The Law, Corporate Finance, and Management - 2012 Book Archive

1137 Pages·2012·12.62 MB·English

The Law, Corporate
Finance, and Management
v. 1.0
This is the bookThe Law, Corporate Finance, and Management(v. 1.0).
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ii
Table of Contents
About the Authors................................................................................................................. 1
Acknowledgments................................................................................................................. 5
Preface..................................................................................................................................... 6
Chapter 1: Introduction to Law and Legal Systems....................................................... 8
What Is Law?...................................................................................................................................................9
Schools of Legal Thought............................................................................................................................11
Basic Concepts and Categories of US Positive Law...................................................................................17
Sources of Law and Their Priority..............................................................................................................23
Legal and Political Systems of the World..................................................................................................32
A Sample Case...............................................................................................................................................34
Summary and Exercises..............................................................................................................................40
Chapter 2: Corporate Social Responsibility and Business Ethics ............................. 44
What Is Ethics?.............................................................................................................................................46
Major Ethical Perspectives..........................................................................................................................52
An Ethical Decision Model...........................................................................................................................63
Corporations and Corporate Governance..................................................................................................66
Summary and Exercises..............................................................................................................................78
Chapter 3: Courts and the Legal Process ....................................................................... 83
The Relationship between State and Federal Court Systems in the United States...............................85
The Problem of Jurisdiction........................................................................................................................92
Motions and Discovery..............................................................................................................................111
The Pretrial and Trial Phase.....................................................................................................................114
Judgment, Appeal, and Execution............................................................................................................120
When Can Someone Bring a Lawsuit?......................................................................................................124
Relations with Lawyers..............................................................................................................................127
Alternative Means of Resolving Disputes................................................................................................130
Cases............................................................................................................................................................133
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Chapter 4: Constitutional Law and US Commerce..................................................... 141
Basic Aspects of the US Constitution.......................................................................................................142
The Commerce Clause...............................................................................................................................147
Dormant Commerce Clause.......................................................................................................................154
Preemption: The Supremacy Clause........................................................................................................159
Business and the Bill of Rights..................................................................................................................163
Cases............................................................................................................................................................173
Summary and Exercises............................................................................................................................195
Chapter 5: Administrative Law...................................................................................... 200
Administrative Agencies: Their Structure and Powers.........................................................................201
Controlling Administrative Agencies.......................................................................................................209
The Administrative Procedure Act..........................................................................................................212
Administrative Burdens on Business Operations...................................................................................215
The Scope of Judicial Review....................................................................................................................219
Cases............................................................................................................................................................224
Summary and Exercises............................................................................................................................231
Chapter 6: Criminal Law.................................................................................................. 236
The Nature of Criminal Law......................................................................................................................237
Types of Crimes..........................................................................................................................................240
The Nature of a Criminal Act....................................................................................................................250
Responsibility.............................................................................................................................................254
Procedure....................................................................................................................................................257
Constitutional Rights of the Accused.......................................................................................................260
Cases............................................................................................................................................................264
Summary and Exercises............................................................................................................................271
Chapter 7: Introduction to Tort Law............................................................................. 276
Purpose of Tort Laws.................................................................................................................................277
Intentional Torts........................................................................................................................................283
Negligence..................................................................................................................................................292
Strict Liability.............................................................................................................................................300
Cases............................................................................................................................................................304
Summary and Exercises............................................................................................................................316
Chapter 8: Contracts......................................................................................................... 320
General Perspectives on Contracts..........................................................................................................321
Contract Formation...................................................................................................................................332
Remedies.....................................................................................................................................................340
Cases............................................................................................................................................................346
Summary and Exercises............................................................................................................................354
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Chapter 9: Relationships between Principal and Agent........................................... 359
Introduction to Agency and the Types of Agents...................................................................................360
Duties between Agent and Principal........................................................................................................371
Cases............................................................................................................................................................384
Summary and Exercises............................................................................................................................399
