ETHICS AND STRUCTURE

Objective 1.02

EVOLUTION OF AMERICAN LAW

Laws are rules of conduct established by

the government of a society to maintain

stability and justice in that society.

American law, like its people, is a

blending of changing ideas and diverse

cultures.

GREEK LEGAL SYSTEM

Philosophers debated ideals of justice

Circa 620 BC Draco, the Greek lawgiver,

classified law into four areas: tort, family, public

and procedural laws

“Rule of Law” should govern man, not other

men

• First legal system using a jury

• Included laws of commerce and property

NAPOLEONIC LAW

• Influenced by Roman Civil Law

• Established by Emperor Napoleon of

France

• Transported to French Colonies

– Quebec Province, Canada

– Louisiana, USA

• Legal systems following Napoleonic Code

– Modern day Quebec, Canada

– Modern day Louisiana, USA

– Did not accept the entire Uniform Commercial

Code (UCC)

– Louisiana has modified many state laws to

correspond with 49 other states for uniformity

CONSTITUTIONS

• A document which spells out the principles

by which a government rules and the

fundamental laws that govern a society

• American constitutions

– US Constitution (1787)

– Each state has a constitution

SOURCES OF AMERICAN LAW

Common Law

Law of Precedent

Statutory Law

Federal and State Constitutions

Administrative Law

COMMON LAW

• Unwritten laws

• Based on customs and traditions of people in a society

• Colonists brought English Common Law doctrines with them to America.

• Primary basis of American legal system

Adopted by US legal system

• Common law developed into a legal system

modeled by nations around the world

LAW OF PRECEDENT

• Judges referred to decisions in previous

common law cases.

• Judges applied that decision to a new

but

similar case.

• Thus, Law of Precedent established

STATUTORY LAW

STATUTES

• Statutory law is enacted (passed, created,

ratified) by a governing body for a specific

purpose.

– Federal legislature

• Creates statutes, acts

– State legislature

• Creates statutes

– Municipal (city/town) government

• Creates local ordinances and by-laws

• All statutes-

– Are subject to review by

judicial system

– Must be constitutional -

cannot conflict with the

United States Constitution

JUDICIAL REVIEW

Precedent set by Marbury vs. Madison, 1803,

gave court system the right to:

– Review Lower Court Decisions

– Review Statutory laws

– Review Executive Branch

CONSTITUTIONAL LAW

• The US Constitution is the supreme law of

land.

– Any state or local law that conflicts with the US

Constitution is unconstitutional.

– If unconstitutional, then law is null and void.

• The Supremacy Clause, US Constitution

Article VIWho has supremacy

RIGHTS OF CITIZENS

• US Constitution guarantees rights to

citizens

– Bill of Rights – Individual rights

– Rights of Representation

– Arrest/Trial Rights

– Suffrage (Voting) Rights

– States Rights

– Right to amend Constitution

DUTIES OF CITIZENS

• Duty of Citizens

– #1 Allegiance to country

• Breach of Duty

– Treason-disloyalty to country

– Expatriation-the act of abandoning one’s

country

ADMINISTRATIVE LAW

• Administrative law is the regulations,

orders, rules and decisions of administrative

agencies.

• Legislators create an administrative or

regulatory agency.

• Purpose is to regulate certain activities for

the benefit of the public.

ADMINISTRATIVE (REGULATORY)

AGENCIES

• HAVE THE POWER TO: ADMINISTRATIVE AGENCIES

– Make rules

– Enforce rules

– Investigate violations

– Decide guilt or innocence

of violators

– Penalize those convicted

– Order actions to sto

• Are set up when expert

knowledge is

needed

• Have a limited scope of

power

• Are subject to judicial

review by the court

system

GOAL 2.0 NOTES

CRIME

An act against the public good NOTE: Each statute that defines a

crime must specifically explain

the conduct that is forbidden by

that statute.

No act can be considered a

crime unless it is prohibited

by the law of the place where

it is committed and unless the

law provides for the

punishment of offenders.

4 PUNISHMENTS FOR A CRIME?

Imprisonment

Fine

Probation

Community Service

Combination of the above

PARTICIPANTS OF A TRIAL

Plaintiff? (2)

-Government

-Prosecutor

Defendant (1)

-Person accused of the crime

CLASSIFYING A CRIME

ACCORDING TO SERIOUSNESS ELEMENTS OF A CRIME

What is the most serious?

