Introduction to US Business law

18.02.2015

Us judges are so powerful, and highly regarded in us society. Very successful attorney have
aspirations to end their careers with being a judge. Moral dimension- battles between lawyers and
judges, judges tell the lawyers what to do. Judges keep low profile. Its the parties who drive the
proceeding form. Each judge in US has his own court room. For each judge a specific court room.
There are chambers for each judge, very well kept.

Legal terminology- specific legal terms. Very close to what we are using, very often. For example-
contracts, very similar to contracts in Switzerland. Little differences are sometimes very important.

In the US there is a third thing coming to the game- consideration in ordering to offer become legal
binding. They use the same terms, but they dont mean the same thing.

Complexity of the US legal system:

Probably more complex than Swiss legal system. Both are federal legal system. In Switzerland much
more advanced than in the US. 50 States in US, 50 different regulations on a state level.

You cannot speak about US private law, it is a private law of NY, and Washington, Louisiana (has civil
code).

Two court systems that enforce two legal systems.

Plays a very prominent role.

Brief history of USA:

Important to understand the legal system.

First settlement was at St Augustine, first permanent settlement in US.

The British started more as gentlemen adventurers. They wanted to find new resources. Founded the
Virginia Company in 1606, around Washington DC. Soon they started to grow tobacco there. 1614
the first Virginia tobacco was sold to England and became the first export product from US.

The Crown created official colony. Population went up quite fast. Who went to the US? At the
beginning, most the people who had religious reasons. Those were called The Pilgrims. Founded in
Virginia, they were independent from English crown.
The Mayflower was the ship they used.

The Massachusetts Bay Company (1629)

The southern states in the US were mainly based on agriculture. The northern states developed some
kind of industry.

The Dutch founded New Netherland- New Amsterdam was renamed to NY. The Swedish were very
strong power in Europe in those times.

No taxation wihout representation.

Swiss immigrants came in 1850 to the US.

Relation between US colonies and British government worsened over the years.
American Revenue Act (Sugar Act)

Imports of British goods were boycotted.

George Washington had been made commander officer.

Every human being has the right to pursue happiness, and the state should be supportive of that. If
the state is restricting happiness, then citizens have a natural right to change the government or
make a revolution. (Declaration of independence)

The American Revolutionary War:

French joined US against the English. Enemy of my enemy is my friend. Peace treaty was signed in
Paris in 1773. Each of the states was independent, but they had a common enemy, and they created
a confederation, joining forces together. They found an example in Switzerland. Mutual influence
between Switzerland and the US since then.
Best invention Americans ever had- Federal system, as a first federal system in the world. The try to
mix independent states in federal central government. American federal system is the effort to
combine advantages of having different states but with the having a central government at the same
time. Once they created USA in 1789 they needed a president (commander chief in the war)- George
Washington. Washington is the big father of the US. He couldve become the king of the US in that
time. The Constitution mostly says who does what. They amended the constitution with the Bill of
rights. The US Constitution cannot be changed. It can only be upgraded with amendments. The first
10 are fundamental rights.

1803- The Louisiana purchase The most important factor of growing. Napoleon was in war and he
had to sell Louisiana for 15 million $.

Civil war: it was the bloodiest war the Americans have ever been engaged. More people died than in
all wars combined since then. Southern states could maintain their economic systems with
maintaining the slaves. Their economy depended on cheap labour. Northern states were
industrialised and they didnt need slaves and cheap labour. Lincoln was opposing slavery. Southern
states succeeded from US. They didnt want to maintain their membership in US. The government
under Lincoln in Washington didnt accept that. The main general of the US before the war was
General Lee, from Virginia- southern states, he couldnt fight against southern.

Southern lost because they had fewer troops, fewer money, because they used slaves to fight for
them. The economic growth started rapidly after abolition of slaves. The Rockefellers owned at the
end of the day all the oil companies. It was a huge development.

The 1920s- the era of alcohol prohibition.

The Wall Street Crash- Black Friday A real difficult economic situation in the US so called The Great
Depression. Franklin Delano Roosevelt was elected a President (New Deal). The only President of US
who was 4 times enrolled as a President for 14 years. The American people amended the US
Constitution, 2 mandates. He was unable to walk, and most Americans couldnt realise that. People
didnt know.
The Americans didnt participate the II WW until the Pearl Harbour.

USA after the II WW:

Most powerful nation on Earth. Civil rights movement- black people were officially treated equally,
in New Orleans black people were not allowed to use the trains, buses or parks together with white
people (early 60s).

McCarthyism- claimed the right to invite everybody who was suspicious of being communist could be
called in front of committee to be interrogated of being a communist (Charlie Chaplin)

Vietnamese war- a terrible disaster for Americans.

Watergate- Nixon recorded every conversation in Oval office. He refused to hand over the tapes to
Congress. The Congress started the procedure of impeachment, and then Nixon resigned. He was in
charge of these secret agents. President was clearly violating the US Constitution just for his
advantage.

Young history, but still very decisive for many things going on in US.

Legal system:

US has a lot of statutory law. They have statutory provisions. Uncommon common law system,
different than one in England.

25.02.2015

Europa Institut Hirschengraben 56 ZH

Role of the courts in US is way more important than in Europe, because the law is more fundamental
element.

