Week 1 discussion
DQ1 May I Call You?
Congress enacted a restriction on telemarketing, known as the National Do-Not-Call list, which made it illegal for telemarketers to place unsolicited commercial calls to consumers. A consumer may register up to three residential phone numbers for the list. The Act does not prohibit calls from political campaigns and others seeking support for political candidates, nor calls from certain charities seeking donations. The Act provides for significant financial penalties imposed by the Federal Communications Commission on any telemarketer or company that violates the law. Some telemarketer organizations claim that the law is unconstitutional.
Congress also enacted the CAN SPAM Act, prohibiting certain kinds of spam e-mail nationwide. The CAN SPAM Act also states that, “This act supersedes any statute, regulation or rule of a state that expressly regulates the use of electronic mail to send commercial messages, except to the extent that the state rule prohibits deception in any portion of a commercial electronic mail message or information attached thereto.” Subsequently, California enacted a new anti-SPAM law that applies to spam e-mail either sent from a server in California or sent to a California e-mail address.
What constitutional law issues do these statutes raise, and who should prevail? How, specifically, should the courts resolve these constitutional issues according to the current state of the law? What substantial government interest is Congress attempting to protect with the National DNC List? Where is that found in U.S. Constitution? What other strategies could the government employ to reach the same result?
DQ2 A Sobering Lawsuit
Fun Products, Inc. is in the business of designing computer games. At the end of a particularly successful year, company management decided to throw a celebration party at which it would announce large bonuses for the entire workforce. The party was held in the banquet room of a local hotel, owned by the Milton Hotel chain, and was catered by the hotel, including an open bar for all guests. Employees were also invited to bring a spouse or significant other. A good time was had by all, but too much fun was had by a few, including Larry Lush, and his wife, Linda. Larry and Linda had attended other company functions at which alcohol was served, and had a reputation for drinking a bit too much.
The company offered a free taxi ride home to any employee who had a bit too much to drink, but Larry and Linda declined the free cab ride, and attempted to drive home in their own car. En route, Larry, who was driving, struck another vehicle, injuring Veronica, the driver of that car. Larry has limited assets, and his insurance had just expired, as well as his driver's license. Veronica wants to sue Fun Products, Inc. and the Milton Hotel chain for her injuries, which include medical bills, lost wages, property repair costs (her car), and pain and suffering. She also wants to obtain a court order prohibiting Fun Products, Inc. from ever serving alcohol at a company function again.
Without trying to decide who will win if Veronica sues Fun Products, Inc. and the Milton Hotel chain, analyze the following. Who are the parties to this lawsuit, and what are they called (trial level and appeal level)? What types of law will Veronica's lawsuit involve? What type of remedies is she seeking, and are these remedies (or some of them) appropriate to this type of case? What legal sources will the court consider in deciding if Fun Products, Inc. and the Milton Hotel chain (or either of them) are liable for Veronica's injuries? What types of liability does Larry face as a result of this scenario? What burden of proof will apply? What issues in this dispute would a jury decide (if the case went to trial), and what issues would a judge decide? What if the person(s) with liability here doesn't have the money to pay Veronica's damages?
Week 2 discussion
DQ1 Wendy Wanderer
Derek Dirt operates a home-based business selling herbs and supplements. He frequently receives new samples and is constantly discarding unwanted samples, as well as packaging, old files, and other junk on a back yard trash heap that accumulates between trash pick-ups. Little Wendy Wanderer, age five, who lives next door, sees what, to her, promises to be a nice toy among Derek's trash. Upon coming closer to the trash heap, Wendy is bitten by a rat. She screams and then faints. Her nearby mother calls an ambulance, which, on the way to the scene, jumps a curb and strikes Paul Pedestrian, seriously injuring him. Wendy requires a series of rabies shots. Except for some bad dreams, Wendy apparently recovers. Derek and Wendy are both citizens and residents of Ohio. Paul, who is a citizen and resident of Texas, was visiting friends in Ohio when the ambulance struck him.
