I posted my business law terms I wrote as my study guide in college. I will try to keep these terms updated, but if you have any legal questions consult with a licensed attorney.
The reason I do this is so you understand what legal professionals say without paying the high costs of interpretation.
I. International Law
1. Treaties: A formally signed and ratified agreement formed between two or more independent nations.
2. Comity: Courtesy among political entities (nations, states, or courts of different jurisdictions), involving esp. mutual recognition of legislative, executive, and judicial acts.
3. Act of State Doctrine: A doctrine that provides the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own territory.
4. Sovereign Immunity: 1). A government’s immunity from being sued in its own courts without its consent. 2). A State’s immunity from being sued in federal court by the state’s own citizens.
5. Foreign Sovereign Immunities Act (1976): A federal statute providing individuals with a right of action against foreign governments, under certain circumstances, to the extent the claim arises from private, as opposed to the public acts of the foreign state.
6. Foreign Corrupt Practice Act (1977): A doctrine that prohibits U.S. businesspersons from bribing foreign officials to secure advantageous contracts.
II. Contracts
7. Bilateral v. Unilateral Contracts:Commitment: Two types;
1. Bilateral- a bilateral contract is a “promise for a promise.” No performance, such as a payment of money or the delivery of goods, need take place for the bilateral contract to be formed. The contract comes into existence at the moment the promises are exchanged. For example, Mike wants to sell his car and Joe offered to buy it after payday if Mike agrees to hold onto the car until payday.
2. Unilateral- In contrast to bilateral, unilateral is a “promise for an act” the offer is phrased so the offeree can accept the offer only by completing the contract performance. For example, Mary offers Dan $20 after he goes to the liquor store for her and brings back two cases of low carb beer.
8. The 4 elements of Contract:
(1). Agreement- A agreement to form a contract includes an offer and an acceptance. One party must offer to enter into a legal agreement, and another party must accept the terms of the offer.
(2). Consideration- Consideration is any promises made by the parties to the contract must be supported by legally sufficient and bargained-for consideration, something of value received or promised.
(3). Contractual capacity- Both parties entering into the contract must have the contractual capacity to do so; the law must recognize them as possessing characteristics that qualify them as competent parties.
(4). Legality- The contract’s purpose must be to accomplish some goal that is legal and not against public policy.
9. Implied Contract: Implied-in-fact-Unspoken understanding between parties through the conduct rather than words. For an implied-in-fact contract to arise, certain requirements must be met: 1.) The plaintiff furnished some service or property; 2). the plaintiff expected to be paid for that service or property, and the defendant knew or should have known that payment was expected; 3). the defendant had the chance to reject the services or property and did not. For example, Joe drives into Jiffy Lube, asks for the advertised oil change special, and leaves to go across the street before the completion of the service. Joe expects his oil changed and the store manager expects to be paid for the service.
10. Quasi-Contract: Fictional contracts created by the courts and imposed on parties to avoid the unjust enrichment of one party without a contract, for the interests of fairness and justice. Under the doctrine of quasi-contract, a plaintiff may recover monetary compensation owed under a contract implied by law in quantum meruit, Latin for “as much as he deserves.” For example, George watches Bill all winter long for the snow removal service intended for the next-door neighbors. The court can rule for the payment because George benefited from the service.
11. Void v. Voidable Contract:
Void contract- element missing; therefore, no contract at all. For example, the contract is illegal because the party was underage.
Voidable contract- the party or parties has a right to cancel or ratify (make valid) the contract. For example, fraud and duress, and a minor child at his/her option.
12. Acceptance/Rejection/Revocation:
Acceptance: A voluntary manifestation of assent by the offeree to the terms of the offer in a manner invited or required by the offer.
Rejection: The offeree can reject an offer by words or conduct evidencing intent not to accept.
Revocation: the offeror can revoke the offer, as long as the revocation is communicated to the offeree before the offeree accepts.
13. Consideration: The thing of 1) legal value that is 2) bargained for and given in exchange for the act or promise.
Legal sufficiency of consideration involves the requirement that consideration be something of legally sufficient value in the eyes of the law. In extreme cases, a court may consider the adequacy of consideration in terms of its amount or worth because inadequate consideration may indicate fraud, duress, or undue influences was involved that the element of bargained-for exchange was lacking.
Past consideration is no consideration. Promises made in return for actions or events that have already taken place are unenforceable. In short, you can bargain for something now or in the future but not for something that has already taken place.
14. Statute of Frauds: The Statute of Frauds is a rule of law that requires certain kinds of contracts to be evidenced in writing and must be signed by the person seeking the enforcement of the contract. The Statute of Frauds is a defense to a breach of contract cause of action. There are six following types of contracts are said to fall “within” or “under” the Statute of Frauds and therefore, are required to be in writing or evidenced by writing.
· A contract by its own terms cannot be performed within one year.
· Any contract that is possible to complete of less than 1 year is not a Statute of Frauds contract and it is not needed to be in writing. If the contract is probable for completion in less than 1 year, than it is a Statute of Frauds contract and it is required to be in writing.
· The Statute of Frauds requires legal sufficiency of the writing in either a written contract or a written memorandum evidencing an oral contract signed by the party against whom enforcement is sought, except when there is a legally recognized exception, such as partial performance.
· For the contract to be legally sufficient, the writing must contain all of the material terms of the agreement. The court must be able to ascertain the material terms to be certain and definite, and signed by the person whom the contract is enforced.
· There are exceptions to the legal sufficiency when the contract is oral and not in writing. First, the party admits on public record in court that there is an existence of a contract. Second, is there the Doctrine of partial performance? The Doctrine of partial performance is when the oral contract supposed to be in writing will be enforced to the extent that the contract is to be performed. Third, promissory estoppel is the enforcement of an oral contract that otherwise would be unenforceable, based on detrimental reliance was foreseeable to the person making the promise and if injustice can be avoided only by enforcing the promise.
Statute of Frauds under Article 2. Under this provision, oral sales contracts for goods priced at $5,000 or more will be enforceable despite the absence of writing in the circumstances. Merchants can satisfy the sufficiency of the writing requirements if one of the merchants sends a written confirmation to the other merchant. The communication must show the terms of the agreement to the identity and quantity of the goods, and the merchant getting the confirmation must have reason to know of its contents. Unless the merchant who gets the confirmation repudiates the letter within ten days of receipt, he or she is bound by the contract regardless of a signature.
Special exceptions under the UCC- oral contracts for the sale of goods and confirmed in writing between merchants may be enforced in certain circumstances to include the quantity of items agreed in the oral contracts.
15. Discharge: There are four ways to discharge a contract by agreement: Discharge by recission, discharge by novation, discharge by substituted agreement, and discharge by accord and satisfaction.
Discharge by recission is the process by which a contract is canceled or terminated and the parties are returned to the positions they occupied prior to forming it. In sum, contracts that which neither party has performed can be rescinded by agreement. However, contracts on which one party has performed can be rescinded only if the party who has performed receives consideration for the promise to call off the deal.
Discharge by impossibility of performance is when it is not objectively possible to perform the terms of the contract by the destruction of the subject matter of the contract or, death or disability in a personal service contract or, subsequent illegality.
16. Consequential Damages: Special damages that compensate for a loss that is indirect or immediate relating to a business, profession, or property that is easily calculable in monetary terms. The special damages must have been reasonably foreseeable at the time of the breach or injury occurred for the Plaintiff to collect.
17. Compensatory Damages: Monetary damages deemed to compensate the harmed party for the actual direct losses and costs sustained and provable as a direct result of the injury or damages suffered.
(I.e. sale of goods-amount equal to the difference between the contract price and the market price.
Sale of land-majority rule, (seller’s breach awards the property. Unavailable remedy or Buyer’s breach is awarded the difference between the contract price and the market price of the land); minority rule, (seller’s breach is not deliberate, allows the purchaser to recover any down payment plus any expenses occurred, title fees, attorneys, etc…).
Construction contracts-the owner can breach three different ways: Before performance begins, (awards the contract cost less the materials and labor); During performance (recover the profits plus costs in partial construction), and After performance has been completed (recover the entire contract price plus interest).
The builder can breach two different ways: Failing to perform or partial performance before quitting, (damages is the cost of completion, which includes reasonable compensation for any delays in performance). Finishing late, (damages are the loss of use. If the contractor substantially performs, the courts will calculate the cost-of-completion formula if the continuation of the project does not produce substantial economic waste for the completion)).
18. Incidental Damages: 1). Losses reasonably associated with or related to actual damages. 2). A seller’s commercially reasonable expenses incurred in stopping delivery or in transporting and caring for goods after a buyer’s breach. UCC§ 2-710. 3). A buyer’s expenses reasonably incurred in caring for goods after a seller’s breach. UCC § 2-715(1).
19. Specific Performance: An equitable remedy that requires the breaching party to fulfill the exact terms of a contract, promise, obligation, or decree mandating a remedy and that is used when legal remedies; as monetary damages, are inadequate and the subject matter of the contract is unique. When specific performance is unavailable, then monetary damages be awarded instead. This remedy is quite attractive to the nonbreaching party for three reasons. First, the nonbreaching party need not worry about collecting damages awarded by the court. Second, the nonbreaching party need not spend time looking for an alternative contract. Third, the performance is more valuable than the money damages.
