Gale Encyclopedia Of Everyday Law

Gale Encyclopedia Of Everyday Law
Everyday Law
Gale Encyclopedia of
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Everyday Law
Americans with Disabilities Act
Family Law
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Gale Encyclopedia of Everyday Law
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Includes bibliographical references and index.
ISBN 0-7876-5759-X (set : hardcover : alk.paper)—ISBN 0-7876-5760-3
(v. 1)—ISBN 0-7876-5761-1 (v. 2)
1. Law–United States–Popular works. I. Phelps, Shirelle.
KF387.G27 2003
Printed in the United States of America
10 9 8 7 6 5 4 3 2 1
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . .ix
How to Use This Book . . . . . . . . . . . . . . . . . .ix
Acknowledgments . . . . . . . . . . . . . . . . . . . . .xi
Overview of the American Legal System . . . . .xiii
Entries Arranged in Alphabetical Order Within
Broad Categories from: American with Disabil-
ities Act to Travel . . . . . . . . . . . . . . . .1-1156
Americans with Disabilities Act
Educational Accommodations . . . . . . . . . . . .1
Public Facility Accommodations . . . . . . . . . .5
Work Accommodations . . . . . . . . . . . . . . . .9
Attorney-Client Privilege . . . . . . . . . . . . . . .13
How to Find an Attorney . . . . . . . . . . . . . .19
Malpractice . . . . . . . . . . . . . . . . . . . . . . . .25
Accident Liability . . . . . . . . . . . . . . . . . . . .31
Buying a Car/Registration . . . . . . . . . . . . . .39
Driver’s License . . . . . . . . . . . . . . . . . . . . .45
Insurance . . . . . . . . . . . . . . . . . . . . . . . . .53
Leasing a Car . . . . . . . . . . . . . . . . . . . . . .59
Safety . . . . . . . . . . . . . . . . . . . . . . . . . . . .65
Seat Belt Usage . . . . . . . . . . . . . . . . . . . . .71
Traffic Violations . . . . . . . . . . . . . . . . . . . .75
Banking and Lending Law . . . . . . . . . . . . .81
Banks, Saving & Loans, Credit Unions . . . . .89
FDIC . . . . . . . . . . . . . . . . . . . . . . . . . . . .95
Interest Rates . . . . . . . . . . . . . . . . . . . . . . .99
Business Law
Corporations . . . . . . . . . . . . . . . . . . . . . .103
Limited Liability Companies . . . . . . . . . . . .107
Partnerships . . . . . . . . . . . . . . . . . . . . . . .115
Shareholder Rights . . . . . . . . . . . . . . . . . .123
Civil Rights
Affirmative Action . . . . . . . . . . . . . . . . . .131
Age Discrimination . . . . . . . . . . . . . . . . . .139
Assembly . . . . . . . . . . . . . . . . . . . . . . . .143
Children’s Rights . . . . . . . . . . . . . . . . . . .151
Firearm Laws . . . . . . . . . . . . . . . . . . . . . .155
Free Speech/Freedom of Expression . . . . .163
Racial Discrimination . . . . . . . . . . . . . . . .169
Religious Freedom . . . . . . . . . . . . . . . . . .177
Sexual Discrimination and Orientation . . . .183
Voting Rights . . . . . . . . . . . . . . . . . . . . . .189
Consumer Issues
Advertising . . . . . . . . . . . . . . . . . . . . . . .197
Bankruptcy . . . . . . . . . . . . . . . . . . . . . . .203
Contracts . . . . . . . . . . . . . . . . . . . . . . . . .207
Credit/Truth-in Lending . . . . . . . . . . . . . .215
Deceptive Trade Practices . . . . . . . . . . . . .221
Defective Products . . . . . . . . . . . . . . . . . .229
Federal Trade Commission/Regulation . . . .233
Mail-Order Purchases/Telemarketing . . . . .237
Product Safety and Consumer Protection . .243
Purchases and Returns . . . . . . . . . . . . . . .249
Recalls by Manufacturers . . . . . . . . . . . . . .255
Warranties . . . . . . . . . . . . . . . . . . . . . . . .261
Courts and Procedures
Civil Procedure . . . . . . . . . . . . . . . . . . . .265
Criminal Procedure . . . . . . . . . . . . . . . . .273
Federal Courts and Jurisdictions . . . . . . . . .281
Juries . . . . . . . . . . . . . . . . . . . . . . . . . . .289
Small Claims Courts . . . . . . . . . . . . . . . . .301
State Courts and Procedures . . . . . . . . . . .307
Criminal Law
Appeals . . . . . . . . . . . . . . . . . . . . . . . . . .313
Crimes . . . . . . . . . . . . . . . . . . . . . . . . . .317
Death Penalty . . . . . . . . . . . . . . . . . . . . .323
Double Jeopardy . . . . . . . . . . . . . . . . . . .329
Evidence . . . . . . . . . . . . . . . . . . . . . . . . .337
Fifth Amendment . . . . . . . . . . . . . . . . . . .345
Insanity Defense . . . . . . . . . . . . . . . . . . .353
Juveniles . . . . . . . . . . . . . . . . . . . . . . . . .359
Plea Bargaining . . . . . . . . . . . . . . . . . . . .365
Probation and Parole . . . . . . . . . . . . . . . .369
Right to Counsel . . . . . . . . . . . . . . . . . . .375
Search and Seizure . . . . . . . . . . . . . . . . . .381
Sentencing and Sentencing Guidelines . . . .389
Dispute Resolution Alternatives
Arbitration . . . . . . . . . . . . . . . . . . . . . . . .395
Mediation . . . . . . . . . . . . . . . . . . . . . . . .403
Mini-Trials . . . . . . . . . . . . . . . . . . . . . . . .411
Negotiation . . . . . . . . . . . . . . . . . . . . . . .417
Administering Medicine . . . . . . . . . . . . . .423
Athletics . . . . . . . . . . . . . . . . . . . . . . . . .429
Bilingualism . . . . . . . . . . . . . . . . . . . . . .435
Codes of Conduct . . . . . . . . . . . . . . . . . .441
Competency Testing . . . . . . . . . . . . . . . . .445
Compulsory Education . . . . . . . . . . . . . . .451
Curriculum . . . . . . . . . . . . . . . . . . . . . . .459
Desegregation/Busing . . . . . . . . . . . . . . . .465
Discipline and Punishment . . . . . . . . . . . .471
Drug Testing . . . . . . . . . . . . . . . . . . . . . .477
Finance/Funding . . . . . . . . . . . . . . . . . . .483
School Prayer/Pledge of Allegiance . . . . . .487
Special Education/Disability Access . . . . . .493
Student’s Rights/Free Speech . . . . . . . . . . .501
Teacher’s Unions/Collective Bargaining . . .507
Teacher’s Rights . . . . . . . . . . . . . . . . . . . .513
Truancy . . . . . . . . . . . . . . . . . . . . . . . . .521
Types of Schools . . . . . . . . . . . . . . . . . . .527
Violence and Weapons . . . . . . . . . . . . . . .533
Estate Planning
Estate and Gift Taxes . . . . . . . . . . . . . . . .539
Guardianships and Conservatorships . . . . .543
Intestacy . . . . . . . . . . . . . . . . . . . . . . . . .549
Life Insurance . . . . . . . . . . . . . . . . . . . . .555
Power of Attorney . . . . . . . . . . . . . . . . . .559
Probate and Executors . . . . . . . . . . . . . . .565
Trusts . . . . . . . . . . . . . . . . . . . . . . . . . . .569
Wills . . . . . . . . . . . . . . . . . . . . . . . . . . . .575
Family Law
Adoption . . . . . . . . . . . . . . . . . . . . . . . . .583
Child Abuse/Child Safety/Discipline . . . . . .587
Child Support/Custody . . . . . . . . . . . . . . .591
Cohabitation . . . . . . . . . . . . . . . . . . . . . .599
Divorce/Separation/Annulment . . . . . . . . .607
Domestic Violence . . . . . . . . . . . . . . . . . .619
Emancipation . . . . . . . . . . . . . . . . . . . . . .625
Family Planning/Abortion/Birth Control . . .629
Foster Care . . . . . . . . . . . . . . . . . . . . . . .633
Gay Couples . . . . . . . . . . . . . . . . . . . . . .637
Grandparent’s Rights . . . . . . . . . . . . . . . .641
Guardianship . . . . . . . . . . . . . . . . . . . . . .649
Marriage/Marriage Age . . . . . . . . . . . . . . .653
Parent Liability Child’s Act . . . . . . . . . . . . .659
Prenuptial Agreements . . . . . . . . . . . . . . .663
Unmarried Parents . . . . . . . . . . . . . . . . . .667
First Amendment Law
Libel and Slander . . . . . . . . . . . . . . . . . . .671
Doctor-Patient Confidentiality . . . . . . . . . .675
Informed Consent . . . . . . . . . . . . . . . . . .683
Insurance . . . . . . . . . . . . . . . . . . . . . . . .687
Managed Care/HMOs . . . . . . . . . . . . . . . .693
Medicaid . . . . . . . . . . . . . . . . . . . . . . . . .701
Medical Malpractice . . . . . . . . . . . . . . . . .709
Medical Records . . . . . . . . . . . . . . . . . . . .717
Organ Donation . . . . . . . . . . . . . . . . . . . .723
Patient’s Rights . . . . . . . . . . . . . . . . . . . . .729
Treatment of Minors . . . . . . . . . . . . . . . . .737
Treatment Without Insurance . . . . . . . . . . .741
Asylum . . . . . . . . . . . . . . . . . . . . . . . . . .745
Deportation . . . . . . . . . . . . . . . . . . . . . . .749
Dual Citizenship . . . . . . . . . . . . . . . . . . .753
Eligibility for Government Services . . . . . . .757
Immigration and Naturalization Service(INS) 765
Residency/Green Cards/Naturalization . . . .769
Intellectual Property
Copyright . . . . . . . . . . . . . . . . . . . . . . . .773
Patents . . . . . . . . . . . . . . . . . . . . . . . . . .777
Trademarks . . . . . . . . . . . . . . . . . . . . . . .783
Unfair Competition . . . . . . . . . . . . . . . . .789
Advertising . . . . . . . . . . . . . . . . . . . . . . .795
Consumer Rights and Protection . . . . . . . .801
Free Speech . . . . . . . . . . . . . . . . . . . . . .805
Internet Crime . . . . . . . . . . . . . . . . . . . . .811
Internet Filters in Schools and Libraries . . .819
Internet Privacy . . . . . . . . . . . . . . . . . . . .825
Internet Regulation . . . . . . . . . . . . . . . . . .833
Online Business . . . . . . . . . . . . . . . . . . . .841
Pornography . . . . . . . . . . . . . . . . . . . . . .849
Labor Law
Benefits . . . . . . . . . . . . . . . . . . . . . . . . . .855
Discrimination . . . . . . . . . . . . . . . . . . . . .859
Drug Testing . . . . . . . . . . . . . . . . . . . . . .865
Employee’s Rights/EEOC . . . . . . . . . . . . . .871
Family and Medical Leave Act (FMLA) . . . .877
Independent Contractors/Freelancers . . . . .881
Labor Unions/Strikes . . . . . . . . . . . . . . . .885
Occupational Health and Safety . . . . . . . . .891
Privacy . . . . . . . . . . . . . . . . . . . . . . . . . .897
Sexual Harassment . . . . . . . . . . . . . . . . . .903
Unemployment Insurance/Compensation . .909
Wage and Hour Laws . . . . . . . . . . . . . . . .915
Whistleblowers . . . . . . . . . . . . . . . . . . . .919
Worker’s Compensation . . . . . . . . . . . . . .925
Real Estate
Boundary/Property/Title Disputes . . . . . . .931
Buying and Selling/Mortgages . . . . . . . . . .935
Condominiums/Co-ops . . . . . . . . . . . . . . .941
Contractors/Liens . . . . . . . . . . . . . . . . . . .947
Easements . . . . . . . . . . . . . . . . . . . . . . . .955
Foreclosure . . . . . . . . . . . . . . . . . . . . . . .961
Homeowner’s Liability/Safety . . . . . . . . . . .965
Housing Discrimination . . . . . . . . . . . . . .969
Insurance (Homeowners and Renters) . . . .975
Landlord/Tenant Rights . . . . . . . . . . . . . . .983
Neighbor Relations . . . . . . . . . . . . . . . . . .995
Renters’ Liability . . . . . . . . . . . . . . . . . . . .999
Timeshares . . . . . . . . . . . . . . . . . . . . . .1003
Trespassing . . . . . . . . . . . . . . . . . . . . . .1007
Zoning . . . . . . . . . . . . . . . . . . . . . . . . .1011
Retirement and Aging
Assisted Living Facilities . . . . . . . . . . . . .1015
Elder Abuse . . . . . . . . . . . . . . . . . . . . . .1023
Healthcare/Medicare . . . . . . . . . . . . . . . .1027
Nursing Homes . . . . . . . . . . . . . . . . . . .1033
Retirement Pension Plans . . . . . . . . . . . .1041
Social Security . . . . . . . . . . . . . . . . . . . .1045
Capital Gains . . . . . . . . . . . . . . . . . . . . .1053
Corporate Tax . . . . . . . . . . . . . . . . . . . .1057
Income Taxes . . . . . . . . . . . . . . . . . . . .1063
IRS Audits . . . . . . . . . . . . . . . . . . . . . . .1069
Property Taxes . . . . . . . . . . . . . . . . . . . .1077
Sales Taxes . . . . . . . . . . . . . . . . . . . . . .1083
Self Employment Taxes . . . . . . . . . . . . . .1089
Small Business Tax . . . . . . . . . . . . . . . . .1093
Tax Evasion . . . . . . . . . . . . . . . . . . . . . .1099
FCC Regulations . . . . . . . . . . . . . . . . . . .1105
Satellite and Cable . . . . . . . . . . . . . . . . .1111
Telephone . . . . . . . . . . . . . . . . . . . . . . .1117
Television . . . . . . . . . . . . . . . . . . . . . . .1121
Children Travelling Alone . . . . . . . . . . . .1127
Hotel Liability . . . . . . . . . . . . . . . . . . . .1131
International Travel . . . . . . . . . . . . . . . . .1139
Passports and Visas . . . . . . . . . . . . . . . .1147
Safety . . . . . . . . . . . . . . . . . . . . . . . . . .1151
State and Federal Agency Contacts . . . . . .1157
Glossary . . . . . . . . . . . . . . . . . . . . . . . . . .1161
General Index . . . . . . . . . . . . . . . . . . . . .1187
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The Gale Encyclopedia of Everyday Law is a two-
volume encyclopedia of practical information on
laws and issues affecting people’s everyday lives.
Readers will turn to this work for help in answer-
ing questions such as, “What is involved in estate
planning?” “Do I have any recourse to noisy neigh-
bors?” and “What are the consequences of an
expired visa?” This Encyclopedia aims to educate
people about their rights under the law, although it
is not intended as a self-help or ‘do-it-yourself’
legal resource. It seeks to fill the niche between
legal texts focusing on the theory and history
behind the law and shallower, more practical
guides to dealing with the law.
This encyclopedia, written for the layperson, is
arranged alphabetically by broad subject categories
and presents in-depth treatments of topics such as
consumer issues, education, family, immigration,
real estate, and retirement. Individual entries are
organized in alphabetical order within these broad
subject categories, and include information on state
and local laws, as well as federal laws. In entries
where it is not possible to include state and local
information, references direct the reader to
resources for further research.
The work contains approximately 200 articles of
2,000-5,000 words each, organized within 24 broad
subject categories. Each article begins with a brief
description of the issue’s historical background,
covering important statutes and cases. The body of
the article is divided into subsections profiling the
various U.S. federal laws and regulations concern-
ing the topic. A third section details variations of
the laws and regulations from state to state. Each
article closes with a comprehensive bibliography,
covering print resources and web sites, and a list of
relevant national and state organizations and agen-
Due to the constantly shifting landscape of the
Internet, websites acknowledged by authors in this
publication may no longer operate, or may operate
at a different URL. The editors are not responsible
for obsolete or changed URLs.
How to Use This Book
This first edition of the Gale Encyclopedia of
Everyday Law has been designed with ready refer-
ence in mind.
Entries are arranged alphabetically with-
in 24 broad categories. All entries are
spelled-out in the Table of Contents.
Boldfaced terms direct readers to glossary
terms, which can be found at the back of the
second volume.
A comprehensible Overview of the
American Legal System details civil and
criminal procedure; appeals; small claims
court; in pro per representation; differences
between local codes and state codes; and the
difference between statutes and regulations.
A list of State and Federal Agency Contacts
gives websites that lead the user to various
state and federal agencies and organizations,
which can be found at the back of the second
•A General Index at the back of the second
volume, covers subject terms from throughout
the encyclopedia, case and statute titles, per-
sonal names, and geographic locations.
This Page Intentionally Left Blank
Advisory Board
In compiling this edition, we have been fortu-
nate in being able to call upon the following peo-
ple, our panel of advisors who contributed to the
accuracy of the information in this premiere edition
of the Gale Encyclopedia of Everyday Law. To them
we would like to express sincere appreciation:
Glen-Peter Ahlers, Sr.
Associate Dean of Information Services
Barry University
Dwayne O. Andreas School of Law
Orlando, FL
Susana Carmargo-Pohl
Head of Reference & Electronic Services
Rutgers Law Library
Rutgers University Law School
Newark, NJ
Matthew C. Cordon
Assistant Professor of Law & Reference Librarian
Baylor University Law School
Waco, TX
Mary Alice Durphy
Legislative Assistant
Baker & Hostetler LLP
Washington, DC
Mark D. Engsberg
International Law Librarian
Lillian Goldman Law Library
Yale Law School
New Haven, CT
Jim Heller
Director of the Law Library and
Professor of Law
College of William & Mary
Williamsburg, VA
Susanna Marlow
Former Head of Reference Services
Ohio State University
Moritz Law Library
Columbus, OH
Matt Morrison
Reference/Electronic Information Services
University of Kentucky
College of Law Library
Lexington, KY
Eric L. Welsh
Head of Research Services
Regent University Law Library
Virginia Beach, VA
Lauren Barrow, James Cahoy, Matthew C.
Cordon, Richard Cretan, J. Alicia Elster, Mark D.
Engsberg, Lauri Harding, Kristy Holtfreter, Sunwoo
Kahng, Anne Kevlin, Frances Lynch, George A.
Milite, Melodie Monahan, Joe Pascarella, Monica L.
P. Robbers, Thomas W. Scholl, III, Scott Slick,
Sherrie Voss Matthews, Eric L. Welsh
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Basis of the American Legal System
The legal system of the United States is adminis-
tered and carried on by the official branches of gov-
ernment and many other authorities acting within
their official lawmaking capacity. The original basis of
the law in this country is the United States Constitu-
tion, which lays the framework under which each of
the different branches of government operates. The
Constitution also guarantees the basic civil rights of
the citizens of the United States. All authority of the
federal government originates from the Constitu-
tion, and the Constitution serves as the supreme law
of the land. The Constitution grants to the federal
government certain enumerated powers, and grants
to the states any power not specifically delegated to
a branch of the federal government. Under this sys-
tem, states retain significant authority and autono-
my. The constitutions in each of the fifty states con-
tain many similar provisions to those in the U.S.
Constitution in terms of the basic structure of gov-
ernment. Under the federal and state constitutions,
the United States legal system consists of a system of
powers separated among branches of government,
with a system of checks and balances among these
Legislative Branches
The legislative branch is the primary law-making
body among the three branches, although authority
emanating from the other branches also constitutes
law. The legislative branch consists of Congress, and
is subdivided into two lower houses, the House of
Representatives and the Senate. In addition to the
powers granted to Congress, the Constitution sets
forth specific duties of both the House and the Sen-
ate. Each Congress meets for two sessions, with each
session lasting two years. For example, the 107th
Congress met in its first session in 2001, and meets
in its second session in 2002. State legislatures are
structured similarly, with the vast majority of these
legislatures consisting of two lower houses.
Judicial Branches
The judicial branch in the federal system consists
of three levels of courts, with the Supreme Court
serving as the highest court in the land. The interme-
diate courts in the federal system are the thirteen
Courts of Appeals. The United States is divided by
circuits, with each circuit consisting of a number of
states. The Fifth Circuit, for example, consists of
Texas, Mississippi, and Louisiana. Each Court of Ap-
peals has jurisdiction to decide federal cases in its re-
spective circuit. The trial level in the federal judicial
system consists of the District Courts. Each state con-
tains at least one district, with larger states contain-
ing as many as four districts. Congress has also estab-
lished a number of lower federal courts with
specialized jurisdiction, such as the bankruptcy
courts and the United States Tax Court.
Most state court systems are similar to that of the
federal system, with a three-tiered system consisting
of trial courts, appellate courts, and a highest court,
which is also referred to as a ‘‘court of last resort.’’
The names of the courts are similar from state to
state, such as superior court, court of appeals, and
supreme court. However, some states do not follow
this structure. For example, in New York, the trial
level court is the Supreme Court, while the court of
last resort is the Court of Appeals. Texas, as another
example, has two highest courts— the Supreme
Court and the Court of Criminal Appeals. In addition
to the trial level courts, small claims courts or other
county courts typically hear small claims, such as
those seeking recovery of less than $1000.
Executive Branches
The federal Constitution vests executive power in
the President of the United States. The President also
serves as the Commander in Chief of the Armed
Forces and has the power to make treaties with other
nations, with the advice and consent of the Senate.
Besides those powers enumerated in Article II of the
Constitution, much of the power of the executive
branch stems from the executive departments, such
as the Department of the Treasury and the Depart-
ment of Justice. Congress has the constitutional au-
thority to delegate power to administrative agencies,
and many of these agencies fall under the executive
branch and are known as executive agencies. Con-
gress also has the authority to create agencies inde-
pendent of the other branches of government, called
independent agencies. Authority emanating from ex-
ecutive and independent agencies is law, and it is
similar in many ways to legislation created by legisla-
tures or opinions issued by courts. State executive
branches and administrative agencies are similar to
those of their federal counterparts.
Constitutional Authority
Interpretation of the Constitution
The federal Constitution is not a particularly
lengthy document, and does not provide many an-
swers to specific questions of law. It has, instead,
been the subject of extensive interpretation since its
original ratification. In the famous 1803 case of Mar-
bury v. Madison, Chief Justice John Marshall wrote
an opinion of the Supreme Court, which stated that
the judicial branch was the appropriate body for in-
terpreting the Constitution and determining the con-
stitutionality of federal or state legislation. Accord-
ingly, determining the extent of power among the
three branches of government, or determining the
rights of the citizens of the United States, almost al-
ways requires an evaluation of federal cases, in addi-
tion to a reading of the actual text of the Constitu-
Powers of Congress
Most of the enumerated congressional powers are
contained in section 8 of Article I of the Constitution.
Many courts have been asked to review congressio-
nal statutes to determine whether Congress had the
constitutional authority to enact such statutes.
Among these powers, the power of Congress ‘‘to reg-
ulate [c]ommerce among the several [s]tates’’ has
been the subject of the most litigation and outside
debate. A number of cases during the New Deal era
under President Franklin D. Roosevelt considered
the breadth of this provision, which is referred to as
the Commerce Clause. After the Supreme Court de-
termined that many of these statutes were unconsti-
tutional, Roosevelt, after a landslide election in 1936,
threatened to add additional justices to the court, in
order to provide more support for his position with
respect to the pieces of legislation passed during the
New Deal era (the reason he gave to Congress at the
time was that many of the justices were over the age
of seventy, and could no longer perform their job
function, but the general understanding was that he
wanted justices that would approve the New Deal
legislation as constitutional). The threat of this so-
called ‘‘Court-packing’’ plan succeeded, and the
Commerce Clause has been construed very broadly
since then. Other powers enumerated in Article I are
generally construed broadly as well.
Civil Rights Provisions in the Constitutions
The main text of the Constitution does not pro-
vide rights to the citizens of the United States. These
rights are generally provided in the many amend-
ments to the Constitution. The first ten amend-
ments, all ratified in 1791, are called the ‘‘Bill of
Rights,’’ and confer many of the cherished and fun-
damental rights to the citizens of the United States.
Among the rights included in the Bill of Rights are
the freedoms of speech and religion (First Amend-
ment); right to keep and bear arms (Second Amend-
ment); right to be free from unreasonable searches
and seizures (Fourth Amendment); right to be free
from being compelled to testify against one’s self in
a criminal trial (Fifth Amendment); right to due pro-
cess of law (Fifth Amendment); right to a jury trial
(Sixth Amendment); and right to be free from cruel
and unusual punishment (Eighth Amendment).
Between 1791 and 1865, no constitutional amend-
ments were ratified that provided civil rights to citi-
zens. However, at the conclusion of the Civil War and
during the reconstruction period following the war,
three major amendments were added to the Consti-
tution. The first was the Thirteenth Amendment, rati-
fied in 1865, which finally abolished slavery and in-
voluntary servitude in the United States. The
Fourteenth Amendment, ratified in 1868, provided
some of the most significant rights to citizens, includ-
ing the guarantee of equal protection of the laws and
prohibited denial of life, liberty, or property without
due process of law. The Fifteenth Amendment, rati-
fied in 1870, provided that the right to vote could not
be abridged on account of race, color, or previous
condition of servitude. Fifty years later, women were
guaranteed the right to vote with the ratification of
the Nineteenth Amendment in 1920.
Application of Constitutional Amendments
Like other constitutional provisions, the judicial
branch is the appropriate body to interpret the Bill
of Rights and other amendments to the Constitution.
The plain language of the amendments can cause
some confusion, since some, by their own terms,
they apply specifically to Congress, while other apply
specifically to states. For example, the First Amend-
ment begins, ‘‘Congress shall make no law respect-
ing an establishment of religion . . .’’ Similarly, the
Fourteenth Amendment contains a provision that
states, ‘‘No State shall make or enforce any law which
shall abridge the privileges and immunities of the cit-
izens of the United States . . .’’ Modern courts have
resolved some of these questions by ruling that the
Due Process Clauses of the Fifth and Fourteenth
Amendments incorporate these provisions, so many
provisions apply to both the federal and state gov-
ernments, despite the language in the Constitution.
State Constitutions
Many state constitutions are structured similarly
to the federal Constitution, except that most are
more detailed than the federal Constitution. Most
citizens are guaranteed basic civil rights by both the
federal Constitution and their relevant state constitu-
tions. For example, it is common for state constitu-
tions to include provisions guaranteeing freedom of
speech or equal protection, and most are phrased
similarly to the provisions in the First and Fourteenth
Amendments. Since the federal Constitution is the
supreme law of the land, any rights provided in it are
guaranteed to all citizens and cannot be lost because
a state constitution’s provisions conflict with the cor-
responding provision in the federal Constitution. A
state may provide greater rights to citizens than
those provided in a federal counterpart, but may not
remove rights guaranteed under the federal doc-
trine. Section 10 of Article I of the Constitution also
prohibits states from making certain laws or conduct-
ing certain acts, such as passing an ex post facto law
or coining money.
International Treaties
Authority of Treaties
Article VI of the Constitution provides, ‘‘This Con-
stitution, and the Laws of the United States which
shall be made in Pursuance thereof; and all Treaties
made, or which shall be made, under the Authority
of the Untied States, shall be the supreme Law of the
Land.’’ An international treaty is generally considered
to be on the same footing as a piece of legislation.
If a treaty and a federal statute conflict, the one en-
acted at a later date, or the one that more specifically
governs a particular circumstance, will typically gov-
ern. State legislation may not contradict provisions
contained in a treaty. Similarly, states are forbidden
from entering into treaties under the provisions in
Article I, Section 10.
Creation of Treaties and Other
International Agreements
The power to enter into treaties is vested in the
President, though the executive must act with the ad-
vice and consent of the Senate, and receive the con-
currence of two-thirds of the Senate before a treaty
is ratified. The various Presidents have also entered
into executive agreements with foreign nations when
the President has not been able to receive approval
from two-thirds of the Senate, or has not sought ap-
proval from the Senate. While nothing in the Consti-
tution permits or forbids this practice, executives
have entered into thousands of such agreements.
Federal and State Legislation
Federal Legislative Process
Members of Congress have the exclusive authority
to introduce legislation to the floor of either the
House of Representatives or Senate. Legislation is in-
troduced to Congress in the form of bills. Most bills
can originate either in the Senate or in the House,
with the exception of bills to raise revenue, which
must originate in the House under Article I of the
Constitution. When a bill is introduced, it is designat-
ed with a bill number, and these bill numbers run se-
quentially through two sessions of Congress. For ex-
ample, the fifty-sixth bill introduced in the House
during the 108th Congress will be designated as
‘‘H.R. 56’’ (‘‘H.R.’’ is an abbreviation for House of
Representatives). Likewise, the twelfth bill intro-
duced in the Senate during the same Congress will
be designated ‘‘S. 12.’’ It is not uncommon that bills
are introduced in both the House and the Senate si-
multaneously that address the same subject matter.
These bills are referred to as ‘‘companion bills,’’ and
the actual law that is passed often contains compo-
nents from both the enacted bill and its companion
bill. Thousands of bills are introduced in the House
and Senate each session, and a relatively small pro-
portion is actually passed into law.
After a bill has been introduced, it is sent to one
or more appropriate committees in the House or
Senate. The committee or committees analyze the
provisions of the bill, including the reasoning for
such legislation and the expected effect of the bill if
it were enacted into law. A committee conducts hear-
ings, where it hears testimony from experts and
other parties that can provide information relevant
to the subject matter covered by a bill. A committee
may also order the preparation of an in-depth study
(called a ‘‘committee print’’) that provides additional
background information, often in the form of statis-
tics and statistical analysis. A number of additional
documents may also be produced during the com-
mittee stage, and practically every action is docu-
mented, including the production of written tran-
scripts of committee hearings. A committee may
amend or rewrite a bill before it approves it, which
generally extends the length of time that a bill re-
mains at the committee stage. The vast majority of
bills, in fact, never leave the committee stage, and
these bills are commonly said to have ‘‘died in com-
When a committee completes its consideration of
a bill, it reports the bill back to the floor of the House
or Senate. A committee ordinarily accompanies the
bill with a report that summarizes and analyzes each
bill’s provisions, and provides recommendations re-
garding the passage of the bill. Reports, as well as
other documents, are designated with unique num-
bers and are made available to the public. An exam-
ple of a report number is ‘‘H.R. Rep. No. 108-15,’’
which indicates that it is the fifteenth report submit-
ted to the House of Representatives in the 108th
Members of the houses of Congress debate the
bills on the floor of the relevant house. These de-
bates are transcribed, and the text of the transcrip-
tion is routinely available to the public. During this
period, the relevant chamber may amend the bill.
Once the debates and other activities are completed,
the chamber votes to pass the bill. If the chamber ap-
proves the bill, it is sent to the other chamber, and
the entire process is repeated. The version of the bill
sent to the other chamber of Congress is called the
‘‘engrossed’’ version of the bill. The other chamber
must pass this version exactly as it appears in the en-
grossed version, or else the bill, assuming the second
chamber passes it, is sent back to the original cham-
ber for future consideration. If the House and Senate
cannot agree to a single version of a bill, a confer-
ence, or joint, committee may be convened, where
members of both chambers may compromise to
complete a version of a bill acceptable to both cham-
bers. If this conference committee is successful in
doing so, the bill is returned to the House and Senate
for another vote.
Once a bill passes both the House and the Senate,
it is sent to the President as an ‘‘enrolled’’ bill. The
President may sign the bill and make it law. If the
President does not sign the bill, and Congress is still
in session, the bill becomes law automatically after
ten days. If the President does not sign the bill, and
Congress adjourns within ten days, the bill does not
become law. The President may also reject the bill by
vetoing it. Congress may override this veto with a
two-thirds majority vote in both chambers.
Types of Laws Passed by Congress
Laws that apply to and are binding on the general
citizenry are called public laws. Each public law is
designated with a public law number, and the num-
bering system is similar to that of reports and other
documents described above. For example, Public
Law Number 108-1 represents that this is the first
public law passed in the 108th Congress. Congress
may also pass laws that apply only to individual citi-
zens or small classes of individuals. These laws are
called private laws, and are usually passed in the con-
text of immigration and naturalization. Private laws
are numbered identically to public laws, such as, for
example, Private Law Number 108-2, which is the sec-
ond private law passed in the 108th Congress.
Congress also passes various types of resolutions,
some of which do not constitute law and do not con-
tain binding provisions equivalent to public laws. A
single chamber of Congress may pass simple resolu-
tions, which relate to the operations of that chamber
or express the opinion of that chamber on policy is-
sues. Both chambers may pass a concurrent resolu-
tion, which relate to the entire operation of Con-
gress, or the express opinion of the entire Congress.
Neither simple nor concurrent resolutions constitute
law, and are not submitted to the President for ap-
proval. Joint resolutions, on the other hand, have the
same binding effect as bills, and must be submitted
to the President for final approval. Appropriations
and similar measures often enter Congress as joint
resolutions. Some actions, particularly the introduc-
tion of a constitutional amendment, require the use
of a joint resolution, and many of these actions do
not require presidential approval.
Publication of Federal Legislation
Practically all documents produced by Congress
during the legislative process are published by the
United States Government Printing Office and made
available to the public. Most of items produced since
1995 are now also available on the Internet in elec-
tronic formats. Legislation first appears in the form
of a slip law, named as such because the Government
Printing Office prints these on unbound slips of
paper. At the conclusion of a session of Congress, the
laws passed during that session are compiled and ap-
pear in the form of session laws, organized in chro-
nological order. The official source for federal ses-
sion laws is the United States Statutes at Large.
Most legislation in force in the United States is or-
ganized into a subject matter arrangement and pub-
lished in the United States Code. A statute contained
in the United States Code is called a codified statute.
The U.S. Code consists of fifty titles, with each title
representing a certain area of law. For example, Title
17 contains the copyright laws of the United States;
Title 26 contains the Internal Revenue Code; and
Title 29 contains most of the labor laws of the United
Relationship Between Federal and State
Federal legislation is superior to state legislation
under the provisions of Article VI of the U.S. Consti-
tution. Thus, the courts will resolve any potential
conflicts between a state statute and a federal statute
by enforcing the federal statute. Federal superiority,
however, does not mean that states are forbidden
from enacting legislation covering the same subject
matter as a federal statute; it is common for both fed-
eral and state legislation to govern similar areas of
law. This is true in such areas as securities regulation,
consumer protection, and labor law. Federal labor
relations laws, for example, apply specifically to pri-
vate employers, but do not apply to public employ-
ers. Labor relations between public employers and
their employees are governed generally by state
labor relations laws.
If Congress wants an area of law to be governed
solely by federal legislation, Congress may include a
provision that such legislation preempts any state
law related to the subject matter covered by the fed-
eral statute. Congress may preempt state regulation
expressly through specific statutory language, or by
implication based on the structure and purpose be-
hind a federal statute. Examples of legislation that
contain preemption provisions are the Employment
Retirement Income Security Act of 1974, the Com-
prehensive Environmental Response, Compensation
and Liability Act, and the Toxic Substance Control
The Tenth Amendment to the federal Constitu-
tion reserves any power not delegated to the federal
government to the states, or to the people. However,
there have been questions among the courts and
scholars regarding the extent of this amendment,
and it has not generally been construed to grant any
special powers to the states through its enactment.
Rather, it is a clause that reserves power to the states
where Congress has not acted, subject to some limi-
Legislative Process in State Legislatures
Most state legislatures follow similar processes as
Congress. Each state legislature, with the exception
of Nebraska, consists of two chambers. Most legisla-
tures meet in regular session annually, though some
meet biannually with special called sessions held pe-
riodically. In many states, the process of introducing
a bill is streamlined, where only one chamber may in-
troduce certain types of bills. Several states also per-
mit citizens to initiate legislation, which is not possi-
ble in Congress. Some states allow citizens to vote
directly on a proposed piece of legislation. Other
states contain provisions that all citizens, once they
have received a requisite number of signatures, may
force the legislature to consider and vote on a partic-
ular issue.
Publication of State Legislation
Most states publish enacted legislation in a similar
manner as the publication of federal legislation. Laws
passed during each session of a respective legislature
are compiled as session laws, and laws currently in
force are compiled in a subject matter arrangement.
In most states, laws in force are compiled according
to a numbering system similar to the United States
Code, with title or chapter numbers representing the
subject matter of the statute. Other states, most no-
tably California and Texas, have created codes that
are named to represent the subject matter of the
statues contained in them. For example, the Califor-
nia Family Code contains the family law statutes of
that state; similarly, the Texas Finance Code contains
the statutes governing many of the financial opera-
tions in that state.
Bills introduced in every legislature during a cur-
rent session are now available on the various legisla-
tures’ Internet sites, as are the current statutes. How-
ever, very little documentation from the legislative
process is published in a fashion to make it readily
available to interested members of the public. Legal
researchers interested in such information must
often travel to their respective state capitol to obtain
this information.
Interpretation of Legislation
The language of a statute may be somewhat am-
biguous regarding their application, and the courts
have the responsibility to interpret or construe the
language to determine the proper application of the
statute. Courts have developed ‘‘canons of construc-
tion’’ to aid in this interpretation. The most basic
form of statutory construction is consideration of the
text and plain meaning of a statute. This consider-
ation includes the process of defining the terms and
phrases used in statute, including the use of a dictio-
nary to derive the common meaning of a term.
Courts will also consider the application of the stat-
ute in the context of the broader statutory scheme,
which can often indicate what the purpose of the
statute was when the statute was enacted.
If the plain meaning of a statute cannot be derived
from the statute or statutory scheme, courts may
look to the history of the legislation to determine the
intent of the legislature when it enacted the statute.
It is possible that Congress or a state legislature spe-
cifically addressed a concern during the legislative
process, and members of the legislature may have
made statements indicating how the legislature in-
tended for the statute to apply in a particular circum-
stance. Locating this information requires a legal re-
searcher to locate documentation prepared during
the legislative process, in a process called ‘‘compil-
ing’’ a legislative history.
Substantive vs. Procedural Laws
Many of the laws passed by legislatures are consid-
ered ‘‘substantive’’ laws, because they create, define,
and regulate legal rights and obligations. If an indi-
vidual has been harmed and wants to bring litigation
against the person or group that harmed him or her,
substantive statutes often provide the law that gov-
erns that situation, and also include provisions re-
garding the appropriate damages that can be award-
ed to the plaintiff should the plaintiff successfully
prove his or her case.
By comparison, procedural laws are those that set
forth the rules used to enforce substantive laws.
These laws may dictate the steps that a litigant must
take to bring a suit to court, or may dictate the appro-
priate courts where a case may be brought. Some
statutes, called statutes of limitations, also limit the
amount of time in which a particular case may be
brought. Procedural laws are as important as sub-
stantive laws in many respects, because a party with
a valid claim may nevertheless lose a case if the prop-
er procedures are not followed, or if the claim is not
filed in the time required under a statute of limita-
Criminal Law vs. Civil Law
Criminal laws are those designed to punish pri-
vate parties for violating the provisions contained in
these laws. Violations of these laws are crimes against
society, and are brought as criminal actions against
the alleged offenders by state or federal attorneys
acting on behalf of the people. All citizens of the
United States are guaranteed rights in criminal inves-
tigations and criminal trials, and law enforcement of-
ficers and prosecutors must follow certain proce-
dures in order to protect these rights. For this
reason, criminal procedure differs significantly from
the procedures for bringing a civil case to court.
Among the most fundamental rights is that all ac-
cused individuals are presumed innocent until the
state proves them guilty beyond a reasonable doubt.
This places the burden of proof in a criminal action
on the state, rather than on the defendant. Title 18
of the U.S. Code contains most of the federal crimi-
nal laws, while state penal codes generally contain
the state criminal laws.
The term ‘‘civil law’’ has different meanings in two
distinct contexts. First, it refers to a system of law
that differs from the common law system employed
by the United States. This is discussed below. Sec-
ond, it refers to a type of law that defines rights be-
tween private parties, and, as such, differs from crim-
inal law. Civil laws are applicable in such situations
as when two parties enter into a contract with one
another, or when one party causes physical injury to
another party. The procedures that must be followed
in a civil court case are generally less stringent than
those in a criminal case. Some civil laws include pro-
visions designed to punish wrongdoers, usually in
the form of punitive, or exemplary, damages that are
paid to the other party.
Municipal Ordinances and Other Local Laws
Local government entities are generally created by
the various states, and are typically referred to as mu-
nicipalities. The powers of a municipality are limited
to those granted to it by the state, usually defined in
the municipal charter that created the municipality.
Charters are somewhat analogous to state constitu-
tions, and usually were created by vote of the voters
in the municipality. Local governing bodies may in-
clude a city council, county commission, board of su-
pervisors, etc., and these bodies enact ordinances
that apply specifically to the locality governed by
these bodies. Ordinances are similar to state legisla-
tive acts in their function. In many municipalities, or-
dinances are organized into a subject matter arrange-
ment and produced as municipal codes.
