LAW 231 Legal Environment of Business Chapter 5-8

Principles-Based Approach

A large family of diverse moral theories, including theories based on religion, virtue, natural law, and universal moral duties. What these theories have in common is that they are all based on general or universal moral principles. Doing what is right Kant believed humans have an inherent notion that we should act from a sense of duty

Novation

A substitute third party that enters into the contract with the offeror.

Operation of Law: Impossibility

After the parties have entered into an agreement, the contemplated performance of the obligation may be impossible.

What is required for a valid contract?

Agreement/Mutual Asset, Consideration, Capacity, Legality

Uniform Commercial Code(UCC)

Applies only to sales contracts; provides standardization that merchants and consumers can rely on.

Common Law

Applies to contracts for services or real estate.

Statutory Law

Applies to contracts of goods or products.

Implied Warranty of Merchantability

Applies to every sale of a product from merchant to buyer. Requires the seller to warrant: Fit for its ordinary use, properly packaged, and proper quality

Values Management

Business ethics in the workplace emphasizes prioritizing moral values for the organization and ensuring that employee and manager behaviors are aligned with those values

Moderate View

Business's ethical responsibility is to comply with the law and pursue objectives that are legal. Sarbanes Oxley- Requires public companies to create systems to report illegal acts

Broad View

Business's should strive to promote the economic, legal, ethical, and philanthropic social responsibilities expected of it by its stakeholders.

Implied Warranty of Fitness for a Particular Purpose

Buyer must prove: Seller knew of the buyer's desire to use the product and the buyer relied on seller's advice and recommendation

Wells Fargo Case

CFPB fined Wells Fargo for secretly opening unauthorized consumer accounts. The CEO kept a big portion of the money and didn't help out paying for the fine.

Federal Debt Collection Practices Act

Collection agencies or secondary debt collectors, collecting debts on behalf of someone else. Doesn't apply to individuals collecting debt for themselves

Compensatory v. Consequential Damages

Compensatory- Out of pocket damages(Value of lost bargain) Consequential- Compensations to the non-breaching party for foreseeable indirect losses not covered by compensatory.

Ethics

Conscious system in place for solving moral dilemmas.

Debt Collectors Cannot:

Contact the debtor at work, contact at inconvenient or unusual times, use threats, hire third parties, persistently contact the debtor after saying not to pay

Hybrid Contracts

Contracts of goods and services The law that is applied is determined by predominant subject matter.

Truth-In-Lending Act

Credit Cardholder is liable only for $50 per card for unauthorized charges made before the creditor is notified that the card is stolen

Liquidated Damages

Damages the parties agreed to ahead of time.

Utilitarian/Consequence-Based Approach

Emphasizes that the ethical action provides the greatest good for the greatest number of people

Morals

Generally accepted standards of right and wrong in a given society or community.

AIG Case

Government gave the company money to help them out their financial crisis; the executives of the company were given +$100 million bonuses just months before their financial crisis.

International Sale of Goods

Governs sale of good transaction between businesses in the 79 member countries No writing required and only applies to merchants

Merchant's Firm Offer

In a writing that promises the offer will be held open Irrevocable for: Stated period of time; reasonable period of time; no longer than 3 months

Augstein v. Leslie & Next Selection Inc

Leslie lost his laptop and offered a reward to whoever found it. Augstein found the laptop and Leslie didn't pay. Leslie tried telling the court it was an advertisement, not an offer. Valid, enforceable, implied, unilateral contract; Leslie had to pay the reward to Augstein.

Narrow View

Milton Friedman's theory that proposed the only responsibility a business should have is to maximize stakeholders profits.

Warranty Disclaimers

Must be in conspicuous writing: Capital letters, bold print, font that stands out

Recission

Neither party has fully performed, can cancel the contract.

Objective Intent v. Subjective Intent

Obj. : How the offeree interprets the offeror's words and conduct.(What the court relies on) Sub. : Offeror's actual intent(Not relevant)

Unilateral Contract

One promise, followed by one performance which then triggers a second performance. Fast food restaurants: Pay them for the food first, then they make the food for you.

UCC Enforceable

Past commercial conduct Correspondence or verbal exchanges between the parties Industry standards and norms

Stakeholders

People affected by business decisions. Primary stakeholders are directly impacted while secondary stakeholders suffer indirectly.

Contract-Based Approach

People must negotiate their own ethical rules and principles for themselves. Rawls approach

Substantial Performance

Performance of the essential terms of the contract such that performance can be considered complete; less damages for anything still unperformed.

Statute of Frauds

Prevent fraud by requiring certain contracts have written evidence to be enforceable. Under the UCC, writing must contain: Quantity, signature of party whom enforcement is sought, and language that a reasonable person can conclude that the parties intended to form a contract.

Offers with Open Terms

Quantity- No contract without stated quantity Delivery- Buyer takes delivery at the seller's place of business Payment- Due at the time and place where the seller is to make the delivery Price- UCC requires court to determine a reasonable price at the time of delivery

Statute of Frauds Applies to Contracts that Involve:

Real Estate; Can't be performed in under a year; Paying the debt of another; Consideration of marriage; and sale of goods $500 or more and lease tractions for goods $1000 or more.

Substantial Performance Test

Result is substantially enough to be considered complete Difference is unimportant Can the part not performed be made of a monetary difference

Express Warranty

Seller expressly promises that the goods have certain qualities

Material Breach

Some deviation of contract that results in a substantial change.

Maximizing Profits Theory

Striving for the greatest profit without breaking laws.

Moral Minimum Theory

Striving to be as ethical as possible while making a reasonable profit.

Implied Contract

The agreement is reached by the parties' actions.

Operation of Law: Impracticability

The burden of performance must be unforeseeable and extreme in terms of the contract.

Bilateral Contract

Two promises and two performances

Breach

When a party fails to fulfill their obligation.

Revocation

When the offer is revoked by the offeror prior to acceptance.

Express Contract

When the parties have knowingly and intentionally agreed on the promises and performances.

Battle of the Forms

With contracts between merchants, additional terms automatically become part of the contract, unless: 1. Original offer expressly prohibit additional terms 2. Additional terms materially alter contract 3. Offeror objects within a reasonable period of time