III. UCC
20. UCC Article 2—what does it cover? Applies to the contractual sales of goods.
21. Warranty of Title—UCC §2-312: An implied warranty made by a seller that the seller has good and valid title to the goods sold and that the transfer of the title is rightful.
22. Express Warranty UCC §2-313: A seller’s or lessor’s oral or written promise, ancillary to an underlying sales or lease agreement, as to the quality, description, or performance of the goods being sold or leased.
It is created by the following: (1) an affirmation of fact or promise made by the seller to the buyer relating to the goods that becomes the basis of the bargain; (2) a description of the goods becomes part of the bargain; or (3) a sample or model made part of the basis of the bargain.
23. Implied Warranty of Merchantability, UCC 2-314, 2A-212: A warranty that the property is fit for the ordinary purposes for which it is used.—Sometimes shortened to warrant of merchantability.
24. Implied Warranty of Fitness for Particular Purpose UCC §9-10, at 527 (4th ed. 1995): A warranty—implied by law if the seller has reason to know of the buyer’s special purposes for the property—that the property is suitable for those purposes.—Sometimes shortened to Warranty of Fitness.
25. Disclaimer of Warranties, UCC 2A-214(4): An oral or written statement intended to limit the seller’s liability for defects in the goods sold. In some circumstances, printed words must be specific and conspicuous to be effective, such as to include the word “Merchantability” and “as-is with all faults.”
26. Good Faith in UCC § 1-203—Merchants: For UCC Article 2 to apply, a person must qualify in at least one of three ways as a merchant: (1) A merchant is a person who deals in the goods of the kind involved in the sales contract; or (2) A merchant is who, by occupation, holds himself out as having knowledge and skill unique to the practices or goods involved in the transaction; or (3) A person who employs a merchant as a broker, agent, or other intermediary has the same status of merchant in that transaction.
27. Open Price Terms in the UCC § 2-305:
(1) The parties if they so intend can conclude a contract for sale even though the price is not settled. In such case, the price is a reasonable price at the time of delivery if
(a) nothing is said as to price; or
(b) the price is left to be agreed by the parties and they fail to agree; or
(c) the price is to be fixed in terms of some agreed market or other standard as set
or recorded by a third person or agency and it is not so set or recorded.
(2) A price to be fixed by the seller or by the buyer means a price for him to fix in good faith.
(3) When a price left to be fixed otherwise than by agreement of the parties fails to be fixed through fault of one party, the other may at his option treat the contract as cancelled or himself fix a reasonable price.
(4) Where, however, the parties intend not to be bound unless the price be fixed or agreed and it is not fixed or agreed there is no contract. In such a case the buyer must return any goods already received or if unable to do so must pay their reasonable value at the time of delivery and the seller must return any portion of the price paid on account.
28. Perfect Tender Rule, UCC § 2-601, 2A-509: If goods or tender of delivery fails in any respect to conform to the contract, the buyer or lessee has the right to accept the goods, reject the entire shipment, or accept part and reject part.
Exceptions to the Perfect Tender Rule—If the parties have agreed, for example, that defective goods or parts will not be rejected if the seller or lessor is able to repair or replace them within a reasonable period of time, the perfect tender rule does not apply.
29. Mirror Image Rule, UCC §2-207(1): Requires that the terms of the acceptance exactly match those of the offer.
However, The UCC generally takes the position that if the offeree’s response indicates a definite acceptance of the offer, a contract is formed, even if the acceptance includes terms additional to or different from those contained in the offer.
IV. Constitutional Law
30. Freedom of Speech and its Limits: The First Amendment guarantees the freedom of religion, speech, and the Press and the rights to assemble peaceably and to petition the Government.
However, pornography, some business advertisements, hate speech, and any speech that causes harm is not protected.
31. Interstate Commerce Clause: US Const. Art. I, § 8, cl. 3, which gives Congress the exclusive power to regulate commerce among the States, with foreign nations, and with Indian tribes.
V. Tort
32. Assault and Battery Defenses:
1.) Consent- When a person consents to the act that damages her/him, there is generally no liability for the damage done.
2.) Self-Defense- An individual who is defending his/her life or physical well-being can claim self-defense. In a Real or Apparent Danger, Reasonable Force may be used to prevent harmful contact.
3.) Defense of Property- Reasonable force may be used in attempting to remove intruders from one’s home, although force that is likely to cause Death or Great Bodily Injury normally cannot be used just to protect property.
4.) Defense of Others-When an individual defends the life or physical well-being of another person.
33. False Imprisonment: Detaining others without consent.
34. Intentional Infliction of Emotional Distress: Outrages conduct that causes damage.
35. Defamation (Slander & Libel) & Defenses: Defamatory statements wrongfully hurting a person’s GOOD reputation failing to refrain from making false statements of fact about others, persons products, business, or Title to Property to a third party.There are two types of Defamation:
1). SLANDER- (Tort of Slander) Breaching the Duty “orally” false statements to a Third party. The Plaintiff must prove “special damages.” Exceptions to the Burden of Proving “special damages” are “Slander per se” for it to be actionable.
“Slander Per se” is:
A), A false statement that another has a loathsome communicable disease, (i.e. Aids, Genital warts, etc…, making people not wanting to have contact with you).
B). a False statement that another has committed improprieties while engaging in a profession or trade, (i.e. Doctor having inappropriate contact during examination).
C). A False statement that another has committed or has been imprisoned for a serious crime,(i.e. publicizing to others that you’re a Murderer, Bank robber, etc..)
D). A False statement that an unmarried woman is unchaste. (I.e. actively telling everyone in the bar that she is a whore.).
Finally,
2). LIBEL- Breaching the Duty “in writing.” The False publication of a statement or statements that holds an individual up to contempt, ridicule, or hatred to a Third party. A person is still Liable if he/she republishes, repeats defamatory statements even if the sources were stated. Plaintiff does not need to show injury he/she suffered in any way because of the libelous statement.
36. Invasion of Privacy: There are four ways to establish Invasion of Privacy.
1). Appropriation- The use of a person’s name, picture, or other identifying characteristics for commercial purposes without permission. Cases of wrong appropriation may also include the rights of those who invest time and money in the creation of a special system, (i.e. ABC sports), or commercial misappropriation may also occur when a person takes and uses property of another for the sole purpose of capitalizing unfairly on the goodwill or reputation of the property owner.
2). Intrusion on an Individual’s affairs or seclusion- Self-explanatory rule of immediate privacy. (I. e. window peeping, illegally searching other’s property, eavesdropping by wiretap, unauthorized scanning of a bank account, etc...)
3). Publication of Information- An act that places a person in a False light. (I.e. a story attributing to someone ideas not held or actions not taken by that person)
4). Public disclosure of private facts- about an individual that an ordinary person would find objectionable. (I.e. a newspaper account of a private citizen’s sex life or financial affairs could be an actionable invasion of privacy).
5). Explain the difference between trespass to land and trespass to personal property.
Trespass to land- Wrongful interference with another person’s real property rights when a person, without permission, enters onto, above, or below the surface of land owned by another; causes anything to enter onto the land; or remains on the land or permits anything to remain on it. This includes entering of another’s property to commit an illegal act. (I.e. walking or driving on another’s property). This protects the rights of property owners.
Trespass to personal property- (Trespass to Personality), Whenever any individual without consent, harms the personal property owner’s right to exclusive possession and enjoyment of that property (intentional meddling).
37. Fraudulent Misrepresentation: Intentional false representation or omission of a material fact and relied by the innocent party.
38. Trespass to Land: invading someone’s real property, whether it is going over or
underneath the property.
39. Trespass to Personal Property: depriving someone the use of personal property.
40. Conversion: Defined as any act that deprives an owner of personal property without the owner’s consent and without just cause. Conversion is the civil side equivalent of theft. The defense to Conversion works only if the purported owner does not in fact own the property or rights to possess it that is superior to the right of the holder.
The difference between Trespass to personal property and conversion is Intent and Possession. The intent to meddle with personal property falls under pranks, intentional delayment, and some carelessness. The conversion is when personal property becomes “inherited” – taken by another with or without permission of the rightful owner.
41. Negligence’s & Defenses
a. Duty of Care: A legal obligation to provide a person a reasonable amount of care from harm.
b. Causation: The action was a foreseeable proximate cause of the injury or harm.
c. Injury: violation of a right or a proximate physical harm or property damage.
d. Damages: Money claimed by or ordered paid to a person as compensation for the loss or injury.
e. Assumption of Risk: This is when a person (plaintiff) knowingly and voluntarily places himself/herself into a potentially harmful situation.
f. Contributory/ Comparative Negligence: This is when a defendant can claim that the act of the plaintiff contributed to his/her harm. This was a common defense in the past but now only used in a few states.
42. Strict Liability: Liability if causing injury—Dangerous activity and animals. There is a high level of risk involved that cannot be guarded against by reasonable care and is not commonly performed in the community or area.
43. Wrongful Interference with a Contractual Relationship: Intentional tort, a contract exists, the Third party knows of an existing contract, and he or she induces one of the contracting parties to breach the contract.
44. Wrongful Interference with a Business Relationship: No contract, but a business relationship, predatory methods used that intentionally caused this business relationship to end, and the plaintiff suffered damages as a result of the tortfeaser’s actions.
45. Wrongful Entry into Business: Trespassing on business property or advertisements for promoting and directing customers away to another competitive business
46. Appropriation: Using an image or likeness without consent for commercial purposes.
47. Disparagement of Property: Malicious statements made against property (False lien); two types
Slander of title= Malicious statements about the clear title of ownership.