Local laws often govern everyday situations more
so than many state or federal laws. These laws in-
clude many provisions for public safety, raise reve-
nue through the creation and implementation of
sales and other local taxes, and govern the zoning of
the municipality. Decisions regarding education are
also generally made through local boards of educa-
tion, though these boards are entities distinct from
the municipal government. Local laws cannot contra-
dict federal or state law, including statutory or consti-
tutional provisions.
Cases and Case Law in the Judicial
Systems of the United States
Adversarial System
The judicial system in the United States is prem-
ised largely on the resolution of disputes between
adversaries after evidence is presented on both sides
to a judge or jury during a trial. Civil cases usually in-
volve the resolution of disputes between private par-
ties in such areas as personal injury, breach of con-
tract, property disputes, or resolution of domestic
relations disputes. Criminal cases involve the prose-
cution by the state or federal government of an indi-
vidual accused of violating a criminal statute. The
rules and procedures that parties must follow differ
between criminal and civil trials, although similarities
exist between the two types of rules. Some courts,
such as probate courts and juvenile courts, have
been developed to hear specific types of suits in a
particular jurisdiction. Other tribunals, such as small
claims courts and justice of the peace courts, have
also been established to resolve minor disputes or
try cases involving alleged infractions of minor
crimes. The systems by which parties appeal deci-
sions are also premised on an adversarial process.
Civil Trials
A party commences a civil trial by filing a petition
or complaint with an appropriate court. The party
bringing the suit is usually referred to as the plaintiff,
though in some cases the party is referred to as the
petitioner. A petition or complaint must generally
name the parties involved, the cause of action, the
legal theories under which recovery may be appro-
priate, and the relief sought from the court. Once the
petition or complaint is filed with the court, the
plaintiff must serve the party or parties against whom
the action was brought. The party against whom the
case is brought is referred to as the defendant,
though in some cases this party is referred to as the
respondent. A defendant generally responds to a pe-
tition or complaint by filing an answer admitting or
denying liability, though the filing of a pre-answer
motion or motions may precede this.
A number of events occur between the time a pe-
tition or complaint is filed with a court and the time
of trial. During the pretrial stage, the parties will usu-
ally file a series of motions with the court, requesting
the addition or removal of a party, limits on evidence
that may be presented at trial, or the complete dis-
missal of the case in its entirety. Parties also collect
information in a process called discovery. During dis-
covery, parties file interrogatories, which are written
questions submitted to the other party or parties;
seek admissions to certain facts from the other party
or parties; and take depositions, which are oral ques-
tions asked of witnesses who are under oath. The
pretrial stage is very important to the eventual reso-
lution of a dispute, and many cases are settled by the
parties outside of court or dismissed before the case
actually goes to trial.
When a civil case goes to trial, a judge or a jury
may try it. If a judge tries a case, he or she makes find-
ings of facts and rulings of law, and the trial is usually
referred to as a bench trial. If a jury tries a case, the
jury makes findings of facts, such as whether a con-
tract existed or whether one party assaulted another
party. However, the judge makes rulings of law in a
jury trial. A plaintiff who wants a jury to try his or her
case must usually request it as a jury demand, or else
the case will proceed as a bench trial. Some types of
cases, such as family law cases, are never tried with
juries. If a jury is requested, the case proceeds with
the selection of jurors. During this time, a specified
number of jurors are selected randomly from a pool
of potential jurors. Both parties are permitted to
question the jurors in a process called voir dire, and
may ask that a certain number of jurors be removed
from the final jury.
At the beginning of a trial, both sides give opening
statements, providing an overview of the evidence
that will be presented during the trial. After opening
statements, both sides present evidence by question-
ing its own witnesses (called direct examination) and
introducing physical items into evidence. Each party
has the right to cross-examine witnesses produced
by the opposing party. All jurisdictions have devel-
oped detailed rules of evidence that must be fol-
lowed by both parties. Many of these rules govern
the questions that may be asked on direct or cross-
examination of witnesses. If one party enters some-
thing into evidence that violates the rules of evi-
dence, the other party must raise an objection to the
entry of this evidence, and the judge may sustain or
overrule this objection. Some violations of the rules
of evidence may result in a mistrial, in which the en-
tire trial process must be repeated because it would
be unfair to continue with the case. Even if the rule
violation is not enough to cause a mistrial, a party
who may wish to appeal an adverse ruling must raise
objections during trial to ‘‘preserve error’’ for future
consideration by appellate courts. Appellate courts
will generally only consider points of possible error
when the party seeking the appeal raised an objec-
tion and preserved error at the trial level.
A plaintiff generally has the burden to prove a
case, and always introduces evidence before the de-
fendant. Because a plaintiff has the burden of proof,
a defendant is not required to introduce evidence,
though the defendant will almost always do so. After
the defendant concludes his or her presentation of
evidence, the plaintiff may present evidence that re-
buts evidence offered by the defense. Once all evi-
dence has been introduced, both parties make clos-
ing arguments. Closing arguments are followed by
jury deliberation, in which the jury determines
whether the plaintiff or plaintiffs deserve to recover,
and what amount of damages is appropriate. A jury
relies on jury instructions (or court charges) given to
them by the court, which describe the law and proce-
dure that the jury must use to make its decision. The
percentage of jurors that must be in agreement to
render a decision ranges among different jurisdic-
Once a jury renders a verdict, the parties may file
post-trial motions that may still affect the outcome
of the trial. These motions may include motion for
new trial, which is usually awarded if something oc-
curred during the trial that rendered the process un-
fair to one of the parties; or a motion for judgment
notwithstanding the verdict (commonly referred to
as ‘‘JNOV’’), where the court renders judgment for
one party, though the jury decided in favor of the
other party, because the evidence presented at trial
did not support the jury’s decision. A party who wish-
es to appeal an adverse decision may also file a notice
of appeal with the trial court, indicating that it wishes
to appeal the ruling to an appellate court. Filing a no-
tice of appeal within a certain time frame (30 days is
common) is required in most jurisdictions in order
to appeal a case to a higher court.
Criminal Trials
State and federal prosecutors initiate criminal
cases, which involve charges that an individual has vi-
olated a criminal law. In all criminal cases, the state
or federal government serves as the plaintiff, while
the person charged is the defendant. Criminal laws,
which are promulgated by the various legislatures,
consist of two major types of laws: felonies and mis-
demeanors. Felonies consist of the more serious
crimes, and carry with them the most serious punish-
ment. Both felonies and misdemeanors can result in
jail or prison time, and both will usually result in a
significant fine.
Citizens are guaranteed a number of rights in the
context of criminal prosecution, and exercise of
these rights is often the focus of criminal trials. The
Fourth Amendment of the U.S. Constitution requires
that law enforcement officials obtain a search war-
rant, upon showing of probable cause, before con-
ducting searches or seizures of individuals or the
property of individuals. The Fifth and Sixth Amend-
ments contain a number of guarantees to all citizens
that must be provided in a criminal trial. If a citizen’s
constitutional rights have been violated, the state
may be required to proceed without the introduc-
tion of relevant evidence obtained illegally, or may be
required to terminate the criminal action altogether.
When a person is arrested for violation of a crimi-
nal law, he or she must generally be brought before
a judge within twenty-four hours of the arrest. The
judge must inform the individual of the charges
brought against him or her, and set bail or other con-
dition of release. After other preliminary matters, the
defendant is formally charged in one of two ways.
First, the prosecutors may file a ‘‘trial information,’’
which formally states the charges against the defen-
dant. In more serious cases, such as murder trials, a
panel of citizens will be convened as a grand jury to
consider the evidence against the defendant. A grand
jury, unlike a trial jury, only determines whether suf-
ficient evidence to support the criminal charge ex-
ists, and will issue an indictment if evidence is suffi-
cient. Either the filing of a trial information, or the
return of an indictment, formally begins the trial pro-
cess by charging the defendant. Once the defendant
has been formally charged, he or she must appear for
an arraignment, where the court reads the charge
and permits the defendant to enter a plea. The de-
fendant may enter a plea of guilty or not guilty at this
time. Where it is permitted or required as a prerequi-
site to an insanity defense, the defendant may enter
a plea of not guilty by reason of insanity. In some ju-
risdictions, including federal courts, the defendant
may plead nolo contendere, or ‘‘no contest,’’ which
means that the defendant does not contest the
charges. Its primary effect is the same as a plea of
guilty, and its primary significance is that a plea of
nolo contendere cannot be introduced into evidence
in a subsequent civil action as proof of the defen-
dant’s guilt in the criminal action. Nolo contendere
pleadings may usually only be entered with the per-
mission of the court.
The Sixth Amendment guarantees the accused in
a criminal prosecution a speedy and public trial.
When a defendant enters a plea of not guilty, the trial
is usually scheduled within ninety days of the filing
of the trial information or indictment. The Sixth
Amendment also guarantees citizens accused of
crimes the right to a jury trial, though a defendant
may waive this right and request a bench trial. During
the pre-trial stage, the defendant may file motions
with the court, such as those requesting exclusion of
evidence from a trial because the evidence may have
been obtained illegally. A defendant may also engage
in pretrial discovery, including requests to view evi-
dence in the possession of the prosecution. The
prosecution and the defendant may engage in plea
bargaining, whereby the prosecution may agree to
reduce charges against the defendant in exchange
for a plea of guilty or nolo contendere.
When a case proceeds to a jury trial, the parties
have an opportunity to question prospective jurors,
similar to the selection of jurors in a civil case, except
that the final number of jurors in a criminal trial is
usually larger than the number used in a civil case.
Both the state and the defendant have the opportu-
nity to strike jurors from the final jury. Once the final
jury is selected and the trial begins, the prosecution
reads the indictment or trial information, reads the
defendant’s plea, and makes an opening statement.
The defendant may make an opening statement im-
mediately after the prosecution, or may wait to do so
until the time the defense introduces its evidence.
Introduction of evidence in a criminal case is similar
to that of a civil case, and the prosecution bears the
burden of proving that the defendant is guilty be-
yond a reasonable doubt. Until the state proves oth-
erwise, the defendant is presumed innocent. The de-
fendant is not required to introduce evidence since
the prosecution bears the burden of proof, but if the
defendant does produce evidence, the prosecution
may present rebuttal evidence and cross-examine
any witnesses. Once both sides have presented the
evidence, each party may give a closing argument.
A jury in a criminal trial must return a unanimous
verdict of ‘‘guilty’’ or ‘‘not guilty.’’ If a jury fails to
reach a unanimous verdict, it is referred to as a
‘‘hung’’ jury, and a mistrial is declared. In such a situ-
ation, a new jury must retry the entire case. If the jury
returns a unanimous verdict of guilty, then the jury’s
duty is usually complete, since a jury in most jurisdic-
tions is not involved in the sentencing of the defen-
dant. A judge, when determining an appropriate sen-
tence for a convicted defendant, considers testimony
and reports from a number of different sources, such
as probation officers and victims. The federal govern-
ment and many state governments have established
detailed sentencing guidelines that must be followed
by judges in criminal cases. In addition to a sentence
of imprisonment or of a fine, a court may place a con-
victed defendant on probation, meaning that the de-
fendant is placed under the supervision of a local
correctional program. A defendant must comply with
specific terms and conditions of the probation in
order to avoid time in prison or jail. Similar to proba-
tion, a judge may also give the defendant a deferred
judgment, or may suspend the defendant’s sentence.
In either case, the defendant is given the opportunity
to remove the crime from his or her criminal record
by successfully completing a period of probation.
If a party in a case is not satisfied with the out-
come of a trial decision, he or she may appeal the
case to a higher court for review. Not all parties have
the right to appeal, however, and parties must follow
proper procedures for the higher court to agree to
hear the appeal. During trial, parties must ‘‘preserve
error’’ by making timely objections to violations of
the rules of evidence and other procedural rules.
After trial, the party seeking an appeal must file a no-
tice of appeal with the trial court. The opposing party
may file a notice of cross-appeal if that party is not
satisfied with the final judgment from the lower
court. The party bringing the appeal is usually re-
ferred to as the appellant (though in some cases this
party is the petitioner), and the opposing party is re-
ferred to as the appellee (or respondent in some
Once a party has filed a notice of appeal, both par-
ties must comply with a series of rules of appellate
procedure to continue with the appeal. The appel-
lant usually requests that the transcript of the trial
court proceeding from the trial court reporter be
sent to the court of appeals. The appellant must also
pay a docketing or similar fee with the court of ap-
peals. Both parties then file briefs with the appellate
court stating the facts from the case, stating the legal
arguments and reasons for appeal, and requesting re-
lief from the appellate court. Both parties have ac-
cess to the other party’s briefs submitted to the
court. Parties also request an oral argument, where
both sides are given the opportunity to make their
legal arguments before the court, and answer ques-
tions from the appellate court justices. Appellate
courts do not hear testimony from witnesses or con-
sider evidence that was not introduced in the trial.
Rather, a court of appeals reviews the trial court pro-
ceeding to determine whether the trial court applied
substantive or procedural law to the facts of the case
correctly. At the end of the appeal, the court will
issue an opinion that states the conclusion of the
court of appeals.
Almost all judicial systems in the United States
consist of three tiers, and an intermediate appellate
court hears the first level of appeals. If a party is dis-
satisfied with an intermediate court’s opinion, the
party may seek an appeal by its jurisdiction’s court
of last resort. In many cases, the decision of a court
of last resort to hear an appeal is discretionary, and
a party must petition the court to hear the appeal (in-
termediate appellate courts, by comparison, typically
do not have this discretion). The United States Su-
preme Court is the court of last resort for all cases
in the United States, including the intermediate fed-
eral courts of appeals and the highest state courts.
The U.S. Supreme Court only hears cases involving
the application of federal law, and in most cases, the
decision to grant an appeal is completely discretion-
ary on the part of the Supreme Court. A party seek-
ing review from the Supreme Court must file a peti-
tion for writ of certiorari requesting that the Court
review the lower court’s decision, and if the Court
grants the writ, the Court orders the submission of
the lower court’s case. The Supreme Court grants a
writ of certiorari in a very small percentage of cases,
usually when there is a controversial issue of federal
law in question in the case.
Civil appeals and criminal appeals are similar, with
two main exceptions. First, with very few exceptions,
the state may not appeal an acquittal of a criminal in
a trial court case. Second, in some criminal cases, es-
pecially murder cases where the defendant has re-
ceived the death penalty, the right to appeal is guar-
anteed and automatic.
Jurisdiction and Venue
When a party bring a lawsuit in a court in the Unit-
ed States, the party must determine which court has
appropriate jurisdiction to hear the case, and which
court is the proper venue for such a suit. Jurisdiction
refers to the power of a court to hear a particular
case, and may be subdivided into two components:
subject matter jurisdiction and personal jurisdiction.
Venue refers to the appropriateness of a court to
hear a case, and applies differently than jurisdiction.
A court has proper subject matter jurisdiction if it
has been given the power to hear a particular type
of case or controversy under constitutional or statu-
tory provisions. For example, a county court of law
may have jurisdiction to hear cases and controversies
where the amount in controversy of the claim is less
than $5,000. If a claimant brings a case before the
county court with an amount in controversy of
$7,500, the court lacks jurisdiction to hear the case
and will dismiss it. Subject matter jurisdiction is often
a difficult issue with respect to the jurisdiction of fed-
eral courts, discussed below. Personal jurisdiction is
based on the parties or property involved in the law-
suit. In personam jurisdiction refers to the power of
a court over a particular person or persons, and usu-
ally applies when a party is a resident of a state or has
established some minimum contact with that state.
In rem jurisdiction, by comparison, refers to the
power of a court over property located in a particular
Venue is often confused with jurisdiction because
it applies when determining whether a particular
court may hear a case. A court may have jurisdiction
to hear a case, but may not be the proper venue for
such a case. Statutes often provide that proper venue
in a particular case is the county or location where
the defendant or defendants reside. Even if a court
in the county where the plaintiff resides has proper
jurisdiction to hear the case, it may not be the proper
venue because of a provision in a statute regarding
Jurisdiction of Federal Courts
Federal courts in the United States have limited
jurisdiction to hear certain claims, based primarily on
provisions in Article III of the U.S. Constitution. Fed-
eral courts can hear cases involving the application
of the Constitution, federal statutes, or treaties. Fed-
eral courts may also hear cases where the amount in
controversy is more than $75,000, and all of the par-
ties are citizens of different states. State courts may
also hear cases with federal questions or where par-
ties reside in different states. If a party brings a case
in state court and a federal court has jurisdiction to
hear the case, the opposing party may remove the
case to federal court. The federal court generally re-
views each case to determine whether jurisdiction is
appropriate. If federal jurisdiction is not appropriate,
the court remands the case to state court.
Some suits may only be brought in federal court,
such as those brought by or against the government
of the United States. Other examples are those in-
volving bankruptcy, patents, and admiralty.
Legal vs. Equitable Remedies
Some remedies available from courts are consid-
ered ‘‘legal’’ remedies, while others are considered
‘‘equitable’’ remedies. Legal remedies are usually
those involving an award of monetary damages. By
comparison, a court through use of an equitable
remedy may require or prohibit certain conduct
from a party. The distinction between legal and equi-
table remedies relates to the historic distinction be-
tween ‘‘law’’ and ‘‘equity’’ courts that existed in En-
gland as far back as the fourteenth century. Law
courts traditionally adhered to very rigid procedures
and formalities in resolving the outcome of a legal
conflict, while equity courts developed a more flexi-
ble system where judges could exercise more discre-
tion. This system transferred to the United States,
but today, most courts in the United States may hear
cases in both law and equity, although the procedure
and proof required to request an equitable remedy
may differ from the requirements to request a legal
remedy. Examples of equitable remedies are specific
performance of a contract, reformation of a contract,
injunctions, and restitution.
Procedural Rules of the Courts
In addition to procedural laws promulgated by
legislatures, judicial systems also adopt various rules
of procedure that must be followed by the courts and
parties to a case. Two main types of court rules exist.
First, some rules have general applicability over all
courts in a particular jurisdiction. Examples of such
rules are rules of civil procedure, rules of appellate
procedure, rules of criminal procedure, and rules of
evidence. Second, some rules apply only to a particu-
lar court, and are referred to as local court rules.
Many counties draft local court rules that apply to all
courts in those particular counties. Local court rules
are generally more specific than rules of general ap-
plicability, and both must be consulted in a given
Pro Se Litigants and the Right to
A litigant representing himself or herself, without
the assistance of counsel, is called a pro se litigant.
It is almost always advisable to seek counsel with re-
spect to a legal claim, if possible. Defendants in crim-
inal cases are entitled to legal representation, and a
lawyer will be provided to a criminal if the criminal
shows indigence. Such assistance in criminal cases is
usually provided by a public defender’s office. Claim-
ants in civil cases, on the other hand, are not entitled
to attorneys, though any of a number of legal aid so-
cieties may be willing to provide legal services free
of charge. Many of these legal aid societies are subsi-
dized by public agencies, and will accept a case only
if a person meets certain criteria, usually focusing on
the income of the party.
In a civil case, a court may appoint counsel after
considering a number of factors, including the validi-
ty of the party’s position, and the ability of the party
to try the case. A party who is indigent must usually
file a written motion with the court, explaining the
party’s indigence and need for counsel. An attorney
who provides free legal assistance is said to provide
a pro bono service. Attorneys are generally free to
determine when they will provide pro bono services,
and it is common in every jurisdiction for the num-
ber of litigants seeking the appointment of counsel
to outweigh the number of attorneys willing to pro-
vide pro bono services.
If a party must continue pro se, the rules regard-
ing sanctions of attorneys apply equally to this party.
A party must verify the accuracy and reasonableness
of any document submitted to the court. If any sub-
mission contains false, improper, or frivolous infor-
mation, the party may be liable for monetary or other
sanctions. Likewise, a pro se litigant may be held in
contempt of court for failure to follow the directions
of a court. Many courts provide handbooks that as-
sist pro se litigants in following proper trial proce-
Small Claims Courts and Other Local
Cases involving a relatively small amount in con-
troversy may be brought before small claims court.
These courts exist only at the state court level. The
maximum amount in controversy for a small claims
court is usually $1,000 for a money judgment sought,
or $5,000 for the recovery of personal property,
though these amounts vary among jurisdictions. Wit-
nesses are sworn, as they are in any trial, but the
judge in a small claims court typically conducts the
trial in a more informal fashion than in a trial at the
district court level. Judges may permit the admission
of evidence in a small claims action that may not be
admissible under relevant rules of evidence or rules
of procedure. One major exception is that privileged
communication is usually not admissible in a small
claims action. A small claims court usually only has
the power to award monetary damages. If a party is
unsatisfied with the judgment of the small claims
court, the party may ordinarily appeal the case to a
district court or other trial court.
Alternative Dispute Resolution
A variety of procedures may be available to par-
ties, which can serve as alternatives to litigation in
the court system. Alternative dispute resolution, or
ADR, has become rather common, because it is typi-
cally less costly and does not involve the formal pro-
ceedings associated with a trial. Parties usually enter
into one of two types of ADR: arbitration or media-
tion. If a case is submitted to arbitration, a neutral ar-
bitrator renders a decision that may be binding or
non-binding, depending on the agreement of the
parties. An arbitrator serves a function analogous to
a judge, though the presentation of each party’s evi-
dence does not need to follow the formal rules that
must be followed in a judicial decision. Though par-
ties are generally not able to appeal an arbitrator’s
award, parties may seek judicial relief if the arbitrator
acts in an arbitrary or capricious manner, shows bias
towards one of the parties, or makes an obvious mis-
take. Arbitration may be ordered by a court, may be
required under certain laws, or may be voluntary.
Mediation is similar to arbitration because it in-
volves the use of a neutral third party to resolve a dis-
pute. A mediator assists the parties to identify issues
in a dispute, and makes proposals for the resolution
of the dispute or disputes. However, unlike arbitra-
tors, a mediator does not have the power to make
a binding decision in a case. Also unlike arbitrators,
a mediator typically meets with each of the interest-
ed parties in private to hold confidential discussions.
Mediation may be court-ordered, may be required
under certain laws, or may be voluntary. A number
of organizations, including state bar associations,
offer mediation services.
A number of other forms of ADR exist. For exam-
ple, parties may employ the use of a fact finder, who
resolves factual disputes between two parties. In
some jurisdictions, parties may be required to sub-
mit a dispute to early neutral evaluation, where a
neutral evaluator provides an assessment of the
strengths and weaknesses of each party’s position.
Case Law in the Common Law System
Cases play a very important part in the legal sys-
tem of the United States, not only because courts ad-
judicate the claims of parties before them, but also
because courts establish precedent that must be fol-
lowed in future cases. The United States adopted the
common law tradition of England as the basis for its
legal system. Under the common law system, legal
principles were handed down from previous genera-
tions, first on an unwritten basis, then through the
decisions of the courts. Though legislatures possess
constitutional power to make law, in a common law
system there is no presumption that legislation ap-
plies to every legal problem in the area addressed by
the legislation. This differs from the legal systems
based on the civil law tradition derived from Roman
law (the use of the term civil law also refers to non-
criminal laws, as discussed below, and the two uses
of the term are distinct). In a civil law system, legisla-
tures develop codes that are presumed to apply to
all situations relevant to the code, and courts are em-
ployed only to adjudicate claims. The only state in
the United States that does not consider itself a
‘‘common law state’’ is Louisiana, which adopted the
civil law tradition based on its roots in French law.
Accordingly, the codes (legislation) in that state are
somewhat different than those in other states.
Courts in the United States follow the doctrine of
precedent, which was also adopted from the English
common law system. Under this doctrine, courts not
only adjudicate the claims of the parties before them,
but also establish a precedent that must be followed
in future cases. The ruling of a court binds not only
itself for future cases, but also any courts under
which the court has appellate jurisdiction. Though
trial level courts make rulings of law that are binding
on future cases, the doctrine of precedent is most
important in the legal system at the appellate levels.
Publication of Case Law
Unlike statutes, cases are usually not available in
a subject matter arrangement. When a case is first
published, it is issued as a ‘‘slip opinion,’’ named as
such because these are printed on unbound sheets
of paper. These opinions are compiled, and eventu-
ally published in bound case reporters. Cases from
the U.S. Supreme Court and from courts in many ju-
risdictions are contained in reporters published by
government bodies, and are called official reporters.
These cases and other cases are also published in the
National Reporter System, originally created by West
Publishing Company (now West Group) in 1879.
Case reporters in this system include state cases, fed-
eral cases, and cases from specialized tribunals, such
as the bankruptcy courts. Cases may be readily locat-
ed by finding their citation in the National Reporter
System, or in another case reporter. An example of
such a citation is ‘‘Roe v. Wade, 93 S. Ct. 705 (1973).’’
‘‘Roe v. Wade’’ refers to the names of the parties of
the case; ‘‘93’’ refers to the volume of the reporter;
‘‘S. Ct.’’ is an abbreviation for Supreme Court Report-
er; ‘‘705’’ refers to the page in the reporter where the
case begins; and ‘‘(1973)’’ refers to year the case was
Cases from all three levels of the federal judicial
system are published. With few exceptions, only ap-
pellate court opinions from state courts are pub-
lished. Unlike appellate courts, state trial judges sel-
dom issue formal legal opinions about their cases,
although rulings of law may be available in the record
of the trial court. Most legal research in case law fo-
cuses on location of appellate court decisions.
Reading a Judicial Opinion
Like other types of law, reading and understand-
ing the meaning of a judicial opinion is more of an
art than a science. The opinion of the case includes
the court’s reasoning in deciding a case, and is bind-
ing on future courts only if a majority of the court de-
ciding the case joins the opinion (in which case the
opinion is called the majority opinion). If an opinion
is written in support of the court’s judgment, but is
not joined by a majority of justices, then the opinion
is termed a plurality. Plurality opinions are not bind-
ing on future courts, but may be highly persuasive
since they support the judgment of the court. Some
justices may agree with the judgment, but may not
agree with the majority opinion. These justices may
write concurring opinions that state their reasons in
support of the judgment. These opinions have no
precedential value, but may be persuasive in future
cases. Similarly, justices who disagree with the judg-
ment, the opinion, or both, write dissenting opinions
that argue against the judgment or majority opinion.
Some components of a majority opinion are bind-
ing on future courts, while others are not. The actual
holding or reason for deciding (traditionally referred
to as the ratio decidendi) provides the rule of law
that is binding precedent in future cases. By compari-
son, dictum is the portion of an opinion that is not
essential to a court’s holding, and is not binding on
future courts. Dicta may include background infor-
mation about the holding, or may include the judge’s
personal comments about the reasoning for the
holding. Dicta may be highly persuasive and may
alter the holdings of future cases.
Administrative Law and Procedure
Creation and Empowerment of Government
Although the branches of government are primar-
ily responsible for the development of law and reso-
lution of disputes, much of the responsibility of the
administration of government has been delegated to
government agencies. While branches of govern-
ment may not delegate essential government func-
tions to agencies, agencies may administer govern-
ment programs, and promulgate and enforce
regulations. When a legislature creates a government
agency, it does so through the passage of an enabling
statute, which also describes the specific powers del-
egated to the agency. The Administrative Procedure
Act (APA) governs agency action at the federal level,
and state counterparts to the APA govern state agen-
Types of Government Agencies
Some government agencies are formed to carry
out government programs, but do not promulgate
regulations that carry the force of law. A number of
these agencies have been established to administer
such programs as highway construction, education,
public housing, and similar functions. Other govern-
ment agencies promulgate rules and regulations that
govern a particular area of law. Examples of regulato-
ry agencies include the Environmental Protection
Agency and Nuclear Regulatory Commission, both of
which promulgate regulations that are similar in
function to legislation. Legislatures also create agen-
cies that resolve dispute among parties, similar to the
function of a judicial body. Agency decisions are usu-
ally referred to as agency adjudications. Examples of
agencies that adjudicate claims are the National
Labor Relations Board and Securities and Exchange
Agency Rulemaking
Most agencies that have regulatory power promul-
gate regulations through a process called notice and
comment rulemaking. Before a regulatory agency
can promulgate a rule, it must provide notice to the
public. Federal agencies provide notice in the Feder-
al Register, a daily government publication that pro-
vides the text of proposed and final agency rules.
After considering comments from the public and
making additional considerations, the agency may
issue a final, binding rule. The promulgation of a final
rule can take months, or may take years, to com-
plete. State agencies must follow similar procedures,
including publication of proposed rules in a publica-
tion analogous to the Federal Register. Agency rules
are functionally equivalent to statutes. Federal agen-
cy rules currently in force are published in a subject
matter arrangement in the Code of Federal Regula-
tions. Each state publishes its rules in force in a state
administrative code.
Some agencies at the state and federal levels are
required to follow more formal procedures. Agencies
may not exceed the power delegated by a respective
legislature, and may adopt rules without following
the proper procedures provided in the enabling leg-
islation or legislation governing administrative pro-
Agency Adjudications
Agencies with power to adjudicate claims operate
similarly to a court. Such an agency considers evi-
dence presented in a hearing, and makes a final,
binding decision based on an application of the law
to the facts in a case. An agency that adjudicates a
claim must maintain a record of the hearing, and par-
ties are generally able to seek judicial review of a de-
cision, much like judicial review of a lower court de-
cision. A court may overrule an agency decision if the
agency acted in an arbitrary or capricious manner,
made a decision unsupported by substantial evi-
dence, or made a decision unsupported by the facts
presented to the agency.
Relationship Among Various Laws and
Other Authority
Laws in the United States do not exist in a vacuum,
and determining the appropriate outcome of a case
may require consultation with several different types
of laws. A single case may be governed by application
of a statute, an administrative regulation, and cases
interpreting the statute and regulation. Understand-
ing the application of laws usually requires an under-
standing of the nature of legal authority.
Any authority emanating from an official govern-
ment entity acting in its lawmaking capacity is re-
ferred to as primary authority, and this authority is
what is binding on a particular case. Primary authori-
ty can be subdivided into two types: primary manda-
tory authority and primary persuasive authority. Pri-
mary mandatory authority is law that is binding in a
particular jurisdiction. For example, a Fifth Circuit
Court of Appeals decision is primary mandatory au-
thority in Texas, Mississippi, and Louisiana, since the
Fifth Circuit governs these states. By comparison,
primary authority that is not binding in a particular
jurisdiction is referred to as primary persuasive au-
thority. It is considered persuasive because though
such authority does not bind a decision-maker in a
jurisdiction, the decision-maker may nevertheless be
persuaded to act in a familiar fashion as the authority
from outside the jurisdiction. In the example above,
a Fifth Circuit decision in a court in California would
be considered primary persuasive authority, and
could influence the California tribunal in its decision-
A second type of authority—secondary authori-
ty—may also be helpful in determining the appropri-
ate application of the law. Secondary authority in-
cludes a broad array of sources, including treatises (a
term used for law book); law review articles, which
are usually written by law professors, judges, or ex-
pert practitioners; legal encyclopedias, which pro-
vide an overview of the law; and several other items
that provide commentary about the law. An individu-
al who is not trained in the law (and in many cases
those who are trained in the law) should ordinarily
begin his or her legal research by consulting such au-
thority to gain a basic understanding of the law that
applies in a particular situation.
A final consideration that cannot be overlooked is
that the law constantly changes. If a legal researcher
comes across literature describing the law in a given
area, he or she must always verify that the discussion
in the literature reflects the current state of the law.
Legislatures and agencies constantly add new laws,
and revise and amend existing laws. Similarly, courts
routinely overrule previous decisions and may rule
that a statute or regulation is not valid under a rele-
vant constitutional provision. Updating legal authori-
ty involves a process of consulting supplements and
other resources, and is necessary to ensure that an
individual knows the current state of the law.
Sections within this essay:
Defining Disability
Accommodation of Disabilities
Reasonable Accommodation
Testing and Examinations
Hidden Disabilities
Private and Religious Schools
Postsecondary Education
Additional Resources
The Fourteenth Amendment to the Constitution
provides: ‘‘No state shall make or enforce any law
which shall abridge the privileges or immunities of
citizens of the United States; nor shall any state de-
prive any person of life, liberty, or property, without
DUE PROCESS OF LAW; not deny any person withinits
These rights have been extended to many groups
throughout the history of the United States, and the
Americans with Disabilities Act spells out how those
living with disabilities may not be barred from any
educational situation.
The DISABILITY rights movement used similar tac-
tics and strategies to fight to extend the ‘‘equal pro-
tection of the laws’’ to those with physical or mental
handicaps following the passage of the CIVIL RIGHTS
Act of 1964. The first success the disability rights
movement had was with Section 504 of the Rehabili-
tation Act of 1973. Based on the models of previous
laws with prohibited discrimination based on race or
gender, Section 504 prohibits DISCRIMINATION in pro-
grams or activities receiving federal financial assis-
tance. It provides: ‘‘No otherwise qualified individual
with handicaps in the United States . . . shall, solely
by reason of her or his handicap, be excluded from
the participation in, be denied the benefits of, or be
subjected to discrimination under any program or
activity receiving Federal financial assistance.’’ This
provision marks the first time the disabled were
viewed as a class of people, similar to a race or gen-
der. The disabled used Section 504 to demand and
enforce equal footing as a class under the law, one
that could demand facilities to accommodate their
Although this language offered some protection
from educational discrimination for those with dis-
abilities, Section 504 did not go far enough. It only
applied in limited situations, where the program or
building used federal financial aid in the form of
grants. Those with disabilities still faced discrimina-
tion in the private sector, in private schools, and in
those public facilities that did not use federal grant
money. The disabled still faced a great many inacces-
sible schools, testing situations that did not offer al-
ternatives for the deaf, the blind, or those with other
types of disability, and other, similar barriers to equal
education and access.
The Americans with Disabilities Act was passed on
July 26, 1990, and signed into law by President
George H. W. Bush. The intention of Americans with
Disabilities Act was to fill the gaps left behind by Sec-
tion 504. The ADA builds upon the legal language
within Section 504, so that applied together, both
laws would cover almost any situation, public or pri-
vate, that the disabled might encounter.
The ADA bars employment and educational dis-
crimination against ‘‘qualified individuals with dis-
abilities.’’ Title II of the Americans with Disabilities
Act applies specifically to educational institutions, re-
quiring them to make educational opportunities, ex-
tracurricular activities, and facilities open and acces-
sible to all students. The ADA applies equally to
public and private sector institutions, although the
requirements for private schools and institutions are
slightly less stringent.
Defining Disability
Section 504 of the Rehabilitation Act of 1973 de-
fines individuals with disabilities as those who have
a physical or mental impairment which substantially
limits one or more major life activities; has a record
of such impairment; or is regarded as having such an
impairment. This category includes physiological dis-
orders such as hearing impairment, vision impair-
ment, or speech impairments; neurological disor-
ders such as muscular dystrophy or multiple
sclerosis; psychological disorders such as mental re-
tardation, mental illness, or learning disabilities. The
legislative definition does not spell out specific ill-
nesses or impairments because of the difficulty of en-
suring an all-inclusive list.
The deciding factor in determining whether or
not a person suffers from a disability under Section
504 is whether the impairment limits one or more
major life activities, such as walking, performing
manual tasks, seeing, hearing, speaking, breathing,
learning and/or working. The Americans with Disabil-
ities Act defines a disability as a ‘‘physical or mental
impairment that substantially limits one or more
major life activity; a record of such impairment; or
being regarded as having such impairment.’’ The
Americans with Disabilities Act covers obvious im-
pairments such as difficulty in seeing, hearing, or
learning, as well as less obvious impairments such as
alcoholism, epilepsy, paralysis, mental retardation,
and contagious and noncontagious diseases, specifi-
cally Acquired Immune Deficiency Syndrome
The difference between the two laws, as they
apply to educational institutions, is that Section 504
applies to the recipients of grant monies from the
federal government, while Title II of the Americans
with Disabilities Act applies only to public entities,
with some applications to private sector entities.
These entities include nursery, elementary, second-
ary, undergraduate, or postgraduate schools, or
other places of education, day care centers, and gym-
nasiums or other places of exercise or recreation.
Accommodation of Disabilities
Section 504 of the Rehabilitation Act of 1973 and
Title II of the Americans with Disabilities Act cover
students in virtually any public school district, col-
lege, or university because they receive some form
of federal assistance. Some private schools, colleges,
and universities also receive such assistance, and stu-
dents are protected under Section 504, but Title II
does not apply to them. Both laws apply to all pro-
grams of a school or college, not simply academics.
These include extracurricular activities such as band,
clubs, or academic teams, as well as athletics and any
activity that might occur off campus.
Neither law requires that all buildings be made
fully accessible to students or teachers with disabili-
ties. Those buildings constructed after the Section
504 regulation was issued in 1977 must be fully acces-
sible. For older buildings, the law requires that the
program or activity be made accessible. Often, class-
es or extracurricular activities are moved to another,
more accessible, room to accommodate any disabled
person who attends. An interpreter for the hearing-
impaired or other types of assistance can be sup-
Reasonable Accommodation
One aim of the Americans with Disabilities Act was
to make educational institutions more accessible for
the disabled. This aim covers ‘‘reasonable accommo-
dations’’ such as the following:
Modification of application and testing
Allowing students to tape-record or video-
tape lectures and classes
Modification of class schedules
Extra time allotted between classes
Specialized computer equipment
Special education
Accommodation also includes physical changes to
an educational institution’s buildings, including the
Installing accessible doorknobs and hard-
Installing grab bars in bathrooms
Increasing maneuverability in bathrooms for
Installing sinks and hand dryers within reach
Creating handicapped parking spaces
Installing accessible water fountains
Installing ramps
Having curb cuts, sidewalks, and entrances
that are accessible
Installing elevators
Widening door openings
Public accommodation is not required if a particu-
lar aid or service would result in either fundamental
alteration of the services offered or the facility if the
accommodation would impose an undue burden.
(See Southeastern Community College v. Davis, 442
U. S. 397 (1979)). Under the U. S. Supreme Court’s
interpretation, Congress intended that undue bur-
den and hardship shall be determined on a case-by-
case basis.
Testing and examinations
Section 309 of the Americans with Disabilities Act
fills the gap regarding testing and examination not
defined by Section 504 of the Rehabilitation Act of
1973 or Title II of the Americans with Disabilities Act.
Any educational facility that receives federal money
or is a public facility because it is a function of the
state or local government as defined under Title II of
the ADA is required to make any examination acces-
sible to persons with disabilities. This requirement
includes physical access to the testing facility, as well
as any modification of the way the test is adminis-
tered to assist the disabled. Modifications may in-
clude offering extended time, written instructions, or
the assistance of a reader.
Many licensing and testing authorities are not cov-
ered by Section 504 or Title II. In these cases, a provi-
sion in the ADA was included to assure that persons
with disabilities are not prohibited from or disal-
lowed in any educational, professional, or other
EXAMINATION opportunity because a test or course is
conducted in an inaccessible location or is offered
without the needed modifications to assist the dis-
abled student. Modifications may include offering an
examination with the assistance of a reader, in a
braille or large print format, transcribers, or the
proper computer equipment to help the disabled
Examiners may require proof of disability, but re-
quests for documentation of the disability must be
reasonable and must be limited to support for the
modification or aid requested. The student or testing
applicant may be required to bear the cost of provid-
ing such documentation for examination officials.
Appropriate documentation would include:
Letter from physician or psychiatrist or other
qualified individual
Evidence of prior diagnosis
Evidence of prior accommodation
Hidden Disabilities
Hidden disabilities are considered to be any physi-
cal or mental impairments that are not readily appar-
ent to others. They include such conditions as learn-
ing disabilities, allergies, diabetes, epilepsy, as well as
chronic illnesses such as heart, kidney, or liver dis-
ease. There are roughly four million American stu-
dents with disabilities, many with impairments that
are not immediately known without medical or diag-
nostic testing.
Private and Religious Schools
The ADA covers private elementary and secondary
schools as places of public accommodation, i.e. they
must be physically accessible to those with disabili-
ties. But these schools are not required to provide
free appropriate education or develop an individual-
ized educational program for students with disabili-
ties. Any private school that receives federal grant
monies or any type of federal assistance would then
fall under the Department of Education’s regulations
regarding construction and alterations to the private
school’s structures and buildings, where it can be
conveniently and economically incorporated.
Postsecondary Education
Under Section 504, colleges and universities are
not required to identify students with disabilities.
They are required to inform all applicants of the
availability of auxiliary aids, services, and academic
adjustments. It is the student’s responsibility to
make his or her condition known and to seek out as-
Additional Resources
Americans with Disabilities Handbook. Equal Opportuni-
ty Commission and U. S. Department of Justice. Octo-
ber 1991.
Auxiliary Aids and Services for Post–secondary Students
with Disabilities: Higher Education’s Obligations
Under Section 504 and Title II of the ADA. Office for
Civil Rights, U. S. Department of Education. 1998.
The Civil Rights of Students with Hidden Disabilities
Under Section 504 of the Rehabilitation Act of 1973. Of-
fice for Civil Rights, U. S. Department of Education.
Clearinghouse for information about federal govern-
ment resources, pamphlets, and information regard-
ing disabilities, maintained by the Presidential Task
Force on Employment of Adults with Disabilities.http://
Student Placement in Elementary and Secondary Schools
and Section 504 and Title II of the ADA. Office for Civil
Rights, U. S. Department of Education.1998.
