Term
| What is the definition of a contract? |
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Definition
| A promise that the law will enforce |
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Term
| What are the various types of contracts? |
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Definition
*Bilateral Contract
*Unilateral Contract
*Express Contract
*Implied Contract
*Executory Contract
*Executed Contract
*Valid Contract |
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Term
|
Definition
| Both parties make a promise |
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Term
|
Definition
| One party makes a promise that the other party can accept only by doing something. |
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Term
|
Definition
| The two parties explicitly state all important terms of their agreement |
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Term
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Definition
| The words and conduct of the parties indicate that they intended on the agreement. |
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Term
|
Definition
| When one or more parties has not fulfilled its obligations |
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Term
|
Definition
| When all parties has fulfilled their obligations |
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Term
|
Definition
| Is one that satisfies all of the laws requirements |
|
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Term
| Identify the theories of recovery in Contract Law? |
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Definition
| Express Contract; Implied Contract; Promissory Estoppel; Quasi Contract |
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Term
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Definition
Even when there is no contract, a plaintiff may use promissory estoppel to enforce the defendants 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, the the only way to avoid injustice is to enforce the promise. |
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Term
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Definition
| There is no intention to contract, but the plaintiff gives some benefits to the defendant, who knows that the plaintiff expects compensation; it would be unjust not to award the plaintiff damages. |
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Term
| What conditions would constitute a discharge of contract. |
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Definition
Full performance & Agreement
*A party is discharged when she has no more duties under a contract.
*Most contracts are discharged by full performance.
*Sometimes the parties discharge a contract by agreement.
*At times a court may discharge a party who has not performed. |
|
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Term
| Describe the conditions for a discharge of a contractual obligation. |
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Definition
Full Performance: The parties do what they promise.
Agreement: Termination by mutual agreement. |
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Term
| Describe types of acceptable performance of a contract. |
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Definition
| Strict Performance; Substantial Performance |
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Term
|
Definition
| Requires one party to perform its duties perfectly |
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Term
|
Definition
| Generally sufficient to entitle the promisor the contract price, minus the cost of defects in the work. |
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Term
| What constitutes a breach of contract? |
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Definition
| An unjustifiable failure to perform all or some part of a contractual duty with out a valid excuse. |
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Term
| What is the definition of remedies? |
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Definition
| Methods the court use to compensate an injured party. |
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Term
| What are the various types of Remedies in Contracts? |
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Definition
| Expectation Interest; Reliance; Restitution Interest; Equitable Interest |
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Term
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Definition
| What the injured party reasonable though they would get from the contract. This places the injured party in the position they would have been in if both sides had fully performed their obligations. |
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Term
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Definition
| The injured party may be unable to demonstrate expectation damages, perhaps because it is unclear he would have profited. |
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Term
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Definition
| he injured party may be unable to show expectation interest or reliance but perhaps she has conferred a "benefit" to the other party. Here, the objective is to restore to the injured party the benefit she has provided. |
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Term
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Definition
| In some cases money damages will not suffice to help the injured party. Something is needed such as the transfer of property to the injured party (specific performance) or an order forcing once party to stop doing something (an Injunction). |
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Term
| What is the point at which a legal agreement is said to have occurred. |
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Definition
|
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Term
|
Definition
| Is one for which a legal remedy is offered in the event that the contract is not fulfilled. |
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Term
|
Definition
| When certain statutory requirements have not been met. |
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Term
|
Definition
| Which may be written or oral, are contracts in which the terms of the agreements made are explicitly stated-When a valid offer is accepted, an express contract has been created. |
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Term
|
Definition
| Usually referred to as "implied in fact", are contracts that are formed by the behavior of the parties in the absence of directly negotiating the specifics of the transaction. (Example would be filling your gas tank and obligating to pay for the gas). |
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Term
| If there is a breach of contract, what remedies are available? |
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Definition
Injunction: An order forcing someone to do something or refrain from doing something.
Expectation Damages/Restitution: Money required to put on party in the position she would have been had the other side performed the contract.
Specific Performance: In cases of rare property court ordered to complete the deal.
Reformation: Court will rewrite the contract |
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Term
| What are the breach of Contracts? |
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Definition
*Material Breach
*Minor Breach
*Anticipatory Breach
*Mutual Rescission
*Accord/Satisfaction |
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Term
|
Definition
| One that substantially harms the innocent party and for which it would be hard to compensate with out discharging the contract (particularly in contracts involving services) |
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Term
|
Definition
| By making it unmistakably clear that it will not honor that contract. |
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Term
|
Definition
| Begins to run at the time of injury and will limit the time within the injured party may file suit. |
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Term
| Remedies for breach of contracts. |
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Definition
*Compensatory Damages (Expectation Interest)
*Consequential Damages (Special Damages)
*Incidental Damages (Relatively Minor) |
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Term
|
Definition
| Regulate competition, standard oil company dissolved, all had to compete. Section 2- illegal to monopolize or attempt to monopolize. |
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Term
|
Definition
| Prohibits mergers that are anticompetitive, companies with substantial assets must notify the FTC before merger. |
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Term
| Key Provisions of Sherman Act |
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Definition
Section 1 of the Sherman act prohibits all agreements "in restraint of trade". In restraint of trade means anything that impedes trade, transport and related activities. monopolies, price fixing and other tactics used to inhibit competition are also examples.
*Section 2 of the Sherman act bans monopolization: the wrongful acquisition of a monopoly. |
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Term
| Key Provisions of the Clayton Act |
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Definition
Clayton act prohibits anticompetitive mergers, tying arrangements, and exclusive dealing agreements.
*The Robinson-Patman act bans price discrimination that reduces competition. |
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Term
| The Variety of Aggressive Business actions that are illegal as violations of antitrust regulations. |
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Definition
| Monopolization; Predatory Pricing; Tying Arrangements; Controlling Distributors and Retailers; Resale Price Maintenance |
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Term
|
Definition
| under the section 2 of the act, it is illegal to monopolize or attempt to monopolize a market. |
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Term
|
Definition
| occurs when a company lowers its prices below cost to drive competitors out of business. |
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Term
|
Definition
| is an agreement to sell a product on the condition that the buyer also purchases a different product. |
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Term
| Controlling Distributors and Retailers |
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Definition
| It is difficult to compete in a market if you are forclosed from the best distribution channels. |
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Term
| What is the role of the Federal Trade Commission |
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Definition
| Created to regulate business, although its original focus was on antitrust law, it now regulates a wide range of business activities that affect consumers, everything from advertising to consumer loans to warranties to debt collection practices. |
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Term
| What are the prohibited sales activities under the FTC act. |
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Definition
| DECEPTIVE ACTS OF PRACTICES; UNFAIR PRACTICES; BAIT AND SWITCH |
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Term
| DECEPTIVE ACTS OF PRACTICES |
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Definition
| Under the FTC act, an advertisement is deceptive it is contains and important misrepresentation or omission that is likely to mislead a reasonable consumer. |
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Term
|
Definition
| it causes a substantial consumer injury, the harm of the injury outweighs any countervailing benefit, the consumer could not reasonably avoid the injury. |
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Term
|
Definition
| FTC rules prohibit bait and switch advertisements a merchant may not advertise a product and then diparage it to consumers in an effort to sell a different item |
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Term
| How is consumer credit regulated |
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Definition
| Truth in lending act, Fair credit billing act. |
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Term
| What is the Magnusson-Moss Warranty Act. |
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Definition
| An act put into place which requires any supplier that offers a written warranty on a product that costs more than $15.00 to disclose the terms of the warranty in simple, understandable language before sales. |
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Term
| What government regulations apply to consumer product safety. |
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Definition
| The consumer product safety act of 1972 was put in place to regulate products and develop safety standards to prevent injury. |
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Term
| What is the role of the Environmental Protection Agency. |
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Definition
| To consolidate environmental regulation under one roof. When congress passes a new environmental law, the EPA issues regulations to implement it. |
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Term
| Describe the requirements of the Clean Air act? |
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Definition
| States that the EPA must establish national ambient air quality standards for both primary (affects health) and secondary (doesnt necessarily affect your health) pollution. States must produce implementation to meet quality air standards citizens can sue people for not following the clean air act and companies can share emission allowances. |
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Term
| Describe requirements of the Clean Water act. |
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Definition
| Prohibits any single producer from discharging pollution into water with out a permit from the EPA. Requires EPA to measure water quality broadly to determine if the permit system is working. Until clean water standards are met, every point source is held to the same standard, whether it is discharging into clean ocean that can handle more pollution or a stagnant lake that cannot. |
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Term
| Identify regulations regarding waste disposal that business must follow. |
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Definition
*Anyone who owns property with an underground storage tank must notify the EPA and comply with
regulations leak detectors.
