1 - Part One-Introduction, Legal Process & Ethics (Pgs 1-12)

8/13/2019 1 - Part One-Introduction, Legal Process & Ethics (Pgs 1-12)

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CASES AI{D MATERIALSF'OR USE INFIL 185

LEGAL, ETHICAL AI\D SOCIALENVIRONMENT OF BUSINBSS

PART OI\E - Introduction, Legal Process & EthicsPages | - 12

DR. ERIC T. RUUI)Instructional Assistant Professor

College of BusinessIllinois State [.IniversifySpring,2010


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Michelle D. GreenLegal Environment of Business

Flagiello v. The Pennsylvania Hospital477 Pa.486,2O8 A. 2d 193 (1965)

Facts: Mary Flagiello, while a paying patent of the Pennsylvania Hospital, was caused to fall and breakher ankle through the negligence of two hospital employees. The Flagiellos brought suit against thehospital and the two employees for this loss. The hospital claimed it was not responsible on the bass ofthe doctrine of charitable immunity. This doctrine says that charitable institutions are immune from suitdue to negligence. The trial court dismissed the complaint, and the Flagiellos appealed to thePennsylvania Supreme Court.

lssue: Should the doctrne of charitable immunity be overruled?

Judqment: Yes.

Reasonins: Historically, hospitals have been immune from suit under the doctrine of charitableimmunity. Justice Musmanno, however, feels that this doctrine has now lost its justification. The Courtsaid that since Mary Flagiello was paying for her stay at the hospital, she was not recevng charity andthat the hospital was, in fact, operating as a business in the legal sense of the term, and thus, subject tothe obligations of a business.The court stated that stare decisis does not bind the court if injustice would result. The court also saidthat legislation was not required to change prior judge-made law.The decision ended the use of the charitable immunity doctrine, at least as it applied to charitablehospitals.


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The &rviro.nrnen of Busness

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INTRODUCTION TO THE LECAL ENVIRONMENT OF BUSINESS 19The cosrson law is just a: binding 1s aoy statute, because in the final analysis it is what judges do thatdetermines the nature of the law- The following decision illustrates both the concept of stare'declsis and thenatue of the cosrmon law.

417 Pa. .l{16,208 A.2d 193 (1965)Mary Flagiello was a paying patient in the pennsylvania Hospital, a charitableinsli.utio1uough the negligence of two employees of the hospiial she was causedto fall and fracture her ankte. Th_at iniury in tumcaused a longer hospital stay andmore hospital expenses. Mrs. Flagiello and her husband (th ptainkffs) brughtsuit.for their loss against the hospital and the two ernployees wh a[egedly."ri"aF: *t".y.The hospital (the defendanr) daimed thaiit was not respo;ibe for theinjuries on the basis of an ancient common-law doctrine called charitable inmu-niry- That doctrine provides that cJraritable (eleemosynary) institutions are i.srmurefrom suit for their own negligelg" 9r the negrigene of iet employees- The trialcourt dismissed rhe complaint filed by the Flagiellos, and the Rgittos appealedthe decision to the Perusylvania Suprerre Court.

