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Business Law For Accountants > Business Law for Accountants Pt.2 > Flashcards

Business Law for Accountants Pt.2 Flashcards

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1
Q

Case law

A

rules of law announced in court decisions - interprets statutes, regulations, and constitutional provisions

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2
Q

Constitutional law

A

the supreme law of the land

state constitutions are supreme within state borders in that they don’t conflict with federal constitution

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3
Q

Statutory Law

A

statutes (including uniform laws) and ordinances enacted by federal, state, and local legislatures - includes local ordinances

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4
Q

Administrative Law

A

rules, orders, and decisions of federal, state, and local administrative agencies

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5
Q

Case Law and Common Law Doctrines

A

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

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6
Q

Primary sources of law

A

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

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7
Q

Secondary sources of law

A

books and articles that summarize and clarify the primary sources of law:

  • legal encyclopedias
  • articles in law reviews
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8
Q

Ordinances

A

law passed by a local governing unit, such as a city or a county

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9
Q

Uniform Laws

A

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.

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10
Q

Uniform Commercial Code (UCC)

A
  • first issued in 1952
  • A comprehensive set of laws governing all commercial transactions of GOODS in the US
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11
Q

Administrative agency

A

federal, state, or local government agency established to perform a specific function

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12
Q

Executive agencies

A

administrative agency within the executive branch of government

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13
Q

Independent regulatory agencies examples

A
  • Federal Trade Commission
  • Securities and Exchange Commission
  • Federal Communications Commission
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14
Q

The US Constitution sets forth the government’s what?

A

limits and powers

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15
Q

Laws enacted by legislative bodies at any level of government make up the body of law generally referred to as what?

A

statutory law

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16
Q

The Uniform Commercial Code provides a set of rules governing what?

A

commercial transactions

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17
Q

Administrative law includes what?

A

rules, orders, and decisions of a government agency

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18
Q

Criminal statutes proscribe what?

A

Wrongs committed against society for which society demands redress

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19
Q

In a civil case, the object is what?

A

to obtain a remedy to compensate the injured party

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20
Q

In a criminal case, the object is what?

A

to punish a wrongdoer to deter others from similar actions

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21
Q

A precedent is what?

A

a court decision that furnishes an example for deciding subsequent cases involving similar or identical facts or principles

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22
Q

Each court has a jurisdiction. Jurisdiction is best defined as what?

A

the geographic area in which a court has the power to apply the law

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23
Q

The federal government has the power to regulate commercial activities among the states under

A

the commerce clause

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24
Q

Commerce clause

A
  • 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
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25
Q

Supremacy clause

A

gives precedence to federal law over state laws and state constitutions

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26
Q

Corporate social responsibility (CSR)

A

The concept of corporations can, and should act ethically and be accountable to society for their actions

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27
Q

Stakeholders

A

Groups, other than the company’s shareholders, that are affected by corporate decisions

  • employees
  • customers
  • creditors
  • suppliers
  • community
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28
Q

Triple Bottom Line

A

sustainability framework that measures a business’s success in three key areas: profit, people, and the planet

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29
Q

IDDR approach

A

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

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30
Q

Ethical reasoning

A

process in which a person examines the situation at hand in light of their moral convictions or standards

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31
Q

Duty-based ethics

A

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

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32
Q

Outcome-based ethics

A

THE RIGHT THING TO DO PRODUCES A BETTER WORLD OR THE ACTION AT HAND WILL NOT LEAD TO A BETTER WORLD

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33
Q

How is the effectiveness of a code of ethics determined?

A

A code of ethics is only as good as the commitment of the organization to following the code

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34
Q

Cost Benefit Analysis

A

An action that affects the majority negatively may be ethical if the opposite decision would affect a few individuals in a severe manner

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35
Q

Duty-based ethical standards are most likely to derive from what?

A

philosophical reasoning

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36
Q

Principle of rights theory

A

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

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37
Q

Cyberlaw

A

an informal term used to refer to both new laws and modifications of traditional laws that relate to the online environment

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38
Q

Specific performance

A

ordering a party to perform an agreement as promised

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39
Q

Systematic approach

A

organizes the issues and approaches them systematically

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40
Q

Who must certify both quarterly and annual filings?

A

CEO and CFO

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41
Q

Stare decisis

A
  • 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
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42
Q

What describes the content of the Code of Federal Regulations?

A

Codification of the general rules and regulations adopted by administrative agencies

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43
Q

Remedies at law

A

take the form of monetary damages—an amount given to a party whose legal interests have been injured

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44
Q

Trial courts

A

evidence is presented and testimony given - BOTTOM TIER

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45
Q

Appellate court / court of appeals

A

court that hears the appeal of a trial court’s decision

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46
Q

Case Citations

A

After appellate decisions have been published, they are cited by name, case, and volume of the reporter

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47
Q

triple asterisks

A

omission of words or sentences for the sake of readability or brevity

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48
Q

quadruple asterisks

A

omission of an entire paragraph or more

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49
Q

Fifth Amendment

A

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

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50
Q

Equal protection clause

A

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

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51
Q

Strict scrutiny

A

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

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52
Q

Intermediate Scrutiny

A

applied in cases involving discrimination based on gender or legitimacy

Laws using these classifications must be substantially related to important government objectives

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53
Q

Statutes of limitation

A

how long after an event a particular type of action can be brought

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54
Q

“Rational Basis” Test

A

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

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55
Q

USA Patriot Act

A

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

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56
Q

License

A

an agreement, or contract, permitting the use of a trademark, copyright, patent, or trade secret for certain purposes

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57
Q

Royalties

A

fees to be paid for the privilege of using an intellectual property

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58
Q

Trademark

A

A type of intellectual property that identifies a product

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59
Q

Lanham Act of 1946

A

Prohibits, trademark infringement, trademark dilution, and false advertising

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60
Q

Dilution

A

the name or logo is being used but the product itself is not

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61
Q

4 Trademark Dilution Revision Act (TDRA) claim requirements

A
  1. plaintiff owns a famous mark that is distinctive
  2. defendant has begun using a mark in commerce that allegedly is diluting the famous mark
  3. similarity between the defendant’s mark and the famous mark gives rise to an association between the marks
  4. association is likely to impair the distinctiveness of the famous mark or harm its reputation
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62
Q

When can trademarks be registered?

