Commercial Law for Accountants Final

Respondeat Superior

"Let the master answer" an employer is vicariously liable for the behavior of an employee working within his or her scope of employment. Principal has a right to indemnification against the employee, the right to be reimbursed for the amount they are required to pay.

restitution

(n.) the act of restoring someone or something to the rightful owner or to a former state or position; making good on a loss or damage

Intentional Discrimination (Disparate Treatment)

- A discriminatory or harassing treatment directly to the employee - usually quid pro quo

Limited Liability Companies (LLC)

- A hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership. - Pass through entity

ERISA

- Better defined contribution plans, gave more vesting rules - Set more standards for retirement law - Shortened the vesting period for employee contribution plans

HIPPA

- Confidentiality relating to medical records - limits preexisting condition discrimination and supports privacy

Rule 506 (private placements)

- Created billions of dollars of hedge funds, do not have to comply with being monitored by the SEC - General advertising or solicitation not permitted - Raise unlimited amount of money from unlimited number of accredited investors - 35 non accredited investors are allowed if they have sufficient knowledge and experience in financial and business matters - Restricted securities - An offering is disqualified if the issuer or any person covered under Rule 506 has a relevant criminal conviction, regulatory, or court order - Form D filing within 15 days of first sale of securities

electronic monitoring

- If the employee is using a company computer/email, they have no privacy - Employer can have cameras in the building and officers

Title VII of Civil Rights Act of 1964

- Protects discrimination against race, sex, religion, national origin, age, disability, and genetic information - protects against retaliation

Private Blockchain

- Requires permission to join the network. - Industry or customer/client based - Only specific employees or people can join - Lose anonymity because specific people can only join - Super Nodes are not part of the blockchain but have the power to add to the chain

Rights of Partners

- Right to use and possess partnership property for partnership purposes - Transferable interest in the partnership - partner's share of the profits and losses of the partnership and the partner's right to receive distributions - Right to share in distributions - Right to participate in management - each partner has equal rights in the management, unless stated otherwise - Right to choose associates - Enforcement rights -Access to records and books, information regarding partnership affairs

Minority shareholder protections:

- Shareholder agreements - ensured dividends are distributed to all owners when the organization is profitable, a type of side agreement to give assurance - Super Majority Voting - when giving bonuses to management/owners, you need approval from the minority ownership if dividends are not being given

Close or Closely Held Corporation

- a corporation whose outstanding shares of stock are held by a small number of persons, frequently relatives or friends - Built in minority protections that other corporations do not include

Agent is Liable

- agent has no actual or apparent authority. - agent only has apparent authority and the third party does not know that the agent is acting for someone else - agent acts outside the scope of their authority

Ratification

- agent works outside the scope of their authority, but the principal accepts the contract. - Once the principal accepts, they are bound to the contract. - The agent can be liable if the principal does not ratify the contract.

Duty of Obedience

- agents must obey the request and instructions of the principal - Agents do not need to follow illegal orders or unethical behavior - Agents that exceed their actual authority are subject to liability to the principal - An agent may be subject to liability for the breach of this duty if they entered into an unauthorized contract that the principal is now liable for, if they improperly delegated their authority, or if they committed a tort that the principal is now liable for

Whistleblowing

- allows the employees to report illegal acts being committed by an employer - An employer cannot retaliate against the employee through anti-retaliation clauses

Electronic Agents

- can be recognized as human agents under agency law because they are a means of receiving goods. - Have the ability to bind principal to contract. - Cannot modify terms.

Termination of Agency by the Operation of Law

- death of an agent or principal - incapacity of the principal

Equal Employment Opportunity Commission (EEOC)

- enforcement agency that makes all of the rules that management has to following for hiring - Investigate charges of discrimination

Employee

- get a salary or hourly pay - make income - are dictated as to where they need to be and when they need to be there. - usually work for one employer - enjoy facility and benefits of employer - employer has right to control - employer can exert actual contol

Independent Contractor

- get commission/lump sum payment - make profits - set their own schedule and does their own thing without being controlled by the employer. - can have multiple projects at once - cannot always enjoy facilities and benefits of employer - employer does not have the right to control - employer cannot exert actual control

