Business Law Day 1

Commercial Vehicle Liability and Operational Risks

• Prevalence of Commercial Risk: There are approximately $100,000,000$ vehicles driving in the United States daily. Even if only a quarter of a percent ($0.25\%$) are involved in accidents, a substantial portion involves commercial vehicles such as delivery trucks or service vehicles used by furnace repair people.

• Economic Impact on Premiums: While insurance protects against accidents, a worsening loss history leads to increased premiums. Businesses cannot ignore safety just because they are insured.

• Risk Management Procedures: Entrepreneurs must implement specific systems to mitigate risk:

  • Hiring Process: Implementing a rigorous selection process for drivers.

  • Training Programs: Ensuring drivers know how to handle specific commercial vehicles.

  • Clear Instructions: Providing explicit rules on conduct during the delivery or service process.

• The "Dupus" Factor: In a company of $500$ employees, it is statistically likely that at least one individual will lack common sense or foresight, potentially creating massive liabilities for the firm.

Vicarious Liability and the Nature of Entities

• Definition of Vicarious Liability: A legal concept where an employer is held responsible for the actions or negligence of an employee.

• Final Exam Alert: The instructor explicitly stated that a question requiring a description of "vicarious liability" will appear on the final exam. Students must "burn it into their brain."

• Corporate Agency: A business entity (e.g., Starbucks) is intangible; you cannot physically "touch" the entity itself. Therefore, entities must use people (agents) to operate and conduct business.

• Scope of Employment Examples:

  • Scenario A (Likely Liable): A pizza delivery driver enters a home and takes money by force because the customer refused to pay for a cold pizza. Although the action was "stupid," the employer is liable for failing to properly hire, train, or discipline the individual, as the employee was attempting to collect a fee for the employer.

  • Scenario B (Unlikely Liable): If a delivery driver goes to an army surplus store, buys a "bazooka," and blows up the customer’s house, the employer has a strong argument that this was way beyond the scope of his responsibility to collect a fee.

Course Structure and Grading Policy

• Quizzes: There will be $4$ to $6$ quizzes throughout the term.

• Self-Correction Option: Quizzes are designed to ensure comprehension of basic concepts. Once the last student turns in a quiz, the instructor uploads the correct answers. Students may then:

  • Grade their own work.

  • Identify and correct wrong answers.

  • Provide a written explanation of why they were wrong the first time.

  • Completing this process earns the student a score of $100\%$. Failure to provide an explanation results in the original, un-corrected grade.

• Final Exam: Consists of two parts:

  • Part 1: An essay exam with $3$ or $4$ questions, given a week in advance to complete.

  • Part 2: An in-class exam on the scheduled date involving true/false, multiple choice, and short definitions.

  • The final determines approximately $90\%$ of the final grade.

• Participation: Crucial for correcting misunderstandings. Students must articulate their thought processes to ensure they have mastered the nuances of the law.

Civil Procedure and the Burden of Proof

• Core Components of Legal Study:

  • Civil Procedure: The rules governing how a dispute moves through the court system (filings, jurisdiction, service of process, appeals).

  • Evidence: The rules determining what information can be used in court, based on the "Two R's": Relevant and Reliable.

• The Cost of Litigation: A dispute over $250$ can quickly escalate into a $25,000$ expense in legal fees and lost productivity, even for the winning party.

• Cause of Action: To litigate, one must fit their claim into a recognized "box of legal right." Each cause of action has specific elements that must be proven.

• Elements of Negligence:

  1. Duty: A legal obligation to adhere to a standard of care.

  2. Breach: Failure to meet that duty.

  3. Causation: The breach caused damage/injury.

  4. Proximate Cause: The injury was reasonably related to the duty.

  5. Damages: Proof of the specific amount of loss.

• Standards of Proof:

  • Criminal Case: "Beyond a reasonable doubt."

  • Civil Case: "Preponderance of the evidence."

    • This is defined as > 50\% (even by one "iota").

