Law and Ethics MIDTERM and FINAL

Unconditional

"I will pay you on Tuesday." is an example of this type of promise to pay

Board of Directors

A body of persons elected by the stockholders to define and establish corporate policy

Corporation

A business entity created by statutory law and owned by individuals known as stockholders

Sole Proprietorship

A business owned and carried on by one person

Sole Proprietorship

A business owned by one person who is subject to claims of creditors

Bailor

A case of someone finding and taking possession of lost property is a bailment for the sole benefit of this party

Cashier's Check

A check drawn on a bank's own funds and signed by a responsible bank official

Certified Check

A check for which the bank assures that the drawer has sufficient funds to make a payment

Life Insurance

A contract by which the insurer agrees to pay a beneficiary a specified sum upon the death of the insured

Executory Contract

A contract in which the terms have not been fully carried out by all parties

Insurance

A contract whereby a party transfers a risk of financial loss to a risk bearer for a fee

Private Corporation

A corporation formed by individuals to carry out some non-governmental function

Public Corporation

A corporation formed to carry out government functions

Domestic Corporation

A corporation in the state in which it received its initial charter

Alien Corporation

A corporation that is incorporated in another country

Domestic Corporation

A corporation that operates in the state that granted the charter

Precedent

A court decision that determines the decision in a subsequent, similar case

Subchapter S Corporation

A creation of the tax codes; shareholders elect to be taxed as a partnership (no double taxation) without losing corporation status

Quitclaim Deed

A deed that transfers whatever interest a grantor has in a property, but makes no claims as to what that interest may be

General Warranty

A deed that warrants that a grantor has good title to a real property and further warrants that the grantor will defend the grantee against all claims by third parties

Close Corporation

A designation which applies to a corporation in which outstanding share of stock and managerial control are held by a limited number of people (often members of the same family)

Bill of Sale

A document that conveys or evidences title to tangible personal property

Duress

A means of destroying another's free will by one party obtaining consent to a contract as a result of a wrongful threat to do the other person or family members some harm

Assignment

A means whereby one party in a contract conveys rights to another party, who is not a party to the original contract

Promissory Note

A negotiable instrument containing a promise to pay

Silent Partner

A partner has all the rights and liabilities of a general partner but does not want to be actively engaged in the day to day operations

Secret Partner

A partner that has all the rights of a general partner and is actively engaged but is not disclosed as being a partner and has unlimited liability when discovered by the public

General Partner

A partner that has unlimited liability and are actively engaged in management and operation of the business while sharing the profits and losses of the business

Limited Partner

A partner that is created by the partnership itself obtaining the status of a limited partnership and the amount of liability is limited by the amount of investment

Dormant Partner

A partner that is not actively engaged in the business and is not disclosed as a partner that has unlimited liability when discovered by the public

Nominal Partner

A partner that is not legally a partner but may be a paid consultant that has some interest in the business succeeding (i.e. held out as a partner)

Principal

A party who appoints a second party to serve as an agent

Bearer

A person in possession of an instrument

Endorsee

A person who becomes the holder of a negotiable instrument by endorsement which names him or her as the person to whom the instrument is negotiated

Promoter

A person who takes the initial steps to form a corporation

Term Insurance Policy

A policy where the company assumes, for a specified period of time, the risk of death of the insured

Mutual Benefit

A private carrier's contract for transporting goods is an example of this type of bailment

Valid Consideration

A promise to refrain from doing an act that can be lawfully done

Legal Rate of Interest

A rate that is applied when no rate is specified

Bill of Lading

A receipt and contract between the shipper of a particular good and a carrier

Endorsement

A signature on the back of an instrument along with any directions or limitations regarding use of or liability for the instrument

Insurable

A type of interest in the nonoccurence of the risk insured against`

Concealment

A willful failure to disclose pertinent information by the insured

Commercial Paper/Negotiable Instrument

A writing drawn in a special form which can be transferred from person to person as a substitute for money or as an instrument of credit

Bill of Exchange

A written order by one person directing another to pay a sum of money to a third person

Complaint/Petition

A written request to a court to settle a dispute

Officers

Agents of the corporation

Personal Property

All property that is not real property

Bailment

An act of delivering goods (mainly personal property) for a particular purpose without the transfer of ownership

Power Over Business Practices

An agency's power to determine whether the activity of a regulated entity is acceptable or not is an example of this type of power

Special Agent

An agent who is authorized to carry out all of the principal's business of a particular kind

Implied Authority

An agent's authority to do things not specifically authorized in order to carry out express authority