American Council on Rural Special
Education (ACRES)
2323 Anderson Ave., Suite 226, Kansas State
Manhattan, WA 66502
Phone: (785) 532-2737
Fax: (785) 532-7732
American Speech Language-Hearing
Association (ASHA)
1801 Rockville Pike
Rockville, MD
Phone: (301) 897-5700
Phone: (800) 638-8255
Children with Attention Deficit Disorders
8181 Professional Place, Suite 201
Landover, MD 20785
Phone: (301) 306-7070
Fax: (301) 306-7090
Clearinghouse of Disability Information
Office of Special Education and
Rehabilitative Services U. S. Department of
Switzer Building Room 3132 330 C Street SW
Washington, DC 20202
Phone: (202) 205-8241
Fax: (202) 401-2608
Dyslexia Research Institute, Inc.
5746 Centerville Road
Tallahassee, FL 32308
Phone: (850) 893-2216
Fax: (850) 893-2440
Learning Disabilities Association of America
4156 Library Road
Pittsburgh, PA 15234
Phone: (412) 341-1515
Fax: (412) 341-8077
National Center for Learning Disabilities
381 Park Avenue South, Suite 1401
New York City, NY 10016
Phone: (212) 545-7510
Fax: (212) 545-9665
Sections within this essay:
Before ADA
- Architectural Barriers Act
- Rehabilitation Act of 1973
- Uniform Federal Accessibility Stan-
dards (UFAS)
ADA and Title III
- Physical Accommodations
- Auxiliary Accommodations
- Other Accommodations
Enforcing the Law
Additional Resources
Many people think that the Americans with Dis-
abilities Act (ADA) primarily covers workplace ac-
commodations. The only public accommodations
they associate with ADA are handicapped parking
spaces and Braille numbers on elevator buttons. In
fact, the ADA’s public facilities rules, as outlined in
Title III of the act, are far more comprehensive than
that. All sorts of buildings and businesses fall under
Title III: restaurants, schools, office buildings, banks,
doctors’ offices, and movie theaters, to name a few.
Accommodation can include anything from adjusting
store shelves to constructing special ramps and en-
Some people mistakenly believe that ADA re-
quires businesses to make all sorts of prohibitively
expensive changes or else face stiff penalties. The
truth is that ADA is designed to benefit the disabled,
not to punish business owners. The key to under-
standing ADA is knowing what is and is not required,
as well as what constitutes an acceptable accommo-
Before ADA
In years past, ‘‘disability’’ was not something peo-
ple dealt with publicly; it was understood that those
who were blind, deaf, paralyzed, or otherwise ‘‘hand-
icapped’’ would not participate in ordinary life activi-
ties, such as school or work.
Attitudes changed slowly but steadily, and by the
twentieth century such notable people as Helen Kel-
ler and Franklin D. Roosevelt helped break down ste-
reotypes about disabilities. Accommodating the dis-
abled was another matter. Only important public
figures such as Roosevelt (who could not stand or
walk unaided after his 1921 bout with polio) could
expect that structural accommodations would be
made for them, and even then those accommoda-
tions were limited in scope. There were simply some
places that the disabled could not visit freely.
Architectural Barriers Act
Although most people think that ADA was the first
federal law regulating public facilities, in fact it was
an earlier law that set the stage. The Architectural
Barriers Act (ABA) was passed in 1968, and it mandat-
ed that any buildings designed, constructed, altered,
or leased with federal funding had to be accessible
to the disabled. This included post offices, national
parks, some schools, some public housing, and mass
transit systems. Because it dealt only with federally
funded structures, it was (and still is) less well known
than ADA, but it was an important early step.
Rehabilitation Act of 1973
As important as ABA was, it was met with a certain
degree of apathy that undermined its effectiveness.
Congress, eager to improve ABA compliance and
equally eager for the government to create new and
more comprehensive design standards, passed the
Rehabilitation Act in 1973. Perhaps the most impor-
tant element of this law was Section 502, which es-
tablished the Architectural and Transportation Barri-
ers Compliance Board (later called simply the Access
Board). Originally created to develop as well as en-
force design requirements, its role later became
more focused on ensuring compliance. Beginning in
1976, the Access Board started investigating ABA
non-compliance complaints against a variety of pub-
lic buildings. The law covers any facility that was de-
signed, built, altered, or leased with federal funds
after 1969.
Uniform Federal Accessibility Standard
The design requirements that are supposed to be
followed under ABA are spelled out by the Uniform
Federal Accessibility Standard (UFAS), which was
first published in 1984. These guidelines served as a
precursor of sorts to guidelines later introduced
under ADA. Today, some government agencies re-
quire compliance with both the ADA guidelines and
ADA and Title III
The Americans with Disabilities Act was signed
into law on July 26, 1990. Title I of the law covers
places of employment; Title II state and local govern-
ments. Title IV covers telecommunications for the
deaf and hearing-impaired, and Title V covers miscel-
laneous items. The section of ADA that deals with
public facilities, is Title III.
Public accommodations include any building or
outdoor space through which any person can enter,
with or without a fee. Essentially, that means all
buildings except for ‘‘private’’ clubs (any club that re-
quires members to vote to admit an individual) and
religious facilities. Among the facilities covered as
listed by ADA are the following:
Lodgings (hotels, motels, inns)
Establishments that serve food and drink
(restaurants, bars, taverns)
Establishments that offer entertainment
(theaters, stadiums)
Places where public gatherings may be held
(auditoriums, convention halls)
Sale or rental establishments (retail stores)
Service establishments (medical offices, law
offices, funeral parlors)
Places of public display or collection (muse-
ums, galleries, public gardens)
Social service centers (homeless shelters,
day care centers)
Recreation/exercise establishment (golf
courses, gymnasiums)
It is important to understand not only which facili-
ties are covered under ADA, but also who is consid-
ered disabled. Under ADA guidelines, anyone who
possesses a physical or mental impairment that sig-
nificantly limits at least one major life function—for
example, the ability to feed oneself, the ability to
walk, or the ability to breathe on one’s own. Alcohol-
ics and other substance abusers are also covered if
they have been shown to have a history of such
A public accommodation is expected to follow
three basic guidelines under Title III of ADA. First, it
cannot deny goods or services to a disabled person
covered under the legislation. Second, it cannot sat-
isfy its commitment to the legislation by offering ben-
efits that are separate or unequal. Finally, it must
offer all services in as integrated a setting as possible.
This kind of wording frightens some owners of
public facilities. Retail store owners, for example,
sometimes fear that Title III compliance means hav-
ing to make expensive structural changes to their
stores or keep people on staff to accommodate all
possible disabilities. Would a small company have to
install an elevator in its building? Does a restaurant
have to make Braille menus and sign-language inter-
preters available?
In fact, ADA’s Title III guidelines do offer a certain
degree of leeway for facilities, but that leeway is de-
pendent on a number of factors including cost and
a facility’s special needs.
Physical Accommodations
Under Title III, any new building first occupied
after January 26, 1993 is required to meet full ADA
standards (unless the building plans had been com-
pleted before January 26, 1992). The following are
among the requirements that new buildings are ex-
pected to meet:
Doorways must be wide enough to accom-
modate wheelchairs; doors must be easy to
Restrooms must be equipped with ade-
quately wide stalls, grab bars, and sinks and
towel dispensers easily accessible for some-
one in a wheelchair
Pay phones must be provided at more than
one height, and phones with amplifiers
should also be available
Adequate parking spaces should be set aside
to accommodate disabled patrons
Elevators must have Braille numbers and vi-
sual as well as audible operation signals
Alarm systems must be audible and visible
Existing facilities that are being remodeled (and in
some cases those that are not) must make sure that
alterations are ADA-compliant, as long as such
changes are deemed reasonable, or, in the words of
the legislation, ‘‘readily achievable.’’ An alteration is
deemed readily achievable when it can be done rela-
tively easily and without much expense. It might not
be structurally or economically feasible for a public
facility with no elevator to install one, for example,
but it probably is feasible to install ramps, handrails,
and grab bars. Shelving in stores, telephones mount-
ed lower on the wall, soap dispensers in bathrooms,
and brighter lights are all things that can be added
with little difficulty or undue expense. In cases in
which alterations are difficult or impossible, alterna-
tives can be incorporated instead. Examples include
providing taped lectures of inaccessible gallery ex-
hibits or providing a water cooler or reachable paper
cups instead of installing a new accessible drinking
As for new buildings, the costs of incorporating
ADA-compliant accessibility features has been esti-
mated to be less than one percent of overall con-
struction costs. Thus, it is unlikely that the owners
of a building currently under construction would be
able to make a case against accessibility. Nor should
they want to; as more disabled people enter both the
consumer market (as tourists, for example) and the
workforce, it benefits building owners to make their
structures ADA-compliant.
Auxiliary Accommodations
A special accommodation category exists for
those with visual and hearing impairments. The
‘‘auxiliary accommodations’’ are designed to make it
easier to communicate with people who have diffi-
culty seeing or hearing. Among the accommodations
ADA can recommend are the following:
Interpreters who speak sign language
Special listening devices and headsets
Texts in large print and Braille, or recorded
on tape
TDD/TTY text telephones for those with
hearing impairments
As with physical alterations, auxiliary accommoda-
tions are not designed to create an undue burden on
the building owner. Nor are they meant to alter the
nature of goods or services offered by the public fa-
cility in question. For example, a museum whose art
works are too delicate to be handled may implement
a ‘‘no touch’’ policy, even though it means that cer-
tain blind people may not be able to enjoy the exhibit
Stores are not required to have signs or price tags
in Braille, nor do they need to have a sign language
interpreter on staff. As long as an employee can read
price tags and similar information to blind shoppers,
and as long as store employees can communicate
with deaf customers by writing out notes, there is no
requirement for businesses to incur the expense of
extra assistance.
Actually, many auxiliary accommodations can be
made quite inexpensively. Most ordinary computer
programs can be set to display and print in large
type, for example. TDD/TTY telephone units
equipped with printers cost about $500, which most
fair-sized businesses could afford with little difficulty.
Other Accommodations
There are a number of other accommodations
that in general are cost-effective to implement. For
example, restaurants that need to make more room
for wheelchairs may be required to move their tables
around; unless they had to remove a significant num-
ber of tables and thus lose business, this should not
be a burden. (In fact, many restaurants add or re-
move tables for certain events as a matter of course.)
Some stores may have to relocate display racks for
the same reason. Outdoor cafes that crowd side-
walks may be required to reduce the number of ta-
bles or increase the space between them. Large
plants, whether indoors or outdoors, may need to be
moved to make room for disabled individuals.
Enforcing the Law
In the 25-year period from 1976 to 2001, the Ac-
cess Board investigated more than 3,300 complaints
against public facilities, including post offices, mili-
tary facilities, veterans hospitals federal courthouses,
and prisons. In general, the Board works with the fa-
cility to find ways to bring it into compliance. One ex-
ample is the Holocaust Memorial Museum in Wash-
ington, D.C. A group of children with varying degrees
of hearing impairment were touring the museum
when the fire alarm went off. Because the students
actually thought the alarms were part of the exhibit,
and because they could not hear the evacuation no-
tices, there was potential for serious consequences.
A complaint was filed with the Access Board, which
worked with the museum to install new alarms that
offered a more distinct and distinguishable signal.
Another example is a homeless shelter in Phoenix,
Arizona. Although rest rooms in the shelter had been
renovated twice using federal funds, they were still
not ADA compliant. The Access Board worked suc-
cessfully with the shelter to address the issue and
make the rest rooms compliant.
Those who feel that a public facility is in violation
of Title III may file their complaints with the U.S. De-
partment of Justice. In cases of repeat violations, the
Department has authorization to bring lawsuits
against offenders, although the more desired out-
come would be correction of the problem with the
help of groups such as the Access Board. The Depart-
ment of Justice web site that handles ADA issues is
Additional Resources
The ADA: A Review of Best Practices Jones. Timothy L.,
American Management Association, Periodicals Divi-
sion, 1993.
Equality of Opportunity: The Making of ADA. Young,
Jonathon M., National Council on Disability, 1997. Jor-
dan I. Kosberg, ed., Wright-PSG, 1983.
The New ADA: Compliance and Costs. Kearney, Deboral
S., R.S. Means, 1992.
Access Board
1331 F Street NW, Suite 1000
Washington, DC 20004 USA
Phone: (202) 272-0080
Fax: (202) 272-0081
Primary Contact: Pamela Y. Holmes, Chair
Council for Disability Rights
205 West Randolph Street, Suite 1645
Chicago, IL 60606 USA
Phone: (312) 444-9484
Fax: (312) 444-1977
Primary Contact: Jo Holzer, Executive Director
U. S. Department of Justice, Civil Rights
Division, Office of Disability Rights
950 Pennsylvania Avenue NW
Washington, DC 20530 USA
Phone: (202) 307-2227
Fax: (202) 307-1198
Primary Contact: John L. Wodatch, Chief
U. S. Equal Employment Opportunity
Commission (EEOC)
1801 L Street NW
Washington, DC 20507 USA
Phone: (202) 663-4900
Fax: (202) 663-4494 (TTY)
Primary Contact: Cari M. Dominguez, Chair
Sections within this essay:
Reasonable Accommodations
Types of Reasonable Accommodations
Additional Resources
In the United States, approximately 43 million
people have physical or mental disabilities or impair-
ments that substantially limit major life activities. In
an effort to avoid DISCRIMINATION against disabled
people in the workplace, Congress enacted in July of
1990 the Americans with Disabilities Act (ADA). One
way that the ADA seeks to improve employment op-
portunities for disabled people is by requiring em-
ployers under certain circumstances to alter the
workplace to accommodate disabilities. These alter-
ations are known as workplace accommodations.
Just like individuals of different races, colors, reli-
gions, gender, or national origin, individuals with
physical or mental disabilities historically have faced
discrimination. Disabled people have been excluded
from mainstream society, segregated, provided with
inferior or unequal services, and denied benefits that
non-disabled people enjoy. What is different about
the discrimination of disabled people as compared
to other types of discrimination is that there is often
a rational basis for treating disabled people different-
ly from able-bodied people. Whereas there is usually
no rational basis for treating, for example, a woman
from South Africa differently from a woman from the
United States, there may be a rational basis for treat-
ing a woman who is blind differently from a woman
with good vision. The visually impaired woman may
require the use of Braille, for example.
Another difference in DISABILITY discrimination is
its intent. Many types of discrimination, such as racial
discrimination, are rooted in hostility or hatred to-
ward people who are different. But discrimination
against disabled individuals more often is rooted in
ignorance or apathy. Some people view disabilities
with pity or discomfort, leading to behavior that may
patronize people with disabilities. Other people sim-
ply fail to consider or understand the needs of dis-
abled people, leading to benign neglect or misguid-
ed efforts to assist.
The U. S. Constitution does little to protect those
with mental or physical disabilities from discrimina-
tion. Courts historically have not applied the Consti-
tution’s EQUAL PROTECTION Clause to discrimination
of DISABLED PERSONS with the same level of scrutiny
as discrimination of such protected classes as race,
religion, and gender. People with disabilities, there-
fore, had little or no recourse when their disabilities
unfairly prevented them from getting suitable jobs.
Only two-thirds of employable disabled persons in
the United States were employed in the late 1980s,
and many of those employed were not working to
their full capacity to earn given their disabilities. By
1990, more than 8 million disabled individuals were
unemployed and forced to live on welfare and other
forms of government assistance. Congress began en-
acting federal laws in the 1960s designed to protect
disabled people, but these laws did not outlaw dis-
ability discrimination by employers. Such protec-
tions did not enter the workplace until the 1990 pas-
sage of the ADA.
The ADA prohibits private and state and local gov-
ernment employers, as well as employment agencies
and labor unions, from discriminating on the basis of
disability. It does not apply to private employers with
fewer than 15 employees. The ADA prohibits several
specific forms of disability discrimination. One exam-
ple of an ADA violation occurs when an employer
fails to make reasonable accommodations to allow
disabled workers to work.
Reasonable Accommodations
The ADA requires employers to make reasonable
accommodations to qualified persons with disabili-
ties unless such accommodations would cause an
undue hardship to the employer. A disabled person
under the ADA is someone who is substantially limit-
ed in the ability to perform a major life activity or
who has a record of such an impairment or who is
regarded as having such an impairment. To be quali-
fied as a disabled person under the ADA, an individu-
al must show an ability to perform all of the essential
job functions either with or without a reasonable ac-
commodation. Courts look at mitigating measures in
determining whether an individual is disabled. For
example, persons who need eyeglasses may be sub-
stantially limited in the ability to read, which is a
major life activity, unless they wear eyeglasses. Be-
cause eyeglasses mitigate their bad vision and allow
them to read normally, they are not considered to
disabled under the ADA.
There are three general types of reasonable ac-
commodations. The first type modifies the job appli-
cation process to enable qualified job applicants with
a disability to be considered for the job they want.
The second type modifies the work environment or
the manner in which the job is performed to allow
disabled individuals to perform the job’s essential
functions. The third type modifies the workplace to
allow disabled employees equal benefits and privi-
leges as similarly situated employees without disabili-
More specific types of reasonable accommoda-
tions may include making an office wheelchair acces-
sible; restructuring jobs; providing part-time or mod-
ified work schedules; modifying or purchasing
special furniture or equipment; changing employ-
ment policies; providing readers or interpreters; and
reassigning disabled individuals to vacant positions.
An employer is not required to eliminate an essential
job function or fundamental duty of the job to ac-
commodate a disabled person. An employer is not
required to lower production quotas or standards
that apply to all employees, although an employer is
required to provide reasonable accommodations to
help a disabled individual meet production quotas or
standards. An employer is not required to provide
disabled employees with personal use items that are
necessary both on and off the job, for example, hear-
ing aids.
The ADA does not require that reasonable accom-
modations be made when the accommodations
would cause employers an undue hardship. Undue
hardship means significant difficulty or expense
when compared with the employer’s resources and
circumstances. The employer’s financial capabilities
are one factor in defining undue hardship, but undue
hardship also occurs when the reasonable accommo-
dation would be unduly extensive or disruptive or
would fundamentally alter the nature or operation of
the business. Courts determine on a case-by-case
basis whether a reasonable accommodation would
be an undue hardship for the employer.
Individuals who want a reasonable accommoda-
tion must request it but need not mention the ADA
or the phrase ‘‘reasonable accommodation.’’ It is suf-
ficient if employees simply ask for an accommoda-
tion for a medical reason. Once a request is made,
employers are obligated to investigate the request
and determine if the requesting employee is quali-
fied as a disabled individual under the ADA. If that
determination is positive, then the employer must
begin an interactive process with that employee, de-
termining that individual’s needs and identifying the
accommodation that should be made. Sometimes
this is an easy process with both sides agreeing on
the reasonable accommodation. Other times, the in-
teractive process can be complicated and conten-
Sometimes, employers do not know about or un-
derstand the disability enough to determine a rea-
sonable accommodation. In these cases, employers
are entitled to obtain documentation, such as medi-
cal records or a letter from a doctor, to learn about
the disability, its functional limitations, and the sort
of accommodation that needs to be made. Alterna-
tively, employers may simply ask the requesting em-
ployee about the disability and limitations. Unless
the disability is obvious, that employee must provide
the employer with sufficient information about the
disability to help the employer determine a reason-
able accommodation.
As long as the reasonable accommodation is effec-
tive in allowing the disabled individuals to perform
their job functions and receive the same benefits as
other, non-disabled individuals, then employers
have the right to choose among reasonable accom-
modation options. Employers may choose options
that are cheaper or easier to provide, for example. If
employers offer disabled employees reasonable ac-
commodations that employees do not want, the em-
ployers may not force the employees to accept the
accommodations. If, however, the employee’s refus-
al of the reasonable accommodation results in the in-
dividual’s inability to perform the essential functions
of the job, the employee may be deemed unqualified
for the job. The employer may then be justified in
terminating the employee.
During the hiring process, employers are not per-
mitted to ask whether job applicants require a rea-
sonable accommodation unless an applicant’s dis-
ability is obvious, such as an applicant who uses a
wheelchair, or unless the applicant voluntarily in-
forms the employer about the disability. If the em-
ployer offers the applicant a job, it is with the condi-
tion that the applicant is able to perform the
essential job functions either with or without a rea-
sonable accommodation. Once the applicant re-
ceives the job offer, the employer may inquire about
the necessity of reasonable accommodations.
The ADA also mandates that employees with dis-
abilities be permitted to enjoy the same benefits and
privileges of employment as non-disabled employees
enjoy. Therefore, employers must provide reason-
able accommodations to allow the disabled worker
to gain access to such privileges as workplace cafete-
rias or lounges, gyms or health clubs, training pro-
grams, credit unions, transportation, or any other
perk offered to non-disabled employees. A blind em-
ployee, for example, would not be able to read em-
ployment related notices placed on bulletin boards.
In that case, the employer would have to provide a
reasonable accommodation, such as sending that
employee telephone messages.
Types of Reasonable Accommodations
An employer may restructure or modify a job as
a reasonable accommodation for an employee with
a disability. Job restructuring may include reallocat-
ing job functions or trading certain job functions that
are difficult or impossible for the disabled worker
with other job functions of a non-disabled worker. A
disabled secretary who cannot climb stairs, for exam-
ple, may be able to fulfill the essential functions of
the job but cannot easily retrieve files from the up-
stairs storage room. In this case, an appropriate ac-
commodation would be to assign the disabled work-
er additional filing duties and require an able-bodied
co-worker to actually retrieve the files.
A disabled worker may be entitled to a paid or un-
paid leave of absence from the job as a reasonable
accommodation for such reasons as the worker’s
need for surgery or other medical treatment, the
worker’s recovery from illness related to the disabili-
ty, or the worker’s education or training related to
the disability. An employer does not have to pay the
disabled worker during a disability-related leave of
absence beyond the employer’s own policy regard-
ing sick pay or vacation pay. The employer is re-
quired to hold open the disabled worker’s job during
the leave of absence, but the employer may demon-
strate that holding open the position for an extended
period would constitute an undue hardship. In the
event of undue hardship, the employer can fill the
disabled worker’s position with another employee
but then must try to identify an equivalent position
for the disabled worker when the leave of absence
Unless doing so would cause an undue hardship
to the employer, the employer must allow a disabled
worker the option of a modified or part-time work
schedule if required by the disability. This may be
necessary for individuals who need medical treat-
ment periodically. Another type of job modification
involves workplace policies. An employer who pro-
hibits workers from eating or drinking at their work-
stations may amend that policy for a worker with a
disability that requires this worker to eat or drink at
specific times of the day. An employer who requires
employees to work at the employer’s office rather
than at home may alter the policy if a disabled work-
er can perform the essential job functions from
home but cannot perform them at the office.
An employer may claim that undue hardship pre-
vents the provision of reasonable accommodations,
but undue hardship is not easy to prove. The em-
ployer must demonstrate that the specific reasonable
accommodation being considered would cause sig-
nificant difficulty or expense. The determination of
undue hardship is made on a case-by-case basis, and
courts consider such factors as the type and cost of
the accommodation, the financial resources of the
employer, the number of employees, and the overall
impact of the accommodation on the employer’s op-
eration. An employer cannot claim undue hardship
resulting from fears or prejudices about an individu-
al’s disability or fears that an accommodation would
result in a morale problem with co-workers. An em-
ployer may, however, demonstrate undue hardship
if an accommodation would unduly disrupt the work
of other employees.
Additional Resources
West’s Encyclopedia of American Law. West Group, 1998.
ADA Disability and Business Technical
Assistance Centers USA
Toll-Free: 800-949-4232
Job Accommodation Network (JAN)
PO Box 6080
Morgantown, WV 26506-6080 USA
Phone: 800-232-9675
U. S. Equal Employment Opportunity
1801 L Street, NW
Washington, DC 20507 USA
Phone: 800-669-3362
Sections within this essay:
The Elements, Scope, Application of the At-
torney-Client Privilege
- Elements of the Attorney-Client Privi-
- Scope and Application of the Attor-
ney-Client Privilege
State Rules Governing Attorney-Client Privi-
Additional Resources
rule that protects both attorneys and their clients
from being compelled to disclose confidential com-
munications between them made for the purpose of
furnishing or obtaining legal advice or assistance.
The privilege is designed to foster frank, open, and
uninhibited discourse between attorney and client
so that the client’s legal needs are competently ad-
dressed by a fully prepared attorney who is cognizant
of all the relevant information the client can provide.
The attorney-client privilege may be raised during
any type of legal proceeding, civil, criminal, or ad-
ministrative, and at any time during those proceed-
ings, pre-trial, during trial, or post-trial.
The privilege dates back to ancient Rome, where
governors were forbidden from calling their advo-
cates as witnesses out of concern that the governors
would lose confidence in their own defenders. In
1577 the first evidentiary privilege recognized by the
English COMMON LAW was the attorney-client privi-
lege. The English common law protected the confi-
dential nature of attorney-client communications, re-
gardless of whether those communications took
place in public or in private. The American colonies
adopted this approach to the attorney-client privi-
lege, and Delaware codified the privilege in its first
constitution in 1776.
The Elements, Scope, and Application of
the Attorney-Client Privilege
Elements of the Attorney-Client Privilege
Because the attorney-client privilege often pre-
vents disclosure of information that would be rele-
vant to a legal proceeding, courts are cautious when
examining objections grounded in the privilege.
Most courts generally require that certain elements
be demonstrated before finding that the privilege ap-
plies. Although the elements vary from JURISDICTION
to jurisdiction, one often cited recitation of the ele-
ments was articulated in U.S. v. United Shoe Ma-
chinery Corp., 89 F.Supp. 357 (D.Mass. 1950), where
the court enumerated the following five-part test: (1)
the person asserting the privilege must be a client or
someone attempting to establish a relationship as a
client; (2) the person with whom the client commu-
nicated must be an attorney and acting in the capaci-
ty as an attorney at the time of the communication;
(3) the communication must be between the attor-
ney and client exclusively; (4) the communication
must be for the purpose of securing a legal opinion,
legal services, or assistance in some legal proceeding,
and not for the purpose of committing a crime or
FRAUD; and (5) the privilege may be claimed or
waived by the client only.
Scope and Application of the Attorney-Client
The five-part test is typically the starting point in
a court’s analysis of a claim for privilege. Each ele-
ment appears straight-forward on its face but can be
tricky to apply, especially when the client is a corpo-
ration and not a natural person. CORPORATE clients
raise questions as to who may speak for the corpora-
tion and assert the attorney-client privilege on behalf
of the entity as a whole. Some courts have ruled that
the attorney-client privilege may only be asserted by
the upper management of a corporation. A vast ma-
jority of courts, however, have ruled that the privi-
lege may be asserted not only by a corporation’s offi-
cers, directors, and board members, but also by any
employee who has communicated with an attorney
at the request of a corporate superior for the pur-
pose of obtaining legal advice. Upjohn Co. v. U.S.,
449 U.S. 383, 101 S.Ct. 677, 66 L.Ed.2d 584, (U.S.
Whether the client is a natural person or a corpo-
ration, the attorney-client privilege belongs only to
the client and not to the attorney. As a result, clients
can prevent attorneys from divulging their secrets,
but attorneys have no power to prevent their clients
from choosing to waive the privilege and testifying
in court, talking to the police, or otherwise sharing
confidential attorney-client information with third
parties not privy to the confidential discussions. Cli-
ents may waive attorney-client privilege expressly by
their words or implicitly by their conduct, but a court
will only find that the privilege has been waived if
there is a clear indication that the client did not take
steps to keep the communications confidential. An
attorney’s or a client’s inadvertent disclosure of con-
fidential information to a third party will not normal-
ly suffice to constitute WAIVER. If a client decides
against waiving the privilege, the attorney may then
assert the privilege on behalf of the client to shield
both the client and the attorney from having to di-
vulge confidential information shared during their
In most situations, courts can easily determine
whether the person with whom a given conversation
took place was in fact an attorney. However, in a few
cases courts are asked to decide whether the privi-
lege should apply to a communication with an unli-
censed or disbarred attorney. In such instances,
courts will frequently find that the privilege applies
if the client reasonably believes that he or she was
communicating with a licensed attorney. State v. Ber-
berich, 267 Kan. 215, 978 P.2d 902 (Kan. 1999). But
courts in some jurisdictions have relaxed this stan-
dard, holding that the privilege applies to communi-
cations between clients and unlicensed lay persons
who represent them in administrative proceedings.
Woods on Behalf of T.W. v. New Jersey Dept. of
Educ., 858 F.Supp. 51 (D.N.J. 1993).
Although many courts emphasize that the attor-
ney-client privilege should be strictly applied to com-
munications between attorney and client, the attor-
ney-client privilege does extend beyond the
immediate attorney-client relationship to include an
attorney’s partners, associates, and office staff mem-
bers (e.g., secretaries, file clerks, telephone opera-
tors, messengers, law clerks) who work with the at-
torney in the ordinary course of their normal duties.
However, the presence of a third party who is not a
member of the attorney’s firm will sometimes defeat
a claim for privilege, even if that third person is a
member of the client’s family.
Thus, one court ruled that in the absence of any
suggestion that a criminal defendant’s father was a
confidential agent of the DEFENDANT or that the fa-
ther’s presence was reasonably necessary to aid or
protect the defendant’s interests, the presence of the
defendant’s father at a PRETRIAL CONFERENCE between
the defendant and his attorney invalidated the attor-
ney-client privilege with respect to the conference.
State v. Fingers, 564 S.W.2d 579 (Mo.App. 1978). In
the corporate setting, the presence of a client’s sister
defeated a claim for attorney-client privilege that in-
volved a conversation between a client-company’s
president and the company’s attorney, since the sis-
ter was neither an officer nor director of the compa-
ny and did not possess an ownership interest in the
company. Cherryvale Grain Co. v. First State Bank
of Edna, 25 Kan.App.2d 825, 971 P.2d 1204
(Kan.App. 1999).
Many courts have described attorney-client confi-
dences as ‘‘inviolate.’’ Wesp v. Everson, —- P.3d
——, 2001 WL 1218767 (Colo. 2001). However, this
description is misleading. The attorney-client privi-
lege is subject to several exceptions. Federal Rule of
EVIDENCE 501 states that ‘‘the recognition of a privi-
lege based on a confidential relationship... should be
determined on a case-by-case basis.’’ In examining
claims for privilege against objections that an excep-
tion should be made in a particular case, courts will
balance the benefits to be gained by protecting the
sanctity of attorney-client confidences against the
probable harms caused by denying the opposing
party access to potentially valuable information.
The crime-fraud exception is one of the oldest ex-
ceptions to the attorney-client privilege. The attor-
ney-client privilege does not extend to communica-
tions made in connection with a client seeking
advice on how to commit a criminal or FRAUDULENT
act. Nor will a client’s statement of intent to commit
a crime be deemed privileged, even if the client was
not seeking advice about how to commit it. The at-
torney-client privilege is ultimately designed to serve
the interests of justice by insulating attorney-client
communications made in furtherance of adversarial
proceedings. But the interests of justice are not
served by forcing attorneys to withhold information
that might help prevent criminal or fraudulent acts.
Consequently, in nearly all jurisdictions attorneys
can be compelled to disclose such information to a
court or other investigating authorities.
A party seeking DISCOVERY of privileged communi-
cations based upon the crime-fraud exception must
make a threshold showing that the legal advice was
obtained in furtherance of the fraudulent activity and
was closely related to it. The party seeking disclosure
does not satisfy this burden merely by alleging that
a crime or fraud has occurred and then asserting that
disclosure of privileged communications might help
prove the crime or fraud. There must be a specific
showing that a particular document or communica-
tion was made in furtherance of the client’s alleged
crime or fraud.
The fact that an attorney-client relationship exists
between two persons is itself not typically privileged.
U.S. v. Leventhal, 961 F.2d 936 (11th Cir. 1992). How-
ever, if disclosure of an attorney-client relationship
could prove incriminating to the client, some courts
will enforce the privilege. In re Michaelson, 511 F.2d
882 (9th Cir. 1975). Names of clients and the
amounts paid in fees to their attorneys are not nor-
mally privileged. Nor will clients usually be successful
in asserting the privilege against attorneys who are
seeking to introduce confidential information in a
lawsuit brought by a client accusing the attorney of
wrongdoing. In such instances courts will not allow
clients to use the attorney-client privilege as a weap-
on to silence the attorneys who have represented
them. Courts will allow both parties to have their say
in MALPRACTICE suits brought by clients against their
former attorneys.
State Rules Governing Attorney-Client
The body of law governing the attorney-client
privilege is comprised of federal and state legislation,
court rules, and CASE LAW. Below is a sampling of
state court decisions decided at least in part based
on their own state’s court rules, case law, or legisla-
ARKANSAS: Attempts by both an attorney and his
secretary to communicate with the client regarding
his pending criminal case were protected by the at-
torney-client privilege. Rules of Evid., Rule 502(b).
Byrd v. State, 326 Ark. 10, 929 S.W.2d 151 (Ark.
ALABAMA: Where a defendant asserted that his guilty
pleas to robbery charges were the product of his de-
fense counsel’s COERCION, the absence of the defense
counsel’s TESTIMONY to rebut the defendant’s testi-
mony could not be excused by any assertion of the
attorney-client privilege. Walker v. State, 2001 WL
729190 (Ala.Crim.App., 2001).
ARIZONA: By asserting that its personnel understood
the law on stacking coverage for under insured and
uninsured motorist claims, the insurer affirmatively
injected legal knowledge of its claims managers into
the insureds’ BAD FAITH action and thus effectively
waived the attorney-client privilege as to any com-
munications between the insurer and its COUNSEL re-
garding the propriety of the insurer’s policy of deny-
ing coverage. State Farm Mut. Auto. Inc. Co. v. Lee,
199 Ariz. 52, 13 P.3d 1169 (Ariz. 2000).
CALIFORNIA: The attorney-client privilege is not lim-
ited to litigation-related communications, since the
applicable provisions of the state Evidence Code do
not use the terms ‘‘litigation’’ or ‘‘legal communica-
tions’’ in their description of privileged disclosures
but instead specifically refer to ‘‘the accomplishment
of the purpose’’ for which the lawyer was consulted.
West’s Ann.Cal.Evid.Code §§ 912, 952. STI Outdoor
v. Superior Court, 91 Cal.App.4th 334, 109
Cal.Rptr.2d 865 (Cal.App. 2 Dist. 2001).
ILLINOIS: To prevail on an attorney-client privilege
claim in a corporate context, a claimant must first
show that a statement was made by someone in the
corporate control group, meaning that group of em-
ployees whose advisory role to top management in
a particular area is such that a decision would not
normally be made without their advice or opinion
and whose opinion, in fact, forms the basis of any
final decision by those with actual authority. Hayes
v. Burlington Northern and Santa Fe Ry. Co., 323
Ill.App.3d 474, 752 N.E.2d 470, 256 Ill.Dec. 590
(Ill.App. 1 Dist. 2001).
MAINE: Counsel’s inadvertent disclosure of a memo-
randum to opposing counsel, which summarized a
telephone conference between counsel and his cli-
ent, did not constitute a waiver of the attorney-client
privilege, where the document was mistakenly
placed in boxes of unprivileged documents that were
available to opposing counsel to photocopy and the
memorandum in question was labeled ‘‘confidential
and legally privileged.’’ Corey v. Norman, Hanson &
DeTroy, 742 A.2d 933, 1999 ME 196 (Me. 1999).
MASSACHUSETTS: Hospital personnel were neither
the defendant’s nor his attorney’s agents when they
conducted a blood-alcohol test on the defendant at
the attorney’s request for sole purpose of gathering
potentially exculpatory evidence, and thus the state’s
GRAND JURY SUBPOENA of the test results did not vio-
late the attorney-client privilege. Commonwealth v.
Senior, 433 Mass. 453, 744 N.E.2d 614 (Mass. 2001).
MICHIGAN: A Court of Appeals reviews de novo a de-
cision regarding whether the attorney-client privi-
lege may be asserted. Koster v. June’s Trucking, Inc.,
244 Mich.App. 162, 625 N.W.2d 82 (Mich.App. 2000).
MINNESOTA: The presence of the defendant’s wife
at a joint meeting in which the defendant, his attor-
ney, and his wife discussed financial aspects of a pos-
sible DIVORCE prevented the attorney-client privilege
from attaching. State v. Rhodes, 627 N.W.2d 74
(Minn. 2001).
NEW JERSEY: The person asserting the attorney-
client privilege bears the burden to prove it applies
to any given communication. Horon Holding Corp.
v. McKenzie, 341 N.J.Super. 117, 775 A.2d 111
(N.J.Super.A.D. 2001)
NEW YORK: A client’s intent to commit a crime is not
a protected confidence or secret for the purposes of
the attorney-client privilege. N.Y.Ct.Rules, § 1200.19.
People v. DePallo, 96 N.Y.2d 437, 754 N.E.2d 751,
729 N.Y.S.2d 649 (N.Y. 2001).
NORTH DAKOTA: A communication is confidential,
for the purposes of determining the applicability of
attorney-client privilege, if it is not intended to be
disclosed to persons other than those to whom the
disclosure is made during the course of rendering
professional legal services or to those reasonably
necessary for transmission of the communication
during the course of rendering professional legal ser-
vices. Rules of Evid., Rule 502(a)(5). Farm Credit
Bank of St. Paul v. Huether, 454 N.W.2d 710 (N.D.
OHIO: The attorney-client privilege is not absolute,
and thus the mere fact that an attorney-client rela-
tionship exists does not raise a presumption of confi-
dentiality of all communications made between the
attorney and client. Radovanic v. Cossler, 140 Ohio
App.3d 208, 746 N.E.2d 1184 (Ohio App. 8 Dist.
TEXAS: Physicians who were defending against a
malpractice action were not entitled to discover,
under fraud exception to attorney-client privilege,
material relating to a SETTLEMENT between the plain-
tiffs and another defendant, although the physicians
alleged that disparate distribution of the settlement
proceeds was a sham intended to deprive the physi-
cians of settlement credit, since there was no evi-
dence that the plaintiffs made or intended to make
hidden distributions. Vernon’s Ann.Texas Rules
Civ.Proc., Rule 192.5(a); Rules of Evid., Rule
503(d)(1). IN RE Lux, 52 S.W.3d 369 (Tex.App. 2001).
WASHINGTON: The federal constitutional founda-
tion for the attorney-client privilege is found in the
INCRIMINATION, the Sixth Amendment right to coun-
sel, and the Due Process Clause of the Fourteenth
Amendment, as these rights can be protected only if
there is candor and free and open discussion be-
tween client and counsel. U.S.C.A. Const.Amends. 5,
6, 14. In re Recall of Lakewood City Council Mem-
bers, 144 Wash.2d 583, 30 P.3d 474 (Wash. 2001).
Additional Resources
American Jurisprudence. West Group, 1998.
client.htmlFindLaw: CyberSpace Law Center: Privacy:
Attorney-Client Privilege.
West’s Encyclopedia of American Law. West Group, 1998.
American Bar Association
740 15th Street, N.W.
Washington, DC 20005-1019 USA
Phone: (202) 662-1000
Fax: (816) 471-2995
Primary Contact: Robert J. Saltzman, President
National Lawyers Association
P.O. Box 26005 City Center Square
Kansas City, MO 64196 USA
Phone: (800) 471-2994
Fax: (202) 662-1777
Primary Contact: Mario Mandina, Chief Executive
National Organization of Bar Counsel
515 Fifth Street, N.W.
Washington, DC 64196 USA
Phone: (202) 638-1501
Fax: (202) 662-1777
Primary Contact: Robert J. Saltzman, President
This Page Intentionally Left Blank
Sections within this essay:
- Why is it so Difficult to Find an Attor-
- When Do I Need A Lawyer?
- Avoiding the Dishonest or Unethical
Methods of Finding an Attorney
- By Advertisements
- By Published Directories
- By Internet
- By Lawyer Referral Services of State
Bar Associations
Questions to Ask Before Retaining a Lawyer
Additional Resources
When the United States handed down its decision
in Bates v. State Bar of Arizona which struck down
state laws prohibiting lawyers from advertising as an
unconstitutional interference with free speech, it was
widely thought that it would then be easier to find
an attorney. This belief was based on the premise
that since lawyers were allowed to compete in the
same way as other businesses do, it would be easier
to meet one’s needs for legal representation and that
the costs would go down.
It is true that lawyer advertising has made it easier
to find an attorney. However, there is still a problem
in finding the right attorney for one’s particular
needs. If the selected lawyer is inexperienced, in-
competent, or lacks the willingness or ability to com-
municate effectively with a client, the client will not
be satisfied with the lawyer’s service. Furthermore,
the consequences for the client could be catastroph-
ic, such as losing a business or being unable to recov-
er for injuries the client sustained at the hands of a
liable third party. In order to find the best attorney,
one needs more than a list of names, even if these
are specialists in the relevant legal area. Clients are
best served by asking questions before they decide
on an attorney to retain.
