Business Law Study Questions
Study Questions 1 (Ch. 1)
1. The vast majority of holdings in a law library are Reporters (publications of past legal decisions).
How are these old cases important or useful?
American law adheres to the common law tradition. One of the unique features of common law is
that it is judge-made law. In other words, as judges decided legal controversies, those decisions
became incorporated into the common law and now serve as a legal precedent. A precedent is a
decision that provides an example for deciding subsequent cases involving similar legal facts.
Because new judicial decisions are based heavily on precedent, cases are published in reporters.
These reporters are useful because the cases in them furnish future legal decision making.
2. Assume that your company is involved in a contract dispute concerning an allegedly fraudulent
sale of an office building in California. As we will see, this sort of contract dispute is primarily an
issue of state common (non-statutory) law. In this case, which of the following sources would be
● Ohio Supreme Court case concerning fraudulent real estate contract.
● California Supreme Court dissenting opinion concerning fraudulent real estate contract.
● California Court of Appeals opinion concerning fraudulent real estate contract.
● Law Review article by the learned Prof. Murphy concerning fraudulent real estate contract.
● California Court of Appeals opinion concerning whether minors can purchase real estate.
Binding authority is any source of law that a court must follow when deciding a case. These include
constitutions, statutes, and regulations that govern the issue being decided as well as court decisions
that are controlling precedents within the jurisdiction, where “jurisdiction” refers to the geographical
area in which a court has the power to apply the law. It is also important to note that US Supreme
Court decisions remain controlling until they are overruled or altered by a constitutional
amendment. For these reasons, I think the California Court of Appeals opinion concerning
fraudulent real estate contract would be binding precedent.
3. Give one example of a person or institution you would expect to align with the Natural Law
Natural law theory posits that a higher law exists which has universal applicability. Advocates of
natural law theory believe that written law should imitate this higher law. Laws that are unjust do not
need to be obeyed because they do not imitate the natural law. The natural law theory finds its antithesis in positivism. Those who adhere to legal positivism believe that human rights exist
because of laws. They fail to recognize natural human rights, and hold that the national law is the
highest form of law. According to positivists, the law must be obeyed until it is changed, regardless
of whether or not it is just.
The United Nations is an organization I believe would align with the natural law tradition because
“protecting human rights” is a major component of the organization’s founding Charter.
Study Questions 2 (Ch. 2-3)
1. Assume that you believe you have suffered a legally-recognizable wrong. You are considering
filing a lawsuit. What factors should you consider as you are deciding whether to pursue legal
action? (Please list at least 3.)
Three factors you should consider before deciding to pursue legal action include:
1. Determining which court has the jurisdiction to hear your case
2. Determining whether you have standing to sue, or a sufficient stake in the matter to justify
seeking relief through the court system
3. Deciding whether or not to pursue alternative dispute resolution instead
2. You read about some advantages of Alternative Dispute Resolution. Are there reasons or
circumstances under which it might not be a good decision to use ADR rather than the court system?
An example of a circumstance in which ADR is unfavorable is mandatory arbitration clauses in
employment contracts. While these clauses are advantageous for the business, many employees
subject to these clauses are at a disadvantage because, in agreeing to arbitrate all disputes, they
necessarily waive their rights under statutes designed to protect employees.
● When an arbitrator renders a decision, it is final.
○ No ability to appeal as you could in the court system
○ To get a court to overturn an arbitrator's award, you must show clear misconduct of
3. Can a court hear a case if that court does not have proper jurisdiction? Explain.
A court that lacks proper jurisdiction cannot hear a case. Jurisdiction refers to the authority of a
court to hear and decide a specific action. Therefore, in order to hear a case, a court must have jurisdiction over the person (or company) who is the defendant or over the property involved in the
suit. In addition the court must have jurisdiction over the subject matter of the dispute.
4. We will see throughout the course that new technology and methods of communication (such as
the web, email, Twitter, etc.) gives rise to new legal issues. For example, this chapter considers the
issue of whether jurisdiction over a company exists in every state because that company maintains a
website that can be accessed from computers in every state. On this issue, which of the following
statements is more accurate?