Corporation

An artificial being, existing only in contemplation of law

Restrictive

An endorsement that attempts to prevent the use of instrument for anything except the stated use

Special Endorsement

An endorsement which designates the particular person to whom payment is to be made

Qualified Endorsement

An endorsement which limits the liability of the endorser

Restrictive Endorsement

An endorsement which prevents the use of the instrument for anything except the stated use

Silent Partner

An individual who takes no active part in the management of a partnership, but has capital invested in the business

Universal Life Policy

An insurance product combining features of both whole life and term life policies

Check

An order by a depositor on the bank to pay a sum of money to a payee

Ultra Vires Contract

Any contract entered into by a corporation that goes beyond its powers

Bailee

Any loss or damage to bailed property due to no fault of the bailee falls on the owner is an example of a bailment for the sole benefit of this party

Shares

Certificates that represent ownership in a stock corporation

Order Paper

Commercial paper made payable to the order of some named party; the word order or its equivalent must be used

Bearer Paper

Commercial paper made payable to whoever has possession of it

Bearer Paper

Commercial paper payable to bearer; i.e. to the person having possession of such

Precedents

Common law cases are decided on the basis of ____

Bill of Rights

Consists of ten amendments to the U.S. constitution specifically designed to protect the civil rights and liberties of citizens and the states

Term Life Policy

Contract whereby insurer assumes risk of death of insured for a specific time with no cash surrender value

Voidable

Contracts that are made by people who have become so intoxicated that they cannot understand the meaning of their acts are considered ____

Binding Contract

Created when an offeree accepts an offer that has been properly communicated

Foreign Corporation

Designation that applies when a corporation operates in any state other than where it is chartered

Deed

Document conveying title to real property

Blank Endorsement

Having no words other than the signature of the endorser

Void

If a contract is not for a lawful purpose that must be achieved in a lawful manner then the contract is ____

Quasicontract

If a minor contracts for necessaries, the minor is not required to play the contract price but will e required to pay a reasonable amount to avoid unjust enrichment. This makes the contract a ____

Consideration

Indicates what the promisor demands and receives as the price for a promise

Whole Life Policy

Insurance that covers an insured for life and accumulates cash surrender value

Life Estate

Interest in real property for duration of a person's life

Qualified

James wants to endorse a check to Janice but wishes to rid himself from all further liabilities - what type of endorsement is this?

Real Property

Land and those objects permanently attached to land

Suicide

Life insurance contracts are commonly not claimable in cases involving this

Limited Liability Company

Newest from of business ownership recognized in the U.S. combines features of both the corporation and partnership

Fixture

Objects permanently attached to land

Tenancy at Sufferance

Occurs when a tenant holds over the tenancy after the expiration of the lease without the permission of the landlord

Special Agent

One authorized by the principal to execute specific act(s)

General Agent

One authorized to carry out all of the principal's business of a particular kind

Holder

One in possession of commercial paper

Independent Contractor

One who contracts to perform certain tasks for a set fee, but who is independent of the control of the contracting party as to a means by which the contract is executed, except for specifications established in the contract

General Agent

One who is authorized to execute the principal's business of a particular kind, or all the principals business at a particular place, if not all of one kind

Consignee

One who receives goods shipped by common carrier

Consignor

One who ships goofs by common carrier

Title

Ownership; evidence of ownership of property

Limited Partner

Partners who have their liability for the firm's debts limited to the amount of their investment

Fixture

Personal property attached to land or building that becomes part of the land

Intangible Personal Property

Personal property that lacks a physical presence

Antitrust Laws

Purpose of these is to promote competition among businesses

Beneficiary

Recipient of the proceeds of a life insurance policy

Undue Influence

Refers to a person in a special relationship causing another's action contrary to free will

Mental Capacity

Required as a prerequisite for any agreement to be legally enforceable

Contract

Results when the parties intend to be legally obligated by the terms of the agreement

Agreement

Results whenever two people's minds meed on a subject

Bailor

Sally leaving her car in a neighbor's carage while Sally's carport is getting a new roof is an example of a bailment for the sole benefit of this party

True

T/F: A bailment can be created by the unspoken conduct of the parties

True

T/F: A bailment may exist when the recipient does not return the actual goods

True

T/F: A close corporation has a small number of stockholders

False

T/F: A common carrier is liable for a loss if it is transporting goods that pose a menace to health which are seized by a public authority

False

T/F: A common carrier may refuse service that is unprofitable

True

T/F: A common carrier may refuse to provide transport for goods if it does not have proper equipment