General Partner (LP)

- has expertise to start the business but needs an investor to get the idea going - Has unlimited liability to the partnership - Is subject to all duties and restrictions of a partner in a partnership - Death or bankruptcy of this individual dissolves the partnership

Limited Partner (LP)

- invests in the organization, can't make managerial decisions, and does not have control - Has limited liability to the amount that they invested - Subject to few if any duties - no duty of care to partnership

Rule 504

- limited offers not exceeding $10 million - Permits general advertising or solicitations - Must be permitted under state law - No disclosures necessary - Unlimited number of investors - Freely transferable interest - Bad actor disqualification - Cannot be an investment company or be used to acquire another company - Form D filing within 15 days of the first sale of securities

Rule 147

- no re-sales to a nonresident within 6 months after the last sale - may be out of state company but must satisfy doing business requirement and must have principal office in state

Subchapter S Corporation

- small organizations of less than 100 members, privately held - File with the IRS for tax purposes as if they were a partnership, no double taxation

COBRA

- standards for health insurance - Employers need to give employees a 60-day notice if they will not be contributing to their health insurance anymore - Up to 18 months after an employee leaves, they can still stay with the group insurance provider, but they have to pay the premium for it

Termination of Agency by the Acts of the Parties

- terminates at an agreed upon time or a reasonable amount of time - mutual agreement to terminate - principal revokes an agent's authority by notifying agent - agent ends agency by notifying the principal

General Partnerships (Common Law)

- the oldest type of organization, has the lowest threshold to create, and has unlimited liability to the partnerships' debts. - No formalities and no documents need to be filed - jointly and severally liable - The only characteristic is that it needs to be an enterprise that seeks to make a profit - If one partner leaves, the partnership ends

Principal is Liable

- the third party knows that the agent is acting for someone else and knows the identity of the principal. (apparent or actual) - the third party knows the agent is acting for someone else but does not know the identity. (apparent or actual) - the third party does not know that the agent is acting for someone else (only actual)

German Work Councils

- used to decide terminations of employees - Need to petition the council which is made up of all employees - the longer you're in a job, the more ownership you have over that job

Public Blockchain

-Anyone can join, does not need permission -In a sale, the other party is unknown since it is protected by the block -Ledgers and currency are open, transparent, and visible -Privacy is not assured, and decentralization means that no one is in control, responsible, or liable - inflexible and anonymous

Pitfalls of AI

-Certain things can only be done by humans that computers are not capable of doing -Unlikely to transplant human know-how and intuition -Can only replicate System 2 thinking which is more rational and not System 1 thinking which is more intuitive -AI can develop the same biases as humans through the coding -AI could make a decision that it believes is in the best interest of its human benefactor, but the decision is not the one that the human would have made

Future of AI Regulation

-For Super AI, the law will need to regulate for the future instead of letting it happen first -Focus should be on mitigating the negative effects of disruption and using smart design to prevent AI from ever becoming an existential threat to humankind -Do not want to regulate too harshly to inhibit innovation

Are Smart Contracts' Contracts?

-Generally, no because of the coding problem -Contracts are too complex to code into the blockchain -Due to cognitive limitations, lack of full information, and the fact that information is often asymmetrically distributed between parties, the ability to reach a complete contract is impossible

Are Smart Contracts Smart?

-No, because they can only do a couple of things -No flexibility is allowed because of the coding aspect - cannot think and react in real time

Benefits of AI

-The AI can do things that humans can't do or are not quick enough to do -Can be used to improve people's lives by helping to solve some of the world's greatest challenges and inefficiencies

AI Regulation by Design

-standardization -Designated as the threshold for companies to follow -Industries can implement into their systems -Develop acceptable rules and restrictions for the system -Attempts to prevent the problems in the first place

Six Things that need to be considered in creating responsible AI

1. Regulation and control - humans retain in control of the system 2. Transparency - required to disclose the nature of the processes being used, the personal information being processed, and how decisions are made 3. Responsibility - which stakeholder should be allocated liability if the AI system fails or causes farm 4. Design - act ethically and ensure the privacy of personal information is protected by design 5. Ethics - selecting existing ethical norms and new norms. Prevention of biases, privacy, accountability, beneficence, freedom/autonomy, trustworthiness, dignity 6. Socioeconomic impact - benefits outweigh harms