Slander of quality= Malicious statement about the quality of the goods.
48. RICO: Racketeering Influenced Corrupt Organizations Act.
VI. Product Liability
49. Products Liability Theory: Different theories when personal property or product causes injury.
1) Breach of Contract—privity
2) Negligence—no problem with privity (extended warranties)
3) Fraudulent misrepresentation
4) Breach of Warranty (UCC Sale of Goods ONLY)*
* Breach of Warranty, 2-313, Express Warranties:
1) Any affirmation or promise by the Seller, which is the base of the
bargain to the buyer.
2) Description of the goods must be confirmed to the promise.
3) Sample or model was the base of the bargain (Door-door salesperson).
50. 402A of Restatement of Torts: (1964) Liability of Sellers of goods.
1) Defective condition when sold--Plaintiff must prove condition (Lack of
Warning)
2) Defendant must normally engaged in the business of selling/distributing
that product.
3) Product must be unreasonably dangerous to the user or consumer
because of defective condition—
A) Product was dangerous beyond the expectation of the
consumer.
B) A less dangerous alternative was economically feasible for
the manufacturer, but the manufacturer failed to produce it.
4) Plaintiff must incur physical harm to self or property by use or
consumption of the product.
5) The defective condition must be the proximate cause of the injury or
damage.
6) The goods must not have been substantially changed from the time sold
to the time of the injury.
51. Market Share Liability: general liability of manufacturers who share in selling the exact product. Sellers may share liability.
52. Limitations on Products Liability Recovery: Assumption of Risk, Product misuse, comparative negligence, commonly known danger, statutes of limitations, and repose.
53. Strict Liability to Bystander: 402A of Restatement (Second) of Torts.
54. Defenses to Product Liability: No basis of the claim.
--Assumption of risk, the Plaintiff knowingly and appreciated the risk the product
created.
--Product Misuse, The injured party does not know that the product is dangerous
for a particular use for which the particular product is designed.
--Comparative negligence, Negligent, or intentional actions of both the plaintiff
and the defendant.
--Commonly known danger, which the parties knew the commonly known danger.
--Statute of Limitations, restrict the time within which action may be brought.
--Statute of Repose, no claims for anything manufactured after X number of years.
VII. Legal Organizations
55. Corporation: A legal entity formed in compliance with statutory requirements. The
entity is distinct from its shareholders-owners.
56. Sole Proprietorship: One person in business for profit. Pay once on individual income
tax. Personally responsible for debts and contractual agreements.
57. Partnership: Do not need a written agreement. Two people in business for profit. Pay
once on individual income tax. Creditors can sue one or both people.
Liability insurance for protection.
58. Limited Partnership: A partnership, filed with the State, consisting of one or more
general partners (who manage the business and are liable fully
of their personal assets for debts of the partnership) and one or
more limited partners (who contribute only assets and are liable
only to the extent of their contributions). Taxes pass through.
* General Partner has compensation, rights to inspect books,
Indemnification agreements and can
incorporate self from liability.
59. Limited Liability Partnership (LLP): A form of private partnership, filed with the
State and allows members, who elect a Board of Directors, to
enjoy the tax benefits of a partnership while members limit their
personal liability from the malpractice of other partners.
60. Sub S Corporation: State law--filed with the State, A closely held business corporation that has met the IRS code and thus qualifies for special income tax treatment. Essentially, taxed as a partnership, its shareholders enjoy the privilege of limited liability.
61. C Corporation: File and pay fee to the Secretary of State for the Articles of Incorporation. Considered as an entity. No tax passes through, but shareholders protected. Shareholders elect a Board of Directors, which control its officers. The Board of Directors owes a fiduciary duty of loyalty and care to the corporation.
62. Duty of Care: Directors and officers are personally liable when they must exercise due care in performing their duties as a prudent reasonable person would exercise in similar circumstances and to act in the best interests of the corporation. The duty of care requires that all Directors and officers must attend all regularly scheduled board of director’s meetings, and their votes recorded into the minutes of the corporate meeting. Unless registering a dissent with the Secretary of the Board into the corporate record, the corporate Director or officer presumes to have agreed with the actions taken at the meeting. The corporate Directors and officers must know about any relevant business information and must do what is necessary to disclose or become informed. The Directors and officers are liable for supervising the other competent officers and employees that provide the business information relied as accurate by the corporate director or officer. The Directors and officers must attend presentations, ask for information from those who have it, read reports, and review other written materials before deciding on a corporate business matter. Depending on the nature of the business, the corporation expects their corporate directors and officers to act in the accordance with their own knowledge and training. The business judgment rule recognizes the directors and officers cannot guarantee any business success. Therefore, the corporate directors or officers are not liable for business losses when they acted in good faith and in the best interest to obey the duty of care and loyalty to the corporation and its shareholders.
63. Duty of Loyalty: The Officers or the Directors must exercise due care and to use their best judgment to act in the best interest of the corporation without any personal interests to themselves for profit maximization.
VIII. Court System
64. Subject Matter Jurisdiction: (Not waivable) The court’s jurisdiction over the subject
of the lawsuit.
65. Federal Court Jurisdiction: Federal law involved or Diversity of Jurisdiction.
1) Defendants not living in the same State, or
2) More than $75, 0000 at stake.
66. Personal Jurisdiction: (waivable) Person meets the minimum contacts requirement of
the State for prosecution or jurisdiction in its courts.
67. Venue: The geographical district in which an action is tried and from which the jury
is selected.
68. Trial Court v. Appeals Court: The Trial Court has a jury who examines the evidence, one judge determines the law. The Appeals Court has a panel of three judges who examine the court transcripts for procedural violations. It has the power to remand back to the court of origin.
69. Judge v. Jury Functions: The judge determines the law, the jury decides the case.
IX. Alternative Dispute Resolution (ADR)
70. Mediation: Offered before the trial, a neutral third party tries to get the two parties to
find common ground.
71. Arbitration—binding: When the two parties agree instead of going to trial.
72. Arbitration—non-binding: An advisory settlement technique.
X. Administrative Law
73. Rulemaking: 1) Notice of the proposed rulemaking, 2) Comment period, and 3) The Final Rule.
74. Adjudication: Administrative Agency judicial proceedings.
75. Freedom of Information Act (1972): Allows the general public access and review of
documents.
XI. Consumer Law
76. Bate and Switch: Advertising a product at a very attractive price (the “Bait’) and then
informing the consumer, once he or she is in the store, that the
advertised product is either not available or is of poor quality; the
customer is urged to purchase (“switched” to) a more expensive
item.
Defense: If there was a run on the sale of products, which they did have an ample supply before the sale.
77. Federal Trade Commission Act: Federal law that protects people from unfair and
deceptive advertising or trade practices.
78. Truth in Lending: Federal law that controls the disclosure of consumer loans and
interest.
79. Equal Credit Opportunity: A federal statute prohibiting a creditor from discriminating
against an applicant on the basis of race, color, religion,
national origin, age, sex, or marital status with respect to
any aspect of a credit transaction.
80. Fair Credit Reporting Act: A federal or State law that regulates the keeping of credit
reports and ensures the right of consumers to get and
correct their credit reports. One free report allowed to
each person every year.
81. Fair Debt Collection Practices Act: Regulation of consumer debt collection.
XII Employment
82. Employment at Will and Exceptions: The lack of an employee contract, in which case the employer or employee can terminate employment at any time and for any reason. If there is a union employment contract, then the person cannot be fired unless for good cause.
Why some employee contracts have elevated the workers’ rights above employee-at-will.
1. The Warren Act gives workers 60 days notice for mass layoffs.
2. Receiving an employee handbook.
3. Express contract whether written or oral.
4. Implied contract by conduct of an employer.
5. Web, e-mails, or written communication of employer’s policies.
6. Union collective bargaining Agreement.
83. Whistleblower Statutes: Whistle blowing occurs when an employee tells a government official, upper-management authorities, or the press that her or his employer has engaged in some unsafe or illegal activity.
Whistleblower Protection Act of 1989 protects federal employees from discrimination by firing.
False Claims Reform Act of 1986 requires the whistleblower who discloses information relating to a fraud perpetrated against the US government to receive 15-20% of the proceeds if the government brings suit against the wrongdoer.
84. Privacy Rights of Employees
a. Lie Detector: Polygraph testing is unreliable. The Employee Polygraph Protection Act (1988)—The act prohibits employers from (1) requiring or causing employees or job applicants to take lie detector tests or suggesting or requesting that they do so; (2) using, accepting, referring to, or asking about the results of lie-detector tests taken by employees or applicants; and (3) taking or threatening negative employment-related action against employees or applicants based on results of lie-detector tests or on their refusal to take the tests.
Exceptions—Federal, state, and local government employers; certain security service firms; and companies manufacturing and distributing controlled substances.
Other employers may use polygraph tests when investigating losses attributable to theft, including embezzlement and the theft of trade secrets or national security.
b. Drug Testing: In the interest of public safety employers may drug test their employees under a reasonable policy. The Fourth Amendment protects government employees unless there is reasonable suspicion of drug use that threatens public safety.
c. Aids Testing: American Disabilities Act forbids the discrimination of employees or prospective employees who have AIDS.
d. Performing Monitoring: Internet blocking, e-mail, and phone monitoring of company equipment are allowed because it belongs to a private entity.
e. Screening: If employees are taking discriminatory tests for employment.