Musmanno, f ustice The hospital has not denied that itsnegligence caused Mrs. Flagiello's injuries. It merely an-nounces that it is an eleemosynary insttution, nd,therefore, owed no duty of care to its patient. It declaresin effect that it can do wrong and still not be liable indamages to the person it has wronged. lt thus urges amomentous exception to the generic proposition thiat nlaw there is no wrong without a rernedy.iron the earli-estdays of.organized society it became apparent thatsociety could never becorne a success unlesj the collec-tivity of mankind guaranteed to every member of soci_ety a remedy.for a_palpable wrong inflicted on him byanother member of that society. In 184,* Justice Storrs ofthe Supreme Court of Connecticut crystallized into epi-Ermmatic language that wise concet, as follows: -ninjury- is a wrong; and for the redreis of everv wrongthee is a remedy: 1 wrofE is a violation of on.s righand 6or the vindication of every right there is a reme'y.,,On what basis then, may a hospital, which expectsand receives compensation for its iervices, demand ofthe law that it be excuse_d from responding io damagesfor iniuries tortiously inflicted by it emplyees on pay_ing patients? There is not a person or estalishrnent inall civilization that is not reQuired ro meet his or its fi-nancial obligations, there is not a person or establish-ment that is not ca$ed upon by the law to render anaccounting for harm visited by him or it on innocenfvictims. By what line of reasoning, then, can any insti_tution,_operating commercially, expect the law to insu_late it ffom its debts?. . The hospital in this case . . . replies to rhat questionwith various answers, some of which are: it is an an-cient rule that charitable hospital have never been re-quired.to.recompense patients who have been iniuredthrough the negligence of their employees; the rte ofstarc dccisis forbids that charirable hospitats be held li_able . _ . ; if rhe rule of charitabe immunity is to be dis_carded, this must be done by the State Legislature; andthat sinc hospitals serve the public, theie is involvedhere a mater of public policy which is not within theiurisdicrion of the courts.Whatever Mrs. Flagiello received in the pennsylva-nia Ho_spital was not bestowed on her gratuitouslf. Shepaid 524-50 a lll rattrer substantiaf fee for holpitalservices in 1965.-Ed.l for the services she was to re_ceive. And she paid this amount not only for the period

he was to remain n the hospital to be cured of the ail-ment with which she entered the hospital, but she hadto continue to pay that rate for the perod she was com-pelled. to remain in thg hospital as a result of iniuriescaused by the hospital itself.P say that a person who pays for what he receivesis still -the-object of charity is self-contradiction interms- ln the early days oipublic accommodation forthe ill and the rnaimed, chari was exercised in i pureand pristine_sense- Many goo men and wornen, litjeralin purse and generous in Joul, set up houses to heat thepoor and homeless victims of diseae and iniury. Theyma.de no $-u.g." for this care- . _ . The wealthy nd tfe scalled middle class were treated in their homei where usu-ally there could be found better facilities than could behad inihe hospitals. Charity in the biblical serse prevailed.Whatever the law my have been regarding chari-table institutions in the past it does not reet the-condi-tons of t99"y. . . - Hoipitals today are growing intotiqhty edifices in brick, ltone, glas and arble;"manyof the maintain large staffs; they-use the best equipmentthat scence can devise; rhey 6lize the mosf mbdernmethods in devoting themseives to the noblest purposeof man, that of helpng one,s stricken brother. ut heydo all this on a business basis, submitting invoices forservices rendered-and properly so.And if a hospital functiois ai a business insdrution,Py tr.gl"S and receiving money for what it offers, it mustbe a business establishmnt al in meeting obligations it 'incurs in running that establishment. One of th-ose ines-capable obligations is that it must exercise a proper de.gree of care for its parients, and, to the extent itrai t falsin that care, it should be liable in damages as any othercommercial firm would be liable- _ .lf there was any iustification for the charitable im-munity doctrine when it was first announced, it has lostthat iustifica tion today.- . The appellee [Hospitall . . . insist[s] that if the char-ty rmmunity doctrine is to undergo mutation the onlysurteon capable of performing the-operation is the Leg-islature. We have seen howeier that the controvertedrute is not the creation of the Lesislature. This Courtfashioned it, and. what it put toseiher_ it can dismantte.. Fajling to hold back bth rho.,ef,elming reasonsof ru.dimentary-ustice for abolishing the doct;ine, andthe rising tide of out-of-stare repudiaion of the doctrine,

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TNTRODUCTION TO THE LEGAL ENVTRONMENT OF BUSINESS 21,1 The words of a stahte should-be given their plain and narural meaning unlessinjustice or absurrdity would result.2 A statute should be interpreted, if possible, to have a legal and constitutionaleffect3 Criminal statutes are construed strictly against the govemment.4 Tax statutes are construed in the manner that imposes the least burden on theLaxpayer.5 Statutes that change the common law are strictty construed.6 Technical words are given their technical meaning.7 May is permissive, whereas shall or will mears -musL,,8 statutes should be interpreted as a wholq and all of the pars of the statute shouldbe viewed to determine the intent of a part of the statute.

