BULE 303 Final (Ch 17, 18, and Mindtap)
Limited partnerships:
- Must be formed in compliance with statutory requirements. - A limited partnership consists of one or more general partners, who have unlimited liability for partnership losses and one or more limited partners, who are liable only to the extent of their contributions and are protected from personal liability
Jordynne was the manager of Pets-R-Us, a pet store in Southern Valley Mall. Pets-R-Us had a one-year lease, and rent payments were $2,000.00 per month. Five months into the lease, Jordynne found a better site for the pet store. She notified Southern's manager, vacated the mall, and moved her store to its new location. After two months, Southern was able to re-lease the premises to another retail store, but at a reduced rent of $1,800.00 per month. If Southern successfully sues Pets-R-Us, Southern will likely receive:
$5,000.00 in damages.
Directors have general responsibility for all management decisions:
- All major corporate policies. - Appointment and removal of all corporate officers and their compensation. - Financial decisions, including dividends and retained earnings
3 types of franchises:
- Distributorship - Chain Style operation - Manufacturing/Processing arrangement
Corporation is a legal " person " under state and federal law. Corporation has right to:
- Due process - Equal protection - Speech - Access to Courts - Freedom from unreasonable search and seizure - Does not have 5th amendment right to remain silent
Termination of Franchise
- Duration is determined by parties and contract - Usually termination is "for cause" such as the death or disability of franchisee, insolvency, etc.
LLC Operating Agreement contains provisions for:
- Management - Voting - Transfer of membership interests - New or Deceased members
Two Options for LLC management
- Member managed (equal rights) - Manager-managed (typical "President") - members and/or non-members
Franchise Contract
- Ordinarily requires the franchisee (purchaser) to pay a price for the franchise license. - Specifies the territory to be served by the franchisee's firm. - May require the franchisee to purchase certain supplies from the franchisor at an established price. - May require the franchisee to abide by certain standards of quality relating to the product or service offered but cannot set retail resale prices. - Usually provides for the date and/or conditions of termination of the franchise arrangement. But federal and state statutes attempt to protect certain franchisees from franchisors who unfairly or arbitrarily terminate franchisees.
Directors have the right to:
- Participate in corporate decisions and inspect corporate books and records. - Compensation (usually a nominal sum) and indemnification. If a director is sued for acts as director, the corporation should guarantee reimbursement (indemnification) or purchase liability insurance to protect the board from personal liability.
Corporate Formations
- The corporation is a legal entity distinct from its owners. - Formal statutory requirements, which vary somewhat from state to state, must be followed in forming a corporation. - The corporation can have perpetual existence or be chartered for a specific period of time. - Promoters are personally liable for all pre-corporate dealings until corporate formally creates a "novation"
Sole Proprietorship
- The simplest form of business; used by anyone who does business without creating an organization; flexible - The owner pays personal income taxes on all profits and is personally liable for all business debts
The S Corporation must:
- be a domestic corporation. - not be a member of an affiliated group of corporations. - have only shareholders that are individuals, estates, or certain trusts. Most corporations, partnerships, and nonqualifying trusts cannot normally be shareholders. - have 100 or fewer shareholders. - have only one class of stock, although not all shareholders need have the same voting rights. - not have shareholders who are nonresident aliens.
Alma owns fifty shares of common stock in Alpha Corporation. Alma also owns eighty shares of preferred stock in the same corporation. Alpha Corporation has an upcoming vote for a new director. In the election for the new board member of Alpha, Alma will be able to cast:
50 votes.
Implied Powers
Acts reasonably necessary to accomplish express powers (borrow, lend, etc)
Franchise
Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright, under specified conditions or limitations, in the selling of goods and services.
Express Powers
Articles of Incorporation set forth express powers of corporation, generally broad terms
Ahmed is an employee of Bristol Manufacturing Company. Bristol manufactures plastics, which creates large amounts of toxic waste that must then be disposed of. Ahmed is responsible for making sure this toxic waste is properly disposed of. To cut costs, Ahmed decides to divert the liquid waste into a local stream, instead of properly disposing of it. This is a direct violation of the Clean Water Act, a national law that protects the United States' waterways. Sanford is the director of the division in which Ahmed works and knows that Ahmed is doing this. When the authorities discover Ahmed's unlawful actions, can Bristol be held criminally liable?
Bristol can be held criminally responsible if Sanford knew of Ahmed's criminal actions.
Megan Kanka was raped and murdered in 1994, when she was only seven years old, by one of her neighbors. As a result of her murder, a federal statute was created that requires law enforcement authorities to make information available to the public regarding registered sex offenders. This federal statute was created by:
Congress.
