Business Law Exam 1 Study Guide 31 QuestionsChapter 1 Business and Its Legal Environment 7 Questions

Law- Rules of conduct established by the government of a society to maintain, harmony, stability, and justiceo May impose duties or confer rights

o Sanctions for noncompliance

Jurisprudence- study of law and legal ethics through learning about different schools of jurisprudential thought in each school to make a judicial decisiono How judges apply law to specific dispute depends in part on their philosophical approaches to

laws

Positivist school- Judge with positivist leanings would usually defer to existing law rather than use legal reasoning to find new law

Natural Law School- judge using natural rights that everyone is entitled to, what is right and just

Historical School- judges strictly follow decisions made in past cases

Legal realism- given that all judges have different beliefs they will bring different reasoning processes to the same case

Positivist schools o Positive Law- comprised of the written laws of a given country or society

Provides bright lines for conduct

Provides order and structure for society, but it ignores natural rights

Valid Laws must be obeyed regardless of whether they are just in a situationo Issued by the Government

Ex. Statues, judicial decisions, administrative agency rules

Natural Law School- Philosophers: Aristotle, Thomas Jeffersono Natural Law- assumes that law, rights and ethics are based on universal moral principles

inherent in nature that people can discover through intelligence or reasono One of the oldest and most significant schools of jurisprudential thought

o Defines law in terms of justice- what is fair, right & just according to individuals own

sensibilities.o Recognizes the existence of natural rights

o Weakness: lack of agreement on what is just due to different beliefs and ideas of justice

o Ex. Civil rights activists, whistle blowers, civil disobedience

Historical School- legal thought emphasizes the evolutionary process of law by concentrating on the origin and history of the legal system

Legal Realism- based on the idea that law is just one of many institutions in society and that it is shaped by social forces and needs

Many laws may be applicable to a single business transaction Primary Sources of American Law

o 1. U.S. and State Constitutions

Define the form and basic principles of government and create individual protectionso 2. Statutes

Statutory Law- laws passed by congress and state legislatures

Model statutes are not law until adopted by states

Ex. Uniform Commercial Code (UCC)- set of rules governing commercial transactionso Adopted by all fifty states and U.S. territories

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Ordinances- laws passed by municipal governments to govern matters not covered by federal or state law

Ex. Zoning ordinanceso 3. Administrative Regulations

Administrative Law-rules, orders, and decisions of administrative agencies

Administrative Agency- federal, state, or local government agency established to perform a specific function

Ex. FDA and FCCo 4. Case Law and Common Law Doctrines- judge made law

Case Law- judicial interpretations of constitutions, statutes and regulations announced in prior court decisions

Also includes judge-made law based on common law doctrines in areas not covered by statutes or regulations

Ex. Torts and contracts Common Law- based on English legal tradition meaning rules generally applied in all of the

courts in the countryo Judges establish common law through written opinions that are binding on future decisions of

lower courts in the same jurisdictiono Typically addresses situations not covered by statutes

o Historical distinction between courts of law and courts of equity are no longer applicable in

the American judicial systemo Legal Remedies vs. Equitable remedies

Common law- based on doctrine of precedent, which requires that judges decide current cases based on the legal principles and decisions established within their jurisdiction in previous cases with the same or similar factso General legal principles that evolved over time through court decisions

Stare Decisis( to stand by that which is decided)- legal doctrine based on precedent that makes law more stable and predictableo Cornerstone of both the American and English legal system

Binding Precedent vs. persuasive precedent U.S. common law is derived from written court decisions opinions, generally from appellate

courts

Legal Reasoning- reasoning process used by judges in deciding what law applies to a given dispute and then applying that law to specific circumstances in a case

IRAC Method- basic steps in legal reasoningo Issue- lay out facts and identify issues

o Rule- apply rules to case

o Application- how the rules of law apply to the particular facts and circumstances of this case

o Conclusion- what conclusion should be drawn

Legal controversies rarely clear-cut Restatements of the Law- ruling based on previous rulings, summarizes common law rules

followed by most states

Substantive Law- define, describe, regulate, and create legal rights and obligationso Rules that govern people relations with each other

o Ex. Contracts, torts, property

Procedural Law- establish the processes for enforcing the rights established by substantive law and settling disputes

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o Rules of Legal administration

o Ex. Procedures for filing civil lawsuits, statutes of limitation for bringing legal actions

Civil Law- rules that define and regulate the rights and duties that exist between persons and between persons and their government, as well as relief when they are violatedo Compensatory objective

o Legal remedies- compensatory damages, punitive damages, nominal damages

Remedies- Legal means used to recover a right or redress a wrongo Equitable remedies- injunction, specific performance

o Plaintiff may be a private party or a government

o Burden of proof- preponderance of the evidence (more than 50%)

Criminal Law- Rules designed to protect and vindicate societys interest with respect to the individualso Punitive Objective

o Goals of punishment: retribution, restraint, deterrence, rehabilitation

o Plaintiff is national, state or municipal government, which is represented by a prosecutor,

district attorney or attorney generalo Burden of Proof: beyond a reasonable doubt (a higher burden of proof than required for civil

cases)

Double Jeopardy clause of the 5 th Amendment- nor shall any person by subject for the same offence to be twice put in jeopardy of life or limb- prevents a government from prosecuting a defendant more than once for the same criminal offenseo Not applicable to new trial due to mistrial or hung jury

o A State and the federal government could both prosecute someone for an act that violates

different state and federal statutes without subjecting the defendant to double jeopardyo Not double jeopardy if a trial in a civil lawsuit is based on the same wrongful act that was

prosecuted as a crime by the state

Finding Statutory Law- Laws are collected in a publication titled United States Statutes at Largeo Citation- reference to a publication in which a legal authority can be found

o U.S. Code- compilation of all federal statutes organized into 50 titles that are grouped by

broad subjects

Ex. 11 U.S.C. 109

11 is the title number 109 is the section number Annotated version cites relevant cases

o State Codes (annotated)

Tennessee Code Annotated (T.C.A.)o Code of Federal Regulations (C.F.R.)- compilation of rules and regulations issued by Federal

administrative agencies (updated annually)

Organized into 50 titles

Citation ex. 26 C.F.R.1.183

Rules and regulations are initially published in the Federal Register (published every government business day).

Finding Common Lawo Common Law is comprised of published court opinions

o Courts that typically issue written opinions: U.S. Supreme Court, federal district courts,

federal court of appeals, state supreme courts and state appellate courtso Reporters- Chronological sets of books containing opinions for courts by region/state/court

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o Case citations tell you where to find a particular case including name of parties, reporter

where case is published, court, and date

Ex. Berger v. city of Seattle, 512 F. 3d 582 (9th Cir. 2008).

Computer Based Legal Researcho Private subscription services- Lexis and Westlaw

o Internet (free services): Library of congress, Findlaw.com, Law school databases

Chapter 2 The Court System 9 Questions

Sources of Law- U.S. constitution is Americas social compacto Federalism- form of government where lawmaking authority is divided between two

sovereigns (Federal and State governments)o Constitution provides that Federal government has the power to make laws in enumerated

area (interstate commerce); all other powers are reserved to the states

Ex. Of reserved area in police power- power to legislate for health, safety and welfare of the states citizens

o Legislature (federal and state)

o Administrative agencies (federal and state)

o Courts (federal and state systems)

Case law and common law are judge-made law

52 separate court systems (1 federal, 50 states, and D.C.)