Felony

Imprisonment or death

What is less serious?

Misdemeanor

Fine and/or probation

Criminal Act

-Must violate a statute

Required state of mind

-Depends on crimes definition

Motive is NOT required

TYPES OF CRIMES

Crimes Against People

Social Crimes

Crimes Against Property

Business crimes (White Collar)

CRIMES AGAINST PEOPLE

Murder

Malice aforethought?

1st degree—aggravated (premeditated, cruelty,

torture, rape, robbery, kidnapping)

2nd degree—non of the above conditions apply

Manslaughter

Voluntary?

Intentional

Involuntary

Occurs while committing an unlawful or reckless

act

CRIMES AGAINST PEOPLE-CONTINUED

Assault - Attempt (pointing or shooting at someone)

Aggravated (Usually felony)-using deadly weapon with

intent

Simple (misdemeanor)

Battery

Hitting

Kidnapping

Unlawful removal against person’s will

Sex offenses

Statutory rape

Date rape (acquaintance rape)

SOCIAL CRIMES

Federal/State governments have the right to

regulate health, safety, welfare, and morals of

the people.

Drug Use

illegal and harmful substances

Addiction-inability to function normally

Alcohol Use

Domestic Violence

Physical or mental abuse

PUNISHMENT

Fines-payment of specified amount of money

as penalty for committing crime.

Imprisonment –indefinite or indeterminate

sentences

Mandatory Sentencing

What is the only thing a judge cannot do?

Not allow you to see a family member.

ASSIGNMENT FOR THE ATTORNEYS

You are hereby assigned the following

responsibilities:

Write a narrative (1 page minimum)

summarizing what you learned from the unit

on Criminal Law and its impact on your life.

Take a posttest on the objective to measure

what you should know about the subject

matter.

Discuss results with teacher and prepare to

retest if the need occurs.

Court is dismissed!

GOAL 3.0

ACCEPTANCE

Unqualified willingness to go along with the

offer

REQUIREMENTS OF ACCEPTANCE

Unconditional Acceptance

– Mirror Image Rule (IMPORTANT)

• Acceptance must “mirror” offer

• Any change means there is no acceptance

Counteroffer

• Offeree makes an offer

• Offeror becomes offe

METHODS OF ACCEPTANCE

• Contract accepted when sent, if same

method of communication used

• Contract accepted when received, if

different method of communication is used

• If method is stated in offer, it MUST be

used

• Action=Acceptance

• Silence cannot be a method of acceptance

TERMINATION OF OFFER

• Revocation – Taking back of an offer by offeror

• Rejection – Refusal by the offeree

• Counteroffer – Any change in the terms of the

offer

• Expiration of Time – If the offer puts a time limit

on the offer and it has passed

• Death – Offeror dies

• Insanity – Offeror is declared insane

CAPACITY TO CONTRACT

Capacity – legal ability to enter a contract

Majority – age of legal adulthood

Minor – not yet reached legal age

(minority)

NC Age of Majority = 18 years old

Voidable Contracts – minors may disaffirm

or avoid their contracts if they so choose

Infancy = minority = minor = under 18 yrs

old

Returning Merchandise – must be returned

if disaffirming a contract

Tender – offer to return

Misrepresenting Age – fraud

- if contract disaffirmed, you may be sued

for fraud

RATIFICATION OF CONTRACTS WITH

MINORS

Ratify – approve contract

- after reaching majority age, a minor can ratify a

contract made while he or she was a minor

- ratification ends all rights given to a minor

Contracts for Necessaries – necessities – food,

clothing, shelter, and medical care

- responsible for the fair value of item

AGREEMENTS THAT VIOLATE

STATUTES

• Civil & Criminal Statutes

– Agreements to commit a crime/tort are illegal

• Usury Statutes

– State sets a max interest rate

• Interest

– Fee the borrower pays to the lender for using the

money

• Usury

– Charging too high of an interest rate

LICENSING STATUTES

License - legal document stating that the

holder has permission from the proper

authorities to carry a certain trade or

profession

• (Example) - If license is only to raise

revenue (not to show competence) contracts

made are valid not void (Person w/out

license subject to arrest )

MISTAKE

• Unilateral Mistake

• An error on the part of one of the parties

• Cannot get out of contract

• Types:

• Nature of the Agreement

• Signing a contract you don’t understand or have not read

• This applies to signing a contract in a language you don’t

understand

• Identity of a Party

• Bound by contract with face to face meetings

• May be able to void a contract made NOT face to face

BILATERAL MISTAKE (MUTUAL MISTAKE)

• Both parties are mistaken

• Types:

• Possibility of Performance

• Contract is impossible to perform Either party can void

contract

• Subject Matter

• Either party can void contract

4.0

METHODS TO

TERMINATE A

CONTRACT

DISCHARGE BY PERFORMANCE

• Complete

• All terms have been carried out properly and completely.