Ultra Vires Doctrine
Corporate acts that are beyond the express or implied powers of the corporation are considered to be "ultra vires" (beyond the powers)
Limited Liability Partnership
Similar to an LLC, but LLPs are designed for professionals
General Partnership
Created by express or implied agreement of the parties. Partners have right to: - Share profits and losses - Joint ownership of the business - Equal right to management Partners have joint and several liability for partnership debts
Daria applies for a position at Corinthian Tire Works as an assembly line worker. The only requirements for the job are a high school diploma and the ability to lift thirty pounds. Daria is called in for an interview with the supervisor, Edwardo. The interview goes very well, and Daria is sure she will get the job. Three days later, however, Daria receives a phone call from Edwardo informing her that she did not meet their needs. Edwardo states to Daria that they need to make sure their employees have the stamina required for the job. Daria remembers that during the interview Edwardo kept looking at her medical alert bracelet, which she wears because she is a diabetic. If Daria decides to sue Corinthian Tire Works for discrimination based on disability:
Daria will likely succeed if she can show that her being a diabetic is the only reason she was denied the position because diabetes qualifies as a disability under federal law.
Duty of Care:
Directors/officers are expected to act in good faith and the best interests of the corporation. Failure to exercise due care may subject individual directors or officers personally liable.
Bill and Mark have lived together for twenty years, and they finally decide to get married. Three days after their marriage, Bill returns to his job at Hometown Furnishings. When his supervisor finds out that Bill has just gotten married to a man, she immediately fires Bill. Bill is devastated; he has worked for Hometown Furnishings for five years and never had an issue of any kind. The next day, Bill and Mark go to see an attorney to discuss Bill's options. The attorney will likely advise Bill that:
Hometown Furnishings firing him because he is gay violates the Civil Rights Act of 1964.
Elvis agrees to provide guitar lessons to Angela's niece for three months for $600. Angela decides her niece really is not interested in guitar lessons, and assigns her rights under the contract to Jose, so Jose can use the lessons for his daughter. When Jose contacts Elvis to set up the first guitar lesson for his daughter:
Jose cannot enforce the contract against Elvis because the contract is for personal services.
LLCs Jurisdictional Requirements:
LLCs are citizens of every state in which its members are citizens for purposes of personal jurisdiction
Midwest Life Insurance sells a life insurance policy to Thiago. Under the terms of the contract between Thiago and Midwest Life, Thiago will pay $75 per month for the policy, and, upon Thiago's death, Midwest Life will pay $100,000 to Laurelei. Four years later, Thiago dies, and Midwest refuses to pay under the terms of the policy. The party entitled to sue Midwest for its failure to honor the terms of the contract is:
Laurelei, because she is a donee beneficiary.
Lupita enters into a contract with Faith to purchase a used car. At the time they sign the contract, Lupita appears to be very intoxicated. Faith notices this but signs the contract anyway. If Lupita later decides she wants to get out of the contract:
Lupita can raise the defense of lack of contractual capacity due to intoxication.
Selma wants to buy Matilda's house. Selma has been admiring the house for a long time and has asked Matilda repeatedly to sell the house to her, but Matilda has always refused. Finally, Selma tells Matilda that if Matilda does not sell Selma the house, Selma will kill Matilda's daughter. Afraid for her daughter's life, Matilda signs the contract to sell the house to Selma. If Matilda later tries to rescind the contract:
Matilda may rescind the contract on the grounds that she signed the contract under duress.
Roger has worked for an agency, the Federal Reserve, for ten years. Recently, Roger has heard rumors that multiple employees have contracted COVID-19, a highly contagious and potentially dangerous disease, although they have recovered completely. Nevertheless, Roger is still concerned about being around these people, so Roger asks his employer, the Federal Reserve, for a list of these employees. The Federal Reserve refuses, so Roger files a Freedom of Information Act (FOIA) request for the information. Under the FOIA, will the Federal Reserve provide Roger this list?
No, this information is confidential and personal.
Heather is an artist and has several watercolors she would like to sell. Heather orally asks Rylee to sell the paintings for her and directs Rylee that each painting should be sold for at least $100. Rylee schedules a showing in her art gallery to display Heather's paintings. On the day of the showing, a customer offers to buy one of the paintings for $100, and Rylee accepts. When Heather finds out the price the painting sold for, she tries to get the painting back from the customer. Heather claims that she and Rylee did not have a written agency agreement, and, therefore, an agency relationship did not exist between them. Is Heather correct?
No, most agency agreements do not have to be in writing to be effective.
During the pandemic of 2020, the City of Mayberry passes an ordinance that requires all citizens to wear a face mask in public. Addison believes that the government cannot regulate his personal behavior and refuses to wear a mask; he says that forcing him to wear a mask violates his constitutional rights! A police officer stops Addison on the street and arrests him for violating the city ordinance. Can Addison successfully challenge the mask ordinance on constitutional grounds?
No, requiring people to wear a face mask during a pandemic is a valid exercise of the state's police power.