*Anyone who creates, stores, transports, treats or disposes of a certain amount of hazardous waste must be tracked and have to be disposed of at a certain facility. Any company that generates more than 100 kg of hazardous waste must obtain an ID# for its waste. When it ships its waste disposal facility it must send a multi copy manifest that identifies the waste, the transporter and destination. The company must notify the EPA if it does not receive a receipt from the disposal site indicating that the waste has been received. |
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Term
| What are common types of antitrust violations? |
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Definition
*Horizontal Strategies: market division, price fixing, bid-rigging, refusal to deal.
*Vertical Cooperative Strategies: Reciprocal dealing, price discrimination. |
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Term
| What is the Sherman Antitrust Act of 1890? |
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Definition
| First national legislation in the world against monopoly; prohibited trusts, restraints of trade, and monopolization, but the law was vague and ineffective; tycoons found a way to get out. |
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Term
| Describe the Clayton Antitrust Act of 1914. |
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Definition
| Prohibits anti competitive mergers, tying arrangements, and exclusive dealing agreements. Passed partly because courts were not enforcing Sherman act strictly as intended. Purpose- clarify Sherman statute. As result, the 2 laws overlap significantly. |
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Term
| What requirements were specified by the Federal Trade Commission Act of 1914? |
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Definition
| Voluntary compliance, administrative hearings and appeals, penalties. |
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Term
| What requirements are set forth by the environmental Protection Agency? |
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Definition
| 1970: to consolidate environmental regulation. Can bring administrative enforcement action against violators. Agency judge hears actions. Parties can appeal to U.S. appeals supreme court violators liable for civil damages. Some statutes offer criminal penalties, prison. |
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Term
| Describe alternative dispute resolution techniques. |
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Definition
*Negotiation: in most cases the parties negotiate, whether personally or through lawyers. Fortunately, the great majority of disputes are resolved this way.
*Mediation: mediation is the fastest growing method of dispute resolution in the united states. Here, a neutral person, called a mediator, attempts to coax the two disputing parties toward of voluntary settlement.
*Arbitration: In this form of ADR, the parties agree to bring in a neutral third party, but with a major difference-the arbitrator has the power to impose an award. The arbitrator allows each side equal time to present its case and, after deliberation, issues a binding decision, generally without giving reasons. |
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Term
| List the advantages and disadvantages of the various alternative dispute resolution options. |
|
Definition
*Negotiation: party to party no one in between.
*Mediation: between parties with someone in between, usually they voluntarily enter mediation.
*Arbitration: parties agree to bring someone in, catch is they can choose who is right or wrong. |
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Term
| Dispute Resolutions - General |
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Definition
| Different methods to resolve disputes between individuals with out involving courts. |
|
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Term
|
Definition
| A faster, cheaper and less adversarial alternative to arbitration or litigation: means of dispute resolutions, may involve personal mediators. |
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Term
|
Definition
| The parties select a neutral 3rd person or persons, who render a binding decision after hearing arguments and reviewing evidence. The decision of the arbitrator is generally binding on the parties involved in the dispute. Usually takes less time and cheaper. |
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Term
|
Definition
*Trial Court
*Appellate Court
*Court of Appeals
*Federal Court |
|
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Term
| Describe the family and Medical Leave Act, COBRA |
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Definition
| This statute provides that former employees must be allowed to continue their health insurance for 18 months after leaving their job. |
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Term
| What are actions which would constitute wrongful discharge of an employee? |
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Definition
*Public Policy: Prohibits an employer from firing a worker fro a reason that violates basic social rights, duties, or responsibilities.
*Exercising a Legal Right: exercising a legal right if that right supports public policy.
*Performing a Legal Duty: For serving on a jury. |
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Term
| What are workplace safety requirements under OSHA? |
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Definition
*Employers must comply with specific health and safety standards.
*Employers are under a general obligation to keep their workplace "free from recognizing hazards that are causing or are likely to cause death or serious physical harm" to employees.
*Employers must keep records of all workplace injuries and accidents.
*OSHA (Occupational Safety & Health Act) may inspect workplace to ensure that they are safe. OSHA may assess files for violations and order employers to correct unsafe conditions. |
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Term
| What rights to employees have to privacy in the workplace? |
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Definition
*Off Duty Conduct: More than half the states have passes laws that protect the rights of employees to smoke cigarettes while off duty. Some of these statutes permit any lawful activity when off duty. Including drinking socially, having high cholesteral, being overweight, or engaging in dangerous hobbies.
*Alcohol & Drug Testing: Government employees can be tested for drug and alcohol use only if they show signs of use or if they are in a job where this type of abuse endangers the public. Most states permit private employers to administer alcohol and drug tests.
*Lie Detector Tests: Under the employee polygraph protection acts of 1988, employers may not require, or even suggest, that an employee or job candidate submit to lie detector test, except as part of an
"on-going investigation" into crimes that have occurred.
*Electric Monitoring of the Workplace: Technological advances in communications have raised a host of new privacy issues. |
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Term
| What actions by an employer constitute employment discrimination? |
|
Definition
*Equal pay act of 1963: An employee may not be paid at a lesser rate than employees of the opposite sex for equal work.
*Title VII: Title VII of the civil rights act of 1964 prohibits employers from discriminating on the basis of race, color, religion, sex, or national origin.
*Age Discrimination: the age discrimination in employment act (ADEA) of 1967 prohibits age discrimination against employees or job applicants who are at least 40 years old.
*Amendments with Disabilities Act: Passed in 1990, the Americans with disabilities act (ADA0 prohibits employers from discriminating on the basis of disability. |
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Term
| National Labor Relations Act(NLRA) |
|
Definition
| most important of all labor laws. To establish and maintenance of industrial peace, to preserve the flow of commerce ensures the right of workers to form unions. |
|
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Term
|
Definition
| guarantees employees the right to organize and join unions, bargain collectively through representatives of their own choosing, and engage in other concerted activities. |
|
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Term
|
Definition
Makes it an unfair labor practice (ULP) for an employer:
- To interfere with union organizing efforts.
-To dominate or interfere with any union
-To discriminate against a union member
-To refuse to bargain collectively with a union. |
|
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Term
|
Definition
Representation: the board decides whether a particular union is entitled to represent a group of employees.
- Unfair Labor Practices: the board adjudicates claims by either the employer or workers that the other side has committed ULP. |
|
|
Term
| Section 8b makes it an unfair labor practice for a union |
|
Definition
To interfere with employees who are exercising their labor rights under 7.
- To encourage an employer to discriminate against a particular employee because of a union dispute.
- To refuse to bargain collectively.
- To engage in an illegal strike or boycott, particularly secondary boycotts. |
|
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Term
| National Labor Relations act of 1935 |
|
Definition
Also know as wagnar act.
-Created NLR board to enforce labor laws
-Prohibits employers from penalizing workers who engage in union activity.
-Requires employers to bargain "I good faith" with unions. |
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Term
| Family and Medical Leave Act of 1993 |
|
Definition
| Guarantees both men and women up to 12 weeks of unpaid leave each year for child birth, adoption, or medical emergencies for themselves or a family member. Or an equivelent job with the same pay and benefits. |
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Term
| Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) |
|
Definition
| Statute provides that former employees be allowed to continue health insurance for 18 months after leaving there job. |
|
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Term
| Fair Labor Standards Act of 1938 |
|
Definition
the fair labor standards act (FLSA) regulates wages and limits child labor.
-Minimum Wage
-Overtime Pay: worker must be paid time and a half for any hours over 40 a week.
-Child Labor: the FLSA prohibits "oppressive child labor" which means that children under 14 may work only in agriculture and entertainment. Ages 14-15 are permitted to work limited hours after school in nonhazardous jobs. Ages 16-17 may work unlimited hours in nonhazardous jobs. |
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Term
| Describe what constitutes wrongful discharge under the law. |
|
Definition
Wrongful discharge prohibits an employer from firing a worker for a bad reason. They fall into three categories:
-Public Policy: prohibits employer from firing someone for a reason that violates basic social rights, duties, and responsibilities.
-Contract Law: written or oral promises made during the hiring process can be enforceable. Employee hand book creates a contract.
