WEBVTT 00:00:00.500 --> 00:00:05.219 Harry: Hey everyone, and welcome to the Exam Two review for Business Law Two. 00:00:05.879 --> 00:00:08.939 Harry: I'm Harry, and I've got the whole panel with me today. 00:00:09.339 --> 00:00:11.359 Hermione: Hi, everyone. I'm Hermione. 00:00:11.959 --> 00:00:13.419 Sheldon: Sheldon. I'm ready. 00:00:13.979 --> 00:00:18.639 Leonard: Leonard here. And I'm going to win the arguments today, just so everyone knows. 00:00:19.299 --> 00:00:22.139 Tyrion: I'm Tyrion. I'll be the one keeping Leonard humble. 00:00:22.879 --> 00:00:27.159 Harry: Here's how this works. I'll read each question and the answer choices. 00:00:27.619 --> 00:00:32.099 Harry: Then the panel argues it out, and trust me, they will argue. 00:00:32.559 --> 00:00:35.439 Harry: Then I'll give you the correct answer and why. 00:00:35.979 --> 00:00:41.519 Harry: We've got thirty-nine multiple-choice questions, and then we'll finish with the two essay questions. 00:00:42.039 --> 00:00:47.659 Hermione: Product liability, negotiable instruments, and employment law. A lot of ground. 00:00:47.939 --> 00:00:51.019 Harry: A lot of ground. So let's begin. 00:00:53.628 --> 00:00:59.868 Harry: Question one. A newly purchased robot vacuum contains a defective battery when it leaves the factory. 00:01:00.268 --> 00:01:03.988 Harry: The battery ignites during normal operation and burns Leonard. 00:01:04.448 --> 00:01:06.288 Harry: Which of the following is true? 00:01:07.148 --> 00:01:13.628 Harry: A. The manufacturer is not liable because a vacuum's motor and battery can generate heat during normal use. 00:01:14.608 --> 00:01:20.488 Harry: B. The manufacturer is not liable if its inspection practices satisfied industry standards. 00:01:21.288 --> 00:01:27.808 Harry: C. Leonard may establish strict liability even if the manufacturer exercised reasonable care. 00:01:28.208 --> 00:01:34.448 Harry: D. Leonard must prove that the manufacturer was aware of the battery defect before the sale. 00:01:35.008 --> 00:01:41.691 Sheldon: Okay, B sounds comforting to me. If the company followed industry inspections, how could it be responsible? 00:01:41.851 --> 00:01:47.851 Hermione: Sheldon, no. That's negligence. You're mixing up negligence with strict product liability. 00:01:48.491 --> 00:01:49.171 Sheldon: Am I? 00:01:49.631 --> 00:01:53.371 Hermione: You are. The battery was defective when it left the factory. 00:01:53.591 --> 00:01:57.931 Hermione: Reasonable inspections aren't enough to get rid of liability for the defect. 00:01:58.431 --> 00:02:04.631 Leonard: And D makes the same mistake. It says the manufacturer has to be aware of the defect to be liable. 00:02:04.631 --> 00:02:08.791 Leonard: I was just using the vacuum normally, and I got burned. 00:02:09.351 --> 00:02:12.251 Tyrion: Then A tries to distract us with ordinary heat. 00:02:12.691 --> 00:02:17.971 Tyrion: A vacuum getting warm is one thing. A battery igniting and burning the person using it? 00:02:18.291 --> 00:02:19.871 Tyrion: That's something else entirely. 00:02:20.551 --> 00:02:21.371 Leonard: So C. 00:02:22.091 --> 00:02:24.151 Tyrion: C states the correct rule. 00:02:24.771 --> 00:02:34.371 Harry: Tyrion is correct. The correct answer is C. Leonard may establish strict liability even if the manufacturer exercised reasonable care. 00:02:36.931 --> 00:02:45.171 Harry: Question two. A defect in a car's steering assembly causes Arya to lose control and hit Sansa, who is walking beside the road. 00:02:45.691 --> 00:02:47.671 Harry: Which of the following is true? 00:02:48.671 --> 00:02:54.631 Harry: A. Sansa may assert product liability even though she did not purchase or use the defective car. 00:02:55.371 --> 00:03:00.191 Harry: B. Sansa must obtain Arya's assignment of the product liability claim. 00:03:00.691 --> 00:03:07.071 Harry: C. Sansa must prove that the car manufacturer acted negligently to recover her damages. 00:03:08.611 --> 00:03:15.411 Harry: D. Sansa has no claim against the manufacturer because Sansa did not purchase the car and is not related to Arya. 00:03:15.911 --> 00:03:19.769 Leonard: I'm going with A. She was injured by a defective product. 00:03:19.829 --> 00:03:23.169 Leonard: It doesn't matter that she didn't buy it or use it. 00:03:23.429 --> 00:03:30.769 Sheldon: And B doesn't make sense at all. Sansa has her own claim, as a foreseeable bystander injured by the defective product. 00:03:31.029 --> 00:03:33.869 Sheldon: She doesn't need Arya to assign anything to her. 00:03:33.929 --> 00:03:41.369 Hermione: C doesn't work either. A manufacturing-defect strict-liability claim doesn't require proof of negligence. 00:03:41.529 --> 00:03:46.769 Hermione: And that standard shouldn't change just because the purchaser wasn't the one who got hurt. 00:03:47.229 --> 00:03:52.589 Tyrion: Then D. D says she has no claim because she's not related to Arya. 00:03:53.009 --> 00:04:00.309 Tyrion: But a party injured by a defective car should be able to assert a product liability claim regardless of her relationship with the 00:04:00.309 --> 00:04:01.069 Tyrion: purchaser. 00:04:01.649 --> 00:04:02.589 Leonard: So, A. 00:04:03.029 --> 00:04:07.069 Harry: Leonard's instincts are right on. The correct answer is A. 00:04:07.789 --> 00:04:12.749 Harry: Sansa may assert product liability even though she did not purchase or use the defective car. 00:04:15.249 --> 00:04:20.769 Harry: Question three. A defective heating stone installed in a new cauldron causes a fire. 00:04:21.529 --> 00:04:28.409 Harry: Separate businesses manufactured the stone, assembled the cauldron, distributed the finished product, and sold it to Harry. 00:04:29.369 --> 00:04:31.009 Harry: Which of the following is true? 00:04:32.129 --> 00:04:37.889 Harry: A. Only the cauldron manufacturer is a potential defendant because it assembled the finished product. 00:04:38.509 --> 00:04:45.189 Harry: B. Only the heating-stone manufacturer is a potential defendant because the defect began in that component. 00:04:45.749 --> 00:04:53.669 Harry: C. The retailer would also be subject to a potential liability claim only if it had prior knowledge of the defect. 00:04:54.729 --> 00:05:01.969 Harry: D. The component manufacturer, cauldron manufacturer, distributor, and retailer are potential defendants. 00:05:02.469 --> 00:05:09.442 Tyrion: Four businesses handled this ill-fated cauldron. And I promise you, every one of them would rather point at somebody else. 00:05:11.122 --> 00:05:16.082 Sheldon: Well, B seems plausible to me. The heating stone was the defective part. 00:05:16.422 --> 00:05:19.122 Sheldon: Why not limit liability to the business that made it? 00:05:19.602 --> 00:05:23.682 Hermione: I disagree with B. And for the same reason I disagree with A. 00:05:24.002 --> 00:05:29.102 Hermione: They're both too narrow. Assembly isn't the only commercial role that matters. 00:05:29.642 --> 00:05:30.382 Sheldon: Fair. 00:05:30.742 --> 00:05:37.602 Hermione: And C is wrong because strict product liability doesn't require proof that the seller knew about the defect. 00:05:37.942 --> 00:05:47.562 Leonard: Which leaves D. The businesses all through the distribution chain, the component maker, the assembler, the distributor, and the retailer, 00:05:47.562 --> 00:05:49.962 Leonard: are potential defendants. 00:05:50.382 --> 00:05:51.822 Tyrion: Potential, mind you. 00:05:52.602 --> 00:05:56.222 Leonard: Right. Potential doesn't mean automatic recovery against everyone. 00:05:56.222 --> 00:06:00.682 Harry: The correct answer is D, for the reasons Leonard gave. 00:06:00.922 --> 00:06:07.822 Harry: The component manufacturer, cauldron manufacturer, distributor, and retailer are potential defendants. 00:06:10.322 --> 00:06:14.942 Harry: Question four. Peter is injured by medication prescribed by Dr. 00:06:14.942 --> 00:06:20.342 Harry: Hartman. The doctor prescribed the medication but did not sell it. 00:06:20.342 --> 00:06:26.182 Harry: Brian sold Ken an old chair at a garage sale, and the chair broke when Ken attempted to sit on it. 00:06:26.182 --> 00:06:30.502 Harry: Which parties are subject to strict product liability claims? 00:06:30.502 --> 00:06:35.962 Harry: A. Both Dr. Hartman and Brian because each provided a defective product. 00:06:35.962 --> 00:06:43.222 Harry: B. Neither Dr. Hartman nor Brian because they are not considered sellers for product liability purposes. 00:06:43.222 --> 00:06:48.842 Harry: C. Only Dr. Hartman, because he regularly prescribes drugs to patients. 00:06:48.842 --> 00:06:52.562 Harry: Brian is not liable because he is a casual seller. 00:06:52.562 --> 00:06:56.681 Harry: D. Only Brian because he sold the chair directly to Ken. 00:06:57.181 --> 00:07:02.041 Sheldon: A is a possibility. A chair breaks, medicine causes an injury. 00:07:02.741 --> 00:07:05.761 Sheldon: That's a classic product liability case against both of them. 00:07:06.041 --> 00:07:11.481 Hermione: B's better. Neither the doctor nor Brian is a commercial seller on these facts. 00:07:11.761 --> 00:07:16.521 Hermione: The doctor only prescribes the drug, and Brian is a casual seller. 00:07:16.801 --> 00:07:25.161 Leonard: Hmm. But C still tempts me. The doctor prescribes drugs regularly, and Brian only sells a chair once in a while. 00:07:25.541 --> 00:07:30.941 Tyrion: Ah, but prescribing medication regularly doesn't make the doctor a commercial seller of it. 00:07:31.021 --> 00:07:32.841 Leonard: Okay. That's fair. 00:07:33.301 --> 00:07:39.361 Tyrion: And D is wrong because selling one chair directly to one person doesn't make Brian a commercial seller. 00:07:39.781 --> 00:07:48.101 Harry: The correct answer is B. Neither Dr. Hartman nor Brian because they are not considered sellers for product liability purposes. 00:07:48.481 --> 00:07:52.581 Harry: Hermione explained it well. One thing to keep in mind, though. 00:07:53.061 --> 00:07:58.941 Harry: That resolves strict product liability. It doesn't decide whether some other legal claim might exist. 00:08:01.521 --> 00:08:07.834 Harry: Question five. The design for a bicycle requires two fasteners on each brake when it is assembled. 00:08:08.634 --> 00:08:12.414 Harry: During production, only one fastener is installed on the front brake. 00:08:13.134 --> 00:08:16.894 Harry: Sheldon purchases the bicycle and the brake separates, injuring Sheldon. 00:08:17.494 --> 00:08:19.594 Harry: Which type of product defect is this? 00:08:20.194 --> 00:08:24.394 Harry: A. A design defect, because the completed bicycle was unsafe. 00:08:25.134 --> 00:08:30.454 Harry: B. A warning defect, because Sheldon was not warned of the danger which resulted in his injury. 00:08:30.454 --> 00:08:38.434 Harry: C. A manufacturing defect, because the particular bicycle was not assembled properly according to its intended design. 00:08:38.714 --> 00:08:45.394 Harry: D. A design defect, because the bicycle should be safe even when a required fastener is not installed. 00:08:45.914 --> 00:08:53.174 Sheldon: C, obviously. My bicycle has one fastener where the specifications call for two. 00:08:53.174 --> 00:08:57.714 Sheldon: Honestly, I object to a universe that allows that kind of incompetence. 00:08:57.714 --> 00:09:02.754 Hermione: And A and D are both wrong. It's not a design defect. 00:09:02.754 --> 00:09:06.594 Hermione: The bicycle was put together wrong, not designed wrong. 00:09:06.594 --> 00:09:14.794 Leonard: B calls it a warning problem. But a warning doesn't get rid of liability for a manufacturing defect that causes an injury. 00:09:14.794 --> 00:09:18.774 Harry: Just like Sheldon said, the correct answer is C. 00:09:18.774 --> 00:09:25.034 Harry: A manufacturing defect, because the particular bicycle was not assembled properly according to its intended design. 