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by: Elmo Upton
Elmo Upton

GPA 3.82

G. Burnett

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G. Burnett
Class Notes
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This 193 page Class Notes was uploaded by Elmo Upton on Monday October 26, 2015. The Class Notes belongs to TSTM E240 at University of South Carolina - Columbia taught by G. Burnett in Fall. Since its upload, it has received 26 views. For similar materials see /class/229629/tstm-e240-university-of-south-carolina-columbia in Tec Technology, General at University of South Carolina - Columbia.


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Date Created: 10/26/15
0 Private wrong against a person or property 0 Latin Tortus meaning twisted crooked especially as applied to conduct 0 One injured by tortius act of another may file a suit for actual damages to compensate for his injuries 0 Includes physical injury loss of privacy emotional distress loss of pay consortium Intentional Tort v Breach of Duty 0 Key word is Intent 0 Assault Battery Defamation Intentional infliction of emotional distress 0 These torts require intent to commit 39 Breach of Duty torts are unintentional No one intended for another to be injured The person was Negligent 0 Strict Liability 0 Liability of those who profess to be competent in a certain area Neghgence 0 Kind of Conduct 0 Characterized by 4 elements 0 Duty or obligation recognized by law requiring a person to conform to a certain standard of conduct 0 Failure on his part to conform to the standard 0 Close causal connection between conduct and injury Proximate Cause 0 Actual loss or damage Duty of Ca re 0 Due Care obligation that people owe each other 0 Not to cause harm Drive carefully 0 Keep a good lookout 0 Make safe products Standard of Behavior 39 Presumes a uniform standard of behavior 0 Yet impossible to X the standard 0 Too many situations Standard of behavior is xed amp objective Fictitious person never existed nor will ever exist quotReasonable Man 0 Prudent Man 0 Embodiment of all qualities of a good Citizen 0 No mention of a reasonable woman 0 Question asked is 39 The standard allows for limitations 0 A reasonable man who is blind is held to the standard of a blind reasonable man 0 Children can never meet the standard 0 Violation of Statute Who is the duty owed to 0 Only to the foreseeable plaintiff 0 What is the Plaintiff is unforeseeable 0 Suppose one breaches a duty to A but causes injury to B 0 Plasgraf V Long Island Railroad 1928 One is liable to B only if a reasonable person would have foreseen the risk of injury to him in the circumstances a A rescuer is ALWAYS foreseeable Breach of Duty 0 Show what happened and that the Defendant acted unreasonably 0 Direct or circumstantial evidence 0 Direct evidence 0 Custom or usage 0 Statute 0 Circumstantial Res Ipsa Loquitor the facts are so clear infer negligence from them Causation 0 Proximate or Legal Cause 0 Cause in Fact or Actual cause use In Fact 0 But For 0 The injury would not have occurred but for this cause 0 But for not wearing his seat belt John would have remained in the car and not been hurt 39 Sometimes the But for test is inadequate 0 Joint Causes If two or more causes combine would either have caused the injury Use Substantial Factor Test or Alternative Causes Approach Proximate Cause 0 Not liable for all damages set in motion by his negligent act 0 Law sets a point beyond which the negligent party is no longer responsible for the consequences of his negligence 0 Proximate or Legal Cause test is Foreseeability 0 Negligent person who is found to be the actual cause but not the proximate cause of the plaintiff s injuries is NOT liable 0 Palsgraf V Long Island Railroad Company 248 NY 339 162 NE 99 NY 1928 Proximate Cause amp Indirect Cause 0 Direct Cause An uninterrupted chain of events from the time of the negligent act to the time of injury N 0 external intervening causes 0 Actual Cause Legal Cause if the actual cause is the cause in fact AND the injury is the direct result of the negligent act 0 Indirect Cause 0 Intervening event 0 Defendant liable for harm caused by foreseeable intervening event that are normal incidents of and within the increased risk of act amples of Foreseea quot Intervening Forces 39 Efforts to protect a person or property 0 Reaction Forcing another to react 39 Subsequent disease or accident 0 Medical malpractice 0 Rescuers Damages 0 Essential element of case no damage no case of negligence 0 Actual harm 0 Personal Injury 0 Property Injury 0 Duty to mitigate damages Special Problems 0 Negligent in iction of emotional distress 0 Negligence per se 0 Res Ipsa Loquitor 0 Dram Shop Laws 0 Danger Invites Rescue 0 Duty of Landowner Defenses 0 Contributory Negligence 0 Last Clear Chance 0 Assumption of Risk 0 Comparative Negligence 0 Superseding or Intervening Event AGENCY FORMATION AND TERMINATION x Agency describes a relationship between persons x Restatement Second of Agency Fiduciary relationship which results from the manifestation of consent by one person to another that the other shall act in his behalf and subject to his control and consent by the other so to actquot Principal one who employs another to act on his beha Agent one who agrees to act on behalf of another CREATION OF AGENCY x Nature of relationship Usually formed by contract though it can exist even if parties do not want it to exist Results from any indication of consent by principal that agent may act on his behalf and under his control x Proven by direct evidence x Circumstances x Words or conduct CAPAQJWEL x Agent can do anything his principal can do One can work through an agent to do any legal thing x Legal effect same as if principal has done the act A minor or insane person can be bound only to the extent they could be bound if they had taken the action themselves W H Q ANIQBMAQENQLRELA Q SIiLEL x Any person with capacity to contract can appoint an agent a One who lacks capacity cannot appoint an Agent Lack of capacity can be cured by the appointment of a Guardian who can appoint an agent One lacking capacity though CAN be an agent a Agency must be formed for a legal purpose x Book distinguishes between PrincipalAgent x Employees with authority to enter contracts on behalf of his principal EmployerEmployee x Employee with not authority to act on principal39s behalf Performs only physical services FORIVMIAIIQN 0E AQENC x 4 Ways x Express Agency Contract for Power of Attorney x Implied Agency arises out of the facts and circumstances