-Tort Law: giving a false or unfavorable reference about a former employee, or "intentional inflication of emotional distress: employers who codone cruel treatment of their employees face liability under tort of intentional inflication of emotional distress |
|
|
Term
| Explain the responsibilities of Occupational Safety and Health Administration (OSHA) |
|
Definition
| Holds employers to a workplace "free from recognized hazardous that are causing or likely to cause death or serious injury to employees. Inspects workplace to insure that they are safe. |
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|
Term
| What is an express warranty? |
|
Definition
| Is an affirmation of fact or promise made by the seller to the buyer or description that is the basis of the bargain statements of value or opinion are not express warranties. |
|
|
Term
| What is an implied warranty? |
|
Definition
| When a merchant sells a good he warranties the good is fit for ordinary purpose at the time of the sale. No warranty to apparent defects if opportunity to examine. |
|
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Term
|
Definition
| Is a statement that a particular warranty does not apply. |
|
|
Term
| What are the limitations on remedies for breach of warranty and product liability? |
|
Definition
| Limitation remedy clause, by which the parties may limit or exclude the normal remedies permitted under the code. |
|
|
Term
| What is negligence and how does that concept apply to a manufacturer? |
|
Definition
| How does negligence apply to a manufacturer: Negligent design, Negligent manufacturer, Failure to warn. |
|
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Term
|
Definition
| We might call negligence the "unintentional" tort because it concerns harm that arises by accident. A person, or perhaps an organization, does some act, neither intending nor expecting to hurt anyone, yet someone is harmed. |
|
|
Term
| What is strict liability? |
|
Definition
| Some activities are so naturally dangerous that the law places an especially high burden on anyone who engages in them. This higher burden is strict liability. |
|
|
Term
| What are the defenses available to an action for negligence, or an action for strict liability? |
|
Definition
| None: a defendant engaging in an ultra hazardous activity is virtually always liable for any harm that results. |
|
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Term
|
Definition
| Implied, Express, Implied warranty of fitness warranty, Warranty of merchantiability. |
|
|
Term
| What are the basic provisions of the Sarbanes-Oxley Act? |
|
Definition
Rights of shareholders
*Right to information
*Right to vote |
|
|
Term
| What are the rights of shareholders? |
|
Definition
As a shareholder you have neither the right nor the obligation to manage the day to day business of the enterprise.
*To Vote
*Must have at least one annual shareholders meeting
*Elect Directors
*Inspect the corporate books and records
*Dissenters rights
*Net distribution of assets upon dissolution. |
|
|
Term
| What recourse do shareholders have against corporations if shareholder rights are violated? |
|
Definition
*Derivative Lawsuit: Shareholders can sue but all proceeds go to corporation. In turn, shareholders stocks go up.
*Direct Lawsuit: Only if own shareholders rights are harmed, such as denying any rights of the shareholders. Shareholders keep damages.
*Class Action: More than one shareholder files suit at the same time, reduces cost of lawsuit since they all share it. |
|
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Term
| What are key provisions of the Securities Act of 1933? |
|
Definition
| Before offering or selling securities, the issuer must register the securities with the SEC, unless the securities qualify for an exemption. |
|
|
Term
| What are the disclosure requirements of the Securities Act of 1933? |
|
Definition
| Required a one time disclosure when the company sells stock to the public. In 1934 the amendment to this law required a quarterly and yearly report showing all financial statements, and disclosing all significant developments in the company such as bankruptcy, change of directors, etc. |
|
|
Term
| How did Sarbanes-Oxley change the disclosure requirements of the Securities Act of 1933? |
|
Definition
Added to the 1934 securities act by requiring CEO and CFO to certify that:
*The information in the quarterly and annual reports are true
*The company has effective internal controls
*The officers have informed the company's audit committee and it auditors of any concerns that they have about the internal control system. |
|
|
Term
|
Definition
| The system of governing an organization so the interests of corporate owners are protected. |
|
|
Term
| How would you define "business ethics"? |
|
Definition
| Being ethical and being honest, being like how a true person should be not a crook. The study of how people should act. |
|
|
Term
| What is involved in developing an ethical culture in an organization? |
|
Definition
| Managers setting the example and training |
|
|
Term
| What are three benefits to business of a clear ethical framework? |
|
Definition
*Investor Loyalty
*Customer Satisfaction
*Profits |
|
|
Term
| List the steps involved in implementing a stakeholder perspective in business ethics. |
|
Definition
| Which stakeholders are primary? Implement the appropriate corporate governance mechanisms. |
|
|
Term
Both Sides
What are the components of a comprehensive framework for ethical decision making in business? |
|
Definition
| Ethical issue intensity, individual factors, organizational factors, opportunity business ethics evaluations and intentions, ethical or unethical behavior. |
|
|
Term
| How can knowledge about ethical decision making be used to improve ethical leadership? |
|
Definition
| Sometimes in the heat of the moment your view about something might be skewed because of others peoples influence. But if you already have the knowledge about ethics then you shouldn't even have to think twice about making a decision. You already know right from wrong. |
|
|
Term
| What are leadership styles and habit that promote an ethical culture? |
|
Definition
| Coercive leader, authoritative leader, affiliative leader, democratic leader, pacesetting leader, coaching leader. |
|
|
Term
| How do moral philosophies and values influence group ethical decision making in business? |
|
Definition
| If you get caught in a situation where you are following all rules and codes, but you know of some kind of odd that could be catastrophic, what do you do, do you tell? |
|
|
Term
| What are the stages of cognitive moral development, and how do those relate to ethical development? |
|
Definition
1) Punishment and obedience
2) Individual purpose and exchange
3) Mutual interpersonal expectation relationships
4) Prior rights, social contract, or utility
5) Poor rights, social contract, or utility
6) Universal ethical principal |
|
|
Term
| How does white collar crime relate to moral philosophies, values, and corporate culture? |
|
Definition
| White collar crimes always seem to get justified in the act. If people will set values for themselves and then just stick to their values then they wouldn't get caught in these types of situations where they get in trouble. |
|
|
Term
|
Definition
| A court taking a passive role and requiring the parties to fulfill whatever obligations they agreed to, whether the deal was wise or foolish. |
|
|
Term
|
Definition
| A court will ignore certain provisions of a contract, or an entire agreement, if the judge believes that enforcing the deal would be unjust. |
|
|
Term
| Four Elements of a Contract |
|
Definition
● Agreement. One party must make a valid offer, and the other party must accept it.
● Consideration. There has to be bargaining that leads to an exchange between the
parties.
● Legality. The contract must be for a lawful purpose.
● Capacity. The parties must be adults of sound mind. |
|
|
Term
|
Definition
| Neither party may trick or force the other into the agreement. |
|
|
Term
|
Definition
| Some contracts must be in writing to be enforceable. |
|
|
Term
|
Definition
Some contracts affect people other than the parties
themselves. |
|
|
Term
| Performance and Discharge. |
|
Definition
If a party fully accomplishes what the contract requires,
his duties are discharged. |
|
|
Term
|
Definition
A court will award money or other relief to a party injured by a breach of
contract. |
|
|
Term
|
Definition
that is, deals in which neither party gave anything to the other
but both promised to do something in the future. |
|
|
Term
|
Definition
t is one that neither party can enforce, usually because the pur-
pose of the deal is illegal or because one of the parties had no legal authority to make a
contract |
|
|
Term
| Difference between Promissory Estoppel and Quasi-Contract Cases. |
|
Definition
In promissory estoppel cases, the defendant made a promise that the plaintiff relied
on.
In quasi-contract cases, the defendant did not make any promise, but did receive a
benefit from the plaintiff. |
|
|
Term
| A plaintiff may use Promissory Estoppel to enforce the defendant's promise if he can show? |
|
Definition
● 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. |
|
|
Term
|
Definition
| meaning that the plaintiff gets “as much as he deserved.” |
|
|
Term
Uniform Commercial
Code (UCC), created in 1952. |
|
Definition
| Sale of Goods only. Services not included. |
|
|
Term
|
Definition
| The Court imply's a contract where none existed. |
|
|
Term
|
Definition
| An event that must occur before a party becomes obligated under contract. |
|
|
Term
|
Definition
| Where a party expressly states a condition. Such as "Provided that". |
|
|
Term
|
Definition
| Parties say nothing about a condition but it is clear from their agreement that they have implied one. |
|
|
Term
|
Definition
| An Event must occur before a duty arrises. |
|
|
Term
|
Definition
| The condition must occur after the particular duty arises. |
|
|
Term
|
Definition
| Both parties have a duty to perform simultaneously. |
|
|
Term
| Time of the Essence Clause |
|
Definition
| will generally make contract dates strictly enforceable. |
|
|
Term
|
Definition
is one that sub-
stantially harms the innocent party and for which it would be hard to compensate with-
out discharging the contract. |
|
|
Term
|
Definition
by mak-
ing it unmistakably clear that it will not honor the contract. |
|
|
Term
|
Definition
begins to run at the time of injury and will limit the time within which the
injured party may file suit. |
|
|
Term
| True Impossibility Breach |
|
Definition
something has hap-
pened making it utterly impossible to do what the promisor said he would do. Which would be the following:
● Destruction of the Subject Matter
● Death of the Promisor in a Personal Services Contract.