A
  1. if it is currently in commerce
  2. if the applicant intends to put it into commerce within six months
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63
Q

Trademark Infringement

A

when a trademark is copied to a substantial degree or used in its entirety by another, intentionally or unintentionally

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64
Q

What needs to happen in order for trademark infringement to be proven?

A

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

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65
Q

injunction

A

a judicial order that orders a party to cease engaging in specific activity or to undo some wrong

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66
Q

Strong Marks

A

Fanciful
Arbitrary
Suggestive

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67
Q

Fanciful marks

A

most descriptive - uses invented words - “google” or “kleenex”

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68
Q

Arbitrary marks

A

uses common words in an uncommon way that is not descriptive of the product - “Dutch boy” as a paint color

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69
Q

Suggestive marks

A

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

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70
Q

Secondary Meaning

A

association a specific term or phrase with specific trademarked items - “Calvin Klein” with designer clothing

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71
Q

Service mark

A

a trademark that is used to distinguish the services

Ex. Airlines

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71
Q

Generic Terms

A

refer to an entire class of products - “bicycle” and are NOT protected

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72
Q

Certification mark

A

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

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73
Q

Trade dress

A

image and overall appearance of a product

Ex. McDonald’s arches

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74
Q

Collective mark

A

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

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75
Q

Stop Counterfeiting in Manufactured Goods Act (SCMGA)

A

enacted to combat counterfeit goods - makes it a crime to traffic intentionally in or attempt to traffic in counterfeit goods or services

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76
Q

What are the penalties for counterfeiting?

A

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

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77
Q

Trade name

A

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

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78
Q

Patent

A

grant from the government that gives an inventor the exclusive right to make, use, or sell their invention for a period of twenty years

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79
Q

If two people file for the same patent, who is it granted to?

A

the first person to file

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80
Q

U.S. Patent and Trademark Office

A

provides searchable databases covering U.S. patents granted since 1976

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81
Q

What Is Patentable?

A

Anything excepts laws of nature, natural phenomenon, and abstract ideas, including algorithms

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82
Q

What must an applicant prove in order to be granted patent?

A

that the invention, discovery, process, or design is novel, useful, and not obvious in light of current technology

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83
Q

Patent Infringement

A

when someone other than the owner makes, uses, or sells another’s patented design, product, or process without the patent owner’s permission

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84
Q

Remedies for Patent Infringement

A

injunction
damages for royalties
damages for royalties

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85
Q

Copyright

A

INTANGIBLE + Intellectual property right protecting the original expression of an idea - must be recorded in some tangible way

Ex. Books and music

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86
Q

How long is a copyright good for?

A

The entire life of the creator + 70 years

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87
Q

Copyright Act of 1976

A

governs copyrights

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88
Q

What are copyright owners protected against?

A

Reproduction

Development of derivatives

Distribution

Public

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89
Q

Are compilations of facts copyrightable?

A

Yes

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90
Q

What cannot be copyrighted?

A

ideas

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91
Q

Copyright Infringement

A

whenever the form or expression of an idea is copied

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92
Q

Remedies for Copyright Infringement

A

actual damages or statutory damages imposed at the court’s discretion

criminal proceedings for willful violations.

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93
Q

“Fair Use” Exception

A

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

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94
Q

4 factors of the Fair Use Exception

A
  1. Purpose and Character -
  2. Nature of the Work
  3. Amount
  4. Market Effect
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95
Q

The First Sale Doctrine

A

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

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96
Q

Trade secret

A

Information, ideas, or a process that gives a business an advantage over competitors who do not know the information or process

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97
Q

Restatement of Torts

A

Harmful actions against companies (Ex. Bribing an employee to break a contract in a way that hurts the employer)

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98
Q

How long does someone have to claim patent infringement?

A

6 years

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99
Q

How may the U.S. Patent and Trademark Office (PTO) help entrepreneurs?

A

Protect intellectual property

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100
Q

What does common law govern?

A

all contracts except when it has been modified or replaced by statutory law

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101
Q

What type of law is the UCC?

A

statutory

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102
Q

What does the UCC govern?

A

Contracts for the sale and lease of goods

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103
Q

Contract

A

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.

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104
Q

Objective theory of contracts

A

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

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105
Q

4 Requirements of a Valid Contract

A
  1. Agreement - includes an offer and an acceptance
  2. Consideration - something of value received or promised, such as money, to convince a person to make a deal (bargained for)
  3. Contractual capacity - law must recognize both parties as competent
  4. Legality - contract’s purpose must be to accomplish some goal that is legal and not against public policy
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106
Q

What do objective facts include?