Shrink-wrap acceptance

A buyer's acceptance of the conditions of the EULA, demonstrated by removing the shrink wrap from the product box. Once the box is opened, the buyer is agreeing to the contract of the order

employment at will

A common law doctrine under which either party may terminate an employment relationship at any time for any reason, unless a contract specifies otherwise. Can get fired for no reason

smart contracts

A digital agreement written by computer code, run on the blockchain or similar distributed ledgers (decentralized) and automatically executed without the need for an intermediary or human intervention. Is a unilateral contract.

Compensatory damages

A money award equivalent to the actual value of injuries or damages sustained by the aggrieved party. Includes the loss of value minus the loss or cost avoided by lack of performance plus incidental damages plus consequential damages place the injured party in a position as good as the one he would have been in had the contract been performed.

Limited Partnerships (Statutory Entity)

A partnership but not each partner is equal. Formed by filing a certificate

Express Warranty

A seller's or lessor's oral or written promise, ancillary to an underlying sales or lease agreement, as to the quality, description, or performance of the goods being sold or leased.

Nominal damages

A small monetary award (often one dollar) granted to a plaintiff when plaintiff has not sustained or cannot prove any injury or loss resulting from the breach

Blockchain

A type of technology created by Bitcoin used as a continuous ledger of data on sales and transactions. Originally created because of a venture to eliminate the need for intermediaries, such as central banks, courts, and other governmental bodies.

Implied Warranty of Merchantability

A warranty that goods being sold or leased are reasonably fit for the ordinary purpose for which they are sold or leased, are properly packaged and labeled, and are of fair quality. The warranty automatically arises in every sale or lease of goods made by a merchant who deals in goods of the kind sold or leased.

gratuitous agency

Agency created without an agent's right to compensation

Express Authority

Agreement in writing or orally that describes the agency relationship and what powers the agent has. Authority declared in clear, direct, and definite terms.

Professional Associations (PA)

Allows for duly licensed professionals to practice in the corporate form

Confidentiality clauses

An agreement specifying the obligations of a party (usually the employee) to keep information confidential. Are perpetual (can be enforced forever)

Insider trading rule (Rule 10b-5)

Any type of deceit or fraud on the market

Implied Authority

Authority that is created not by an explicit oral or written agreement but by implication. Can be conferred by custom, inferred from the position the agent occupies, or implied by virtue of being reasonably necessary to carry out express authority. What a reasonably prudent person would assume in the agreement

Mutual Mistake

Both parties have a common but erroneous belief forming the basis of the contract; renders the contract voidable by either party.

Foreseeability

Can only collect (recover) damages that were foreseeable in the time of contract.

Reliance Interest

Designed to put the injured party in the position he would have been in had the parties never entered into a contract.

Expectation Interest

Designed to put the injured party in the position she would have been in had both sides fully performed their obligations

Benefits (B) Corporation

Dual purpose. 50% purpose to make money for shareholders, 50% purpose is social responsibility

Duty of Best Efforts

Duty to use reasonable effort to provide the principal with facts that the agent knows, has reason to know, or should know.

Limitations to damages

Foreseeability of Damages, Certainty of Damages, Mitigation of Damages

limited liability partnerships (LLP)

General partnership that by making the required filings, limits the liability of its partners for some or all of the partnership's obligations

Recoverable Damages

Include compensation to injured person for tangible losses and expenses of the injury as well as intangible losses that are more difficult to measure.

Section 16b short swing transactions

Insider buy/sells its companies shares within a 6-month period.

