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Solution Manual For: SM Essentials of Business Law, 7th Edition Jeffrey F. BeattySusan S. SamuelsonPatricia Sanchez Abril, 2022, 9780357634059;

Solution Manual For SM Essentials of Business Law, 7th Edition Jeffrey F. BeattySusan S. SamuelsonPatricia Sanchez Abril, 2022, 9780357634059; Chapter 1: Introduction to Law

Table of Contents Multiple Choice Questions .......................................................................................................................................... 1 Case Questions ................................................................................................................................................................ 2 Discussion Questions..................................................................................................................................................... 4

Multiple Choice Questions 1. The United States Constitution is among the finest legal accomplishments in the history of the world. Which of the following influenced Franklin, Jefferson, and the rest of the Founding Fathers? A. English common-law principles B. The Iroquois’ system of federalism C. Both A and B D. None of the above Answer: C. Both English common-law principles and the Iroquois’ system of federalism shaped the Constitutional framers’ ideas.

2. Which of the following parts of the modern legal system are “borrowed” from medieval England? A. Jury trials B. Special rules for selling land C. Following precedent D. All of the above Answer: D. Countless parts of our modern system originated in Merry Olde England.

3. Union organizers at a hospital wanted to distribute leaflets to potential union members, but hospital rules prohibited leafleting in areas of patient care, hallways, cafeterias, and any areas open to the public. The National Labor Relations Board (NLRB), a government agency, ruled that these restrictions violated the law and ordered the hospital to permit the activities in the cafeteria and coffee shop. What kind of law was it creating? A. A statute B. Common law

Solution Manual For: Chapter 1: Introduction to Law

C. A constitutional amendment D. Administrative regulation Answer: D. The NLRB, as an agency, creates regulations. Congress creates statutes, and judges shape the common law.

4. If the Congress creates a new statute with the president’s support, it must pass the idea by a ____________ majority vote in the House and the Senate. If the president vetoes a proposed statute and the Congress wishes to pass it without their support, the idea must pass by a ____________ majority vote in the House and the Senate. A. simple; simple B. simple; two-thirds C. simple; three-fourths D. two-thirds; three-fourths Answer: B. More than 50 percent to pass initially (a simple majority), two-thirds if an override is necessary.

5. Dr. Martin Luther King, Jr., wrote “An unjust law is no law at all.” As such, “One has … a moral responsibility to obey unjust laws.” Dr. King’s view is an example of: A. legal realism. B. jurisprudence. C. legal positivism. D. natural law. Answer: D. It is an example of the natural law theory of jurisprudence.

Case Questions 1. Lance, an Internet hacker, stole 15,000 credit card numbers and sold them on the black market, making millions. Police caught Lance, and two legal actions followed, one civil and one criminal. Who will be responsible for bringing the civil case? What will be the outcome if the jury believes that Lance was responsible for identity thefts? Who will be responsible for bringing the criminal case? What will be the outcome if the jury believes that Lance stole the numbers? Answer: The civil cases will be brought by the victims of identity theft, and the outcome of a successful case against Lance would be some type of monetary award for damages suffered. The criminal case will be brought by state prosecutors and the outcome would be imprisonment for Lance. 2. As The Oculist’s Case indicates, the medical profession has faced large number of lawsuits for centuries. In Texas, a law provides that, so long as a doctor was not reckless and did not intentionally harm a patient, recovery for “pain and suffering” is limited to no more than $750,000. In many other states, no such limit exists. If a patient will suffer a lifetime of pain after a botched operation, for example, they might recover millions in compensation.

