exam 2 chpater 404-420 Flashcards
1
Q
most imoprtant and pervasive legal relationships is
A
agency
2
Q
a relationship between two parties in which one party( the agent) agrees to represent or act for the other
A
agency
3
Q
in a relationship between two parties, one of the parties is called the
A
agent
4
Q
the _______has the right to control the agent’s conduct in matters entrusted to the agent
A
principal
5
Q
defines agency as “the fiduciary relation which results form the manifestation of conesent by one person to antoher that the other shall act in his behalf and subject to his control, and consent by the other so to act
A
section1 restatement of agency
6
Q
person having a duty created by his or her undertaking to act primarily for another;s benefit in matters connected with the undertaking. as as adjective, a relationship founded on trust and confidence
A
fiduciary
7
Q
normally all employees who deal with third parties are deemed to be
A
agents
8
Q
independent contractors are not employess because by deifntion
A
those who hire them have no control over the details of their physical performance
9
Q
employers are required to pay certain taxes, such as social security and unemployment insurance taxes, for employes but not for
A
independent contractors
10
Q
1.if an employee can exercise considerable control over the details of the work , this would indicate employee status
2.Does the person do a job or run a business that’s different from what the employer does? If yes, they’re likely seen as an independent contractor, not an employee.
3.Is the work usually done under the employer’s direction or by a specialist without supervision?if yes, then employee
A
determining whether a worker has the status of an employee or an independent contractor
11
Q
workers may benefit from having employee status
A
for tax purposes
12
Q
established its own criteria for determining whether a worker is an independent contractor or an employee
A
internal revenue service (IRS)
13
Q
the IRS established its own rule to see if a worker is independent or employee which is
A
the determination of the degree of control the business exercises over the worker
14
Q
the IRS closely scrutinize a firm’s classificaiton of its workers because,
A
employers can avoid certain tax liabilities by hiring independent contractors instead of employees
15
Q
under the copyright act of 1976, any copyrighted work created by an employee within the scope of her or his employment at the request of the employer is a
A
work for hire and the employer owns the copyright to the work
16
Q
agency relationships are normally considered
A
consensual
17
Q
agency relationships typically come about by
A
voluntary consent and agreement between the parties
18
Q
a person must have contractual capacity to be a
A
principal
19
Q
two reasons where agency agreements must be in writing
A
- If the agent is allowed to make a contract that the law says must be written down (like for big deals), then the agent’s authority from the principal also has to be written down. This is called the “equal dignity rule.”
2.the power of attorney, which conferes authority to an agent, must be in writing
20
Q
an agency relationship can be created for
A
any legal purpose
21
Q
most agency relationships are based on
A
expressed or implied agreement that the agent will act for the principal and the principal agrees to have the agent to act
22
Q
if the principal affirms that contract by word or by action, an agency relationship is created by
A
ratification
23
Q
ratification involves a
A
question of intent
24
Q
intent can be expressed by either
A
words or conduct
25
when a principal causes a third person to believe that another person is his or her agent, the third person deals with the supposed____, the ____ is "estopped to deny" the agency relationship
-agent
-principal
26
once the principal-agent relationship has been created
both parties have duties that govern their conduct
27
in a fiduciary relationship, each party owers the other the
duty to act with the utmost good faith
28
generally, the agent owes the principal five duties
1. performance
2.notification
3.loyalty
4. obedience
5.accounting
29
a gratuitous agent cannot be liable for
breach of contract, bc there is no contract
30
gratuitous agent can be liable for
tort liability
31
the duty to act solely for the benefit of his or her principal and not in the interest of the agent or a third party
loyalty
32
principal also owes certain duties to the agent which are
compensation, reimbursement, indemnification, cooperation, and safe working conditions
33
An agent's authority to act can be either
actual or apparent
34
authority declared in clear, direct, and definite terms
express authoirty
35
rule requiring that an agent's authority be in writing if the contract to be made on behalf of the principal must be in writing
equal dignity rule
36
the equal dignity rule does not apply when an agent acts in the presence of a
prinicple or when the agent's act of signing is merely automatic
37
giving an agent a power of attorney confers
express authority
38
authorization for another to act as one's agent or attorney in either specified circumstances or in all situations
power of attorney
39
a public official authorized to attest to the authenticity of signatures
notary public
40
power of attorney can be
special or general
41
when the principal causes a third party to believe that the agent has authority, even though she or he does not
apparent authority
42
ratification occurs when the principal affirms an agents
unauthorized act
43
principals can be considered three different types of disclosed:
disclosed, partially disclosed, or undisclosed
43
liability for contracts formed by an agent depends on how the
principal is classified and whether the actions of the agent were authorized or unauthorized
44
principal whose identity is known to a third party at the time the agent makes a contract with the third party
disclosed principal
45
Principal whose identity is unknown by a third party, but the third party knows that the agent is or may be acting for a principal at the time the agent and the third party form a contract
partially disclosed principal
46
principal whose identity is unknown by a third party, and that person has no knowledge that the agent is acting for a principal at the time the agent and the third party form a contract.