A
  • 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.
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107
Q

Defenses to the Enforceability of a Contract

A
  • 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
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108
Q

Bilateral contract

A

promise for a promise - two sided - contract is made at one point in time and both perform it at a later point in time

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109
Q

Unilateral Contract

A

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

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110
Q

Formal Contract

A

contracts that require a special form such as being executed under seal, to be valid

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111
Q

Informal contracts

A

contract that does not require a specified form or formality in order to be valid

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112
Q

Express contract

A

contract in which the terms of the agreement are fully and explicitly stated in words, oral or written

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113
Q

Implied Contract

A

contract where the conduct of the parties, rather than their words, creates and defines the terms of the contract

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114
Q

Requirements for Implied Contracts

A
  • 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
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115
Q

Executed contract

A

contract that has been fully performed on both sides

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116
Q

Executory Contract

A

contract that has not been fully performed by both parties

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117
Q

three elements are necessary for an offer to be effective

A
  1. offeror must have a serious intention to become bound by the offer
  2. offeror must have a serious intention to become bound by the offer
  3. offer must be communicated
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118
Q

Intention

A

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

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119
Q

Situations in Which Intent May Be Lacking

A
  • Expressions of opinion
  • Statements of future intent
  • Preliminary negotiations: request or invitation to negotiate
  • Invitations to bid
  • Advertisements and price lists
  • Auctions
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120
Q

What are the requirements for an offer to be effective?

A
  1. identification of the parties
  2. identification of the parties including the work to be performed, with specific identification of such items
  3. including the work to be performed, with specific identification of such items
  4. time of payment, delivery, or performance
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121
Q

Revocation

A

withdrawal of an offer by an offeror

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122
Q

How can revocation be accomplished?

A
  • Express repudiation - “I withdraw”
  • Performance of acts that are inconsistent with the existence of the offer
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123
Q

Option contract

A

created when an offeror promises to hold an offer open for a specified period of time in return for a payment

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124
Q

Mirror image rule

A

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.

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125
Q

Requirements for termination by operation of law

A
  1. Lapse of time
  2. Destruction of subject matter
  3. Death or incompetence
  4. Supervening illegality -statute or court decision that makes an offer illegal
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126
Q

The Mailbox Rule

A

ule providing that an acceptance of an offer becomes effective on dispatch - NOT when it is received

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127
Q

Promissory estoppel (detrimental reliance)

A

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

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128
Q

Promissory estoppel required elements of application

A
  1. must be a clear and definite promise
  2. promisor should have expected that the promisee would rely on the promise
  3. promisee reasonably relied on the promise by acting or refraining from some act
  4. promisee’s reliance was definite and resulted in substantial detriment
  5. Enforcement of the promise is necessary to avoid injustice
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129
Q

estopped

A

Barred, impeded, or precluded, prevented

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130
Q

Contractual capacity

A

he legal ability to enter into a contractual relationship

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131
Q

Disaffirmance

A

The legal avoidance, or setting aside, of a contractual obligation

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132
Q

Usury

A

Charging an illegal rate of interest

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133
Q

Contracts Contrary to Statute

A
  • Contracts to Commit a Crime
  • Usury
  • Gambling
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134
Q

unconscionable

A

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

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135
Q

Exculpatory Clauses

A

clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault

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136
Q

Statute of Frauds

A

state statute under which certain types of contracts must be in writing to be enforceable

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137
Q

Which types of contracts are required to be in writing?

A
  • 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
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138
Q

Third Party Beneficiary

A

One for whose benefit a promise is made in a contract but who is not a party to the contract

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139
Q

Doctrine of privity

A

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

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140
Q

Article 2—The Sale of Goods (UCC)

A

governs sales contracts, or contracts for the sale of goods

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141
Q

How does the UCC define a sale?

A

the passing of title [evidence of ownership rights] from the seller to the buyer for a price

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142
Q

What are goods?

A

an item of property must be tangible, and it must be movable

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143
Q

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

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144
Q

Who Is a merchant?

A

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
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145
Q

Requirements Contract

A

buyer agrees to purchase and the seller agrees to sell all or up to a stated amount of what the buyer requires

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146
Q

Output Contract

A

seller agrees to sell and the buyer agrees to buy all or up to a stated amount of what the seller produces

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147
Q

Firm Offer

A

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

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148
Q

Rules When One Party or Both Parties Are Nonmerchants

A

contract is formed according to the terms of the original offer and does not include any of the additional terms in the acceptance

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149
Q

Rules When Both Parties Are Merchants

A

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.
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150
Q

UCC exceptions

A
  1. 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
  2. Admissions - admits in pleadings, testimony, or other court proceedings that a sales or lease contract was made
  3. Partial performance - payment has been made and accepted or goods have been received and accepted
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151
Q

Identification

A

takes place when specific goods are designated as the subject matter of a sales or lease contract

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152
Q

Shipment contract

A

title passes to the buyer at the time and place of SHIPMENT

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153
Q

Destination contract

A

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

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154
Q

When does title pass?

A

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

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155
Q

When does risk of loss pass to the buyer with shipment contracts?

A

when the goods are delivered to the carrier

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156
Q

When does risk of loss pass to the buyer with destination contracts?

A

when the goods are tendered to the buyer or lessee at the specified destination

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157
Q

Insurable interest

A

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.

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158
Q

What is the primary source for contract law?

A

common law

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159
Q

Condition

A

a qualification in a contract based on a possible future event

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160
Q

Strict Performance

A

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

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161
Q

What are the basic requirements for performance to qualify as substantial?

A
  • 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
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162
Q

Anticipatory Repudiation

A

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

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163
Q

Mutual Rescission (Recission)

A

agreement between the parties to cancel their contract, releasing the parties from further obligations

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164
Q

Discharge by Novation

A

when both of the parties to a contract agree to substitute a third party for one of the original parties

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165
Q

what are the requirements of a novation?