of a particular situation x Apparent Agency Where principal allows the apprearence of an Agency that does not exist x Agency by Ratification DU39IES QE ERINCIEAL AND AQENI x Duty of agent to principal Duty of loyalty a fiduciary Complete honesty Duty to obey instructions Duty to exercise care and skill Duty to communicate information Duty to account for funds and property x Duties of principal to agent Duty to compensate Duty to reimburse and indemnify Duty to keep accounts Duty to cooperate TERMLNADQMLAQEb x Will of partiesOperation of law Mutual agreement Lapse of time Purpose achieved Occurrence of specified event Agency at will x General rule for employment x Operation of law Deathinsanity Bankruptcy if it affects agency Object of agency becomes impossible Object of agency destroyed war NOIIQLBEQLJJBELLMJEBMLNAIIQN x Notice to third parties those who have dealt with agent knowledge of agency no knowledge of agency Agent retains ability to bind principal if third parties are unaware of the termination of agency status xActual notice to all persons with whom the agent has dealt Either written or oral gtlt Constructive notice publish in paper Effective to those who know about the agency but with whom the agent has not dealt I will be responsible LIA BILJLLEQBLQBI JME x Agent liable for the consequences of his actions No duty to comply with wrongful instructions ie to commit a crime or a tort x Principal may also be liable victim get only 1 recovery not one from principal and agent x Respondeat Superior let the master answer DE FAMAT ION I Injury to a person s reputation Two kinds D Libel which is written defamation D Slander which is spoken defamation Elements I Defamatory Language on the part ofthe Defendant I Language is of or Concerning the plaintiff The language must identify the plaintiff Publication Damage to reputation Fault Defamatory language is language that is untrue Publication is communication ofthe language to or more person The original publisher is liable as are repeat publishers as well as secondary publishers Similar to the social sin of gossip Groups cannot be defamed even if slanderous statements are made about the group eg ethnic or racial slurs Corporations have a limited right to sue to protect their reputations for statements that cause persons not to do business with them a Disparagementis tort that defamesa company s goods and services I Slander of title claiming a peFSQnrs title to I a 19mm 0 I Damages presumed in libel cases unless the comment is not defamatory on its face I Damages must be pled and proved in slander cases since slander is regarded as not being as serious as libel due to its spoken nature Slander per se is slander that does not deed a proof ofdamages Slander per se 4 kinds ofSlander per se Attribution of a loathsome disease to someone Imputing unchastity to a female but not a male D Sometimes imputing serious sexual misconduct to anyone Claiming one is guilty ofa crime I g ilii ml Defenses to Slander I Truth is an absolute defense Regardless of how bad the comment may be if it is true it is not actionable Consent Privilege absolute or conditional a n Judicial 0 Legislative ll Defamation post 1964 I NewYork Times v Sullivan 376 US 254 1964 U Gives the media an almost absolute privilege when discussing a public figure D Must show the statement was made with 1 knowing falsity or 2 reckless disregard for the truth This is a subjective standard Not the g Reasonable man standard U Termed Actual Malice or Constitutional Malice ml Public Figure I Someone who injects himself into a public controversy Le a politician or I One who has a pervasive notoriety or fame e g a celebritymovie star This person deserves less protection because he has acted to put himself in the public eye a He wanted public attention and should not object if he gets it even if it be unfavorable Damages I General Damages nonspecific U Injury to reputation Mental suffering Hurt feelings Incapable of definite valuation Special damages n Tangible losses to property business occupation resulting from the injury to the plaintiff s Torts to Property I Trespasstoland Trespass to Personal property Conversion SummaryTable on page 129 ll Tort against Property real or Personal Interference with the exclusive right to possess I Unauthorized use of another s property and land is actionable D Rent land forfarming but hunt the land also No actual harm necessaryentry is sufficient Entering land remaining on property causing someone or something to enter land water ii Trespass to Personalty I Injures or interferes with another s personal property I Breaking a car window I Borrowing property without permission I Depriving owner of use and enjoyment by a exercising ownership I Conversion of personal property U Ta a goonverti it own use Defenses amp Standard of Proof Must show by preponderance of the evidence Actual consent Selfdefense Defense of others Necessity INTELLECTUAL PROPERTY 3 TYPES OF PROPERTY 0 Personal property automobiles computers books stocks and bonds money 0 Real Property land houses etc 0 Intellectual Property intangible ownership rights that are protected by statute o For business Intellectual Property is a crucial area 0 Trade secrets for the basis of many businesses Maurice has his special sauce 0 Software companies develop proprietory software 0 Even entertainment media have their trade secrets 0 Patents too are the reason why many businesses exist 0 Copyrighted material is key to an artist s creativity 0 Whether it be the creation of a book poem or song or the development of a brand name TRADE SECRETS 0 Business is successful because their trade secrets set it apart from its competitors Formulae patterns design data 0 Not patented marked or Copyrighted May not be eligible for these protections 0 Uniform Trade Secrets Act SC Code section 39810 SC Trade Secrets Act Protected against discovery misappropriation criminal proceedings Forbids obtaining trade secrets improperly Duty of employees to protect company s trade secrets Criminal penalties of 10 100000 PATENTS 0 Federal Patent Act 1952 Incentive for inventors to invent and to make inventions public Naturally patent has a technical scientific base and normally patent attorneys have a technical background File application with USPTO Patent is for 20 years post invention 14 for a design patent On expiration invention enters public domain 0 American Inventors Protection Act of 1999 o Provisional application pending the preparation and filing of final application Grants provisional rights for 3 