BUS213: Business Law I Lesson 3

tying agreement

occurs when one party refuses to sell a product unless the buyer also purchases another product tied to that first product

acceptance of the offer

offeree agreeds to be bound by the terms set up by the offeror

reasonable time

time that may fairly, poperly and conventiently be required to do the task that is to be done, considering attending circumstances

rule of contemporary ownership

to bring a derivative suit, a shareholder must own stock at the time of he injury and at the time of the suit

officer of investor advocate (OIA)

to help make the work of broker-dealers and investment advisors more transparent

shareholder resolution

traditionally been among the weakest of shareholder voting tactics

inversion

typically occurs when an American corporation buys an alien corporation and then reincorporates in that alien's national base

bright-line test

used by those courts who saw a violation of the best-price rule only during the actual tender offer

one that has no legal effect whatsoever

void contract

ratification

when a board of shareholders approve a previously unauthorized act by a manager

executed contract

when a contract's terms have been completely and satisfactorily carried out by both parties

horizontal expansion

occurs between companies that are involved in the same business

executory contract

: a contract that has not yet been fully performed by the parties

inverted company

: a corporate entity that has gone through the inversion process

punitive damages

: designed to punish the wrongdoer for his or her outrageous conduct

implied-in-law contract

: imposed by a court when someone is unjustly enriched (apply reasons of justice and fairness), quasi-contract

condition concurrent

: requires both parties to perform at the same time

express contract

: requires written or spoken expression indicating a desire to enter the contract

RPM agreement

occurs when a retailer and a manufacturer decide that the retailer will sell certain products at a price set by the manufacturer

breach of contract

occurs when one of the two parties fails to keep the promise

formal contract

(1) written, (2) signed, witnessed, placed under the seal of the parties, and (3) delivered

commerce clause

: "Congress shall have the Power. . . to regulate Commerce with foreign nations, and among the several States."

Antitrust Prcoedures and Penalties Act

Justice Department's Decrees are regulated by a federal statute (Tunney Act)

leveraged buyout

a controlling portion of the stock in a corporation is purchased by a group of shareholders, often several outsiders but sometimes a team of officers and directors

actual authority rule

a manager may be held liable if he or she exceeds his or her authority and the corp is harmed as a result

voting trust

agreement among shareholders to transfer their voting rights to a trustee

contract

agreement between two or more persons to do, or refrain from doing, something

output contract

agreement in which one party consents to sell to asecond party all of the goods that the party makes

audit committee

all corporate persons that are publicly traded and alien corporations included on an American stock exchange may have this

privity

all parties have a legally recognized interest in the subject of the contract if they are to be bound to it

derivative suit

allows shareholders to sue corporate management of behalf of the corporation

proxy

authority given to one shareholder to cast another shareholder's votes

quasi-RPM agreement

occurs when a manufacturer lets retailers know the price that it expects to see on an item and then declines to sell that item to any retailer that does not list the item at that price

security-based swap

based on single security, a loan, a narrow-based group or index of securities, or event relating to a single issuer or issuers of securities in a narrow-based security index

unenforceable contract

because of some rule, cannot be upheld by a court of law

sharheolder/corporate democracy

believe that the shareholders have the right to run the corporation, because without their money, the corp. would not be able to survive

vertical expansion

between companies that were in a customer-supplier relationship

auction with reserve

bidders are the offerors and the seller is the offeree

junk bonds

bonds that are unstable but offer an elevated level of return to large, powerful investors

consolidation

both companies disappear, and a new company caries on the business under a new name

direct suit

brought by shareholders who have been deprived of a right that belongs to them as shareholders

greenmail

buying the portion of the target's stock that the bidder already owns (the most effective way for a arget to shake off a bidder's hostile suit)

golden parachute

compensation package that protects executives who might lose their positions following a merger or consolidation

capitalism

complex adaptive system of overlapping economic agents that operates on the basis of competition and a free market that responds to the movement of supply and demand

condition precedent

condition that requires the performance of certainacts or promises before the other party is obligated to pay money or provide any other agreed to consideration

contract of record

confirmed by the court with an accompanying judgement issued in favor of one of the parties

registration statement

contains detailed information about the corporation, including data about its management, capitalization, and financial condition

prospectus

contains much of the same information but in a condensed form

implied-in-fact contract

contract implied by the direct or indriect acts of the parties

derivative

contract/instrument; financial tool whose value emerges from a variable item, such as an interest rate, a stock index, or a commodity like fuel or crops

ultra vires

corporate managers who exceed their authority

implied contract

created by the actions or gestures of the parties involved in the transaction

integral-part test

decided that any type o price enhancement, including employment-related packages, would violate the best-price rule.

