BUSI 53 Lichter-Heath Exam 3

A promise for a promise Bilateral contract A promise for an act (acceptance is the completed performance of the act) Unilateral contract Requires a special form for creation Formal contract Requires no special form for creation Informal contract Formed by words (oral, written, or combination) Express contract Formed by the conduct of the parties Implied in fact contract A fully performed contract Executed contract The contract has the necessary contractual elements: agreement (offer and acceptance), consideration, legal capacity of the parties, and legal purpose Valid contract One party has the option of avoiding or enforcing the contractual obligation Voidable contract A contract exists, but it cannot be enforced because of a legal defense Unenforceable contract No contract exists, or there is a contract without legal obligations Void contract Advertising that APPEARS to be based on factual evidence but in fact is not reasonable supported by some evidence. Deceptive advertising The advertisement info is true but incomplete, thus it leads consumers to a false conclusion Half truth Advertising a very low price for a particular item that will likely be unavailable to the consumer, who will then be encouraged to purchase a more expensive item. Bait-and-switch advertising List the four things the FTC says that must occur in order to have bait-and-switch advertising. 1. The seller refuses to show the advertised item2. Fails to have a reasonable quantity of the item in stock3. Fails to promise to deliver the advertised item within a reasonable time.4. Discourages employees from selling the item. What are the 3 guidlines provided by the FTC for advertising? 1. Must be truthful and not misleading.2. Any claims made in an ad must have evidence to back up their claims.3. Ads cannot be "unfair", which the FTC defines as "causing or likely to cause substantial consumer injury that consumers could not reasonable avoid and that is not outweighed by the benefit to consumers or competition". What does "clear and conspicuous disclosure of any qualifying or limiting information" mean? Online advertisers should place any disclosures as close as possible to the claim being qualified or include the disclosure within the claim itself. What does the FTC do when it concludes that a given advertisement is unfair or deceptive? Drafts a formal complaint and sends it to the alleged offender What are a company's two options once they receive the complaint? 1. Agree to settle the complaint without further proceedings.2. Have a hearing conducted by the FTC in which the company can present its defense. cease-and-desist order If the FTC succeeds in proving an advertisement is unfair or deceptive, they can require the company to stop the challenged advertising Counteradvertising When the FTC requires the guilty company to inform the public about the earlier misinformation Multiple product orders Enforced by the FTC. Requires a firm to cease and decist from false advertising in regard to all of its products, not just the product that was subject of the action. Prohibits telephone solicitation using an automatic telephone dialing system or prerecorded voice Telephone Consumer Protection Act (TCPA) Makes it illegal to transmit ads via fax without first obtaining the recipient's permission Telephone Consumer Protection Act How can a person recover from a violation of the Telephone Consumer Protection Act? 1. Can recover actual losses resulting from a violation2. Receive $500 in damages for each violation Whichever one is greater, they get. What three things does the Telemarketing Sales Rule of 1995 enforce? Requires the telemarketer to identify:1. The seller's name2. Describe the product being sold3. Disclose all material facts related to the sale (such as the cost of the product) It basically makes it illegal for telemarketers to misrepresent info or facts about their goods or services. What is the Do Not Call registry? A list of consumers who have placed their names on it asking for telemarketers to not call them. Breaching this is breaching the Telemarketing Sales Rule of 1995 What is the name of the act that enforces rules about labels on food? The Fair Packaging and Labeling Act What 5 things does the Fair Packaging and Labeling Act require food labels to identify? 1. The product2. The net quantity of the contents, and if the number of servings is stated, the size of the serving3. The manufacturer4. The packager/distributor5. Other descriptions on packages, savings, claims, components of nonfood products, and standards for the partial filling of packages The Nutrition Labeling and Education Act of 1990 Requires standard nutrition facts on food labels Who enforces the Nutrition Labeling and Education Act? The Department of Health and Human Services Regulation Z Governs credit provisions associated with sales contracts What is a cooling off period? Permits the buyers of goods sold door-to-door to cancel their contracts within a specified period of time. Usually 2-3 days after the sale The FTC Mail or Telephone Order Merchandise Rule of 1993 Provides specific protections for consumers who purchase goods over the phone, through the mail, orders transmitted using computers, fax machines, etc. Also requires merchants to ship orders within the time promised in their