Esther is pulled over for crossing the yellow line with her automobile. The officer suspects Esther is intoxicated, so she administers a field sobriety test. Esther blows a .16 on the test, so the officer arrests Esther for DWI. Esther decides to fight the charge. Her defense is that she is an alcoholic, and the laws against driving while intoxicated unconstitutionally discriminate against her and other alcoholics. Does Esther have a valid defense to her DWI charge?
No, she does not because laws that regulate economic or social issues are presumed valid, and the courts will apply minimum scrutiny in evaluating whether such laws discriminate against people.
For some time, the police have suspected Abbie of selling drugs out of her apartment, but the police have not been able to gather any concrete evidence with which to prosecute Abbie. One night, the police decide to try a knock-and-talk procedure, where the police just knock on Abbie's door and see if Abbie will allow them inside. Abbie refuses to give consent for the officers to enter after they knock, but the police officers push past Abbie anyway. Once the officers are in the apartment, the officers see drugs in plain sight, so the police seize the drugs and arrest Abbie for possession with intent to sell. At Abbie's trial, can the drugs be entered into evidence?
No, the drugs cannot be admitted into evidence at trial because they were illegally obtained.
Korbyn enters into a contract with Peyton to sell Peyton a 1956 roadster. The contract has a condition precedent that the roadster will pass inspection by an independent appraiser, verifying that the roadster contains all original parts and is in good working order. This contract provision means that:
Peyton is not required to perform under the contract until the appraisal is complete.
Roland and Alfreeda enter into a written agency agreement in which Alfreeda will represent Roland as his agent to obtain acting jobs for Roland. No termination provisions are included in the written agreement. If Roland wishes to terminate his agreement with Alfreeda:
Roland must do so in writing because the agency agreement is in writing.
Samantha has been the top salesperson at her company for the last six months in a row. Samantha has been using high-pressure techniques to meet the unrealistically high sales quotas in her division, including marking up the price so she can offer a good discount to the customers, lying about the quality of the product, and telling customers that the items are one-of-a-kind when they are not. Her manager, Samuel, is aware of the tactics Samantha is using but does not say anything because Samantha makes their division look great. Here, the parties guilty of unethical behavior include:
Samantha and Samuel.
Corporate Taxation:
The corporation pays income tax on net profits; shareholders pay income tax on disbursed dividends.
Nevada passes a statute that any 18-wheel truck passing through Nevada must meet a Clean Fuel Fleet Exhaust Emission Standard of no more than 2.8 nitrous oxide (NOx). The federal statute requirement for such trucks is no more than 3.8 NOx. Carlton is driving his 18-wheeler cross-country to deliver a load and stops at a Nevada weigh station. The weigh station officer inspects Carlton's documents, notes that Carlton's truck has a 3.4 NOx emission level, and issues a citation. On what grounds might Carlton fight this citation?
The federal statute preempts the state statute under the Supremacy Clause.
Personnel:
The shareholders elect directors, who set policy and hire officers to run the day-to-day business of the corporation.
Grover is a sales representative for Avon Products Inc., a company that sells beauty and gift products door-to-door. Ruby, Grover's manager, assigns Grover a certain territory in which to work. The territory that Grover is assigned has historically had one of the highest sales records in the state. Ruby is concerned that Grover is not adequately working the territory, so she allows Regina to also sell in that same territory. Does Grover have any grounds on which to file a lawsuit against Ruby?
Yes, Ruby has violated a principal's duty of cooperation and may be liable to Grover for Grover's lost profits.
Isaiah wants to build a new shopping complex. He is afraid that once news gets out about his plans, the price of the land where he wants to build the shopping complex will increase in price. Isaiah, therefore, hires Landon to purchase the parcels of land for him and to keep the fact that Landon is working for Isaiah a secret. Landon enters into a written contract for the sale of the land with Miriam and does not tell Miriam that Landon is an agent for anyone else on the deal. Isaiah refuses to buy the property from Miriam. Is Landon obligated to perform the contract with Miriam?
Yes, he is because there was an undisclosed principal who failed to perform.
Tillie is served with a lawsuit to collect a debt Tillie allegedly owes to Big Ben Clocks. The summons attached to the lawsuit says that Tillie has thirty days to answer the complaint. Fifteen days later, Tillie receives a copy of a default judgment in the mail, directing Tillie to pay $1000 to Big Ben Clocks. Does Tillie have any grounds on which to have the default judgment set aside?
Yes, it is a violation of procedural due process.
Sofia works in the advertising department of Energy First, a company that manufactures a vitamin supplement that allegedly boosts a person's energy level. Sofia creates an advertisement for the product that states that Energy First has been clinically proven to boost energy levels when she knows that no such study has occurred. Can the government prevent Sofia from making such claims in her advertisements?
Yes, the government has a substantial interest in protecting the health of the public, and the restriction on these claims advances that interest without going any further than necessary.
Piercing the corporate veil occurs when
a court, in the interest of justice or fairness, holds shareholders personally liable for corporate acts.
