# Business Law Course Guide: [Programme and course] > A course guide for the MBA course on the legal environment of business: what the course is for, the competencies it > builds, a 12-session roadmap, the key concepts, the course in eight topics (contracts, agency, business forms and > limited liability, directors' duties, intellectual property, employment, competition law, and product, data and > corporate criminal liability), a short method for putting legal risk into numbers, an original mini-case on Corvane > Robotics with exhibits and a teaching note, how assignments are graded, an exam plan and a self-test. It is > international in scope: where a rule must be named, it gives the European Union (EU), the United Kingdom (UK) and the > United States (US) as dated examples with links to official texts. It is for admitted students preparing for the > core, first-year students during the course and managers who want to work well with lawyers. Source basis: the > primary legal texts and cases named in each topic and the management and economics literature on law and the firm > (Coase 1937, Macaulay 1963, Jensen and Meckling 1976, Hansmann and Kraakman 2000, Bagley 2008), written up in > original words. Replace every [bracketed] value and every row marked *Example*. This is a learning aid, not legal > advice: laws differ by country and change often, so check the current official text and ask a qualified lawyer > before you act on any point. ## Document control | Field | Value | |---|---| | Learner | [Your name] | | Programme and course | [Programme], [course code and name] | | Term | [Term and year] | | Instructor and syllabus version | [Name], [syllabus date] | | Main jurisdiction taught | [For example: US federal and Delaware, England and Wales, EU, or comparative] | | Learning team | [Team name or number, members] | | Course policy on AI tools and collaboration | [Summary and link to the syllabus or honour code] | | Dated facts last checked | 2026-10-30 (re-check before each exam and before any real decision) | | Reviewed by | [Learning-team member, mentor or law-trained colleague] | | Version | [0.1] | | Last updated | YYYY-MM-DD | ## Contents - [1. What the course is for](#1-what-the-course-is-for) - [2. Competencies it builds](#2-competencies-it-builds) - [3. Prerequisites](#3-prerequisites) - [4. Session roadmap](#4-session-roadmap) - [5. Key concepts](#5-key-concepts) - [6. The course in eight topics](#6-the-course-in-eight-topics) - [7. Putting legal risk into numbers](#7-putting-legal-risk-into-numbers) - [8. Mini-case: Corvane Robotics and the late drive modules](#8-mini-case-corvane-robotics-and-the-late-drive-modules) - [9. Typical assignments and how they are graded](#9-typical-assignments-and-how-they-are-graded) - [10. Exam preparation plan](#10-exam-preparation-plan) - [11. Common struggles](#11-common-struggles) - [12. Self-test questions](#12-self-test-questions) - [13. My notes and next steps](#13-my-notes-and-next-steps) - [14. Teaching note for the mini-case](#14-teaching-note-for-the-mini-case) ## 1. What the course is for The business law course asks a manager's question, not a lawyer's: **which legal rules shape this decision, what do they allow, what could they cost, and when do I need a lawyer?** Managers make legally significant choices every week: they sign contracts, hire and dismiss people, choose a company form, license technology, price products through distributors and collect customer data. Lawyers advise on those choices, but managers decide, and a manager who can spot the legal issue early keeps options open that disappear once a dispute starts. The course also teaches that law is a strategic resource, not only a constraint. Bagley (2008) calls this legal astuteness: the capacity of a management team to communicate with counsel and to use the law to create and capture value, for example through contracts that allocate risk to the party best able to bear it, intellectual property that turns know-how into an asset, or a corporate form that lets investors fund the firm without risking their other wealth. Hansmann and Kraakman (2000) argue that the essential contribution of organisational law is asset partitioning: it shields the firm's assets from the personal creditors of its owners and, with limited liability, the owners' assets from the firm's creditors. Coase (1937) and Jensen and Meckling (1976) explain why firms exist and why the relationships inside them (owners, managers, employees) need contracts and duties. Hart and Moore (1990) add that ownership of assets matters because contracts are incomplete: whoever owns the asset decides what the contract does not cover, which is why intellectual property and asset ownership are strategic questions. Macaulay (1963) adds a sobering finding: many business relationships run on trust and reputation, and formal contracts matter most when the relationship breaks down. By the end of the course you should be able to: 1. Spot the legal issues in a business situation and say which body of law governs each (contract, agency, company, intellectual property, employment, competition, product liability, data protection, criminal law). 2. Read a commercial contract for the clauses that allocate risk: price and payment, delivery, warranties, remedies, liquidated damages, limitation and exclusion of liability, termination, governing law and dispute resolution. 3. Choose a business form and explain the trade-offs between liability, tax, governance and fundraising. 4. Explain the duties directors and officers owe, to whom, and how courts review their decisions. 5. Choose between patent, copyright, trade mark and trade secret protection for an innovation. 6. Recognise the employment and competition law limits on common management practices (non-compete clauses, dismissals, distributor pricing, information exchange with rivals). 