Law 322 Final Exam (Exam 3) Study Guide
Law 322 Final Exam (Exam 3) Study Guide LAW 3220
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This 15 page Study Guide was uploaded by Stephanie Notetaker on Friday April 22, 2016. The Study Guide belongs to LAW 3220 at Clemson University taught by Edward R. Claggett in Fall 2015. Since its upload, it has received 80 views. For similar materials see Legal Environment of Business in Law and Legal Studies at Clemson University.
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Date Created: 04/22/16
Law 322 Exam 3 Study Guide Chapter 11 1. Goods are tangible person property, does not apply to real property 2. Merchants are involved in day to day business 3. Article two governs these types of contracts a. Designed to promote commerce, commercial sales of goods b. More liberal than common law of contracts i. A contract can be formed in any manner that shows agreement between parties ii. Requires the parties to act in good faith iii. If some terms are unclear, then article two and the courts can act to fill the gaps and fix the contract to make it binding iv. Designed to complete the contract v. Firm offer=will remain open for a fixed period of time 1. It MUST stay open for that period of time, you cannot withdrawal like in common law unless the subject matter of the contract is destroyed or becomes illegal vi. Statute of Frauds-‐what must be writing to be enforceable 1. Any contract subject to article two for the sale of goods for $500 or more must be in writing to be enforceable 2. Businesses put almost every contract in writing vii. Parole of Evidence Rule-‐oral evidence or testimony 1. You cannot introduce oral evidence or testimony if it contradicts the written words of the contract 2. More liberal than common law a. Can introduce oral evidence or testimony if there is a term missing in the contract (as a way to fill in the gap), if the contract is vague, or if you are trying to prove fraud was committed by the other party to get you to sign the contract viii. For price, Look at parties previous behavior, what kind of price have they used in the past? Look at other people in the same type of business and look at their terms. If the quantity is left blank: 1. Requirements contract a. Says to the buyer, how much do you require? Seller says whatever you require I will produce at the time they have entered into the contract 2. Output contract a. Looks at the seller and asks how much can they produce and the buyer says they will take the entire output ix. Cash on delivery-‐pay me when the goods show up 1. Don’t leave payment terms blank if you are the buyer x. Sellers primary obligation is to deliver goods in accordance with the contract-‐ “Get me 100 widgets in 60 days” If the seller does this, then the buyers primary obligation is to pay for those widgets in accordance with the contract xi. Buyers initial right is to inspect the goods they receive, if they are fully in accordance with the contract then the buyer just needs to pay, if some or all don’t accord with the contract the buyer has 3 rights: 1. Accept all the goods 2. Reject all of the goods 3. Compromise in the middle, accept some, reject some xii. Buyer has the obligation to immediately notify the seller about the problem, and the seller can fix the problem as long as the time in the contract hasn’t passed xiii. Warranties under Article two 1. Every contract has a warranty of good title, good clear title 2. There are three ways a seller can create an expressed warranty a. Any promise from the seller to the buyer b. Any description of the goods given to the buyer c. Any sample or model of the goods that the seller gives to the buyer 3. Implied warranty of merchantability a. Dealing with commerce, implied warranty that every unit will be useable in the business, exists in every contract subject to article two 4. Implied warranty of fitness for particular purpose 5. All warranties create strict liability for the seller a. Article two says seller can disclaim warranties if they use clear and conspicuous language in the contract and the buyer signs the contract i. Buyer and seller can agree to an amount of damages if any of the warranties are breached ii. Buyer can allow to disclaim one or two warranties xiv. Remedies and damages 1. Article two law is designed to put the non-‐breaching party back in the same economic position had the contract been performed (Monetary damages) 2. Nonbreaching party has the right to mitigate damages 3. Nonbreaching party must notify the other party of a canceled contract 4. If the buyer breaches, the seller has the right to get all the goods back xv. Does not provide for punitive damages to be awarded, only see if fraud is committed xvi. Applies to contracts for sale of goods to merchants in the United States 1. Article two doesn’t control foreign buyers or sellers a. Should make sure the contract is in writing b. Should provide how the parties will agree to resolve disputes (usually arbitration) c. If you don’t want to arbitrate, you should decide where you are going to litigate d. CISG-‐international convention (last resort if you didn’t put anything in your agreement) i. Applies to commercial sale of goods in international transactions ii. Tries to fill in the gaps, but doesn’t specifically provide for how you will try to resolve