SOLUTIONS MANUAL
Business Law: Text & Exercises 10/E by Roger LeRoy Miller
Chapter 01: Introduction to the Law
Table of Contents
Answers to Straight to the Point ..................................................................................................... 1
Answers to Issue Spotters ............................................................................................................... 2
Answers to Real Law ......................................................................................................................... 2
Answers to Ethical Questions .......................................................................................................... 4
Answers to Work Set ........................................................................................................................ 5
True-False Questions .................................................................................................................................... 5
Multiple-Choice Questions ........................................................................................................................... 6
Answering More Legal Problems.................................................................................................................. 8
Answers to Straight to the Point
1A. Why is knowledge of business law essential for any businessperson?
Solution
Knowledge of the laws and regulations governing business is essential to the making of good
business decisions. Determining the best course of action in a given situation requires evaluating
how the law might apply.
2A. What is the common law?
Solution
The common law is a body of law developed from court decisions. These decisions reflect the
customs and traditions within the jurisdiction of the courts.
3A. When and why does a court apply the decision of another court to determine the result in a
case?
Solution
In a common law system, court decisions, and the principles behind them, are applied to resolve
similar disputes in a consistent way. This is the doctrine of precedent, or stare decisis.
4A. What are some of the remedies that a party can obtain from a court to make a wrong situation
right?
Solution
The normal remedy at law is the payment of money, or damages. If money is not enough to make a
situation right, a party might be ordered to do specifically what he or she promised. Or a contract
might be cancelled, and the contracting parties returned to the positions they held before the deal.
1
,Chapter 01: Introduction to the Law
5A. Which aspects of a business’s operation do the rules, orders, and decisions of administrative
agencies affect?
Solution
The rules, orders, and decisions of administrative agencies affect almost every aspect of a business’s
operation. These include a business’s capital structure and financing, hiring and firing procedures,
relations with employees and unions, and making and selling of products.
Answers to Issue Spotters
1A. Under what circumstances might a judge rely on case law to determine the intent and purpose
of a statute?
Solution
Case law includes courts’ interpretations of statutes, constitutional provisions, and administrative
rules. Statutes often codify common law rules. For these reasons, a judge might rely on the common
law as a guide to the intent and purpose of a statute.
2A. The First Amendment provides protection for the free exercise of religion. A state legislature
enacts a law that outlaws all religions that do not derive from the Judeo-Christian tradition. Is this
law valid within that state? Why or why not?
Solution
No. The U.S. Constitution is the supreme law of the land and applies to all jurisdictions. A law in
violation of the Constitution (in this question, the First Amendment to the Constitution) will be
declared unconstitutional.
Answers to Real Law
1-1A. Stare Decisis. A patent is an exclusive right granted to the creator of an invention. Under U.S.
law, a patent owner possesses that right for twenty years. The owner can allow another party to
make and market a product based on the invention in exchange for a payment of royalties on the
sales. According to the United States Supreme Court in a case known as the Brulotte decision, a
contract to pay royalties after a patent has expired is unenforceable. Stephen Kimble owned the
patent to a toy glove that could shoot foam intended to look like the web of Marvel Comics’ Spider-
Man. Kimble agreed to allow Marvel Entertainment, LLC, to sell its version of the toy. Marvel agreed
to pay Kimble a royalty of 3 percent on the sales. Their contract did not specify an end date. After
the patent expired, Marvel sued to stop the payments. What is the doctrine of stare decisis? What are
the arguments for and against applying it in this case? Discuss. [Kimble v. Marvel Entertainment, LLC,
135 S.Ct. 2401, 192 L.Ed.2d 463 (2015)]
Solution
The doctrine of stare decisis is the practice of deciding cases with reference to previous decisions.
This is an important principle of our judicial system. Under this doctrine, courts are obligated to
follow the precedents established within their jurisdictions. A precedent is a decision that stands as
,Chapter 01: Introduction to the Law
an example or authority for deciding subsequent cases involving identical or similar legal principles
or facts.
In the facts of this problem, Stephen Kimble owned the patent to a toy glove that could shoot foam
intended to look like the web of Marvel Comics’ Spider-Man. He contracted with Marvel
Entertainment, LLC to sell its version of the toy in exchange for a royalty of 3 percent on the sales.
The contract did not specify an end date. Marvel sued to stop the payments after the patent expired.
A patent is an exclusive right granted to the creator of an invention. Under U.S. law, a patent lasts
for twenty years. According to the United States Supreme Court in a case known as the Brulotte
decision, a contract to pay royalties after a patent has expired is unenforceable.