00:09:27.534 --> 00:09:33.074 Harry: Question six. A steak knife is free from defects when the manufacturer sells it. 00:09:33.514 --> 00:09:40.314 Harry: After Jon purchases the knife, he places it upright in a utensil holder on a kitchen counter, with the blade pointing up. 00:09:41.054 --> 00:09:45.374 Harry: Picking it up to use, Jon places his hand on the blade and cuts his finger. 00:09:45.814 --> 00:09:47.514 Harry: Which of the following is true? 00:09:48.634 --> 00:09:55.954 Harry: A. Jon cannot recover for a manufacturing defect because the knife was not defective and the danger of getting cut when touching the 00:09:55.954 --> 00:09:57.814 Harry: blade side of a steak knife is well known. 00:09:59.174 --> 00:10:03.954 Harry: B. Jon may recover because the knife injured him when he was going to use it. 00:10:04.334 --> 00:10:11.814 Harry: C. Jon may recover because strict liability focuses on the dangerous nature of the product when the injury occurred. 00:10:12.854 --> 00:10:20.734 Harry: D. Jon may recover if the manufacturer did not specifically warn him against setting the knife upright, exposing the sharp blade. 00:10:21.234 --> 00:10:27.134 Tyrion: A is correct, no question. If steak knives weren't sharp, we'd all be eating baked beans. 00:10:27.654 --> 00:10:28.194 Leonard: Ha! 00:10:28.514 --> 00:10:33.134 Sheldon: B and C treat every injury like it proves strict liability. 00:10:33.554 --> 00:10:36.774 Sheldon: But the question tells us flat out that the knife wasn't defective. 00:10:36.994 --> 00:10:41.834 Sheldon: Jon getting hurt doesn't turn an ordinary sharp blade into a manufacturing defect. 00:10:42.374 --> 00:10:48.034 Hermione: And D assumes he needed a warning about the obvious risk of grabbing a knife by the blade. 00:10:48.394 --> 00:10:52.814 Hermione: Warning or no warning, this danger is obvious and well known. 00:10:53.274 --> 00:10:56.774 Harry: For the reasons stated, the correct answer is A. 00:10:57.394 --> 00:11:04.414 Harry: Jon cannot recover for a manufacturing defect because the knife was not defective and the danger of getting cut when touching the blade 00:11:04.414 --> 00:11:06.714 Harry: side of a steak knife is well known. 00:11:09.254 --> 00:11:17.712 Harry: Question seven. The first time that Hermione turned on a new electric heater, using it normally and as instructed, it caught fire and 00:11:17.712 --> 00:11:20.132 Harry: burned a portion of the carpet in Hermione's room. 00:11:20.752 --> 00:11:25.692 Harry: The electric heater was completely destroyed. Which of the following is true? 00:11:26.612 --> 00:11:32.012 Harry: A. Because the heater was destroyed, Hermione is unable to establish that it was defective. 00:11:32.392 --> 00:11:38.952 Harry: B. The fire establishes liability even if Hermione had used or altered the heater improperly. 00:11:39.572 --> 00:11:45.852 Harry: C. Hermione must identify the exact component that failed and caused the heater to catch fire. 00:11:47.232 --> 00:11:54.472 Harry: D. Hermione can assert that under the malfunction doctrine, it can be inferred that a manufacturing defect existed when the heater left 00:11:54.472 --> 00:11:55.732 Harry: the retailer's control. 00:11:56.232 --> 00:12:00.598 Hermione: So my heater's destroyed. I can't produce the part that failed. 00:12:00.718 --> 00:12:02.498 Hermione: Is that the end of my claim? 00:12:03.118 --> 00:12:09.098 Sheldon: Well, C seems plausible to me. Don't you have to identify the exact manufacturing defect, Hermione? 00:12:09.578 --> 00:12:10.878 Sheldon: Too bad it burned up. 00:12:11.438 --> 00:12:14.358 Tyrion: And B goes way too far in the other direction. 00:12:14.698 --> 00:12:20.238 Tyrion: A fire doesn't establish liability, especially if it came from misuse or alteration. 00:12:20.838 --> 00:12:30.438 Leonard: A is too conclusive. D is right. The malfunction doctrine can support an inference of a defect when the product malfunctions during normal 00:12:30.438 --> 00:12:36.018 Leonard: operation. Hermione doesn't necessarily have to identify the exact part that failed. 00:12:36.838 --> 00:12:44.078 Harry: Leonard nailed the distinction. An inference can support the claim even when there's no direct evidence of the failed part. 00:12:44.658 --> 00:12:52.958 Harry: The correct answer is D. Hermione can assert that under the malfunction doctrine, it can be inferred that a manufacturing defect existed 00:12:52.958 --> 00:12:55.178 Harry: when the heater left the retailer's control. 00:12:57.718 --> 00:13:02.658 Harry: Question eight. A riding lawn mower is manufactured according to its design. 00:13:02.818 --> 00:13:08.358 Harry: While operating the mower properly, Peter was injured by a rock that was ejected by one of the tires. 00:13:09.358 --> 00:13:15.698 Harry: For this question, apply a risk-utility design-defect analysis. Which of the following is true? 00:13:16.298 --> 00:13:21.918 Harry: A. There is no design defect because the mower conforms to the manufacturer's intended design. 00:13:22.398 --> 00:13:30.998 Harry: B. Peter may establish a design-defect claim if a reasonable, safer alternative design available when the mower was manufactured would 00:13:30.998 --> 00:13:37.098 Harry: have prevented or reduced this injury, and the design's risks outweigh its utility under the applicable test. 00:13:37.598 --> 00:13:44.798 Harry: C. An alternative design is relevant to a design-defect claim only if it would have added no cost. 00:13:45.738 --> 00:13:52.838 Harry: D. To make a viable design-defect claim, Peter must prove that a shield would have made the mower completely safe. 00:13:53.338 --> 00:13:57.537 Leonard: This one's easy. The mower was built exactly the way it was designed. 00:13:57.757 --> 00:14:00.777 Leonard: That sounds like A. No design defect. 00:14:01.177 --> 00:14:07.717 Hermione: That only proves there's no manufacturing deviation, Leonard. A flawed design can be followed perfectly. 00:14:08.237 --> 00:14:09.537 Leonard: Oh. Right. 00:14:09.937 --> 00:14:16.637 Sheldon: And C is too absolute. A safer alternative can still matter even if it adds a reasonable cost. 00:14:17.017 --> 00:14:21.937 Sheldon: We weigh that cost, the safety benefit, and the effect on how useful the mower is. 00:14:22.057 --> 00:14:27.637 Tyrion: B ties the practical alternative to Peter's injury, and to the design's risks and utility. 00:14:28.157 --> 00:14:31.937 Tyrion: D demands perfection. And perfection is not the test. 00:14:32.257 --> 00:14:41.837 Harry: Tyrion has it. The correct answer is B. Peter may establish a design-defect claim if a reasonable, safer alternative design available when 00:14:41.837 --> 00:14:49.437 Harry: the mower was manufactured would have prevented or reduced this injury, and the design's risks outweigh its utility under the applicable 00:14:49.437 --> 00:14:50.057 Harry: test. 00:14:52.557 --> 00:15:02.137 Harry: All right, on to negotiable instruments. Question nine. Sheldon buys laboratory equipment from Leonard and hands him a signed paper stating, 00:15:02.797 --> 00:15:08.537 Harry: "I owe Leonard $1,800 for laboratory equipment." Which of the following is true? 00:15:09.577 --> 00:15:13.997 Harry: A. The paper is a negotiable instrument because Sheldon signed it. 00:15:14.717 --> 00:15:19.677 Harry: B. The paper is a negotiable instrument because it states a fixed amount of money. 00:15:20.357 --> 00:15:26.877 Harry: C. The paper is not a negotiable instrument because it does not contain a promise or order to pay. 00:15:27.477 --> 00:15:32.877 Harry: D. The paper is a negotiable instrument because it relates to the purchase of goods. 00:15:33.377 --> 00:15:37.962 Sheldon: I signed an acknowledgment of the debt. Isn't my signature authoritative enough? 00:15:38.342 --> 00:15:45.382 Leonard: I get why A and B are tempting. A negotiable instrument does need a signature and a fixed amount of money. 00:15:45.642 --> 00:15:51.642 Hermione: But C shows you the problem. "I owe" describes a debt that already exists. 00:15:51.922 --> 00:15:57.882 Hermione: Just acknowledging it isn't the unconditional promise to pay that a negotiable note requires. 00:15:58.342 --> 00:16:01.862 Tyrion: And the fact that the debt is for goods doesn't matter here at all. 00:16:01.862 --> 00:16:03.762 Tyrion: So D is out. 00:16:04.242 --> 00:16:08.162 Harry: Hermione is on a roll. The correct answer is C. 00:16:08.642 --> 00:16:13.922 Harry: The paper is not a negotiable instrument because it does not contain a promise or order to pay. 00:16:16.422 --> 00:16:25.081 Harry: Question ten. Tyrion signs a promissory note promising to pay to the order of Bronn $4,000 if a dragon returns to King's Landing 00:16:25.081 --> 00:16:28.861 Harry: during the next year. Which of the following is true? 00:16:29.701 --> 00:16:34.981 Harry: A. The promissory note is a negotiable instrument because the amount payable is fixed. 00:16:35.641 --> 00:16:41.621 Harry: B. The promissory note is a negotiable instrument because the stated event is unlikely to occur. 00:16:42.261 --> 00:16:49.181 Harry: C. The promissory note is a negotiable instrument payable on demand because it does not state a specific date. 00:16:49.581 --> 00:16:55.421 Harry: D. The promissory note is not negotiable because payment depends on a contingency. 00:16:55.961 --> 00:17:02.697 Tyrion: If a dragon comes back, Bronn gets paid. I'd call that an exceptionally poor lending strategy. 00:17:04.017 --> 00:17:08.497 Sheldon: Well, four thousand dollars is a fixed amount, so A is tempting. 00:17:08.857 --> 00:17:13.757 Sheldon: But the payment itself is conditional. Would it help if the condition were more likely? 00:17:14.257 --> 00:17:19.837 Hermione: No. And B is even worse. Whether the condition is likely doesn't matter. 00:17:20.077 --> 00:17:24.457 Hermione: And C can't turn a conditional note into a demand instrument. 00:17:24.757 --> 00:17:28.817 Leonard: Right. The note only promises payment if something happens. 00:17:28.977 --> 00:17:34.977 Leonard: How likely that is doesn't matter. A negotiable note needs an unconditional promise to pay. 00:17:35.457 --> 00:17:39.377 Harry: Leonard has the rule right. The correct answer is D. 00:17:40.017 --> 00:17:44.517 Harry: The promissory note is not negotiable because payment depends on a contingency. 00:17:47.017 --> 00:17:55.617 Harry: Question eleven. Ron signs a note stating, "I promise to pay to the order of Hermione $1,200 or a racing broom of the 00:17:55.617 --> 00:17:59.077 Harry: same value." Which of the following is true? 00:17:59.897 --> 00:18:04.477 Harry: A. The note is not a negotiable instrument because it may be paid with property. 00:18:05.317 --> 00:18:09.717 Harry: B. The note is a negotiable instrument because it may be paid with money. 00:18:10.557 --> 00:18:16.977 Harry: C. The note is a negotiable instrument because Ron made an express unconditional promise to pay. 00:18:17.817 --> 00:18:25.017 Harry: D. The note is not a negotiable instrument only if there is no broom worth $1,200 when payment is due. 00:18:25.517 --> 00:18:30.877 Hermione: Ron promised me money or a broom. Personally, I'd take the money. 00:18:31.137 --> 00:18:34.297 Tyrion: Your preference matters less than the broom option, I'm afraid. 00:18:35.177 --> 00:18:37.217 Leonard: B says the note can be paid in money. 00:18:37.417 --> 00:18:42.817 Leonard: But the rule requires an obligation to pay money, not an optional swap for property. 00:18:43.677 --> 00:18:47.757 Sheldon: And C relies on the fact that there's a promise without looking at what's promised. 00:18:48.297 --> 00:18:57.157 Sheldon: D invents a valuation exception. A gets it right in rejecting negotiability, because a negotiable note has to contain an unconditional 00:18:57.157 --> 00:19:03.717 Sheldon: promise to pay a fixed amount of money, with or without permitted interest or other charges. 