Article III of U. S. constitution establishes the Supreme Court and gives Congress power to create other inferior federal courts

Judiciarys Role- courts interpret laws and apply them to specific cases filed in the courts Judicial Review- process by which the Supreme Court determines whether statutes passed by

Congress and actions of the executive branch are constitutionalo Provides a check of power on the legislative and executive branches

o Not in the constitution but establish after the Supreme Court case Marbury v. Madison (1803)

Judicial Requirements: A court must have jurisdiction in order to hear a case and render an enforceable judgmento State where a lawsuit is filed is the forum state

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Jurisdiction- the authority of a court to hear and decide a specific actiono To have jurisdiction the court must have jurisdiction over the subject matter of the dispute

AND either over the defendant, personal jurisdiction or over the property involved in the lawsuit

In personam jurisdiction- personal jurisdiction over any person or business that resides in a certain geographic area, within the states borders when process is served on them, or consent to courts authorityo Ex. State trial court normally has jurisdictional authority over residents or businesses of a

particular state, such as a county or districto Long Arm Statute- personal jurisdiction over certain out-of-state defendants based on the

activities that took place within the state

Must meet a minimum contact requirement to justify the jurisdictiono Ex. Mastondrea v. Occidental- where the plaintiff was injured at a Mexican hotel sued the

hotel and its owners (both foreign companies) in a NJ state court

Ruling: NJ court had personal jurisdiction due to NJs long arm statue, the defendants contract and marketing activities met the sufficient minimum contacts requirements

In rem jurisdiction- jurisdiction over property that is located within its boundaries

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o Ex. Ownership disputes in Florida where both parties live in other states

Subject Matter Jurisdiction: Courts of General (unlimited) jurisdiction- can decide cases on wide range of issues

o Ex. State trial courts and federal district courts

Courts of Limited jurisdiction- can only hear cases involving specific matterso Ex. State- probate court, juvenile court

o Ex. Federal Bankruptcy Court, Tax Court

Original Jurisdiction vs. appellate jurisdiction- 1st time hearing original jurisdiction wins, appeal get appellate Jurisdiction

Probate Courts- state courts that handle only matters relating to the transfer of a persons assets and obligations after that persons death, including issues relating to the custody and guardianship of children

Bankruptcy Courts- handle only bankruptcy proceedings, which are governed by federal bankruptcy law

Federal Court Jurisdiction- Constitution limits the types of cases over which the federal courts have subject-matter jurisdictiono Federal Courts have exclusive subject matter jurisdiction on certain cases

Ex. Copyrights, patents, admiralty, bankruptcy, military, federal crimeso Federal Courts will have personal jurisdiction over a defendant if the state in which the

federal court sits would have personal jurisdiction over the persono Federal Courts can hear criminal cases for violations of federal criminal laws and civil cases

o Federal courts may only hear cases involving a federal question or there is diversity of

citizenshipo Federal Question- cases that involve rights or obligations of a party that are created or defined

by the U.S. constitution, a treaty or a federal lawo Diversity of Citizenship- plaintiff and defendant are citizens of different states and the

amount in controversy is greater than $75,000o

Concurrent Jurisdiction- when both the federal and state courts have the power to hear a caseo Ex. Cases involving federal laws, contract and tort cases where there is diversity of

citizenship, employment discrimination caseso When concurrent jurisdiction exists a party may choose to bring a suit in either a federal or

state court

Exclusive Jurisdiction- when cases can be tried only in federal courts or only in state courtso Federal exclusive jurisdiction exists in: federal crimes, bankruptcy, and most patent and

copyright claims, and suits against the United Stateso State exclusive jurisdiction exists in: divorce and adoption claims

Venue- the most appropriate location for a trial Standing to Sue- Plaintiff must have a significant stake in case in order to sue, the party must

have suffered a legal injury

Justiciable controversy- controversy that is real and substantial, as opposed to hypothetical or academico Requirement to go to court

State Court Systems- consist of several levels or courtso 1. Local trial courts of limited jurisdiction

Ex. Small Claims Court with a limit on the amount of up to $25,000 in Tennessee

Ex. General Sessions court with a limit of $27,000

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Ex. Municipal court and Juvenileo 2. State Trial courts of general jurisdiction

Questions of fact- focus of trial courts where the determine what really happened in regard to the dispute being tried

Ex. Did the party actually burn the flag Chancery Courts- or equity courts historically heard lawsuits where legal damages

(money) were not adequate

Chancery and Circuit Court generally have concurrent jurisdiction over most civil matters, so civil lawsuits can be filed in either

Superior (circuit) courts appeals are conducted in state courts of appeals

Most lawsuits are filed hereo 3. State court of appeals (intermediate appellate courts)

3 or more judges review the record of the case on appeal and then determine whether the trial court committed an error

Question of Law- focus of appellate courts concerning the application or interpretation of the law

Ex. Is flag burning protected in your 1st Amendment right to free speecho 4. States highest court(state supreme court)- review proceedings conducted in the trial court

based on court record to determine validity

Decisions of each states highest court on all questions of state law unless overturned by the U.S. Supreme Court

Decisions are final on questions of state law

3 of 5 Supreme court justices for Tennessee are womeno Federal Court System- Divided into 3 tiers

o 1. U.S. district Court (Trial courts of general jurisdiction)- Federal equivalent of state trial

courts with general jurisdiction

94 U.S. Districts

Federal judges nominated by the president and confirmed by the Senate

Must retire or be impeached to leave officeo 2. U.S. courts of appeals(intermediate court of appeals)- hear appeals from the federal district

courts located within their respective judicial circuits

Consist of 13 Circuits

Tennessee is in the 6th circuit located in Cincinnati

Most cases are final but appeal to the U.S. Supreme court is possibleo 3. United States Supreme Court- highest court in the United States

Consist of 9 Justices (1 Chief Justice and 8 associated justices)

Final arbiter of the Constitution and federal law

Writ of certiorari- order issued by the Supreme Court to lower courts requiring them to send its record of the case for review

Rule of 4- must have 4 of the 9 justices approval to issue a Writ Typically cases involving important constitutional decisions

In rare cases the court will overturn its own prior decision

Attorney- acts as his or her clients advocate, presenting the clients view of the facts in a way as to convince the judge or jury that this version is correcto Pro Se Alternative- clients are allowed to represent themselves

o Attorney will be appointed by the court in criminal cases if the defendant cannot afford one

Cannot be appointed in Civil cases

Attorney Fee Arrangements vary:

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o Hourly- standard arrangement typically costing between $175- $300 an hour

o Fixed Fee- typically with Wills, POA( power of attorney)

o Contingent fees for plaintiff council- personal injury cases where attorney will receive a

percent of the gains ranging from 25% to 40%

Not permitted in criminal caseso American Rule- each pay own attorney

o English Rule- Loser pays for attorney

o A contract may stipulate who pays the legal cost in the event of a dispute

o Certain Statutes allow successful plaintiffs to recover legal fees from defendant

Rules of Civil Procedure- Substantive law governs the legal rights of parties, procedural laws govern how lawsuits are conducted

Federal Rules of Civil Procedure- procedural laws that govern lawsuits conducted in federal courtso Rule 1- shall be construed and administered to secure the just, speedy, and inexpensive

determination of every action

Each state has its own rules of civil procedure governing lawsuits in state courts Steps in a Civil Lawsuit: 1. Cause of Action- Facts that indicate that a party has been legally wronged and is entitled to

have a court provide a remedyo Standing- must be a party who has directly suffered a legal wrong

o Acts as a control on the amount of litigation

o Statute of Limitation- can bar a lawsuit that is not commenced within time period specified

by Law

Torts- 1 Year

Contracts- 4-6 Years

Property actions- up to 20 Yearso Plaintiff bears burden of proof >50%

o Must have subject matter jurisdiction and personal jurisdiction

2. Complaint filed- short and plain statement of the claim showing that the plaintiff is entitled to the relief soughto Pleading- consist of the complaint and the answer

o Includes: facts, alleged violations by the defendant, injuries suffers, request for relief, demand

for jury trial

3. Defendant Served- Defendant receives the summonso Summons- notice prepared by the plaintiff and issued by the court to inform a defendant that

he has been suedo States a date you must respond by and must be properly served or the case will likely be

dismissed

4. Defendant Answers- defendant responds to the complaint by filing an answer in the required time periodo Admits or denies allegations and places any counterclaims and affirmative defenses

o Failure to file an answer will likely result in a default judgment

5. Discovery- process by which parties search for information from the other party relevant to the caseo Depositions- sworn testimony by either party or witness

o Interrogatories- parties write answers to questions to aid their attorney

o Request for admissions, documents, or other information related to the case

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6. Pretrial Conference to address scheduling matters 7. Motions e.g. - Motion for Summary Judgment- same as the motion for judgment but allows for

supported evidence such as testimony

8. Trial, Verdict, and judgmento Trial takes place with or without a jury depending on request by either party

Right to a jury in civil cases depends on the court and the matter and whether requested by either party

Voir Dire- attorney may challenge a juror for the belief that they are biased

Opening arguments, then plaintiff presents his case, then defendant presents his defense to the plaintiffs charges

o Verdict- after judge instructs jury prior to deliberations of limitations

Additur- judge increases damages reward

Remittitur- decreases damages rewardo Judgment- entry of the verdict by the judge in the court records

o Motion for a new trial- granted only if the judge is convinced that the jury was in error but

does not believe that it is appropriate to grant judgment for the other side

9. Appeals and res judicata- Post-Trial Mattero Appeals- referral of case to higher courts for review upon the application

