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196 terms

Business Law Final Exam

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common law
judge made law, body of all decisions made by judges
statute
law passed by Congress or by a state legislature
equity
court's use of power to create an equitable result
precedent
earlier court case used to influence a court decision in a current case
criminal law
concerns behavior so threatening that society outlaws it altogether
civil law
regulates the rights and duties between parties
holding
courts decision
reverse
to declare lower courts ruling wrong and void
remand
to send a case back down to a lower court
affirm
to uphold a lower court's ruling
litigation
process of resolving disputes in court
alternative dispute resolution
resolving disputes out of court through formal or informal processes
mediation
form of ADR in which a neutral third party coaxes the disputing parties toward a voluntary settlement
arbitration
form of ADR in which a neutral third party has the power to impose a binding decision
trial courts
determine the facts and apply to them the law given by appellate courts
jurisdiction
court's power to hear a case
appellate courts
generally accept the facts provided by trial courts and review the record for legal errors
error of law
wrong decision made in a trial that leads to the reversal of a decision or a new trial
federal question case
claim based on the US Constitution, a federal statute, or a federal treaty
diversity case
lawsuit in which the two parties are of different states and the amount in dispute exceeds 75,000
steps to litigation
pleadings, complaint, answer, discovery, interrogatories, depositions, production of documents and things, summary judgement(optional), trial
steps of trial
opening statements, plaintiffs case, defendants case, closing argument, verdict
pleadings
documents that begin a lawsuit; complaint, answer, reply
complaint
short statement of the facts alleged by the plaintiff, and his or her legal claims
answer
defendants response to the complaint
default judgement
decision that the plaintiff in a case wins without going to trial
class action
suit filed by a group of plaintiffs with related claims
discovery
pre-trial opportunity for both parties to learn the other side's case
interrogatories
written questions that the opposing party must answer, in writing, under oath
depositions
one party's lawyer questions the other party
motion
formal request to the court
summary judgement
ruling that no-trial is necessary because the essential facts are not in dispute
adversary system
system based on the assumption that if the two sides present their best case before a neutral party, the truth will be established
burden of proof
plaintiff must convince the jury that its version of the case is correct
preponderance of the evidence
burden of proof in civil case
beyond a reasonable doubt
burden of proof in a criminal case
tort
violation of a duty imposed by civil law
defamation
defamatory statement, falseness, communicated to another, injury
defamatory statement
statement is likely to harm another person's reputation
falseness (defamation)
must be false to by defamatory
communicated (defamation)
statement must be communicated to at least one other person besides the defendant
injury (defamation)
in slander cases, plaintiff must show some injury; in libel cases, law is willing to assume injury
opinion (defamation)
opinion is generally a valid defense in a defamation case
public personalities and defamation
must prove actual malice
actual malice
defendant knew that that his statement was false and acted with reckless disregard of the truth
false imprisonment
intentional restraint of another person without reasonable cause or consent
battery
intentional offensive touching
assault
an action that causes another person to fear an imminent battery
fraud
injuring someone by deliberate deception
intentional infliction of emotional distress
extreme and outrageous conduct that causes serious emotional harm
compensatory damages
intended to restore the plaintiff to the position he was in before he defendants conduct caused injury
single recovery principle
requires a court to settle a legal case once and for all, by awarding a lump sum for past and future expenses
punitive damages
punish the defendant for conduct that is extreme and outrageous
intrusion
into someones life is a tort if a reasonable person would find it offensive
commercial exploitation
prohibits the unauthorized use of another person's likeness or voice for business purposes
negligence
duty of due care, breach of duty, factual cause, foreseeable harm, injury
duty of due care (negligence)
if a defendant can foresee injury to a particular person, she has a duty to him
breach of duty (negligence)
by failing to behave the way a reasonable person would under similar circumstances
factual cause (negligence
defendants breach led to the ultimate harm
foreseeable (negligence)
injury that a reasonable person could anticipate
injury (negligence)
must be genuine, not spectulative
trespasser
anyone on property without consent, no liability
licensee
anyone on the land for her own purposes but with the owner's permission, entitled to warn of hidden dangers on property
invitee
someone on property as of right because it is a public place or a business open to the public, duty of reasonable care
assumption of the risk
person who voluntarily enters a situation of obvious danger cannot complain if she is injured
contributory negligence
plaintiff who is even slightly negligent recovers nothing
comparative negligence
plaintiff may generally recover even if she is partially liable
strict liability
high level of liability assumed by the people or corporations who engage in activities that are very dangerous: ultra-hazardous activity and defective products
ultra-hazardous activity
defendant engaging in such acts is virtually always liable for resulting harm
judicial activism
will ignore certain provisions of a contract
judicial restraint
court won't enforce a contract if serious harm to one party will occur
elements of a contract
agreement, consideration, legality, capacity
contract
promise a court will enforce
bilateral contract
both parties make a contract
unilateral contract
one party makes a promise the other party can only accept only by doing something
express contract
agreement with all important terms explicitly stated
implied contract
contract where the words and conduct of the parties indicate that they intended an agreement
agreement (contracts)
meeting of minds, offer, terms are definite, acceptance, mirror image rule
meeting of the minds
both parties understood each other and they intended to reach an agreement
consideration (contracts)
bargaining that leads to an exchange between the parties
non compete clause
has to be generally reasonable to be enforceable
exculpatory clauses
contract provision that attempts to release one party from liability in the event the other party is injured
unenforceable exculpatory clauses
when it attempts to exclude an intentional tort or gross negligence, affected activity is in public care, unequal bargaining power, unless clause is clearly written and readily visible
unconscionable contracts
contract that is shockingly one-sided and fundamental unfair