True

T/F: A common carrier of people is required to assist passengers when necessary for alighting

False

T/F: A contract is void if parties to a contract are mutually mistaken about their expectations

True

T/F: A contract negotiated by an agent usually involves at least three parties

True

T/F: A depository bank receiving a check with a restrictive endorsement, such as "for deposit" must always honor the restriction

True

T/F: A false statement made in belief that it is true is known as innocent misrepresentation

True

T/F: A finder has title to and absolute right to possession of abandoned property

True

T/F: A finder of lost property has the right of possession against all but the true owner, as long as the finder has not committed a wrong of some kind

True

T/F: A foreign corporation who has authority to do business in the state is allowed to form contracts

True

T/F: A grantor and grantee must be identified in a deed

True

T/F: A holder who takes a negotiable instrument in good faith and for value, is a holder in due course

True

T/F: A minor, upon reaching the age of majority, must ratify none or all parts of a contract

True

T/F: A partner who commits a tort has liability for indemnifying the partnership for any loss it sustains

False

T/F: A person who sells alcoholic beverages to a minor when such a sale is prohibited can recover on the contract

True

T/F: A principal may ratify an authorized contract and thus be bound on it

True

T/F: A principal must reimburse the agent for expenses incurred during the agency

False

T/F: A principal ordinarily does not have liability to third parties for contracts made within the actual or the apparent scope of an agent's authority

False

T/F: A promise to steal a valuable piece of art is valid consideration to support a contract

False

T/F: A qualified endorser makes no warranties regarding the instrument

True

T/F: A sole proprietor has ultimate responsibility for all business decisions

True

T/F: A sole proprietor has unlimited liability and high financial risk

False

T/F: A sole proprietor has very limited flexibility in managing the business

False

T/F: A special endorsement is having no words other than the name of the endorser

False

T/F: A special warranty deed warrants that a grantor has the right to sell a personal property

False

T/F: A state administrative agency affects businesses throughout the country

False

T/F: A tenancy for years is a tenancy for an indefinite period of time

True

T/F: Administrative agencies primarily set policy through the issuance of rules and regulations

True

T/F: Advertisements and catalogs are examples of general invitations

True

T/F: Agents have a duty to keep principals informed of all facts pertinent to the agency

False

T/F: All agreements are contracts

False

T/F: All partners of a limited partnership have limited liability

True

T/F: All people legally competent to act for themselves may act through an agent

True

T/F: An LLC can be dissolved with the written consent of all members

True

T/F: An LLC can be sued by third-parties as a separate entity

False

T/F: An agent does not incur liability for any losses caused by disobeying a principal's instructions

False

T/F: An agent does not incur personal liability for fraud or any other wrongdoing caused by disobedience

False

T/F: An antitrust violation occurs when a business firm seeks to have cooperation within its firm to diminish competition

False

T/F: An easement gives an exclusive right to possession

False

T/F: An instrument made payable to more than one person is not negotiable

False

T/F: An insurer is a party who purchases insurance to provide protection from a loss

True

T/F: An offer expresses the willingness of the offeror to enter into a contractual agreement

False

T/F: An offer made in jest that does not appear to be seriously intended to an offeree is considered to be a valid offer

True

T/F: An offer that does not specify a particular manner of acceptance may be accepted in any manner reasonable under the circumstances

False

T/F: An order or promise in a negotiable instrument must be conditional

True

T/F: Any expense incurred as a result of an agent's unlawful act must be borne by the agent

True

T/F: Appellate courts include courts of appeals and supreme courts

False

T/F: As a general rule, a unilateral mistake made at the time of contracting has an effect on the validity of a contract

False

T/F: Common stockholders do not possess the right to a share of the assets of a corporation on dissolution

True

T/F: Consideration distinguishes mere agreements from legally enforceable obligations

False

T/F: Contracts which are designed to limit competition are acceptable by law

False

T/F: Dissolution of a partnership relieves the partners of their duties to each other

True

T/F: Dividends paid to shareholders can be paid with stock in a corporation owns in another company

True

T/F: Each state is part of the federal court system and has a state court system

False

T/F: For a promise to constitute consideration, the promise must not impose an obligation on the person making it

True

T/F: Generally, a part payment of a past-due debt is not consideration to support the creditor's promise to cancel the balance of the debt

True

T/F: Generally, a promise must be supported by consideration

False

T/F: If a decision of an administrative agency conflicts with a statute enacted enacted by a higher legislative body, the agency decision will prevail