Rando and Shania are involved in an automobile accident. Rando decides to sue Shania for his injuries, so he files a complaint, a formal pleading that starts the lawsuit and sets out the allegations that Rando has against Shania. Rando has the complaint, along with a summons, served on Shania to give her notice of the lawsuit. If Shania does not respond to the complaint:
a default judgment may be entered against her.
The limited liability company (LLC) is
a hybrid form of business organization that offers the limited liability feature of corporations but the tax benefits of partnerships.
Like in partnerships, Disassociation and Dissolution of LLC occurs when
a member ceases to be associated in the continuation of the business.
Bonds
a security evidencing a corporate or government debt
Stocks
a security representing an ownership interest in the corporation
A corporation is referred to as a foreign corporation by
any state that is not its home state
Andre is involved in a business dispute with his former partner, Ned. Instead of filing a lawsuit, Andre and Ned decide to use alternative dispute resolution (ADR) to settle their dispute. Andre and Ned choose to present their case to a neutral third party, and that third party will decide the case. The form of ADR that Andre and Ned have decided to use is:
arbitration.
Onida is an employee at Kale's Manufacturing Company. The company makes bicycle tires, and Onida's job is to inspect the inner tubes before they are inserted into the tires. She recently noticed that the inner tubes are thinner than the safety specifications require. Onida tells her supervisor, Tom, about the problem, and is instructed to ignore it because these thinner tubes save the company money. Onida cannot ignore this problem in good conscience, so she tells Tom that if he is not going to report the problem, she will. Tom then fires Onida. Kale's Manufacturing Company is in an employment-at-will state. If Onida brings a lawsuit for wrongful termination, she will likely:
be successful because she was fired for an unlawful reason.
Gerald has been a sales representative for Goldsmith's Department Store for the past five years. When Gerald was hired, the general manager told Gerald that he would have a job there as long as he made $3,000 in sales each month. Every month, Gerald has exceeded that level in sales, so he is surprised when his supervisor calls him into the office and fires him. Gerald tells the supervisor about the promise from the general manager not to fire him as long as his sales were $3,000 each month. The supervisor responds by telling Gerald that the law in this state is employment at will, so he can fire him at any time for any reason. If Gerald sues Goldsmith's for wrongful termination, he will likely:
be successful because the general manager orally promised him that he would remain in his job as long as his sales stayed at a specific level, and he has maintained that level.
Every corporation is governed by a
board of directors that are elected by the shareholders.
Sanchez and Yan entered into a contract that required Sanchez to deliver twenty textbooks to Yan's bookstore every month by the 15th of the month. Six months after Sanchez and Yan entered into this contract, Sanchez breached the contract by not delivering the textbooks to Yan's bookstore. After Sanchez breached the contract, Yan sued Sanchez for her damages. Yan must choose the appropriate court in which to file her lawsuit. To do this, Yan needs to be sure the court has:
both subject matter and in personam jurisdiction in the case.
Jayne is opening her own bakery. As she develops her company policies, she is concerned about the morality of her actions and how those actions will affect her employees, her stakeholders, and herself. Jayne studying the rightness or wrongness of her actions as they apply to her business constitutes the study of:
business ethics.
Franchises are governed by
contract law, occasionally by agency law, and by federal and state statuary and regulatory laws.
Bart works as an accountant for Good Times Restaurant. He is responsible for not only keeping the books current but also for making daily bank deposits for Good Times. Bart has been struggling financially, so he decides to put some of the daily bank deposits for Good Times into his personal account, instead of the bank account of Good Times. Every day, for one month, he takes ten percent of the cash receipts from Good Times and deposits them into his personal checking account. When the manager of Good Times discovers what Bart is doing, she contacts the police, and Bart is arrested. Bart can be found guilty of:
embezzlement.
Bernard and Hilda have both worked for Home Refinance Inc. for many years. Bernard has been with the company for fifteen years, and Hilda has been with the company for nine years. Both Bernard and Hilda are loan managers for the company, so they perform the exact same duties. Hilda discovers that Bernard's salary is twenty percent higher than hers. She cannot believe that she is paid less for the same job just because she is a woman. If Hilda sues the company over the disparity in pay, Hilda's lawsuit will likely:
fail if Home Refinance can prove the difference in pay is due to Bernard's seniority.
Professional Corporations -
for licensed professionals
Benefit Corporations -
for-profit but benefit the public; annual benefit report issued
Kelly lives in Arkansas and works in the data division of Acxiom Corporation. Acxiom has its headquarters in Conway, Arkansas. Acxiom is incorporated in Delaware, however, because of the corporate-friendly laws in that state. Kelly works in a(n):
foreign corporation because Acxiom is incorporated in a different state than the division where Kelly works.
Corporation:
formed in compliance with statutory requirements, is a legal entity separate and distinct from its owners and can have perpetual existence.