Appellate court may affirm or reverse the lower court decision or remand the case to the lower courts for further action such as a rehearing

o Res Judicata- doctrine for civil lawsuits baring subsequent litigations over the same dispute

that has already been litigated

Collecting the Judgment:o Judgment creditor (successful plaintiff) must collect from the judgment debtor (losing

defendant)o Judgment Proof defendants- they do not have money to pay if they lose

These cases often not even brought to trial cause their wont be any material gaino Taking judgment debtors property

Exempt property (defined by state law) cannot be seized

Writ of execution- court authorized seizure of debtors nonexempt property by sheriff to sell it and then turn proceeds over to creditor

Writ of garnishment- directs an employer to withhold a percentage of debtors wages which will then be remitted to the creditor

o Consumer Protection act of 1968- limits amount of wage garnishments

o Judgment creditor may put a lien on judgment debtors real property by recording the

judgmento Bankruptcy filing by judgment debtor may discharge the obligation, making it non-

collectibleo Fraudulent Transfers- illegal to transfer property of debtors to third parties to avoid payment

of creditors

Chapter 3 Alternative and Online Dispute resolution 4 Questions

Litigation Considerations:o Substantial pre-trial and trial cost

o Time consuming

o Processes handled by attorney

Leaves plaintiff feeling left out of the legal processo Settlement Discussions often occur late in the process (after discovery)

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o Appeals can extend litigation beyond the trial

o Collection on judgment can be difficult

Alternative Dispute Resolution (ADR)- any means of settling a dispute outside of courto ADR can take place either before or after lawsuit is filed

o Advantages: higher success rate, speedier, less expensive, direct involvement of parties to

reach a solution, confidential, applicable for most civil matters, sanctioned by federal and state courts

Three types: Negotiation- simplest form of ADR, parties come together with or without attorneys, where the

parties air their differences and try to reach a settlemento More likely to reach a favorable agreement if each party comes prepared

o Mini-trial- private proceeding in which partys attorney briefly argue their partys case before

the other partyo Early neutral Case evaluation- a neutral third party evaluates each parties strengths and

weaknesses and forms a basis for negotiating a settlemento Facilitation- third party assists parties in reconciling their differences

Mediation- oldest form of ADR, in which a mediator works with both sides in a dispute to facilitate a resolutiono Essentially a form of assisted negotiation

Advantages: greater chance of collection, and each party agrees on the mediator

Disadvantages: Mediator will charge a fee, informality and absence of third party referee, and no time line so could be time consuming

Mediator- 3rd party who tries to facilitate a resolution by listening to each parties side separately and then jointly and not imposing a solution

There are requirements by the state to be a mediator, typically a lawyer

Arbitration- Formal method of ADR, parties present their arguments and evidence before an arbitrator at a hearing and the arbitrator imposes a resolutiono Arbitrator- third party or panel of experts that hears parties arguments in arbitration then

imposes a resolutiono Process: submission, hearing, award

Parties may jointly select an arbitrator (or panel of arbitrators), subject to the arbitration provision in an existing contract

Arbitration hearing is run like a trial, but with simplified rules of evidence and limited discovery

Arbitrators decision (known as an award) is final and binding on the parties case (unless the parties have specifically agreed upon non-binding arbitration- which is rare)

Losing party may appeal the award to a court Disadvantages: result is unpredictable, must make decision on rules rather than what is

fair, can be as expensive as litigation, and no discovery stage

Federal Arbitration Act (FAA)- provides the means for enforcing the arbitration procedure that the parties have established for themselves

Sec. 04 a party may petition a federal district court for an order compelling arbitration where this a contractual agreement to arbitrate disputes

Buckeye Check Cashing, Inc. v. Cardegna (2006)

Rule: a challenge to the validity of a contract as a whole, and not specifically to an arbitration clause contained in the contract, must be resolved by an arbitrator

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Courts generally enforce arbitration agreements contained in contracts however, courts may invalidate or modify certain provisions in consumer contracts that are oppressive for consumers

NCR Corp. v. Korala Asoc. Ltd. (6th cir. 2008)

Rule: under federal law, any doubts concerning the scope of arbitrated issues should be resolved in favor of arbitration

Provisions in contracts my require that all disputes be submitted to arbitration instead of litigated

Clauses in contracts may specify choice of arbitrators and/or location of hearing, and may exclude some matters from the arbitration requirements

Widely used in banking, credit, brokerage, employment, and purchase agreements. Almost always used in labor union contracts

Arbitration in Employment Agreements:o Mandatory arbitration clauses in employment contracts are generally enforceable

o Some courts have overturned provisions in employment contracts requiring the parties to split

costs when an employee cannot afford to pay arbitration cost

Setting Aside Arbitration Awards:o If a losing party appeals an award to a court, the court will not review the merits of the case,

but will only determine whether a valid award exist- and if so the court will order the parties to comply with the award

o Possible grounds for invalidating an award:

Public policy and illegality

Defects in the arbitration process (ex. Fraud, bias)o Winning party may ask court to compel the other party to comply with the award

Federal and State Courts support ADR because it means less cases for them to try Court-Annexed Arbitration- main difference is that rulings here are not final and either party can

reject the rewardo If the reward is rejected the case will proceed to court and begin de nuvo, as though no

arbitration had taken place

Summary Jury Trial- mock trial that takes place in a courtroom before a judge and juryo Verdict is only advisory

o Goal is to let each party see how they will fair in a real trial

Forum-Selection Clause- designates the jurisdiction (court or country) in which any dispute arising under the contract will be litigated

Choice-of-law Clause- allows parties to choose a particular state law to govern their arbitration agreement

If ADR is successful a written settlement agreement will follow If ADR fails then litigation will follow

Chapter 5 Constitutional Law 7 Questions

Confederal Government- form of government that was established immediately after the Revolutionary War

Federal Form of Government- national government and the states share sovereign powero Constitution sets out specific powers that can be exercised by the national government with

the rest being reserved to the states under the 10th amendment

Police powers- broad right of state governments to regulate private activities to protect or promote the public order, health, safety, morals, and general welfare

Separation of powers among the three branches

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Federalism- allocation of power between federal and state government Checks and Balances- system that allows each branch to limit the actions of the other two

branches, thus preventing any branch from exercising too much powero Legislative branch can enact laws but they must be approved by the executive branch

(president)o Executive branch sets foreign policy but must have consent of senate to enact treaties

o Congress determines federal jurisdiction, president appoints federal judges, but the judicial

branch can rule their actions unconstitutional

Articles of Confederation- 7 Articles Article 1: Legislative Power- Formed Congress (house and senate), rules for the passage of

legislation, and enumerated powers(taxing and spending money)

Article II: Executive Power Article III: Judicial Power- vested in the Supreme Court and such inferior courts as the Congress

may ordain and establisho Jurisdiction of Federal Courts- cases under the constitution, U.S. laws and treaties, citizens of

different jurisdiction(diversity jurisdiction) and cases with foreign officials and governments

Article IV- Relations among the Stateso Privileges and Immunities Clause- prevents states from imposing unreasonable burdens on

citizens of another state

Substantial reason required for a state to treat nonresidents differently from its own residents

o Full Faith and Credit Clause- ensures that judicial decisions (judgments) of a state will be

honored and enforced in all states

Applies to civil matters

Ex. Rights established under deeds, wills, contracts Article V- Amendment Process Article VI Supremacy Clause- constitution, laws, and treaties of the United States are the

supreme Law of the Lando When there is direct conflict between federal and state law the state law is invalid

o Preemption- congress chooses to act exclusively in an area in which federal and state

governments have concurrent powers

Article VII- Ratification of Constitution Interpretation of the Constitution

o Constitution is amended and/or its meaning changed by USSC Decisions:

Some provisions lack clear meaning due to obscure or ambiguous language

Social changeso U. S. Supreme Court interprets and provides meaning to the Constitution

o Doctrine of judicial review- courts are permitted to declare actions by other government

entities to be unconstitutional, and therefore unenforceable

Article I Section 8- congress has the power to lay and collect taxes, duties, imposts, and excises, including the power to make all laws necessary and proper for carrying into execution the foregoing powers, and all other powers vested by this constitution in the Government of the U.S., or any department or Officer thereofo Primary source of revenue

o Also given the power to spend to pay debts and provide for the common defense and general

welfareo Congress may make conditions that states must meet to get funding

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Ex. Highway funds for speed limits and DUI level

