Designed to compensate individuals for wrongs suffered (Reimbursement)
ii. Comes from common and statutory law
iii. Evidence: Preponderance of the evidence (more likely than not)
iv. Usually involve business
d. Criminal Law
i. Designed to protect society from activities that upset social order by preventing crime
1. Punish criminals
 ii. Statutory Law
iii. Intent is not to provide remedies for victims of crime
iv. Beyond a reasonable doubt
e. Substantive Law
i. Defines rights and duties
ii. Meat or heart of the law
iii. Establishes procedural law
f. Procedural Law
i. Defines the procedural means to enforce rights established by substantive law
ii. How to of the law
g. Equitable Law
i. Equity- developed in England, purpose was to was to avoid unjust results occurring from
strictly following the rules of common law
ii. Legal remedies- money

Chapter 2 Constitutional Law

1. Anti-Federalists
a. Thomas Jefferson, creator of Declaration of Independence so people looked up to him
b. Opposed the Constitution bc it took too much power away from the states and too much power
through taxation, deprived citizens of civil liberties
c. Believed the Articles of Confederation provided the true federal system
2. Articles of Confederation
a. Made after the Revolutionary War, dysfunctional document; weak national government
b. Led to the chaotic period, states treated each other in an openly hostile manner
c. One-house Congress, no president or national judicial government
3. Bill of Rights
a. When Massachusetts ratified the Constitution, called for the BoR to protect the civil liberties and
personal freedoms of Americans
b. James Madison introduced 12; 10 were passed (27th amendment is one of the 12 that was passed
later)
c. Guarantees certain rights, liberties, and freedoms from intrusion or abridgement by the federal
government
d. Protects business in the context of the individuals who compromise the business
e. Originally, only intended to limit the power of the national government
f. Barron v Baltimore- BoR did NOT apply to the states (14th amendment> increasingly applied to the
state governments through the doctrine of incorporation)
g. Portions that so NOT apply to the states:
i. 3rd amendment- quartering of soldiers
ii. 5th amendment- requirement for a grand jury
iii. 7th amendment- right to a jury trial in civil cases
4. Blue Laws/Sunday Laws
a. State/local laws, regulate the types of business activities that can be conducted on Sunday
b. Constitutional on the grounds that they serve the secular purpose of providing a uniform day of rest
5. Commerce Clause
a. Most Important Clause for business/major limitation of states abilities to regulate business
b. Gibbons v Odgens- allowed Congress to legislate all commerce that concerns 1+ states
c. NLRB v Jones & Laughlin Steel Corp- restated Gibbons
d. Katzen v McClung & Heart of Atlanta Motel v US (civil rights-commerce cases)
e. Limitations:
i. US v Lopez- led to the 3 categories that Congress can assert its power using interstate
commerce:
 1. Regulate the use of the channels of interstate commerce
2. Regulate/protect instrumentalities/persons/things
3. Regulate activities having a substantial relation to interstate commerce
4. (And have a substantial effect on interstate commerce)
6. Commercial Speech
a. Speech that doesnt contain a political message of any sort is sometimes subject to regulation with
respect to both content and method
b. Valentine v Chrestensen- purely commercial speech isnt protected by the 1st amendment
i. Overruled by Virginia State Board of Pharmacy v Virginia Consumer Council
c. 4 prong test:
i. Is the speech legal? Is the government interest substantial? Does the regulation of speech
directly advance that governmental interest/ go too far than is necessary to advance that
governmental interest
7. Constitutional Convention of 1787
a. Met in Philadelphia (after Shay) to draft a new arrangement of basic functions of the government
b. Document Constitution of the United States of America
c. Founding Fathers- were very different, led my George Washington
d. Rhode Island did not send any representatives
e. Virginia Plan- powerful central government, three branches, bicameral, favored large states
f. New Jersey Plan- strengthen Articles, not replace, favored small states
g. Led to the Great (Connecticut) Compromise- basic structure of the US Congress
h. Slavery was ignored, but 3/5ths compromise was made
i. James Madison- author of the Constitution
j. Limited Government (checks and balances)
k. Separation of powers: designed to control the use of powers granted by the states to the Fed govt
i. Immigration and Naturalization Service v Chadha
l. New Hampshire ratified the constitution last, became official
8. Due Process
a. 5th amendment; individual shall not be deprived of life, liberty, or property, without due process
b. 14th amendment for states; sliding scale (depends on the magnitude of the interests at stake
c. Substantive Due Process: content/meat of the law; rational basis test is simply economic, IF
individuals fundamental rights are restricted, then government must prove a compelling,
overriding interest
d. Procedural Due Process: Government uses to deprive anyones life, liberty, or property
i. Protection is greatest when capital punishment is at stake
ii. Liberty- Protection of a presumption of innocence until proven guilty beyond a reasonable
doubt
iii. Property- lower standard of procedural safeguarding depending on the nature
9. Eminent Domain
a. Taking of private property by the government
b. Government must have a reason and MUST give just compensation
c. Taking of land for Public Use put stricter standards for public use (Texas included)
10. Equal Protection
a. 14th amendment, passed shortly after the Civil War
b. Expanded to protect against other arbitrary governmental distinctions
c. Also applies to the national government due to the due process requirements of the 5 th amendment
d. Invalidated state laws in deemed illogical, purpose of distinction between persons was improper
e. Three-tier sliding scale
i. Rational Basis Test: laws concerned w economic or social classes
ii. Substantial Governmental Interest: Involves gender or legitimacy
 iii. Compelling State Interest: involves the exercise of some fundamental right/suspect
classification (race)
11. Establishment Clause
a. Prohibits governmental establishment of an official religion
12. Exclusionary Rule
a. Any evidence seized improperly must be excluded from trial
13. Executive Law
14. Executive Order
a. Independent method to create law by the President
15. Federalism/Federalists/Federalist Papers
a. Constitutional Law establishes the Federal System/Federalism
b. Establishes checks and balances (executive, judicial, legislative)
c. Federalist Papers- by James Madison, John Jay, Alexander Hamilton, pro-constitution ratification
i. Used as a guide by the courts in interpreting the Constitution, supporters are Federalists
16. Free Exercise Clause
a. Protects the rights of individuals to free exercise of religion
b. Businesses need to mandate accommodations of all religious beliefs
17. Judicial Law
18. Legislative Law
a. Any power of the national government must be authorized by the Constitution before it can be
legally exercised
b. Combination of the commerce, supremacy, and necessary and proper clauses allow Congress to
make federal laws
19. Necessary and Proper Clause (or Inherent, Implied, Elastic Clause)
a. to make all laws which shall b necessary and proper for carrying into execution the foregoing
powers, and all other powers vested by this Constitution in the govt in the US
b. Purpose: give the congress the ability to account for all contingencies (possibilities)
i. ONLY enhances specific powers of Congress, CANNOT be used to increase the list of
enumerated powers
c. McCulloch v Maryland
20. Political Speech
a. Commercial Speech
b. Greatest protection under the first amendment
21. Preemptive Power
22. Ratification
a. 9 states or 3/4ths of the states to ratify the Constitution
b. Delaware was the first state to ratify the Constitution
c. Federalist Papers (see #20c)
23. Self-incrimination
a. No person shall be compelled in any criminal case to be a witness against himself
i. Only guaranteed to persons in a criminal case
ii. If not a criminal case, no protection against self-incrimination
b. Doesnt apply to corporations and most partnerships
c. 5th amendment
d. Miranda v Arizona- attempts to prevent coerced confessions
24. Separate but equal
a. Plessy v Ferguson- govt allowed it
b. Texas- Smith v Allwright: white primary unconstitutional
25. Shays Rebellion
a. After the Revolutionary War, Shay (farmer) led men to courthouses to stop foreclosure on farms
b. No state/government militia to stop them, led to the realization that change was mandatory
 26. States Rights
a. Commerce Clause
b. 10th Amendment; powers NOT delegated to the US, nor prohibited by it to the States, are reserved
to the States respectively, or to the people (Reserved Powers Clause)
c. 3 Major Events (defined the struggle of states rights)
i. McCulloch v Maryland- state has the power to tax the federal government? Maryland relied
on the 10th amdmnt, US relied on Necessary and Proper Clause (govt won)
ii. American Civil War- national govt won, ended slavery, expanded govt power
1. Jim Crow Laws- states efforts to keep minorities as second-class citizens
iii. Civil Rights Movement- Brown v Board: Supreme Court overruled Plessy and declared its
Separate but Equal unconstitutional
27. Supremacy Clause
a. This constitution and the laws of the US which shall be made in Pursuance thereof shall be the
supreme law of the land
b. Whenever both state and federal law cover the same thing, federal law is supreme (not always)
c. Determining Factor: Whether the national law leaves the states w the ability to supplement the law
and how the states supplements the existing national law
d. Conflicts are solved by the US Supreme Court and its interpretation of the Supremacy Clause
i. Hughes v Oklahoma- no legit reason, court declared OK law unconstitutional
ii. Maine v Taylor- proved to the Supreme Court that it had a legit reason, protect its fishing
(lobster) industry; economy relies on fishing.
28. Unreasonable Search and Seizure
a. Constitutional protection for businesses against unreasonable search/seizure and normally this does
require a warrant to search
b. Warrants required for inspection of business in regulatory situations are administrative warrants
i. Easy to obtain by the government regulators
ii. No warrant is needed in highly regulated industries or if health is an issue
29. Writ of Certiorari
a. Request to go to the supreme court
30. Right of Privacy- not specifically guaranteed in the US Constitution but became recognized by the Griswold
v Connecticut (Freedom of Information Act and Privacy Act of 1974)
Chapter 3 Litigation and Alternate Dispute Resolution
1. Adversarial System
a. Courts will not decide lawsuits unless there is a true case/controversy between the parties to the
action
b. Based on the belief that truth and justice can prevail only if both parties to the action have the
incentive to win
2. Affirm
a. Appellate courts decision may be to affirm the lower court
b. Reverse the lower court
c. Remand the case to the lower court for further proceedings
3. Answer
a. 2nd part (after complaint)- defendant must respond to the complaint by filing an answer within 20
days
b. IF defendant does nothing, then the plaintiff goes to court and takes a default judgement
c. IF defendant does respond, defendant must include all affirmative defenses legal defenses that
must be proven by the defendant
i. Or provide a counterclaim: allow parties with disputes to settle all of their claims at once
ii. Or can file a cross-action: bring a 3rd party into the lawsuit
4. Appeal/Appellate Court/Appellant/Appellee
 a. Higher rungs of the ladder that lead to the highest court in the system
b. Concerned about whether or not an error occurred at the lower (trial) court
c. Relies on the record, briefs of the parties, and oral argument
d. Procedure:
i. Appellant- appealing party, gives notice of appeal to the trial court and files a designation
of the record which specifies all of the items from trial court and sent to the appellant
court
ii. Appellant prepares a brief, legal document, citing precedent and proving error
iii. Appellee, non-appealing party, files a brief response that the appellant is incorrect
iv. Oral Argument- occurs before the appeals court (parties have limited time)
v. Decision of the appellant court (months afterwards)
e. Appeals help guarantee that the parties to a lawsuit received a fair trial, rule only on errors of law
5. Arbitration
a. Similar to mediation, except they DO make a LEGALLY BINDING decision
6. Brief
a. List of alleged errors of law that were committed by the trial court in legal documents (Appeal)
7. Complaint (Petition)
a. Filed by the Plaintiff
b. Must allege facts necessary to establish jurisdiction
c. Provide a short statement, applicable law, and remedy requested
8. Depositions
a. Oral testimony of witnesses before the attorneys for the parties and court reporter
b. Uncover all information reasonably calculated to lead to discovery of admissible evidence)
c. Do not allow testimony that is not firsthand knowledge to be introduced at trial: hearsay
9. Directed Verdict
a. In the trial phase, after the plaintiff presents the evidence in the case-in-chief; defendant is saying
that the plaintiff has failed to sustain the burden of proof in proving the necessary facts
10. Discovery
a. Pretrial process by which each party obtains information from the opposing party (or 3rd party)
with relevant information; force ones opponent to take a position and stick to it
b. Purpose: preventing surprises and allowing the parties to prepare their case & preserve testimony
c. Depositions, Interrogations, Requests for Admissions, Production of Documents
11. En banc decision
a. Entire membership of the court will hear a case (Court of Appeals)
12. Interrogatories
a. Written questions which are served on the opposing party; cannot be used on 3rd party witnesses
b. Easier to use and less costly than depositions
13. Judgement notwithstanding the verdict (nov)
a. Judge can reverse the jurys verdict after trial IF determines the moving party is entitled to
judgement as a matter of law, or may grant a new trial if the verdict was against the great weight of
the evidence; rare.