7. Put a legal risk into numbers (expected cost, settlement range) and decide when to involve counsel. ## 2. Competencies it builds The table maps the course to the broad competency areas that graduate business programmes use for learning goals. The exact wording of your school's goals will differ; check the programme handbook. | Competency area | How the business law course builds it | Evidence you can collect | |---|---|---| | Analytical reasoning | Issue spotting, applying rules to facts, distinguishing cases | Case briefs and exam answers in IRAC form (issue, rule, application, conclusion) | | Quantitative reasoning | Expected value of claims, settlement ranges, damages calculations | The mini-case numbers in section 8 | | Ethical decision making | The gap between what is legal and what is right; whistleblowing; bribery and fraud prevention | A paragraph on stakeholders in each recommendation (`mba/mba-ethics-guide`) | | Communication | Briefing counsel, writing a short legal risk memo for a business reader | A one-page memo to the chief executive | | Global perspective | Comparing EU, UK and US rules on the same question (non-competes, distributor pricing, dismissal) | A comparison table for one issue | | Technology, data and AI | Software and data as intellectual property, data protection, product liability for software | Notes on the EU product liability changes for software (section 6) | ## 3. Prerequisites - **How a legal system is organised:** statutes and regulations, case law and precedent, civil law and common law traditions, courts and arbitration. Read the introduction to any business law textbook named in the sources. - **Basic finance:** expected value, discounting, probability trees (`mba/pre-mba-finance-primer`, `mba/mba-decision-trees-card`). - **Basic accounting:** provisions and contingent liabilities, the idea that a probable loss is recognised and a possible one is disclosed (`mba/pre-mba-accounting-primer`). - **Negotiation basics:** reservation price and zone of possible agreement, because most disputes settle (`mba/mba-negotiation-planner`). - **Case method:** how to read and prepare a case (`mba/mba-case-reading-guide`, `mba/mba-case-prep-sheet`). ## 4. Session roadmap | Session | Topic | Reading or tool | Case or exercise | Deliverable | |---|---|---|---|---| | 1 | Law as a business resource; legal systems; when to call a lawyer | Bagley (2008); this guide sections 1 and 7 | A decision from your past job | One paragraph: the legal issue you missed | | 2 | Contract formation: offer, acceptance, consideration, intention, capacity | Topic 1 below | Battle of the forms between two purchase documents | Formation flowchart for the case | | 3 | Contract terms and remedies: warranties, damages, liquidated damages, limitation clauses | Topic 1; `legal-ops/contract-review-playbook` | Mini-case in section 8 | Clause-by-clause risk table | | 4 | Agency and authority: who can bind the firm | Topic 2 | The pilot agreement in the mini-case | Authority matrix for a team you know | | 5 | Business forms and limited liability; veil piercing | Topic 3; Hansmann and Kraakman (2000) | Choose a form for a two-founder start-up | Form comparison table | | 6 | Directors' and officers' duties; business judgment; oversight | Topic 4; `mba/mba-corporate-governance-card` | A board approving a related-party deal | Board minute that shows a careful process | | 7 | Intellectual property: patents, copyright, trade marks, trade secrets | Topic 5 | A software and hardware product | IP strategy table | | 8 | Employment: hiring, contracts, discrimination, dismissal, restrictive covenants | Topic 6 | The departing engineer in the mini-case | Comparison of three jurisdictions | | 9 | Competition law I: cartels, information exchange, abuse of dominance | Topic 7 | Trade association meeting agenda | Do and do not list for a sales team | | 10 | Competition law II: distribution, resale pricing, merger control | Topic 7; `mba/mba-mergers-acquisitions-guide` | The reseller clause in the mini-case | Redrafted clause with reasons | | 11 | Product liability, data protection, bribery and fraud prevention | Topic 8; `compliance/iso-37001-anti-bribery` | A software update that causes damage | Compliance programme outline | | 12 | Disputes: negotiation, mediation, arbitration, litigation; integration | Section 7; `mba/mba-negotiation-planner` | Settlement of the mini-case claim | Settlement range and recommendation | ```mermaid flowchart LR A["Making deals: contracts and agency (sessions 2 to 4)"] --> B["Organising the firm: forms and duties (sessions 5 to 6)"] B --> C["Protecting assets: intellectual property (session 7)"] C --> D["Managing people: employment (session 8)"] D --> E["Competing lawfully: competition law (sessions 9 to 10)"] E --> F["Liability and compliance (session 11)"] F --> G["Resolving disputes (session 12)"] ``` ## 5. Key concepts | Concept | Source | One-line meaning | Where in this guide | |---|---|---|---| | Offer and acceptance | Common law of contract; CISG Articles 14 to 24 | A contract forms when a definite offer is accepted on its terms | Topic 1 | | Consideration | Common law (England, US) | Each side must give something of value; civil law systems do not require it | Topic 1 | | Expectation damages | Contract law generally | Put the innocent party where it would have been had the contract been performed | Topic 1, section 7 | | Remoteness and foreseeability | *Hadley v Baxendale* (1854) | Losses are recoverable only if they were within the parties' contemplation | Topic 1 | | Liquidated damages | Contract law; penalty doctrine | A pre-agreed sum for a defined breach, enforceable if it protects a legitimate interest | Topic 1, mini-case | | Actual and apparent authority | Agency law (US Restatement (Third) of Agency) | A principal is bound by an agent's acts it authorised or appeared to authorise | Topic 2 | | Separate legal personality | *Salomon v A Salomon & Co Ltd* [1897] | A company is a person distinct from its shareholders | Topic 3 | | Limited liability and asset partitioning | Easterbrook and Fischel (1985); Hansmann and Kraakman (2000) | Owners risk only their investment; firm assets are shielded from owners' creditors | Topic 3 | | Fiduciary duties of care and loyalty | Company law (for example UK Companies Act 2006 ss. 171 to 177; Delaware case law) | Directors must act carefully and in the company's interest, not their own | Topic 4 | | Business judgment rule | US (Delaware) case law | Courts do not second-guess informed, disinterested, good-faith decisions | Topic 4 | | Patent, copyright, trade mark, trade secret | TRIPS Agreement; national laws | Four different ways to own an intangible, with different scope and duration | Topic 5 | | Employment at will and unfair dismissal | US common law; UK Employment Rights Act 1996 | Default freedom to dismiss in most US states versus statutory protection in the UK and EU | Topic 6 | | Restrictive covenants | Contract and employment law | Non-compete, non-solicit and confidentiality clauses, enforced very differently by country | Topic 6 | | Cartel prohibition | Sherman Act s. 1; TFEU Article 101; UK Competition Act 1998 Chapter I | Agreements between rivals to fix prices or share markets are prohibited | Topic 7 | | Abuse of dominance or monopolisation | TFEU Article 102; Sherman Act s. 2 | A dominant firm must not exclude rivals or exploit customers by improper means | Topic 7 | | Resale price maintenance | TFEU Article 101; Regulation (EU) 2022/720; *Leegin* (2007) | A supplier fixing the reseller's minimum price: a hardcore restriction in the EU | Topic 7 | | Strict product liability | EU Directive 85/374/EEC and its successor (EU) 2024/2853 | A producer is liable for damage caused by a defective product without proof of fault | Topic 8 | | Failure-to-prevent offences | UK Bribery Act 2010 s. 7; Economic Crime and Corporate Transparency Act 2023 | The organisation is liable unless it had adequate or reasonable prevention procedures | Topic 8 | ## 6. The course in eight topics **Topic 1. Contracts.