exam 2 study guide
exam 2 study guide LGS200
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This 4 page Study Guide was uploaded by Mallyna Sessions on Sunday February 8, 2015. The Study Guide belongs to LGS200 at University of Alabama - Tuscaloosa taught by Tripp in Spring2014. Since its upload, it has received 223 views. For similar materials see Legal Studies in Business at University of Alabama - Tuscaloosa.
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Date Created: 02/08/15
I II III IV II Exam 2 Contracts an agreement enforceable by the law a All contracts are agreements But not all agreements are contracts b can enter into a contract with the terms that you decide Free will and free choice you and I have the right to be stupid sometimes we make bad choices c 4 elements must have all 4 i two people have agreed on something agreement part of the contract ii your ability to enter into a contract iii negotiating iv must be for a lawful purpose d contract has all of the 4 required elements and it will be enforced e a contract is not a contract at all results from a defect making it not a contract f in between valid and void there is voidable and unenforceable g a contract appears to be valid but has a defect that gives one party an option to cancel if you are underage this could cause voidable h an contract is an otherwise valid contract that will not be enforced because of a legal reason is better known as the agreement way to test this was an offer made and was an acceptance given when you have an offer you have an and an Offeror makes the offer The offeree receives the offer Each has a power under the law offeror controls the terms and conditions of his offer Offeree has the power to say yes no nothing or make a counter offer The Offer Has To Have 3 Parts a the offer must show serious intent by the offeror i The reasonable person looks down at what the offeror was saying and if he decides the offeror is serious then its serious b The offer has to be definite c have to communicate the offer from the offeror to the offeree face to face phone text 3rd party How An Offer Can Be Terminated a by the offeree b by the offeror pulls backcancels revokes offer can revoke offer anytime prior to acceptance can revoke even if you say the offeree has a certain amount of time to respond c it terminates the preceding offer parties switch places Offeror becomes offeree and offeree becomes offeror d the offer will die of old age if not accepted it will lapse or die after a reasonable period of time e the death of the offeror or the offeree the offer dies with the offeror or offeree Acceptance To An Offer the acceptance must acceptagree to all the terms and conditions oF the oFFer this is called the your acceptance must be unconditional and absolute yes means yes no maybe or thinking about it answers the acceptance must be communicated From the oFFeree to the oFFeror silence is not an acceptance III Situations That AFFect Mutual Assent the agreement a a threat oF any kind that takes away one party s Free will you have an oFFeree and an oFFeror but the oFFeree says yes under a threatpressure didn t say yes under Free will can be physicalgunpoint and non physicalblackmail the contract entered into under duress is void b one party to the contract takes advantage oF the other party in a relationship oF trust lt someone in the superior position is supposed to look out For someone in the inFerior position Trustee is the dominant party the inFerior party is the beneFiciary The contract is The victim has the option to cancel and walk away c one party misrepresents a material Fact deceives lies tricks Stating an opinion does not constitute Fraud Misrepresenting a Fact constitutes as Fraud End result void or voidable depending on your state Id your silence Fraud No iF you re not asked the direct question you re not required to volunteer Facts Silence without a question is not Fraud i can either be proven to be true or False ii What we believe but cant be proven to be true or False d Mistake 2 types i As to the subject matter both parties don t know contract is void ii As to the value oF the subject matter there is no eFFect on the contract It s valid and enForced IV do you have the legal power to enter into a binding contract a age every state has a minimum age that you must reach to order to have capacity into a contract Alabama age oF majority 19 A contract maid by a minor is voidable at the option oF the minor except For necessities Meaning the minor has the option to walk away and the other party has no say IF it is a necessity the minor must pay the value oF the goods or services not the contract price i Necessities Food shelter medical care clothing ii Minor can chooses to stay in the contract by continuing to pay or the minor chooses to cancel and walk away by stop making the payments Minor can aFFirm only aFter he turns 19 Minor can disaFFirm at any time while he is a minor and within a reasonable period oF time aFter he turns 19 2 3 months Upon disaFFirming the minor must return what he bought in whatever condition it is in iF he still has it iii iv Adult deals with minors at their own risk They cannot be forced to enter into a contract with a minor Usually get a cosigner v If the minor misrepresents his age he looses his right to disaffirm b one party to the contract is under the influence of some mind altering substance i Its not limited to alcohol legal or illegal ii Were not talking about criminal law iii you do not understand what you re doing when you enter into the contract iv Very hard to prove at that level Very few contracts are set aside because of intoxication c what if you have some mental defect 3Consideration the negotiating or bargaining process when two people negotiate they exchange something exchange a promise for another promise whatever you exchange it does not have to have any actual money value you can not promise to do something that you are already obligated to do have to promise something new 4Lawful Purpose Legality a contract