• Time

• Court will honor time request, if it is deemed “of the essence.”

• If not mentioned in contract, then a reasonable time will be

assumed.

DISCHARGE BY AGREEMENT

Mutual Release

• Each side releases the other side from the

contract.

• Accord and Satisfaction

• Substitute one contract for another.

DISCHARGE BY

IMPOSSIBILITY OF PERFORMANCE

• Death or Illness in a Personal Service Contract

• Only allowed in Personal service contracts.

• What is personal service?

• Photographer

• Artist

• Any other contract must be completed.

DISCHARGE BY OPERATION OF

LAW

• Wrongful Alteration

• Any altering or changing of a contract will discharge parties to

the agreement.

• Statute of Limitations

• Individual states have a time limit on lawsuits to be filed.

• What is the only crime/tort that doesn’t have a time limit?

ASSIGNMENT

• Legally transferring your RIGHTS in a contract.

• Assignor – party who transfers the right.

• Assignee – party to whom the right is transferred.

• No consideration needed.

• Must not change the obligations in the contract.

• Must be a RIGHT not a DUTY.

• Assignor is responsible for contract fulfillment

DELEGATION

• Transfer a duty.

• Delegating party is still responsible for the contract being

fulfilled.

• Contracts that CANNOT be delegated:

• Promise to perform service personally.

• Exercise of personal skill or judgment.

• Contract prohibiting delegation.

CHARACTERISTICS OF A CONTRACT

• Valid

– Legally good

• Void

– No legal force

• Voidable

– Not void, but may be voided by one party

• Unenforceable

– Some rule of law can not be enforced by the cour

EXPRESS VS. IMPLIED

• Express

– Stated in words

– Written or spoken

• Implied

– Based on actions (not words)

BILATERAL VS.. UNILATERAL

• Bilateral

– Contains two promises

• Unilateral

– Contains one promise

ORAL VS.. WRITTEN

• Oral

– Spoken words

• Written

– Write out exact terms

05.01 Understand the Types of Ownership

UNDERSTAND THE TYPES OF OWNERSHIP

CHARACTERISTICS OF SOLE PROPRIETORSHIP

● Requirements for Organizing - none

● Legal Status – owner is the business and it is

not a separate entity.

● Liability - unlimited

● Management – owner makes the decisions

● Dissolution – owner decides and the business

terminates upon the owner’s death

● Ease of formation – just do it!

● Duration – death or disinterest of owner

● Ability to attract professional managers - poor

TYPES OF CORPORATIONS

● Domestic-chartered in a specific state

● Foreign-chartered in one state but doing

business in another state

● Alien-chartered in another nation but doing

business in a state

6.01

TYPES OF NEGOTIABLE INSTRUMENTS

ENDORSEMENTS

■ Signature on the back of a negotiable instrument

■ Allow payee to cash, deposit or transfer payment

of the check to someone else

■ Proof that the payee cashed or transferred

payment of the check to someone else

■ Endorser is responsible for payment of the check

if the new owner cannot collect payment

■ Endorse should sign the check the way it is on the

front of the check and if the name is misspelled,

correct the signature directly up under the first

endorsement

BLANK ENDORSEMENTS

Signed with

endorser’s name only

■ Can be cashed by

anyone who has a

check with a blank

endorsement

SPECIAL OR FULL ENDORSEMENTS

■ Transfer payment to

someone else

■ Can make a payment

on a debt with this

endorsement

■ Payee signs the

check over to another

person to receive

payment

RESTRICTIVE ENDORSEMENTS

■ Limits use of check

■ Safest type of

endorsement

■ Can not be cashed by

someone who has

stolen the check

■ Safest way to send a

check through the

mail

LAWS PROTECTING DEBTORS

SETTING MAXIMUM INTEREST RATES DISCLOSURE OF TERMS

Usually apply to loans of

money

Some states govern

charges imposed on

credit purchases of

goods/services “on time”