85. OSHA: (Occupation Safety Health Act 1970) Part of the Department of Labor and it has the authority to promulgate standards, make inspections, and enforce the act.
OSHA compliance officers may enter and inspect facilities of any establishment covered by the Occupational Safety and Health Act. Employers with eleven or more employees are required to maintain occupational injury and illness records for each employee. Any injury or death on the job must be reported to OSHA, in which case the failure to do so will result in a fine.
86. Workers’ Compensation: (State law) that provides an administrative procedure for compensating workers injured on the job (percentage rated system for each injury).
Exceptions—No state covers all employees, such as domestic workers, agricultural workers, temporary employees, and employees of common carriers (companies that provide shipping and transportation services to the public). It does cover minors.
Employers can be self-insured—that is, employers who show an ability to pay claims do not need to buy insurance.
**An employee who accepts workers’ compensation is barred from suing for injuries caused by the employer’s negligence.
87. ERISA: (Employee Retirement Income Security Act (Tax code)) federal law that regulates pension plans through a third party, such as 401K. The statute empowers the Labor Management Services Administration of the Department of Labor to enforce its provisions governing employers who have private pension funds for their employees. ERISA does not require an employer to establish a pension plan. A key provision of ERISA concerns vesting.
Vesting means the employee has the legal right to receive pension benefits at some future date when he or she stops working.
88. COBRA: (Consolidated Omnibus Budget Reconciliation Act) federal law to keep your health insurance for at the group rate that your employer previously paid. After the employment termination, the ex-employee has 60 days to determine if he or she will continue with the employer’s insurance plan.
The employer is obligated to keep the group insurance policy active for 18 months. Twenty-nine months if the worker is disabled. To receive continued insurance coverage the ex-employee may have to pay the entire premium, as well as the 2% administrative charge. The loss of employment could prevent purchasing the COBRA insurance.
89. Family Leave and Medical Act (1993): Protects employees who need time off work for family or medical reasons. It does not supersede State laws. The FMLA requires employers who have fifty or more employees to provide an employee with up to twelve weeks of family or medical leave during any twelve-month period.
For most absences, the employee must demonstrate the health condition requires continued treatment by a health-care provider and includes a period of incapacity of more than three days.
Employees suffering from certain chronic health conditions such as asthma and diabetes, as well as those who are pregnant, however, may take FMLA leave for their own incapacities that require absences of less than three days.
The act does not apply to part-time or newly hired employees (those who have worked for less than one year).
The employer cannot interfere with, restrain, or deny an employee from exercising or attempting to exercise his or her rights under the FLMA, nor can the employer discharge or discriminate against an employee for taking leave.
The employer must continue the worker’s health-care coverage and guarantee employment in the same or a comparable position when the employee returns to work. In addition, the employer is required to immediately reinstate the employee after the leave, provided the worker can perform the essential functions of the position.
**An important exception to the FMLA, however, allows the employer to avoiding reinstating a key employee—defined as an employee whose pay falls within the top 10% of the firm’s workforce.
If reinstating a highly paid key employee would cause “substantial and grievous economic injury” to the employer, the employer is not required to restore the employee’s position after the leave. The employer must continue to maintain health benefits for the key employee during the leave, however. This exception is to be used only in specified and limited circumstances, and the employer must notify the employee of her or his status as a key employee and offer them an option of retuning to work immediately rather than risk losing her or his position.
Violations of the FMLA—Remedies for violations of the FMLA include (1) damages for unpaid wages (or salary), lost benefits, denied compensation, and actual monetary losses (such as the cost of providing for care of the family member) up to an amount equivalent to the employee’s wages for twelve weeks; (2) job reinstatement; and (3) promotion, if a promotion had been denied. The successful plaintiff is entitled to court costs, attorney’s fees, and—in cases involving bad faith on the part of the employer—double damages. Supervisors may also be subject to personal liability, as employers, for violations of the act.
An employer cannot be sanctioned for failing to provide notice under DOL regulations unless the employee was injured or prejudiced by the lack of notice.
XIII. Employment Discrimination
90. Title VII & State Laws: Civil Rights Act of 1964—No discrimination in employment based on race, color, national origin, religion, gender, disability, and age. (Gender DOES NOT INCLUDE sexual orientation. Title VII applies to employers affecting interstate commerce with twelve or more employees, labor unions with twelve or more members, labor unions operating hiring halls (to which members go regularly to be rationed jobs as they become available), employment agencies, and state and local governing units or agencies. A special section of the act prohibits discrimination in most federal government employment.
Minnesota law covers all people who are employees and does not discriminate on sexual orientation.
91. Sexual Harassment: Court interpreted statute. The two types of sexual harassment are Quid pro Quo and Hostile environment.
Quid Pro Quo is that something in exchange for sexual favors.
Hostile environment harassment occurs when the employer knowingly fails to take steps to remedy an abusive work environment by taking a tangible employment action. “The workplace is permeated with discriminatory intimidation, ridicule, and insult, which are sufficiently severe or pervasive to alter the conditions of the victim’s employment and create an abusive working environment.
92. Disparate Treatment and Prima Facie Case is intentional discrimination by an employer against an employee. To sue for disparate treatment you must show that (1) you are a member of a protected class; (2) you applied and was qualified for the job in question, (3) you were rejected by the employer, and (4) the employer continued to seek applicants for the position or filled the position with a person not in a protected class.
If the person can meet these relatively easy requirements, the person can make a Prima Facie case of discrimination. Making a Prima Facia case means the plaintiff has met the initial burden of proof and will win in the absence of a legally acceptable employer defense. The burden then shifts to the employer-defendant, who must articulate a legal reason for not hiring the plaintiff. To prevail, the plaintiff must then show the employer’s reason is a pretext (not the true reason) and that discriminatory intent actually motivated the employer’s decision.
The protected class includes religion, age, disabilities, etc.
93. Disparate Impact and Prima Facie Case: (Neutral rule) Disparate impact occurs when an employer’s practices, procedures, or tests, which do not seem to be discriminatory, adversely impact a protected group of people.
The complaining party must first show statistically the employer’s practices, procedures, or tests are discriminatory in effect. Once the plaintiff has made out a prima facia case, the burden of proof shifts to the employer to show that the practices or procedures in question were justified. The plaintiff could get their job back, damages, and attorney’s fees.
There are two ways of proving that disparate impact exists.
Pool of applicants—a plaintiff can prove a disparate impact by comparing the employer’s workforce to the pool of qualified individuals available in the local labor market.
Rate of hiring—when an educational or other job requirement or hiring procedure excludes members of a protected class from an employer’s workforce at a substantially higher rate than nonmembers, regardless of the racial balance in the employer’s workforce. This “rate analysis” compares the selection rate for whites with that for nonwhites (or other members of a protected class). It does not require the plaintiff to prove what percentage of qualified nonwhite persons are available in the local labor market.
The EEOC has devised a test, called the “four-fifths rule” or the “80% rule,” to determine whether an employment examination is discriminatory on its face. Under this rule, a selection rate for protected classes that is less than four-fifths, or 80%, of the rate for the group with the highest rate will generally be regarded as evidence of disparate impact. To illustrate: One hundred majority applicants take an employment test and fifty pass the test and are hired. One hundred minority applicants take the test, and twenty pass the test and are hired. Because twenty is less than four-fifths (80 percent) of fifty, the test would be considered discriminatory under the EEOC guidelines.
94. Remedies under Title VII: If the plaintiff successfully proves that unlawful discrimination occurred, he or she may be awarded reinstatement, back pay, retroactive promotions, and damages.
--Compensatory damages are available only in case of intentional discrimination.
--Punitive damages may be recovered against a private employer only if the employer acted with malice or reckless indifference to an individual’s rights.
--The statute limits the amount recovered for damages from specific employers (ranging from $50,000 against employers with one hundred or fewer employees to $300,000 against employers with more than five hundred employees).
| Disparate Treatment --1. Plaintiff is a member of a protected class. --2. Denied something. --3. Qualified/not to be fired. --4. Other member class gets the benefit. | Disparate Impact --1. “Neutral” Rule. --2. Disportionate impact on a class. |
95. American Disabilities Act of 1990 (ADA): designed to eliminate discriminatory employment practices that prevent otherwise qualified workers with disabilities from fully participating in the national labor force.
The Act protects federal protection against disability-based discrimination to all workplaces with fifteen or more workers (with the exception of State government employers, who are generally immune under the Eleventh Amendment). The ADA requires that employers “reasonably accommodate” the needs of persons with disabilities unless to do so would cause the employer to suffer an “undue hardship.”
The ADA defines persons with disabilities as persons with physical or mental impairments that “substantially limit” their every day activities. More specifically, the ADA defines a disability as “(1) a physical or mental impairment that substantially limits one or more of the major life activities of such individuals; (2) a record of such impairment; or (3) being regarded as having such impairment.”
Health conditions under federal law include blindness, alcoholism, heart disease, cancer, muscular dystrophy, cerebral palsy, paraplegia, diabetes, AIDS, and morbid obesity.
96. Age Discrimination Act (1967): Protects against discrimination of people forty years old or older. It also prohibits mandatory retirement for non-managerial workers. For the act to apply—the employer must have twenty or more employees, and the employer’s business activities must affect interstate commerce. The EEOC administers the ADEA, but the act also permits private causes of action against employers for age discrimination.