Great Presidents of the USA

First one to remember is George Washington- 2 terms, 8 years

Maximum 8 years, 2 terms

George Washington- founding father of US

Thomas Jefferson (3rd) US Ambassador in Paris

Abraham Lincoln (16th) President during the civil war He spoke only few words, but decisive
president

Franklin Delane Roosevelt (32nd) enacted a lot of social oriented rules, he was a democrat, more open
than republicans, was in a wheelchair, nobody knew

John F. Kennedy (35th) brought the whole new spirit to US, 60s Very young president, gave so much
power to believe in future. Shot in Dallas in 1963

Ronald Reagan (40th) used to be an actor in Hollywood, 2nd grade, conservative, no anti-trust,
charismatic, small government, lower the taxes
Barack Obama (44th) Nobel peace prize, expectations were so high, he didnt change the world

Sources of law in the US

1. US Constitution and the laws and treaties adopted thereupon

Supreme law of the land the basis (all other law is somehow based on the Constitution)

2. State law (constitution and legislation)

3. Municipal law

4. Common law (fill in when there is no statutory provisions in law)

Common law

If similar facts have been decided on the same way, the courts are bound by that decision.
Starring decision principle: precedents are binding for similar cases

US Supreme Court accepts cases being brought before him when two courts of appeal have decided
similar facts with different rules.

States label their courts just how they want.

Case: Pierson v. Post

Who owns the fox? Pierson who was hunting the fox, or Post who shot the fox?

One who killed the fox, could keep the fox. Based on Justinian and Puffendorf.

US Constitution

For the first time the Americans said We, the people

US Constitution- a new model of governance, they limited the central government twice, first by the
federalist system. And secondly they created within the federal government a system of checks and
balances. They all had to play together in order to use the powers of central government. Checks and
balances work only if you have different organs that somehow have similar competences.
The people who wrote the US Constitution are today called The Founding Fathers.

Benjamin Franklin was one of the Founding Fathers. He drafted Articles of Confederation.

The US Constitution has just seven articles. And the document says who has which power (division of
powers). Right after the Constitution they argued about the fundamental rights. They are in 10 first
amendments, first is called The Bill of Rights.
Founding Fathers: George Washington, Thomas Jefferson, Alexander Hamilton, John Adams, John
Jay, James Madison, Benjamin Franklin.

Adoption of the new US Constitution

New York was the Capital of US before moving it do Washington DC. Articles of Founding Fathers are
major sources for interpreting of the Constitution nowadays.

Bill of Rights- first amendment of the US Constitution, gives rights to individuals.

The most recent amendments include limiting the president to two terms in office, granting citizens
of the District of Columbia the right to vote for the President and the Vice President, lowering the
voting age to 18.

Criticism of the Constitution

The old one is that it didnt end slavery. Only whites were treated equally, only men were treated
equally. That promise was not kept in reality. Its rather an ideal world.

They justified different treatment of black people, white people. We are equal, but different.

Power sharing is also point of criticism.

Legislative

Congress can only do what the Constitution empowers it to do, not much.

As soon as business, commerce has cross-border elements then Federal government can interfere.

If a state regulation is somehow hindering cross-border business.

US Parliament could regulate almost everything in business today. Contract law is state law in US.

Share of power between state and federal business.

Executive

The President is commander in chief of all armed forces. Its the Congress that declares war.

Veto power of the President. The President has to sign the law in order to pass it. The President is
appointing federal officers (bureaucrats) .

Judiciary

Federal courts

In top The US Supreme Court

Federal and state system

Each state has state supreme court. Those courts are dealing with state law. In the same time the
federal court system which has two levels, first instance and the court of appeal.

US Constitution Amendments

Bill of Rights:

1. Freedom of speech, press, aseembly

2. Right to bear arms (does it include machine guns?)
3. Housing of soldiers
4. Search and arrest warrants (you are protected)
5. Rights in criminal cases (important) (reason of arrest, reading the rights)
6. Rights to a fair trial
7. Rights in civil cases
8. Bails, fines and punishments
9. Rights retained by the people
10. Powers retained by the states and the people
11. Lawsuits against states
12. Election of the President and Vice-President (in the old days, Vice-President was the
opposing candidate)
13. Abolition of slavery
14. Civil rights
15. Black suffrage
16. Income taxes
17. Direct election of senators
18. Prohibition of liquor (producing and selling alcohol is illegal in US under the US Constitution)
19. Woman suffrage (1920- right to vote)
20. Terms of the President and Congress
21. Repeal of prohibition
22.
04.03.2015

In the US politics can always be brought before courts, because courts have constitutional power.

Federalism is only there to limit the power. Their main concern was how can they limit the central
power? They created two systems of limitation of the central governments power. They are based
on writers from Europe, especially in France and England. First limitation is federalism, and the
second one is checks and balances.

Federalism
State vs Federal government
State governments are powerful. Limitation of power by introducing a federalist system.

Rivalry between state governments and central government. State governments always try to limit
central government. They say a trend to more and more power going over to central government.
They say that state governments are losing influence. Central government has become much more
powerful.

Separation of powers

They wanted to split the power in the central government.

They couldnt fulfil all the duties alone.

3 branches created:

1. Congress (Two chambers: The Senate and the House of Representatives)

2. President (Executive branch, the central part of executive branch)
3. Supreme Court (The US Institution introduced one Federal court, they created their own
federal court system to enforce federal law, state courts enforce state law) If you have
complaint based on federal law, you go to the federal court, and same applies to complaints
based on state law.

Checks and balances

In order to create law, make law it needs one way or another, the co-operation of other branches.
Congress can enact law (majority of both houses). In order to become binding law, it needs a
signature of the President. The President can put a veto on the law, but its not unlimited. It goes
back to Congress and it can override the veto, veto is a relative power. President has a power to
appoint federal judges and ministers, but he needs the consent and approval of the Senate (only
Senate).