Article 1 Section 8 Commerce Clause- gives congress the power to regulate commerce with foreign nations, among several states, and with Indian tribeso May promote any objective they deem worthwhile, so long as it does not violate the Bill of

Rightso Commerce power further expanded to permit congress to legislate regarding intrastate matters

affecting interstate commerce

Ex. Authority for legislation prohibiting racial discriminationo Recently USSC cases have curbed congresss use of the commerce power by invalidating

federal laws regulating and/or criminalizing certain intrastate actions

Ex. Lopez (1995) fed laws banning guns in school was struck down because had nothing to do with commerce

o Also covers commerce with activities that substantially affect interstate commerce

Ex. Gibbons v. Ogden- Ruled that that commerce within the states could also be regulated by the national government as long as the commerce substantially affected commerce involving more than one state

Article 1 Section 10- prohibits states from certain actions Bill of Rights(1791)- first ten amendments that embody a series of protections for the individual

against various types of interference by the federal governmento Over time the Supreme Court incorporated most of these rights into protections against

certain state actions found in the 14th Amendmento Though incorporation most of the Bill of Rights now apply to the states and the 14th

amendment equal protection guarantee applies to the federal governmento 1st Amendment- freedoms of religion, speech, and the press and the rights to assemble

peaceably and petition the governmento 4th Amendment- Prohibits unreasonable searches and seizures of persons or property

o 5th Amendment- due process guarantee, prohibits self incrimination and double jeopardy, and

right to jury, and fair payment for property taken by governmento 8th Amendment- prohibits excessive bail and fines as well as cruel and unusual punishment

o 10th Amendment- Powers neither delegated to the federal government nor denied to the states

are reserved to the states and to the people

Under Federal Law possession of Marijuana is illegal but under some states medical Marijuana is legal

Supreme court ruled state laws that allow the use of medical marijuana do not insulate the users from federal prosecution

14th Amendment- equal protection guarantee gives protection from state and federal governmento No protection from private activities only government ones

Limits on Government Actions:o Even though the government is acting within its powers, it cannot enact laws that violate the

Bill of Rights, which are independent checkso Constitutional protection of individual rights only protects people against government activity

(not private activity).

Public Function Doctrine- extend constitutional protections to cover private entities deemed to be government actorso Ex. TSSAA case- court ruled TSSAA was a government actor but its actions did not violate

1st Amendment

Commercial Speech- increases the flow of consumer info and promotes free competition and economic efficiencies, has some protection but not as much as noncommercial speech

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o Subject to intermediate Scrutiny

o Ex. Advertising and marketing

o Ex. Some restrictions such as cigarette companies not allowed to advertise

o Bad Frog Brewery, Inc. v. New York State Liquor Authority- NY denied approval for a beer

label them deemed as vulgar display

Rule: NY denial was invalid because they were not making a substantial effort to advance a valid state interest

Unprotected Speech- speech that violates criminal laws is not constitutionally protectedo Ex. Threatening speech, pornography, fighting words, or speech that harms others good

reputation

1st Amendment:o Establishment Clause- prohibits the government from establishing a state-sponsored religion,

as well as from passing laws that promote religion or that show a preference to one religion over another

Ex. Praying in school and using government scholarships for religious schools

blue laws- make use of some commercial speech illegal on Sunday

Rules legal due to need for a day of rest to promote the health and welfare of workerso Free Exercise Clause- guarantees that no person can be compelled to do something that is

contrary to his or her religious beliefs

Government can act when religious practices violate public policy or endanger public welfare

Ex. Employers must make reasonable accommodations to an employee who needs certain days off for his or her religion

Belief must be religious in nature and sincerely held by employee 4th Amendment- right of people to be secure in their persons, houses, papers, and effects

o Search Warrant- order from a judge or other public official authorizing the search and seizure

of items based on probable cause

To get a search warrant there must be probable cause

Exceptions come when the items sought are likely to be removed by the time a warrant can be obtained

Ex. Police officer having probable cause the automobile has evidence of a crime Ex. U.S. v. Moon- tried to get evidence of his files suppressed since they did not have a

search warrant

Rule: search warrant was not needed since the defendant volunteered the fileso Probable Cause- must have trustworthy evidence that would convince a reasonable person

that the proposed search or seizure is more likely justified than not o Warrants not required for businesses when: seizure of spoiled or contaminated food, or in

highly regulated business such as liquor, guns, and strip mining

5th Amendment- no person shall be compelled in any criminal case to be a witness against himselfo Extends only to natural persons so corporations and partnerships can no plead the fifth, but a

sole proprietor can o Property- real or personal property or an entitlement to a benefit

Ex. Disability benefits, professional licenses, income from tenured jobo Liberty- physical freedom or Bill of Rights freedoms, or various fundamental freedoms

Ex. Right to have children, practice a professiono Takings Clause- prohibits the federal government form taking private property for public use

without just compensation

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o Due Process Clause- Consist of aspects in procedural and substantive

Procedural- requires that any government decision to take life, liberty, or property must give person proper notice and a fair trial or hearing before the government can deprive the person of life, liberty or property

Substantive- focuses on the content or substance of legislation

Laws limiting fundamental rights must be based on a compelling state interesto Ex. Speech, privacy, religion, interstate travel, marriage

Laws limiting non-fundamental rights require only a rational basis Violating Due Process involves: deprivation of life, liberty, or property, by a government

without due process of law

14th Amendment- may not deny to any person within its jurisdiction the equal protection of the lawso Provides a check against arbitrary and unjustified government discrimination against

classifications of individuals, groups, or activitieso Equal Protection Clause- government cannot enact laws that treat similarly situated

individuals differently

Standards of Review- when laws are challenged under the constitutions individual rights provisions, the restrictions are evaluated using these tests:o Strict Scrutiny- law must be necessary to achieve a compelling government purpose and must

use the lease restrictive means to accomplish it

Highest standard- applied to protections in Bill of Rights and other fundamental rightso Intermediate Scrutiny- law must be substantially related to an important government interest

and restrictions must be narrowly tailored

Ex. Commercial Speech restrictions, discrimination cases, legitimacyo Rational Basis test- law must be rationally related to a legitimate government purpose

Almost impossible for a law to fail, most lenient generally applied to matters of economic or social welfare

Ex. Law prohibiting certain cart venders might be legitimate if they say to help traffic in certain areas

Ex. Law prohibiting unemployment benefits to people under five feet tall would be illegal

16th Amendment Authorized the current Income Tax system we have Privacy Rights- fundamental right not expressly found in the constitution, but derived from 1st,

3rd, 4th, 5th, 9th, 14th, amendment according to the USSC interpretationso Laws and policies affecting privacy are subject to the strict scrutiny (compelling interest) test

o Federal Privacy Act (1974)- protects against misuses of personal information obtained by

federal agencieso Health Insurance Portability and Accountability Act (HIPAA)- defines and limits

circumstances in which an individuals protected health information may be used or disclosed

o Patriot Act- allows government officials to monitor internet activity and to gain access to

personal financial information and student information without prior proof of any wrongdoing

Chapter 6 Administrative Law 4 Questions

Administrative Agencies- non-legislative, non-judicial government lawmaking bodyo Created by federal and state governments but only worry about federal

o Sometime referred to as the fourth branch of the U.S. government because of their power

o Agencies regulate many areas of business, and the cost of compliance is significant

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o Article I of the U.S. Constitution authorizes Congress to delegate such powers to

administrative agencies

Administrative Law- consists of legal rules that define the authority and structure of administrative agencieso Sources of Law include:

o Enabling statues of administrative agencies

o Administrative Procedures Act

o Rules issued by administrative agencies

o Court decisions reviewing the validity of agency actions

Enabling Legislation- how administrative agencies are created, specifying the name, purposes, functions, and powers of the agency being createdo Enabling statute- defines an agencies legal authority

Ex. Federal Trade Commission Act of 1914- that give the Federal Trade Commission authority to prohibit unfair methods of competition or deceptive trade practices

Types of Agencies:o Federal Executive agencies- cabinet departments of the executive branch, which were formed

to assist the president in carrying out executive functions, and the sub-agencies within the cabinet departments