disputes iii. Still need to resolve jurisdiction and choice of law 4. Uniform Commercial Code designed to promote uniformity and consistency of law-‐Article two is underneath this Chapter 13 1. Negotiable Instruments-‐transferred for value a. Why do we have them? Substitute for cash, way to extend credit to debtors b. Requirements-‐ law is in article three of UCC i. Written agreement ii. Unconditional order or promise to pay (check, promissory note) iii. Must be signed by the maker or the drawer iv. Must be payable on demand or at a specified time (check) v. Must be made out to the order of or the bearer 1. Bearer instruments are risky to use if they get lost vi. Must be a certain sum of money c. Four major types i. Three party instruments (orders to pay) 1. Drawer-‐creates the instrument 2. Drawee-‐person who is going to make the payment like a bank or financial institution 3. Payee-‐who is going to get the money? a. Drafts i. Three party instrument, order to pay, can be payable by a bank, corporation, a charity, a trust, can be payable currently or in the future b. Checks i. A check is a draft ii. A check is draft that can only be paid by a bank or financial institution and has to payable on demand ii. Two party instruments (promises to pay) 1. “I am promising to pay you back” a. Notes i. Promissory note (most common) 1. I will pay you back with specified interest at a certain date ii. Collateral note 1. Assets of the borrow if they don’t pay, they can seize the assets 2. Assets of the debtor or the person borrowing=collateral b. Certificates of deposit i. Note that is issued by the bank to one of its depositors d. Merchants want to sell on credit so that they can expand their business, sell more product e. Must have a credit policy f. If you are going to sell goods on credit, it is good to get a security interest i. Have the person sign a financing agreement ii. File with secretary of state (perfecting your security interest) iii. Prefer to be a secured creditor g. Guarantor and surety i. Co-‐sign for someone else’s borrowing ii. Surety is primarily liable, creditor can come directly against the surety iii. Guarantor is only secondarily liable h. Security interest over inventory i. Can get one (floating lean) 1. Floating lean-‐security interest in inventory ii. If you have one and the borrower defaults, you have the right to go reclaim those goods as long as it doesn’t breach the peace, otherwise get the police i. Leans i. Attachment lean 1. Court order ii. Judgment lean 1. Court reaches a decision, they issue a judgment 2. May need to ask for a writ of execution, allows you seize assets and sell them 3. Second option is a garnishment order iii. Mechanics lean 1. Lean on real property 2. Someone does work on your home or condo and you don’t pay them for it 3. Acts like a mortgage lean 4. Can force the sale of your real property if not paid iv. Possessory lean 1. Most common on personal property 2. Laptop or car and don’t want to pay for it when you pick it up j. Bankruptcy i. Federal law ii. Everything is frozen the minute you file for bankruptcy, can’t sue you for non payment iii. If an individual wants to file, they first must take credit counseling to see if they really need to file, then if they need to file they still must take a debtor education course to try and keep them from coming back to bankruptcy court iv. Three types of filings: 1. Chapter 13-‐Need a little bit more time a. You give a plan saying you need a certain amount of time b. Normally will give you up to 5 years to get current on your debt c. More time to pay off creditors d. Hope is that they go on with their live at the end 2. Chapter 11 a. Businesses b. The business working with the trustee and judge submits a plan as to how much more time they need to get current c. Typically up to 3 years d. Business continues to operate, employees continue to get paid e. Hope is that the business goes on with the life and operates normally at the end 3. Chapter 7 a. Implies to both businesses and individuals b. File if you are hopelessly in debt c. If you are in chapter 13 or 11 you can decide to do this d. Business terminates, no more jobs, business assets are liquidated e. At the end, most of your debts that are not paid off are legally discharged f. People you owe the money to are out of luck v. Priority classes 1. Bankruptcy a. Secured creditors get paid first b. No funds then no money c. If there are assets, they can first to the secured creditors d. Worst place to be is a general unsecured creditor, no collateral vi. Debts that don’t get discharged 1. Alimony, child support, back taxes, student loans 2. If you borrow money just before you file for bankruptcy, those will not be discharged 3. Assets that you transfer within 90 days of filing for bankruptcy, those asset transfers are presumed to be void, bank reaches out to sell them and uses that money to paid creditors vii. If debtors and creditors can’t agree then you have no choice but to go into bankruptcy court viii. There are non bankruptcy alternatives that are voluntary Chapter 12 1. Sole Proprietorship a. Easiest, most flexible, no licensing or registration requirements b. Positives: quick and easy to start business, you are the business so any income or loss goes on your tax return c. Negatives: unlimited liability, personally responsible