The President nominates, the Senate approves the Supreme Court judges. The Court in practice can
oversee both branches. This right was picked by the US Supreme Court in a decision Marbury vs
Madison 1803. The case stands that US Supreme Court tells what the law is. By doing that the US
Supreme Court made itself more powerful than other two branches. Nobody can control the US
Supreme Court. Only if they commit serious crimes can the impeachment be possible, not if you
dont like their decisions. Its much easier for the Supreme Court to nullify the decisions of other two
branches, than vice versa. Co-operation of different branches is important. The problem today is that
two parties seem not impossible to co-operate. The US Constitution is based on the principle of co-
operation. If the opposing parties dont find the solution, they block US.
Congressional Powers
They are limited. Probably most important source of power is the Commerce clause. US Congress can
regulate all issues that are interstates. Federal governments come into play once the commerce is
cross-border. Almost anything that has to do with business is interstate commerce. Federal
government nowadays could regulate almost everything. In practice it doesnt happen, because the
Senate still resists out of political reasons, not out of legal implications.

Dormant commerce clause (discrimination)

Necessary and proper clause

Supremacy clause- says that US federal laws are supreme over state regulations

Powers of the President

Are listed in Art. 2 USC

He is Commander in Chief, he cannot declare war, which is in power of Congress. Who has the power
to send troops? The President can say that he can, because he is a Commander in Chief. Today the
President needs an approval if he wants to send troops (by the Congress). Only in case of an
emergency can the President do it without approval.

President needs an approval to sign international treaties.

State of the Union- goes to the Congress every year and tells what he plans to do next year.

Third branch

US Supreme Court and all the other federal courts

As a first instance federal court, you can appeal from that first instance to the court of appeal (12
courts of appeal), from the court of appeal you might go to the US Supreme Court.

Only if you persuade the US Supreme Court that your case is important then you can go to US
Supreme Court. The US Supreme Court picks the case that it wants to decide. 4/9 judges have to
agree to pick the case (if there is important constitutional question that has to be addressed). One
Court of Appeal said that the death penalty is legal, and the other Court of Appeal said that the death
penalty is illegal

How to become a Judge?

It is a prestigious function. If people are very successful they can afford to be Judge (Federal). You
have to be the same political party as the President. If you are somehow known in politics and people
believe they know for what values you stand, they might nominate you.

Courts with original jurisdiction over specific subject matter

- US bankruptcy courts
 - US tax courts
- US court of private land claims
- US court of international trade
- US court of federal claims
- US foreign intelligence surveillance court (the CIA comes and says, we want to kill somebody,
US interest etc.)
- US alien terrorist removal court

Jurisdiction

In order to have jurisdiction Federal courts and State courts have to have personal, territorial, subject
matter jurisdiction and diversity jurisdiction. Subject matter jurisdiction- federal courts enforce
federal law. What is federal law? Anti-trust law for example.

Diversity jurisdiction- the case is actually based on state law. When you commit a crime, violated
traffic. It is a state matter. Diversity jurisdiction when the persons involved arent the citizens of the
same state. Federal courts jurisdiction in cases where involved parties are different states. The
amount has to be over 75000$.

Territorial jurisdiction is also important. Federal courts have only jurisdiction over US citizens, not
both sides have to be US citizens. The example of Swiss ambassador suing the tabloids in Texas- no
jurisdiction because three copies of newspapers had been sold in Texas, therefore no jurisdiction
because it hadnt caused damage to her).

The forum shopping issue. Two court system that are somehow overlapping, and you get into
opportunity to choose between them, which is more in favour of you, or more against you.

Its important where you bring the case (O.J. Simpson case).

Courts decide different cases differently. If we are sued how can we bring the case from that court to
another court who might be favourable for us?

Federal courts subject matter jurisdiction

Differences among the states

State Court Jurisdiction

Each state regulates the appointment of the judges for itself. The tricky issues are that state courts
are elected by the people. State judges are more leaning to a local influence, they collect money to
run campaigns, and they need donors. Federal judges are more quality judges (one of 750). Usually
state judges are running for re-election.
Dual Jurisdiction

If your case is weak you might prefer not such a smart judge. If your client is an old lady fighting big
corporation you might want to go to the state court. The factors are numerous: black and white,
educated and uneducated

Distance can be relevant also.

18.03.2015

16.09. 2015. Justice of Supreme Court of USA speaks at the UZH.

Jurisdiction

Subject matter jurisdiction

Constitutional law or federal law is the basis. US Congress can regulate all kind of commerce as long
as it regulates commerce between two states. Congress is a very broad basis for legislation. Patent is
a specific federal issue.

Diversity- if you have two parties involved from different states, even if the case itself is based on
state law. It is much rarer that state courts deal with federal law. Most regulations in US is state law.
Insignificant cases cannot be moved to federal courts- under 75 000 $.

Personal jurisdiction:

Power to bring parties before court and bind them to judgment:

- In personam (state has jurisdiction over that person)

- In rem (court has power over defendants property- where the house is)
- Quasi in rem (a minimal contact)

If you have consent the courts are not always obliged to accept the case. Domicile is another
form of minimum contact- if you have domicile in some state, then you are entitled to have
subject matter jurisdiction. Minimal contact is also valid for Internet advertisements.

Subject matter jurisdiction cases:

Antitrust (federal and state antitrust laws).

Diversity of citizenship cases

You have to have two parties involved from different states. Second requirement is that the
amount in the dispute has to be more than 75 000$.