False

T/F: If a druggist sells morphine to one who does not have a prescription, a suit to collect the price would be successful

False

T/F: If an adult purchases personal property from a minor, the minor has only a voidable title to the property

False

T/F: If commercial paper is made payable to whoever has possession of it, it is called order paper

True

T/F: If parties want to mutually cancel an old contract and place it with a new one, there must be added features in the new contract benefiting both parties to be enforceable

False

T/F: If the choice of whether an instrument is payable in either cash or goods is left up to the holder, the instrument is not negotiable

True

T/F: If the intended acceptance varies or qualifies an offer, the counteroffer rejects the original offer under the common law

True

T/F: If the supposed consideration consists merely of a promise to do what one is already legally obligated to do, consideration is invalid

True

T/F: If, after an offer has been made, the performance of the contract becomes illegal, the offer is terminated

True

T/F: In a situation where an injured party in an accident is partly to blame for the accident, the injured party cannot recover any damages because it is partially negligent in the case

True

T/F: In the legal system of the United States, it is possible for identically worded laws to have different consequences in different states

True

T/F: Insurance contracts must specify the particular risks being transferred from one party to another

False

T/F: Mistakes such as duress and undue influence render contracts void

True

T/F: One attempting to ratify must have been capable of authorizing the act at the time the act was done

True

T/F: One may have rights and obligations imposed by law even when no real contract exists

False

T/F: One who contracts with an independent contractor has more control over the performance of the work than does an employer

True

T/F: Ordinarily, for a mistake to invalidate a contract, the mistake must be a mutual one about a material fact

False

T/F: Performing or promising to perform what one is already obligated to do is a valid consideration

False

T/F: Ratification to a contract can be made any time before reaching majority

True

T/F: Silence constitutes acceptance to an offer if it is reasonable in consideration of previous dealings that the offeree to notify the offeror of non-acceptance

True

T/F: Silent partners take no part in the management of the business

True

T/F: Statutes are easier to amend than constitutions

False

T/F: Stockholders, by virtue of their investment in a corporation, have the right to act as its agent

False

T/F: The "mailbox rule" does not apply in situations where the offeror does not receive the acceptance

True

T/F: The U.S. Supreme Court is the highest tribunal in the land and its decisions are binding on all other courts

True

T/F: The articles of incorporation constitutes a contract between the corporation and the state

False

T/F: The courts will generally still allow a wrongdoer to enforce a contract against an innocent party

True

T/F: The decision of appellate court is binding on lower courts

True

T/F: The delivery of the deed to the purchaser transfers the title to real estate

True

T/F: The doctrine of strict liability can make the manufacturer of a dangerously defective product liable, even if there's no proof of negligence

False

T/F: The grace period refers to the period of time in which an insurance company may investigate a death before paying the face

False

T/F: The law considers everyone under the age of 21 to be a minor

False

T/F: The law states that a unilateral contract can be formed when performance is started

True

T/F: The legal term for one party benefiting unfairly at the expense of another is unjust enrichment

True

T/F: The liability of a common carrier of people begins when the passenger enters the waiting platform

False

T/F: The maker executes a note by signing on the back of the instrument

False

T/F: The most common type of relief that courts of equity provide is monetary damages

True

T/F: The principal may terminate the agency by taking actions that are inconsistent with the continuation of the agency

True

T/F: The promise or obligation of each party to a contract must be supported by consideration in order for the contract to be valid

True

T/F: The sum payable in a negotiable instrument cannot be dependent on future profits

True

T/F: To bind the principal and not the agent, the agent should sign the contract as "agent for the principal"

False

T/F: To recover damages for an intentional tort, the plaintiff is required to prove that there was a breach of duty by the tortfeasor to the plaintiff

True

T/F: Unlimited personal liability of each general partner for partnership debts is a disadvantage of the partnership form of business

False

T/F: When a bailment is for the sole benefit of a bailor, a bailee may receive benefits of ownership during the bailment

True

T/F: When a contract is required to be sealed, a substitute for an actual seal may be used

True

T/F: When a corporation terminates its existence, it must surrender its articles of incorporation

True

T/F: When a partner makes an honest mistake without negligence while working on behalf of the partnership, both the partner and the partnership are excused from liability

False

T/F: When one party wrongly threatens to injure another person physically in order to get agreement to a contract, economic duress occurs

True

T/F: When there is a contract of agency, the law imposes duties not specified in the contract on both the agent and principal

True

T/F: With regards to negotiability, the instrument must be in writing and signed by the party executing it

Certificate of Deposit

The acknowledgement by a bank of a receipt of money with an agreement of repayment

