DOCUMENT RESUME

ED 373 207 CE 067 041

TITLE Legal Issues. Unit 12. Level 1. Instructor Guide.PACE: Program for Acquiring Competence inEntrepreneurship. Third Edition. Research &Developr.'ent Series No. 301-12.

INSTITUTION Ohio State Univ., Columbus. Center on Education andTraining for Employment.

PUB DATE 94

NOTE 21p.; For the complete set, i.e., 21 units, each doneat three levels, see CE 067 029-092. Supported by theInternational Consortium for EntrepreneurshipEducation, the Coleman Foundation, and the Center forEntrepreneurial Leadership Inc.

AVAILABLE FROM Center on Education and Training for Employment, 1900Kenny Road, Columbus, OH b3210-1090 (order no.RD301-12, IG, instructor guide $4.50; RD3012M,student module, $3; student module sets, level1--RD301M, level 2--RD302M, level 3--RD303M, $45each; instructor guide sets, level 1--RD301G, level2--RD302G, level 3--RD303G, $75 each; 3 levels andresource guide, RD300G, $175).

PUB TYPE Guides Classroom Use Teaching Guides (For

Teacher) (052) Guides Classroom UseInstructional Materials (For Learner) (051)

EDRS PRICE MF01/PC01 Plus Postage.DESCRIPTORS Behavioral Objectives; *Business Education;

*Competency Based Education; Compliance (Legal);*Contracts; Copyrights; *Entrepreneurship; LearningActivities; Legal Problems; *Legal Responsibility;Ownership; Patents; Postsecondary Education;Secondary Education; *Small Businesses; StudentEvaluation; Teaching Guides

IDENTIFIERS *Program for Acquiring Competence Entrepreneurship

ABSTRACTThis instructor guide for a unit on legal issues in

the PACE (Program for Acquiring Competence in Entrepreneurship)curriculum includes the full text of the student module and lessonplans, instructional suggestions, and other teacher resources. Thecompetencies that are incorporated into this module are at Level 1 of

learning--understanding the creation and operation of a business.Included in the instructor's guide are the following: unitobjectives, guidelines for using PACE, lists of teaching suggestionsfor each unit objective/subobjective, model assessment responses, andoverview of the three levels of the PACE program. The followingmaterials are contained in the student's guide: activities to becompleted in preparation for the unit, unit objectives, studentreading materials, individual and group learning activities, casestudy, discussion questions, assessment questions, and references.Among the topics discussed in the unit are the following: ways lawsaffect the operation of small businesses; the importance of legalissues and learning about the law; contracts and their importance;agreements; the concepts of consideration, capacity, legality, andmutuality of consent; and ways business ideas can be protected.

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UNIT 12LEVEL 1

THIRD EDITION

Program for AcquiringCompetence inEntrepreneurship

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Objectives:

Define how laws affect the small business operation.

Discuss the importance of government rules and regu-lations.

Define the term "contracts".

Identify the components of a contract.

Discuss the importance of a contract.

Define patents, copyrights, and trademarks.

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INSTRUCTOR GUIDE

Unit 12

Legal IssuesLevel 1

HOW TO USE PACE

Use the objectives as a pretest. If a studentis able to meet the objectives, ask him orher to read and respond to the assessmentquestions in the back of the module.

Duplicate the glossary from the ResourceGuide to use as a handout.

Use the teaching outlines provided in theInstructor Guide for ascktance in focusingyour teaching delivery The left side ofeach outline page lists objectives with thecorresponding headings (margin questions)from the unit. Space is provided for you toadd your own suggestions. Try to increasestudent involvement in as many ways aspossibly to foster an interactive learningprocess.

When your students are ready to do theActivities, assist them in selecting thosethat you feel would be the most beneficialto their growth in entrepreneurship.

"PERMISSION TO REPRODUCE THISMATERIAL HAS BEEN GRANTED BY

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TO THE EDUCATIONAL RESOURCESINFORMATION CENTER (ERICi

Assess your students on the unit contentwhen they indicate they are ready. Youmay choose written or verbal assessmentsaccording to the situation. Model re-sponses are provided for each module ofeach unit. While these are suggestedresponses, others may be equally valid.

BEST COPY AVAILABLE

Objectives Teaching Suggestions

1. DEFINE HOW LAWS AFFECTTHE SMALL BUSINESSOPERATION

How do laws affect the operationof a small business?