for debts, limited ability to raise capital, business terminates if you want to stop business i. Debt financing (borrowing money) ii. Equity financing (issues shares of stock) 2. Partnerships a. Two or more persons or businesses come together to work as co-‐ owners b. At least two partners, if one dies the partnership terminates c. Unless the partnership agreement says otherwise, they share in management and share profits and losses equally d. Partnership is not a separate legal entity, they are personally liable for debts, unlimited liability e. Partners get to participate in day to day business activities 3. Limited Partnership a. At least one general partner, and at least one or more limited partners b. General partner i. Personally liable for debts of partnership, unlimited liability ii. Day to day operating decisions c. Limited i. Passive investor, limited liability, personal assets are not at risk ii. Does not participate in day to day running of business iii. If you lose general partner, partnership terminates d. Corporations i. Created under state law ii. Limited liability, owners/shareholders have limited liability iii. Treated as a separate legal entity iv. Personal assets cannot be reached by creditors v. Piercing the corporate veil 1. If the court decides it was not run as a corporation 2. Says shareholders are personally liable for debts of the business vi. Board of directions 1. High level management authority 2. Hires managers to run day to day business vii. Shareholders 1. Owners of the corporation, put capital in and buy stock 2. Elect board of directors viii. Managers 1. Making day to day decisions with guidance from board of directors ix. Business judgment rule 1. Neither directors nor managers are liable from problems that arise from honest mistakes in judgment, can’t be sued 2. They would be if they are grossly negligent or engage in intentional negligent conduct x. A person can have more than one status within a corporation, a corporation can be a manager, a shareholder, a creditor and on the board of directors e. Professional corporations i. All 50 states allow them ii. Do give some limited liability to shareholders f. Limited liability company i. Limited liability, don’t want personal assets at risk, but I don’t want two levels of tax (like a corporation) ii. Gives limited liability and one level of tax, no corporate level tax, income is only taxed to its shareholders g. Subchapter S Corporation i. Largely limited to family businesses, can only have 100 or more shareholders, all have to be U.S citizens h. Joint Ventures i. Not a legal entity ii. Two or more people coming together to complete a project iii. When the project is finished the joint venture terminates i. Cooperatives i. Trying to combine members to get purchasing power like Sam’s Club and Costco j. Syndicates i. Group of people coming together to get financing for a specific project, just an agreement 4. Potential liability of owners a. Shareholder or limited partner 5. Transferability of ownership a. If you own stock in a publicly traded corporation is easiest to get out of b. All other entities have varying difficulties 6. Perpetual existence a. Corporation will continue forever unless: i. Shareholders voluntary agree to dissolve company (50% must agree) ii. Creditors put it into a chapter 7 bankruptcy b. No other entities can have perpetual existence 7. Capital a. Publicly traded company have greatest ability to raise capital b. Sole proprietorship has least ability to raise capital c. The more partners you have, the greater ability you will have 8. Taxes a. One negative with a corporation i. Some income can get taxed twice 9. Franchising a. Quicker way to get started, large parent company that can help build and train staff b. Basic agreement that controls everything is the franchise agreement, will tell you how much support you get, the fees you will have to pay, what events can terminate agreement Chapter 14 1. Agent a. Exists when a principal gives an agent authority to act on his or her behalf b. Used because they are somewhat less expensive then full time employees might be c. Agency relationship can be terminated at any time d. Principal gives agent authority to act e. Can be created by: i. Agreement-‐written or oral 1. Written-‐power of attorney (common way) ii. Ratification 1. Agent doesn’t have author from principal, agent takes an action and the principal ratify it iii. Estoppel 1. Third party believes the agent has authority iv. Operation of law 1. Emergency situations f. Actual Authority g. Implied authority i. If you hired someone as an agent we are going to assume they have all authority to run the business ii. Court inserts h. Apparent Authority i. Arises if they agent and principal are sitting at a bar and the agent negotiates a deal with a third party i. Duties of the parties to each other i. Act in good faith ii. Agent has a duty to financially account to the principal 1. Finances and business generated j. Disclosed/Undisclosed principal i. Disclosed-‐third parties know who you are ii. Undisclosed-‐third parties don’t know the agent iii. If disclosed doesn’t follow through with deal, third party can sue disclosed not sue undisclosed k. If you terminate an agency agreement, if you are the principal you should notify the third party, because the apparent