Ex. Occupational Safety and Health Administration is a sub-agency within the U.S. department of labor

o Independent Regulatory Agencies- outside of major executive departments, and thus do not

report directly to the president

Ex. Federal Trade Commission and SEC

Enabling Statute- how congress creates federal agencies which grants three times of authority/powerso Legislative authority- make regulations in a particular area

o Judicial Authority- for agency to hear cases dealing with agency subject matter

o Executive power- to administer the statute and related rules and regulations and to investigate

violations

Administrative Procedure Act (APA) 1946- establishes procedural requirements for federal agencies in their rulemaking, adjudication, and enforcement functionso In response to criticism that agencies were out of control, and it standardized federal agency

procedureso Provides for due process in hearings before federal agencies and provides for judicial review

of agency decisions

Rulemaking- formulation of new regulations or rules Notice-and-comment rulemaking- involves 3 basic steps:

o 1. Notice of the proposed rulemaking- agency publishes a notice of the proposed rulemaking

proceedings in the Federal Register

States where and when the proceedings will be held, the agencys legal authority for making the rule, and terms or subject matter of the proposed rule

Must make certain info available to the public such as scientific data underlying the proposal

o 2. Comment Period- ample time given for persons to comment in writing on the proposed

rule

Purpose to give interested parties time to express their views

The agency does not have to respond to all comments but it must respond to significant comments that bear directly on the rule

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The Agency responds by modifying the rule or accompanying the final rule with a statement on why they did not make the change

o 3. The Final rule- drafting the final rule and publishing it in the Federal Register

Must contain a concise general statement on basis and purpose that describes the reasoning behind the rule

Can make some changes in light of the public comments but cannot be to radically or will have to start the process over

Rules are final unless overturned by a court then later included in the Code of Federal Regulations

Legislative Rules- substantive in that they affect legal rightso These are administrative laws and have full force and effect of law

Interpretive rules- simply declare policy and do not affect legal rights or obligationso Exempt from the APA requirements and are not directly legally binding

Agency Regulation are expected to be known by all persons that are applicable to their activitieso Regulation is binding on persons and entities regardless of their actual knowledge of what is

in the regulation or the hardship resulting from innocent ignorance of the regulation

Agency Enforcement- enforces by identifying violators and pursuing civil remedies against them in a proceeding held by the agency

Investigation- takes place after the final rule in effect, where they monitor companies compliances with the lawo Inspection- how agencies gather info from companies usually through on-site inspections

with the companies compliance

Ex. Inspecting an underground mine, safety test on equipment, and measuring factory emissions

o Subpoena ad testificandum- to testify is an ordinary subpoena compelling a witness to

appear at an agency hearingo Subpoena duces tecum- bring it with you compels an individual or organization to hand

over books, papers, records, or documents to the agency

To determine if an agency is abusing power they consider the following:

Purpose of the investigation Relevance of the information Specificity of the demand for testimony or documents Burden of the demand on the party from whom the info is sought

o Searches- Agencies dont need a warrant if is a highly regulated industry, hazardous

operations, and emergency situations

Ex. Firearms, liquor, coal mines, and waste facilities

Adjudication- process of resolving a dispute by presenting evidence and arguments before a neutral third party decision makero Most actions are resolved without formal adjudication

o Negotiated Settlement- purpose to rectify the problem to the agencys satisfaction and avoid

additional proceedings

Consent Decrees- alleged violator does not admit guilt, but agrees to take certain actions to settle issues in the agencys complaint

Appealing to firms- avoid appearing uncooperative and avoid the expenses from future proceedings and appeals

Appeals to Agency- conserve their own resources and avoid formal actionso Formal Complaints- issued if negotiations fail, public document with possible press

conference

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Leads to a hearing before an administrative law judge if a settlement is not reached

Firm then responds and if a settlement is not reached the case will adjudicated

Administrative Law Judge (ALJ)- presides over the hearing and has the power to administer oaths, take testimony, rule on questions of evidence and make determinations of facto ALJ is typically a neutral employee of the agency who is not involved in the investigation or

prosecution of the complaint

Hearing Procedures- can be informal with people in a conference room, or can be formal resembling a trialo Agencies hold hearings to resolve disputed matters, where the hearings is a trial-like

arbitration proceeding before an administrative law judgeo Prior to the hearing the parties may conduct discovery

o Agency is the prosecutor at the hearing and has the burden of proof

o Parties introduce evidence, witnesses, and arguments to support their case

o Initial order- decision on the case by the Administrative Law Judge

o Final Order- same as the initial order if nobody appeals or the ruling after the case has been

appealed

Judicial appeals- courts grant significant weight to an agencys judgment because of the agencys expertise, this deference especially applies to factual questionso Ex. Chevron case- the USSC considered whether courts should defer to an agencys

interpretation of the law, and held that courts should defer to an agencys reasonable interpretation of the law as well as facts

APA: Judicial review gives courts power to invalidate agencies actions that are arbitrary, capricious, and abuse of discretion, or not in accordance with the lawo Criteria for what makes agencies rules arbitrary and capricious:

Failed to provide a rational explanation for its decision

Changed its prior policy without justification

Considered Legally inappropriate factors

Entirely failed to consider a relevant factor

Rendered a decision plainly contrary to the evidenceo Ex. Fox Television Studios v. FCC- court found that the FCCs new policy of fleeting

expletives failed to provide a reasoned analysis for departing from prior policy.

Rule: in favor of Fox and court vacated the FCCs order

Limitations of Agency Powers:o Judicial Controls- in addition to the judicial review of agency decisions; agencies are also

subject to the following judicial doctrines

Exhaustion Doctrine- requires that a regulated party use all of its potential administrative remedies before going to court

Ripeness Doctrine- parties must show that they have a standing to sue and that there is an actual controversy

o Executive Controls- President appoints federal officers and can veto enabling legislation by

congresso Legislative Controls- creates and funds the agency, can investigate the agency to make sure

they are implementing laws created, and can freeze enforcement before regulations take effect

Freedom of Information Act(FOIA) 1966- requires the federal government to disclose certain records to any person or entity on written requesto Purpose is to give transparency to what federal agencies are doing by granting access to

information agencies have in their possession

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o Nine exemption: ex. Trade secrets, information related to nation defense matters

Government in the Sunshine Act(1976)- requires every portion of every meeting of an agency to be open to public observationo Closed meetings are authorized in a limited number of instances

o Actions taken at unauthorized closed meeting will be invalid

o Adequate notice of meetings must be given to the public

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Business Law Exam 2 Study GuideChapter 9 Contract Formation 13 Questions on Ch. 9/10

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 dutyo Play a vital role in the market economy by providing stability, predictability, and certainty for

buyers and sellers in the marketplace by giving parties confidence that their bargained-for exchanges will be enforceable

o May be created by words in formal writing or through oral agreement express contracts

o Implied contracts- may be inferred by actions of the parties

o Contract law- deals with the formation and enforcement of contracts

o Governed primarily by state common law (court opinions) as modified by state statutes such

as the Uniform Commercial Code (UCC)

UCC, Article 2 only covers contracts for the sale of goodso Other state statutes may govern other specific types of contracts (e.g. real estate)

Promise - manifestation of the intention [of a party] to act or refrain from acting in a specified manner

Objective theory of contracts - courts adhere to when enforcing contract to determine whether a contract has been formedo A partys intention to enter into a contract is judged by outward, objective facts as interpreted

by a reasonable person- rather than secret intention (E.g. what a party said, how they acted, or appeared, circumstances surrounding the transaction)

Ex. Lucy v. Zehmer illustrates how courts apply this theory

Defendant asserted that he was joking when he agreed to sell his farm, was rejected by the court

Valid Contracts must meet 4 requirements to be formed:o 1. Agreement- mutual assent to a bargain

Reached through the process of offer and acceptanceo 2. Consideration

Something of value given or promised (such as money) to convince a person to make a deal; the consideration must be bargained for.