The burden shifting procedure under the ADEA is similar to that under Title VII. If a plaintiff can establish that he or she (1) was a member of the protected age group, (2) was qualified for the position from which he or she was discharged, and (3) was discharged under circumstances that give rise to an inference of discrimination, the plaintiff has established a prima facia case of unlawful age discrimination.
The burden then shifts to the employer, who must articulate a legitimate reason for the discrimination. If the plaintiff can prove that the employer’s reason is only a pretext and that the plaintiff’s age was a determining factor in the employer’s decision, the employer will be held liable under the ADEA. State can expand the age and sexual orientation rights.
States are immune from private age discrimination lawsuits.
97. Defenses
a. Business Necessity: Disparate impact claim by asserting that a practice is discriminatory if the employer can demonstrate to the courts’ satisfaction that a definite connection exists between the plaintiff and the job requirements.
b. BFOQ (Bona Fide Occupation Qualification): The employer, for some reason, can only hire certain groups of people for the job—however there cannot be a race issue.
c. Seniority System: If no present intent to discriminate are shown, however, and if promotions or other job benefits are distributed according to a fair seniority system (in which workers with more years of service are promoted first or laid off last), the employer has a good defense against the suit. The US Supreme Court holds that this defense may also apply to alleged discrimination under the ADA unless the accommodation conflicts with an employer’s seniority system.
d. Employee Misconduct: Employers have attempted to avoid liability for employment discrimination based on “after-acquired evidence” of an employee’s misconduct, such as material misrepresentations on an employment application that would have the employer fire the employee.
However, The US Supreme Court ruled that after-acquired evidence of wrongdoing could not be used to shield an employer entirely from liability for employment discrimination. It may, however, be used to limit the amount of damages for which the employer is liable.
XIV Anti-Trust (Federal Law)
98. Sherman Act (1890): Teddy Roosevelt enforced the Sherman Act. A broadly worded pronouncement that prohibits competitors from making agreements that unreasonably restrain trade and conduct leading to or tending to produce monopoly power. Violations are criminal and civil offenses.
a. Restraint of Trade: Section 1--Any contract or combination that tends to eliminate or reduce competition,
Section 2--create a monopoly, artificially maintain prices, or otherwise hamper the course of trade and commerce, as it would be carried on if left to the control of natural economic forces.
Section 1:
--Per Se Violations—Liable for the crime and damages no matter what you do.
*Horizontal: An agreement that in some way restrains competition between rival firms competing in the same market.
1) Price fixing—Two or more competitors agree to fix a price for eliminating competitors.
2) Market Division—two or more competitors agree to split up a market. Each firm has a monopoly over its allocated share of the market for that particular brand—it is the sole supplier. The sole supplier is free not only from price competition for that brand but also from competition for that brand regarding quality, customer service, and all other dimensions of competition.
* It covers Trade associations, Group boycotts, and Joint venture.
*Vertical: Set of restraints of trade comprises those imposed by the seller on the buyer (or vice versa), as distinct from those imposed among sellers or buyers.
* It covers Resale price agreements, Price discrimination, Tying, exclusive dealing, and Refusals to deal.
Rule of reason—We do look at the activity involved if an agreement is found to be a Per se violation of Section 1. If a court finds that a particular practice or agreement that restrains trade involves no apparent intent to fix prices or limit output, and that it benefits the public as well as the association, and then the court will weigh those benefits against the harms to competition under the rule of reason.
b. Anti-monopoly: The Interstate Commerce Act of 1887. The Clayton Act—specific acts not covered by the Sherman Act. The Federal trade Commission Act—deceptive and unfair competition affecting commerce.
99. Clayton Act (1913) Woodrow Wilson signed into law. Provisions that deal with specific practices that are not expressly covered by the Sherman Act but that are considered to reduce competition or lead to monopoly power. These practices are divided into four categories—price discrimination, exclusionary practices, corporate mergers, and interlocking directorates.
a. Price Discrimination: Sellers charge different buyers different prices for the same goods, unless the costs difference in production or transportation.
The Robinson-Patman Act made it more difficult for businesses to evade the terms of the Clayton Act Section 2. Sellers are prohibited from reducing prices to levels substantially below those charged “in good faith to meet an equally low price of the competitor.” The wrongful intent to put somebody out of business and then recover profits later by raising prices.
b. Exclusionary practices: Section 3 prohibits sellers and lessor from selling or leasing “on the condition, agreement or understanding that the…purchaser or lessee thereof shall not use or deal in the goods…of a competitor or competitors of the seller.”
Section 3 prohibits two types of contracts and tie-in sales agreements:
1) Exclusive-dealing contract—A Seller forbids the buyer from purchasing products from the seller’s competitors if it substantially lesson competition or tend to create a monopoly.
2) Tying arrangement, or tie-in sales agreement—The Seller conditions the sale of the product (the tying product) on the buyer agreeing to purchase another product (the tied product) produced or distributed by the same seller. The legality depends on consideration of the purpose and its likely effect on the competition in the relevant markets.
c. Mergers: A contractual and statutory process in which one corporation (the surviving corporation) acquires all of the assets and liabilities of another corporation (the merged corporation). The shareholders of the merged corporation receive either payment for their shares or shares in the surviving corporation.
Under Section 7 of the Clayton Act, a person or business organization cannot hold stock or assets in another business when it substantially lessons competition.
Market concentration is the allocation of percentage market shares among the various firms in the relevant product market.
d. Interlocking directorates: Section 8 of the Clayton Act—when individuals serve as directors on the Boards of two or more competing companies simultaneously. No person may be a director in two or more corporations at the same time if either of the corporations has capital, surplus, or undivided profits aggregating more than $21,327,000 or competitive sales of $2,132,700. The FTC adjusts the thresholds upward each year.
100. FTC Act: A “Catch-all” that enforces the Clayton Act and has sole authority to enforce the only substantive provision of the Federal Trade Commission Act, Section 5 through cease and desist actions. Anyone considering a merger must notify this agency.
101. Treble Damages: Section 4 of the Clayton Act that allows a private party to sue for three times what he or she has suffered and attorney’s fees for violating any of the antitrust laws. Can also sue for an injunctive relief.
102. Exemptions to Anti-Trust Laws: Statutory and judicially created exemptions that apply to such areas as labor, insurance, foreign trade, utilities, gas companies, and political lobbies.
Noerr-Pennington doctrine—covers joint efforts by businesspersons to obtain legislative, judicial, or executive action. However, it will not be protected if the action is clear and “objectively baseless in the sense that no reasonable [person] could reasonably expect success on the merits.”
103. Monopoly and Market Share Test:
Monopoly—A term used to describe a market (geographical and product) in which there is an intent for a single seller or a limited number of sellers.Market Share Test—the primary measure of monopoly power. A firm’s market share is the percentage of a market that the firm controls. It consists of two elements: (1) a relevant product market and (2) a relevant geographical market. A firm has monopoly power if its share of the relevant market is 70 % or more.
104. Per se v. Rule of Reason: Per se is the rule of Liability for the crime and damages no matter what you do (price fixing and market division).
Rule of reason is the court rule of looking at the activity involved if an agreement is found to be a Per se violation of Section 1.
105. Price Fixing: (Non-competitive per se violation) By eliminating price competition in which firms seek to sell more by charging less than their rivals, or firms restrict output.
106. Market Division: (Non-competitive per se violation) The agreements to divide the market up among rival firms. The allocation may be geographical, or it may be functional, by class of customer. Market division does not need to be a monopoly.
RULE OF REASON--- Horizontal
107. Trade Association: An organization that may provide for the exchange of information among the members, the enhancement of the public image of the trade or profession, the setting of industry or professional standards, or the pooling of resources to represent members’ interests to various governmental bodies. Some of these activities benefit society, as well as the individual members.
We do look at the activity involved if an agreement is found to be a Per se violation of Section 1. If a court finds that a particular practice or agreement that restrains trade involves no apparent intent to fix prices or limit output, and that it benefits the public as well as the association, and then the court will weigh those benefits against the harms to competition under the rule of reason.
108. Group Boycott: An agreed concerted refusal to deal by which two or more buyers or sellers refuse to engage in any transaction with a particular person or organization, the object of a boycott. Cannot put somebody out of business to increase their own stock value.
109. Joint Venture: Any undertaking by two or more firms or individuals that, while maintaining their distinct identities, come together for the limited purpose of achieving a specific goal. They are not necessarily competitive if it is not involved with price fixing or market divisions.
RULE OF REASON—Vertical (Chain of inside distribution)
110. Resale Price Maintenance Agreements: A. K. A. Fair trade agreements. Occur when a manufacturer seeks to establish a minimum price that a retailer or wholesaler may charge for the manufacturer’s product. It is controlled under the Rule of Reason.
111. Refusal to Deal: Basic freedom to contract is a defense. A refusal to deal is in violation of Section 2 of the Sherman Act if (1) the firm refusing to deal has, or is likely to acquire, monopoly power and (2) the refusal is likely to have an anticompetitive effect on a particular market.
112. Price Discrimination: When a seller charges different buyers different prices for identical goods. The act prohibits indirect discrimination, such as variations in the terms of delivery and differences in sales returns, cash discounts, and the like, as well as direct price discrimination.
113. Exclusive Dealing Contacts: (Section 3 of the Clayton Act) Contracts under which a seller forbids the buyer from purchasing products from the seller’s competitors.