How can you create a federal jurisdiction case if both parties are from the same state? Extending
the case, bringing someone else in the case. Lawyers try to find the solutions to bring the case in
front of the federal court. One area where state judges are much better qualified than federal
judges is company law. Company law is state law. The state judges do almost nothing else except
dealing with the company law. On the other side federal judges rarely use company law. If you
want to have qualified company law judge you go to Delaware state judge.

Diverse citizenship also applies to out of state cases.

50% of all corporations in all the US have their headquarters in Delaware. They were the first to
create company friendly regulations. Delaware effect leads through whole US to decrease of
company regulations.

Differences among the states

Texas and Oklahoma have separate courts for criminal cases and other cases. Law in the US is
much more simply divided than in Europe. Administrative law is a civil law in the US. Its either
criminal or civil law.

The highest court of the state court system is the Supreme Court (state supreme court) except in
Maryland and NY (The Court of Appeals).

The courts of Louisiana and the Commonwealth of Puerto Rico are organized under a civil law
model. District of Columbia is not a state. It has its own legal system.

Everybody has to follow the US Supreme Court.

Some states are not that big and they dont have a three level court system (First instance, Court
of Appeal, Supreme Court). In some states you can go directly to Supreme Court.
In Utah civil cases are appealed directly to the state supreme court.

State Court Jurisdiction

Dual Jurisdiction

When you can file in federal or state court

Exclusive federal jurisdiction is there always when federal question is involved.

State Courts

98% of the cases are decided by the state courts.

US Courts- International jurisdiction

The basis for suing someone in the US:

1. Territorial principle (persons or events in US, if you get hurt during the vacation in Texas)
2. Nationality principle (US courts have jurisdiction over Americans)
 3. Passive personality principle (if the US citizen gets killed abroad, his family can sue in the
US)
4. Protective principle (national security is always an issue when you can sue in the US)
5. Universal principle (jus cogens- genocide, some cases you can sue anywhere)

It is interesting to bring the case to the USA.

Wegelin case

Wegelin (oldest Swiss private bank) was being sued in the US by US Government. They dealt with
non-declared money from US citizens. The US Government under Obama changed its view on
jurisdiction. Especially when they found out that some of the activities with Swiss banks took place
on the US soil. By doing that they obviously violated the US tax law.
In that case came the Wegelin, they didnt have the branch in US, they didnt do any business in the
US. The US learned about that, and they started an investigation against Wegelin. The US decided
that they might start a lawsuit against bank Wegelin at the US court. Clients of the bank started to
withdraw the money from this bank. Customers started to lose confidence with the bank. Wegelin
was somehow forced to co-operate with the US by indirect threat. Just a fact that there is
indictment. They started to co-operate with the IRS and the US Justice Department. They signed an
agreement, they agreed that they violated the US law.

The question was- was this right from bank Wegelin? What if they have done something different
and not have signed the agreement? The bank Wegelin first said that US courts have no jurisdiction,
then they were threatened by the Department of Justice, and started losing the customers.
Did bank Wegelin give up too early?

Civil Litigation

Everything in the US but criminal litigation. Everything that deals with Zivilrecht, Verwaltungsrecht.
You can file lawsuits with state courts or federal courts. Each state court has a civil procedure rules.
Federal courts civil procedure rules are unified.

As an attorney you are admitted to practice in only one state, because rules are different in each
state. Different phases in the civil procedure:

1. Pre-trial phase (you file a lawsuit with a specific court, you send it to the court and also to the
party you are suing, trials in the US are run by the parties, not by the court. The judges role
is to observe that the rules and regulations are being maintained. The judge in the US civil
procedure is not the person who tries to bring out the truth. Its up to the parties. Theyre
making sure that the parties are playing fairly. The judge is presiding the proceeding. The
defendant gets the complaint, and can react in a specific time. Usually the party doesnt
react or is opposing the complaint. Then the judge invites the parties to pre-trial conference.
In that phase the parties are allowed to gather evidences, on their own. Now both sides can
ask the other side to produce records, evidences they think are necessary. The other party is
required to give that. It is called supreme trial discovery procedure. You have to ask on the
smart way for the information. Thats the tricky thing. The idea for this is that at the end of
this proceeding both parties know what the other party has in hand. If both have this
knowledge they can see the chances of winning or losing. If you are in a bad position, you
 might say you dont want to go to trial. You can agree to settle the case. The US cases are
much more often settled before the trial starts. Pre-trial is speciality of the US civil
procedure, its a burden of both parties to produce all information, evidences. Its very bad
to modify, falsify your records at that stage. Pre-trial enables both parties to have all
evidences they think are necessary for the case. There are a few cases where a judge can
dismiss the case, when nothing is substantial, or when one party can prove that the bill has
to be paid. If there is no such evidence, you start the next phase.
2. Trial- always starts with the jury to be selected. The jury for that specific trial has to be
selected. Each court picks a number out of the voters register randomly. They have an
obligation to be a part of jury. You might ask to be excused. Both parties have a right to
exclude a couple of members of jury. You have to give reason for that. Usually 9 or 12 jurors.
This is a lengthy procedure. The trial can start when you have jurors. The party that filed the
complaint proves the facts to jury. The jury has not read any files. Oral capacity of a lawyer
comes to play at this point. The other side starts second, witnesses can be cross examined.
Cross examination can be very tricky for a specific witness. Lawyers in big cases prepare
heavily for their presentation. They form very often mock jurors. They test their oral
presentation and the effectiveness of what they say. The jurors decide on the facts at the
end of the day. The court decides the consequences. Once the jury have decided,
anonymously, they stay together until they reach a verdict. The jury decides in the jury room,
locked-in. The judge is bound with that decision.
3. Post-trial phase- when the parties think about appealing this decision to a superior court.
Legal reasons, or when the jury have violated the civil procedure rules. You cannot come
with the new facts. Less legal remedies than in Europe.