14. Jurisdiction
a. Power of a court to hear and decide certain types of cases
b. Must have jurisdiction over both:
i. Subject Matter Jurisdiction- cases involving federal questions and diversity of citizenship
1. Removal Doctrine: Right to have a case removed from federal court
ii. Territorial Jurisdiction- ability to order the parties to appear in the territory of the court
and have the ability to bind those defendants to the courts decisions
1. Can always sue a defendant in his home state
a. In Personam Jurisdiction: Most common way to establish territorial
jurisdiction; obtaining jurisdiction over the defendant
 i. Accomplished by serving the defendant physically w a
summons (citation)
b. In Rem Jurisdiction: State is given jurisdiction over property located
within that state (must be the subject matter of that lawsuit
c. Quasi in Rem Jurisdiction: property is not the subject matter, states
stretched its power, rarely used due to historic abuse
15. Litigation
a. Lawsuit filed in order to have the issues resolved by the court
b. Expensive, time consuming, and public.
16. Long Arm Jurisdiction
17. Mediation
a. Third party serves as a mediator, doesnt make final decision
18. Motion for new trial
a. After the trial verdict, have to have a really good reason to be approved
19. Negotiation
a. Alternative Dispute Resolution: informal, simple and common alternative
20. Oral argument
21. Original court jurisdiction
22. Plaintiff
a. Party that begins the lawsuit
23. Pleadings
a. Papers that are filed with the court (person instigating a civil lawsuit)
b. Complaint, Answer, and pretrial motions
24. Preponderance of the evidence
a. Standard for proving the defendant responsible in a civil court
25. Pretrial conference
a. (After Complaint, Answer, and Discovery Phases)
b. Courts technique for pushing the case toward settlement or forcing the parties to prepare for trial
c. Can be several pretrial conferences (hearings)
26. Protective order
27. Request for production (documents)
a. Request the other side produce requested documents that are relevant to the dispute on hand
28. Request of admissions
a. A written set of facts that one part requests the other to admit as being true
29. Senatorial courtesy
30. Standing to sue
a. Showing the business had been harmed by the law/regulation
31. Substituted service
32. Trial court
a. Lowest rung on the ladder of court hierarchy; where the case begins
b. Decide issues of fact and issues of law (substantive or procedural)
c. Develop the record of the case- foundation for the appeal of the case (if any)
d. All testimony, rulings by the judge, objections by the parties, admissible evidence, go on record
e. Then, the appellate courts
33. Venue
a. Right of a defendant to be tried in a proper court within a specific geographic area
b. The court that will hear the case is determined by venue
c. Not a factor until jurisdiction has been established - Venue Rules are set forth by statute
d. General Rule- within a state, you can always sue the defendant where the defendant lives
e. Forum Shopping: finding the appropriate jurisdiction
34. Voir dire
 a. Jury selection, speak the truth
b. Challenge for Cause: Juror cannot be fair due to bias prospective
c. Peremptory Challenge: Random
35. TEXAS TRIAL COURTS
a. First Tier
i. Municipal judge elected by city council, doesnt need a law degree, class C
misdemeanors that occur within the city limits (traffic cases, oud noise violations) not
courts of record; appeal would be de novo (start over)
ii. Justice of Peace created by the Texas Constitution, criminal class C misdemeanors and
low dollar amount civil cases, partisan election, 4-year term, doesnt have to be a licensed
attorney, not court of record; de novo appeal
iii. Small Claims Court created by the Texas Legislation; statutory court, created so that
ordinary people could have civil court w/o a lawyer, no jurisdiction over criminal matters
(other than that, same as justice of peace)
b. Second Tier
i. County Court Constitutional Court created by the Texas Constitution, one county court
per county, appeals from first tier courts, trial court for criminal cases (class B and A)
juvenile matter, probate cases (& head of the administrative arm of the courthouse),
partisan elections, 4 year term, doesnt have to be an attorney; both trial/appellant court
ii. County Court at Law Civil jurisdiction $100,000; must be an attorney, same criminal
jurisdiction as a county court, both trial and appellant court
iii. District Court - Only a trial court for the state of Texas, family law, NOT an appellant
court, strict qualifications
c. Third Tier- Appellant Courts
i. Court of Appeals 14 court of appeals in Texas, 6 year overlapping terms, doesnt need
to have prior judicial experience but 10 years of attorney experience, 35 years old, hear
both civil and criminal cases, en banc-61b, any case from the 2nd tier can be appealed here
d. Fourth Tier
i. Court of Criminal Appeals criminal cases, equal to the Texas Supreme Court but hear
different type of cases, serve 6 years, 9 members, statewide elections
ii. Texas Supreme Court- 9 members, elected statewide, 6 years, 1 chief justice, 8 associate
justices, final court for civil/juvenile cases unless appeals to the US Supreme Court
36. FEDERAL COURT SYSTEM Constitutional Courts
a. Federal District Court
i. General trial courts for the federal court system
ii. Each state has at least one do not cross state boundaries
iii. One judge, 12 jurors (if any)
b. Federal Courts of Appeal
i. Divided into 13 circuits
ii. Limited jurisdiction: international trade, governmental contracts, intellectual property
iii. Panel Decision: cases heard by a panel of 3 judges; opinions issues by the panel
iv. Controversial cases representing important public policy issues will be heard by ALL
members of the court of appeals in a given circuit- opinions are en banc
c. Supreme Court
i. Court of last resort
ii. 8 associate judges and a chief justice, all cases decided en banc
iii. Supreme Court jurisdiction is determined by Congress
iv. The writ is issued whenever four justices vote to review the case- Rule of Fours
Chapter 4
1. Acceptance
 a. Terms that are accepted must be the exact terms (mirror image) of the terms of the offer, if not it
counts as a counteroffer
b. Unconditional and Unequivocal & Legally Communicated
2. Agency/Agent
a. Agency law is an extension of contract law because an agency relationship is creates when the agent
agrees to act on behalf (under/representation)of a principal
3. Apparent Authority (Estoppel)
a. Not an agreed agency relationship but someone acting on the behalf of someone else; made it
appear to the 3rd party that he has the given authority to act on the behalf of the agent
4. Bilateral
a. If a return promise is required, both parties are promisors; legal exchange of legally enforceable
promise- promise for a promise
5. Complete Performance
a. Contract comes to an end when both parties have fulfilled their duties as promised
6. Condition Concurrent
a. Duty of performance occurs at the SAME time (Conditional Contract)
7. Condition Subsequent
a. Duty of performance occurs right now until something else cancels it (Conditional Contract)
8. Consideration
a. Something of value given up in return for the promise of the other party to the contract (return
promise; opportunity cost)
b. Legal Detriment- do/not do something they werent already going to do- one party
c. Legal benefit- other party receiving
d. Courts dont bail you out of a dumb deal
9. Disaffirmance
10. Duress
a. When someone forces another person to enter into a contract against their will
i. Is wrongful/illegal, innocent party can rescind the contract (not economic)
11. Executory (Partially Executed)
a. Not fully performed by BOTH parties, fix future obligations, one-sided
b. Unperformed by both parties or one with respect to which something still remains to be done on
both sides
12. Express Contract
a. Written or Oral, sets forth all rights/duties for each party; terms are states by the parties
13. Fiduciary Duty
a. Duties owed of agents to principals(must subordinate his self-interests for those of the principal
i. Loyalty, obedience, reasonable care, accounting, notification
14. Fraud
a. When an innocent party consents to a contract w fraudulent terms, voidable to the innocent party
i. Contract can be rescinded and the innocent party restored to his original position
ii. Can seek to enforce the contract and sue for damages caused by the fraud
b. Misrepresentations of facts that are consciously intended to mislead another (misrepresent,
deceive, relief on misrepresentation, innocent party has been injured) ex. Conman
15. General Agency
16. Illusory Contract
a. Does NOT involve a commitment by the promisor, creates NO obligation; Christmas bonus
17. Implied by Law Contract (Quasi)
a. Almost a contract, something missing, no not a true contract
18. Implied Contract (Implied by Fact)
a. All facts are there to give rise to the contract implied by the actions of the party
 i. Implied by Law (Quasi) Contract- Something that is mandatory in the contract is missing,
not a valid contract (judge can fix missing piece sometimes)
ii. courts dont bail you out of a dumb deal
19. Injunction
20. Mitigation
a. Injured party is under a duty to mitigate the damages is reasonably possible
i. Requires the non-breaching party to avoid running up the bill, discourages the waste of
valuable resources
21. Novation
a. New party under the same terms of the old contract (replaces an original party)
22. Offer/Offeree/Offeror
a. Offeror/Promisor: party making the contract, promises to do or not do something
b. Offeree is the party to whom the offer is made
23. Option Contract
a. Exception to lapse of time, under common law
b. If someone is selling something and you give them $5 to keep it open- create binding contract
c. Given consideration, and assume all of the other required elements are present
24. Parole Evidence Rule
a. Written contract speaks for itself, cant bring in oral evidence to contradict written terms of a
contract UNLESS you can proved that were was an oral modification of the written contract
(change orders), contract was void/voidable, incomplete, written condition
25. Promissory Estoppel (detrimental reliance)
a. Enforces a promise IF promise suffers substantial loss due to change of promise
26. Ratification
a. Agency by Ratification- someone without the agreement of the principal acts on behalf of the
principal and then notifies the principal afterwards principal doesnt have to agree to action
27. Reformation
a. Contracts that are incomplete/mathematical errors, where the judge/parties can reform the
contract and fix mistakes
b. Remedy used to rewrite the contract to express the true agreement between the parties
28. Rejection
a. Offeree by words/actions does not accept the offer- terminates offer
29. Repudiation (Anticipatory Breach)
a. One of the parties to the contract, prior to the required time of performance, announces that he
will NOT perform as required under the contract- material breach (can be reversed)
30. Rescission
a. All of the parties agree to not to the contract, make a 2nd contract undoing the 1st contract
31. Revocation
a. Offeror takes back his offer PRIOR to the acceptance from the offeree
32. Self-dealing
33. Special Agency
34. Specific Performance
a. Court orders the breaching party to perform the exact bargain promised in the contract (not used
as long as money damages provide an adequate remedy)
35. Undue influence
a. Where someone mentally takes control of another person and substitutes their will for that of the
victim; elderly people
36. Unenforceable
37. Unilateral
a. Is contract is phrased in a way where only one performance is needed to accept
b. Promise for an act
 38. Universal agency
39. Valid/Void/Voidable
a. Valid: all of the elements necessary to entitle at least one of the parties to enforce it in court
b. Void: Not a contract, not recognized by law [illegal or never excited]
c. Voidable- Valid contracts, but one of the parties to the contract has the right to avoid his
contractual obligations without incurring legal liability [one party is able to void the contract]
d. Unenforceable: Valid contract that cannot be enforced because of certain legal defense, law
changes and the contract becomes unenforceable
Chapter 5 Torts and Products Liability
1. Torts
a. A civil wrong other than a breach of contract for which the courts will provide a remedy in the