2. DISCUSS THE IMPORTANCEOF GOVERNMENT RULESAND REGULATIONS

Why are legal issues important?

3. DEFINE THE TERM"CONTRACT" AND DISCUSSITS IMPORTANCE

What is a contract?

4. IDENTIFY THE COMPONENTSOF A CONTRACT

What makes a contract legally en-forceable?

What is an agreement?

What is consideration?

What is capacity?

What is legality?

What is mutuality of consent?

On a chalkboard or overhead, list and discuss the major lawsaffecting small business.

Break into small groups, have each group discuss the concept ofbusiness ethics as it relates to the laws governing small business.Reconvene the class and facilitate a group discussion using ideasgenerated in the small groups.

Have the class offer ideas relating to how their lives are affectedby different types of contracts.

Discuss the five essential components of a contract. The discus-sion should address each separately and how they relate to eachother to form the makeup of a legally enforceable contract.

Objectives Teaching Suggestions

5. DEFINE PATENTS,COPYRIGHTS, ANDTRADEMARKS

How can business ideas be pro-tected?

Why learn about the law?

Task the class with gathering samples from the popular media(i.e., newspaper, magazines, general advertisements) of trade-marks and/or service marks.

Discuss with the class the ramifications of being unaware of thelaws and regulations that affect small business. Highlight thefact that it does not pay to take shortcuts when it comes businesslaws. The risks are too great.

MODEL ASSESSMENT RESPONSES

1. Failure to obey rules and regulations can ruin a business. Contracts are guided by many rules and regula-tions and most business transactions involves a contract. Each creates a specific legal issue that must bedealt with.

2. The operations of a small business cannot help but be affected by laws. Every aspect of small businessfrom beginning to end is regulated by laws. This is why an entrepreneur must know where to go to getlegal advice when the need arises.

3. A contract is an arrangement regarding mutual responsibilities between two or more parties that is legallyenforceable.

4. The five essential elements of a contract are: (1) Agreement is the foundation of a contract. An agreementstarts with an offer, followed by acceptance, and ending with a reasonable definite understanding. (2) Con-sideration describes the exchange of something valuable between the parties to a contract. (3) Capacityis the ability to clearly understand the terms and scope of the contract. (4) Legality (or legal purpose)refers to the stipulation that all aspects of the 'contract must be legal. Courts will not enforce an illegalcontract. (5) Mutuality of consent means that the parties to a contract know and understand the terms ofthe contract and freely enter into it.

5. A patent provides the exclusive rights to the inventor to make, use, or sell their invention. Patents may beobtained on new products, industrial or technical processes, machines designs, or other items ;avolved inthe process of doing business.

Copyrights protect printed material such as literary and artistic. Copyrights are effective for the life of theauthor plus an additional fifty years.

A trademark is a word, na.ie, symbol, device (design), or a combination of these items that are used toidentify a product.

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406 -AP:,

Program for AcquiringCompetence inEntrepreneurship

Incorporates the needed competencies for creating and operating a small business at three levels of learning, with experiences and

outcomes becoming progressively more advanced.Level I Understanding the creation and operation of a business.Level 2 Planning for a business in your future.Level 3 Starting and managing your own business.

Self-contained Student Modules include: specific objectives, questions supporting the objectives. complete content in form of answers

to the questions, case studies, individual activities, group activities, module assessment references. Instructor Guides include the full text

of each student module and lesson plans. instructional suggestions. and other resources. PACE,Third Edition, Resource Guide includesteaching strategies, references, glossary of terms, and a directory of entrepreneurship assistance organizations.

For information on PACE or to order, contact the Publications Department at theCenter on Education and Training for Employment, 1900 Kenny Road, Columbus, Ohio 43210-1090

(614) 292-4353, (800) 848-4815.

