Term
Four elements of a contract
Ch. 10; pg. 232
(Introduction to Contracts) |
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Definition
| Agreement, Consideration, legality, capacity |
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Term
Issues in contracts
Ch. 10; pg. 233
(Introduction to Contracts) |
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Definition
| Consent, written contracts, 3rd party interests, performance & discharge, remedies |
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Term
Contract
Ch. 10; pg. 234
(Introduction to Contracts) |
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Definition
| A promise that the law will enforce |
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Term
Three Common Sense Promise Questions
Ch. 10; pg. 234
(Introduction to Contracts) |
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Definition
Is it certain that the defendant promised to do something?
If she did promise, is it fair to make her honor her word?
If she did not promise, are there unusual reasons to hold her liable anyway? |
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Term
Types of Contracts
Ch. 10; pg. 237
(Introduction to Contracts) |
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Definition
· Bilateral- both parties make a promise
· Unilateral- one party makes a promise the other party can only accept by doing something
· Express- two parties agree & cover all the bases
· Implied- words & conduct indicate agreement intentions |
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Term
Executory
Ch. 10; pg. 239
(Introduction to Contracts) |
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Definition
| one or more parties did not fulfill/ Executed-all parties fulfill |
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Term
Promissory Estoppel
Ch. 10; pg. 240
(Introduction to Contracts) |
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Definition
Even when there is no contract, a plaintiff may use promissory estoppel to enforce the defendant’s promise if he can show that:
· The defendant made a promise knowing that the plaintiff would likely rely on it
· The plaintiff did rely on the promise; and
· The only way to avoid injustice is to enforce the promise |
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Term
Quasi-Contract
Ch. 10; pg. 242
(Introduction to Contracts) |
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Definition
Even when there is no contract, a court may use quasi-contract to compensate a plaintiff who can show that:
· The plaintiff gave some benefit to the defendant
· The plaintiff reasonably expected to be paid for the benefit and the defendant knew this; and
· The defendant would be unjustly enriched if he did not pay |
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Term
Discharge
Ch. 17; pg. 373
(Performance & Discharge) |
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Definition
A party is discharged when they have no more duties under a contract
· Most are discharged by full performance
· Sometimes, discharged by agreement. Both parties may agree to rescind their contract |
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Term
Conditions
Ch. 17; pg. 374
(Performance & Discharge) |
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Definition
an event that must occur before a party becomes obligated under a contract
· Express Conditions: Clearly stated conditions, informal wording can be open to discussion
· Implied Conditions: No conditions are explicitly stated, but it is implied from the agreement |
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Term
Types of Conditions
Ch. 17; pg. 376
(Performance & Discharge) |
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Definition
if the condition does not occur, one party can be discharged without performing
· Condition Precedent- an event must occur before a duty arises
· Condition Subsequent- condition must occur after the duty arises
· Concurrent Conditions-both parties have a duty to perform simultaneously. |
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Term
Strict Performance
Ch. 17; pg. 380
(Performance & Discharge) |
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Definition
| A party is not expected to render strict performance unless the contract expressly demands it and such a demand is reasonable. |
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Term
Substantial Performance
Ch. 17; pg. 380
(Performance & Discharge) |
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Definition
In a contract for services, a party that substantially performs its obligations will receive the full contract price, minus the value of any defects
A party that fails to perform substantially receives nothing on the contract itself and will only recover the value of the work, if any |
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Term
Personal Satisfaction Contract
Ch. 17; pg. 381
(Performance & Discharge) |
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Definition
| in which the promisee makes a personal, subjective evaluation of the promisor’s performance |
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Term
Subjective Standard
Ch. 17; pg. 382
(Performance & Discharge) |
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Definition
| A court applies a subjective standard only if assessing the work involves personal feelings, taste, or judgment, and the contract explicitly demanded personal satisfaction. A “subjective standard” means that the promisee’s personal views will greatly influence her judgment, even if her decision is foolish and unfair. |
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Term
Objective Standard
Ch. 17; pg. 382
(Performance & Discharge) |
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Definition
| a court applies an objective standard to the promisee’s decision. The objective standard will be used if assessing the work does not involve personal judgment or if the contract failed to explicitly demand personal satisfaction. An objective standard means that the promisee’s judgment of the work must be reasonable |
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Term
Time of the Essence Clause
Ch. 17; pg. 385
(Performance & Discharge) |
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Definition
| A time of the essence clause will generally make contract dates strictly enforceable. Merely including a date for performance does not make time of the essence. |
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Term
Types of Breaches
Ch. 17; pg. 385-386
(Performance & Discharge) |
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Definition
material breach- one that substantially harms the innocent party for which it would be hard to compensate without discharging the contract.
anticipatory breach one party makes it unmistakably clear that it will not honor the contract. |
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Term
True Impossibility
Ch. 17; pg. 386
(Performance & Discharge) |
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Definition
means that something happened that makes it utterly impossible to do what the promisor said he would do. Emphasis on can’t, not just would be a financial strain.
· Destruction of subject matter
· Death of the promisor in a personal services contract
· Illegality |
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Term
Frustration of Purpose
Ch. 17; pg. 388-389
(Performance & Discharge) |
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Definition
an event occurred that neither party anticipated and the contract now has no value for one party
· Financial difficulties will never suffice to discharge a contract
· Event must have been truly unexpected
· If promisor must use a different means to accomplish a task, at a greatly increased cost, probably has valid claim of impracticability
· Force majeure clause (important but not necessarily dispositive)- allows cancellation of the agreement in case of extraordinary and unexpected events
· UCC permits discharge only for major, unforeseen disruptions |
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Term
Commercial Impracticability
Ch. 17; pg. 386
(Performance & Discharge) |
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Definition
| an event occurred that neither party anticipated and fulfilling the contract would now be extraordinarily difficult and unfair to one party |
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Term
Sherman Act in 1980
Ch. 39; pg 928
(Antitrust) |
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Definition
| first national law designed to regulate competition |
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Term
Major provisions of the antitrust laws
Ch. 39; pg 929
(Antitrust) |
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Definition
· Section1 of Sherman Act- Prohibits all agreements “in restraint of trade”
· Section 2 of Sherman Act- Bans “monopolizations”- wrongful acquisition of a monopoly
· Clayton Act- prohibits anticompetitive mergers, tying arrangements and exclusive dealings agreements
· Robinson-Patman Act- bans price discrimination that reduces competition |
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Term
Two Categories of Antitrust violations
Ch. 39; pg 929
(Antitrust) |
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Definition
· Per se- automatic; no defense; subject to criminal & civil penalties
· Rule of reason- illegal only if have antitrust competitive impact; court considers circumstances, intent, and impact; usually only civil penalties & private lawsuits |
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Term
Two types of competitive strategies
Ch. 39; pg 930 & 933
(Antitrust) |
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Definition
Cooperative: allow companies to work together for their mutual advantage
o Horizontal- among competitors (i.e. Levi Strauss & Wrangler)
Vertical- among different stages of production (i.e. Levi & Macy’s)
Any effort by a group of competitors to divide its market is a per se violation of the Sherman Act; Illegal arrangements include agreements to allocate customers, territory, or products |
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Term
Price Fixing
Ch. 39; pg 931
(Antitrust) |
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Definition
| Competitors agree on prices they will buy/sell products; per se violation |
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Term
Bid-rigging
Ch. 39; pg 931
(Antitrust) |
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Definition
| competitors eliminate price competition by agreeing on who will submit the lowest big; per se violation |
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Term
Refusal to Deal
Ch. 39; pg 933
(Antitrust) |
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Definition
| a group of competitors boycotts a buyer, supplier, or another competitor; rule of reason violation (illegal if it harms competition) |
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Term
Reciprocal Dealing Agreement
Ch. 39; pg 934
(Antitrust) |
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Definition
| buyer refuses to purchase goods from a supplier unless the supplier also purchases items from the buyer; rule of reason violation |
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Term
Price Discrimination
Ch. 39; pg 934
(Antitrust) |
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Definition
Illegal if items are same and discrimination lessens competition
Legal if costs of serving this buyer are lower or seller is simply meeting competition |
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Term
Mergers & Joint Ventures
Ch. 39; pg 935-937
(Antitrust) |
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Definition
§ Pg. 935- Companies with substantial assets must notify FTC before merging
§ Horizontal merger- companies that compete in the same market; government tries to prevent those that could lead to a monopoly
§ Pg. 937- Vertical Mergers- involves companies at different stages of production; can be anticompetitive, especially if they reduce entry into a market by locking up an important supplier or top distributor
§ Joint ventures- partnership for a limited purpose; do not combine permanently only for a specific project; government usually permits |
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Term
Monopolization
Ch. 39; pg 937
(Antitrust) |
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Definition
to acquire a monopoly in the wrong way; having a monopoly is legal unless it is gained or maintained by using wrongful tactics
§ Pg. 938- 3 questions to determine illegal monopoly:
ú What is the market?
