Business Law/Consumer Protection Laws Flashcards
Contracts
-Enforceable agreements between 2 or more parties
What apply to make a contract legally enforceable
- Must be an agreement before the offer and an acceptance by the person who the offer has been made
-There must be consideration - value must be exchanged (usually $$$)
-The principal MUST have LEGAL CAPACITY to execute:
-Incompetence or intoxicated adults have limited or no capacity to execute contracts
-Minors only have capacity to contract for necessities (food, clothing shelter)
-The contract must be for a lawful purpose
Voidable Contract
-One party has an option to void the contract if desired while the other party is bound by the contract
Void Contract
-It was never valid
-It is not enforceable because it lacks one of the requirements for being enforceable
Agent
-Legal rep of the insurance company
-Has express, implied, and sometimes apparent authority on behalf of the insurer (insurance company)
Broker
-A marketing intermediary between the insurer and the policy owner
-Represents the policy owner rather than the insurance company
Express Authority
-Written, explicit direction from the principal (insurance company) to the agent)
Implied Authority
- The authority the PUBLIC BELIEVES of the agent
-It is actual authority that the agent has to carry out the principal’s (insurance company’s) business in accordance with general business practices
Apparent Authority
-Arises out of negligence of the principal in allowing the agent to appear to have the authority because of certain past actions of the agent
Conditional Receipt
-Evidence of temporary contract requiring a life insurance company to provide coverage as long as the premium accompanies an acceptable application
Law of Agency
-The agent’s compliance with the rules of the insurance company (principal)
Fiduciary
-A person, company, or association holdings assets in trust for a beneficiary
-Charged with the responsibility of investing $$$ wisely for the beneficiary
Examples of Fiduciaries
-CFP Certificants
-Executors of wills and estates
-Receivers in bankruptcy
-Trustees
-Those who administer the assets belonging to underage or incompetent beneficiaries
-Financial Planners
-Physicians
Employee Retirement Income Security Act of 1974 (ERISA)
-An example of a legislative act that provides guidance for a fiduciary
-Federal legislations that defines fiduciary conduct for parties associated with corporate retirement plans
Prudent Person Rule
-Fiduciaries must act as a prudent individual would be expected to act with discretion and intelligence to seek reasonable income, preserve assets, and in general, avoid speculative investments.
-Financial professionals including CFPs are generally held to a higher standard
Chapter 11
-For individuals who do not qualify for Chapter 13 because they exceed the debt limitations or do not have a regular source of income
Chapter 13
Reorganization:
-Payments to creditors are reduced to be more manageable
-Creditors cannot harass the debtor
-The advantage is that the debtor generally is not required to liquidate assets
Chapter 7
Most commonly tested
-Liquidation
-The bankruptcy code permits a debtor to claim either the “federal” exemptions or “State” exemptions.
-33 states have opted out of federal exemptions
What are the state law exemptions under Chapter 7?
- Homestead (house and adjacent land)
-Limited personal property
-Wages to head of family, includes anyone providing more than one-half of the support for children or other minor
-Limited amount of equity in car
-Pension and Retirement Plans (ERISA plans only)
-CV of life insurance/proceeds of annuity contracts
-Disability benefits/unemployment/workers comp
-Property held in tenancy by entirety
Misc. federal exemption under Chapter 7
-Civil service retirement benefits/railroad pensions/veterans’ benefits
What debts are not cancelable by Bankruptcy
-Student and government loans
-Wage withholding & FICA obligations/recent income taxes due
-Child support and alimony
Fair Credit Reporting Act
-Consumers may review their files at any time for a nominal fee, but are entitled to one free report per year
-If denied credit, right to free copy of file
-Information may be retained for 7 years
-Only interest parties can access the file (creditors, mortgage companies, insurance companies, etc.)
Consumer Credit Protection Act
-Also known as, Truth in Lending
-Interest must reported as annual percentage rate (APR)
-Credit terms must be disclosed, including fees, points, repayment penalties, etc.
-Lost or stolen credit cards have limited liability of $50