Promise of a gift not a contract because no consideration is giveno 3. Contractual Capacity- legal ability to enter into a contractual agreement

Intoxicated persons and the insane have limited capacity to contract

Although minors can enter into contracts, they are generally able to avoid it at their election

o 4. Legality- propose of the contract must be to accomplish a legal goal and not against public

policy

Defenses to enforceability - even when all four requirements are met it may not be enforceable if one of these requirements are not met:o Genuineness of assent - consent must be genuine and voluntary ( no fraudulent inducement,

duress, or undue influence)o Form - contract must comply with any law that requires it to be in a specified form

Ex. Each state has a statue of Frauds that requires certain types of contracts to be in writing

Offer - first step in making a contract where one party makes an offer to anothero Offeror- party making offer

o Offeree- party receiving offer

o Once the offer is accepted the offeror is bound to a contract

Bilateral Contracts - two people exchange promises: a promise for a promiseo Offeree can accept the offer by promising to perform some act, such as make a payment or

provide services

Promise- declaration that something will or will not happen in the futureo Once the offer is accepted, it cannot be revoked by the offeror

o Provides more protection to offeree because all it takes to accept the offer- and bind the other

party to a contract- is to make a return promise (do not have to perform the act in order to accept the offer

o When in doubt about what type of contract it is, there is a presumption that the offeror

intended a bilateral contracto Ex. Sally offering someone $50 for their text book

o Formal Contract- require a special form or method of creation (formation)

o Informal Contracts- typically no special form required, all other contracts

Unilateral Contracts - offeror makes a promise, and asks for a return act by the offeree: a promise for an acto Ex. If you cut my grass ill pay you $50

o Offeree can accept the offer only by completing the requested act therefore, the contract is

formed only when the contractual act is performed by the offereeo Offer cannot be revoked once performance has begun

Express Contract - state completely in words(may be oral or written); parties explicitly agree on all important terms of their agreement

Implied-in-fact contract - implied contract, inferred from the parties conduct, not from anything written or saido Based on a legal doctrine that allows a judge to impose a contract between parties where a

contract did not existo Purpose is to prevent unjust enrichment, if a party accepts a benefit, then payment equal to

the reasonable value of the benefit is required- even though there was no contract between the parties

o Requirements:

Plaintiff furnished some service/property to defendant

Plaintiff expected to be paid for service/property, and defendant knew or should have known payment was expected

Defendant had a chance to reject the services/property and did not

Void Contract - a contract that does not exist at law( no contract at all), so it cannot be enforces e.g. contract with illegal purpose, party lacked legal capacity, no consideration

Voidable contract - contract where one party has the right to avoid or rescind the contract however, the party with such right may choose to perform the contracto Ex. Where one party is a minor, party induced to enter contract by fraud

o Minors can enter contracts but they have the option to rescind in which case is unenforceable

against the minor

Unenforceable contract - valid contract that is unenforceable by a court because of a legal defense against it (such as not complying with a statute of frauds)

Executed contract - contract that has been fully performed by both parties Executory contract - contract that has not yet been performed by one or both parties Agreement - (or mutual assent) by the parties as to the terms of a contract is a required

o Two components: an offer by one party and acceptance by the other

o Once there is agreement a contract is formed, provided that the other required elements

(consideration, capacity, and legality) are satisfied

Offer- made by one party (offeror) to another party (offeree) o Indication of what the offeror will do or refrain from doing and what he wants in return from

the offereeo Communication of an offer gives the offeree the power to form a binding contract by

accepting the offero Requirements:

1. Offeror must intend to become bound by the offer

Intent of the part of the offeror is determined by a persons words and actions and not by their secret, unexpressed thoughts or feelings( objective theory of contracts

2. Terms of the offer must be reasonable certain and definite

3. Offer must be communicated to the other party, who then has the power to accept and bind the offeror

o Not offers:

Offers mad in anger, jest, or undue excitement are usually not offers

Expressions of opinions, statements of intention, and preliminary negotiations are not offers

Ex. Advertisements such as catalogues are not offers, they are treated as invitations to negotiate or invitations to make an offer

Preliminary agreements- in some cases may be held as contractso Ex. Basis technology Corp v. Amazon.com Inc.- terms of proposed settlement sent by one

party via email and approved by opposing party were held to be binding even though the parties could not reach a settlement

Definiteness of Terms- second requirement for an effective offer thato Essential terms includes:

Identification of the parties

Object or subject matter of the contract

Consideration to be paid

Time of payment, delivery, or performanceo If an essential term is missing a court may refuse to enforce the contract

Ex. Baer v. Chase- implied-in-fact contract was not found by the court because the compensation terms were not definite enough

Termination of offers- offers may be terminated by actions of a party (revocation rejection or counter offer) or by operation of lawo Revocation - offeror may revoke an offer any time before acceptance

Revocation is effective when offeree receives offerors revocation

Some offers may be irrevocable( options contracts, doctrine of promissory estoppel)o Rejection- offeree refuses the offer, then the offer ends

Offer cannot be effectively accepted after it has been rejectedo Counteroffer- offeree rejects the offer and makes a new offer

Offerees alteration to the original offer constitute a counteroffer

Common law mirror image rule vs. UCCo Operation of Law- offer may be terminated for the following reasons

Time lapse- based on time for acceptances stated in offer

If offeror does not state how long the offer is open, then a reasonable time Death or incompetence of offeror or offeree- triggers termination of offer

Destruction of essential subject matter

Supervening illegality of the proposed contract

Ex. Hiring a hitman Acceptance of offer- voluntary act by the offeree that shows agreement to the terms of the terms

of the offero Can accept by word or act

o Must be unequivocal- non new conditions or terms can be added

o Upon acceptance, the offer and acceptance are merged into a binding contract (provided the

other contract elements are satisfiedo Offer must be accepted by offeree alone

o To accept an offer, the acceptance must be made in the same way, and within the timeframe,

that the offeror requests that acceptance be madeo Silence is generally not acceptance

Exceptions: trade customs and previous dealings

Under federal law, unordered goods delivered via USPS may be treated by recipients as gifts, and do not have to be returned or paid for

o Acceptances adding to or varying from offer may be a rejection, depending on whether the

common law or the UCC governs

UCC Art. 2 applies to contracts for the sale of goods the common law rule exactness rule applies to other agreements

o Common Law exactness rule mirror image rule- terms as stated in the acceptance must

exactly mirror the terms in the offer; changes are treated as a rejection and a counteroffero UCC Article 2- governs only sale of goods, modifies the common law mirror image rule for

acceptances

Under the UCC, as long as there is a definite expression of acceptance, a contract is formed on the original terms, even if the acceptance contains additional or different terms

i.e. offeror has the option to accept or reject the additional terms proposed by the offeree

o An acceptance is effective when sent via an authorized method(deposit in a mailbox), if

method is not indicated by offeror, then any reasonable method is acceptableo Once an offer is accepted, the offer cannot be revoked because the contract has been formed

Consideration- both sides to the contract are giving something to the other party that has been bargained for, makes agreement bindingo Something of legal value given in exchange for a promise

o Offeror and offeree must bargain for and give up something of legal value in order to make

the others promise or act enforceable

Promise of a gift not a contract because there is no considerationo Consideration for a promise must be either detrimental to the promisee or beneficial to the

promissoro As long as the consideration is bargained for by the parties the value of the consideration

usually wont be questioned by a courto Generally, consideration takes the form of money, property, or services but can be in other

forms such as a promise not exercise a legal right

Ex. Right to sue, right to engage in a legal activity

Ex. Hamer v. Sidway uncle offered to pay nephew $5,000 if he would not drink or use tobacco till he was 21 but he died before his nephew turned 21 and the executor of the estate refused to pay

Rule- court rules nephew won

o A waiver of any legal right by one party at the request of another party is a sufficient

consideration for a promise (even if the waiver does not benefit the requesting party)

Adequacy of consideration- fairness of the bargain- courts rarely question so long as the consideration has been bargained for by the partieso Law does not protect a person from entering into an unwise contract

In rare cases, a court may find that a contract was unconscionable because excessive payments are required by an individual

Preexisting Duty- a promise to do something you are already obligated to do is not considerationo Typically occurs where there was a previous contract

Contracts that are invalid due to illegality:o Contrary to a statute governing the subject matter of the contract(e.g. criminal laws, usury

laws, gambling prohibitions)o Contrary to public policy

Contracts in restrain to trade (covenants not to compete)

Unconscionable contracts or clauses- highly unfair contracts

Exculpatory Clauses - releases a party from liability in the event of monetary or physical injury no matter who is at fault

Voluntary Consent- genuineness of assent, lack of voluntary consent is a defense to the enforceability of a contract

