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D216 Outline
Unit 2 – Legal Environment Sources of American Law
- The US Constitution
- Statutory Law – made by congress.
- Administrative Law – made by Administrative Agency – executive branch (President appoints who runs the agency). Two types: executive and independent regulatory
- Case Law (common law, judicial doctrine, judge-made law) – Stare Decisis- follow past decisions goal is consistency of decisions. Exception when they don’t follow it – wrong in past and want to correct. Not happy with a decision of United State Supreme court - amend the constitution. Civil Law and Criminal Law Civil Law – lawsuit between persons or between persons and their governments. Private parties sue each other. Criminal Law – wrongs committed against the public as a whole. Society decides action are criminal, such murder, rape, robbery, assault. Society is represented by a public official – District Attorney or prosecutor. Court Decisions
- Majority – biggest group
- Dissenting – losing group.
- Concurring – agree with one side, but for a different legal reason.
- Plurality – largest group for one side but not a majority
- Per Curim – all agree, no one identified as the writer
Constitution Privileges and Immunities Clause – prevents a state from imposing unreasonable burdens on citizens of another state. Can’t make different rules for citizens of your state vs citizens of other states. Commerce Clause – National government regulates interstate commerce. (Commerce means doing business) (Interstate-means between states and foreign countries) Supremacy Clause – Supreme Law of the land. If federal law and state law are in direct opposition, federal prevails. Bill of Rights – first 10 amendments to the constitution First Amendment – Guarantees right to free speech. Symbolic Speech – burning the flag is free speech. Unprotected Speech – Threatening speech – threatens harm and obscene speech - pornography. Fourth Amendment – Prohibits unreasonable searches and seizures of person or property – get a search warrant.
Trademark Infringement – Someone using mark to confuse the manufacturer. Ex. I make tennis shoes and I put the Nike swish on it, you see them and think Nike made them. CAUSES CONFUSION Penalties – Lanham Act
- Injunction – order of court to stop selling the product.
- Recover actual damages.
- Profits of the infringer
- Order for destruction of fake goods.
- Possible attorney fees Trademark Dilution – lessens the value of the mark, not confusion. Famous mark required!!!!! - Well known mark Trademarks can be registered but is not required. First person to use has the mark. Trademark – on a manufactured item. Ex. Nike (tennis shoes, sport clothing) Service mark – on a service Ex. United Airlines Certification mark – item certified by an organization. Ex. Good Housekeeping Seal of Approval, Energy Star Logo Getting a trademark Strong Marks – you get a trademark if you meet these requirements. Fanciful – made up word ex. Google, Xerox Arbitrary- existing word that doesn’t fit the product ex. Apple Suggestive- suggest the product ex. Dairy Queen, Pizza Hut Generic Term- a trademark that becomes the word for the item and loses protection. Ex. Escalator, Aspirin
Patents
Invent something that is novel, useful, not obvious in light of
current technology.
Must apply for patent. American Invent Act- as soon as you
apply you have the protection. Protection is immediate.
License – sell right to manufacture your patented item
Copyright – intangible property right granted to creator. Fixed in a durable medium (able to see or reproduce) Ex. Books, songs, motion pictures, architectural work, software (only the computer language, not how it looks) Get copyright as soon it is perceivable. Copyrights can be registered but not required. Fair Use Doctrine – use material for free – teaching or newspaper. Trade Secret Protect business that cannot be patent, copyright, trademark Ex. Recipes, Research and Development, customer lists Extend both idea and their expression. KEY to trade secret getting by improper means. Violate
- Uniform Trade Secret Act
- Uniform Espionage Act
- Tort action
- Criminal Act Unit 4 – Contracts Common Law (past court decision) Requirements of Valid Contract
Discharge by Performance – complete contract Substantial Performance – party who in good faith substantially perform the terms. The court will decide the price paid. Anticipatory Repudiation – one party to the contract says they can’t complete the contract. Nonbreaching party has to two options:
- can treat it like breach and buy elsewhere, they sue for the difference in cost.
- wait and see, if party can complete, no issue. Discharge by parties Mutual Rescission – both parties agree to release from the contract Accord and Satisfaction – when you offer less than what is owed and you pay less than what is owed. CHECK for a lesser amount with a memo that says for full satisfaction. Novation – replace person contract with a third party, by agreement Discharge by operation of law (beyond the control of the parties) Impossibility of performance – events occur that it is impossible to do contract (Ex. Contract to sell house and it burns down.) Bankruptcy – debtor has no control of their estate. Statute of Limitation – the time you have to sue has passed. You can reduce statute by contract, not less than one year. Damages
- Compensatory Damages -put injured party in same position they would have been if no breach. Can be cash – the difference between contract price and the market price you paid to get the goods. Ex. You order 10 hat for cost of $100, not delivered so you cover, buy them form someone else, cost is $200, sue for difference paid $ Specific performance – when item is unique to force the seller to complete the sale: Real Estate
Art Duty to Mitigate/Right to cover – less then damages, buy the items somewhere else and sue for cost difference.