● Courts are following traditional jurisdictional rules but applying those rules to these
● Courts have come up with entirely new jurisdictional rules to cover jurisdiction in
In response to the rise of new technology and methods of communication, the courts have
developed a “sliding scale standard” to determine when they can exercise personal jurisdiction
over an out-of-state defendant based on the defendant’s web activities. Therefore I think the first
statement is more accurate.
5. I am a private citizen from Indiana. Assume that I am outraged to hear on television that a
particular clothing manufacturer in South Carolina mistreats its workers, in apparent violation of US
labor laws. Can I properly sue the company? Explain.
The federal court has subject-matter jurisdiction in cases in which a federal question arises and in
cases that involve a diversity of citizenship. This particular case involves both of these situations.
Firstly, a federal question arises because the clothing manufacturer is in violation of US federal law.
Additionally, the case involves diversity of citizenship in that (1) the plaintiff and defendant are
residents of different states and (2) the dollar amount in the controversy likely exceeds $75,000.
Therefore, the private citizen can sue the clothing manufacturer in the relevant U.S. district court.
Would the case be taken in the 7th district court (includes Indiana)?
Study Questions 3 (Ch. 4)
1. As your reading notes (p.74), under our federal form of government, states have inherent
sovereign power. The states delegated to the federal government a portion of that power. The
Constitution sets forth specific powers that can be exercised by the federal government. If the
federal government exceeds powers granted under the Constitution, the federal government's
actions should be struck down by the courts. a. Does it often happen that courts strike down federal government actions because the federal
government has exceeded its power? Why or why not?
It is not frequent that the courts strike down federal government actions because the federal
government has exceeded its power. One of the primary reasons for this is the commerce clause.
After the landmark ruling in Gibbons vs. Ogden, the Court held that inter- as well as intra- state
commerce could be regulated by the federal government as long as the commerce substantially
affected commerce involving more than one state. Today, this broad definition of federal power
allows the federal government regulate virtually every commercial enterprise in the U.S. Therefore, it
is extremely rare that the Supreme court will curb the federal government’s power under the
commerce clause. A 1995 case marked the first time in 60 years that the courts determined that the
federal government had overstepped its bounds under the commerce clause.
b. To justify the constitutionality of any particular federal action or regulatory program, the federal
government must be able to point to a particular clause in the Constitution that justifies it. Turn to
the Constitution, beginning on page A-5 in the back of your book. Find the clause in the
Constitution that justifies the existence of the federal Department of Education. Quote the clause
Article I, Section 8 states that Congress has the power to “to pay the Debts and provide for the
common Defence and general Welfare of the United States.” This power is referred to as Congress’s
spending power. Congress can spend revenues not only to carry out its expressed powers, but also
to promote any objective it deems worthwhile, as long as it does not violate the Bill of Rights.
2. Could a state impose a higher tax on out-of-state companies doing business in the state than it
imposes on in-state companies if the sole reason for the tax is to protect in-state companies? Why
or why not?
A state could not impose a higher tax on out-of-state companies doing business in the state than it
imposes on in-state companies for the sole reason of protecting in-state companies, as this would
violate the dormant commerce clause. The dormant commerce clause comes into play when state
regulation affects interstate commerce. Generally, discrimination under the commerce clause means
“differential treatment of in state and out of state economic interests that benefits the former and
burdens the latter” (78). State laws that alter conditions of competition to favor in-state interests
over out-of state interests are typically subject to invalidation. A case in point is the case of Family
Winemakers of California v. Jenkins in which California wineries contended that a Massachusetts
statute preventing “large” wineries from distributing directly to customers discriminated against out
of state wineries (all the Massachusetts wineries were classified as “small”). The U.S. court of appeals
affirmed the federal district court's decision to prevent enforcement of the statute. The following three Study Questions are for the second class on Constitutional Law.
3. Could the government, in the interest of energy conservation, ban all advertising by power
utilities if conservation could be accomplished by less restrictive means? Why or why not?
The government could not impose this ban. A restriction on commercial speech must meet the
following three criteria in order to be considered by the courts:
1. It must seek to implement a substantial government interest.
2. It must directly advance that interest.
3. It must go no further than necessary to accomplish this objective.
Although the ban meets the first two criteria, there are less restrictive means that can accomplish the
government’s objective of improving energy conservation. As a result, a government ban of this
nature would be deemed a violation of the power utility companies’ First Amendment rights.