Does Wendy have a solid basis for suing Derek for her injuries?
Who might be liable to Paul Pedestrian?
What types of damages could Wendy recover?
If Wendy sues Derek, in what state(s) could she sue, and in what court (federal or state) could she properly file the suit?
If Paul sues Derek, in what state(s) could he sue, and in what court (federal or state) could he properly file the suit?
DQ2 Bad Bar-B-Q
Over many years, Jake and Jo Bob built up a barbeque ribs business, Hambones, Inc., which caters picnics and parties and sells ribs and corn at county fairs. They have several creditors, including Sauce Supply and First State Bank.
Two years ago, in reliance on an audit of the company's books prepared by Hambones, Inc.'s accounting firm, Able & Henderson, First State Bank made a loan to Hambones, Inc. It now appears that the audit failed to disclose financial improprieties in Hambones, Inc.'s maintenance of its books: Certain liabilities were being carried off the books, causing Hambones, Inc.'s bottom line to appear more favorable than it really was. The decision to carry the liabilities off the books was made by Jake and Jo Bob, but there is now an argument as to whether a more careful audit would have uncovered the liabilities. Jake told the accounting firm that the audit was being done at the bank's request in order for the loan to be approved, and that it was really important that the company receive a clean bill of health from the audit. Able & Henderson didn't want to lose Hambones, Inc. as a client.
Sauce Supply also knew that Hambones, Inc. had been audited and heard from Jake and Jo Bob that the auditors were very satisfied with Hambones, Inc.’s financial position. Jake gave Sauce Supply's president, Sandy Saucy, a copy of the audit report. Able & Henderson had no knowledge of these statements, or that Sauce Supply had received a copy of the audit report.
What standard of care applies to Able & Henderson's accounting work for Hambones, Inc.?
Does Able & Henderson face any negligence liability to First State Bank or Sauce Supply in a state that has adopted the Ultramares rule?
In a state that has adopted the Restatement rule?
In a state that has adopted the Reasonably Foreseeable User rule?
Week 3 discussion
DQ1 Fine Dining
You enter an expensive restaurant and are seated by the hostess. A waiter brings you plates, knives, forks, napkins, and other set-ups for dinner, including bread and butter and ice water, all of which you partly consume. When you read the menu, you realize that the prices far exceed what you can afford. You then make it clear that you do not intend to order a meal.
What type of contract (obligation) do you have, if any?
What factors and contractual elements will you consider in assessing whether a contract was formed?
What if, instead, you read the menu and place an order, but say nothing about agreement to pay. Is there a contract?
Also, assume there is fine print at the bottom of the menu that states: 20% gratuity charged. $20.00 cover charge per table.
If you ordered dinner but didn't see the fine print, what is the effect?
Does this change in the facts alter your conclusion regarding the scenario above? Why or why not?
What key factors and elements are at play?
DQ2 Distant Deal Making
Maria, who lives in Seattle, sent Koji a letter via first class mail, stating, "Koji, I think your 2003 Ford SUV is worth $20,000. I will give you $20,000 cash for it." Koji receives the letter, but believes his car isn't worth more than $14,000 due to the manner in which he drives the vehicle and due to the weather in Florida where he resides.
Maria's letter was mailed on Monday. When she didn't hear from Koji by Wednesday, she sent an e-mail on Wednesday afternoon with the same message, and asked whether he received her letter. Koji received Maria's letter on Wednesday, but did not receive the e-mail until Friday afternoon, due to server problems. In the meantime, Koji sent a fax late on Friday stating, "Are you sure you still want to buy my car for $20,000? I accept your offer."
On Saturday, after some research, Maria decided the Ford SUV was not worth what she thought. To make certain Koji would know this fact, she sent Koji a letter via Federal Express stating, "Your SUV is not really worth $20,000." On Monday morning, Koji received the Federal Express letter from Maria. Also on Monday morning, an hour later, Maria received Koji's fax at work.
Has a contract been formed here? Why or why not?
