Business Law for Accountants Pt.2 Flashcards
Case law
rules of law announced in court decisions - interprets statutes, regulations, and constitutional provisions
Constitutional law
the supreme law of the land
state constitutions are supreme within state borders in that they don’t conflict with federal constitution
Statutory Law
statutes (including uniform laws) and ordinances enacted by federal, state, and local legislatures - includes local ordinances
Administrative Law
rules, orders, and decisions of federal, state, and local administrative agencies
Case Law and Common Law Doctrines
Judge-made law, including interpretations of constitutional provisions, statutes enacted by legislatures, and regulations created by administrative agencies - governs all areas not covered by other law
Primary sources of law
Sources that ESTABLISH law including:
- U.S. Constitution and the constitutions of the various states
- U.S. Constitution and the constitutions of the various states
- Regulations created by administrative agencies
- Case law and common law doctrines
Secondary sources of law
books and articles that summarize and clarify the primary sources of law:
- legal encyclopedias
- articles in law reviews
Ordinances
law passed by a local governing unit, such as a city or a county
Uniform Laws
model law created for the states to consider adopting
If a state adopts the law, it becomes statutory law in that state.
Each state has the option of adopting or rejecting all or part of a uniform law.
Uniform Commercial Code (UCC)
- first issued in 1952
- A comprehensive set of laws governing all commercial transactions of GOODS in the US
Administrative agency
federal, state, or local government agency established to perform a specific function
Executive agencies
administrative agency within the executive branch of government
Independent regulatory agencies examples
- Federal Trade Commission
- Securities and Exchange Commission
- Federal Communications Commission
The US Constitution sets forth the government’s what?
limits and powers
Laws enacted by legislative bodies at any level of government make up the body of law generally referred to as what?
statutory law
The Uniform Commercial Code provides a set of rules governing what?
commercial transactions
Administrative law includes what?
rules, orders, and decisions of a government agency
Criminal statutes proscribe what?
Wrongs committed against society for which society demands redress
In a civil case, the object is what?
to obtain a remedy to compensate the injured party
In a criminal case, the object is what?
to punish a wrongdoer to deter others from similar actions
A precedent is what?
a court decision that furnishes an example for deciding subsequent cases involving similar or identical facts or principles
Each court has a jurisdiction. Jurisdiction is best defined as what?
the geographic area in which a court has the power to apply the law
The federal government has the power to regulate commercial activities among the states under
the commerce clause
Commerce clause
- Commerce = economy
- gives congress the power to regulate commerce both among the states and with other nations
- courts will balances the national interest vs state interest on any laws states pass that impose barriers on interstate commerce or discriminates other state’s businesses
Supremacy clause
gives precedence to federal law over state laws and state constitutions
Corporate social responsibility (CSR)
The concept of corporations can, and should act ethically and be accountable to society for their actions
Stakeholders
Groups, other than the company’s shareholders, that are affected by corporate decisions
- employees
- customers
- creditors
- suppliers
- community
Triple Bottom Line
sustainability framework that measures a business’s success in three key areas: profit, people, and the planet
IDDR approach
I - Inquiry: clarify the nature of the problem, identify the stakeholders, determine whether there are any legal issues
D - Discussion: each action should be thoroughly analyzed
D - Decision: articulate the reasons you arrived at the decision to serve as documentation explaining why the plan of action was ethical
R - Review: determine what you could have done better
Ethical reasoning
process in which a person examines the situation at hand in light of their moral convictions or standards
Duty-based ethics
An ethical philosophy, rooted in the idea that every person has certain duties to others
CANT WORRY ABOUT CONSEQUENCES, I JUST HAVE TO DO MY DUTY
Outcome-based ethics
THE RIGHT THING TO DO PRODUCES A BETTER WORLD OR THE ACTION AT HAND WILL NOT LEAD TO A BETTER WORLD
How is the effectiveness of a code of ethics determined?
A code of ethics is only as good as the commitment of the organization to following the code
Cost Benefit Analysis
An action that affects the majority negatively may be ethical if the opposite decision would affect a few individuals in a severe manner
Duty-based ethical standards are most likely to derive from what?
philosophical reasoning
Principle of rights theory
The principle that human beings have certain fundamental rights
***believe that a key factor in determining whether a business decision is ethical is how that decision affects the rights of various groups
Cyberlaw
an informal term used to refer to both new laws and modifications of traditional laws that relate to the online environment
Specific performance
ordering a party to perform an agreement as promised
Systematic approach
organizes the issues and approaches them systematically
Who must certify both quarterly and annual filings?
CEO and CFO
Stare decisis
- Judicial
- “Let the decision stand”
- Common law doctrine includes the practice of deciding new cases with reference to former decisions, or precedents
- A higher court’s decision is binding on lower courts
What describes the content of the Code of Federal Regulations?
Codification of the general rules and regulations adopted by administrative agencies
Remedies at law
take the form of monetary damages—an amount given to a party whose legal interests have been injured
Trial courts
evidence is presented and testimony given - BOTTOM TIER
Appellate court / court of appeals
court that hears the appeal of a trial court’s decision
Case Citations
After appellate decisions have been published, they are cited by name, case, and volume of the reporter
triple asterisks
omission of words or sentences for the sake of readability or brevity
quadruple asterisks
omission of an entire paragraph or more
Fifth Amendment
guarantees that no person “shall be compelled in any criminal case to be a witness against himself”
An accused person cannot be forced to give testimony that might subject him or her to any criminal prosecution
Equal protection clause
provision in the Fourteenth Amendment that guarantees that no state will “deny to any person within its jurisdiction the equal protection of the laws
mandates that state governments treat similarly situated individuals in a similar manner
Strict scrutiny
If a law or action prohibits or inhibits some persons from exercising a fundamental right - the court will evaluate the constitutionality of governmental discrimination. Under this standard, the classification must be necessary to promote a compelling state interest.