Negotiation

The act of transferring ownership of a negotiable instrument to another party

Negotiation

The act of transferring ownership of commercial paper to another party

Apparent Authority

The authority an agent is believed by third parties to have because of the behavior of the principal

Express Authority

The authority of an agent stated in the document or agreement creating the agency

Survivorship

The automatic right of the remaining surviving owner(s) to own the entire property free of any interest of a deceased owner

Fee Simple Estate

The broadest form of ownership in real property

Dissolution

The change in the relation of the partners by ending the present legal entity

Bill of Lading

The contract existing between the consignor and the carrier

Peril

The danger of a loss of, or injury to, property, life, or anything else

Disaffirmation

The election to avoid a contract or set it aside

Breach of Contract

The failure of a party to perform the obligations assumed under a contract

Lessee

The individual who has a duty to pay rent on the lease

Fee Simple Estate

The largest and most complete right that one may possess in property

Face

The maximum amount that the insurer agrees to pay in case of a loss

Counteroffer

The offeree's response that rejects an offer by varying its terms

Lessor

The owner of leased property; the person giving possession of a leased property

Members

The owners or investors of a limited liability company

Agent

The party appointed by the principal to enter into a contract with a third party on behalf of the principal

Assignor

The party making the assignment

Payee

The party to whom any negotiable instrument is made payable

Assignee

The party to whom the assignment is made

Bailee

The party who acquires possession, but not the title, of personal property by one party to another, under agreement

Employer

The party who employs employees to do certain work

Bailor

The party who gives up possession, but not the title, of personal property in a bailment

Employee

The person hired to perform work and who is obligated both as to the work to be done and as to the manner in which it is to be done

Maker

The person who executes a promissory note

Drawer

The person who executes the draft

Drawee

The person who is ordered to pay a draft

Endorser

The person who writes his or her name on the back of an instrument

Drawee

The person, company or financial institution ordered to pay a draft

Authority

The power to act for someone else

Board of Directors

The primary policy-making body of the corporation

Title

The right of ownership of property or evidence of ownership

Endorsement

The signature or statement of purpose by the owner on the back of a negotiable instrument, which indicates the future control of the instrument

Courts

The sole purpose of these is to interpret and apply the law from whatever source to a given situation

Bailment

The transfer of possession, but not the title, of personal property by one party to another under agreement

Conversion

The unauthorized exercise of ownership rights over another's property

Share

The unit value of a company's total stock

Partnership

The voluntary association of two or more people who have combined their resources to carry on as co-owners of a lawful enterprise for their joint profit

Administrative Agencies

These can become specialists in a particular area of regulation

State Trial Courts

These courts handle cases that are first instituted in them

Regulatory Agencies

These use their licensing power to allow a business to enter the field being regulated

Supreme Court

This court has appellate jurisdiction in cases based on the U.S. Constitution

Obligation of Record

This is an exception to the idea that a promise must be supported by consideration

Automobile Accidents

This is the most likely case where there would be a tort based on negligence

Par Value Stock

This must equal the value of money, property, or services received by the corporation

Tenancy in Common

This occurs when two or more people own property such that when one owner dies, that owner's interest in the property passes to a person named in the deceased's will

Promissory Estoppel

This requires the promisor to reasonably expect the promise to induce action by the promisee

Quasicontract

This type of contract is not a true contract and has been imposed by law in order to prevent one party benefiting unfairly at another's expense

Executed Contract

This type of contract is when each party has completed performance of each part of the contract

Formal Contract

This type of contract must be in special form or be created in a certain way

Quasicontract

This type of contract prevents the unjust enrichment of a party

Special Federal Courts

This type of courts have jurisdiction limited by congress

Special

This type of endorsement designates the particular person to whom payment should be made

Insurable

This type of interest may arise when a party has sufficient economic interest in the transaction to entitle them to insure the property involved

Valid Offer

This type of offer is seriously intended

Stockholders

Those having title to one or more shares of stock in a corporation; combined, they represent ownership of the corporation

General Partner

Those individuals actively and openly engaged in the business and held to everyone as a partner

Cosigner

To obtain a cosigner is a good precaution to take when a business person is dealing with a ____

Breach of the Tortfeasor's Duty

To recover for a tort based on negligence, the plaintiff must show this to the injured party

Forbearance

When one refrains or promises to refrain from doing something

Merger

When two companies combine their board of directors

Commercial Paper

Writings drawn in a special form that can be transferred from person to person as a substitute for money or as an instrument of credit