Support for PACE, Third Edition provided in whole or in part by:

International Consortium for Entrepreneurship Educationand

International Enterprise AcademyCenter on Education and Training for Employment

The Ohio State University

The Coleman Foundation

Center for Entrepi eneurial Leadership Inc.Ewing Marion Kauffman Foundation

Your Potentialas an

Entrepreneur

Nature ofSmall Business

Help forthe

Entrepreneur

RecordKeeping

Types ofOwnership

BusinessOpportunities

MarketingAnalysis

Business Human

Management Resources

FinancialAnalysis

LegalIssues

Global Markets

Location

UNIT 12LEVEL 1

TheBusiness Plan

Pricing FinancingStrategy the Business

Promotion Selling

CustomerCredit

II

RiskManagement

Operations

Program for Acquiringilk Competence in

EntrepreneurshipI

CENTER ON EDUCATIONAND TRAINING FOR EMPLOYMENT

COLLEGE OF EDUCATIONTHE OHIO STATE UNIVERSITY

13Research & Development Series No. 301-12

LEGAL ISSUES

BEFORE YOU BEGIN .. .

1. Consult the Resource Guide for instructions

2. Read What are the Objectives for this Unityou can meet these objectives now, consult

3. Look for these business terms as you readmeanings, ask your instructor for a copy ofResource Guide.

AgreementConsiderationContractContractual capacityCopyrightDuressEqual opportunity/Anti discrimination

lawsFraudLawsuit

Copyright al) 1994. Center on Education and Training for Employment.The Ohio State University. All rights reserved.

if this is your first PACE unit.

on the following page. If you thinkyour instructor.

this unit. If you need help with thethe PACE Glossary contained in the

Legally enforceableMisrepresentationMutuality of consentParty to a contractPatentReasonable definite understandingService markTrademarkUsury

LEGAL ISSUES

WHAT ARE THE OBJECTIVES FOR THIS UNIT?

Upon completion of this unit you will be able to

discuss how laws affect the small business operation,

discuss the importance of government rules and regulations,

define the term "contract" and discuss its importance,

identify the components of a contract, and

define patents, copyrights, and trademarks.

WHAT IS THIS UNIT ABOUT?

There are many laws and regulations thataffect the way business is done. Small busi-ness owners must understand a variety oflegal issues in order to avoid breaking thelaw. Small business owners who break thelaw may face lawsuits from those they injureand in some cases fines or jail time.

This unit is designed to help you understandthe legal issues that small business ownersface. When you have completed this unityou will be able to answer the followingquestions: Why are government rules andregulations important? How do laws affectthe way small businesses operate? What is

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a contract? Why are contracts important?What are patents, copyrights, and trade-:narks?

Completing this unit will familiarize youwith the basic legal issues facing the smallbusiness owner. You will not become alegal expert, but you will know when youshould get professional help with problemsinvolving legal issues.

Two other PACE units deal with legalissues. They are titled Types of Ownershipand Help for the Entrepreneur. These units,along with this one, prepare you to under-stand and deal with the legal issues faced bysmall business owners.

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HOW DO LAWS AFFECTTHE OPERATION OF ASMALL BUSINESS?

Much of an entrepreneur's time is spentdealing with legal issues. When the businessis first started the entrepreneur must get therequired licenses, file for ownership paper-work if the entrepreneur chooses to form apartnership or corporation, and comply withsecurities laws if the entrepreneur sells stockor partnership interests in the business. Eachof these areas is regulated by laws.

Small businesses are affected by many laws.Some of the laws affecting businesses are asfollows:

Contract laws

Tax laws

Worker safety laws

Lending and credit regulations

Sales laws

Labor laws

Real estate laws

License laws

Consumer protection laws

Equal opportunity (anti-discrimination)laws

After the business is started the entrepreneurwill continue to face legal issues almostdaily. Contracts are made with suppliers andcustomers. Taxes are collected and paid.People may be injured by activities of thebusiness. Employees are hired and fired.Property is either bought or leased. Allthese areas and more are governed by lawsand regulations.

Laws even affect entrepreneurs when theydecide to go out of business. Agreementswith suppliers, customers and landlords maybe broken. Taxes may be owed. Employeesmay be owed wages. All of these areas arepotential sources of legal problems.

It is not necessary for the small businessowner to be an expert in all areas of busi-ness law. However, it is important thatentrepreneurs recognize situations that createpotential legal problems. When entrepre-neurs identify a situation that presents alegal issue, they should seek advice from aqualified attorney.

WHY ARE LEGALISSUES IMPORTANT?

Laws and regulations make business easierto do. Business transactions are more pre-dictable and safer. For example, withoutbanking laws it would be impossible for cus-tomers to pay for goods and services withchecks or credit cards. Laws and govern-ment regulations make the banking systemwork. This allows people to use bank ser-vices such as checking accounts and creditcards.