** A contract is a promise the law will enforce. In common law systems (England and Wales, most of the US) a contract needs an offer, an acceptance that mirrors it, consideration (each side gives something), an intention to create legal relations and capacity; the classic English illustration is *Carlill v Carbolic Smoke Ball Co* [1893] 1 QB 256, where a public advertisement was treated as an offer that anyone could accept by performing. Civil law systems do not require consideration and tend to imply more duties of good faith. For the sale of goods across borders, the UN Convention on Contracts for the International Sale of Goods (CISG, Vienna 1980) applies by default between businesses in contracting states unless the parties exclude it; in the US, domestic sales of goods fall under Article 2 of the Uniform Commercial Code. Managers meet two practical problems most often. The first is the battle of the forms: each side sends its own standard terms, and the rules on whose terms win differ between systems. The second is remedies. The normal remedy is damages that put the innocent party where performance would have put it (expectation damages), limited by causation, mitigation and remoteness: under *Hadley v Baxendale* (1854) 9 Exch 341, a party recovers losses that arise naturally from the breach or that both parties contemplated when they contracted. Contracts change these defaults with liquidated damages (a pre-agreed sum for a defined breach), limitation clauses (a cap on liability) and exclusion clauses (no liability for indirect or consequential loss). Courts in many systems control such clauses, for example the penalty rule for liquidated damages and reasonableness tests for exclusions in standard terms. *Typical question: what can the buyer recover, and does the contract change the answer?* **Topic 2. Agency.** Firms act through people. A principal is bound by what its agent does with actual authority (express or implied from the role) and also with apparent authority, where the principal's conduct led a third party reasonably to believe the agent had authority. A sales director who regularly signs customer contracts may bind the company to an unusual term even if an internal policy required board approval, because the customer cannot see the policy. Agents owe duties of loyalty and obedience to the principal, and the principal is generally liable for torts committed by employees in the course of employment (vicarious liability). Jensen and Meckling (1976) show the economic side of the same relationship: delegation creates agency costs, which the firm reduces by monitoring, bonding and incentives (see `mba/mba-compensation-design-card`). *Typical question: is the company bound by what its employee signed, and what internal controls would have prevented the problem?* **Topic 3. Business forms and limited liability.** The main choices are sole proprietorship, partnership (general or limited), limited liability partnership, limited liability company and corporation (private or public, in the UK a private limited company or public limited company; in the EU national forms plus the European Company, the SE). They differ on four dimensions: owner liability, tax (entity-level tax or pass-through), governance (who manages, how decisions are made) and access to capital (whether shares can be issued to many investors and later listed). Under *Salomon v A Salomon & Co Ltd* [1897] AC 22, a company is a separate person from its shareholders, so the shareholders are not liable for its debts. Easterbrook and Fischel (1985) explain why limited liability lowers the cost of capital: investors need not monitor each other or the firm's every creditor. Courts disregard the separate personality only in narrow cases; the UK Supreme Court in *Prest v Petrodel Resources Ltd* [2013] UKSC 34 confined veil piercing to the evasion of an existing legal obligation, while US courts apply multi-factor tests (commingling of funds, undercapitalisation, ignoring formalities, fraud). Start-ups that plan to raise venture capital in the US commonly use a Delaware corporation because investors and their documents expect it; check what your investors require before you form a company (see `mba/mba-new-venture-launch-plan`). *Typical question: which form would you choose for this business, and what would make you change it?* **Topic 4. Directors' and officers' duties.** Directors owe duties to the company. The UK Companies Act 2006 codifies them in sections 171 to 177, including the duty to promote the success of the company for the benefit of its members as a whole while having regard to employees, suppliers, customers, the community and the environment (s. 172), and the duties of care, skill and diligence (s. 174) and to avoid conflicts of interest (s. 175). In Delaware the duties come from case law: the duty of care, reviewed under the business judgment rule (courts defer to informed, disinterested, good-faith decisions; *Smith v Van Gorkom*, 488 A.2d 858 (Del. 1985), is the classic case where a board lost that protection by deciding without adequate information), and the duty of loyalty, which includes a duty of oversight (*In re Caremark International Inc. Derivative Litigation*, 698 A.2d 959 (Del. Ch. 1996)). Officers who are not directors owe similar duties as agents. The practical lessons for managers are process lessons: disclose conflicts, document the information the board saw, take advice on unusual transactions and build a reporting system for legal and compliance risks. `mba/mba-corporate-governance-card` covers board structure and the governance codes. *Typical question: did the board meet its duty, and what should the minutes show?* **Topic 5. Intellectual property.** Four regimes protect intangibles. **Patents** protect new, inventive, industrially applicable inventions for a limited term (at least 20 years from filing under Article 33 of the TRIPS Agreement) in exchange for public disclosure; in Europe a Unitary Patent covering the participating EU member states has been available since 1 June 2023. **Copyright** protects original expression, including software code, automatically and for a long term, but not the underlying ideas or functionality. **Trade marks** protect signs that distinguish goods or services and can last indefinitely if used and renewed. **Trade secrets** protect valuable confidential information for as long as it stays secret and the owner takes reasonable steps to keep it so; the EU harmonised protection with Directive (EU) 2016/943 and the US created a federal civil claim with the Defend Trade Secrets Act of 2016. The manager's choices are strategic: patent (disclose, exclude for a term, enforce at a cost) or keep secret (no disclosure, no term, but no protection against independent discovery or reverse engineering); license or keep; register trade marks in every market before launch. Employees' and contractors' inventions belong to the firm only if the law or a written assignment says so, which is why invention assignment clauses matter in every start-up. *Typical question: how should this firm protect its software, its hardware design and its brand?