00:19:04.577 --> 00:19:12.557 Harry: Sheldon has it. The correct answer is A. The note is not a negotiable instrument because it may be paid with property. 00:19:15.057 --> 00:19:21.910 Harry: Question twelve. Peter signs a promissory note providing that interest will equal the rate paid on specified U.S. 00:19:21.950 --> 00:19:27.130 Harry: Treasury bills plus one percentage point. Which of the following is true? 00:19:28.090 --> 00:19:33.090 Harry: A. It is not a negotiable instrument because its interest rate is subject to change. 00:19:33.630 --> 00:19:42.050 Harry: B. The variable interest rate does not prevent negotiability because interest may be determined by reference to a financial index, assuming 00:19:42.050 --> 00:19:44.190 Harry: the note otherwise meets the requirements. 00:19:45.030 --> 00:19:51.330 Harry: C. It can only be a negotiable instrument if the parties agree to a single fixed interest rate. 00:19:52.370 --> 00:19:58.790 Harry: D. It cannot be a negotiable instrument because only an order to pay can be subject to a variable interest rate. 00:19:59.290 --> 00:20:04.967 Sheldon: A variable rate? A whole formula! Mathematically, that seems fine to me. 00:20:05.327 --> 00:20:08.407 Leonard: A and C both assume the rate has to stay the same. 00:20:08.727 --> 00:20:11.967 Leonard: But the interest can be set based on the Treasury-bill index. 00:20:12.487 --> 00:20:19.967 Hermione: Right. The UCC allows a variable interest rate, and it allows reference to information outside the instrument. 00:20:20.247 --> 00:20:25.147 Hermione: A rate that changes doesn't, by itself, defeat negotiability. 00:20:25.407 --> 00:20:30.227 Tyrion: And D makes up a distinction between a note and a draft that doesn't exist. 00:20:30.787 --> 00:20:34.227 Tyrion: B recognizes that an objective reference rate is fine. 00:20:34.987 --> 00:20:38.787 Harry: Tyrion figured it out. The correct answer is B. 00:20:39.387 --> 00:20:46.947 Harry: The variable interest rate does not prevent negotiability because interest may be determined by reference to a financial index, assuming 00:20:46.947 --> 00:20:49.147 Harry: the note otherwise meets the requirements. 00:20:51.727 --> 00:20:59.167 Harry: Question thirteen. Amy signs a promissory note stating that interest is payable but does not include a specific interest rate. 00:20:59.847 --> 00:21:01.507 Harry: Which of the following is true? 00:21:02.367 --> 00:21:07.687 Harry: A. When the promissory note becomes due, the parties must agree to the interest rate. 00:21:08.527 --> 00:21:15.467 Harry: B. Because the promissory note indicates interest is due but does not state the rate, it is non-negotiable. 00:21:16.127 --> 00:21:21.187 Harry: C. The promissory note is negotiable only if it is payable on demand. 00:21:21.627 --> 00:21:28.127 Harry: D. Interest is payable at the judgment rate in effect at the place of payment when interest first accrues. 00:21:28.627 --> 00:21:33.447 Leonard: So Amy wrote that interest is due, but she forgot the percentage. 00:21:33.447 --> 00:21:35.427 Leonard: Was that a fatal mistake? 00:21:35.427 --> 00:21:39.247 Sheldon: You know, Leonard may actually be onto something. It's B. 00:21:39.247 --> 00:21:41.967 Sheldon: No stated rate, no negotiability. 00:21:41.967 --> 00:21:49.467 Hermione: Hold on. A wrongly demands some future agreement. We're dealing with the note as it stands right now. 00:21:49.467 --> 00:21:56.707 Hermione: And C wrongly requires payment on demand. Neither one deals with the actual issue. 00:21:56.707 --> 00:22:04.557 Tyrion: D does. It uses the statutory judgment rate, set by the place of payment and the time interest first accrues. 00:22:04.557 --> 00:22:10.867 Tyrion: We can look that up. A missing number doesn't have to sink an otherwise negotiable note. 00:22:10.867 --> 00:22:13.927 Sheldon: Okay. I withdraw B. 00:22:13.927 --> 00:22:22.007 Harry: Tyrion reasoned correctly. The correct answer is D. Interest is payable at the judgment rate in effect at the place of payment when 00:22:22.007 --> 00:22:23.427 Harry: interest first accrues. 00:22:25.927 --> 00:22:35.727 Harry: Question fourteen. Sansa signs a promissory note promising to pay to the order of Arya $3,500 sixty days after Jon was elected to 00:22:35.727 --> 00:22:44.027 Harry: office. When the note is issued, Jon was elected ten days earlier, and the election date is readily ascertainable. 00:22:44.027 --> 00:22:46.607 Harry: Which of the following is true? 00:22:46.607 --> 00:22:53.067 Harry: A. The promissory note is a demand note because it does not specifically state the calendar date of payment. 00:22:53.067 --> 00:22:59.487 Harry: B. The promissory note is not negotiable because its payment is based on an event. 00:22:59.487 --> 00:23:05.567 Harry: C. The promissory note is negotiable because the exact payment date can be determined. 00:23:05.567 --> 00:23:11.594 Harry: D. The promissory note is non-negotiable because Jon might decide not to take office. 00:23:12.094 --> 00:23:15.383 Tyrion: The note comes due sixty days after Jon's election. 00:23:15.763 --> 00:23:19.063 Tyrion: And one might think politics is about as uncertain as it gets. 00:23:19.863 --> 00:23:23.923 Hermione: Except Jon had already been elected when Sansa issued the note. 00:23:24.183 --> 00:23:27.463 Hermione: So we can figure out the due date right then. 00:23:28.023 --> 00:23:32.703 Leonard: Yeah, B mistakes an event that already happened for a future contingency. 00:23:33.103 --> 00:23:38.463 Leonard: And D throws in a new event, taking office, which has nothing to do with the due date. 00:23:38.743 --> 00:23:44.663 Sheldon: And a date you can determine isn't the same thing as payable on demand, whatever A says. 00:23:45.023 --> 00:23:48.403 Sheldon: C is the precise answer, because we know the precise date. 00:23:48.903 --> 00:23:53.043 Harry: Sheldon is on the mark again. The correct answer is C. 00:23:53.523 --> 00:23:57.823 Harry: The promissory note is negotiable because the exact payment date can be determined. 00:24:00.323 --> 00:24:10.603 Harry: Question fifteen. Harry draws and signs a draft directing Gringotts to pay Luna $900 "at sight." Which of the following is true? 00:24:11.443 --> 00:24:15.423 Harry: A. The draft is payable on demand when it is presented for payment. 00:24:16.003 --> 00:24:20.783 Harry: B. The draft is payable only after Gringotts selects a maturity date. 00:24:21.383 --> 00:24:27.743 Harry: C. The draft is not negotiable because "at sight" does not identify a calendar date. 00:24:28.423 --> 00:24:33.363 Harry: D. The draft is payable only if Harry maintains a separate line of credit. 00:24:33.863 --> 00:24:39.869 Hermione: Harry wrote "at sight." Does that mean the bank can wait until it feels like looking at it? 00:24:40.389 --> 00:24:45.969 Sheldon: No. "At sight" is a commercial term. It means payable when it's presented. 00:24:46.589 --> 00:24:54.689 Tyrion: B lets Gringotts pick its own maturity date. And C insists on a calendar date, when payment on demand is perfectly permitted. 00:24:55.549 --> 00:24:58.989 Leonard: And D adds a credit-line condition that makes no sense. 00:24:59.449 --> 00:25:05.129 Leonard: A says what the words actually mean. "At sight" means "on demand." 00:25:05.129 --> 00:25:12.789 Harry: Congratulations, Leonard. The correct answer is A. The draft is payable on demand when it is presented for payment. 00:25:15.389 --> 00:25:21.649 Harry: Question sixteen. Lois purchases a cashier's check from a bank payable to Brian. 00:25:21.649 --> 00:25:24.069 Harry: Which of the following is true? 00:25:24.069 --> 00:25:29.529 Harry: A. Lois is the maker because she supplied the funds used to purchase the check. 00:25:29.529 --> 00:25:35.569 Harry: B. The bank is both drawer and drawee and is obligated to pay the cashier's check. 00:25:35.569 --> 00:25:43.669 Harry: C. If the bank does not honor the cashier's check, Brian must pursue Lois, not the bank, for payment. 00:25:43.669 --> 00:25:48.016 Harry: D. The cashier's check is a promissory note rather than a draft. 00:25:48.516 --> 00:25:54.237 Leonard: Lois paid for the cashier's check. Is that enough to make her the maker, like A says? 00:25:55.017 --> 00:26:00.697 Sheldon: No. The bank draws the check on itself, so it's both the drawer and the drawee. 00:26:00.777 --> 00:26:04.197 Sheldon: And I suspect its resources are a bit bigger than my checking account. 00:26:04.757 --> 00:26:09.437 Hermione: Lois is the remitter. She's the person who bought the check payable to Brian. 00:26:09.757 --> 00:26:16.097 Hermione: C wrongly sends Brian only after Lois, but the bank has its own obligation to pay. 00:26:16.477 --> 00:26:21.437 Hermione: And D mistakes a draft the bank issued for a promissory note. 00:26:22.017 --> 00:26:25.117 Tyrion: B gets the bank's role and its obligation right. 00:26:25.657 --> 00:26:28.837 Tyrion: It's a smancy fancy check, backed by the bank. 00:26:29.937 --> 00:26:33.737 Harry: Tyrion, even the bankers would approve of that explanation. 00:26:34.317 --> 00:26:41.737 Harry: The correct answer is B. The bank is both drawer and drawee and is obligated to pay the cashier's check. 00:26:44.237 --> 00:26:52.277 Harry: Question seventeen. As The Cheesecake Factory's authorized treasurer, Penny applies its signature stamp to a note evidencing a business 00:26:52.277 --> 00:26:55.197 Harry: loan. Which of the following is true? 00:26:56.157 --> 00:27:00.617 Harry: A. The company is not liable because the signature was not handwritten. 00:27:01.397 --> 00:27:05.797 Harry: B. Penny is personally liable merely because she applied the stamp. 00:27:06.497 --> 00:27:13.297 Harry: C. The authorized stamped signature which Penny used on behalf of the company binds the company on the note. 00:27:13.737 --> 00:27:21.817 Harry: D. Penny, the agent, and the company, the principal, are both liable whenever an agent signs an instrument in any capacity. 00:27:22.317 --> 00:27:29.576 Sheldon: A stamp? I was under the impression that important obligations needed a big, flourishing, handwritten signature. 00:27:30.276 --> 00:27:35.416 Hermione: That's why A is wrong. An authorized signature can be made with a stamp. 00:27:35.516 --> 00:27:40.576 Hermione: What matters is that the mark is adopted with the intent to authenticate the writing. 00:27:40.796 --> 00:27:44.756 Leonard: And Penny stamped it for an identified company, as its treasurer. 00:27:45.036 --> 00:27:51.756 Leonard: That's literally her job. B and D assume she's personally on the hook just for doing that authorized act. 00:27:51.816 --> 00:27:55.656 Leonard: Which, honestly, would scare a lot of people away from that job. 00:27:56.096 --> 00:28:02.816 Tyrion: C binds the company through its authorized agent, without automatically making the agent responsible for the debt. 00:28:03.296 --> 00:28:12.036 Tyrion: Here, the stamp is the company's signature. Now, a different or ambiguous signature could raise a different personal-liability question. 00:28:12.516 --> 00:28:16.876 Harry: Tyrion, that distinction matters. The correct answer is C. 00:28:17.376 --> 00:28:22.756 Harry: The authorized stamped signature which Penny used on behalf of the company binds the company on the note. 00:28:25.376 --> 00:28:31.611 Harry: Question eighteen. Jon owes Davos $6,000 and gives him an ordinary check. 00:28:32.331 --> 00:28:38.811 Harry: Davos accepts and deposits the check. They have not agreed that merely accepting the check discharges the debt. 00:28:39.591 --> 00:28:41.391 Harry: Which of the following is true? 00:28:42.231 --> 00:28:49.391 Harry: A. Enforcement of the original debt by Davos is suspended until the check is paid, certified, or dishonored. 