Chapter 10: Liability of Principal and Agent; Termination of Agency.................. 404
Principal’s Contract Liability....................................................................................................................405
Principal’s Tort and Criminal Liability....................................................................................................411
Agent’s Personal Liability for Torts and Contracts; Termination of Agency.......................................419
Cases............................................................................................................................................................425
Summary and Exercises............................................................................................................................437
Chapter 11: Partnerships: General Characteristics and Formation....................... 442
Introduction to Partnerships and Entity Theory...................................................................................443
Partnership Formation..............................................................................................................................449
Cases............................................................................................................................................................458
Summary and Exercises............................................................................................................................471
Chapter 12: Partnership Operation and Termination .............................................. 476
Operation: Relations among Partners......................................................................................................477
Operation: The Partnership and Third Parties.......................................................................................488
Dissolution and Winding Up.....................................................................................................................494
Cases............................................................................................................................................................506
Summary and Exercises............................................................................................................................522
Chapter 13: Hybrid Business Forms.............................................................................. 529
Limited Partnerships.................................................................................................................................531
Limited Liability Companies.....................................................................................................................539
Other Forms................................................................................................................................................546
Cases............................................................................................................................................................551
Summary and Exercises............................................................................................................................560
Chapter 14: Corporation: General Characteristics and Formation........................ 566
Historical Background...............................................................................................................................567
Partnerships versus Corporations............................................................................................................571
The Corporate Veil: The Corporation as a Legal Entity.........................................................................574
Classifications of Corporations.................................................................................................................579
Corporate Organization.............................................................................................................................582
Effect of Organization................................................................................................................................589
Cases............................................................................................................................................................591
Summary and Exercises............................................................................................................................603
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Chapter 15: Legal Aspects of Corporate Finance........................................................ 610
General Sources of Corporate Funds........................................................................................................611
Bonds...........................................................................................................................................................614
Types of Stock.............................................................................................................................................617
Initial Public Offerings and Consideration for Stock.............................................................................623
Dividends....................................................................................................................................................627
The Winds of Change.................................................................................................................................632
Cases............................................................................................................................................................635
Summary and Exercises............................................................................................................................642
Chapter 16: Corporate Powers and Management ...................................................... 647
Powers of a Corporation............................................................................................................................648
Rights of Shareholders..............................................................................................................................653
Duties and Powers of Directors and Officers...........................................................................................660
Liability of Directors and Officers............................................................................................................664
Cases............................................................................................................................................................676
Summary and Exercises............................................................................................................................685
Chapter 17: Securities Regulation................................................................................. 691
The Nature of Securities Regulation........................................................................................................692
Liability under Securities Law..................................................................................................................701
Cases............................................................................................................................................................708
Summary and Exercises............................................................................................................................716
Chapter 18: Corporate Expansion, State and Federal Regulation of Foreign
Corporations, and Corporate Dissolution.................................................................... 720
Corporate Expansion.................................................................................................................................721
Foreign Corporations.................................................................................................................................728
Dissolution..................................................................................................................................................732
Cases............................................................................................................................................................735
Summary and Exercises............................................................................................................................741
Chapter 19: Nature and Form of Commercial Paper................................................. 746
Introduction to Commercial Paper..........................................................................................................747
Scope of Article 3 and Types of Commercial Paper and Parties...........................................................754
Requirements for Negotiability................................................................................................................761
Cases............................................................................................................................................................767
Summary and Exercises............................................................................................................................776
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Chapter 20: Negotiation of Commercial Paper........................................................... 782
Transfer and Negotiation of Commercial Paper.....................................................................................783
Indorsements..............................................................................................................................................788
Problems and Issues in Negotiation.........................................................................................................795
Cases............................................................................................................................................................801
Summary and Exercises............................................................................................................................817
Chapter 21: Holder in Due Course and Defenses........................................................ 822