ú Does the company control the market?
ú How did the company acquire or maintain its control? |
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Term
Predatory Pricing
Ch. 39; pg 941
(Antitrust) |
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Definition
a company lowers it prices below cost to drive out competitors; once the predator has the market it raises prices to make up lost profit
ú To win must prove three elements:
ú Defendant is selling its products below cost
ú The defendant intends that the plaintiff go out of business
ú If the plaintiff does go out of business, the defendant will be able to ear sufficient profits to recoup its prior losses |
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Term
Tying Arrangement
Ch. 39; pg 942
(Antitrust) |
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Definition
an agreement to sell a product on the condition that the buyer also purchased a different product
ú Illegal if:
ú Products are clearly separate
ú Seller requires the buyer to purchase the two products together
ú Seller has significant power in the market for the tying product, and
ú Seller is shutting out a significant of the market for the tied product |
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Term
Exclusive Dealing Agreements
Ch. 39; pg 943
(Antitrust) |
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Definition
contract where distributor or retailer agrees with a supplier not to carry the products of any other supplier; rule of reason
ú Number of other distributors available
ú Portion of the market foreclosed by the exclusive dealing agreement
ú Ease with which new distributors could enter the market
ú Possibility that could distribute product soley
ú Legitimate business reasons that may have led the distributor to accept an exclusive contract |
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Term
Resale Price Maintenance (RPM)
Ch. 39; pg 944-945
(Antitrust) |
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Definition
| manufacturer sets minimum prices that retailers may charge, per se violation |
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Term
Vertical Maximum Price Fixing
Ch. 39; pg 946
(Antitrust) |
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Definition
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Term
FTC
Ch. 40; pg. 951
(Consumer Law) |
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Definition
| Congress created FTC in 1915 to regulate business; original focus on antitrust law; now regulates wide range of business activities |
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Term
Options for FTC to enforce the law
Ch. 40; pg. 951-952
(Consumer Law) |
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Definition
· Voluntary Compliance- first choice; asks offender to sign affidavit promising to stop prohibited activity
· Administrative Hearings and Appeals- Company refuses to stop; FTC takes case to administrative law judge (ALJ); violator may settle by signing a consent order; if case proceeds to hearing ALJ issues a cease and desist order commanding to stop
· Penalties- impose fine for each violation |
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Term
Penalties under FTC
Ch. 40; pg. 952
(Consumer Law) |
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Definition
Penalties- impose fine for each violation of:
o Voluntary compliance affidavit
o Consent order
o Cease and desist order
o FTC rule or
o Cease and desist order issued against someone else
Section 5 of FTC Act prohibits “unfair and deceptive acts or practices.” |
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Term
Section 5 of FTC Act
Ch. 40; pg. 952
(Consumer Law) |
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Definition
prohibits “unfair and deceptive acts or practices.”
· Deceptive if it contains an important misrepresentation or omission that is likely to mislead a reasonable consumer |
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Term
Unfair Practice- FTC
Ch. 40; pg. 954
(Consumer Law) |
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Definition
FTC considers practice to be unfair if it meets all of the following 3 tests:
· It causes a substantial consumer injury- physical or financial.
· The harm of the injury outweighs any countervailing benefit.
· The consumer could not reasonably avoid the injury. |
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Term
Bait & Switch
Ch. 40; pg. 955
(Consumer Law) |
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Definition
FTC prohibits bait and switch advertisements: a merchant may not advertise a product and then disparage it to consumers in an effort to sell a different item. They must also have enough stock on hand to met reasonable demand for any advertised product.
· Bait is an alluring offer that sounds too good to be true.
· Switch- advertiser does not wish to sell advertised merchandise but switch consumers to another higher priced product.
· Real purpose of advertisement is simply to find costumers who are interested in buying |
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Term
Mail or telephone Order Merchandise
Ch. 40; pg. 955-956
(Consumer Law) |
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Definition
· Mail order companies must ship an item within the time stated or, if no time is given, within 30 days after receipt of the order
· If a company cannot ship the product when promised, it must send the customer a notice with the new shipping date and an opportunity to cancel. If the new shipping date is within 30 days of the original one, and the customer does not cancel, the order is still on.
· If the company cannot ship within 30 days of the original date, it must send the customer another notice. This time, however, the company must cancel the order unless the customer returns the notice, indicating that he still wants the item.
Under the FTC Act, anyone who receives unorder merchandise in the mail can treat it as a gift.
In door-to-door sales, a saleperson is required to notify the buyer that she has the right to cancel the transaction prior to midnight of the third business day thereafter. |
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Term
Truth in Lending Act (TILA)
Ch. 40; pg. 958
(Consumer Law) |
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Definition
applies to a transaction only if all the following are met:
· It is a consumer loan. (individual loan, not business)
· The loan has a finance charge or will be repaid in more than four installments.
· The loan is for less than $25K or secured by a mortgage on real estate.
· The loan is made by someone in the business of offering credit. |
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Term
Required Disclosure in TILA loans
Ch. 40; pg.958
(Consumer Law) |
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Definition
· The disclosure must be clear and in meaningful sequence.
· The lender must disclose the finance charge- the amount, in dollars, the consumer will pay in interest and fees over the life of the loan.