00:28:49.951 --> 00:28:55.351 Harry: B. The original debt from Jon to Davos is immediately discharged when Davos accepts the check. 00:28:55.351 --> 00:29:02.131 Harry: C. The bank becomes primarily liable when Davos deposits the check. 00:29:02.791 --> 00:29:08.171 Harry: D. Jon is released from liability to Davos even if the bank refuses payment. 00:29:08.751 --> 00:29:12.494 Tyrion: Davos takes Jon's check. Does the debt just go "poof"? 00:29:12.934 --> 00:29:17.894 Leonard: That's the trap in B and D. An ordinary check is conditional payment. 00:29:18.194 --> 00:29:24.634 Leonard: The underlying debt is generally suspended until the check is paid, certified, or dishonored. 00:29:25.074 --> 00:29:28.294 Leonard: Handing someone a check isn't the same as handing them cash. 00:29:29.214 --> 00:29:34.414 Sheldon: And C mistakes depositing a check for the bank taking on primary liability for it. 00:29:34.414 --> 00:29:39.534 Hermione: A keeps Jon's obligation suspended while the check is being collected. 00:29:39.854 --> 00:29:44.174 Hermione: And if the check is dishonored, the debt doesn't just disappear. 00:29:45.034 --> 00:29:54.414 Harry: Hermione is right! The correct answer is A. Enforcement of the original debt by Davos is suspended until the check is paid, certified, 00:29:54.414 --> 00:29:55.754 Harry: or dishonored. 00:29:58.254 --> 00:30:03.876 Harry: Question nineteen. Harry pays Ron with his own check after the bank certifies it. 00:30:04.376 --> 00:30:08.516 Harry: The bank later refuses to honor it. Which of the following is true? 00:30:09.416 --> 00:30:13.696 Harry: A. Ron must seek payment from Harry before pursuing the bank. 00:30:14.576 --> 00:30:19.576 Harry: B. Harry remains secondarily liable because he originally wrote the check. 00:30:20.056 --> 00:30:25.256 Harry: C. Harry and the bank are both primarily liable on the certified check. 00:30:25.756 --> 00:30:33.636 Harry: D. Ron may enforce the certified check against the bank because certification is the bank's acceptance and discharges Harry's liability 00:30:33.636 --> 00:30:34.476 Harry: as drawer. 00:30:35.056 --> 00:30:40.443 Hermione: So Harry got his check certified, and then the bank refuses to pay Ron. 00:30:40.843 --> 00:30:42.523 Hermione: Who does Ron go after? 00:30:43.323 --> 00:30:50.043 Sheldon: Certification is the bank's acceptance. A and B wrongly keep Harry on the hook as the drawer after acceptance. 00:30:50.403 --> 00:30:53.043 Sheldon: The bank's acceptance discharges that liability. 00:30:53.943 --> 00:30:57.323 Tyrion: C makes both Harry and the bank primarily liable. 00:30:57.443 --> 00:31:00.783 Tyrion: But the bank is the one obligated on the certified check. 00:31:01.183 --> 00:31:03.463 Tyrion: Its obligation comes from accepting the check. 00:31:03.463 --> 00:31:07.643 Leonard: D sends Ron to the bank, which is right. 00:31:07.983 --> 00:31:12.723 Leonard: Certification is a lot more than the bank saying, "Eh, probably fine." 00:31:13.783 --> 00:31:17.443 Harry: Leonard, this time you're actually right. 00:31:17.503 --> 00:31:18.703 Leonard: This time? 00:31:19.023 --> 00:31:28.203 Harry: The correct answer is D. Ron may enforce the certified check against the bank because certification is the bank's acceptance and discharges 00:31:28.203 --> 00:31:29.923 Harry: Harry's liability as drawer. 00:31:32.545 --> 00:31:39.463 Harry: Question twenty. Peter receives a certified check, indorses it, and delivers it to Quagmire. 00:31:40.223 --> 00:31:46.243 Harry: Peter does not disclaim indorser liability, and Quagmire presents the check within the applicable time limits. 00:31:46.743 --> 00:31:50.923 Harry: The bank dishonors the check, and Peter receives timely notice. 00:31:51.423 --> 00:31:53.243 Harry: Which of the following is true? 00:31:54.283 --> 00:32:00.723 Harry: A. Peter has no liability because certification protection extends to every subsequent indorser. 00:32:01.723 --> 00:32:09.823 Harry: B. Quagmire may enforce payment against Peter because Peter indorsed the check after certification and the requirements for indorser liability 00:32:09.823 --> 00:32:10.843 Harry: have been met. 00:32:12.283 --> 00:32:17.063 Harry: C. Quagmire must pursue the person who originally obtained the certified check. 00:32:17.483 --> 00:32:22.203 Harry: D. Peter became primarily liable when he indorsed the check. 00:32:22.703 --> 00:32:29.403 Leonard: Peter passed a certified check to Quagmire. Doesn't certification release every signature on it? 00:32:29.643 --> 00:32:37.963 Hermione: That's exactly the overreach in A. Certification discharges the drawer, no matter who got the check certified. 00:32:38.263 --> 00:32:43.323 Hermione: And it discharges indorsers who signed before the bank accepted the check. 00:32:43.563 --> 00:32:48.963 Hermione: But Peter signed after certification. So that discharge doesn't protect him. 00:32:49.063 --> 00:32:49.823 Leonard: Oh. 00:32:50.323 --> 00:32:54.803 Hermione: So B is correct. Quagmire, have at it against Peter. 00:32:55.243 --> 00:33:00.263 Sheldon: Peter indorsed and transferred the check, and he got timely notice after dishonor. 00:33:00.523 --> 00:33:04.423 Sheldon: So his secondary liability as an indorser can kick in. 00:33:05.003 --> 00:33:08.283 Tyrion: D makes him primarily liable, which is also wrong. 00:33:08.883 --> 00:33:12.743 Tyrion: B captures his potential liability without mislabeling it. 00:33:13.223 --> 00:33:17.443 Harry: Have at it indeed, Hermione. The correct answer is B. 00:33:18.043 --> 00:33:25.303 Harry: Quagmire may enforce payment against Peter because Peter indorsed the check after certification and the requirements for indorser liability 00:33:25.303 --> 00:33:26.403 Harry: have been met. 00:33:30.303 --> 00:33:35.023 Harry: Question twenty-one. Howard is authorized to sign a promissory note for Wolowitz Industries. 00:33:35.083 --> 00:33:45.143 Harry: He signs "Wolowitz Industries, by Howard, President" and also signs "Howard, Individually." Which of the following is true? 00:33:45.903 --> 00:33:50.963 Harry: A. Only Wolowitz Industries is liable because Howard acted with authority. 00:33:51.903 --> 00:33:57.523 Harry: B. Only Howard is liable because his individual signature cancels the company's signature. 00:33:57.963 --> 00:34:03.043 Harry: C. Both Wolowitz Industries and Howard are liable on the note. 00:34:03.883 --> 00:34:08.883 Harry: D. Howard is liable only if his signature for the company was unauthorized. 00:34:09.383 --> 00:34:16.391 Sheldon: Howard signed once for Wolowitz Industries, and then again "Individually." Why, I ask? 00:34:16.631 --> 00:34:23.471 Leonard: Well, A ignores his separate individual signature. And B ignores that he also signed for the corporation. 00:34:23.611 --> 00:34:29.911 Hermione: The two signatures do two different jobs. Signing as an authorized officer binds the company. 00:34:30.071 --> 00:34:32.631 Hermione: Signing individually binds Howard. 00:34:32.811 --> 00:34:37.811 Tyrion: And D assumes authority wipes out personal liability. It doesn't. 00:34:37.811 --> 00:34:42.391 Tyrion: Just like C says, both Howard and the company are liable. 00:34:42.811 --> 00:34:45.571 Harry: Tyrion, you stole Hermione's thunder. 00:34:45.711 --> 00:34:46.851 Hermione: He does that. 00:34:47.091 --> 00:34:53.271 Harry: The correct answer is C. Both Wolowitz Industries and Howard are liable on the note. 00:34:55.771 --> 00:35:01.471 Harry: Question twenty-two. A forger signs Tyrion's name as maker of a promissory note. 00:35:02.071 --> 00:35:04.811 Harry: Arya later acquires it as a holder in due course. 00:35:05.451 --> 00:35:11.451 Harry: Tyrion did not authorize or ratify the signature, and no facts prevent him from asserting the forgery. 00:35:12.091 --> 00:35:13.771 Harry: Which of the following is true? 00:35:14.711 --> 00:35:19.371 Harry: A. Arya may enforce the note against the forger but not against Tyrion. 00:35:19.711 --> 00:35:25.831 Harry: B. Arya may enforce the note against Tyrion and the forger because she is a holder in due course. 00:35:26.431 --> 00:35:32.791 Harry: C. Arya cannot enforce the note against the forger because the forger did not sign their real name. 00:35:33.531 --> 00:35:41.391 Harry: D. Arya may enforce against both Tyrion and the forger because even though it is forged, Tyrion's name appears on the note. 00:35:41.951 --> 00:35:46.726 Tyrion: Someone forged my name, and now a holder in due course wants me to pay. 00:35:47.146 --> 00:35:49.486 Tyrion: I am offended on several levels. 00:35:49.946 --> 00:35:55.246 Sheldon: B and D treat Tyrion's name showing up on the note as if it were his actual signature. 00:35:55.826 --> 00:35:59.526 Sheldon: A forgery doesn't ordinarily bind the person who was impersonated. 00:35:59.786 --> 00:36:05.786 Hermione: Tyrion can say the signature is unauthorized, even against a holder in due course. 00:36:06.146 --> 00:36:09.846 Hermione: On these facts, it doesn't work as Tyrion's signature. 00:36:10.066 --> 00:36:14.886 Hermione: But it does work as the forger's signature, in favor of Arya. 00:36:15.326 --> 00:36:19.906 Hermione: The forger can't hide behind the forgery. A is the right choice. 00:36:20.446 --> 00:36:23.966 Leonard: And C is wrong too. Hermione just told us why. 00:36:24.526 --> 00:36:28.666 Harry: Good job, Leonard and Hermione. The correct answer is A. 00:36:29.486 --> 00:36:33.406 Harry: Arya may enforce the note against the forger but not against Tyrion. 00:36:35.906 --> 00:36:42.245 Harry: Question twenty-three. Hogwarts keeps blank checks beside its signature stamp in an unlocked drawer. 00:36:42.985 --> 00:36:47.525 Harry: Draco, an employee, writes a check to himself and uses the signature stamp. 00:36:48.105 --> 00:36:52.065 Harry: The bank fails to follow its own check-cashing procedures and honors the check. 00:36:52.365 --> 00:37:00.905 Harry: The bank acted in good faith. A court finds that Hogwarts's failure to exercise ordinary care substantially contributed to the forged signature 00:37:00.905 --> 00:37:06.125 Harry: and that the bank's failure to exercise ordinary care substantially contributed to the loss. 00:37:06.745 --> 00:37:08.885 Harry: Which of the following is true? 00:37:09.645 --> 00:37:14.765 Harry: A. Hogwarts bears the entire loss because Draco used its check and stamp. 00:37:15.145 --> 00:37:19.825 Harry: B. Payment of the check makes the bank responsible for the entire loss. 00:37:21.165 --> 00:37:26.105 Harry: C. Hogwarts and the bank must split the loss equally because they were both at fault. 00:37:26.825 --> 00:37:34.705 Harry: D. The court will allocate the loss according to the extent to which each party's failure to exercise ordinary care contributed to it. 00:37:35.205 --> 00:37:38.719 Sheldon: Blank checks and a signature stamp in an unlocked drawer. 00:37:39.179 --> 00:37:42.399 Sheldon: That is a spectacular failure of security. 00:37:42.899 --> 00:37:47.399 Hermione: True. But that doesn't excuse the bank for ignoring its own procedures. 00:37:47.899 --> 00:37:55.899 Hermione: The court found that each party failed to use ordinary care, and that each failure substantially contributed to the problem. 00:37:56.439 --> 00:38:02.559 Hermione: A and B are just finger pointing, when Hogwarts and the bank were both negligent. 