form of damages to compensate the injured party (wrong against a private party)
b. More likely than not standard
2. Assumption of the Risk
a. Defense to Negligence
i. Voluntary exposure to aa known risk; a person can only assume known risks
3. Cause in Fact
4. Caveat Emptor/ Caveat Vendor
a. Caveat Emptor- let the buyer beware
b. Caveat Vendor- let the seller beware
5. Comparative Negligence
a. Defense to Negligence majority
i. Proration of the damages resulting from the combined negligence of the parties
6. Compensatory Damages
a. Damages rewarded in individual tort cases are intended to make the plaintiff whole again
b. Three types of loss
i. Past/Future Medical Expenses/economic loss/pain and suffering
7. Consent
a. Defenses to assault/battery: can be expressed(waivers)/implied(sports)
8. Contributory negligence
a. Defense to Negligence
i. Failure of the plaintiff, the injured party, to exercise reasonable care, which contributes to
the injury
9. Copyright
a. A form of protection for original works of authorship fixed in a tangible medium, or that can be
reduced to a tangible medium of expression and includes both published and unpublished work
10. Cybersquatting
a. Registering someone elses trademark or a famous persons name as an Internet domain name in ad
faith, hoping to make a profit by selling the name to its rightful owner
i. Banned by the Anticybersquatting Consumer Protection Act of 1999
11. Defense
a. Legal justification to commit what otherwise would be a tort
12. Ethical Compensation
a. Same as Retribution except from the point of view of the victim
13. Ethical Retribution
a. Payment of compensation is harmful to the tort-feasor, justice requires that he suffer the harm
14. Fair Use Doctrine
a. Exception to the copyright rules set out by the Copyright Act- allows someone to use the copyright
of someone else without permission when appropriate (litigation often required)
 i. Non-profit educational purpose, nature of work, & of total work used, effect the use will
have on the value/profit-making potential of the original work
15. Intellectual Property
a. Property created from the ideas or thought process of the creator
b. One of the most active areas of current law
c. Infringement- when someone other than the owner uses those ideas without the owners
permission
16. Labeling defect
17. Market Share Liability
a. Jointly liable for damages (DES- abortion pill)
18. Patent
a. A grant from the federal government that gives the applicant the exclusive right to
make/use/sell/allow others to use an invention for 20 years from the date of the filing of the
application for the patent
b. Process, manufacture, composition of matter
19. Personal Property
a. Anything not permanently attached to the land (tangible/intangible property)
20. Privilege
a. Defense to assault/battery: allows the individual to commit the tort due to who he is and if theyre
acting within the scope of their official capacity
21. Product Abuse
22. Product Disparagement
23. Proximate Cause
24. Public Domain
a. Just because it is posted on the internet doesnt mean that it has become part of the public domain
(belongs to everyone so anyone is free to use it)
b. Cards against humanity
25. Punitive Damages
a. Punish individual defendants, intentional and negligence cases (gross negligence or willful
wanton) disregard for the plaintiffs safety. Rare.
26. Real Property
a. Land or anything else permanently attached to the land
27. Secondary Meaning
a. Substantial number of people feel that there is a secondary meaning from the logo, word
b. Words w an ordinary/primary meaning of their own, may by long use with a particular product,
come to be known by the public as specifically designating that product
28. Self-Defense
a. Defenses to assault/battery- you can defend yourself, but with what amount of force?
i. Defending property- reasonable force (not deadly force)
29. Service-mark
a. Same thing as trade mark, but used to identify a service instead of a product
30. Shopkeepers Privilege
a. A merchant under common law has the right to detain a suspected shoplifter for a reasonable time
period if the shopkeeper has reason to believe that the detained individual committed/attempted to
commit a theft from the store
31. Social insurance
a. Party who is in the best position to spread the loss of injury should be held liable; deep-pocket theory
32. Trade name
a. Tradenames apply to a part (or all) of a business name; type of trademark
b. No federal protection, local in nature, make part of trademark then register trademark w Lanham
33. Trade secrets
 a. Anything that the business wants to keep secret
b. To be protected under state law- must be original and secret
c. Misappropriation- taking or stealing the secret, using it without the owners permission, against
anyone who obtains the trade secret in an unlawful manner
34. Trademark
a. Word, name, symbol, or design combination used in commerce to identify and distinguish he
goods of one manufacturer or seller from those of another and to indicate the course of the goods
35. Warranty of Merchantability
36. TORTS TO KNOW*
37. Conversion
a. Personal property is taken by the wrongdoer and kept from its true owner or prior possessor
b. Civil side of crimes related to stealing
38. Copyright Infringement
a. Prove that the alleges infringer had access to the copyrighted work, substantial similarity between
he copyrighted work/pirated work, and copyright owner has a valid copyright
39. Defamation
a. Publication of a false statement that tends to injure a persons reputation causing the public to hold
that person up to hatred. Victim must suffer harm
b. Libel- Defamation in a permanent form
c. Slander- Defamation through some transitory means (unrecorded speech)
d. Defenses: truth and privilege
40. False Imprisonment
a. Personal Intentional Tort- intentionally causing the confinement of another person without
consent/legal justification
i. Physically restraining an individual
ii. Using threatening force against an individual/family to restrain them
iii. Using force/threat of force against an individuals property
iv. Refusing to release a person from confinement
b. Shopkeepers Privilege
41. Intentional Infliction of Emotional Distress
a. Intentional/reckless causing of severe mental suffering in another by means of outrageous and
extreme conduct or language that goes beyond the bounds of decency, rare.
i. Manifested by some form of physical injury to the plaintiff (heart attack)
42. Intentional Interference with Contract
a. Can sue a 3rd party for interfering with the performance of the contract (English Common law)
i. A valid contract with another party existed
ii. Defendant knew about the contract
iii. Defendant interfered with the contract causing damage to the plaintiff
43. Invasion of Privacy
a. A person has the right to live his life privately without being subjected to unwarranted publicity
i. Unwarranted does not mean unwanted
ii. Is something taken from public records, no invasion of privacy
iii. Public figures give up some, but not all, of their privacy
b. Defendant intentionally intruded on the plaintiffs solitude, seclusions, private affairs, AND
intrusion would be highly offensive to a reasonable person (false light)
c. Public disclosure of a private act
d. 3 prong test for celebrity right of privacy:
i. Was there legitimate public interest being sought? Right of the individual to be left alone?
What was the danger of continuing the surveillance without court intervention
44. Malicious Prosecution
a. Wrongful use of the legal proceedings (civil or criminal)
 b. Very difficult, have to WIN the case and have proof by a preponderance of the evidence
c. Texas- Abuse of Process
45. Market Share Liability abestoes
46. Negligence
a. Careless or reckless conduct rather than intentional conduct
b. Duty (duty of care), Breach (Failure to exercise Care), Harm (or injury), Causation
c. Failure to exercise due care when there is a foreseeable risk of harm to others
i. Failure to exercise due care can be either an act or a failure to act
d. Standard is that of a reasonable person
e. Defenses:
i. Assumption of Risk- voluntary exposure to a known risk
ii. Contributory Negligence- failure of the plaintiff, the injured party, to exercise reasonable
care, which contributes to the injury; minority rule
47. Patent Infringement
a. Is someone uses, makes copies, sells, patent without the owners permission in the US
b. Private since the govt does not enforce patents- awarded treble damages and interest
48. Product Liability
a. Recognized the need in the consumer product area with the creation of the Consumer Product
Safety Commission (CPSC)
49. Strict Liability
a. Liability without fault, cases involving abnormal or ultra-hazardous activities
b. Not absolute: Defenses:
i. Abuse/Misuse, Assumption of the risk
50. Trade Names Infringement
51. Trade Secrets Infringement
52. Trademark Infringement
53. Trespass to Personal Property (Chattel)
a. Wrongful invasion of ownership rights in property other than land
b. Interference by an individual or business with the property owners right to exclusive use and
possession of personal property
54. Trespass to Real Property/Land/Trespass
a. Any unauthorized physical intrusion or entry upon land(onto, above, below) where someone else
has a superior right to the property (remains on the land after being told to leave)
b. Harm is not required
c. Property owner does not have any responsibility to a trespasser for damages the trespasser incurs
while she is injured on the property (but owe a duty of reasonable care- warnings)
Chapter 6- Administrative Law, FDA, CPSC
1. Arbitrary or Capricious Standard
2. Delegation
3. Deregulation
4. Economy-wide
5. Enabling Statue
a. Administrative Law; Congress specifies the agencies regulatory mission, organizational structure,
procedures, and enforcement powers
6. Executive Agencies
a. Dependent; headed by a cabinet member
b. Departments and Administrations
c. Part of the executive department, answer directly to the President (receive power from Congress)
d. Created by Executive Order/ Enabling statute
7. Formal Rule-Making
 a. Substantive
b. Begins like informal Notice of Proposed Rule Making in the Fed Register, but more specific
c. Formal-like hearing is held and a record of oral testimony/evidence
d. Then, writes final draft and then published 30 days later
8. Imminently
9. Hazardous
10. Consumer
11. Product
12. Independent Agencies
a. Created by congress, given broad powers
b. Appointed for terms, can only be removed for cause
c. Never completely independent; Congress controls money, ultimate control
d. commissions and boards
13. Industry- Specific
a. Regulate ONE business, easy to fall unto Regulatory Capture (agencies adopt the perspective of the
members of the regulated agency)
b. Usually found in Historical Era (little bit in the New Deal Era)
c. SEC, FCC, etc. (railroads, steel)
14. Informal Rule-Making
a. Procedural and Regulations
b. First: Identifies the need for a rule, drafts the proposed regulation to induce public commentary
c. Notice of Proposed Rule Making in the Fed Register then published 30 days before its effective date
d. Procedural due process- Notice and Comment written commentary is usually the only way the
public is heard (but can be ignored completely)
15. Labeling Standard
16. Standing
a. Constitutional requirement that limits the jurisdiction of the federal courts to actual cases and
controversies
i. Must show that they are members of the class that is affected
ii. Standing to sue- a party that has a real hard dispute w the agency
17. Substantial Evidence Test
18. Sunset Laws
a. Require periodic review of many laws/regulations, if the laws arent extended by new legislations,
then it expires (5-10 years)
i. Texas- Death Date
Chapter 7- Antitrust Law
1. Competition
a. Lifeblood of capitalism
b. Want a wide range of customer choices
c. Leads to better products
d. Efficiency
e. Individual firms want to reduce competition and eliminate the competition
f. Gives rise to Monopolies which leads to Antitrust Law
g. Anticompetitive practices: forms of action that harm their competitors rather than trying to
improve their own products and services (antitrust laws work to prevent/punish such actions)
2. Origins of Antitrust Law
a. Concern grew in the late 1800s due to entrepreneurs (like John D. Rockefellers Standard Oil
Trust)