Tax laws are needed to raise money for gov-ernment services. These services includebuilding roads, establishing telephone andtelevision regulations, providing police andfire protection, and building schools, just toname a few. Without these important gov-ernment services it would be almost impos-sible to do business.

Business owners, employees, and consumersalso benefit from various laws. Antitrustlaws prevent big companies from drivingsmall businesses out of business. Workersbenefit from workplace safety rules andminimum wage laws. Consumers are pro-tected against false advertising and defectiveproducts. As you can see from the aboveexamples, laws and regulations are an irnoor-tant part of the business system. Everybusiness person gets the benefit of thesystem. Everyone must also obey the lawsso the system will work. Everyone mustlearn and understand the laws that affectthem so that they can obey the law.

Failure to obey the law can ruin a business.Breaking the law usually results in produc-ing unnappy customers, suppliers, and em-ployees. Many times those who have beenharmed will start lawsuits against the entre-preneur who broke the law. In some casesthere may be a criminal penalty for not fol-lowing a law or regulation. In these cases,violating the law could land the businessowner in jail or he or she could be fined. Itis good business to know the law and obeyit.

In day-to-day business operations, entrepre-neurs must deal with a variety of activitiesthat involve business law. Contracts, whichare made in most business transactions,present legal issues to the entrepreneureveryday.

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5

WHY LEARN ABOUTTHE LAW?

The law is very complex. Most entrepre-neurs will have to hire an attorney to getadvice on how the law affects their business.So why learn about the law?

It is important for every entrepreneur tolearn about the law. Therefore, many oftheir business activities involve the law.Things such as hiring employees, payingtaxes, and using' contracts to buy and sellgoods and services directly involve laws orregulations. An active business personencounters hundreds of legal situations aday.

Knowing about the law helps in two ways.Firstly, it allows a business person toidentify issues that involve the law.Knowing that an issue may involve speciallegal concerns helps an entrepreneur knowwhen to seek advice from an attorney,accountant or other source of assistance.

Secondly, it helps them deal with theirattorney or accountant more effectively. Ifa legal issue is minor, they may be able tohandle it without much help. If it is a morecomplex issue they will know what questionsto ask when they seek assistance. This helpsthem get better advice.

WHAT IS A CONTRACT?

A contract is an agreement between two ormore people that is legally enforceable. Thepeople making a contract are called parties.Each party to a contract must do something.

6

For example, the owner of a paint shopenters into an agreement to buy 200 cartonsof paper from the local supplier for $1,000.This agreement involves two major prom-ises. The print shop owner has promised to

give him 30 days to pay the supplier. Thisgives the print shop owner time to sell thepaper to customers to get the money to payfor the paper. The print shop owner hasused the contract to help his cashflow.

pay $1,00J to the paper supplier, and thepaper supplier has promised to deliver 200cartons of paper to the print shop owner. Ifeither party does not do what was promised,he or she can be sued by the other party.

WHY ARE CONTRACTSIMPORTANT?

Contracts are a very important part of anybusiness. All the major buying and sellingthat a business does involves entering intocontracts. The contracts control how thebusiness runs. For example, when the printshop owner buys paper, the company may

WHAT MAKES ACONTRACT LEGALLYENFORCEABLE?

Courts will only enforce contracts that havefive essential components. These five com-ponents are

agreement,

consideration,

capacity,

Ii

legality, and

mutuality of consent.

Business owners use contracts almost every-day in the business. It is very important forthem to understand how to make an enforce-able contract. The sections of this unitexplain the five essential components of acontract. The key concepts that a smallbusiness owner should understand about eachcomponent are emphasized.

WHAT IS AN AGREEMENT?

An agreement is the foundation of a con-tract. When agreement exists the parties areon their way to entering into a contract. Ifno agreement is reached, there can be nocontract. There are three steps to reachingagreement. First, there is an offer. Theoffer must be' stated in a reasonable clearmanner and it must be communicated to theother party. Then, there must be acceptanceof the offer. This occurs when the partywho has received an offer agrees to it.Lastly, the offer and acceptance must createa reasonable definite understanding betweenthe parties. This happens if the offer andacceptance include enough details so that astranger knows what each party to the con-tract is supposed to do.