Circumstances voluntary consent may be lacking:o Mutual (bilateral) mistake regarding a material fact- contract can be rescinded by either party

o Unilateral mistakes - regarding a material fact- contract is enforceable unless (i) other party

knew or should have know there was a mistake or (ii) mistake was due to substantial math error, and made inadvertently without gross negligence

o Fraudulent misrepresentation - of a material fact; intent to deceive; innocent party justifiable

relies on the misrepresentationo Non-fraudulent misrepresentation - no intent to deceive is required

Innocent- person makes a statement they believe to be true but actually misrepresents material facts

Guilty only of innocent misrepresentation not fraud Negligent- failure to exercise reasonable care in uncovering or disclosing the facts or

does not use skill or competence requiredo Undue Influence- one party can greatly influence another party overcoming there free will

Ex. Cases with minors and elderly where a guardian is presento Duress- forcing another party to do something including entering into a contract

Statute of Frauds - requires that contracts dealing with certain subjects be written and signed by the person against whom enforcement is sought in order for the contract to be enforceableo Most states have a statute of frauds

o Contract must be signed by the person to be charged with the contractual obligation (i.e. the

defendant)o Even though it is a valid contract, a contract that violates the SOF is an unenforceable

contracto SOF prevents persons from trying to fraudulently prove the formation of contracts dealing

with important, costly complex matterso Writing must identify the parties and subject matter, indicate that a contract exists, and state

the essential termso Contracts that fall under the SOF requirement for a signed writing include:

Transfers of interest in real estate (including long-term leases)

Sale of goods priced over $500

Guaranty contract- where one person guarantees the debt of another

Contracts that cannot be completed within one year- starting on date contract was formed

Promises in consideration of marriage

Chapter 10 Contract Performance, Breach, and Remedies

Discharge- performing the duties required by the contracto Failure to perform is a breach of contract

The contract comes to an end when both parties fulfill their respective duties by performing the acts they have promised

Other ways a party may be discharged from contractual duties include: 1. Failure of a condition- possible future event, the occurrence or nonoccurrence of which will

trigger the performance of a legal obligation or terminate an existing obligation under a contract( ex. House sale contingent on appraisal/financing)o Contractual obligation contingent on the occurrence of a future event

o If a required condition is not satisfied, the parties are released from their obligations, unless

the condition is excused(as in the case where a party who does not want to perform tries to ensure that a condition wont be satisfied) or waived by the party whose performance is contingent on the condition

2. Material breach by the other party- promissor fails to give substantial performanceo Breach - nonperformance of a contractual duty by a party to a contract

o If no time for performance is stated, then a reasonable time is assumed

o If a material breach occurs, the non-breaching party is excused from performing their

obligations under the contract and may sue the breaching party for damageso A minor breach may suspend the non-breaching partys obligation but not excuse them,

however it does entitle them to sueo Anticipatory Repudiation - treated as a material breach (even though the time for the

performance has not expired), and the non-breaching party can sue for damages immediately instead until waiting for the performance deadline

Ex. Football player sued for not showing up

Ex. Not delivering lumber could be suedo Non-breaching party may sue for one of the following to enforce a right to compensate for

injuries

Remedies at low- monetary damages

Equitable remedies- usually not awarded unless money damages are not adequate

Rescission and restitution Specific performance of a contract Reformation of the contract Recovery based on implied-in-fact contract

3. Agreement of the parties 4. Operation of law Damages- goal of monetary damages in contract cases is to compensate non-breaching party for

their loss on a bargain

Types of Monetary damages: o Compensatory damages - relate to direct losses of the non-breaching party and is the most

common type of damages awarded

Ex. In Breach involving failure to deliver goods, compensatory damages would be the difference between contract price and market price for replacement goods

o Consequential (special) damages - foreseeable losses related to the contract breach (loss of

profits)

Relate to special circumstances beyond just the contract and are hard to prove, and if damages are awarded they would be in addition to any compensatory damages

To be award plaintiff must prove defendant was aware or should be aware that the breach would cause the injury party additional loss(burden of proof)

Hadley v. Baxendale Defendant wins due to the fact that to be liable for consequential damages defendant must reasonable foresee the loss (in this case loss profits due to shutdown of mill)

o Punitive damages - designed to punish or deter future conduct, and generally are not available

for mere breach of contracto Nominal damages - awarded where there is no financial loss to plaintiff

o Mitigation of damages - when breach of contract occurs, the innocent injured party is held to

a duty to reduce the damages he or she suffered

Ex. If I a tenet moves out before end of lease the landlord is required to make a reasonable effort to find another tenet to replace them and lessen the cost to the tenet. If he doesnt then damages awarded may be reduced

o Liquidated Damages - contract provides specific amount to be paid as damages in the event of

future default or breach of contract

Types of Equitable remedies: o Rescission - contract is canceled and the parties are restored to the original position that they

occupied prior to transactiono Restitution - both parties must return goods, property, or money previously conveyed to each

othero Reformation - contract is reformed or rewritten to reflect the parties true intentions

o Specific Performance - performance of the act promised by the breaching party in contract

Only granted if money damages are not adequate to compensate non-breaching party

Rarely awarded in sale of goods cases, but typical in contracts for sale of land

Not an available remedy in contract for personal services

Chapter 12 Torts 11 Questions

Tort Law- designed to compensate those who have suffered a loss or injury due to another persons wrongful act o Primarily state common law governs tort actions

o Liability is imposed for conduct that unreasonably interferes with the interests of another

party, even if the conduct was accidental

Tort- civil wrong (not arising from a breach of contract) against persons or propertyo Breach of a legal duty owed to another that causes harm or injury

o Torts are private wrongs whereas crimes are public wrongs

o People owe duties of care to other persons, and they also owe a duty to society not to commit

crimeso Civil action filed by an injured party

Criminal law- objective is to protect the publico Criminal action is prosecuted by the state

Damages awarded in tort actions:

1. Compensatory Damages - compensate or reimburse a plaintiff for actual loss and make them whole for these loss or return them to their prior positiono Special(economic) damages - compensate the plaintiff for quantifiable monetary loss

Compensatory damages must be reasonably certain, but future damages can be estimated

Ex. Medical expenses, lost wages and benefits(now and future)o General( non-economic) Damages - compensate individuals not companies for nonmonetary

aspects of the harm suffered such as pain and suffering

2. Punitive Damages - to punish the wrongdoer and deter others from similar wrongdoing Only appropriate when defendants actions were particularly egregious or reprehensive

and very rare

Not awarded in negligence cases, unless there is gross negligence

Cant be grossly excessive; must be reasonable in proportion to the compensatory damages (less than 10X)

Tortfeasor - one committing the tort Intentional tort - tortfeasor intended to commit an act, the consequences of which interfere with

the personal or business interest of another in a way not permitted by lawo Evil or harmful motive not required

Negligence Torts - occurs when the defendants actions were unreasonably careless or unsafe Strict Liability Torts - (liability without fault) do not depend on the degree of carefulness or fault

of the defendant, but are established when a particular action causes damage

Product liability torts- arise from manufacturing or selling defective products Intentional Tort types of Victims: 1. Persons:

o Assault - intentional, unexcused act that creates in another person a reasonable apprehension

of immediate harmful or offensive contact

Intent is to cause the harmful or offensive contact or the apprehension of such contact

Fear not required just apprehension of immediate contact

Ex. Stalking or threatening someoneo Battery - intentionally causing of an actual bodily contact that is harmful or offensive

Intent is to cause the contact or the apprehension of the contact

Physical injury does not have to be intended or incurred

Ex. Actually doing the act that was threatened o Defenses to Assault and Battery:

Consent- whether the person consented to the act that was alleged

Self-defense- individual was defending their life or physical well-being

Defense of others- acted to protect others who were in real or apparent danger

Defense of property- reasonable force can be used in attempting to remove intruders from ones home as long as it is not likely that it will cause death or great bodily injury

False Imprisonment - intentional confinement or restraint of another persons activities without justification, can be for any period of time if against their willo Victim must be aware of the confinement when it happens

o Can be accomplished by physical barriers, restraints, or threats of physical force

o shopkeepers privilege- allows merchants to detain a suspected shoplifter in a reasonable

manner for a reasonable period of time while the matter is investigated, provided there is a reasonable basis for suspicion

Defamation - wrongfully hurting a persons good reputationo Libel - committing defamation in writing

