TEST 2 !!
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This 17 page Study Guide was uploaded by Savannah Masucci on Monday March 21, 2016. The Study Guide belongs to ACCT 2700 at Auburn University taught by Robert Hollis Cochran in Spring 2016. Since its upload, it has received 196 views. For similar materials see Business Law in Accounting at Auburn University.
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Date Created: 03/21/16
Chapter 4 - Business and the Constitution Constitution - Historical Background ❖ Colonists : wanted different from the way Britain had governed them (No King in charge), weak national government, stronger state, ➢ Problem with weak National Government - problems with business, states impeded input into state and tariffs, caused businesses to become depressed, weren’t hiring, only way to make money was farming. Original Constitution - Articles of Confederation ❖ Was not working → States called a Constitutional convention to form a new, workable form of government Sole reason we have this government is because of business Constitution - established Federal form of Government ❖ First proposed Constitution had a serious flaw → did not protect individual rights and liberties ➢ Created Amendments - Bill of Rights ❖ Shares power between national and state government ❖ National government was limited (Checks and Balances) ➢ 10th Amendment - Regulatory Powers of State → reserves all powers not specifically given to the Federal Government to the States ■ Police Powers : Nothing to do with the police/enforcement of laws, regulates health, safety, or morals of citizens Regulations among the States 1. Privileges and Immunities Clause a. Have to treat citizens and noncitizens (out of state citizens) the same, no discrimination b. Same for businesses 2. Full Faith and Credit Clause a. Enforce the laws and court rulings of other states b. ISSUE: Same sex marriages 3. Separation of Powers a. Checks and Balances b. Legislative (Congress), Judicial (Courts), Executive (President/Agencies) 4. Commerce Clause - Most important to business a. Gives Federal Government the Exclusive Right to regulate Interstate Commerce i. Exclusive Right: Federal Government has exclusive right, if they want it ii. State can regulate unless “unduly burden” for Federal Government or if they want to only do it b. 1824 - Interstate vs Intrastate i. Happened during the Great Depression, plenty of food, but was not well distributed so people were starving, free market was not able to sort it out, Government came up with a quota system (some land goes to what the farmers want to plant and some had to go to food), Intrastate commerce regulated by state, but it affected interstate commerce so the Federal Government could get involved and regulate if they wanted. c. Expansion of Powers : 1964 - Supreme Court prohibited racial discrimination in interstate commerce i. 1964 - Heart of Atlanta vs US - Heart of Atlanta Hotel gave whites an unfair playing field over blacks, they were regulating commerce through racial discrimination when the Federal Government prohibited racial discrimination. ii. Authorizes the national government to regulate virtually any business enterprise, including the internet-based iii. Limits : 1995 - US vs Lopez - Over Gun control, however, state is the one that has the right to protect their citizens, not the Federal Government iv. States may regulate Interstate Commerce only if: The Federal Government has not decided to Exclusively Regulate a particular area of commerce 5. Supremacy Clause a. Constitution laws are the Supreme Law of the Land (overrule state or local laws) b. Only a valid federal statute or regulation will take precedent over a conflicting state or local statute Bill of Rights ❖ 10 Amendments to the US Constitution ❖ Protects personal liberties from an overreaching government (natural persons) ➢ Most apply to business ethics ➢ 4 pertain to business: ■ 1st Amendment - Freedom of Religion (Mostly outside of business, but involved in sales//regulations, changed from 1930-now), Abortion, Freedom of Speech (business’ freedom of speech can be restricted, cigarette advertisements are not allowed, sign restrictions ■ 2nd Amendment - Right to keep and bear arms, there are restrictions ■ 4th Amendment - Freedom from Unreasonable searches (Business exception - if a business is conducting dangerous activity, fireworks company and nuclear power plant, or highly regulated activities - liquor stores, gun stores ■ 5th Amendment - Right against Self-incrimination (Where something that one person says proves that they are guilty) (Business has no right to self-incrimination, if questioned, people must answer truthfully even if it will hurt the business) and Due Process Clause No rights are