A

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

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166
Q

Discharge by Accord and Satisfaction

A

parties agree to accept performance that is different from the performance originally promised

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167
Q

Situations of the doctrine of impossibility of performance

A
  • 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
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168
Q

Commercial Impracticability

A

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

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169
Q

frustration of purpose

A

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

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170
Q

What is the basic obligation of the seller?

A

to transfer and deliver conforming goods

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171
Q

conforming goods

A

Goods that conform to the contract description in every way

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172
Q

Shipment Contracts Delivery Requirements

A
  1. Place the goods into the hands of the carrier
  2. 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.)
  3. 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
  4. Promptly notify the buyer that shipment has been made
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173
Q

Destination Contracts Delivery Requirements

A

seller agrees to deliver conforming goods to the buyer at a particular destination

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174
Q

Perfect Tender Rule

A

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

175
Q

Exceptions to the Perfect Tender Rule

A
  • 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
176
Q

Obligations of the Buyer or Lessee

A
  • payment
  • right to inspect the goods before making payment
  • demonstrate acceptance
  • partial acceptance
  • anticipatory repudiation
177
Q

What are the 3 types of title warranties?

A
  1. good title
  2. no liens
  3. no infringements
178
Q

Security interest

A

an interest in the goods that secures payment or performance of an obligation

179
Q

Express Warranties

A

arise when a seller indicates that the goods conform to any declaration that something is true about the goods

180
Q

Implied Warranties

A

warranty that the law derives by inference from the nature of the transaction or the relative situations or circumstances of the parties

181
Q

Implied Warranty of Merchantability

A

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

182
Q

Implied Warranty of Fitness for a Particular Purpose

A

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
183
Q

mistakes of fact

A

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

184
Q

mistakes of Value or Quality

A

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

185
Q

Unilateral Mistakes of Fact

A

mistake that occurs when one party to a contract is mistaken as to a material fact

186
Q

Bilateral (Mutual) Mistakes of Fact

A

mistake that occurs when both parties to a contract are mistaken about the same material fact

187
Q

Undue Influence

A

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

188
Q

Remedies of the Seller

A
  • 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
189
Q

Remedies of the Buyer

A
  • 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
190
Q

Loss of the Bargain

A

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

191
Q

Procedural unconscionability

A

focuses on the fairness of the process leading to the formation of the agreements

192
Q

Substantive unconscionability

A

focuses on whether the terms of the agreements are so one-sided that it unfairly benefits one of the parties to the agreement

193
Q

How do liquidated damages differ from penalties?

A

Liquidated damages are for damages difficult to estimate

194
Q

Suretyship

A

Express contract in which third party promises to be primarily responsible for the debtors obligation AS SOON AS THE BORROWER DEFAULTS

195
Q

Guarantor

A

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

196
Q

Actions That Release the Surety and the Guarantor

A
  1. Material modification - any material modification to the terms of the original contract without the surety’s consent
  2. Surrender of property - if a creditor surrenders the collateral to the debtor or impairs the collateral without the surety’s consent
  3. Payment
197
Q

Defenses of the Surety and the Guarantor

A
  1. Incapacity and bankruptcy - may assert his or her own incapacity or bankruptcy as a defense but not that of the debtor’s
  2. Statute of limitations
  3. Fraud
198
Q
  1. Rights of the Surety and the Guarantor
A
  1. The Right of Subrogation
  2. The Right of Reimbursement
  3. The Right of Contribution
199
Q

The Right of Subrogation

A

Any right that the creditor had against the debtor now becomes the right of the surety

200
Q

The Right of Reimbursement

A

Surety is entitled to receive from the debtor all outlays made on behalf of the suretyship arrangement

201
Q

The Right of Contribution

A

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

202
Q

Foreclosure

A

the legal process by which the lender repossesses and auctions off the property that has secured the loan

203
Q

forbearance

A

postponement of part or all of the payments on a loan for a limited time

204
Q

short sale

A

sale of the property for less than the balance due on the mortgage loan

205
Q

writ of execution

A

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

206
Q

writ of attachment

A

A court order prior to trial, directing seizure of nonexempt property

207
Q

mechanic’s lien

A

Statutory lien created to ensure payment for work performed
(Ex. Building)

208
Q

artisan’s lien

A

Lien that permits a worker to retain possession of an item until it is paid for

209
Q

creditors’ composition agreements

A

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

210
Q

adjustable-rate mortgage (ARM)

A

the rate of interest paid by the borrower changes periodically

211
Q

fixed-rate mortgage

A

a fixed, or unchanging, rate of interest, so the payments remain the same for the duration of the loan

212
Q

prepayment penalty clause

A

requires the borrower to pay a penalty if the mortgage is repaid in full within a certain period

213
Q

main purpose rule

A

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
214
Q

homestead exemption

A

law permitting a debtor to retain the family home free from the claims of unsecured creditors or trustees in bankruptcy

215
Q

Exempted Personal Property from satisfaction of judgment debts

A
  • 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
216
Q

3 Types of Bankruptcy Relief

A

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

217
Q

What are the 2 main goals of bankruptcy law?

A
  1. To protect a debtor by giving him or her a fresh start without creditors’ claims.
  2. To ensure equitable treatment of creditors who are competing for a debtor’s assets.
218
Q

consumer-debtor

A

a debtor whose debts result primarily from the purchase of goods for personal, family, or household use

219
Q

reaffirmation agreement

A

An agreement between a debtor and a creditor in which the debtor voluntarily agrees to pay a debt dischargeable in bankruptcy

220
Q

How can a reaffirmation agreement be enforceable?