Full disclosure of interest

and finance charges

Does not limit percentage

amount

True annual percentage rate

(APR)

Does not apply to first

mortgages

LAWS PROTECTING DEBTORS

Creditors must mail bills at least 14 days before due

date

Creditors must acknowledge billing inquiries within

30 days

Creditors must settle complaints within 90 days

Creditors may not send repeated letters demanding

payment until disputes over billing are settled

Credit cardholders may withhold payment for items

defective without being liable for entire amount owed

(purchases of $50 or more and 100 miles from home)

07.01

AGENCY LAW

AGENCY

Relationship in which one person,

called an agent, represents another

person, called a principal, in some sort

of business transaction with a third

party. In most cases a binding

contractual agreement is formed.

Principal -> Agent -> Third Party

– Example: You picked up and paid for a

pizza ordered by a family member

TYPES OF AGENTS

General Agent-given authority to perform

any act within the scope of a business.

Special Agent-employed to accomplish a

specific purpose or to do a particular job.

Subagents-appointed by another agent.

Agent’s Agent-has no power to appoint a

subagent but does so anyway.

Coagents-two ore more agents hired by the

principal.

AGENCY RELATIONSHIPS

Gratuitous Agent: agent works for free

(no contract)

Master: has the right to control the

conduct of his or her servant

Independent Contractor: agent is

hired by the other party, but not

controlled

Partially Disclosed Agent: principal’s existence but not identity is known to the third party.

Fiduciary: relationship is based on

trust.

Actual Authority: real power the

principal gives to an agent to act on

his or her behalf

TYPES OF AUTHORITY

Actual-real power given to agent

Express-all orders, commands, or

directions given to agent when

relationship created

Implied-understood acts or powers

implied from express terms

AGENT’S DUTIES TO

PRINCIPAL

Obedience-obey reasonable orders

Good faith-deal honestly

Loyalty-faithfulness or acting in best

interest

Duty to account-accountable for all

money entrusted to him/her

PRINCIPAL’S DUTIES TO

AGENT

Compensation-payment for services

Reimbursement-repayment for own

money spent

Indemnification-repayment for amount

lost

Cooperation-working together

TERMINATION OF

RELATIONSHIP

By operation of law

– Death of principal or

agent

– Bankruptcy

– Impossibility of

performance

– Agent’s objective

becomes illegal

Termination of acts

– Performance

– Mutual agreement

– Agent’s withdrawal

– Agent’s discharge

FEDERAL ENERGY REGULATORY

COMMISSION (FERC)

Manages the wholesale price of natural

gas and electricity sold for interstate

commerce use.

Answers questions about increase in prices

State Utility agencies regulate prices

Manages transportation of electricity and

natural gas

Ensures that regulated energy companies

are following guidelines set by the law

U.S. DEPARTMENT OF ENERGY

Protects National Security

Applies advanced science and

nuclear technology

Protects economic security

Promotes supply and delivery of

reliable, affordable, and

environmentally sound energy

ENERGY REORGANIZATION ACT

Energy Reorganization Act created

the NRC

Controls licensing, constructing, and

creation of nuclear reactors

Manages possession, use,

transportation, and disposal of

nuclear material

Controls all nuclear activities

ENVIRONMENTAL PROTECTION AGENCY

(EPA)

Responsible for environmental

protection

Implements the Environmental

Policy Act

Governs the environmental laws for

air, water, solid waste, toxic substances, and noise pollution

Controls executive orders

NATIONAL ENVIRONMENTAL POLICY ACT

(NEPA)

Fights Pollution and cleans the

environment

Explains consequences for environmental

violation

Prevents or eliminates damage to the

environment

Requires federal agencies to integrate

environmental values by creating

Environmental Impact Statements each

week that are posted every Friday on the

website

NUCLEAR REGULATORY COMMISSION

(NRC)