Consumer dissatisfaction with lawyers has be-
come a major problem. A survey taken in 1995 by
Consumer’s Union revealed that out of 30,000 re-
spondents, one–third were not well satisfied with the
quality of their attorneys’ services. The reasons for
this dissatisfaction varied, ranging from attorneys fail-
ing to keep their clients informed on the progress of
their cases, failing to protect clients’ interests, failing
to resolve cases in a timely manner, and continually
charge unreasonable fees. The reason for this wide-
spread dissatisfaction is linked to the lack of knowl-
edge by consumers on how to find attorneys experi-
enced with the kinds of problems they are facing as
well as knowing what questions to ask a lawyer they
are considering retaining. The results of a one thou-
sand person survey reported in the Florida Bar Jour-
nal revealed that the average time spent in finding a
lawyer was two hours or less. Nearly one half of those
surveyed said it was hard to find a good lawyer, and
over a quarter of them said they did not know how
to find a lawyer. It is remarkable that 80 per cent of
respondents said they wished there was a source for
information on lawyers’ credentials.
Why It Is Difficult to Find an Attorney?
One difficulty in finding the appropriate attorney
is the ever expanding number of specialties practiced
by lawyers. Specialization makes selection more
complicated. Law has become more specialized be-
cause changes in technology have necessitated the
development of new areas, such as Cyberlaw and In-
ternet law. New areas of law have also been created
by recently enacted laws and regulations from such
federal administrative bodies as the Environmental
Protection Agency. This could impact and compli-
cate the problems of a person acquiring a business
and trying to determine whether the seller or the
buyer is liable for cleaning up a toxic waste site. The
increasing number of laws and regulations have
forced lawyers to become more specialized in order
to keep up with new developments. Furthermore,
many general areas of the law in which an attorney
could become proficient, have now been split up
into specialties. In business law, there are specialists
for mergers and acquisitions because of the com-
plexity involved in these transactions. Even criminal
law is not immune to this trend since some lawyers
now specialize in white collar crime.
When Do I Need A Lawyer?
Potential clients should retain a lawyer for any of
the following reasons:
If they have been charged with a felony
If they have been served with papers naming
them as defendants in a lawsuit
If their insurance coverage is less than the
amount a third party is claiming due to their
If they are making a will or changing it
If they wish to adopt a child
If someone with whom they are involved in
a business setting breaches his or her con-
tract with the client
If they are resulting in substantial harm, or
if the person suing them has a lawyer.
If a person is a DEFENDANT in a civil lawsuit and fails
to appear in court, a DEFAULT JUDGMENT will be en-
tered by the court against them, and for all practical
purposes, they will be unable to overturn it.
Avoiding the Dishonest or Unethical Lawyers
This situation is easy to fall into because with the
exception or Oregon, at least some part of the disci-
plinary process is kept private. This means that po-
tential clients have no way of knowing whether a
complaint has been made against a lawyer if no ac-
tion has been taken. Although some complaints
against lawyers are frivolous, the consumer has no
way of knowing whether the decision by the state bar
not to take any action was made in GOOD FAITH. Fur-
thermore, the action taken may only amount to a pri-
vate reprimand in the form of a letter sent to the at-
torney. According to a recent investigation by the
Washington Times, lawyers guilty of serious ethical
violations and felonies are at the most only suspend-
ed for a limited period of time and made to make
RESTITUTION to the client. Even the most severe pun-
ishment, disbarment, is not permanent since in most
states the attorney can apply for reinstatement in five
Not only are the actions taken against lawyers
found guilty of ethical violations not published in
many states, this information is unavailable even in
publications and databases relied upon by consum-
ers to avoid this problem. There are attorneys listed
in the well–respected Martindale–Hubbell Lawyers
Directory who may be under suspension, disbarred,
or imprisoned. The database set up by the American
BAR ASSOCIATION (ABA) to allow consumers to find
out whether a lawyer has been sanctioned is a great
deal less than helpful since no details are given as to
the offense charged or the punishment given.
Out of all the complaints made against lawyers,
only one half of one per cent result in disbarment,
and a total of only one and one half percent result
in any SANCTION at all including private reprimands.
Methods of Finding an Attorney
By Advertisement
In an advertisement, consumers cannot obtain
the information you need in order to make a wise de-
cision. There is nothing upon which to judge the
legal skills of the attorney, whether his style would
be conducive to achieving specific goals as to how to
resolve specific problem, or whether there have
been any complaints against the attorney resulting in
a reprimand, suspension or disbarment. It also can-
not determine from an advertisement whether the
attorney will be accessible enough so that they can
communicate effectively with their clients and willing
to take the time necessary so that they understand
the possible outcomes of handling the client’s case
in a given manner.
By Personal Referral
Friends and business acquaintances whose judg-
ment is trusted is a good source in finding an attor-
ney, if they have used the attorney for the same kind
of problem that a consumer is facing or at least prac-
tices in a specialty pertaining to the consumer’s situ-
ation. An even better source is a friend or acquain-
tance who actually is an active or recently retired
lawyer or judge. Such persons can inform potential
clients as to attorneys’ reputation in the legal com-
By Published Directories
Martindale Hubbell Law Directory
This annually published directory is the oldest and
best known of those available today. It includes law-
yers practicing in the United States as well as 159
other countries. This coverage of foreign countries
will continue to become more important as laws in
the United States are affected by foreign and interna-
tional law.
Each individual lawyer entry will contain the date
of birth, the year first admitted to a state bar,
numeric codes indicating where all listed educational
degrees were earned Specialized areas of law in
which they practice, and a listing of representative
clients, the firm where the lawyer practices, and con-
tact information. If the entry has the bar registry des-
ignation (BR), it means that they are also listed in the
Martindale Hubbell Directory for Pre–Eminent Law-
Despite its enormous size, not all practicing attor-
neys are listed. In order for an attorney or firm to be
included in this directory, they must send the appro-
priate information to the publisher.
Many, but not all of the attorneys and firms listed,
are rated according to their degree of legal skill and
whether they follow the highest ethical standards.
The rating ‘‘AV’’ is the highest rating given. A ‘‘BV’’
rating is still above average in terms of legal skills and
an indication the attorney subscribes to the same
high ethical standards as those given the ‘‘AV’’ rating.
The ‘‘CV’’ rating denotes an average rating in terms
of legal skills and an indication the lawyer also fol-
lows the highest ethical standards. No attorney is
given a rating without their consent. The ratings are
based on confidential written evaluations by practi-
tioners and judges in the position to know the given
lawyer. There is no rating to indicate that a lawyer is
below average in legal ability or that he does not fol-
low the highest ethical standards.
Martindale Hubbell Bar Register of Pre–
Eminent Lawyers
Listings are restricted to those individual attor-
neys and firms that have earned the ‘‘AV’’ rating and
who practice in the United States and Canada. In-
stead of being grouped by state and within each state
by the locality in which the lawyer practices, the law-
yers are first grouped according to the specialty in
which they practice. Sixty specialties are included.
The primary value of these directories in your
search for an attorney is that they tell you how long
that lawyer has been in practice, whether he special-
izes in an area relevant to the problem you are facing,
and whether there may be a CONFLICT OF INTEREST if
you retain that attorney based on the clients they
The Best Lawyers in America 1999–2000
Now in its eighth edition, the information is based
on the polling of 11,000 lawyers who were asked
which attorneys in practice for a minimum of ten
years they consider to be the best in their specialty.
In the 1995–1996 edition only one and one half per-
cent of all lawyers practicing in the United States
were listed.
Lawyer’s Register International by
Specialties and Fields of Law. 16th ed. 1999
This directory gives a worldwide listing of attor-
neys who represent themselves as being certified or
designated as practicing in one or more of 390 legal
specialties. The designation as a specialist is given for
one of three reasons. First, the attorney has success-
fully completed a certification program given for that
specialty in the state in which they practice. Second,
the state in which the lawyer practices has designat-
ed them on a defacto basis that they have sufficient
experience to be qualified in a given specialty. Third,
they have been certified by the National Board of
Trial Advocacy. There is a separate designation given
for each of these three reasons why a lawyer is desig-
nated as certified in a given specialty.
The directory is arranged alphabetically by spe-
cialty, and within each specialty alphabetically by
where they practice. In order to assist the consumer,
a separate table lists all states that have established
certification programs in particular specialties. By
using this table, you are able to more easily select at-
torneys that have been certified by a state program
in a given specialty.
Chambers Global The World’s Leading
Published in London, England, by Chambers and
Partners, this source is designed for those trying to
find an attorney practicing in one of over sixty spe-
cialized areas of business and CORPORATE law.
Evaluations are from leading practitioners in each
specialty obtained through telephone interviews av-
eraging thirty minutes. During these interviews, the
person interviewed is asked who they consider to be
the best attorney in their specialty and why they hold
such a high opinion of them. This procedure, unlike
the written questionnaires upon which other lawyer
directories rely, allows for a more thorough investi-
gation of the legal abilities of a given attorney. This
is because a interview by telephone avoids the BIAS
that is inherent in written questionnaires since the
ones returned in such surveys are much more likely
to be favorable. Conversely, attorneys who do not re-
spect the abilities of another practitioner are less
likely to send in their written responses.
By the Internet
America Online (AOL) Anywhere Lawyer Di-
rectory URL: – Be-
sides acting as an online aid to finding an at-
torney, this site also contains a link to
answer questions that need to be asked by
those seeking legal representation.
Martindale Hubbell Lawyer Locator URL: – This is the most fre-
quently used lawyer directory on the inter-
net. URL: – This
site also belongs to Martindale–Hubbell, but
it differs from the preceding web site be-
cause it targets individuals and small busi-
ness people. This site allows searches to be
narrowed to those attorneys practicing a
particular specialty in a given locality. It also
has links to help a consumer determine
whether they need a lawyer, how attorneys
bill their clients and how much they charge
as well as a list of questions to ask an attor-
ney before you decide to retain them.
Chambers and Partners URL: http:// – This or-
ganization’s home page has links that enable
you to find evaluations of lawyers and law
firms as to their legal skill in various areas of
business and corporate law.
By Lawyer Referral Services of State Bar
These sources are useful only to the extent they
can give consumers the names of lawyers in a given
locality who practice law in a given specialty and who
have agreed to have their name put on the list main-
tained by the Bar Association. For a small fee, usually
$25 – $30, each attorney on the list agrees to give a
fifteen to thirty minute consultation. This can be
helpful because consumers can get an opinion from
a lawyer as to whether they have a case and whether
it is worth pursuing. This can save consumers a great
deal of time and effort as opposed to attempting to
research the matter on their own. During the consul-
tation, the lawyer should be able to inform the po-
tential client whether the STATUTE OF LIMITATIONS for
filing their particular claim has expired or not. Al-
though consumers could do research on their own,
just reading the STATUTE may be insufficient to deter-
mine whether the statute of limitations has run out;
they may have to read the CASE LAW on this matter.
Regardless of what the attorney tells the consumer
regarding their case, they are under no obligation to
retain the lawyer’s services.
The following are a short list of directory services
ABA Directory of Lawyer Referral Services –
This directory lists state wide and local bar
association referral services. The local refer-
ral services specify which counties they
serve. Each referral service will indicate
whether they give referrals for all specialties
or exclude certain ones. Information is also
given as to whether low fee or PRO BONO (no
fee) programs are provided for low income
Law and Legal Information Directory by Ste-
ven & Jacqueline O’Brien Wasserman – This
source has an alphabetical listing by state of
referral services located in that JURISDICTION.
Included are entries for services provided by
the state bar as well as local bar associations.
Street and web site addresses, regular and
toll–free telephone numbers Are provided.
If you qualify by income, a listing of legal aid
offices arranged alphabetically by state and
cities within will include the same informa-
tion the lawyer referral section provides.
Web Services – If you do not have access to
either of the above titles, you may obtain in-
formation on the legal referral services of-
fered by your state bar by logging on to From this cite you will be
led to links for each state which in turn will
include links to that state’s bar association
and the lawyer referral service it provides.
Questions to Ask Before Retaining a
There are four purposes to this process. First, it
allows consumers to determine whether the attorney
has sufficient experience not just in the specialty per-
taining to their problem, but also whether the lawyer
has had previously solved a similar problem for an-
other client. Second, they can learn whether his style
is suited to their goals in resolving the dispute they
have with the other side. For example, if a potential
client is hoping for a SETTLEMENT, a hardball Rambo
like style may backfire. Third, they will discover how
well they and the attorney communicate with one
another. Fourth, they can ask the attorney if they are
able to devote sufficient time and resources, such as
a support staff, to their case.
Consumer Reports suggests that the following
questions be asked during an interview with any at-
torney a consumer is considering retaining:
How many years of experience do you have
in this specialty and how have you handled
similar disputes in the past?
What are the possible results from pursuing
this matter?
How long will you expect it to take to resolve
this matter?
How will you keep me informed of what is
happening as the case proceeds?
Will anyone else, such as one of your asso-
ciates or paralegals, be working on my case?
Do you charge a flat or an hourly rate and
how much?
What other expenses will there be besides
your fee and how are they calculated?
What’s a reasonable approximate figure for
a total bill?
Can you give me a written estimate?
Can some of the work be handled by mem-
bers of your staff at a lower rate?
Will unforeseen events increase the amount
you charge me?
If you charge on a contingency basis, what
proportion of the amount I recover will be
paid to you as your fee and can this figure
be calculated after the expenses are deduct-
How often will I be billed, and how are bill-
ing disputes resolved? If we cannot settle
this, will you agree to mandatory arbitration?
Do you need any further information from
Can I do some of the work in exchange for
a lower bill?
Do you recommend that this matter be sub-
mitted to an arbitrator or mediator, and do
you know anyone qualified to do this?
Additional Resources
Choosing a Matrimonial Lawyer: 10 Criteria for Finding
the Right One for You. David M. Wildstein, Wilentz,
Goldman, & Spitzer, 1996.
Consumer’s Guide to Getting Legal Help. ABA, 2001.
Do I Really Need a Lawyer? Kahon, Stewart & Robert M.
Cavello, Chilton Book Co., 1979.
Finding the Right Lawyer. Jay Foonberg, ABA Section of
Law Practice and Management, 1995.
Guide to Consumer Services: Consumer Union’s Advice
on Credit, Income Tax, Choosing a Doctor or Dentist,
Finding a Lawyer, Closing Costs, Auto Repair and
Much More. Consumer’s Union, 1979.
How to Find the Best Lawyers: And Save over 50% in Legal
Fees. John Roesler, Message Co., 1996.
Lawyer Referral and Information Service Handbook.
ABA, 1980 - Published biannually.
Let’s Talk Law: Selecting a Lawyer. Crest Video Marketing.
Profile 2000: Characteristics of Lawyer Referral and In-
formation Service. ABA Committee on Lawyer Referral
and Information Service, 1999.
Using a Lawyer and What to Do if Things Go Wrong.
American Divorce Association of Men
1519 S. Arlington Heights Rd.
Arlington Heights, IL 60005 USA
Phone: (847) 364-1555
American Society for Divorced and
Separated Men
575 Keep St.
Elgin, IL 60120 USA
Phone: (847) 665-2200
Atlanta Lawyers for the Arts
152 Nassau St.
Atlanta, GA 30303 USA
Phone: (404) 585-6110
Chicago Divorce Association
One Pierce Center
Itasca, IL 60143 USA
Phone: (630) 860-2100
Christian Legal Society
4208 Evergreen Lane, Suite 222
Annandale, VA 22003 USA
Phone: (703) 642-1070
Families for Private Adoption
P.O. Box 6375
Washington, DC 20015 USA
Phone: (202) 722-0338
Find the Children
3030 Nebraska Ave., Suite 207
Santa Monica, CA 90404-4111 USA
Phone: (310) 998-8444
Help Abolish Legal Tyranny (HALT)
1612 K St., N.W. Suite 510
Washington, DC 20006 USA
Phone: (202) 887-8255
Phone: (888) FOR-HALT
Military Law Task Force
1168 Union, #200
San Diego, CA 92101 USA
Phone: (619) 233-1701
National Counsel of Black Lawyers
116 W. 111th St., 3rd Floor
New York, NY 10026 USA
National Health Law Program
2639 S. LaCienega Blvd.
Los Angeles, CA 90034 USA
Phone: (310) 204-0891
National Lawyers Guild
126 University Place, 5th floor
New York, NY 10003-4538 USA
National Whistleblower Center
3238 P St., N.W.
Washington, DC 20007 USA
Phone: (202) 342-1902
Sections within this essay:
Establishing the Attorney-Client Relation-
Conduct vs. Performance
What Constitutes Actionable Malpractice
- Omission or Failure to Do Some-
thing (Nonfeasance)
- Failure to Perform or Do Something
Competently (Malfeasance)
- Acting Outside the Scope of Authori-
ty, Duty, or Area of Competence
Filing a Malpractice Lawsuit
Alternatives for Addressing Malpractice
Select State Laws on Limitations Period For
Filing Malpractice Lawsuits
Additional Resources
MALPRACTICE is professional NEGLIGENCE or (less
frequently) professional misconduct. Attorney mal-
practice generally implies an unreasonable lack of
skill, or failure to render professional services in a
manner consistent with that degree of skill, care, and
learning expected of a reasonably competent and
prudent member of the legal profession. Claims
against attorneys (lawyers) for legal malpractice are
viable in all fifty states. There is no federal law gov-
erning attorney malpractice, and state statutes typi-
cally address only the appropriate STATUTE OF
LIMITATIONS (limiting the time period) for filing
claims or lawsuits against attorneys. However, state
CASE LAW will define and set the parameters for ac-
tionable cases of malpractice within the state.
For legal malpractice to be ‘‘actionable’’ (having
all the components necessary to constitute a viable
cause of action), there must be a duty owed to some-
one, a breach of that duty, and resulting harm or
damage that is proximately caused by that breach.
The simplest way to apply the concept of proximate
cause to legal malpractice is to ask whether, ‘‘but
for’’ the alleged negligence, the harm or injury would
have occurred?
Establishing the Attorney-Client
First and foremost, an attorney must owe a legal
duty to a person before his or her competency in
performing that duty can be judged. In American
JURISPRUDENCE, a lawyer has no affirmative duty to as-
sist someone—in the absence of a special relation-
ship with that person (such as doctor-patient, attor-
ney-client, guardian-ward, etc.). That ‘‘special
relationship’’ between an attorney and his/her client
is generally established by mutual assent/consent.
This is most often confirmed by a written ‘‘retainer’’
agreement in which the client expressly and exclu-
sively retains a lawyer and his/her law firm to repre-
sent the client in a specific legal matter.
Under rare and limited circumstances, a court
may infer that an attorney-client relationship existed
as a matter of law, even without a contract or agree-
ment between the parties, and even without the at-
torney’s ASSENT. Such a legal conclusion may be
drawn from the facts presented, such as reliance on
the part of the client (who believed in GOOD FAITH
that an attorney-client relationship existed) or by the
fact that the attorney provided more than just infor-
mal or anecdotal opinion or answer to a question.
The paying of a fee or RETAINER is not dispositive in
determining whether an attorney-client relationship
existed, and courts generally defer to the ‘‘client’’
and base their conclusions on—or at least give sub-
stantial weight to—whether the client believed such
a relationship existed, confided in the attorney, and
relied upon the professional relationship to his or
her detriment.
In any event, once the requisite attorney-client re-
lationship is established, the attorney owes to the cli-
ent the duty to render legal service and COUNSEL or
advice with that degree of skill, care, and diligence
as possessed by or expected of a reasonably compe-
tent attorney under the same or similar circum-
stances. The ‘‘circumstances’’ may include the area
of law in which the attorney practices (although all
attorneys are deemed to have basic legal skill and
knowledge in the general practice of law), the cus-
tomary or accepted practices of other attorneys in
the area, and the particular circumstances or facts
surrounding the representation. The requisite de-
gree of skill and expertise under the circumstances
is established by ‘‘expert testimony’’ from other prac-
ticing attorneys who share the same or similar skill,
training, certification, and experience as the allegedly
negligent attorney.
Conduct vs. Performance
The practice of law requires state licensure. All
fifty states have criteria governing admission to prac-
tice within their states. Although requirements may
vary slightly, almost all states require graduation
from an accredited law school, passing the ‘‘bar
exam’’ (referring to the professional BAR ASSOCIATION
of that state), and submitting to a review and investi-
gation of one’s personal background for ASSESSMENT
of ‘‘character and fitness’’ to practice law. According-
ly, all new lawyers start their profession with an ac-
ceptable level of professional competency (as deter-
mined by graduation from law school and passage of
a comprehensive bar exam which gauges their pro-
fessional knowledge of the law), as well as an accept-
able level of character and fitness to practice law (as
determined by the state bar review board).
Each state also has adopted codes of conduct,
disciplinary rules, and adjudicative boards to address
issues of misconduct once attorneys are admitted to
practice. The American Bar Association also promul-
gates and promotes its Model Rules of Professional
Conduct (adopted by two-thirds of the states as of
Additionally, virtually all states now require peri-
odic ‘‘updating’’ of technical and/or academic skills
by the mandatory completion of a certain number of
classroom or seminar hours each year. Attorneys
may generally choose the topics in which these
hours are completed, but there is usually a require-
ment that a minimum number of hours be complet-
ed in the area of ‘‘ethics.’’ Attorneys who fail to com-
plete these courses may not renew their license to
practice for the upcoming year. Additional fines or
penalties may apply.
That said, trained, licensed attorneys nonetheless
may engage in questionable conduct, display a seem-
ing lack of skill, or otherwise neglect or fail to proper-
ly render those duties owed to their clients, their ad-
versaries, or to the judicial system as a whole, in their
day-to-day practice of law. For those indiscretions
and failures that have resulted in harm to a client, a
lawsuit for legal malpractice may be an appropriate
What Constitutes Actionable Malpractice
State laws govern the viability of causes of action
for legal malpractice. The laws vary in terms of time
limits to bring suit, qualifications of ‘‘expert’’ witness-
es, cognizable theories of liability, and proper party
defendants/proper party plaintiffs. Notwithstanding
these differences, there are common themes for all
cases, and general agreement from state to state on
particular instances of nonfeasance or malfeasance of
professional duties that may constitute legal mal-
Not all instances of malpractice involve an attor-
ney’s handling of a case for trial (although persons
generally think of attorneys within the context of
matters involving LITIGATION). For example, an attor-
ney may fail to file a request for variance in a county
ZONING matter involving a parcel of real property or
may fail to catch an error on closing documents sub-
mitted to him/her. An attorney may erroneously ad-
vise a client about an area of law, e.g. foreign
ADOPTION. Or an attorney may otherwise act on be-
half of a client, against that client’s express authority
or permission. Any of these may constitute examples
of actionable legal malpractice.
Omission or Failure to Do Something
At the top of the list of dreaded mistakes for any
attorney is the failure to file a claim, notice, or lawsuit
within the time prescribed by law. Inevitably, the cli-
ent loses his or her right of action, and the entire
cause is lost. Such a failure is ‘‘black and white’’ in
the eyes of jurors, and disastrous for the client. Simi-
larly, the failure to answer a claim, notice, or lawsuit
on behalf of a client may result in FORFEITURE, loss of
defense, or DEFAULT JUDGMENT entered against a cli-
ent, often FATAL failures. A failure to appear in time
to set aside a DEFAULT judgment is equally serious.
Unfortunately, courts do not consider that the error
was made by the attorney and not the client. The cli-
ent must sue the attorney for malpractice to recoup
his or her loss.
Probably second to the above, in terms of occur-
rence and viability, is the failure to provide required
notice. Such failures may include the failure to notify
potential heirs at law of a PROBATE matter, failure to
provide notice to creditors of a pending action, fail-
ure to post public notice regarding a real property ac-
tion, failure to appear in court, or failure to notify a
client of an offer to settle the case, received from the
opposing party. These matters generally constitute
actionable malpractice if the client has suffered harm
or damage as a result of the alleged failures.
Third in line is that group of failures which are se-
rious but not always fatal to a client’s interest(s).
These include such things as failure to file a certain
motion in court, failure to name the right parties in
a lawsuit (very serious if the time period for filing ex-
pires), failure to take or obtain certain DISCOVERY
(e.g., documents or EVIDENCE), failure to object to
the admission of certain evidence at trial (more seri-
ous), failure to raise certain issues or questions at de-
positions, public hearings, trials, arbitrations and me-
diations, etc.
Sometimes overlooked but nonetheless consid-
ered malpractice is the failure to communicate with
a client and/or keep the client apprized of the status
of the legal matter. However, such instances of mal-
practice are seldom ‘‘actionable’’ (because of impal-
pable damages) and are better addressed through a
grievance process or letter of complaint.
The above instances of failures are not compre-
hensive and are intended only as representative by
way of example. Not all occurrences of the above
‘‘failures’’ will result in actionable malpractice in all
jurisdictions and under all factual scenarios.
Failure to Perform or Do Something
Competently (Malfeasance)
An attorney may be equally liable for malpractice
if he or she performs the actions required by law, but
does so in an incompetent or substandard manner.
For example, an attorney may timely file a cause of
action in court, but the complaint may fail to contain
important details or averments (allegations), result-
ing in DISMISSAL of the suit. An attorney may take the
DEPOSITION of a witness but ask irrelevant questions
or fail to ask the necessary questions needed to elicit
needed TESTIMONY. An attorney may prepare a last
will and TESTAMENT for a client but accidentally leave
out or miswrite a very important BEQUEST. An attor-
ney may appear in time for a criminal sentencing
HEARING but be wholly unprepared or unfamiliar with
the case or the issues.
All of the above examples represent situations re-
quiring levels of skill generally attributable to or ex-
pected of any competent attorney practicing law in
any state. They do not require specialized knowledge
in any particular area of law and do not require ad-
vanced levels of legal experience or expertise. They
are considered examples of fundamental practice of
law. Breaches or failures of this type are generally
preventable, avoidable, and therefore, actionable in
most cases.
Within the context of litigation, it should be men-
tioned that in most states, a client’s retention of an
attorney to represent an action at trial implies that
the client has delegated to the attorney all decision-
making regarding the manner in which the trial
should be conducted or the case should be pres-
ented. Even if the attorney loses the case, and a judg-
ment is entered against his or her client, it does not
mean that any malpractice was committed; after all,
in every trial, at least one competent attorney loses
and one wins. Under a broad area of attorney discre-
tion, commonly referred to as ‘‘trial tactics,’’ errors
in judgment at trial (e.g., whether or not to present
a certain witness or introduce certain evidence)
which are not patently substandard for the profes-
sion, do not generally give rise to a cause of action
for malpractice.
Acting Outside the Scope of Authority, Duty,
or Area of Competence
In addition, there are clear instances when attor-
neys should decline representation because they are
not skilled enough—or do not possess the requisite
subject matter knowledge— to provide competent
representation for a client. By way of example, such
legal matters as WRONGFUL DEATH by MEDICAL
MALPRACTICE, complex CORPORATE mergers or buy-
outs, or complex financial transactions, should not
be handled by new attorneys without supervision.
Often, mistakes in taking on a new client are made
when new attorneys want to ‘‘impress’’ their col-
leagues or superiors, or when sole practitioners need
money or more cases.
An attorney retained to represent a client in one
matter may unilaterally and without authority decide
to represent a client, or act on the client’s behalf, in
another unrelated matter. The client may subse-
quently ratify the representation, or, if harmed, may
sue for malpractice. Likewise, an attorney retained
for a specific matter may unilaterally and without au-
thority decide to accept an offer of SETTLEMENT for a
certain amount of money, without the client’s au-
thority. This is a good example of malpractice but
may not be ‘‘actionable’’ malpractice, if the client is
unable to prove (by a preponderance) that he or she
would have gotten more money had the matter gone
to trial.
Filing a Malpractice Lawsuit
There are two important factors to remember
about a cause of action for malpractice. First, a client
should realize that a poor, unfair, or unexpected re-
sult does not mean that any malpractice occurred.
Second, in the event that malpractice has occurred,
the client must prove that he or she has suffered
harm or loss due to the alleged wrongs on the part
of an attorney. This is not as easy to prove as one
might think. For example, if the alleged malpractice
involved a matter in litigation, the client must prove
that he or she would have won the case, i.e., a jury
would have ruled in his or her favor, ‘‘but for’’ the
alleged malpractice. This means that, in proving a
case for malpractice, the client will have to actually
‘‘try’’ the ‘‘underlying case’’ before a real jury, and
win it, in order to prove the point. Consequently,
many lawsuits for malpractice are settled out of court
to avoid the time, expense, and uncertainty of such
a burden.
Alternatives for Addressing Malpractice
All states have attorney discipline boards or com-
mittees that accept informal or formal complaints
from aggrieved clients. In matters that involve mis-
conduct more than INCOMPETENCY, this may be the
forum of choice. Generally, disciplinary boards have
authority to impose fines, order RESTITUTION to a cli-
ent, and suspend or revoke a lawyer’s license to prac-
tice law in that state. Clients also may wish to consid-
er alternative dispute resolution, such as ARBITRATION
or MEDIATION, to settle their claims of alleged mal-
Finally, it is worth noting that attorneys are gener-
ally required to advise their clients of known in-
stances of actionable malpractice that have harmed
the client or caused loss or damage. By far, the ma-
jority of attorneys are honest, competent, and com-
mitted to providing good service, and will so advise
clients in the event of a known failure. However,
what may appear to a layman as ‘‘malpractice’’ at first
blush, may in reality constitute no more than a deci-
sion or tactic employed by the attorney that conflicts
with a client’s expectation of likely action or out-
come. Persons who believe that their attorneys may
have committed malpractice are encouraged to con-
sult with legal counsel who specialize in the area of
professional malpractice.
Select State Laws on Limitations Period
For Filing Malpractice Lawsuits
CALIFORNIA: Actions for legal malpractice must be
brought within one year of discovery of a claim, with
a maximum four years’ limitation from the date of
the alleged wrong. Proc: Section 340.6.
CONNECTICUT: Actions for legal malpractice must
be brought within two years of discovery, with a max-
imum three years’ limitation from the date of the al-
leged wrong. Section 52-584.
ILLINOIS: Actions for legal malpractice must be
brought within a maximum of six years from discov-
ery of the alleged wrong 735 ILCS 5/13/214/3.
KANSAS: Actions for legal malpractice must be
brought within two years of discovery, with a maxi-
mum four years’ limitation from the date of the al-
leged wrong. Section 60-513(a)(7), 60-513(c).
KENTUCKY: Actions for professional service mal-
practice must be brought within one year from dis-
covery. Section 413-245.
MAINE: Actions for legal malpractice must be
brought within two years, Section 753-A.
MISSISSIPPI: Actions for professional malpractice
must be brought within two years. Section 15-1-36.
MONTANA: Actions for legal malpractice must be
brought within three years from discovery, with a
maximum ten years’ limitation from the date of the
alleged wrong. Section 27-2-206.
NEVADA: Actions for legal malpractice must be
brought within four years. Section 11.207.
RHODE ISLAND: Actions for legal malpractice must
be brought within three years. Section 9-1-14.1 and
SOUTH DAKOTA: Actions for legal malpractice must
be brought within three years. Section 15-2-14.2.
TENNESSEE: Actions for legal malpractice must be
brought within one year Section 28-3-104.
Additional Resources
‘‘American Bar Association Model Rules of Professional
Conduct’’ 2001. Available at
‘‘Attorney Malpractice’’ 2001. Halt Legal Information
Clearinghouse. Available at
‘‘The Hierarchy of Attorney Malpractice’’ 2001. Available
National Survey of State Laws 3rd Edition. Richard A.
Leiter, Ed. Gale Group, 1999.
This Page Intentionally Left Blank
Sections within this essay:
Concept of Fault or Liability
- Common Law
- Motor Vehicle Statutory Violations
Automobile Accident Liability Insurance
- Contributory Negligence Standards
- Comparative Negligence Standards
- No-Fault Liability Systems
- Components of an Automobile In-
surance Policy
When Accidents Occur
- In a Rental or Leased Vehicle
- When a Pedestrian or Bicyclist is Hit
- When an Animal is Hit
- In One Vehicle Accidents
- In Another State or Country
- When One Causes an Accident
- When One is Injured in an Accident
Vicarious Liability and Negligent Entrust-
Selected State Laws
Additional Resources
All fifty states and the District of Columbia provide
‘‘drivers’ licenses’’ for their residents, permitting
them to operate motor vehicles upon public roads.
Once individuals have been licensed by a state, they
are presumed qualified and competent to operate a
motor vehicle for the period of time covered by the
license. By far, the vast majority of automobile acci-
dents are caused by persons well qualified to drive
under state criteria but who are careless and/or reck-
less in their operation of motor vehicles at the time
of an accident. Moreover, a high number of accidents
are the result of intentional misconduct, such as alco-
hol consumption or excessive speeding.
Concept of Fault or Liability
The determination of fault in an automobile acci-
dent may or may not establish the person or party
liable for payment of the damages or injuries. This
fact is wholly the result of legislative LOBBYING over
the years by automobile liability insurance carriers,
who have devised and promoted various alternative
strategies to the COMMON LAW concept that persons
at fault pay for the damages. Under such legislative
schemes, common law recovery for damages has
been totally or partially abolished. In its place is a
STATUTORY reapportionment of liability for payment
of damages. This arrangement does not mean that
there is a statutory re-defining of actual ‘‘fault’’ PER
SE. It simply means that many states have reappor-
tioned the liability for fault, at least for purposes of
automobile accident liability insurance. In all states,
persons who fail to maintain liability insurance and
who cause accidents may be personally sued, and
their assets seized to satisfy any judgment against
Common Law
In its purest form, ‘‘fault’’ for causing an accident
is either created by STATUTE or defined by common
law. Common law recognizes four basic levels of
fault: NEGLIGENCE, recklessness or wanton conduct,
intentional misconduct, and strict liability (irrespec-
tive of fault).
Negligence generally means careless or inadver-
tent conduct that results in harm or damage. It is a
recurring factor in an aggregate majority of automo-
bile accidents. It encompasses both active and pas-
sive forms of fault. That is to say, failing or omitting
to do something (e.g., yielding a right-of-way) may
result in liability just as much as actively doing some-
thing wrong (e.g., running a red light). Reckless or
wanton conduct generally refers to a willful disregard
for whether harm may result and/or a disregard for
the safety and welfare of others. Strict liability may be
imposed, even in the absence of fault, for accidents
involving certain defective products or extra hazard-
ous activities (such as the transporting of explosive
Under common law, individuals who have caused
an automobile accident have committed a ‘‘tort,’’ a
private wrong against another, not founded in ‘‘con-
tract,’’ and generally not constituting a crime. Those
who have committed torts are referred to as ‘‘tortfea-
sors’’ under the law. Many automobile insurance pol-
icies continue to use the word ‘‘tortfeasor’’ to refer
to people who are at least partly ‘‘at fault’’ or respon-
sible for an accident.
There is rarely a question of fault when the
TORTFEASOR has engaged in intentional or reckless
misconduct, such as drunk driving. But when it
comes to something less than intentional miscon-
duct, e.g., general negligence, establishing fault for
an automobile accident becomes more complex.
Moreover, it is often the case that more than one
driver or person is negligent and/or has played a role
(even inadvertently) in the resulting accident. When
there are multiple tortfeasors involved in an acci-
dent, state law dictates who must pay for both dam-
age to property and injuries to the occupants of vehi-
Motor Vehicle Statutory Violations
Every state has passed multiple laws which dictate
the manner in which drivers must operate their vehi-
cles upon public roads. Many of these statutes are ac-
tually codified versions of the common law, while
others are the result of legislative initiative.
The important point to remember is that a viola-
tion of any of these statutes generally creates a pre-
sumption of negligence as a matter of law. Thus,
‘‘fault’’ in an accident may be established merely by
citing a statute that has been violated. A tortfeasor
who is presumed to have caused an accident by vir-
tue of a statutory violation must bear the burden, in
any legal dispute, of proving that he or she was not
negligent, or (in the alternative) that his or her negli-
gence was not a proximate cause in the accident. The
simplest way to apply the concept of proximate
cause to an automobile accident is to ask whether it
would be true that, ‘‘but for’’ the violation, the acci-
dent would not have occurred.
Automobile Accident Liability Insurance
The federal McCarran-Ferguson Act, 15 USC
1011, contains the basic provisions which give states
the power to regulate the insurance industry. This
power particularly applies to in the automobile insur-
ance industry, where there is very little federal inter-
est, excepting matters involving interstate commerce
in general.
State law dictates not only what form of negli-
gence law applies to automobile accidents but also
what form of liability insurance individuals must
maintain in order to lawfully operate a motor vehicle.
The liability insurance that they purchase generally
parallels the form of negligence law found in their
particular state.
In general, liability for accidents can be affected by
any of the following:
Contributory Negligence Standards
Contributory Negligence: A minority of states
have maintained the common law defense of con-
tributory negligence. Its significance to automobile
accident liability is that individuals cannot sue anoth-
er for injuries or damages if they also contributed to
the accident by his or their own negligence. For ex-
ample, if they are making a left-hand turn in their ve-
hicle and are struck by an oncoming vehicle that is
traveling 10 mph over the speed limit, they cannot
sue the motorist for damages if they failed to have
their turn signal on and the speeding motorist did
not know that they were going to turn in front of
them. Under such a theory, their own negligence
contributed to the accident, and, therefore, bars
their right to recover from the other motorist. This
situation is referred to as ‘‘pure contributory negli-
gence.’’ Some states have maintained a version re-
ferred to as ‘‘modified contributory negligence’’ in
which individuals may file suit against another tort-
feasor only if their own negligence contributed to
the accident by less than 50 percent.
Comparative Negligence Standards
Comparative Negligence: In states that utilize
comparative negligence theories, individuals may
sue another motorist whether or not their own negli-
gence played any role in the accident. However, re-
covery for damages will be reduced by the percent-
age of fault attributable to them. This situation is
often referred to as ‘‘apportionment of fault’’ or ‘‘al-
location of fault.’’ For example, in the above exam-
ple, assume that the turning driver sues the speeding
motorist for $100,000 in damages. At trial, a jury will
be asked to determine what percentage of the acci-
dent was caused by the speeding and what percent-
age of the accident was caused by the turning driver’s
failure to operate the turn signal. Assume further that
the jury finds that the turning driver’s own negli-
gence contributed to the accident by 30 percent and
the negligence of the other motorist contributed to
the accident by 70 percent. If the jury agrees that
damages are worth $100,000 the turning driver
would only be able to recover $70,000 in damages
(or $100,000 reduced by 30 percent caused by that
driver’s own negligence). If, conversely, the negli-
gence was found to have contributed 70 percent to
the accident, the driver could only recover $30,000
for the 30 percent fault for which the other tortfeasor
was responsible. Again, this is true in states that
apply a ‘‘pure’’ theory of comparative negligence.
Other states have modified comparative negligence
principles to permit a lawsuit only if a person is were
less than 50 percent negligent.
No-Fault Liability Systems
No-Fault Systems: In states that have statutorily
established a ‘‘no-fault’’ system of liability for negli-
gence, each person’s own insurance company pays
for his or her injury or damage, regardless of who is
at fault. No-fault insurance liability coverage does not
apportion damages or fault. However, it usually does
not cover damage to the automobile, and separate
collision coverage is needed. In states with NO FAULT
systems, individuals may file suit only if certain
threshold injuries have occurred or damages exceed
insurance coverages.
Components of an Automobile Insurance
Depending on the state, automobile liability insur-
ance policy may contain some or all of the following:
Bodily Injury Liability: The insurer will pay
damages when other persons are injured or
killed in an accident for which the insured
are at fault.
PERSONAL INJURY Protection (PIP): The insur-
er will pay for the insured’s injuries and
other related damages to the insured and to
Property Damage Liability: The insurer will
pay damages when the property of other
persons has been harmed or destroyed by
the insured’s vehicle and the insured is at
Collision Coverage: The insurer will pay for
damages to the insured’s own vehicle, when
the insured is at fault. If the insured’s vehicle
is financed, the loaner may require the in-
sured to maintain collision coverage on the
Comprehensive Coverage: The insurer will
pay for damages to the insured’s automobile
caused by fire, theft, VANDALISM, acts of God,
riots, and certain other perils. If the in-
sured’s vehicle is financed, the loaner may
require the insured to maintain comprehen-
sive coverage on the vehicle.
Uninsured/Underinsured Motorist (UM/
UIM) Coverage: The insurer will pay for inju-
ry or death to the insured and the insured’s
passengers if caused by an uninsured or un-
derinsured tortfeasor or a hit-and-run mo-
torist. In some states, the insurer will also
pay for damage to the insured’s vehicle. An
uninsured at-fault tortfeasor may be sued
and his or her personal assets attached to
satisfy any judgment.