General damages availableo Slander - committing defamation orally

o Slander Per Se - exceptions to burden of proof

Statement that another person has a loathsome disease

Statement that another committed improprieties in a profession or trade

Statement that another has committed a serious crime

Statement that a person has engaged in serious sexual misconducto Elements of defamation claim:

Statement about a persons reputation, honesty, or integrity that is untrue

Must be punished(communicated in some way) to a third party

Special damages must be proven for slander except for slander per se

General damages are presumed as a matter of law in cases of libelo Defenses to defamation:

Truth is an absolute defense to a defamation charge

Privileged speech(absolute or qualified)- even if all elements are satisfied, defendant may not be liable if he enjoys a privilege (immunity)

Absolute privilege- judicial proceedings; legislative debate Qualified privilege- good faith statements with limited publication to persons with a

legitimate interest in the communicationso Ex. Discussing an employee with managers

Statements about public figures are generally not actionable unless made with actual malice( knowledge of falsity or reckless disregard of the truth)

Invasion of Privacy - violating someones right to solitude and privacyo Acts that qualify as invasion of privacy:

1. Appropriation of identity- using someones identity for commercial purposes without permission

2. Intrusion into an individuals affairs or seclusion- invading someones home or searching their computer without authorization

3. False light- publication of information that puts a person in a false light

4. Public Disclosure of private facts that an ordinary person would find objectionableo Defenses: matter published is of public or general interest; consent to publication

Appropriation - use of another persons name, likeness, or other identifying characteristic for commercial purposes, without permission and for the benefit of usero Often arise in context of photos used in advertising

o Public figures have the right to sue anyone who uses their likeness for commercial purposes

without consent

The fight to ones likeness is inheritable if decedent specifically provided of it in his willo Exception exists for parody and satire, celebrity imitator performers are exempt for

appropriation claims under some state laws (e.g. Nevada)

Ex. SNL skits

Fraudulent Misrepresentation - Intentional deceit for personal gain, that leads someone to believe in a condition that is different from the condition that actually existso Accomplished through false or incorrect statement

o Can occur in inducing a party to enter a contract or concealment of material facts

o Elements of Misrepresentation:

1. Misrepresentation of fact or conditions they know are false

2.Intent to induce another party to rely on the misrepresentation

3. Justifiable reliance on the misrepresentation by the deceived party

4. Damages suffered as a result of that reliance

5.Causal connection between the misrepresentation and the injury suffered

Business tort - wrongful interferences with the business rights of others Wrongful interference with a Contractual relationship elements :

o 1. A valid enforceable contract must exist between two parties

o 2. A third party must know that this contract exists

o 3. The third party must intentionally induce a party to the contract to breach the contract

Ex. Hiring a employee who has another employment contracto Case: Pennzoil v. Texaco- Pennzoil accused Texaco of interfering with their contract with

Getty Oil by making an offer to buy themo Rule: Pennzoil won and ultimately settled for 3 Billion

Negligence Torts - tortfeasor neither wishes to bring about the consequences of the act nor believes that they will occuro Risk must be foreseeable it that a reasonable person engaging in the same activity would

anticipate the risk and guard against it

Plaintiff must prove the following for a negligence action: o 1. Defendant owed a duty of care to the plaintiff

Duty of care - people are free to act as they please so long as their actions do not infringe on the interest of others

There is no duty for rescue, therefore if you see an injury about to happen and you dont act then you are not guilty of negligence

Reasonable person standard - societys judgment of how an ordinarily prudent person should act

Landowner must exercise reasonable care to protect people from harm on their property

Must protect tenants and their guest from harm in common areas Certain Professionals are held to a higher standard of care based on their knowledge of

the particular profession

Malpractice - essentially professional negligence

Ex. Accountant being not familiar with GAAP Business Invitees - persons invited to come on to the premises by retailers and other firms

Must use reasonable care to protect these people Ex. If you slipped on the floor of a business when a sign was not up then you would

have a negligent caseo 2. Defendant breached that duty-if the tortfeasor has not acted in accordance with the

appropriate standard of care

Standard is what an ordinary, reasonable, prudent person would do in the same situation

But professionals are held to standard applicable with professiono 3. Plaintiff suffered a legally recognizable injury

Must have suffered some loss, harm, wrong, or invasion of a protected interest

Compensatory damages are the norm and must be reasonably certain

Punitive damages only in cases of gross negligenceo 4. Defendants breach caused that injury

Must prove both for causation of an injury:

Causation in fact - injury would not have occurred without the defendants act

Use the but for test Proximate Cause - connection between an act and an injury is strong enough to justify

imposing liability

Defendants carelessness must be close in time and space to have caused plaintiffs damages

Harm suffered must have been foreseeable Ex. Palsgraf v. Long Island Railroad Co.- plaintiff was injured when fireworks exploded

that a rider was carrying after RR attendant pushed him into the train so he would make it.

Rule- Defendant won because there was no way to foresee this event happening Defenses to Negligence Torts: 1. Assumption of Risk- voluntarily enters into a risky situation, knowing the risk involved, will

not be allowed to recovero Knowledge of risk and the voluntary assumption of the risk are required for this defense

Ex. Driver entering a car race knows there is a risk of being injured or killed

2. Superseding Cause- unforeseeable event breaks the causal connection between the wrongful act and an injury to anothero Ex. You hit someone on your bike causing her injury, but while she waits a plane crashes

nearby causing her serious burns. You would be liable for the bike injuries but not the plain injuries

3. Contributory negligence (minority rule)- plaintiffs own carelessness partly caused his injuries then he is barred from recovering any damages from defendant

Old and majority of states have adopted the comparative negligence rule

4.Comparative negligence (majority rule)- enables both the plaintiffs and the defendants negligence to be computed and the liability for damages to be distributed accordingly

Ex. A plaintiff who is 35% at fault could recover 65% of the damages

50% rule- if plaintiff is more than 50% at fault then they cannot receive any damages

Only some states have this Res ipsa loquitur - the facts speak for themselves presumption of the defendants negligence,

leaving the burden of proof with the defendanto Occurs only in events where damage or injury is one that does not ordinarily happen without

negligenceo Event must be within the defendants power to control and must not be due to any voluntary

action or contribution on the part of the plaintiff

Ex. Getting sick from drinking a soda that had a rat in it cause the bottler had to be negligent for the rat to get in it

Negligence per se - in or of itself- individual violates a statute or an ordinance providing for a criminal penalty and the violation causes another to be injuredo Injured person must prove:

o 1. That the statute clearly sets out what standard of conduct is expected, when and where it is

expected and of whom it is expectedo 2. He or she is in the class intended to be protected by the statute

o 3. Statute was designed to prevent the type of injury that he or she suffered

o Ex. Statute against inattentive driving and an inattentive driver causes multiple car wreck.

The driver is found guilty he could then be sued by the injured party under Negligence per se

Danger invites Rescue Doctrine- person who is injured while going to someone elses rescue can sue the person who caused the dangerous situation

Good Samaritan Statutes - persons who are aided voluntarily by others cannot turn around and sue the good Samaritan for negligence

Dram Shop Acts - tavern owner or bartender may be held liable for injuries caused by a person who becomes intoxicated while drinking at the bar or who was already intoxicated when served by the bartender

Social Host statute - holds persons having parties responsible for intoxicated guest that cause others injury on their way home

Strict Liability - defendant liable for harm even though no negligence is shown, liability is imposed on the defendant as a matter of public policyo Ex. Liability for defective products

o Abnormally dangerous activities involve a high degree of risk that cannot be completely

protected against even with reasonable careo Highly hazardous activities are allowed because their social value outweighs their hazard

Theory that the cost of damages should be borne by the party that benefits economically from the activity

o Keepers of wild animals are strictly liable for any harm caused by the animals

o Manufacturers and sellers of harmful or defective products due to the fact:

Can spread the cost throughout society by increasing prices

Since they profit from their production activities, the cost of related injuries should be treated as an operating cost

Chapter 25 Property Rights 7 Questions

Property - rights that people have with respect to something, not the thing itselfo Gives the owner the right to possess, control or transfer property

o Long-standing custom in the U.S. and is protected by the constitutions due process and

taking clauseso Violations may result in civil actions and/or criminal charges

Property Law - generally governed by state law, including some UCC statuteso Federal law governs trademark, copyright and patent property rights

o Property rights may be restricted by other laws(e.g. zoning, criminal tort