Compelling state interests include remedying past unconstitutional or illegal discrimination but do not include correcting the general effects of “society’s discrimination
Intermediate Scrutiny
applied in cases involving discrimination based on gender or legitimacy
Laws using these classifications must be substantially related to important government objectives
Statutes of limitation
how long after an event a particular type of action can be brought
“Rational Basis” Test
In matters of economic or social welfare, a classification will be considered valid if there is any conceivable rational basis on which the classification might relate to a legitimate government interest
USA Patriot Act
gives government officials increased authority to monitor Internet activities (such as e-mail and website visits) and to gain access to personal financial and student information
License
an agreement, or contract, permitting the use of a trademark, copyright, patent, or trade secret for certain purposes
Royalties
fees to be paid for the privilege of using an intellectual property
Trademark
A type of intellectual property that identifies a product
Lanham Act of 1946
Prohibits, trademark infringement, trademark dilution, and false advertising
Dilution
the name or logo is being used but the product itself is not
4 Trademark Dilution Revision Act (TDRA) claim requirements
- plaintiff owns a famous mark that is distinctive
- defendant has begun using a mark in commerce that allegedly is diluting the famous mark
- similarity between the defendant’s mark and the famous mark gives rise to an association between the marks
- association is likely to impair the distinctiveness of the famous mark or harm its reputation
When can trademarks be registered?
- if it is currently in commerce
- if the applicant intends to put it into commerce within six months
Trademark Infringement
when a trademark is copied to a substantial degree or used in its entirety by another, intentionally or unintentionally
What needs to happen in order for trademark infringement to be proven?
owner must show that the defendant’s use of the mark created a likelihood of confusion about the origin of the defendant’s goods or services
BUT owner does not need to prove that the infringer acted intentionally or that the trademark was registered
injunction
a judicial order that orders a party to cease engaging in specific activity or to undo some wrong
Strong Marks
Fanciful
Arbitrary
Suggestive
Fanciful marks
most descriptive - uses invented words - “google” or “kleenex”
Arbitrary marks
uses common words in an uncommon way that is not descriptive of the product - “Dutch boy” as a paint color
Suggestive marks
indicate something about a product’s nature, quality, or characteristics, without describing the product directly - “Dairy Queen” suggests an association with milk but not directly to ice cream
Secondary Meaning
association a specific term or phrase with specific trademarked items - “Calvin Klein” with designer clothing
Service mark
a trademark that is used to distinguish the services
Ex. Airlines
Generic Terms
refer to an entire class of products - “bicycle” and are NOT protected
Certification mark
used by one or more persons, other than the owner, to certify the region, materials, mode of manufacture, quality, or other characteristic of specific goods or services
Ex. Seal of approval
Trade dress
image and overall appearance of a product
Ex. McDonald’s arches
Collective mark
mark used by members of a cooperative, association, or other organization to certify the region, materials, mode of manufacture, quality, or accuracy of the specific goods or services
Ex. movie credits
Stop Counterfeiting in Manufactured Goods Act (SCMGA)
enacted to combat counterfeit goods - makes it a crime to traffic intentionally in or attempt to traffic in counterfeit goods or services
What are the penalties for counterfeiting?
may be fined up to $2 million or imprisoned for up to ten years
defendant must forfeit and destroy counterfeit products
defendant must also pay restitution in an amount equal to the victim’s actual loss
DOES NOT APPLY TO FOREIGN COUNTERFEITERS
Trade name
indicates part or all of a business’s name - only protected if the trade name is also the name of the company’s trademarked product
Ex. Coca-Cola
Patent
grant from the government that gives an inventor the exclusive right to make, use, or sell their invention for a period of twenty years
If two people file for the same patent, who is it granted to?
the first person to file
U.S. Patent and Trademark Office
provides searchable databases covering U.S. patents granted since 1976
What Is Patentable?
Anything excepts laws of nature, natural phenomenon, and abstract ideas, including algorithms
What must an applicant prove in order to be granted patent?
that the invention, discovery, process, or design is novel, useful, and not obvious in light of current technology
Patent Infringement
when someone other than the owner makes, uses, or sells another’s patented design, product, or process without the patent owner’s permission
Remedies for Patent Infringement
injunction
damages for royalties
damages for royalties
Copyright
INTANGIBLE + Intellectual property right protecting the original expression of an idea - must be recorded in some tangible way
Ex. Books and music
How long is a copyright good for?
The entire life of the creator + 70 years
Copyright Act of 1976
governs copyrights
What are copyright owners protected against?
Reproduction
Development of derivatives
Distribution
Public
Are compilations of facts copyrightable?
Yes
What cannot be copyrighted?
ideas
Copyright Infringement
whenever the form or expression of an idea is copied
Remedies for Copyright Infringement
actual damages or statutory damages imposed at the court’s discretion
criminal proceedings for willful violations.
“Fair Use” Exception
exception to liability for copyright infringement allowing use of copyrighted materials without obtaining permission as long as the use can be considered fair
allows the free use of copyrighted material for criticism, comment, news reporting, teaching -including multiple copies for classroom use-, scholarship, or research
4 factors of the Fair Use Exception
- Purpose and Character -
- Nature of the Work
- Amount
- Market Effect
The First Sale Doctrine
the owner of a particular item that is copyrighted can, without the authority of the copyright owner, sell or otherwise dispose of it
Ex. resale of college textbooks
Trade secret
Information, ideas, or a process that gives a business an advantage over competitors who do not know the information or process
Restatement of Torts
Harmful actions against companies (Ex. Bribing an employee to break a contract in a way that hurts the employer)
How long does someone have to claim patent infringement?
6 years
How may the U.S. Patent and Trademark Office (PTO) help entrepreneurs?
Protect intellectual property
What does common law govern?
all contracts except when it has been modified or replaced by statutory law
What type of law is the UCC?
statutory
What does the UCC govern?
Contracts for the sale and lease of goods
Contract
an agreement that can be enforced in court, formed by two or more parties, each of whom agrees to perform or to refrain from performing some act now or in the future.
Objective theory of contracts
theory under which the intent to form a contract will be judged by outward, objective facts as interpreted by a reasonable person, rather than by the party
4 Requirements of a Valid Contract
- Agreement - includes an offer and an acceptance
- Consideration - something of value received or promised, such as money, to convince a person to make a deal (bargained for)
- Contractual capacity - law must recognize both parties as competent
- Legality - contract’s purpose must be to accomplish some goal that is legal and not against public policy
What do objective facts include?
- What the party said when entering into the contract.
- How the party acted or appeared (intent may be manifested by conduct as well as by oral or written words).
- circumstances surrounding the transaction.
Defenses to the Enforceability of a Contract
- Voluntary consent: consent of both parties must be voluntary. If a contract was formed as a result of fraud, undue influence, mistake, or duress, the contract may not be enforceable.