Consists of a five member commission

One member is appointed by the President

Generates safety policies and regulations for nuclear

reactors and materials and allows the Executive

Director for Operations (EDO) to handle policies and

decisions of the commission

Issues licenses

Handles legal matters

Directs the activities of the program

EDO ensures safety of commercial use of nuclear

materials in the US

Offices handle inspections, enforcement of laws, and

emergency response programs licensees

CLEAN AIR ACT

Established to protect public health and

the environment

Was created by the US Environmental

National Ambient Air Quality Standards

(NAAQS) to assist in the creations of law

to protect the environment

Handles problems such as acid rain,

ground-level ozone, and air toxics

CLEAN WATER ACT

Protects water quality

Does not handle ground water

Helps to reduce pollution in

waterways, wastewater treatment plants, and

control runoff pollution

Protects the fish, shell fish, and

wildlife in water

TOXIC SUBSTANCE CONTROL ACT

Tracks industrial chemicals

produced and imported into the US

Handled by the EPA

Screens, tests, and reports

chemicals that pose a threat to the environment

EPA can prohibit the manufacture or

import of chemicals thought to be hazardous

Objective 8.01

DOMESTIC RELATIONS LAWS

RIGHTS RELATING TO THE MARRIAGE CONTRACT

The right to support, either emotional or financial, by one’s spouse when necessary

The right to inheritance from one’s deceased spouse

The right to property if the marriage fails

The right to file a joint income tax return

The right to compensation to continue one’s standard of living, if the marriage ends.

The right to the division of community prop

DUTIES RELATING TO THE MARRIAGE CONTRACT

The duty of faithfulness to one’s spouse

The duty to provide support, either emotional or

financial, to one’s spouse when necessary

The duty to refrain from bodily harm to those

with whom they live

The duty to support their children, if there are

any

PREMARITAL AGREEMENTS

A premarital agreement is an agreement between two people considering marriage

Each party in the agreement must be honest

about every aspect of the agreement

Not every marriage contract includes a premarital agreement

A premarital agreement must be in writing and

signed by each party

Also called prenuptial agreement

CEREMONIAL MARRIAGES

Ceremonial marriages are typically used to

make a marriage official (solemnize)

Ceremonial marriages must be administered by

someone who has authority (judge, ordained

minister, sea captain, and in some states

notary public)

COMMON LAW MARRIAGES

Common Law marriages require no witnesses or

ceremony by anyone authorized

Common Law marriages do not require a

ceremony but is typically considered when a man

and a woman share common residence for an

extended period of time (different by state,

typically 10 years)

Under Common Law, a published notice of an

upcoming marriage was called a marriage bann

PROXY MARRIAGES

One or both of the parties to a marriage are

absent and are represented by an agent who

acts on their behalf

Absent due to military duty or serious illness

Historically due to travel and distance issues

on arranged marriages

PROHIBITED MARRIAGES

Prohibited marriages include, in most states, marriage between close relatives, marriage between those related by blood (consanguinity), or marriages related by marriage (affinity)

The Uniform Marriage and Divorce Act prohibits marriage between parent/grandparent, child/grandchild, brother/sister, uncle/niece, or aunt/nephew

Bigamy (two spouses at one time) and Polygamy (more than two spouses at one time) are prohibited

GROUNDS FOR ENDING A MARRIAGE

Marriages can end either by:

Death

Annulment

Divorce

ANNULMENT

The grounds for annulment include either

spouse lying about:

Pregnancy

Freedom from disease

Willingness to have a child

Past Marriage

Age

DIVORCE

The grounds for divorce vary from stateto-state but can include:

No-fault (the breakdown of the domestic relationship)

Adultery

Physical or mental cruelty

Desertion

Alcoholism or drug addiction

Nonsupport

Conviction of a felony

A few states have allowed for divorce based on incompatibility

Impotency

ALIMONY

An allowance made to a divorced person by his

or her former spouse for support

Set during the court settlement

The judgment of the court

SUPPORT AND CUSTODY OF CHILDREN

The welfare of the child is the main concern of the courts

Many factors are considered when determining custody:

Parents’ wishes

Childs’ wishes

Child’s relationship with parents, siblings, and any other person who may affect the child’s welfare

Child’s adjustment to home, school, and community

Physical and mental health of all involved

Joint custody may be awarded

If one parent receives custody, the court will then set child support payments for the other parent.

If child support is not paid, a parent locator service is then used to help collect the unpaid child support payments

Objective 08.02

INTRODUCTION TO

INSURANCE

NATURE OF INSURANCE

• The concept of insurance involves risk

pooling or spreading losses over a greater

number of people.

• An insurance company collects and pools

premiums from many individuals or

businesses for the payment of future

claims.

RISK MANAGEMENT

• All people take risks every day.

• Risk management is the process of

managing one’s exposure to risk.