months 0 PTO must issue patent within 3 years after filing of application 0 Provides for contest a patent as overly broad appeal from PTO decision to US Court of Appeals for the Federal Circuit PATENT PROCESS 0 Novel useful nonobvious items 0 Machines processes compositions of matter improvements to existing technology design for articles of manufacture o Asexually reproduced plants living matter invented by a person 0 No abstractionsscientific principles PATENT INFRINGEMENT o Unauthorized use of patent o Recover Money damages reasonable royalties o Other damages Destruction of offending articles 0 Injunction Discretion to award 3X damages COPYRIGHT 0 Common law copyright arises upon creation of writing 0 Article 1 section 8 United States Constitution authorizes Congress to enact copyright protection 0 Copyright Revision Act of 1976 0 Established requirements for obtaining copyright 0 Protect infringement Protect works of authors and other creative persons form unauthorized use of materials Incentive to write 0 Copyright covers tangible writing 0 very broad coverage 0 Books music maps compositions photos sound recordings MP3 0 Registration of copyright 0 To be protected under federal statutes 0 Original work 0 Created when author produces the work 0 Register with US Copyright Of ce Berne Convention international copyright 0 Sonny Bono Copyright Extension Act of 1998 0 Life of creator 70 years 0 Business copyright 95 years from publishing or 120 years INFRINGEMENT amp FAIR USE o Profits made 0 Damages suffered o Destruction of offending work 0 Injunction o Possibility of fine of 150000 in lieu of actual damages 0 Fair Use 0 Narrowed in recent years 0 Articles copy or on reserve no longer 0 Permits certain limits where use is permissible 0 See page 217 TRADEMARK 0 Company name or ad slogan or commercial logo 0 Lanham Act of 1946 Protect owner s investment and goodwill o Prevent confusion Registration good for 10 years renew indefinitely Must be used in commerce or registered 6 months prior to proposed use 0 Trademark distinctive symbol name motto Chevrolet Coke IBM Oldsmobile 0 Service mark distinguished services form competition 0 SC Partners for Health 0 Certification mark certifies goods are from a certain area or quality 0 Florid Oranges o Collective mark used by cooperatives associations and fraternal organizations BSA 0 Not register 0 Flag or coat of arms of countrystate Amoralscandalous items 0 Geographic or surnames standing alone 0 Trade dress the look and feel of a productpackagingetc 0 Generic names companies guard their marks lest they lose the right to use them and the name passes into the public domain Coke Xerox work hard at preserving marks 0 Federal Dilution Act 0 Protect against a dilution of the mark Not a technical infringement but it s a name or mark very close to a well known mark 0 Original mark must be famous Offending use must be commercial Must cause dilution of the distinctive quality of the mark CONTRACTS Legally enforceable set of promises Common Law D Agreement offer and acceptance El Supported by consideration D Voluntarily entered into B By parties with the capacity to contract a To do a legal act W Why Contracts I Necessary device in a market economy Prior to the Industrial Revolution U More face to face dealing between parties D Hands ofic attitude by courts U Advent of form contracts a More complex business arrangements W Modern Developments Law of contracts as we know it dates from the late 19th Century 20th Century Uniform Commercial Code UCC especially Article 2 Sale ofGoods Adopted by every US state in some form and to some degree except in Louisiana a U Applies only to the Sale ofGoods The common law of contracts applies to services W Terms I Valid Contract all legal requirements for a contract have been met I Unenforceable Contract meets all requirements but not able to be enforced due to some legal rule I Voidable Contract cancellable by one or I both parties I Void Contract lacks one or more basic lasagna life 1 col 391 I Unilateral Contract promise made by only one party Bilateral Contract promise made by 2 parties Executed Contract contract that has been fully performed according to its terms Executory Contract contract that has not ere fu performed I Express Contract definitely stated terms I Implied Contract agreement has been reached but the terms are not clearly stated I Quasi Contract a legal fiction Used to avoid injustice I Promissory Estoppel equitable device to avoid injustice fone acts in reliance on another s g promise and suffers harm as a result a contract a will be implied I Adhesion Contract a take it or leave it I Offeror one who makes an offer to enter into a contract I Offeree one to whom an offer to contract is made W Is there a Contract I Is there a valid offer I Isthere U Willingness to enter a bargain such that another person will understand his assent is invited D Objective intent to be bound U Terms that are definite or reasonably certain D Communication ofthe offer W Offer I Intent is measured by the objective Reasonable Man standard Definite terms Identify Parties subject matter consideration time of performance Some terms can be implied UCC a 39 Communicate the Offer D Mailedemailedfaxetc n de quotto offeree d ire Special Problems Advertisements Rewards Auctions Termsin the offer How long does the offer last I Lapse oftime RevocationRejection Counteroffer simultaneously reject offer and create a new offer Destruction of subject matter Death or Incapacity of offerorofferee egaity Lapse oftime 0 Effective ti Xdate m 39 W Acceptance I Manifestation of assent by offeree to offer in the manner invited or required as measured by the objective standard Who can accept the offer D Only offeree to whom offer made D If offer made to 2 or more each can accept but acceptance terminates the offer to the others U Except Mem ber of a class to whom the offer de 39Iafe e 39 39 quot Exactness I Common Law Mirror Image rule The acceptance must mirror or reflect the offer in all aspects Grumbling Acceptance is acceptance UCC 2207 expresses a similar concept I Same present intent to contract as required to make an offer One must intend to accept the offer Acceptance may be express or implied W What about silence I General Rule Acceptance must be expressed I Ifyou do not accept in 10 daysl we have a contract does NOT form a contract I Did the offeree objectively indicate his intent to contract I But if offeree indicates that silence acceptance eg Book ofthe Month Club 1 I Prior Dealings I Equity do what is