- Form: contract must be in whatever form the law requires. Some contracts must be in writing to be enforceable
Bilateral contract
promise for a promise - two sided - contract is made at one point in time and both perform it at a later point in time
Unilateral Contract
promise for an act - one-sided contract agreement in which an offeror promises to pay only after the completion of a task (Ex. I promise to give you my laptop but you have to pay me right now)
Person accepting performs their promise immediately
Formal Contract
contracts that require a special form such as being executed under seal, to be valid
Informal contracts
contract that does not require a specified form or formality in order to be valid
Express contract
contract in which the terms of the agreement are fully and explicitly stated in words, oral or written
Implied Contract
contract where the conduct of the parties, rather than their words, creates and defines the terms of the contract
Requirements for Implied Contracts
- plaintiff furnished some service or property
- plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected
- defendant had a chance to reject the services or property and did not
Executed contract
contract that has been fully performed on both sides
Executory Contract
contract that has not been fully performed by both parties
three elements are necessary for an offer to be effective
- offeror must have a serious intention to become bound by the offer
- offeror must have a serious intention to become bound by the offer
- offer must be communicated
Intention
not determined by the subjective intentions, beliefs, and assumptions of the offeror - but determined by what a reasonable person in the offeree’s position would conclude that the offeror’s words and actions meant
Situations in Which Intent May Be Lacking
- Expressions of opinion
- Statements of future intent
- Preliminary negotiations: request or invitation to negotiate
- Invitations to bid
- Advertisements and price lists
- Auctions
What are the requirements for an offer to be effective?
- identification of the parties
- identification of the parties including the work to be performed, with specific identification of such items
- including the work to be performed, with specific identification of such items
- time of payment, delivery, or performance
Revocation
withdrawal of an offer by an offeror
How can revocation be accomplished?
- Express repudiation - “I withdraw”
- Performance of acts that are inconsistent with the existence of the offer
Option contract
created when an offeror promises to hold an offer open for a specified period of time in return for a payment
Mirror image rule
requires the offeree’s acceptance to match the offeror’s offer exactly—to mirror the offer
Any change in, or addition to, the terms of the original offer automatically terminates that offer and substitutes the counteroffer.
Requirements for termination by operation of law
- Lapse of time
- Destruction of subject matter
- Death or incompetence
- Supervening illegality -statute or court decision that makes an offer illegal
The Mailbox Rule
ule providing that an acceptance of an offer becomes effective on dispatch - NOT when it is received
Promissory estoppel (detrimental reliance)
doctrine that applies when a person who has reasonably and substantially relied on the promise of another may be able to obtain some measure of recovery
Promissory estoppel required elements of application
- must be a clear and definite promise
- promisor should have expected that the promisee would rely on the promise
- promisee reasonably relied on the promise by acting or refraining from some act
- promisee’s reliance was definite and resulted in substantial detriment
- Enforcement of the promise is necessary to avoid injustice
estopped
Barred, impeded, or precluded, prevented
Contractual capacity
he legal ability to enter into a contractual relationship
Disaffirmance
The legal avoidance, or setting aside, of a contractual obligation
Usury
Charging an illegal rate of interest
Contracts Contrary to Statute
- Contracts to Commit a Crime
- Usury
- Gambling
unconscionable
a contract or clause that is void on the basis of public policy because one party is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party
Exculpatory Clauses
clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault
Statute of Frauds
state statute under which certain types of contracts must be in writing to be enforceable
Which types of contracts are required to be in writing?
- Contracts involving interests in land
- Contracts that cannot by their terms be performed within one year from the day after the date of formation
- Collateral, or secondary, contracts, such as promises to answer for the debt or duty of another
- Promises made in consideration of marriage
- Contracts for the sale of goods priced at $500 or more
Third Party Beneficiary
One for whose benefit a promise is made in a contract but who is not a party to the contract
Doctrine of privity
Common law doctrine which provides that you cannot either enforce the benefit of or be liable for any obligation under a contract to which you are not a party
Article 2—The Sale of Goods (UCC)
governs sales contracts, or contracts for the sale of goods
How does the UCC define a sale?
the passing of title [evidence of ownership rights] from the seller to the buyer for a price
What are goods?
an item of property must be tangible, and it must be movable
predominant-factor test
Test that courts use to determine whether a contract is primarily for the sale of goods or for the sale of services
Who Is a merchant?
person who is engaged in the purchase and sale of goods
- a person who deals in goods of the kind involved in the sales contract (merchant for one type of goods is not necessarily a merchant for another type)
- a person who, by occupation, holds himself or herself out as having knowledge and skill unique to the practices or goods involved in the transaction
- a person who, by occupation, holds himself or herself out as having knowledge and skill unique to the practices or goods involved in the transaction
Requirements Contract
buyer agrees to purchase and the seller agrees to sell all or up to a stated amount of what the buyer requires
Output Contract
seller agrees to sell and the buyer agrees to buy all or up to a stated amount of what the seller produces
Firm Offer
offer (by a merchant) that is irrevocable without consideration for a period of time (not longer than three months) - must be in writing and must be signed by the offeror
Rules When One Party or Both Parties Are Nonmerchants
contract is formed according to the terms of the original offer and does not include any of the additional terms in the acceptance
Rules When Both Parties Are Merchants
Additional terms automatically become part of the contract unless one of the following conditions arises:
- The original offer expressly limited acceptance to its terms.
- The new or changed terms materially alter the contract.
- The offeror objects to the new or changed terms within a reasonable period of time.
UCC exceptions
- Specially manufactured goods - goods that are specially manufactured for a particular buyer or lessee, the goods are not suitable for selling or leasing to others
- Admissions - admits in pleadings, testimony, or other court proceedings that a sales or lease contract was made
- Partial performance - payment has been made and accepted or goods have been received and accepted
Identification
takes place when specific goods are designated as the subject matter of a sales or lease contract
Shipment contract
title passes to the buyer at the time and place of SHIPMENT
Destination contract
title passes to the buyer when the goods are tendered at that destination - occurs when the seller places or holds conforming goods at the buyer’s disposal, enabling the buyer to take possession
When does title pass?
Once goods exist and are identified - unless otherwise explicitly agreed
Without an explicit agreement to the contrary, title passes to the buyer at the time and the place the seller performs by delivering the goods
When does risk of loss pass to the buyer with shipment contracts?
when the goods are delivered to the carrier
When does risk of loss pass to the buyer with destination contracts?
when the goods are tendered to the buyer or lessee at the specified destination
Insurable interest
buyer has an insurable interest in identified goods
seller has an insurable interest in goods as long as he or she retains title to the goods.
What is the primary source for contract law?
common law
Condition
a qualification in a contract based on a possible future event
Strict Performance
conditions expressly stated in a contract must fully occur in all respects for complete performance conditions expressly stated in a contract must fully occur in all respects for complete performance
What are the basic requirements for performance to qualify as substantial?