Vicarious Liability

Legal responsibility placed on one person for the acts of another. principal is responsible for employee torts but not independent contractor torts

Punitive Damages

Monetary damages that may be awarded to a plaintiff to punish the defendant and deter similar conduct in the future. monetary damages in addition to compensatory damages awarded to a plaintiff in certain situations involving willful, wanton, or malicious conduct

Indirect discrimination

Occurs when treating everybody the same way disadvantages someone because of a personal characteristic

General Data Protection Regulation (GDPR)

Proposed set of regulations adopted by the European Union to protect Internet users from clandestine tracking and unauthorized personal data usage. the legal framework that sets guidelines for the collection of personal information. Gives "right to be forgotten"

Occupational Safety and Health Act (OSHA)

Recognizes hazards in the workplace and creates a standard to adhere to for it

electronic contracting

Relatively new as the digital age has started becoming more prominent, typically seen through an online platform for buying and selling goods/services

Consequential Damages

Special damages that compensate for a loss that is not direct or immediate (for example, lost profits). The special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them.

Preemptive Right

Stockholders' right to maintain their proportionate interest in a corporation with any additional shares issued. the Social Network

Browse-Wrap Agreement

Terms and conditions of use that are presented to an internet user at the time certain products, such as software, are being downloaded but that need not be agreed to before being able to install or sue the product.

Apparent Authority

The acts or conduct of the principal lead to a third person to believe that the agent has actual authority, on which the third party justifiably relies on

Duty of Care

The duty of all persons, as established by tort law, to exercise a reasonable amount of care in their dealings with others. Failure to exercise due care constitutes the tort of negligence. Held to a reasonable standard of a prudent person in that field

DAO Incident - Hard Fork

The original blockchain can be terminated and a new chain is created that forks off it. Prompted by incident where someone hacked the blockchain and stole money.

Alter Ego Theory

Theory used for disregarding the corporate protection of limited liability for shareholders; results when individuals treat the corporation's properties and accounts as their own and fail to follow corporate formalities. requires there to be fraud, lack of formalities, and under capitalization

Age Discrimination in Employment Act (ADEA)

U.S. act that prohibits discrimination in the workplace on the basis of age. only employees over 40 years old can claim, cannot claim for inverse

American Disabilities Act (ADA)

U.S. law that gives civil rights to disabled persons. That includes equal opportunities in access and use of places such as transportation and buildings. Includes mental disabilities

Joint Ventures

Unincorporated business association for the purpose of making a profit for a short period of time. Governed by the law of partnerships

Writ of mandamus

Used when order is directed against a governmental entity

Remedy

When one party to a contract breaches the contract by failing to perform his contractual duties, the law provides this for the injured party

clickwrap agreement

a contract in which an offeree enters into a contract by clicking on a dialog box on an Internet web site.

Duty of Loyalty

a fiduciary duty owed by an agent not to act adversely to the interests of the principal. the agent cannot do a side deal when they are in a transaction for the principal.

injunction

a formal court order enjoining a person to refrain from doing a specific act or to cease engaging in specific conduct. only issued if it is a irreparable injury or continuing harm (harm or damages increase every day).

Substituted Contracts

a new contract accepted by both parties in satisfaction of the parties' duties under the original contract. A substituted contract immediately discharges the original contract and imposes new obligations under its own terms.

Assumption of Risk of Mistake

a party may assume the risk of a mistake and may avoid the contract even though the mistake would have otherwise permitted the party to do so. This allocation of risk may occur by agreement of the parties

Reformation

a process where the court corrects a written contract to make it conform to the true agreement of the parties

Manager-managed LLC

a professional is hired to manage the entity and does not have an individual interest in the entity. Have duty of care, duty to refrain from grossly negligent conduct, duty to act in good faith, fiduciary duty

Novation

a substituted contract involving a new third-party promisor or promisee. It is a substituted contract that involves an agreement among three parties to substitute a new promisee for the existing promisee or to replace the existing promisor with a new one. Ending a contract to a party by substituting with a third party. contract stays the same

Breach

a wrongful failure to perform the terms of a contract that gives rise to a right to damages by the injured party. Can revoke the contract as this is a departure from the contract

assent

agreement through written or spoken words or other conduct

Member-managed LLC

all of the members participate in management, and decisions are made by majority vote. same duties of care and loyalty as managers.