 b. Grew into a behemoth through stock transfers and using near-monopoly power to squeeze
competition out of the market
i. Ohio dissolved Standard Oil Trust in 1892
1. Broken into several geographic companies
a. Standard Oil of New Jersey, now Exxon
b. Standard Oil of California , now Chevron
c. Railroad trusts- set prices at will, hurt consumers, Congress passed
i. Interstate Commerce Act: First large step towards protecting consumers and small
business by preserving competitive markets; regulated the railroads
3. Major Antitrust Legislation
a. Sherman Antitrust Act of 1890 (Trust Buster Act)
i. Outlawed trusts and empowered the fed govt to break up existing trusts
ii. Addressed mainly outcomes, trusts, or monopolies themselves
iii. Very broad terms w very severe penalties
1. But
a. Fell short of protecting consumers from all anticompetitive practices
b. Sometimes ineffective at dismantling well-established trusts (due to
Supreme Court that narrowly interpreted the law)
iv. Section 1: Restraints of Trade- any agreement between 2+ that substantially reduces
competition; rival firms must compete; cant enter agreement to eliminate competition
unreasonably
1. Criminal offense
2. Requires a contract (expressed or implied) between 2+ persons
3. Unilateral actions to restrain trade are not covered
4. Federal Courts interpreted Section 1 narrowly and were reluctant to undo many
contracts that restrained trade (some agreements seemed unharmful to society)
5. Two Categories of violations: Per Se & Rule of Reason Violations
v. Section 2: Monopolization (Anticompetitive Behavior)
1. Only outlaws attempts to monopolize, not the already-existence of them
2. Doesnt outlaw all monopolies, outlaws anticompetitive means of achieving a
monopoly/attempting to use anticompetitive means to create a monopoly
3. To differentiate monopolies that violate section two, courts look for the intent to
monopolize(willful acquisition or and/or maintenance of monopoly power)
4. Requires the courts to show that the alleged violator has monopolistic power in
the relevant power and to have engaged in willful attempted to acquire/maintain
5. NOT a legal tool for preventing monopolies BEFORE they arise, its a means of
punishing successful, anticompetitive attempts to create and sustain them
6. Broad and punitive
7. Determine intent and strength of monopolistic/market power
a. Define the relevant market
b. Show that has ability to price above the competitive level for a
significant period of time
i. Methods: actual pricing history, econometric testing, expert
testimony, comparison to similar cases
ii. Courts frequently used market share tests as rules of thumb in
determining whether a firm could price above competitive
levels for a prolonged period
 c. Determination of market power is difficult to prove
b. Clayton Antitrust Act of 1914
i. Directly outlawed anticompetitive practices- those acts that lead to monopolization
ii. Addressed activities that could lead to monopolies
iii. Specific and preventative
iv. Required that actions have a significant probability of reducing competition, probably
harms to competition
v. No criminal liability for violations, only lead to civil or monetary damages
vi. Administered by the Department of Justice (DOJ) in both civil and criminal enforcement
(and can be utilized by private citizens)
vii. Can be enforced by the Clayton or FTC but only deals with civil violations
viii. Violations
1. Price Discrimination- occurs when firms charge different prices for the same
good and the differences in prices cant be explained by differences in cost
justification. Strengthened this part with the Robinson-Patman Act of 1936
2. Exclusionary Practices- where 1 firms is given the exclusive right to the exclusion
of others if the effect substantially lessens competition
a. Forestall competition, therefore anticompetitive
b. SOME exclusive dealing arrangements are a threat to market
competition only when the arrangement applies to the substantial share
of the products in a particular market
3. Tying Arrangements (Tie- in Sales Agreements)- when a seller requires buyers to
purchase a tied product as a condition of purchasing the tying product
a. Apply ONLY to the exchange of GOODS, not services/land
ix. Mergers- joining 2+ companies into 1
1. Best-known activity of DOJ and FTC (review and prevention of mergers)
2. Accomplished by having 1 firm acquire another firm directly, or combine of
assets into a new firm
3. Mergers that lesson competition reduce consumer choice and efficiency of
markets for the sake of profits
4. DOJ and FTC examine:
a. Firm Concentration- proportion of the relevant market served by the
largest firms in the market (not always appropriate basis for determining
that a potential merger will lessen competition)
b. Barriers to Entry- any characteristics of the relevant market that make it
difficult for new firms to enter; also check availability of a substitute
products and ability of new firms to enter concentrated markets
i. Common barriers to entry:
1. Licensing requirements, large-scale investments
(manufacturing plant development and construction
costs), access to scarce resources
ii. If potential competitors cant offer their products to buyers,
market may be made substantially less competitive by a merger
between existing firms
5. Types of Mergers
a. Horizontal- same market
b. Vertical- two firms in the same chain
 c. Market Extension
i. Geographic- same product, different geographic market
ii. Product- similar, but not exact same, product
d. Conglomerate- unrelated markets
6. Principal benefits of competitive markets
a. Prevent suppliers from charging exorbitant prices
b. Encourage them to improve their products
7. Interlocking Directorates- having the same people/controlling interest sit on the
competing corporations board of directories
a. Based on the profits of the competing companies or competitive sales
totals of the two companies (amounts set by FTC)
c. Federal Trade Commission Act of 1914 (Catch-all Law)
i. Created the Federal Trade Commission
ii. Regulated unfair methods of competition and deceptive acts or practices of competition
iii. Can literally be used to regulate all forms of anticompetitive behavior not covered by
Sherman or Clayton
d. Enforcement
i. 2 regulatory agents that enforce antitrust law; DOJ and FTC
ii. Private parties can enforce most provisions of Sherman and Clayton, but only DOJ can
enforce penalties of Sherman
iii. Private Parties (non-governmental entities; individuals or businesses)
1. If an Individual brings a lawsuit under Sherman or Clayton, entitles to treble
damages, attorney fees, and court costs (if successful)
2. Cant file under FTC

iv. Criminal Sanctions

1. If criminal sanctions brought by the DOJ under SHERMAN (only), can result in
3 years of jail, $350k fine (individual) & $10mil fine per violation (corporations)
2. Private Parties cant bring criminal actions
v. Civil Action by the Govt
1. Under Sherman, govt can seek injunction
2. FTC and DOJ can seek civil damages (and treble if successful)
3. FTC can investigate suspected business dealings, hold hearings, and issue
cease/desist orders, prevent mergers, assess substantial civil penalties
4. Civil Actions can be sought by either individuals or govt under Sherman OR
Clayton, and both can receive treble damages
vi. Remedies Available
1. Injunctions, monetary damages, can be ordered to divest a subsidiary
e. The Courts and Antitrust Analysis
i. Two Rules: Per Se and Rule of Reason
ii. *** CHART ***
f. Mergers
i. Pre-Merger Notification: Hart-Schot-Rodino Antitrust Improvement Act requires pre-
merger notification to the DOJ and FTC, only applied to marge mergers (>$70mil) gout
can sue to stop the merge (Clayton)
 ii. Govt Response to Pre-Merger Notification: Under Clayton (Celler-Kefauver) business
cant hold stock/assets in another business if itll lesson competition.
1. Need to determine Market Power:
a. DOJ/FTC establish merger guidelines (w factors thatll help decide)
i. Concentration of Market Power- HHI
ii. Also look at ease of entry, economic efficiency, financial
conditions, politics, etc.
2. Market Power- Ability of 1+ firms to profitable maintain prices above
competitive levels for a significant period of time
3. Market Share- % of the relevant market controlled by the firm
4. Product Market- Market of interchangeable products, want to have enough
producers so that one doesnt affect the entire market
5. Geographic Market- Where the products are sold (influenced by the price of
product)
6. Relevant Market- Product market + geographic market
iii. Once a Prima Facia Case is Made by Govt
1. Defendant must convince the court that the proposed merger doesnt have
competitive effect OR
2. There is a defense thatll allow the merge
a. Failing Firm Defense
b. Lack of Power Defense
g. Exceptions
i. Natural Monopolies- total production costs for a single firm is less than others in market
1. Can sustain itself by simply charging lower prices, not excluding competitors or
using anticompetitive practices)
2. Governmental/public utility commissions set prices to ensure that the benefits of
lower production costs are passed along to consumers
ii. Individual Exceptions
1. Labor Unions (Clayton)
2. Agricultural Cooperatives/Associations (and commercial fisherman)
3. State Action Exemptions (if state clearly articulates/actively supervises the policy
behind its actions[Parker v Brown])
Chapter 8 Labor-Management Relations
History:
- 19th century-20th century:
o Free Market/Laissez-faire economic climate in the US (individualism, great frontier)
o Employment-at-will: An employee could quit/be fired from their job for any reason.
o No need for labor unions
- Mid-1800s century:
o American economy started moving away from agrarian roots/small business because:
Railroad
Thousands of immigrants coming to America
From Europe, where labor unions were already flourishing and socialism
o 1886, Samuel Gompers was elected to the Presidency of the:
 AFL (American Federation of Labor) Union focused more on the business of winnings
its members increased wages benefits than on social/political goals. Tried to organize
skilled workers and only got involved w politics only to help its organizing/bargaining efforts
More business unionism than social unionism
Business community fought his activities in courts using the Sherman Antitrust
Act of 1890, but didnt get his activities declared illegal
Got the US Congress to enact the Clayton Antitrust Act specifically excluded labor
unions from US antitrust laws, but continued to face employer resistance and relative
worker apathy (didnt care)
- Roaring 20s
o No need to join a labor union
o Employer resistance and worker apathy due to:
Yellow Dog Contracts: Contracts where an employee, as a condition of taking a job, agreed
to not join or engage in any union organizing activities
Courts upheld these contracts pursuant to the doctrine of freedom on contract
Black Listing, and unions werent being effective
o Stock Market Crash of 1929 and The Great Depression
Dynamics changed, laissez-faire no longer seemed appropriate
FDRs New Deal Administration asked Congress to pass pro-union measures (to redress
the market failure-breakdown or failure in the general free market economic system):
Norris-LaGuardia Act of 1932 (Anti-Injunction Law) 1st national pro-labor law,
only did 2 things; outlawed yellow dog contracts (free market freedom of
contract between employers and employees seized to exist) AND made it
difficult for employers to get injunctions stopping labor union activity activities
o Did NOT directly sanction (authorize) the development of labor unions
- Wagner Act of 1935 (National Labor relations Act [NLRA] or Magna Carta of the American Labor
Movement)
o Pendulum swings to full pro-union
o Explicitly stated that employees have to right to self-organization, to form, join, or assist labor
organizations, to bargain collectively through representatives of their own choosing, and to engage
in other concerted activities for the purpose of collective bargaining or other mutual aid or
protection
o Policy of the US to encourage employee collective action and bargaining
o Made labor unions CLEARLY lawful , adopted govt policy of encouraging workers to join unions
and engage in collective bargaining
Scope of the laws coverage:
EXCLUDES:
o Virtually all government employers (State and Federal)
o Railroad employers and Airlines (Covered by the Railway Labor Act)
o Domestic Servants (maids, butlers, etc.)