authority exists 2. Employees a. Control, the more control you have over the persons day to day activity, the more likely they are an employee b. Work for one person c. Office or cubicle d. Duty to report to employer e. Training or supplies from employer f. Agent and employee acting within the scope of employment, can create tort liability i. Agent can create tort liability for the principal ii. Employee acting within the scope of his or her employment, vicariously liability, employer is vicariously liable for its employees 3. Independent contractors a. Operates independently b. Can work for more than one person c. Can schedule their own work d. Needs training or supplies, they supply it themselves e. No liability created for the person who hires them 4. Employee handbooks a. Good to have b. Employers need to be careful c. Can create a legal contract with employees d. If you don’t follow what is in the handbook, you can create a breach of contract e. Can put something in the book saying this is advisory 5. Almost all employees are considered employees at will a. Can be fired or quit at any point in time b. Exceptions: i. Don’t say you cant be fired 1. You may have been wrongfully discharged ii. Written contract 1. If you get fired before time period on contract 2. Court will have employer make the rest of your payments to you iii. Bonuses or retirement benefits 1. Court will make sure you get the payments iv. Refused to commit an illegal act v. Jury duty vi. Filed for bankruptcy vii. You will get damages but won’t get your job back 6. Negligent hiring a. Two burdens: i. Should do an appropriate background check ii. After you have hired them, you have an obligation to monitor their conduct, if you do something not within company policy you need to take action 1. If you ignore both of these obligations, more serious consequences to you Chapter 15 1. Three types of contracts courts will look at to see if with public policy a. Exculpatory agreements i. One party promises not to sue another incase they are injured by a tort or another event ii. Before we make you a job offer lets make this agreement iii. Court says there is no equal bargaining power here, this is against public policy, we won’t enforce this b. Non Compete Agreements i. If it is limited in a duration of time, we will enforce it ii. If it is too long of a period of time, we wont enforce it c. Anti-‐rating covenant i. Employee says if I leave the employer I wont reach back into the company and try to hire other employees 2. Substance Abuse a. Expensive to U.S businesses b. What cant businesses do to minimize this? i. If there is a union that represents the employees, employers can only drug test them if the collective bargaining agreements allows it 1. Collective bargaining agreement-‐union negotiates with employer every 3 years ii. If no union, the company should have a clear policy on when it will drug test 1. Pre-‐employment testing-‐during interviewing process 2. Annual testing-‐part of a physical 3. Random testing-‐if it is part of the company policy and it is a job where safety is an issue it is normally permitted 4. Drug testing after accidents-‐generally fine as long as public safety is a concern (truck driver) iii. Outside, independent lab if you are going to do drug testing, don’t do inside the company iv. Drug Free Workplace Act 1. Federal act 2. More than 25,000 dollars worth of business, you have certify that you have a drug free workplace v. Occupational Safety and Health Act 1. OSHA is concerned with employers making the workplace safe for their employers 2. Send out inspectors based on number of accidents reported at businesses 3. Inspectors looks for risky dangerous working conditions, hazardous chemicals contained properly 4. Will write of report, employer has a certain amount of time to fix the problem and they can be closed down if they don’t do this 3. Workers Compensation a. State Insurance plan, every state has it b. If an employee got injured on a job beforehand, only way was to file a tort cause of action c. States pay premiums based on their ratings, more claims=higher premiums d. If employee is hurt at work from a negligent based tort, you cannot sue the employer, you can only file a workers comp based claim i. Quicker, medical expenses reimbursed, getting back to job quickly 4. Family and Medical Leave Act a. Federal law b. Private employees with 50 or more employees and government employers c. It says that employers have to offer as a minimum up to 12 weeks of unpaid leave for an employee to either have a child, adopt a child, or to take care of a sick relative or themselves, and when they come back you have to give them the same or comparable job 5. General Regulations a. Immigration i. Employers have to obtain and retain documentation that every employee they hire is in the United States legally b. Federal minimum wage law i. Family of 4 can’t live on minimum wage, a number of states have raised it 1. Pros: fewer minimum wage jobs available 2. Cons: Other employers will want a raise who are above them c. WARN Act i. Only applies to employers with 100 or more full time employees and you want to take an action that is going to negatively impact 50 or more of those employees like layoffs or plant closures than you must give them at least 60 days advance notice d. ERISA i. Designed