· The creditor must also disclose the annual percentage rate (APR). This number is the actual rate of interest the consumer pays on an annual basis. |
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Term
Open-End Credit
Ch. 40; pg.959
(Consumer Law) |
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Definition
ender makes a series of loans that the consumer can repay at once or in installments (i.e. credit cards)
· In each statement the lender must disclose the following:
o Amount owed at beginning of billing cycle (previous balance)
o Amounts and dates of all purchases, credits, and payments
o Finance charges and late fees
o The date by which a bill must be paid to avoid these charges
o Either the consequence of making the monthly minimum payment or a toll free number at which to obtain such information |
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Term
Closed-End Credit
Ch. 40; pg. 959
(Consumer Law) |
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Definition
only one loan and the borrower knows the amount and the payment schedule in advance
· Lender must disclose:
o Cash price
o Total down payment
o Amount financed
o Itemized list of all other charges
o The number, amount, and due dates of payments
o The total amount of payments
o Late payment charges
o Penalties for prepaying the loans
o Lender’s security interest in the item purchased |
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Term
Home Equity Loans
Ch. 40; pg. 960
(Consumer Law) |
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Definition
Has an APR that is more than 10 percentage points higher than Treasury securities, or
· The consumer must pay fees and points at closing that are higher than 8 percent of the total loan amount, then,
· At least three business days before the loan closing the lender must notify the consumer that (1) he does not have to go through with the loan (even if he has signed the loan agreement) and (2) he could lose his house if he fails to make payments, and
· Loans that are for less than five years may not contain balloon payments (that is, a payment at the end that is more than twice the regular monthly payment) |
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Term
Recission
Ch. 40; pg. 960
(Consumer Law) |
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Definition
· under TILA consumers have the right to rescind a mortgage for up to three business days after the signing (including Saturdays).
· If lender does not comply with the disclosure provisions of TILA, the consumer can rescind for up to three years from the date of the mortgage |
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Term
Special Credit Card Rules
Ch. 40; pg. 961-962
(Consumer Law) |
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Definition
· Under TILA, you are only liable for the first $50 in charges if your credit card is stolen before you notify the credit card company
o If you call before any charges are made; you have no liability
· In the event of a dispute between a customer and a merchant, the credit card company cannot bill the customer if
o She makes a good faith effort to resolve the dispute
o The dispute is for more than $50
o The merchant is in the same state where she lives or is within 100 miles of her house |
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Term
Debit Card Rules
Ch. 40; pg. 961-962
(Consumer Law) |
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Definition
· Unauthorized withdrawals
o Report before use, no liability
o Report within two days; only $50
o Report three-sixty days; liable for $500
o Report after sixty days; completely liable
· Stolen number; not card
o Report within 60 days; no liability
o Report after 60 days; complete liability |
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Term
Fair Credit Billing Act (FCBA)
Ch. 40; pg. 961-962
(Consumer Law) |
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Definition
provides additional protection for credit card holders
· If, within 60 days, a consumer writes to a credit card company to complain about the bill, the company must acknowledge receipt of the complaint within 30 days
· Within two billing cycles (but no more than 90 days) the credit card company must investigate the complaint and respond:
o In the case of an error, by correcting the mistake and notifying the consumer
o If there is no error, by writing to the consumer with an explanation
· Whether or not there was a mistake, if the consumer requests it, the credit card company must supply documentary evidence to support its position- for example, copies of the bill signed by the consumer or evidence that the package actually arrived
· The credit card company cannot try to collect the disputed debt or close or suspend the account until it has responded to the consumer complaint
· The credit card company cannot report to credit agencies that the consumer has an unpaid bill until 10 days after the response. If the consumer still disputes the charge, the credit card company may report the amount to a credit agency but must disclose that it is disputed |
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Term
Fair Credit Reporting Act (FRCA)
Ch. 40; pg. 964
(Consumer Law) |
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Definition
· A consumer report can only be used for a legitimate business need, and a consumer reporting agency must be careful not to supply reports that will be used for any other purpose. A nosy neighbor does not have the right to order a report.
· A consumer reporting agency cannot report obsolete information. Ordinary credit information is obsolete after seven years, bankruptcies after 10 years. (But if a consumer is applying for more than $150K of credit or life insurance, or for a job that pays more than $75K a year, then there is no time limit).
o Investigative reports that discuss character, reputation, or lifestyle become obsolete in three months. Some commentators argue that the type of information contained in investigative reports is not relevant and should not be used at all. Although the FCRA does not limit the kinds of information that can be collected and reported, it does specify that an investigative report cannot be ordered without first informing the consumer.
· A consumer reporting agency cannot report medical information without the consumer’s permission.
· An employer cannot request a consumer report on any current or potential employee without the employee’s permission. An employer cannot take action because of information in the consumer report without first giving the current or potential employee a copy of the report and a description of the employee’s rights under this statue.
· Anyone who makes an adverse decision against a consumer because of a credit report must reveal the name and address of the reporting agency that supplied the information. An “adverse decision” includes denying credit or charging higher rates.
· Upon request from a consumer, a reporting agency must disclose all information in his file, the source of the information (except for investigative reports), the name of anyone to whom a report has been sent in the prior year (two years for employment purposes), and the name of anyone who has requested a report in the prior year.
· If a consumer tells an agency that some of the information in his file is incorrect, the agency must both investigate and forward the data to the information provider. The information provider must investigate and report the results to the agency. If the data are inaccurate, the information provider must so notify all national credit agencies. The consumer also has the right to give the agency a short report telling his side of the story. The agency must then include the consumer’s statement with any credit reports it supplies and also, at the consumer’s request, send the statement to anyone who has received a report within six months (or two years for employment purposes) |
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Term
Fair & Accurate Credit Transactions Act (FACTA)
Ch. 40; pg. 965
(Consumer Law) |
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Definition
goal to reduce identity theft
· Gramm-Leach-Bliley Privacy Act of 1999- banks, etc must notify customer
o Before disclosing any personal information to a third party
o If there has been unauthorized access to the consumer’s sensitive personal information
· Company cannot disclose private info if the consumer opts out |
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Term
Fair Debt Collection Practices Act (FDCPA)
Ch. 40; pg. 965
(Consumer Law) |
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Definition
a collector must send debtor written notice within 5 days containing:
· Amount of debt
· Name of creditor to whom the debt is owed
· A statement that if debtor disputes the debt (in writing) the collector will case all collection efforts until it has sent evidence of the debt |
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Term
FDCPA- Collectors may not
Ch. 40; pg. 965
(Consumer Law) |
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Definition
· Call or write a debtor who has notified the collector in writing that he wishes no further contact
· Call or write a debtor who is represented by an attorney
· Call a debtor before 8AM or after 9PM
· Threaten a debtor or use obscene or abusive language
· Call or visit the debtor at work if the consumer’s employer prohibits such contact
· Imply that they are attorneys or government representatives when they are not, or use a false name
· Threaten to arrest consumers who do not pay their debts
· Make other false or deceptive threats, that is, threats that would be illegal if carried out or which the collector has no intention of doing- such as suing the debtor or seizing property
· Contact acquaintances of the debtor for any reason other than to locate the debtor (and then only once), or
· Tell acquaintances that the consumer is in debt |
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Term
Equal Credit Opportunity Act (ECOA)
Ch. 40; pg. 967
(Consumer Law) |
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Definition
| prohibits any creditor from discriminating against a borrower because of race, color, religion, national origin, sex, marital status, age (as long as the borrower is old enough to enter into a legal contract), or because the borrower is receiving welfare. |
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Term
onsumer Leasing Act (CLA)
Ch. 40; pg. 969
(Consumer Law) |
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Definition
does not apply to the rental of real property- that to house or apartment leases.