Let's look at agreement in the paper pur-chase example. The contract negotiationswere started when the supplier's sales-woman, Daniel, met with Martin to discussselling Martin some paper. Martin lookedthrough the paper company's catalog. Hetold Danzel he needed 200 cartons of whitecopier paper. Danzel said her company

7

would sell him the 200 cartons he neededfor $1,000. She said the paper would bedelivered in 10 days. The $1,000 paymentfor the paper would have to be made within10 days after the paper was delivered. Thiswas the offer by Danzel to Martin.

Martin liked the deal offered by Danzel. Heagreed to it. This is called acceptance.Martin accepted Danzel's offer. Danzelwrote down the terms of the contract on anorder form. Martin signed the order form toshow that he accepted the terms of the con-tract.

The understanding must also be reasonableand definite. The terms of the above dealincluded

the type of paper was being bought,

when the paper was to be delivered,

the quantity of paper involved,

how much the paper cost, and

when the amount was to be paid.

The terms covered all the important itemsinvolved in the sale. The understanding thatwas reached by Danzel and Martin was rea-sonable and definite.

Danzel and Martin have reached an agree-ment. There was an offer. The offer wasaccepted. The offer and acceptance createdan understanding that was reasonable andclear. Since all three steps were completed,there was agreement.

8

Remember, reachin3 agreement is only thefirst step to forming a contract. All fivecomponents must be present for a contract tobe made.

WHAT IS CONSIDERATION?

Both sides to a contract must give consider-ation. If they do not, the contract is notvalid. Consideration is a legal term. Itmeans that there has been an exchange ofsomething valuable between the parties to acontract. Consideration can be material,such as money or goods. It can also be apromise, such as a promise to paint some-one's house. It is necessary that both sidesgive something of value.

There was consideration in the paper pur-chasing example. Martin promised to payDanzel $1,000 in exchange for Danzel'spromise to deliver 200 cartons of paper tohis print shop. They exchanged a promisefor a promise.

The consideration could have been materialinstead of a promise. If Danzel had 200cartons of paper in her car she could havegiven them to Martin. In exchange Martincould have paid her $1,000 right away. Thiswould also have been good consideration.

WHAT IS CAPACITY?

Even if there is agreement and considera-tion, there may not be a contract. Theparties must have had the capacity to enterinto a contract. For parties to have thecapacity to enter into a contract, they must

be able to understand what they are doing.Most adults have the capacity to enter into acontract.

By law, minors generally do not have thecapacity to enter into a contract. Minors arepeople under the age of 18 in most states. Ifminors enter into a con 't, they can get outof it because they lack the capacity to enterinto it.

Adults who are intoxicated or insane alsolack capacity to enter into contracts. Insaneor intoxicated people usually do not under-stand what they are doing. Because they donot understand, the law lets them break con-tracts they enter into without having to paya penalty. Small businesses should be verycareful when making contracts with anyonewho may lack capacity.

WHAT IS LEGALITY?

Contracts must have legal purposes in orderto be enforceable. Courts will not help aparty enforce a contract that is for an illegalpurpose. If part of the contract involvessomething illegal, courts will not enforce theillegal part. The rest of the contract wouldbe enforceable.

Let's look at some examples of illegal pur-poses. Contracts involving stolen propertyinvolve an illegal purpose. A court wouldnot enforce a contract involving stolen pro-perty. Contracts that charge very high ratesof interest involve an illegal purpose.Charging a very high rate of interest is

called usury, it is illegal. For example,Penny borrows money from a bank to buya house. The bank charges 100 percent

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interest per year on the loan. This is usury.Courts will not make Penny pay the 100 per-cent interest on her loan.

WHAT IS MUTUALITYOF CONSENT?

Mutuality of consent means that the partiesto a contract know and understand the termsto a contract and freely enter into it. Thereis no mutuality of consent if one of these ispresent:

Fraud

Misrepresentation

Mistake

Duress

Fraud and misrepresentation happen whenone of the parties lies or only tells part ofthe truth to the other party. In the paperpurchase example, Danzel could have com-mitted fraud. She could have showed Martina high-quality paper from Best Company andthen delivered a lower quality paper but putit in Best Company boxes. This would havebeen fraud. If Danzel had done that, Martincould have voided the contract.