to protect employee’s retirement benefit plans e. Labor Laws i. National labor relations act is made up of 3 separate acts 1. Acts: a. Wagner b. Taft Hartley c. Landrom Griffin 2. Created the national labor relations board 3. Exclusive jurisdiction to hear unfair labor complaints from any business in interstate commerce 4. Deals with relations between labor unions and employers 5. Remedies: back pay, front pay, issue an injunction like stop engaging in it, asses fines and penalties, order the employer to reinstate the worker ii. Union process 1. If the union wants to get in and represent employer, they must have 30% employees sign the authorization cards, then an election is held 2. More than 50% of employees voted for them, they become the exclusive bargaining agent for 100% employees 3. If elected, then employees have to decide if they want o be a member a. If yes, they must pay dues b. If not, they must be agency and union fees c. Exception: if you work in a right to work law state i. Says: in our state, if you don’t want to be a member you cannot be forced to pay agency and union fees (SC is one) iii. Collective bargaining process 1. When it expires, both parties have an obligation to sit down and negotiate a new one in good faith a. Economic Pressure i. Employees can strike, hurts business ii. Primary boycott 1. Legal, when you strike against your employer iii. Secondary boycott 1. Not legal, strike against companies that are not your employer (customer) b. Employer can do a lock out and tell employees not to come back to work until there is a new agreement c. Employer can go out and hire replacement workers Chapter 16 1. Equal Pay Act a. Equal pay for equal work regardless of sex 2. Title 7 a. Cant discriminate in any employment decision because a person is in one of the following classes: i. Race ii. Color iii. Sex iv. Religion v. National origin b. Religious practices i. Employer must make a reasonable accommodation (minor expenditure) ii. If it is more than minor then they don’t have to do it c. Affirmative Action i. Effort to correct what is a discriminatory hiring practice ii. Two types: 1. Voluntary a. Employer institutes it and tells HR 2. Involuntary a. Found to have discriminated by the EEOC, they can mandate that you implement a plan 3. Pregnancy discrimination act a. Employer cant discriminated because of pregnancy 4. Sexual harassment a. All sexual harassment is prohibited 5. Age discrimination a. Only implies to 20 or more employees b. Can’t discriminate to any person over the age of 40 6. Bringing a charge of discrimination: a. Go to the EEOC office or fill it out and mail it in b. You have 180 days to file your complaint c. Most states allow up to 300 days in the state EEOC offices d. EEOC investigates the complaint e. They might dismiss it, they might try to settle it, otherwise issue a finding and give you a right to sue letter to bring to the courts 7. Constructive discharge a. Haven’t really been fired by the employer but if they make the working conditions so intolerable, you can still file for wrongful discharge b. Unbearable working conditions and you leave 8. If it appears you have a case of discrimination, burden shifts to employer: a. Business necessity i. Qualification that relates to the ability to do this job 1. Licensing ii. Law says this is not discriminating (licensed electrician) b. Use of professional developed ability test i. Tests developed by third parties and you can show that people who scored higher on this test then people who scored lower, you are allowed to make employment decisions based on these results c. Based on seniority or merit i. Promoting someone is allowed ii. Promoting someone based on merit, who produced better product that is allowed d. Bona Fide occupational qualification i. Discrimination might be ok if you can show that a person of a certain class is needed to be effective in that role 1. Modeling women’s clothes 2. 90% of customers are a certain religious background, you can hire someone of that background e. Voluntary early retirement plan i. Just the older people in your workplace ii. Can’t be mandatory, they have the choice so the law says it is ok 9. Disability discrimination a. Americans with disability acts i. Protected disabled ii. If you think you have been discriminated, process is the same, do it with the EEOC office iii. Must show: 1. You have a disability 2. The potential employer knew or should have known about your disability 3. Can perform that job with reasonable accommodation=minor expenditure 4. Employer refused to make the reasonable accommodation iv. What is a disability? 1. Physical or mental impairment that limited your ability to perform major life activities a. Major life activities: i. Walking, seeing, hearing, taking care of yourself 2. If you have that disability, you are protected, if you ever had that disability you are protected, even if you never had that disability but people treat you like you have it then you are protected v. Reasonable accommodation 1. Changing work schedule, changing work station 2. Minor amount of money vi. Remedies: 1. They will be ordered to make the reasonable accommodation and hire the individual 2. Fines and penalties and punitive damages could come into pay, and attorney fees, not always
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