By Estoppel:
if it acts like a corporation, cannot avoid liability by claiming that no corporation exists.
Zayn boards the Big Rock Metro to ride downtown to his job. Zayn gives his money to the driver and takes his seat. Neither the driver nor Zayn says anything. Zayn and the bus driver:
have an implied contract.
Common stock
holders have ownership interest in the corporation
Preferred stock
holders have priority over common stock holders as to dividends and payment on dissolution of corporation
For the past year, Zegrida has been writing a historical fiction novel based on the experiences of her family as they immigrated to the United States from Latvia during World War II. When finished, she contacted a publisher and was shocked to discover that her book had just been published two weeks ago with Fran, a business acquaintance of Zegrida, listed as the author. Two months ago, Zegrida had asked Fran to review the book and give feedback, but instead, Fran published the book under her own name. Zegrida plans to sue Fran for copyright infringement and is trying to decide in which court to sue. Zegrida must sue Fran:
in federal district court because the suit involves a copyright issue.
A corporation is referred to as a domestic corporation within
its home state (the state in which it incorporates).
Alexander, the CEO of Westwind Baby Furnishings, received a report from one of his quality inspectors about a possible defect in the Baby Sleeptime Crib Westwind had just started to market. The report said the bed was not safe for older babies, because there was a chance it would collapse if the baby climbed up onto the railing. Westwind had manufactured 20,000 Baby Sleeptime Cribs and would lose a great deal of money if it could not market the cribs. Alexander decided to proceed with the sale of the cribs anyway, to maximize company short-run profits. Possible consequences Westwind could face for such unethical conduct include:
lawsuits, large settlements, and bad publicity.
Judge Jasper and his friend, Judge Judy, were debating the philosophical theories of jurisprudence. Judge Jasper believes that law is just one of many institutions in society and that it is shaped by social forces and needs. Judge Jasper believes in the theory of jurisprudence called:
legal realism.
In certain situations, corporate officers may be held personally
liable for corporate crimes.
Dion is head of the National Security Agency, a subagency of the Department of Defense. Dion has held the position for years and feels comfortable that he is secure in his position. However, after Dion holds a press conference where he directly contradicts a statement the president made, he receives a letter from the president removing him from his position. Dion objects to the firing, stating that he can only be removed from office "for good cause." If Dion sues for being wrongfully removed from office, he will:
lose because the president has the power to appoint and remove officers of executive federal agencies.
Kevin is preparing his wife's favorite stir-fry dish for dinner. As Kevin is chopping the vegetables for the stir-fry, his hand slips and he cuts his hand on the sharp knife. Kevin's wife rushes him to the emergency room. Kevin receives twenty stitches because the cut is so deep. Kevin wants to sue the knife manufacturer for damages. Kevin claims that the knife was defective because it was unreasonably dangerous. If Kevin files a strict liability lawsuit against the knife manufacturer, he will:
lose, because a sharp knife is not unreasonably dangerous.
Unless operating agreement says otherwise...
member- management is presumed.
Bart, Sam, and Greg create Big Barns Sales LLC, a company that builds pre-constructed barns. They file the certificate of organization with the secretary of state and create an operating agreement for the LLC. The operating agreement, however, does not address the method by which the LLC will be managed. Because management of the LLC is not addressed in the operating agreement, it is assumed the LLC will be:
member-managed; all members will vote on decisions of the LLC, and the majority vote controls.
Marlo is about to be transferred overseas and wants to sell her house. Julianna, who is not a real estate agent, offers to sell the house for Marlo for free. Marlo jumps at the chance to get such a valuable service for free! Because Julianna offered to sell the house for free, Julianna owes Marlo:
no duty to sell the house, but if Julianna does attempt to sell the house, she owes Marlo the duty to use reasonable diligence and skill in performing the task.
Limited Liability of Shareholders:
normally are not personally liable for the debts of the corporation.
Liam is Neely's supervisor. During Neely's yearly written evaluation, Liam states that Neely has not performed her job well at all, constantly comes in late to work, and stirs up trouble with the other employees. Neely is understandably upset and wants to sue Liam for defamation. If Neely files a lawsuit against Liam for libel, Neely will probably:
not be successful if Liam's comments on Neely's written evaluation were made in good faith.
Rihana and her friends attend the opening day of Wild Water Country, a local water park attraction. Wild Water Country requires its customers to sign a waiver of liability which states that they know the risks involved in riding the Tornado Tunnel, and that Wild Water Country is not responsible for injuries that occur during the ride. Rihana signs the waiver and climbs to the top of the slide. As she begins her descent, however, the metal slide buckles under the weight of the riders. Rihana and several other riders are thrown from the slide and fall one hundred feet to their deaths. Rihana's parents sue Wild Water Country. Wild Water Country defends the lawsuit by stating they are not liable for any injuries because Rihana had signed a waiver of liability, and, therefore, she had assumed the risks associated with riding the water slide. Wild Water Country's defense will probably:
not be successful, because Rihana did not assume the risk of the water ride collapsing.