* Illegality. |
|
|
Term
| Commercial impracticability |
|
Definition
means some event has occurred that neither
party anticipated and fulfilling the contract would now be extraordinarily difficult
and unfair to one party |
|
|
Term
|
Definition
some event has occurred that neither party
anticipated and the contract now has no value for one party |
|
|
Term
|
Definition
An order forcing someone to do something, or
refrain from doing something |
|
|
Term
|
Definition
the most common monetary awards for the expectation
interest. Courts also refer to these as “direct damages.” |
|
|
Term
|
Definition
consequential dam-
ages or, as they are also known, “special damages.” resulting from the unique circumstances of this injured party. |
|
|
Term
|
Definition
are the relatively minor costs that the injured party suffers when
responding to the breach. |
|
|
Term
|
Definition
If a buyer breaches a sale of goods contract, the
seller generally has at least two remedies. She may
resell the goods elsewhere. If she acts in good faith,
she will be awarded the difference between the
original contract price and the price she was
able to obtain in the open market. |
|
|
Term
|
Definition
First, the buyer can “cover” by purchasing substitute goods. To
cover means to make a good faith purchase of goods similar to those in the contract. The
buyer may then obtain the difference between the original contract price and her
cover price. Alternatively, if the buyer chooses not to cover, she is entitled to the differ-
ence between the original contract price and the market value of the goods. |
|
|
Term
|
Definition
designed to put the injured party in the position he would have been
in had the parties never entered into a contract. |
|
|
Term
|
Definition
a process in which a
court will partially “re-write” a contract. |
|
|
Term
|
Definition
A party injured by a breach of contract may not recover for damages that he
could have avoided with reasonable efforts. |
|
|
Term
|
Definition
that is, to
keep damages as low as he reasonably can |
|
|
Term
|
Definition
are a token sum, such as one dollar, given to a plaintiff who
demonstrates that the defendant breached the contract but cannot prove damages. |
|
|
Term
|
Definition
are designed not to compensate the injured party but to
punish the breaching party |
|
|
Term
| Promissory Estoppel Cases |
|
Definition
| The courts will generally award only reliance damages |
|
|
Term
| If the parties to a contract have a liquidated damage clause,this clause will always be enforced. |
|
Definition
|
|
Term
| If a contract has no time of performance, performance must generally occur in a reasonable time. |
|
Definition
|
|
Term
| A buyer entered into a contract with a seller to purchase an rare item. When the buyer tendered payment, the seller refused to perform. If requested the court will grant |
|
Definition
|
|
Term
| Minor deviations in the performance of a contract: |
|
Definition
| are permitted, buy may require a modification of the contract price. |
|
|
Term
| Accord and satisfaction Breach |
|
Definition
| Accord and satisfaction occur when both parties agree to accept a performance of the contract different from that originally agreed. |
|
|
Term
|
Definition
| Mutual rescission, which itself takes the form of a contract, ends the contract. The five elements of a binding contract—offer, acceptance, consideration, legal purpose, and capacity—must be evident. |
|
|
Term
|
Definition
| Minor breach occurs when the essential terms of the contract have been fulfilled but the other party is inconvenienced rather than suffering loss or damages. The nonbreaching party still has contractual obligations, but could suspend performance of the contract. |
|
|
Term
| Difference between Common Law and Article 2 of UCC? |
|
Definition
| Sale of Moveable goods and at least one party is a merchant it is Article 2. If for services or the sale of land and fixtures its Common law. |
|
|
Term
|
Definition
| If the performance of a contract, although not impossible, would be impracticable, the contract is unenforceable |
|
|
Term
| Elements to Consider when negotiating a contract |
|
Definition
| Fairness, Honesty, Respect for Confidentaility, Good Faith, and Fair dealing. |
|
|
Term
| Per Se Violation of Anti Trust Laws |
|
Definition
| Are Automatic and defendants are charged as both criminal and with civil penalities. |
|
|
Term
| Rule of Reason Violations of the Anti Trust laws |
|
Definition
| Are illegal only if they have an anti-competitive impact. |
|
|
Term
| Who enforces Anti-Trust laws |
|
Definition
| Both the Justice Department and the Federal Trade Commission (FTC). |
|
|
Term
| What 3 corporate strategies are potentially illegal? |
|
Definition
| Horizontal agreements, Vertical Agreements, and Mergers and Joint Ventures. |
|
|
Term
|
Definition
| An agreement between two of the same manufactors. Example Levi and Wrangler who both make jeans. |
|
|
Term
|
Definition
| Among Participants at different stages of production. Such as Levi who makes jeans and Macy's who sells them. |
|
|
Term
| Mergers and Joint Ventures |
|
Definition
| Where companies go beyond simple agreements to combine forces more permanently. |
|
|
Term
|
Definition
| Any effort by a group of competitors to divide its market is a per se violation of $1 of the Sherman Act. An example violation would be if Georgetown would only accept men and in return George washington would take only women. |
|
|
Term
|
Definition
| When competitors agree on prices at which they will buy or sell products or services. (An example would be when the NCAA tried to put a cap on assistant coachs so they could only make $12,000). |
|
|
Term
|
Definition
| Competitors eliminate price competition by agreeing on who will submit the lowest bid. |
|
|
Term
|
Definition
| When a refusal of a company to deal with another company harms competition. |
|
|
Term
| Reciprocal Dealing agreements |
|
Definition
| A Buyer refuses to purchase goods from a supplier unless the supplier also purchases items from the buyer. |
|
|
Term
|
Definition
| When charging different prices to different purchasers when the items are the same and it lessens competition. |
|
|
Term
| Robinson-Patman Act (RPA) |
|
Definition
| Passed in 1936 to prevent large chains from driving small, local stores out of business using price discrimination. |
|
|
Term
|
Definition
| Occurs when a company lowers its prices below cost to drive competitors out of business. |
|
|
Term
|
Definition
| An agreement to see a product on the condition that the buyer also purchases a different or tied product. |
|
|
Term
| Exclusive Dealing Contract |
|
Definition
| One in which a distributor or retailer agrees with a supplier not to carry the products of any other supplier. |
|
|
Term
| Resale Price Maintenance (RPM) |
|
Definition
| Means the minimum prices that retailers may charge. |
|
|
Term
|
Definition
When the FTC determines that a business has violated the law,
it first asks the offender to sign a voluntary compliance affidavit promising to stop
the prohibited activity. |
|
|
Term
|
Definition
. If the company refuses to stop voluntarily, the
FTC takes the case to an administrative law judge (ALJ) within the agency. The
violator may settle the case at this point by signing this order. |
|
|
Term
|
Definition
com-
manding the violator to stop the offending activity. |
|
|
Term
|
Definition
if it
contains an important misrepresentation or omission that
is likely to mislead a reasonable consumer |
|
|
Term
| FTC guidelines on Mail or Telephone Order Merchandise. |
|
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 company cannot ship within 30 days of the original date, it must send the cus-
tomer another notice. This time, however, the company must cancel the order unless
the customer returns the notice, indicating that he still wants the item. |
|
|
Term
|
Definition
| Requires lenders to disclose the terms of a loan in a understandable and complete manner. |
|
|
Term
|
Definition
| A credit transaction in which the lender makes a series of loans that the consumer can repay at once or in installments. |
|
|
Term
|
Definition
| There is only one loan, and the borrower knows the amount and the payment schedule in advance. |
|
|
Term
|
Definition
| Passed in 1975 provides additional protection for credit card holders. |
|
|
Term
| The Equal Credit Opportunity Act (ECOA) |
|
Definition
prohibits any creditor from discrim-
inating 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 |
|
|
Term
|
Definition
| Protection for leases. (Cars) |
|
|
Term
| Magnuson-Moss Warranty Act, |
|
Definition
The Magnuson-Moss Warranty Act does not require manufacturers or sellers to pro-
vide a warranty on their products. The Act does require any supplier that offers a
written warranty on a consumer product that costs more than $15 to disclose the
terms of the warranty in simple, understandable language before the sal |
|
|
Term
| The federal consumer protection laws are meant to protect consumers from the consequences of bad business decisions. |
|
Definition
|
|
Term
| When a borrower uses his home as security for a second mortgage, the borrower has the right to rescind for: |
|
Definition
|
|
Term
| A commercial for basketball shoes included a testimonial from a famous basketball player. If the player does not use the basketball shoes in the ad: |
|
Definition
|
|
Term
| The Consumer Leasing Act requires a lessor to disclose which of the following? |
|
Definition
| The consumer's right to terminate a lease early. |
|
|
Term
| If an Administrative Law Judge found someone violated the Resource and Conservation and Recovery Act can that company or person appeal the decision to the U.S. Court of Appeals and then the US Supreme Court? |
|
Definition
|
|
Term
| Federal law regulates point source and non-point source pollution. |
|
Definition
| False. Federal Law watches Point Source Pollution. The State is suppose to watch Non Point Sources. |
|
|
Term
| Under Superfund legislation, a hazardous waste site must be cleaned to safe levels under the circumstances. |
|
Definition
| False. Congress requires that the land be returned to pristine condition. However, the EPA's "Brownsfield" program bases the cleanup levels for some property on the potential risk to human health. |
|
|
Term
| If Company A dumped Hazardous waste on a site, sells it to Company B, who in turn sells it to Company C who discovers the waste who is responsible? |
|
Definition
| All tenants past and present would be |
|
|
Term
| If someone knowingly violates the Clean Air Act. The EPA can. |
|
Definition
seek criminal prosecution of the corporation.