o Individuals employed by wife or parent
o Agriculture Workers
o Supervisors- any individual having authority, in the interest of the
employer, to hire, transfer, suspend, lay off, recall, promote, discharge,
assign, reward, or discipline other employees and does do not out of
routine but requires the use of independent judgement
 o Independent Contractors- FedEx Corporation drivers
o Makes Company Unions illegal
o Unions basically ran by the employer
o Unlawful for an employer to dominate or interfere with the formation or
administration of any labor organization or contribute financial or other support to it
o Labor Organization: Any organization of any kind, or any agency or employee
representation committee or plan, in which employees participate and which exists for
the purpose, in whole or in part, of dealing with employers concerning: grievances,
labor disputes, wages, rates of pay, hours of employment, or conditions of work
o Defines Employer Unfair Labor Practices
Ulp, employer to interfere with, restrain, or coerce employees in the exercise
of their rights to form labor unions and engage in collective bargaining
Cant discriminate in hiring/rewarding employees based on their union
affiliation
Cant refuse to bargain collective with duly chosen employee representatives
Surface Bargaining- Employer has no real intention of agreeing on anything and
is simply going through the motions of collective bargaining
o Sets up Election of Labor Union Representation
First determine the relevant and appropriate bargaining unit at issue
30% of employees need to sign authorization cards expressing their interest in
unionization (if so, a secret ballot is held)
Representation elections are conducted on a majority rule basis for the union
If less than the majority rule votes for the union, cant attempt to reorganize til
at least a year later
o Employee Rights (union and non-union)
o Specifically legalizes unions and ability to form unions
o Collective Bargaining
Good faith bargaining: must occur with respect to the mandatory subjects:
Wages all forms of compensation (pensions, fringe benefits, profit
sharing, and stock purchases incentives)
Hours seniority, work-loads, and disciplinary measures
Other conditions- union status, job security, subcontracting, volume
of production, plant closing, responses to technological change
Strikes and lockout in support of proposes NOT included under
mandatory subjects are considered unfair labor practices
Doesnt need to be ulp IF the UNION doesnt want to do it
o Concerted Activities, social media
o NLRB v Washington Aluminum: non-unionized workers walked out bc of inadequate heating, US
Supreme ct ruled that they couldnt be fired because law protected non-unionized employee concerted
activity, when such activity was more mutual aid or protection
o Collective Bargaining Agreements- Labor contract with the employer covering the
employees in the given bargaining unit. Usually 3 years, in specific detail of the
employment relationship governing the given employees during the contract
Grievance Procedure employees with complaints have a process where they
can air their concerns, leading to labor arbitration: having an outside third party
hear evidence regarding the grievance and then rendering a binding decision
 Provide that employees can only be fired for just clause: overrule the
employment-at-will, employers cant just fire someone at will
anymore
No Strike Clause- labor agreement agrees not to strike during the term of the
contract in exchange for a grievance procedure
o Creates the National Labor Relations Board Federal agency that administers labor law
Members are appointed by the President and confirmed by the Senate
Broad administrative powers under the NLRA
General Counsels prosecutes violations under the law
Board hear and decide cases; serves and hears cases
Appeal to the Court of Appeals, very political
o The Right to Strike
o Once the contract expires, unions are free to go on strike over mandatory bargaining
issues.
o US Supreme Court Case- NLRB v Mackay Radio & Telegraph: employer is free to
hire/replacement workers (scabs) for striking workers (but causes problems w skilled
v unskilled workers)
o If its a worker safety strike though, you can strike at any time and they cant replace
you
o Remedies
o NLRA is remedial, not a punitive statue make whole
o Puts aggrieved party in status they wouldve been in if there was no violation (reinstate
employee to their old job with lost wages and interest)
o RESULT - Labor Unions were in total control, Wagner was VERY Pro-Union, WWII increased
demand for goods and thus for labor; decrease in workers and the result was that Unions got
greedy, result was backlash of public opinion against the Labor Unions
- Taft-Hartley Act of 1947 (Labor Management Relations Act or American Slave Labor Act)
o Result of Public Opinion against the Labor Unions
o Purpose to Limit/Cut-back Power of the Unions
o Bitterly Opposed by Unions
o Vetoed by President TrumanOverridden
o Tries to be NEUTRAL; fed govt took no position either way on the issue of unionization (economy
had rebounded so no longer a necessity to correct a market failure)
o Constituted Provisions amending the NLRA (now both the Wagner & Taft-Hartley Act)
Right to refrain from joining unions or engaging in other forms of self-organization
Right to Work laws gave employees the right to work without having to join a union
-2/3 of the states have passed r2w laws (the passage in Michigan recently is
seen as evidence of the decline of unions)
Deter union organization efforts in those states because unions winning labor
elections and are paying money to represent employees but the employees are
not paying any union dues (Free Riders);unfair
Outlaws Closed Shops(had to join union), allow union shops/agency shops
Duty of Fair representation (in Wagner) is when the union represents all of the
employees in the bargaining unit and they must join the union
 Free Speech states that both employers and unions are free to speak out during labor
election campaigns as long as it doesnt contain any threat of reprisal (revenge) or force
or promise of benefit
unfair labor practice for a union to refuse to bargain fairly with an employer
- Landrum-Griffin Act of 1958
o Corruption had infiltrated Unions>Unions had formed alliances with Crime Syndicates (Mafia)
o Purpose of law to regulate the internal affairs of the Union; cut back labor union power
o Major Provisions
o Allows members and government to regulate the monetary reserves, financial affairs, and the
election of union officers of the Unions (by the Department of Labor)
o Allows NLRB to oversee election of union officers which had to be democratic with secret ballot
o Unions are among the most highly regulated private organization in the country
o First President to enforce them was Kennedy through his attorney general
Very Active in prosecuting labor leaders, both Kennedys will be assassinated
o Employers could propagandize against the Union
o Outlaws Secondary Boycotts unless Ally Doctrine used
o Outlaws Featherbedding
o Gives an 80 Day Cooling Off Period
o Gives Employer right to use a Lockout
o Prevented charging new members higher fees
- Future
o Unions have declined since Taft-Hartley due to:
Big loss of manufacturing jobs to China/Mexico (loss of business/workers to foreign)
Lack of support by Congress
Internal squabbling within the union movement itself
- Public Sector Units
o Unions were making progress in state level, but have started to change policy and reduce the rights
of public employee unions
o 2012 controversial legislation was enacted in the State of Wisconsin reducing the rights of public
employee unions in that state
Chapter 9 - Business Entities
1. Articles of Dissolution
a. Once the winding up process is over, file and then the state official shall issue a Certificate of
Dissolution: which terminated the LLC
2. Certificate of Organization
3. Close Corporations /Closely Held Corporations/Family Corporations/Privately Held Corporations
a. Created under state corporate statues, not traded in the public market
b. Limited Liability, can be owned by as few as one shareholder; but must follow corporate structure
4. Corporation
a. Taxed separately, double taxation, limited liability, limited to the extent of their investment
5. Limited Partners (LP)
a. Created by state statute
b. Requires a filing of documents to create- Certificate of Limited Partnership
c. Part partnership, part corporation
d. Two classes of partners:
 i. General Partner- unlimited liability, fiduciary duty to the LP and limited partners
ii. Limited Partner- limited liability, acts as only an investor
6. Limited Liability Corporations (LLC)
a. From Germany, used in Europe and Latin American before US
b. Creation:
i. Created by filing Articles of Organization w the proper state official
1. In Texas, Articles of Formation
ii. Once filed, state official will issue a Certificate of Organization (birth certificate)
c. No double taxation, shareholder meetings are generally not required, flexibility in mgmt.
d. BUT, laws are not uniform among the different states, cant be used for state banks insured by the
FDIC, joint stock associations, certain foreign entities, and insurance companies
7. Limited Liability Limited Partnerships (LLLP)
a. Type of Limited Partnership that tries to combine the LP and LLP
b. General Partner has the same liability as the limited partner (limited liability)
8. Limited Liability Partnerships (LLP)
a. First used by only professionals, creatures of state law, created to avoid some earlier problems w
the LLC,
9. Manager-Managed
a. Members can choose to have managers instead (create agent/principal relationship)
10. Member-Managed
a. Governed by the members of the LLC
11. Operating Agreement
a. Governs the internal affairs of the LLC and the relations among members, managers, and officers
12. Organizer
a. The people who organize the LLC and can be future members/professionals hired to organize the
LLC
13. Partnership
a. Unlimited liability, least favorite, can raise additional capital
14. S Corporation
a. Closely held corporation that meets IRS requirements (individuals w limited exceptions)
b. Profits are passed directly to shareholders- avoids double taxation
c. Overshadowed by LLC and LLPs
15. Sole Proprietorship
a. Oldest and simplest business entity; no formalities to creating sole proprietorship
b. Owner is business, unlimited liability, difficulty of selling business/raising capital
16. Winding Up
a. LLC must wind up before filing the Articles of Dissolution
Chapter 10 Corporate Governance
State law, separate legal entities (like LLC/LLP), double taxation, big companies (Walmart)
1. Publicly Traded Corporation
a. Shareholders own the corporation
b. Can hire professionals-
c. Corporate Governance- control the people that control your money, governed in the best interest
of the shareholders, cant please everybody.
 i. Formulating, overseeing, and monitoring the processes by which a corporation is
governed in order to shape its strategic direction and performance , define its mission and
scope, and assess its interactions with affected groups
ii. Formulating, implementing the rights, responsibilities, and accountability of (3) groups
within the corporation (stockholders, board of directions and managers)
d. Transfer of ownership rights
i. Shareholders can transfer their ownership
ii. Done own their own
2. History
a. Connecticut 1837 (catch on late 1800s)
b. State law, Delaware dominates
3. Creation of Corporation
a. Filing Articles of Incorporation
b. Filed w state official (Secretary of state in Texas) and pay fee
c. Corporate charter issues (birth certificate)
d. Charter in one state can be used in another state
4. Corporate steps
a. Corporate Charter
b. Bylaws
i. Can be amended, controlled by shareholders
5. Rights of Shareholders
a. Can vote
b. Priority stock
c. Proxy Solicitation- give the right to vote to somebody else, governed by the SEC under the sec
exchanged act, sets a proxy list agent, difficult to do, rarely works, any outsider can do this
d. Shareholder Proposal Rare ; permission of a percentage of shareholders to do this, only larger %
of shareholders can hold a proposal
e. Derivative Actions Rare ; need the backing from a number of shareholders, even when you get
that you still need to post a bond, need to pay the other sides expenses
6. Basic Structure
a. One vote per share
b. Large shareholders ultimately decide who the board of directors are, and theyll listen to the large
shareholders who voted for them
7. Principal-Agent Problem
a. Agency Law; fiduciary duty, board of directors need to do whats right for the corporation. NOT
the shareholders
b. As long as youre doing what is right at that point in time, even if its a wrong decision you cant
get in trouble.
c. Can: Directly monitor; impose control systems; develop a system of rewards/punishments/ and
utilize legal remedies.