* **Topic 6. Employment.** Employment law limits how firms hire, pay, manage and dismiss. In most US states employment is at will: either side can end it for any lawful reason, subject to federal and state anti-discrimination and other statutes. The UK and EU member states protect employees against unfair dismissal and require fair procedures; in the UK the qualifying period for ordinary unfair dismissal claims is being cut from two years to six months (see the dated facts below). All three systems prohibit discrimination on protected grounds, and the EU Pay Transparency Directive adds duties on pay ranges and pay information (see `mba/mba-compensation-design-card`). Restrictive covenants show how differently systems treat the same clause: a non-compete clause is void for most employees in California (Business and Professions Code s. 16600), enforceable in England only if it protects a legitimate interest and goes no further than reasonably necessary, and subject in several EU states to statutory conditions such as paid compensation during the restricted period. In the US, the Federal Trade Commission's 2024 rule that would have banned most non-competes is not in effect (dated facts below), so state law still governs. Confidentiality obligations and trade secret law usually protect the firm better than a broad non-compete. *Typical question: what can the firm do to protect itself when a key engineer joins a rival, and how does the answer change by country?* **Topic 7. Competition (antitrust) law.** Competition law prohibits three things managers can do by accident. **Agreements that restrict competition:** price fixing, market sharing and bid rigging between rivals are per se illegal in the US under Sherman Act section 1 (and a crime), prohibited by Article 101 of the Treaty on the Functioning of the European Union (TFEU) and by Chapter I of the UK Competition Act 1998; exchanging future pricing information with rivals can be enough. **Abuse of a dominant position** (TFEU Article 102, UK Chapter II) or monopolisation (Sherman Act section 2): a dominant firm must not exclude rivals by means other than competition on the merits. **Mergers** that substantially lessen competition can be blocked; above set thresholds they must be notified before closing (in the US under the Hart-Scott-Rodino Act, in the EU under the EU Merger Regulation). Vertical agreements between a supplier and its distributors are treated more leniently, with one sharp exception: in the EU, fixing a reseller's minimum or fixed resale price is a hardcore restriction under Article 4(a) of the Vertical Block Exemption Regulation (Commission Regulation (EU) 2022/720), while US federal law has judged minimum resale price maintenance under the rule of reason since *Leegin Creative Leather Products, Inc. v PSKS, Inc.*, 551 U.S. 877 (2007), and some US states are stricter. Fines are large: the European Commission can fine up to 10% of worldwide annual turnover (Regulation (EC) No 1/2003, Article 23). *Typical question: is this clause or conversation lawful, and what would you change?* **Topic 8. Product, data and corporate criminal liability.** A producer is strictly liable for damage caused by a defective product: the claimant proves the defect, the damage and the causal link, not fault. The EU has replaced its 1985 Product Liability Directive with Directive (EU) 2024/2853, which treats software (including software supplied as a service and AI systems) as a product and covers products placed on the market after 9 December 2026. Data protection law (in the EU and the UK the General Data Protection Regulation, with fines of up to EUR 20 million or 4% of worldwide annual turnover under Article 83 of the EU text) governs how firms collect and use personal data (see `legal-lite/privacy-policy`). Corporate criminal liability is expanding through failure-to-prevent offences: under section 7 of the UK Bribery Act 2010 a commercial organisation commits an offence if a person associated with it bribes to obtain business for it, unless it had adequate procedures to prevent bribery; since 1 September 2025 large organisations can also be liable for failing to prevent fraud by their associated persons unless they had reasonable prevention procedures. The US Foreign Corrupt Practices Act prohibits bribing foreign officials. Compliance programmes (`compliance/iso-37001-anti-bribery`, `compliance/code-of-business-conduct`, `compliance/whistleblowing-policy`) turn these laws into procedures. *Typical question: what would an adequate prevention programme for this company contain?* **Dated facts (checked 2026-10-30; check the official page before you rely on any of them).** | ID | Fact | Status and source | |---|---|---| | LAW-F01 | The CISG (Vienna, 1980) has 97 parties | Confirmed on the UNCITRAL status page, https://uncitral.un.org/en/texts/salegoods/conventions/sale_of_goods/cisg/status | | LAW-F02 | The Unitary Patent system started on 1 June 2023; 18 EU member states participate | Confirmed on the European Patent Office page, https://www.epo.org/en/applying/european/unitary/unitary-patent/start | | LAW-F03 | UK: the qualifying period for ordinary unfair dismissal falls from two years to six months, and the cap on the compensatory award is removed, for dismissals with an effective date of termination on or after 1 January 2027 (Employment Rights Act 2025 and commencement regulations) | Reported consistently by several law firms; check legislation.gov.uk and gov.uk before relying on it | | LAW-F04 | US: the FTC Non-Compete Clause Rule is not in effect and not enforceable; a district court set it aside on 20 August 2024, the FTC moved to dismiss its appeal on 5 September 2025 and published a notice removing the rule in February 2026 | Confirmed on the FTC rule page, https://www.ftc.gov/legal-library/browse/rules/noncompete-rule | | LAW-F05 | US: Hart-Scott-Rodino notification thresholds from 17 February 2026 are USD 133.9 million (size of transaction, lower test) and USD 535.5 million (transactions above which the size-of-person test no longer applies) | Confirmed on the FTC thresholds page, https://www.ftc.gov/enforcement/premerger-notification-program/current-thresholds | | LAW-F06 | EU: Directive (EU) 2024/2853 on liability for defective products must be transposed by 9 December 2026 and applies to products placed on the market or put into service after that date; the 1985 Directive continues to apply to earlier products | Official text: http://data.europa.eu/eli/dir/2024/2853/oj (EUR-Lex blocked automated access; date confirmed through national government and law-firm summaries) | | LAW-F07 | UK: the failure to prevent fraud offence (Economic Crime and Corporate Transparency Act 2023) came into effect on 1 September 2025 for large organisations | Confirmed on gov.uk, https://www.gov.uk/government/publications/offence-of-failure-to-prevent-fraud-introduced-by-eccta | | LAW-F08 | EU: the Pay Transparency Directive (Directive (EU) 2023/970) had a transposition deadline of 7 June 2026; Article 5 gives applicants a right to pay information before the interview and bars questions about pay history | Official text: http://data.europa.eu/eli/dir/2023/970/oj; check the national law that transposes it | ## 7. Putting legal risk into numbers A legal question becomes a business decision once it has numbers. Three tools cover most course cases. **Expected value of a claim.