catalogues/advertisements, and to notify them when the orders CANNOT be shipped on time Postal Reorganization Act of 1970 When something in the mail gets sent to you on accident, you're not obligated to return it. It's the sender's fault that they sent it to the wrong address. Truth-in-Lending Act (TILA) Requires sellers and lenders to disclose credit terms or loan terms so that individuals can shop around for the best financing arrangements Only applies to people who end funds, sel on credit, or arrange for the extension of credit Regulation Z Applies to any transaction involving an installment sales contract that calls for payment in more than 4 installments What amended the Truth-In-Lending Act? The Equal Credit Opportunity Act (ECOA) What does the Equal Credit Opportunity Act enforce? Prohibits:1. denial of credit solely on the basis of race, religion, national origin, color, gender, marital status, or age2. Credit discrimination on the basis of whether an individual receives certain forms of income What...1. Limits the liability of a cardholder to $50 per card for unauthorized charges made before the creditor is notified that the card has been lost2. Prohibits a credit card company from billing a consumer for any unauthorized charges if the credit card was improperly used by the company. Credit card rules under the truth in lending act What provides protection for consumers who lease automobiles and other goods? The Consumer Leasing Act of 1988 The Consumer Leasing Act of 1988 only applies if... 1. The goods are priced at $25,000 or less2. The lease term exceeds 4 months Provides that consumer credit reporting agencies may issue credit reports to uses only for specified purposes The Fair Credit Reporting Act Whenever a consumer is denied credit of insurance on the basis of his/her credit report or is charged more than others ordinarily would be for credit/insurance, the consumer must be notified of the fact and of the name/address of the credit reporting agency that issued the credit report The Fair Credit Reporting Act Established a national fraud alert system so that consumers who suspect that they have been/may be victimized by identity theft can place an alert on their credit files Fair and Accurate Credit Transactions Act Requires major credit report agencies to provide consumers with free copies of their own credit reports every 12 months Fair and Accurate Credit Transactions Act Requires account numbers of credit card receipts to be truncated Fair and Accurate Credit Transactions act Protects consumers against adulterated and misbranded foods and drugs The Federal Food, Drug, and Cosmetic Act Requires the Food and Drug Administration to ensure that drugs are safe before they are marketed to the public The Federal Food, Drug, and Cosmetic Act Regulates medical devices, such as pacemakers and other health devices/equipment and to withdraw from the market and such device that is mislabeled The Federal Food, Drug, and Cosmetic Act A person having duty created by his/her undertaking to act primarily for another's benefit in matters connected with the undertaking Fiduciary (noun) A relationship involving trust and confidence Fiduciary relationship _____ law has a broader reach than ____ law does AGENCY law has a broader reach than EMPLOYMENT law does What is an authoritative summary of agency law and is often referred to by judges in their decisions and opinions The Restatement of Agency Employment laws (state and federal) only apply to what kind of relationship? Employer-employee relationship What is fiduciary duty? Utmost duty of loyalty and care Employee or independent contractor:How much control does the employer exercise over the details of the work? Employee: Considerable control over the details of the work/day-to-day activities of the worker Ind. contractor: Not that much control Employee or independent contractor:Is the worker engaged in an occupation or business distinct from that of the employer? Employee: NoIndep. contractor: Yes Employee or independent contractor:Is the work usually done under the employer's direction, or by a specialist without supervision? Employee: Under employer's directionIndep contractor: Specialist without supervision Employee or independent contractor:Does the employer supple the tools at the place of work? Employee: YesIndep contractor: No Employee or independent contractor:For how long is the person employed? Employee: Long timeIndep contractor: Until the deed is done Employee or independent contractor:What is the method of payment?1. By time period2. Completion of job Employee: By time periodIndep contractor: Completion of job What degree of skill is required of the worker? Indep. contractor: Great degree of skill How does the IRS decide if a worker is an employee or independent contractor? By how much control the employer has over the employee. WORK FOR HIRE:Who owns the copyright to a copyrighted work made by an employee?Who owns the copyright to a copyrighted work made by an independent contractor? 1. Employer2. Independent contractor, UNLESS the parties agree in writing that the employer can own the copyright. Agency relationships are ______. This means they can happen by voluntary consent and agreement between parties. CONSENSUAL To be a principal, you need _____. Contractual capacity To be an agent, you need ______. Nothing. What are the 4 ways agency relationships can be created? 