FIGURE 1.5 _ Some Basic Rules for the lnterpretation of Statutesof all statutory construction is to f:rl.d "tfu intent of the legislature," or, in the case ofthe federal corstitution, "the intet of the fmmeri," "r,d'6rr" effect to that intent.Sometimes that intent is easy to deternine, particularly iittu t"glrtuture d,isclosesits intent in the statute, or if the legislative record contains tatements of thelegislahrre's intent. But often such help is not available, and the courts must relyon other "rules of construction" to determine the true intent of the legislature (selFigure 1.5).When a court interprets a constihtional provision, statute, or administrativeregulation, generally that interpretation has the same status in the law as the pro-visioninterpreted and, thus, becomes a part of the law. Therefore, if the supremeC-ourt inteprets a provision of the u.S. Constitution, the Court's interpretaiion ineffect becomes a part of the Constitution until either the Constiturion is amendedor the Court changes its mind. If Congress were to pass a starute declaring theCourt's interpretation unlawful, that statute would Le of no effect, becaur th.Court's decision had the stahs of the Constihtion itself.Interpretation and Case Laws sometimes even cases need interpretation-It is at this point that the distinction between the common law and interpretativefunctions of judicial decisions becomes furzy.k the Flagielto decision (pp. *x-r"),the court's decision may be read in one of two ways. Eiher the doctrine of chari-table imnunity is completely dead, or the doctrine no longer applies to payingpatients in charitable hospitals. Sometimes, as in the following case, the courts arerequired to darify and interpret thei own decisions.

Nolan o. Tifereth Israel Synagogue of Mt. Carmel425 Pa. 106,227 A.zd 675 O96n Sup. Ct. of pennsylvania

O'Brien, Justice The opinion of the court below con-dudes that our decision in Flagreflo abrogated the doc-

Gertnde Nolan fell on the sidewalk in front of the defendant-synagogue's build-ing,.resulting in personal iniuries. Mrs. Nolan and her husband Uro"-gt t this action",guT"l the synagogue, charging negligence. The synagogue raised the defense ofcharrtabe immunity, but the Nolans argued that the Flagiello case had overturnedthat.doctrine in Perursylvania. The lower court held that-the synagogue was a non-profit religious organization and was exempt from suit under'thetrine of chari-table immtnity. The case was dismissed, and the Norans appeared to the statesupreme court.

trine of charitable immuni only isofar as it relatedto an action - . . brought by a paying patient in a hos-


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22 THELEGALPROCESSpital. . . . Appellants, on the other hand, contend thatFlagello intended to, and did, put an end to the doc-trine of charitable immtnity in Perursylvania.To hold thatFlagrello is limited to the extent foundy t" court below and contended for by the appel-lee would produce an anomalous siuaion boer-Tg or, the barre. We would then be required to saythat a paying patient in a hospital could recover forin-ries sustale{ by him as the resulr of the hospital,snegligencq while a nonpaying patient could-srakeno such r-ec v rI- We would further be requiled tosay that of all of the charitable institutions in the Com-monwealth formerly beneficiaries of the doctrine ofcharitable lnrllunity, only hospitals had lost the pro-tection and all other charitable institutions retaiiredi-t- Or, we might be required to say that payment of afee for servce is the criterion upon which d"ter^i-nation of who may recover agairst a charitable insti-tution in tort is based, if indeed the decision in Flagizllois dependent on the cicr:nstance of the plain-t'rff,shaving been a payrng patienl Were such conclu-sion reached, we might be required to hold that incases such as the one at bar involving a religious in-stitution, that a dues-p,^y*g member of the congre,gation could recover while another person not so situ-

ated could not, if indeed the organation were setup on the basis of fixed membership dues, as manyreligious organizations are-We carnot condude that our decision in Flagrellodid nothing more than remove the protection of thedoctrine fom hoopitals involved in tort litig-ation withpaying patients, and therefore, Iest the fact that sucha situation was involved nFlagello remain as asourceof conftrsiory we here hold unequivocally that thedoctrine of immunity of charitable institutions fromliability in tort no longer exists in the Coruronwealthof PennsylvaniaThe judgment of the court below is reversed, andthe cause renanded for further proceedings. . . -Case Disctssion QuestionsI How do the charities in Flagello ard Nolar differ?What relationship betrreen the prties exists in the twocases? What remedies were the taintift requesting?2 Does this decision change the Ftagiello decision ormerely explain it?3 FollowingNolar, would you advise the local Boy Scouttroop to get insurance? Why or why not?