Angelina and Sophia attended a professional development retreat at Ferncliff Camp. They met at a downtown location and traveled to the camp by bus. After three days of team-building exercises, Angelina and Sophia returned on the bus to their respective cars. When Angelina arrived at home, she discovered the camp employee who unloaded the bus had given her Sophia's luggage by mistake. She called the camp to explain what happened and hopefully get her luggage back. Angelina can be charged with the crime of:
nothing, because she did not have the mental state required to commit a crime.
Unlike shareholders in S corporations, members of LLCs may be corporations or partnerships, are not restricted in
number, and may be residents of other countries.
Unlike limited partners, LLC members participate in management via the
operating agreement.
A corporation is referred to as an alien corporation if it
originates in another country but does business in the United States.
Andrea and Jerome are involved in a terrible car accident. Andrea ran a red light and plowed into Jerome's car, causing Jerome's car to be totaled. Luckily, Jerome was not hurt. Jerome files a tort lawsuit against Andrea. If he is successful in his lawsuit, Jerome will receive compensatory damages, the purpose of which is to:
put Jerome in the position he would have been in had the tort not occurred.
Shania offers to sell her lakefront property to Tonya for $150,000, and Tonya agrees to buy it. Tonya and Shania both sign the real estate contract, but, before they close the deal, Shania learns that a new resort is being opened on the lake. The opening of the resort will drive property prices up in the area, so Shania believes she can sell her property to someone else and get a better price on the deal. Shania tells Tonya that she has decided not to sell the property to Tonya. If Tonya sues to enforce the contract, a court will likely:
require Shania to go through with the sale.
Karishma and Stephen, co-owners of Roundtree Corporation, are discussing a new benefits package they are considering for their employees. The proposed plan is more expensive for the company than the current plan but will offer better benefits to the employees. Stephen wants to decide based solely on the effect on the owners of the corporation, while Karishma's position is that the employees should be taken into consideration as well. Stephen is more concerned with the _____________ theory of management, and Karishma is more concerned with the __________ theory of management.
shareholder; stakeholder
The faculty at Hopeland University have always been predominantly white. Concerned that it may be discriminating against potential nonwhite faculty members, Hopeland institutes an affirmative action program that provides that fifty percent of any new faculty positions at the university will be reserved for nonwhite applicants. Clara, who is white, applies for a faculty position at Hopeland. The position is given to a black applicant, even though Clara has more teaching experience and higher educational credentials. When Clara challenges the hiring decision by claiming that the Hopeland University affirmative action program violates the Equal Protection Clause of the Fourteenth Amendment:
she may be successful because the Hopeland University affirmative action program uses quotas.
Phyllis has worked as a mechanic for Boeing Corporation for the last ten years. Phyllis recently found out she is pregnant, so she requests a transfer to another position that does not require as much lifting. Boeing refuses to transfer Phyllis and fires her instead. Phyllis files a complaint with the EEOC for a violation of the Pregnancy Discrimination Act, and that agency, the EEOC, decides the case in Boeing's favor. After exhausting all administrative remedies, Phyllis files a lawsuit in federal court, which will:
show deference to the agency's decision on both questions of law and fact, upholding the decision unless it is unreasonable.
Johnson lives near Dollywood, a popular theme park in Tennessee. Johnson decides to begin a new money-making venture selling screen printed t-shirts from a booth just down the road from the theme park, to take advantage of the traffic that flows by on its way to the park. Johnson's t-shirts, however, will not be Dollywood-themed t-shirts; they will be Johnson's own creations. Johnson's daughter Susan helps him in his new venture by manning the booth from time to time, but Johnson has total control over everything about the business—from ordering the t-shirts, paying the bills, pricing the t-shirts, paying the taxes on his sales, and receiving all the profits from the venture. Even though Johnson put no thought into what kind of business venture he was creating when he started his business, Johnson has effectively created a:
sole proprietorship.
Joan's lawyer, Albert, feels pretty good about the chances of winning Joan's case. He has found a case directly on point, which means it has the same issue and very similar facts. If the court follows the decision in the case Albert found, then Joan will win her case. Albert argues Joan's case to the trial court, and the trial court decides for Joan. The fact that the trial court decided the case in Joan's favor is an example of:
stare decisis.
Mary and Hanna, who are Tennessee residents, were traveling through Mississippi when they were involved in an automobile accident with Franco, who is a resident of Mississippi. Franco sues Mary, who was driving the car, in federal court in Mississippi and asks for $100,000 to reimburse him for his medical bills and lost wages. In deciding the case, what law will the federal district judge apply?
state law
Elton is a state representative for the North Dakota legislature. Recently, Elton and his colleagues in the legislature proposed a law that would increase the penalty drivers would have to pay if they pass a stopped school bus. The type of law that Elton and his colleagues will enact is known as:
statutory law.