Before a lease is signed, a lessor must disclose the following in writing:
· All required payments, including deposits, down payments, taxes, and license fees
· The number and amount of each monthly payment and how payments are calculated
· Balloon payments (that is, payments due to the end of the lease)
· Required insurance payments
· The total amount the consumer will have paid by the end of the lease
· Available warranties
· Maintenance requirements and a description of the lessor’s wear and use standards
· Penalties for late payments
· The consumer’s right to purchase the leased property and at what price
· The consumer’s right to terminate a lease early
· Any penalties for early termination |
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Term
Magnuson-Moss Warranty Act
Ch. 40; pg. 969
(Consumer Law) |
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Definition
· Does not require a warranty
· Does require supplier offer written warranty on product that costs more than $15 to disclose the terms of the warranty in simple, understandable language before the sale
Required Disclosures:
o The name and address of the person the consumer should contact to obtain warranty service
o The parts that are covered and those that are not
o What services the warrantor will provide, at whose expense, and for what period of time
o A statement of what the consumer must do and what expenses he must pay |
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Term
Full Warranty
Ch. 40; pg. 970
(Consumer Law) |
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Definition
· warrantor must promise to fix a defective product for a reasonable time without charge
· If, after a reasonable number of efforts to fix the defective product, it still does not work, the consumer must have the right to a refund or a replacement without charge |
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Term
Consumer Product Safety Act of 1972 (CPSA)
Ch. 40; pg. 970
(Consumer Law) |
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Definition
prevent injuries
· Evaluate consumer products and develop safety standards
· The Commission can impose civil and criminal penalties on those who violate its standards. |
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Term
Clean Air Act
Ch. 41; pg. 976-977
(Environmental Law) |
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Definition
Under the Clean Air Act of 1970, the Environmental Protection Agency must establish national ambient air quality standards for both primary and secondary pollution. States must produce implementation plans to meet the EPA standards.
Under the Clean Air Act, power plants may trade emissions allowances. |
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Term
Clean Water Act
Ch. 41; pg. 983
(Environmental Law) |
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Definition
| The Clean Water Act prohibits the discharge of pollution into water without a permit from the EPA. States must set EPA-approved water quality standards and develop plans to achieve them. The Clean Water Act also prohibits any discharge of dredge and fill material into a wetland without a permit. |
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Term
Safe Drinking Water Act
Ch. 41; pg. 986
(Environmental Law) |
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Definition
| The Safe Drinking Water Act requires the EPA to set national standards for every contaminant potentially harmful to human health that is found in drinking water. |
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Term
Ocean Dumping Act
Ch. 41; pg. 986
(Environmental Law) |
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Definition
| The Ocean Dumping Act prohibits the dumping of wastes in ocean water without a permit from the EPA. |
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Term
Oil Pollution Act
Ch. 41; pg. 986
(Environmental Law) |
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Definition
| The Oil Pollution Act of 1990 sets design standards for ships operating in US waters and requires shipowners to pay for damage caused by oil discharged from their ships. |
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Term
Resource Conservation and Recovery Act
Ch. 41; pg. 987
(Environmental Law) |
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Definition
| The Resource Conservation and Recovery Act establishes rules for treating hazardous wastes and other forms of solid waste. |
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Term
Comprehensive Environment Response, Compensation, and Liability Act (Superfund or CERCLA)
Ch. 41; pg. 989
(Environmental Law) |
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Definition
Under Superfund (CERCLA), anyone who has ever owned or operated a site on which hazardous wastes are found, or who has transported wastes to the site, or who has arranged for the disposal of wastes that were released at the site, is liable for:
a. The Cost of cleaning up the site
b. Any damage done to natural resources
c. Any required health assessments |
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Term
Federal Insecticide, Fungicide, and Rodenticide Act
Ch. 41; pg. 992
(Environmental Law) |
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Definition
| The Federal Insecticide, Fungicide, and Rodenticide Act requires manufacturers to register all pesticides with the EPA. |
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Term
Federal Food, Drug, Cosmetic Act
Ch. 41; pg. 992
(Environmental Law) |
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Definition
| The Federal Food, Drug, and Cosmetic Act requires the EPA to set maximum levels for pesticide residue in raw or processed food. |
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Term
Food Quality Protection Act
Ch. 41; pg. 993
(Environmental Law) |
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Definition
| The Food Quality Protection Act requires the EPA to set pesticide standards at levels that are safe for children. |
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Term
Toxic Substances Control Act
Ch. 41; pg. 993
(Environmental Law) |
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Definition
| Under the Toxic Substances Control Act, manufacturers must register new chemicals with the EPA. |
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Term
National Environmental Policy Act
Ch. 41; pg. 993
(Environmental Law) |
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Definition
| The National Environmental Policy Act requires all federal agencies to prepare an environmental impact statement for every major federal action significantly affecting the quality of the environment. |
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Term
Endangered Species Act
Ch. 41; pg. 994
(Environmental Law) |
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Definition
| The Endangered Species Act prohibits activities that cause harm to endangered species. |
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Term
Alternative Dispute Resolution (ADR)
Ch. 3; pg. 45
(Dispute Resolutions) |
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Definition
| Alternative dispute resolution (ADR) is any formal or informal process to settle disputes without a trial. Mediation, arbitration, and other forms of ADR are growing in popularity. |
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Term
Court Systems
Ch. 3; pg. 47
(Dispute Resolutions) |
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Definition
| There are many systems of courts, one federal and one in each state. A federal court will hear a case only if it involves a federal question or diversity jurisdiction. |
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Term
Trial Courts
Ch. 3; pg. 47
(Dispute Resolutions) |
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Definition
| Trial courts determine facts and apply the law to the facts; appeals courts generally accept the facts found by the trial court and review the trial record for errors of law. |
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Term
Pleadings
Ch. 3; pg. 53
(Dispute Resolutions) |
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Definition
| A complaint and an answer are the two most important pleadings, that is, documents that start a lawsuit. |
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Term
Discovery
Ch. 3; pg. 56
(Dispute Resolutions) |
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Definition
| Discovery is the critical pre-trial opportunity for both parties to learn the strengths and weaknesses of the opponent’s case. Important forms of discovery include interrogatories, depositions, production of documents and objects, physical and mental examinations, and requests for admission. |
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Term
Motion
Ch. 3; pg. 56
(Dispute Resolutions) |
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Definition
| A motion is a formal request to the court. |
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Term
Summary Judgement
Ch. 3; pg. 60
(Dispute Resolutions) |
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Definition
| Summary judgment is a ruling by the court that no trial is necessary because there are no essential facts in dispute. |
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Term
Money Damages
Ch. 3; pg. 62-63
(Dispute Resolutions) |
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Definition
| Generally, both plaintiff and defendant may demand a jury in any lawsuit for money damages. |
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Term
Voir Dire
Ch. 3; pg. 63
(Dispute Resolutions) |
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Definition
| Voir dire is the process of selecting jurors in order to obtain an impartial panel. |
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Term
Burden of Proof
Ch. 3; pg. 64
(Dispute Resolutions) |
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Definition
| The plaintiff’s burden of proof in a civil lawsuit is preponderance of the evidence, meaning that its version of the facts must be at least slightly more persuasive than the defendant’s. In a criminal prosecution, the government must offer proof beyond a reasonable doubt in order to win a conviction. |
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Term
Rules of Evidence
Ch. 3; pg. 64-65
(Dispute Resolutions) |
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Definition
| The rules of evidence determine what questions may be asked during trial, what testimony may be given, and what documents may be introduced. |
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Term
Verdict
Ch. 3; pg. 66
(Dispute Resolutions) |
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Definition
| The verdict is the jury’s decision in a case. The losing party may ask the trial judge to overturn the verdict, seeking a judgment non obstante veredicto or a new trial. Judges seldom grant either. |
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Term
Appeals Court
Ch. 3; pg. 67
(Dispute Resolutions) |
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Definition
| An appeals court has many options. The court may affirm, upholding the lower court’s decision; modify, changing the verdict but leaving the same party victorious; reverse, transforming the loser into the winner; and/or remand, sending the case back to the lower court. |
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Term
Common Law Rule of Employment
Ch. 30; pg. 694
(Employment Law) |
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Definition
| The traditional common law rule of employment provided that an employee at will could be fired for a good reason, a bad reason, or no reason at all. |
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Term
National Labor Retaliations Act
Ch. 30; pg. 695
(Employment Law) |
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Definition
| The National Labor Relations Act prohibits employers from penalizing workers for union activity. |
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Term
Family and Medical Leave Act
Ch. 30; pg. 695
(Employment Law) |
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Definition
| The Family and Medical Leave Act guarantees workers up to 12 weeks of unpaid leave each year for childbirth, adoption, or medical emergencies for themselves or a family member. |
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Term
Wrongful Discharge
Ch. 30; pg. 696
(Employment Law) |
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Definition
| An employer who fires a worker for a bad reason is liable under a theory of wrongful discharge. |
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Term
Cannot fire an employee for...