- party must have performed in good faith / intentional failure to comply with the contract terms is a breach
- performance must not vary greatly from the performance promised / omission, variance, or defect in performance is considered minor if it can easily be remedied by compensation
- performance must create substantially the same benefits as those promised
Anticipatory Repudiation
An assertion or action by a party indicating that they will not perform an obligation that they are contractually obligated to perform at a future time - treated as a breach of contract
Mutual Rescission (Recission)
agreement between the parties to cancel their contract, releasing the parties from further obligations
Discharge by Novation
when both of the parties to a contract agree to substitute a third party for one of the original parties
what are the requirements of a novation?
A previous valid obligation
An agreement by all parties to a new contract
The extinguishing of the old obligation
A new contract that is valid
Discharge by Accord and Satisfaction
parties agree to accept performance that is different from the performance originally promised
Situations of the doctrine of impossibility of performance
- When one of the parties to a personal contract dies or becomes incapacitated prior to performance
- When the specific subject matter of the contract is destroyed
- When a change in law renders performance illegal
Commercial Impracticability
doctrine under which a seller may be excused from performing a contract when:
- a contingency occurs
- the contingency’s occurrence makes performance impracticable
- the nonoccurrence of the contingency was a basic assumption on which the contract was made
frustration of purpose
court-created doctrine under which a party to a contract will be relieved of his or her duty to perform when the objective purpose for performance no longer exists due to reasons beyond that party’s control
What is the basic obligation of the seller?
to transfer and deliver conforming goods
conforming goods
Goods that conform to the contract description in every way
Shipment Contracts Delivery Requirements
- Place the goods into the hands of the carrier
- Make a contract for their transportation that is reasonable according to the nature of the goods and their value. (For instance, certain types of goods need refrigeration in transit.)
- Obtain and promptly deliver or tender to the buyer any documents necessary to enable the buyer to obtain possession of the goods from the carrier
- Promptly notify the buyer that shipment has been made
Destination Contracts Delivery Requirements
seller agrees to deliver conforming goods to the buyer at a particular destination
Perfect Tender Rule
common law rule under which a seller is required to deliver to the buyer goods that conformed perfectly to the requirements stipulated in the contract
Exceptions to the Perfect Tender Rule
- Cure: refers to the right of the seller or lessor to repair, adjust, or replace defective or nonconforming goods
- Substitution of Carriers
- Commercial Impracticability: occurrences unforeseen by either party
- Destruction of Identified Goods
- Assurance and Cooperation: if one party has “reasonable grounds” to believe that the other party will not perform, the first party may in writing “demand adequate assurance of due performance
Obligations of the Buyer or Lessee
- payment
- right to inspect the goods before making payment
- demonstrate acceptance
- partial acceptance
- anticipatory repudiation
What are the 3 types of title warranties?
- good title
- no liens
- no infringements
Security interest
an interest in the goods that secures payment or performance of an obligation
Express Warranties
arise when a seller indicates that the goods conform to any declaration that something is true about the goods
Implied Warranties
warranty that the law derives by inference from the nature of the transaction or the relative situations or circumstances of the parties
Implied Warranty of Merchantability
warranty that goods being sold or leased are reasonably fit for the ordinary purpose for which they are sold or leased, are properly packaged and labeled, and are of fair quality
Implied Warranty of Fitness for a Particular Purpose
arises in the sale or lease of goods when a seller knows:
- the particular purpose for which a buyer will use the goods
- That the buyer is relying on the skill and judgment of the seller or lessor to select suitable goods
mistakes of fact
mistake must involve some material fact—a fact that a reasonable person would consider important when determining their course of action
Only a mistake of fact makes a contract voidable
mistakes of Value or Quality
If a mistake concerns the future market value or quality of the object of the contract, the mistake is one of value, and the contract normally is enforceable
Unilateral Mistakes of Fact
mistake that occurs when one party to a contract is mistaken as to a material fact
Bilateral (Mutual) Mistakes of Fact
mistake that occurs when both parties to a contract are mistaken about the same material fact
Undue Influence
Persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party
Remedies of the Seller
- Right to Cancel the Contract
- Right to Withhold Delivery
-Right to Resell or Dispose of the Goods - Right to Recover Damages for the Buyer’s Nonacceptance
- Right to Stop Delivery of Goods in Transit
Remedies of the Buyer
- Right to Cancel the Contract
- Right to Obtain Goods upon Insolvency
- Right to Obtain Specific Performance
- Right of Cover ( substitute goods)
- Right to Replevy Goods ( recover goods)
- Right to Recover Damages
- Right to Reject the Goods
- Right to Revoke Acceptance
-Right to Recover Damages for Accepted Goods
Loss of the Bargain
in a case regarding fraudulent representations made during the sale of a house, the damages would be the difference between the value of the property as it actually is and the value it would have had if it had been as represented
Procedural unconscionability
focuses on the fairness of the process leading to the formation of the agreements
Substantive unconscionability
focuses on whether the terms of the agreements are so one-sided that it unfairly benefits one of the parties to the agreement
How do liquidated damages differ from penalties?