One argument in favor of applying the doctrine of stare decisis to these facts is that a United States
Supreme Court decision is controlling until it is overruled by a subsequent decision of the Court or
changed by congressional legislation or a constitutional amendment. And the Court is bound by
principle that a precedent should not be overruled unless there is a compelling reason to do so.
An argument against applying the doctrine in this situation is that it would interfere with the
contract the parties made. And applied generally, the Brulotte precedent would undercut the ability
of parties to make any contract that would otherwise reflect the true value of a patent.
In the actual case on which this problem is based, a majority of the Court favored the application of
the doctrine, even though they agreed that it could hinder competition and innovation.
1-2A. Role of Law. Otto May, Jr., a pipefitter for Chrysler Group, LLC, was the target of racist,
homophobic, and anti-Semitic remarks. He received death threats, his bike and car tires were
punctured, and someone poured sugar into the gas tank of his car. A dead bird was placed at his
workstation wrapped in toilet paper to look like a member of the Ku Klux Klan. Chrysler documented
and investigated the incidents. Records were checked to determine who was in the building when
the incidents occurred, the graffiti handwriting was examined, and employees were reminded that
harassment was not acceptable. What role might the law play in these circumstances? Discuss. [May
v. Chrysler Group, LLC, 716 F.3d 963 (7th Cir. 2013)]
Solution
Knowledge of the law is essential for any businessperson. To make a good decision, a
businessperson must have a basic knowledge of the law relating to that decision. And a
businessperson is expected to make a decision that is ethical as well as legal. Many different laws
may apply in a single situation. If a dispute cannot be resolved amicably, a lawsuit may result.
In the circumstances of this case, there are employment laws that prohibit discrimination in the
workplace. Under these laws, an employer has a significant duty to take complaints of harassment
seriously. The employer has an obligation to set up clear policies and procedures and follow those
procedures when a complaint is made. If the employer does not take these steps, a lawsuit may
result, and a large penalty may be assessed.
3
, Chapter 01: Introduction to the Law
Here, it appears that Chrysler took sufficient steps to stop and prevent the harassment against its
employee so as to avoid a penalty. The company used several strategies to stop and prevent the
harassment. These steps included documenting and investigating the incidents, analyzing the graffiti
handwriting, and reminding employees that harassment was not acceptable.
In the actual case on which this problem is based, Chrysler's actions had a positive effect—the
harassment's frequency gradually decreased and finally ceased. The harasser was never discovered,
however. Later, May filed a suit against Chrysler. The court issued a judgment in the employer’s
favor, and the U.S. Court of Appeals for the Seventh Circuit affirmed this judgment, based in part on
the reasons stated above.
1-3A. Constitutional Law. Under a Massachusetts statute, large wineries could sell their products
through wholesalers or to consumers directly, but not both. Small wineries could use both methods.
Family Winemakers of California filed a suit against the state, arguing that this restriction gave small
wineries a competitive advantage in violation of the U.S. Constitution. Which source of law takes
priority, and why? [Family Winemakers of California v. Jenkins, 592 F.3d 1 (1st Cir. 2010)]
Solution
The U.S. Constitution is the supreme law of the land. A law in violation of the Constitution is
normally declared unconstitutional ultimately by the United States Supreme Court if all other
appeals have failed on a constitutional issue. The First Amendment to the U.S. Constitution prevents
the government from making laws that regulate an establishment of religion or prohibit the free
exercise of religion. In this case, the plaintiffs (those bringing the lawsuit against the governor of
Nevada) argued that limiting the number of indoor church goers to a maximum of 50 people
violated the First Amendment. The plaintiffs argued that the governor’s orders allowed casinos,
gyms, bars, and restaurants to operate with often much larger numbers of patrons.
When this case reached the United States Supreme Court, the majority of the justices denied the
plaintiff’s request for relief.
Answers to Ethical Questions
1-4A. Anticipation of Legal Problems. Should legal problems be anticipated? Why and why not?
Solution
Legal problems should be anticipated to prevent legal liability before it arises. One method to
anticipate legal problems is to learn about legal rights and duties ahead of time.
1-5A. The Doctrine of Precedent. Sandra White operated a travel agency. To obtain lower airline
fares for her nonmilitary clients, she booked military-rate travel by forwarding fake military
identification cards to the airlines. The U.S. government charged White with identity theft, which
requires the “use” of another’s identification. As background, the court in the White case had two
cases that represented precedents.
In the first case, David Miller obtained a loan to buy land by representing that certain investors had
approved the loan when, in fact, they had not. Miller’s conviction for identity theft was overturned
4