Ch. 30; pg. 696-697
(Employment Law) |
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Definition
| Generally, an employee may not be fired for refusing to break the law, exercising a legal right, or performing a legal duty. |
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Term
Whistleblowers
Ch. 30; pg. 698-699
(Employment Law) |
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Definition
| Whistleblowers reeve some protection under both federal and state laws. |
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Term
Oral promises/ employee handbook
Ch. 30; pg. 700
(Employment Law) |
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Definition
| Oral promises made during the hiring process may be enforceable, even if not approved by the company's top executives. An employee handbook may create a contract. |
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Term
Defamation
Ch. 30; pg. 701
(Employment Law) |
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Definition
| Employers may be liable for defamation if they give false and unfavorable references. |
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Term
Occupational Safety and Health Act (OSHA)
Ch. 30; pg. 703
(Employment Law) |
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Definition
| The goal of the Occupational Safety and Health Act is to ensure safe conditions in the workplace. |
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Term
Employee Right to Privacy
Ch. 30; pg. 704
(Employment Law) |
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Definition
| Employees have a limited right to privacy in the workplace. |
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Term
Fair Labor Standards Act
Ch. 30; pg. 705
(Employment Law) |
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Definition
| The Fair Labor Standards Act regulates minimum and overtime wages. it also limits child labor. |
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Term
Worker's Compensation
Ch. 30; pg. 705
(Employment Law) |
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Definition
| Worker's compensation statutes ensure that employees receive payment for injuries incurred at work. |
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Term
Social Security
Ch. 30; pg. 706
(Employment Law) |
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Definition
| The Social Security system pays benefits to workers who are retired, disabled, or temporarily unemployed and to the spouses and children of disabled or deceased workers. |
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Term
Employee Retirement Income Security Act
Ch. 30; pg. 707
(Employment Law) |
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Definition
| The Employee Retirement Income Security Act relates private pension plans. |
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Term
Equal Pay Act
Ch. 30; pg. 707
(Employment Law) |
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Definition
| Under the Equal Pay Act, an employee may not be paid at a laser rate than employees of the opposite sex for equal work. |
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Term
Title VII of the Civil Rights Act of 1964
Ch. 30; pg. 707-708
(Employment Law) |
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Definition
| Title VII of the Civil Rights Act of 1964 prohibits employers from discriminating on the basis of race, color, religion, sex, or national origin. |
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Term
Age Discrimination in Employment Act
Ch. 30; pg. 715
(Employment Law) |
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Definition
| The Age Discrimination in Employment Act prohibits age discrimination against employees or job applicants who are age 40 or older. |
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Term
Americans with Disabilities Act
Ch. 30; pg. 717
(Employment Law) |
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Definition
| The Americans with Disabilities Act prohibits employers from discriminating on the basis of disability. |
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Term
Section 7 of the National Labor Relations Act (NLRA)
Ch. 31; pg. 727
(Labor Law) |
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Definition
| Section 7 of the National Labor Relations Act (NLRA) guarantees employees the right to organize and join unions, bargain collectively, and engage in other concerted activities. |
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Term
Section 8(a) of the NLRA
Ch. 31; pg. 727
(Labor Law) |
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Definition
| Section 8(a) of the NLRA make it an unfair labor practice for an employer to interfere with union organizing, discriminate against a union member, or refuse to bargain collectively. |
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Term
Section 8(b) of the NLRA
Ch. 31; pg. 728
(Labor Law) |
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Definition
| Section 8(b) of the NLRA make it an unfair labor practice for a union to interfere with employees who are exercising their rights under Section 7, to encourage an employer to discriminate against an employee because of a labor dispute, to refuse to bargain collectively, or to engage in an illegal strike or boycott. |
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Term
Section 9 of the NLRA
Ch. 31; pg. 730
(Labor Law) |
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Definition
| Section 9 of the NLRA makes a validly recognized union the exclusive representative of the employees. |
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Term
Employer Views on Unions
Ch. 31; pg. 731-733
(Labor Law) |
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Definition
| During a union organizing campaign, an employer may vigorously present anti-union views to its employees, but it may not use threats or promises of benefits to defeat the union effort. |
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Term
National Labor Relations Board (NLRB)
Ch. 31; pg. 727, 733
(Labor Law) |
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Definition
| The National Labor Relations Board (NLRB) will certify a proposed bargaining unit only if the employees share a community of interest. |
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Term
Employer-Union Bargaining Terms
Ch. 31; pg. 737
(Labor Law) |
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Definition
| The employer and the union must bargain over wages, hours, and other terms and conditions of employment. They may bargain other subjects, but neither side may insist on doing so. |
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Term
Employer-Union Bargaining
Ch. 31; pg. 740
(Labor Law) |
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Definition
| The union and the employer must bargain in good faith, but they are not obligated to reach an agreement. Management may not unilaterally change wages, hours, or terms and conditions of employment without bargaining to impasse. |
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Term
Right to strike
Ch. 31; pg. 743
(Labor Law) |
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Definition
| The NLRA guarantees employees the right to strike, with some limitations. |
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Term
What happens when a worker strikes?
Ch. 31; pg. 744
(Labor Law) |
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Definition
| After an economic strike, an employer is not obligated to lay off replacement workers to give a striker her job back, but it may not discriminate against a striker. After a Unfair Labor Practices strike, the stricken worker must get her job back. |
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Term
Picketing
Ch. 31; pg. 746
(Labor Law) |
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Definition
| Picketing the employer's workplace in support of a strike in generally lawful; a secondary boycott is generally illegal. |
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Term
Worker Lock Out
Ch. 31; pg. 746
(Labor Law) |
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Definition
| An employer may lock out workers, but only after giving them notice. |
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Term
Multi-employer bargaining
Ch. 31; pg.