4. Why is the Kelo decision that is the subject of the PBS article controversial? This was a 5-4
decision by the Supreme Court. The majority found that supporting economic development is a
compelling policy concern that justifies condemnation of land for private development. What
public policy concerns could be raised by those opposing such use of the eminent domain power?
Try to list three.
In the past, eminent domain had been used to secure land for traditionally defined public projects
such as pipelines, road development and school buildings. However, in the Kelo case, the power of
eminent domain was being used under the rationale that the private developments outlined in Fort
Trumbull’s redevelopment plan would increase its tax base and contribute to the city’s economic
development. Homeowners argued that redevelopment of their neighborhood was not necessary for
the public good and expressed concern that the primary beneficiaries of the redevelopment project
would be private developers rather than the city or its citizens. Nevertheless, the Supreme Court
ruled that the power of eminent domain could ultimately be used for economic development. Three
public policy concerns the opposition could site include:
1. Because any property can be taken for the benefit of a private party, large corporations can
use their disproportionate political influence to profit at the expense of the average citizen.
2. This broad interpretation of eminent domain drastically weakens a citizen’s Fifth
Amendment rights, making private property vulnerable to government usurpation.
3. If pure economic development constitutes “public use,” the definition of this term will be
misinterpreted in future rulings. 5. Do a web search for your state or city and “eminent domain” to find information about a recent
exercise of eminent domain power. Come to class ready to describe the case. Was it for more
traditional governmental purposes (like building a road or prison or airport) or to encourage
economic development? Did the government succeed in its efforts to exercise eminent domain?
What level of public opposition was encountered?
A recent Pennsylvania case involving eminent domain deals with the state appeal court’s decision
involving Sunoco’s Mariner East 2 pipeline. The 350-mile pipeline is intended to transport natural
gas liquids from eastern Ohio and western Pennsylvania to Sunoco’s terminal in Philadelphia, where
it will ship to a plastic manufacturing facility in Scotland. The court ruled against property owners
fighting eminent domain takings by Sunoco Logistics, asserting that in the case of the Mariner East 2
pipeline, Sunoco is a public utility subject to regulation by the Pennsylvania Public Utility
Commission, which granted the company a certificate of public convenience that extends to all 17
counties along the pipeline’s path.
Study Questions 4 (Ch. 6)
Answer these two questions for the first class on torts:
1. Give an example (other than those in the text) of
a. a battery with no assault
An example of a battery with no assault would be a robber taking the purse of a woman he
passes on the street.
b. an assault with no battery
An example of an assault with no battery would be threatening to beat someone up without
actually doing so.
2. Assume that Olson is the owner of a small retail business. One day at work, Olson hits
Edwards over the head with a pipe, knocking Edwards out. Can you imagine any circumstance
where Olson would NOT be liable for battery? Try to come up with three possibilities, briefly
explaining why there would be no liability in each case.
1. Olsen can attempt to justify his actions by claiming self defense from Edwards, who had
threatened him with a gun.
2. Olsen can attempt to justify his actions by claiming that he was defending restaurant
patrons from Edwards after Edwards began physically fighting the clientele. 3. Olsen and Edwards could have been hitting one another as part of a game. If Edwards
consented to being struck on the head with a pipe, Olsen would not have liability for his
Study Questions 5 (Ch. 6)
Answer these two questions for the second class on torts:
1. Someone writes of Mary Leonard: "Mary Leonard served 10 years in a federal penitentiary
for tax evasion." Mary Leonard wishes to file a defamation suit against the speaker. Assess the
strength of Leonard's case. Are the elements of defamation met? What additional facts would
the court need to decide this case?
To establish defamation, the plaintiff normally has to prove the following:
1. The defendant made a false statement of fact.
2. The statement was understood as being about the plaintiff and tended to harm the
3. The statement was published to at least one person other than the plaintiff.
4. If the plaintiff is a public figure, he or she must prove actual malice.
The above statement is a statement of fact, but the plaintiff has the burden of proving the
statement is false, as truth is normally an absolute defense against a defamation charge.