rightjustfair u Maxims Laches V 7 gt 7 r uy L v x 39 l i l V Vquot 394 a 7 i N quot quot1 EL v 1 LI ll TimeMode of Acceptance I Unilateral contract accepted by performance Bilateralcontract D Express acceptance with YES D Implied acceptance looks to acceptor s actions D Courts try to find bilateral contracts W Communication I To accept a unilateral contract offeree must perform what is required Offer accepted at the successful completion of required performance All other contracts acceptance must be communicated a D Offeror may stipulate or require how acceptance is to be made When is communication effective Critical issue Offeror may try to revoke his offer while offeree is trying to accept the offer Problem easily solved Offeror merely requires that acceptance be received to be valid I Otherwise the Mailbox Rule applied a Effective ejn mailed ll Lets summarize communication I 4 ways to communicate acceptance Authorized means of communication D Manner spelled out in offer D Implied by the communications D Trade usage U Acceptance when dispatched I UCC Restatement of Contracts method U Acceptance by any reasonable means U as determined by a court if necessary U Effective when dispatched I Unauthorized means B Any means slower than the way the offer was communicated D Effective when received Implied Authorization U Look to party s prior dealings Consideration I Courts will not enforce a free promise Must give up something ofvalue in exchange for the promise I Consideration may be H Act a promise Legal Value I If the offeror does or agrees to do something he or she had no prior legal duty to do in exchange for the promise that provides legal value I If he agrees to NOT do something he has the legal right to do in exchange for the promise that provides legal value Legal value may have no monetary value Bangained for Exchange I Most business parties engage in such exchanges as part oftheir initial negotiations I All these questions are or should be worked out prior to a contract being drawn up and put on paper Gift promise is unenforceable since it lacks consideration W Is consideration adequate Legal Value nothing to do with adequacy of consideration I Courts not generally concern selfwith whether a party received value for promise But see case on p 142 Shocking to conscience Gift I ll give you 500 for 1 Looks like gift Gross inad egua f censideration may imply l gt 397 h l 39 4 V l a V i 572 l 4 g c quot J mire lit it ll LL MaliaJ ll Rules of Consideration Preexisting Duties do not support a promise Promise to perform a pre existing contract novation or new contract with consideration Unforeseen difficulties will warrant enforcement t1 Promises not to commit a crimetort Promises made by public officials Illegal consideration Illusory Promise Past consideration never serve as consideration Moral obligation Forbearance to sue For x I won t sue you 0 Consideration valid but this looks like extortion W Accord amp Satisfaction Law promotes voluntary settlement of claims Conservesjudicial resources and serves interests of parties more than going to trial Compromise agreement to settle dispute Accord is an agreement to accept something different less than what was originally clue I Satisfaction is the performance ofthe accord I The entire transaction is called Accord ii Enforceability of Contract I Lack of capacity may render contract either void or voidable Minors D Contract voidable may not be able to bargain effectively with older experienced person U Right to cancel or disaf rm contract but modern trend is to enforce certain contracts 0 Emancipation not confer capacity DisaffrimanceRatification Disaffirm by writing or conduct Prior to majority reasonable time I Duty of RestorationRestitution I Ratify by passage oftime or by not disaf rming Necessaries Doctrine I Mentally incompetentintoxicated Unable to bargain effectively Voidable at option of person not adjudged insane Void is person adjudged incompetent or insane g Test 0 Does the person have sufficient mental capacity W Legality of Contracts I Object ofthe Contract must be for a legal purpose Those without such purpose are termed Illegal Contracts Effect of Illegal Contracts exceptions Exculpatory Clauses Promissory EstoppeI will enforce a promise with no consideration Avoid injustice Do NOT everforget about Promissory Estopppel W Assent to Contract I Voluntary consent necessary at every step in the contracting process Vital to create an enforceable contract Assent may be manifested in any manner sufficient to show agreement 0 Conduct 0 Express words I If Assent be absent Contract is not enforceable Mistake erroneous belief about subject matter value other aspect ofthe contract D Unilateral D Mutual a Fraud assertion make not in accord with the facts Renders the contract Vo idable 7 w TJ Vrii Misrepresentation Undue Influence one party takes advantage of another person s mental physical emotional weakness D Elder Law matter Duress Statute of Frauds ampUSENESS RQAN HZAT N S o Entrepreneurs o Sole Proprietors o Partnerships General Partnership Limited Partnership o Corporations o Various Hybrids LLC LLP LLLP ENTEENEUgHHP o One who forms and operated a new business is an entrepreneur A new business can take several forms Each form has advantages and disadvantages Generally speaking the form the business takes has a great bearing on whether it is a successful operation o One of the chief considerations in forming a business is the tax aspect and the other is liability o REMEMBER THIS ENTEPENEUg S LE lETQSHS PATNERSHEg 9 Sole proprietorship Simplest form of business Business operated by a person as own personal property Extension of the owner all responsibilities May have employees and use a trade name Salaries business expenses deducted from profits and income taxed to owner No formalities to create No governmental approval Some local governments require a business license in order to operate o Sole proprietor bears the personal liability of the business If the business fails he loses all his investment If the business incurs a debt the owner incurs the debt to the limit of all he owns Therefore a creditor may recover what he is owed by taking or causing the sale of the owner s house car bank account ATNEgH 9 Several kinds General Limited 0 Permutations of limited partnerships oA partnership is a voluntary association of 2 or more persons to carry on a business for profit o Creates certain rights and duties among partners o General partners are personally liable for all the debts and obligations of the partnership