(Labor Law) |
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Definition
| Multi-employer bargaining and implementation do not violate antitrust laws |
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Term
Fair Representation
Ch. 31; pg. 747
(Labor Law) |
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Definition
| The duty of fair representation requires that a union represent all members daily, impartially, and in good faith. |
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Term
Express Warranty
Ch. 21; pg. 467
(Warranties and Product Liability) |
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Definition
Express Warranty- Contract (p. 467)
* Source of Law:UCC 2-313
* Summary: May be created by an affirmation of fact, a promise, a description of goods, or a sample ut it must have been the basis of the bargain
* Example: Salesman say "This helicopter will operate perfectly at 16,000 feet."
* Potential Issue: Written contract may disclaim any and all oral warranties. |
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Term
Implied Warranty of Merchantability
Ch. 21; pg. 470-471
(Warranties and Product Liability) |
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Definition
Implied Warranty of Merchantability- Contract (p. 470-471)
* Source of Law: UCC 2-314
* Summary: The Code implies that the goods are fit for their ordinary use.
* Example: Buyer purchases a deep freezer. The Code implies a warranty that it will keep food frozen.
* Potential Issue: Seller may disclaim this warranty only if a conspicuous disclaimer includes the word "merchantability" |
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Term
Implied Warranty of Fitness
Ch. 21; pg. 472-473
(Warranties and Product Liability) |
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Definition
Implied Warranty of Fitness- Contract (p. 472-473)
* Source of Law: UCC 2-315
* Summary: The Code implies that the goods are fit for buyer's special purpose that seller knows about.
* Example: Where seller knows (1) buyer wants pine trees to plant in sandy soil, and (2) buyer is relying on seller's judgment, the trees carry an implied warranty that they will grow in that soil.
* Potential Issue: Seller may disclaim this warranty with conspicuous writing, but note that some states will disregard a disclaimer of any implied warranty in a consumer sale. |
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Term
Implied Warranty of Title
Ch. 21; pg. 473-474
(Warranties and Product Liability) |
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Definition
Implied Warranty of Title- Contract (p. 473-474)
* Source of Law: UCC 2-312
* Summary: The Code implies that seller has good title, free of any security interests and claim of patent, copyright, or trademark.
* Example: Seller sells a stolen car to buyer, who must later return it to the rightful owner. Seller has breached his warranty of good title and owes buyer her full damages.
* Potential Issue: Buyer is not protected against any security interests that she knows about. |
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Term
Negligence
Ch. 21; pg. 480-481
(Warranties and Product Liability) |
|
Definition
Negligence- Tort (p. 480-481)
* Source of Law: Common law
* Summary: Seller is liable if she fails to show level of conduct that a reasonable person would use.
* Example: Manufacturer sells bathing suit made of miracle fabric; buyer swims in ocean where saltwater makes garment transparent; seller's failure to test the suit in saltwater was unreasonable and leaves seller liable. If seller had thoroughly tested and this was a freak occurrence, there would probably be no negligence.
* Potential Issue: No duty to warn if the danger is obvious. (in the bathing suit example, the danger is not obvious and there was a duty to warn.) |
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Term
Strict Liability
Ch. 21; pg. 483
(Warranties and Product Liability) |
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Definition
Strict Liability- Tort (p. 483)
* Source of Law: Reinstatement 402A (subject to new revisions) and common law
* Summary: Seller liable if the product leaves in a dangerously defective condition
* Example: Can of barbecue lighter fluid explodes in the users hand because the can't metal was defective; manufacturer took every reasonable precaution to test and inspect every can leaving factory, that reasonable care is irrelevant and seller is liable.
* Potential Issue: Injured buyer need not prove negligence but must prove that the product was defective. |
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Term
Five Elements of Negligence
Ch. 7; pg. 153-154
(Negligence and Strict Liability) |
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Definition
* Duty of due care
* Breach
* Factual causation
* Foreseeable type of harm
* Injury |
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Term
Foreseeable Misconduct
Ch. 7; pg. 154
(Negligence and Strict Liability) |
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Definition
| If the defendant could foresee that misconduct would injure a particular person, he probably has a duty to her |
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Term
Landowner's duty of due care
Ch. 7; pg. 156
(Negligence and Strict Liability) |
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Definition
| In most states, a landowner's duty of due care is lowest to trespassers; often higher to children; higher still to a licensee (anyone on the land for her own purposes but with the owner's permission); and highest of all to an invitee (someone on the property as of right). |
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Term
Breach of duty of due care
Ch. 7; pg. 158
(Negligence and Strict Liability) |
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Definition
| A defendant breaches his duty of due care by failing to behave the way a reasonable person would under similar circumstances. |
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Term
Employer Liability
Ch. 7; pg. 158-159
(Negligence and Strict Liability) |
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Definition
| Employers may be liable for negligent hiring or negligent retention of employees. |
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Term
Minimum Standard of Care
Ch. 7; pg. 159
(Negligence and Strict Liability) |
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Definition
| If a legislature sets a minimum standard of care for a particular activity in order to protect a certain group of people, and a violation of the statute injures a member of that group, the defendant has committed negligence per se. |
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Term
Factual Cause
Ch. 7; pg. 159
(Negligence and Strict Liability) |
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Definition
| If one event physically led to the ultimate harm, it is the factual cause. |
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Term
Defendant Liability
Ch. 7; pg. 160
(Negligence and Strict Liability) |
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Definition
| For the defendant to be liable, the type of harm must have been reasonably foreseeable. |
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Term
Genuine vs. Speculative Harm
Ch. 7; pg. 163
(Negligence and Strict Liability) |
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Definition
| The plaintiff must persuade the court that he has suffered a harm that is genuine, not speculative. |
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Term
Contributory Negligence State
Ch. 7; pg. 165
(Negligence and Strict Liability) |
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Definition
| In a contributory negligence state, a plaintiff who is even slightly responsible for his own injury recovers nothing; in a comparative negligence state, the jury may apportion liability between plaintiff and defendant. |
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Term
Strict Liability
Ch. 7; pg. 167
(Negligence and Strict Liability) |
|
Definition
| A defendant is strictly liable for harm caused by an ultra-hazardous activity or a defective product. Ultra-hazardous activities include using harmful chemicals, blasting, and keeping wild animals. Strict liability means that if the defendant's conduct led to the harm, the defendant is liable, even if she exercises extraordinary care. |
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Term
Breach of contract
Ch. 18; pg. 394
(Remedies) |
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Definition
| Beach of contract- fails to perform a duty without a valid excuse |
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Term
Remedy
Ch. 18; pg. 394
(Remedies) |
|
Definition
Remedy- method a court uses to compensate an injured party
· Focus: how to help an injured party, without unfairly harming the other person |
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Term
Injunction
Ch. 18; pg. 394
(Remedies) |
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Definition
| Injunction- order forcing someone to do (or not do) something |
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Term
Expectation damages
Ch. 18; pg. 394
(Remedies) |
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Definition
| Expectation damages- money required to put one party in the position they would have been had the other party performed their end of the contract |
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Term
Specific Performance
Ch. 18; pg. 394
(Remedies) |
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Definition
| Specific performance- forcing both parties to complete the deal |
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Term
Liquidated Damages Clause
Ch. 18; pg. 394
(Remedies) |
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Definition
| Liquidated damages clause- a provision in the contract that states in advance what one party will receive if the other party breaches |
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Term
Expectation Interest
Ch. 18; pg. 395
(Remedies) |
|
Definition
Expectation Interest- what the injured party thought they would get from the contract. Goal- put injured party in position would have been if contract had been completed.
