Business Law Flashcards
Before registration is effective, what can a company do during the 20 day waiting period?
Make an oral offer and issue a preliminary prospectus, called a “red herring”.
What is a “red herring”?
A preliminary prospectus missing certain key information, usually the issue price.
What is an accredited investor?
Insurance companies, banks, wealthy individuals, credit unions, broker dealers, corporations, savings and loans, and certain trusts.
What is considered a wealthy individual?
Someone with a net worth of $1M, excluding primary residence, or net income of $200k ($300k MFJ) for the two most recent years.
What are the 2 main sources of contract law?
Common law derived from courts and UCC derived from Statutory Law.
What is needed in order to have a valid contract?
Offer, acceptance, consideration, and a lack of defenses.
Under common law, what happens if you modify a contract?
It requires new consideration.
How are members of an LLC taxed?
As a partnership, unless they elect to be taxed as a corporation.
Bilateral contract
A promise for a promise, I’ll pay you X for doing my audit.
Unilateral contract
A promise for an act, I’ll pay anyone to find my dog.
When is an offer communicated?
When it is received
What terminates an offer?
Expiration, revocation, rejection, counteroffer, and operation of law.
How long does an offer stay open?
Until it’s either accepted or terminated
What represents acceptance of an offer?
Agree to all terms and conditions
What is the mirror image rule?
The acceptance has to exactly mirror the offer
What are the 2 rules of acceptance?
The mirror image rule and the early acceptance rule
What is the early acceptance rule?
Aka, mailbox rule. Acceptance is effective when transmitted or dispatched.
What is the difference between voidable and void?
Voidable means one or more of the party can escape it. Void means the contract is null and void and the courts will not enforce it.
How is a contract voidable?
Duress, undue influence, misrepresentation of a material fact, mistake, capacity.
How is a contract void?
Extreme duress, fraud in the execution, illegal subject matter, incompetent persons.
What is a substituted contract?
Maintains the contractual relationship between the parties, but revises their obligations.
What is novation?
When a new party replaces an original party to a contract and assumes (ie, steps into) the obligations and duties of that original party. All 3 parties must agree.
Who pays for FUTA?
Paid for entirely by employer
Who pays FICA?
Both employer and employee, 7.65% each
What is Respondeat Superior?
Provides that an employer is responsible for torts committed by employees in the normal scope of employment
Does assignment of a contract remove liability?
Assignment of a contract does not remove liability except in the case of novation
What are the exceptions to the Statute of Frauds?
Specifically manufactured goods, Partial performance, Admitted in court by defendant, Merchant in goods does not object to written confirmation w/in 10 days
Does an agency agreement have to be in writing?
Not unless either 1) agency sells real estate 2) agency relationship is over 1 year
What is liquidated damages?
Specifies what damages a party will be entitled to upon breach of contract by the other party
What are creditor rights for personal and real property?
Creditor rights against personal property are based on the secured transaction article of the UCC, while creditor rights against real property are based on state laws.
What is an option contract?
Consideration paid to keep an offer open
Are punitive damages available under the UCC Sales Article?
No, only under common law
When would an uncompensated surety be released from liability?
Anytime the creditor makes a change to the agreement.
What is the right of contribution?
The right of a co-surety to recover from other co-sureties a proportionate share of the liabilities
What is exoneration?
The right of sureties and co-sureties to sue the debtor to compel payment to the creditor.
What are duties of a principal?
Compensation, cooperation, indemnity/reimbursement, express contractual duties
What are duties of an agent?
Reasonable care, loyalty, obedience, express contractual duties
What is a right that a holder of public cumulative preferred stock always entitled?
Dividend carryovers from years in which dividends were not paid
How can agent authority be terminated?
Agreement, unilateral, operation of law (death of principal/agent, insanity of principal, principal bankrupt, or subject becomes illegal or impossible.
What is required to perfect a security interest?
Possession is required to perfect a security interest