When Accidents Occur
The following points may assist individuals in the
event that they are involved in a motor vehicle acci-
In a Rental or Leased Vehicle
In a Rental or Leased Vehicle: In most states, indi-
viduals’ own insurance policy will protect them for
any automobile that they are driving. There is no
need to purchase additional insurance from the au-
tomobile rental or leasing company unless they wish
to increase their coverage, e.g., add collision cover-
When a Pedestrian or Bicyclist is Hit
When a Pedestrian or Bicyclist is Hit: In some
states, there is a presumption of fault if drivers strike
a pedestrian or bicyclist, for want of care and defen-
sive driving on the driver’s part. However, the pre-
sumption can be overturned by EVIDENCE of fault or
statutory violation on the part of the bicyclist or pe-
destrian, e.g., bicycling at night without a headlight,
jaywalking, etc. In no-fault states, injured pedestrians
are often covered by their own automobile policies,
even though they were pedestrians at the time, and
even if the driver was were at fault.
When an Animal is Hit
When an Animal is Hit: When a domesticated ani-
mal is injured and/or damage occurs to the driver,
there may be a presumption of fault on the part of
the animal’s owner for allowing the animal to run at
large. If the accident was caused by driver negli-
gence, the animal owner may file suit against the
driver. Most states limit damages to the value of the
animal or its medical care, and do not permit non-
economic damages such as emotional damages asso-
ciated with the loss of a pet. However, this is a rapidly
developing area of law. Injury or damage to the driv-
er’s vehicle caused by collision with wild animals
(e.g., deer) is generally covered without assignment
of fault. The driver should render assistance to the
animal only if the driver will not further endanger
himself or other motorists.
In One Vehicle Accidents
In One Vehicle Accidents: The insurance policy
will generally cover injuries and damages, but the
driver may still be found ‘‘at fault,’’ which could af-
fect the driver’s insurance premiums.
In Another State or Country
In Another State or Country: Generally, the laws
of the state in which the accident occurs will govern
the allocation of fault and liability.
When One Causes Accident
When One Causes an Accident: Individuals should
never leave the scene of the accident. They should
avoid statements of apology or admissions of fault:
there may be other factors involved that they are not
aware of. They need to render assistance to any in-
jured persons, but not to attempt to move them.
They should not move their vehicle unless the acci-
dent is minor. They should attempt to secure the
names and telephone numbers of witnesses, even
though they believe they are at fault. They must al-
ways be truthful to their insurance company. Misrep-
resentations may result in cancellation of a policy for
insurance and expose them to even more liability.
Some states require that a police officer always be
called to the scene; other states require police in-
volvement only in circumstances of declared injury.
Generally, a police officer cannot issue a CITATION if
he or she did not witness the accident, unless it is
clear that the accident could only have been caused
by one driver. Notwithstanding, others drivers may
have contributed to the accident, even if they did not
receive citations.
When One is Injured in an Accident
When One is Injured in an Accident: People
should never assume that they are not injured. They
should remain in the vehicle and take a few moments
to assess their physical condition and the situation.
Some injuries, such as spinal vertebral displacements
(e.g., narrowing of intervertebral disc spaces) do not
manifest immediately. If you they are physically able,
they should attempt to secure contact information of
witnesses. If they are taken to a medical facility, their
personal health care insurance provider may origi-
nally be billed, or the medical facility may request
contact information for their automobile insurance
provider. (Each state has its own law regarding the
‘‘priority’’ of insurers responsible for payment.) Indi-
viduals should remember that if they do not have ei-
ther healthcare or automobile insurance, they are
still entitled to emergency medical treatment until
their condition is stabilized. This entitlement stands
is true regardless of their ability to pay, and regard-
less of who caused the accident.
Vicarious Liability and Negligent
In most states, individuals may be liable for acci-
dents caused by other persons who are driving their
vehicle, with their direct or implied permission. In
many states, both the owner and the driver of a vehi-
cle may be named in a lawsuit under a theory of ‘‘vi-
carious liability.’’ Even in the absence of ‘‘owner’s lia-
bility’’ statutes, the common law theory of ‘‘negligent
entrustment’’ of their vehicle to another person may
result in liability exposure.
Likewise, under general negligence theories of vi-
carious liability and ‘‘respondeat superior’’ (‘‘let the
master answer’’), employers may be liable (in addi-
tion to their employees) for accidents caused by
their employees while operating company vehicles.
Such vicarious liability is generally limited to automo-
bile accidents caused during the course of employ-
ment and does not apply if the employee was using
the vehicle beyond the scope of his or her authority.
In a roundabout way, the law permits two other
circumstances for vicarious or remote liability. One
involves an accident caused by a defective vehicle, in
which a ‘‘product liability’’ lawsuit against the manu-
facturer may result in payment of damages. In the
other, several state laws permit suits against state
highway officers and departments in connection
with the negligent construction or repair of high-
ways, streets, bridges, and overpasses, that may have
proximately caused an accident.
Selected State Laws
ALABAMA: See Title 32 of the Alabama Code of 1975,
(Motor Vehicles and Traffic), Chapter 7, Motor Vehi-
cle Safety Responsibility Act. Available at http://
ALASKA: See Title 28 (Motor Vehicles) of the Alaska
Statute, Chapter 28.20, ‘‘Motor Vehicle Safety Re-
sponsibility Act.’’ Available at http://www.legis.state.
ARIZONA: See Title 28 (Transportation) of the Arizo-
na Revised Statutes, Chapter 9, (Vehicle Insurance
and Financial Responsibility). Available at http://
lated Industries), Subtitle 3 (Insurance), Chapter 89
(CASUALTY Insurance), Subchapter 2 (Automobile Li-
ability Insurance Generally) of the Arizona Revised
Statutes, Chapter 9, ‘‘Vehicle Insurance and Financial
Responsibility.’’ Also see Title 27 (Transportation),
Subtitle 2 (Motor Vehicle Registration and Licens-
ing), Chapter 19, ‘‘Motor Vehicle Safety Responsibili-
ty Act,’’ and Chapter 22, Motor Vehicle Liability Insur-
ance. Available at
CALIFORNIA: See California Insurance Code and Cal-
ifornia Vehicle Code, Division 7 (Financial Responsi-
bility Laws), Chapter 3 (Proof of Financial Responsi-
bility) Available at
COLORADO: See Title 10, Chapter 40701 et seq.,
‘‘Colorado Auto Accident Preparations Act,’’ and
Title 42, Chapter 7, ‘‘Motor Vehicle Financial Respon-
sibility Act.’’ Available at
CONNECTICUT: See Title 38a (Insurance), Chapter
700, (Property and Casualty Insurance). Available at
DELAWARE: See Title 21 (Motor Vehicles), part II
(Registration, Titles, and Licenses), Chapter 21 (Reg-
istration of Vehicles), Subchapter 1, Section 2118.
Also see Chapter 29, Motor Vehicle Safety-
Responsibility. Available at
DISTRICT OF COLUMBIA: See DC Code, Title 35 (In-
surance), Chapter 21 (Compulsory/No-Fault Motor
Vehicle Insurance) and Title 40 (Motor Vehicles and
Traffic), Chapter 4 (Motor Vehicle Safety Responsibil-
ity). Available at
FLORIDA: See Florida Statutes Annotated, Title 37
(Insurance), Part 11 (Motor Vehicle and Casualty In-
surance), and Title 23 (Motor Vehicles), Chapter 324
(Financial Responsibility) Available at http://www.
GEORGIA: See Georgia Code, Section 40-9-1, ‘‘Motor
Vehicle Safety Responsibility Act.’’ Available at http://
HAWAII: See Title 17 (Motor and Other Vehicles),
Chapter 287, ‘‘Motor Vehicle Safety Responsibility
Act.’’ Available at
IDAHO: See Titles 49 (Motor Vehicles), Chapter 12
(Motor Vehicle Financial Responsibility), Section 12-
1229 (Required Motor Vehicle Insurance) Available
ILLINOIS: See Chapter 625 (Vehicles), 625 ILCS5/ (Il-
linois Vehicle Code), Chapter 7 (Illinois Safety and
Family Financial Responsibility Law, Article II (Securi-
ty Following Accident). Available at http://www.azleg.
INDIANA: See Title 7 (Motor Vehicles), Article 25 (Fi-
nancial Responsibility), Chapter 4 (Financial Respon-
sibility). Available at
IOWA: See Iowa Code, Chapter 321A (Motor Vehicle
Financial Responsibility) Available at http://www.
KANSAS: See Kansas Statutes, Title 40 (Insurance),
Article 31, ‘‘Kansas Automobile Injury Reparations
Act.’’ Available at
KENTUCKY: See KRS Title XXV (Business and Finan-
cial Institutions) Chapter 304, Subtitle 39 (Motor Ve-
hicle Reparations Act). Available at http://www.azleg.
LOUISIANA: See Louisiana Statutes Title 32, Sections
861 and 900. Available at
MAINE: See Title 29A (Motor Vehicles), Ch. 13 (Fi-
nancial Responsibility and Insurance), Subchapter II
(General Financial Responsibility) Section 1605.
Available at
MARYLAND: See Statute Sections under Insurance
(19-509) and Transportation (17-103). Available at
MICHIGAN: See Chapter 500 (Insurance Code of
1956), Act 218, and MCL Chapter 31 (Motor Vehicle
Personal and Property Protection). Available at http://
MINNESOTA: See Minnesota Statutes Annotated,
Chapter 65B (Automobile Insurance). Available at
MISSISSIPPI: See Title 63 (Motor Vehicles and Traffic
Regulations), Chapter 15 (Motor Vehicle Safety-
Responsibility. Available at http://www.
clientID=6125&infobase=ms code.N
MISSOURI: See Missouri Revised Statutes, Title XIX
(Motor Vehicles, Watercraft and Aviation),Chapter
303 (Motor Vehicle Financial Responsibility). Avail-
able at
MONTANA: See Montana Code, Title 16 (Motor Vehi-
cles), Chapter 6 (Responsibility of Vehicle Users and
Owners), Part 1 (Financial Responsibility), Section
61-6-103, et seq. Available at http://statedocs.msl.
6928&infobase=MCA_97.NF O &softpage=Browse_
NEBRASKA: See Chapter 60 (Motor Vehicles), Sec-
tion 501 et seq. (Motor Vehicle Safety Responsibility
Act). Available at
NEVADA: See Chapter 485 (Motor Vehicles: Insur-
ance and Financial Responsibility Act). Available at
NEW HAMPSHIRE: See Title 21 (Motor Vehicles),
Chapter 264 (Accidents and Financial Responsibili-
ty), Section 264.16 et seq. Available at http://
NEW JERSEY: See Title 39 (Motor Vehicle and Traffic
Regulation), Section 39:6A-1 (Maintenance of Motor
Vehicle Liability Insurance Coverage. Available at
NEW MEXICO: See Chapter 66 (Motor Vehicles), Ar-
ticle 5, Part 3 (Financial Responsibility), Mandatory
Financial Responsibility Act, Section 66-5-201 to 239.
NEW YORK: See New York State Consolidated Laws,
Chapter 28 (Insurance Law), Article 51 (Comprehen-
sive Motor Vehicle Insurance Reparations). Available
NORTH CAROLINA: See Chapters 20 (Insurance) of
the North Carolina General Statutes, Article 9A
(Motor Vehicle Safety an Financial Responsibility Act
of 1953), Section 20-279.1 et seq. Available at http://
NORTH DAKOTA: See Title 26.1 (Insurance), Chap-
ter 26.1-41 (Auto Accidents Reparations Act). Avail-
able at
OHIO: See Title 29 (Insurance), Chapter 3937 (Casu-
alty Insurance, Motor Vehicle Insurance), Section
3937.18 et seq; also Title 45 (Motor Vehicles-
Aeronautics-Watercraft), Chapter 4509 (Financial Re-
sponsibility), Section 4509.20. Available at http://orc.
OKLAHOMA: See Section 47-7-101 et seq. Available
OREGON: See Title 56 (Insurance), Chapters 731-
752, including 742 (Insurance Policies Generally).
Title 59 (Oregon Vehicle Code), Chapter 806 con-
tains the Financial Responsibility Act. Available at
PENNSYLVANIA: See Pennsylvania Statutes Annotat-
ed, Title 67 (Transportation), Part I (Department of
Transportation), Subpart A (Vehicle Code Provi-
sions), Article XIII (Administration and Enforce-
ment), Chapter 219 (Proof of Financial Responsibili-
ty); Chapter 221 (Obligations of Insurers and Vehicle
Owners); and Chapter 223 (Self-Insurance). Available
RHODE ISLAND: See Title 31 (Motor and Other Vehi-
cles), Chapter 31-30 and 31-31 (Safety Responsibility
Administration), and Chapter 31-47 (Motor Vehicle
Reparations Act). Available at http://www.riiln.state.
SOUTH CAROLINA: See Title 56 (Motor Vehicles),
Chapter 9 (Motor Vehicle Financial Responsibility
Act), Section 56-9-19 et seq. Available at http://www.
SOUTH DAKOTA: See Title 58 (Insurance), Chapter
23 (Liability Insurance), and Title 32 (Motor Vehi-
cles), Chapter 32-35 (Financial Responsibility of Vehi-
cle Owners and Operators). Available at http://www.
clientID=1548&infobase=sdcode.NF O&softpage=
TENNESSEE: See Tennessee Code, Title 56 (Insur-
ance), Chapter 7 (Policies and Policyholders), Part 11
(General Provisions- Automobile Insurance) and Part
12 (Underinsured Motor Vehicle Coverage). Avail-
able at
TEXAS: See Insurance Code, Chapter 5, Part I, Sub-
chapter A, Article 5.06-3 (Personal Injury Protection
Coverage); Transportation Code, Title 7 (Vehicles
and Traffic), Subtitle D (Motor Vehicle Safety Re-
sponsibility), Chapter 601 (Motor Vehicle Safety Re-
sponsibility Act), Subchapter C (Financial Responsi-
bility). Available at
UTAH: See Title 41A (Motor Vehicles), Chapter 12a
(Financial Responsibility of Motor Vehicle Owners
and Operators Act). Available at http://
VERMONT: See Title 23 (Motor Vehicles), Chapter 11
(Financial Responsibility and Insurance), Subchapter
V (Insurance Against Uninsured, Underinsured or
Unknown Motorists). Available at http://www.le.
VIRGINIA: See Title 38.2 (Insurance), Chapter 22 (Li-
ability Insurance Policies), Title 46.2 (Motor Vehi-
cles), Chapter 3 (Licensure of Drivers), Article 15
(Proof of Financial Responsibility). Available at http://
WASHINGTON: See RWC Title 46 (Motor Vehicles),
Chapter 46.30 (Mandatory Liability Insurance). Avail-
able at
WEST VIRGINIA: See Chapter 17D (Motor Vehicle
Safety Responsibility Act)/. Available at http://www.
WISCONSIN: See Chapter 632 (Insurance Contracts
in Specific), Section 632.32 (Provisions of Motor Ve-
hicle Insurance Policies) and Chapter 344 (Vehicles
Financial Responsibility). Availability at http://ww.
WYOMING: See Title 31 (Motor Vehicles), Chapter
9 (Motor Vehicle Safety Responsibility), Article 4
(Proof of Financial Responsibility). Available at http://
Additional Resources
Guide to Consumer Law American Bar Association. Ran-
dom House, 1997.
‘‘Introduction to Automobile Accident Liability.’’ Available
Law for Dummies. Ventura, John, IDG Books Worldwide,
Inc., 1996.
‘‘The 6 Parts of an Auto Insurance Policy.’’ Available at
‘‘Websites for Motor Vehicle Laws of the 50 States.’’ Avail-
able at
‘‘Who is Liable? Who Pays for Accident Injuries?’’ Available
This Page Intentionally Left Blank
Sections within this essay:
Consumer Protections
- Product Warranties
- Lemon Laws for New and Used Vehi-
- Right to Rescind Purchases
- Credit Matters
Title Transfers and Liens
State Registration Requirements
State Lemon Laws
Additional Resources
Buying an automobile involves three essential
components. First, there are the matters related to
the vehicle itself, including product guarantees and
warranties. Second, there are the matters relating to
transferring ownership of the vehicle from the manu-
facturer or dealer to the buyer. Third, there are the
matters required of the buyer to properly register
and insure the vehicle before the buyer may operate
it on a public road.
Consumer Protections
Before individuals purchase a vehicle, there are al-
ready several federal laws at work that govern the
quality and safety of products available for their pur-
chase. Most of these are found under Title 15 (Com-
merce and Trade) of the U. S. Code.
The federal Automobile Information Disclo-
sure Act, 15 USC 1231 et seq., requires auto-
mobile manufacturers and importers of new
cars to affix a sticker on the window of each
vehicle, called the ‘‘Monroney label.’’ The
label must list the base price of the vehicle,
each option installed by the manufacturer
and its suggested retail price, the transporta-
tion charge, and the car’s fuel economy (in
miles per gallon). Only the ultimate user
(the buyer) can remove the label.
For used vehicles, the Federal Trade Com-
mission (FTC) has passed its Used Car Rule
under 15 USC 41, which applies in all states
except Maine and Wisconsin. (These states
have adopted their own rules governing
used car sales.) Under the Used Car Rule,
dealers must prominently post buyer’s
guides on used vehicles that advises wheth-
er the vehicles comes with a WARRANTY and
what type or are sold ‘‘as is.’’ The buyer’s
guide must be given to the buyer if the buyer
purchases a used vehicle, and it becomes
part of the purchase contract, and its terms
override any conflicting terms in the con-
The National Traffic and Motor Vehicle Safe-
ty Act of 1966, 15 USC 1381 et seq., has been
broken down and re-codified over the years
into many legal progeny. The following laws
address such matters as motor vehicle or
driver safety; minimum standards for motor
vehicle emissions, fuel economy, bumper
standards, or crash-worthiness; motor vehi-
cle manufacturer recalls or advisories; manu-
facturer and dealer disclosures, etc.
The Motor Vehicle Information and Cost
Saving Act, 15 USC 1901 et seq., (much of
which has been broken down into additional
acts and laws, and recodified under Title 49,
Transportation) contains numerous provi-
sions for minimum quality and safety stan-
dards, disclosure, and reporting require-
The federal Truth in Mileage Act of 1986,
commonly referred to as the ‘‘Anti-
Tampering Odometer Law,’’ (PL 99-579) (49
CFR 580) criminalizes any act that falsifies ac-
tual odometer readings and mandates that
each transferor of a motor vehicle furnish
the transferee certain information concern-
ing the vehicle’s history.
The Clean Air Act, 42 USC 7401 et seq., ad-
dresses minimum standards for exhaust
emissions on motor vehicles.
The Anti-Car Theft Act of 1992, 15 USC 2021
et seq., establishes, among other things, a
national motor vehicle title information sys-
tem to disrupt attempts to obtain legitimate
vehicle ownership by auto thieves. It also
provides for the inspection of exports for
stolen vehicles.
Product Warranties
USC 2301 et seq. (1984) is applicable to warranties
for purchases of automobiles. Under the Act, any
warranty accompanying a product must be designat-
ed as either ‘‘full’’ or ‘‘limited.’’ Importantly, if a man-
ufacturer has given a full or limited warranty on a
new car, it cannot disclaim any implied warranties.
However, some states have laws that effectively void
any IMPLIED WARRANTY for buyer’s guide used vehicles
that are checked ‘‘As Is-No Warranty.’’
Implied warranties are exactly that: implied. They
follow the sale of certain consumer goods automati-
cally, without any express writing or document. The
implied warranty of merchantability basically guaran-
tees that the product is what it is stated to be and is
adequate for the purpose for which it is purchased.
adopted in all 50 states, this implied warranty only
applies to sellers in the business of selling the partic-
ular item and does not apply to incidental sales or
cross-consumer sales.
However, the implied warranty of fitness for a par-
ticular purchase applies to all sellers, even non-
professionals. Under this warranty, the seller is pre-
sumed to guarantee that the car sold (e.g., a restored
race car), is fit for the particular purpose for which
it is being sold.
Lemon Laws for New and Used Vehicles
All 50 states have enacted ‘‘lemon laws’’ to protect
consumers from defective new automobiles. Some
states have enacted separate LEMON LAWS to cover
used vehicles. While their application and protec-
tions vary from state to state, they generally protect
consumers from having to keep defective new vehi-
cles. Lemon laws entitle buyers to a replacement new
vehicle or a full refund if a dealer cannot fix a vehicle
to conform with a warranty after three or four repair
attempts made within six months to a year (state vari-
ations). Some state laws also entitle buyers to such
a remedy if the new vehicle is out of commission for
more than 30 non-consecutive days during the war-
ranty period or a STATUTORY period, e.g., one year.
Right to Rescind Purchases
Contrary to general assumption, there is no feder-
al law giving buyers the right to cancel their new car
purchase within three days of sale. The often-cited
Federal Trade Commission (FTC) ‘‘Cooling Off’’ law
is only effective for door-to-door sales or sales made
at other than the seller’s place of business. However,
many states have enacted their own versions of the
FTC law, affording broader protections than what the
federal law does. Prior to purchase, prospective buy-
ers should check with their state’s attorney general’s
office to see if automobile purchases are covered
under state law.
Credit Matters
15 USC 1601 et seq., also referred to as the Truth in
Lending Act, assures that consumers receive specific
information regarding the terms, conditions, and
final cost of financing. It also requires disclosure of
other information that will contribute to a meaning-
ful choice and decision to finance the purchase.
If buyers finance their purchase of vehicles, they
most likely will execute a document known as a se-
curity agreement, which gives their CREDITOR a secur-
ity interest in their vehicles. Under most state laws,
if they seriously DEFAULT on car payments, their cred-
itor may repossess their vehicle, sometimes without
advance notice. Although they generally have a right
to ‘‘cure’’ the default and redeem the vehicle, they
normally have to pay the entire balance on the car,
not just the payments in ARREARS. Most financing
agreements contain ‘‘acceleration clauses’’ which
permit the termination of the INSTALLMENT payments
once default occurs. Some states have laws that per-
mit creditors to reinstate the contract terms once
buyers pay the amount in arrears.
If buyers do not redeem the vehicle, the creditor
may keep their vehicles to satisfy the debt, even if the
vehicles are worth more than the debt owed. This is
referred to as ‘‘strict foreclosure.’’ However, if buyers
have paid at least 60 percent of the purchase price,
they generally are entitled to any excess money re-
couped from the vehicle’s sale above and beyond the
balance owed. Buyers are also entitled to take part
in the bidding at the sale.
Title Transfers and Liens
Under the UCC (Article 2), a new car contract
which purports to transfer ownership to the purchas-
er must be in writing. It should include a description
of the make and model of the vehicle, its full vehicle
identification number (VIN), a statement as to
whether the vehicle is new, used, a ‘‘demo,’’ rental
car, etc., the full price and any financing terms, a can-
cellation provision if certain conditions occur (such
as the car not being delivered by a certain date), and
a full statement of warranty terms.
Every transfer of title to a motor vehicle must in-
clude an odometer reading and statement of mileage
from the transferor. For purposes of TAXATION, most
states require an AFFIDAVIT of purchase price as well.
Importantly, if the purchased vehicles are being fi-
nanced, state law will dictate the form of title trans-
fer. Some states will allow title to transfer to the buy-
ers even though they have not yet fully paid for the
vehicle, but the creditor/lender will encumber the
title with a LIEN. Other states permit the creditor/
lender to keep title in its name until they pay for the
vehicle in total, then transfer title to them. In those
states, the buyers maintain an ‘‘equitable lien’’ on the
vehicle while it is being paid for but do not have legal
title to it until their final payment has been made.
Under the UCC, after executing a purchase docu-
ment, but prior to the delivery of the vehicle, the risk
of loss or damage to the vehicle is allocated to the
seller if the seller is a merchant (car dealer). If the
seller is not a merchant under the UCC, the risk pass-
es to the buyer upon tender of delivery, i.e., when
the seller actually attempts delivery or makes the car
available for pickup under the contract.
Generally, title to a vehicle cannot be transferred
if there is any existing lien listed. Creditors will auto-
matically file the necessary paperwork (buyers
should receive a copy) to remove their liens against
the title to their vehicles once buyers have paid them
creditors in full. However, if buyers attempt to sell
their vehicles while a lien is still recorded, the bur-
den is on them to contact the necessary parties to ef-
fect a removal of the lien.
State Registration Requirements
Registering a vehicle in the owner’s name notifies
the state of ownership of the vehicle, and provides
the necessary documentation for the issuance of
state license plates and tags to be affixed to the vehi-
cle. Operating a motor vehicle that is not properly
registered is usually an offense punishable by fine or
IMPRISONMENT. Within most states, the Department
of Motor Vehicles (DMV) or an office of the Secretary
of State is the proper entity for registering vehicles.
The most common document requirements for
registering a vehicle are the title and a certificate of
automobile insurance coverage. Some states addi-
tionally require a copy of the contract or BILL OF SALE,
or in the alternative, an affidavit containing aver-
ments of purchase price, description of the vehicle,
and the VIN number, names of seller and buyer, date
of purchase, and odometer reading.
The title owner of the vehicle is generally, but not
always, the party to whom the vehicle is registered.
Even in states where creditors retain titles in their
names until the buyer pays off the auto loan, registra-
tion of the vehicle will nonetheless be in the buyer’s
name. This means that the buyer will pay the sales
taxes, use taxes, licensing plate fees, and (usually)
fees associated with the transferring of the vehicle to
the buyer’s name.
If the buyer has a lien against the title to the
buyer’s vehicle, the state will most likely require the
buyer to maintain full coverage insurance on the car,
including, especially, collision coverage. Doing so
protects the interests of the lienholder, who could
stand to lose both payment and the vehicle if the
buyer is involved in an accident and does not have
the vehicle insured. Registration may be denied if the
vehicle fails to pass auto emissions or operational
testing, or if any taxes are pending. Additionally, reg-
istration may be denied to persons whose driving li-
censes have been suspended or revoked.
State Lemon Laws
ALABAMA: See Article 8, Chapter 20A of the Alabama
Code of 1975. Requires three repair attempts or 30
calendar days out of service.
ALASKA: See Title 45, Chapter 45, Sections 300 to 360
of the Alaska Statutes. Requires three repair attempts
or 30 business days out of service.
ARIZONA: See Sections 44.1261 to 1265 of the Arizo-
na Revised Statutes. Requires four repair attempts or
30 calendar days out of service.
ARKANSAS: See Title 4, Chapter 90, Sections 401 to
417 of Arkansas Statutes. Requires one repair at-
tempt for defect that may cause death or serious in-
jury or three repair attempts or 30 calendar days out
of service.
CALIFORNIA: See California Civil Code 1793.22, the
Tauner CONSUMER PROTECTION Act. Requires two re-
pair attempts for a defect which may cause death or
serious injury or four repair attempts or 30 calendar
days out of service.
COLORADO: See Colorado Statutes 42-10-101 to
107. Requires four repair attempts or 30 calendar
days out of service.
CONNECTICUT: See Connecticut Statutes, Title 42,
Chapter 743b for new vehicles, Chapter 743f for used
vehicles. Requires two repair attempts if there is a se-
rious safety hazard, otherwise four repair attempts or
30 calendar days out of service.
DELAWARE: See Title 6, Subtitle II, Chapter 50, Sec-
tions 5001 to 5009. Requires four repair attempts or
30 business days out of service.
VIII, Title 50, Subtitle II, Chapter 5. Requires four re-
pair attempts or 30 calendar days out of service.
FLORIDA: See Florida Statutes Annotated, Chapter
681. Requires three repair attempts or 30 calendar
days out of service.
GEORGIA: See Georgia Code, Section 10-1-780. Re-
quires one attempt for a serious safety defect in brak-
ing or steering systems, otherwise three repair at-
tempts or 30 calendar days out of service.
HAWAII: See Hawaii Revised Statutes, Chapter 481i.
Requires one repair for defects which may cause
death or serious injury, otherwise three repair at-
tempts or 30 business days out of service.
IDAHO: See Titles 48, Chapter 9, Sections 901-903.
Requires four repair attempts or 30 business days out
of service.
ILLINOIS: See Chapter 815, 815 ILCS, Section
815.380. Requires four repair attempts or 30 business
days out of service.
INDIANA: See Indiana Code Section 24-5-13. Re-
quires four repair attempts or 30 business days out
of service.
IOWA: See Iowa Code, Chapter 322G, Sections 1 to
15. Requires one repair attempt for defects that may
cause death or serious injury, otherwise three repair
attempts plus a final attempt or 30 calendar days out
of service.
KANSAS: See Kansas Statutes, Chapter 50-645 to 646.
Requires four repair attempts or ten repair attempts
for different defects, otherwise 30 calendar days out
of service.
KENTUCKY: See KRS 367.840 to 846, also KRS 860 to
870. Requires four repair attempts or 30 days out of
LOUISIANA: See Louisiana Revised Statutes Title 51,
Sections 1941 to 1948. Requires four repair attempts
or 30 calendar days out of service.
MAINE: See Title 10, Chapter 203A, Sections 1161 to
1169. Requires three repair attempts or 15 business
days out of service.
MARYLAND: See Statutes under Commercial Law, 12-
1504 and 14-501. Requires one unsuccessful repair
for braking or steering system failures, otherwise
four repair attempts or 30 calendar days out of ser-
MICHIGAN: See MCL 257.1401 et seq. Requires four
repair attempts or 30 business days out of service.
MINNESOTA: See Minnesota Statutes Annotated,
325F.665 for new cars, 325F.662 for used ones. Re-
quires one unsuccessful repair for braking or steer-
ing system failures, otherwise four repair attempts or
30 business days out of service.
MISSISSIPPI: See STATUTE Sectiosnns 63-17-151 to
165. Requires three repair attempts or 15 working
days out of service.
MISSOURI: See Missouri Revised Statutes 407.560 to
579. Requires four repair attempts or 30 business
days out of service.
MONTANA: See Montana Code, Title 61, Chapter,
Part 5, Section 61-4-501. Requires four repair at-
tempts or 30 business days out of service.
NEBRASKA: See Chapter 60 (Motor Vehicles), Sec-
tions 60-2701 to 2709. Requires four repair attempts
or 40 business days out of service.
NEVADA: See Nevada Revised Statutes, 597.600 to
680. Requires four repair attempts or 30 calendar
days out of service.
NEW HAMPSHIRE: See Title 31, Chapter 3570. Re-
quires three repair attempts or 30 business days out
of service.
NEW JERSEY: See Title 56, Sections 56-12-29 to 49.
Requires three repair attempts or 30 calendar days
out of service.
NEW MEXICO: See Chapter 57, Article 16A. Requires
four repair attempts or 30 business days out of ser-
NEW YORK: See New York State General Business
Laws (GBL), Section 198a for new vehicles, Section
198b for used vehicles. Requires four repair attempts
or 30 calendar days out of service. Substantial defects
must be repaired within 20 days of receipt of notice
from the consumer using certified mail.
NORTH CAROLINA: See Chapters 20 of the North
Carolina General Statutes, Article 15A. Requires four
repair attempts or 20 calendar days out of service.
NORTH DAKOTA: See Title 51 of the Century Code,
Sections 51-07-16 to 22. Requires three repair at-
tempts or 30 business days out of service.
OHIO: See ORC 1345.71 to 78. Requires one repair
attempt for condition likely to cause death or injury,
three repair attempts for same defect, eight total re-
pair attempts, or 30 calendar days out of service.
OKLAHOMA: See Section 15-901 of the Oklahoma
Statutes. Requires four repair attempts or 45 calen-
dar days out of service.
OREGON: See ORS 646.315 to 75. Requires four re-
pair attempts or 30 business days out of service.
PENNSYLVANIA: See Pennsylvania Statutes Annotat-
ed, Title 73, Chapter 28, Sections 1951 to 63. Re-
quires three repair attempts or 30 calendar days out
of service.
RHODE ISLAND: See Rhode Island Code, Title 31
(Motor and Other Vehicles), Chapter 31-5.2. Re-
quires four repair attempts or 30 calendar days out
of service.
SOUTH CAROLINA: See Title 56 (Motor Vehicles),
Chapter 28, Section 56.28-10. Requires three repair
attempts or 30 calendar days out of service.
SOUTH DAKOTA: See Title 32, Chapter 32-6D.1 to
11. Requires four repair attempts plus a final attempt.
TENNESSEE: See Tennessee Code, Chapter 24, Sec-
tions 55-24-201. Requires four repair attempts or 30
calendar days out of service.
TEXAS: See Motor Vehicle Commission Code, Article
4413(36) of Vernon’s Texas Civil Statutes. Requires
two repair attempts for serious defects, otherwise
four repair attempts or 30 days out of service.
UTAH: See Utah Administrative Code, Rule R152-20.
Requires four repair attempts or 30 business days out
of service.
VERMONT: See Chapter 115, Sections 4170 to 4181.
Requires three repair attempts or 30 calendar days
out of service.
VIRGINIA: See Title 59.1, Chapter 17.3, Sections 59.1-
207.9 to 207.16. Requires one repair for serious safe-
ty defect, otherwise three repair attempts or 30 cal-
endar days out of service.
WASHINGTON: See RCW Title 19, Chapter 118, Sec-
tion 19.118.005. Requires two repair attempts for se-
rious safety defect, otherwise four repair attempts or
30 calendar days out of service.
WEST VIRGINIA: See West Virginia Code 46A-6A, Sec-
tions 1 to 9. Requires three repair attempts or 30 cal-
endar days out of service.
WISCONSIN: See Chapter 218.015. Requires four re-
pair attempts or 30 days out of service.
WYOMING: See Title 40, Chapter 17, Section 101. Re-
quires three repair attempts or 30 business days out
of service.
Additional Resources
‘‘Buying a New/Used Car FAQ,’’ Nolo Online Law. Available
Guide to Consumer Law. American Bar Association. Ran-
dom House, 1997.
Law for Dummies. Ventura, John,. IDG Books Worldwide,
Inc., 1996.
‘‘State by State Lemon Law Summaries.’’ Autopedia. Avail-
able at
The Automotive Consumer Action Program
Sections Within This Essay:
- Written
- Vision
- Driving
Kinds of Licenses
- Instruction or Learner’s Permit
- Commercial
- International
- Motorcycle
The Motor Voter Law
Organ Donation
License Suspension and Revocation
Renewing License
Additional Resources
In the United States, driver licenses are issued by
the individual states for their residents. Protecting
the PUBLIC INTEREST is the primary purpose of driver’s
licenses. They are required for operating all types of
motor vehicles. Driver licenses are also used as an
important form of photo identification in the United
States, particularly in many non-driving situations
where proof of identity or age is required. As identifi-
cation, they are useful for boarding airline flights,
cashing checks, and showing proof of age for activi-
ties such as purchasing alcoholic beverages.
The first driver’s licenses were issued in Paris in
1893. To obtain one of these licenses, the driver was
required to know how to repair his own car as well
as drive it. In the United States, vehicle registration
began in 1901. Licensing drivers began in 1916, and
by the mid-1920s there were age requirements and
other restrictions on who could be licensed to oper-
ate an automobile.
This authority is delegated to the states, although
from the earliest years there have been challenges to
particular aspects of state licensing laws, as well as
outright challenges to the states’ rights to license ve-
hicles and drivers. With respect to the latter issue,
the U. S. Supreme Court noted in 1915 in the case
of Hendrick v. Maryland that ‘‘The movement of
motor vehicles over the highways is attended by
constant and serious dangers to the public and is also
abnormally destructive to the [high]ways themselves
. . . .[A] state may rightfully prescribe uniform regula-
tions necessary for public safety and order in respect
to the operation upon its highways of all motor vehi-
cles—those moving in interstate commerce as well
as others . . . .This is but an exercise of the police
power uniformly recognized as belonging to the
states and essential to the preservation of the health,
safety, and comfort of their citizens’’ 235 US 610.
Driver’s licenses perform several vital functions.
When they were first issued in the United States,
driver’s licenses were meant to verify that the holder
had complied with the regulations associated with
operating a motor vehicle. In addition to verifying
compliance with state laws, driver’s licenses have be-
come an almost essential form of identification for in-
dividuals, law enforcement authorities, and others
who require validation of identity. Later, photo-
graphs were added to aid in positive identification
and to help reduce instances of FRAUD. Other mea-
sures to prevent COUNTERFEITING driver’s licenses in-
clude using thumb print and hologram images on
the license. Today, many states issues licenses with
magnetic strips and bar codes to provide for the elec-
tronic recording of driver license information if a traf-
fic CITATION is issued.
When individuals present themselves at a state’s
licensing facility as an applicants for a driver’s li-
censes, there are several requirements they will be
required to meet in order to obtain a valid driver’s
license. State statutes provide very specific informa-
tion about the requirements for obtaining a driver’s
license. These requirements include:
Residency requirements. For example, it is
common for states to require individuals to
apply for a driver’s licenses within a certain
time after moving to the state
Production of identification documents
(there is a preference for photo identifica-
tion) and disclosure of the individuals’ Social
Security numbers
Proof that the applicants meet the state’s
minimum age for possessing a driver’s li-
Three tests: a written exam, a vision test, and
a driving test
If applicants are a foreign national, there
may be additional requirements imposed by
the state or by the INS
Payment of the appropriate application fees
Proof of insurance
Production of any other valid licenses and in-
structions permits from other states or for-
eign countries
Besides providing proof of an individual’s’ permis-
sion to drive, a driver’s licenses are an important
form of identification. Before licenses are awarded by
a state, applicants will be asked to provide adequate
proof of identity. Some of the common forms of
identification accepted in many licensing facilities
A military identification card
A United States PASSPORT
A student driver permit
A Social Security Card
An identification card issued by a state
An identification card issued by the U. S., a
state, or an agency of either the U. S. or a
Immigration and Naturalization Service
identification cards or forms
The Alien Registration Card, I-151. Note that
in some states, The Employment Authoriza-
tion for Legalization Applicant’s Card (I-688A
and I-688B) may not be sufficient as an iden-
tification document.
In many states, individuals may present a combi-
nation of documents as proof of identity. These
items may include:
Birth certificate or registration cards. It is
best to bring either the original or a CERTIFIED
The applicant’s social security card
A marriage certificate or DIVORCE DECREE.
Again, original or certified copies will be
The applicant’s voter registration card
A government-issued business or profes-
sional licenses (e.g. cosmetology license, law
The applicant’s vehicle registration and/or
The applicant’s original or a certified copy of
his school transcripts
If applicants present documents written in a lan-
guage other than English, there may be a delay. Most
licensing facilities make GOOD FAITH efforts to read
and interpret these documents. Occasionally, they
may need to FAX applicants’ documents to another
office for assistance. If an adequate translation can-
not be obtained, they may be asked to provide an En-
glish translation along with the original document
States require applicants for drivers’ licenses to be
at least 16 years of age. In many states, if applicants
are younger than 18, they must also provide a signed
parental authorization form. This form states a per-
son’s relationship to the applicant for a license and
gives permission for the person to acquire a driver’s
Usually, states will require that the parental autho-
rization form be notarized or signed in the presence
of the proper authority at a licensing facility. When-
ever individuals present themselves for a driver’s
EXAMINATION, they must provide proof of their identi-
fication and age. This can be done with an official
document such as a birth certificate or passport.
When individuals apply for a driver’s license, they
are required to pay a fee based on the type of license
for which they are applying and for any endorsement
attached to the license. There are also fees assessed
for license renewals and extensions. In most states,
fees must be paid either in cash or by personal
check. Few states accept credit cards or DEBIT cards
for payment of licensing fees. License fees are fairly
moderate, but they do vary from state to state. Indi-
viduals can check with their state’s department of
motor vehicles for a fee schedule for driver’s li-
censes, endorsements, or permits.
As part of the driver’s license application process,
individuals will be required to take a written test.
This exam tests their knowledge of the rules of the
road and their ability to recognize and interpret road
signs. Usually, they must successfully complete the
written exam prior to scheduling the driving test.
Good eyesight is of utmost importance for the
safe operation of motor vehicles. Therefore, as part
of the driver’s license application process, the de-
partment of motor vehicles in the state will adminis-
ter a vision test. This is a brief test meant to evaluate
the applicants’ eyesight. The vision test evaluates
three factors:
Clarity of vision
How far individuals can see to either side
while looking straight ahead (peripheral vi-
Depth and color perception
If individuals wear glasses or contact lenses, they
will be asked to perform the exam with their correc-
tive eyewear both on and off. The results of the test
will determine whether there are restrictions placed
on their driver’s licenses (e.g. must wear corrective
eyewear when operating a motor vehicle).
The final portion of a driver’s license application
procedure is the driving test. Applicants will be re-
quired to provide a safe vehicle for the test. They will
also need to provide proof of automobile insurance
prior to the driving test. An unlicensed applicant may
not use a rental car for the driving test. The driving
test may be waived if an applicant has a valid driver
license from another state and meets all other appli-
cable requirements. The driving test will be required
of applicants with licenses from foreign countries, in-
cluding Mexico and Canada.