o (p. 396) Compensatory- represents direct harm from the failed contract
o Consequential- represents harm from the injured parties unique situation
o Incidental- minor costs |
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Term
Reliance Interest
Ch. 18; pg. 396
(Remedies) |
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Definition
| Reliance Interest- injured party didn’t expect profit, but can prove he spent money. Goal- compensate for money spent. |
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Term
Restitution Interest
Ch. 18; pg. 396
(Remedies) |
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Definition
| Restitution Interest- injured party didn’t spend money or expect money but provided a benefit to the other party. Goal- restore injured party the benefit provided |
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Term
Equitable Interest
Ch. 18; pg. 396
(Remedies) |
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Definition
| Equitable Interest- Money isn’t enough to make things right. Instead, transferring of property or forcing the other party to stop doing something (injunction) |
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Term
Reliance Interest
Ch. 18; pg. 401
(Remedies) |
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Definition
| Reliance interest- designed to put injured party in the position if no contract were ever formed |
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Term
Promissory Estoppel
Ch. 18; pg. 401
(Remedies) |
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Definition
| Promissory estoppel- court will award only reliance damages |
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Term
Restitution Interest
Ch. 18; pg. 403
(Remedies) |
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Definition
Restitution Interest- return injured party a benefit the other party got and would be unfair to leave them with
· When parties have reached a contract and one of them breaches & no other remedy is available or fair
· When in quasi-contract- one side benefits the other
Restitution common in contracts involving fraud, misrepresentation, mistake and duress |
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Term
Rescission
Ch. 18; pg. 403
(Remedies) |
|
Definition
|
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Term
Preliminary injunction
Ch. 18; pg. 407
(Remedies) |
|
Definition
| Preliminary injunction- order issued early in a lawsuit keeping a party from doing something during the course of the lawsuit |
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Term
Reformation
Ch. 18; pg. 409
(Remedies) |
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Definition
| Reformation- process when a court will partially “re-write” a contract |
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Term
Mitigation
Ch. 18; pg. 409
(Remedies) |
|
Definition
Mitigation- keep damages as low as reasonable
· A party injured by a breach may not recover for damages that could have been avoided |
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Term
Nominal damages
Ch. 18; pg. 409
(Remedies) |
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Definition
| Nominal damages- token sum given to a plaintiff who demonstrates breach of contract but no damages |
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Term
Liquidated Damages Clause
Ch. 18; pg. 409
(Remedies) |
|
Definition
Liquidated damages clause- provision stating in advance how much a party must pay if it breaches
· Court will enforce liquidated damages clause if:
o When contract created could not guess cost of damages
o Amount is reasonable |
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Term
Punitive damages
Ch. 18; pg. 412
(Remedies) |
|
Definition
Punitive damages- not to compensate but to punish
· Three Guideposts
o Reprehensibility of defendant’s conduct
o Ratio between harm suffered and award
o Difference between punitive award and civil penalties
· Additional guidelines
o Cannot be 9 times more than compensatory damages
o Cannot use defendant’s wealth for unreasonably high damages |
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Term
Securities and Exchange Commission
Ch. 36; pg. 848
(Shareholders) |
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Definition
| The Securities and Exchange Commission (SEC) regulates the relationship between publicly held corporations and their shareholders. The SEC plays a less active role in privately held corporations. |
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Term
Shareholders Rights
Ch. 36; pg. 848
(Shareholders) |
|
Definition
Shareholders have the right to:
1. Receive annual financial statements
2. Inspect and copy the corporation's records (for a proper purpose)
3. Elect and remove directors; and
4. Aprove fundamental corporate changes, such as a merger or a major sale of assets. |
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Term
Proxies
Ch. 36; pg. 850
(Shareholders) |
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Definition
| Virtually all publicly held companies solicit proxies from their shareholders. A proxy authorizes someone else to vote in place of the shareholder. |
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Term
Shareholder Proposals
Ch. 36; pg.851
(Shareholders) |
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Definition
| Under certain circumstances, public companies must include shareholder proposals in the proxy statement. |
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Term
Dissenters' rights
Ch. 36; pg. 859
(Shareholders) |
|
Definition
| A shareholder who objects to a fundamental change in the corporations can insist that her shares be bought out at fair value. This protection is referred to as "dissenters' rights." |
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Term
Controlling Shareholders
Ch. 36; pg. 860-861
(Shareholders) |
|
Definition
Controlling shareholders:
1. May not enter into unfair business transactions with the corporation
2. Have a fiduciary duty to minority shareholders
3. May not exclude minority shareholders from beneficial arrangements involving stock; and
4. Are prohibited from expelling minority shareholders, unless the expulsion is done for a legitimate business purpose. |
|
|
Term
Preventing Management Abuses
Ch. 36; pg. 861-862
(Shareholders) |
|
Definition
| Congress, the NYSE, and Nasdaq have all taken steps to prevent management abuses. These new regulations required that companies adopt effective financial controls. They also require more independent directors on the boat as a whole and on important subcommittees. |
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|
Term
Derivative Lawsuit
Ch. 36; pg. 862
(Shareholders) |
|
Definition
| A derivative lawsuit is brought by shareholders to remedy a wrong to the corporation. The suit is brought in the name of the corporation, and all proceeds of the litigation go to the corporation. |
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Term
Class Action
Ch. 36; pg. 866
(Shareholders) |
|
Definition
| If a group of shareholders all have the same claim against the corporation, they can join together and file a class action, rather than suing separately. |
|
|
Term
Security
Ch. 37; pg. 873
(Securities Regulation) |
|
Definition
| A security is any transaction in which the buyer invests money in a common enterprise and experts to earn a profit predominantly from the efforts of others. |
|
|
Term
Registering Securities
Ch. 37; pg. 874
(Securities Regulation) |
|
Definition
| Before any offer or sale, an issuer must register securities with the SEC, unless the securities qualify for an exemption. |
|
|
Term
Securities Exempt from Registration
Ch. 37; pg. 875
(Securities Regulation) |
|
Definition
| These securities are exempt from the registration requirement: government securities, bank securities, short-term notes, nonprofit issues, insurance policies, and annuity contracts |
|
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Term
Public Offering
Ch. 37; pg. 875
(Securities Regulation) |
|
Definition
Public Offering: (p.875)
1. Maximum Value of Securities Sold: Unlimited
2. Public Solicitation of Purchasers: Permitted
3. Suitability Requirements for Purchasers: No requirements
4. Disclosure Requirements: Elaborate registration statement; audited financials
5. Resale of Securities: Permitted |
|
|
Term
Intrastate Offering
Ch. 37; pg. 875-876
(Securities Regulation) |
|
Definition
Intrastate Offering: (p. 875-876)
1. Maximum Value of Securities Sold: Unlimited
2. Public Solicitation of Purchasers: Permitted
3. Suitability Requirements for Purchasers: Must reside in issuer's state
4. Disclosure Requirements: None
5. Resale of Securities: Permitted, but may not be made out of state for nine months |
|
|
Term
Regulation A
Ch. 37; pg. 877
(Securities Regulation) |
|
Definition
Regulation A: (p. 877)
1. Maximum Value of Securities Sold: $5 million
2. Public Solicitation of Purchasers: Permitted
3. Suitability Requirements for Purchasers: No requirements
4. Disclosure Requirements: Offering circular that is less detailed than a registration statement
5. Resale of Securities: Permitted |
|
|
Term
Regulation D- Rule 504
Ch. 37; pg. 876
(Securities Regulation) |
|
Definition
Regulation D- Rule 504: (p. 876)
1. Maximum Value of Securities Sold: $1 million
2. Public Solicitation of Purchasers: Sometimes permitted
3. Suitability Requirements for Purchasers: May be limited to accredited investors