8. Corporate Expectations
a. Corporate Executives want to do whats best for the corporation, reputation for being good at what
you do.; max their own pay, keep their positions and way of life
9. Private Solutions to Corporate Governance
a. Pay them depending on how well the company is doing
b. Install outside directors, can keep themselves in power but bring in the experts, who really know
whats best for the company
 c. Market for corporate control
10. Public Solutions to Corporate Governance
a. Fiduciary duty of officers/directors
b. Hold d/o personally liable for corporate losses
c. Duty of Care
d. Business Judgement- as long as you act in the way you were supposed to act, you can do business
with your company, just dont do it. (San Antonio example) Make correct decision after being
informed of the (correct) information
i. Holding directors personally liable in situations where hindsight reveals that they made a
mistake
ii. Without it, worried about being held personally liable even if the surest gamble failed
11. Stock Market Crash of 1929
a. Shares of stock, securities; no trust
b. No real regulation, companies couldve been overvalued, conman couldve done anything
c. Federalist System; state are laboratories, FDR picked Kansas to give them disclosure so they would
know who to trust, passed the Securities Exchange and Securities Act LEARN DATES*
12. Securities (Stocks and Bonds) Act of 1933*** Memorize date
a. Security- stock, bonds, debentures, or anything commonly known as a security. OK~
b. Howey Test defines what is a security,
c. Must file registration statement with the SEC
i. Registration Statement
1. Prospectus (for public)/ Regulation SK (for SEC)
d. Goes by Blue Sky Laws
e. Is the sale of the security the first time its ever been sold
13. Securities Act of 1934
14. Board of Directors
15. Bond
16. Corporate Officers
17. Corporate Managers
18. Corporate Opportunity Doctrine
a. One form of fiduciary loyalty owed by the officers and directors to the corporations
b. Mandates that should an officer/director discover a business opportunity, he must first present it to
the corporation
19. Duty of Due Care and Diligence
a. Directors and officers must act in good faith and exercise a level of care that an ordinary prudent
person would under similar circumstances
b. Does NOT require the right decision
20. Insider Trading
a. Not to profit from trading in the companys stock based upon information they have acquired as
agents of shareholders
b. Undermine publics confidence in the integrity of the public capital market
21. Institution Investor
a. A large, professionally managed provider of capital (pension fund and insurance company)
22. Know-thy-customer Rule
a. Whether particular investments are appropriate for a client before recommending it to him
23. Market for Corporate Control
 a. When the executives are greedy so the business suffers and attracts other companies wholl want to
buy it out
b. Friendly Offer- When the acquiring company (company that want to take over the target company)
asks the targets board of directors to enforce the tender offer and recommend its acceptance by the
shareholders, if the board concurs= offer was a friendly offer
24. Proxy/ Proxy Contests
a. Proxy: written authorization by the shareholder, designating an agent to vote on the shareholders
behalf at the shareholders meetings
b. Proxy contests: means for outsiders (individuals not connected with the incumbent management
team) to take control of the corporation by convincing shareholders to vote for their slate of
directors
i. Unlawful for either side in a proxy contest to submit a proxy statement that contains false
or misleading material fact
25. Registration Statement
26. Securities Exchange Commission (SEC)
27. Security
28. Separation of Ownership and Control
a. Created potential disincentives on the part of the mangers
b. Because of fractured ownership (principal-agent), no one shareholder find it in his self-interest to
monitor actively the performance of the company
29. Shareholder/Shareholder meetings
a. Shareholders want the board of directors to max the value of their shares of stock in the company
30. Short-swing Profits
a. A capital gain made by buying and selling the company stock within any six month period gain
must be returned to the companys treasury
31. Stock
Chapter 11
Role of Advertising in Markets
1) Communication that businesses offer customers in an effort to increase the demand for their products
2) False Advertising- an advertiser is not honest/forthcoming in the advertising which creates both the consumer
and the competitors
Private Remedies for False Advertising
3) Common law
a) Contract:
i) Advertising was an offer to contract (Express Warranty)
b) Torts:
i) Can recover for misrepresentation but NOT for puffing
ii) Disparagement is false ad attacks competitors product
4) Statutory Law
a) Lanham Trademark Act of 1946
b) Falsehood about your own product
Federal Trade Commission (FTC)
5) Includes:
 Unfair advertising- Can be unfair without being deceptive, FTC enforcement has proven to be
controversial and difficult
Unfair if:
Unfairness is substantial
The Unfairness is not outweighed by countervailing benefits to
consumers/competition or Injury must be of such a type that the consumers
could not reasonably avoid (very controversial)
a) Deceptive advertising- A representation/omission or practice in advertising that is likely to mislead a
reasonable consumer and result in material harm to the consumer (Usually informal, bait and switch,
Deceptive Quality Claims
6) Remedies: Cease and desist orders OR Corrective Advertising
7) Deceptive
a) FTC will recognize something to be deceptive IS it finds that there is a representation, omission, or practice
that is likely to mislead a reasonable consumer and result in material harm to the consumer
8) Deceptive Price Advertising
a) bait and switch
9) Deceptive Quality Claims
a) First, must determine what claim (if any) is being made by the advertisement Then, the identified claim
must be shown to be deceptive
b) Standard of a reasonable consumer
10) FTC Regulation of Unfair Advertising
a) Regulates advertising practices that it find to be unfair, even though they might not be deceptive or
fraudulent
b) Injury must satisfy three tests:
i) Must be Substantial
ii) Not outweigh by any countervailing benefits to consumers/competition that the practice produces
iii) Must be an injury that consumers themselves could not reasonably have avoided
Chapter 12- Employment Regulation
Employment Relationships:
11) Employer- Employee (Master-Servant)
12) Employer-Employee with an Agency Relationship
13) Employer-Independent Contractor
Employment-at-will
14) Employee can quit at any time (Common Law)
15) Payne v Western & Alt
16) Employer can fire the employee for almost any reason and they dont have to give a reason
a) Except:
i) If the employee has a contract that will take the relationship under contract and employment-at-will
does not exist
ii) Express Contract- labor contracts
iii) Implied Contract written/oral and based on employers past actions, statements, policies, practices
iv) Implied Covenant of Good Faith and Fair Dealing
b) Termination for Good Clause
i) An Employer can normally terminate an employee when has just cause of:
(1) Incompetence of employee
 (2) Employer has financial hardship
(3) Insubordination by Employee

Chapter 14
1. Pollution: Something that is not where its supposed to be
a. Court enforces the property rights accompanying the ownership of land through a system of tort law
b. Govt uses influence to seek voluntary compliance with emission standards by businesses
c. Congress passes broad legislations that mandate reduction of pollution
2. Tort Law- two theories
a. Trespass to land- any unauthorized physical intrusion/entry upon the land of another( no actual injury
to the land is needed and can only recover damages from past invasions)
b. Nuisance- unreasonable interference with ones peaceful enjoyment or use of land(sight, odor, sounds,
smoke,, vibrations, height of building)
c. Boomer v Atlantic Cement Company- Permanent injunctions again polluters are difficult to obtain; no
available tech that can eliminate nuisance/trespass= plant would have to shut down; economic cost
cannot be ignored
d. Permanent Damages- one-time compensation for all future harm caused by nuisance
e. Permanent Injunctions- public nuisance, only public officials can bring the suit
3. Voluntary Compliance
a. Superfund- waste dumps leaked into groundwater tables, clean up these dumpsites, funded by
taxpayers.
b. Toxic Release Inventory- provides info to the public (from self-reporting of emissions by firms)
c. Use media and citizen groups to pressure polluters
4. Legislation
a. Command-and-Control
i. Congress place emission limits on the amount of certain wastes that may be disposed
1. Advantage: All producers are treated equally Disadvantage: Dif to enforce
ii. Tax certain emissions: allow firms to decide whether to cut emissions or pay tax (hard to set)
b. Tradable Permits System
i. Can be bought and sold (auctioned) determining optimal amount is a problem
5. Competition can drive pollution cheaper
a. (Hard to reach an agreement w Congress and what do you do with the waste?
6. History of Environment Movement
a. Boston- water system 1652
b. Henry David Thoreau Walden, of life in the woods
c. John Muir- Mountains of California
d. Roosevelt- Conservation President, yellowstone first national park
e. Antiquities Act- proclaims national monuments
f. Civilian Conversation Corp (CCC)- New Deal Era, helped make public aware of conservation
g. Tennessee Valley Authority (TVA)- helped control flooding, provided electricity, recreation
h. Post WWII
i. Ecology- migration to suburbs; valuing real beauty and the environment
ii. Literary world was involved
iii. Nixon created EPA by executive order
iv. Congress passed NEPA- required federal agencies to submit Environmental Impact Statements
(EIS) and instructed Nixon to create a council on Environmental Quality
i. EPA
 i. Congress passes laws
ii. Issue complaint, hold hearing in front of ALJ, appealed to the admin of EPA and then the
federal court system
iii. Carol Browner (EPA Admin in 1990s) put detailed records of environmental inspection to
inform citizens as to how and where to place pressure for environment reform
iv. Texas Commission on Environmental Quality (TCEQ) Texas equivalent to EPA
7. Clean Air Act
a. Air pollution between states and regulates air from both mobile sources and statutory sources
b. National Ambient Air Quality Standards (NAAQS)- air quality standards (primary-humans and
secondary-vegetation, climate, visibility, property)
c. State enforces, if not the govt can enforce
i. State enforces by preparing a State Implementation Plan (SIP)- states plan to implement the EPA
standards
1. Divides state into Air Quality Control Regions (AQCRs) and monitors them
a. If they do NOT meet the standards- non attainment areas
b. If they DO meet the standards- attainment areas
d. Mobile Sources of Pollution
i. Automobiles- primary mobile source of pollution
ii. EPA regulates the production of automobiles to ensure compliance with its emission standards
and regulate fuel and fuel additives and service stations
e. Stationary Sources of Air Pollution
i. Requires states to identify the major stationary sources of air pollution & develop plans to
reduce their levels of pollution
ii. Require to install pollution control devices (2)
1. Reasonable Available Control Technology (RACT)- Existing
2. Best Available Control Technology (BACT)- New
3. Factors to consider: cost of equipment/size of polluting company
iii. Over 180 toxic air pollutants- utilize maximum achievable control technology(MACT)
1. Without regard to economic/technological feasibility
8. Clean Water Act
i. River and Harbor Act- first water pollution act
1. Established a permit system
ii. Federal Water Pollution Control Act(1948)
1. Passed by congress, regulate water pollution, updated to the :
a. Clean Water Act of 1972 (amended in 1977 & 1987)
i. Permit system was replaced by the National Pollutant Discharge
Elimination System (NPDES) 1972
1. Still requires a permit but its set by EPA
2. Expanded navigable waterways (intrastate lakes, streams,
coastal, freshwater wetlands)
iii. EPA establishes water quality standards that determine what bodies of water are safe to use for:
1. Public Drinking Water
2. Recreation
3. Propagation of Fish and Wildlife
4. Agricultural and Industrial Use
5. States are responsible for enforcement but if fail to do so, EPA can enforce
iv. Areas of concern:
1. Point Sources:
a. Point from which water pollution comes
b. PS required to install pollution control equipment based on standards(2)
i. Best Practical Control Technology(BPCT)- existing
1. Cost, severity of the pollution, time are considered
ii. Best Available Control Technology (BACT)- new
1. Regardless of cost
c. All dischargers of water pollutants are required to keep records, maintain
monitoring equipment, and keep samples of water pollutant discharges
(subject to EPA review)
2. Thermal Pollution
a. CWA specifically forbids thermal pollution
b. Decreases the oxygen content of the water and can harm fish,birds,animals
c. Major source: Electricity-generating plants/Hydro-electric power plants
3. Wetlands
a. Protects wetlands- areas that are saturated by water where plant/animal life
have adapted.
