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