Additionally, the plaintiff will need to show that the statement was published to at least one other
person. Is she a public figure?
a. Would Leonard have a harder case or easier one if the only place the statement
was made was in an Internet chat room? Very briefly explain.
Ms. Leonard would most likely have a harder case. Many times users on an internet chatroom are
anonymous, so tracking down the actual source of the defamatory statement would be much
more difficult. Additionally defamation typically applies to false statements of fact that damage a
reputation. Because it is likely that Ms. Leonard is only known by her user name in the
chatroom, it would be challenging to prove that the above statement injured her reputation. If the
internet chatroom is private and relatively small in size, Ms. Leonard probably will not have a
The defendant is the person who typed the false statement
-The internet service provider is protected by Congress
-Can only be sued if the ISP provided the false content b. Would Leonard have a harder case or easier one if the above-quoted statement
had been made by a former employer in a letter of recommendation? Very briefly explain.
Ms. Leonard would have a more difficult case in this instance. An employer’s statements in
written evaluations of employees are protected by qualified privilege that prevents the employer
from being liable for defamatory statements. Therefore, if the statements are made in good faith
and the publication is limited to those who have a legitimate interest in the communication, the
statements fall within the area of qualified privilege.
2. Explain why you agree or disagree with the following statement: “Because of the anonymous
nature of the Internet, defamation has become an outmoded legal concept. It’s now too difficult
to track down the person responsible for the defamatory statement.”
I disagree with the above statement. In my opinion, the Internet makes defamation a more
serious issue because it has exponentially increased the efficiency of communication. As a result,
a damaging statement made about another person has the potential to travel much faster and
reach a much larger audience than ever before. Therefore, I would argue that the dawn of the
internet has actually made defamation a more relevant issue.
Study Questions 6 (Ch. 6)
Answer these three question for the third class on torts:
1. What are your reactions to the Hayden case (see below)? Is it appropriate to impose a duty on
Notre Dame here? Why or why not? Does a finding that a defendant may have been negligent
necessarily reflect badly on the defendant?
I was surprised that the appellate court reversed the trial court’s decision. The chapter discussed
assumption of risk as an affirmative defense in negligence cases. Under this defense, a plaintiff
who voluntarily enters into a risky situation, knowing the risk involved, will not be allowed to
recover. Cases such as Taylor v. Baseball Club of Seattle, LP have established that this
assumption of risk extends to spectators who are injured while watching sporting events. As a
result, I feel that the appellate court made a mistake in ruling that Notre Dame owed Mrs.
Hayden a duty to protect her from injury in this instance.
2. Ruth carelessly parks her car on a steep hill, leaves the car in neutral, and fails to engage the
parking brake. The car rolls down the hill and knocks down a power line. The sparks from the
broken line ignite a grass fire. The fire spreads to a barn a mile away. In the barn is a large
quantity of dynamite, which explodes, injuring Jim, a passing motorist. If Jim sues Ruth for negligence, which element of negligence will be hardest for him to prove? Will he likely be able
to recover damages from Ruth? Might he have a better claim than this negligence claim against
To succeed in a negligence action the plaintiff must prove four things: duty, breach, causation,
and damages. Of the four, Jim will have the most trouble proving causation. In order for the
requirement of causation to be met, the act (Judy’s careless parking in this case) must be the
proximate, or legal, cause of the injury. Questions of proximate cause are linked to the concept
of foreseeability. If the court decides that Jim’s injuries were too remotely connected to the
incident to trigger liability, Ruth will not be held liable.
Jim would probably have a more successful claim against the owner of the barn. Under the rule
in Rylands v. Fletcher, the court developed the concept of strict liability. The court held that a “a
person for who his own purposes brings onto his land and collects and keeps anything there
likely to do mischief if it escapes is prima facie answerable for all the damage which is the
natural consequence of its escape.”
3. Explain why you would have liability if you cause an accident while texting and driving.
Negligence per se occurs when an individual violates a statute providing for a criminal penalty,
and that violation causes another to be injured. Texting and driving is completely illegal in 46
states. By texting and driving, I would be violating the standard of conduct required by this
statute, and, by necessity, the duty that I owe to the injured party.