seek criminal prosecution of the corporate officers.
seek criminal prosecution of employees involved in the violation. |
|
|
Term
|
Definition
| Refers to Lawsuits, the process of filing claims in court, and ultimately going to trial. |
|
|
Term
| Alternative dispute resolution |
|
Definition
is any other for-
mal or informal process used to settle disputes without resorting to a trial. It is increas-
ingly popular with corporations and individuals alike because it is generally cheaper
and faster than litigation. |
|
|
Term
|
Definition
| Type of Alternative Dispute Resolution. Begins as soon as a dispute arises. Between the two parties involved. |
|
|
Term
|
Definition
is the fastest growing method of dispute resolution in the United States.
Here, a neutral person, called a mediator, attempts to coax the two disputing parties
toward a voluntary settlement. |
|
|
Term
|
Definition
the parties agree to bring in a neutral third party, but with a
major difference: the arbitrator has the power to impose an award. |
|
|
Term
|
Definition
allows the two sides in a lawsuit to obtain,
before trial, documentary and other evidence from the opponent. |
|
|
Term
|
Definition
is a suit in which one injured party represents a large
group of people who have suffered similar harm. |
|
|
Term
|
Definition
Municipal, Probate, Domestic Relations, Land, Juvenille, Small Claims, General Criminal, Civil all lead to
Appeal Courts then to
State Supreme Court then to
Federal Supreme Court. |
|
|
Term
| The burden of proof required in a criminal case is proof by a preponderance of the evidence. |
|
Definition
| Incorrect. The burden in a criminal case is proof beyond a reasonable doubt. Proof by a preponderance of the evidence is the burden in a civil case. |
|
|
Term
| The process of jury selection is called "voir dire." |
|
Definition
|
|
Term
| An appellate court does not conduct a new trial but instead reviews the record of a case to determine if any errors were made during trial. |
|
Definition
|
|
Term
| A motion for summary judgment: |
|
Definition
| cannot be granted if any significant facts are in dispute. |
|
|
Term
| If you receive a summons and complaint, but you believe the case had no merit and didnt respond what would happen. |
|
Definition
| The court will issue a default judgment. |
|
|
Term
|
Definition
could be fired for a good reason, a bad reason, or no reason at
all. |
|
|
Term
| National Labor Relations Act (NLRA) |
|
Definition
| Passed in 1935 by congress that was distressed by Anti-Union violence. Protects those that work in Unions. |
|
|
Term
| Family and Medical Leave Act (FMLA) |
|
Definition
, which
guarantees both men and women up to 12 weeks of unpaid leave each year for
childbirth, adoption, or medical emergencies for themselves or a family member |
|
|
Term
|
Definition
This statute provides that former employees must be allowed to continue
their health insurance for 18 months after leaving their job. The catch is that employ-
ees must pay for it themselves, up to 102 percent of the cost. (The extra 2 percent cov-
ers administrative expenses.) |
|
|
Term
|
Definition
|
|
Term
|
Definition
Oral promises made during the hiring process can be enforce-
able, even if not approved by the company’s top executives. |
|
|
Term
|
Definition
| an employee handbook creates a contract. |
|
|
Term
| Covenant of Good Faith and Fair Dealing |
|
Definition
In some cases, courts will imply a covenant of good faith and fair dealing
in an at-will employment relationship. |
|
|
Term
|
Definition
Employers may be liable for defamation when they give false and
unfavorable references about a former employee. |
|
|
Term
| Intentional Infliction of Emotional Distress. |
|
Definition
. Employers who condone cruel treat-
ment of their workers face liability under the tort of intentional infliction of
emotional distress. |
|
|
Term
| Occupational Safety and Health Act (OSHA) |
|
Definition
| Passed in 1970 to ensure Safe working conditions. Employers must comply with health and Safety standards, must keep the workplace free from recognized hazards, must keep record of all accidents, and OSHA may inspect the workplace. |
|
|
Term
|
Definition
Some companies have banned off-duty smoking and have even
fired employees who show traces of nicotine in their blood. In response, more than half
the states have passed laws that protect the right of employees to smoke cigarettes
while off-duty. Some of these statutes permit any lawful activity when off-duty, includ-
ing drinking socially, having high cholesterol, being overweight, or engaging in dan-
gerous hobbies—bungee jumping or roller blading, for instance |
|
|
Term
|
Definition
Government employees can be tested for drug and alcohol use only if they show signs
of use or if they are in a job where this type of abuse endangers the public. Most states
permit private employers to administer alcohol and drug tests. According to one sur-
vey, more than 80 percent of large firms test employees for drugs. |
|
|
Term
|
Definition
Under the Employee Polygraph Protection Act of 1988, employers may not require, or
even suggest, that an employee or job candidate submit to a lie detector test, except as
part of an “on-going investigation” into crimes that have occurred. |
|
|
Term
The Electronic Communications
Privacy Act of 1 986 (ECPA) |
|
Definition
permits employers to monitor workers’ telephone
calls and e-mail messages if (1 ) the employee consents, (2) the monitoring
occurs in the ordinary course of business, or (3) in the case of e-mail, the
employer provides the e-mail system. |
|
|
Term
| Passed in 1938, the Fair Labor Standards Act (FLSA) |
|
Definition
regulates wages and limits
child labor. |
|
|
Term
|
Definition
The FLSA does not limit the number of hours a week that an employee can work, but it
does specify that workers must be paid time and a half for any hours over 40 in one week. |
|
|
Term
|
Definition
The FLSA prohibits “oppressive child labor,” which means that children under 14 may
work only in agriculture and entertainment. Fourteen- and 15-year-olds are permitted
to work limited hours after school in nonhazardous jobs. Sixteen- and 17-year-olds may
work unlimited hours in nonhazardous jobs. |
|
|
Term
|
Definition
Workers’ compensation statutes ensure that employees receive payment for
injuries incurred at work. |
|
|
Term
| The federal Social Security system began in 1935 |
|
Definition
Cur-
rently, the Social Security system pays benefits to workers who are retired, dis-
abled, or temporarily unemployed and to the spouses and children of disabled or
deceased workers. |
|
|
Term
In 1974, Congress passed the Employee Retirement Income Security Act
(ERISA) |
|
Definition
| to protect workers covered by private pension plans. |
|
|
Term
|
Definition
Under the Equal Pay Act, an employee may not be paid at a lesser rate than
employees of the opposite sex for equal work. |
|
|
Term
| Title VII of the Civil Rights Act of 1964 |
|
Definition
prohibits employers from discriminat-
ing on the basis of race, color, religion, sex, or national origin |
|
|
Term
|
Definition
Employers must make reasonable accommodation for a worker’s religious beliefs
unless the request would cause undue hardship for the business. |
|
|
Term
| Bona Fide Occupational Qualification. |
|
Definition
An employer is permitted to establish discrim-
inatory job requirements if they are essential to the position in question. |
|
|
Term
|
Definition
quid pro quo harassment
occurs if any aspect of a job is made contingent upon sexual activity. |
|
|
Term
| The Age Discrimination in Employment Act (ADEA) of 1967 |
|
Definition
prohibits age dis-
crimination against employees or job applicants who are at least 40 years old. |
|
|
Term
| Passed in 1990, the Americans with Disabilities Act (ADA) |
|
Definition
prohibits employers from
discriminating on the basis of disability. |
|
|
Term
| The Age Discrimination in Employment Act prohibits discrimination based on age against those over age 50. |
|
Definition
|
|
Term
| Norris-LaGuardia Act of 1932 |
|
Definition
which prohibited federal
court injunctions in nonviolent labor disputes. No longer could management obtain an
injunction merely by mentioning the word “strike.” |
|
|
Term
In 1935 Congress passed the Wagner Act, generally known as the National Labor
Relations Act (NLRA). |
|
Definition
This is the most important of all labor laws. A fundamental
aim of the NLRA is the establishment and maintenance of industrial peace, to preserve
the flow of commerce. The NLRA ensures the right of workers to form unions and
encourages management and unions to bargain collectively and productively. |
|
|
Term
National Labor
Relations Board (NLRB) |
|
Definition
to administer and inter-
pret the statute and to adjudicate labor cases. |
|
|
Term
the National Labor
Relations Board (NLRB)has two primary tasks. |
|
Definition
● Representation. The Board decides whether a par-
ticular union is entitled to represent a group of
employees.