A
  • must be made before the debtor is granted a discharge
  • must be signed and filed with the court
221
Q

bankruptcy trustee

A

a person appointed by the court to manage the debtor’s funds / sells the nonexempt assets and distributes the proceeds to creditors

222
Q

petition in bankruptcy

A

the document that is filed with a bankruptcy court to initiate bankruptcy proceedings

223
Q

Chapter 7 Bankruptcy Schedules

A
  • 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
224
Q

Means Test

A

determine a debtor’s eligibility for Chapter 7 bankruptcy

225
Q

When would Chapter 7 filings be dismissed?

A
  • 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)
226
Q

Order for Relief - Voluntary

A

court’s grant to relieve the debtor of the immediate obligation to pay the debts listed in the bankruptcy petition

227
Q

Requirements for Involuntary Bankruptcy

A
  • 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
228
Q

Order for Relief - Involuntary

A
  • 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.
229
Q

Automatic Stay

A

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

230
Q

The Adequate Protection Doctrine

A

protects secured creditors from losing their security as a result of the automatic stay

231
Q

Exceptions to the Automatic Stay

A
  • 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
232
Q

Automatic Stay on Secured Property

A

terminates forty-five days after the creditors’ meeting unless the debtor redeems or reaffirms certain debts

233
Q

estate in bankruptcy/property

A

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
234
Q

preference

A

a property transfer or payment made by the debtor that favors one creditor over others - ILLEGAL

235
Q

preferred creditor

A

creditor who has received a preferential transfer from a debtor

236
Q

Chapter 11

A

REORGANIZATION - generally involves a corporate reorganization

237
Q

fast-track” Chapter 11

A

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

238
Q

debtor in possession (DIP)

A

a debtor who is allowed to continue in possession of the estate in property (the business) and to continue business operations

CHAPTER 11 ONLY

239
Q

cram-down provision

A

provision of the Bankruptcy Code that allows a court to confirm the plan over the objections of a class of creditors

240
Q

Under Chapter 7, the primary effect of a discharge is to what?

A

void a judgment on a discharged debt and prohibit an action to collect it

241
Q

Under Chapter 7, creditors are paid in a certain order of priority. The highest-priority class comprises claims for what types of claims?

A

domestic support

242
Q

The Chapter of bankruptcy in which the debts are discharged, and the debtor is given the opportunity of a fresh start is what?

A

Chapter 7

243
Q

What is the most common form of bankruptcy?

A

Chapter 7

244
Q

What is a bad faith bankruptcy filing under Chapter 7?

A

filing for Chapter 7 Liquidation after dismissal of two or more bankruptcy petitions during the prior year

245
Q

What is the preferential transfer under Chapter 7 Bankruptcy?

A

Payment or transfer of property by a debtor favoring one creditor over others

246
Q

What is a reorganizational plan under Chapter 11?

A

A plan to conserve and administer debtor’s assets for an eventual return to successful operation and solvency

247
Q

What is the relief provided to an individual debtor under a Chapter 13 Bankruptcy filing?

A

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

248
Q

How is disposable income calculated under the means test?

A

By subtracting living expenses and secured debt payments from monthly income

249
Q

What is an ordinary or straight bankruptcy?

A

Liquidation under Chapter 7 of the Bankruptcy Code

250
Q

Sole Proprietorships

A

simplest form of business - the owner is the business

251
Q

Advantages of the Sole Proprietorship

A
  • 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
252
Q

Disadvantages of the Sole Proprietorship

A
  • 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
253
Q

Uniform Partnership Act

A

governs the operation of partnerships in the absence of express agreement

254
Q

Essential Elements of a Partnership

A
  • sharing of profits or losses.
  • joint ownership of the business.
  • equal right to be involved in the management of the business.
255
Q

articles of partnership

A

written agreement that sets forth each partner’s rights and obligations with respect to the partnership

256
Q

pass-through entity

A

a business entity that has no tax liability

257
Q

partnership by estoppel

A

When a third person has reasonably and detrimentally relied on the representation that a non-partner was part of a partnership

258
Q

Fiduciary Duties

A

actions taken in the best interests of another person or entity

259
Q

duty of care

A

refraining from “grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law

260
Q

duty of loyalty

A

requires partners to put the firm’s interests ahead of their own

261
Q

Joint liability

A

third party must sue ALL of the partners as a group, but each partner can be held liable for the full amount

262
Q

Joint and Several Liability

A

a third party has the option of suing all of the partners together or one or more of the partners separately

263
Q

Indemnification

A

reimburse

264
Q

Dissociation

A

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

265
Q

Events That Cause Dissociation

A
  • 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
266
Q

Winding up

A

the actual process of collecting, liquidating, and distributing the partnership assets

267
Q

Dissolution

A

the closing down or dismissal of an assembly, partnership

268
Q

buy-sell agreement

A

buyout agreement

269
Q

articles of organization

A

document that is filed when an LLC is formed

270
Q

Advantages of the LLC

A
  • Limited Liability
  • Flexibility in Taxation
  • Foreign investors are allowed to become LLC members
271
Q

Disadvantages of the LLC

A

state LLC statutes are not uniform so state LLC statutes are not uniform

272
Q

operating agreement

A

agreement in which the members of an LLC set forth the details of how the business will be managed and operated

273
Q

What happens to an LLC when it dissolves?

A

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

274
Q

Limited Liability Limited Partnerships
(LLLP)

A

liability of all partners is limited to the amount of their investments in the firm

275
Q

With respect to taxes imposed on limited liability companies, do most states follow federal or state rules?