1. Agreement of parties2. By ratification3. By estoppel4. By operations of law Most agency relationships are based on _____ or ____ agreements. expressed or implied What is agency by ratification? When someone who is NOT an agent wants to make a contract (question of intent). If the prinicipal says yes, it is an agency relationship by ratification. What is agency by estoppel? A principal tells Person B that Person A is his agent. Person B believes the principal and works accordingly. Then he finds out that the principal just made up Person A as his agent, so the principal is then "estopped to deny" (prevented from denying) the agency relationship. Person B then has to prove that an agency relationship actually existed. What is an agency by operation of the law? When agency relationships are formed without formal agreement. What are an agent's 5 duties to the principal? 1. Performance2. Notification3. Loyalty4. Obedience5. Accounting What are a principals 4 duties to the agent? 1. Compensation2. Reimbursement and indemnification3. Cooperation4. Safe working conditions What are an agent's 3 rights/remedies against the principal? 1. Tort and contract remedies2. Demand for an accounting3. No right to specific performance What are a principal's 3 rights/remedies against the agent? 1. Constructive trust2. Avoidance3. Indemnification An agent's authority can be either ____ or ____. Actual (expressed/implied)Apparent This requires that if the contract being executed is or must be in writing, then the agent's authority must also be in writing. Equal Dignity Rule What is an exception to the Equal Dignity Rule in relation to executive officers of a corporation? If an executive officer is merely conducting ordinary business work, they are NOT required to obtain written authority from the corporation. Power of Attorney is an _______ authority. EXPRESS authority An agent who holds power of attorney. An attorney in-fact A written document that is notarized by a notary public figure authorized to attest the authenticity of signatures. Power of Attorney A power of attorney can be _____ or _____. Special or general _____ Authority:When an agent is allowed to do what is reasonably necessary to carry out express authority and accomplish the objectives of the agency. Implied _____ Authority:Authority acquired after an agent occupies a certain position. Implied _____ Authority:What the principal makes clear to the agent. Actual _____ Authority:What the principal causes a third party to believe that the agent has the authority to act, even though the agent has no expressed or implied warranty. Apparent Authority ____ is when a principal accepts responsibility for an agent's unauthorized act. Ratification In order to have ratification, a principal must ____________. know all of the terms.If a principal ratifies a contract without knowing all of the facts, the principal can cancel the contract. What are the three different types of principals? Disclosed, partially disclosed, and undisclosed A principal whose identity is known by a third party at the time the contract is made by the agent. disclosed principal A principal whose identity is unknown by the third party, but the third party knows that the agent is/may be acting for a principal at the time the contract is made. Partially disclosed principal A principal whose identity is totally unknown by the third party, and the third party has no knowledge that the agent is acting in an agent capacity at the time the contract is made. Undisclosed principal. If a principal is ____, an agent has no contractual liability for the nonperformance of the principal or third party. Disclosed 3 things a principal can be responsible for under tortious conduct 1. Giving improper instructions2. Authorizing the use of improper materials/tools3. Establishing improper rules that result in the agent committing a tort Respondeat Superior Says that the principal/employer is responsible for any harm caused to a third party by an agent-employee. Vicarious Liability Responsibility without regard to the personal fault of the employer for torts/crimes committed by an employee in the scope of employment. What are the 7 factors that courts will consider in determining whether a particular act occurred within the course of employment? 1. Whether the employee's act was authorized by the employer.2. The time, place, and purpose of the act.3. Whether the act was one commonly performed by employees on behalf of their employers.4. The extent to which the employer's interest was advanced by the act.5. The extent to which the employee furnished the means or instrumentality (ie. a truck/machine) by which an injury was inflicted.6. Whether an employer had reason to know that the employee would perform the act in question and whether the employee had it done before.7. Whether the act involved a commission of a serious crime. Who is responsible?Servant "takes a detour" from his master's business Master is responsible Who is responsible?Servant was on a "frolic of his own" and not in any way "on his master's business" Servant Under Respondeat Superior, an employer can be held liable for an employee's intentional torts if... (3) 1. It is committed within the scope of employment2. The employer knows that the employee has a history of committing torts3. The employer allows the employee to engage in reckless actions that can injure others Who is responsible for the negligence of an independent contractor? The independent contractor, NOT the employer Why is the employer NOT responsible for physical harm done to a third party by the negligent act of an independent contractor? Because the employer doesn't have THE RIGHT TO CONTROL the details of an independent contractor's performance Who is liable for an agent's crimes? The agent himself An agency may be terminated by either _____ or ______. An act of the partiesOperation of law What are the 6 ways an agency relationship can be terminated by act of the parties? 