Liquidated damages are for damages difficult to estimate
Suretyship
Express contract in which third party promises to be primarily responsible for the debtors obligation AS SOON AS THE BORROWER DEFAULTS
Guarantor
Person who agrees to satisfy the debt of another only after the principal debtor defaults - ONLY HAS TO PAY AFTER EVERY OTHER LEGAL REMEDY HAS BEEN EXHAUSTED
Actions That Release the Surety and the Guarantor
- Material modification - any material modification to the terms of the original contract without the surety’s consent
- Surrender of property - if a creditor surrenders the collateral to the debtor or impairs the collateral without the surety’s consent
- Payment
Defenses of the Surety and the Guarantor
- Incapacity and bankruptcy - may assert his or her own incapacity or bankruptcy as a defense but not that of the debtor’s
- Statute of limitations
- Fraud
- Rights of the Surety and the Guarantor
- The Right of Subrogation
- The Right of Reimbursement
- The Right of Contribution
The Right of Subrogation
Any right that the creditor had against the debtor now becomes the right of the surety
The Right of Reimbursement
Surety is entitled to receive from the debtor all outlays made on behalf of the suretyship arrangement
The Right of Contribution
The right of a co-surety who pays more than his or her proportionate share on a debtor’s default to recover the excess paid from other co-sureties
Foreclosure
the legal process by which the lender repossesses and auctions off the property that has secured the loan
forbearance
postponement of part or all of the payments on a loan for a limited time
short sale
sale of the property for less than the balance due on the mortgage loan
writ of execution
A court order issued post-judgment that directs the sheriff to seize and sell any of to seize the debtor’s property in the debtor’s possession
writ of attachment
A court order prior to trial, directing seizure of nonexempt property
mechanic’s lien
Statutory lien created to ensure payment for work performed
(Ex. Building)
artisan’s lien
Lien that permits a worker to retain possession of an item until it is paid for
creditors’ composition agreements
agreement formed between a debtor and his or her creditors in which the creditors agree to accept a lesser sum than that owed by the debtor in full satisfaction of the debt
adjustable-rate mortgage (ARM)
the rate of interest paid by the borrower changes periodically
fixed-rate mortgage
a fixed, or unchanging, rate of interest, so the payments remain the same for the duration of the loan
prepayment penalty clause
requires the borrower to pay a penalty if the mortgage is repaid in full within a certain period
main purpose rule
legal principle that states that if someone promises to pay for someone else’s debt, and the main reason for making that promise is for their own benefit
- does not need to have that promise in writing
homestead exemption
law permitting a debtor to retain the family home free from the claims of unsecured creditors or trustees in bankruptcy
Exempted Personal Property from satisfaction of judgment debts
- Household furniture
- Clothing and certain personal possessions, such as family pictures or a Bible.
- A vehicle (or vehicles) for transportation
- Certain classified animals, usually livestock but including pets.
- Equipment that the debtor uses in a business or trade, such as tools or professional instruments
3 Types of Bankruptcy Relief
Chapter 7 - liquidation proceedings / selling of all nonexempt assets and the distribution of the proceeds to the debtor’s creditors
Chapter 11 - governs reorganizations
Chapter 12 - for family farmers and fishermen
Chapter 13 - for individuals / provide for the adjustment of debts by persons with regular incomes but allows a debtor to retain possession of their assets
What are the 2 main goals of bankruptcy law?
- To protect a debtor by giving him or her a fresh start without creditors’ claims.
- To ensure equitable treatment of creditors who are competing for a debtor’s assets.
consumer-debtor
a debtor whose debts result primarily from the purchase of goods for personal, family, or household use
reaffirmation agreement
An agreement between a debtor and a creditor in which the debtor voluntarily agrees to pay a debt dischargeable in bankruptcy
How can a reaffirmation agreement be enforceable?
- must be made before the debtor is granted a discharge
- must be signed and filed with the court
bankruptcy trustee
a person appointed by the court to manage the debtor’s funds / sells the nonexempt assets and distributes the proceeds to creditors
petition in bankruptcy
the document that is filed with a bankruptcy court to initiate bankruptcy proceedings
Chapter 7 Bankruptcy Schedules
- list of both secured and unsecured creditors, addresses, and amount of debt owed to each
- statement of the financial affairs of the debtor
- list of all property owned by the debtor, including property that the debtor claims is exempt
- list of current income and expenses
- certificate of credit counseling
- proof of payments received from employers within 60 prior to the filing of the petition
- statement of the amount of monthly income, itemized to show how the amount is calculated
- copy of the debtor’s federal income tax return for the most recent year ending immediately before the filing of the petition
Means Test
determine a debtor’s eligibility for Chapter 7 bankruptcy
When would Chapter 7 filings be dismissed?
- if the debtor has been convicted of a violent crime or a drug-trafficking offense
- if the debtor fails to pay post petition domestic-support obligations (which include child and spousal support)
Order for Relief - Voluntary
court’s grant to relieve the debtor of the immediate obligation to pay the debts listed in the bankruptcy petition
Requirements for Involuntary Bankruptcy
- If the debtor has twelve or more creditors, three or more of these creditors having unsecured claims totaling at least $16,750 must join in the petition.
- If a debtor has fewer than twelve creditors, one or more creditors having a claim totaling $16,750 or more may file
Order for Relief - Involuntary
- debtor is not paying debts as they come due.
- general receiver, assignee, or custodian took possession of, or was appointed to take charge of, substantially all of the debtor’s property within 120 days before the filing of the petition.
Automatic Stay
suspension of almost all litigation and other action by creditors against the debtor or the debtor’s property
is effective the moment the debtor files a petition in bankruptcy
The Adequate Protection Doctrine
protects secured creditors from losing their security as a result of the automatic stay
Exceptions to the Automatic Stay
- Domestic-support obligations, including any debt owed to or recoverable by a spouse, a former spouse, a child of the debtor, that child’s parent or guardian, or a governmental unit
- Proceedings against the debtor related to divorce, child custody or visitation, domestic violence, and support enforcement
- Investigations by a securities regulatory agency (such as an investigation into insider trading)
- Certain statutory liens for property taxes
Automatic Stay on Secured Property
terminates forty-five days after the creditors’ meeting unless the debtor redeems or reaffirms certain debts
estate in bankruptcy/property
consists of all the debtor’s interests in property, wherever located, including:
- community property
- property transferred in a transaction voidable by the trustee
- proceeds and profits from the property of the estate
preference
a property transfer or payment made by the debtor that favors one creditor over others - ILLEGAL
preferred creditor
creditor who has received a preferential transfer from a debtor
Chapter 11
REORGANIZATION - generally involves a corporate reorganization
fast-track” Chapter 11
or small-business debtors whose liabilities do not exceed a specified amount (about $2.7 million) and who do not own or manage real estate
debtor in possession (DIP)
a debtor who is allowed to continue in possession of the estate in property (the business) and to continue business operations
CHAPTER 11 ONLY
cram-down provision
provision of the Bankruptcy Code that allows a court to confirm the plan over the objections of a class of creditors
Under Chapter 7, the primary effect of a discharge is to what?
void a judgment on a discharged debt and prohibit an action to collect it
Under Chapter 7, creditors are paid in a certain order of priority. The highest-priority class comprises claims for what types of claims?
domestic support
The Chapter of bankruptcy in which the debts are discharged, and the debtor is given the opportunity of a fresh start is what?
Chapter 7
What is the most common form of bankruptcy?
Chapter 7
What is a bad faith bankruptcy filing under Chapter 7?
filing for Chapter 7 Liquidation after dismissal of two or more bankruptcy petitions during the prior year
What is the preferential transfer under Chapter 7 Bankruptcy?
Payment or transfer of property by a debtor favoring one creditor over others
What is a reorganizational plan under Chapter 11?
