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Business Law Test #1 Chapter 1 and 30
Terms in this set (95)
Nature of Law
What is Law (2 Things?)
1. Prediction of how a court will decide a legal question
2. Rule of civil conduct prescribed by the supreme power, commanding what is right, and prohibiting what is wrong
3 Functions of law
1. To resolve disputes (The primary function of law is to maintain stability in the social, political, and economic system while at the same time permitting change)
2. A second function is to protect private ownership of property and to assist in the making of voluntary agreements
3. A third function is the preservation of the state.
Law and Moral
The primary function of law is to maintain stability in the social, political, and economic system while at the same time permitting change
Is an action morally improper but not illegal? Ex
Is an action illegal but not morally improper? Ex:
Yes; Gar marriage???
Law and Justice
Different concepts, but interrelated (These are separate and distinct concepts, although without law, there can be no justice in the sense of fair, equitable, and impartial treatment of competing interests and desires with due regard for the common good)
However, even 'legal laws can be unjust? (Example)
A little boy dying in a car accident. No way of getting justice
A right is the capacity of a person, with the aid of the law, to require another person or persons to perform, or refrain from performing, a certain act.
A duty is the obligation imposed by law upon a person by which he or she is required to perform a certain act or to refrain from performing a certain act.
There can be no right in one person without a corresponding
duty resting upon some other person, or in some cases upon all other persons.
Creates, defines, and regulates legal rights and duties (Creates rights and duties)
Sets forth rules rules of enforcing those rights that are created by the substantive law.
Public and Private law is a part of the category of
Public law is the branch of substantive law that deals with the government's rights and powers and its relationship to individuals or groups
3 Examples of Public law
1. Constitutional law
2. Criminal law
3. Administrative law
Private law (Definition and Main one)
is that part of substantive law governing individuals and legal entities (such as corporations) in their relationships with one another
Private Law (Part 1; 4 Things)
4. Commercial Paper
Private Law (Part 2; 4 Things)
Civil Law (Definition and part of)
Defines duties & deals with the rights & duties of individuals among themselves (Part of private law)
Criminal Law (Definition and part of)
is the law that involves offenses against the entire community and is a part of public law
What is the purpose of Civil law? (2 Things)
Civil Law (How does it start?)
In a civil action, the injured party (plaintiff) begins a lawsuit (sues) to recover compensation for the damages resulting from the defendant's wrongful conduct.
Civil Law (Burden of Proof and principal form of relief)
The plaintiff has the burden of proof which must be sustained by a preponderance (greater weight) of the evidence.
The principal forms of relief under civil law are money damages and decrees ordering the defendant to perform a specified act or to stop specified conduct.
Criminal law (Who brings it up and crime)
In a criminal action, the government brings a criminal proceeding against (prosecutes) a person accused of committing a crime.
A crime is any act prohibited or omission required by public law in the interest of protection of the public and made punishable by the government in a judicial proceeding brought by it.
Criminal Law (Burden of Proof and principal sanction)
The government must prove criminal guilt beyond a reasonable doubt, a higher burden of proof than that required in a civil action.
The principal sanctions under criminal law are capital punishment, imprisonment, and fines.
4 Purpose of Criminal Law
4. Preservation of Peace
Sources of Law
The sources of law in the U.S. legal system are the federal and state constitutions, federal treaties, interstate compacts, federal and state statutes, the ordinances of countless local municipal governments, executive orders, the rules and regulations of federal and state administrative agencies, and an ever-increasing volume of reported federal and state court decisions.
What is the Supreme law of the land?
The U.S Constitution
What are significant sources of law? (2 Things)
1. Federal legislation
2. Court Decisions
Constitution (Study Guide_
A constitution is the fundamental law of a government, establishing the governmental structure and allocating power among the levels of government, thereby defining political relationship.
Set forth basic principles and limitations for a government. US Constitution is supreme law of the nation; State constitution is the highest law within that state
Separation of Powers
Division of power among branches of government
Power of courts to decide constitutionality of governmental action
The common law is a body of law that originated in England and is derived from judicial decisions. The U.S. legal system is a common law system that relies heavily on the judiciary as a source of law and on the adversary system for settling disputes. (Sometimes referred to as judge-made law, case-law or common law)
The adversary system is one in which opposing parties initiate and present their cases
Civil law system (Definition and this is?)
In contrast to common law systems are civil law systems, which are based on Roman law and depend upon comprehensive legislative enactments called codes and the inquisitorial system of determining disputes
the judiciary initiates, conducts, and decides cases.
Judicial Law (3 Things)
1. Common law
3. Restatements of Law
The courts in common law systems have developed a body of law that serves as precedent for determination of later controversies. This law is called case law, judge-made law, or common law
Case decisions establish precedent in our common law system & must be consulted when researching a legal question
In order to evolve in a stable and predictable manner, the common law has developed by application of
"to stand by the decisions"; Principle that courts should apply rules decided in prior cases in deciding substantially similar cases
Is a legal principle that requires inferior courts make decisions consistent with higher courts on cases with similar facts
Judicial relief based on settled rules of fairness, justice and honesty.