The driving test is an opportunity to demonstrate
that the applicants are a safe drivers. There will be
no passengers other than an examining official—a
local or state police officer or authorized department
of motor vehicles personnel—allowed on the drive
test. The EXAMINER in the front seat will give the ap-
plicants driving directions. The directions should be
given in a clear manner and with enough time to
allow the applicants to take appropriate action. Ap-
plicants will never be asked to do anything unsafe or
The exact procedure for driving tests will vary
somewhat from state to state, although several fea-
tures of these tests are fairly consistent throughout
the United States. Before the test applicants will be
asked to use their arms to signal for a right turn, left
turn, slow, or stop. Along with noting their driving
skills in normal traffic the examiner will also ask them
to perform certain maneuvers such as parking on a
hill, parallel parking, entering traffic from a parked
position, and backing out of a driveway or around a
A few of the most common test items the examin-
er will observe are:
Backing up
Controlling the vehicle
Driving in traffic
Driving through blind or crowded intersec-
Judging distance
Leaving the curb
Obeying traffic signals and signs
Respecting the rights of pedestrians and
other drivers
Starting the vehicle
When individuals obtain a driver’s licenses they
will be required to provide proof that they have pur-
chased adequate automobile insurance. Among
other things, automobile insurance helps pay for
medical bills and car repairs if drivers are in an auto-
mobile accidents. Every state requires drivers to pur-
chase some auto insurance, and they specify the
minimum amounts required. Individuals can pur-
chase insurance from any company they choose, but
should they be stopped by the police or should they
be involved in a traffic accidents, they will most likely
be required to supply proof of current insurance in
their automobile or on their persons. There are sev-
eral kinds of automobile insurance, including the fol-
Liability. There are two principal aspects to
liability insurance, bodily injury coverage
and property damage coverage. Bodily inju-
ry liability insurance covers costs up to cer-
tain limits if drivers kill or injure someone
else in an accident. In these cases the driv-
ers’ insurance company pays for expenses
like legal fees (if the insured is sued), medi-
cal bills, and lost wages of the other person
if the insured is are at-fault. Property damage
liability insurance covers the costs associat-
ed with damage to someone else’s car or
other property if the insured damaged that
property while driving. Both bodily injury
and property damage liability insurance can
be purchased in various amounts, but the
state that licenses the individual to drive will
set minimum amounts which that person
must purchase.
Uninsured motorist bodily injury coverage.
This type of insurance covers individuals for
their bodily injury caused by a hit-and-run
driver or from injuries caused by a driver
who has no auto liability insurance.
Collision insurance. This type of insurance
coverage reimburses drivers for damage to
their cars if the car collides with another ob-
ject. To figure out how much an insurance
company will pay to fix the insured’s car, a
claims ADJUSTER may look at the damage, or
the insured may be asked to get estimates
from body shops. If the insured’s car is ‘‘to-
taled,’’ the insured person gets what the car
is worth (according to tables of vehicle val-
ues) at the time of the accident.
Comprehensive insurance. Comprehensive
insurance covers the cost of damage to the
insured’s car caused by most other causes
such as fire, theft, hail, or other natural disas-
ters. If the insured have a loan on the vehi-
cle, the insured’s lender may require the in-
sured to carry this type of insurance.
The cost of automobile insurance varies according
to a number of factors. For example, statistics show
that drivers under the age of 25 are more likely to be
involved in accidents; insurance companies charge
them more for coverage. If drivers get a ticket for
speeding or other traffic violation, their insurance
costs may go up. Models of vehicles that are more
dangerous to drive (e.g. convertibles) or cost more
to repair if they’re damaged will generally cost more
to insure than safer cars or cars that cost less to re-
pair. And if the insured lives in a city with greater
chances that the car will be hit, stolen, or vandalized
are higher—, the insurance costs will probably be
higher as well.
There are some things individuals can do to help
keep the cost of insurance down:
Choose the vehicle carefully. Remember
that some vehicles—like convertibles and
sports cars—cost more to insure than oth-
Consider the age and condition of the vehi-
cle. If the vehicle is an older model, it may
not be cost-effective to pay for insurance
that covers physical damage to the older car.
Drive lawfully and defensively to avoid viola-
tions and accidents.
Increase the DEDUCTIBLE and thus lower the
premium, however realize that by doing so,
it will cause the owner to pay more out of
pocket each time they have a claim.
Students who get good grades may enjoy
lower rates. For example, some companies
give discounts to students with a B average
or better.
Kinds of Licenses
There are several kinds of driver’s licenses. There
are important distinctions among these types of li-
censes, as well as different requirements for obtain-
ing them. The most common are:
Instruction or learner’s permit
Commercial licenses
Instruction or Learner’s Permit
In most states, individuals may apply for a driver
instruction permit—often called a ‘‘learner’s per-
mit’’—as early as the age of 15 on the condition that
they are also enrolled in an approved traffic safety ed-
ucation course. Driving privileges under a learner’s
permit are restricted. The restrictions that apply to
the learner’s permit will vary from state to state. They
may include restrictions on the age of the licensed
driver accompanying the learner/driver, the hours in
which the learner/driver may be able to drive, and
even the types of highways that learners may drive
In some states, individuals may be able to apply
for a learner’s permit without being enrolled in a
class, but they must take the written driving test to
prove they are capable of understanding the funda-
mentals of driving and the rules of the road. Those
with a learner’s permit usually may drive a vehicle as
long as a licensed driver is present in the vehicle at
the time. There are additional requirements stating
how long they must have a learner’s permit before
they may obtain a permanent license. Individuals can
check with their state’s department of transportation
for the exact rules which will apply in their situation.
As with a permanent driver’s license, when they
apply for a learner’s permit, they will be required to
supply proof of identification. Proof of age, docu-
mented parental consent, and other forms are also
required, as well as a fee for the permit.
Since 1992 drivers of commercial motor vehicles
(CMV) have been required to have a commercial
driver’s license (CDL). The Federal Highway Admin-
istration (FHWA) issues rules and standards for test-
ing and licensing CMV drivers. These standards per-
mit states to issue CDLs to drivers only after the
drivers passes knowledge and skills tests related to
the type of vehicle to be operated. CDLs fall into sev-
eral categories depending on the weight of the vehi-
cle and/or load being pulled and depending on the
number of passengers in the vehicle. These catego-
ries are:
Class A: The vehicle weighs 26,001 or more
pounds and the vehicle(s) being towed is in
excess of 10,000 pounds
Class B: The vehicle weighs 26,001 or more
pounds, or any such vehicle towing a vehicle
not in excess of 10,000 pounds
Class C: Any vehicle or combination of vehi-
cles that is either designed to transport 16
or more passengers, including the driver or
is marked as a carrier of hazardous materials
Drivers who operate CMVs will be required to
pass additional tests to obtain any of the following
endorsements on their CDL:
T: Double/Triple Trailers
P: Passenger
N: Tank Vehicle
H: Hazardous Materials
X: Combination of Tank Vehicle and Hazard-
ous Materials
A state will determine the appropriate license fee,
the rules for license renewals, and the age, medical
and other driver qualifications of its intrastate com-
mercial drivers. Drivers with CDLs who cross state
lines must meet the Federal driver qualifications (49
CFR 391). All CDLs contain the following informa-
Color photograph or digital image of the
Notation of the ‘‘air brake’’ restriction, if is-
The class(es) of vehicle that the driver is au-
thorized to driver
The issue date and the expiration date of the
The driver’s date of birth, sex, and height
The driver’s full name, signature, and ad-
The driver’s state license number
The endorsement(s) for which the driver
has qualified
The name of the issuing state
The words ‘‘Commercial Driver’s License’’
or ‘‘CDL’’
States may issue learner’s permits for training on
public highways as long as learner’s permit holders
are required to be accompanied by someone with a
valid CDL appropriate for that vehicle. These learn-
er’s permits must be issued for limited time periods.
If individuals are traveling to an English-speaking
country, they may be able to get by with their U. S.
driver’s licenses. However, many other countries will
ask that they also obtain an International Driver’s
Permit, which is a document that translates the infor-
mation on the home driver’s license into 11 different
languages. More than 160 countries recognize the In-
ternational Driver’s Permit. If individuals plan to rent
a car on their trip abroad, they will probably be asked
to present one along with their valid state license.
Some countries require special road permits, instead
of tolls, to use on their major roads. They will fine
those found driving without such a permit.
An International Driver’s Permit must be issued in
the home country. To obtain an International Driv-
er’s Permit, individuals will need to produce two
passport photos and their valid state driver’s li-
censes. Currently, an International Driver’s Permit
costs $10 for a one-year issue. Individuals must com-
plete an application, which can be printed online or
submitted by mail. Only two agencies in the United
States are authorized to issue these licenses: the
American Automobile Association and the American
Automobile Touring Alliance. However, travelers
should remember that an International Driver’s Per-
mit is not a license in and of itself, so drivers can not
establish a separate driving record with one. If driv-
ers get a traffic citation while driving with their inter-
national driver’s permit, it will be reflected on their
state licenses.
To apply for an international driving permit, indi-
viduals must:
Be at least age 18
Present two passport-size photographs
Present their valid U. S. licenses
In most cases, U. S. auto insurance will not cover
drivers abroad; however, their policy may apply
when they drive to Mexico or Canada. Even if their
U. S. policy is valid in one of these countries, it may
not meet the minimum requirements in Canada or
Mexico. Individuals may check with the embassy or
consulate of the country they plan to visit for specific
insurance requirements. Overseas car rental agen-
cies usually offer auto insurance for an additional fee,
but in some countries, the required coverage is mini-
mal. If drivers rent a cars overseas, they ought to con-
sider purchasing insurance coverage that is equiva-
lent to the amount of automobile insurance coverage
that they carry at home.
All states regulate the issuance of motorcycle per-
mits and motorcycle endorsements. All states re-
quire that those wishing to operate motorcycles pass
motorcycle knowledge and skill tests. These tests are
separate from standard automobile driver license
tests. Some states have mandatory motorcycle train-
ing in addition to the knowledge and skill tests. In
most cases if individuals have successfully completed
an approved motorcycle skills course, they may bring
their completion cards to the vehicle licensing facility
in their state (usually within a limited time) and if
they pass the knowledge test, the skill test will be
waived. As with other operator licenses, states assess
a fee for issuing a motorcycle license, and individuals
will also be required to provide proof that they are
in compliance with the state’s vehicular insurance
The Motor Voter Law
The National Voter Registration Act (commonly
referred to as ‘‘motor voter,’’ or, ‘‘NVRA’’) took effect
in 1995. The NVRA requires states to offer voter regis-
tration to citizens when they apply for drivers’ li-
censes. This tie between driver’s licensing agencies
or facilities and voter registration is the source of the
term ‘‘motor voter.’’ When individuals obtain drivers’
licenses, states can also assess needs and benefits for
other assistance programs such as food stamps,
MEDICAID, Aid to Families with Dependent Children,
and Women, Infants, and Children. The Act also im-
poses on states a requirement to designate addition-
al offices for voter registration services.
Additional provisions of the law require states to
accept a national mail-in voter registration form and
to establish guidelines for maintaining the accuracy
of voter registration rolls—most notably prohibiting
states from removing registrants from the rolls for
not voting. Despite the mandatory provisions, states
have some discretion in how they implement the
act’s provisions. The NVRA requires states to register
voters in three specified ways in addition to any
other procedures the state uses for voter registra-
Simultaneous application for a driver’s li-
cense and registration to vote
Mail-in application for voter registration
Application in person at designated govern-
ment agencies
Election officials must send all applicants a notice in-
forming them of their voter registration status.
Organ Donation
Individuals can state on their driver’s licenses
their desire to donate their organs or bodily tissues
upon their deaths. There is a brief questionnaire
about organ donation that is part of the application
for a driver’s license. When individuals answer ‘‘yes’’
to the questions about organ and tissue donation on
their license applications, then the department of
motor vehicles will place a symbol (e.g. a red heart
with a ‘‘Y’’ in the center) on the front of their li-
censes, permits, or ID cards. Individuals must also
sign the back of the license and discuss their wish to
donate their organs with their families. By indicating
their wish to donate their organs, their names will
most likely be entered in a computerized registry.
For more information about organ and tissue dona-
tion, individuals can see ‘‘Organ Donation’’ in the
Gale Encyclopedia of Everyday Law.
States use various methods to help enforce their
traffic safety laws. All states use some variation of a
point system as part of this effort. Depending on the
state, individuals may begin with a certain number of
points, have points deducted for traffic violations, or
they may have points added for traffic violations.
Points are assigned for only moving violations (viola-
tions that occur when the car is being driven); points
are not assigned for parking, licensing, or other non-
moving violations. If a driver accumulates (or loses)
a certain number of points within a prescribed
amount of time, that driver’s driving privileges may
be suspended or revoked.
These point systems identify persistent or repeat
violators. Several violations may indicate that a state
should take action against the driver. Point systems
may not be the only basis for suspending or revoking
driver licenses. For example, several speeding viola-
tions in an 18-month period, or a single drunk driv-
ing violation, could result in the state’s mandatory re-
vocation of a license, regardless of the driver’s
number of points. While a CONVICTION is required for
the points to go on a record, the conviction date is
not used to determine the point total. Points are re-
duced by not having any further violations over a pe-
riod of time. The point systems differ in important
ways from state to state. People can contact their
state’s department of motor vehicles for more de-
License Suspension and Revocation
All licenses expire at some point, but there are
ways to lose driving privileges before the license’s ex-
piration date. Early termination of the validity of a
driver’s license is known as suspension (where a li-
cense is temporarily rendered invalid), and revoca-
tion (where driving privileges granted by a license
are fully terminated). In both cases, drivers would be
are notified by the state and would have the right to
a HEARING. Examples of driver license suspensions
and revocations are:
Driving Under the Influence (DUI) of alco-
hol and other drugs.: If a breath, blood, or
urine test reveals individuals are driving
under the influence of alcohol or other
drugs, or if individuals are convicted of DUI
offenses, their licenses may be suspended or
Failure to Appear: If individuals receive a
traffic ticket and do not pay the fine on time
or do not appear in court when required
their licenses are subject to being suspend-
ed or revoked.
Security Deposit: If individuals are in an acci-
dent and they do not have liability insurance,
their driver licenses and their vehicle regis-
tration plates may be suspended.
CHILD SUPPORT ARREARS: If individuals are in
arrears in court ordered child support pay-
ments the state may suspend or revoke li-
Truancy: Juveniles can lose their driver’s li-
censes, or their issuance may be delayed for
HABITUAL absence from school.
A driver’s license suspension or revocation is usu-
ally handled as a separate action from any other
court case in which individuals may be involved. A
state does not automatically reinstate driving privi-
leges if licenses were suspended or revoked. Individ-
uals must follow reinstatement procedures to regain
their driving privileges, even if the court case under-
lying the suspension or revocation was dismissed.
Furthermore, all 50 states share license suspension
and revocation information. If there is an active sus-
pension or revocation in one state, no other state
may issue a driver’s license. Driving while suspended
or revoked are serious criminal offenses. If individu-
als are apprehended driving a vehicle with a sus-
pended or revoked license, they could pay hefty
fines and even face a term of IMPRISONMENT.
Renewing License
A driver’s license expires within a statutorily set
number of years after the driver first acquires it. The
longevity of a license varies somewhat from state to
state, with either three or five years being the normal
term of a license. In some states, individuals may be
able to renew their licenses by mail, but usually they
will be required to appear in person and pass a vision
test. Additionally, they may be required to take other
exams if licensing officials in their state determine
that it is necessary. States assess fee for a license re-
newals. Individuals should watch out for penalties if
they fail to meet deadlines to renew their licenses
after they has expired.
Additional Resources
‘‘A Citizen’s Guide to the National Voter Registration Act
of 1993’’ League of Women Voters, 1994. Available at
‘‘State and Local Government on the Net’’ Piper Re-
sources, 2002. Available at http://
‘‘State Statutes on the Internet: Motor Vehicles.’’ Cornell
University, 2002. Available at http://
motor_vehicles,. Cornell University, 2002.
The International Council on Alcohol, Drugs
& Traffic Safety (ICADTS)
ICADTS Secretary, Mississippi State University
Mississippi State, MS 39762 USA
Phone: (601) 325-7959
Fax: (601) 325-7966
E-Mail: bwparke
National Highway Traffic Safety
Administration (NHTSA)
400 7th St. SW
Washington, DC 20590 USA
Phone: (888) 327-4236
U. S. Department of Transportation
400 7th Street, S.W.
Washington, DC 20590 USA
Phone: (202) 366-4000
Sections within this essay:
Liability Insurance
- What Is Covered?
- Liability Limits
Collision and Comprehensive Coverage
- Determining Value of Car
Uninsured/Underinsured Motorist Coverage
No Fault Insurance
State-By-State Insurance Requirements
Additional Resources
For anyone who has ever owned a car, auto insur-
ance is something almost impossible to do without.
Forty-six states and the District of Columbia now re-
quire automobile owners to carry some form of auto-
mobile insurance, and even if you are residents of
one of the few states that does not require some sort
of insurance policy on your car, it’s a good idea prob-
ably if you to have insurance anyway.
Why? Because accidents do happen, they can be
expensive, and auto insurance is often the only way
for car owners to protect themselves from damages,
liability, and possible a hefty court SETTLEMENT. As
with anything else so ubiquitous, there are different
types of auto insurance designed to suit different
types of drivers and cars. Auto insurance require-
ments vary from state-to-state, with some states re-
quiring more coverage than others. Some states also
have NO FAULT laws in place, which require insurers
to pay for certain accidents no matter who is at fault.
Whatever the case, it is good to know some of the
basics of auto insurance before deciding on buying
a specific policy for your car.
Liability Insurance
Liability insurance is the most basic form of insur-
ance. It pays if the insured is at fault in an accident.
Generally speaking, it covers medical injuries and
property damage to the other driver. It can also
cover for pain and suffering and legal bills of the
other driver as well. Owners are required to carry lia-
bility insurance in the vast majority of states. It is also
required for rental cars and for drivers of third-party
owned vehicles.
What Is Covered?
Liability insurance usually covers the named in-
sured on the policy, the named insured’s spouse and
children, any blood relative of theirs by marriage, or
ADOPTION, including foster children, and anyone driv-
ing the car with the insured’s permission. It covers
named vehicles in the policy, as well as added vehi-
cles that the named insured replaces the original
named vehicle with in the policy. Most of the time
(though not always), it also covers non-named vehi-
cles if the named insured was driving, and any addi-
tional non-named vehicle the named insured ac-
quires during the policy period, providing the named
insured informs the insurance company during a
specified period.
Temporary vehicles that substitute for an insured
vehicle that is out of service because of repairs or be-
cause it has been totaled are usually covered as well,
though again, this is not always the case and an in-
sured individuals should check their policies to de-
termine the exact limits of their coverage.
Drivers who use a named vehicle without the
named insured’s permission are not covered by a lia-
bility policy, although the vehicle itself may be. Also
rental cars that are not being used to replace a
named vehicle being repaired may not be covered
unless the named insured pays a special premium.
Liability Limits
In the 47 states and the District of Columbia that
require liability insurance, a minimum amount of
coverage is also required. Even the states that do not
require liability insurance insist that when liability in-
surance is purchased in the state, it needs to meet
a minimum requirement.
These minimum requirements are usually repre-
sented by a series of three numbers. The first num-
ber represents the amount of money (in thousands)
an insurance company is required to pay for bodily
injury for one person injured in an accident. The sec-
ond number represents the amount an insurance
company is required to pay in total for all the injuries
in an accident. The final number represents the
amount the insurance company must pay for proper-
ty damage in an accident.
For example, the liability requirements of the
state of Alabama are usually represented as 20/40/10.
Thus, insured drivers in Alabama are required to
carry a minimum of $20,000 of medical coverage for
a single person injured in an accident, $40,000 of
medical coverage for all people injured in an acci-
dent, and $10,000 of coverage for property damage.
Insurance companies are not allowed to sell poli-
cies that are under the liability limits. In Alabama, a
motorist could not buy $10,000 worth of coverage
for a single person injured in an accident or $5,000
of coverage for property damage. Insurance policies
must at least meet the minimum requirements, al-
though they can offer more coverage than the re-
quirements. States that do not mandate liability in-
surance also have liability minimums—insurers
cannot sell policies in those states below the mini-
Not all states require medical liability insurance to
be carried by drivers: - in Florida and New Jersey,
only property damage liability is mandatory. Califor-
nia also allows lower minimums for eligible low-
income drivers in the California Automobile As-
signed Risk Plan. In New York, drivers are required
to carry a higher amount of liability insurance de-
signed to cover injury from the accident which re-
sults in death.
States have different laws as to when proof of in-
surance must be presented. Some states oblige such
proof to be offered when a car is registered, others
ask for such proof only when drivers are charged
with a traffic violation or have an accident on their
Collision and Comprehensive Coverage
Besides liability, drivers can get other coverage
from auto insurance. Collision coverage insures driv-
ers for the damage done to their own cars by an acci-
dent that was their fault. Collision insurance is the
most expensive auto insurance coverage, and may
come with a high DEDUCTIBLE.
Comprehensive coverage pays for damage to a
driver’s car that was caused by events other than a
car accident. Weather damage, theft damage, and fire
damage are just some of the events covered by com-
prehensive. Many policies even cover damages from
hitting a deer. Comprehensive coverage is not as ex-
pensive as collision, but it is still more expensive than
liability and usually comes with a deductible.
Determining Value of Car
With both collision and comprehensive, insurers
will usually only cover the ACTUAL CASH VALUE (ACV)
of the cost of the car. ACV is determined by taking
the replacement cost of the vehicle—what it would
cost to repair damage to the vehicle without deduct-
ing for depreciation—and subtracting the
DEPRECIATION. So, if a car is bought for $10,000, and
is 10 years old, the ACV of the car would be substan-
tially less than $10,000.
Drivers willing to pay a higher premium can get
insurance policies that will cover the replacement
costs of the car. Depending on the age and condition
of the vehicle, these kinds of policies may be worth
it, although they are usually not recommended for
older vehicles.
Uninsured/Underinsured Motorist
Uninsured motorist (UM) coverage provides cov-
erage for the insured who is hit by a motorist who
is uninsured or by a hit-and-run driver who remains
unidentified. Since the injured party cannot get
money for their injuries from the driver of the liable
vehicle, uninsured motorist coverage picks up the
bill. UM coverage is required in many states as part
of a driver’s liability coverage.
UM coverage pays for the driver or a relative who
lives with the driver, or anyone else driving a named
vehicle with a driver’s permission, or anyone else rid-
ing with the driver in the named vehicle. UM cover-
age also covers the insured if they are passengers in
someone else’s car, although the passenger’s UM in-
surance will not contribute until the driver’s UM in-
surance is exhausted. For a hit-and-run, a driver is
usually required to notify the police within 24-hours
of the accident to receive the benefits of UM cover-
Underinsured motorist (UIM) coverage operates
in a similar fashion. With UIM coverage, the liability
policy of the driver at fault is not enough to cover the
injuries of the other driver or passengers. UIM cover-
age pays out the difference for the non-liable driver.
Generally speaking, UM or UIM coverage pays for
only medical injury to the driver and passengers of
the hit car. For a higher premium, it can cover prop-
erty damage to the automobile as well. UM and UIM
coverage is reduced by amounts the driver receives
from other insurance coverage such as personal
medical insurance or worker’s compensation.
No Fault Insurance
Since 1970, many states have passed a no-fault in-
surance law. This law requires drivers to buy insur-
ance that covers their injuries in an auto accident no
matter who is at fault. No-fault laws, which were first
enacted in Canada in the 1940s and 1950s, are an at-
tempt to rein in LITIGATION by making the determina-
tion of fault irrelevant, thus allowing drivers to get re-
imbursed for their injuries faster and without court
cost and delay.
Most no-fault insurance provides for very limited
coverage—only providing for medical bills and lost
income, and sometimes vehicle damage, though that
is often paid outside no-fault by utilizing liability in-
surance. No fault does not pay for medical bills
higher than the insured PERSONAL INJURY Protection
(PIP) limits. If medical bills are higher, the insured
must file a liability claim against the driver at fault.
Some states put no restriction on an injured party’s
right to sue under no-fault,; other states require the
injured party to reach a certain threshold of injury,
either monetary or physical, before the party can sue
the other driver.
In addition, no-fault puts restriction on suing for
pain-and-suffering damages. All states that have no-
fault allow recovery for pain and suffering in the
event of death; however, pain and suffering lawsuits
may not be allowed for other injuries. Examples of
injuries which no-fault states allow no or only limited
recovery for pain and suffering include dismember-
ment, loss of bodily function, serious disfigurement,
permanent injury or DISABILITY, serious fracture and
temporary disability or loss of earning capacity.
Two states, Pennsylvania and New Jersey, allow
policy holders to determine if their no-fault insur-
ance gives them the right to sue for pain and suffer-
ing expenses. If the drivers are willing to pay a higher
premium, they have an expanded right to sue for
pain and suffering.
State-By-State Insurance Requirements
The following is a list of state insurance liability re-
quirements as of 2001, showing also whether the
state is a no-fault state and whether uninsured mo-
torist coverage is required. All liability minimums are
in thousands of dollars, and the numbers are listed
in the following order: coverage for injury per per-
son, coverage for total injury, and coverage for prop-
erty damage.
ALABAMA: Liability insurance required; liability mini-
mums 20/40/10
ALASKA: Liability insurance required; liability mini-
mums 50/100/25
ARIZONA: Liability insurance required; liability mini-
mums 15/30/10
ARKANSAS: Liability insurance required; liability
minimums 25/50/25
CALIFORNIA: Liability insurance required; liability
minimums 15/30/5
COLORADO: Liability insurance required; liability
minimums 25/50/15, no-fault state
CONNECTICUT: Liability insurance required; liability
minimums 20/40/10
DELAWARE: Liability insurance required; liability
minimums 15/30/5
DISTRICT OF COLUMBIA: Liability insurance re-
quired; liability minimums 25/50/10, uninsured mo-
torist coverage required
FLORIDA: Liability insurance required for property
damage only; liability minimums 10/20/10, no fault
GEORGIA: Liability insurance required; liability mini-
mums 25/50/25
HAWAII: Liability insurance required; liability mini-
mums 20/40/10, no fault state
IDAHO: Liability insurance required; liability mini-
mums 25/50/15
ILLINOIS: Liability insurance required; liability mini-
mums 20/40/15, uninsured motorist coverage re-
INDIANA: Liability insurance required; liability mini-
mums 25/50/10
IOWA: Liability insurance required; liability mini-
mums 20/40/15
KANSAS: Liability insurance required; liability mini-
mums 25/50/10, no fault state, uninsured motorist
coverage required
KENTUCKY: Liability insurance required; liability
minimums 25/50/10, no fault state
LOUISIANA: Liability insurance required; liability
minimums 10/20/10
MAINE: Liability insurance required; liability mini-
mums 50/100/25, uninsured motorist coverage re-
MARYLAND: Liability insurance required; liability
minimums 20/40/15, uninsured motorist coverage
MASSACHUSETTS: Liability insurance required; lia-
bility minimums 20/40/5, no fault state, uninsured
motorist coverage required
MICHIGAN: Liability insurance required; liability
minimums 20/40/10, no fault state
MINNESOTA: Liability insurance required; liability
minimums 30/60/10, no fault state, uninsured motor-
ist coverage required
MISSISSIPPI: Liability insurance required; liability
minimums 10/20/5
MISSOURI: Liability insurance required; liability mini-
mums 25/50/10, uninsured motorist coverage re-
MONTANA: Liability insurance required; liability
minimums 25/50/10
NEBRASKA: Liability insurance required; liability
minimums 25/50/10
NEVADA: Liability insurance required; liability mini-
mums 15/30/10
NEW HAMPSHIRE: Liability insurance not required;
liability minimums 25/50/25, uninsured motorist cov-
erage required
NEW JERSEY: Liability insurance required; drivers
may choose standard or basic policy. For basic poli-
cy, minimums are 10/10/5 and only property damage
is mandatory. For standard policy, minimums are 15/
30/5 and all liability is mandatory. No fault state, unin-
sured motorist coverage required
NEW MEXICO: Liability insurance required; liability
minimums 25/50/10
NEW YORK: Liability insurance required; liability
minimums 25/50/10, liability must rise to 50/100/10
if injury results in death. No fault state, uninsured
motorist coverage required
NORTH CAROLINA: Liability insurance required; lia-
bility minimums 30/60/25
NORTH DAKOTA: Liability insurance required; liabil-
ity minimums 25/50/25, no fault state, uninsured mo-
torist coverage required
OHIO: Liability insurance required; liability mini-
mums 12.5/25/7.5
OKLAHOMA: Liability insurance required; liability
minimums 10/20/10
OREGON: Liability insurance required; liability mini-
mums 25/50/10, uninsured motorist coverage re-
PENNSYLVANIA: Liability insurance required; liability
minimums 15/30/5, no fault state
RHODE ISLAND: Liability insurance required; liabili-
ty minimums 25/50/25, uninsured motorist coverage
SOUTH CAROLINA: Liability insurance required; lia-
bility minimums 15/30/10, uninsured motorist cover-
age required
SOUTH DAKOTA: Liability insurance required; liabili-
ty minimums 25/50/25, uninsured motorist coverage
TENNESSEE: Liability insurance not required; liabili-
ty minimums 25/50/10
TEXAS: Liability insurance required; liability mini-
mums 20/40/15
UTAH: Liability insurance required; liability mini-
mums 25/50/10, no fault state
VERMONT: Liability insurance required; liability
minimums 25/50/10, uninsured motorist coverage
VIRGINIA: Liability insurance required; liability mini-
mums 25/50/20, uninsured motorist coverage re-
WASHINGTON: Liability insurance required; liability
minimums 25/50/10, uninsured motorist coverage
WEST VIRGINIA: Liability insurance required; liability
minimums 20/40/10, uninsured motorist coverage
WISCONSIN: Liability insurance not required; liabili-
ty minimums 25/50/10, uninsured motorist coverage
WYOMING: Liability insurance required; liability
minimums 25/50/20
Additional Resources
Digest of Motor Laws. Compiled by Butler, Charle A., and
Kay Hamada, Editors., American Automobile Associa-
tion, Heathrow, FL, 1996. ‘‘Minimum Levels Of Required Auto In-
surance,’’ Insurance Information Institute, 2002. ‘‘Auto Insurance,’’,
2002. ‘‘Auto Insurance FAQ’s’’ Nolo Press,
West’s Encyclopedia of American Law. West Publishing
Company, St. Paul, 1998.
Insurance Information Institute
110 William Street
New York, NY 10038 USA
Phone: (212) 346-5500
Primary Contact: Gordon Stewart, President
National Association of Insurance
2301 McGee St, Suite 800
Kansas City, MO 64108-2660 USA
Phone: (816) 842-3600
Primary Contact: Therese Vaughan, President
National Automobile Dealers Association
8400 Westpark Drive
McLean, VI 22102 USA
Phone: (800) 252-6232
Primary Contact: H. Carter Myers, Chairman
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Sections within this essay:
Federal Consumer Laws and Regulations
Important Terms in Leasing Contracts and
Disclosures Required Under CLA and Regu-
lation M
Additional Disclosures Required under Cer-
tain State Laws
Fraud and Overcharging
Common Leasing Scams
Should People Lease or Purchase?
Additional Resources
Twenty-five percent of all new cars moved off
dealers’ lots are leased. The contract that defines this
relationship between the consumers and the owner
of these vehicles is complicated, subject to regula-
tion, and often the site of misunderstanding and
FRAUDULENT activity. Leasing cars allows people to
drive cars they believe they could not afford to buy.
It appears to give people access to a better class of
cars, while another party remains in charge of the
car’s mechanical problems. For many people, leasing
a car feels like renting an apartment; it’s a way to live
without the responsibilities of personal ownership.
For some people perhaps leasing is a good idea; it
is certainly a good idea for the owners of leased vehi-
cles who profit generally at a rate of about three
times the list price of their vehicles.
A car LEASE is a contract between the party who
owns the car (LESSOR) and the one who will use the
car (leasee). A contract signed between these parties
governs the terms, those conditions under which the
car may be used and the obligation of each party.
Consumers sign their lease agreements with auto-
mobile dealers. Shortly thereafter, the dealers sell
the leased vehicles to a leasing company. The leasing
company may be, in fact, the car dealer, or it may be
a finance company subsidiary to a car manufacturer,
or an independent leasing company. This leasing en-
tity now owns the vehicles and is thus the lessor. Be-
sides profiting from the sale of the car, the dealer en-
joys financial incentives from the leasing company
and manufacturer rebates.
The leasee acquires no equity in the vehicle. Dur-
ing the lease period, in fact, the leasee pays the leas-
ing company for the car’s DEPRECIATION, that is the
difference between the list price of the car new and
the value it has once it has been driven for the leased
period. For this reason, consumers are better off
leasing vehicles that hold their value.
Federal Consumer Laws and Regulations
The Consumer Leasing Act (CLA) covers car leases
of at least four months in duration in which the total
amount of money a leasee owes does not exceed
$25,000 for a vehicle limited to personal use. In 1998,
regulations governing this act, referred to as Regula-
tion M, were established by the Federal Reserve
Board. Regulation M can be found in the CODE OF
FEDERAL REGULATIONS (CFR), Title 12, Part 213.4. The
CFR is available in many law libraries and on the In-
ternet. Leasing law specifies the disclosures which
must be contained in the lease document. For exam-
ple, dealers must reveal the monthly and total cost
of the lease, additional fees, and potential mileage
and early termination penalties. Enforcement of
these disclosures is handled through the Federal
Trade Commission.
Important Terms in Leasing Contracts
and Negotiations
The lease contains terms which the consumer
may not know but which are important to under-
stand since they determine the nature of the contract
the consumer is signing. The following are the im-
portant terms to know.
Amortized Amounts: These consist of fees a
lessor is required to collect, such as taxes
and registration fees These expenses are
paid off gradually as a part of each monthly
payment. Expenses for insurance and main-
tenance, when provided by the dealer, are
also amortized.
Base Monthly Payment: This depreciation
amount is the value the vehicle is calculated
to lose each month, plus the amortized
amounts and the interest leasees pay in fi-
nancing charges over the lease term, divided
by the number of months the vehicle is
Capitalized Cost: This is the total price of the
car as agreed to by the lessor and the leasee
over the life of the lease term, plus the regis-
tration fees, title fees, and taxes.
Capitalized NET Cost: This is the amount the
leasee will have paid for the car after all pay-
ments have been made. This is the same fig-
ure as the adjusted capitalized cost as it
takes into account any DOWN PAYMENT made.
Depreciation plus Amortized Amounts: The
difference between the value of the car at
the beginning of the lease and at the end of
the lease is the car’s depreciation. If the lea-
see does not exercise the option to purchase
the vehicle, the lessor will charge the leasee
a fee averaging between $250 and $400 to
cover the expenses the lessor incurs in pre-
paring the car for sale.
Open-End Lease: When this lease is termi-
nated, the leasee is liable for the difference
between a lesser FAIR MARKET VALUE and a
comparable residual value given to the value
in the lease. The residual value will be con-
sidered unreasonable if it exceeds the fair
MARKET VALUE by more than triple that
Close-End Lease: When this lease is termi-
nated, the leasee is not responsible for pay-
ing the difference between the residual
value given to the vehicle in the lease and a
lesser fair market value.
Lease Rate: This figure is that percentage of
the monthly payment which is rental charge.
Some dealers will disclose to a lessor what
this amount is. As of 2002, no federal stan-
dard governs how this amount is calculated,
and dealers are not required to disclose how
they arrive at the amount. However, if a
lease rate is used in an advertisement, there
must also be a disclaimer that the lease rate
may not be an accurate reflection of the total
cost leasee will pay for their leases. This fig-
ure is frequently used to deceive customers
into believing they are paying less interest in
financing the lease than they actually are.
Money Factor: This is a decimal number
used to determine the proportion of the
monthly payment that consists of a rental
charge. This figure is similar to an interest
charge and is not required to be disclosed
under federal law.
Reasonable Standard: The Consumer Leas-
ing Act stipulates that penalties for early ter-
mination and late payments or ceasing to
make payments must be reasonable accord-
ing to the amount of harm actually experi-
enced or anticipated by the lessor.
Disclosures Required Under CLA and
Regulation M
When dealers and consumers discuss a potential
lease, dealers are required by law to disclose certain
factors. Disclosures include a description of the vehi-
cle, the amount due at signing or delivery, the pay-
ment schedule, and other charges payable by the lea-
see. These charges need to be itemized. Dealers
need to disclose the total dollar amount of the pay-
ments. Also the dealer needs to reveal the leasee’s
responsibility for compensating the owner for the
car’s depreciation. The payment calculation must
disclose the following figures and explain how they
were determined: gross capitalized cost, capitalized
cost reduction, adjusted capitalized cost.
In addition, dealers need to explain the rules gov-
erning termination and the formula used in calculat-
ing the penalties. Leasees need to be warned that
early termination may result in a PENALTY of several
thousand dollars, the earlier the termination, the
larger the penalty. Excessive wear and tear needs to
be defined, along with all other possible additional
fees. Liability, the right of the leasee to get an inde-
pendent APPRAISAL of damage and the vehicle’s end
value need to be explained. Responsibility for insur-
ing the vehicle and for maintaining it need to be ex-
plained. Purchase options need to be spelled out as
Consumers need to know Regulation M does not
cover all elements involved in the lease design. For
example, it does not make clear that the leasee has
the right to a written explanation of termination fees.
Nor does Regulation M govern the fact that TAXATION
can change over time. Tax rates may change and thus
affect the costs leasees incur.
Additional Disclosures Required under
Certain State Laws
At least 20 states have chosen to adopt their own
disclosure laws on car leases in order to provide
more protection to consumers. These states are: Ar-
kansas, California, Colorado, Florida, Illinois, Hawaii,
Indiana, Iowa, Kansas, Louisiana, Maine, Maryland,
Michigan, New Hampshire, New Jersey, New York,
Oklahoma, Washington, West Virginia, and Wiscon-
sin. Some laws are inconsistent with the CLA or Reg-
ulation M. Where these inconsistencies exist, state
law is superseded by federal law. Moreover, some
state laws give greater protection to the consumer.
These laws require additional notices, warnings, dis-
closures regarding gap insurance and manufacturer
warranties. Also, some newly enacted state laws have
caused consumers confusion which is contrary to the
intention of state reform.
California has enacted extensive reforms of leas-
ing law. For example, the $25,000 maximum limit
stipulated by the CLA and Regulation M does not
apply to cars leased in California. Second, leasees are
free to terminate at any time. Termination penalties
are calculated according to a specified formula that
sets a ceiling on the amount. Moreover, notice must
be given at least ten days in advance by mail that a
vehicle turned in by a leasee will be sold by the les-
sor. This disclosure allows those who terminated
early to obtain an independent appraisal of the vehi-
cle’s worth. If the appraisal gives a value higher re-
garding the residual value, the leasee will owe less in
termination fees.
Fraud and Overcharging
In the 1990s, numerous instances of FRAUD oc-
curred in car leasing transactions. ABC’s Prime Time
reported on an undercover investigation which puts
car dealers under surveillance with hidden cameras.
Half of the ten dealers surveyed attempted to cheat
the undercover investigators. These dealers used
various means, such as secretly raising the purchase
price or capitalized cost of the vehicle or by quoting
low-ball interest rates. In Florida, a probe by the state
attorney general uncovered illegal business practices
in 23.000 leases which overcharged leasees on an av-
erage of $1,450. The terms of the leasing contract are
complicated, and fast talking dealers can all too easily
mislead unsuspecting customers.
Common Leasing Scams
There are a number of ways dealers can illegally
increase the leasing fees they obtain for their vehi-
cles. For example, they can use an undisclosed acqui-
sition fee, concealed in the net capitalized cost of the
car. This fee typically averages $450. Consumers
should ask if the fee has been included in the cost
of the vehicle and if it can be waived. Another way
is for dealers to quote the money factor as an interest
rate. Customers can be easily confused because both
of these figures are quoted in decimal form. For ex-
ample, a dealer may tell the customer that the inter-
est rate is 2.6 percent. The use of a money factor
of.00260 will be mistaken for the interest rate. When
this money factor is used, the actual interest rate is
6.24 percent. If the customer is able to distinguish
between these two figures and voices an objection,
the dealer may say he said 6.2 instead of 2.6 percent.
Dealers may also ‘‘forget’’ to enter the value of the
trade-in into the lease terms. Customers need to
carefully examine the figures of the lease to make
sure the value of their trade-in is listed. Then too
dealers can secretly increase the cost of the vehicle.
Customers need to insist the residual, money factor,
applicable fees, taxes, and dealer incentives are fully
disclosed. Then the customers can calculate the
lease payment themselves. Moreover, termination
penalty wording may be vague enough to allow some
dealers to charge more than the leasee was expect-
ing to pay. Finally, many customers may not know
that so-called LEMON LAWS pertain to leased vehicles
as well, and dealers may not offer that information.
Should People Lease or Purchase?