o No real formalities required aside from the intent to form a partnership UNHFQ ATNESHH AQT o UPA promulgated in 1914 o Establish consistent partnership law among the various states Adopted the entity theory of partnership which considers a partnership a separate legal entity MALi F ENEL ATNESHH 94 criteria Definition of Partnership Association of 2 or more people Carrying on a business As coowners For profit All must agree to participation of each as a co partner Most important factor in determining partnership is whether the parties share profits and management responsibility Share of profits prima facie evidence of partnership as employees get wages not profits 9 May or may not have a Partnership Agreement Regardless each partner has the following rights and duties Share in management and profits Right to compensationreimbursement and return of loans and capital Right to information lgng F ATNEg FQCAY ELATHQNSHH o Duty of loyalty Basic breaches are Selfdealing Usurping partnership opportunity Competing with partnership Secret profits Breach of confidentiality amp misuse of property 9 Duty of care use reasonable care and skill in transacting business 9 Duty to inform o Duty of obedience LEAHLHW F TNEg o Personal liability for contracts and torts of partnership regardless of which partner was responsible oJointly and severally liable even if did not participate in tortious act o Release of one partner does not affect liability of the others o Partners are jointly liable on partnership contacts name all partners and collect against any or all HS QLUTN F ATESH o Fixed term or until particular project is completed Wrongful dissolution withdraw before term or project is completed Liable in damages 9 Partnership at will I Any partner can dissolve the partnership by withdrawing Assets are paid out upon dissolution in this order creditors creditorpartners capital contributions profits SurvivingRemaining partners can continue the partnership after dissolution either as a partnership or some other form of business LHMHTE ATNESHH o Limited partnerships existed for centuries o Creatures of statute Revised Uniform Limited Partnership Act RULPA o 2 types of partners General partners who invest capital manage the business are liable for debt amp Limited partners who invest capital and are not liable for debts beyond their investment o1 or more General Partners and 1 or more Limited Partners FQLTHES AN N o Creation is formal and requires public disclosure o Comply with the statutory requirements of the RULPA o Certificate of ltd partnership filed with the Secretary of State of the appropriate state o Ltd partnership agreement sets out rights and duties of the partners Allocates how profits divided how partnership to be run Not required RULPA provides rules when no Ltd Partnership Agreement exists LHALHW F GENELLHMWE ATNES o General partners have unlimited liability just like any other general partner including personal liability o Limited partners liability are limited to their capital contributions Except defective formation of partnership Participation in management unless as an employee Personal guarantee o Dissolution of limited partnership End of the life of the partnership Written consent of all partners Withdrawal of general partner retirement death insanity bankruptcy etc Decree of judicial dissolution no longer practicable to carry on business QQ o Most dominant form of business organization o 85 of business receipts o Organized under corporation statutes Created under the laws of the state of incorporation Codes and formalities must be followed to the letter or the corporation will be revoked Corporation is a distinct legal person 0 Fictive person who can sue and be sued in own names 0 Enter contracts as corporation own property 0 Fined lose license to operate or some other sanction HAQTEHSTHQS F R o Limited liability of shareholders Liable only for value of their shares o Free transferability of shares Shares or ownership in corporation are bought and sold daily on the stock exchanges Perpetual existence Central management Board of directors makes policy decisions and elect the officers who run the day to day business This is true of General Motors and the small mom and pop store o Chief reason to incorporate is to limit the liability of the owners Liability limited to the loss of their investment o No individual liability for torts or other judgments against the corporation WEg F QQHQNS o Public corporations formed to meet a specific governmental purpose o Private corporations conduct business o ProfitNonprofit conduct business for profit or for charitable educational etc purposes 9 Publically Held v Closely Held lots of shareholders v few shareholders normally family members o Professional Corporations associations of professionals formed to limit personal liability o Domestic Corporation a corporation incorporated in this state o Foreign Corporation a corporation incorporated in another state oAlien Corporation a corporation incorporation in a foreign country o SCorp a corporation taxed as a partnership Must be a domestic corporation have less than 75 shareholders elect to be under SubChapter S Revision Act of 1982 HNQQQHQN QEUES o Creatures of statute Statute must be followed exactly oArticles of Incorporation filed with the S o S o Select registered agent o Draw up Bylaws and adopt a corporate seal o Have annual meetings keep minutes Board of Directors o Issue stock or shares of ownership in corporation QNSETHQNS N gELEQTNG A USNESS RM 9 Limited Liability 9 Tax considerations 9 Formalities to be observed 9 Financing 9 Management 6 Life of the business 9 Liquidity FNANQHNG THE PN o Most common way to raise money Equity Securities Debt Securities EQUHW gEQUTES o Equity is ownership rights in a Corporation Common Stock Represents the residual value of the corporation No preferences 0 Both Creditors and preferred Stock holders get paid before a common stockholder Ownership shown by Stock certificate 0 Allows holder to elect directors vote on matters of importance to corporation receive dividends or a share of the profits 9 Preferred Stock Entities holder to certain preferences over a holder of common stock Same position as a Creditor of the corporation Limited Liability 9 Preferences include Dividend preference guaranteed fixed dividend Liquidation preference Cumulative dividend Participate in profits in addition to the preferred dividend Conversion preference o Callable Preferred Stock can be redeemed at option of company Debt Corporation can borrow money 