114. Tying: An arrangement in which the seller may condition the sale of the product (the tying product) on the buyer’s agreeing to purchase another product (the tied product) produced or distributed by the same seller and its monopoly power.
115. Mergers: Horizontal v. Vertical:
*Horizontal merger—Mergers between firms that compete with each other in the same market. If a horizontal merger creates an entity with a resulting significant market share, the merger may be presumed illegal (Amended 1950 Clayton Act).
The FTC uses the Herfindahl-Hirschman index (HHI). It is computed by summing the squares of the percentage market shares of the firms in the relevant market.
The FTC also looks at the ease of entry into the relevant market, economic efficiency, the financial conditions of the merging firms, the nature, and price of the product or products involved, and so on. If a firm is a leading one—having at least a 35% share and twice that of the next leading firm—any merger will be scrutinized.
*Vertical merger—occurs when a company at one stage of production acquires a company at a higher or lower stage of production.
Whether a vertical merger will be deemed illegal depends on market concentration, barriers to entry into the market, and the apparent intent of the merging parties. Mergers that do not prevent competitors of either of the merging firms from competing in a segment of the market will not be condemned, as “foreclosing” competition is legal.
*Conglomerate merger—two unrelated markets come together for diversification.
XV. Creditor-Debtor Relations and Bankruptcy
116. Liens/Judgments: Decision entered by the court that the debtor owes money.
Involuntary: Someone who has an interest in property, by law, starts a bankruptcy proceeding. Chapter 7—(extremely unusual) three creditors are owed more than $12,000 total in an undisputed debt, and debtor failed to pay the amount when due.
Voluntary: (loans and mortgages creditor), someone who has an interest in property. Court requires debt counseling before filing; and must have bankruptcy schedules within 15 days of filing.
**The means test must be met (below median). If above the median--Chapter 13 to pay creditors in 3 to 5 years. Below—stay in Chapter 7.
Mechanics: Statutory lien on real property of another, created to ensure payment for work performed and materials furnished in the repair or improvement of real property, such as a building.
Posessory Lien—someone can take possession of property if the debt is not paid.
117. Guaranty: a contract for the promise to answer a debt or default of another. The guarantor is secondary liable
118. Exemptions: Personal property that is most often exempt from satisfaction of
judgment debts. ***Not for corporations.
1) Home, or no more than 160 acres (equity).
-Rural, $750,000+
-Urban, $300,000+.
2) Fed law protects 401K or govt. pension plans, but not IRAs over $1
million.
3) $4,000 equity in an automobile.
4) Clothing and certain personal possessions, such as family pictures
or a Bible.
5) Certain classified animals, usually livestock, and pets.
6) Equipment the debtor uses in a business or trade, such as tools or
professional instruments, up to a specified dollar amount.
*******Federal law is generous with exceptions; however, one exception is that if you do not own land or a house then you can claim $9,000 of any personal property you want exempt.
119. Chapter 7 Liquidation: Federal Bankruptcy Court. (Most popular) Voluntary bankruptcy--a debtor turns over all non-exempt assets over to an appointed trustee for creditor distribution. All creditors are given a Stay where they cannot harass the debtor. No Banks or Insurance companies, and cannot get out of Chapter 7 unless ordered by the court.
Discharge for bankruptcy—debtor is relieved from the debts.
Chapter 7 Schedules,
1) A list of both secured and unsecured creditors, their addresses, and the amount of debt owed to each.
2) A statement of the financial affairs of the debtor.
3) A list of all property owned by the debtor, including property that the debtor claims exempt.
4) A list of current income and expenses.
5) A certificate from am approved credit-counseling agency.
6) Proof of payments received from employers within sixty days prior to the filing of the petition.
7) A statement of the amount of monthly income, itemized to show how the amount is calculated.
8) A copy of the debtor’s federal income tax return (or a transcript of such a return) for the most recent year ending immediately before the filing of the petition.
Chapter 7 exemptions,
Either State (lived in last 2 years) exemptions or Federal exemptions.
MN Home- $30,000 in equity.
Federal-$18,000 for exemptions on anything.
First creditors meeting 30 days after filing to contest the exempt property.
Debts are discharged 100 days after filing bankruptcy.
Non-dischargeable debts: Student loans unless you can prove an undue hardship. (Burden of proof on the Plaintiff), Child support, tax debt, properly secured parties, criminal fines, and restitution.
120. Chapter 11 Reorganization: Business, no trustee, management still in control of business.
Bank or business has control of their assets. (Bank has to be protected) Post-bankruptcy assets can be collected.
Leases kept or rejected within 60 days; extend to 210 days and can cure past debts.
Creditors committee= representatives for the creditors in the trade debt approved by the court. The committee votes for the 2/3 of the dollar amount owed.
Any person can come in and make a bid on debtor’s assets.
Discharge of bankruptcy when there is a reorganization plan,
--giving creditor the collateral back,
--paying creditor back,
--voting procedures,
--sale of the business.
121. Chapter 13 Repayment Plan: Can be removed to Chapter 7 (If you can meet the median income levels and able to repay the debt).
Pay out over 3 to 5 years. File proof of claim (90 days).
Paying through the State formula.
Trustee performs the same debt distribution.
Plan filed with the petition.
Secured creditors cannot plan, but they can object to the repayment plan.
Homestead could cure for up to 1 year (arrears mortgage payments).
122. Stay: automatic suspension of all actions by a creditor against the debtor or the debtor’s property when a petition for bankruptcy is filed.
The adequate protection doctrine protects secured creditors from losing their security because of the automatic stay.
123. Discharge: The extinction of the individual debtor’s dischargeable debts.
Certain debts are not discharged, such as taxes, student loans (unless proven of hardship), bad acts (Fraud, Theft, and Willful malicious injury), and illegal transfer of property within one year of the bankruptcy filing.
XVI. Environmental Law
124. Nuisance Law: The common law doctrine of nuisance, persons may be held liable if they use their property in a manner that unreasonably interferes with other’s rights to use or enjoy their own property. The courts have often denied injunctive relief on the ground that the hardships that would be imposed on the polluter and on the community are greater than the hardships suffered by the plaintiff.
125. Clean Air Act (1963): Federal law—The Environmental Protection Agency regulates the air quality caused by mobile and stationary sources.
In 1990, pollution control equipment must be installed with the maximum achievable control technology, or MACT.
In 1996, the EPA can assess civil penalties of up to $25,000 per day. Additional fines of up to $5,000 per day can be assessed for other violations, such as failing to maintain the required records.
To penalize those who find it more cost-effective to violate the act than to comply with it, the EPA is authorized to impose a penalty equal to the violator’s economic benefits from noncompliance. Persons who provide information about violators may be paid up to $10,000. Private citizens can also sue violators.
Those who knowingly violate the act may be subject to criminal penalties, including fines of up to $1 million and imprisonment for up to two years (for false statements or failures to report violations). Corporate officers are among those who may be subject to these penalties.
126. Clean Water Act Amendment of (1972): Federally regulated act that established the following goals: (1) make waters safe for swimming, (2) protect fish and wildlife, and (3) eliminate the discharge of pollutants into the water. The amendments required that municipal and industrial polluters apply for permits before discharging wastes into navigable waters.
Regulations, for the most part, specify that the best available control technology, or BACT be installed. The EPA also issues guidelines as to what equipment meets this standard.
127. Comprehensive Environmental Response, Compensation, and Liability Act--CERCLA (1980): 42 U.S.C. Sections 9601-9675 To regulate the clean up of hazardous waste-disposal sites, or known as the Superfund.
Superfund provides that when a release or a threatened release of hazardous chemicals from a site occurs, the EPA can clean up the site and recover the cost of the clean up from the following persons: (1) the person who generates the waste disposed of at the site, (2) the person who transported the wastes to the site, (3) the person who owned or operated the site at the time of the disposal, or (4) the current owner or operator. A person falling within one of these categories is referred to as a potentially responsible party (PRP).
128. Joint & Several Liability: Liability under Superfund is usually joint and several— a PRP who generated only a fraction of the hazardous waste disposed of at the site may nevertheless be liable for all clean-up costs. CERCLA authorizes a party who has incurred clean-up costs to bring a “contribution action” against any other person who is liable or potentially liable for a percentage of the costs.
129. Assumption of Risk: This is when a person (plaintiff) knowingly and voluntarily places himself/herself into a potentially harmful situation.
130. Commonly Known Danger: which the parties knew the commonly known danger.
XVII. Intellectual Property --
*You must file intellectual property if you seek to enforce infringements.
131. Patent: A grant the government gives an inventor the right to exclude others from making, using, and selling an invention for 20 years after filing. Patent often denied (needs approval). Encourages monopoly. Infringement= violation of the patent.
132. Trademark (service mark, trade name): distinctive mark, motto, device, or implement that a manufacturer stamps, prints, or otherwise affixes to the goods it produces so they can be identified on the market and their origin made known.
Trademark holder must protect trademark or it becomes a common household word and lose protection. Remedy—injunction prohibiting the future use of the trademark.
**Cannot trademark fraudulent misrepresentation or offensive materials.
133. Copyright: The right of an author or originator of a literary or artistic production of a specified type. (Intangible property). Duration—Life of the author and 70 years, which is automatic after the item’s production. Satire permitted as free speech.