● Unfair Labor Practices. The Board adjudicates
claims by either the employer or workers that the
other side has committed a ULP. |
|
|
Term
Taft-Hartley Act, also known as the Labor-Management Rela-
tions Act |
|
Definition
designed to curb union abuses. The statute amended §8 of the NLRA to
outlaw certain unfair labor practices by unions.
Section 8(b) makes it an unfair labor practice for a union:
● To interfere with employees who are exercising their labor rights under §7
● To encourage an employer to discriminate against a particular employee because of a
union dispute
● To refuse to bargain collectively, or
● To engage in an illegal strike or boycott, particularly secondary boycotts. |
|
|
Term
in 1959 Congress passed
the Landrum-Griffin Act, generally called the Labor-Management Reporting and
Disclosure Act (LMRDA) |
|
Definition
The LMRDA requires union leadership to make certain
financial disclosures and guarantees free speech and fair elections within a union. |
|
|
Term
|
Definition
All states have labor statutes. Some are comprehensive, while others focus on narrow
issues. For example, certain states prohibit particular kinds of picketing, while many
states outlaw strikes by public employees. A court enforces a state statute when no fed-
eral law applies. In general, when a federal law such as the NLRA does apply, it con-
trols the outcome. |
|
|
Term
|
Definition
Organized labor is shrinking in the United States. In the 1950s about 25 percent of the
workforce belonged to a union. Today, only about 13.5 percent of all workers are union
members. |
|
|
Term
|
Definition
Union organizers ask workers to sign authorization cards, which state that the particu-
lar worker requests the specified union to act as her sole bargaining representative. |
|
|
Term
|
Definition
| the exclusive representative for the bargaining unit. |
|
|
Term
|
Definition
The goal of bargaining is a contract, which is called a collective bargaining agree-
ment (CBA) |
|
|
Term
| Mandatory subjects of Bargaining for Unions include |
|
Definition
wages, hours, and other
terms and conditions of employment |
|
|
Term
|
Definition
means that a manufac-
turer, rather than producing all parts of a product and
then assembling them, contracts for other companies,
frequently overseas, to make some of the parts. |
|
|
Term
| No Strike/No Lockout Agreements |
|
Definition
. Most agreements include some form of no-strike clause, mean-
ing that the union promises not to strike during the term of the contract. In turn,
unions insist on a no-lockout clause, meaning that in the event of a labor dispute, man-
agement will not prevent union members from working. |
|
|
Term
|
Definition
| A closed shop means the employer must hire only union members. |
|
|
Term
|
Definition
In a union shop, membership in the union becomes com-
pulsory after the employee has been hired |
|
|
Term
|
Definition
In a union shop, membership in the union becomes com-
pulsory after the employee has been hired. Thus management retains an unfettered
right to hire whom it pleases |
|
|
Term
|
Definition
which restrict or even outlaw
union shop and agency shop agreements. |
|
|
Term
|
Definition
Virtually all collective bargaining agreements provide for their own enforcement, typi-
cally through grievance-arbitration. |
|
|
Term
| If employees go on Strike the company can hire replacement workers at any time. |
|
Definition
|
|
Term
|
Definition
| which refers to goods that have caused an injury |
|
|
Term
|
Definition
which prohibits defective products whether the defendant acted rea-
sonably or not. |
|
|
Term
| Any sample or model can create an express warranty. |
|
Definition
A sample can be a very effec-
tive way of demonstrating the quality of goods to a customer. However, a seller who
uses a sample is generally warranting that the merchandise sold will be just as good. |
|
|
Term
To prove an
express warranty, a buyer must |
|
Definition
demonstrate that the two parties included the statements or
acts in their bargain. |
|
|
Term
| Example of Express Warranty |
|
Definition
: Manufacturer sends
Retailer a brochure describing its
brand of children’s bicycle.The
brochure states that “these bikes
will last for a minimum of eight
years of normal use.” If the
handlebars snap off after six
months, Manufacturer has
breached its express warranty |
|
|
Term
Example of Implied Warranty of
Merchantability |
|
Definition
Example: Manufacturer sells
Retailer 300 “children’s bicycles.”
There is no brochure and no
promise made by Manufacturer
about the bikes’ quality.The UCC
implies a warranty that the bikes
will be fit for ordinary riding by
children. But the cycles might not
be strong enough to withstand
mountain racing, and there is no
warranty to that effect. |
|
|
Term
Example of Implied Warranty of Fitness
for a Particular Purpose |
|
Definition
Example: Retailer orders from
Manufacturer “300 mountain
bikes, for racing,” and
Manufacturer agrees.The UCC
implies a warranty that the bikes
will withstand the added stress
of mountain racing. |
|
|
Term
|
Definition
| A disclaimer is a statement that a particular warranty does not apply |
|
|
Term
| If a company says a product is the best in the world that is an express warranty. |
|
Definition
| False. They never said how long it would last. |
|
|
Term
| Jessie stole a Black Labrador puppy from Diana. Jessie sold the puppy to Shawn. Shawn did not know that the puppy was stolen. Shawn sold the puppy to Edna. In selling the puppy to Edna, Shawn breached the implied warranty of title. |
|
Definition
| True. The seller of goods warrants that her title is valid and that the goods are free of any security interest that the buyer knows nothing about. |
|
|
Term
|
Definition
, making liquor stores, bars, and restau-
rants liable for serving drinks to intoxicated customers who later cause harm |
|
|
Term
| Res ipsa loquitur shifts the burden of proof from the defendant to the plaintiff. |
|
Definition
| False. If a court applies res ipsa loquitur, the burden shifts from the plaintiff to the defendant because the facts imply that the defendant's negligence caused the accident. |
|
|
Term
| An individual will not be liable in strict liability if they can establish that they exercised reasonable care. |
|
Definition
| False. The "reasonable person" rule is irrelevant in strict liability cases. |
|
|
Term
| Which of the following elements is not required in a negligence action? |
|
Definition
|
|
Term
| Alma was shot and severely injured during an armed robbery as she was working as a clerk at MiniMart Convenience Store in the Astro Shopping Center. If Alma sues Astro, she probably would: |
|
Definition
| . recover if she could show other similar acts in the Center. |
|
|
Term
| Inside directors (Stock Market) |
|
Definition
who are also officers in the corporation, have typically con-
trolled their company’s board |
|
|
Term
| Outside directors (also called independent directors) |
|
Definition
do
not work for the company and have traditionally played a lesser role.1 They have been
described derisively as “ornaments on a corporate Christmas tree” or “parsley on the
fish.” Nominated by their friend, the chief executive (CEO), and elected by shareholders
without question, these directors could collect handsome paychecks while simply rubber stamping the CEO’s decisions. |
|
|
Term
|
Definition
| Dont have right to control the direction of company but you have the right to information and to know what the company is doing with their money. |
|
|
Term
|
Definition
Typically,
common shareholders have the right to vote and preferred shareholders do not, but
there are many exceptions to this rule. |
|
|
Term
|
Definition
Under SEC rules, any shareholder who has continuously owned for
one year at least 1 percent of the company or $2,000 of stock can require that
one proposal be placed in the company’s proxy statement to be voted on at the
shareholder meeting |
|
|
Term
| Merger Rules for Stockholders |
|
Definition
As a general rule, one corporation cannot merge with another unless a
majority of both sets of shareholders approve. |
|
|
Term
| Sale of Assets for Stockholders |
|
Definition
Generally, shareholders are not asked to approve the sale of corpo-
rate assets. After all, one could hardly ask shareholders of Philip Morris to approve
the sale of every pack of cigarettes at every convenience store in the country. But
shareholders must approve any sale that involves “all or substantially all” of the com-
pany’s assets. |
|
|
Term
| Dissolution Rules for Stockholders |
|
Definition
| A corporation cannot voluntarily dissolve without shareholder approval. |
|
|
Term
| Amendments to the Charter Stockholder Rules |
|
Definition
Directors propose amendments to the charter, but
these amendments are not valid unless approved by shareholders. |
|
|
Term
| Amendments to the Bylaws Stockholder rules |
|
Definition
. Both directors and shareholders have the right to
amend the bylaws. Shareholder activists have begun using bylaw amendments in cre-
ative ways because, unlike the typical shareholder proposal, an amendment is binding on the company. For example, CalPERS proposed a bylaw amendment at Advanced
Micro Devices, Inc., to separate the jobs of chairman and CEO. |
|
|
Term
|
Definition
If a private corporation (i.e., one whose stock is not publicly traded) decides to
undertake a fundamental change, the Model Act and many state laws require the
company to buy back the stock of any shareholders who object to this decision.