    • In the OJ Simpson case, he was found not guilty in the criminal trial (burden not met) but liable in the civil trial (preponderance of evidence was met).

    • Note: To win a civil case, the plaintiff must prove every single element by a preponderance of the evidence. Proving $4$ out of $5$ elements is a total loss.

Legal Principles: Torts, Contracts, and Property

• Hearsay: A statement made outside of court offered to prove the truth of the matter asserted. It is generally excluded because it is unreliable, similar to the "Telephone Game," where a story changes as it is repeated. Failure to object to hearsay during trial waives the right to exclude it.

• Torts (Major Categories):

  1. Intentional Torts: e.g., Battery (intentionally hitting someone).

  2. Negligence: A broad category covering most accidental behaviors.

  3. Strict Liability: Liability regardless of fault or effort to prevent injury. Examples include using a "wrecking ball" for demolition in a city or keeping dangerous animals (e.g., a Doberman Pinscher).

• Contracts:

  • Uniform Commercial Code (UCC): Governs the sale of Goods (e.g., blenders, cars).

  • Common Law: Governs Services, Real Estate, and Intellectual Property.

• Property Types:

  • Real Property: Land and things attached to it (e.g., trees).

  • Personal Property: Tangible items (e.g., computers).

  • Intangible Property: Property that is a manifestation of a right (e.g., a check represents an order to a bank; Intellectual Property).

Agency and Business Entities

• Agency Law: Subsumes all of employment law.

• Types of Agents: CEOs, employees, and independent contractors.

• Tax Implications: The government requires employers to withhold taxes (Social Security, etc.) because they "do not trust" individuals to pay them later. Failure to pay withheld funds within approximately $2$ weeks creates personal liability for the responsible person in the company.

• Purpose of Business Entities: The law permits limited liability entities to allow for the accumulation of capital. It incentivizes investment by limiting an investor's risk to the amount they put in (e.g., $100,000,000$).

• Partnerships: The riskiest way to do business. Partners are jointly and severally liable. If one partner causes a loss, the wealthiest partner (e.g., Bill Gates) may be forced to pay the entire amount and must then try to collect from the other partners.

Constitutional Law and Jurisdiction

• Jurisdiction: A court's power to render a final judgment. If a court lacks jurisdiction, the case is treated as if it never happened.

  • In Persona Jurisdiction: Power over the person.

  • In Rem Jurisdiction: Power over a thing (e.g., Iowa land).

• Constitutional Structure:

  • Article 1: Legislature (considered the most important branch by the founders).

  • Article 2: Executive.

  • Article 3: Judiciary (only the US Supreme Court is mandated; lower courts are created by Congress).

• Judicial Limiting Doctrines:

  • Cases and Controversies: Courts cannot issue advisory opinions; there must be a real dispute between at least $2$ parties.

  • Mootness: The controversy has already been resolved (Exception: Abortion cases, which take longer than $9$ months to litigate).

  • Ripeness: The court waits for an issue to develop fully in lower courts before deciding.

  • Political Question Exception: Issues like redistricting (gerrymandering for political parties) are deemed political and must be solved at the "ballot box," not in court, unless an individual constitutional right is violated.

• Commerce Clause: Prevents states from acting like "little countries" by prohibiting trade barriers and tariffs between states.

Questions & Discussion

• Audience Member: "Where'd you get [the term Vicarious Liability] from?"

• Instructor: "Vicarious liability. It's a legal concept… burn it into your brain that it will be on the final exam."

• Audience Member: "How does Starbucks do business?"

• Response: "It uses people."

• Audience Member: "Why does the government and the law even permit such a thing [limited liability entities]?"

• Instructor: "Because it permits the accumulation of capital that then can be used more efficiently for some venture that generally benefits not only those individuals, but society itself."

• Audience Member: "Will there be a final exam?"

• Instructor: "Excellent question. Yes."

• Discussion on Writing: The instructor noted that few students are pushed to write essays anymore, so a portion of a future session will be dedicated to writing skills.