XVIII. Land Use Control & Real Property
134. Fixtures: Certain personal property can become so closely associated with the real property to which it is attached that the law views it as real property. Such property is known as a fixture—a thing affixed to realty. A thing is affixed to realty when it is attached to it by roots; embedded in it; or permanently attached by means of cement, plaster, bolts, nails, or screws. The fixture can be physically attached to real property, can be attached to another fixture, or can even be without actual physical attachment to the land, as long as the owner intends the property to be a fixture.
Fixtures are included in the sale of land if the sales contract does not provide otherwise.
135. Profits: the right to go onto land in possession of another and take away some part of the land itself or some product of the land.
136. Fee Simple absolute: The most complete form of ownership. It is limited to a person and his or her heirs and it is assigned forever without limitation or condition. No restrictions outside of government restrictions.
Exclusive possession—disposed of by deed or by Will to heirs.
137. Fee Simple defeasible (conditional): Some restrictions on the title. The property is transferred back to the owner if a condition or a condition occurs, such as land preservation trusts.
However, you cannot put a stop for transferring title. Also used in trusts.
138. Life estate: An estate that lasts for the life of some specified individual. There must be no waste committed to the land.
-- can create a mortgage and create other interests in the land.
--pay property taxes and make repairs.
--without a Will, once granted then you cannot take the property back.
-- Second wife or third party to restrict transfer of property.
139. Future interests: A residuary interest not granted by the grantor in conveying the estate to another for life, for a specified period of time, or on the condition that a specific event does or does not occur. Future interest includes the following:
1. Reversionary interest—the grantor retains the residuary interest.
2. Remainder—the grantor transfers ownership rights in the future interest to another who will take possession immediately on the expiration of another interest.
3. Executory interest—like a remainder, but it does not take effect immediately on the expiration of another interest.
140. Leasehold estate: the leasehold estate is created when a real property owner or lessor (landlord) agrees to convey the right to posses and use the property to a lessee (tenant) for a certain period of time.
141. Tenancy for years: Tenancy for years is created by an express contract (which can sometimes be oral) by which property is leased for a specified period of time, such as a month, a year, or a period of years.
142. Periodic tenancy is created by a lease that does not specify how long it is to last but does not specify that rent is to be paid at certain intervals. This type of tenancy renews itself for another rental period unless properly terminated.
143. Tenancy at will: A type of tenancy under which either party can terminate the tenancy without notice; usually arises when a tenant who has been under a tenancy for years retains possession, with the landowner’s consent, after the tenancy for years has terminated. Most States disallow Tenancy at will-- everyone must have received a notice of eviction.
144. Tenancy at sufferance: A type of tenancy under which one who, after rightfully being in possession of leased premises, continues (wrongfully) to occupy the property after the lease has been terminated. The tenant has no rights to posses the property and occupies it only because the person entitled to evict the tenant has not done so.
145. Tenancy in common: Co-ownership of property in which each party owns an undivided interest that passes to his or her heirs at death.
146. Joint tenancy: The joint ownership of property by two or more co-owners in which each co-owner owns an undivided portion of the property. On the death of one of the joint tenants, his or her interest automatically passes to the surviving joint tenants.
147. Tenancy by the entirety: The joint ownership of property by a husband and wife. Neither party can transfer his or her interest in the property without the consent of the other.
148. Easement: the right of third parties to trespass on private property.
--compensation.
149. Zoning: The division of a city by legislative regulation into districts and the application in each district of regulations having to do with structural and architectural designs of buildings and prescribing the use to which buildings within designated districts may be put. Rules promulgated by City council.
Residential,
Agricultural & residential,
Commercial/ no residential,
In addition, structural rules.
150. Variance: an exception to the zoning rules (often fought).
151. Eminent Domain: The Fifth Amendment of the US Constitution prohibits the taking of private property for the public use or purpose without consent and just compensation.
The Fourteenth Amendment protects against eminent domain by the due process and equal protection clause.
--other government agencies can regulate the definition of the public good.
--legislators can make new laws against eminent domain.
Comps—an appraiser who takes a median of the value of houses in the area.
XIX. Securities (Fed Law)
152. Bonds: Certificates that evidences a corporate (or government) debt, in which case it is capped on interest. A security involves no ownership interest in the issuing entity.
153. Common stock: Shares of ownership in a corporation that give the owner of the stock a proportionate interest in the corporation with regard to control, earnings, and net assets; shares of common stock are lowest in priority with respect to payment of dividends and distribution of the corporation’s assets on dissolution.
154. Preferred stock: Classes of stock that have priority over common stock both as to payment of dividends and distribution of assets on the corporation’s dissolution. All stock held in one state or closely held shares are not regulated.
155. Securities & Exchange Commission: The federal agency that regulates the issuance and trading of securities in an effort to protect investors against fraudulent or unfair practices. The commission was established by the Securities Exchange Act of 1934.
156. Registration Statement: A document containing detailed information required by the SEC for the public sale of corporate securities. The statement includes the “red herring” prospectus to be supplied to prospective buyers by an underwriter. The registration statement must include the following:
1. A description of the significant provisions of the security offered for sale, including the relationship between that security and the other securities of the registrant. In addition, the corporation must disclose how it intends to use the proceeds of the sale.
2. A description of the corporation’s properties and business.
3. A description of the management of the corporation; its security holdings; and its remuneration and other benefits, including pensions and stock options. Any interests of directors or officers in any material transactions with the corporation must be disclosed.
4. A financial statement certified by an independent public accounting firm.
5. A description of pending lawsuits.
157. Exempt securities, transactions:
Exempt security is a security that need not be registered under the provisions of the Securities Act of 1933 and is exempt from the margin requirements of the Securities Exchange Act of 1934.
1. All bank securities sold prior to July 27, 1933.
2. Commercial paper, if the maturity date does not exceed nine months.
3. Securities of charitable organizations.
4. Securities resulting from a corporate reorganization issued for exchange with the issuer’s existing security holders and certificates issued by trustees, receivers, or debtors in possession under the bankruptcy laws.
5. Securities issued exclusively for exchange with the issuer’s existing security holders, provided no commission is paid (for example, stock dividends and stock splits).
6. Securities issued to finance the acquisition of railroad equipment.
7. Any insurance, endowment, or annuity contract issued by a state-regulated insurance company.
8. Government-issued securities.
9. Securities issued by banks, savings and loan associations, farmers’ cooperatives, and similar institutions subject to supervision by governmental authorities.
10. In consideration of the “small amount involved,” an issuer’s offer of up to $5 million in securities in any twelve-month period.
Exempt transaction is a security sale (from above) that falls outside the scope of the Securities Act of 1933 and the security Exchange Act of 1934. Regulation D allows four separate exemptions from registration for small amounts under $1 million for trade within a twelve-month period. Rules 504. 504a, 505, 506, Section 4(6), Intrastate rules—Rule 147, 144, and 144a.
158. Insider trading-tipper/tippee, misappropriation theories: Tipper/tippee is anyone who acquires inside information as a result of a corporate insider’s breach of his or her fiduciary duty can be liable under SEC Rule 10b-5. This liability extends to tippees (those who receive “tips” from insiders) and even remote tippees (tippees of tippees). The key to liability is that the inside information must be obtained as a result of someone’s breach of a fiduciary duty to the corporation whose shares are traded. The tippee is liable under this theory only if (1) there is a breach of duty not to disclose the information, (2) the disclosure is in exchange for personal benefit, and (3) the tippee knows (or should know) of this breach and benefits from it.
The tipper can trade in the stock, but he or she must file their stock trading in advance.
Misappropriation theory: If an individual wrongfully obtains (misappropriates) inside information and trades on it for her or his personal gain, then the individual should be held liable because, in essence, the individual stole information rightfully belonging to another.
159. Section 10b: This section prohibits the use of any manipulative or deceptive device in violation of SEC rules and regulations for buying stock.
160. SEC Rule 10b5: Prohibits the commission of fraud in connection with the purchase or sale of any security. It is applicable only when the requisites of federal jurisdiction are present. The key to liability (civil and criminal) under this rule is whether the information omitted or misrepresented is material.
161. Insider reporting: Officers, directors, and certain large stockholders of Section 12 corporations must report a monthly report to the SEC when more than 10% of the stock is traded.
XX. Agency
162. Fiduciary: As a noun, a person having a heightened duty created by his or her undertaking to act primarily for another’s benefit in matters connected with an undertaking. As an adjective, a relationship founded on trust and confidence.
Agency by agreement must have an implied agreement or an agreement expressed by words, legal capacity, and legality. The equal dignity doctrine holds that if the transaction between the agent and the principal is a Statute of Frauds contract, the agency must also be in writing. The principal must have legal capacity to approve the agent to contract. Legality in the agency must conform to the laws within public policy.
In a business partnership, each partner in a partnership acts as an agent to the other partners within the scope of authority in the partnership agreement to contract with a third person. The principal expresses the scope of authority to the agent orally or by a written agreement of the approved acts to conduct in that particular business. In an absence of authority in an emergency, the agent has an emergency power of authority to contract and bind the principal to it.
163. Independent contractor v. employee: Agency commonly forms between an employer and an employee. The employer controls the scope of authority and the specific details of the work performance for an employee. Any employee working in the same work as the employer and dealing with a third party are agents for the employer. An independent contractor may have an agency with an employer, but he or she is not an employee because the employer does not have any control over the details of the contractor’s work performance. An independent contractor is not an agent of the contracting principal. The courts use the following six questions to discover whether a worker is an employee or an independent contractor:
· How much exercised control does the principal have over the details of the work performance?