If the parties make a mistake about an im-portant fact, the contract can be voided.Mistakes involving important facts do hap-pen but not very often. Contracts are hardlyever unenforceable due to mistake.

Mutuality of consent is also absent if one ofthe parties to the contract is forced to enter

4

9

into the contract with a threat. This is calledduress. For example, suppose Danzel hadtold Martin that if he did not buy paper fromher, she would burn his office down. Thatwould be using duress to get Martin to enterinto a contract. Even if Martin agreed, thecontract would not be enforceable. Therewas no mutuality of consent.

Remember, all five elements of a contractmust be present before there is an enforce-able contract. If anyone of the elements ismissing the contract is not enforceable.

HOW CAN BUSINESSIDEAS BE PROTECTED?

In the process of doing business, small busi-ness owners many times have an opportunityto originate a new idea for a product or pro-cess. If so, they may wish to take steps toprotect their idea through patents, trade-marks, service marks, or copyrights. Let'stake a closer look at these items and seehow they can be used to protect businessideas.

If an item is invented in the process of oper-ating a business, it may qualify for a patent.Patents may be obtained on new products,industrial or technical processes, machines,designs, or other items involved in the pro-cess of doing business. A patent providesthe exclusive rights to the inventor to make,use, or sell their particular invention for aperiod of years. On new devices, it is a 17-year period.

In order to qualify for a patent, an inventionmust be new and unique. It cannot simplybe a reworked version of an existing idea.

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If entrepreneurs invent a new and uniqueproduct or process, they should investigateprotecting their invention by getting itpatented. The process of getting a patent isvery detailed and time consuming. Most in-ventors find it useful to hire a patent at-torney or registered patent agent to helpthem through the process.

Like a trademark, a service mark is a word(or words), design (or designs), or combina-tions of word(s) and design(s) used to adver-tise services. A service mark helps custom-ers to distinguish the services of one firmfrom those of another. These marks areused to advertise banking, real estate, motel,and other services. Through such advertis-

A trademark is a word, name, symbol, de-vice (design), or a combination of theseitems that are used to identify a product.When a trademark is registered, that trade-mark is protected against use by others for aperiod of 20 rays. The trademark is a de-vice pointing directly to the origin or owner-ship of merchandise to which it is applied.The trademark is legally reserved to theexclusive use of the owner as maker orseller of the product. The "Golden Arches"symbol used by McDonald's restaurants is agood example of a trademark. No one elseis allowed to use the "Golden Arches"because it is a registered trademark ofMcDonald's.

ing, prospective customers become aware ofa firm's services. When they see the servicemark, they associate it with a particular levelof quality.

Printed material such as literary and artisticwork is protected through copyrights. Copy-rights are effective for the life of the authorplus an additional 50 years. Small businessowners may desire to copyright materialused in advertising. For example, catalogs,brochures, or instruction sheets about pro-ducts and services can be copyrighted.

ACTIVITIES

The following activities are designed to helpyou apply what you have learned in thisunit.

INDIVIDUAL ACTIVITIES

A.

Look at advertisements in current issues ofmagazines, such as Time, Newsweek orSports Illustrated. See if you can find atleast three uses of trademarks, service marksand copyrights in advertisements. Look forthe TM mark to identify trademarks, SM toidentify service marks and © to identifycopyrights. What types of companies usetrademarks? When are service marks used?What type of material is copyrighted?

B.

Test your understanding of the legal termsdiscussed in this unit. Use the numbers onthe telephone dial to decode the followingnumber codes. Each number code can besolved to spell a legal term found in thisunit.

1. 247336368

2. 26687228

3. 26674337284664. 82543 837675. 87879

6. 22722489

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Example: The code is 529. The number 5could be J, K, or L. The number 2 could beA, B, or C. The number 9 could be W, X,or Y. Those letters can be put together tospell law.

After you have decoded the legal terms,match each of them to their definition below.

1. Ability to enter into a contract.

2. Understanding between the parties of acontract, meeting of the minds.

3. Charging excessively high interest rates.

4. An agreement made between two ormore persons that is valid andenforceable by law.

5. Something of value that is exchangedbetween the parties to a contract.

6. Terms of a contract that are enforceableby law.

12

GROUP ACTIVITIES

A.

Divide the class into small groups of four tosix people. Each group has two teams oftwo or three people. The teams will roleplay the situation described below.