Mutual Rescission

an agreement between the parties to terminate their respective duties under the contract. a contract to end a contract. Contrived = forced. If settlement agreement involves liquidated debt, subject to the challenge of duress. Have to have unliquidated debt for it to work. Liquidated debt = undisputed debt

Condition Precedent

an event that must or must not occur before performance is due (Before contract is enforceable). something has to happen first for contract to be binding

Condition Subsequent

an event that terminates a duty of performance (terminates contract). if this happens during contract, it will terminate it

Condition

an event who's happening or non-happening affects a duty of performance under a contract

Anticipatory Repudiation

an inability or refusal to perform, before performance is due, that is treated as a breach, allowing the non-repudiating party to bring suit immediately

Mistake

an understanding that is not in accord with existing fact

three basic elements of agency relationship

assent, control by the Principal, Agent's Acting on Behalf of the Principal

CISG Special Remedy - Price Reduction Remedy

buyer can unilaterally reduce the price based on differential between contract price and selling

Oracles

can be used to allow for some changes to the blockchain and provide additional information. If something unexpected happens, the smart contract will not change it, but the Oracle can. Provides real-world parameters for coded self-performance. Helps with the variability among contracts

Control in fact

can the employer exert actual control over that person?

Concurrent Conditions

conditions that are to take place at the same time

Implied in Law Conditions (constructive condition)

contingency not contained in the language of the contract but imposed by law to accomplish a just and fair result. It only needs to be substantially performed.

Implied in Fact Conditions

contingency understood by the parties to be part of the agreement, though not expressed

Reliance Damages

contract damages placing the injured party in as good a position as she would have been in had the contract not been made. Reimbursement for foreseeable loss caused by reliance on the contract as measured by the cost or values of the performance

Impediment (CISG)

contract is suspended due to impracticability

Unilateral Mistake

courts are unlikely to grant relief unless the error is known or should be known by a non-mistaken party.

out of pocket rule

damages equal to the difference between the value of what a person has received and the value of what they have given for it.

benefit of the bargain rule

damages equal to the difference between the value received and the value of the fraudulent party's performance as represented

Incidental damages

damages that arise directly out of the breach, such as costs incurred to acquire the non-delivered performance from some other source

1934 Securities and Exchange Act

deals with everything once the company becomes public (periodic filings, statements, etc.)

Restitution Interest

designed to return to the injured party a benefit he has conferred on the other party

Right to control

does the employer have control over that person?

Under capitalization

drain corporation of all its money every so often so nothing can be recovered if sued

Duty of care (partners)

duty of faithful service to the best of their ability

Fiduciary duty (Duty of loyalty) (partners)

duty of utmost loyalty, fairness, and good faith owed by partners to each other and to the partnership

Duty of obedience (partners)

duty to act in obedience to the partnership agreement and to any business decisions properly made by the partnership

duty of accounting

duty to keep and render accounts to the principal of money or other property received or paid out on the principal's account

Employee Privacy Rights

federal and state courts generally view little or no privacy rights to employees, AKA they have none. narrowed greatly because of more hybrid workers

3 Underlying Principles of Excuses

foreseeability, beyond control, undue burden

Family & Medical Leave Act

gives employees up to 12 weeks of leave during any 12 month period for the birth of a child

Freeze Outs/Squeeze Outs:

in family-owned businesses, the minority interest is usually squeezed out of any benefits

Tipper-tippee theory

insider breaking fiduciary duty by telling someone outside of the corporation the information

Artificial Intelligence

intelligence displayed by machines, as opposed to natural intelligence

Is notice actual or constructive?

is the buyer familiar with the website, are they a prior customer, are they familiar with websites in a general or proper notice of terms? Is the usage policy a part of the contract? Notice of the change of terms in a "continuing" contract?

Loss of value

is the difference between the value of the promised performance and the value of the actual performance

Commercial frustration excuse (frustration of purpose)

it's not impossible to perform on this contract but the purpose of the contract has been frustrated.

Impracticability excuse

less than impossibility. Performance is possible but impractical

Lucy Ledbetter Act

made it clear that the pay difference is continuous throughout the employment and that the total differential should be paid

Quid pro quo

make something happen or get fired

Super Node

master node in blockchain. controls additions.

