The Entrepreneur’s Guide to Business Law
Karr, Frederic H
THE ENTREPRENEUR’S GUIDE TO BUSINESS LAW by Constance E. Bagley and Craig E. Dauchy (West Educational Publishing Co., 1998, 540 pages, paperback, $19.95)
Supposedly, the waitresses at the Hooters chain of restaurants wear revealing T-shirts that bear the slogan on the back, “More than a mouthful.” This bit of information is actually uncharacteristic of the otherwise thoughtful and instructive text in the very helpful The Entrepreneurs Guide to Business Law.
Each of the authors is individually qualified to write such a work. Ms. Bagley is an attorney and has taught since 1988 at the Stanford University School of Business. As for Mr. Dauchy, he is the managing partner at the Menlo Park, California, office of Cooley Woodward LLP; this law firm is one of the nation’s leading firms for both entrepreneurs and venture capitalists.
The several chapters in the easily understandable and smoothly written Guide follows the natural progression in the life of a small business. It starts from the departure of the would-be entrepreneur from his or her previous employer, through the start-up of the new firm, to the final issuance of stock as the small business goes public.
Several different boxed-in features make the Guide even more valuable to the entrepreneur, whether she or he is a budding or an accomplished business person. First, appearing at the end of each chapter is “Putting It Into Practice,” a fictional account of Alexandria Scott and her ultimately successful effort to launch WebRunner, a software computer practice. That feature recounts in story form the lessons set forth in that particular chapter; it also provides a launchpad for the immediately succeeding chapter.
Other boxed-in features of the Guide include “From the Trenches,” which contain true-to-life tales illustrating the lessons set forth in that particular chapter. Where the “Trenches” story is from an actual judicial case, the Guide properly sets forth the West case citation. Still other features are “Exhibits” and “Getting it in Writing”; examples of the latter feature include sample independent contractor service agreements, venture capital term sheets, and a sample indemnity agreement.
Useful tidbits of information abound throughout the Guide. For example, the authors recommend that when shopping for an attorney, the entrepreneur should have lunch with the attorney, both to make his or her acquaintance “and to obtain some free legal advice.” On this topic of attorneys, the Guide recommends that the entrepreneur use junior associates, reasoning that a partner would probably have these associates do much of the legwork anyway.
As I trudged though law school, I found certain subjects to be crashing bores, among them being bankruptcy, editors’ rights, and contracts. Nonetheless, these particular bodies of law are vitally important to the small entrepreneur, and the authors cover them well in the Guide.
Where it is necessary, the Guide usefully points out the distinction between the common law and any necessary statutory law. Witness contract law: There is the common law, on the one hand, and the Uniform Commercial Code (enacted by most state legislatures) on the other. Where solely federal law is concerned, such as bankruptcy and the federal Bankruptcy Code, the authors likewise do an admirable job of explaining clearly the relevant statutes.
The Guide favors heavily the use of the bankruptcy option by the beleaguered entrepreneur, characterizing bankruptcy as “one strategy for working with creditors and other constituencies.” The authors observe that bankruptcy, with its “unique benefits,” is a “final alternative strategy for the young company in a financial crisis.”
About the only criticism I have for the Guide is the paucity of information on the “Sale of Goods.” To me, this subject merits much more than merely two full paragraphs. Indeed, the authors themselves note that Article 2 of the Uniform Commercial Code, which governs the sale of goods, is a highly important body of law. Accordingly, Bagley and Dauchy should devote to it more space in their treatise.
At the end of the final “Putting It Into Practice,” Alexandria Scott, after successfully launching WebRunner’s initial public offering of stock, exclaims, “Break out the champagne! It’s time to party!” While concluding a read of the Guide may not necessarily be a cause for celebration, it is nonetheless a worthwhile achievement.
In one volume, the authors have summarized very well the necessary business law for either the budding or experienced entrepreneur. Clearly, the Guide is must reading.
Copyright Commercial Law League of America Jan/Feb 1999
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