– Examples

• Using a seat belt

• Installing smoke detectors

• Driving a vehicle

• Playing sports

• Purchasing an insurance policy

ADHESION CONTRACT

• An adhesion contract is a standard form contract that is written

primarily by one party

• Insurance policies are adhesion contracts

• Policyholder (buyer) cannot usually change:

– Policy language

– Perils covered

• Policyholder can change:

– The dollar limit of coverage

• Example- $200,000 coverage on homeowner’s structure

– Specific items to be covered

• Example- 1 carat diamond ring, valued at $3000

• Some adhesions contracts are found by courts to be

unconscionable if they take advantage of one party

INSURANCE

• Planned protection provided by sharing

economic losses

• Insurance does NOT stop the loss from

happening

• Insurance companies provide a risk

management service to consumers

• Insurance does indemnify or financially repay

the insured a portion of the loss

• All insurance policies have a specified limit of

coverage

INSURABLE INTEREST

A financial interest in property or a

person’s life that permits someone to buy

insurance to protect against the financial

loss of that property or person’s life

• Examples:

– You can insure cars owned or leased by you,

but not a car belonging to another person

– You can purchase life insurance on someone

whose death would be a financial loss to you,

ie spouse, business partner, parent, child

PREMIUM

NON-PAYMENT OF PREMIUM

The amount of money the policyholder

must pay for insurance coverage

• An insurance underwriter determines the

cost of the policy using risk factors and

statistical data

• An agent represents the company to the

consumer

• Equals consideration in the insurance

contract

If the premium is not paid, the policy may

lapse or cancel, voiding the contract

• If claims are made after a lapse, the

claim is denied

• Some policies have a grace period

– Late premiums are received and

– Policies are reinstated

CLAIMS

The request for payment from an

insurance company to cover the financial

losses

• Examples:

– Automobile-car accident

– Medical-doctor’s appointment

– Life-covered person dies

– Disability-out of work for health reasons

– Unemployment-laid off from job

DEDUCTIBLES

Most policies have a self-insured portion of the

cost of the claim that is paid by the insured.

– The insured chooses the amount of risk retained by

choosing the deductible amount

– Deductible

• On auto coverage, the amount the insured pays before the

insurer pays collision or comprehensive damage claims

• On health coverage, the amount the patient pays before the

insurance company pays any covered medical expenses

– The higher the deductible chosen by the insured, the

lower the premium for the coverage.

– 100% self insurance = 100% risk retention

• means no insurance is purchased

AUTO CLAIMS

The at fault driver of a vehicle that

damages other property or injures other

people is liable for the cost of repairs.

• North Carolina financial responsibility laws

mandate that drivers carry bodily injury

and property liability insurance coverage.

PROPERTY DAMAGE LIABILITY

– Property Damage Liability protects the insured

person from liability claims for damage to

property of others, such as:

• Personal property including vehicles, animals

• Business property including telephone poles and

other utility structures

• Government property such as bridges and other

road structures

• Real property

– Does NOT cover the insured person’s

propertyOptional

LIFE INSURANCE

Provides income to dependents or other

named beneficiaries in the event of the

insured person’s death.

• Face value- the amount of protection

stated in the policy

– Example: Marla buys a $100,000 face value

life insurance policy. Marla dies. Marla’ s

beneficiaries will get $100,000 in proceeds

BENEFICIARIES

The policyholder names a beneficiary

• Can be an individual or business

• Beneficiary receives proceeds from a life

insurance claim.

• Proceeds is the money paid to a survivor

by a life insurance policy.

• Contingent beneficiaries named in the

policy are second in line if the

beneficiary is deceased.

LIFE INSURANCE ADVANTAGES

• Face amount is paid as proceeds to

beneficiary

• Proceeds are NOT taxable by income,

estate or inheritance tax laws.

• Proceeds are paid direct to beneficiaries.

• Proceeds avoid probate.

TERM LIFE INSURANCE

• Term life is temporary insurance.

– Only pays if insured dies during policy

period

– Purchased for a specific term (one year or

multiple years)

– Usually renewable for another term

– Least expensive premium for most coverage

– Pure insurance, no savings add up

09.02

REAL AND PERSONAL PROPERTY

BAILMENT

• An agreement created by the

temporary delivery

of personal property by the owner to

someone

who is not the owner for a specific

purpose.

• Both parties agree that the

property will be

returned to the bailor.

• Bailee - has in their temporary

possession

property that belongs to someone

else.