Holder in Due Course.................................................................................................................................823
Defenses and Role in Consumer Transactions........................................................................................831
Cases............................................................................................................................................................838
Summary and Exercises............................................................................................................................852
Chapter 22: Liability and Discharge.............................................................................. 857
Liability Imposed by Signature: Agents, Authorized and Unauthorized.............................................858
Contract Liability of Parties......................................................................................................................862
Warranty Liability of Parties....................................................................................................................869
Discharge....................................................................................................................................................874
Cases............................................................................................................................................................879
Summary and Exercises............................................................................................................................896
Chapter 23: Legal Aspects of Banking .......................................................................... 902
Banks and Their Customers......................................................................................................................903
Electronic Funds Transfers.......................................................................................................................914
Wholesale Transactions and Letters of Credit........................................................................................920
Cases............................................................................................................................................................927
Summary and Exercises............................................................................................................................941
Chapter 24: Consumer Credit Transactions................................................................ 946
Entering into a Credit Transaction..........................................................................................................948
Consumer Protection Laws and Debt Collection Practices....................................................................957
Cases............................................................................................................................................................963
Summary and Exercises............................................................................................................................973
Chapter 25: Secured Transactions and Suretyship.................................................... 978
Introduction to Secured Transactions.....................................................................................................979
Priorities.....................................................................................................................................................998
Rights of Creditor on Default and Disposition after Repossession.....................................................1006
Suretyship.................................................................................................................................................1011
Cases..........................................................................................................................................................1019
Summary and Exercises..........................................................................................................................1029
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Chapter 26: Mortgages and Nonconsensual Liens ................................................... 1036
Uses, History, and Creation of Mortgages.............................................................................................1037
Priority, Termination of the Mortgage, and Other Methods of Using Real Estate as Security........1044
Nonconsensual Lien.................................................................................................................................1052
Cases..........................................................................................................................................................1056
Summary and Exercises..........................................................................................................................1073
Chapter 27: Bankruptcy................................................................................................. 1078
Introduction to Bankruptcy and Overview of the 2005 Bankruptcy Act...........................................1079
Case Administration; Creditors’ Claims; Debtors’ Exemptions and Dischargeable Debts; Debtor’s
Estate.........................................................................................................................................................1085
Chapter 7 Liquidation..............................................................................................................................1098
Chapter 11 and Chapter 13 Bankruptcies..............................................................................................1104
Alternatives to Bankruptcy.....................................................................................................................1110
Cases..........................................................................................................................................................1113
Summary and Exercises..........................................................................................................................1124
viii
About the Authors
Don Mayer
Don Mayer teaches law, ethics, public policy, and
sustainability at the Daniels College of Business,
University of Denver, where he is professor in
residence. His research focuses on the role of business
in creating a more just, sustainable, peaceful, and
productive world. With James O’Toole, Professor Mayer
has coedited and contributed content toGood Business:
Exercising Effective and Ethical Leadership(Routledge,
2010). He is also coauthor ofInternational Business Law:
Cases and Materials, which is in its fifth edition with
Pearson Publishing Company. He recently served as the
first Arsht Visiting Ethics Scholar at the University of
Miami.
After earning a philosophy degree from Kenyon College and a law degree from Duke
University Law School, Professor Mayer served as a Judge Advocate General’s (JAG)
Corps officer in the United States Air Force during the Vietnam conflict and went
into private practice in North Carolina. In 1985, he earned his LLM in international
and comparative law at the Georgetown University Law Center. Later that year, he
began his academic career at Western Carolina University and proceeded to become
a full professor at Oakland University in Rochester, Michigan, where he taught for
many years before moving to the University of Denver. He has taught as a visitor at
California State Polytechnic University, the University of Michigan, the Manchester
Business School Worldwide, and Antwerp Management School.
Professor Mayer has won numerous awards from the Academy of Legal Studies in
Business, including the Hoeber Award for best article in theAmerican Business Law
Journal, the Maurer Award for best article on business ethics (twice), and the Ralph
Bunche Award for best article on international business law (three times). His work
has been published in many journals and law reviews but most often inAmerican
Business Law Journal, theJournal of Business Ethics, and theBusiness Ethics Quarterly.
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About the Authors
Daniel M. Warner
Daniel M. Warner is a magna cum laude graduate of the
University of Washington, where—following military
service—he also attended law school. In 1978, after
several years of civil practice, he joined the faculty at
the College of Business and Economics at Western
Washington University, where he is now a professor of
business legal studies in the Accounting Department. He
has published extensively, exploring the intersection of
popular culture and the law, and has received the
College of Business Dean’s Research Award five times for
“distinguished contributions in published research.”
Professor Warner served on the Whatcom County
Council for eight years (two years as its chair). He has
served on the Faculty Senate and on various university and college committees,
including as chairman of the University Master Plan Committee. Professor Warner
has also been active in state bar association committee work and in local politics,
where he has served on numerous boards and commissions for over thirty years.
George J. Siedel
George J. Siedel’s research addresses legal issues that
relate to international business law, negotiation, and
dispute resolution. Recent publications focus on
proactive law and the use of law to gain competitive
advantage. His work in progress includes research on
the impact of litigation on large corporations and the
use of electronic communication as evidence in
litigation.
Professor Siedel has been admitted to practice before
the United States Supreme Court and in Michigan, Ohio,
and Florida. Following graduation from law school, he
worked as an attorney in a professional corporation. He has also served on several
boards of directors and as associate dean of the University of Michigan Business
School.
The author of numerous books and articles, Professor Siedel has received several
research awards, including the Faculty Recognition Award from the University of
Michigan and the following awards from the Academy of Legal Studies in Business:
the Hoeber Award, the Ralph Bunche Award, and the Maurer Award. The Center for
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