Equity (Study Guide)
is a body of law based upon principles distinct from common law and providing remedies not available at law
Remedies (Law 1 thing)
1. Money Performance
Remedies (Equity 4 things)
1. Specific performance
Restatement of Law
The Restatements they have developed cover many of the important areas of common law and are regarded as the authoritative statement of the common law of the United States, though not actually binding law in themselves.(Created by the group)
Summaries of common law; cover many areas (torts, contracts, agency, property, trusts); are persuasive but not binding on courts
Statues passed by legislature. Also, statues can repeal judge-made laws unless unconstitutional
Since the end of the nineteenth century, legislation has become the primary source of new law and ordered social change in the United States
Uniform law (Definition and example)
State statues that have been passed to promote uniformity in some areas of the law
Example: Uniform Commercial Code (UCC)
Are agreements between or among independent national. If signed by President and approved by Senate, it has the legal force of a federal statue
President has power to issue in limited situations and has effect of law
Administrative Law (3 Things: Branch of, Concerned with, Created by)
1. Branch of public law, governs powers and procedures of governmental entities (other than courts and legislatures)
2. Frequently concerned with public health, safety and welfare
3. Law is created by administrative agencies in forms of rules, regulations, and order
This refers to the method of analyzing and briefing federal and state judicial decisions.
What are Court of appeals decisions?
What is the order of the name (5 Things)
4. Page of reporter
5. Year of decision
5 Things the Reported opinions usually includes
1. Summary of essential facts and controversy, nature of the actions, parties, what happened in lower courts, and what pleadings are material
2. Issues of law or fact
3. Legal principles invovled
4. Application of these principles
5. Decision of the court
Four basic steps to analyze a reported decision are
(1) state the facts of the case
(2) determine the legal issue or question involved
(3) state the decision of the court
(4) explain the legal reasons or basis for the court's decision
Four important points to remember when reading legal opinions are:
(1) a court must decide the specific legal dispute before it;
(2) a court can decide only the specific legal dispute before it;
(3) a court can decide the legal dispute before it only according to general rules that cover the whole class of similar disputes;
(4) everything stated in the opinion must be read regarding the legal dispute.
6 Factors when determining choice of business (Part 1; 3 Things)
1. Ease of Formation
3. External liability
6 Factors when determining choice of business (Part 2; 3 Things)
4. Management and control
Ease of Formation
Any required formalities, filings with state
Some types can be created with no formality; others require state filings.
Management and Control
Who runs the business? May have restrictions (ex: limited partner)
The extent to which owners can share in operation and control of the business varies with the type of association.
General Partnership (What is it, formation, tax, liability, transfe, and death)
unincorporated business association; 2 or more persons who co-own a business for profit. Little formality required. normally partners are taxed for their share of profits. General partners have unlimited liability for debt, but have the right to control also. Can assign interest in partnership (right to receive $$) but not ownership without consent of other partners. Generally will terminate if partner dies withdraw or becomes bankrupt
Association of two or more persons to carry on as co-owners a business for profit
For a partnership (Legal Action; How to handle)
Regardless of the action, both partners are responsible for the other's actions.
1. Can take all from the other
2. Other partners will owe, where it will be proportion to what they owe.
Limited Liability Partnership (LLP) (What is it, formation, liability, tax, transfer, and death)
General partnership that makes a required statutorily required riling and thus limits the liability of its partners for some or all of the partnership obligations
Legal existence separate from that of its members EX: PS may own property in the name of partnership
5 examples of legal entity
1. Partnership assets are considered separate from the individual assets of its members
2. Title to real estate may be acquired in the partnership name
3. A partner is accountable as a fiduciary to the partnership
4. Every partner is considered an agent of the partnership
5. A partnership can sue or be sued in the firm name
What has a partnership been considered as
can be in a general or limited partnership; has unlimited liability for debts, but full management powers and right to share in profits
Taxation (Describe the two groups)
"Flow though" (partnership, joint venture, sole proprietorships) or entity is taxed (corporation)
Some associations are separate taxable entities. In others, the owners are taxed.
External Liability (two groups)
For torts and contracts; unlimited liability (general partnership) vs. limited liability (corporation, limited partnership)
In some business forms, owners have unlimited liability, which places their entire estate at risk for the obligations of the business. In other business forms, the owners have limited liability, which means their liability is limited to the extent of their capital contribution.
Member of a limited partnership; has limited liability for debt only to extent of capital contribution
Can ownership interest be transferred to another, and how easily (shares vs. partnership interest)
In some types of business associations, the entire ownership interest can be freely transferred. In others, transferability is limited to either the financial or the management interest.