25.03.2015

Out of 50, 35 states have adopted the federal civil procedure rules.

Civil procedure has couple of specialities that are different from the ones in Europe:

- Extensive pre-trial discovery (parties are entitled to ask the other party to ask any kind of
evidence, takes place largely without judge)
- Trial is heavily relying on live testimony (because the jury decides the facts based on the
sayings they hear, both sides have to convince the jury about the case, the better convincing
story is going to win; oral presentation in US trial is much more important than in our
system)
- Aggressive pre-trial motions (They try to settle the case. Both parties figure what is more
beneficent- long trial, attorney expenses etc. If the facts are undisputed, jury decides about
the facts)
- Class actions (Basically give little people, ordinary people the chance to sue big companies,
big corporations. It is very risky to sue big corporations for small guys. Many small guys can
get together and sue big corporations. Different ways of starting class actions. Law firm tries
to find people to sue the corporation (after they found out some facts that prove they can
win the case). No trial, no paper work. It has become a business model for class action
attorneys.
- Punitive damages (Doesnt exist in Europe. If you sue somebody (breach of contract), you are
suing for compensation, for damage. In Europe you cannot sue for more than your damage
is. In US there is the idea if people behave really badly, they should get punished, they should
 pay the damage, and more. Punitive damage makes it interesting suing other people, you can
make money suing somebody. In Europe you get in the position before the damage
(restitutio in integrum).
- Lawyers fees (no loser pays rule) - In the US most of the cases you always have to pay your
own lawyers fees. If you have the contingency fee arrangement, if you lose, you will not pay
his fees. Usually the other party pays its own lawyer. Costs of the court are usually not high.

Typical exam question.

1. Pleading: plaintiff is filing a complaint, not detailed, and doesnt need to be as long as in
Europe. Defendants have 20 days to react. In case of not reacting- default judgement.

Defendant: either files answer.

2. Pre-trial discovery: basically 3 forms of evidence you can ask the other party: interrogatories
(people, witnesses), to produce documents (e-mails, reports) and questions to third parties
and depositions.
3. Trial: Right to trial by jury. Jury is finder of facts. Not by law. At the end of trial each party
makes closing arguments. Then the judge instructs jury. Jurors get a list of questions from
judge. The jury doesnt have to give reasons. They just decide.
Mock Jury-Trial- attorneys train themselves in mock trials.
What does the judge do at all? Listening to parties performing. Decides on admission of
evidence. If the jurors come to the conclusion that one of the parties has to be convicted, the
judge must write his opinion.
4. Post-trial: is the right to appeal. Under the federal civil procedure law, you can appeal only
once. This one appeal is limited to legal arguments, no second jury. Jury is only present on
first instance courts. Court of appeal is also the higher court.

The way up to the US Supreme Court- funny video.

Contracts

Contract law in the US is based on the Common law. It is a state law, you dont have US contract law.
It is based on Common law principles. It became burdensome in doing cross border business, there
was a conference held in 1942. They came up with Uniform Commercial Code- the model law. It was
widely followed by state regulators. It became a model for a state law. UCC is not a law, just a model.
The complaint has to be based on actual law. UCC is very often cited, but its not a law. It shows how
to modify state regulations. Stets fall under the UN convention on sales of goods.

Freedom of contract as a principle in US law.

New York Contract Law.

Contract is an agreement, but it is also legally binding. Not every agreement is a contract.
Contract Components:

- Offer
- Acceptance
- Consideration (one element that shows how tricky it can be sometimes)

Defences to Contract:

- Legality of the contract

- Capacity of the parties
- Mistake, Duress, and Fraud
- Unconscionability
- Statute of Frauds
- Parol Evidence Rule
- Contract Termination
- Damages (Money Damages, Specific Performance, Liquidated Damages)

Contract formation:

Offeror and offeree usually know fix form of contract. No specific form of a contract. Both have to
mean the same thing- meeting of the minds.

Acting as an acceptance- acting accordingly.

The contract is initiated by the offer.

The contract is legally binding only if either contract is formalized or the consideration exists.

Sealed contract are either in written form or have seals.

States know that certain contracts must be in writing.

What is consideration?

It means that you are supporting the offer of contract. Just to say yes is not enough. It must include
giving back. It should limit somehow your freedom. It can be a promise. You have to give something
in, something that shows that it is serious for you to be bound by an offer. The promise is only
turning from an agreement to a contract if the one who accepts it gives something back.

Consideration is not so important in daily business in US. No issue of enforcement. In order to make
an agreement to a legally binding contract, that is where consideration is important.

When there is a time difference between agreement and consideration there is always a matter of
consideration.

Chappell & Co. v. Nestle

15.04.2015

Carlill v. Carbolic Smoke Ball Company

What is the consideration here?

Yes there is a consideration. All essential elements are there: an offer, an acceptance and an
intention to create legal binding relation by telling everybody that they are serious about everything.

Purchasing and using the ball is a good consideration. It had a benefit to Carbolic.

Breach of contract

If you dont live up to your obligations once the contract has been created. If a contract is claimed to
be breached, there are certain defences:

- No valid contract (just an agreement, minds have never met)

- Lack of capacity (being drunk)
- Mistake (you wanted to buy the red car, and bought the yellow car)
- Fraud (reason why enforceable agreement can legally be breached)
- Public policy (the government says that specific agreement is not legally binding)

Remedies

Usually in general damages= money damage.

Mostly for very specific goods (painting) - you can try to get specific performance.