This process is referred to as dissenters’ rights, and the company must pay “fair
value” for the stock. |
|
|
Term
| Right to Protection from Other Shareholders |
|
Definition
Anyone who owns enough stock to control a corporation has a fiduciary duty to
minority shareholders (those with less than a controlling interest) |
|
|
Term
| Minority Shareholders Rights |
|
Definition
Minority shareholders have the right to overturn an ordinary business transac-
tion between the corporation and a controlling shareholder, unless the corpora-
tion can show that the transaction is fair to the minority shareholders. |
|
|
Term
| Excluding Minority Shareholders Rules |
|
Definition
Controlling shareholders must include minority shareholders in any favorable
arrangements that they make for their own stock. |
|
|
Term
| Expelling Shareholders Rules |
|
Definition
Many states prohibit a
company from expelling shareholders unless the firm pays a fair price for the
minority stock and the expulsion has a legitimate business purpose. |
|
|
Term
| Right to Monitor rules for Shareholders |
|
Definition
As owners of an enterprise, shareholders play a relatively passive role. Primarily, they
have the right to monitor, meaning the right to receive information and the right to
vote on proposals put to them by the board. Shareholders do not, by and large, have
the right to initiate corporate changes |
|
|
Term
Creation of Sarbanes-
Oxley Act (SOX) in 2002. |
|
Definition
It was in response to Enron and other corporate scandals. This statute applies to all publicly traded corporations in the
United States as well as to all foreign companies listed on a U.S. stock exchange. |
|
|
Term
Rules Under Sarbanes-
Oxley Act (SOX) |
|
Definition
● Rule 404 requires each company to adopt effective financial controls.
● CEOs and CFOs must personally certify their company’s financial statements. These
officers are subject to criminal penalties for violations.
● All members of a board’s audit committee must be independent.
● A company cannot make personal loans to its directors or officers.
● If a company has to restate its earnings, its CEO and CFO must reimburse the com-
pany for any bonus or profits they have received from selling company stock within a
year of the release of the flawed financials.
● Each company must disclose if it has an ethics code and, if it does not, why not.
● It is a felony to interfere with a federal investigation into fraud.
● Whistleblowing employees are protected.
● A new Public Accounting Oversight Board has been established to oversee the audit-
ing of public companies. |
|
|
Term
The NYSE and Nasdaq responded to the Enron-era scandals by establishing a new
role for independent directors at listed companies: |
|
Definition
● Independent directors must comprise a majority of the board.
● They must meet regularly on their own without inside directors.
● Only independent directors can serve on audit, compensation, or nominating
committees.
● Audit committees must have at least three directors who are financially literate. |
|
|
Term
|
Definition
A derivative lawsuit is brought by shareholders to remedy a wrong to the corpora-
tion. The suit is brought in the name of the corporation, and all proceeds of the
litigation go to the corporation. |
|
|
Term
|
Definition
Shareholders are permitted to sue the corporation directly only if their own
rights have been harmed. |
|
|
Term
|
Definition
If a group of shareholders all have the same claim, they can join together and
file suit as a class action, rather than suing separately. |
|
|
Term
| Eugene, a shareholder in Big Sky Enterprises, claimed that Big Sky was being mismanaged by the board of directors. Eugene is considering a lawsuit. Eugene's lawsuit would be a direct action |
|
Definition
| False. This would be a derivative lawsuit. Shareholders bring a lawsuit on behalf of the corporation to remedy a wrong to the corporation. All proceeds of the litigation go to the corporation. |
|
|
Term
| Lalita owned 1,000 shares of stock in Komack, Inc. Lalita wants to obtain corporate records including the corporation's minute book and accounting records. Under the Model Act, Lalita is entitled to this information if she |
|
Definition
| Has a Proper Purpose. Under the Model Act, all that is required is that the shareholder has a proper purpose. |
|
|
Term
| Alberto is the chief financial officer of Tejano Music Sales, Inc. He is also a member of Tejano's board of directors. Alberto is an inside director. |
|
Definition
| True. Because he is also an officer of the corporation, Alberto is an inside director. Typically inside directors control their company's board. |
|
|
Term
| EXtreme, Inc. solicited proxies from its shareholders. A proxy authorizes someone else to vote in the place of the shareholder. |
|
Definition
| True. A proxy is both the name of the person voting for the shareholder and the document the shareholder signs to appoint the substitute voter. |
|
|
Term
| Who has the right to manage the business of a corporation? |
|
Definition
| The Board of Directors. The directors have the right to manage the corporate business, but the shareholders have some means by which to protect their investment. |
|
|
Term
In 1933, Congress passed the Securities Act of
1933 (1933 Act) to regulate the issuance of new securities. The next year, it passed the
Securities Exchange Act of 1934 (1934 Act) to regulate companies with publicly traded
securities. The 1934 Act also established the Securities and Exchange Commission
(SEC), the regulatory agency that oversees the securities industry |
|
Definition
| This is was in Response to the Great Depression that occured in 1929 to prevent it from happening again. |
|
|
Term
| The Securities and Exchange Commission |
|
Definition
The SEC creates law in three different ways:
● Rules. The securities statutes are often little more than general guides. Through its
rules, the SEC fills in the crucial details.
● Releases. These are informal pronouncements from the SEC on current issues.
Releases often operate as two-way communication. When the SEC issues a release to
announce a proposed change in the rules, it also asks for comments on the proposal.
● No-Action Letters. Anyone who is in doubt about whether a particular transaction
complies with the securities laws can ask the SEC directly. The response is called a
no-action letter because it states that “the staff will recommend that the Commission
take no action” if the transaction is done in a specified manner.
In addition to creating laws, the SEC has the power to enforce them. It can bring
cease and desist orders against those who violate the securities laws, and it can also
levy fines or confiscate profits from illegal transactions |
|
|
Term
|
Definition
Both the 1933 and the 1934 Acts regulate securities. The official definition of a secu-
rity includes a note, stock, treasury stock, bond, debenture, evidence of indebtedness,
certificate of interest or participation in any profit-sharing agreement, and 17 other
equivalents. Courts have interpreted this definition to mean that a security is any
transaction in which the buyer (1) invests money in a common enterprise and (2)
expects to earn a profit predominantly from the efforts of others. |
|
|
Term
| SECURITIES ACT OF 1933 Requires |
|
Definition
that, before offering or selling securities, the issuer must
register the securities with the SEC, unless the securities qualify for an exemp-
tion. An issuer is the company that issues the stock. Registering securities with the
SEC in a public offering is a major undertaking, but the 1933 Act exempts some secu-
rities and also some particular types of securities transactions from the full-blown reg-
istration requirements of a public offering. |
|
|
Term
|
Definition
| prohibits fraud in any securities transaction. |
|
|
Term
|
Definition
gave the SEC new authority under both the 1933 and
the 1934 Acts to grant exemptions that are “in the public interest” and “consistent with
the protection of investors.” |
|
|
Term
|
Definition
The 1933 Act exempts some types of securities from registration because they (1) are
inherently low risk, (2) are regulated by other statutes, or (3) are not really investments.