Will death, bankruptcy or withdrawal of owner terminate the business
Some business associations must dissolve upon the death, bankruptcy, or withdrawal of an owner. Others may continue operation.
Sole Proprietorship (What is it, formation, liability, tax, transfer, and death)
This is an unincorporated business consisting of one person who owns and controls the business and has unlimited liability. A sole proprietorship is formed without any formality and is not a taxable entity. The proprietor's interest is freely transferable if he chooses to sell. Death of the sole proprietor dissolves the business.
Group of individuals not having a separate legal existence; Ex: Partnership not taxed; each Partner pays taxes on income. Have unlimited personal liability and one partner leaving leads to the end
Joint venture (What is it, formation, liability, tax, transfer, and death)
One key thing?
This is an unincorporated business association, usually of short duration, composed of persons who combine their property, money, efforts, skill, and knowledge to carry out a particular business enterprise for profit. Partnership law generally governs a joint venture.
Similar to general partnership but for a particular business enterprise or venture (not typically on-going)
Limited Partnership (What is it, formation, liability, tax, transfer, and death)
What about the limited partner
This is an unincorporated business association consisting of at least one general partner, who has unlimited liability and shares an equal right of control with any other general partners, and at least one limited partner, who has limited liability and no right to control. A certificate must be filed with the state to form a limited partnership.
Death- Unaffected by the removal of limited partner. Only focus is on General
Limited partner has limited liability for debts, but cannot participate in management
Limited Liability Company (LLC) (What is it, formation, liability, tax, transfer, and death)
A certificate must be filed with the state to form a limited partnership.
Limited Liability Company-This is an unincorporated business association in which all members have limited liability and share the right to participate in management. It may elect not to be a taxable entity. Death, bankruptcy, or withdrawal of a member DOESN'T dissolves an LLC.
Articles of Partnership (5 Things; Part 1)
1. The firm name and the identity of partners
2. The nature and scope of the partnership business
3. The duration of the partnership
4. The capital contributions of partnership
5. The division of profits and sharing of losses
Corporation (What is it, formation, liability, tax, transfer, and death)
This is a legal entity separate from its owners and it is formed by filing articles of incorporation with the state. A corporation is taxed as an entity and owners are taxed on earnings distributed to them. Shareholders have limited liability, and shares are freely transferable. Death, bankruptcy, or withdrawal of an owner does not dissolve the corporation.
Business trust (What is it, formation, liability, tax, transfer, and death)
A trust (managed by a trustee for the benefit of a beneficiary) established to conduct a business for a profit
These can be created by voluntary agreement of the parties without authorization of the state. A business trust is devoted to the conduct of a business. By the terms of the agreement, each beneficiary is entitled to a certificate evidencing an ownership interest. Trustees have the exclusive right to manage and control the business. Unless otherwise agreed, trustees are personally liable for the debts of the business.
Articles of Partnership (5 Things; Part 2)
6. The managerial duties of each partner
7. A provision for salaries, if desired
8. Restrictions, if any, upon the authority of particular partners to bing the firm
9. Any desired variations from the partnership statue's default provisions governing dissolution
10. A statement of the method of formula for determining the value of a partner's interest in the partnership
Articles of Partnership
Written partnership agreement; preferred but not required. Partnership can agree to anything they wan to, as long as it's not illegal
A legal entity is an organization having a separate legal existence from its members. It is a unit with the capacity of possessing legal rights and being subject to legal duties. A legal entity may acquire, own, and dispose of property. It may also enter into contracts, commit wrongs, sue, and be sued.
Statute of Frauds
A writing ordinarily is not required to form a partnership, but is required by the statute of frauds if the partnership is to continue for a period longer than one year.
Total money and property contributed by the partners for permanent use by the partnership; can't take out unless ending partnership
The sum of all of the partnership's assets, including all property brought into the partnership or subsequently acquired by it
Formation of Partnership
Partnership formation is simple and a partnership may result from an oral or written agreement, an informal arrangement, or from the conduct of the parties. If two or more parties share control and profits of a business, the law may deem them partners regardless of how they characterize their relationship.
The name of a partnership cannot be the same or deceptively similar to the name of another business. The name may include one or more names of the individual partners.
Three things to test be considered a partnership
1. An association of two or more persons
2. Conducting a business for profit
A partnership must have two or more persons who agree to become partners. Any natural person having full capacity may enter into a partnership. A minor may become a partner, but has the right to disaffirm the partnership agreement at any time in order to avoid personal liability
Business for profit
does not of itself establish a partnership, even though the co-owners share the profits derived from use of the property. There must be a business in addition to the co-ownership of property.
Intent to make profit and share those profits
Although co-ownership of property used in business is not sufficient for the existence of a partnership, the co-ownership of a business is essential. In determining whether co-ownership of a business exists, the two most important factors are sharing of profits and the right to manage and control the business.
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