poison pill

defense is triggered when a potential hostile bidder manages to purchase a specified percentage (perhaps 10/20 percent) of the firm

security

defined as a monetary investment that expects a return solely because of another person's efforts

swap transaction

derivative that is made in an over-the-counter market

self-dealing managers

different standards are used to judge the conduct of these managers

competitive impact statement

document that clarifies any potential antitrust problems inherent within the expansion and the solutions to those problems suggested by the decree

cost-plus contract

does not include a final price; rather, the contract price is determined by the cost of labor

contract classification

enforceability, valid, void, voidable, nenforcable, express, or implied

monopoly

exclusive control of a market by a business enterprise

targeted shareholder agreement

executive protection strategy (the suitor negotiates a deal with certain targeted shareholders, generally the CEO, CFO, the CTO, and other high-ranking officers

illusory promises

fail to obligate one to do anything

consent decrees

help the parties negotiate a merger that can be completed without violating the law

requirements contract

in which one party agrees to buy all of the goods it needs from the second party

interlocking directorates

individuals serve as directors of two corporations that are competitors

objective concept rule

interpreting the acts and gestures of a party (the meaning of one's actions is determined by the impression those actions would make upon any reasonable person)

friendly suitor/white knight

invited suitor agrees that it will retain existing management

accord/satisfaction

involve an agreement to accept a performance different from the one originally agreed to

proxy contest

involve large, publicly traded companies that are closely regulated by the SEC

merger

involves two corporations, one of which is absorbed by the other

U.S. Sentencing Commission

issued a set of rules that control the discretion of the federal courts in issuing fines against corporations found guilty of criminal activities.

conglomerate expansion

joins two companies that were not in competition with each other, either because they dealt in different products or services or because they operated in different geographical regions

promissory estoppel

legal doctrine baerring a party from denying a promise is enforceable when he or she knew that the other party was relying on the promise

valid contract

legally binding and fully enforceable by the court

duty of loyalty

managers must place the corporation's interests above their own

duty of obedience

managers will be held liable for any violation of the limits of their authority on the basis of absolute or strict liability

inside information

material, nonpublic, factual data that can be used to buy or sell securities at a profit

lockup agreement

might be used by target management if the target owns an irreplaceable piece of property, the sale of which could seriously devalue the overall worth of the target

asset acquisition

one corporation purchases all the property of a second corporation

bilateral contract

one in which both parties make promises

current market price contract

one in which prices are determined by reference to the market price of the goods as of a specified date

unilateral contract

one party makes a promise to do something in return for an act of some sort

controlled company

one that has more than half of its voting power concentrated in one individual or small group of people who always vote together

voidable contract

one that may be avoided or canceled

informal contract

oral/written contract that is not under seal or is not a contract of record is considered this

condition subsequent

parties agree that the contract will be terminated when a prescribed event occurs or does not occur

hopscotch loan

permits a tax-free loan to flow from an established alien branch into the treasury of the new alien parent

trustee

person who is entrusted with the management and control of another's property or rights

per se violations

practice is so contrary to antitrust policy that harm is presumed and practice is prohibited

list price

price that the seller asks initially when the property is placed on the market

proxy solitication

process by which one shareholder asks another for his or her voting right

best-price rule

prohibited suitors from offering different prices to different shareholders during a tender offer process

auction

sale that is open to the public

preemptive rights

shareholders have the right to purchase a proportionate share of every new offering of stock by the corporation

public power

state's authority to restrict private rights to promote and mantain public health, safety, welfare and morals

corporate opportunity doctrine

states that the corporate managers cannot take a corporate business opportunity for themselves if they know that the corporation would be interested in that opportunity

shareholder proposal

suggestion about a broad company policy or procedure that is submitted by a shareholder

standard construction rule

tells judges that their primary objective is the interepretation of a written contract is to uncover the goals that the parties when they entered the contract

mirror image rule

terms as stated in the acceptance must exactly mirror the terms stated in the offer

tender offer

the buyer or suitor makes a public offer to buy voting stock in a target corporation

stock acquisition

the buyer purchase enough stock in a corporation to gain voting control of that corporation

business judgment rule

the court will not interfere with the most business decisions

shareholder of record

the person to whom stock shares are transferred has the right to have the stock transfer entered on corporate books

associative corporativism

the process of doing business as a self-governing business association

office of credit ratings

the purpose of which is to watch those organizations that issue credit ratings

police power

the right to regulate behavior to promote public health, safety, and welfare

auction without reserve

the seller is the offeror and the bidder is the offeree

rule-of-reason standard

will stop certain practices only if they are an unreasonable restriction of compensation