Thus, although a decision may constitute binding precedent, it may also requireinterpretation- And, the lower courts are not bornd by a decision if a new cale isdifferent in its essential facts (e.g., is distinguishabte) from the precedent. InNolan,the trial cort thought that theFlagrlfo decision did not apply io chaitable immu-nity in contexts other than paying patients in hospitals, and thus ds tinguished thecase. But the trial court, as it turned out, was wrong.faI courts are not botnd by dicta, or gratuitous statements in a decision thatare not necessay for the final result. For example, many of the statements in thesecond frrll paragraph of the Nolar decision might be characterized as dicfa, andno kial court is bound by such statements.Stare Decss and the Organization of the CourtsThe oganization of the trial and appellate courts presents some tricky problemsin applying the doctrine of stare decisis. Asstme, for example, that congress passsa statute prohibiting any person from killing any -deer, bear, wolf, or other largemammal in federally protected territories."Assume also thatSnith killed a whalein federally protected waters and was charged with a violation of that statute inFederal District Court A (see Figure 1.6).Federal District court A would decide the question of whethe a whale wasthe kind of "large mam-mal" intended by Congress, using a variety of rules ofconskuction and ultimately looking to the intent of Congress- Assuming that thatcourt convicted Smith, Smith could appeal only to the U.S. Court of Appeals forCircuit l- That court might agree with the lower court and affirm the conviction,or disagree with the lower court and reverse the decision. tf anything further re-mained to be done in the trial couf, the appellate court would remand the caseback to the bial court for further proceedings (see Chater 3, p- g1, for a discus-sion of appellate procedure). The decision would become precdent for all corrts

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38 THELEGALPROCESSThere is a gray area in between the two sets of ethics. For example, it is proably a universal ethic of duty to refrain from telling deliberate lies for selfiPurPoses. On the other hand, exhibiting total honesty or frankness is a laudabbut perhaps unreachable goal. Between these extremes are "white" lies, silenwhen one should speak, and speaking the literal truth while implying somethielse by tone of voice, gesture, or expression.

The Law and the Ethical ScaleAt least in the United States, the law is chiefly concerned with enforcing the eics of duty and only rarely is concerned with the ethics of excellence. That is nnecessarily the case in other nations, where the law may be intimately involvein enforcing the ethics of excellence. In theocratic (church-based) states, for eample, the law imposes religious duties, whereas in the Soviet Union the whopurpose of the system, at least in theory, is to create a "perfect" society and ulmately to create Soviet Man, an idealized perfect person. In both cases ProfessFuller might say that the "iron hand of imposed obligation may stifle experimeninspiration, and spontaneity."Ethical Problem L:Ethics of Duty and Ethics of ExcellenceFollowing graduation, you have become manager of a local office of a major corportion as *111 ut being active in civic affairs. The local city council is considering asing an ordinance banning smoking in any public place, including any workpiaiewhich nonsmokers may be present. In your office there are thirty employee, tenyvhom smoke cigarettes. The ciiy council has asked you for your personal and prfessional opinion about the ban on smoking. One of the city councifmembers directasks you at a public session of the council, "Is this a good law?,,Discussion Questions1 Does this law enforce an ethic of duty or an ethic of excellence?2 If this law is passed, has the moral pointer been moved? Which way?3 which of the functions of law described in chapter 1 (see p. 8) does this laillustrate? How do you answer the question?THE NATURE OF ETHICAL DILEMMASThe most difficult ethical questions involve ethical dilemmas. An ethical dilemminvolves conflicting moral duties, each of which pushes an individual in a diffeent direction. For example, the duty of honesty may conflict with the duty oloyalty, or the duty to obey the law may conflict with the duty to family.Ethical Problem 2:Ethical Dilemmas.{s child is dying of a rare bloodstance that may cure that disease. disease. B, a chemistThe cure costs $1000 has discovered a subto manufacture, but