Leasing may be a good choice under certain cir-
cumstances. For example, if consumers use a vehicle
in easy-wear situations only and for only the distance
specified in the lease mileage terms. Also, it may pay
to lease a car if the monthly payments for the lease
are lower than those for a car loan to purchase that
car. To calculate how to compare car loan payments
with lease payments, follow these steps:
Determine through negotiation the lowest
possible price so that it is no more than $200
over the dealer invoice
Add SALES TAX and other up front costs appli-
cable to purchasing and to leasing
Add the relevant figures in each case to ar-
rive at the gross purchase price and the capi-
talized cost for the lease
Subtract from each of these figures the
trade-in value if applicable
Subtract from each of these figures the
amount of the down payment. Ideally, 20
percent of the figure calculated in the imme-
diately preceding step should be put down
for a purchase and nothing should be put
down for a lease. This calculation gives the
customer the net purchase price for buying
and leasing
Next add the respective FINANCE CHARGE for
leasing and purchasing. For a lease this
amount will be listed as a rent charge. This
will give the total cost in purchasing and
Finally, divide each figure by the number of
payments required
After the comparative costs have been deter-
mined, customers need to remember that if they buy
their cars, they will have a vehicle to sell the next
time they enter the car market as consumers.
Additional Resources
Buying and Leasing Cars on the Internet. Raisglid, Ron et.
al. St. Martin’s Press, 1998.
Car Buyers’ and Car Leasers’ Negotiating. Bible Bragg, W.
James, Random House, 1999.
Car Shopping Made Easy: Buying or Leasing, New or
Used: How to Get the Car You Most Want at the Price
You Want to Pay. Edgerton, Jerry, Warner Books, 2001.
Complete Idiot’s Guide to Buying or Leasing a Car. Nerad,
Jack, Macmillan Spectra, 1996.
Don’t Get Taken Away Every Time: The Insider’s Guide to
Buying or Leasing Your New Car or Truck. Sutton,
Remar, Penguin Books, 1997.
How to Buy or Lease a Car Without Getting Ripped Off.
Lyle, Pique, Adams Media Corp., 1999.
Insider’s Guide to Buying and Leasing. Wesley, John, Del-
mar-Thompson Learning, 2002.
Keys to Leasing: A Consumer’s Guide to Vehicle Leasing.
Board of Governors Federal Reserve System, 1997.
Leasing Lessons for Smart Shoppers. Eskeldson, Mark,
Technews Pub., 1997.
Smart Wheels, Hot Deals: A Layperson’s Guide to Buying,
Leasing, and Insuring the Best Car for the Least Money.
Silver Lake Publishing, 2001.
The Unofficial Guide to Buying or Leasing a Car. Howell,
Donna, Macmillan 1998.
American Council on Consumer Interests
240 Stanley Hall
Columbia, MO 65211 USA
Phone: (573) 882-3817
Phone: (573) 884-6571
Primary Contact: Carrie Paden
Association of Consumer Vehicle Lessors
Auto Leasing Hot Line Service
Phone: (800) 418-8450
Automotive Consumer Action Program
8400 Westpack Dr.
McLean, VA 22102 USA
Phone: (703) 821-7144
Consumer Action
717 Market St.
San Francisco, CA 94103 USA
Phone: (415) 777-9635
Phone: (415) 777-5267
URL: ttp://
Primary Contact: Ken McEldowney, Director
Consumer Bankers Association
1000 Wilson Blvd.
Washington, DC 22209-3912 USA
Phone: (703) 276-1750
Phone: (703) 528-1290
Primary Contact: Joe Belew, President
Federal Trade Commission
6th and Pennsylvania Ave.
Washington, DC 20580 USA
Phone: (877) 382-4357
Phone: (202) 326-3676
Primary Contact: Robert Pitofsky, Chair
National Vehicle Leasing Association
PO Box 281230
San Francisco, CA 94128 USA
Phone: (650) 548-9135
Phone: 650 548-9155
Primary Contact: Rodney J. Couts, Executive
This Page Intentionally Left Blank
Sections within this essay:
Child Passenger Safety
- Proper Child Safety Seat Use
- Booster Seat Safety
- Child Safety Law Exemptions
Safety Belt Laws
- Standard Enforcement Information
- Highway Safety Grant Programs for
Occupant Protection Activities
Motorcycle Helmets
Blood Alcohol Content
- The Repeat Intoxicated Driver
- Intoxicated Drivers Repeat Offender
- Section 164 of 23 U.S.C.
Additional Resources
Those who drive cars may not realize the amount
of thought that goes into safety, both in terms of
safety equipment in the vehicle and the require-
ments of safe driving. Safety is incorporated into the
U.S. driving culture in many ways. From safety belts
and air bags, to motorcycle helmet laws and driving
while impaired laws, there is a delicate balance be-
tween the government’s role of protecting the driv-
ing and pedestrian population through safety laws
and regulations and the public’s and the automobile
industry’s privacy interests.
For the most part, market forces determined how
manufacturers addressed safety issues in their vehi-
cles. There was a good deal of tension between obvi-
ous safety hazards and the public’s unwillingness to
pay for vehicle modifications or features that ap-
peared to be ‘‘optional.’’ But in the 1960s, a grass-
roots level movement, led by Ralph Nader and oth-
ers, sought to inform the public, auto manufacturers,
and the government about the serious safety risks in
The late 1960s saw the first regulatory measures
to make cars safer. For example, the threat of a feder-
al mandate for auto manufacturers to install anchors
for front safety belts prompted the industry to install
them ‘‘voluntarily’’ as standard equipment. In hear-
ings in 1965, TESTIMONY from many physicians result-
ed in a recommendation that all cars sold in the state
of New York would have by 1968 the seventeen safe-
ty features already required in federally owned vehi-
cles. Around that time Michigan, Iowa, Illinois, and
Washington also conducted hearings on automobile
As of 2002, there are large federal agencies that
oversee an enormous array of federal laws and regu-
lations that are intended to safeguard American driv-
ers, passengers, and pedestrians. These are supple-
mented by many additional laws and regulations in
all fifty states, the District of Columbia, and U.S. terri-
tories and possessions.
Child Passenger Safety
Traffic crashes are one of the leading causes of
death in the United States. All 50 states, the District
of Columbia, Puerto Rico, and the U.S. territories
have child passenger safety laws on the books. These
do much to reduce the number of deaths and seri-
ous injuries from vehicle crashes. But the biggest
problem with these laws remains the significant gaps
and exemptions in coverage that diminish the pro-
tection that all children need in motor vehicles.
According to the September 1998 issue of the
Journal of Pediatrics, the best predictor of child oc-
cupant restraint use is adult safety belt use. In other
words, an adult driver who is buckled up is far more
likely to restrain a child passenger than one who is
not buckled.
Proper Child Safety Seat Use
Perhaps the single most important rule about chil-
dren in vehicles is that children should be seated in
the back seat at all times.
The proper seating information for infants, birth
to one year or up to twenty-two pounds is:
If the car seat also converts to a carrier, the
infant should face the rear
Harness straps should be at or below the
Infants should never be in the front seat, es-
pecially if the vehicle is equipped with pas-
senger-side air bags
The proper seating information for toddlers,
twenty-two to forty pounds is:
If the car seat also converts to a carrier, the
child should face forward
Harness straps should be above shoulder
Toddlers should never be in the front seat,
especially if the vehicle is equipped with pas-
senger-side air bags
The proper seating information for preschool
children, forty to eighty pounds is:
They need a belt positioning booster seat
They should face forward
Their booster seat must be used with both
lap and shoulder belts
The lap belt should fit low and tight
There are child safety seat laws in every state plus
the District of Columbia. Police and other law en-
forcement officers are allowed to issue a CITATION
when they see a violation of these laws. There are
some 18 states that have gaps in their child passen-
ger restraint laws; in these states, some children are
not covered by either a child safety seat law or a safe-
ty belt law. Additionally, in states where children are
protected under the safety belt law as opposed to
specific child safety seat laws, police may enforce the
law only if a driver violates an additional law.
Safety belt laws do protect children. For example,
the NHTSA found that when Louisiana upgraded its
safety belt law from secondary to standard enforce-
ment, compliance with child restraint rules rose from
45 percent to 82 percent without any other change
in the state’s child passenger safety law.
Booster Seat Safety
Automobile accidents are a leading cause of death
and injury for American children. Approximately 500
of the nearly 19.5 million children in the five to nine
year-old age group die in automobile accidents.
About 100,000 more are injured in automobile crash-
es each year. Although the fatality rate has decreased
for other age groups in the same time period, the fa-
tality rate in automobile crashes for this age group
has remained constant over the past twenty years.
That is why this particular age group is sometimes
known as ‘‘the forgotten child;’’ they have outgrown
toddler-sized child safety seats but do not yet fit into
adult safety belts properly. Despite this problem, nei-
ther government nor industry has made concerted
efforts to address the safety needs of children ages
five to nine.
Booster seats are one answer to this problem;
they provide a proper safety belt fit. Booster seats lift
children up off vehicle seats. This improves the fit of
the adult safety belt on children. If used properly,
boosters should also position the lap belt portion of
the adult safety belt across the child’s legs or pelvic
area. An improper fit of an adult safety belt can ex-
pose a child to abdominal or neck injury because the
lap belt rides up over the stomach and the shoulder
belt cuts across the neck. When a child is restrained
in an age-appropriate child safety seat, booster seat,
or safety belt, his or her chance of being killed or se-
riously injured in a car crash is greatly reduced.
The facts about booster seat laws are sobering.
For example, only seven states have booster seat
laws: Arkansas, California, New Jersey, Oregon,
Rhode Island, South Carolina, and Washington. Thir-
ty-three states and the District of Columbia require
all children up to age 16 to be restrained in every
seating position. The other states require child re-
straint systems for children up to ages two, three, or
four, with a few more requiring the use of safety belts
after the age of four. According to some estimates,
as many as 630 additional children’s lives would be
saved and 182,000 serious injuries prevented every
year if the states closed all the gaps in their child oc-
cupant protection laws and all children—ages birth
to fifteen years old—were properly restrained.
Child Safety Law Exemptions
Several states have enacted laws which exempt
children from passenger restraint laws in certain cir-
cumstances or under unique circumstances. These
vary widely from state to state. The following is a list
of some of the most common exemptions:
Overcrowded vehicles. In nearly half of the
states, children can ride unsecured if all safe-
ty belts are otherwise in use.
‘‘Attending to the personal needs of the
child.’’ This vague exemption may cover
many activities.
Medical waivers for children with special
medical needs. These exemptions may dis-
appear as advances in child restraint systems
make it possible to accommodate children
with most types of physical disabilities.
Out-of-state vehicles, drivers, and children.
Children in many states are frequently ex-
empted if the vehicle or driver is from anoth-
er state.
Drivers who are not the vehicle owner or
who are not related to the children being
carried. Some states have laws that do not
hold the driver responsible for unrestrained
Safety Belt Laws
It is clear from the statistics that lives are saved
when drivers and passengers in vehicles use safety
belts. This is especially true when safety belt use is
reinforced by meaningful safety belt laws. According
to NHTSA, as of 2002, approximately 61 percent of
passenger vehicle occupants killed in traffic crashes
were not wearing safety belts. This figure is down
from 65 percent in 1998.
Standard Enforcement Information
Every state except New Hampshire has safety belt
laws, but only 17 states and the District of Columbia
have standard enforcement of their belt laws. Stan-
dard enforcement laws allow police officers to stop
vehicles if the driver or front seat passenger is ob-
served not wearing a safety belt; the law also applies
to drivers who have not properly restrained a child.
Secondary enforcement laws allow officers to issue
a citation for failing to wear a safety belt only after
stopping the vehicle for another traffic INFRACTION.
Some have raised concerns that standard enforce-
ment laws could lead to police harassment of minori-
ties. However, according to a 1999 NHTSA report,
surveys in California and Louisiana conducted short-
ly after these states upgraded to standard enforce-
ment found that neither Hispanics (California) nor
African Americans (Louisiana) reported receiving a
greater number of safety belt citations than the pub-
lic as a whole.
Currently, seventeen states, the District of Colum-
bia and Puerto Rico have primary laws in effect. An-
other thirty-two states have secondary enforcement
laws, and New Hampshire has no seat belt use law
at all. Fines for not wearing a safety belt in the United
States currently range from a low of $5 in Idaho to
a high of $75 in Oregon. In twenty-seven states, the
fine is just $20-25.
Highway Safety Grant Programs for
Occupant Protection Activities
Congress passed the Transportation Equity Act for
the 21st Century (TEA-21) in May of 1998. There are
several programs in TEA-21 that make a direct impact
on seat belt use and occupant protection. The three
most important programs funded by the Act are:
1. Section 157 Seat Belt Incentive Grant pro-
gram. This program authorized half a bil-
lion dollars over five years to encourage
states to increase seat belt use rates. States
apply for grant money under this program
and may use grant funds for any eligible
Title 23 project (including approved con-
struction projects). The TEA-21 Act also
encourages innovative state-level projects
that promote increased seat belt use rates
and child passenger safety activities.
2. Section 405 (a) Occupant Protection In-
centive Grant program. This program de-
ploys $83 million over five years to target
specific occupant protection laws and pro-
grams. States can receive grants under this
program if they demonstrate that they
have enacted certain occupant protection
laws and programs, such as primary safety
belt use laws and special traffic enforce-
ment programs.
3. Section 2003 (b) program. This portion of
the TEA-21 established a two-year program
for year 2000 and 2001. In the program,
states received grants if they implemented
child passenger protection education and
training activities.
Motorcycle Helmets
Motorcycle helmets are proven to save the lives of
motorcyclists, and they help prevent serious brain in-
juries. Twenty states and the District of Columbia re-
quire motorcycle drivers and their passengers to use
helmets. Twenty-seven other states have laws that
apply to some riders only, particularly those younger
than 18. Colorado, Illinois, and Iowa have no motor-
cycle helmet requirements at all.
Helmet laws increase motorcycle helmet use, thus
saving lives and reducing serious injuries. The
NHTSA reports that in 2000 there were 2,862 motor-
cycle riders killed on U.S. roads and highways. This
number represents a 15 percent increase from 1999.
There were 58,000 motorcycle-related injuries in
2000, a 16 percent increase from 1999.
Speeding is a factor in nearly one-third of all FATAL
crashes. Speeding entails exceeding the posted
speed limit; it also means driving too fast for condi-
tions (such as in fog, rain, or icy road conditions), re-
gardless of the posted speed limit. Some 6.3 million
vehicular crashes were reported in 2000.
When drivers speed, they cause the following:
Reduction in the amount of available time
needed to avoid a crash
Increase the likelihood of a crash
Increase the severity of a crash once it oc-
According to a report issued by the NHTSA in 2000,
speed was a factor in 30 percent (12,628) of all traffic
fatalities in 1999. It was second only to alcohol (39
percent) as a cause of fatal crashes.
Congress repealed the National Maximum Speed
Limit in 1995. Accordingly, speeds increased on In-
terstate highways in the states that raised their speed
limits. Twenty-four states raised their speed limits in
late 1995 and in 1996. Twenty-nine states have cur-
rently raised speed limits to 70 MPH or higher on
portions of their roads and highways.
Blood Alcohol Content
Motor vehicle crashes are the number one cause
of death for Americans ages six through thirty-three.
Alcohol-related crashes are a big part of this prob-
lem. But alcohol-related accidents account for an in-
ordinately large percentage of all deaths in automo-
bile crashes. In fact, every 33 minutes someone is
killed in an alcohol-related crash.
Individuals absorb alcohol at different rates. The
main reason is body weight, but a number of other
factors affect blood alcohol content (BAC):
Body type
Rate of metabolism, medications taken
The strength of the drinks
Whether drinkers have eaten recently
Despite these factors, though, just one drink will de-
grade the physical and mental acuity of practically ev-
eryone. A person with a BAC in the range of.08 to.10
is considered legally intoxicated in every state. It
takes just a few drinks to get there, even if drinkers
do not ‘‘feel’’ the effects of the alcohol.
Intoxicated Drivers Repeat Offender Laws
State law uses four general methods to deal with
the problem of repeated offenses by intoxicated driv-
ers. These are:
1. Addressing Alcohol Abuse: Some states re-
quire drivers with repeat violations to be
assessed for their degrees of alcohol
abuse; some also mandate appropriate
2. Licensing Sanctions: Suspending or revok-
ing licenses of repeat intoxicated drivers
for a greater period of time than they for
first offenders is the law in most states.
3. Mandatory Sentencing: Some states have
mandatory minimum sentences for repeat
intoxicated drivers.
4. Vehicle Sanctions: Some states impound
or immobilize the vehicles of repeat intoxi-
cated drivers. This can involve installing an
ignition interlock system, or other device
on their vehicles that prevents a vehicle
from starting if the driver’s blood alcohol
concentration is above a certain amount.
Programs that concentrate on an individual’s alco-
hol-related behavior have also experienced success.
For example, Milwaukee’s Intensive Supervision
PROBATION (MISP) program reduced recidivism by
more than 50 percent. The MISP program includes
a component of behavior monitoring. It seems that
a variety of measures are needed to address this issue
and that states are providing an array of sanctions to
the problem of repeat offenders of impaired driving
Revoking or suspending a driver’s license is now
a common PENALTY for violations related to impaired
driving. Despite these penalties, many offenders con-
tinue to drive. Too many drivers with a suspended
license receive additional traffic citations or become
involved in crashes during the periods when their li-
censes are suspended. As a way to ameliorate this
problem, many states have enacted legislation that
directly affects the offender’s vehicle or license
plates as a penalty for the impaired driving offense
and/or for driving with a suspended license.
Driver licensing sanctions have proven to help re-
duce the problem of impaired driving. Non-criminal
licensing sanctions have resulted in reductions in al-
cohol-related fatalities of between 6 and 9 percent.
According to a NHTSA study, the following states
have seen significant reductions in alcohol-related
fatal crashes following their implementation of ad-
ministrative license revocation procedures: Colora-
do, Illinois, Maine, New Mexico, North Carolina, and
According to the NHTSA, these kinds of sanctions
actually do prevent many repeat DWI offenders from
driving. Those repeat offenders who continue to
drive without a license tend to drive more infre-
quently or at least more carefully.
The NHTSA State Legislative Fact Sheet-Vehicle
and License Plate Sanctions states that a variety of ve-
hicle sanctions programs have been used successful-
ly. For example, California’s vehicle impoundment
program substantially reduced subsequent offenses,
convictions, and crashes for repeat offenders in the
program. These penalties work by either separating
repeat DUI/DWI offenders from their vehicles or by
requiring them to be sober when they drive.
Section 164 of 23 U.S.C.
Section 164 of 23 U.S.C. required states to enact
certain laws regarding repeat intoxicated drivers.
These were to be in place by October 1, 2000. States
without these laws forfeited part of their Federal
highway construction funds. These monies were re-
directed to the state’s highway safety program to be
used for alcohol-impaired driving countermeasures,
or for enforcement of anti-drunk driving laws. Alter-
natively, states could also elect to use the funds for
its hazard elimination program.
To be in compliance with Section 164, a state’s
laws related to subsequent convictions for driving
while intoxicated or driving under the influence of al-
cohol must require the following:
Behavior ASSESSMENT: States must mandate
assessment of repeat intoxicated drivers’ de-
gree of alcohol abuse and refer them to
treatment when appropriate
Driver’s License Suspension: suspension
must be for a minimum of one year
Mandatory Minimum Sentence: These
should be not less than five days of
IMPRISONMENT or 30 days of community ser-
vice for the second offense. For the third or
subsequent offense, the sentence should
not be less than 10 days of imprisonment or
60 days of community service.
Vehicle Seizure: all vehicles of repeat intoxi-
cated drivers must be impounded or immo-
bilized for some period of time during the li-
cense suspension period
The STATUTE defines a repeat intoxicated driver as
a driver convicted of driving while intoxicated or
driving under the influence of alcohol more than
once in any five-year period. This means that states
need to maintain records on driving convictions for
DWI/DUI for a minimum of five years. Additionally,
states must certify that they are in compliance with
all the provisions of the statute. The following states
and the District of Columbia met the requirements
of Section 164 by the end of 2000: Alabama, Arizona,
Arkansas, Colorado, Florida, Hawaii, Indiana, Idaho,
Iowa, Kentucky, Maine, Michigan, Mississippi, Ne-
braska, Nevada, New Hampshire, New Jersey, North
Carolina, Oklahoma, Pennsylvania, Utah, Virginia,
and Washington.
Additional Resources
‘‘Advocates for Auto and Highway Safety.’’ Available at Advocates for Highway &
Auto Safety, 2002.
‘‘Buckle Up America.’’ National Highway Traffic Safety Ad-
ministration, 2002. Available at http://
2001 Car and Vehicle Safety Data: National Highway
Traffic Safety Administration (NHTSA) Documents
and Reports U.S. Government, Progressive Manage-
ment, 2001.
The Car Book: The Definitive Buyer’s Guide to Car Safety,
Fuel Economy, Maintenance, and Much More. Gillis,
Jack, Clarence M. Ditlow, Amy B. Curran, HarperPeren-
nial, 1998.
Drive to Survive! Rich, Curt, Motorbooks International,
Human Factors in Traffic Safety. Olson, Paul L. and Rob-
ert E. Dewar, eds. Lawyers & Judges Publishing Compa-
ny, 2001.
‘‘NHTSA State Legislative Fact Sheet-Administrative Li-
cense Revocation.’’
outreach/stateleg/adminlicense.htm. National Highway
Traffic Safety Administration, 2001.
‘‘NHTSA State Legislative Fact Sheet-Vehicle and License
Plate Sanctions.’’
outreach/stateleg/veh_lic_sanctions.htm. National
Highway Traffic Safety Administration, 2001.
‘‘Transportation and Vehicle Safety.’’,
2002. Available at
AAA Foundation for Traffic Safety
1440 New York Ave., NW, Suite 201
Washington, DC 20005 USA
Phone: (202) 638-5944
Fax: (202) 638-5943
Center for Auto Safety (CAS)
1825 Connecticut Ave., NW, Suite 330
Washington, DC 20009-5708 USA
Phone: (202) 328-7700
Kids ‘N Cars
918 Glenn Avenue
Washington, MO 63090 USA
Fax: (636) 390-9412
Mothers Against Drunk Driving (MADD)
P.O. Box 541688
Dallas, TX 75354-1688 USA
Phone: (800) 438-6233
National Highway Traffic Safety
Administration (NHTSA)
400 7th St., SW
Washington, DC 20590 USA
Phone: (202) 366-0699
Fax: (202) 366-7882
P.O. Box 470
Arlington, VA 22210-0470 USA
Phone: (703) 469-3700
Fax: (703) 469-3701
Sections within this essay:
Types of Seat Belts
- Federal
- State
- Primary versus Secondary Laws
Why People Ignore Seat Belts
Seat Belts on School Buses
Keeping Safe
Additional Resources
More than 90 percent of Americans age 16 and
above drive a motor vehicle; of those, nearly 80 per-
cent claim to wear their seat belts at all times while
driving. These figures come from the National High-
way Traffic Safety Administration (NHTSA), which
also estimates that seat belts saved more than
135,000 lives between 1975 and 2001. While many
people wear their seat belts because they recognize
the safety factor, others wear them because failure to
do so can result in a fine. Regardless of the reason
one wears a seat belt, the fact is that since the 1950s
they have been proven to save lives.
However, many people refuse to wear seat belts.
They say that the belts are too uncomfortable, or
they say they are only driving a short distance. They
may also say that they simply forget. With the grow-
ing prevalence of state ‘‘primary laws,’’ in which po-
lice officers are allowed to stop cars at random to
perform seat-belt checks, people are clearly more
careful when they know they may be facing a fine.
The first seat belts were not installed in cars by
auto manufacturers. Early automobiles did not go
particularly fast, and there were relatively few cars on
the road. As the number of motor vehicles increased,
so did the amount of danger. In the 1930s, a number
of physicians, seeing the results of traffic accidents,
lobbied car makers to create some sort of restraining
device to keep people from being thrown from a car
in an accident. Several doctors actually designed
their own lap belts and installed them in their autos.
It was not until the 1950s that seat belts began to
appear with some regularity. In 1954 the Sports Car
Club of America began to require drivers to wear lap
belts as they raced. Soon afterward such groups as
the National Safety Council (NSC), American College
of Surgeons, and International Association of Chiefs
of Police issued their own recommendations for the
manufacture and installation of seat belts. The Swed-
ish auto manufacturer Volvo began marketing lap
belt in 1956; that same year both Ford and Chrysler
decided to offer lap belts as well. Seat belts were not
required by law, though, in the United States until
Types of Seat Belts
The simple belt that was pulled across the lap
(and that only came on the front seats) has long
since been retired. That belt was known as two-point
because of its simple A-to-B design. Today’s seat
belts are three-point; one strap goes across the lap
while another goes over the shoulder and diagonally
across the chest. In some automobiles, the two
straps are connected and the occupant crosses it
over the chest and the lap in one motion. In other
cars, the occupant connects the lap belt while the
shoulder belt slides into place automatically once the
door is closed. A prototype for a four-point is being
developed; it works more like a harness than a typi-
cal seat belt would.
Seat belts are made of lightweight but durable fab-
ric that is designed to withstand impacts and hold
the wearer in place. Of the roughly 40,000 automo-
bile deaths that occur each year, safety experts say
nearly half could have been prevented if a seat belt
was being worn. In many cases, the person is killed
as a result of being thrown from the vehicle upon
crashing. In addition to being durable, seat belts are
also designed to be much more comfortable than
they were in the past. Most seat belts today employ
a mechanism that allows the wearer to move fairly
comfortably while driving; if the car comes to a sud-
den stop the belt locks and holds the wearer firmly
in place.
There is no federal seat belt law; such laws are left
to the individual states. The U. S. Department of
Transportation, through NHTSA, offers grant pro-
grams to states; in 2002, 48 states, the District of Co-
lumbia, and Puerto Rico shared a $44.4 million grant
(Maine and Wyoming declined to take any grant
money). Safety and public awareness campaigns are
also conducted by NHTSA. Probably the best known
is the series of print and broadcast advertisements
that feature Vince and Larry, the crash test dummies.
In 1998, Congress passed the Transportation Eq-
uity Act for the 21st Century (TEA-21), which in-
cludes grant money for states to initiate new seat belt
laws, traffic enforcement programs, and child pas-
senger protection and training activities.
Every state except New Hampshire has a seat belt
requirement for adults. All 50 states and the District
of Columbia have seat belt laws that cover children.
These laws require children under a certain age (usu-
ally 3 or 4) to be placed in a child restraint (a baby
seat, a booster seat, etc.); buckling these children up
with adult belts is not permitted by law.
New York is one of the most active proponents of
seat belt regulation. It was the first state to try to pass
seat belt legislation when in 1959 it tried to mandate
seat belts in all new cars sold in the state. In 1985,
New York made seat belt use mandatory for back
seat passengers aged 10 or older; in 1987 it became
the first state to require seat belts on large school
Primary versus Secondary Laws
Primary seat belt laws are one of the most effective
enforcement tools available. A primary law allows po-
lice to stop an automobile and ticket the driver for
not wearing a seat belt. Seventeen states and the Dis-
trict of Columbia have primary laws.
Secondary laws allow the police to ticket a driver
who is not wearing a seat belt, but the police must
have already stopped the driver for some other rea-
son. A person who is speeding or who goes through
a red light or whose tail light is out can be stopped
and ticketed; a person who is obeying all the laws but
is not wearing a seat belt will not be pulled over in
a state with no primary law.
Proponents of primary legislation point out the
safety factor. More people will wear seat belts if they
know they run the risk of being pulled over and tick-
eted. If the driver of a car is wearing a seat belt,
chances are his or her passengers are too. Moreover,
according to information from the National Safety
Council (NSC), adults who buckle up are more likely
to make sure their children are properly buckled up.
In fact, according to NSC, overall seat belt usage can
be as much as 15 percent higher in states with prima-
ry laws.
Why People Ignore Seat Belts
Of the people who use seat belts, most say their
reason for wearing them was to avoid injury. A study
conducted in 1998 for NHTSA called the Motor Vehi-
cle Occupant Safety Survey (MVOSS) revealed that
97 percent of frequent seat belt users and 77 percent
of occasional users wear their seat belts as a safety
measure. Other reasons cited included wanting to
set a good example, being with other people who are
wearing seat belts, and force of habit. More than 80
percent of the respondents admitted they use them
because doing so is required by law.
Regarding people who do not wear seat belts,
some wear seat belts occasionally and others admit
never wear seat belts. According to the MVOSS study,
the primary reason occasional seat belt users fail to
buckle up is that they are only driving short distances
(56 percent). More than half said that they simply for-
get on occasion. For those who never wear a seat
belt, the most commonly cited reason (65 percent)
is that seat belts are uncomfortable. Other reasons
people gave for not wearing their seat belts include
the following:
Being in a hurry and not having time to
buckle up
Light traffic on the roads when respondent
Not wanting to get clothing wrinkled
Resentment at being told what to do
Knowing someone who died in a crash while
wearing a seat belt
Resentment at government interference in
personal behavior
Never having gotten used to seat belts
The belief that with air bags, seat belts are re-
Safety experts point out that many of these rea-
sons are based on faulty logic. For example, light traf-
fic may have nothing to do with having to make a
sudden stop. Air bags, while a valuable safety precau-
tion, are limited in how much they can do. Some
overweight people claim that they cannot wear seat
belts because the seat belts do not fit them. Some,
but not all, auto manufacturers offer seat belt extend-
ers to deal with this problem; others offer custom-
ized longer seat belts. The fact remains, however,
that there are people who simply will not wear seat
belts; they are more comfortable risking being ticket-
ed or potential injury or death.
Seat Belts on School Buses
Smaller school buses are treated like passenger
vehicles when it comes to seat belt requirements. Be-
cause of their small size they are more likely to eject
passengers; as a result, they are equipped with seat
belts as a matter of course. As for standard size
school buses, the effectiveness of seat belts has been
a source of debate for several years.
In 1992, five years after New York passed a law re-
quiring seat belts on school buses, New Jersey
passed a similar law. While New York’s law makes use
of the seat belts optional, New Jersey’s law requires
children to buckle up. In 1999, Florida, Louisiana,
and California also enacted laws for what they called
‘‘improved occupant restraint systems’’ on large
school buses, although they have not yet decided ex-
actly what type of restraint they wish to require on
their buses.
It may seem odd that in an atmosphere of in-
creased emphasis on safety there would be any ques-
tion about seat belts on large buses. Yet opponents,
citing data from NHTSA, have said that seat belts on
buses might do little to help children. Rather, they
believe, the improved interior design of school buses
(known as compartmentalization) is more effective.
Since the 1970s, school bus seats have been mandat-
ed by law to be well-padded on both sides, with high
backs and extra-sturdy anchoring, and no exposed
rivets. The design of the modern school bus has
been compared to that of an egg carton; the extra
padding around the seats helps protect the passen-
gers during sudden impacts and keeps them from
being ejected from their seats. Moreover, say oppo-
nents of school bus seat belts, in the event of an acci-
dent, it would be much harder for someone to get
children out of a bus if they are all wearing seat belts.
This issue will not be resolved easily. What both sides
can agree on, however, is that school buses are defi-
nitely safer today than they were in the early 1970s.
Keeping Safe
The bottom line for drivers and automobile pas-
sengers is that in almost all cases it is wiser to buckle
up. From a safety perspective, the EVIDENCE clearly
points to the value of seat belts in saving lives. From
a legal perspective, failure to wear a seat belt can
mean being ticketed. Just as there are people who
continue to smoke, no doubt there will be people
who continue to avoid wearing seat belts. By getting
into the habit of wearing them, say the safety experts,
travelers will become more comfortable with seat
belts, both as drivers and as passengers.
Additional Resources
Baby Seats, Safety Belts, and You. Breitenbach, Robert J.,
Janet B. Carnes, and Judy A. Hammond, U. S. Depart-
ment of Transportation, 1995.
SAE Vehicle Occupant Restraint Systems and Components
Standards Manual. Society of Automotive Engineers,
Standard Enforcement Saves Lives: The Case for Strong
Seat Belt Laws. NHTSA, National Safety Council, 1999.
Mothers Against Drunk Driving (MADD)
P. O. Box 541689
Dallas, TX 75354 USA
Phone: (800) 438-6233 (GET-MADD)
Primary Contact: Millie I. Webb, President
National Association of Governors’ Highway
Safety Representatives (NAGHSR)
750 First Street NE, Suite 720
Washington, DC 20002 USA
Phone: (202) 789-0942
Primary Contact: Marsha M. Lembke, Chair
National Safety Council
1121 Spring Lake Drive
Itasca, IL 60143 USA
Phone: (630) 285-1121
Fax: (630) 285-1315
Primary Contact: Alan McMillan, President
National Transportation Safety Board
490 L’Enfant Plaza SW
Washington, DC 20594 USA
Phone: (202) 314-6000
Primary Contact: Marion C. Blakey, Chairman
Society of Automotive Engineers (SAE)
400 Commonwealth Drive
Warrendale, PA 15096 USA
Phone: (724) 776-5760
Primary Contact: S. M. Shahed, Ph.D., 2002
U. S. Department of Transportation,
National Highway Traffic Safety
Administration (NHTSA)
400 Seventh Street SW
Washington, DC 20590 USA
Phone: (888) 327-4236 (Auto Safety Hotline)
Primary Contact: Jeffrey W. Runge, Administrator
Sections within this essay:
Types of Traffic Violations
Effect of Traffic Violations
- Fines
- Traffic School
- Suspension of License
- Insurance Premiums
Drunk Driving
- Drunk Driving Laws and Penalties
Additional Resources
Traffic violations followed the invention of the au-
tomobile: the first traffic ticket in the United States
was allegedly given to a New York City cab driver on
May 20, 1899, for going at the breakneck speed of 12
miles per hour. Since that time, countless citations
have been issued for traffic violations across the
country, and states have reaped untold billions of
dollars of revenue from violators.
Traffic violations can be loosely defined as any acts
that violates a state or municipalities traffic laws.
Most laws are local, though the federal government
does regulate some traffic aspects, and it can deny
federal money in order to coerce states to pass par-
ticular traffic laws. Today, motorists can find them-
selves faced with dozens of traffic laws, depending
on where they are driving. These traffic laws vary by
state, city, highway, and region
Types of Traffic Violations
Traffic violations are generally divided into major
and minor types of violations. The most minor type
are parking violations, which are not counted against
a driving record, though a person can be arrested for
unpaid violations. Next are the minor driving viola-
tions, including speeding and other moving viola-
tions, which usually do not require a court appear-
ance. Then there are more serious moving violations,
such as reckless driving or leaving the scene of an ac-
cident. Finally there is drunk driving, also called Driv-
ing Under the Influence (DUI), which is a classifica-
tion onto itself.
All but the most serious traffic violations are gen-
erally prosecuted as MISDEMEANOR charges; however,
repeat offenses can be prosecuted at the level of felo-
nies. As misdemeanor charges, most traffic violations
require payment of a fine but no jail time. State laws
do not allow a judge to impose a jail sentence for
speeding or failure to stop at a signal. However,
more serious traffic violations, such as drunk or reck-
less driving, can result in jail time at the judge’s dis-
The most common type of traffic violation is a
speed limit violation. Speed limits are defined by
state. In 1973, Congress implemented a 55-miles-per-
hour speed limit in order to save on energy costs, but
these were abolished in 1995. Since then, most states
have implemented 65-mph maximum speed limits.
There are two types of speed limits: fixed maximum,
which make it unlawful to exceed the speed limit
anywhere at any time, and prima facie, which allow
drivers to prove in certain cases that exceeding the
speed limit was not unsafe and, therefore, was lawful.
Another common type of traffic violation is a seat
belt violation. Most states now require adults to wear
seatbelts when they drive or sit in the front seat, and
all states require children to be restrained using seat
belts. New York was the first state to make seat belts
mandatory, in 1984.
Effect of Traffic Violations
The effect of a traffic violation depends on the na-
ture of the offense and on the record of the person
receiving the traffic violation. Beyond the possibili-
ties of fines and/or jail, other consequences of traffic
violations can include traffic school, higher insurance
premiums, and the suspension of driving privileges.
Fines for traffic violations depend on the violation.
Typically, states will have standard fines for a specific
group of moving violations, with the fines increasing
with the seriousness of the violation. Some states will
also increase the fine if violators have other viola-
tions on their record. Courts will occasionally reduce
fines on violations while still recording the violation
as part of the violator’s record.
Traffic School
Virtually every state allows perpetrators of a traffic
violation to attend some sort of traffic school in re-
turn for the violation being wiped off their records.
Traffic school generally consists of a 6-8 hour class
that describes the dangers of committing traffic viola-
tions. Different states have different procedures re-
garding their traffic schools. Some allow traffic
schools in place of paying the fine; others require
payment of the fine in addition to the traffic school
cost of admission. Some allow traffic violators to go
to traffic school once a year, whereas others require
a longer waiting period between traffic school atten-
dances. Also, the type of violation may affect whether
the violator is allowed to go to traffic school: the
more serious the violation, the less likely the violator
will be allowed to go to traffic school to wipe it off
their record.
Procedures for signing up for traffic school also
differ from state to state: some states allow drivers
to sign up with the school directly, others have them
go through the clerk of court or judge in order to
sign-up. Most states require drivers to go to a specific
location for traffic school, although some, such as
California, now offer an Internet option that allows
a student to attend traffic school without leaving the
comfort of home
Suspension of Driving Privileges
A traffic violation not wiped out by traffic school
will count against the suspension of driving privi-
leges. In most states, suspension of driving privileges
is calculated using a point system: the more points
drivers have, the more likely it is their driving privi-
leges could be suspended. Some states calculate the
number of violations drivers have in a straightfor-
ward manner; if drivers reach the requisite number
of violations within a certain time frame, their privi-
leges are automatically suspended. Age can also be
a factor in determining when a driver’s license is sus-
pended. Minor drivers typically see their licenses sus-
pended with fewer violations than adults.
All states entitle persons facing suspended li-
censes to receive a HEARING, typically in front of a
hearing officer for that state’s Department of Motor
Vehicles. At that point, the person whose license is
to be suspended may offer an explanation for why
the violations in question occurred. The hearing offi-
cer usually has discretion in all but the most extreme
cases (i.e. drunk driving) to reduce, defer the sus-
pension, or cancel it entirely.
Insurance Premiums
Beyond the suspension of driving privileges, traf-
fic violators typically can face higher insurance. In-
surance companies will raise insurance rates for
HABITUAL violators of traffic law. In many cases insur-
ance rates will go up for as little as two violations
within a three-year period. Different insurance com-
panies follow different procedures. It is up to the dis-
cretion of the insurance company whether to raise
rates as a result of a traffic violation.
Drunk Driving
Among driving violations, drunk driving is usually
considered a special case. Called by various names,
including Driving Under the Influence (DUI), Driving
While Intoxicated (DWI) and Operating While Intox-
icated (OWI), drunk driving usually results in strong-
er fines and penalties than normal driving violations.
Drunk driving means that the persons driving
have consumed enough alcohol to impair their driv-
ing abilities. This is usually determined either by a
blood-alcohol test, some other sobriety test, or just
the observations of the officer. The test is subjective:
just because drivers do not feel drunk does not mean
they cannot be arrested for drunk driving.
A blood alcohol test measures the amount of alco-
hol in a person’s blood. This can be done directly,
through drawing blood from the person, or it can be
done with instruments measuring breath or urine.
Some states allow a choice as to which test to take,
others do not. If persons test above the level of
INTOXICATION for their state (.08 to.10 percent, de-
pending on the state), they are considered drunk
and a prima facie case of drunk driving has been
A blood alcohol test can be refused, but the conse-
quences can be severe. In most states, refusal to take
a blood alcohol test is prima facie EVIDENCE of drunk
driving. In some states refusal to take the test can re-
sult in the automatic revocation of a license for a
Whether a driver is drunk can also be measured
using a sobriety test, such as requiring the driver to
walk a straight line, stand on one leg, or recite a
group of letters or numbers. A driver failing any of
these tests can usually be arrested for drunk driving,
though often the police officer requests a blood alco-
hol test as a follow up. The officer can also base the
arrest on simple observation of the driver’s behavior,
although a request for a blood alcohol test is a stan-
dard follow-up in these instances as well.
Currently 31 states require a level of.08 or above
in order for drivers to be considered intoxicated.
They are: Alabama, Alaska, Arizona, Arkansas, Califor-
nia, Florida, Georgia, Hawaii, Idaho, Illinois, Indiana,
Kansas, Kentucky, Louisiana, Maine, Maryland, Mas-
sachusetts, Missouri, Nebraska, New Hampshire,
New Mexico, North Carolina, Oklahoma, Oregon,
Rhode Island, Texas, Utah, Vermont, Virginia, Wash-
ington, and the District of Columbia. The other
states all require.10 or above in order for a driver to
be considered intoxicated. Currently all states have
zero tolerance laws that make it illegal for drivers
under the age of 21 to operate a motor vehicle with
a blood alcohol level of.02 or less.
Drunk Driving Laws and Penalties
Drunk driving has been considered a traffic viola-
tion since the turn of the century, but in recent years
the penalties for drunk driving in most states have
grown much harsher, as a result of the efforts of
groups such as Mothers Against Drunk Driving
(MADD), founded in 1980. In every state at a mini-
mum, convicted drunk drivers automatically lose
their licenses for a certain amount of time. Some
states require short jail terms for first time offenders,
and most states require drunk-driving offenders to
go through some sort of treatment program.