** If counsel estimates a probability $p_i$ of recovering each head of claim $A_i$, and pursuing the claim costs $C$ in fees and management time, the expected net value of litigating is $$ EV_{claim} = \sum_i p_i \, A_i - C $$ **Settlement range.** A rational claimant should accept any settlement above its expected net value from litigating, and a rational defendant should pay anything below its expected loss plus its own costs $C_d$: $$ S_{min} = \sum_i p_i \, A_i - C_c \qquad S_{max} = \sum_i p_i \, A_i + C_d $$ The gap between $S_{min}$ and $S_{max}$ is the zone of possible agreement; it is wide because both sides save their costs by settling, which is why most commercial disputes settle (`mba/mba-negotiation-planner`). **Expected cost of a compliance risk.** If a violation occurs with annual probability $q$ and costs $L$ (fines, damages, remediation, lost business), and a programme costing $K$ a year reduces the probability by a share $\rho$, the programme pays for itself when $$ K < \rho \, q \, L $$ | Symbol | Meaning | Note | |---|---|---| | $A_i$, $p_i$ | Amount of each head of claim and counsel's probability of recovering it | Ask counsel for a range, not a point | | $C$, $C_c$, $C_d$ | Cost of pursuing the claim; claimant's and defendant's costs | Include management time; in England the loser often pays part of the winner's costs | | $S_{min}$, $S_{max}$ | Lowest settlement the claimant should accept; highest the defendant should pay | Before risk attitudes and relationship value | | $q$, $L$ | Annual probability and cost of a compliance failure | Fines are only part of $L$ | | $K$, $\rho$ | Programme cost and share of the risk it removes | A programme can also be a legal defence (adequate or reasonable procedures) | *Example:* a company estimates a 4% annual probability of a competition law infringement in its sales force, costing USD 2.5 million. The expected loss is USD 100,000 a year (`=4%*2500000`). A training and monitoring programme costing USD 60,000 a year that removes 75% of the risk leaves an expected loss of USD 25,000, so the total expected cost falls to USD 85,000 (`=4%*(1-75%)*2500000+60000`). The numbers are illustrative; in practice the probability is uncertain, the loss includes reputation, and the law may require the programme regardless of the arithmetic. These calculations are tools for a manager's conversation with counsel, not a substitute for legal advice. They also leave out what matters most in many disputes: the value of the relationship, precedent for other customers or suppliers, and the time management spends on the dispute instead of the business. ## 8. Mini-case: Corvane Robotics and the late drive modules ### 8.1 Situation Corvane Robotics (fictional) makes autonomous mobile robots for warehouses. After the board decided not to build its own drive modules (see the mini-case in `mba/mba-strategy-guide`), Corvane signed a supply agreement with its main supplier, Brenmoor Drive Systems (fictional), at USD 6,400 per module, and kept its second supplier for smaller volumes. The agreement is governed by the law of England and Wales. In March, Corvane ordered 400 modules for delivery in week 14. In week 11 Brenmoor told Mei-Ling Novak, vice president of operations, that a component shortage would delay the whole order "by about ten weeks, maybe more". Corvane had promised robots to Arden Freight (fictional), its largest customer, for a peak-season start. Mei-Ling wrote to Brenmoor that Corvane "cancels 150 modules of the order with immediate effect because of your inability to deliver", and bought those 150 modules from the second supplier at USD 7,150 each. Brenmoor did not object in writing. It delivered the remaining 250 modules six weeks late. Corvane's robots for Arden Freight were still late, and Corvane paid Arden Freight a contractual service credit of USD 90,000. Three other matters reached the chief executive, Priya Raman, the same month: - **The pilot agreement.** Tomás Ekwueme, head of sales, had signed a pilot agreement with a new customer that promised 99.9% fleet uptime and uncapped liability for downtime. Corvane's signing policy, approved by the board, requires the chief financial officer's approval for any uncapped liability. The customer had dealt only with Tomás, who had signed Corvane's previous pilot agreements with it. - **The departing engineer.** Ilse Marchetti (fictional), who led the fleet congestion analytics team, resigned to join a rival. Her contract has a 12-month worldwide non-compete clause and a confidentiality clause. Corvane's engineering teams sit in California, England and Germany, and the question arose for each location because two colleagues might follow her. - **The reseller programme.** For the European launch, the sales team drafted a reseller agreement with the clause: "The reseller shall not advertise or sell the products below the list price published by Corvane." Daniel Achterberg, chief financial officer, asked for one page: what can Corvane recover from Brenmoor, what should it settle for, and what should the company change so that the other three problems do not recur. ### 8.2 Exhibits **Exhibit 1. Key clauses of the Brenmoor supply agreement (summary, fictional).** | Clause | Summary | |---|---| | 6.2 Late delivery | For each full week of delay, Brenmoor pays liquidated damages of 0.5% of the price of the late units, up to 10% of the price of the order. These are the buyer's sole financial remedy for late delivery, without prejudice to the buyer's right to terminate for a delay of more than eight weeks | | 6.4 Partial cancellation | The buyer may cancel undelivered units by written notice if the supplier states it cannot deliver by the agreed date | | 11.1 Exclusion | Neither party is liable for indirect or consequential loss, including loss of profit and payments to the buyer's customers | | 11.3 Cap | Total liability in any contract year is capped at 100% of the price paid in the preceding 12 months | | 18 Law and disputes | Law of England and Wales; disputes to the courts of England after 30 days of good-faith negotiation | **Exhibit 2. Claim amounts, USD (fictional).