- Consequential Damages/Special Damages – Foreseeable damages as result of breach. Breaching party know what you the item for, fails to deliver, no time cover, sue for losses (profit).
- Punitive Damages – to punish. Rare in contract. vs. Liquidated Damages – provision in contract that spells out the amount of damages. UCC – Uniform Commercial Code Facilitate commercial transactions – (make process of selling good easier) Tangible and moveable goods- things touch and physically move. UCC is the law of every state – has been adopted by state legislature- STATUTORY LAW – IT IS STATE LAW!!!! UCC is flexible – can modify by contract. UCC – applies to everyone with extra rules for merchants (people in business) Open Terms – (Common Law all terms must be in contract) in UCC you can have missing terms and still have a contract.
- If you intend to contract
- If you know the quantity
- There is a reasonably certain basis that the court can decide the contract. (fill in what is missing) a. Ex. of open terms: Price, delivery Merchant’s Firm Offer – merchant makes an irrevocable (can’t take it back) offer
- Written
- Signed by the offeror Statute of Fraud – requirement that a contract be in writing to be enforced.
- Sales contracts for good priced at $500 or more
Right To Stop Delivery of Good in Transit – IF BUYER IS INSOLVENT seller has right to get the goods back from the delivery company. Right to Cover – buy goods elsewhere and sue for the price difference between market (what you paid) and contract price. Buyer does not have a duty to cover, but failure to will result in a judgment of a reduce amount that court determines what you lost. Warranties Title – seller owns the goods Express Warranties – representations to buyer about the quality, condition, performance of good. Implied Warranty of merchantability – fit for its ordinary purpose. Implied Warranty for a particular purpose- seller know what you need the goods for and you rely on the expertise. Warranty Disclaimer – can disclaim any warranty with notice. Disclaimer must be clear with specific and unambiguous language. Must call to buyer attention. Ex. “As is” Unit 5 - Creditor/Debtor Relations and Bankruptcy Laws Assist Creditors Mechanic Lien- improve real property (real estate) Artisan’s Lien – improve personal property (stuff you can move)
- Must possess the property to have a lien Judicial Liens – sue for judgment so you can collect the debt. Writ of Attachment – court grabs debtors’ property to hold during lawsuit. Writ of Execution – after judgment sheriff can seize debtor’s non- exempt property if located in court’s jurisdiction.
Garnishment – creditor collect debt by seizing property in hands of third parties. Wages – debtor protected keep 30 times federal minimum wage of 75% of disposable earnings per week. Bank Accounts – take anything that is not protected. (not protected social security, spousal support) Co-signers to a loan Surety – promise to be responsible for a third person debt. Primary liable. Guarantor – promise to be responsible for a third person debt if they default. Secondarily liable. Must be a default and attempt to collect. If cosigner pays debt - Rights of surety or guarantor Right of Subrogation – steps into shoes of creditor, right to repossess, be listed as creditor in bankruptcy. Right of Reimbursement – right to get repaid by debtor Right of Contribution – two or more sureties, if co-surety pays more that her shared, can get overpayment from other cosigner. Bankruptcy Protection for the Debtor Exempt property – stuff you can keep, that the court cannot take. Reason is to leave people with necessities. Real Property – homestead exemption Personal Property Automobile Household furniture Clothing Tools of your trade Damages awarded from personal injury
Discharge – released from dischargeable debts Non-Dischargeable debts Student loan, unless undue hardship on the debtor Recent back taxes Child support, spousal support Loan against retirement account Reaffirmation agreement – accepting to keep a debt you can get rid of in your filing. Court has one year to revoke discharge if found that petition was fraudulent or dishonest. Chapter 11 – Business Reorganization Debtor stays in business (debtor in possession) Creditor Committee – unsecured creditor, work on reorganization plan Small Business Exception – “Fast Track” with less than 2.7 million in debt and don’t manage real estate. No need for committees Reorganization Plan – Acceptance of plan, approved by each class of creditor (all creditors) by 2/3 amount of total claim. Cram Down – court forces creditors to accept plan Chapter 13 – Individual Repayment plan – those who have disposable income Plan last 3 -5 years Discharge at end is good faith – all debt discharged except for those not in the plan and secured debt, domestic support obligation. Unit 6 – Forms of Business Sole Proprietorship – the owner is the business. Advantage own entire business and no documents need to start.
