Business Law Exam 2
UCC (Fraud)
$500 or more must be in writing
Common Law (Fraud)
-Land -Cannot be performed under one year -Pay the debt of another (co-sign) -Contracts related to marriage (pre-nup)
Violation of care duty
1. Negligence (fail to read reports) 2. Failure to act (Diligence) 3. Rubber stamp (No outside consolation)
Partnership
A business in which two or more persons combine their assets and skills
Corporation
A business that is owned by many investors.
Franchise
A business that uses the name, logo and trading systems of an existing successful business
Void Contract
A contract having no legal force or binding effect. EX. Helping someone with illegal activity
Unenforceable Contract
A contract in which the essential elements to create a valid contract are met but there is some legal defense to the enforcement of the contract. EX. Alex and his uncle make a deal that he will not drink or smoke anything until he turns 21, if he does not he gets 5,000 dollars. There is no written agreement tho.
valid contract
A contract that has the necessary elements and, thus, can be enforceable. EX. Employees enter into a contract with their employer to perform their work in exchange for a monthly or weekly salary.
privately held corporation
A corporation that has only a few stockholders and whose stock is not available for sale to the general public.
Preexisting Duty
A duty that one is already legally obligated to perform and, thus, that is generally not recognized as a legal detriment.
implied partnership
A partnership lacking a written agreement, but in which the parties involved conduct business like a partnership
Past Consideration
A promise made in return for a detriment previously made by the promisee; does not meet the bargained-for exchange requirement.
offer
A promise or commitment to perform or refrain from performing some specified act in the future.
Mailbox Rule
A rule providing that an acceptance of an offer becomes effective on dispatch.
Limited Liability Company (LLC)
A structure that separates companies and their owners. Prevents individuals from being liable for the company's financial losses, debts, and other liabilities.
Withdrawl
A term used by the RULPA to describe the act of separation of one partner from the partnership
Piercing the Corporate Veil
Action in which a court discards the corporate veil and holds some or all of the shareholders personally liable because fairness demands doing so in certain cases of inadequate capitalization, fraud, and failure to follow corporate formalities.
winding up
After dissolution, the process of paying the debts of the partnership and liquidating and/or distributing the remaining assets. Its sole purpose is to sell off stock, pay off creditors, and distribute any remaining assets to partners or shareholders.
Counteroffer
An action terminating an offer whereby the offeree rejects the original offer and proposes a new offer with different terms.
Voidable Contract
An agreement that may be terminated by one of the parties EX. if the party was tricked into signing it or if they were underage
limited partnership
An entity that exists by virtue of a state statute that recognizes one or more principals as managing the business enterprise while other principals participate only in terms of contributing capital or property
Unilateral Mistake
An erroneous belief held by only one party about a basic assumption in the terms of an agreement.
lapse of time
An event covered under operation of law in which a contract may be terminated once either the offeror's expressed time limit has expired or a reasonable time has passed.
pass-through entity
Any profits are taxed at an individual rate after they pass through the business and are distributed to the partners.
bargained for exchange
Both parties are getting something that they've agreed to, usually something of value for something of value.
mental incapacity
Category of individuals who have limited capacity to enter into a contract; includes anyone who is unable to understand the nature and consequences of the contract and anyone who is unable to act in a reasonable manner in relation to the transaction when the other party has reason to know of his condition.
Minors
Category of individuals who have limited capacity to enter into a contract; includes those younger than the majority age of 18. Until a person reaches her majority age, any contract that she may enter into is voidable at the minor's option.
State Statutory Law
Contracts for goods or products are governed by
Capitalization
Debt: Private, Commercial, Public Equity: Private, Semi-Private, Public Offering
Statement of qualification
Document filed to form a limited liability partnership by converting a general partnership
Operating Agreement
Document that governs an LLC; sets out the structure and internal rules for operation of the entity.
Legality
For the formation of a valid contract, the requirement that both the subject matter and performance of the contract must be legal.
mistake
In contract law, an erroneous belief that is not in accord with the existing facts.