undisclosed principal
47
agency law is similar to contract law that both an agency and a contract can be termined by
an act of the parties or by operation of law
48
for an agent's apparent authority to be terminated
third persons may also need to be notified that the agency has been teminated
49
a doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment
respondeat superior
50
indirect liability imposed on a supervisory party for the actions of a subordinate because of the relationship between the two parties
vicarious liability
51
entrepreneurs primary motive for undertaking a business enterprise is to make
profits
52
question faced by anyone who wishes to start a business is
what form of business organization to use
53
three major forms to structure business enterprises:
sole proprietorship, the partnership, and corporation
54
The simplest form of business organization, in which the owner is the business
sole proprietorship
55
more than 2/3 of all US business are
sole proprietorships
56
major advantage of sole proprietorships
has right to recieve all profits
57
arises from an agreement, express or implied, between two or more persons to carry on a business for profit
partnership
58
prove the existence of a partnership:
sharing both profits and losses
59
modern law DOES treat partnership as
an aggregate of the individual partners rather than as a separate legal entity in one situation
60
a business entity that has no tax liability
pass-through entity
61
tax return submitted by a partnership that only reports the business's income and losses
information return
62
agreements to form a partnerships can be
written, oral, or implied by conduct
63
written agreement that sets forth each partner's rights and obligations with respect to the partnership
articles of partnership
64
common terms included in a partnership agreement
basic structure, capital contributions, sharing of profits and losses, management and control, dissociation and dissolution
65
partnership liability imposed by a court on persons who have held themselves out to be partners, even though they were not and others have detrimentally relied on their representations
partnership by estoppel
66
the rights of partners in a partnership relate to the following areas
management, interest in the partnership, compensation, inspection of book, accounting and property
67
in a general partnership, all partners have equal rights in
managing the partnership
68
unless the partners agree otherwise, each partner has one vote in management matters regardless of
the proportional size of his or her interest in the firm
69
the majority rule controls decisions in ordinary matters connected with partnership business
unless otherwise specified in the agreement
70
an accounting of partnership assets or profits is required
to determine the value of each partners share in the partnership
71
property acquired by a partnership is the property of the partnership and not of the
partners individually
72
partnership property is owned by the partnership as an entity and not by
the individual partners
73
in a partnership law, an order granted by a court to a judgmenet creditor that entitles the creditor to attach a partner's interest in the partnership
changing order
74
Duties and liabilites of partners are derived from
agency law
75
each partner is a ____ of the partnership in carrying out the usual business of the firm
general agent
76
The diuciary duties a partner owes to the partnership and to the other partners are the
duty of care and duty of loyalty
77
Under the UPA, a partner's duty of care involves refraining from
grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law
78
the duty of loyalty required a partner to account to the partnership for any
property, profit, or benefit derived by the partner from the partnership's business or the use of its property
79
the extent of implied authoirty is geneally broader for partners than for
ordinary agents
80
third party must sue all of the partners as a group, but each partner can be held liable for the full amount
join liability
81
third party has the option of suing all of the partners together or one or more of the partners separately
joint and several liability
82
occurs when a partner ceases to be associated in the carrying on of the partnership business
dissociation
83
based on the amount that would have been distributed to the partner if the partnership had been wound up on the date of dissociation
buyout price
84
termination of a partnership is referred to as
dissolution
85
the actual process of collecting, liquidating, and distributing the partnership assets
winding up
86
A partnership's assets are distribued according to the following priorities
1. payment of debts, including those owned to partner and nonpartner creditors
2. return of capital contributors and distribution of profits or partners
87
hybrid form of business designed mostly for professionals who normally do business as partners in a partnership
limited liability partnership
88
LLP is attractive for two cateogires of busienss
professional service firms and family businesses
89
partnership consisting of oneor more general partners and one or more limite partners
limited partnership
90
assumes management responsbility for the partnership and so has full responsibility for the partnership and for all of its debts
general partner
91
contributes cash or other property and owns an interest in the firm but does not undertake any management responsbilites and is not personally liable for partnership debts beyond the amount of his or her investment
limited partner
92
not only must a limited partnership have at one one general partner and one limited partner, but partners must also sign a
certificate of limited partnership
93
document that must be filed with a designated state official to form a limited partnerhsip
certificate of limited partnership
94
a general partner has the power to volunatarily
dissociate or withdraw from a limited partnership unless thhe partnership agreement specifies otherwise
95
in limited partnership, general partner's voluntary dissociation from the firm normally will lead to dissolution unless
All partners agree to continue the business
96
bankruptcy of a limited partner, does not dissolve the partnership unless
it causes the bankruptcy of the firm
97
limited liability of limited partners is conditional:
limited liability exists only so long as the limited partner doe snot participate in management
98
hybrid form of business enterprise that offers the limited liability of a corporation and the tax advantages of a partnership
limited liability company
99
a person who has an ownership interest in a limited liability company
members
100
the document filed with a designed state official by which a limited liability company is formed
articles of organization
101
main disadvantage of the LLC is that
state LLC statutes are not uniform
102
Members of an LLC can decide how to operate the various aspects of the business by forming an
operating agreement
103
all of the members participate in management, and decisions are made by majority vote
member-managed LLC
104
the members designated a group of persons to manage the firm
manager-managed LLC
105
corporation is creature of
statute
106
codification of modern corporation law that has been influential in the drafting and revision of state corporation stautes
model business corporation act
107
legal entity created and recognized by state law.
