Business Law and Ethics
What the domain tests
This domain tests contract law, torts, agency, employment law, consumer protection, intellectual property, business ethics, and corporate social responsibility. Questions often ask whether an agreement is enforceable or which legal concept applies.
Core rules
- A valid contract generally requires offer, acceptance, consideration, capacity, legality, and genuine assent. An offer must be definite and communicated; acceptance must mirror the offer unless the offer invites negotiation. Consideration is a bargained-for exchange.
- A minor generally lacks capacity; contracts may be voidable by the minor. Contracts for illegal purposes are void. Fraud, duress, and undue influence can make a contract voidable.
- A breach occurs when a party fails to perform. Remedies include damages, specific performance, and rescission. Compensatory damages aim to put the injured party in the position expected had the contract been performed.
- Torts include negligence (duty, breach, causation, damages), intentional torts, and strict liability. Agency law binds a principal for an agent’s authorized acts; apparent authority can also bind the principal.
- Employment law includes at-will employment, discrimination, wage and hour, safety, and workers’ compensation. Intellectual property includes patents, copyrights, trademarks, and trade secrets.
- Ethics asks what is right beyond legality; CSR addresses obligations to stakeholders.
Worked example
A 16-year-old signs a contract to buy a used car on credit. The dealer has a signed agreement, but the minor later disaffirms. The contract is voidable at the minor’s option because capacity is missing. The dealer’s remedy may be limited; the minor may be required to return the consideration in many jurisdictions, but enforceability is not the same as for an adult. The key reasoning is that capacity is a separate element from offer, acceptance, and consideration.
Traps
An invitation to negotiate is not always an offer. Consideration must be bargained for, not a gift. A contract can be legal yet unethical. Copyright protects expression, not ideas; patents protect inventions. At-will employment is not a license for illegal discrimination.