absolute Limits on Federal and State Actions Equal Protection: 3 levels of scrutiny ❖ Strict Scrutiny: highest level, race classification, ❖ Intermediate Scrutiny: any classification based on age or gender ❖ “Rational Basis” Test: everything else Chapter 6 : Torts Tort (French): A wrong ❖ A civil wrong for which the law provides a remedy ➢ Between people (where a victim may get compensation) (make the victim whole) ➢ Just because you have a remedy doesn’t mean you are going to get anything ❖ Business: involves risk, both legal and financial, from the commission of torts ➢ Greatest tort risk: Vicarious liability - makes a business liable for the torts of their employees “in scope of employee” (at work) ❖ Compensation: make the victim hole ➢ How to compensate for a lost arm/retirement fund/child ■ Mostly use money Vicarious Liability means a business will only be responsible for the intentional torts of its employees - False Types of Damages (Attempt to make the victim whole again) ❖ Compensatory ➢ Actual or out of pocket ■ Example : Car crash - bill for car and medical bills = $100,000 ❖ Consequential ➢ Special ■ In addition to actual damages - time taken off of work to recover (suffered a loss of wage), pain and suffering ❖ General ➢ Not direct monetary loss, not money damages, basically everything else ❖ Punitive ➢ Punish the wrongdoer Tort law is designed to protect people from injury - False (Not protect - compensate) Intentional Torts ❖ Tortfeasor - person committing the tort (Judge rules this) ➢ Intended the consequences of their action ➢ Knew with substantial certainty that certain consequences would result ■ Example: Bank robbery - intentionally killed bank security guy, but if he misses the security guy and hits an innocent citizen - that is unintentional, or Transferred Intent ● (Intent of tortfeasor is transferred when he intends to harm one person, but unintentionally harms another person. ❖ Assault and Battery ➢ Assault - Raising the feat of eminent fear/harm to a person, no contact necessay ➢ Battery - unlawful/unwelcomed contact ❖ False Imprisonment ➢ Confinement/Restraint of another person’s activities without their jurisdiction ■ Merchant Protection Statute - No False Imprisonment if you have probable cause, hold them for a reasonable time, and investigation of the matter is conducted in a reasonable fashion ❖ Intentional Infliction of Emotional Distress ➢ Extreme or outrageous severe emotional distress ■ Courts normally require some physical symptoms or illness ❖ Defamation ➢ Wrongfully hurting someone’s reputation - Fact vs Opinion ■ Slander - oral defamation (Short shelf life) ■ Libel - print/media/internet ■ Public figures ● If Plaintiff is a public figure, Plaintiff must show the statement was made with “actual malice” (wanted to destroy their reputation) ❖ Invasion of Privacy ➢ Intrusion of Individual’s Affairs or Seclusion ➢ Public Disclosure of Private Facts ❖ Fraudulent Misrepresentation (Intent to deceive) ➢ Misrepresentation of material fact (Material - something that is important) ➢ Intent to induce another to rely ➢ Justifiable reliance by innocent party ■ Opinion doesn't matter - Fact based ■ Puffery - an opinion (sales talk) Since virtually all injuries cause emotional hurt and distress it is almost automatic that torts result in additional damages for the intentional infliction of emotional distress - False Slander is easier to recover damages - False ❖ Trademark - names of titles or phrases ➢ War Eagle ❖ Copyright - book or manual ➢ Types ■ Collective mark - IFC or Panhellenic : all of them belong under that name ■ Certification mark - Florida orange juice: certifying quality of an item ■ Service mark - delta saying they will fly you Wrongful Interference with a Contractual Relationship ❖ Occurs when - Defendant knows about contract between A and B ❖ Intentionally induces A and B to breach the contract ❖ Defendant benefits from breach Conversion - the intent to disrupt normal activities ❖ Theft ❖ Wrongful possession or failure to return ❖ Converts someone else's property to your own use Negligence ❖ No intent to harm anyone or their property ❖ Tortfeasor’s conduct creates a foreseeable risk of injury ➢ Ex. Car accident between BMW and Mercedes Benz ❖ Elements 1. Duty - Defendant owed Plaintiff a duty of care not to injure or harm 2. Breach - Defendant breached or violated that duty 3. Causation - Defendant’s breach caused the injury, the actual action 4. Damages - Plaintiff suffered by injury, result of action ❖ Duty of Care and Breach ➢ Duty not to harm anyone, duty to protect Plaintiff from foreseeable risks that Defendant knew about ■ Landlords owe duty of reasonable care to invitees for common areas ● No duty of reasonable care to trespassers (However, cannot injure