• Bailor – owner of property who

gives up

possession to someone else

temporarily

Examples of Bailments

• Leather jacket left at a dry cleaners

• Vehicle delivered to parking valet

• Goods transported by common carrier

• Truck taken to dealership for service check

• Diamond ring taken to jeweler for cleaning or

repair

• Leaving your clothes in dressing room while

trying on new sweater

• Goods delivered to a consignment shop

MUTUAL BENEFIT BAILMENTS

• Invokes the duty of ordinary care on the bailee

• Results from a contract (for service, repair,

storage, rental) with consideration exchanged

• Both bailor and bailee receive benefit

• A pledge as security for a loan is also a mutual

benefit bailment

Most bailments are mutual benefit

RIGHTS AND DUTIES OF BAILEE

• Rights:

– To hold a Mechanic’s Lien -the right to retain

property of another, if not paid for service

rendered

– To expect payment for services rendered

• Duties:

– Of reasonable care and protection of goods

while in custody of bailee

– To comply with terms of bailment

RIGHTS AND DUTIES OF BAILOR

• Rights

– to have goods protected

– to receive service as agreed upon

– to have goods returned in timely manner

• Duties

– to pay for service provided

– to warn of dangers or special care required

– to pick up goods in a reasonable time

TORTIOUS BAILEE

• What is a tortious bailee?

– A party who wrongfully retains lost property or stolen

property

– A party who wrongfully uses a bailed article for a

purpose other than that agreed upon by the parties

• Examples:

– Student who finds necklace and knows who it

belongs to but does not return it to the rightful owner

– Parking valet who takes your hot car on a joy ride

– Dry cleaner’s employee who wears your leather jacket

REAL PROPERTY

• Land and anything permanently attached,

including:

– Buildings, structures, fixtures

– Water, water rights

– Minerals on and below the surface of the earth.

– Trees & crops

– Air space above the surface

PERSONAL PROPERTY

• Anything other than real property, including:

– Clothing, jewelry, furniture, appliances in a home

– Automobiles, ATVs, lawnmowers

– Equipment & machinery used in business

– Copyrights, patents, trademarks

– Software, stocks, loans, mutual funds

• Must be delivered in order to transfer ownership.

• May be tangible or intangible.

RIGHTS OF OWNERSHIP

• Possess, use and enjoy the property

• Dispose of, sell, consume, modify, insure or

destroy the property

• Give the property away by will after death

• Lease the property to a tenant

INTELLECTUAL PROPERTY

• Includes copyrights, patents, trademarks and trade

secrets

• Is an original work fixed in a tangible medium of

expression.

• Examples: literature, computer software, musical

scores and lyrics, choreography, dramatic works,

unique product or process, symbols or word that

identify a product, commercially valuable

information that is kept secret

METHODS TO ACQUIRE PROPERTY

• Purchase contract – earn money and use it to buy

• Gift – includes intent, delivery and acceptance

• Intellectual labor – creation of property

• Inheritance – wills and trusts

• Accession – farm animals naturally increase

• Found property – lost or mislaid

• Occupancy – possession of property that belongs

to no one else

REAL PROPERTY TRANSFERS

Grantor - conveys a deed to

real property

• Grantee – receives the

deed

TYPES OF DEED

• Quitclaim

– Transfers a seller’s interest in a property but doesn’t

warrant that the seller owns any interest

• General Warranty Deed

– Warrants the title

– Most desirable for the buyer

• Bargain and Sale Deed

– Transfers title to property without giving warrant

PERSONAL PROPERTY TRANSFERS

• Transfer of title (ownership) to property

• Not all transfers require written titles

– Purchases of goods from a retail store

• Certain transfers have formal titles-Vehicles

– Are registered with the state

– MUST BE NOTARIZED

– Require odometer reading disclosure statements

– Require damage disclosure statements

LIMITS ON USE OF PROPERTY

• Police powers by government

• Nuisance ordinances enacted by cities

• Zoning ordinances enacted by cities to regulate

• Health and public safety issues

• Certain physical rights

• Eminant domain

• Deed restrictions

• Easements

PROPERTY RIGHTS

• Physical rights apply to:

– Surface (the right to occupy the land, and

develop it with buildings, etc.)

– Subterranean Minerals or Water (rights to

remove or conserve)

– Air (right extends into upper atmosphere-but

cannot exclude aircraft from flying over

property)

EMINENT DOMAIN

• Right to make private property into public if

it is for the public good.