capacity
legal ability to enter into a contract
disaffirm
give notice of refusal to be bound by an agreement (minors)
restitution
restoring an injured party to its original position
misrepresentation
statement that is factually wrong
to rescind a contract based on misrepresentation or fraud must show:
false statement of fact, fraud or materiality, and that she did rely on the false statement and was reasonable
contracts that must be in writing
interest in land, cannot be performed in one year, pay the debt of another, made by an executor of an estate, made in consideration of marriage, sale of goods worth more than $500
what writing must contain (statute of frauds)
signature, reasonable certainty
promisor
person who makes the promise that the third party beneficiary benefits from
promisee
person to whom a promise is made
assignor
person making the assignment
assignee
person receiving the assignemtn
obligor
person obligated to do something under a contract
obligee
person who has an obligation coming to her
what rights are not assignable
would substantially change the obligor's rights or duties under the contract, forbidden by law or public policy, or is validly precluded in the contract itself
delegator
person who gives his obligation under a contract to someone else
delegatee
person who receives an obligation under a contract from someone else
what duties are not delegable
would violate public policy, contract prohibits, obligee has a substancial interest in personal performace by obligor
strict performance
party generally not required to render strict performance unless the contract expressly demands it and such a demand is reasonable
substantial performance
will receive full contract price, less the value of any defects
consequential damages
damages that result from the unique circumstances of the plaintiff
injunction
court order to do something or to refrain from doing something
merchant
someone who routinely deals in the particular goods involved
cover
to reasonably obtain substitute goods because another party has not honored a contract
implied warranty of merchantability
goods must be of least average passable quality in the trade
negligence in sales
negligent design, negligent manufacture, failure to warn
commercial paper
unsecured promissory note
promissory note
maker of the instrument promises to pay a specific amount of money
maker
issuer of a promissory note
payee
someone who is owed money under the terms of an instrument
draft
order directing someone else to pay money for you
check
most common form of draft
drawer
person who issues a draft
drawee
person who pay the draft (bank)
payee
person getting paid
non-negotiable commercial paper
possessor has same rights as the person who made the original contract
negotiable commercial paper
possessor of negotiable commercial paper has more rights than the person who made the original contract
elements of negotiable commercial paper
must be in writing, must be signed by the maker or drawer, must contain an unconditional promise to pay, must be payable on demand or at a definite time, must say "pay to order or bearer of"
interpretation of ambiguities
words over numbers, handwritten over typed over printed
negotiation
an instrument has been transferred to the holder by someone other than the issuer
to be negotiated:
must be endorsed (order paper) and delivered to the transferee
holder in due course
someone who has given value for an instrument, in good faith, without notice of outstanding claims or other defenses
outstanding claims or other defects for holder in due course
instrument is overdue, instrument is dishonored, instrument is altered, forged, or incomplete, holder has notice of certain claims or disputes
attachment
three step process that creates an enforceable security interest; security interest, secured party has given value to security agreement, debtor has rights in the collateral
after acquired property
items that the debtor obtains after the parties have made their security agreement
perfection by filing
filing a financing statement with state agency
financing statement
is sufficient if it provides the name of the debtor, name of secured party, and indication of the collateral
perfection by possession
actually having th debtor's merchandise
perfection of consumer goods
PMSI
purchase money security agreement (PMSI)
interest taken by the person who sell the collateral or advances money so the debtor can buy it
steps to file bankruptcy
file a petition, assigned a trustee, meeting of the creditors, automatic stay, payment of claims, discharge, can reaffirm
voluntary petition must include:
petition, list of creditors, all assets and liabilities, exceptions, income and expenses, statement of financial affairs
automatic stay
safe burrow for the bankrupt
exempt property
allows debtor to keep some property for himself
voidable preferences
trustee can void any payment to creditor up to 90 days before filing petition
fraudulent transfers
made within one year of filing and made to hinder creditors
payment of claims
secured claims, priority claims, unsecured claims
elements of an agency relationship
principal, agent, consent that agent will act on behalf of principal, principal controls, creates a fiduciary relationship
fiduciary relationship
purpose is for one person to benefit another
duty of loyalty (agent to principal)
agent may not recieve outside benefits unless principal knows and agrees, cannot disclose confidential information, cannot compete with principal in scope of business, cannot act for two principals whose interests conflict, secretly dealing with the principal, appropriate behavior
other duties of an agent
duty to obey instructions, duty of care, duty to provide information
express authority
either by words or conduct, principal grants agent permission to act
implied authority
authority to conduct a transaction includes authority to do acts that are reasonably necessary to accomplish it
apparent authority
principal can be liable to third party for agent
fully disclosed principal
can sue principal alone for contracts made
partially disclosed principal
third party can sue either agent or principal
undisclosed principal
third party can recover from agent or principal
sole proprietorship
tax goes through own income taxes, are personally liable, very easy to form, cannot sell stock, only entire business, no existence once owner dies
corporation
gets taxed, owners not liable, difficult to form, can exchange stock, exists indefinably
close corporation
taxable as an C corporation, not as a S corporation, owners not liable, difficult to form, stock in company not publicly traded, exists indefinably, no board required
s corporation
taxed through shareholders, owners not liable, stock transfer restrictions, exists indefinably
special features of an s corporation
only 100 shareholders, one class of stock, shareholders cannot be other corporations, all shareholders must agree to S status
promoter
someone who organizes a corporation, personally liable for any contracts he signs before corporation is formed
novation
new contract with different terms, promoter can get off hook if maker of contract agrees to
domestic corporation
state in which the company incorporates
foreign corporation
everywhere else
where to incorporate?