** | Head of claim | Computation | Amount | Excel | |---|---|---|---| | Order value | 400 x 6,400 | 2,560,000 | `=400*6400` | | Liquidated damages on the 250 late units | 250 x 6,400 x 0.5% x 6 weeks | 48,000 | `=250*6400*MIN(0.5%*6,10%)` | | Cap on liquidated damages | 10% x 2,560,000 | 256,000 | `=10%*2560000` | | Extra cost of the 150 replacement modules | 150 x (7,150 - 6,400) | 112,500 | `=150*(7150-6400)` | | Service credit paid to Arden Freight | Contractual | 90,000 | | | Total claimed | 48,000 + 112,500 + 90,000 | 250,500 | `=48000+112500+90000` | **Exhibit 3. Counsel's estimates (fictional).** Brenmoor accepts the delay, so the liquidated damages are not in dispute. Counsel puts the probability of recovering the replacement cost at 60% (it depends on whether clause 6.4 made the cancellation lawful, so that the claim is for non-delivery rather than delay) and of recovering the service credit at 25% (clause 11.1 probably excludes it). Corvane's cost of litigating to judgment, including management time, is about USD 120,000; Brenmoor's is about USD 110,000. ### 8.3 Discussion questions 1. Which bodies of law does each of the four matters raise? Write one line per matter. 2. What can Corvane recover from Brenmoor under each head of claim, and what are the best arguments on each side about the 150 replacement modules and the service credit? 3. Compute the expected value of litigating and the settlement range. What should Corvane propose? 4. Is Corvane bound by the pilot agreement Tomás signed? What should the company change? 5. How would the enforceability of Ilse Marchetti's non-compete differ between California, England and Germany, and what protects Corvane's congestion analytics better than the non-compete? 6. What is wrong with the reseller clause under EU competition law, and how would you redraft the commercial aim lawfully? 7. Write the three sentences of the one-page memo that Daniel asked for. ## 9. Typical assignments and how they are graded Business law courses for MBA students commonly combine class participation, short written analyses of problems or cases, a contract review or negotiation exercise, and a final examination of the issue-spotting kind (a fact pattern with several hidden legal questions). Weights vary by school; your syllabus is the authority. | Criterion | Excellent | Adequate | Weak | |---|---|---|---| | Issue spotting | Finds every legal issue, including the hidden ones, and ranks them by business impact | Finds the main issues | Misses major issues or invents irrelevant ones | | Rule statement | States the rule accurately, with its source and jurisdiction | States the rule loosely | Wrong rule or no source | | Application | Applies the rule to the specific facts, argues both sides, names the facts that would change the answer | Applies the rule in general terms | Restates the facts or the rule without linking them | | Business judgement | Turns the legal analysis into a recommendation with numbers, timing and who should act | Gives a recommendation | Ends with "it depends" | | Knowing the limits | Says what needs a lawyer's advice and which facts must be checked | Mentions uncertainty | Presents conclusions as certain legal advice | | Communication | Short, answer-first, readable by a non-lawyer | Readable | Long, unstructured | For written work, use `mba/mba-case-write-up` with an IRAC structure inside each issue. ## 10. Exam preparation plan | When | Activity | Output | |---|---|---| | Exam minus 14 days | Rebuild the key concept table (section 5) from memory; mark gaps | Flashcards for each gap (`mba/mba-concept-flashcards`) | | Exam minus 12 days | Write a one-page outline per topic: rule, leading case or statute, typical facts, common defence | Eight one-page outlines | | Exam minus 10 days | Timed practice: one unseen fact pattern, full IRAC answer | Graded by your learning team with the rubric | | Exam minus 7 days | Review errors (`mba/mba-error-log`); redo the weakest topic | Corrected answer | | Exam minus 5 days | Second timed fact pattern mixing contracts, employment and competition | Answer and self-grade | | Exam minus 3 days | Issue-spotting checklist on one page (below) | One page | | Exam minus 1 day | Light review; prepare permitted materials | Sleep | Use this issue-spotting order on every fact pattern: ```mermaid flowchart TD A["Read the facts once for the story"] --> B["Mark every promise, signature, payment, product, employee, rival and data flow"] B --> C{"Which body of law does each mark raise?"} C --> D["Contract and agency"] C --> E["Company law and duties"] C --> F["Intellectual property"] C --> G["Employment"] C --> H["Competition"] C --> I["Product, data and criminal liability"] D --> J["IRAC for each issue: issue, rule, application, conclusion"] E --> J F --> J G --> J H --> J I --> J J --> K["Rank issues by business impact and say what needs counsel"] ``` ## 11. Common struggles 1. **Answering as a lawyer, not a manager.** The course wants a business decision informed by law, not a legal opinion. End every answer with what the company should do and who should do it. 2. **Mixing jurisdictions.** A rule from California does not answer a question governed by English law. Say which law governs before stating the rule. 3. **Ignoring the contract.** Default rules apply only when the contract is silent. Read the clauses first. 4. **One-sided arguments.** Exams reward the best argument for each side and the facts that would decide between them. 5. **Treating a non-compete as the main protection.** Confidentiality, trade secret law, invention assignment and good retention practice usually protect a firm better. 6. **Thinking competition law applies only to big firms.** Price fixing and resale price maintenance are unlawful for firms of any size. 7. **Forgetting the numbers.** A legal risk with no estimate of probability and cost cannot be weighed against anything else. 8. **Presenting conclusions as certain.** Courts, regulators and facts are uncertain; give ranges and say what evidence would change your view. ## 12. Self-test questions 1. Name the elements of a contract in a common law system and one element that civil law systems do not require. 2. State the rule in *Hadley v Baxendale* in one sentence. 3. What is the difference between liquidated damages and a limitation of liability clause? 4. Define apparent authority and give a business example. 5. What does asset partitioning mean, and why does it lower the cost of capital? 6. Under the business judgment rule, what must a board show to receive deference? 7. Compare patent and trade secret protection for a new algorithm on three dimensions. 8. Why is a broad non-compete clause a weak protection for a California-based employer? 