· How much skill does the worker have?
· Is the worker engaged in a work distinct from the employer?
· Is the work under the employer’s direction or by a specialist without supervision?
· Does the employer supply the tools at the place of work?
· How long was the person employed?
· What is the method of payment—by time or at completing the job?
***The IRS will scrutinize the employee or contractor status, in which case the principle must pay all back taxes and social security if the IRS deems an independent contractor as an employee.
*** “works for hire” by an independent contractor for free-lance artists, writers, or any intellectual pursuits own their copyrights to the work.
164. Creation of agency relationship: Agency is a consensual relationship between a Principal and an Agent. The agent represents the principal in the scope of actual or apparent authority to act as an agent that legally contracts the principal in a transaction with a third person. There are four ways to form an agency, agreement of the parties, by approval, by estoppel, and by law.
165. Agent’s duty to Principal: The agent owes the principal five duties—performance, notification, loyalty, obedience, and accounting.
Performance—an implied condition in every agency to use reasonable diligence and skill in performing the work. If an agent has misrepresented himself or herself as possessing special skills, however, the agent is expected to exercise the degree of skill or skills claimed.
**A gratuitous agent, who once begun to perform in an agency capacity, he or she must finish the task with the same standards of duty and care.
Notification—an agent is required to notify the principal of all matters that come to her or his attention concerning the subject matter of the agency.
The principal is aware of any information acquired by the agent that is relevant to the agency—regardless of whether the agent actually passes on this information to the principal.
Loyalty—the agent has 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.
*Includes confidentiality; such as work product, trade secrets, and customer lists.
Obedience—the agent must follow all lawful and clearly stated instructions of the principal. During emergencies, however, when the principal cannot be consulted, the agent may deviate from the instructions without violating the duty. Whenever the instructions are not clear, the agent must act in good faith and in a reasonable manner under the circumstances.
Accounting—unless an agent and a principal agree otherwise, the agent has the duty to keep and make available to the principal an account of all property and funds received and paid out on behalf of the principal.
The agent must maintain separate accounts for the principal’s funds and the agent’s personal funds, and no intermingling of these accounts is allowed.
The Agent has express, implied, or Apparent authority in the scope of employment.
166. Principal’s duty to Agent: The principal owes the agent--compensation, reimbursement, indemnification, cooperation, and safe working conditions.
Compensation—the principal has an implied duty to pay the agent for services rendered in a timely manner.
**Except in a gratuitous agency, the principal must pay the agreed-on value for the agent’s services. If no amount has been expressly agreed on, then the principal owes the agent the customary compensation for such services.
Reimbursement and Indemnification—whenever an agent disburses sums of money to fulfill the request of the principal or to pay necessary expenses in the course of a reasonable performance of his or her agency duties, the principal has the duty to reimburse the agent for these payments.
The principal has the duty to Indemnify (compensate) the agent for liabilities incurred because of authorized and lawful acts, benefits conferred, and transactions.
Cooperation—a principal has the duty to cooperate with the agent and to assist the agent in performing his or her duties. No competition between the principal and the agent.
Safe working conditions—common law requires the principal to provide safe working premises, equipment, and conditions for all agents and employees. The principal must inspect and warn agents and employees of dangerous conditions. When the agent is an employee, the State worker’s compensation insurance covers the breach. Federal and State law require the employer to meet certain safety standards.
167. Express authority: is embodied in that which the principal has engaged the agent to do something, the authority may be orally or in writing.
***The equal dignity doctrine holds that if the transaction between the agent and the principal is a Statute of Frauds contract, the agency must also be in writing. Failure to comply can make a contract voidable at the option of the principal. The law regards the contracts as a mere offer.
--Exceptions: (1) an executive officer of a corporation, when acting for the corporation, does not need written authority from the corporation, or
(2) when an agent acts in the presence of the principal or when the agent’s act of signing is merely perfunctory.
168. Implied authority: is conferred by custom, can be inferred from the position the agent occupies, or is implied by virtue of being reasonably necessary to carry out express authority. It is important for third parties to be familiar with the custom of the particular trade.
169. Apparent authority: the agent has authority when the principal, by either word or action, causes a third party reasonably to believe that the agent has authority to act, even though the agent has no express or implied authority. If the third party changes his or her position in reliance on the principal’s representations, the principal may be estopped (prevented) from denying the agent had authority.
170. Liability of principal for agent’s act—misrepresentation: A principal is exposed to tort liability whenever a third party sustains a loss due to the agent’s misrepresentation. The principal’s liability depends on whether the agent was actually or apparently authorized to make representations and whether such representations were made within the scope of the agency.
Apparent implied authority—principal liable if the agent acts in apparent authority.
171. Respondeat superior: The doctrine places the partnership vicariously liable for the harms caused by the employee-agent’s actions within his or her scope of authority in employment. However, principals are not liable to independent contractors for their tortious actions or for their tax withholding. There is no liability to the principal if the third party knows the agent has no such authority within the scope of employment.
XXI. Labor Law --Federal law
172. National Labor Relations Act (1935): (Wagner Act) established the right of employees to form unions, the right of those unions to engage in collective bargaining (negotiate contracts for their members), and the right to strike.
The Act created the National Labor Relations Board to oversee union elections and to prevent employers from engaging in unfair labor union activities and unfair labor practices. Section 8(a) of the act defines unfair employer practices as unfair to labor.
173. Closed shop: (The most important provision of the Labor-Management Relations Act (1947)). A closed shop is a firm that requires union membership of its workers as a condition of obtaining employment. Closed shops were made illegal by the Taft-Hartley Act.
174. Union shop: The LMRA preserved the legality of the union shop, which does not require that workers join the recognized union after a specified amount of time on the job. The act allowed individual States to pass their own right-to-work laws (23 States)—laws making it illegal for union membership to be required for continued employment in any establishment.
175. Preliminary organizing: Plan who is going to be covered in the union. The first step is to get relevant workers to sign authorization cards. The authorization cards states that 30% of the workers desire to have a union represent them and it is presented to the NLRB regional office with a petition for an election.
176. Appropriate Bargaining unit: a collective mutuality of interest among all thee workers to be represented. Groups of workers with significantly conflicting interests may not be represented in a single union. There are three factors to determine an appropriate bargaining unit; similarity of the jobs of the workers, geographical, the rule against unionization of management employees.
177. Union election: The NLRB supervises this election, ensuring secret voting and voter eligibility. The election is held about one month after the NLRB orders the vote (although it may be much longer, if management disputes the composition of an appropriate bargaining unit). If the election is a fair one, and if the proposed union receives majority support, the board certifies the union as the bargaining representative. Otherwise, the board will not certify the union.
Sometimes, a plant can decertify the union. The employees must petition the NLRB with a 30% employee support and no certification within the past year. The NLRB may grant this petition and call for a decertification election.
178. Collective bargaining: The terms of employment that result from the negotiations apply to all workers in the bargaining unit, even those who do not choose to belong to the union. Bargaining does not mean that either side must give in on demands or even that the sides must always compromise.
Subjects of bargaining: Terms and conditions of employment, closing or relocating a plant, and privacy issues.
Good faith bargaining: Bad faith bargaining includes—(1) Engaging in a campaign among workers to undermine the union, (2) Constantly shifting positions on disputed contract terms, and (3) Sending bargainers who lack authority to commit the company to a contract. Failure to bargain in good faith is an unfair labor practice.
179. Strikes: An organized cessation or slowdown of work by employees to compel the employer to meet the employees’ demands. The right to strike is guaranteed by the NLRA, within limits.
*Employers are allowed to lock out employees if there is a strike.
Illegal strikes
Secondary boycotts—a strike directed against someone other than the strikers’ employer, such as the companies that sell materials to the employer.
--Common Situs Picketing—a union pickets a site occupied by both primary and secondary employers. If evidence shows the picket is directed the secondary employer than it is illegal.
-- Hot-Cargo Agreements—employers voluntarily agree with unions not to handle, use, or deal in non-union-produced goods of other employers. Parties injured by this agreement can sue the union for damages.
--Wildcat strike—Occurs when a minority group of workers, perhaps dissatisfied with a union’s representation, calls its own strike. An unauthorized union wildcat strike is illegal.
--Strikes That Threaten National Health or Safety—The Taft-Hartley Act provides an 80-day cooling off period after filing an injunction in the federal court.
--Strikes That Contravene No-Strike Clauses—A strike may be illegal if it contravenes a no-strike clause. The US Supreme Court held that the arbitration clause was an effective substitute for the right to strike. In the absence of an applicable arbitration provision, however, an employer cannot enjoin (forbid) a strike, even if the contract contains a no-strike clause.
180. Replacement workers: The employer may find replacement workers, or “scabs” to fulfill the employment position as temporary or permanent. An employer can use employment agencies to recruit replacement workers.
181. Unfair labor practice: Any conduct prohibited by state or federal law governing the relations among employers, employees, and labor organizations.
Examples of unfair labor practices by an employer include (1) interfering with protected employee rights, such as the right to self-organization, (2) discriminating against employees for union-related activities, (3) retaliating against employees who have invoked their rights, and (4) refusing to engage in collective bargaining.
Example of unfair labor practices by a labor organization include causing an employer to discriminate against an employee, engaging in an illegal strike or boycott, causing an employer to pay for work not to be performed (i.e., featherbedding), and refusing to engage in collective bargaining. 29 USCA §§ 151-169.