00:38:02.919 --> 00:38:11.679 Tyrion: C suggests an automatic fifty-fifty split. That may not be fair, depending on how much each party contributed to the loss. 00:38:12.539 --> 00:38:18.179 Leonard: D splits the loss based on how much each party's failure of ordinary care contributed to it. 00:38:18.419 --> 00:38:20.099 Leonard: That's the fair way to do it. 00:38:20.819 --> 00:38:26.319 Harry: Hermione and Leonard, you share in my praise. The correct answer is D. 00:38:26.759 --> 00:38:33.239 Harry: The court will allocate the loss according to the extent to which each party's failure to exercise ordinary care contributed to it. 00:38:35.739 --> 00:38:44.599 Harry: Now we're into employment law. Question twenty-four. Assume this question arises in a jurisdiction that recognizes implied employment contracts 00:38:44.599 --> 00:38:52.779 Harry: based on handbook promises. Penny was verbally hired and subsequently discharged without a stated reason, despite receiving high praise 00:38:52.779 --> 00:38:59.939 Harry: from the employer. According to the employer's manual, employees are not to be fired unless they do not perform adequately. 00:39:00.639 --> 00:39:05.979 Harry: The manual contains no disclaimer of contractual effect. Which of the following is true? 00:39:06.259 --> 00:39:12.679 Harry: A. The manual is irrelevant to Penny's discharge because Penny did not have a written employment contract. 00:39:13.139 --> 00:39:20.819 Harry: B. The manual may create an implied contract that limits the employer's right to discharge Penny unless she does not adequately perform 00:39:20.819 --> 00:39:21.899 Harry: her job duties. 00:39:22.539 --> 00:39:30.179 Harry: C. The manual is not controlling under the doctrine of employment at will, which means that Penny can be discharged for any reason 00:39:30.179 --> 00:39:31.359 Harry: or no reason. 00:39:31.859 --> 00:39:39.819 Harry: D. A manual is not controlling on whether Penny's discharge was proper because it is merely the perspective of the employer which could 00:39:39.819 --> 00:39:41.259 Harry: change at any time. 00:39:41.759 --> 00:39:47.502 Leonard: Penny was hired verbally, and according to B, the manual might still give her job security. 00:39:47.562 --> 00:39:52.382 Leonard: My vote is B. An implied contract that gives her some job security. 00:39:52.782 --> 00:39:57.102 Sheldon: Ordinary at-will employment lets the employer fire someone without cause. 00:39:57.682 --> 00:40:02.122 Sheldon: But here the employer's own manual promised a performance-based limit. 00:40:02.442 --> 00:40:03.762 Sheldon: I agree with Leonard. 00:40:04.422 --> 00:40:13.882 Hermione: And A is wrong because not having a separate written employment agreement doesn't necessarily stop a handbook promise from creating an 00:40:13.882 --> 00:40:18.722 Hermione: implied contract, at least in the jurisdiction the question describes. 00:40:19.602 --> 00:40:23.282 Tyrion: C and D assume the employer can just ignore its own manual. 00:40:23.862 --> 00:40:29.262 Tyrion: Now, I'd love to ignore documents nobody reads. But an employer's promise may still matter. 00:40:30.122 --> 00:40:35.202 Harry: Sheldon, you were wise to agree with Leonard. The correct answer is B. 00:40:35.822 --> 00:40:43.122 Harry: The manual may create an implied contract that limits the employer's right to discharge Penny unless she does not adequately perform her 00:40:43.122 --> 00:40:43.902 Harry: job duties. 00:40:46.402 --> 00:40:56.701 Harry: Question twenty-five. Podrick's employer generates only $430,000 of revenue annually and therefore does not meet the $500,000 enterprise 00:40:56.701 --> 00:41:02.361 Harry: threshold. Assume it does not fall into a category covered regardless of revenue. 00:41:03.061 --> 00:41:08.461 Harry: Podrick, however, routinely handles invoices and electronic payments for out-of-state customers. 00:41:08.721 --> 00:41:11.121 Harry: Is Podrick covered by the FLSA? 00:41:11.861 --> 00:41:18.121 Harry: A. Podrick is excluded because the company's revenue is below $500,000. 00:41:18.121 --> 00:41:24.461 Harry: B. Podrick is excluded because processing interstate orders is not itself an interstate activity. 00:41:24.821 --> 00:41:31.961 Harry: C. Podrick is covered only if he is involved in actual interstate sales, rather than paperwork. 00:41:32.681 --> 00:41:39.501 Harry: D. Podrick may receive individual FLSA coverage because he regularly handles interstate transactions. 00:41:40.181 --> 00:41:45.246 Tyrion: The company only makes four hundred thirty thousand. The revenues don't add up. 00:41:45.486 --> 00:41:46.426 Tyrion: It's A. 00:41:47.026 --> 00:41:51.326 Hermione: Not at all. Tyrion, stop thinking about the Starship Enterprise. 00:41:51.626 --> 00:41:55.606 Hermione: The question is whether Podrick might have individual coverage. 00:41:55.846 --> 00:41:58.226 Tyrion: I was thinking about the Enterprise. 00:41:59.226 --> 00:42:06.206 Sheldon: Regularly processing invoices and electronic payments for out-of-state customers can be interstate commerce. 00:42:06.646 --> 00:42:12.186 Sheldon: It doesn't stop counting just because it's paperwork. So B and C are out. 00:42:12.866 --> 00:42:22.946 Leonard: Sheldon is right, for once. D recognizes that Podrick's regular interstate transactions may bring him within individual FLSA coverage, 00:42:23.346 --> 00:42:25.766 Leonard: even when there's no enterprise coverage. 00:42:26.446 --> 00:42:30.466 Harry: Leonard wasn't very gracious to Sheldon, but he's right. 00:42:30.826 --> 00:42:38.606 Harry: The correct answer is D. Podrick may receive individual FLSA coverage because he regularly handles interstate transactions. 00:42:41.126 --> 00:42:50.744 Harry: Question twenty-six. During a workweek in October 2026, a Florida restaurant uses the tip credit and pays the proper direct cash wage to 00:42:50.744 --> 00:43:00.944 Harry: servers. At the end of that workweek, Hermione, a server, has combined tips and cash wages averaging only $13.50 per hour. 00:43:01.244 --> 00:43:03.344 Harry: Which of the following is true? 00:43:04.264 --> 00:43:10.624 Harry: A. The employer must pay the difference so that Hermione receives at least the applicable minimum wage for the workweek. 00:43:11.064 --> 00:43:18.584 Harry: B. As long as the employer pays the proper amount of cash wages, the employer is not responsible for any shortage. 00:43:19.184 --> 00:43:27.024 Harry: C. The employer may average Hermione's wages and tips over the entire month to determine whether she has received at least the applicable 00:43:27.024 --> 00:43:28.444 Harry: minimum wage amount. 00:43:28.884 --> 00:43:35.384 Harry: D. The employer must pay the difference only if it failed to disclose the tip credit to the servers. 00:43:35.944 --> 00:43:38.768 Sheldon: B says paying the required cash portion is enough. 00:43:39.348 --> 00:43:42.368 Sheldon: But Hermione is entitled to the applicable minimum wage. 00:43:42.548 --> 00:43:48.068 Sheldon: And in Florida, that went up to fifteen dollars an hour on September 30, 2026. 00:43:48.808 --> 00:43:52.048 Tyrion: C averages her tips and wages over a whole month. 00:43:52.548 --> 00:44:01.048 Tyrion: Wrong period. The workweek is the measuring period. And D makes the employer's obligation depend on whether the servers were told about 00:44:01.048 --> 00:44:02.088 Tyrion: the tip credit. 00:44:02.708 --> 00:44:07.568 Leonard: A makes the employer cover the shortfall. Here, that's another dollar fifty an hour. 00:44:08.068 --> 00:44:12.468 Leonard: A tip credit isn't permission to pay below the applicable minimum wage. 00:44:12.608 --> 00:44:14.368 Hermione: I agree with Leonard. 00:44:15.068 --> 00:44:19.228 Harry: Leonard, of course, is right. The correct answer is A. 00:44:19.868 --> 00:44:25.488 Harry: The employer must pay the difference so that Hermione receives at least the applicable minimum wage for the workweek. 00:44:27.988 --> 00:44:33.148 Harry: Question twenty-seven. Chris must purchase a uniform selected by his employer. 00:44:33.808 --> 00:44:39.248 Harry: A payroll deduction for that uniform causes his pre-tax wages to fall below the minimum wage. 00:44:39.628 --> 00:44:41.368 Harry: Which of the following is true? 00:44:42.428 --> 00:44:46.948 Harry: A. The deduction is permissible if Chris agreed to it before starting work. 00:44:47.788 --> 00:44:54.788 Harry: B. Uniform costs are a permissible deduction even if they cause an employee's wages to go below minimum wage. 00:44:55.288 --> 00:45:00.768 Harry: C. The uniform charge cannot cause Chris's wages to go below minimum wage. 00:45:01.108 --> 00:45:07.348 Harry: D. The uniform deduction is permissible whenever Chris earns overtime during the same pay period. 00:45:07.848 --> 00:45:14.668 Leonard: So Chris has to buy the uniform the employer picked, and the deduction drops his pay below minimum wage. 00:45:15.128 --> 00:45:17.208 Leonard: Could his consent make that okay? 00:45:17.928 --> 00:45:20.908 Tyrion: A would let the employer bargain away a valuable right. 00:45:21.388 --> 00:45:24.468 Tyrion: And that's exactly what the minimum wage is there to prevent. 00:45:25.148 --> 00:45:29.908 Hermione: B would let employers get around the minimum wage with charges like this. 00:45:30.528 --> 00:45:36.508 Hermione: And D treats overtime in the pay period as permission for a deduction that's otherwise prohibited. 00:45:36.508 --> 00:45:44.028 Hermione: An employer-required uniform charge can't cut into required minimum wage or overtime pay. 00:45:44.468 --> 00:45:49.488 Sheldon: C protects the minimum wage after the employer-required uniform charge. 00:45:49.748 --> 00:45:52.728 Sheldon: Even a very stylish uniform can't change the arithmetic. 00:45:53.608 --> 00:45:59.208 Harry: Sheldon isn't just stylish. He's also right. The correct answer is C. 00:45:59.648 --> 00:46:03.928 Harry: The uniform charge cannot cause Chris's wages to go below minimum wage. 00:46:06.428 --> 00:46:13.628 Harry: Question twenty-eight. Leonard is a covered, nonexempt employee of a private company and is paid every two weeks. 00:46:14.188 --> 00:46:20.208 Harry: Within one pay period, he works 48 hours in week one and 32 hours in week two. 00:46:20.968 --> 00:46:22.628 Harry: Which of the following is true? 00:46:23.508 --> 00:46:30.808 Harry: A. The employer may average the hours because Leonard is paid every two weeks to determine whether he is entitled to overtime pay. 00:46:31.628 --> 00:46:36.388 Harry: B. No overtime is due because in the second workweek Leonard had a lighter work schedule. 00:46:36.388 --> 00:46:45.968 Harry: C. Each workweek is considered separately, so Leonard is entitled to overtime pay in the week in which he worked more than 40 00:46:45.968 --> 00:46:46.628 Harry: hours. 00:46:47.788 --> 00:46:54.088 Harry: D. Instead of paying overtime wages, the employer can substitute paid time off during a later workweek. 00:46:54.588 --> 00:46:57.905 Sheldon: Forty-eight plus thirty-two is eighty hours over two weeks. 00:46:58.085 --> 00:47:01.245 Sheldon: Average of forty. Mathematically solid. 00:47:01.365 --> 00:47:09.245 Hermione: And legally the wrong averaging period. Overtime under the FLSA is measured separately for each workweek. 00:47:09.585 --> 00:47:16.105 Tyrion: So A and B wrongly cancel out the eight overtime hours in week one with the lighter week two. 00:47:16.565 --> 00:47:21.005 Tyrion: And D offers paid time off later instead of overtime wages. 00:47:21.265 --> 00:47:26.205 Tyrion: For this private-sector employee, that's no substitute for overtime pay. 00:47:26.985 --> 00:47:30.445 Leonard: C correctly gives me eight overtime hours in the first week. 00:47:30.545 --> 00:47:36.405 Leonard: And those hours have to be paid at no less than one and one-half times my regular rate. 00:47:36.605 --> 00:47:41.545 Harry: Thanks, Leonard, for making the calculation clear. The correct answer is C. 00:47:42.025 --> 00:47:49.125 Harry: Each workweek is considered separately, so Leonard is entitled to overtime pay in the week in which he worked more than 40 hours. 