Solution Manual For: Chapter 1: Introduction to Law

Which rule seems more sensible to you—the “Texas” rule, or the alternative? Answer: Answers will vary. 3. You Be the Judge: WRITING PROBLEM Should trials be televised? Here are a few arguments to add to those in the chapter. You be the judge. Arguments against Live Television Coverage: We have tried this experiment and it has failed. Trials fall into two categories: Those that create great public interest and those that do not. No one watches dull trials, so we do not need to broadcast them. The few that are interesting have all become circuses. Judges and lawyers have shown that they cannot resist the temptation to play to the camera. Trials are supposed to be about justice, not entertainment. If a citizen seriously wants to follow a case, they can do it by reading online news reports or the daily newspaper. Arguments for Live Television Coverage: It is true that some televised trials have been unseemly affairs, but that is the fault of the presiding judges, not the media. Indeed, one of the virtues of television coverage is that millions of people now understand that we have a lot of incompetent people running our courtrooms. The proper response is to train judges to run a tight trial by prohibiting grandstanding by lawyers. Access to accurate information is the foundation on which a democracy is built, and we must not eliminate a source of valuable data just because some judges are ill-trained. Answer: For most of the “You Be the Judge” writing problems, we provide the case citation and holding. For this question, of course, there is no definitive answer. 4. Leslie Bergh and his two brothers, Milton and Raymond, formed a partnership to help build a fancy saloon and dance hall in Evanston, Wyoming. Later, Leslie met with his friend and drinking buddy, John Mills, and tricked Mills into investing in the saloon. Leslie did not tell Mills that no one else was investing cash or that the entire enterprise was already bankrupt. Mills mortgaged his home, invested $150,000 in the saloon—and lost every penny of it. Mills sued all three partners for fraud. Milton and Raymond defended on the ground that they did not commit the fraud, only Leslie did. The defendants lost. Was that fair? By holding them liable, what general idea did the court rely on? What Anglo-Saxon legal custom did the ruling resemble? Answer: The partners are indeed liable. Bergh v. Mills, 763 P.2d 214 (Wyo. 1988). That is the essence of a partnership: All partners are liable for the acts of any partner committed in the partnership’s normal business. This is the general idea of collective responsibility. It relates to the “tithing” of English legal history, in which all tithing members were legally responsible for the conduct of the others. 5. The father of an American woman killed in the Paris terrorist attacks sued Twitter, Facebook, and YouTube, alleging the sites knowingly allow ISIS terrorists to recruit members, raise money, and spread extremist propaganda. The sites defended themselves by saying that their policies prohibit terrorist recruitment and that, when alerted to it, they quickly remove offending videos. What type of lawsuit is this—criminal or civil? What responsibilities, if any, should social media sites have for the spread of terrorism? Answer: The case is a civil case, but answers will vary as to the scope of the responsibilities social media sites should have for the spread of terrorism.

Solution Manual For: Chapter 1: Introduction to Law

Discussion Questions 1. In the 1980s, the Supreme Court ruled that it is legal for protesters to burn the American flag. This activity counts as free speech under the Constitution. If the Court hears a new flag burning case in this decade, should it consider changing its ruling, or should it follow precedent? Is following past precedent something that seems sensible to you: always, usually, sometimes, rarely, or never? Answer: Answers will vary. 2. When should a business be held legally responsible for customer safety? Consider the following statements, and consider the degree to which you agree or disagree: a. A business should keep customers safe from its own employees. b. A business should keep customers safe from other customers. c. A business should keep customers safe from themselves. (Example: an intoxicated customer who can no longer walk straight.) d. A business should keep people outside its own establishment safe if it is reasonable to do so. Answer: Answers will vary. 3. In his most famous novel, The Red and the Black, the French author Stendhal (1783–1842) wrote: “There is no such thing as ‘natural law’: this expression is nothing but old nonsense. Prior to laws, what is natural is only the strength of the lion, or the need of the creature suffering from hunger or cold, in short, need.” What do you think? Does legal positivism or legal realism seem more sensible to you? Answer: Natural law should be a question in the back of our minds throughout the course, because it is a reminder of morality, and law without morality is despotism. Nonetheless, Stendhal is obviously correct that both strength and need help to create law. The important thing for this course is continually to apply moral principles to the rules you study, and make your own determinations about whether natural law really plays a role. 4. Before becoming a Supreme Court justice, Sonia Sotomayor stated in a speech to students: “I would hope that a wise Latina woman with the richness of her experiences would more often than not reach a better conclusion than a white male who hasn’t lived that life.” During her Senate confirmation proceedings, this statement was heavily probed and criticized. One senator said that the focus of the hearings was to determine whether Judge Sotomayor would “decide cases based only on the law as made by the people and their elected representatives, not on personal feelings or politics.” (Sotomayor convinced many of her critics, because the Senate confirmed her by a vote of 68–31.) Should judges ignore their life experiences and feelings when making judicial decisions? Answer: Answers will vary. 5. The late Supreme Court Justice Antonin Scalia argued that because courts are not elected representative bodies, they have no business determining certain critical social issues. He wrote: Judges are selected precisely for their skill as lawyers; whether they reflect the policy views of a particular constituency is not (or should not be) relevant. Not surprisingly then, the Federal Judiciary is hardly a cross section of America. Take, for example, this Court, which consists of only nine men and women, all of them successful lawyers who studied at Harvard or Yale Law School. Four of the nine are natives of New York City. Eight of them grew up in east- and west-coast States. Only one hails from the vast expanse in-between. Not a single Southwesterner or even, to tell the truth, a genuine Westerner (California does not count). Not a single evangelical Christian (a group that