4. Disclosure Requirements: May be required under state law
5. Resale of Securities: Sometimes Permitted |
|
|
Term
Regulation D- Rule 505
Ch. 37; pg. 876
(Securities Regulation) |
|
Definition
Regulation D- 505: (p. 876)
1. Maximum Value of Securities Sold: $5 million
2. Public Solicitation of Purchasers: Not Permitted
3. Suitability Requirements for Purchasers: No limit on accredited investors; no more than 35 unaccredited investors
4. Disclosure Requirements: Same requirements as Reg A for unaccredited investors; no disclosure to accredited investors
5. Resale of Securities: Not Permitted for one year |
|
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Term
Regulation D- Rule 506
Ch. 37; pg. 876
(Securities Regulation) |
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Definition
Regulation D- Rule 506: (p. 876)
1. Maximum Value of Securities Sold: Unlimited
2. Public Solicitation of Purchasers: Not Permitted
3. Suitability Requirements for Purchasers: No limit on accredited investors; no more than 35 accredited investors who, if unsophisticated, must have a purchaser representative
4. Disclosure Requirements: Same requirements as Reg A for unaccredited investors; no disclosure to accredited investors
5. Resale of Securities: Not Permitted for one year |
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Term
Security Purchaser Recovery
Ch. 37; pg. 884
(Securities Regulation) |
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Definition
| If a final registration statement contains a material misstatement or omission, the purchaser of a security offered under that statement can recover from everyone who signed it. |
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Term
1934 Act
Ch. 37; pg. 885-886
(Securities Regulation) |
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Definition
| The 1934 Act requires public companies to make regular filings with the SEC. |
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Term
Section 16
Ch. 37; pg. 887
(Securities Regulation) |
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Definition
| Under Section 16, insiders who buy and sell or sell and buy company stock within a six-month period must turn over to the corporation any profits from the trades. They must also disclose any trades they make in company stock. |
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Term
Section 10(b)
Ch. 37; pg. 887-888
(Securities Regulation) |
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Definition
ection 10(b) prohibits fraud in connection with the purchase and sale of any security, whether or not the issuer in registered under the 1934 Act.
Section 10(b) also prohibits insider trading |
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Term
Foreign Corrupt Practices Act
Ch. 37; pg. 894
(Securities Regulation) |
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Definition
| Under the Foreign Corrupt Practices Act, it is a crime for any US company to make payments to foreign officials to influence a government decision. This statute also requires reporting companies to keep accurate records. |
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Term
NSMIA
Ch. 37; pg. 896
(Securities Regulation) |
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Definition
The NSMIA prohibits states from regulating securities offerings that are: (p. 896)
1. Traded on a nation exchange
2. Exempt under Rule 06, or
3. Sold to "qualified purchasers." |
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Term
Securities not covered by NSMIA
Ch. 37; pg. 896-897
(Securities Regulation) |
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Definition
| Any securities offerings not covered by the NSMIA must comply with state securities laws, which are varied and complex. |
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Term
Audits
Ch. 38; pg. 903
(Accountant's Liability) |
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Definition
*
Charged with detecting and anticipating financial problems
* Serve as an independent evaluator of financial statement's
* Investors will not put up money without an audit report |
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Term
Verifying Transactions
Ch. 38; pg. 904
(Accountant's Liability) |
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Definition
*
Vouching- choose a transaction listed in the company's books and check backwards to make sure that there are original data to support it
* Tracing- accountant begins with an item of original data and traces it forward to ensure that it has been properly recorded throughout the bookkeeping process |
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Term
Accounting Rules
Ch. 38; pg. 904
(Accountant's Liability) |
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Definition
*
Generally accepted accounting principles (GAAP)
* Rules for preparing financial statements
* Generally accepted auditing standards (GAAS)
* Rules for conducting audits |
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Term
Unqualified Opinion
Ch. 38; pg. 904-905
(Accountant's Liability) |
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Definition
Unqualified Opinion- aka clean opinion
* most favorable report an auditor can give
* indicates that the company's financial statements fairly present its financial condition in accordance with GAAP |
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Term
Qualified Opinion
Ch. 38; pg. 904-905
(Accountant's Liability) |
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Definition
Qualified Opinion
* indicates that although the financial statements are generally accurate there is nonetheless an outstanding, unresolved issue.
* may be a violation of GAAP or another important issue whose ultimate impact is uncertain. |
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Term
Adverse Opinion
Ch. 38; pg. 904-905
(Accountant's Liability) |
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Definition
Adverse Opinion
* Bad news
* Company's financial statements do not accurately reflect its financial position
* company is lying about its finances |
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Term
Disclaimer of Opinion
Ch. 38; pg. 904-905
(Accountant's Liability) |
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Definition
Disclaimer of Opinion
* Not as bad as adverse, but still not good
* Auditor does not have enough information to form an opinion
* If auditor knows statements are inaccurate, cannot hide behind "disclaimer", must issue "adverse" |
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Term
Public Company Accounting Oversight Board (PCAOB)
Ch. 38; pg. 905-906
(Accountant's Liability) |
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Definition
*
Ensures investors receive accurate and complete financial information
* Board has the authority to regulate public accounting firms, establish everything from audit rules to ethics guidelines
* All accounting firms that audit public companies must register with the board, and the board must inspect them regularly
* Board has the authority to revoke an accounting firm's registration or prohibit it from auditing public companies
* No more than two of the five PCAOB board members may be certified public accountants
* Board has authority to revise lax accounting rules |
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Term
Reports to Audit Committee
Ch. 38; pg. 906
(Accountant's Liability) |
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Definition
*
Under SOX, auditors must report to the audit committee of the client's board of directors, not to senior management.
* Accountants must inform the audit committee of any
* Significant flaws they find in the company's internal controls
* Alternative options that the firm considered in preparing the financial statements
* Accounting disagreements with management |
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Term
Consulting Services
Ch. 38; pg. 906
(Accountant's Liability) |
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Definition
| An accounting firm cannot audit a company if one of the client's top officers has worked for the accounting firm within the prior year and was involved in the company's audit |
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Term
Term Limits on Audit Partners
Ch. 38; pg. 906
(Accountant's Liability) |
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Definition
*
After 5 years with a client, the lead audit partner must rotate off the account for at least five years.
* Other partners must rotate off an account every seven years for at least two years. |
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Term
Consolidation in the Accounting Profession
Ch. 38; pg. 906-907
(Accountant's Liability) |
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Definition
*
Ordered GAO (Government Accountability Office) to prepare a study on the factors that have caused the consolidation from the Big 8 to the Big 4, as well as potential impact and possible methods for increasing competition within the industry.
* GAO found that the accounting industry is so concentrated that the largest firms have substantial market power
* No conclusive evidence that consolidation had led to an increase in audit fees or a decline in quality or independence
* Smaller audit firms face substantial barriers to entry
* GAO warns that further consolidation would be harmful and additional study was warranted |
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