Business Law Study Guide Chapters 3 and 13-17
Business Law Study Guide Chapters 3 and 13-17 ACCT 324 - 002
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This 5 page Study Guide was uploaded by Kendall Davis on Tuesday September 20, 2016. The Study Guide belongs to ACCT 324 - 002 at University of South Carolina taught by Julius David Johnson (P) in Fall 2016. Since its upload, it has received 8 views. For similar materials see Survey of Commercial Law in Accounting at University of South Carolina.
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Date Created: 09/20/16
Exam 1 Review: Chapters 2 and 1327 Chapter 2 Business ethics: the application of ethics to the special problems and opportunities experienced by business people; it does not yield one “correct” decision WPH Framework: a process of ethical decision making o Who (Stakeholders) the many groups of people affected by a firm’s decisions, which include: owners or shareholders, employees, customers, management, community, future generations o Purpose (Values) positive abstractions that capture our sense of what is good and desireable o How general ethical guidelines Golden Rule Public disclosure test if the public knew about this decision, what would you decide? Universalization test what would the world be like if everyone copied this decision? Social Responsibility of a Business: expectations that the community imposes on firms doing business with its citizens Business ethics builds on business law; the law both affects and is affected by evolving ethical patterns Law is the minimally acceptable course of action The ultimate purpose of decision: to determine which values (freedom, efficiency, security, and justice) are being upheld by the decision Chapter 13: Introduction to Contracts Contract: a promise or set of promises for the breach of which the law gives a remedy or the performance of which the law in some way recognizes a duty; a set of legally enforceable promises Consideration: anything bargained for in an exchange Covenant not to compete: restrict what an employee may do after leaving a company; often delegate where, when, and with whom an employee can work Four Elements of a Contract: agreement, consideration, contractual capacity, and legal object Contractual capacity: the legal ability to enter into a binding agreement; at least the age of majority and do not suffer from any defect that renders them unable to understand the nature of the contract Defenses to the enforcement of a contract o Lack of genuine assent: when the offeror secures acceptance of the agreement through improper means such as fraud, duress, undue influence, or misrepresentation o Lack of proper form: typically, it lacks writing o Objective theory of contracts: the existence of a contract is based on the outward manifestations of the party Sources of Contract Law under Common Law o Must have four essential elements: acceptance, consideration, contractual capacity, and legal object o Must have genuine assent o Must have proper form All contracts for a sale of a good fall under jurisdiction of Article 2 of the UCC (Uniform Commercial Code); if it is for anything else, it falls under common law Bilateral contract = a promise + a promise Unilateral contract = a promise + a requested action o Ex. reward o Calls for action, not a promise Express Contracts: all clearly set forth in either writing or spoken word Implied contracts: arise from the conduct of the parties o Ex. if someone is unconscious and taken to the hospital there is no contract agreed upon, but the doctor still operates and expects to be paid Quasicontracts: (or impliedinlaw contracts) not usually a contract; in order to prevent one party from being unjustly enriched at the expense of another, courts impose contractual obligations on one of the parties as if that party had entered into a contract o Ex. a painting company starts painting the wrong house, the owner of the house notices but then refuses to pay the bill because he did not request the service. The court would then impose a quasicontract to benefit the painting company Valid contract: one that contains all 4 legal elements Unenforceable contract: may still be a valid contract, but a law prohibits the courts from enforcing a contract Void contract: not really a contract at all; either its object is illegal or it has a serious defect in the contract making it not a contract at all Voidable contract: if one or both parties have the right to withdrawal from the contract; if one party performs before the contract is voided then all consideration must be returned; contracts entered into as a result of fraud, duress, or undue influence may be voided Executed: once all of the terms of the contract have been fully performed Executory: a term used to describe a contract where only some of the terms have been carried out Formal contracts: has a special form and must be stated in a specific manner Informal contract: (simple contract) may still be complex but no formalities are required; less “official” Chapter 14: Agreement Elements of an offer: o Intent to be bound by the offeree’s acceptance o Definite and certain terms o Communication: offer must be communicated to offeree or their agent Preliminary negotiations are not an offer An advertisement is an offer to make an offer An auction (with reserve) is where a seller expresses intent to receive offers An auction without reserve is where a seller makes an offer; they make an offer to accept the highest bid and therefore must accept it Revocation by the offeror: effective only when the offeree receives it Option contract: the offeree gives the offeror a piece of consideration in exchange for them to hold the offer open; ex. a down payment Ways an offer can be terminated: o Revocation by the offeror o Rejection by the offeree o Counteroffer by the offeree o Death