Sometimes you can even get more money than you wanted to (punitive damages)- because the other
side behaved badly.

Uniform Commercial Code

In some ways all states have implemented more or less UCC.

Case: Payne v. Stalley

Lawyer failed to check whether the Florida implemented the UCC.

Drafting US Contracts

The contracts in the US are longer than continental European ones.

Why?

Europeans dont include regulations and principles which are in the statues. We involve everything
that is specific agreement what is necessary. Americans involve everything that could be relevant for
the specific case.
American approach has swapped more to the Europe.

The biggest difference from European contract law is in consideration.

Company law (Corporate law)

Basically it is state law. There is no general rule for federal government to harmonize that law. Except
interstate commerce clause (Art. 1 sec. 8 USC) - provided there is a cross-border element.

US corporate law doesnt exist. It is US states corporate law. Significant differences between states.

Delaware has become so attractive for US companies that more than 50% of all US companies are
registered in Delaware. Because corporations like Delaware corporate law. Delaware had and still has
a reputation for low regulation. It gives more freedom and more choice than other jurisdiction.

Other states go for the Delaware model- Delaware effect- it has created more business friendly
environment. The idea of Delaware effect- there are no real company regulations anymore.

There is a constant deregulation on the state level. By lowering the regulation, you have a steady
relaxed regulation on corporate law.

At the same time more regulations are being introduced on a federal level. US Business environment
hasnt become more safe.

Why is it so attractive to many corporations?

- Taxes (no taxes on income outside Delaware)

- Experienced courts (state court system; so many corporations have their HQs in Delaware,
you have a lot of cases in Delaware, therefore judges are very experienced, high degree of
legal security in business law; state judges are much more qualified for corporate law than
the federal judges; if parties agree- no juries in the case)
- Computerized registration system (you can create your own company online)
- Confidentiality?
- Lax corporation laws (manager friendly approach, they protect managers, not the
shareholders and public)

Internal affairs doctrine- means that if you have a litigation going on about internal structure of
corporation- they are always decided by the court of the law where the corporation is based.

All offices may be held by a single person who also can be a sole shareholder.

Residency is not required. Corporations may also operate anonymously.

Two principles:

- Principle of loyalty (in case of conflict they have to act in favour of company)
- Duty of care (the members of the board of directors have to make sure that the decisions
they take are based on information, facts, discussions. They have an obligation to care to
make the right decision. It is called the business judgment rule)
Business judgment rule- as long as there is an informed decision made in good faith, the court will
not make a second guess. The court says that they are not the business people, they are better in
business than judges.

Model laws in company law

Kind of legal harmonisation. Considerable differences between states in corporate law. Over the time
the federal government has stepped in.

Sarbanes- Oxley was a shock for a business environment.

Legal entity- characteristics

Limited liability of shareholders, limited to investment.

Formation- filed with secretary of state.

Taxes are separate- income of company and your income are different worlds

Statutory requirements- persons, no residence, name, officers, shares, address, purpose

Financing- a corporation needs stocks/shares and in addition you can try to finance through bonds

Piercing corporate veil- companys liable only for the companys debts- torts might be an exception,
fraud, inadequate capitalization and parent liability where Mother Company might be liable for debts
of Daughter Company

Duties of directors- duty of care, duty of loyalty.

Public and private corporations- whether they are listed on stock exchange.

Different forms of doing business

Sole proprietorship- the most simple thing (one person runs a hairdresser saloon), only one owner.
No formalities

General Partnership (GP) - at least 2 partners get together for business purpose. No legal
personality. Each partner is totally liable for all debts (torts). Profit share equally- same amount of
profit. No registration necessary.

Limited partnership (LP)- you need at least one or more general partners. General partners are liable
for everything. One limited partners are limited to their investment

Corporation Legal entity comparable to AG. Name has to include Corp., Inc. or Ltd.
You issue shares.
Board of directors- CEO is the officer under US terms.
Board of directors appoints the officers. Duty of care and loyalty for both.

Walkovszky v. Carlton

Is this the case for piercing the corporate veil? It is legal to divide your corporation as long as you
dont undercapitalize your company. Is 10 000$ undercapitalization of one car taxi corporation. It is
ok, and you cannot pierce the corporate veil.

Yearly income statement, balance sheet and an auditing.

Stock exchange- can be transferred with an agreement.

One man corporations are possible.

Closed corporations:

Fixed shareholders- great for family businesses

Tax advantages

Stock transfer is restricted

The same income will be taxed twice if company makes profit and when the companies divide the
profits between shareholders.

22.04.2015

Repetition from the last time:

Most regulations in US- state law- differing from one state to another. One state especially popular,
this is Delaware. There might come up a question- why 50% of businesses have their HQ in
Delaware? Manager friendly, no taxing on business outside of Delaware, online registering of
business.

Harmonization in the US- federal law gradually stepping in and regulating more and more specific
areas. Relevant federal legislation:

- Securities act
- Securities Exchange

Forms of corporations
Limited Liability Corporation

LLC or Incorporate?

LLC- like a bulletproof jacket. Protecting personal assets from business assets. LLC is very flexible,
anybody can own it. It can qualify to business any place in the world.

The law does permit the LLC to convert to Corporation.

LLC- Corporation, shield of liability.

Disadvantage- you have difficulty to sell your shares. If you want to sell the business you better
create a corporation.

Limited liability partnership (LLP)

Lawyers tend to create partnership under the LLP structure. It is not a corporation, it is a partnership.
Within the partnership partners have full liability.

It wouldnt be possible to create a corporation as a law firm in the US.

LLP is the vehicle to limit the liability.

LLPs have no time limitation.