3 General types of debt 0 Debentures 30 year unsecured debt resting on the general credit standing of the company 0 Bond long term debt secured by collateral 0 Note short term debt ES F THE CQPQQN 9 Same rights as a physical person o Express powers Found in Constitutions statutes Articles of Incorporation Bylaws of the corporation and resolutions of the Board of Directors Generally has the power to purchase own lease sell mortgage or otherwise deal in real and personal property enter contracts borrow and lend money incur debt etc o Implied powers Exceed express powers in order to accomplish its corporate purpose eg open bank accounts 9 But If the corporation goes beyond its express or implied powers Ultra Vi res Act Remedies for Ultra Vi res Acts 0 Shareholders can sue for injunction to prevent the act 0 Corporation or share holders sue officers or directors for damages 0 Attorney General of the state of incorporation can bring an action to enjoin the act or dissolve the corporation HQLUTHQNWENAWQN F QRQQS o Voluntary Dissolution If not begun business or issued shares of stock can be dissolved by vote of majority of incorporators or directors File Articles of Dissolution o Administrative Dissolution Secretary of State administratively dissolve corporation if it failed to file annual report failed to maintain registered agent in state failed to report change of registered agent did not pay franchise fee or the period of duration stated in Articles of Incorporation has expired o Judicial Dissolution Winding Up Liquidation termination A dissolved corporation continues its existence but may not do any business except to wind up and liquidate its business and affairs Voluntary dissolution liquidation carried out by the Directors Involuntary dissolution or directors refuse to liquidate a court appoints a receiver to wind up and liquidate the business o Termination occurs only after winding up the liquidation of assets and distributions of proceeds to the claimants Assets paid out in the following order Expenses of liquidation and the creditors according to their respective liens and contract rights Preferred shareholders according to their rights Common shareholders Dissolution does not impair any rights or remedies or causes of action against the corporation directors shareholders that existed before the dissolution QQTE HEQTQSE FFHQEg SHAEHQLES gELEQTE TQHCS While a shareholder may be a Director or Officer they fulfill different functions o Shareholders elect Directors and vote on important issues affecting the corporation o Directors Officers and Shareholders each have different rights in managing a corporation o Directors are responsible for appointing officers and for policy decisions o Officers run the daytoday business HAEHLES o Own the corporation o Yet are not agents of the corporation and unless employees of the corporation cannot bind the corporation o Only duty is to vote on issues presented to them oAnnual Stockholders meeting o Proxies Voting rights VQTNG F HAE AT ANNUAL MEETNG o 2 ways to do this and either will be set out in the Bylaws o Straight Voting Shareholder votes the number of his shares for each candidate as she chooses Allows a majority shareholder to control the election o Cumulative Voting Shareholder may accumulate all his votes shares x candidates and vote for 1 candidate or split his vote among all candidates Favors the minority shareholders 9 Transfer of Shares Advantages of corporation is the ability to transfer freely shares of stock Sell on open market unless the bylaws provide for Right of First Refusal or BuySell Agreement Preemptive rights 0 Allow existing shareholders to purchase additional stock so as not to dilute shareholder interest VEN o Profit Corporations operate to make a profit Objective of the shareholder is to share in those profits Through capital appreciation Receipt of Dividends or both o Dividends are paid at the discretion of the directors Determine whether when where how and how much Set Record date Stock dividend HAEH LE HTS o Right to receive informationinspect the books Right to be informed of affairs of the corporation Receive 0 Annual Report and Income Statement 0 Balance Sheet and Change in Equity statement For a proper purpose a shareholder may 0 Inspect tax and accounting records minutes of director s and shareholder meetings over 3 years old He has an absolute right to see the shareholder s list articles of incorporation bylaws and minutes of shareholder meetings of the past 3 years HEQE QQTE VEHL o If a shareholders dominate a corporation and use it for improper purposes a court of equity can disregard the corporate structure and hold the shareholder liable for the debts and obligations of the business o If the corporation has been formed without sufficient capital and o Separateness not maintained between the corporation and shareholder failure to maintain corporate records and books EQTQ EgPQSHHLHTHES o Make policy decisions affecting management supervision control amp operation of the business o Recruited for their expertise and experience Have access to books records facilities and other information affecting business o Paid annual retainer expenses and they fix own compensation Also given stock o Outside Directors directors who are not officers of the corporation Recruited from outside the business o Inside Directors usually officers of the corporation o Serve set terms staggered or not as the by laws set o Normally there are 6 committees of the board o Executive Audit Nominating Compensation Investment and Litigation committees o SarbanesOxley Act of 2002 enacted in the wake of fraudulent corporate activity of the late 90 put restrictions on the Audit Committee among other things The Audit Committee must exist and be made up of outside directors At least 1 must be a financial expert based on education or experience FFHQEg oAppointed by the Board Must be at least 4 Authority as provided in the bylaws or by corporate resolution Agents of the corporation ad act with either express apparent or implied authority 9 Concept Summary 291 good test question LHALHW F FFE AN HEQTQS o Both classes are fiduciaries having a special relationship of trust with the corporation As such they owe the following duties o Duty of Obedience o Duty of care o Duty to Dissent o Duty of Loyalty o May Not Usurp corporate opportunity Self deal Compete with corporation Make a secret profit LHMTE LHALW C MANY amp LHMTE LAHLHW ATNESHP 9 Several important hybrid forms of business organization 9 Unheard of prior to late 19705 