Identify and explain the stages of contract formation as they occurred in this scenario and analyze them in this context from a contract formation standpoint.
Week 4 discussion
DQ1 Dream House
In a contract dated June 15, 2006, Bobby agrees to build your dream house on a lot you own near Naples, Florida. The contract price is $500,000. The house is to be completed and ready for occupancy by March 1, 2007. Bobby is paid a progress payment of $100,000, for labor and materials, in October, 2006. In November, 2006, a hurricane strikes the Naples area and floods the work site. Bobby claims he had completed 50% of the job before the hurricane struck. Thereafter, Bobby performs no further work and walks off the job.
On January 1, 2007, you declare Bobby to be in breach of contract and sign a contract with Sheila to complete the job for $350,000.
Was your contract with Bobby a unilateral or bilateral contract; if unilateral, at what time did Bobby substantially undertake performance?
What remedies and/or damages are available to you and to Bobby?
Since Sheila’s cost to complete the house is more than half the cost, who sees a loss from the hurricane?
DQ2 Nightmare House
After months of combing the real estate ads for a vacation property, you find an ad for a lovely Victorian cottage in a scenic small town about three hours away. After viewing the house, you decide it is the perfect weekend place; and amazingly, the price is in your budget. In fact, you're amazed that the house is so affordable and has been on the market for a while. You sign a real estate purchase contract to buy the house from the current owners, who have lived there for over 20 years. You make the sale contingent upon an inspection of the property by a licensed construction engineer. The engineer inspects the house over the course of two days and gives the house a clean bill of health. You proceed to closing, and buy the house.
After moving in, you learn for the first time from the neighbors that many actively claim this house is possessed by poltergeists, which the prior residents of the house had reportedly seen. In fact, the house is listed in a national guide to haunted houses, and had previously been included in a walking tour of the town as the haunted house. A newspaper article once described it as a charming Victorian (with ghost). You now jump at every creak and noise the house makes. You want the seller of the house to take it back for failing to inform you that the house is haunted.
Do you have a good basis for rescinding the sale?
What duties will you claim were owed to you by the seller?
What responsibilities did you have as a buyer that may affect your ability to recover?
What damages can you claim stem from the alleged failure to disclose by the seller?
Week 5 discussion
DQ1 Battle of the Forms
Initial Text:Nellie Nimble, purchasing manager for Fast Color Paint Company, mailed a purchase order to AB Can Corporation for 100,000 cans of high-gloss white paint at $15 per gallon wholesale. The order form mailed by Nellie contained 17 printed conditions on its reverse side. The third condition stated: "Buyer may reject any defective goods within 30 days of delivery."
The order form also stated that payment would be made as follows: 50% upon receipt of the goods, and 50% within 30 days of the receipt of goods. AB Can (the seller) sent a signed letter confirming the order, but the letter stated: "Any objection to goods shipped must be in writing within five (5) days of receipt of goods." AB Can's letter specified the same payment schedule as Fast Color's purchase order, but stated, in addition, "Interest at the rate of 12% per year will be charged on late payments." Fast Color's purchase order said nothing about interest on late payments.
AB Can delivered the cans (100,000) and Fast Color sought to object to 10,000 of the cans as defective on the seventh day after receipt of the cans. Fast Color paid 50% of the order’s purchase price upon delivery but paid the balance (minus the 10,000 cans it rejected) 40 days after delivery.
Did Fast Color have the right to reject 10,000 cans, seven days after delivery?
Does Fast Color owe interest on the portion of its payment that was not paid within 30 days of receipt of the paint order?
Did the provision for interest on late payments materially alter the contract?
What terms in AB Can’s purchase confirmation are additional terms, not mentioned at all in Fast Color’s order? (Explain your rationale, and also state whether you believe the outcome is fair.)
DQ2 Want to Lose Weight?