Change in partnership is possible only with the consent of all partners.

Capital Market Regulation

The most important body is the SEC (Securities and Exchange Commission). Sarbanes-Oxley act gave
a lot of power to SEC. SEX- very powerful, has a lot of authority.

Public listed companies

Usually NYSE (Wall Street) largest stock exchange in the world. They want to merge with the stock
exchange in Frankfurt, to make a World stock exchange. EC turned it down, explaining that it could
lead to monopoly position.

Dow Jones Index- index of performing of the NYSE. It was created in 1790. 24. October 1929 black
Thursday.

International level playing field

Torts Law

What is tort?
Extra-contractual obligations liability. If you hurt someone illegally without justification, this person
has a legal basis in tort for compensation.

Torts include:

- Injuries to persons (medical malpractice)

- Injuries to property (trespasses)
- Injuries to reputation

What is damage? A loss of earning capacities (breaking of leg- you may not serve as a servant), pain
and suffering, present and future expected losses.

General torts and specific torts. Specific torts have been established for trespasses, assault, battery,
negligence

Intent

Deliberate and purposeful state of mind or knowledge with substantial certainty that consequences
would result from that act.

It is distinguished from negligence, requires a foreseeable risk which a reasonable person would
avoid.

You dont have an intention, but you should have foreseen.

Intent is obvious tort.

Torts law is as most regulations state law. You have certain differences between different states.

Restatement of Torts- guide for judges- leads to results you have in practice. It somehow harmonizes
tort law in US. It is practical, reasonable. It is not a law, not a statute, it is a guide.

3 elements have to be established in tort action:

- Plaintiff must establish that defendant was under a legal duty to act in particular fashion- this
creates a standard of care.
- Plaintiff must demonstrate that defendant breached this duty of care
- Plaintiff must prove that he or she suffered injury or a loss as a direct result of defendants
breach of duty of care.

Causation

General categories of torts:

1. Intentional torts- you know or should have known what you do (intentionally hitting a
person) excuse- you are allowed to hit a robber in order to protect yourself
2. Negligent torts- action were you behave in an unreasonable way (causing an accident
because of driving on the other side of the road without attention)
3. Strict liability- usually seen as things that are dangerous
Intentional torts:

Include battery, assault, false imprisonment, intentional infliction of emotional distress, malicious
prosecution, abuse of process, trespass to land, trespass to chattels, conversion.

Special actions based on intentional torts.

Defence:

- Mistake
- Self-defence
- Defence of others
- Defence of property and chattel
- Necessity
- Authority of law/immunity
- Consent (most important) boxing, ice-hockey.

Trespass example

Intel Corp. v. Hamidi (2003)

Mr. Hamidi was a former Intel employee, used critical e-mails about Intel to current employees
which caused discussions.

Intel: sued them based on trespassing- a modern form of trespassing- entering an e-mail system.

The court rejected- it said that old common law trespassing system doesnt fit for e-mail system.

Assault and battery example

Katko v. Briney (1971)

Briney installed shotgun in his unoccupied house which severely injured Katko. Katko sued Briney.

Briney defended himself that he installed the shotgun to protect his property.

The court said that it is out of proportion- human life v. property.

Defamation example

Barret v. Rosenthal (2006)

Barret sued a womens health advocate Rosenthal because of publication of libellous information
about him in the internet.

Publishing critical letter twice.

Negligence torts

Most common source of common law

Failure to comply with the duty of care of a reasonable person.

Reasonable person standard is the standard that courts apply.

Person acts negligent when behaviour departs from standard, ordinary conduct.

Donoghue v. Stevenson

Dead snail in a drink bought by a friend.

The defendant claimed that there is no contractual basis.

Duty of care that was breached, because it was reasonably foreseeable that failure to ensure the
products safety would lead to harm of consumers. First case of consumer protection as a basis of
tort.

MacPherson v. Buick Motor Co. (1916)

MacPherson got injured by one of the wooden wheels of his Buick collapsed.

Buick said that they have no liability because they dont sell cars. The court said that they have
liability because they produce risky products. First product liability case.

Car producer has to set up a system of checking each car.

Breach of duty of care example

U.S. v. Carroll Towing Co (1947)

Standard of care for tort negligence.

Boat was parked together with other boats at public pier.

Emotional distress

Miller v. National Broadcasting Co. (1986)

NBC camera crew followed a firefighter and paramedics team on a night shift.

Camera crew entered home without consent, filmed Miller dying, aired film without consent. Miller
widow sued for invasion of privacy and infliction of emotional distress.

Does the media have same access privilege like police or paramedics?

The NBC teams invasion was clearly illegal according to court.

Medical malpractice

Ewing v. Goldstein (2004)

Former police officer C received metal treatment by Dr. Goldstein for loss of girlfriend.

Dr. Goldstein learnt that he was considering harming Ewing who was his ex gfs new boyfriend.
Goldstein recommended voluntary hospitalization to C but did not warn Ewing and committed
suicide.

Was Dr. Goldstein wrong?

Court ruled that Goldstein was negligent and guilty of wrongful death. Duty to protect and duty to
warn!

The court extended the obligations of doctors.

06.05.2015

Sherman Act Section 1

Every contract in the form of trust or otherwise, or conspiracy, in restraint of trade or commerce
among the several States, or with foreign nations, is declared to be illegal.

In all other cases we apply the rule of reason. What are those part core restrictions? Basically: price
fixing, geographical division of markets.

Section 2 is dealing with monopolization. Criminal section regime with fines in combination with jail.

Rule of reason/per se

Per se= severe restrictions

Merger control compared to monopoly is even trickier.