00:47:51.725 --> 00:48:00.525 Harry: Question twenty-nine. Brienne receives a salary above the applicable threshold with the job title "assistant manager." Her job duties include 00:48:00.525 --> 00:48:05.605 Harry: stocking merchandise, operating the cash register, and directing one coworker. 00:48:06.025 --> 00:48:12.285 Harry: She has no role in hiring or firing, and her recommendations on those decisions carry no particular weight. 00:48:13.065 --> 00:48:14.705 Harry: Which of the following is true? 00:48:15.465 --> 00:48:20.645 Harry: A. Brienne qualifies for the executive exemption because her salary exceeds the threshold. 00:48:21.225 --> 00:48:29.205 Harry: B. Brienne does not qualify for the executive exemption because her actual job responsibilities do not meet the executive exemption's duties 00:48:29.205 --> 00:48:30.085 Harry: requirements. 00:48:30.605 --> 00:48:39.165 Harry: C. Brienne qualifies for the executive exemption because her job title, "assistant manager," establishes executive status. 00:48:39.725 --> 00:48:47.265 Harry: D. Brienne qualifies for the executive exemption because supervising one employee meets the exemption's requirements. 00:48:48.028 --> 00:48:53.488 Tyrion: "Assistant manager." Has a distinguished sound to it. I'm very impressed. 00:48:54.768 --> 00:48:57.388 Sheldon: A and C rely only on salary or title. 00:48:57.648 --> 00:48:59.988 Sheldon: But there's still the executive duties test. 00:49:00.548 --> 00:49:10.708 Hermione: Look at what Brienne actually does. She stocks shelves, runs a register, oversees one coworker, and has no hiring or firing role. 00:49:11.128 --> 00:49:20.768 Hermione: Her duties don't satisfy the complete test. The ordinary executive exemption requires management as the primary duty, supervision of at 00:49:20.768 --> 00:49:30.528 Hermione: least two full-time employees or their equivalent, and hiring or firing authority, or recommendations that are given particular weight. 00:49:31.028 --> 00:49:38.568 Leonard: B looks at her actual responsibilities. An impressive title and good pay don't change the work she's actually doing. 00:49:39.408 --> 00:49:48.368 Harry: Leonard is insightful. The correct answer is B. Brienne does not qualify for the executive exemption because her actual job responsibilities 00:49:48.368 --> 00:49:51.468 Harry: do not meet the executive exemption's duties requirements. 00:49:54.028 --> 00:50:02.868 Harry: Question thirty. Ron, age 17, works 42 hours a week stocking shelves in a supermarket during weeks in which school is in session. 00:50:03.408 --> 00:50:11.908 Harry: Considering only the federal FLSA child-labor restrictions, and assuming all of his work is nonhazardous, which of the following is true? 00:50:12.948 --> 00:50:20.688 Harry: A. The schedule is permitted under those federal child-labor restrictions because Ron is 17 and the work is nonhazardous. 00:50:21.208 --> 00:50:26.908 Harry: B. The schedule is prohibited because a 17-year-old can only work 40 hours per week. 00:50:27.308 --> 00:50:32.728 Harry: C. The schedule is permitted only if all work occurs outside school hours. 00:50:33.368 --> 00:50:37.568 Harry: D. The schedule is permitted only if Ron's parents own the store. 00:50:38.128 --> 00:50:42.848 Hermione: Ron's seventeen and works forty-two hours during the school year. 00:50:42.848 --> 00:50:46.548 Hermione: B assumes every minor has a forty-hour cap. 00:50:46.548 --> 00:50:54.348 Sheldon: The federal hour limits for fourteen- and fifteen-year-olds are different from the ones for sixteen- and seventeen-year-olds. 00:50:54.348 --> 00:50:56.748 Sheldon: Even young Sheldon knows this. 00:50:56.748 --> 00:51:01.528 Leonard: C imposes a federal school-hours restriction that doesn't apply to this age group. 00:51:01.528 --> 00:51:08.608 Leonard: And D just invents a parental-ownership requirement. State law can add more restrictions, though. 00:51:08.608 --> 00:51:16.468 Tyrion: A is it. Under the federal child-labor rules we're being tested on, Ron is old enough and isn't doing hazardous work. 00:51:16.468 --> 00:51:21.668 Harry: Tyrion, you are so right. The correct answer is A. 00:51:21.668 --> 00:51:29.068 Harry: The schedule is permitted under those federal child-labor restrictions because Ron is 17 and the work is nonhazardous. 00:51:29.068 --> 00:51:33.328 Harry: That does not eliminate any overtime obligation or stricter state requirements. 00:51:35.828 --> 00:51:41.648 Harry: Question thirty-one. Which of the following is true regarding E-Verify? 00:51:41.648 --> 00:51:50.088 Harry: A. If it is used by an employer to verify employment eligibility, the employer is not required to use Form I-9. 00:51:50.088 --> 00:51:55.208 Harry: B. All employers must use E-Verify with no exception. 00:51:55.208 --> 00:52:00.008 Harry: C. Only federal employers must use E-Verify. 00:52:00.008 --> 00:52:08.468 Harry: D. Covered federal contractors whose contracts contain the applicable E-Verify clause must use E-Verify as required by that clause. 00:52:08.968 --> 00:52:14.848 Sheldon: E-Verify sounds way better than paper. So A's right, and Form I-9 goes away. 00:52:14.848 --> 00:52:20.808 Hermione: It doesn't. E-Verify supplements the employer's Form I-9 requirements. 00:52:20.808 --> 00:52:22.768 Hermione: It doesn't replace them. 00:52:22.768 --> 00:52:29.068 Leonard: B says every employer has to enroll, and C says only federal employers use it. 00:52:29.068 --> 00:52:33.108 Leonard: Neither one accurately describes who has to use the system. 00:52:33.108 --> 00:52:39.308 Tyrion: D is the only correct answer listed. The requirement applies to covered federal contractors. 00:52:39.308 --> 00:52:43.348 Tyrion: For other employers, federal and state requirements vary. 00:52:43.348 --> 00:52:48.428 Harry: That's two in a row for you, Tyrion! The correct answer is D. 00:52:48.428 --> 00:52:56.301 Harry: Covered federal contractors whose contracts contain the applicable E-Verify clause must use E-Verify as required by that clause. 00:52:58.801 --> 00:53:08.181 Harry: Question thirty-two. A company refuses to hire Raj for an accounting position because of his national origin, even though he is qualified. 00:53:08.181 --> 00:53:10.941 Harry: Which of the following is true? 00:53:10.941 --> 00:53:17.381 Harry: A. The claim involves disparate impact because the decision changed the composition of the workforce. 00:53:17.381 --> 00:53:24.901 Harry: B. The claim involves retaliation because Raj disclosed his national origin during the hiring process. 00:53:24.901 --> 00:53:32.441 Harry: C. The claim involves disparate treatment because the company's decision not to hire him was based on a protected trait. 00:53:32.441 --> 00:53:38.894 Harry: D. The claim involves a hostile work environment because Raj was offended by the decision not to be hired. 00:53:39.394 --> 00:53:44.554 Leonard: Raj was qualified, and he was rejected because of his national origin. 00:53:44.874 --> 00:53:46.714 Leonard: Is that disparate impact? 00:53:47.014 --> 00:53:52.814 Hermione: No. Refusing to hire Raj because of his national origin is intentional. 00:53:53.234 --> 00:53:55.094 Hermione: That's disparate treatment. 00:53:55.514 --> 00:54:02.454 Sheldon: And B confuses disclosing a protected characteristic with engaging in protected activity. 00:54:02.754 --> 00:54:09.374 Sheldon: Just stating his national origin isn't, by itself, opposing discrimination or taking part in a discrimination proceeding. 00:54:09.374 --> 00:54:15.934 Tyrion: C is correct. He wasn't hired because of his national origin, which is a protected characteristic. 00:54:16.414 --> 00:54:24.794 Harry: Exactly right, Tyrion. The correct answer is C. The claim involves disparate treatment because the company's decision not to hire him was 00:54:24.794 --> 00:54:26.194 Harry: based on a protected trait. 00:54:28.694 --> 00:54:37.864 Harry: Question thirty-three. After investigating Missandei's charge against a private company, the EEOC concludes that discrimination likely 00:54:37.864 --> 00:54:42.424 Harry: occurred. Attempts to voluntarily settle the case are unsuccessful. 00:54:43.264 --> 00:54:44.644 Harry: What may happen next? 00:54:45.744 --> 00:54:51.424 Harry: A. The EEOC has the discretion to bring the claim in federal court on Missandei's behalf. 00:54:52.284 --> 00:54:58.964 Harry: B. The EEOC must bring the claim in federal court whenever conciliation fails and discrimination likely occurred. 00:55:01.084 --> 00:55:05.624 Harry: C. An EEOC administrative judge will decide the case. 00:55:06.524 --> 00:55:11.324 Harry: D. Missandei and the employer must submit the claim to binding arbitration. 00:55:11.824 --> 00:55:20.884 Tyrion: The EEOC found reasonable cause, and conciliation failed. So shouldn't the EEOC file a lawsuit for Missandei? 00:55:20.884 --> 00:55:27.784 Sheldon: B would make that mandatory. But the EEOC keeps the discretion to decide whether to sue. 00:55:28.384 --> 00:55:35.684 Hermione: And C wrongly brings in the EEOC administrative-hearing process for this private-sector charge. 00:55:35.764 --> 00:55:40.304 Hermione: If the EEOC sues, it sues in federal court. 00:55:40.924 --> 00:55:46.964 Hermione: D is wrong too. Failed conciliation doesn't automatically require arbitration. 00:55:47.264 --> 00:55:55.324 Hermione: Some employment discrimination disputes can be arbitrated under an enforceable agreement, but we didn't cover that in class. 00:55:56.184 --> 00:56:02.384 Leonard: A is the right answer. The EEOC has discretion to bring the case on Missandei's behalf. 00:56:02.724 --> 00:56:10.464 Leonard: And if it decides not to sue, it issues a notice of right to sue, so Missandei can bring her own case within 00:56:10.464 --> 00:56:12.004 Leonard: the applicable deadline. 00:56:12.884 --> 00:56:17.024 Harry: Leonard, I couldn't have said it better. The correct answer is A. 00:56:17.624 --> 00:56:22.384 Harry: The EEOC has the discretion to bring the claim in federal court on Missandei's behalf. 00:56:24.884 --> 00:56:30.644 Harry: Question thirty-four. The Three Broomsticks rejects every woman who applies to be a greeter. 00:56:31.184 --> 00:56:36.524 Harry: Management relies on survey results showing that the majority of customers prefer to be greeted by men. 00:56:37.184 --> 00:56:39.304 Harry: Is this a valid BFOQ defense? 00:56:40.684 --> 00:56:44.504 Harry: A. Yes, because greeters interact directly with customers. 00:56:45.004 --> 00:56:51.404 Harry: B. Yes, if management reasonably believes that hiring women would reduce revenue. 00:56:52.064 --> 00:56:57.924 Harry: C. No, unless an applicant also proves discrimination based on race. 00:56:58.324 --> 00:57:05.284 Harry: D. No. Customer preference alone under these circumstances is not a valid BFOQ. 00:57:05.784 --> 00:57:12.220 Tyrion: The customers prefer male greeters. I can already hear management calling it a "business necessity." 00:57:13.040 --> 00:57:20.920 Hermione: A and B wrongly put customer preference and expected revenue above the prohibition on sex discrimination. 00:57:22.220 --> 00:57:31.380 Sheldon: A bona fide occupational qualification is narrow. On these facts, customer preference doesn't establish that sex is a valid BFOQ. 00:57:32.120 --> 00:57:37.100 Leonard: And C demands an extra race claim, which would be a separate claim anyway. 00:57:37.520 --> 00:57:40.780 Leonard: D rejects the customer-preference defense on these facts. 00:57:41.540 --> 00:57:46.020 Harry: Leonard, you're on a roll! The correct answer is D. 00:57:46.560 --> 00:57:52.240 Harry: No. Customer preference alone under these circumstances is not a valid BFOQ. 00:57:54.740 --> 00:58:03.600 Harry: Question thirty-five. In a Title VII case, Meg establishes that a neutral physical-ability test disproportionately excludes women. 