corporation
108
in a corporation, the responsibility for the overall management of the firm is entrusted to a
broad of directors, whose members are elected by the shareholders
109
when corporation earns profits, it can either pass them on to its shareholders in the form of
dividends or retain them as profits
110
portion of a corporations profits has not been paid out as dividends to shareholders
retained earning
111
major disadvantage of the corporate business form is
double-taxation feature
112
company whose business activity consists of holding shares in another company
holding company
113
in a given state, a corporation that is organized under the law of that state
domestic corporation
114
corporation that does business in that sttae but is not incorporated there
foreign corporatoin
115
corporation formed in another country but doing business in the US
alien corporation
116
public corporation is one formed by the government to meet
political or governmental purpose
117
any corporation whose shares are publicly traded in securities markets
publicly held corporations
118
corporations formed for purposes other than making profit are called
nonprofit or not-for-profit
119
one whose shares are held by members of a family or by relatively few persons
close corporation
120
can provide for proportional control when one of the original shareholder dies
shareholder agreement
121
close business corporation that has most corporate attributes, including limited liability, but qualifies under the internal revenue code to be taxed as a partnership
s corporation
122
for-profit corporation that seeks to have a materiall positive impact on society and the environment
benefit corporation
123
The primary document to incorporate a business is called the
articles of incorporation
124
the internal rules of management adopted by a corporation at its first organizational meeting
bylaws
125
if a corporation has substantially complied with all requiremetns for incorporation, the corporation is said to have
de jure existence
126
If someone else ends up in a legal dispute with this group, the group can't suddenly say they're not a corporation to avoid responsibility
this is called an estoppel
127
when a corporation is created, the express and implied powers necessary to achieve its purpose
also comes into existence
128
the following order of priority is used when conflicts arise among documents involving corporations
1. us constitution
2. state constitution
3.state statutes
4. the articles of incorporation
5. bylaws
6. resolutions of the board of directors
129
a corporate officer does not have the authority to bind the corporation to an action that wil
greatly affect the corporate purpose or undertaking
130
this means beyond the powers
ultra vires
131
the action of a court to disregard the corporate entity and hold the shareholders personally liable for corporate debts and obligations
piercing the corporate veil
132
to put funds or goods together into one mass so that they are mixed to such a degree that they are no longer have separate identities, as when personal and corporate interests are mixed together to the extent that the corporation has no separate identity
commingled
133
part of the process of corporate formation involves
corporate financing
134
corporations are normally financed by the issuance and sale of
corporate securities
135
stocks, bonds, or other items that represent an ownership interest in a corporation or a promise of repayment of debt by a corporation
securities
136
represent the purchase of ownership in the business firm
stocks or equity securities
137
an ownership interest in a corporation, measure in units of shares
stocks
138
a security that evidence a corporate debt
bonds
139
represents the borrowing of funds by firms
bonds or debt securities
140
stocks represent____ and bonds represent___-
owernship, debt
141
bonds are issued by business firms and by governments at all levels as evidence of the
funds they are borrowing from investors
142
stocks do not have a
fixed dividend rate
143
interest on bonds must always be paid whether or not any
profit is earned
144
stockholders can elect the board of directors
which controls the corporation
145
bondholders usually have no voice in, or control over
management of the corporation
146
stocks do not have a maturity date, the corporaiton usually does not
repay the stockholderbo
147
bonds have a maturity date, when the corporation is to repay the bonholder
the face value of the bond
148
all corporations issue or offer to sell stocks, this is the usual definition of a
corporation
149
corporations do not necessarily issue
bonds
150
stockholders have a claim against the property and income of a corporation after all creditors
claims have been met
151
bondholers have a claim against the property and income of a corporation that must be met
before the claims of stockholders
152
bonds are issued by business firms and by governments at all levels as evidence of the funds they are borrowing from
investors
153
bonds normally have a
designated maturity date
154
another way corporations can obtain financing
issuing stocks
155
true ownership of a corporation is represented by
common stock
156
common stock provides a proportionate interest in the corporation with regard to
1. control (voting rights),
2. earnings and
3. net assets
157
