Chapter 7 - Corporations, Contracts, and Antitrust Legal Issues

Question 1

corporation

Answer 1

an organization—usually a group of people or a company—authorized by the state to act as a single entity and recognized as such in law for certain purposes

Question 2

articles of incorporation

Answer 2

a set of formal documents filed with a government body to legally document the creation of a corporation

Question 3

partnership

Answer 3

an arrangement where parties, known as business partners, agree to cooperate to advance their mutual interests

Question 4

sole proprietorship

Answer 4

a type of enterprise owned and run by one person and in which there is no legal distinction between the owner and the business entity

Question 5

limited partnership

Answer 5

a partnership where one of the partners has limited liability but also limited power

Question 6

joint venture

Answer 6

a business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task

Question 7

shareholder

Answer 7

also known as stockholder; an individual or institution that legally owns one or more shares of the share capital of a public or private corporation

Question 8

share capital

Answer 8

the portion of a corporation’s equity that has been obtained by the issue of shares in the corporation to a shareholder, usually for cash

Question 9

share

Answer 9

one of the equal parts into which a company’s capital is divided, entitling the holder to a proportion of the profits

Question 10

capital

Answer 10

wealth in the form of money or other assets owned by a person or organization or available or contributed for a particular purpose such as starting a company or investing

Question 11

piercing the corporate veil

Answer 11

a situation in which courts put aside limited liability and hold a corporation’s shareholders or directors personally liable for the corporation’s actions or debts

Question 12

alter ego

Answer 12

an alternative self, which is believed to be distinct from a person’s normal or true original personality

Question 13

closed corporation

Answer 13

companies with a small number of shareholders that are held by managers, owners, and even families

Question 14

for-profit corporation

Answer 14

a corporation that is allowed to distribute its income to the shareholders, directors, officers, and other individuals for private gain

Question 15

not-for-profit corporation

Answer 15

a corporation that may not distribute its income for the private gain of individuals; it is allowed to pay reasonable salaries but must generally use the income to improve the corporation

Question 16

equity

Answer 16

the value of the shares issued by a company

Question 17

due diligence

Answer 17

the care that a reasonable person exercises to avoid harm to other persons or their property

Question 18

ultra vires

Answer 18

an act which requires legal authority but is done without it

Question 19

intra vires

Answer 19

an act done with legal permission

Question 20

contract

Answer 20

a legally enforceable oral or written agreement

Question 21

elements of a contract

Answer 21

(1) mutual assent, expressed by a valid offer and acceptance
(2) adequate consideration of the agreement and its consequences
(3) legal capacity (must be sane and an adult)
(4) legality (not a criminal arrangement, not forced on someone against their will)

Question 22

assent

Answer 22

the expression of approval or agreement

Question 23

consent

Answer 23

permission for something to happen or agreement to do something

Question 24

breach of contract

Answer 24

a failure, without legal excuse, to perform any promise that forms all or part of the contract

Question 25

duress

Answer 25

a situation whereby a person performs an act as a result of violence, threat, or other pressure against the person

Question 26

exculpatory contracts

Answer 26

a contract that prevents one party from holding the other party liable for damages related to the contract. Exculpatory clauses are used quite often in purchases such as the ones included with an amusement park or plane ticket.

Question 27

accession

Answer 27

(1) the act or process by which someone rises to a position of honor or power
(2) something added
(3) the act of assenting or agreeing

Question 28

adhesion contracts

Answer 28

also called a standard form contract, leonine contract, take-it-or-leave-it contract, or boilerplate contract; a contract between two parties, where the terms and conditions of the contract are set by one of the parties, and the other party has little or no ability to negotiate more favorable terms and is thus placed in a “take it or leave it” position

Question 29

indemnification clauses

Answer 29

also known as hold harmless agreements, they transfer the liability of one party’s action away from the other

Question 30

indemnity

Answer 30

a contractual obligation of one party to compensate the loss incurred to the other party due to the acts of the indemnitor or any other party

Question 31

indemnitor

Answer 31

the person or organization that holds another (the indemnitee) harmless in a contract

Question 32

warranty

Answer 32

a written guarantee, issued to the purchaser of an article by its manufacturer, promising to repair or replace it if necessary within a specified period of time

Question 33

boilerplate

Answer 33

any written text that can be reused in new contexts or applications without significant changes to the original. The term is used in reference to statements, contracts and computer code, and is used in the media to refer to hackneyed or unoriginal writing

Question 34

hackneyed

Answer 34

(of a phrase or idea) lacking significance through having been overused; unoriginal and trite

Question 35

trite

Answer 35

(of a remark, opinion, or idea) overused and consequently of little import; lacking originality or freshness

Question 36

express contract

Answer 36

an exchange of promises in which the terms by which the parties agree to be bound are declared either orally or in writing, or a combination of both, at the time it is made

Question 37

implied contract

Answer 37

A contract that is found to exist even when its terms are not explicitly stated because (1) the parties assumed a contract existed (implied-in-fact contract), or (2) denying the contract’s existence would result in unjust enrichment to one of the parties (implied-in-law contract)

Question 38

learned intermediary

Answer 38

a doctrine of products liability law: the manufacturer of a prescription drug fulfills its duty to warn of potentially harmful effects of the drug by informing the prescribing physician (who in this case, is called the learned intermediary)

Question 39

abandonment of care

Answer 39

a form of medical malpractice that occurs when a physician terminates the doctor-patient relationship without reasonable notice or a reasonable excuse, and fails to provide the patient with an opportunity to find a qualified replacement care provider

Question 40

unilateral

Answer 40

(of an action or decision) performed by or affecting only one person, group, or country involved in a particular situation, without the agreement of another or the others

Question 41

antitrust

Answer 41

relating to legislation preventing or controlling trusts or other monopolies, with the intention of promoting competition in business

Question 42

trust (corporate or property meaning)

Answer 42

(1) a combination of firms or corporations formed by a legal agreement, especially one that reduces or threatens to reduce competition
(2) a property interest held by one person for the benefit of another

Question 43

vertical restraint of trade

Answer 43

two or more entities at different levels in a distribution chain act together to restrain trade (e.g. a manufacturer of hospital supplies collaborates with a wholesaler to keep prices artificially high)

Question 44

horizontal restraint of trade

Answer 44

competitors agree to fix prices, divide the market between themselves, or try to exclude others from competing in the same market

Question 45

Federal Trade Commission (FTC)

Answer 45

an independent agency of the United States government whose principal mission is the enforcement of civil U.S. antitrust law and the promotion of consumer protection

Question 46

per se antitrust violation

Answer 46

an violation of antitrust law that is automatic and requires no further review (e.g. price fixing, division of markets, etc.)

Question 47

rule of reason analysis

Answer 47

A type of antitrust analysis used to determine the legality of agreements (written or oral) that may restrict competition. Under the rule of reason, courts examine both the positive and negative effects of an agreement before determining whether it violates antitrust laws.

Question 48

economic credentialing

Answer 48

the use of economic criteria unrelated to quality of care or professional competence in determining a physician’s qualifications for initial or continuing hospital medical staff membership or privileges

Question 49

delineation

Answer 49

(1) the action of describing or portraying something precisely
(2) the action of indicating the exact position of a border or boundary

Question 50

noncompete agreement

Answer 50

an agreement in which an individual agrees not to compete directly or work for a competitor for a certain period of time after leaving his or or her employment