• When highways are widened, private

property is taken by eminent domain.

• Owners are paid the fair market value of the

property, but they cannot refuse to release

property

LIMITS ON USE OF PROPERTY

• Restrictive Covenants

– Deed restrictions

– Example- a homeowners association restricts parking

cars in the street

• Easements for limited use

– Example- Gas lines end at my driveway but a neighbor

wants to build a new home on an adjacent lot. I can

sign an easement release so the utility company can

continue the line to his new home by crossing my

property.

RELATIONSHIP BETWEEN LANDLORDS

AND TENANTS

• Parties to the contract to lease or rent

– Lessor/Landlord

– Lessee/Tenant

• Tenant - Wants possession and occupancy free

from interference or annoyance

• Landlord – Wants rent money and property in

good condition at the end of rental term

RIGHTS AND DUTIES:

COVENANTS OF THE CONTRACT

• Covenant = Promise

• Affect both the landlord and the tenant

• May be express or implied

• Number and type vary depending on type of

property

QUIET ENJOYMENT

• Tenants have a right to:

– expect the undisturbed possession of the

property called quiet enjoyment.

– expect exclusive use of the property free from

interference or annoyances.

• State laws vary and the landlord may or

may not have the right to enter the

premise without prior notice.

– Add covenant to lease to address entry issue

IMPLIED COVENANTS

• Implied warranty of habitability by landlord

– May be enforced by city housing codes

– Health and safety of citizens is considered

– Duty of landlord to provide property free of defective

conditions

• Waste - The landlord expects reasonable wear

and tear by tenant, but unreasonable damage is

called waste and tenant can be required to pay

the cost to repair waste.

ASSIGNMENT AND SUBLETTING

• Assignment and subletting

– When a tenant transfers the remaining period

of time on a lease to another party

• May or may not be allowed by landlord

• May have to get prior approval by landlord

RENEWALS OF LEASE

• Tenancy ends at the expiration of stated

time

• Lease may have renewal clause making

provisions for renewal by the parties to

contract

• Agreement usually requires either party to

give advance notice of their intent to nonrenew the lease

SECURITY DEPOSITS

• A money deposit as security for payment

of rent due or repairs for damages done

by the tenant

• Most landlords require one or two month’s

rent in advance as security deposit

• When lease expires, if all rent is paid in full

and there is no waste, the security deposit

is returned to tenant by landlord.

PAYMENT OF RENT

• A critical issue to both parties. Be sure

contract is clear on:

– What is cost of monthly rent/lease?

– When is payment due?

– Is there a late fee if payment is late?

– What constitutes “late”?

– Is late payment grounds for breach of contract

and termination of tenant rights?

TERMINATION OF LEASE

• If the contract has a specified term, it is a

tenancy for years.

• Leases can be terminated prior to the end of the

term by either party, but penalty clauses may

apply.

• Breach of contract exists if the tenant chooses to

vacate and the property cannot be leased to new

tenant in a timely manner.

• Landlord may sue for monetary damages.

Landlord must attempt to lease property and

mitigate any damages from loss of rents

ANTI-DISCRIMINATION

• Anti-discrimination laws such as the Civil Rights

Act bind landlords in the selection of tenants.

• Special emphasis is given on human rights and

needs.

• Law forbids discrimination on basis of race,

religion, color, national origin, sex, age,

ancestry, marital status, blindness, military

service or future plans to have children.

TORT LIABILITY

• Applies to both landlord and tenant

• May require responsibility for injuries

occurring on the premise

• Landlord is usually responsible for

common areas where landlord is in control

• Tenant is usually responsible for injury

caused by defects in the portion of the

premise over which he/she has control

FIXTURES

• Fixtures are items of personal property attached

to real property.

• The addition of fixtures by the tenant causes

problems when tenant prepares to vacate the

premise.

– Who owns fixtures that become real property?

– What damage will be caused if item is removed?

– Will tenant be reimbursed for improvement to

premise?

BREACH OF LEASE AND REMEDIES

• Eviction – The landlord has the right to deprive

the tenant of physical possession of the

premises but landlord

– Must obtain a court order allowing removal of tenant

– Must provide just cause, such as:

• Nonpayment of rent

• Damage to property

• Violations of lease provision

• Lien may also be attached to tenant’s property to

pay back rent or costs of repair due to waste