Officers
Individuals appointed by the board of directors to carry out the directors' set course of direction through management of the day-to-day operations of the business.
Directors
Individuals responsible for oversight and management of the corporation's course of direction.
Objective Intent
It is the perspective of a reasonable person, observing the parties' words and actions, that determines whether they had the intent to be legally bound by the contract.
Member-managed LLC
LLC management structure similar to that of a general partnership, with all the members having the authority to bind the business
Acceptance
Occurs when one party, often referred to as the offeree, agrees to the terms and conditions presented in an offer made by another party, the offeror.
public policy
Part of the legality requirement for a valid contract; necessitates that the terms be consistent with public policy objectives.
corporate officers
President, VP, Treasurer, Secretary
Mirror Image Rule
Principle stating that the offeree's response operates as an acceptance only if it is the precise offer.
capacity
Refers to a person's legal ability to understand the terms of a contract, make informed decisions, and enter into a contract.
RULPA
Revised Uniform Limited Partnership Act; the model for limited partnership legislation in most states
RUPA
Revised Uniform Partnership Act -determines how a business partnership should be organized and established
Detrimental Reliance
Situation in which the offeree acts, based on a reasonable promise made by the offeror, and would be injured if the offeror's promise is not enforced. EX. Jane accepts a job offer with better pay and quits her job, when she is about to start her new job they email her saying they are withdrawing. Which leaves Jane unemployed and in a bad financial situation
operation of law
Termination of an offer by the occurrence of certain happenings or events, which generally include lapse of time, death or incapacity of the offeror or offeree, destruction of the subject matter of the contract prior to acceptance, and supervening illegality.
Enforceability
The ability to carry out effectively
Revocation
The act of withdrawing or canceling an offer before it is accepted.
State Common Law
The body of law governing contracts for services or real estate.
Articles of Organization
The document filed with a designated state official by which a limited liability company is formed.
Certificate of Limited Partnership
The document that must be filed with a designated state official to form a limited partnership.
Fiduciary Duties
The duties of obedience, care, loyalty, and good faith; are intended to ensure that the partners are acting n the best interest of the partnership
jointly and severally liable
The legal principle that imposes liability on general partners both together (jointly) and separately (severally) for debts and liabilities of the partnership.
Consideration
The mutual exchange of benefits and detriments; for the formation of a valid contract, the requirement that each party receives something of value (the benefit) from the other and that each party gives up something of value (the legal detriment) to the other, resulting in a bargained-for exchange.
Promissory Estoppel
Theory allowing for the recovery of damages by the relying party if the promisee actually relied on the promise and the promisee's reliance was reasonably foreseeable to the promisor.
Partnerships (general and limited)
Two or more principals that agree to share profits and losses in an ongoing business venture. Debts and liabilities of the business are also personal debts and liabilities of the general partners. Limited partners have limited liability.
A. Personal Liability B. Capitaliztion C. Taxation D. Management
Which of the following are factors in choosing an entity refers to the business option for funding its operations? B. Capitalization
Quasi Contract
a classification that permits a contract to be enforceable in cases where no express or implied contract exists and one party suffers losses as a result of another party's unjust enrichment
Implied Contract
a contract in which the agreement is reached by the parties actions rather than their words EX. If a customer enters a restaurant and orders food, the restaurant owner is obligated to serve the food, and the customer is obligated to pay the prices listed on the menu for it.
Unilateral Contract
a contract involving one promise followed by one performance, which then triggers a second performance from the offeror EX. when someone posts a reward for their lost pet, wallet, cellphone, etc.
Bilateral Contract
a contract involving two promises and two performances EX. A car buyer may agree to pay the seller a certain amount of money in exchange for the title to the car. The seller agrees to deliver the car title in exchange for the specified sale amount.