Solution and Answer Guide: Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 2: Ethics and Corporate Social Responsibility

comprises about one quarter of Americans), or even a Protestant of any denomination. To allow [an important social issue] to be considered and resolved by a select, patrician, highly unrepresentative panel of nine is to violate a principle even more fundamental than no taxation without representation: no social transformation without representation. Do you agree? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 2: Ethics and Corporate Social Responsibility

Table of Contents Multiple Choice Questions .......................................................................................................................................... 5 Case Questions ................................................................................................................................................................ 6 Discussion Questions..................................................................................................................................................... 8

Multiple Choice Questions 1. The following statement is true: a. Milton Friedman argued that a corporate leader's sole obligation is to make money for the company's owners. b. Milton Friedman argued that corporate leaders should consider the well-being of all company stakeholders, not just shareholders.

Solution and Answer Guide: Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 2: Ethics and Corporate Social Responsibility

c. Milton Friedman argued that lying for prosocial reasons is appropriate. d. Milton Friedman argued that life prospects are a crucial determinant of success in life. Answer: A 2. Which of the following wrote the book Utilitarianism and believed that ethical actions should “generate the greatest good for the greatest number”? a. b. c. d.

Milton Friedman John Stuart Mill Immanuel Kant John Rawls

Answer: B 3. Which of the following believed that the dignity of human beings must be respected and that the most ethical decisions are made out of a sense of duty or obligation? a. b. c. d.

Milton Friedman John Stuart Mill Immanuel Kant John Rawls

Answer: C 4. Kant believed that: a. b. c. d.

it is ethical to tell a lie if necessary to protect an innocent person from great harm. it is ethical to tell a lie if the benefit of the lie outweighs the cost. it is ethical to make a true, but misleading, statement. it is wrong to tell an outright lie or to mislead.

Answer: D 5. The following statement is true: a. Most people rarely lie. b. Even people who do not believe in God are more likely to behave honestly after reading the Ten Commandments. c. Most people are accurate when comparing themselves to others. d. People make their best ethical decisions when in a hurry. Answer: B

Case Questions 1. Should engineers program driverless cars to protect pedestrians or the driver? Who gets to decide? In one study, participants said that, if a car had to choose between ten pedestrians and one driver, it should swerve into a wall, killing the driver and saving the ten people. But when asked what car they would actually buy, participants chose the one that would protect them— © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Solution and Answer Guide: Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 2: Ethics and Corporate Social Responsibility

the driver. What would Kant and Mill say about this choice? What would result under the Front Page test? If drivers chose to protect themselves, would they be to blame, legally or ethically, for the deaths of the pedestrians? Answer: Both Kant and Mill would say that driverless cars should kill the driver and save the ten pedestrians. Under the categorical imperative, Kant believes you should not do something unless you’d be willing for everyone else to do it, but here you’d be making a different decision for yourself. Mill would say that saving ten lives maximizes overall happiness. It would be embarrassing under the Front Page test for everyone to know that you had chosen yourself over ten other people. It is difficult to think of the ethical argument for choosing one person over ten.