Team I wants to buy 10 Model 5500 elec-tronic cash registers. Team II is a whole-saler that has 10 Model 5500 electronic cashregisters for sale. The list price on Model5500s is $500 each. Companies buyingmore than 5 usually get a 10 percent dis-count.

The teams need to work together to negoti-ate a contract for team I to buy 10 cashregisters from team II. Some of the termsyou may want to discuss are as follows:

Price

Quantity

Model

Quantity discount

How team I will pay (cash or credit)

When the cash registers will be delivered

After a contract has been negotiated discusswhether all five elements of a contract weremet. If so, identify how. If not, discusswhy you think an element was missed.

B.

Divide into groups of four to eight people.Each group is to locate several articles onhow laws and regulations affect small busi-ness. Good sources for this research aremagazines such as Business Week, News-week, Time, and Entrepreneur which can befound at four local libraries.

Groups will meet to discuss their researchand to discuss how laws and regulationsaffect small businesses. Use a flip chart torecord the ideas of each group. Use flipcharts to make a master list of the ideas gen-erated by all of the groups.

CASE STUDY

A small business owner phoned a localoffice supply store and asked the followingquestion: "How much do you want for 100yellow legal pads and do you deliver?" Theclerk consulted a price list and replied, "Thatwould be $79.95 and we deliver for andadditional charge of $10." The buyer

DISCUSSION QUESTIONS

13

replied, "I will pay $79.95, but the $10delivery charge is unreasonable. Everyoneelse in town delivers for free." The clerklaughed and the buyer said, "Thanks," andthey ended the phone conversation. Thenext day the legal pads were delivered to thebuyer. The buyer did not accept them.

1. Did the buyer and the clerk have a contract? If you think the answer is yes, explain why acontract existed. If no, explain why a contract was not reached and revise the phoneconversation so that a contract is created.

2. What is a counteroffer? Can you find a counteroffer in the case? If so, state thecounteroffer.

14

ASSESSMENT

Read the following questions to check your knowledge of the topics presented in this unit.When you feel prepared, ask your instructor to assess your competency on them.

1. Explain why governmental rules and regulations are important to small business owners.

2. Explain how laws affect the operation of a small business.

3. Define the term contract.

4. Name the five essential elements of a contract and describe what is meant by each.

5. Define patents, copyrights and trademarks.

9

REFERENCES

Adams P. The Complete Legal Guiue for Starting your Business. New York, NY: John Wiley& Sons, 1982.

Buchholtz, R. Business Environment and Public Policy. Englewood Cliffs, NJ: Prentice Hall,1986.

McAdams, T. Law, Business and Society. Homewood, IL: Irwin, 1992.

Scarbough, N., and Zimmerer, T. Effective Small Business Management. Columbus, OH:Merrill Publishing, 1991.

Siropolis, N. Small Business Management. Boston, MA: Houghton Mifflin Company, 1990.

Sturdivant, F. Business and SocietyA Managerial Approach. Homewood, IL: Irwin, 1981.

U.S. Small Business Administration. Introduction to Patents. Management Aid No. 6.005.Washington, DC: U.S. Government Printing Office, 1988.

U.S. Small Business Administration. Selecting The Legal Structure for your Business. GeneralManagement Aid No. MP 25. Washington, DC: U.S. Government Printing Office, 1988.

Level 1

PACE

Unit 1. Your Potential as An Entrepreneur

Unit 2. The Nature of the Small Business

Unit 3. Business Opportunities

Unit 4. Global Markets

Unit 5. The Business Plan

Unit 6. Help for the Entrepreneur

Unit 7. Types of Ownership

Unit 8. Marketing Analysis

Unit 9. Location

Unit 10. Pricing Strategy

Unit 11. Financing the Business

Eg> Unit 12. Legal Issues

Unit 13. Business Management

Unit 14. Human Resources

Unit 15. Promotion

Unit 16. Selling

Unit 17. Record Keeping

Unit 18. Financial Analysis

Unit 19. Custor'er Credit

Unit 20. Risk Management

Unit 21. Operations

Resource Guide

Instructor's Guide

Units on the above entrepreneurship topics are available at the following levels:

Level 1 helps you understand the creation and operation of a businessLevel 2 prepares you to plan for a business in your futureLevel 3 guides you in starting and managing your own business