MBA-A-Day: Business Law

Finally, something that has no ambiguity: the law is the law. Right?

Right?

The fact is, if you end up in court, you’ve already lost. It’s going to be expensive and time-consuming to win your case, even if you’re 100% in the right.

The law is the law, but it is ambiguous, and requires interpretation. The application of law depends heavily on case law, which is just legal tradition: the outcome of your case may be determined by how a similar, previous case was decided.

The vast majority of cases are settled out of court.

There’s criminal law and then there’s civil law. If an employee steals from the till, a criminal case might send them to jail, but you’ve got to sue them in civil court to see a red cent.

There’s causing deliberate harm, and then there’s negligence. You can be found negligent only if you have a specific duty to keep a specific person from harm, that you didn’t do your job, that your lack of action caused an actual injury, and that a reasonable person could foresee that your lack of action would cause that injury. A mechanic not attaching a wheel properly which causes your car to crash is negligent. The wheel falling off, rolling into an open manhole, shutting off a water main and causing the fire company to not be able to put out a fire is not negligence.

In the US, employees are considered “at-will”: you can fire them for any reason, or no reason at all–as long as it isn’t a “protected” reason, such as gender or race.

That said, even if you don’t have a formal, signed contract with somebody that states that you’ll give them severance if you fire them, or that they have to have a formal hearing before they’re fired, it is possible that an implied contract might exist if they have a realistic expectation of certain things. Companies have gotten in trouble because their employee handbooks accidentally imply just such contractual obligations. Nowadays, you’re likely to sign an explicit “at-will” document when you get hired.

A contract can be oral. It’s harder to enforce than a written one, though.

Minors cannot legally consent to a contract. If you sell a car to a minor, the minor can completely destroy the car, come back to you and declare that the contract is void, and you are out of a car with no option for restitution. That’s why minors often need a cosigner.

Non-compete agreements are often not enforceable, and they always have to be realistic: if there are only two automotive dealerships in a 500-mile radius, and you quit working for one of them, they can’t keep you from working for the other. Non-competes can’t eliminate your ability to make a living.

If you start a corporation, you have certain legal protections: if somebody sues the company, they can’t take your house, for example. But you have to be very careful to run your corporation like a corporation. If you use corporate funds to pay your home mortgage, to go on personal vacations, and to buy things not related to the business, and you get sued, a judge may well “pierce the corporate veil” and decide that you are liable after all.

Patenting an idea is difficult and expensive, and it doesn’t guarantee that you get to make the product. It only guarantees that somebody else can’t. Also, a patent needs to be done for every country where you want your product to be protected.

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