2. Located in Bath, Maine, Bath Iron Works builds high-tech warships for the Navy. Winning Navy contracts is crucial to the company’s success—it means jobs for the community and profits for the shareholders. Navy officials held a meeting at Bath’s offices with its executives and those of a competitor to review the specs for an upcoming bid. Both companies desperately wanted to win the contract. After the meeting, a Bath worker realized that one of the Navy officials had left a folder on a chair labeled “Business Sensitive.” It contained information about the competitors’ bid that would be a huge advantage to Bath. William Haggett, the Bath CEO, was notified about the file just as he was walking out the door to give a luncheon speech. What ethics traps did he face? How could he avoid these traps? What would result if he considered Mill, Kant, or the Front Page test? What should he do? How would you give voice to your values in this situation? Answer: Haggett ordered the file to be copied. By the time he got back from lunch, the company president had found out about the file and ordered the copy destroyed. But by then, other Bath executives had had a chance to examine the file. Haggett personally returned the file to the Navy, but by then it was too late. The Navy considered banning Bath from bidding on its contracts, which would have meant the end of the company. Haggett resigned. A much beloved CEO and an important figure in Maine, he had worked at Bath for 28 years and his father had been a pipe fitter there. The pitfalls were being in a hurry, money. 3. A group of medical schools conducted a study on very premature babies—those born between 24 and 27 weeks of gestation (instead of the normal 40 weeks). These children face a high risk of blindness and death. The goal of the study was to determine which level of oxygen in a baby’s incubator produced the best results. Researchers did not tell the families that being in the study could increase their child’s risk of blindness or death. The study made some important discoveries about the best oxygen level. These results could benefit many children. What would Mill and Kant say about this decision not to tell the families? Answer: Kant would say it was wrong. Mill would say that the study helped save the eyesight and lives of lots of other children. 4. Each year, the sale of Girl Scout cookies is the major fund-raiser for local troops. But because the organization was criticized for promoting such unhealthy food, it introduced a new cookie, Mango Cremes with Nutrifusion. It promotes this cookie as a vitamin-laden, natural whole food—“A delicious way to get your vitamins.” But these vitamins are a minuscule part of the cookie. The rest has more unhealthy fat than an Oreo. The Girl Scouts do much good for many

Solution and Answer Guide: Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 2: Ethics and Corporate Social Responsibility

girls. And to do this good, they need to raise money. What would Kant and Mill say? What about the Front Page test? What do you say? Answer: Mill would say that the benefit of selling the cookie is greater than the harm. Kant would say that it is the wrong thing to do. The Girl Scouts would not want this information on the front page. 5. The CEO of Volkswagen set an ambitious goal: to triple sales in the United States and become the largest car manufacturer in the world. Employees listened carefully because the CEO had a reputation for punishing those who did not make their goals. Then the VW engineers realized that the emissions equipment on the company’s cars could not meet tough U.S. standards. Fixing the equipment would take time, raise costs, and reduce sales. The engineers believed that other car companies had the same problem. Instead of fixing the equipment, an engineer figured out how to install software that would cheat on the emissions tests. Engineers predicted that the chance of being discovered was low, and executives thought the cost of being caught would be manageable. (Indeed, the company continued its cheating ways, even after it knew that regulators were investigating.) VW produced 11 million cars with this deceptive software. After the company was caught, it spent $18 billion on fines, legal costs, and car repairs. Its sales and stock price plummeted, and it faced criminal investigations. Into what traps did these VW employees fall? Answer: Answers will vary. But ethics traps include money, competition, rationalization, following orders, and a short-term perspective.

Discussion Questions 1. Darby has been working for 14 months at Holden Associates, a large management consulting firm. She is earning $95,000 a year, which sounds good, but does not go very far in New York City. It turns out that her peers at competing firms are typically paid 20% more and receive larger annual bonuses. Darby works about 60 hours a week, more if she is traveling. A number of times, she has had to reschedule her vacation or cancel personal plans to meet client deadlines. She hopes to go to business school in a year and has already begun the application process. Holden has a policy that permits any employee who works as late as 8:00 p.m. to eat dinner at company expense. The employee can also take Uber home. Darby is in the habit of staying until 8:00 p.m. every night, whether or not her workload requires it. She then orders enough food for dinner, with leftovers for lunch the next day. She has managed to cut her grocery bill to virtually nothing. Sometimes she invites her boyfriend to join her for dinner. As a student, he is always hungry and broke. Darby often uses the Holden Uber to charge a ride back to his apartment, although the cost is twice as high as to her own place. Darby has also been known to return online purchases through the Holden mailroom on the company dime. Many employees do that, and the mailroom workers do not seem to mind. Is Darby doing anything wrong? What ethics traps is she facing? What would your Life Principle be in this situation?