A plan to conserve and administer debtor’s assets for an eventual return to successful operation and solvency
What is the relief provided to an individual debtor under a Chapter 13 Bankruptcy filing?
provides for adjustment of debts to an individual debtor with regular income
The debtor continues in business or possession of assets
Most debts are discharged after the plan period
How is disposable income calculated under the means test?
By subtracting living expenses and secured debt payments from monthly income
What is an ordinary or straight bankruptcy?
Liquidation under Chapter 7 of the Bankruptcy Code
Sole Proprietorships
simplest form of business - the owner is the business
Advantages of the Sole Proprietorship
- Taxes: pays only personal income taxes on the business’s profits / profits are reported as personal income on the proprietor’s personal income tax return
- Flexibility: free to make any decision they wish concerning the business
Disadvantages of the Sole Proprietorship
- proprietor alone bears the burden of any losses or liabilities incurred by the business
- creditors can pursue the owner’s personal assets to satisfy any business debts
- lacking continuity after the death of the proprietor / when the owner dies, so does the business—it is automatically dissolved
Uniform Partnership Act
governs the operation of partnerships in the absence of express agreement
Essential Elements of a Partnership
- sharing of profits or losses.
- joint ownership of the business.
- equal right to be involved in the management of the business.
articles of partnership
written agreement that sets forth each partner’s rights and obligations with respect to the partnership
pass-through entity
a business entity that has no tax liability
partnership by estoppel
When a third person has reasonably and detrimentally relied on the representation that a non-partner was part of a partnership
Fiduciary Duties
actions taken in the best interests of another person or entity
duty of care
refraining from “grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law
duty of loyalty
requires partners to put the firm’s interests ahead of their own
Joint liability
third party must sue ALL of the partners as a group, but each partner can be held liable for the full amount
Joint and Several Liability
a third party has the option of suing all of the partners together or one or more of the partners separately
Indemnification
reimburse
Dissociation
occurs when a partner ceases to be associated in the carrying on of the partnership business and entitles the partner to have their interest purchased by the partnership
Events That Cause Dissociation
- partner’s voluntarily giving notice of an express will to withdraw
- occurrence of an event specified in the partnership agreement
- unanimous vote of the other partners
- order of a court or arbitrator if the partner has engaged in wrongful conduct that affects the partnership/business
- partner’s declaring bankruptcy
Winding up
the actual process of collecting, liquidating, and distributing the partnership assets
Dissolution
the closing down or dismissal of an assembly, partnership
buy-sell agreement
buyout agreement
articles of organization
document that is filed when an LLC is formed
Advantages of the LLC
- Limited Liability
- Flexibility in Taxation
- Foreign investors are allowed to become LLC members
Disadvantages of the LLC
state LLC statutes are not uniform so state LLC statutes are not uniform
operating agreement
agreement in which the members of an LLC set forth the details of how the business will be managed and operated
What happens to an LLC when it dissolves?
once assets have been sold, assets have been sold in order of:
- debts to creditors
- members’ capital contributions
- remaining amounts are then distributed to members in equal shares or according to the operating agreement
Limited Liability Limited Partnerships
(LLLP)
liability of all partners is limited to the amount of their investments in the firm
With respect to taxes imposed on limited liability companies, do most states follow federal or state rules?
federal rules
pierce the corporate veil
when the court completely disregards the separate entity aspect of a corporation and holds the shareholders personally liable for corporate debts and obligations
A limited liability company that wants to distribute profits to its members could avoid “double taxation” by electing to be taxed as
a partnership
alien corporation
corporation formed in another country but doing business in the United States
Public Corporations
corporation formed by the government to meet some political or governmental purpose
publicly held corporation (public company)
Any corporation whose shares are publicly traded in a securities market
Close Corporation (Privately traded company)
corporation whose shares are held by relatively few persons
shareholder agreement
agreement between shareholders that restricts the transferability of shares
S Corporation
small and simple - can choose to be taxed differently - corp pays no taxes but promise that all profits flow to shareholders
S Corporation requirements
- corporation must be domestic
- corporation must not be a member of an affiliated group of corporations
- shareholders must be individuals, estates, or certain trusts and tax-exempt organizations ( cannot by partnerships)
- shareholders must be individuals, estates, or certain trusts and tax-exempt organizations
- corporation must have only one class of stock
- shareholders must be US citizens
Benefit Corporations
for-profit corporation that seeks to have a material positive impact on society and the environment
Express Powers
found in its articles of incorporation - powers of the national government that are explicitly listed in the Constitution
Ultra Vires Doctrine
Acting or done beyond one’s legal power
Business Judgment Rule
courts will not hold corporate officers and directors liable for honest mistakes of judgment and bad business decisions that were made in good faith
Stock Certificates
certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation
Preemptive Rights
shareholder’s preference over all other purchasers to subscribe to or purchase a prorated share of a new issue of stock
Stock Warrants
rights given by a company to buy stock at a stated price by a specified date
Dividends
distribution of corporate profits or income ordered by the directors and paid to the shareholders in proportion to their shares in the corporation
Shareholder’s Derivative Suit
A suit brought by a shareholder to enforce a corporate cause of action against a third person
Proxies
Authorization to represent a corporate shareholder to serve as his or her agent and vote his or her shares in a certain manner
Does the SEC regulate the purchase and sale of securities?
Yes
Quorum
the minimum number of members that must be present to make the proceedings of that meeting valid
voting trust
agreement under which a shareholder assigns the right to vote his or her shares to a trustee
Watered Stock
Shares of stock less than the fair market value
A corporation’s authority to act and its liability for those actions is, with respect to the firm’s owners is what?
separate and apart
respondeat superior
“Let the master answer” - principals are responsible for their agents
What is the process in which a corporation adopts preincorporation contracts?
Novation
On which tax return does a sole proprietor report business income?
Partnership tax return - pays taxes on the business profits on the proprietor’s personal tax return
Which type of law applies when partners are charged with knowledge of acts executed under the partnership relationship?
Agency law - each are found to have knowledge and responsibility for acts under the partnership
What is the result if the Uniform Partnership Act (UPA) contradicts a partnership agreement?
The agreement will control because it memorializes intent
When must an LLC member’s interest be purchased in order to dissociate?
within 102 days
Which kind of entity is a single-member limited liability company (LLC) treated for federal income tax purposes?
Sole proprietorship
Which provision is typically included in the standard operating agreements for limited liability companies (LLCs)?
How members’ interests may be transferred
Which form of business structure can issue stocks to the general public to obtain financing?