or incapacity of the offeror o Destruction or illegality of the subject matter o Lapse of time offer expires after a reasonable amount of time Silence is not acceptance MirrorImage rule: the terms of the acceptance must mirror the terms of the contract Mailbox rule: an acceptance is valid when the offeree places it in the mailbox; whereas a revocation is only effective when the offeree receives it Chapter 15: Consideration Consideration: required in every contract; /what a person gets in return for performing their legal obligations o Examples: a benefit to the promisee, a detriment to the promisor, a promise o For promise to be enforced by the courts, there must be consideration Promissory Estoppel: the exception to the rule requiring consideration o One party makes a promise and either knows or should know that the other party will reasonably rely on it o The other party does not reasonably rely on the promise o The only way to avoid injustice is to enforce the promise`q2AOWEYÙ B o Ex: someone moves across the country and leaves all of their belongings behind because of a job and when they get there, there isn’t a job Past consideration is no consideration at all Illusory promise, as in “ill look at the good and if I like it I will buy it”, is not an offer or consideration Preexisting Duty: performance of a duty you are obligated to do under the law, all other promises are void Liquidated debt: there is no dispute that money is owed or how much Unliquidated debt: the parties disagree over either money is owed or dispute the amount o The parties can resolve their differences in an accord and satisfaction: The debt is unliquidated The creditor agrees to accept, as full payment, less than it claims is owed The debtor pays the amount they have agreed upon Chapter 16: Capacity and Legality Minors may only enter into voidable contracts and have the right to void the contract at any time until they reach the age of majority or a reasonable amount of time thereafter Once they reach the age of majority, they have the right to ratify, or legally affirm, contracts made as a minor Insanity o Valid: if a persons mental deficiency only impairs their judgment of the desirability of the contract, but they still understand the terms of the contract o Voidable: if a persons mental deficiency impairs their ability to understand o Void: if the person is adjudicated insane Intoxication o Valid: if the intoxication only impairs a person’s judgment but not their understanding of the contractual obligations o Voidable: if the sober party is aware that the intoxicated party is so impaired that he is unable to understand his legal obligations o Void: if the intoxicated person has been adjudicated a habitual drunkard Usury: when a party gives a loan at an interest rate exceeding the legal maximum Gambling: agreements in which parties pay consideration for the chance, opportunity, to obtain an amount of money or property Unconscionable agreement: heavily onesided agreement o Procedural unconscionability: ex: hardtoread print on the back of an agreement, excessive use of legalese Adhesion contract: a takeitorleaveit agreement Substantive unconscionability: agreements that are overly harsh to one party Exculpatory clause: releases one of the contracting parties from all liability Severable contracts: (divisible contracts) contain multiple parts that can be performed separately and for each separate consideration is offered Indivisible contracts: the opposite; requires complete performance by both parties, even if it appears to have multiple parts Chapter 17: Legal Assent Legal Assent: Legal Assent: a promise the courts will require the parties to obey Without legal assent, the contract may be voidable Rescinded: cancelled Mistake of fact: an erroneous belief about the facts of the contract at the time the contract is concluded; unilateral or mutual Misrepresentation: an untruthful assertion by one of the parties about a material fact; regardless of whether or not the party knew they were being untruthful: negligent, innocent, or fraudulent o In negligent or fraudulent misrepresentation, the victim can keep the contract and sue for damages OR rescind o In innocent misrepresentation, the victim can only rescind Concealment: the active hiding of the truth Nondisclosure: the failure to provide pertinent information about the projected contract Undue influence: relationships in which one person takes advantage of their dominant position and unfairly persuades the other to make a decision Duress: one party is forced into the arrangement by the wrongful act of another, such as: threatening physical harm, threatening a lawsuit, threatening economic interests; the contract is then voidable Concepts to Know: Contractual capacity issues Undue influence, duress, coercion Statute of Frauds issues, requirements, and exceptions Types of contracts falling within the Statute of Frauds Donee, creditor, and incidental beneficiaries of contracts Specific performance of contracts Preexisting duty rule under contracts Requirements for formation and acceptance of contracts – bilateral v. unilateral Material terms of contracts issues The concepts of promissory estoppel and detrimental reliance The requirements for covenants not to compete Contract assignments and delegations issues and requirements Methods of contract discharges Unconscionable contracts and adhesion contracts issues Damages received for breach of contracts, mitigation of damages, and liquidated Damages issues UCC requirements for a written document Method of accepting an offer under UCC rules UCC concept of perfect tender rule and exceptions to the rule Simple delivery and Commoncarrier delivery contracts destination and shipment Good, void, and voidable title to goods issues Warranties of goods issues
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