b. Owner is forbidden from filling, dredging, or draining the wetland until they
received a permit from the Army Corps of Engineers
4. Oceans
a. Marine Sanctuaries
i. Marine Protection Research and Sanctuaries Act of 1972 (Ocean
Dumping Act)
1. Protects oceans from water pollution
2. Established marine sanctuaries at sea
3. Requires a permit to dump in the oceans
4. Usually violated by cruise ship lines
5. Civil penalty $50,000 (if violated intentionally you can go
to prison) or injunction to stop action
ii. Oil Spills (Oil Pollution Act OPA)
1. Clean oil spills within 12 miles of the US shore/ on the
continental shelf/recover costs from those responsible for
the spill (due to Exxon Valdez in Alaska)
2. Strict Requirements:
a. Certificate from Coast Guard to enter US waters
b. Insurance and training of crew
c. All ocean going tankers must be double hulled
d. Pay fee (goes to a clean-up fund)
e. Establish an oil cleanup plan
3. Administered by US Coast Guard
4. Penalties: $1,000 per barrel of spill oil/$25,000 per day
5. Drinking Water
a. Safe Drinking Water Act of 1974
i. Authorizes EPA to establish national drinking water standards
ii. Forbids the dumping of wastes into wells for drinking purposes
iii. Must use the best available tech (BACT) that is economically and
technologically feasible
 iv. Concerns:
1. Underground sources of pollutants
2. Landfills
3. Pesticides
v. Amended in 1996 to give the EPA greater flexibility in establishing
regulatory standards governing drinking water and requires each
supplier to send its customers a statement describing the source of
water, level of contaminants, possible health issues
vi. States are responsibly but EPA can enforce if state doesnt
b. Toxic Substances
i. Federal Insecticide, Fungicide and Rodenticide Act (FIFRA)
1. Amended by Food Quality Protection act in 1996 (pesticides)
2. Administered by EPA
3. Pesticides must be registered with the EPA before they can be sold
a. Epa can deny, certify, limit or suspend the registration
4. Penalties vary:
a. Registrants and Producers, 1 year or fine of $50,000
b. Commercial Dealers, 1 year and fine of $25,000
c. Private users, 30 days and fine of up to $1,000
ii. Toxic Substances Control Act of 1976
1. New Chemicals
2. Manu need to test products and send info to EPA before the product can be sold
3. EPA can require special labeling
c. Hazardous Solid Wastes
i. Resource Conservation and Recovery Act of 1976 (RCRA)
1. Disposal of new hazardous wastes
2. Hazardous Wastes- solid wastes that might cause or significantly contribute to an
increase in the mortality or serious illness or hazardous is handled improperly
(constantly expanding)
3. State has primary responsibility but EPA can enforce
4. Cradle to Grave regulation by EPA
5. Penalties (civil and criminal)
a. $50,000/per/violation, 2 years in prison (both & doubled)
6. Regulated the underground storage facilities of hazardous wastes
7. CERCLA (Superfund)
a. Comprehensive Environmental Response, Compensation, and Liability Act
b. Regulates the cleanup of disposal sites where hazardous wastes were
previously existing
c. Administered by the EPA
d. Epa finds the sites, rate them by severity, then begin cleanups
e. Tort law- imposes strict liability, all who can be a potentially responsible
party (Retroactive- unconstitutional?)
f. Texas Equivalent: Texas Solid Waste Disposal Act (Health/Safety Code)
i. Responsible Party- any operator/owner of a solid waste facility
d. Nuclear Waste
i. Regulates nuclear powered fuel plants/byproducts
 ii. Administered/handled by Nuclear Regulatory Commission (NRC) and EPA from construction,
during operation and disposal of wastes
1. NRC was created by the Emergency Reorganization Act of 1977 and licenses he
construction/opening of commercial nuclear power plants and continually monitors
and operation of those nuclear power plants
iii. Types of Nuclear Wastes:
1. LLW- lower-level waste (radioactively contaminated objects)
2. WIR- waste-incidental to reprocessing (spent nuclear fuel)
3. HLW- high-level waste (nuclear reactor fuel)
4. Uranium Mill tailing- residues remaining after the processing of natural ore to
extract uranium and thorium
iv. Nuclear Waste Policy Act of 1982- federal government is responsible for providing a permanent
site for the disposal of HLW and WIR
v. Low-Level Radioactive Waste Policy Amendments- states responsibility to dispose of LLW within
their borders- Regulated by the NRC
vi. Uranium Mill Tailing Radiation Control Act- stabilize/control uranium mill tailing and prevent
radon (NRC has regulatory environment)
vii. Biggest Concern- disposal of nuclear wastes
e. Noise Pollution
i. EPA to establish noise emission standards that are max noise levels below which no harmful
effect occur from the interference with speech/ other activities
ii. Best Available Technology and economically within reason
iii. $50,000 per day/ 2 years of imprisonment (civil penalties)
iv. National Institute for Occupational Safety and Health
f. Endangered Species Act
i. One of the most powerful and most hated
ii. Can prevent land use WITHOUT compensation for taking the land- NO 5th amendment
iii. Protects endangered and threatened species of animals (species likely to become extinct
throughout all of a large portion of their range and threatened as likely to become endangered
in the foreseeable future)
iv. EPA and Commerce Department designate the critical, protected habitats
v. Real estate developed by the government is prohibited (private owners- SHA)
g. Private Protection of the Environment
i. Right of Action- individuals can personally enforce the laws or petition the EPA
ii. Tort theories- Use tort law- nuisance law (pollution can be a form of nuisance whether it is
physical or intangible)
iii. Interest Groups- Sierra Club & Green Peace

15- Global Environment

1. Intro
a. GDP dominated by- US, Europe, Japan (China)- changes and varies from time to time (after
WW2)
i. Developed countries are a major source of highly skilled workers, innovative technology,
and new capital
ii. Most important market for the goods produced by developing countries
2. Emerging Markets
a. BRIC Nations- developing nations that are starting to become world leaders(emerging):
i. Brazil- natural resources & dominant economy of south America
ii. Russia- oil
iii. India- 2nd most populous country/ largest democracy
1. Reduce trade/investment barriers & lessened regulatory burdens on private
sectors >>> Multinational companies & #2 computer software producer
iv. China- communist country, can nationalize everything- low-cost labor/free market
society/manufacturing
3. Four Tigers (Export Promotion Growth Strategy)
a. Four entities(Tigers) used Export Promotion Growth; lots of workers and materials
i. Hong Kong
ii. Taiwan
iii. Singapore
iv. South Korea (biggest success)
b. Export Promotion Growth Strategy- relying on exports as its source of growth
i. More money made, higher waged paid, more taxes, better infrastructure (NIEs)
c. Copied them: Malaysia, Thailand, Indonesia, Philippines
d. Also called: Newly Industrialized Countries (NICs) / Newly Industrialized Economies (NIEs)
4. Africa (unstable government, disease, dark continent, but maybe some good resources)
5. South (Latin) America (Import Substitution Growth Strategy)
a. Buy local, dont involve international trade/Panama
b. Through tourism (Brazil Computers)
c. Import Substitution Growth Strategy- stimulate the development of domestic manufacturing by
raising barriers to imported goods
i. Thus, local manufacturing industries will have the opportunity to develop and grow
ii. Only works for short-term benefits
1. Domestic markets are too small
2. Production costs are too high (high prices)
3. Hurts the countrys economy
d. Late 1980s began to open up their economies, was a hot market, but then slowly burned out
6. Foreign Exchange Market
a. Currency:
i. Specify when youre going to make it payable and in what currency when youre trading
internationally
ii. International business required exchange those currencies w others
iii. International Monetary System- provides the framework for the exchange of one currency
into another and allows firms to do this at a low cost and with little risk
iv. At the center of the foreign exchange market are dozens of large international banks,
trading between these banks establishes the whole-sale price of foreign exchange
v. Foreign exchange market is dominated by traders located in London, New York, Tokyo
vi. Blending of two types of exchange rate systems:
1. Flexible exchange rate- the value (price) of a currency fluctuates according to the
supply/demand for that currency in the foreign exchange market
a. Best determined by the marketplace (but they fluctuate a lot)
2. Fixed Exchange Rate System- government promises that it will hold the value of
its currency fixed relative to some major currency (dollar or euro)
7. Forms of International Business
a. Most important forms are trade and foreign/international investment
b. Trade*
i. Importing/Exporting
1. Vital to the prosperity and profitability of citizens, nations, and firms
2. Exporting generates economic activity/ employment in the home country
3. Importing generates competition/stimulates local manufacturers/improves
quality and price/ lower the cost of production
ii. Benefit both sides/spur competition
c. International Investments*
i. When a resident of one country supplies capital to a resident in another country (does the
investor expect to actively manage the organization or not?)
ii. FPI- Foreign portfolio investment- less than 10% of business of a foreign corporation
iii. FDI- foreign direct investment- built/operate plant and sell in that country (more than
10%)
1. Actively manage
2. Primary destinations for the US are in developed countries
iv. Some countries can be both the primary sources(providers)/destinations(recipients)
v. MNCs (Multinational Corporation)
1. A firm with extensive international business involvement (usually
owning/managing value-adding activities in several countries)
2. Engage in extensive FDI as a means of exploiting some competitive advantage
that they may possess (superior tech, well-known brand-name, etc.)
vi. A strong market presence in each of the worlds market places is critical to its survival and
prosperity (Caterpillar and Komatsu)
d. Licensing sell license to make , NBA/NFL gear (pay for it like in the US)
i. One firm may permit a firm in a foreign country to use its intellectual property (intangible
assets like trademarks, brand names, copyrights, etc.)