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ETHICS AND THE LAW 39realizes that she may charge a great deal more for the treatment. A, a poor per-son, tries to raise the money but succeeds in raising only $3000 of the $10,000asked by B. A gives the $3000 to B as a "down parment" and is unsuccessful inraising the balance. Finally, in desperation, A begs B to let him have the cure oncredit, but B refuses.Variation 1. A burglarizes B's offices and steals the cure.Variation 2. A robs C's store, obtains the money, and buys the cure from B.Discussion Questions1 What ethical notions conflict in these examples? How would you resolvethose conflicts?2 Is A ethically "wrong" in Variation 1? Variation 2? Ir which case is A morewrong? Is B ethically wrong as well? How?3 Should the law punish A in Variation 1? I Variation 2? What response shouldthe law make in either case?In Ethical Problem 2, the ethical duty not to steal conflicts with the ethical duty tosave one's child's life. Although the conduct was clearly illegal, a judgment re-garding its moral wrongness will depend on whether one finds the duty to obeythe law or the duty to save a child's life more important.Hidden in the example is another ethical dilemma. B's talent and work led tothe cure in the first place, and by most ethical standards, B ought to be able toprofit from that talent and work. Similarly, if B permits A to bulthe cure for lessthan the price asked, she would set a piecedent for future reductions. But B'sconduct obviously conflicts with widely held moal beliefs about the importanceof human life and the nature of charity. B, likeA, may be both " right" and twrong"depending on which ethical values are consideredmore important.In determining the moral "righress" of actions in ethical dilemmas, two fac-tors appear to be extremely important in our culture: (1) the motivation or stateof mind of the person involved; and (2) the relationship of the parties. Those twofactors are often recognized by the law in determining legal guilt and responsi-bility as well.

Motivation and State of MindVoluntariness is the basic mental state reguired by both the law and morality as abasis for-guilt. we do not hold a person morally guilty for involuntary acts. wedo not blame people for acts performed while-unconscious or insane, or whileunder compulsion.we also maintain a rough sot of hierarchy of voluntariness, depending onthe amount of choice we have in the matter. Asiume for example ttraiX shoo-ts Y.If X is unconscious at the time and the shooting results from an-involuntary twitchof a finge, we would excuse X and call it an nfortunate accident. If X d insane,we would also tend to excuse the conduct, but chances are there would be moreguilt attached, or at least we would be more suspicious. If X was intoxicated atthe time, we would find him morally guilty, buf perhaps less so than a personwho had a clear mind at the time. The more choic a peison has, the mormoralresponsibility that person will have.

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40 THE LEGAL PROCESS.----> Ethical Problem 3:Voluntariness and Ethical Guilt

After graduation you are made sales manager for a computer firm. You habeen negotiating to sell 150 computers to the ABC Company for quite some timOne night at a cocktail party you meet the purchasing agent for ABC, who hobviously had quite a lot to drink. During the course of the conversation tpurchasing agent orally agrees to the purchase of the computers at a price owhat you had been asking for the units. You hurriedly scribble the details dowon a scrap of paper, and both of you sign the agreement. The next day the puchasing agent calls you, apologizes, and asks that the negotiations go on asnothing had eve happened.Discussion Questions1 Is it unethical for you to insist on payment at the price agreed to at the partWhat if your boss promises you a raise if you can make the deal go throughthat price?2 Should the purchasing agent be fired by ABC? Were his or her actions volutary?3 Should a court excuse the purchasing agent and ABC from legal liabilitythe agreement because the agent was intxiated? Why?The Law and State of Mind The law generally follows our ethical notionof responsibility, particularly in the law of crimes and the law of torts. Civil laoften makes a distinction between negligent and intentional acts (see p. 221). Analmost every criminal statute has a mental element that must be proven befothe defendant may be convicted of the offense. The prosecutor my be requireto show that the defendant acted intentionally, knowingly, or with some speciintent, such as "with intent to defraud."If a statute only requires proof of an intent to commit the act the statute prhibits, the crime in question is said to be a general intent one; but if it requireproof of some other intent, such as assault "with intent to kill" or writing bachecks "with intent to defraud," the crime is known as a specific intent crime,state of mind may also be used as an aggravating or mitigating circumstanceAssault, which only requires proof of "intent to assault," is less aggravated tha"assault with intent to kill," for example. Thus, it seems, the more voluntary aact is, the more both our ethical standards and our legal standards impose morand legal guilt.Motivation and the Law Motive may be defined as the purpose for which aact is performed. Motive has a great deal to do with the amount of moral guattached to an act, but it has less to do with legal responsibility. In Ethical Prolem 2, A's conduct was perhaps morally excusable because his motive wassave another's life. The same conduct undertaken to obtain some personal benefit, such as to sell the cure on the black market, would have been more morallguilty. The law does not often excuse behavior on the basis of "good motives.Motivation might be taken into account by the judge imposing a sentence asmatter of " aggravation and mitigation."