A

federal rules

276
Q

pierce the corporate veil

A

when the court completely disregards the separate entity aspect of a corporation and holds the shareholders personally liable for corporate debts and obligations

277
Q

A limited liability company that wants to distribute profits to its members could avoid “double taxation” by electing to be taxed as

A

a partnership

278
Q

alien corporation

A

corporation formed in another country but doing business in the United States

279
Q

Public Corporations

A

corporation formed by the government to meet some political or governmental purpose

280
Q

publicly held corporation (public company)

A

Any corporation whose shares are publicly traded in a securities market

281
Q

Close Corporation (Privately traded company)

A

corporation whose shares are held by relatively few persons

282
Q

shareholder agreement

A

agreement between shareholders that restricts the transferability of shares

283
Q

S Corporation

A

small and simple - can choose to be taxed differently - corp pays no taxes but promise that all profits flow to shareholders

284
Q

S Corporation requirements

A
  • 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
285
Q

Benefit Corporations

A

for-profit corporation that seeks to have a material positive impact on society and the environment

286
Q

Express Powers

A

found in its articles of incorporation - powers of the national government that are explicitly listed in the Constitution

287
Q

Ultra Vires Doctrine

A

Acting or done beyond one’s legal power

288
Q

Business Judgment Rule

A

courts will not hold corporate officers and directors liable for honest mistakes of judgment and bad business decisions that were made in good faith

289
Q

Stock Certificates

A

certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation

290
Q

Preemptive Rights

A

shareholder’s preference over all other purchasers to subscribe to or purchase a prorated share of a new issue of stock

291
Q

Stock Warrants

A

rights given by a company to buy stock at a stated price by a specified date

292
Q

Dividends

A

distribution of corporate profits or income ordered by the directors and paid to the shareholders in proportion to their shares in the corporation

293
Q

Shareholder’s Derivative Suit

A

A suit brought by a shareholder to enforce a corporate cause of action against a third person

294
Q

Proxies

A

Authorization to represent a corporate shareholder to serve as his or her agent and vote his or her shares in a certain manner

295
Q

Does the SEC regulate the purchase and sale of securities?

A

Yes

296
Q

Quorum

A

the minimum number of members that must be present to make the proceedings of that meeting valid

297
Q

voting trust

A

agreement under which a shareholder assigns the right to vote his or her shares to a trustee

298
Q

Watered Stock

A

Shares of stock less than the fair market value

299
Q

A corporation’s authority to act and its liability for those actions is, with respect to the firm’s owners is what?

A

separate and apart

300
Q

respondeat superior

A

“Let the master answer” - principals are responsible for their agents

301
Q

What is the process in which a corporation adopts preincorporation contracts?

A

Novation

302
Q

On which tax return does a sole proprietor report business income?

A

Partnership tax return - pays taxes on the business profits on the proprietor’s personal tax return

303
Q

Which type of law applies when partners are charged with knowledge of acts executed under the partnership relationship?

A

Agency law - each are found to have knowledge and responsibility for acts under the partnership

304
Q

What is the result if the Uniform Partnership Act (UPA) contradicts a partnership agreement?

A

The agreement will control because it memorializes intent

305
Q

When must an LLC member’s interest be purchased in order to dissociate?

A

within 102 days

306
Q

Which kind of entity is a single-member limited liability company (LLC) treated for federal income tax purposes?

A

Sole proprietorship

307
Q

Which provision is typically included in the standard operating agreements for limited liability companies (LLCs)?

A

How members’ interests may be transferred

308
Q

Which form of business structure can issue stocks to the general public to obtain financing?

A

C corporation

309
Q

Which corporation avoids the imposition of income taxes at the corporate level?

A

S corporation

310
Q

What is one of the disadvantages of a corporation form of business entity?

A

Double taxation

311
Q

fiduciary

A

a person having a duty created by his or her undertaking to act primarily for another’s benefit

312
Q

independent contractor

A

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

313
Q

What are the 4 ways in which an agency relationship can be created?

A
  1. agreement of the parties
  2. ratification
  3. estoppel
  4. operation of law
314
Q

Agency by agreement

A

express or implied agreement that the agent will act for the principal and that the principal agrees to have the agent so act

315
Q

Agency by ratification

A

When someone adopts or approves of someone else’s actions on their behalf after they’ve occurred

316
Q

Agency by estoppel

A

A person who gives the impression that they are acting as an agent for another person or business

317
Q

Agency by Operation of Law

A

agency in the absence of a formal agreement (usually family)

318
Q

Ratification

A

act of accepting and giving legal force to an obligation that previously was not enforceable -

319
Q

requirements for ratification

A
  • 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
320
Q

Termination by Operation of Law

A
  • Death or insanity
  • Impossibility
  • Changed circumstances
  • Bankruptcy
  • War
321
Q

Express Authority

A

Authority declared in clear, direct, and definite terms - generally given in written or oral terms

322
Q

Equal Dignity Rule

A

rule that requires that if the contract is in writing, then the agent’s authority must be in writing

323
Q

Implied Authority

A

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

324
Q

Apparent Authority

A

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)

325
Q

What are the 5 duties of the agent?

A
  1. performance
  2. notification
  3. loyalty
  4. obedience
  5. accounting
326
Q

Duty of performance

A

agent must use reasonable diligence and skill when performing duties

327
Q

Duty of notification

A

agent is required to notify the principal of all matters that concern the subject of the agency

328
Q

Duty of loyalty

A

agent has a duty to act solely for the principal’s benefit

329
Q

Duty of obedience

A

agent must follow all lawful and stated instructions from the principal

330
Q

Duty of accounting

A

agent must provide records of all property and funds received or paid out on the principal’s behalf

331
Q

What are the 4 duties of the principal?