In addition to the general penalties for drunk driv-
ing, many states have specific laws dealing with as-
pects of drunk driving. The following are some of the
various state laws dealing with drunk driving, along
with a list of the states that have them:
Anti-Plea Bargaining: A policy that prohibits
plea-bargaining or reducing an alcohol-
related offense to a non-alcohol related of-
fense. Arizona, Arkansas, California, Colora-
do, Florida, Kansas, Kentucky, Mississippi,
Nevada, New Mexico, New York, Oregon,
Pennsylvania, Wyoming
Child Endangerment: Creates a separate of-
fense or enhances existing DUI/DWI penal-
ties for offenders who drive under the influ-
ence with a minor child in the vehicle.
Alabama, Arizona, California, Colorado, Del-
aware, Florida, Georgia, Hawaii, Idaho, Illi-
nois, Iowa, Kansas, Kentucky, Louisiana,
Maine, Maryland, Michigan, Minnesota, Ne-
vada, New Hampshire, New Jersey, North
Carolina, North Dakota, Ohio, Rhode Island,
South Carolina, Tennessee, Utah, Virginia
West Virginia, Wisconsin
Dram Shop: A law that makes liable estab-
lishments who sell alcohol to obviously in-
toxicated persons or minors who subse-
quently cause death or injury to third parties
as a result of alcohol-related crashes. Ala-
bama, Alaska, Arizona, Arkansas, California,
Colorado, Connecticut, District of Columbia,
District of Columbia, Florida, Georgia, Ha-
waii, Idaho, Illinois, Indiana, Iowa, Kentucky,
Louisiana, Maine, Massachusetts, Michigan,
Minnesota, Mississippi, Missouri, Montana,
New Hampshire, New Jersey, New Mexico,
New York, North Carolina, North Dakota,
Ohio, Oklahoma, Oregon, Pennsylvania,
Rhode Island, South Carolina, Tennessee,
Texas, Utah, Vermont, Washington, West
Virginia, Wisconsin, Wyoming
FELONY DUI: Makes drunk driving a felony
offense based on the number of previous
convictions. Alabama, Alaska, Arizona, Ar-
kansas, California, Colorado, Connecticut,
Delaware, District of Columbia, Florida,
Georgia, Hawaii, Idaho, Illinois, Indiana,
Iowa, Kansas, Kentucky, Louisiana, Maine,
Massachusetts, Michigan, Mississippi, Mis-
souri, Montana, Nebraska, Nevada, New
Hampshire, New Jersey, New Mexico, New
York, North Carolina, North Dakota, Ohio,
Oklahoma, Oregon, Rhode Island, South Da-
kota, South Carolina, Tennessee, Texas,
Utah, Vermont, Virginia, Washington, West
Virginia, Wisconsin, Wyoming
High Blood Alcohol Content Laws: Result in
increased penalties for driving with blood al-
cohol concentration of.15 or higher at time
of arrest. Arizona, Arkansas, Colorado, Con-
necticut, Florida, Idaho, Illinois, Indiana,
Iowa, Kentucky, Maine, Minnesota, Nevada,
New Hampshire, New Mexico, Ohio, Okla-
homa, Tennessee, Virginia, Washington,
Hospital Blood Alcohol Content Reporting:
Authorizes hospital personnel to report
blood alcohol test results of drivers involved
in crashes to local law enforcement where
the results are available as a result of treat-
ment. Florida, Hawaii, Illinois, Indiana, Ore-
gon, Pennsylvania, Utah, Vermont
Increased Penalties for Blood Alcohol Con-
tent Refusal: Provides for increased penalties
for refusing to take a blood alcohol content
test, higher than failing the test would bring.
Arkansas, Georgia, Kansas, Virginia, Wash-
Mandatory Alcohol Assessment/Treatment:
Law that mandates that convicted drunk
driving offenders undergo an ASSESSMENT of
alcohol abuse problems and participate in
required treatment program. Alabama, Ari-
zona, Arkansas, Colorado, Connecticut, Del-
aware, Florida, Georgia, Illinois, Kansas,
Kentucky, Maine, Michigan, Mississippi, Mis-
souri, Montana, Nevada, New Hampshire,
New York, North Carolina, North Dakota,
Ohio, Oklahoma, Oregon, Pennsylvania,
Rhode Island, South Carolina, Tennessee,
West Virginia, Wisconsin
Mandatory Jail, Second Offense: Makes a jail
term mandatory for a second drunk driving
offense. Alabama, Alaska, Arizona, Arkansas,
California, Colorado, Connecticut, Dela-
ware, Florida, Georgia, Hawaii, Idaho, Illi-
nois, Indiana, Iowa, Kansas, Kentucky, Loui-
siana, Maine, Maryland, Massachusetts,
Michigan, Minnesota, Mississippi, Missouri,
Montana, Nebraska, Nevada, New Hamp-
shire, New Jersey, New Mexico, North Caroli-
na, North Dakota, Ohio, Oklahoma, Oregon,
Pennsylvania, Rhode Island, South Carolina,
Tennessee, Texas, Utah, Vermont, Virginia,
Washington, West Virginia, Wisconsin, Wyo-
Sobriety Checkpoints: Allows law enforce-
ment officials to establish checkpoints to
stop vehicles and examine their drivers for
intoxication. Alabama, Arizona, Arkansas,
California, Colorado, Connecticut, Dela-
ware, District of Columbia, Florida, Georgia,
Hawaii, Illinois, Iowa, Kansas, Kentucky,
Louisiana, Maine, Maryland, Massachusetts,
Mississippi, Missouri, Montana, Nebraska,
Nevada, New Hampshire, New Jersey, New
Mexico, New York, North Carolina, North
Dakota, Ohio, Oklahoma, Pennsylvania,
South Carolina, South Dakota, Tennessee,
Utah, Vermont, Virginia, West Virginia, Wyo-
Social Host: Imposes potential liability on
social hosts as a result of their serving alco-
hol to obviously intoxicated persons or mi-
nors who subsequently are involved in
crashes causing death or injury to third-
parties. Alabama, Arizona, Colorado, Con-
necticut, Florida, Georgia, Idaho, Indiana,
Iowa, Louisiana, Maine, Massachusetts,
Michigan, Minnesota, Mississippi, Montana,
New Hampshire, New Jersey, New Mexico,
New York, North Carolina, North Dakota,
Ohio, Oregon, Pennsylvania, Texas, Utah,
Vermont, Wisconsin, Wyoming
Additional Resources
Digest of Motor Laws. Butler, Charles A. Editor and Kay
Hamada, eds.Editor, American Automobile Association,
Heathrow, FL, 1996. ‘‘Stats and Resources,’’ Moth-
ers Against Drunk Driving, 2002‘‘Cars & Tickets,’’ Nolo Press, 2002
West’s Encyclopedia of American Law. West Publishing
Company, 1998.
Mothers Against Drunk Driving (MADD)
P.O. Box 541688
Dallas, TX 75354-1688 USA
Phone: (1-800) 438-6233
Primary Contact: Millie Webb, President
National Highway Traffic Safety
Administration (NHTSA)
400 Seventh Street, SW
Washington, DC, DC 20590 USA
Phone: (202) 366-9550
Primary Contact: Jeffrey Runge, Administrator
U. S. Department of Transportation
400 Seventh Street, SW
Washington, DC, DC 20590 USA
Phone: (202) 366-4000
Primary Contact: Norman Mineta, Secretary of
This Page Intentionally Left Blank
Sections within this essay:
Bank Transactions
- Checks and Other Negotiable Instru-
- Checking Accounts
- Funds Transfers
- Letters of Credit
- Secured Transactions
Federal Reserve System
Insurance of Deposits
Interest Rates Charged by Banks
Truth in Lending
Usury Laws
Crimes Related to Banks and Banking
State Laws Governing Banks, Banking, and
Additional Resources
The law governing banks, bank accounts, and
lending in the United States is a hybrid of federal and
state STATUTORY law. Consumers and businesses may
establish bank accounts in banks and savings associa-
tions chartered under state or federal law. The law
under which a bank is chartered regulates that partic-
ular bank. A mix of state and federal law, however,
governs most operations and transactions by bank
Article 3 of the UNIFORM COMMERCIAL CODE, as
adopted by the various states, governs transactions
involving negotiable instruments, including checks.
Article 4 of the Uniform COMMERCIAL CODE governs
bank deposits and collections, including the rights
and responsibilities of DEPOSITORY banks, collecting
banks, and banks responsible for the payment of a
check. Other provisions of the Uniform Commercial
Code are also relevant to banking and lending law,
including Article 4A (related to funds transfers), Arti-
cle 5 (related to letters of credit), Article 8 (related
to SECURITIES), and Article 9 (related to secured
A number of regulations govern a check when it
passes through the Federal Reserve System. These
regulations govern the availability of funds available
to a depositor in his or her bank account, the delay
between the time a bank receives a deposit and the
time the funds should be made available, and the
process to follow when a check is dishonored for
non-payment. Federal law also provides protection
to bank customers. Prompted by banking crises in
the 1930s, the federal government established the
Federal Deposit Insurance Corporation, which in-
sures bank accounts of individuals and institutions in
amounts up to $100,000.
A number of laws have been passed affecting
banks, banking, and lending. A brief summary of
these is as follows:
National Bank Act of 1864 established a na-
tional banking systems and chartering of na-
tional banks.
Federal Reserve Act of 1913 established the
Federal Reserve System. Banking Act of 1933
(GLASS-STEAGALL ACT) established the Feder-
al Deposit Insurance Corporation (FDIC),
originally intended to be temporary.
Banking Act of 1935 established the FDIC as
a permanent agency.
Federal Deposit Insurance Act of 1950 re-
vised and consolidated previous laws gov-
erning the FDIC.
Bank HOLDING COMPANY Act of 1956 set
forth requirements for the establishment of
bank holding companies.
International Banking Act of 1978 required
foreign banks to fit within the federal regula-
tory framework.
Financial Institutions Regulatory and Inter-
est Rate Control Act of 1978 created the Fed-
eral Financial Institutions EXAMINATION
Council; it also established limits and report-
ing requirements for insider transactions in-
volving banks and modified provisions gov-
erning transfers of electronic funds.
Depository Institutions Deregulation and
Monetary Control Act of 1980 began to elimi-
nate ceilings on interest rates of savings and
other accounts and raised the insurance ceil-
ing of insured account holders to $100,000.
Depository Institutions Act of 1982 (Gar-St.
Germain Act) expanded the powers of the
FDIC and further eliminated ceilings on in-
terest rates. Competitive Equality Banking
Act of 1987 established new standards for
the availability of expedited funds and fur-
ther expanded FDIC authority.
Financial Institutions Reform, Recovery, and
Enforcement Act of 1989 set forth a number
of reforms and revisions, designed to ensure
trust in the savings and loan industry.
Crime Control Act of 1990 expanded the
ability of federal regulators to combat FRAUD
in financial institutions.
Federal Deposit Insurance Corporation Act
of 1991 expanded the power and authority
of the FDIC considerably.
Housing and Community Development Act
of 1992 set forth provisions to combat MONEY
LAUNDERING and provided some regulatory
relief to certain financial institutions.
Riegle Community Development and Regu-
latory Improvement Act of 1994 established
the Community Development Financial In-
stitutions Fund to provide assistance to
community development financial institu-
Riegle-Neal Interstate Banking and Branch-
ing Efficiency Act of 1994 permitted bank
holding companies that were adequately
capitalized and managed to acquire banks in
any state.
Economic Growth and Regulatory Paper-
work Reduction Act of 1996 brought forth a
number of changes, many of which related
to the modification of regulation of financial
Gramm-Leach Bliley Act of 1999 brought
forth numerous changes, including the re-
striction of disclosure of nonpublic custom-
er information by financial institutions. The
Act provided penalties for anyone who ob-
tains nonpublic customer information from
a financial institution under false pretenses.
Numerous federal agencies promulgate regula-
tions relevant to banks and banking, including the
Federal Deposit Insurance Corporation, Federal Re-
serve Board, General Accounting Office, National
CREDIT UNION Administration, and Treasury Depart-
The ability for bank customers to engage in elec-
tronic banking has had a significant effect on the laws
of banking in the United States. Some laws that gov-
ern paper checks and other traditional instruments
are difficult to apply to corresponding electronic
transfers. As technology develops and affects the
banking industry, banking law will likely change even
Banking Transactions
Checks and Other Negotiable Instruments
Article 3 of the Uniform Commercial Code, draft-
ed by the National Conference of Commissioners on
Uniform State Laws and adopted in every state ex-
cept Louisiana, governs the creation and transfer of
negotiable instruments. Since checks are negotiable
instruments, the provisions in Article 3 apply. Be-
cause banks are lending institutions that create notes
and other instruments, Article 3 will also apply in
other circumstances that do not involve checks.
A person who establishes an account at a bank
may make a written order on that account in the
form of a check. The account holder is called the
drawer, while the person named on the check is
called the payee. When the drawer orders the bank
to pay the person named in the check, the bank is
obligated to do so and reduce the drawer’s account
by the amount on the check. A bank ordinarily has
no obligation to honor a check from a person other
than a depositor. However, both the drawer’s and
payee’s banks generally must honor these checks if
there are sufficient funds to cover the amount of the
check. The payee’s bank must generally honor a
check written to the order of the payee if the payee
has sufficient funds to cover the amount of the
check, in case the drawer of the check does not have
sufficient funds. A drawer may request from the bank
a CERTIFIED CHECK, which means the check is guaran-
teed. Certified checks must be honored by any bank,
and, as such, are considered the same as cash.
A customer’s bank has a duty to know each cus-
tomer’s signature. If another party forges the signa-
ture of the customer, the customer is generally not
liable for the amount of the check. Banks may recov-
er from the forger but may not generally recover
from the innocent customer or a third person who
in GOOD FAITH and without notice of the FORGERY
gave cash or other items of value in exchange for the
check. Drawers have the right to inspect all checks
charged against their accounts to ensure that no for-
geries have occurred. Drawers also have rights to
stop payment on checks that have been neither paid
nor certified by their banks. This is done through a
STOP PAYMENT ORDER issued by the customer to the
bank. If a bank pays a check notwithstanding the
stop payment order, the bank is liable to the custom-
er for the value of the check.
Many of the rules applying the checks apply to all
negotiable instruments. Banks that serve as lending
institutions routinely exchange loans for promissory
notes, which are most likely negotiable instruments.
These instruments are considered property and may
be bought and sold by other entities.
Checking Accounts
Article 4 of the Uniform Commercial Code gov-
erns the operation of checking accounts, though sev-
eral federal laws supplement the provisions of Article
4. The provisions of this uniform law define rights re-
garding bank deposits and collections. It governs
such relationships as those between a depository
bank and a collecting bank and those between a
payor bank and it customers.
Funds Transfers
Article 4A of the Uniform Commercial Code gov-
erns methods of payment whereby a person making
a payment (called the ‘‘originator’’) transmits direct-
ly an instruction to a bank to make a payment to a
third person (called the ‘‘beneficiary’’). Article 4A
covers the issuance and acceptance of a payment
order from a customer to a bank, the EXECUTION of
a payment order by a receiving bank and the actual
payment of the payment order.
Letters of Credit
Article 5 of the Uniform Commercial Code gov-
erns transactions involving the issuance of letters of
credit. Such letters of credit are generally issued
when a party (the ‘‘applicant’’) applies for credit in
a transaction of some sort with a third party (the
‘‘beneficiary’’). The bank will issue a letter of credit
to the BENEFICIARY prior to the transaction. This letter
is a definite undertaking by the bank to honor the let-
ter of credit at the time the beneficiary presents this
letter. Article 5 governs issuance, amendments, can-
cellation, duration, transfer, and assignment of let-
ters of credit. It also defines the rights and obliga-
tions of the parties involved in the issuance of a letter
of credit.
Secured Transactions
When a bank agrees to enter into a loan with a
bank customer, the bank will most likely acquire a se-
curity interest in property owned or purchased by
the customer. This transaction, called a secured
transaction, governed by Article 9 of the Uniform
Commercial Code. Article 9 was substantially revised
in 2000, and the vast majority of states have now
adopted the revised version. The security interest
provides protection for the bank in case the custom-
er fails to pay a debt owed to the bank, even if the
customer enters into BANKRUPTCY. A number of steps
must be followed for the bank to ‘‘perfect’’ the secur-
ity interest, including the filing of documents with
the secretary of state or other appropriate officer in
the state where the customer resides.
Federal Reserve System
The Federal Reserve Board has been delegated
significant responsibility related to the implementa-
tion of laws governing banks and banking. The Board
has issued more than thirty major regulations on a
variety of issues affecting the banking industry. When
a check passes through the Federal Reserve System,
Regulation J applies. This regulation governs the col-
lection of checks and other items by Federal Reserve
Banks, as well as many funds transfers. This regula-
tion also establishes procedures, responsibilities,
and duties among Federal Reserve banks, the payors,
and other senders of checks through the Federal Re-
serve System, and the senders of wire transmissions.
Regulation J is contained in Title 12 of the CODE OF
A second significant regulation promulgated by
the Federal Reserve Board is Regulation CC, which
governs the availability of funds in a bank customer’s
account. This regulation also governs the collection
of checks. Under this regulation, cash deposits made
by a customer into a bank account must be available
to the customer no later than the end of the business
day after the day the funds were deposited. The next-
day rule also applies to several check deposits, as de-
fined by the regulation, although banks are not re-
quired to make funds available for as long as five days
after deposit for many other types of checks. Regula-
tion CC also governs the payment of interest, the re-
sponsibilities of various banks regarding the return
of checks. Liabilities to the bank for failure to adhere
to these rules are defined by the regulation. Regula-
tion CC is contained in Title 12 of the Code of Feder-
al Regulations, Part 229.
Other Federal Reserve Board regulations cover a
variety of transactions under a myriad of statutes.
These include such provisions as those requiring
equal credit opportunity; transfer of electronic
funds; consumer leasing; privacy of consumer finan-
cial information; and truth in lending.
Insurance of Deposits
Congress in 1933 established the Federal Deposit
Insurance Corporation, which is funded by premi-
ums paid by member institutions. If a customer
holds an account at a bank that is a member institu-
tion of the FDIC, the customer’s accounts are in-
sured for an aggregate total of $100,000. Banks that
are member institutions are required to display
prominently signs indicating that the bank is a mem-
ber of the FDIC or a sign that states ‘‘Deposits Feder-
ally Insured to $100,000—Backed by the Full Faith
and Credit of the United States Government.’’ This
applies to many banks that are chartered either fed-
erally or by way of state STATUTE.
Interest Rates Charged by Banks
The federal government until the early 1980s reg-
ulated interest rates charged on bank accounts. In-
terest rates on savings accounts were generally limit-
ed, while interest rates on other types of accounts
were generally prohibited. The Depository Institu-
tions Deregulation Act of 1980 and Garn-St. Germain
Depository Institutions Act eliminated restrictions
and prohibitions on interest rates on savings, check-
ing, money market and other types of accounts.
Truth in Lending
The Truth in Lending Act, which was part of the
tion to consumers by requiring lenders to disclose
costs and terms related to a loan. Most of these dis-
closures are contained in a loan application. Lenders
must include several of the following items:
Terms and costs of loan plans, including an-
nual percentage rates, fees, and points
The total amount of principal being financed
Payment due dates, including provisions for
late payment fees
Details of variable-interest loans
Total amount of finance charges
Details about whether a loan is assumable
Application fees
Pre-payment penalties
The Truth in Lending Act also requires lenders to
make certain disclosures regarding advertisements
for loan rates and terms. Specific terms of the credit
must be disclosed, and if the advertisement indicates
a rate, it must be stated in terms of an ANNUAL PERCENT-
AGE RATE, which takes into account additional costs
incurred relating to the loan. Other restrictions on
advertising loan rates also apply. If a bank or other
lending institution fails to adhere to the provision of
the Truth in Lending Act, severe penalties apply.
The Federal Reserve Board has been delegated
authority to prescribe regulations to enforce the pro-
visions of the Truth in Lending Act. These regula-
tions are contained in Regulation Z of the Board.
Usury Laws
Every state establishes a ceiling interest rate that
can be charged by creditors. If a CREDITOR charges an
interest rate higher than the rate established by the
state, the penalties to the creditor can be severe.
Such penalties may include the FORFEITURE of the
principal debt owed to the creditor by the DEBTOR.
Debtors that are subjected to high interest rates
should consult the USURY laws in that state to deter-
mine whether these laws may apply.
Crimes Related to Banks and Banking
Congress has promulgated a number of criminal
statutes applicable to crimes against banks and bank-
ing institutions. Some crimes are related to more vio-
lent acts, such as robbery, while others focus on non-
violent crimes, such as money laundering. Each of
the crimes listed below is contained in Title 18 of the
United States Code.
Bank BRIBERY is prohibited under Title 18,
sections 212 through 215.
Theft by a bank officer or employee is pro-
hibited under Title 18, section 656.
False bank entry is prohibited under Title 18,
section 1005.
False statements to the FDIC are prohibited
under Title 18, section 1007.
Bank fraud is prohibited under Title 18, sec-
tion 1344.
Obstruction of an examination of a financial
institution is prohibited under Title 18, sec-
tion 1517.
Money laundering is prohibited under Title
18, sections 1956 through 1960.
Bank robbery is prohibited under Title 18,
section 2113.
Crimes involving coins and currency are pro-
hibited under provisions in Title 18, Chapter
State Laws Governing Banks, Banking,
and Lending
All U. S. states have adopted at least a portion of
the Uniform Commercial Code, including Articles 3
(1990 version), 4 (1990 version), 4A (1989 version),
and 5 (1995 version). Article 9 was last revised in
2000, with the previous major revision occurring in
1972. Most state laws governing banks, banking, and
lending are consistent from one state to the next.
Moreover, due to federal regulation of banks and
banking, states are rather limited in their ability to
enact laws that differ from the majority of states.
ALABAMA: Adopted Articles 3 and 4 in 1995; Article
4A in 1992; and Article 5 in 1997. The state has adopt-
ed the Revised Article 9 (2000).
ALASKA: Adopted Articles 3 and 4 in 1993; Article 4A
in 1993; and Article 5 in 1999. The state adopted the
majority of the provisions in the Revised Article 9
(2000) in 2000.
ARIZONA: Adopted Articles 3 and 4 in 1993; Article
4A in 1991; and Article 5 in 1996. The state has adopt-
ed the Revised Article 9 (2000).
ARKANSAS: Adopted Articles 3 and 4 in 1991; Article
4A in 1991; and Article 5 in 1997. The state has adopt-
ed the Revised Article 9 (2000).
CALIFORNIA: Adopted Articles 3 and 4 in 1992; Arti-
cle 4A in 1990; and Article 5 in 1996. The state has
adopted the Revised Article 9 (2000).
COLORADO: Adopted Articles 3 and 4 in 1994; Arti-
cle 4A in 1990; and Article 5 in 1996. The state has
adopted the Revised Article 9 (2000).
CONNECTICUT: Adopted Articles 3 and 4 in 1991;
Article 4A in 1990; and Article 5 in 1996. The state has
adopted the Revised Article 9 (2000).
DELAWARE: Adopted Articles 3 and 4 in 1995; Article
4A in 1992; and Article 5 in 1998. The state adopted
the majority of the provisions in the Revised Article
9 (2000) in 2000.
FLORIDA: Adopted Articles 3 and 4 in 1992; Article
4A in 1991; and Article 5 in 1999. The state has adopt-
ed the Revised Article 9 (2000).
GEORGIA: Adopted Articles 3 and 4 in 1996; Article
4A in 1993. The state has adopted the Revised Article
9 (2000).
HAWAII: Adopted Articles 3 and 4 in 1991; Article 4A
in 1991; and Article 5 in 1996. The state adopted the
majority of the provisions in the Revised Article 9
(2000) in 2000.
IDAHO: Adopted Articles 3 and 4 in 1993; Article 4A
in 1991; and Article 5 in 1996. The state has adopted
the Revised Article 9 (2000).
ILLINOIS: Adopted Articles 3 and 4 in 1991; Article
4A in 1990; and Article 5 in 1996. The state adopted
the majority of the provisions in the Revised Article
9 (2000) in 2000.
INDIANA: Adopted Articles 3 and 4 in 1991; Article
4A in 1991; and Article 5 in 1996. The state adopted
the majority of the provisions in the Revised Article
9 (2000) in 2000.
IOWA: Adopted Articles 3 and 4 in 1994; Article 4A
in 1992; and Article 5 in 1996. The state adopted the
majority of the provisions in the Revised Article 9
(2000) in 2000.
KANSAS: Adopted Articles 3 and 4 in 1991; Article 4A
in 1990; and Article 5 in 1996. The state adopted the
majority of the provisions in the Revised Article 9
(2000) in 2000.
KENTUCKY: Adopted Articles 3 and 4 in 1996; Article
4A in 1992; and Article 5 in 2000. The state adopted
the majority of the provisions in the Revised Article
9 (2000) in 2000.
LOUISIANA: Adopted Articles 3 and 4 in 1992; Article
4A in 1990; and Article 5 in 1999. The state has adopt-
ed the Revised Article 9 (2000).
MAINE: Adopted Articles 3 and 4 in 1993; Article 4A
in 1992; and Article 5 in 1997. The state adopted the
majority of the provisions in the Revised Article 9
(2000) in 2000.
MARYLAND: Adopted Articles 3 and 4 in 1996; Article
4A in 1992; and Article 5 in 1997. The state has adopt-
ed the Revised Article 9 (2000).
MASSACHUSETTS: Adopted Articles 3 and 4 in 1998;
Article 4A in 1992; and Article 5 in 1998. The state has
adopted the Revised Article 9 (2000).
MICHIGAN: Adopted Articles 3 and 4 in 1993; Article
4A in 1992; and Article 5 in 1992. The state adopted
the majority of the provisions in the Revised Article
9 (2000) in 2000.
MINNESOTA: Adopted Articles 3 and 4 in 1992; Arti-
cle 4A in 1990; and Article 5 in 1997. The state adopt-
ed the majority of the provisions in the Revised Arti-
cle 9 (2000) in 2000.
MISSISSIPPI: Adopted Articles 3 and 4 in 1995; Article
4A in 1992; and Article 5 in 1997. The state has adopt-
ed the Revised Article 9 (2000).
MISSOURI: Adopted Articles 3 and 4 in 1992; Article
4A in 1992; and Article 5 in 1997. The state has adopt-
ed the Revised Article 9 (2000).
MONTANA: Adopted Articles 3 and 4 in 1991; Article
4A in 1991; and Article 5 in 1997. The state has adopt-
ed the Revised Article 9 (2000).
NEBRASKA: Adopted Articles 3 and 4 in 1991; Article
4A in 1991; and Article 5 in 1996. The state has adopt-
ed the Revised Article 9 (2000).
NEVADA: Adopted Articles 3 and 4 in 1993; Article 4A
in 1991; and Article 5 in 1997. The state has adopted
the Revised Article 9 (2000).
NEW HAMPSHIRE: Adopted Articles 3 and 4 in 1993;
Article 4A in 1993; and Article 5 in 1998. The state has
adopted the Revised Article 9 (2000).
NEW JERSEY: Adopted Articles 3 and 4 in 1995; Arti-
cle 4A in 1995; and Article 5 in 1998. The state has
adopted the Revised Article 9 (2000).
NEW MEXICO: Adopted Articles 3 and 4 in 1992; Arti-
cle 4A in 1992; and Article 5 in 1997. The state has
adopted the Revised Article 9 (2000).
NEW YORK: Adopted older uniform law on negotia-
ble instruments in 1897; Article 4A in 1990; and Arti-
cle 5 in 2000. The state has adopted the Revised Arti-
cle 9 (2000).
NORTH CAROLINA: Adopted Articles 3 and 4 in
1995; Article 4A in 1993; and Article 5 in 1999. The
state adopted the majority of the provisions in the
Revised Article 9 (2000) in 2000.
NORTH DAKOTA: Adopted Articles 3 and 4 in 1991;
Article 4A in 1991; and Article 5 in 1997. The state has
adopted the Revised Article 9 (2000).
OHIO: Adopted Articles 3 and 4 in 1994; Article 4A
in 1991; and Article 5 in 1997. The state has adopted
the Revised Article 9 (2000).
OKLAHOMA: Adopted Articles 3 and 4 in 1991; Arti-
cle 4A in 1990; and Article 5 in 1996. The state adopt-
ed the majority of the provisions in the Revised Arti-
cle 9 (2000) in 2000.
OREGON: Adopted Articles 3 and 4 in 1995; Article
4A in 1992; and Article 5 in 1997. The state has adopt-
ed the Revised Article 9 (2000).
PENNSYLVANIA: Adopted Articles 3 and 4 in 1992;
Article 4A in 1992; and Article 5 in 2001. The state has
adopted the Revised Article 9 (2000).
RHODE ISLAND: Adopted Articles 3 and 4 in 2000;
Article 4A in 1991; and Article 5 in 2000. The state
adopted the majority of the provisions in the Revised
Article 9 (2000) in 2000.
SOUTH CAROLINA: Adopted older uniform law on
negotiable instruments in 1914; Article 4A in 1996;
and Article 5 in 2001. The state has adopted the Re-
vised Article 9 (2000).
SOUTH DAKOTA: Adopted Articles 3 and 4 in 1994;
Article 4A in 1991; and Article 5 in 1998. The state
adopted the majority of the provisions in the Revised
Article 9 (2000) in 2000.
TENNESSEE: Adopted Articles 3 and 4 in 1994; Arti-
cle 4A in 1991; and Article 5 in 1998. The state adopt-
ed the majority of the provisions in the Revised Arti-
cle 9 (2000) in 2000.
TEXAS: Adopted Articles 3 and 4 in 1994; Article 4A
in 1991; and Article 5 in 1998. The state has adopted
the Revised Article 9 (2000).
UTAH: Adopted Articles 3 and 4 in 1993; Article 4A
in 1990; and Article 5 in 1997. The state adopted the
majority of the provisions in the Revised Article 9
(2000) in 2000.
VERMONT: Adopted Articles 3 and 4 in 1994; Article
4A in 1994; and Article 5 in 1998. The state adopted
the majority of the provisions in the Revised Article
9 (2000) in 2000.
VIRGINIA: Adopted Articles 3 and 4 in 1992; Article
4A in 1990; and Article 5 in 1997. The state adopted
the majority of the provisions in the Revised Article
9 (2000) in 2000.
WASHINGTON: Adopted Articles 3 and 4 in 1994; Ar-
ticle 4A in 1991; and Article 5 in 1998. The state
adopted the majority of the provisions in the Revised
Article 9 (2000) in 2000.
WEST VIRGINIA: Adopted Articles 3 and 4 in 1993;
Article 4A in 1990; and Article 5 in 1996. The state
adopted the majority of the provisions in the Revised
Article 9 (2000) in 2000.
WISCONSIN: Adopted Articles 3 and 4 in 1996; and
Article 4A in 1992. The state has adopted the Revised
Article 9 (2000).
WYOMING: Adopted Articles 3 and 4 in 1991; Article
4A in 1991; and Article 5 in 1997. The state has adopt-
ed the Revised Article 9 (2000).
Additional Resources
Banking Law. Matthew Bender & Co., 1981.
Code of Federal Regulations, Title 12: Banks and Bank-
ing. Government Printing Office, 2002. Available at
Consumer Banking and Payments Law. Budnitz, Mark,
National Consumer Law Center, 2001.
Lender Liability and Banking Litigation. Mannimo, Ed-
ward F., and Richard E. Kaye, Law Journal Press, 2001.
Truth in Lending, Fourth Edition. 4th ed., Renuart, Eliza-
beth, and Kathleen E. Keest, National Consumer Law
Center, 1999.
U. S. Code, Title 12: Banks and Banking. U. S. House of
Representatives, 1999. Available at http://
Board of Governors of the Federal Reserve
System, Division of Consumer and
Community Affairs
20th and C Streets, NW, MS 804
Washington, DC 20551 USA
Phone: (202) 452-3667
Federal Deposit Insurance Corporation
550 17th Street, NW
Washington, DC 20429-9990 USA
Phone: (877) ASK-FDIC
National Conference of Commissioners on
Uniform State Laws (NCCUSL)
211 E. Ontario Street, Suite 1300
Chicago, IL 60611 USA
Phone: (312) 915-0195
Fax: (312) 915-0187
E-Mail: nccusl@
Office of the Comptroller of the Currency,
Customer Assistance Group
1301 McKinney, Suite 3710
Houston, TX 77010 USA
Phone: (800) 613-6743
Office of Thrift Supervision, Consumer
Program Division
1700 G Street, NW
Washington, DC 20552 USA
Phone: (800) 842-6929
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Sections Within This Essay:
Types of Financial Institutions
- Banks
- Savings and Loans
- Credit Unions
Automated Teller Machines (ATMs)
Federal Laws
Additional Resources
Banks are only one of several kinds of financial in-
stitutions that offer financial services to their pa-
trons. The term ‘‘bank’’ is often used as a collective
term to describe any one of the numerous forms of
financial institutions. Banks, like most other bank-
like financial institutions, are established by charters.
A charter is official permission from a regulating au-
thority (like a state) to accept deposits and/or to pro-
vide financial services. Charters provide the specifics
of a bank’s powers and obligations. State and federal
governments closely regulate banks and bank ac-
counts. Accounts for customers may be established
by national and state financial institutions, all of
which are regulated by the law under which they are
The federal government regulated and controlled
interest rates on bank accounts for many decades.
There was a cap on interest rates for savings ac-
counts, and most interest bearing payments–on–
demand deposit accounts (e.g. checking accounts)
were prohibited. Banks were also prevented from of-
fering money market accounts. But sweeping
changes in banking law in the early 1980s trans-
formed the way banks and other financial institutions
do business. For example, interest rate controls on
savings accounts were eliminated by the DEPOSITORY
Institutions Deregulation Act of 1980 (DIDRA), and
the Garn-St Germain Depository Institutions Act and
the DIDRA lifted restrictions on checking and money
market accounts.
One common and important service offered by
banking institutions is the checking accounts. Feder-
al and state laws govern the operation of checking ac-
counts. Article 4 of the UNIFORM COMMERCIAL CODE,
which has been adopted at least in part by every
state, enumerates the rights and obligations between
financial institutions and their customers with re-
spect to bank deposits and collections. The five prin-
cipal sections of Article 4 cover the following:
1. General provisions and definitions
2. The actions of one bank in accepting the
check of another and those of other banks
that handle the check but are not respon-
sible for its final payment
3. The actions of the bank responsible for
payment of the check
4. The relationship between the bank re-
sponsible for payment of the check and its
5. The handling of documentary drafts,
which are checks or other types of drafts
that will only be honored if certain papers
are first presented to the institution re-
sponsible for payment of the draft
Checks are commercial documents called ‘‘nego-
tiable instruments.’’ Negotiable instruments are
mainly governed by Article 3 of the Uniform COM-
MERCIAL CODE. All states have adopted Article 3 of the
Uniform Commercial Code (UCC), with some modi-
fications, as the law governing negotiable instru-
ments. Other types of negotiable instruments in-
clude drafts and notes. Drafts are documents
ordering some type of payment to be made to a per-
son or an institution. Checks are one kind of draft.
Notes are documents promising payment will be
made. A MORTGAGE is a kind of note. Money, invest-
ment SECURITIES, and some forms of payment orders
are not considered negotiable instruments under Ar-
ticle 3.
In the Great Depression, banks that could not
meet their financial obligations to their customers or
their creditors failed (became bankrupt). Because
the deposits were not insured, individuals and busi-
nesses with money on deposit at the time a bank
failed lost whatever was in the account at the time
the bank failed. The depression and the banking cri-
sis of the 1930’s gave rise to the development of fed-
eral insurance for deposits administered by the Fed-
eral Deposit Insurance Corporation (FDIC). The
program is funded from premiums paid by member
institutions. Under the FDIC, individual bank ac-
counts at insured institutions are protected up to
$100,000. Multiple accounts in a single financial insti-
tution and belonging to the same customer are com-
bined for purposes of the FDIC limits.
Banks are strictly regulated by three federal agen-
cies. Banks are also subject to regulation by state
bank regulators.
The federal agencies are given below:
COMPTROLLER of the Currency (for national
Federal Deposit Insurance Corporation
Federal Reserve Board
States regulate banks through their banking commis-
sion or department of banking and finance. An offi-
cial called the Commissioner or Director or Superin-
tendent of Banks manages the state’s banking
commission or department of banking and finance.
These state banking authorities may regulate only
banks that have been chartered by the state.
The Gramm-Leach-Bliley Act, signed into law on
November 12, 1999, is one of the most significant
pieces of banking legislation in over fifty years. This
law is the result of decades of effort to restructure
the U. S. financial system. The Gramm-Leach-Bliley
Act is complex and far-reaching, and contains a host
of banking and financial services issues. Perhaps the
most important feature of the Act is that it permits
formal affiliations among banks, securities firms, and
insurance companies. With the passage and imple-
mentation of these laws, the entire U. S. banking in-
dustry has been transformed. The U. S. banking sys-
tem is innovative, yet it remains one of the safest,
most secure systems in the world. It is also one of the
most complex.
Types of Financial Institutions
In common parlance the term ‘‘bank’’ refers to
many types of financial institutions. In addition to a
bank, the term can refer to a TRUST COMPANY, a sav-
ings bank, savings and loan institution, CREDIT UNION,
thrift, thrift and loan, or trust company
There is a wide variety of banking institutions. The
differences among these financial institutions is the
result of both history and politics. Some banks may
be regulated and supervised by different federal and/
or state agencies. While these institutions may ap-
pear quite similar, they actually have different rights,
powers, and obligations; they may even have differ-
ent tax obligations. Savings and loan associations
must invest more of their assets in home mortgages
than traditional banks. Trust companies manage and
administer trust funds of individuals and PENSION
plans but may not take deposits into checking or sav-
ings accounts. Credit unions enjoy certain tax advan-
tages. Some banking institutions have special depos-
it insurance arrangements. Some financial
institutions can sell other financial services or prod-
ucts—like insurance—and other financial institu-
tions may not. And some financial institutions must
put significant cash reserves on deposit with the fed-
eral government, whereas others do not.
Banks that are chartered by the Comptroller of
the Currency are called ‘‘National banks.’’ National
banks usually bear the words ‘‘national’’ or ‘‘national
association’’ in their titles; sometimes they carry the
letters N. A. or N. S. & T. in their titles.
Savings and Loan Institutions
The primary function of savings and loan associa-
tions is the financing of long-term residential mort-
gages. Savings and loan associations accept deposits
in savings accounts, pay interest on these accounts,
and make loans to residential home buyers. They do
not make business loans of any kind, nor do they
provide many of the other business services one
finds in commercial banks. A privately managed
home financing institution, a savings and loan ac-
cepts savings accounts from individuals and other
sources. This money is then principally invested in
loans for the construction, purchase, or improve-
ment of homes.
Savings and loan associations are primarily in-
volved in making residential loans. Consequently,
they may be good sources of indirect business fi-
nancing for homeowners who own substantial equity
in their homes. For example, if homeowners need
money for their businesses, they can refinance their
homes or take out a second mortgage on the equity
equity loan application process at a savings and loan
association is generally simpler than it is for a com-
mercial bank because it is made on the equity of the
home up to a maximum percentage of the equity,
usually between 75 percent to 80 percent. The sav-
ings and loan association bears little risk if the home
is located in a stable or appreciating MARKET VALUE
area. If the borrower defaults on the loan, the savings
and loan association can foreclose the mortgage and,
sell the property to retire the loan, doing so often for
a profit.
Credit Unions
The first credit union in the United States was
formed in Manchester, New Hampshire, in 1909. As
of 2002, there are over 10,000 credit unions in the
United States. They control assets of nearly one–half
a trillion dollars and serve about one–quarter of the
population. Credit unions are members–only institu-
tions. Individuals must join a credit union to take ad-
vantage of its services. But they cannot join just any
credit union— they must first be eligible for mem-
bership. Most credit unions are organized to serve
members of a particular community, group or
groups of employees, or members of an organization
or association. Large CORPORATIONS, unions, or edu-
cational institutions are some of the groups who
commonly form credit unions for their members or
Federal credit unions are nonprofit, cooperative
financial institutions owned and operated by their
members. Credit unions are democratically con-
trolled with members given the opportunity to vote
on important issues that affect the running of the
credit union. For example, the board that runs a
credit union is elected by its members. Credit unions
provide an alternative to banks and savings and loan
associations as safe places in which to place savings
and borrow at reasonable rates. Credit unions pool
their members’ funds to make loans to one another.
In addition to typical credit unions that serve
members and provide banking and lending services,
there are a few special types of credit unions:
Community development credit unions:
The NCUA established the Office of Commu-
nity Development Credit Unions in early
1994. These credit unions serve mostly low-
income members in economically distressed
and/or financially deprived areas. Part of
their function is to educate their members
in fundamental money management con-
cepts. At the same time, they provide an eco-
nomic base in order to stimulate economic
development and renewal to their commu-