Agent

may be an employee or independent contractor

Principal

may be an employer

Monetary damages

money compensation sought or awarded as a remedy for a breach of contract or for tortious acts. Will be awarded only for foreseeable losses, established with reasonable certainty, that could not have been mitigated

business judgement rule

negligent decisions are not actionable if use best judgement. unless grossly negligent

Mitigations

non-breaching party has the duty to take reasonable steps to minimize its damages; if doesn't take such steps cannot recover damages that were preventable

Effect of Fault Upon Mistake

not a bar to avoidance unless the fault amounts to a failure to act in good faith. Does not apply to failure to read the contract

Hostile work environment

not direct harassment but the workplace is consumed with negative energy

Mistake in Meaning of Terms

parties misunderstand their manifestation of mutual assent. If blame can be ascribed to either party, that party will be held responsible.

Substantial Performance

performance that is incomplete but that does not defeat the purpose of the contract; does not discharge the injured party but entitles him to damages. Performance is considered full unless there was a diminishment of value. 100% compliance is impossible

Certainty

plaintiff needs to prove damages with ______; speculative damages are not recoverable

Negligent hiring

principal does not exercise proper care in selecting an agent for the job to be done

Actual Authority

principal gives actual consent to the agent

Fundamental Breach (CISG)

pro seller rule - unless something is really off, have to accept goods. but can still sue for damages. almost nothing is this especially if the product has value

Perfect Tender Rule (UCC)

pro-buyer rule - a seller's performance under a sales contract must strictly comply with contractual duties and that any deviation discharges the injured party

Express contracts and collective bargaining agreements

promises certain terms of employment like the length, amount of compensation. Can be used through unions to counter the power of employers

Dodd-Frank Bureau

protects consumers, lending to consumers, and protects predatory lending

Bona Fide Occupational Qualification

qualification of the job that is somewhat discriminatory but is needed for the job

Covenants Not to Compete

reasonable restrictions on post-employment activities

Fair Labor Standards Act

regulates child labor and overtime rules

Specialized training

remarkable training the employer offers that make the employee more attractive to other employers

Liquidated damages

require that the parties agree in advance to the damages to be paid in event of a breach. If the sum is not reasonable to the amount of the loss, it is unenforceable as a penalty

Contextualism

sees the best form of law as a blend of fixed rules and standards or open textured rules. In general contract and sales law, certainty and flexibility are needed.

Formulism

sees the best form of law consisting of fixed and hard rules

Impossibility Excuse

something happened that made it impossible for one party to complete the contract. Would be an undue burden to perform

Misappropriation theory

stealing, corporate espionage

Accord and Satisfaction

substituted duty under a contract and the discharge of the prior contractual obligation by performance of the new duty

Immigration Reform and Control Act

targets US employers who hire illegal immigrants

Immigration Act of 1990

targets illegal immigrants

Wrongful discharge (discrimination)

terminated based on one of the suspect classes

Wrongful Discharge

termination based on any type of discrimination

Human capital

the day-to-day things employees learn from the job, basic skills

Negligent Misrepresentation

the deceived party may recover general damages and consequential damages

Specific Performance Remedy

the equitable remedy that compels the defaulting party to perform her contractual obligations

Agency by estoppel

the liability that is created when there is no actual agency relationship, but a third party justifiably relied on the reasonable belief that a person is an agent. Principal is liable to the third party

Ergonomics

the relationship between the human/equipment interface

Individual likelihood

things the employee has to themselves

Proprietary interest

things the employer wants to keep inside the company like intellectual property, trade secrets, client lists. Property rights of employer

primary objective of contract remedies

to compensate the injured party for the loss

Recission of contract

to revert to the status quo and act as if there was never an agreement to begin with.

comingling of funds

use company as your personal piggy bank

Anti-solicitation clauses

used so past employees do not take current employees or customers

Constructive Discharge

voluntarily leaving based on being forced out of the company. Seen as firing in the courts

Termination of Agency

when the consent of the principal is withdrawn

Equal Pay Act

women get paid the same amount as men for equal work; protected characteristic is gender

implied repudiation

you've heard that the other party is having financial difficulties and is going to go under soon. We can act on this information if it is credible and true. If it turns out to be wrong, you could be held liable for breach of contract