9. What is resale price maintenance, and how do the EU and US federal approaches differ? 10. What must a large UK organisation have in place to defend itself against the failure to prevent fraud offence? 11. In the mini-case, compute the liquidated damages if all 400 modules had been six weeks late. Show the Excel formula. 12. In the mini-case, what is the settlement range, and why is it wide? ## 13. My notes and next steps | Item | My answer | |---|---| | The decision from my past job (section 1) | [Decision and the legal issue] | | Topic I find hardest | [Topic and why] | | Jurisdiction I most need to understand for my career | [Jurisdiction] | | Contract I will re-read with this guide | [Contract type] | | Lawyer or law-trained colleague I can ask | [Name, role] | | Review dates | [Two days], [one week] | ## 14. Teaching note for the mini-case **Question 1: issues.** The supply dispute raises contract law (breach, remedies, liquidated damages, exclusion and cap clauses, cancellation). The pilot agreement raises agency (actual and apparent authority) and internal control. The departing engineer raises employment law (restrictive covenants), trade secret law and confidentiality. The reseller clause raises competition law (vertical agreements and resale price maintenance). **Question 2: heads of claim.** The 48,000 of liquidated damages (`=250*6400*MIN(0.5%*6,10%)`) is not disputed and is well below the 10% cap of 256,000. For the 150 replacement modules, Corvane's best argument is that clause 6.4 allowed it to cancel undelivered units once Brenmoor said it could not deliver on time, so these units were never delivered and Corvane may claim the extra cost of buying substitutes (112,500), a normal loss that flows from non-delivery. Brenmoor's best argument is that the problem was delay, that clause 6.2 makes liquidated damages the sole financial remedy for delay, and that Mei-Ling's notice did not meet clause 6.4 because Brenmoor had only estimated a delay. The service credit paid to Arden Freight (90,000) is a payment to Corvane's customer, which clause 11.1 names expressly as excluded; Corvane's argument would be that the clause should be read narrowly, but the express words make recovery unlikely. Remoteness under *Hadley v Baxendale* matters less here because the contract deals with the loss directly. **Question 3: numbers.** Expected recovery if Corvane litigates is $48{,}000 + 0.60 \times 112{,}500 + 0.25 \times 90{,}000 = 138{,}000$ (`=48000+60%*112500+25%*90000`). Net of its own costs, litigating is worth 18,000 to Corvane (`=138000-120000`), so Corvane should accept anything above that. Brenmoor's expected cost of litigating is 248,000 (`=138000+110000`), so it should pay anything below that. The zone of possible agreement runs from 18,000 to 248,000: wide because both sides save more than 100,000 of costs by settling. A sensible opening proposal is near the expected recovery plus part of the cost Brenmoor saves, for example 160,000 to 180,000, with a credit against future orders as an alternative form of payment, because Corvane needs Brenmoor as a supplier. The relationship value is the most important number that is not in the exhibits. **Question 4: the pilot agreement.** Tomás had no actual authority to accept uncapped liability, but the customer dealt only with him and he had signed earlier pilots, so the customer can argue that Corvane's conduct gave him apparent authority; an internal policy the customer never saw does not usually defeat that. Corvane is likely bound unless the customer knew of the limit. The fixes are internal: a published signing authority matrix, contract templates with a liability cap that sales cannot edit, a contract review step for non-standard terms (`legal-ops/contract-review-playbook`) and, for the existing agreement, a negotiated amendment at renewal. **Question 5: the departing engineer.** In California the non-compete is void for employees in most cases, so Corvane must rely on confidentiality obligations and trade secret law. In England a 12-month worldwide restriction is at risk of being found wider than reasonably necessary; a narrower clause (shorter, limited to direct competitors and the analytics field) would be more defensible. In Germany a post-employment non-compete for employees generally requires the employer to pay compensation during the restricted period, which Corvane's contract may not provide. In all three, the stronger protection is to identify the trade secrets (the congestion analytics models and data), show the reasonable steps taken to keep them secret (access controls, confidentiality agreements, exit interviews, return of devices) and act quickly if there is evidence of misuse. Counsel in each country should confirm the current rules. **Question 6: the reseller clause.** Requiring resellers not to sell below a list price fixes a minimum resale price: in the EU a hardcore restriction under Article 4(a) of Regulation (EU) 2022/720, so the agreement loses the block exemption and the clause is very likely unlawful, with fines of up to 10% of worldwide turnover possible. The commercial aim (protecting the brand and the resellers' margins) can be pursued lawfully in other ways: a recommended resale price that resellers are free to ignore, selective distribution with quality criteria, minimum service standards, or marketing support paid for performance. Restrictions on advertised prices raise their own questions under the same rules and need counsel's review. **Question 7: the memo.** A strong version: "Corvane is owed 48,000 of liquidated damages and has a reasonable claim to the 112,500 extra cost of replacement modules but probably not to the 90,000 service credit; we recommend proposing a settlement of about 170,000, payable as cash or order credits, and aiming not to settle much below our expected recovery of about 138,000, while keeping the supplier relationship. We are probably bound by the uptime promise in the pilot agreement and will renegotiate it at renewal; from next month only contracts on approved templates can be signed without legal review. We will protect the analytics team through confidentiality and trade secret measures in all three countries, and we have removed the minimum price clause from the reseller agreement." ## Sources and further reading **Primary works (management, economics and legal scholarship).** - Coase, R. H. (1937). The nature of the firm. *Economica*, 4(16), 386-405. - Macaulay, S. (1963). Non-contractual relations in business: A preliminary study. *American Sociological Review*, 28(1), 55-67. - Jensen, M. C., and Meckling, W. H. (1976). Theory of the firm: Managerial behavior, agency costs and ownership structure. *Journal of Financial Economics*, 3(4), 305-360. - Easterbrook, F. H., and Fischel, D. R. (1985). Limited liability and the corporation. *The University of Chicago Law Review*, 52(1), 89-117. - Hart, O., and Moore, J. (1990). Property rights and the nature of the firm. *Journal of Political Economy*, 98(6), 1119-1158. - Hansmann, H., and Kraakman, R. (2000). The essential role of organizational law. *The Yale Law Journal*, 110(3), 387-440. - Bagley, C. E. (2008). Winning legally: The value of legal astuteness. *Academy of Management Review*, 33(2), 378-390. **Cases named in the guide.