The only thing is that you want to buy a new company. If you buy small companies that could be
making monopoly by reducing competition. Merger control is a specific thing in antitrust regulation.

Monopoly doesnt have to be created in the merger control.

In order to give more legal security to market participants, the Antitrust Department has issued
merger guidelines saying how the Department of Justice would approach mergers.

If you are trying to monopolize the market you have to say which one. You monopolize the specific
market, and how do you exactly describe that market is crucial regarding to your market share.

The ones who want to merge have the tendency to make market as big as possible. The Antitrust
says how they define relevant markets, which merger might be dangerous for the market.

Thats not the law, they should bring the case before a court.

General Electrics/Honeywell case

All jurisdictions apply today extraterritorial regulations.

Usually companies try to negotiate the problems with the relevant authorities.

Difficult issues are always market definitions.

Enforcement

If you come forward and cooperate with Department of Justice they grant you an immunity.

US Attorney at law/Legal education

Law schools- around 200 accredited law schools in the US- accredited by the American Bar
Association. Approval of the ABA is decisive for law schools. ABA is very influential and powerful. You
have to provide certain quality, it is kind of proof of seriousness. First 10 law schools- Ivy League law
schools.

Law is a graduate study. You have to study something else before.

Ranking: They take into account a number of criteria.

Curriculum Law School:

First year- almost all classes are mandatory.

Second year- fewer mandatory programs.

Third year- you pick what you want.

20.05.2015

30 questions exam.

USA and WTO

Switzerland wasnt invited to participate at GATT, because they were neutral in WW2. They created a
UN, World Bank, IMF. The third pillar is regulation of international trade organization.

In average, after WW2, an average good would cost 45% more to import in a certain country. Today,
the average custom tariff is 3.7% of the price. That is the success of GATT and WTO today.

Switzerland wasnt a founding member of GATT.

WTO has three pillars and also a framework for US trade policy:

1. GATT (General Agreement on Tariffs and Trade)

2. GATS (General Agreement on Trade in Services)
3. TRIPS (Trade-related Aspects of Intellectual Property Right)

The GATT principles:

Most-favoured nation treatment: if EU has a special arrangement with Pakistan on car import that
for cars coming from Pakistan the custom tariff is 5%, every member of WTO has the right to that
custom tariff. Special access is valid for every other member of WTO. No discrimination between
member states.
National treatment- products coming from abroad have to be treated as products made in the origin
country except customs regime.

Dispute Resolution System

That is a court, unlike all other courts in international law, can issue binding decisions for everybody.
The most frequent clients are the US and the EU. The court has two instances.

Some famous US cases before WTO tribunal:

Maybe the most famous one is the Banana case. EU granted small green bananas which come from
countries that were colonies, a special favour treatment.

They violated the most favoured principle.

The lawsuit based on GATS

The court said that there was an unfair differentiation between those banana producing countries.
And the EU changed the regulation, just a little bit. And they lost the case again.

The Steel Case

During President George W Bush

US steel industry was having a bad time. Bush implemented a special protection plan for US steel
industry. He had to do something during the election time, to increase his chances of being re-
elected. The US clearly lost the case. The problem is that there is no punishment system in WTO
enforcement provisions. You can change regulation, but you dont have to pay the reparation
penalties.

US- Foreign Sales Corporations

GMO case (Genetically Modified Organisms)

EU is against modified organisms. They banned an import of GMO, the ban is a violation of WTO
Trade. There are exceptions on bans. If you want to protect health. WTO is requiring scientific proof.
The EU has to prove scientifically that GMO is a threat to human life and health.

It is illegal to ban the import of a product in order to change the situation in the world. But you can
ban the import of the product in order to change the situation in your country.

Hormone beef case

Stakes produced using hormones.

A ban on US beef.

Dangerous and harmful to public health. There is no proof of it.

Boeing/Airbus disputes

Boeing had a monopoly in producing airplanes.

EU wanted to break monopoly of airplane production

New Challenge TTIP

It will create by far worlds largest free trade agreement in the world between Europe 550 mil
customers and US 320 mil customers. Free exchange of goods and services between US and Europe.

Repetition for exam:

- Declaration of independence meaning

- Sister republics
- Common law and civil law difference
- Pierson V. Post
- Founding fathers
- US constitution (first articles, checks and balances)
- 2 court system
- Federal courts (3 levels)
- State courts (more than 95% cases because of general jurisdiction)
- Jurisdiction (federal court has jurisdiction when there is federal law applied, or diverse
jurisdiction, 75000$)
- Civil litigation
- Speciality of civil litigation, pre-trial, jury system, class actions, punitive damages, lawyers
fees
- Stages of the trial
- Forum shopping (the best suited case for your case)
- Contracts (state law, except anti-trust)
- Uniform Commercial Code- model law Payne v. Stalley (Florida)
- Consideration- Prof. Banks
- Chappel v. Nestle (Chocolat)
- Carbolic smoke case (value contract)
- Form of contract- few exceptions
- Breach of contract (financial damages)
- Why are US contracts so long
- Corporate law (state law)
- Delaware specialities
- Delaware effect
- Harmonization on federal level with the regulation coming into effect after the black Friday
- Forms of corporations
- Swiss-US business relations
- Challenges
- Antitrust, federal statute
- Three main legislative acts on antitrust (Sherman act, Clayton act, Federal Trade Commission
Act)
- Extraterritorial application
- International coordination GE/Honeywell
- Rule of law vs. Per se prohibition
- Legal studies, education of attorneys
- Bar admission
- Legal form of organization
- WTO
- Principles
- Cases