De Facto (in practice):
statutory requirements not met, but promoters made good faith effort to comply with corporate law; corporate status can only be attacked by state.
Duty of Loyalty:
subordination of personal interests to the welfare of the corporation.
De Jure (declared):
substantial statutory requirements are met; cannot be attacked by state or 3rd parties.
Lillian applies for a job as the chief financial officer (CFO) of Delco Corporation. Lillian is excited about the opportunity and feels that she has a pretty good chance of getting the position. Just to make sure, Lillian decides to explore the backgrounds of the decision-makers at Delco. If Lillian knows their interests, she thinks that might increase her chances of making a good impression in the final interview. The decision-makers who will decide whether or not Lillian gets the CFO position at Delco Corporation include:
the board of directors.
Savannah is shopping at King Toys Inc. when a large box of toys falls from a top shelf and strikes her, causing severe injuries. Savannah sues King Toys Inc. and each of its shareholders individually for her injuries. If Savannah's lawsuit is successful, she will be able to recover from:
the corporate entity only.
Ellen offers to sell her 1997 Mustang convertible to Fred for $2,000. Fred agrees to pay $2,000 for Ellen's Mustang. Before Fred picks up the Mustang, Ellen discovers that the Mustang is considered a classic car and is worth much more than $2,000. Ellen refuses to sell the Mustang to Fred, stating that the consideration is insufficient. If Fred tries to enforce the deal by taking Ellen to court:
the court would probably enforce the deal because there was valid consideration on both sides.
In some circumstances, a corporation can be held liable (and be fined) for
the criminal acts of its agents and employees.
Ellie, Josie, and Dylan are partners in a car dealership. Ellie gives notice to Josie and Dylan that she wants to withdraw from the partnership, and Josie and Dylan decide to continue the partnership without her. Shortly after Ellie leaves the partnership, she has lunch with an old friend, Justin. Justin has been looking for a new car and asks about the price of a particular car he saw on the website of the dealership, because he does not know that Ellie has left the partnership. Instead of telling Justin that she has left the partnership, Ellie quotes Justin a price for the car, and Justin accepts. When Justin goes to the car dealership to complete the deal:
the dealership must honor the deal unless it has provided Justin notice of Ellie's dissociation.
Rhea, a 45-year-old supervisor in a women's retail clothing store, recently learned that a younger co-worker was promoted to a position she had applied for. Rhea has more experience and more time with the company and has always gotten excellent scores in her annual reviews. Rhea files an action with the Equal Employment Opportunity Commission (EEOC) for age discrimination. The Administrative Law Judge (ALJ) issues an order in favor of Rhea. This decision of the ALJ is:
the final order in the case unless the store appeals.
Zayden was recently arrested for driving while intoxicated. The law in his state defines the crime of driving while intoxicated as operating a motor vehicle on the public roads with a blood alcohol content over 0.8%. State law also states that anyone convicted of this crime has the right to appeal. Zayden recently took a criminal justice course in college and remembers studying the differences between substantive and procedural law. In his current situation, he knows that:
the law that defines the crime is a substantive law, and the law that provides for the right to appeal is a procedural law.
Genna and four others are establishing a business to create monogrammed items of personal clothing to sell to the general public. Genna is concerned about entering into business with others and possibly being liable for their actions, so she convinces the others that they should incorporate. After doing some basic research on how to incorporate a business, Genna starts preparing the articles of incorporation. At a minimum, Genna must make sure that the articles of incorporation include:
the name of the corporation, the number of shares of stock the corporation is authorized to issue, the name and street address of the initial registered agent of the corporation and his or her registered office, and the name and address of each incorporator.
Officers serve at
the pleasure of the Board of Directors but have fiduciary duties to company as well.
Lola, Jacy, and Tate plan to create a company to manufacture bicycles. After reviewing the pros and cons of the various forms of business enterprises, they decide to create a limited liability company. To create a limited liability company:
they must file a certificate of organization with the secretary of state and should create an operating agreement, although an operating agreement is not required.
The corporation is liable for the
torts committed by its agents or officers within the course and scope of their employment (under the doctrine of respondeat superior).
Benjamin works for The Cabinet Maker, a large manufacturing plant that makes ready-to-hang cabinets for the kitchen and bath. Benjamin is running a table saw that cuts wood into strips to make a cabinet. As Benjamin loads wood onto the conveyer belt, he slips on the concrete floor and falls into the table saw. Benjamin's face and arms are severely injured by the table saw, and he is rushed to the hospital. Benjamin's injuries are so severe that he is admitted to the hospital for four days. The Cabinet Maker must file a report of Benjamin's work-related injury with the Occupational Safety and Health Administration (OSHA) within:
twenty-four hours.