** *Hadley v Baxendale* (1854) 9 Exch 341; *Carlill v Carbolic Smoke Ball Co* [1893] 1 QB 256; *Salomon v A Salomon & Co Ltd* [1897] AC 22; *Prest v Petrodel Resources Ltd* [2013] UKSC 34; *Smith v Van Gorkom*, 488 A.2d 858 (Del. 1985); *In re Caremark International Inc. Derivative Litigation*, 698 A.2d 959 (Del. Ch. 1996); *Leegin Creative Leather Products, Inc. v PSKS, Inc.*, 551 U.S. 877 (2007). **Official texts (dated facts checked 2026-10-30).** - UNCITRAL, United Nations Convention on Contracts for the International Sale of Goods (Vienna, 1980), status page, https://uncitral.un.org/en/texts/salegoods/conventions/sale_of_goods/cisg/status. - European Patent Office, Unitary Patent start date, https://www.epo.org/en/applying/european/unitary/unitary-patent/start. - US Federal Trade Commission, Non-Compete Clause Rule page, https://www.ftc.gov/legal-library/browse/rules/noncompete-rule. - US Federal Trade Commission, current HSR thresholds, https://www.ftc.gov/enforcement/premerger-notification-program/current-thresholds. - UK Home Office and Ministry of Justice, offence of failure to prevent fraud, https://www.gov.uk/government/publications/offence-of-failure-to-prevent-fraud-introduced-by-eccta. - Directive (EU) 2024/2853 on liability for defective products, http://data.europa.eu/eli/dir/2024/2853/oj. - Directive (EU) 2023/970 on pay transparency, http://data.europa.eu/eli/dir/2023/970/oj. - Commission Regulation (EU) 2022/720 (Vertical Block Exemption Regulation), http://data.europa.eu/eli/reg/2022/720/oj. - Consolidated Treaty on the Functioning of the European Union, Articles 101 and 102, http://data.europa.eu/eli/treaty/tfeu_2012/oj. - UK Companies Act 2006, Part 10, https://www.legislation.gov.uk/ukpga/2006/46/part/10. - UK legislation (Employment Rights Act 2025 and its commencement regulations), https://www.legislation.gov.uk. **Textbooks (further reading only).** Bagley, *Managers and the Legal Environment: Strategies for Business* (Cengage); Mallor, Barnes, Bowers and Langvardt, *Business Law: The Ethical, Global, and E-Commerce Environment* (McGraw Hill); Siedel and Haapio, *Proactive Law for Managers* (Gower, 2011); Kraakman and others, *The Anatomy of Corporate Law: A Comparative and Functional Approach* (Oxford University Press). **Open resource.** OpenStax, *Business Law I Essentials*, https://openstax.org (check the licence on the book page). ## Answer key 1. Offer, acceptance, consideration, intention to create legal relations and capacity (plus certainty of terms). Civil law systems do not require consideration. 2. A party in breach is liable for losses that arise naturally from the breach, or that both parties reasonably contemplated as a probable result of the breach when they made the contract. 3. Liquidated damages fix in advance the sum payable for a defined breach (for example per week of delay); a limitation clause caps the total liability for breaches, whatever the actual loss. One sets the amount, the other sets a ceiling. 4. Apparent authority arises when the principal's words or conduct lead a third party reasonably to believe that the agent has authority. Example: a company lets its sales head sign customer contracts for years, so a customer can rely on a contract the sales head signs even if an internal policy required more approval. 5. Organisational law separates the firm's assets from the owners' personal assets: the firm's creditors cannot reach the owners' other wealth (limited liability) and the owners' creditors cannot seize the firm's assets. Investors need not monitor each other or every creditor, so they accept a lower return. 6. That the directors were informed (reasonably available material information), disinterested and independent, and acted in good faith in the company's interest. 7. Scope: a patent excludes everyone, including independent inventors; a trade secret protects only against misuse, not independent discovery. Duration: a patent lasts a fixed term; a secret lasts while it stays secret. Cost and disclosure: a patent requires public disclosure and filing and enforcement costs; a secret requires ongoing confidentiality measures. Patentability of algorithms is also limited in many systems. 8. California voids most employee non-competes (Business and Professions Code s. 16600), so the clause cannot be enforced; the employer must rely on confidentiality, trade secret law and invention assignment. 9. A supplier fixing the price at or below which its resellers may sell. In the EU, fixing a minimum or fixed resale price is a hardcore restriction (Regulation (EU) 2022/720, Article 4(a)); under US federal law, minimum resale price maintenance is judged under the rule of reason since *Leegin* (2007), although some states are stricter. 10. Reasonable fraud prevention procedures, as described in the government guidance (top-level commitment, risk assessment, proportionate procedures, due diligence, communication and training, monitoring and review). 11. `=400*6400*MIN(0.5%*6,10%)` = 76,800, below the cap of 256,000. 12. From 18,000 (`=48000+60%*112500+25%*90000-120000`) to 248,000 (`=138000+110000`). It is wide because both parties save their litigation costs (120,000 and 110,000) by settling. ## Revision history | Version | Date | Author | Change summary | |---|---|---|---| | 0.1 | YYYY-MM-DD | [Your name] | First copy for [course and term] | | 0.2 | YYYY-MM-DD | [Your name] | *Example:* Replaced roadmap with syllabus; re-checked dated facts LAW-F01 to LAW-F08 | ## Standard and licence note Based on the public legal texts and cases named above (the CISG, the TFEU, EU directives and regulations, UK and US statutes and court decisions) and on the management and economics literature on law and the firm (Coase, Macaulay, Jensen and Meckling, Easterbrook and Fischel, Hansmann and Kraakman, Bagley), with dated facts checked on the official pages listed on 2026-10-30. The roadmap, explanations, mini-case, exhibits, teaching note, rubric and answers are original; no textbook, published case or teaching note is copied or paraphrased, and Corvane Robotics, Brenmoor Drive Systems, Arden Freight and every person in the case are fictional. The guide states general legal principles for learning purposes; it is not legal advice and not a statement of the law of any jurisdiction. Laws change and differ by country: check the current official text and consult a qualified lawyer before acting. This template is independent and not affiliated with or endorsed by any school, court, regulator, author or publisher. Template licence: MIT.