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ETHICS AND THE LAW 432 Do you violate any ethical duties to your employer by telling Smith? Do youviolate any ethical duties to Smith by not telling her? What ethical notions are inconflict?3 How should the law react if you tell Smith? What kind of action will youremployer probably take? Is it justified?

One of the reasons for the distinction between intimate and marketplace eth-ics is power and the possibility that power will be abused. We expect intimateethics in certain relationships because the parties are vulnerable to each other,and high ethical standards are a way of guaranteeing that such vulnerability willnot be exploited. Friends and family members are vulnerable to each other be-cause of the emotional commitment the parties have to each other. A "false friend"might exploit that emotional commitment and gain an unfair advantage. Oursociety tries to guard against such abuse by imposing very high ethical standardson such relationships. Similarly, employees (technically agents-see Chapter 12)have the power to bind employers to contracts or make the employer liable fortorts. As a result, the law tries to insulate the employer from abuses of power byimposing higher legal duties.Marketplace ethics have traditionally assumed some rough equality of powerbetween the parties, which permits the parties to protect themselves against po-tential abuses. At the least, persons in a business relationship are forewarnedthat a different set of ethical standards applies. But if we are involved in an inti-mate relationship, we expect intimate ethics to apply. The law may not agree,however, as discussed in the following case.

Eaton a. Sontag387 A.zd 33 (Supreme Court of Maine, 1978)

Mr. and Mrs. Sontag and Mr. and Mrs. Eaton had been good friends for overfifteen years. The Eatons were in the process of developing a campground inMaine and were looking for a purchaser. During numerous social visits the Eatons"sounded out" the Sontags about purchasing the campground, and finally thesontags agreed. The sontags agreed to pay $80,000 for the property-$26,000down, and the balance over three years.The first summer the camp grossed $400, and the Sontags wrote the Eatonscomplaining that they had been overcharged by at least $25,000 and claimed thatthe Eatons had misrepresented the earning potential of the camp. Finally, theSontags stopped making payments, and the Eatons brought an action seekingpayment of the overdue installments. The Sontags counterclaimed, asking rescis-sion of the contract and a refund of all of the money owed. The Eatons repliedthat the doctrine of caaent emptor ("let the buyer beware,,, see p. 330) applid tothe case. The jury found for the Eatons, and the Sontags appealed.Dufresne, Active Retired Justice The charge .of fraud duty on the part of the plaintiff vendors to disclose to thewhich the defendants set out to prove againsl the plain- defndantvrndees theilaintiff's financial embarrassmenttiffs.. 'was thattheEatonsmisrepresenled tothemthat ... instead of representingtheoperationasa gold minethe campste. was a gold mine; lhy had taken in fifteen opportunity. we disagree."hundred dollars in five weeks of their first season of op- ' ^ We agee . . . thathe "fiduciary or confidential rela-eration; there was city water on the prem.ises; the ,So,ntals tion" conept n'hen used in connection with improper in-could live. on the premises year round; also they. failed to fluence affeiting the validity of some transaction ws onedisclose that the value, ... . of the campground did not of broad appliction and tat it embraced not only tech-reflect the true value of the property... :l nical fiduciry relations such as may exist betrven par-. ..The defendants argue on.appeal that the past asso- ent and child, guarclian ancl ward,ttorney ancl client,clation of the parties as social friends for the period of etc., but may also encompass relationships wherein con-fifteen years raised theirrelationsh.ip in conneciion lvith ficlence is atually."posd in another by reason of theirany business transaction between them to one of a confi- social ties. . . .dential nature, and, uncler strch circumstances, the rule [We have held that] "[t]he salient elements clf a confi-