A
  1. compensation
  2. reimbursement / indemnification
  3. cooperation
  4. safe working conditions
332
Q

Claims Based on Half-Truths

A

the presented information is true but incomplete and may therefore lead consumers to a false conclusion

333
Q

Bait-and-Switch Advertising

A

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

334
Q

Lanham Act

A

protects trademarks, and it also covers false advertising claims

335
Q

cooling-off” laws

A

Laws that allow buyers of goods sold in certain transactions to cancel their contracts within three business days

336
Q

The Truth-in-Lending Act

A

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

337
Q

Regulation Z

A

set of rules issued by the Federal Reserve Board of Governors to implement the provisions of the Truth in- Lending Act

338
Q

Equal Credit Opportunity Act (ECOA)

A

prohibits the denial of credit solely on the basis of race, religion, national origin, color, gender, marital status, or age

339
Q

Fair Credit Reporting Act (FCRA)

A

protects consumers against inaccurate credit reporting and requires that lenders and other creditors report correct, relevant, and up-to-date information

339
Q

Fair Debt Collection Practices Act (FDCPA)

A

attempts to curb perceived abuses by collection agencies

340
Q

Fair and Accurate Credit Transactions Act (FACTA)

A

amendment to the FCRA to prevent identity theft, and improve the accuracy of consumer records

341
Q

The Securities Act of 1933

A

governs initial sales of stock by businesses

342
Q

The Howey Test

A

guides the determination of what types of contracts can be considered securities

343
Q

prospectus

A

written document required by securities laws when a security is being sold

344
Q

free-writing prospectus

A

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

345
Q

Examples of Exempt Securities

A
  • Government-issued securities
  • Bank and financial institution securities
  • Short-term notes and drafts
  • Securities of nonprofit, educational, and charitable organizations
346
Q

Regulation A

A

allows companies to sell securities to the public without registering with the SEC

347
Q

Rule 144

A

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

348
Q

Securities Exchange Act of 1934

A

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

349
Q

Insider Trading

A

purchase or sale of securities on the basis of information that has not been made available to the public

350
Q

The Private Securities Litigation Reform Act

A

to reduce the number of frivolous securities lawsuits

351
Q

Scienter Requirement

A

must have acted knowingly, willfully, intentionally, or in reckless disregard of the law

352
Q

Corporate Governance

A

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

353
Q

The Sarbanes-Oxley Act

A

mandates certain practices in financial record keeping and reporting for corporations and establishes criminal penalties for intentional fraudulent reporting

354
Q

What are the 4 primary sources of law?

A
  1. US Constitution
  2. Statutory law
  3. Regulations created by administrative agencies
  4. Case law and common law doctrines
355
Q

What are secondary sources of law?

A

Books and articles that summarize and clarify primary sources - Ex. Legal encyclopedias

356
Q

Types of remedies

A

Land
Items of value
Money

357
Q

Courts of law

A

Court which the only remedies that can be granted are things of value - distinct from courts of equity

358
Q

Courts of equity

A

A court that decides controversies and administers justice accordingly

359
Q

Remedies in equity

A

Injunction
Specific performance
Rescission
Restitution
Reformation

360
Q

Common equitable maxims

A
  1. Whoever seeks equity must do equity
  2. Where there is equal equity, the law must prevail
  3. One seeking the aid of an equity court, must come to the court with clean hands
361
Q

Equitable maxims

A

Propositions of law that have to do with fairness

362
Q

Laches

A

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

363
Q

Action at law vs. action in equity: Initiation of a lawsuit

A

Law: filing complaint
Equity: filing petition

364
Q

Action at law vs. action in equity: Decision

A

Law: judge or jury
Equity: judge, no jury

365
Q

Action at law vs. action in equity: result

A

Law: judgement
Equity: decree

366
Q

Action at law vs. action in equity: remedy

A

Law: monetary damages or property
Equity: injunction, specific performance, or rescission

367
Q

What are the 2 aspects of stare decisis?

A
  1. A court should not overturn its own precedents unless there is a compelling reason to do so
  2. Decisions made by a higher court are binding on lower courts
368
Q

Persuasive authorities

A

Any legal authority or source of law that a court may look to for guidance, but need not follow in making its decision

369
Q

IRAC

A

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?

370
Q

Cases on point

A

Previous case involving factual circumstances and issues that are similar to those in the case before the court

371
Q

Substantive law

A

All laws that define, describe, regulate, and create legal rights and obligations

372
Q

Procedural law

A

Enforcement of substantive law

373
Q

Civil law

A

The branch of law, dealing with the definition and enforcement of all private or public rights, as opposed to criminal matters

374
Q

Criminal law

A

The branch of law that defines and punishes wrongful actions committed against the public

375
Q

United States code (USC)

A

Arranges all existing federal laws by assigning each 52 subjects a title and title number

376
Q

Appellant (petitioner)

A

Party appealing the case

377
Q

Appellee (respondent)

A

Party against whom the appeal is taken

378
Q

Dissenting opinion

A

Core opinion that presents the views of one or more judges or justices, who disagreed with the majority decision

379
Q

Per Curiam opinion

A

A court opinion written by the court as a whole instead of being offered by a judge or justice

380
Q

Privileges and immunities clause

A

Clause in article 5 of the US Constitution that requires states not to discriminate against one another citizens

381
Q

Full faith and credit clause

A

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

382
Q

Dormant commerce clause

A

The prohibition against states passing legislation that discriminated against or excessively burdens interstate commerce

383
Q

Symbolic speech

A

Nonverbal expressions of opinions or thoughts about a subject - protected under the first amendment, guarantee of freedom of speech

384
Q

Content neutral laws

A

Laws that regulate the time, manner, and place – but not the content

385
Q

Unprotected speech

A

Fighting words, or words that are likely to incite others to respond violently – also includes defamatory speech

386
Q

Establishment clause

A

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

387
Q

Free exercise clause

A

Provision in the first amendment to the US Constitution that prohibits Congress for making any law prohibiting the free exercise of religion

388
Q

Public welfare exception

A

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.