but now are among the more common business types 9 Limited Liability Company Unincorporated business I Combine the most favorable attributes of all other models with few downsides Usually elect to be taxed as a partnership The members of the LLC manage the business and The members possess limited liability for actions of the business LLQ o Creatures of state law Most state have enacted LLC codes o 1995 Uniform Limited Liability Company Act Drawn by the Commissioners for Model State laws in 1995 it was enacted in SC the following year Codifies the Limited Liability laws from the various states States may or may not adopt the code they may adopt it in part or in whole and may adapt it to fit the state s existing laws EMEME What did I tell you were the 2 main considerations in selecting a business model o Tax and Liability F THE LLQ o IRS considers the LLC a partnership o Profits are passed through the entity to the member s individual tax return oMembers have an equal right to share in the profits of the company Can result in apparent unfair distribution of profits o Losses are shared equally unless agreed otherwise o Profits and losses do not have to be allocated in the same manner LEAHLHW o In the LLC the owners are known as members 9 Law on the taxation of LLC is quite settled liability is not Members are not personally liable for the debts obligations or other liabilities of the LLC beyond their capital contribution their investment 9 Doesn t matter whether the obligations arise from tort contract or some other place o In practice a court will rule to avoid injustice and harm to a third party 9 Members like other tortfeasors are personally liable for their own torts HQN F THE LLC 9 Used for the operation of a business only 9 Once organized may operate in any forum 9 Name must include the term LLC LCC LC Ltd Company etc 9 Must comply strictly with state statute Generally 1 or more persons needed to create File Articles of Organization with Sec of State Name and address of initial agent for service of process and name and address of organizers I Whether the LLC is a term or atwill LLC whether it is membermanaged or managermanaged and I whether any member will be personally liable for debts of the LLC EHNHTHQNg o Atwill LLC means an LLC whose existence continues indefinitely as opposed to a term LLC whose lifespan is defined by a specific span o Members are the owners of the LLC roughly comparable to shareholders or ltd partners o Membermanaged LLC is an LLC whose members owners take an active part in the operation of the business o Managermanaged LLC is an LLC who hires a manager to operate the business o Member s contributions is the amount of capital in whatever form the member contributes to the LLC May be in any form 9 Operating agreement is entered into by the LLC members to regulate the affairs of the company and its conduct of business 9 Distributional interest is the member s ownership interest in the LLC It is personal property and may be transferred in part or in whole Merely acquiring a distributional interest does not make one a member of the LLC It only allows him to share in the profits QNVESQN F USHNES F o Corporations General Partnerships Limited Partnerships can convert from their present organization to an LLC 9 Why 9 To convert from one business form to an LLC the entity needs 0 Agreement of conversion to set out the terms of the converswn o Terms be approved by all parties or requisite members o Articles of Organization are filed with Sec of State and must state that the LLC was formerly organized under another form of business and the prior name Conversion takes place when articles are filed FHNAL TQQg o Compensation a nonmanager member is NOT entitled to compensation for services furnished to the LLC but may be reimbursed payments they made on behalf of the LLC and to indemnify members and managers for liabilities incurred in the ordinary course of business o Duties owed to the LLC Duty of loyalty Duty of care oA member of a managermanaged LLC who is not a manager owes no duty of either loyalty or due care to the LLC Dissolution of an LLC 9 Limited Liability Partnership LLP South Carolina Code 334120 o Limited top professionals accountants Doctors lawyers o No General partner All partners have limited liability with respect to the debts and obligations of the partnership All partners enjoy the flowthrough tax benefit o Created by filing Articles of Partnership with the Sec of State o Most states require liability insurance to cover negligence wrongful acts and misconduct Quid Pro Quo for limited liability o See handout sheet A person who takes part in certain activities is responsible to others despite the use of due care z 0 Liability without Fault 0 Elements 0 ABSOLUTE Duty to make safe 0 Breach of duty 0 Cause 0 Damages Ultra Hazardous Activities 39 Substantial risk to persons property no matter how much care may be used 0 Test 0 Risk of serious harm 0 Cannot be performed in complete safety no matter how much care is taken 0 Activity not commonly engaged in within the community Elements 0 Absolute duty to make safe the animal activity or condition that is Classified as Ultra hazardous and liability will be imposed for any injuries 0 Duty owed to foreseeable plaintiff one the Reasonable man would foresee at risk 0 Harm must result from normally dangerous propensity of the condition involved Type of Liability Imposed 0 Animals 0 Damage to land or property done by your animals so long as it was foreseeable 0 Personal Injuries 0 Wild animals liable so long as the plaintiff did nothing to provoke an attack 0 Lions Bears Wolves half wolves 0 Dangerous domestic animals o Bull certain dogs 39 Domestic Animals 0 Generally no strict liability attaches to injuries caused by domestic animals 0 One bite rule unless you are on notice that your dog will bite 0 Persons Protected 0 Licenseelnvitee Strict Liability for injuries caused by wild or dangerous domestic animals Exception landowner under a public duty to keep animals Eg A Zoo Negligence must be shown 0 Trespasser Strict Liability will not be imposed in the absence of negligence Exception a Vicious watchdog Proximate cause 39 Same as in negligence 0 May be cut off by an unforeseen intervening force however courts generally hold most intervening forces unforeseen 0 Defenses to Strict Liability 0 Contributory Negligence unless Plaintiff not know of danger N Product Liability tort C Two Theories 0 Negligence 0 Strict Liability Differences 0 Negligence focuses on the manufacturer conduct Did he