Rosemary's son Dave is a United States Marine. Dave was recently injured in a covert operation in the Middle East and now needs round-the-clock care. Rosemary works at the Silver Spoon Café, which has 63 employees. Rosemary advises her supervisor that she needs to take time off to care for Dave. Rosemary quickly uses up all her accrued leave time, so she applies for time off under the Family and Medical Leave Act (FMLA). Under the FMLA, Rosemary may take unpaid time off to care for her injured son for up to:
twenty-six weeks.
Mateo is sixteen years old and just got his first job bagging groceries at Harry's Market, a local grocery store. During the school year, Mateo works limited hours after school and on the weekends. Now that school is out, Harry's Market increases Mateo's hours to six days a week and eight hours a day. Mateo's mother Isabel is concerned about Mateo working such long hours. She knows there is a federal law, the Fair Labor Standards Act (FLSA), that protects children from working long hours and too many days per week. When Isabel raises the issue with Mateo's supervisor, Mateo's supervisor explains to Isabel that:
under the FLSA, children who are sixteen or seventeen years old may work unlimited hours as long as they work in nonhazardous jobs.
Alfonso plays basketball for Hope County High School. His team makes it to the state tournament, where they play their archrival, Duvall County High. After an intense game where tempers run high, the Hope County team wins. While walking home from the basketball game, Alfonso is confronted by George, a member of the Duvall County team. George pushes Alfonso, causing him to fall to the ground. Enraged, Alfonso pulls a gun from his gym bag and shoots George in the chest, killing him instantly. Alfonso is arrested and charged with murder. Alfonso claims he shot George in self-defense. At trial, Alfonso's claim of self-defense is likely to be:
unsuccessful, because Alfonso used excessive force.
Juan owns a manufacturing company that wants to expand its line of plastics. To expand and still make a profit, pollution into the local river will be significantly increased. In evaluating his decision, Juan tries to determine whether expanding the company's line of plastics would produce the greatest amount of good for the greatest number of people. In doing so, Juan is following the ethical principle known as:
utilitarianism.
Freddy carries his books and school supplies in a large backpack. The hallways at Freddy's school are always very crowded. One day, Freddy turns around quickly to talk to a friend, and a sharp pencil that is sticking out of his backpack gouges Lorraine in the eye. Lorraine ends up losing the use of her eye. If Lorraine sues Freddy in a negligence action, the standard the court will use to determine whether Freddy is liable is:
what a reasonable person would have done under the circumstances.
Jerry Hall and Lawrence Vaught practice law in the same building. They share equally in the overhead expenses, such as rent and utilities, required to keep the business running. Both Jerry and Lawrence handle their own cases, consult and accept their own clients, and purchase their own advertising. Jerry and Lawrence do occasionally handle a case together, and they have stationery that says "Hall and Vaught" on the letterhead. They each have their own stationery as well. Jerry and Lawrence keep their finances separate, except when they handle a case together; then, they split the proceeds equally. When a client of Jerry's becomes dissatisfied and sues Jerry for malpractice, she sues Lawrence as well. In deciding whether or not a partnership exists here, the court will look at:
whether Jerry and Lawrence share profits and losses, whether they own the business jointly, and whether they have an equal right to be involved in the management of the business.
Harold is the owner of Fairway Lawn Service, which provides lawn-care services to residential and commercial customers. Harold regularly sprays his customers' lawns with a pesticide that contains glyphosate. The Environmental Protection Agency (EPA) issues a citation to Harold for commercial use of the pesticide. The EPA says glyphosate can only be used in residential applications. Harold knows that this has not been the law in the past, so he searches the EPA website for information about glyphosate. Harold finds nothing that indicates glyphosate cannot be used in commercial applications, so Harold demands a hearing to dispute the citation he has been issued. Harold will probably:
win because the EPA did not give notice of the rule change regarding glyphosate.
Fritz applies for a job as a waiter at Mexico Cantina. Three positions are available, but he is not hired for any of them. Fritz inquires about his application and is informed by the restaurant manager that they could not hire him because he is not Hispanic. Fritz is told that Mexico Cantina wants its patrons to experience an authentic Mexican dining event in its restaurant, so Mexico Cantina will only hire female Mexican wait staff, who are then required to dress in traditional Mexican outfits. Fritz sues for employment discrimination, claiming that Mexico Cantina discriminated against him because he is not Hispanic. Mexico Cantina responds to the lawsuit by claiming that being female and Hispanic are bona fide occupational qualifications (BFOQ). Fritz will probably:
win the lawsuit because race is not a bona fide occupational qualification.
Major advantages of an LLP:
• Pass-through tax entity • Limits personal liability of partners • Can avoid personal liability for malpractice of other partners • • LLPs are creatures of state statute.
Close Corporations
• Typically a small corporation whose shares are held by one person, a family or relatively few persons. • No trading market for shareholders • In practice, operated like a partnership • Substantial flexibility • Shareholders are generally officers and board members