Study Questions 7 (Ch. 7)
1. Choose one of the following two activities:
● Name a product. Imagine that you are the manufacturer of that product. Write an
appropriate warning to be placed on the product's packaging.
Trampoline Product Warning:
● Paralysis or death can result if you land on your head or neck!
● Do not perform flips as this will increase your chances of landing on your head or neck.
● No more than one person at a time on the trampoline!
● Multiple jumpers increases the risk of injury such as broken head, neck, leg, or back.
● Use trampoline only with mature, knowledgeable supervision. 2. Recently, product liability lawsuits have been filed against McDonald's Restaurants and
Kraft Foods, the maker of Oreo cookies. The plaintiffs allege that the products of these
companies caused them to suffer from obesity.
a. Given what you know of negligence theory, assess the plaintiffs' likelihood of
success. What elements of negligence will be the hardest for plaintiffs to prove? What defenses
may be available to the defendants?
To succeed in a negligence action, the plaintiff must prove each of the following:
1. Duty. The defendant owed a duty of care to the plaintiff.
2. Breach. The defendant breached that duty.
3. Causation. The defendant’s breach caused the plaintiff’s injury.
4. Damages. The plaintiff suffered legally recognizable injury.
The plaintiff may have trouble proving that the defendants owed them a duty of care. The
defendants could potentially capitalize on two of the three affirmative defenses against
negligence. First, the defendant could claim that the plaintiff assumed the risk of weight gain by
choosing to eat McDonald’s food and/ or Oreo cookies regularly. It would be fairly easy for the
defendants to prove that (1) the plaintiff had knowledge of the risks associated with both of these
products and (2) the plaintiff voluntarily assumed those risks.
Alternatively, the defendant may be able to use the doctrine of comparative negligence to
undercut the plaintiff’s claim. Under the comparative negligence standard, both the plaintiff and
defendant’s negligence are computed, and the liability for the damages is distributed accordingly.
Most states follow the “50 percent rule” that would prevent the plaintiff from recovering if he or
she was more than 50 percent at fault. As a result, McDonald’s and Kraft may be able to avoid
all liability through application of this standard.
b. Given what you know of strict liability theory, assess the plaintiffs' likelihood of
success. What elements of strict liability will be the hardest for plaintiffs to prove? (I don't ask
here about defenses, because generally the only defense to strict liability is that one or more of
the elements cannot be proven.)
In order for a plaintiff to have a strict liability claim, they must prove the following:
1. The product must be in defective condition when the defendant sells it.
2. The defendant must be normally engaged in the business of selling that product
3. The product must be unreasonably dangerous to the user or consumer because of its
4. The plaintiff must incur physical harm to self or property by use or consumption of the
product. 5. The defective condition must be the proximate cause of the injury or damage
6. The goods must not have been substantially changed from the time the product was sold
to the time the injury was sustained.
The plaintiff will likely have a difficult time proving elements one and three. With regard to
element one, it will be extremely difficult to prove that the food was in a defective condition
when McDonald’s or Kraft sold it. A manufacturing defect in this instance is ruled out, so the
plaintiff would need to prove a design defect with the food to be successful. Most courts engage
in a risk-utility analysis to determine whether the risk of harm from a product’s design outweighs
it benefits. While McDonald’s food and Kraft’s Oreos are unhealthy if consumed in excess, it
will be difficult to convince the courts that the health risks these foods pose outweigh the
happiness they afford many consumers.
With regard to element three, the plaintiff will need to successfully demonstrate that the food in
both instances was unreasonably dangerous. A court could consider a product unreasonably
defective if (a) the product was dangerous beyond the expectation of the ordinary consumer and/
or (b) a less dangerous alternative to the product was economically feasible for the manufacturer,
but the manufacturer failed to produce it. The fact that McDonald’s food and Oreos are
unhealthy and can lead to weight gain are well known facts, so the plaintiff would not be able to
prove element one. Moreover, it could be argued by the defense that either (a) a healthier
alternative for these foods does not exist or (b) producing one would not be economically
feasible given the low price points of both McDonald’s food and Oreo cookies.
3. Not every