Initial Text:You've been hired as the marketing manager for a company that sells weight loss products to the public. The Federal Trade Commission (FTC) recently brought an enforcement action against the company for violating the FTC Act's prohibition of unfair and deceptive trade practices, based on some of the company's advertising. The company wants to challenge the FTC's ruling by appealing to the courts. The FTC's ruling was based on the company's ads for herbal teas (claiming they block absorption of fat and will lead to substantial weight loss) and the company's ad for a popular supplement (claiming they will result in the loss of two pounds or more each week without dieting or exercising).
What is the basis of the FTC's power to regulate ads for diet products? What standards has the FTC established to determine if a diet product claim is unfair and deceptive?
If the company tries to challenge the FTC's ruling by appealing to a court, what test will the appellate court use to determine if the FTC's ruling was justified? How do you think the court should decide this case?
If the company wants to comply with the FTC’s regulations on diet product claims, what language would it need to change in the ads mentioned above?
Week 6 discussion
Initial Text:Dana and Ronnie operate a Web-based business, TraderRon.com, an Internet swap site that uses a Dutch auction system pioneered by Priceline.com. TraderRon.com allows customers to make offers to other customers to swap such items as their unused frequent flyer miles for other customers' unwanted merchandise, including DVDs, music CDs, used books, and any other merchandise customers might want to trade. No sales involving payment of money are made on the site. Some of the merchandise that has been offered on the site and swapped consists of bootleg or pirated merchandise, as well as designer knockoffs. All of TraderRon.com's income derives from advertising.
TraderRon's website and advertising use a black and grey symbol to represent its swapping service. It has used this symbol consistently and registered it with the U.S. Patent and Trademark Office. The symbol is very similar to the Nike swoosh symbol, except it fades from black to grey from left to right. TraderRon.com uses a multimedia presentation to explain its operation to users. The multimedia presentation was created by a friend of Dana's as his senior portfolio project at school, where he was majoring in website design and multimedia. Dana paid him with a free trip to the Caribbean, which she had won in a contest. No copyright was registered in connection with the multimedia presentation.
TraderRon.com sends a weekly e-mail update to customers who have registered on the site. The e-mail is sent via an e-mail address Ronnie established at Yahoo.com. TraderRon.com's customers are located throughout the U.S. and some are overseas.
What intellectual property and Internet law issues are raised by TraderRon.com's business model?
What sort of liability is the business risking?
What legal implications could arise from using the Yahoo.com e-mail account for swap.com’s mass e-mailings?
DQ2 Modern Problems
Joel, a former employee of NetworkBank, an online bank, decided to exact some revenge. Though his official access to the bank's records was removed, he was able to hack into the bank's database of customer information, obtaining passwords associated with customer debit cards. Using debit card numbers and passwords, he purchased merchandise online from various venders, including online auction sites, such as eBay. Among the bank customers whose accounts he raided was Elle, a consumer, and Pet Products, Inc., a business that sells pet products online. Joel took $85 from Elle's checking account the first time, which she didn't notice until a week later, at which point she notified NetworkBank. Joel took $350 from Elle's account a few weeks later, which she noticed the next day and immediately reported to the bank. Joel accessed Pet Products, Inc., just once, for $3,450, which the company noticed the next day and reported to NetworkBank.
Joel also wanted revenge against a former NetworkBank employee, Gwen, who he believed to be responsible for his firing. She left the bank and was working elsewhere. Using Internet search engines, he found postings that Gwen had made to chat rooms on various Internet sites. Using this information, Joel contacted PrivateI.com, an Internet based information and investigation service. He paid the fee required for an investigation on Gwen, and obtained her home and work addresses and telephone numbers. PrivateI.com did not inquire why Joel wanted the information about Gwen. Joel followed Gwen as she exited her workplace one night and attacked her, injuring her severely. Joel is now under arrest.
What remedies do Elle and Pet Products, Inc. have against NetworkBank for the unauthorized fund transfers? What law applies?
What is the extent of liability for the consumers in this scenario? May Gwen hold PrivateI.com liable for her injuries? Why or why not?
What preventative actions should the businesses mentioned in this scenario have undertaken to prevent what occurred here?