The following securities are exempt from registration:
● Government securities, which include any security issued or guaranteed by
federal or state government
● Bank securities, which include any security issued or guaranteed by a bank
● Short-term notes, which are high-quality negotiable notes or drafts that are
due within nine months of issuance and are not sold to the general public
● Nonprofit issues, which include any security issued by a nonprofit religious,
educational, or charitable organization
● Insurance policies and annuity contracts, which are governed by insurance
regulations |
|
|
Term
|
Definition
Section 4(2) of the 1933 Act exempts from registration “transactions by an
issuer not involving any public offering.” |
|
|
Term
| Intrastate Offering Exemption |
|
Definition
Under SEC Rule 147, an issuer is not required to register securities that are
offered and sold only to residents of the state in which the issuer is incorporated
and does business. |
|
|
Term
| A company’s first public sale of securities is called |
|
Definition
| initial public offering or an IPO |
|
|
Term
|
Definition
The registration statement has two purposes: to notify the SEC that a sale of securi-
ties is pending and to disclose information to prospective purchasers. |
|
|
Term
| The SEC presumes accredited investors are sophisticated enough not to need a registration statement or prospectus to evaluate certain kinds of offerings. |
|
Definition
| True. Accredited investors are institutions or wealthy individuals. Under Regulation D, an issuer can sell to as many accredited investors as it wants. |
|
|
Term
| SEC Regulation D allows for the sale of certain types of private offerings without full registration. |
|
Definition
| True. There are three rules under Regulation D which allow for three different type of private offerings. |
|
|
Term
|
Definition
| are securities laws passed by the states. |
|
|
Term
|
Definition
they choose a transaction listed in the company’s books and check backwards to
make sure that there are original data to support it. |
|
|
Term
|
Definition
the accountant begins with an item of original data and traces it
forward to ensure that it has been properly recorded throughout the bookkeeping
process. |
|
|
Term
| In performing their duties, accountants must follow two sets of rules (AUDITS): |
|
Definition
(1) generally
accepted accounting principles (GAAP) and (2) generally accepted auditing standards
(GAAS). GAAP are the rules for preparing financial statements, and GAAS are the
rules for conducting audits. |
|
|
Term
After an audit is complete, the accountant issues an opinion that indicates how accu-
rately the financial statements reflect the company’s true financial condition. The audi-
tor has four choices: |
|
Definition
● Unqualified Opinion. Also known as a clean opinion, this is the most favorable
report an auditor can give. It indicates that the company’s financial statements fairly
present its financial condition in accordance with GAAP. A less than clean opinion is
a warning to potential investors and creditors that something may be wrong.
● Qualified Opinion. This opinion indicates that although the financial statements
are generally accurate, there is nonetheless an outstanding, unresolved issue. This
may be a violation of GAAP or perhaps some important issue whose ultimate impact
is uncertain. For example, the company may face potential liability from environ-
mental law violations, but the liability cannot yet be accurately estimated. Depending
upon the reason for the qualification, this type of opinion does not necessarily pre-
vent a company from borrowing money or selling stock.
● Adverse Opinion. This opinion is definitely bad news. In the auditor’s view, the
company’s financial statements do not accurately reflect its financial position. In
other words, the company is lying about its finances (or to put it more politely, is “materially misstating certain items on its financial statements”). A company with an
adverse opinion is generally unable to sell stock or borrow money.
● Disclaimer of Opinion. Although not as damning as an adverse opinion, a dis-
claimer is still not good news. It is issued when the auditor does not have enough
information to form an opinion. If the auditor knows that the statements are inaccu-
rate, she cannot hide behind a disclaimer of opinion; she must issue an adverse
opinion. |
|
|
Term
| The Public Company Accounting Oversight Board |
|
Definition
Congress established the Public Company Accounting Oversight Board (PCAOB)
to ensure that investors receive accurate and complete financial information. |
|
|
Term
| Reports to Audit Committee |
|
Definition
Traditionally, auditors reported to the senior management of a client. This reporting
relationship created obvious conflicts of interest—the auditors were reporting concerns
to the very people who could be causing, or at least benefiting from, these problems.
Under SOX, auditors must report to the audit committee of the client’s board of direc-
tors, not to senior management. The accountants must inform the audit committee of
any: (1) significant flaws they find in the company’s internal controls; (2) alternative
options that the firm considered in preparing the financial statements; and (3) account-
ing disagreements with management. |
|
|
Term
Contracts between accountants and their clients are either written or oral. A written
contract is often called |
|
Definition
an engagement letter. The contract has both express and
implied terms. The accountant expressly promises to perform a particular project by a
given date. The accountant also implies that she will work as carefully as an ordinarily
prudent accountant would under the circumstances |
|
|
Term
An accountant is liable for negligence to a client who can prove both of the fol-
lowing elements: |
|
Definition
● The accountant breached his duty to his client by failing to exercise the degree
of skill and competence that an ordinarily prudent accountant would under the
circumstances. For example, if the accountant fails to follow GAAP or GAAS, he has
almost certainly breached his duty. But the reverse is not true—compliance with
GAAP and GAAS does not necessarily protect an accountant from liability.
● The accountant’s violation of duty caused harm to the client. To recover dam-
ages, the client must be able to show that the accountant’s misdeeds injured her. |
|
|
Term
| An accountant is liable for fraud if |
|
Definition
(1) she makes a false
statement of fact, (2) she either knows it is not true or reck-
lessly disregards the truth, and (3) the client justifiably relies
on the statement.8 |
|
|
Term
| Accountants have a legal obligation to |
|
Definition
(1) keep all client
information confidential, and (2) use client information only for the benefit of
the client. |
|
|
Term
|
Definition
accountants who fail to exercise due care are liable to a third party only if
they know that the third party (1) will see their work product and (2) will rely on
the work product for a particular, known purpose. To be liable, the accountants
must know the identity of the third party. |
|
|
Term
| Public Company Accounting Oversight Board Action Items |
|
Definition
Prior to audit work done by an external auditor, confirm that the audit firm plans to register with the Public Oversight Board.
Once rules for registering are in place, confirm that the audit firm is registered and is in compliance and good standing with the Public Oversight Board rules. |
|
|
Term
| Auditor Independence Possible Action Items for Banks |
|
Definition
Request that the bank’s accounting department determine what payments have been made and/or agreements signed with accounting firms for services other than financial statement audits. Determine whether those functions need to be performed on an ongoing basis and, if so, prioritize such services to evaluate whether the services should be performed by a different firm.
Discuss with the audit committee any non-audit services that need to be continued by the external audit firm and request approval.
Establish procedures for a single member of the audit committee to approve of non-audit services that may need to be performed by external audit firm.
Inform the audit committee that the external audit partner and reviewing partner will rotate every 5 years. |
|
|
Term
| Corporate Governance Possible Action Items for Banks |
|
Definition
Amend the audit committee charter or description to acknowledge that the public accounting firm reports directly to the audit committee and that the audit committee is directly responsible for functions described.
Establish procedures so that the functions described are understood by the accounting firm, the issues are discussed on a timely basis, and on a time frame that is also efficient for the audit committee.
Request that the bank’s accounting department, along with its audit committee members, determine whether any consulting, advisory, or other compensatory fees are being paid to such members.
Develop audit committee procedures for reacting to complaints received from employees on accounting and auditing matters.
Change the audit committee charter to include the authority to engage independent counsel or other advisors.
Ensure that prompt payment procedures exist for amounts owed to audit firm and advisors.
Consider including at least one financial expert on the audit committee. Otherwise, be ready to disclose that a financial expert is not on the audit committee.
Consider developing internal policies for those who work with auditors.
Work with directors and executive officers to determine whether any personal loans are outstanding.
Determine whether those loans qualify as acceptable transactions under the law. If not, do not arrange for alternative financing, either directly or indirectly.
Certification must state that the officer has reviewed effectiveness of internal controls within 90 days prior to the report.
Educate the CEO, CFO and other financial officers about these provisions. |
|
|
Term
| Goals of the Sarbanes-Oxley Act |
|
Definition
The Sarbanes-Oxley Act seeks to prevent future scandals and restore investor confidence by:
creating a public company accounting oversight board
revising auditor independence rules
revising corporate governance standards
increasing criminal penalties for violations. |
|
|
Term
| he Sarbanes-Oxley Act addresses weaknesses in the controls and processes that surround corporate governance. The Act should create a new ethic of corporate responsibility by: |
|
Definition
adopting tough provisions to deter and punish corporate fraud and corruption
ensuring justice for wrongdoers
protecting the interests of employees and shareholders
promoting responsible leadership and effective board supervision. |
|
|
