R7 Business Law Flashcards
Chapter 13 -Personal reorganizations (similar to Chapter 11) for individuals.
The repayment period cannot exceed five years; the time period is based on the family income as computed. The confirmation of the plan must result in a hearing no sooner than 20 days or more than 45 days after the meeting with the creditors. When considering disposable income of the debtor, the Bankruptcy Code excludes up to 15% of the debtor’s gross income for charitable contributions, and reasonable costs of health insurance for the debtor and the debtor’s family may be considered.
Principal vs agent
While the agent must account to the principal for his activities, the principal has a contractual obligation to pay the agent as shown in the contract. For a commission agreement, the principal must also keep adequate records in order to calculate the commission amount.
The principal must also reimburse the agent for expenses incurred in carrying out the agency activities.
Respondeat superior
Respondeat superior—a legal theory whereby an employer is liable to third parties for the acts of an employee
Parol evidence
Parol evidence is a legal rule of contract interpretation that states that extrinsic (oral or written) evidence (i.e., outside the contract) is not admissible to add to, alter, or vary the terms of a written contract. All preliminary negotiation should have been merged into the writing.
Despite the parol evidence rule, oral evidence may be admitted as proof:
of fraud, misrepresentation, duress, undue influence, lack of consideration, or illegality of the subject matter (constitutes proof, which destroys the contract).
of an oral condition precedent to the written contract: proof that the parties agreed orally to a condition that had to be fulfilled before the contract became effective.
to explain an ambiguity or omission: evidence cannot contradict the terms of the contract but can explain them.
of a subsequent modification (oral or written) made to the contract. (Oral modification is acceptable if it is supported by consideration and does not violate the statute of frauds.)
Parol evidence
However, the parol evidence rule does not bar the introduction of evidence concerning modification to the contract
Offer
An offer is terminated due to the death of either the offeror or offeree. When Opal, the offeror, dies the offer is terminated.
Perfection
Under the Uniform Commercial Code (U.C.C.) Secured Transactions Article, perfection of a security interest in a negotiable instrument is achieved only by the creditor taking possession of the instrument.
Lien holders
Mechanic’s liens and artisan’s liens are liens created by statute for the benefit of creditors who have rendered services associated with specific property. In order to enforce these statutory liens, the lienholder is required to give notice of impending legal action before selling the debtor’s property. Notice exists in multiple capacities and may include any of the following:
Rule 506
Rule 506 allows exemption for an offering to up to 35 unaccredited (but sophisticated) investors. It says nothing about notification of the SEC. It is not acceptable for the offering to be made through a general solicitation or advertising, unless the advertising includes only accredited investors and the company made a reasonable attempt to verify the investors were truly accredited.
Approval of state
Corporations and limited liability companies are business organizations that are legal entities separate from the shareholders (members). A limited liability partnership is a hybrid between a corporation and a partnership. All of these organizational types require some type of formal filing with the state in which they are located.
Formation of a general partnership, however, requires no interaction with state government.
Agent responsibility
The agent is empowered to do whatever is necessary to fulfill the purpose of the agency “in the ordinary course of business.” Clearly, buying insurance to protect an asset is an act within the normal scope of business.
Contract
f it is possible to complete a contract within one year, the contract is enforceable.
The statute of frauds requires a contract to be in writing if the contracts which cannot be completed within one year. Since this contract can be completed within one year, the statute of frauds does not require it to be in writing and the oral contract is enforceable. If the contract could not be performed within a year, it would be necessary for the contract to be written and signed for it to be enforceable.
Novation vs substituted contract
A novation, by definition, requires at least one party of the original contract be substituted for by a new party, and the new party assumes all of the responsibilities of the original party as if that original party was never part of the contract (i.e., a discharge of that original party).
A substituted contract involves the original parties to an agreement whereby all parties agree to substitute the terms and conditions of a new or amended contract in the place of the original contract. As such, the parties are released from their duties to abide by and act upon the original contract, but continue in a contractual relationship with each other in the substituted contract.
Partnership
When one general partner commits a tort while engaged in the course and scope of the business of the partnership, each partner is jointly and severally liable to the injured party. This means that any one of the partners could be held liable for the full amount of the obligation if the partnership fails to pay the debt.
Since the general partnership is not a legal entity separate and distinct from the partners regarding legal liability, the partnership cannot be held legally liable.