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M THELEGALPROCESSdence in fact by one party in another and a great disparityof position nd infltrcnce between the parties" . . . [court'semphasisl[M]ere kinship itself . . . does not establish a confi-dential relationi often relatiaes are hostile to each other ordeal at arnt's length nd act independently and so are held notto haoe been [in] a confidential relation. [court's emphasis][E]ven where specific facts tend to show intimatedealings, as between family members or friends, the ex-istence of a confidential relationship remains a questionof fact and need not be imposed by law. If the parties to atransaction are of mature years and in full possession oftheir faculties, their continuing lifelong relation as [rela-tives] and friends will not give rise to a confidential rela-tion as a matter of law unless there is evidence of supe-rior intellect or will on the part of the one or the other, orof trust reposed or confidence abused.The evidence here fails to disclose any particular de-pendence of one party upon the other's judgment forbusiness transactions during their acquaintanceship offifteen years. That one had developed a reliance on theother in a business way does not appear in this case. . . .That the parties believed in their mutual honesty, sincer-ity, and truthfulness on account of their social intercourseis not sufficient to constitute a confidential relationshipas the term implies in the law.The assertion that the campsite operation is a goldmine was, and should have been understood to be . . ."seller's talk," i.e., "that picturesque and laudatory styleaffected by nearly every trader in setting forth the attrac-tive qualities of the goods he offers for sale," and this evenamong friends. But such is not actionable. . . . The lawrecognizes the fact that sellers may naturally overstate the

value and quality of the articles or ProPerty which thhave to sell. Everybody knows this, and a buyer hasright to rely upon such statements. . . .Furthermore, it is not fraud for one Party to say noing respecting any particular aspect of the subject proerty foi sale where no confidential or fiduciary relatexists and where no false statement or acts to misleadother are made, as was the case here. . . 'Every man has the right to ask any Price he seesfor the wares or lands he has to sell and the matterfixing the price, even for friends who might be interestin their purchase may be predicated upon divers baone of which may be what he thinks he can get for it fra prospective purchaser. To seek a price commensurawilh oe's investment in the property would not onlynon-fraudulent in itself, but mere good business acumAppeal denied.Case Discussion Questions1 Was there a fiduciary relationship here? Is a lilong friendship enough to create a fiduciary relatioship?2 Did the Eatons defraud the Sontags? Did theythem any lies? Did they fail to tell them anything ththey should have told them? Was their conduct unetcal?3 Should the courts require relatives and close personfriends to announce "this is business" before beginniarm's length business dealings?

Markelace ethics present other problems. Some persons are naively uaware of the two sets of standards, and others are aware of those standards bare unable to protect themselves because of great differences in power. ln sucases the law has stepped in, either to restrict the power of one side or to "bance the power equation." Consumer protection laws, labor legislation, and scurities regulation are examples of situations where the government has softenthe rigors of markelace ethics with some of the aspects of intimate ethics, thereraising the "moral pointer."VIRTUE ETHICSTheAristotelian School of philosophy-based on the thought ofAristotle-seemto be making a comeback. As discussed earlier, Aristotle based his ethical thougon the notion of virtues-characteristics of ethical people. Aristotle argued ththere were twelve virtues, each of which he found to be a "golden mean" btween an excess and a deficiency.If one identified the virtues, (see Figure 2.4, p.33) and then sought to finthai mid-point or golden mean, one would become virtuous-and this is impotant-would become HAPPY. These virtues were seen not as constraints on bhaviot but as part of one's basic personality, and would be admired and revereWhenAristotle refers to "happiness," he means more than mere creature comforts. His central ethical concept is a unified, all-embracing notion of happinesperhaps better translated as "flourishin g," or " doins we." One should view onelife as a whole and not separate the personal, public, private or business aspecof our lives. Doing what we ought to do-doing our duties, fulfilling our resposibilities and obligations-is what makes a good life.

1 - Part One-Introduction, Legal Process & Ethics (Pgs 1-12)

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Transcript of 1 - Part One-Introduction, Legal Process & Ethics (Pgs 1-12)