Solution and Answer Guide: Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 2: Ethics and Corporate Social Responsibility

Answer: Answers will vary. 2. Steve supervises a team of account managers. One night at a company outing, Lawrence, a visiting account manager, made some wildly inappropriate sexual remarks to Maddie, who is on Steve’s team. When she told Steve, he was uncertain what to do, so he asked his boss. She was concerned that if Steve took the matter further and Lawrence was fired or even disciplined, her whole area would suffer. Lawrence was one of the best account managers in the region, and everyone was overworked as it was. She told Steve to get Maddie to drop the matter—just tell her that these things happen and Lawrence did not mean anything by it. What should Steve do? What ethics traps does he face? What would be your Life Principle in this situation? What should Maddie do? Answer: Answers will vary. 3. Many people enjoy rap music at least in part because of its edgy, troublemaking vibe. The problem is that some of this music could cause real trouble. Thus, Ice-T’s song “Cop Killer” generated significant controversy when it was released. Among other things, its lyrics celebrated the idea of slitting a policeman’s throat. Rick Ross rapped about drugging and raping a woman. Time Warner Inc. did not withdraw Ice-T’s song, but Reebok fired Ross over his lyrics. One difference: Time Warner was struggling with a $15 billion debt and a depressed stock price. Reebok at first refused to take action, but then singing group UltraViolet began circulating an online petition against the song and staged a protest at the main Reebok store in New York. What obligation do media companies have to their customers? What factors matter when making a decision about the content of entertainment? Answer: Answers will vary. 4. You are negotiating a new labor contract with union officials. The contract covers a plant that has experienced operating losses over the past several years. You want to negotiate concessions from labor to reduce the losses. However, labor is refusing any compromises. You could tell them that, without concessions, the plant will be closed, although that is not true. Is bluffing ethical? Under what circumstances? What would Kant and Mill say? What is the result under the Front Page test? What is your Life Principle? Answer: Answers will vary. 5. Craig Newmark founded craigslist, the most popular website in the country for classified ads. Rather than maximizing its profits, craigslist instead focused on developing a community among its users. It was a place to find an apartment, a pet, a job, a couch, a date, a babysitter, and, it turned out, a prostitute. Most of the ads on craigslist were free, but blatant ads for sex were not. Much of the company’s revenue was from these illegal services. Many of the prostitutes available on craigslist were not independent entrepreneurs; they were women and girls bought and sold against their will. To fight sex trafficking, craigslist required credit cards and phone numbers, and it reported any suspicious ads. Law enforcement officials pressured craigslist to close the sex section of its website. But some people argued that blocking these ads was a violation of free speech and would just drive this business more underground where law enforcement officials were less likely to be © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Solution and Answer Guide: Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 2: Ethics and Corporate Social Responsibility

able to find it. Others said that banning these ads made the business model of selling children for sex less profitable. Does it seem that trafficking women and children was in keeping with the founder’s Life Principles? What were his options? Could he have had any real impact on this thriving industry? What pitfalls did he face? Answer: Answers will vary. Craigslist ultimately shut down the sex section, but a look at the “therapeutic services” section reveals that prostitution still thrives on craigslist. 6. Many socially responsible funds are now available to investors who factor their values into their investment choices. For example, the Appleseed Fund avoids tobacco products, alcoholic beverages, gambling, weapons systems, or pornography. The TIAA-CREF Social Choice Equity Premier Fund invests in companies that are “strong stewards of the environment,” devoted to serving local communities and committed to high labor standards. Are socially responsible funds attractive to you? Would it matter if they are less profitable than other alternatives? How much less profitable? Do you now, or will you in the future, use them in saving for your own retirement? Answer: Answers will vary. 7. What percentage of your income should you donate to charities? Which charities are most worthwhile? Peter Singer, a Princeton professor, argues that people should give away one-third of their income to worthy charities. But, when entertainment mogul David Geffen donated $100 million to renovate a New York concert hall, Singer said that he could not understand “how anyone could think that giving to the renovation of a concert hall that could impact the lives of generally well-off people living in Manhattan and well-off tourists that come to New York could be the best thing that you could do with $100 million.” He added that a donation of less than $100 million could restore sight to someone who is blind. To what theory of ethics is Professor Singer subscribing? Do you agree with him? What obligation do you have to help others? What is the best way to help others? Answer: Answers will vary. 8. I was working on a trading desk. One year, my team did not make its number, which meant no bonuses and maybe even some of us would be fired. My boss was a good friend of the head of our division, so the head agreed to “reallocate” some of the profit from other teams to ours. So my team got a bonus. When I asked my boss about the ethics of this action, she was annoyed that I was not just grateful. What ethics traps did I face? What should I have done? What is the best way to implement my decision? Answer: Answers will vary. 9. I was a plant manager at a factory that used a lot of steel equipment. When a piece of equipment failed and was not worth repairing, it was sold for scrap. Plant managers usually kept the scrap money for themselves without telling headquarters. The money was considered an unofficial bonus. (After all, the equipment was no longer functional, and plant managers are underpaid.) I felt a little uncomfortable taking the money, but my boss warned me that, if I didn’t, I would make the other plant managers look bad. I could have paid off my credit card debt with that money, but instead, I hosted an employee BBQ and bought work boots for the low-wage workers. Did I do the right thing? What traps did I face? Answer: Answers will vary.