must be for a legal or lawful purpose if it is illegal the law will not enforce the contract both parties or left as is 1 violation of a statutelaw violating a criminal civil law usury law sets maximum rate of interest that can be charged on a loan Sunday blue laws a contract made on sunday was illegal not like that now the sunday blue law for alcohol is still in placeRevenue License requires you to have a license in order to do business violation gt contract will be enforcedRegulatory License these statutes protect the public by setting minimum qualifications before you get a license violationgt contract will not be enforced 2 Violation of Public Policy means it is something good for society as a whole looking specifically at a contract that restricts competition the sale of a business the buyer requires the seller to agree not to compete against the buyer after the sale employment contract you promise not to work for the competition after you leave your current employer Next part of notes is in my spiral exculpatory clause it is a clause in a contract that releases one party from liability in advance Business Structures Sole Proprietorship Partnership Corporation Legal Entity a corporation is a non living inanimate object while a sole proprietor is a living thing deals with having legal rights 1 a legal entity can own property in it s name 2 can enter into a contract can lease where business is going to operate sole has person s name corporation has it s name 3 can be sued or sue in your name Sole Proprietorship 1 owner business it is the easiest of the three to create because you dont have to do anything to create it but have an idea you dont have to do any paperwork with the govt and the govt does not have to give you permission once you CREATE your proprietorship you will be regulated of the three it is the most common has the highest failure rating among the three primarily because of the lack of capitalstartup money disadvantage is under capitalization the name of your business can be any name you want as long as you dont use someone else s name the management is direct and hands on the owner is the legal entity theres no limit to how large a sole proprietorship can be only limit is one owner the sole proprietor has unlimited personal liability for the business debtsdisadvantage continuity you can buy or sell a sole proprietorship just like you sell other personal property like cars and houses the sole proprietorship as a legal entity dies with its owner Next part in notes taxation in partnership the partnership itself does not pay income tax rather each partner pays income tax on his share of the profits on his individual tax return the partnership files a partnership tax return but it doesnt actually pay any taxes in the return the partners are listed along with their share they use a K1 for the partners like a W2 for individual workers Dissolution the partnership ceases to exist as a legal entity 3 events that dissolves a partnership1the death of a partner 2the withdrawal of a partner 3expulsion of a partner following a dissolution 1 of 2 things will happen 1 the remaining partners will form a new partnership as a new legal entity and will continue to operate the businesscontinuation 2 the business goes out of business ceases to existliquidation all thats left is a pot of cash because all of the assets have been sold who gets the money 1creditors of the partnership2partners who have loaned money to the partnership are repaid 3capital contributions are repaid to the partners 4 any remaining money is distributed as profits would be only goes down the list until money runs out each partner has unlimited liability to pay the remaining debt if there is one when a partner withdrawals the partner remains personally reliable on debts up until the time they quit if you join a partnership you have no liability for debts created before you but you do have unlimited liability on the debts that occur from the time you join Limited Partnership a limited partner in a limited partnership has limited liability for partnership debts what is the limit of a limited partner the amount of your capital contribution how to create a limited partnership must file documents with your state government once its filed and accepted then its real can use any trade name you want as long as you dont use someone elses but you must include in that name limited partnership or LP or LTD the name tells the public that it is dealing with a limited liability structure the partners you must have at least one limited partner and at least one general partner no maximum on either capital contributions limitedcash and property generalcash property and expertise managing the general partner runs the limited partnership on a day to day basis the limited partner has no voice no vote and no input if the limited partner participates in management he loses his limited liability protection the general partner has unlimited personal liability for the partnership debts limited partnership is a separate legal entity from the partners continuitydissolution limited partners can die withdrawal be expelled or even sell their share without dissolving their limited partnership limited partners can freely come and go without dissolving the business if a general partner dies withdrawals or is expelled then it is dissolved you either reform or end and liquidate the business if you liquidate the cash is paid out like in a general partnership but limited partners get paid back before the general gets their capital repaid 3 parts of a corporation 1ownersstockholders 2board of directors 3officers if you own a corporation you own stock not assets of a corporation stock holders elect the directors the directors set general policy and they hire and fire the officers officers have day to day managerial control run the corporation if you own the majority of the stock then you indirectly control the corporation through electing the directors who hire the officers
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