Express Contract
a contract that is created when the parties have knowingly and intentionally agreed on the promises and performances EX. pay $100 for warehouse, come over and paint warehouse
Business Judgement Rule
a corporate director or officer will not be liable to the corporation or to its shareholders for honest mistakes of judgement and bad business decisions
Duty of Loyalty
a fiduciary duty owed by an agent not to act adversely to the interests of the principal
Corporate Veil
a legal concept that separates the personality of a corporation from the personalities of its shareholders, and protects them from being personally liable for the company's debts and other obligations.
IIIusory promise
a promise that courts will not enforce because the offeror is not truly bound by his vague promise or because a party cannot be bound by his promise due to the lack of bargained-for exchange.
limited liability partnership (LLP)
a type of partnership in which all partners are limited partners
guide posts
allocation of value unique services
rejection
an action terminating an offer whereby the offeree rejects the offer outright prior to acceptance
joint venture
an agreement between two or more companies to share a business project
Mutual Mistake
an erroneous belief held by both parties that concerns a basic assumption on which a contract was made
franchisee
an individual or business that is granted the right to sell another party's product. They pay a fee to the franchisor for the right to sell its established products and use its trademarks and proprietary knowledge.
agreement
any meeting of the minds resulting in mutual assent to do or refrain from doing something
Irrevocable Offers
cannot be revoked EX. Buyer A wants to buy a house from Seller B. Buyer A submits a written offer to seller B, specifying that the offer is (BLANK) for 10 days.
Nominal Consideration
consideration that is stated in a written contract even though it is not actually exchanged EX. Alice sells her bike to her best friend for 1 dollar, in reality the bike is worth 100 but since she is close with him she gives him it for a better price
Written vs. Oral Contracts
contracts can be either written or oral, but some contracts must be in writing under the statue of frauds in order to be enforceable.
Hybrid Contracts
contracts that involve terms for both goods and services EX. A plumbing service that will get all the equipment for you and come to your house and build it
CARE
good faith/ best interest
domestic, foreign, alien
in state, out of state, out of country
formation
low start-up costs and minimal filing
Undue Influence
occurs when one party to a contract is in a position of trust and wrongfully dominates the other party
Mutual Assent
offer and acceptance
Fraudulent Misrepresentation
one party has knowledge that the representation is not true and does not tell the other party
Misrepresentation
one party in an agreement makes a promise or representation about a material fact that is not true
Sole Proprietorship
one person owns the business
Shareholders
owners of a corporation
express partnership
partnership formed when the parties have agreed to conduct a partnership on certain terms and agreements
Partnerships at will
partnerships where the partners have not agreed to remain partners until the expiration of a definite term or event
personal guarantee
pledge from LLC members of personal assets to guarantee payment obligations of the business venture
Contracts
promises that are enforceable by law
Statute of Frauds
requires certain contracts to be in writing
lucid
sane and thinking clearly
Franchisor
sells the right to open stores and sell products or services using its brand, expertise, and intellectual property.
Dissociation
term used in the RUPA to describe the act of separation of a partner from the partnership.
dissolution
the breaking up into parts; termination of a legal bond or contract
articles of incorporation
the document filed with a state government to establish the existence of a new corporation
forbearance
the giving up of a legal right as a consideration in a contract EX. Not enough money to pay rent so the landlord moves the timing back until he gets back on his feet
Genuine Assent
the knowing, voluntary, and mutual approval of the terms of a contract by each party; required for a contract to be enforceable
General Partnership
the law recognizes 2 or more principals as being general partners if they intend to carry on as co-owners of business profit. Can be written or oral. RUPA governs it.
Manager-managed LLC
the members designate a group of persons to manage the firm
Duty of Care
the obligation people owe each other not to cause any unreasonable harm or risk of harm
treble damages
three times the damages actually; awarded in a fraud case
Capacity (Mental)
unable to understand unable to act rationally and other party knows ex. Sparrow v Demonico
Capacity (Age)
voidable until age of majority ex. Lucy v Zimmer
Unconscionability
where the terms and conditions of a contract are so one-sided, oppressive, or unfair that they shock the conscience and are considered unconscionable by a court.