Delaware or state they do most business
what charter must contain
name-must have corporation, company or limited in name
address and registered agent--official address so state knows who to contact and where to sue
incorporator-signs and charter and delivers to secretary of state for filing
purpose for existing
stock-par value, number of shares, classes of stock
bylaws
document that specifies the organizational rules of a corporation such as the date of the annual meeting and the required number of directors
piercing the corporate veil
court holds shareholders personally liable for the debts of the corporation
courts enforce piercing corporate veil in these situations
failure to observe formalities--doesn't act like a corporation, won't be treated like one
commingling of assets
inadequate capitalization--doesn't have enough capital to pay debts
fraud
termination of a corporation
vote-directors recommend to shareholders that the corp be dissolved and a majority agree
filing-files "Articles of Dissolution" with secretary of state
winding up-pay existing debt and distribute rest of property to shareholders
role of corporate management
managers have a fiduciary duty to act in the best interest of the corporation's shareholders; must maximize shareholder value
business judgement rule
court allows managers great leeway in carrying out the responsibility to shareholders
to be protected by business judgement rule:
must show duty of loyalty and duty of care
duty of loyalty (business judgement rule)
cannot benefit them at the expense of the corporation, cannot self-deal, and corporate oppurtunity
self-dealing
manager makes a decision benefiting either himself or another company with which he has a relationship
corporate opportunity
managers are in violation of the corporate opportunity doctrine if they compete against the corporation without its consent
duty of care (business judgement rule)
requires officers and directors to act in the best interest of the corporation and to use the same care that an ordinary prudent person would in the management of her own assets
elements of duty of due care (business judgement rule)
decision must be legal, must have a rational business purpose, manager must have made an informed decision
right to information
shareholder have right to inspect minute book, accounting records, and shareholder lists
right to vote
corporation must have at least one class of stock with voting rights
proxy
someone the shareholder appoints to represent them at the meeting and also the name of the document they sign to appoint them
quorum
attendance requirement at a shareholder meeting
proxy statement
provides information on everything from management compensation to a list of directors who miss too many meetings
annual report
contains detailed financial data
shareholders challenging management compensation
cannot really do anything
must get shareholder approval before:
merger, sale of major assets, dissolution of the corporation, an amendment to the charter or bylaws
patent
grant by government permitting the inventor exclusive use of an invention for 20 years, seller must disclose information about that anyone can use, has to be for tangible application, not idea
patents are available for:
mechanical inventions, chemical inventions, and processes
requirements for a patent
novel, non-obvious, and useful
novel (patent)
not patentable if: is known or has already been used in this country or has been prescribed in publication here or overseas
non-obvious (patent)
not patentable if a person with ordinary skill in that particular area
useful (patent)
must have some current use
copyrights
holder of a copyright owns the particular expression of an idea, but not he underlying idea or method of operation, 70 years
infringement of copyright
to prove a violation, the plaintiff must present evidence that the work was original and that either:

the infringer actually copied the work

the infringer had access to the original and the two works are substantially similar
first sales doctrine
permits a person who owns a lawfully made copy of a copyrighted work to sell or otherwise dispose of that copy
doctrine of fair use
permits limited use of copyrighted material without permission of the author for purposes such as criticism, news reporting, scholarships, or research
trademark
any combination of words and symbols that a business uses to identify its products or services and distinguish them from others
registration of trademark
not necessary
benefits of registering a trademark
even if only used in one state, valid nationally
notifies the public
holder of trademark has right to that domain name
cannot be trademarked:
similar to an existing mark
generic (shoe, book)
descriptive marks (low fat, green)
names
scandalous or immoral trademarks
trade secrets
formula, device, method, or compilation of information that, when used in business, gives the owner an advantage over competitors who do not know it