Week 7 discussion
DQ1 Rocking the Boat
Initial Text:Duchess Cruise Lines, Inc. dry-docked a ship, intending to have maintenance done. Melinda, the ship's supply manager, decided to purchase some needed supplies from Marine Equipment Services, Inc., on the ship's behalf while it was in dry-dock. She charged the supplies to her personal credit card. The supplies were delivered and used, but the cruise line refused to reimburse Melinda for the cost of the supplies because she hadn't obtained the required approvals before making the purchase. Melinda takes the position that doing so would have delayed the purchase of the materials, because the person who normally grants approvals was on leave for several weeks. The cruise line takes the position that someone else would have handled the matter promptly if Melinda had simply followed company procedure. Melinda is threatening to sue to obtain reimbursement.
Meanwhile, Steve, a member of the ship's maintenance crew, on shore leave for a day, came back to the ship late, after drinking to excess. Before retiring for the night, Steve turned several wheels on the dry-dock's wall, which resulted in a flooding of the tanks on one side of the dry-dock. The ship listed, slid off the blocks holding it up, then crashed against the dry-dock wall, ruining much of the dry-dock. The dry-dock owner is suing Duchess Cruise Lines, Inc., for reimbursement of the damages to the dry-dock.
Paul was hired by Duchess Cruise Lines, Inc. as an independent project manager to coordinate the dry-dock maintenance project. He was not an employee of Duchess Cruise Lines, Inc. and was not authorized to make any purchases or enter into any contracts on the cruise line's behalf. All of his proposals were to be submitted to a management team for approval. After Steve caused the ship to slide off the blocks and crash into the dry-dock wall, Paul met on the site with a crane company owner, Al, telling Al that he was Duchess' project manager and requesting a bid from Al's company to move the ship to a new dry-dock facility for repair. At the time, Paul was wearing a Duchess Cruise Lines, Inc. jacket and directing various employees on the dock. Al provided a bid, Paul accepted it, and Paul signed a services contract with Al's company, signing his name followed by the words, "Project Manager, Duchess Cruise Lines, Inc." Duchess Cruise Lines, Inc. did not approve the hiring of Al's company and refuses to pay Al's company on the contract. Paul claims he has no personal liability because he was acting on Duchess' behalf in an emergency.
What agency law issues does this scenario raise?
How should the courts decide these disputes? Why?
How could all of this have been handled to prevent some of these issues?
DQ2 A Sweet Business Idea
Initial Text:Dan and Carla met as employees at a candy company and later married. Carla went on to study accounting and Dan earned a business degree. After working for various businesses and raising $10,000 to open their own business one day, Dan and Carla have settled on opening a business that makes custom centerpieces that look like floral arrangements but are made entirely of chocolates, marzipan, and other candy. They want to call their business "Edible Expressions," and they have prepared a business plan. They are now faced with the decision of what form of business organization makes the most sense: a sole proprietorship, a partnership of some sort, or incorporating in some form.
Dan and Carla both plan to do design work in the business, while hiring confectionery employees to prepare and assemble the company's products. Carla will keep the books, and Dan will do the hiring. Carla and Dan are considering whether it makes more sense for them to co-own the business, or if one should be the owner and the other an employee. They anticipate hiring just one other employee in the beginning, and grow as demand requires. Carla's brother and sister-in-law also want to invest in the business, but do not want to be involved in its operations. Dan and Carla also want to give their daughter, Alissa, age 12, some ownership in the business at some point.
Dan and Carla want to establish their business with a minimum of paperwork and expense, but they also want to avoid high taxation of their business profits. They want to run the business jointly, without the need for a Board of Directors or other advisory group, though they don't mind the idea of having an annual event to honor family members who have invested in their business.
Consider the types of business organizations in this week's reading (sole proprietorship, general partnership, limited partnership, LLP, and corporation, LLC).
What are the pros and cons of each as they apply to Dan and Carla's business goals?
If Dan and Carla were operating in your state, what form of business organization appears most desirable? Why?