C corporation
Which corporation avoids the imposition of income taxes at the corporate level?
S corporation
What is one of the disadvantages of a corporation form of business entity?
Double taxation
fiduciary
a person having a duty created by his or her undertaking to act primarily for another’s benefit
independent contractor
One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer
not an employee but may be an agent
What are the 4 ways in which an agency relationship can be created?
- agreement of the parties
- ratification
- estoppel
- operation of law
Agency by agreement
express or implied agreement that the agent will act for the principal and that the principal agrees to have the agent so act
Agency by ratification
When someone adopts or approves of someone else’s actions on their behalf after they’ve occurred
Agency by estoppel
A person who gives the impression that they are acting as an agent for another person or business
Agency by Operation of Law
agency in the absence of a formal agreement (usually family)
Ratification
act of accepting and giving legal force to an obligation that previously was not enforceable -
requirements for ratification
- agent must have acted on behalf of an identified principal
- principal must know all of the material facts involved in the transaction
- principal must affirm the agent’s act in its entirety
- principal must have the legal capacity to authorize the transaction at the time the agent engages
- principal’s affirmation must occur before the third party withdraws
- principal must observe the same formalities when ratifying the act as would have been required to authorize it initially
Termination by Operation of Law
- Death or insanity
- Impossibility
- Changed circumstances
- Bankruptcy
- War
Express Authority
Authority declared in clear, direct, and definite terms - generally given in written or oral terms
Equal Dignity Rule
rule that requires that if the contract is in writing, then the agent’s authority must be in writing
Implied Authority
Authority that is created not by an explicit oral or written agreement but by implication or inference
Ex. Principal asks an agent to take their car to the mechanic - the agent has the implied authority to drive that car
Apparent Authority
that is only apparent, not real -arises when the principal causes a third party to believe that the agent has authority
Ex. Mechanic attempts to sell your car on behalf of the dealership - cannot sell YOUR car as an agent on behalf of the principal (the dealership)
What are the 5 duties of the agent?
- performance
- notification
- loyalty
- obedience
- accounting
Duty of performance
agent must use reasonable diligence and skill when performing duties
Duty of notification
agent is required to notify the principal of all matters that concern the subject of the agency
Duty of loyalty
agent has a duty to act solely for the principal’s benefit
Duty of obedience
agent must follow all lawful and stated instructions from the principal
Duty of accounting
agent must provide records of all property and funds received or paid out on the principal’s behalf
What are the 4 duties of the principal?
- compensation
- reimbursement / indemnification
- cooperation
- safe working conditions
Claims Based on Half-Truths
the presented information is true but incomplete and may therefore lead consumers to a false conclusion
Bait-and-Switch Advertising
Advertising a product at an attractive price and then telling the consumer that the advertised product is not available or is of poor quality and encouraging her or him to purchase a more expensive item
Lanham Act
protects trademarks, and it also covers false advertising claims
cooling-off” laws
Laws that allow buyers of goods sold in certain transactions to cancel their contracts within three business days
The Truth-in-Lending Act
disclosure law administered by the Federal Reserve Board that requires sellers and lenders to disclose credit terms and loan terms so that individuals can shop around for the best financing arrangements
Regulation Z
set of rules issued by the Federal Reserve Board of Governors to implement the provisions of the Truth in- Lending Act
Equal Credit Opportunity Act (ECOA)
prohibits the denial of credit solely on the basis of race, religion, national origin, color, gender, marital status, or age
Fair Credit Reporting Act (FCRA)
protects consumers against inaccurate credit reporting and requires that lenders and other creditors report correct, relevant, and up-to-date information
Fair Debt Collection Practices Act (FDCPA)
attempts to curb perceived abuses by collection agencies
Fair and Accurate Credit Transactions Act (FACTA)
amendment to the FCRA to prevent identity theft, and improve the accuracy of consumer records
The Securities Act of 1933
governs initial sales of stock by businesses
The Howey Test
guides the determination of what types of contracts can be considered securities
prospectus
written document required by securities laws when a security is being sold
free-writing prospectus
any type of written, electronic, or graphic offer that describes the issuer or its securities and includes a legend indicating that the investor may obtain the prospectus at the SEC’s website
Examples of Exempt Securities
- Government-issued securities
- Bank and financial institution securities
- Short-term notes and drafts
- Securities of nonprofit, educational, and charitable organizations
Regulation A
allows companies to sell securities to the public without registering with the SEC
Rule 144
permits the public resale of restricted or control securities if a number of conditions are met, including how long the securities are held, the way in which they are sold, and the amount that can be sold at any one time
Securities Exchange Act of 1934
law that regulates the secondary trading of securities in the United States to create a fair and transparent environment for investors by preventing fraud and requiring companies to disclose important information
Insider Trading
purchase or sale of securities on the basis of information that has not been made available to the public
The Private Securities Litigation Reform Act
to reduce the number of frivolous securities lawsuits
Scienter Requirement
must have acted knowingly, willfully, intentionally, or in reckless disregard of the law
Corporate Governance
set of policies specifying the rights and responsibilities of the various participants in a corporation and spelling out the rules and procedures for making corporate decisions
The Sarbanes-Oxley Act
mandates certain practices in financial record keeping and reporting for corporations and establishes criminal penalties for intentional fraudulent reporting
What are the 4 primary sources of law?
- US Constitution
- Statutory law
- Regulations created by administrative agencies
- Case law and common law doctrines
What are secondary sources of law?
Books and articles that summarize and clarify primary sources - Ex. Legal encyclopedias
Types of remedies
Land
Items of value
Money
Courts of law
Court which the only remedies that can be granted are things of value - distinct from courts of equity
Courts of equity
A court that decides controversies and administers justice accordingly
Remedies in equity
Injunction
Specific performance
Rescission
Restitution
Reformation
Common equitable maxims
- Whoever seeks equity must do equity
- Where there is equal equity, the law must prevail
- One seeking the aid of an equity court, must come to the court with clean hands
Equitable maxims
Propositions of law that have to do with fairness
Laches
The equitable doctrine, that bars a parties right to legal action, if the party has neglected for an unreasonable length of time to act on their rights
Action at law vs. action in equity: Initiation of a lawsuit
Law: filing complaint
Equity: filing petition
Action at law vs. action in equity: Decision
Law: judge or jury
Equity: judge, no jury
Action at law vs. action in equity: result
Law: judgement
Equity: decree
Action at law vs. action in equity: remedy
Law: monetary damages or property
Equity: injunction, specific performance, or rescission
What are the 2 aspects of stare decisis?