them) ● Ex. Old man with shotgun ■ Professionals - higher duty of care (Doctor, accountant, nurse) ● Breach of duty - called professional malpractice ❖ Causation ➢ Tortfeasor breach duty of care, but the act must have caused the Plaintiff’s injury ■ Proximate case - Foreseeable cause - able to see liability ■ Case 6.2 Palsgraf vs Long Island Railroad (1928) ● Railroad, All aboard, move slowly, people running to get on and jump on real fast, package fell and created an explosion, injured old lady and she sewed Railroad company ◆ Injury was not foreseeable, Railroad not liable, Did not sew guy because Railroad is the one with the money ■ Frat Party problem ● Social at the house, pledge at the top of the stairway and leaning on the railing, friend and date enter door, brother comes up behind pledge, brother knocks pledges eye out, Girl sees eye, passes out, and hits her head, needed 19 stitches, didn’t sew, no proximate cause, not foreseeable ❖ Injury Requirement and Damages ➢ Plaintiff must show legally recognizable injury ➢ May recover Compensatory, Consequential, or General Damages - make the person whole again ➢ Punitive Damages - only considered in cases of extreme misconduct here Special Negligence Doctrines Alter the normal requirements of negligence in some way: ❖ Dramshop Act - (bar or tavern) if overserved, server and bar are liable for person who is over served ❖ Res Ipsa Loquitur - No proof, no other explanation - negligence, warehouse in England ❖ Negligence Per Se - violation of a statute that caused a negligent action to occur, Clear violation, law negligence, college street violation, ■ Ex. texting and driving, runs a red light and gets in an accident ➢ Good Samaritan Statutes: Doctor comes up on accident victim, doctor may be wary to help because of fear of negligence, this law allows health professionals to not be held liable for regular negligence, something grossly negligent will be liable Social Host Liability Defenses to Negligence ❖ Assumption to Risk: every activity has risk, they knew it was risky, did it anyway ➢ If person can get insurance for the activity, you can’t use this, if no insurance, defendant needs to prove Plaintiff know there was risk ■ Ex. Drunk riding bull w/ contract ❖ Superseding Intervening Cause : Someone is negligent and someone is harmed, but then they are harmed again, act that breaks the connection/causal link between Defendant and Plaintiff’s injury - relieving Defendants liability ➢ Accident from someone else running a red light, victim has a broken leg, ambulance is then hit by another car and victim dies, sew guy who runs the red light, but must sew guy who caused the death to get highest recovery ❖ Comparative Negligence : Replacement of contributory negligence in 48 states (Not NY and VA) ➢ Contributory - Plaintiff who contributed to his own injury cannot recover anything from the defendant ➢ Appoints portions of damages between both actions ➢ Plaintiff never pays, but can get Defendants portion/percentage of liability ■ $1,000,000 Damages ■ 10% Plaintiff’s fault ■ 90% Defendant’s fault ■ Defendant pays $900,000 to Plaintiff Chapter 7 - Strict Liability and Product Liability ❖ Many torts are also crimes ❖ Theories of Recovery for Losses ➢ Negligence ➢ Strict Liability - hold certain businesses to a higher standard ■ Without regard to: Fault, Foreseeability, Standard of Care or Causation ■ Abnormally dangerous activities, can be searched without probable cause ● Nuclear power plants, oil refineries ● Ammunition and Firework factories ■ Keeping wild animals ➢ Product Liability ■ Misrepresentation ■ Negligence ■ Strict Liability (Strict Product Liability - Hard to prove causes in a negligence lawsuit, do strict product liability - get less money but the liability could be spread out between the chain of command) ■ Warranty Theory Chapter 10 - Criminal Law ❖ Differences between Civil and Criminal Law ➢ Criminal - Government and Individual ➢ Civil - Between people/property Criminal Law ■ State/Federal Government brings suit (not plaintiff) ■ Violation of a statute ➢ Criminal Liability ■ To be convicted of a crime, a person must: ● Commit a guilty act or ACTUS REUS ● Have the guilty mind or mental state MENS REA during commision of the guilty act ● Meet the other elements of the crime - crime must be specifically stated in a code ◆ Actus Reus : crime of murder committed when there’s intent and a dead body, actually committing the crime ◆ Mens Reus : Guilty state of mind, intent ➢ Required intent / mental state is indicated in the applicable statute or law: ■ Specific intent ■ General intent ■ Criminal Negligence or Recklessness (foreseeable risk that results in harm) ■ No intent (strict liability) ■
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