stock with preferences
preferred stock
158
corporations traditionally obtain financing thorugh
issuing and selling securities in the capital market
159
financing provided by professional, outside investors to new business ventures
venture capital
160
private equity firms obtain their capital from
wealthy investors in private markets
161
Funds invested by a private equity firm in an existing corporation, usually to purchase and reorganize it
private equity capital
162
cooperative activity in which people network and pool funds and other resources via the internet to assit a cause or invest in a venture
crowdfunding
163
a corporation typically extends it operations by
combining with another corporation through a merger, a consolidation, share exchange, purchase of assets, or purchase of controlling asset
164
consolidation generally is used as a generic term to refer to
all types of combinations, including mergers and acquisitions
165
involves the legal combination of two or more corporations in such a way tjhat
only one of the corporations continues to exist
166
two or more corporations combine in such a way that each corporation ceases to exist and a new one emerges
consolidation
167
some or all of the shares of one corporation are exchanged for some or all of the shares of another corporation
share exchange
168
a merger that can be accomplished without the approval of the shareholders of either corporation because one company owns at least 90% of the outstanding shares of each class of stock of the other corporaion
short-form merger
169
what if a shareholder disapproves of a merger or a consolidation but is outvoted by the other shareholders
the law recognizes that a dissenting shareholder should not be foreced to become an unwilling shareholder in a corproation that is new or different from the one in which the shareholder originally invested
170
the right of a dissenting shareholder, who objects to a merger or consolidation of the corporation
appraisal right
171
appraisal rights normally extend to
regular mergers, consolidations, share exchanges, short-form mergers, and sales of sustainability all of the corporate assets not in the ordinary course of business
172
shareholders may lose their appraisal rights if
they do not adhere precisely to the procedures prescribed by statute
173
the corporation that is selling all of its assets is substantially changing its business position and
its ability to carry out its corporate purposes
174
the acquisition of control over a corporation through the purchase of a substantial number of the voting shares of the corporation
takeover
175
an offer made by one company directly to the shareholders of another company to purchase their shares of stocks
tender offer
176
to resist a takeover, a target company can make a
self-tender
177
when threatened with a takeover, management makes the company less attractive to the raider by selling the companys most valuable asset to a third party
crown jewel
178
when takeover is successful, top management usually is changed, company may establish sepcial termination or retirement benefits that must be paid to top managers if theyy are "retired".
golden parachute
179
the target corporation issues to its stockholders rights to purchase additional shares at low prices when ther eis a takeover attempt
poison pill
180
the target corporation solicits a merger with a third party, which then makes a better tender offer to the targets shareholders
white knight
181
Termination of a corporations existence has two phases
dissolution and winding
182
the legal death of the artificial "person" of the corporation
dissolution
183
dissolution can be brought about by the following
1. an act of the state
2. an agreement of the shareholders and the board of directors
3. expiration of a time period stated in the certificate of incorporation
4. court order
184
the process by which corporate assets are liquidated, or converted into cash and distributed among creditors and shareholders
winding up
185
dissolution can be either
voluntary or involuntarywi
186
Winding up may differ to some extent based on whether
voluntary or involuntary dissolution has occured
187
two possible methods to voluntarily dissolve a corporation
1. by the shareholders unanimous vote to initiate dissolution proceedings
2. by a proposal of the board of directors that is submitted to the shareholders at a shareholder's meeting
188
when a corporation is dissolved voluntarily , the corporation must file
articles of dissolution with the state and notify its creditors of the dissolution
189
the court may dissolve the corporation if the controlling shareholders or directors have engaged in
fraudulent, illegal, or oppressive conduct
190
When the dissolution is involuntary, the court will appoint
a receiver to wind up the corporate affairs and liquidate corporate assets
191
legal entity formed in compliance with statutory requirements that is distinct from its shareholer owners
corporation
192
distribution of corporate profits to the corporations shareholderes in proportion to the number o shares held
Dividend
193
legal combination of two or more corporations in such a way that only one corporation continues to exist
merger
194
in corporate dissolution, a court-appointed person who winds up corporate affairs and liquidates corporate assets
receiver
195