00:58:03.600 --> 00:58:11.880 Harry: The company responds with evidence showing that the test is job-related for the position and consistent with business necessity. 00:58:11.880 --> 00:58:15.860 Harry: What additional evidence would allow Meg to prevail? 00:58:15.860 --> 00:58:21.840 Harry: A. Meg must prove that the employer adopted the test with discriminatory intent. 00:58:21.840 --> 00:58:31.500 Harry: B. Meg may still prevail by showing an effective, less discriminatory alternative was available, but the employer refused to use it. 00:58:31.500 --> 00:58:41.400 Harry: C. Nothing, because if the employer can show business necessity, Meg cannot prevail even if a less discriminatory alternative exists. 00:58:41.400 --> 00:58:48.820 Harry: D. No additional evidence is needed; the difference in pass rates alone defeats the employer's business-necessity showing. 00:58:49.320 --> 00:58:54.243 Sheldon: The company showed the test is job-related and consistent with business necessity. 00:58:54.503 --> 00:58:55.863 Sheldon: Doesn't that settle it? 00:58:56.183 --> 00:59:05.243 Hermione: No. C jumps to that conclusion too early. Meg can still win by identifying an effective, less discriminatory alternative that the employer 00:59:05.243 --> 00:59:07.063 Hermione: refused to adopt. 00:59:07.623 --> 00:59:16.543 Tyrion: A wrongly drags intent into a disparate-impact case. And D assumes a disparity always knocks out the test, no exceptions. 00:59:17.483 --> 00:59:22.183 Leonard: B finishes the analysis. The test causes a disparate impact. 00:59:22.423 --> 00:59:31.523 Leonard: The employer shows business necessity. And then Meg identifies an alternative that meets the employer's legitimate needs with less discriminatory 00:59:31.523 --> 00:59:34.563 Leonard: impact, and the employer refused it. 00:59:35.203 --> 00:59:39.803 Harry: Leonard, that completes the analysis. The correct answer is B. 00:59:40.363 --> 00:59:47.823 Harry: Meg may still prevail by showing an effective, less discriminatory alternative was available, but the employer refused to use it. 00:59:50.323 --> 00:59:57.693 Harry: Question thirty-six. Penny's supervisor demands a romantic relationship in exchange for retaining a preferred assignment. 00:59:58.553 --> 01:00:05.513 Harry: Penny rejects him, and he immediately uses his authority to demote her to a demeaning assignment with substantially reduced responsibilities 01:00:05.513 --> 01:00:09.393 Harry: and lower pay. Which of the following is true? 01:00:10.293 --> 01:00:16.033 Harry: A. This is sexual harassment because Penny's refusal led to an adverse change in work assignment. 01:00:16.533 --> 01:00:24.533 Harry: B. The employer is not liable unless this type of conduct was specifically forbidden by a written policy prohibiting such harassment. 01:00:25.253 --> 01:00:32.613 Harry: C. Penny must show that the conduct continued for an extended period before she can assert the claim was based on rejecting the 01:00:32.613 --> 01:00:34.673 Harry: supervisor's romantic advances. 01:00:35.413 --> 01:00:42.953 Harry: D. The liability is limited to the supervisor and not the company unless it specifically approved of the supervisor's demand. 01:00:43.533 --> 01:00:47.913 Leonard: The supervisor demanded a romantic relationship. Penny said no. 01:00:48.353 --> 01:00:53.253 Leonard: And right away she lost her preferred assignment, with a demotion and a pay cut. 01:00:53.593 --> 01:00:54.773 Leonard: That's just wrong. 01:00:55.413 --> 01:01:01.673 Tyrion: I agree with Leonard. The change in assignment is the consequence of Penny turning down the supervisor's demands. 01:01:02.313 --> 01:01:03.933 Tyrion: A says that directly. 01:01:04.653 --> 01:01:08.953 Hermione: C wrongly requires conduct that goes on for a long time. 01:01:09.193 --> 01:01:15.833 Hermione: Here, the supervisor's demand was followed by a tangible employment action when Penny rejected him. 01:01:16.133 --> 01:01:23.373 Hermione: And B wrongly makes liability depend on the wording of some policy, when this is a matter of federal law. 01:01:23.973 --> 01:01:29.633 Sheldon: D assumes the employer has to expressly approve the supervisor's misconduct. 01:01:29.833 --> 01:01:37.833 Sheldon: But an employer is responsible for supervisory harassment that ends in a tangible employment action, like this demotion. 01:01:38.153 --> 01:01:47.053 Harry: Right on, Leonard. The correct answer is A. This is sexual harassment because Penny's refusal led to an adverse change in work assignment. 01:01:49.553 --> 01:01:57.593 Harry: Question thirty-seven. Grey Worm reasonably and in good faith believes that national-origin discrimination occurred and reports it. 01:01:57.973 --> 01:02:05.713 Harry: Months after his employment ends, his former manager provides a knowingly false, damaging reference to his new employer because Grey Worm 01:02:05.713 --> 01:02:11.853 Harry: reported the discrimination. Grey Worm ultimately loses the underlying discrimination case. 01:02:12.193 --> 01:02:14.173 Harry: Which of the following is true? 01:02:15.013 --> 01:02:19.833 Harry: A. The unsuccessful discrimination claim prevents a separate retaliation claim. 01:02:20.373 --> 01:02:27.813 Harry: B. A former employer's reference cannot be materially adverse because it has no effect on the employee's prior employment. 01:02:28.453 --> 01:02:34.573 Harry: C. Grey Worm cannot recover because a manager should be free to provide a negative reference. 01:02:35.193 --> 01:02:44.433 Harry: D. Grey Worm may pursue retaliation because a false, damaging reference given in response to protected activity can be materially adverse, 01:02:44.433 --> 01:02:49.473 Harry: even after employment ends and even if the underlying discrimination claim fails. 01:02:50.053 --> 01:02:56.448 Tyrion: Grey Worm lost the original discrimination case. Doesn't that sink his complaint about the false reference? 01:02:57.028 --> 01:03:05.708 Hermione: That's why A is wrong. A retaliation claim doesn't necessarily fail just because the underlying discrimination claim fails. 01:03:06.308 --> 01:03:08.928 Hermione: Retaliation is a separate violation. 01:03:09.688 --> 01:03:12.568 Leonard: And B assumes the employment has to be ongoing. 01:03:12.988 --> 01:03:17.768 Leonard: A knowingly false, damaging reference can hurt someone's future job prospects. 01:03:18.248 --> 01:03:23.568 Leonard: Grey Worm doesn't have to lose his new job for that reference to count as materially adverse. 01:03:24.608 --> 01:03:28.928 Sheldon: C wrongly gives managers immunity to retaliate through references. 01:03:29.548 --> 01:03:37.748 Sheldon: Retaliation is retaliation. D is correct, because the manager gave the damaging reference because of Grey Worm's protected complaint. 01:03:38.028 --> 01:03:39.928 Sheldon: That causal connection matters. 01:03:40.608 --> 01:03:43.968 Harry: You said it, Sheldon. The correct answer is D. 01:03:44.708 --> 01:03:52.588 Harry: Grey Worm may pursue retaliation because a false, damaging reference given in response to protected activity can be materially adverse, 01:03:52.688 --> 01:03:57.608 Harry: even after employment ends and even if the underlying discrimination claim fails. 01:04:00.108 --> 01:04:06.748 Harry: Question thirty-eight. Parvati asks to exchange shifts so she can attend a religious observance. 01:04:06.748 --> 01:04:15.288 Harry: The company refuses based on undue hardship. What must the company show to establish that defense under Title VII? 01:04:15.288 --> 01:04:20.728 Harry: A. Any additional administrative expense establishes undue hardship. 01:04:20.728 --> 01:04:26.368 Harry: B. Customers' objections to Parvati's religion establish undue hardship. 01:04:26.368 --> 01:04:35.288 Harry: C. It must prove that the accommodation would impose substantial increased costs in relation to the conduct of its particular business. 01:04:35.288 --> 01:04:40.255 Harry: D. Coworkers' objections to Parvati's religion establish undue hardship. 01:04:40.755 --> 01:04:44.384 Hermione: Parvati wants to swap a shift for a religious observance. 01:04:44.484 --> 01:04:48.784 Hermione: Is a small administrative inconvenience enough to say no? 01:04:49.384 --> 01:04:55.184 Sheldon: A says any extra expense proves hardship. That sets the bar way too low. 01:04:55.464 --> 01:05:03.224 Tyrion: B and D lean on customers' or coworkers' objections to her religion, instead of the actual costs of accommodating the practice. 01:05:04.044 --> 01:05:10.924 Leonard: C is correct. The governing standard is substantial increased costs in relation to this employer's business. 01:05:11.764 --> 01:05:17.384 Leonard: The employer has to look at the particular accommodation and its practical effect on the business. 01:05:17.644 --> 01:05:22.144 Leonard: Just disliking the religious practice doesn't establish hardship. 01:05:22.704 --> 01:05:26.704 Harry: You got it, Leonard! The correct answer is C. 01:05:27.244 --> 01:05:34.484 Harry: It must prove that the accommodation would impose substantial increased costs in relation to the conduct of its particular business. 01:05:36.984 --> 01:05:44.944 Harry: Last multiple-choice question. Question thirty-nine. Lois's visual impairment substantially limits her sight. 01:05:45.384 --> 01:05:51.804 Harry: She otherwise meets the position's requirements and could complete all essential tasks by using affordable screen-reading equipment. 01:05:52.324 --> 01:05:57.224 Harry: Assume the equipment is effective and would not impose an undue hardship on the employer. 01:05:57.984 --> 01:05:59.704 Harry: How does the ADA apply? 01:06:00.804 --> 01:06:05.844 Harry: A. Lois can be denied employment because she needs equipment to perform the essential functions. 01:06:05.844 --> 01:06:14.504 Harry: B. Lois can qualify for ADA protection because reasonable accommodation enables her to perform the job's essential functions. 01:06:14.864 --> 01:06:23.004 Harry: C. The employer must eliminate any essential job function that Lois cannot perform without equipment to accommodate her under the ADA. 01:06:24.164 --> 01:06:29.544 Harry: D. The duty to accommodate depends on whether Lois's disability resulted from her employment. 01:06:30.044 --> 01:06:33.683 Tyrion: A says Lois can be turned down just because she needs equipment. 01:06:34.023 --> 01:06:37.243 Tyrion: That would defeat the whole point of reasonable accommodation. 01:06:38.083 --> 01:06:44.283 Sheldon: B recognizes the real question. Can Lois perform the essential functions with reasonable accommodation? 01:06:44.743 --> 01:06:48.163 Sheldon: And the affordable screen reader lets her do exactly that. 01:06:48.463 --> 01:06:53.883 Leonard: Could we just get rid of the tasks she can't do instead, like C proposes? 01:06:54.323 --> 01:06:58.843 Hermione: No. Reasonable accommodation can help her perform the essential tasks. 01:06:59.123 --> 01:07:04.023 Hermione: The ADA doesn't generally require eliminating those essential functions. 01:07:04.443 --> 01:07:11.803 Hermione: And D is irrelevant. Disability protection doesn't depend on whether the disability started at work. 01:07:12.423 --> 01:07:21.763 Harry: Good response, Sheldon. The correct answer is B. Lois can qualify for ADA protection because reasonable accommodation enables her to perform 01:07:21.763 --> 01:07:23.603 Harry: the job's essential functions. 01:07:26.123 --> 01:07:32.433 Harry: That's all thirty-nine. Now the two essay questions. Essay question one. 01:07:33.453 --> 01:07:39.413 Harry: Leonard works as manager of Stuart's comic book store and serves both Marvel and DC customers well. 01:07:40.433 --> 01:07:44.473 Harry: Scenario One: Stuart fires Leonard to hire his cousin. 