389
Q

Procedural due process

A

Requires that any government decision
must give a person proper notice, and an opportunity to be heard

390
Q

Substantive due process

A

limits what the government may do in it’s legislative and executive capacities – must be fair and further a legitimate governmental objective

391
Q

Short-run profit maximization

A

Company may increase its profits by continuing to sell a product, even though it knows that the product is defective

392
Q

What are the 3 elements necessary for an offer to be effective?

A
  1. Offerer must have serious intention to become bound by offer
  2. Terms of the offer must be reasonably certain so that parties and court can ascertain the terms of the contract
  3. Offer must be communicated
393
Q

What are some questionable situations of intent lacking?

A
  • expressions of opinion
  • statements of future intent
  • preliminary negotiations
  • invitations to bid
  • advertisements
  • live and online auctions
394
Q

2 ways in which revocation can be accomplished

A
  1. Express repudiation of the offer (I withdraw)
  2. Performance of acts that are inconsistent with the existence of the offer and are made known to the offeree
395
Q

Unequivocal acceptance

A

Mirror image rule where an offer must be accepted exactly with no modifications

396
Q

Illusory promises

A

A promise that is unenforceable due to indefiniteness (Ex. I’ll give you $10 if I feel like it)

397
Q

Accord and satisfaction

A

When a debtor offers to pay and a creditor accepts a lesser amount than the creditor originally claimed was owed.

Accord = agreement
Satisfaction = performance

398
Q

Liquidated debt

A

A debt that is due and certain in amount

399
Q

Predominant factor test

A

A test that courts use to determine whether a contract is primarily for the sale of goods or for the sale of services

400
Q

Retained earnings

A

Portion of a corporations profits that has not been paid out as dividends

401
Q

Articles of incorporation

A

Document that is filed when a business is incorporated and that contains basic info about the corporation

402
Q

Piercing the corporate veil

A

The action of a court to disregard the corporate entity and hold the shareholders personally liable for corporate debts and obligations

403
Q

Quorum

A

Number of members of a decision making body that must be present before business may be transacted

404
Q

Short swing profits

A

Profits earned by a purchase and sale of the same security within a 6 month period

405
Q

What is the purpose of the UCC?

A

Reduce difficulties for businesses conducting trade and commerce

406
Q

What is a characteristic of a legal claim?

A

Remedy is usually monetary damages

407
Q

Which type of trademark receives automatic protection?

A

Fanciful
Arbitrary
Suggestive

408
Q

Which type of trademark never receives protection?

A

Generic

409
Q

Perfect Tender Rule

A

goods tendered must comply with what was contracted

410
Q

When can the acceptance of substantially impaired goods be revoked?

A

When the seller promises to cure and fails within a reasonable amount of time

411
Q

What is an example of a secured creditor?

A

Mortgages, HELOC, and Auto loans

412
Q

What is an example of an unsecured creditor?

A

Credit cards, utilities, and hospitals

413
Q

What is the time period for filing chapter 7 schedules after the filing of the petition?

A

45 days

414
Q

What is the purpose of the means test?

A

To see if the debtor is actually able to pay the creditor during chapter 7 bankruptcy filings

415
Q

Which bankruptcy filing requires a debtor to receive credit counseling?

A

ALL TYPES

416
Q

What is a cramdown provision?

A

Confirmation of a reorganization plan by the court over any objections of a creditor

417
Q

UPA - uniform partnership act

A

Establishes partnership as separate legal entities, not as an aggregate of partners

418
Q

Statement of value

A

What ought to be the case

419
Q

Which type of law primarily governs LLC’s?

A

State law

420
Q

When winding up an LLC, who is paid first from the sales proceeds?

A

Members who are creditors

421
Q

For which circumstance may an individual be personally liable for actions of an LLC?

A

Member personally guarantees a business loan

422
Q

Who are the owners of a corporation?

A

Shareholders

423
Q

Puffery

A

Exaggerated claims used to entice customers into making purchases

424
Q

What is the entity created by the SOX act of 2002?

A

Public Company Accounting Oversight Board (PCAOB)

425
Q

Who are the members of the audit committee of a public company?

A

Outside directors

426
Q

Which measure of the SOX act insures corporate accountability for the information in financial reports?

A

Certification by the CEO and CFO for accuracy of information

427
Q

What is the stakeholder theory?

A

any action that affects stakeholders negatively is an unethical decision

428
Q

Does discovery qualify for patents?

A

No, anything that is not CREATED or INVENTED cannot be patented

429
Q

Do merchants have to follow the mirror image rule?

A

No

430
Q

What do merchant contracts need to address to be effective in terms of the law?

A

WHAT, and HOW MANY

431
Q

Is sending of goods other than discussed a revocation or a breach?

A

Breach

432
Q

What is FOB an indicator of?

A

Identification of a destination

433
Q

What chapter of bankruptcy does not have a trustee?

A

Chapter 11

434
Q

When is the Uniform Partnership Act (UPA) used?

A

When the partnership has no agreement in place

435
Q
A

Business Law For Accountants (3 decks)

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