Taxed on individual income tax. Disadvantage Unlimited personal liability Business dies when owner dies Partnership – two or more people working together for profit. Equal management rights (regardless of interest) (relationship similar to agency – have duty of care and duty of loyalty) Uniform Partnership Act (UPA) – governs operation of partnership in absence of express agreement. Tax Treatment – pass-through/flow-through entity. If written document called articles of partnership Liability of Partners – DISADVANTAGE Personally liable for the debts of the partnership. Joint Liability – third party must sue all of the partnership as a group for partnership to be liable. If judgment against only some of the partners, partnership assets cannot be taken for the judgment. Joint and Several Liability – liable both jointly and separately All partners in a partnership can be held liable even if a particular partner did not participate in, know about, or ratify the conduct that gave rise to the lawsuit. Indemnification- partner who commits a tort can be required to reimburse the partnership (unless action was committed in the ordinary course of partnership business). Dissociation – partner leaves the partnership. Dissolution – dissolving partnership Winding up 1)pay debts
Board of Directors – responsible for policy making of the corporation. Hire the Corporate officers the CEO, CFO, etc. Shareholders – owners of the corporation, they elect the board of directors. Common stock – one vote per share to elect the board of directors Preferred shares – no right to vote, get paid first Limited Liability Company (LLC) – hybrid between corporations and partnership LLC – state law Members have limited liability. File Articles of Organization Flexibility in Taxation Single member taxed on personal income Two or member choose to be taxed between partnership or corporation Default tax as – partnership Member managed or manager managed – default member Voting rights are typically apportioned according to capital contribution. Dissociation – duty of loyalty ends; duty of care continues only with respect to events that occurred before dissociation. Dissolution – end business – winding up Jurisdiction (to get into federal court claim over $75,000 and diversity of citizenship) Corporation – citizens of State incorporated. LLC, Partnership – citizens of every state where a member or partners live. Unit 7 -Agency
Fiduciary relationship – involves trust and confidence. Independent Contractor – only agency relationship if you have control Employer/Employee – always agency relationship if employee works with third parties. Establish Agency Relationship Agency by Agreement Agency by Estoppel – principal give appearance that person is agent, and third party relies to their determinant. Agency by Ratification Agency by Operation of Law Duties of Agent Performance – do a good job Notification – tell principal everything that is going on Loyalty – Act solely for benefit of your principal Obedience – follow all lawful and clearly state instructions. Accounting – keep a record Principal Duty to Agent Compensation- pay them, unless gratuitous, if no amount discussed pay customary compensation for such services. Reimbursement – for expenses Indemnification – lawsuit against agent, principal pays agent back Cooperation – cooperate with agent Exclusive Agency – principal cannot compete with agent Safe working Conditions
Consumer Protection Deceptive Advertising – Federal Trade Commission – covers half-truth and bait and switch. Puffery allowed – puffery outrageous statement that no one believes. Lanham Act – business does a false ad, if actually damage to business, and the ad was cause. Telemarketing and Consumer Fraud and Abuse Prevention Act - Identify seller, product, disclose all material facts, and include total cost. – ESTABLISHED the National Do Not Call Registry – FTC enforced Truth-in-Lending – Regulation Z – included in a consumer loan - must include annual percentage rate, finances charge, amount financed and total cost. Fair Credit Report Act – if denied credit, get credit report to check for accuracy Fair and Accurate Credit Transaction Act – Identity theft – FREE REPORT Investor Protection The Securities Act of 1933 -If you are going sell stock to public you must first register it with SEC and get approval to sell. Once approved, must give a prospectus. Prefiling, waiting period, post effective. Offer it during waiting period, give prospectus but cannot sell until approve. Exception to registering for the 1933 Act Well-known Season Issuer -sold at least 1 billion in stock, have at least 700 million still outstanding. Can sell as so as register. Exempt Securities – government-issued securities, bank securities, insurance policies, endowment and annuity contracts Private placement – no public, small group of private investors who understand the risk Regulation A – public offering that are Tier 1- up to $20 million, Tier 2- up to $50 million. (not a full registration, just giving notice to SEC) The Securities Exchange Act of 1934 Requires continuous reporting by section 12 companies. These are company’s’ assets more than 10 million and over 500 shareholders. 10Q – quarterly report filed with SEC 10K – annual report filed with SEC
Insider Trading – known as 10(b) SEC 10b-5 Selling or buying stock on inside information, that information that the public does not have. SCIENTER – intent to defraud or knowledge of misconduct. You know you are doing something wrong! Private Securities Litigation Reform Act – that a company can make forward looking statements to public as long as they tell them it a guess. Corporate Governance Board of Directors – elected by shareholders, responsible for hiring corporate officers, advising the corporate officers, exclusive interest of shareholders. Sarbanes-Oxley (SOX) Create the Public Company Accounting Oversight Board – oversee public accounting firms Internal Controls – most senior officers to establish and maintain effective system of internal control. Evaluate effectiveness annually. establishes requirements for companies to publicly report on management’s responsibility for establishing and maintaining an adequate internal control structure, including controls over financial reporting, and the results of management's assessment of the effectiveness of internal control over financial reporting. External auditors must report if they agree with management’s assessment of the company’s internal control over financial reporting. CEO and CFO to certify every financial report filed with the SEC 10Q – quarterly document 10K – annual document Board of Directors – elected by shareholder, they responsible for hiring the corporate officers and make sure corporate officers are running the business wisely, exclusive interest of shareholders. Audit committee – made up of outside directors, must have one of these as financial expert and they will monitor outside auditor. Compensation committee- determine compensation for the senior staff, the CEO, CFO