01:07:45.433 --> 01:07:51.793 Harry: Scenario Two: Stuart fires Leonard for refusing to falsify payroll records concealing unpaid wages. 01:07:52.353 --> 01:07:55.633 Harry: Explain each result and the role of public policy. 01:07:56.313 --> 01:08:01.173 Harry: Identify any conclusion that depends on the applicable state law or a statute's requirements. 01:08:01.813 --> 01:08:10.065 Sheldon: The starting rule is at-will employment. Unless an employment agreement or applicable law restricts the employer, Stuart generally can 01:08:10.065 --> 01:08:16.265 Sheldon: end the employment relationship without proving good cause. But that doesn't mean every reason is lawful. 01:08:16.725 --> 01:08:23.765 Tyrion: Scenario One strikes me as unfair, though. Leonard does a good job, and Stuart just wants a relative in the job. 01:08:24.385 --> 01:08:28.605 Tyrion: Shouldn't favoritism by itself create a wrongful-termination claim? 01:08:29.065 --> 01:08:38.985 Hermione: Not on these facts. Favoring a cousin isn't, by itself, unlawful discrimination, or a violation that supports a public-policy claim. 01:08:39.205 --> 01:08:44.885 Hermione: This is at-will employment, and there's no promise of continued employment for Leonard. 01:08:45.225 --> 01:08:50.665 Hermione: There's no evidence of illegal discrimination or a violation of public policy. 01:08:51.025 --> 01:08:54.465 Leonard: So I can be a good manager and still lose my job? 01:08:54.825 --> 01:08:55.465 Hermione: Yep. 01:08:56.005 --> 01:09:04.505 Leonard: That's the harsh side of employment at will. Unless some legal restriction applies, I can be fired without a sound business reason. 01:09:05.245 --> 01:09:09.445 Sheldon: Scenario Two changes the legal character of the reason for the firing. 01:09:09.985 --> 01:09:15.385 Sheldon: Stuart wants payroll records falsified to hide that he didn't pay earned wages. 01:09:16.045 --> 01:09:21.005 Sheldon: Leonard refuses to take part in the wrongdoing, and he's fired because he refused. 01:09:21.745 --> 01:09:26.505 Tyrion: Now the firing punishes Leonard for refusing to help cover up unlawful conduct. 01:09:26.505 --> 01:09:32.005 Tyrion: An employer shouldn't be allowed to use termination as a tool for breaking wage laws. 01:09:32.645 --> 01:09:40.605 Hermione: So the legal analysis becomes a public-policy question, or a statutory anti-retaliation question. 01:09:40.925 --> 01:09:47.945 Hermione: Leonard may have a claim. But we have to identify the legal protection that applies and satisfy its elements. 01:09:48.365 --> 01:09:57.265 Hermione: States differ on whether they recognize a common-law public-policy exception, and statutory protections have their own requirements. 01:09:58.145 --> 01:10:05.625 Harry: Okay, let's build the essay. For Scenario One: first, state the at-will rule and its limits. 01:10:06.225 --> 01:10:13.425 Harry: Second, explain that replacing Leonard with a cousin is ordinarily permitted, unless something independently prohibits it. 01:10:13.925 --> 01:10:22.925 Harry: For Scenario Two: explain that punishing an employee for refusing to falsify wage records implicates public policy, and potentially statutory 01:10:22.925 --> 01:10:29.025 Harry: protections. Identify the cause of action that applies before you declare the firing unlawful. 01:10:29.205 --> 01:10:36.365 Harry: And finish by comparing why the reasons for the firing, not Leonard's job performance, lead to different legal analyses. 01:10:37.265 --> 01:10:45.765 Harry: Here's how it might read. Employment at will ordinarily permits an employer to terminate an employee without demonstrating good cause, 01:10:46.065 --> 01:10:51.745 Harry: subject to contractual, statutory, and any public-policy limits recognized in the applicable jurisdiction. 01:10:52.805 --> 01:11:00.745 Harry: In Scenario One, Stuart's decision to replace Leonard with his cousin may be unfair, but in and of itself, it is likely not 01:11:00.745 --> 01:11:01.665 Harry: unlawful. 01:11:02.225 --> 01:11:08.865 Harry: In Scenario Two, Stuart fires Leonard because he refuses to falsify records concealing unpaid wages. 01:11:09.225 --> 01:11:17.365 Harry: That reason may support a wrongful-discharge claim in a jurisdiction recognizing the relevant public-policy exception, or a statutory retaliation 01:11:17.365 --> 01:11:20.505 Harry: claim if the statute's coverage and other requirements are met. 01:11:21.265 --> 01:11:27.905 Harry: Subject to the applicable jurisdiction's rules, the second termination is therefore legally distinguishable from the first. 01:11:28.545 --> 01:11:36.345 Harry: Although at-will employment does grant an employer broad firing discretion, it does not grant an employer unlimited authority to terminate 01:11:36.345 --> 01:11:37.685 Harry: for an unlawful reason. 01:11:40.185 --> 01:11:47.205 Harry: Essay question two. Leonard buys a new electric kettle directly from its manufacturer, Cooper Appliances. 01:11:47.945 --> 01:11:53.505 Harry: Used as instructed, its defective handle breaks, spilling boiling water and burning him. 01:11:54.185 --> 01:11:58.805 Harry: The defect existed when the kettle left the manufacturer and the kettle was not altered. 01:11:59.925 --> 01:12:10.805 Harry: Scenario One: Cooper skipped reasonable inspections. Scenario Two: Cooper inspected carefully, yet the defect escaped detection. 01:12:11.505 --> 01:12:17.545 Harry: Discuss negligence and strict product liability, then the fairness of imposing liability without fault. 01:12:18.045 --> 01:12:25.425 Leonard: Both scenarios start with the same crucial facts. The handle had a manufacturing defect when it left the manufacturer. 01:12:25.705 --> 01:12:29.205 Leonard: I used the kettle as instructed. The handle broke. 01:12:29.345 --> 01:12:31.385 Leonard: And that failure caused my burns. 01:12:32.285 --> 01:12:37.265 Sheldon: And a manufacturing defect is a departure from the intended design in this particular product. 01:12:37.545 --> 01:12:41.045 Sheldon: We're not debating whether every kettle should have a different design. 01:12:41.425 --> 01:12:45.285 Sheldon: This handle departed from the specifications and broke in normal use. 01:12:45.705 --> 01:12:53.325 Tyrion: But Scenario One adds the skipped inspections. Surely we need a negligence lawsuit to show Cooper did something wrong? 01:12:54.085 --> 01:13:02.045 Hermione: Negligence may be available in Scenario One, because skipping reasonable inspections is evidence of unreasonable care. 01:13:02.565 --> 01:13:06.265 Hermione: Leonard also has to connect that failure to his injury. 01:13:06.525 --> 01:13:12.505 Hermione: For example, by showing that a reasonable inspection would have caught the defect before the sale. 01:13:12.985 --> 01:13:14.005 Tyrion: Fair enough. 01:13:14.625 --> 01:13:20.845 Hermione: But proof of negligence isn't necessary to establish strict liability for a manufacturing defect. 01:13:21.365 --> 01:13:29.025 Hermione: The two theories have different proof requirements. Whether Cooper used reasonable care matters for the negligence claim. 01:13:29.525 --> 01:13:34.545 Hermione: Leonard doesn't have to prove a lack of reasonable care for the strict-liability claim. 01:13:34.945 --> 01:13:43.965 Leonard: And that matters. If I prove the defective product entered the stream of commerce, reached me without relevant alteration, and the defect 01:13:43.965 --> 01:13:52.505 Leonard: caused my injury, my strict-liability claim doesn't require proof that Cooper knew about the defect or failed to use due care. 01:13:53.345 --> 01:13:59.245 Sheldon: So in Scenario Two, Cooper can prove it inspected carefully and still face strict liability. 01:13:59.625 --> 01:14:08.045 Sheldon: Its precautions matter for a negligence claim. But they don't defeat a properly established manufacturing-defect strict-liability claim. 01:14:08.545 --> 01:14:15.705 Tyrion: I see the policy argument. A buyer who proves the elements of strict product liability can get a remedy for the physical and 01:14:15.705 --> 01:14:22.745 Tyrion: financial loss from a defective commercial product, no matter how diligent the manufacturer's quality control was. 01:14:23.385 --> 01:14:31.145 Hermione: There's a counterargument, too. Strict liability puts the cost on a manufacturer even when it wasn't negligent. 01:14:31.325 --> 01:14:37.445 Hermione: That can raise product costs, and it seems harsh when the manufacturer used reasonable care. 01:14:37.445 --> 01:14:47.085 Leonard: But manufacturers can spread product-related losses through pricing and insurance, and strict liability gives them a reason to reduce defects. 01:14:47.485 --> 01:14:54.485 Leonard: Besides, how is a consumer supposed to figure out exactly where an inspection or production process failed? 01:14:55.225 --> 01:15:01.125 Harry: Great debate. Now, our essay has to separate the legal outcome from the policy debate. 01:15:01.605 --> 01:15:09.945 Harry: Scenario One potentially supports negligence as well as strict liability, even though negligence isn't necessary for Leonard's manufacturing-defect 01:15:09.945 --> 01:15:17.685 Harry: recovery. Scenario Two shows why reasonable care doesn't defeat an otherwise established strict-liability claim. 01:15:18.045 --> 01:15:26.345 Harry: Here's how it might read. Leonard has a strong strict-product-liability claim in both scenarios because the kettle contained a manufacturing 01:15:26.345 --> 01:15:33.785 Harry: defect when it left Cooper Appliances, the product was not altered, and the defect caused burns during normal use. 01:15:34.585 --> 01:15:43.005 Harry: In Scenario One, the skipped inspections may also establish negligence if Cooper failed to exercise reasonable care and that failure caused 01:15:43.005 --> 01:15:51.095 Harry: Leonard's injury. Nevertheless, negligent conduct is not a necessary element of his manufacturing-defect strict-liability claim. 01:15:51.535 --> 01:16:00.335 Harry: In Scenario Two, reasonable inspections may defeat an allegation of negligent inspection, although they do not necessarily rule out negligence 01:16:00.335 --> 01:16:04.785 Harry: elsewhere in production. They do not defeat the strict-liability claim. 01:16:05.285 --> 01:16:12.645 Harry: The justification is to place the cost of injuries from defective commercial products on sellers better positioned to prevent, insure against, 01:16:12.745 --> 01:16:16.565 Harry: or distribute those losses, rather than on an injured consumer. 01:16:17.385 --> 01:16:22.025 Harry: A countervailing concern is that a careful manufacturer may bear loss without fault. 01:16:22.725 --> 01:16:29.925 Harry: The governing strict-liability doctrine resolves that tension by focusing on the defect and causation, not the manufacturer's exercise 01:16:29.925 --> 01:16:31.165 Harry: of reasonable care. 01:16:33.685 --> 01:16:38.135 Harry: And that's the review. Thirty-nine questions and two essays. 01:16:38.635 --> 01:16:42.655 Hermione: If you take one thing away from product liability, it's this. 01:16:43.015 --> 01:16:48.635 Hermione: Strict liability is about the defect, not about whether the manufacturer was careful. 01:16:49.135 --> 01:16:54.295 Sheldon: For negotiable instruments, read the exact words. "I owe" isn't a promise. 01:16:54.975 --> 01:16:59.935 Sheldon: A broom isn't money. And a dragon is definitely a condition. 01:17:00.395 --> 01:17:07.615 Tyrion: And for employment law, look at what actually happened, the workweek, the duties, the reason for the firing. 01:17:07.655 --> 01:17:10.055 Tyrion: Not the label somebody stuck on it. 01:17:10.355 --> 01:17:14.315 Leonard: And when you're down to two answers, ask which one goes too far. 01:17:14.895 --> 01:17:16.895 Leonard: Most of the wrong answers today did. 01:17:17.835 --> 01:17:20.995 Harry: Good luck on Exam Two, everyone. You've got this.