1. Lapse of time2. Purpose achieved3. Occurrence of a specific event4. Mutual agreement5. At the option of one party6. Notice of termination An agent backing out of an agency agreement is _____ Renunciation of authority A principal backing out of an agency agreement is ____ Revocation of authority What are the 5 events that automatically terminate an agency by operation of law? 1. Death or insanity2. Impossibility3. Changed circumstances4. Bankruptcy5. War between principal's country and agent's country What is the name of the directory of lawyers that you could use to find a lawyer for your company? Martindale-Hubbell Law Directory What is it called when a client pays the attorney a fixed amount every month, and the attorney handles all necessary legal business that arises during the month? Attorney on retainer Liability of a GENERAL PARTNERSHIP NO limited liability In a partnership, if one partner dies, what happens to the business? The partnership dies. What is the money a partner gets when he leaves the partnership? Partnership interest What is it called when a new partner joins a partnership, or when one partner leaves the partnership? Dissolution What is it called when you want to sell your partnership, and you have to pay back for all the money each partner has brought to the company? Winding Up When you have a business with limited liability, your ____ assets are protected personal assets In what type of partnership is each partner personally liable for the debts and obligations of the partnership? General partnership What type of liability does a limited partnership have? Limited liability Who is liable of the partnership's obligations in a limited partnership? One general partner What is a franchise tax? Annual taxes imposed for the privilege of doing business in a state What type of business is required to pay a lot of taxes? Corporation Double taxation A corporation has to pay a corporate income tax on its profits, AND the shareholder-owners have to each pay an individual income tax on any distributions of the remaining profits that the receive on the corporation When profits are passed through to the partners or members and are taxed only on their individual returns, not at the business level Pass through taxes A corporation's continuity of life Usually lasts, even if it survives its owners, unless there is an unusual event that the corporate documents provide otherwise What happens when a shareholder of a corporation dies? Their ownership interest is just passed onto his/her heirs Partnership continuity of life Wil not terminate if a partner dies or withdraws, unless the partners have expressly stated otherwise What are the articles of incorporation A charter agreement for starting a corporation What is an operating agreement? A charter agreement for starting an LLC What are the owners of an LLC called? Members A person who seeks out promising enterprises and funds them in exchange for equity stakes Venture capitalist Can you enforce a contract is an officer of a corporation has apparent authority? yes What is UCC 2-205/a firm offer? If a person makes an offer, he/she is to honor it. They can't change it after they offered and put it in writing. Who is liable for overall management of a corporation? The board of directors What type of business deals with piercing the veil? Corporations What are the 4 things that can cause piercing the veil? 1. Ignoring corporate formalities: not filing state corporate law2. Commingling person and corporate assets as if it was yours3. Grossly undercapitalized - lot of risk, very little assets4. Use the corporation to defraud What does caveat emptor mean? Buyer beware What did the Securities Exchange Act of 1934 do? Created the SECProhibits short swing - purchase/sale of a stock within a 6 month period What is short swing?What is it from? Purchase/sale of a stock within a 6 month periodSEC Act of 1934, Sect. 16 Rule 10b-5 Prohibits any act or omission resulting in fraud or deceit in connection with the purchase or sale of any security. S corporation the corporation's income or losses are divided among and passed through to its shareholders.The shareholders must then report the income or loss on their own individual income tax returns A quasi contract is also known as implied-in-fact A quasi contract is a contract that should have been formed, even though in actuality it was not What are some causes for termination of a contract? Death, incompetency, illegality, mutual mistake, etc. undue influence is an equitable doctrine that involves one person taking advantage of a position of power over another person.