Solution and Answer Guide: Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 3: International Law

Solution and Answer Guide Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 3: International Law

Table of Contents Multiple Choice Questions ....................................................................................................................................... 11 Case Questions ............................................................................................................................................................. 12 Discussion Questions.................................................................................................................................................. 13

Multiple Choice Questions 6. For which of the following activities can a foreign sovereign be sued? A. Operating a factory dangerously B. Issuing a law that discriminates against a certain group C. Suspending the civil rights of its people D. None of the above Answer: A

7. Outdoor Technologies (an Australian company) obtained a judgment for $500,000 against Silver Star (a Chinese company) in a court in Australia. Silver Star owned property in Iowa so Outdoor filed suit in Iowa to collect the judgment. Which of the following statements is true? A. Outdoor cannot collect in the United States a judgment that was issued by an Australian court. B. Outdoor cannot collect in the United States because Silver is not an American company. C. Outdoor can collect in the United States if the Australian court was fair and proper. D. Outdoor can collect in the United States, because both the United States and Australia have common law systems. Answer: C 8. The president negotiates a defense agreement with a foreign government. To take effect, the agreement must be ratified by which of the following? A. Two-thirds of the House of Representatives B. Two-thirds of the Senate C. The Supreme Court D. A and B E. A, B, and C Answer: B 9. Lynn is an author living in Nevada. She contracted with a company in China, which promised to print her custom children’s books. After receiving Lynn’s payment, the company disappeared without performing. Lynn wants to sue for fraud, but the contract does not say anything about

Solution and Answer Guide: Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 3: International Law

which country’s law will be used to resolve disputes. Both China and the United States are signatories of the CISG. Will the CISG apply in this case? A. Yes, because both countries are signatories. B. Yes, because the parties did not opt out of the CISG. C. No, because the contract does not involve goods. D. No, because the CISG does not establish rules for fraud. Answer: C 10. Austria, Indonesia, and Colombia are all members of the WTO. If Austria imposes a tariff on imports of coffee beans from Colombia, but not from Indonesia, is it in violation of WTO principles? A. Yes, the WTO prohibits tariffs. B. Yes, the WTO prohibits excise taxes. C. Yes, Austria is violating the WTO’s most favored nation rules. D. No, the WTO’s most favored nation rules permit Austria to do this. Answer: C

Case Questions 1. A Saudi Arabian government-run hospital hired American Scott Nelson to be an engineer. The parties signed the employment agreement in the United States. On the job, Nelson reported that the hospital had significant safety defects. For this, he was arrested, jailed, and tortured for 39 days. Upon his release to the United States, Nelson sued the Saudi government for personal injury. Can Nelson sue Saudi Arabia? Answer: Based on Saudi Arabia v. Nelson (US S. Ct. 1993). The Supreme Court found that FSIA applied to immunize Saudi Arabia from the suit. While employing someone is a commercial activity, the Court reasoned that the injury stemmed from his arrest. Since a private citizen cannot jail someone, this is purely a governmental activity. 2. The Instituto de Auxilios y Viviendas is a government agency of the Dominican Republic. Dr. Marion Fernandez, the general administrator of the Instituto and Secretary of the Republic, sought a loan for the Instituto. She requested that Charles Meadows, an American citizen, secure the Instituto a bank loan of $12 million. If he obtained a loan on favorable terms, he would receive a fee of $240,000. Meadows secured a loan on satisfactory terms, which the Instituto accepted. He then sought his fee, but the Instituto and the Dominican government refused to pay. He sued the government in U.S. district court. The Dominican government claimed immunity. Comment. Answer: The suit arose out of a loan agreement. Since this is activity that an individual can engage in, the Dominican government is not immune. 3. Many European nations fear the effects of genetically modified foods, so they choose to restrict their importation. The EU banned the entry of these foods and subjected them to strict labeling requirements. Does this policy contravene the principles of WTO/GATT? Answer: The United States challenged this practice and WTO ruled that GM food had to be allowed into the EU. The WTO held that no scientific evidence supported the EU’s fears and therefore the regulation unduly burdened trade. © 2022 Cengage. All Rights Reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.