- A court should not overturn its own precedents unless there is a compelling reason to do so
- Decisions made by a higher court are binding on lower courts
Persuasive authorities
Any legal authority or source of law that a court may look to for guidance, but need not follow in making its decision
IRAC
Issue - what are they key facts and issues?
Rule - what rule of law applies to the case?
Application - how does the rule of law apply to the case?
Conclusion - what conclusion should be drawn?
Cases on point
Previous case involving factual circumstances and issues that are similar to those in the case before the court
Substantive law
All laws that define, describe, regulate, and create legal rights and obligations
Procedural law
Enforcement of substantive law
Civil law
The branch of law, dealing with the definition and enforcement of all private or public rights, as opposed to criminal matters
Criminal law
The branch of law that defines and punishes wrongful actions committed against the public
United States code (USC)
Arranges all existing federal laws by assigning each 52 subjects a title and title number
Appellant (petitioner)
Party appealing the case
Appellee (respondent)
Party against whom the appeal is taken
Dissenting opinion
Core opinion that presents the views of one or more judges or justices, who disagreed with the majority decision
Per Curiam opinion
A court opinion written by the court as a whole instead of being offered by a judge or justice
Privileges and immunities clause
Clause in article 5 of the US Constitution that requires states not to discriminate against one another citizens
Full faith and credit clause
A clause in article 5 of the US Constitution that ensures that the rights established under deeds, wills, contracts, etc. and will be honored by the other states
Dormant commerce clause
The prohibition against states passing legislation that discriminated against or excessively burdens interstate commerce
Symbolic speech
Nonverbal expressions of opinions or thoughts about a subject - protected under the first amendment, guarantee of freedom of speech
Content neutral laws
Laws that regulate the time, manner, and place – but not the content
Unprotected speech
Fighting words, or words that are likely to incite others to respond violently – also includes defamatory speech
Establishment clause
Provision in the first amendment of the US constitution that prohibits Congress from establishing a state sponsored religion, as well as from passing laws that promote religion, or show a preference for one religion over another
Free exercise clause
Provision in the first amendment to the US Constitution that prohibits Congress for making any law prohibiting the free exercise of religion
Public welfare exception
When religious practices work against Public policy in the public welfare, the government can act.
Ex. Requirement that a child receive certain types of vaccinations or medical treatment if their is in danger regardless of child or parents, religious beliefs.
Procedural due process
Requires that any government decision
must give a person proper notice, and an opportunity to be heard
Substantive due process
limits what the government may do in it’s legislative and executive capacities – must be fair and further a legitimate governmental objective
Short-run profit maximization
Company may increase its profits by continuing to sell a product, even though it knows that the product is defective
What are the 3 elements necessary for an offer to be effective?
- Offerer must have serious intention to become bound by offer
- Terms of the offer must be reasonably certain so that parties and court can ascertain the terms of the contract
- Offer must be communicated
What are some questionable situations of intent lacking?
- expressions of opinion
- statements of future intent
- preliminary negotiations
- invitations to bid
- advertisements
- live and online auctions
2 ways in which revocation can be accomplished
- Express repudiation of the offer (I withdraw)
- Performance of acts that are inconsistent with the existence of the offer and are made known to the offeree
Unequivocal acceptance
Mirror image rule where an offer must be accepted exactly with no modifications
Illusory promises
A promise that is unenforceable due to indefiniteness (Ex. I’ll give you $10 if I feel like it)
Accord and satisfaction
When a debtor offers to pay and a creditor accepts a lesser amount than the creditor originally claimed was owed.
Accord = agreement
Satisfaction = performance
Liquidated debt
A debt that is due and certain in amount
Predominant factor test
A test that courts use to determine whether a contract is primarily for the sale of goods or for the sale of services
Retained earnings
Portion of a corporations profits that has not been paid out as dividends
Articles of incorporation
Document that is filed when a business is incorporated and that contains basic info about the corporation
Piercing the corporate veil
The action of a court to disregard the corporate entity and hold the shareholders personally liable for corporate debts and obligations
Quorum
Number of members of a decision making body that must be present before business may be transacted
Short swing profits
Profits earned by a purchase and sale of the same security within a 6 month period
What is the purpose of the UCC?
Reduce difficulties for businesses conducting trade and commerce
What is a characteristic of a legal claim?
Remedy is usually monetary damages
Which type of trademark receives automatic protection?
Fanciful
Arbitrary
Suggestive
Which type of trademark never receives protection?
Generic
Perfect Tender Rule
goods tendered must comply with what was contracted
When can the acceptance of substantially impaired goods be revoked?
When the seller promises to cure and fails within a reasonable amount of time
What is an example of a secured creditor?
Mortgages, HELOC, and Auto loans
What is an example of an unsecured creditor?
Credit cards, utilities, and hospitals
What is the time period for filing chapter 7 schedules after the filing of the petition?
45 days
What is the purpose of the means test?
To see if the debtor is actually able to pay the creditor during chapter 7 bankruptcy filings
Which bankruptcy filing requires a debtor to receive credit counseling?
ALL TYPES
What is a cramdown provision?
Confirmation of a reorganization plan by the court over any objections of a creditor
UPA - uniform partnership act
Establishes partnership as separate legal entities, not as an aggregate of partners
Statement of value
What ought to be the case
Which type of law primarily governs LLC’s?
State law
When winding up an LLC, who is paid first from the sales proceeds?
Members who are creditors
For which circumstance may an individual be personally liable for actions of an LLC?
Member personally guarantees a business loan
Who are the owners of a corporation?
Shareholders
Puffery
Exaggerated claims used to entice customers into making purchases
What is the entity created by the SOX act of 2002?
Public Company Accounting Oversight Board (PCAOB)
Who are the members of the audit committee of a public company?
Outside directors
Which measure of the SOX act insures corporate accountability for the information in financial reports?
Certification by the CEO and CFO for accuracy of information
What is the stakeholder theory?
any action that affects stakeholders negatively is an unethical decision
Does discovery qualify for patents?
No, anything that is not CREATED or INVENTED cannot be patented
Do merchants have to follow the mirror image rule?
No
What do merchant contracts need to address to be effective in terms of the law?
WHAT, and HOW MANY
Is sending of goods other than discussed a revocation or a breach?
Breach
What is FOB an indicator of?
Identification of a destination
What chapter of bankruptcy does not have a trustee?
Chapter 11
When is the Uniform Partnership Act (UPA) used?
When the partnership has no agreement in place