e. Franchising (pay for it like in the US- like the licensing) H&R Block
i. Permit a firm to utilize its operating systems/ brand names, trademarks
f. Management Contracts operate the business that you built (hotels)
i. Provide management services/operating facilities
g. Contract Manufacturing hire a foreign firm to make your goods for you, clothing/shoes (Nike)
h. International Joint Ventures one company from one country joint w another company from
another country for a specific purpose, NOT A MERGER
i. Combining the strengths of one company w another in international business
ii. Cadillac Adelante
iii. General Mills and Nestle created Cereal Partners Worldwide to market general mills cereals
in Europe
i. Firms can use a combination of the forms of international business activities
8. Growth of International Business Activities (After WW2)
a. Attracted to the international market due to the large size and rapid growth
b. Most important firms of international commerce- Trade and FDI
c. Reasons for Growth
i. Competition (keep up with rivals)
ii. Expand size of customer base
iii. Acquisition of resources (work 24/7)
 iv. Technological/Government trade policy changes (innovations in data processing)
d. Law of One Price- the price of a good in the long run must equal the same in all markets (minus the
cost of shipping)
9. Trade- voluntary exchange of goods, to benefit both sides (both parties must be better off w the trade)
10. Law of Comparative Advantage you make what youre good at
a. Trade promotes the efficient allocation of resources and enhances the productivity of the nation
through specialization
b. Comparative Advantage-a country should focus on producing/exporting goods[trade
freely]/services that theyre more productive in than other countries (and vice versa)
c. By doing so, countries are able to produce more of everything and citizens have more to consume
than they would if trade were limited by trade barriers (specialization by trading)
11. Free Trade v Fair Trade Argument
a. Free Trade- no (minimal) government interference with international trade
b. Fair Trade- government plays as referee because other countries dont play fair
i. Direct subsidies, tax, cut-rate financing programs, govt-govt negotiations
12. Trade Barriers
a. Tariffs
i. Import tariff- tax on goods you import into the country
ii. Export tariff- tax on goods that are being exported from the country
iii. Transit Tariff- pay to go through the country
iv. Ad Valorem tariff- calculated on the basis of the goods value
v. Specific tariff- per unit basis (sugar)
vi. Compound tariff- combine if you want to- combination of value and unit
vii. Purpose: source of revenue and trade barrier
b. Quotas
i. Numerical limit on the amount of a good that can be imported into the country (limit on
what you can bring in)
1. Absolute Quota-specific quantity
a. The most binding is one that imposes an absolute ban of the item
2. Tariff-Rate Quota- 1st quota= lower tariff & 2nd quota= higher tariff
a. Sugar*- maintain the price of US-made sugar above the world price
c. Non- Quantitative none-tariff barriers (NQTNBs)
i. Sneaky, try to protect domestic business but controversial
ii. Not quotas or tariffs, difficult to change
iii. Embedded in legal/bureaucratic procedures
1. Product and Testing Standards- can be used as a trade barrier (Japan snow)
2. Public Procurement govt puts rules that give their own companies better
chances, brazil computers (at higher price) ex. Brazil 12% bidding preference
3. Local Purchase Requirement- use MY raw materials/workforce (in the country)-
French television show (final product must have a % of local content)
4. Access to Distribution System- ship the goods over there and keep them in the
port, scared of their reaction. (Blocking access to existing distribution systems)
a. Japan auto-dealers refusing to handle American cars to not jeopardize
their relationships w the Japanese auto industry)
5. Regulatory Procedures- can be sided against another country
a. Imposing a higher excise tax on foreign alcoholic beverages than domestic
alcoholic beverages
 6. Investment Controls- ban/limit FDI
a. Airlines limit 25% of foreign investment in domestic airlines
7. Public Choice Analysis- Domestic companies that go out of business. Nations of
the world are very good at developing policies to promote domestic home
industriesdomestic companies demands it on behalf of themselves and he
public is either unaware/apatheticdont get a policy of what is best for the
country but a policy of that is best for powerful companies
a. Policies that promote the interests of their home industries inevitable
make the domestic economy/general public worse off
b. Jones Act- bars foreign ships from transporting cargos from one US port
to another,
c. Definition: Special interest groups are more willing work for the passage
of laws that favor them than is the general public willing to work for the
defeat of such laws
d. The development of a nations trade policy is usually the result of the
interplay of domestic political forces/special interest groups
Chapter 16 International Cooperation to Promote Global Prosperity
Beggar thy neighbor- Germany built down their neighbors so they could go up (Post WW1)
Devalued their currencies/ raised their tariffs/high unemployment (only worked in the short-run)
Prolonged and deepened the Great Depression
Aftermath of WW2:
1. Bretton Woods Agreement: (Late 1944) Allies nations met in Bretton Woods, NH to avoid the
problems created after WW1
a. Created:
i. International Bank for Reconstruction and Development (IBRD)- World Bank
1. Set up w funds to rebuild ALL of Europe
2. Rebuilt Europe
3. Marshall Plan- US sponsored aid program to restore the economies of US
allied, non-communist governments of Western Europe
4. Today: promote loans to 3rd world countries, long-term loans w little
interest rates
ii. International Monetary Fund (IMF)
1. Stop devaluation of currency (beg-thy-neighbor)
2. Oversaw the functioning of the new international monetary system (dollar-
based fixed exchange rate system)
3. Tied to the US dollar
4. Ended in 1871, now its an economic crisis fund,
b. Governing World Trade
i. GATT (General Agreement on Tariffs and Trade) - reduce trade barriers, nations
could negotiate the reduction of trade barriers (not quotas/ NQNTBs)
1. 1947, try to reduce trade barriers:
a. Had to agree to treat other GATT members alike (MFN):
i. (MFN- Most Favored Nation status)
ii. Critical to the GATTs success
 1. Exceptions to the MFN Rule
a. Members of regional trading blocs
(EU/NAFTA) could grant preferences
to their members w/o giving those
preferences to all GATT members
b. Members of GATT could grant
preferential treatment to less developed
countries (LDCs) to aid in their
development efforts
c. Political reasons (US)
b. Reduce trade barriers
i. Trade could be based on comparative advantage
c. Promote multilateral trade negotiations
2. Major factor - reducing import tariffs but NOT quotas or NQNTBs
ii. GATT turned into the WTO (World Trade Organization)
1. More enforcement powers and broader
2. Try to work on one thing at a time, still try to reduce trade barriers
a. HOW:
i. GATS- reduce trade barriers in the service industries
ii. TRIM(-WTO)- set of rules on international investments
iii. TRIP-Protect international intellectual property rights
iv. DOHA Round- agriculture (GATT never interfered with
agriculture stuff) subsidies and tariffs, liberalizing trade in
services, improving access of pharmaceutical products to
LDCs
v. (China is a member, and still active)
2. Regional Trading Block- way to get around GATT
a. Countries enter into these to promote economic prosperity and better lives for citizens
b. Agree to treat non-member nations differently than member nations who get the trading block
benefits
c. Trading Blocks represent a middle position on a spectrum ranging from a perfectly open world
economy to a perfectly closed world economy
i. Free Trade Area- agree to lower the trade barriers among themselves
1. Free to deal with non-member nations as they choose
ii. Custom Union- free trade area PLUS members adopt common trade policy w/
nonmember nations
iii. Common Market started as a customs union PLUS an agreement that member
nations will drop all barriers that hinder the free movement of labor, capital and other
factors of production among
1. Goals:
a. Use factors of productions (capital/labor) in most productive
manner>>increased productivity>raising standard of living
iv. Economic Union- Common Market PLUS an intertwining of their economic
integration by implementing similar economic policies
1. Makes the decisions for all the members nations
2. Mixing Macro/Microeconomic policies
3. Member nations give up a significate amount of their national sovereignty
 d. Advantages of a Regional Trading Bloc
i. Expands trade among members
ii. May increase FDI
iii. Creates trade among member nations
iv. May increase International competitiveness of domestic firms
v. Longer production runs, gives domestic company bigger market, easier access to
newer technology, lower cost loans and larger pool of skilled workers
vi. The difference between trade creation( stimulate trade among members) and trade
diversion (decrease trade between members and nonmembers) tells whether or not a
regional economic integration arrangement is beneficial to the world
3. Major Regional Trading Blocs
a. The European Union
i. Accounts for 25% of the worlds GDP , all are democracies and have adopted free-
market-oriented economic policies (one of the worlds largest market)
ii. 28 democratic nations, purpose is to promote peace and prosperity thru cooperation
iii. Norway and Switzerland are NOT members of the EU
iv. Creation:
1. Began as a Common Market- European Economic Community (ECC)
a. Treaty of Rome created the ECC and a common market
i. Six Nations (Italy, France, West Germany, Belgium,
Luxembourg and Netherlands)
2. Treaty of Maastricht (Treaty on European Union) created the EU
a. Established common defense and foreign policies to strengthen
Europe (not successful)
b. Created the Cohesion Fund
c. Economic and Monetary Union (EMU), the common currency, the
Euro- MOST IMPORTANT PART OF THE TREATY OF
MAASTRICHT
i. US & Sweden chose not to use the Euro
ii. Not all nations use the Euro (17)
v. Governing the EU
1. Members are sovereign nations that have surrendered some of their
economic powers to the EU (Government of Governments / Supranational
Government)
2. Four Primary Institutions:
a. European Council of Ministers (European Council) most
powerful, ultimate decision-making power
b. Commission of the European Union sole power to propose
legislation
c. European Parliament weakest
d. European Court of Justice implement US laws and regulations
b. North American Free Trade Area (NAFTA)
i. Worlds 2nd largest trading bloc
ii. A free trade area between USA, Canada, and Mexico
iii. Goal: promote economic prosperity (agreed to eliminate tariffs eventually)
1. FDI Restrictions:
 a. Screwdriver Plant- adding something small (like a screw) to a good
and claiming that it is made in that country, but only a % is
i. Rules of Origin- determines whether a good is qualified to
be categorized as US-made
b. Mexico- Energy Industry
c. Canada- Cultural Industries (broadcasting, book/magazine
publishing, filmed entertainment)
d. US- Broadcasting and Air Transportation Industries
2. NAFTAs Impact :
a. Good for US and Canada but HUGE for Mexico :
i. Employment in exporting sector doubled
ii. However, manufacturing future depends on China
iii. MNCs were moving to China but,
iv. Some are now moving back to Mexico
b. Other countries (Chile) want to join, but refuse to expand to South
America.
4. Mercosur
a. Movement AWAY from import substitution growth theory in an area
b. Mercosur Accord -
i. Custom Union [same as the Andean pact] AND free trade area
ii. 4 founding nations (Argentina, Brazil, Paraguay/Uruguay)
5. The Andean Pact
a. Bolivia, Columbia, Ecuador, Peru and Venezuela
b. Customs Union [same as Mercosur] 2nd major trading bloc
c. In Response to the signing of the Mercosur agreement the Andean Pact rejuvenated their
agreement (nations of AP became associate members of Mercosur and vice versa)
d. Common Regulation on
i. Capital movement
ii. Agriculture
iii. Immigration
iv. Common External Tariff
e. COMBINED THE TWO REGIONAL TRADING BLOCS
i. Customs Union
6. ASEAN ( Association of Southeast Asian Nations) and APEC
a. Asia is home to two important trading blocs
i. Association of Southeast Asian Nations (ASEAN): promote economic and political
cooperation in that region.
1. Thailand, Singapore, Philippines, Malaysia, Indonesia, Brunei (later joined:
Laos, Myanmar, Cambodia, Vietnam)
2. Established a free-trade area (to create economic/political cooperation in
Southeast Asia)
3. Eliminate tariffs
4. Overshadowed by APEC
ii. Asian-Pacific Economic Cooperation (APEC)
1. 21 member nations- most touch the Pacific Ocean
a. Most Members of ASEAN
b. Four Tigers
 c. NAFTA Nations
d. Japan, Russia, China, Australia, New Zealand
2. 40% of worlds trade
3. Still relatively new and developing (lower trade and investment barriers)
1. Convergence Criteria
2. Euroland/ Euro / EuroZone
a. Euroland/EuroZone- area where euro is being used
b. Euro- significantly reduces the currency conversion costs
3. European Central Bank
a. In Frankfort, Germany, is now in control of the EuroZones money supply, interest rates, and
inflation
4. Fast-Track Authority
5. Generalized System of Preferences
a. Exception to the MFN Principle- Members of GATT could grant preferential treatment to less
developed countries
i. US- generalized system of preferences reduces tariffs imposed on imports from LDCs
6. Harmonization
a. Utilized by the European Union, negotiate with one another to voluntarily adopt common
(harmonized) regulations and standards
7. Marshall Plan
a. Brettonwoods Agreement- The US also helped allied, non-communist countries
8. Mutual Recognition
a. European Union- common market- if one member states recognizes a product as an appropriate for
sale, then all other EU members are mutually bound to do the same (some exceptions)
9. Rules of Origin
a. NAFTA; rules determine if a good is truly North American made
10. Screwdriver plants
a. Where a foreign, nonmember makes something in its home country, slip it to member nation pre-
assembled, making it within the trade block (NAFTA)
11. Single European Act
a. Amended the Treaty of Rome, called for completion of the internal market
b. Took 35 years, but most were implemented- making the EC(u) a common market
12. Trade Creation
13. Trade Diversion