act reasonably 0 Strict Liability focuses on the product Is it unreasonably dangerous because of the defect igence 0 Company could be liable to consumer 0 Prove company breached a duty of due care thereby causmg 1nur1es 0 Negligently not inspecting product before sale 0 Today there are also other conditions giving rise to negligence Intentional misrepresentation or fraud Affirmatively misrepresents quality of product Conceals a defect in the product Elements 0 Must show same 4 elements as in Negligence 0 Failure of Due Care 0 Duty to assemble properly 0 Duty to design the product properly 39 Duty to inspect before sale 0 Duty to warn after sale 0 Breach 0 Negligent conduct leading to supplying a defective product 0 Defect may be in manufacture or design Strict Liability 39 Most commonly used cause of action against a manufacturer 0 Liability without fault 0 Everyone in the chain of distribution are liable 0 Elements 0 Product sold in a defective condition 0 Seller one who is engaged in business of selling this product 0 Physical harm property damage from the defect 0 Greenman V Yuba Power Products Inc 59 Cal 2nd 57 27 Cal Rptr 697 Ca 1963 adopted the theory of Strict Liability in Tort for product liability cases 0 Must show that the product causing the injury was defective 0 Product may be defective in in any or all of the following ways 0 Manufacture 0 Design and packaging 0 Failure to warn Manufacturing Defect 0 Manufacturer fails to properly assemble a product 0 Test a product 39 Check the quality of a product 0 Shoshone Coca Cola Bottling Co V Dolinski Design Defect 0 Toys designed with removable parts that can be swallowed 0 Machines appliances designed without proper safeguards Crashworthiness Doctrine 0 Apply risk utility analysis and consider 0 Gravity of danger posed 0 Likelihood that injury will occur 0 Availability and cost of producing a safer design 0 Social utility of the product Failure to warn 39 Some products are inherently dangerous not made safer and still accomplish the task they are designed to do 0 Statins 0 Certain machines with moving parts 39 Duty to warn users of product s dangerous propensities 39 Proper and conspicuous warning Defect in packaging 0 Design and provide safe packaging for products 0 Tamperproof packaging 0 Childproof bottles 0 Johnson amp Johnson Case I ure to provide a f a instructions 39 Also inadequate testing of product 0 Selection of component parts 0 Improper certification of the safety of product Defenses to Product Liability 39 Generally known dangers 0 Guns shoot bullets 0 Government contractor defense 0 Built according to gov specs and gov warned of risks 0 Assumption of the risk 0 Know and appreciate the risk 81 voluntarily assumed risk 0 Misuse of the product is misuse foreseeable 0 Correction of defect 0 Supervening event removing a guard etc Intentional Torts 0 Tort private wrong against person property 0 Injury more than physical injury 0 Loss of privacy 0 Emotional distress Injury to reputation 0 Etc 0 Result in punitive damages Purpose to punish conduct ments of Tort fan in Ional torts 0 Action by defendant 0 Intent by defendant to act in that manner 0 Tortius conduct by Defendant 0 Causation 0 Damages Intent 39 Specific or General 0 Speci c intent if goal in acting is to bring about the consequences that happen Push A 0 General Intent if actor knows with substantial certainty that the consequences will result from action Push A Afalls and breaks arm 0 Transferred intent intends to harm A but harms B Intent v Motive 39 Motive compells a person to act to receive the result 0 Intent shows the purpose to use certain means to effect the result 0 I dislike A Therefore I act to ruin his reputation 0 The rst is motive the second is intent Eree categories 0 Torts to the Person 0 Torts to land 0 Torts to economic relations Torts to the Person 39 Assault 0 Battery 39 False Imprisonment 0 Misappropriation of Right to Privacy 39 Intentional infliction of emotional distress 0 Invasion of privacy 39 Misuse of legal proceedings Malicious Prosecution 0 Defamation reach of Contract gt A contract must be performed according to its terms or it will be breached or broken unless certain conditions occur to excuse the breach X Conditions of the contract are not met gt Condition precedent performance excused unless condition occurs gt Condition subsequent performance excused if condition occur gt Condition concurrent conditions must happen at the same time gt Conditions may be express or implied X Performance Complete or substantial gt 3 commonsense degrees of performance gt Complete everything is done as specified in the contract If not complete performance payment cannot be made gt Substantial performance falls short of complete performance in minor ways gt Material breach failure to reach degree of perfection the other party is justified in expecting o Anticipatory breach Excuses for non performance gt Prevention by promisee gt Impossibility It cannot be done gt Illnessdeath of promisor gt Intervening illegality gt Destruction of subject matter gt Commercial impractibility X ischarge release from contract ongann gt Agreement gt Waiver gt Alteration gt Statute of Limitation X Remedies gt If a party does not perform under his contract and his performance is not excused or discharged he must put the injured party in the position as if the contract had been performed This is done by an award of Damages Damages must be proved with reasonable certainty they must not be speculative X Compensatory damages gt Actual loss gt Place in the same position as if contract been performed gt Loss in value of promised performance 0 Difference between the value of the performance received and the value one had the right to expect X Consequential amages gt Damages unforeseeable as the result of a breach gt Generally this means that the defendant must have known of the special circumstances that caused the loss See examples on page 291 gt If he does not know no coOnsequential damages recoverable X Nominal amages gt Small damages technical breach gt 100 x Liquidated amages gt Contract may provide specific sum to be recovered if the contract be breached gt Punitive Damages 0 Not normally recoverable in contract 0 May be authorized by statute 0 May be available if sue in Tort as well as contract X uty to Mitigate gt Minimize own damages gt Especially if easily avoided gt Equitable Remedies 0 Based on the equities of the case 0 See thatjustice served 0 Specific Performance 0 Injunction X


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