Solution and Answer Guide: Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 3: International Law

4. Boston Scientific (BSC), an American multinational, hired Carnero to work in its Argentine subsidiary. Carnero was paid in pesos, and his contract was governed by Argentine law. After BSC fired Carnero, he sued in the United States, claiming that the company terminated him for blowing the whistle on its accounting fraud. If this allegation was true, BSC would be in violation of an American statute, the Sarbanes-Oxley Act (SOX). BSC argued that, because SOX made no mention of extraterritorial application, it did not apply to overseas employees. Should SOX apply to an employee of a U.S. subsidiary working abroad? Answer: Citing the “well-established presumption against the extraterritorial application of Congressional statutes.” the Court declined to extend whistleblower protection to overseas workers of U.S. corporations.

5. Chateau, a Canadian winery, contracted over the phone to buy 1.2 million wine corks from Sabate USA, the U.S. subsidiary of Sabate France. The parent company shipped the corks from France to Canada, along with a pre-printed invoice. The invoice contained a forum selection clause providing that any dispute would be heard in a French court. When Chateau realized that the corks altered the taste of its wine, it sued Sabate in California for breach of contract. Chateau argued that the forum selection clause was not part of the original deal. Furthermore, it had an enforceable oral agreement with Sabate USA, which was governed by the CISG because both Canada and the United States were signatories. Did the CISG govern the dealings between Chateau and Sabate USA? If so, did the contract between Chateau and Sabate USA have to be in writing? Was the forum selection clause enforceable against Chateau? Answer: Yes, the CISG did govern the dealings between the parties, and the agreement did not have to be in writing, as oral contracts were sufficient. But the forum selection clause, the court ruled, was a later attempted modification of an existing contract, and therefore, unenforceable.

Discussion Questions 1. After reading this chapter, do you believe that international law exists? Has your concept of law and legal rules changed? Answer: Answers will vary. 2. After the 9/11 terrorist attacks, the U.S. government imprisoned suspected terrorists in Guantanamo Bay, Cuba. Officials argued that these detainees did not enjoy constitutional rights because they were not on U.S. soil, even though they were held by Americans. Are the freedoms guaranteed by the U.S. Constitution reserved for U.S. citizens on U.S. soil or do they apply more broadly? Answer: In Boumediene v. Bush, 553 U.S. 723 (2008), the Supreme Court disagreed, holding that the Constitution protected the rights of noncitizens outside U.S. borders. 3.

The United Kingdom has not signed the CISG. Until recently, major world traders like Japan and Brazil had refused to sign. Imagine that you are a legislator from one of these countries. What might your objections be to ratifying a treaty on sales law? Answer: Answers may include the following:

Solution and Answer Guide: Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 4: Common Law, Statutory Law, and Administrative Law

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Legal uncertainty is caused by introducing a new set of rules of sale. Who will interpret new rules and how? These broadly formulated rules contain many undefined and new terms that have to be developed in the international arena by courts and arbitral tribunals and no principles of stare decisis.  The introduction of foreign solutions to well-known problems.  The absence of certain underlying principles.  The law is robbed of its flexibility and is fossilized in a code that is almost impossible to change. The integrity of the Convention is threatened by diverse interpretational approaches and tradition. 4. Generally speaking, should the United States pass laws that seek to control behavior outside the country? Or, when in Rome, should our companies and subsidiaries be allowed to do as the Romans do? Answer: Answers will vary. 5. What responsibility, if any, does the United States have to obey international law? Is it any different from other countries’ responsibility to uphold international law? Why or why not? Answer: Answers will vary.

Solution and Answer Guide Beatty/Samuelson/Abril, Essentials of Business Law, 7e, 2022, 9780357634059; Chapter 4: Common Law, Statutory Law, and Administrative Law

Table of Contents Multiple Choice Questions ....................................................................................................................................... 14 Case Questions ............................................................................................................................................................. 15 Discussion Questions.................................................................................................................................................. 17

Multiple Choice Questions 11. A bill is vetoed by ___. A. the speaker of the House B. a majority of the voting members of the Senate C. the president D. the Supreme Court Answer: C