Term
| Know what “negotiability” means and why it is commercially useful |
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Definition
Negotiability is the ability to transfer particular financial instruments to third parties either with or without considerations
This gives instruments a high degree of marketability by conferring upon certain good faith transferees immunity from most defenses to the instrument |
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Term
| Know the following forms of negotiable instruments: checks, promissory notes, and certificates of deposit; and the parties to each, such a drawer, drawee, payee, and maker |
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Definition
Checks: form of draft that is drawn on a bank and payable on demand; the drawer orders the drawee (the bank) to pay the payee on demand
Notes: a written promise by a maker (issuer) to pay a payee a certain sum of money, either on demand or a stated date
Certificate of deposit: a specialized form of a note that is given by a bank or thrift association |
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Term
| Know the difference between an order to pay, and a promise to pay, and the difference between order paper and bearer paper |
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Definition
Promise to pay: an undertaking to pay, which must be more than a mere acknowledgment or recognition of an existing debt
Order to pay: instruction pay
Payable to order: payable to the “order of” a named person or anyone designated by that person
Payable to bearer: payable to the holder of the instrument; includes instrument payable (payable to bearer or the order of bearer, that do not specifiy a payee, or payable to cash) |
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Term
| Know the nine requirements for a negotiable instrument |
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Definition
1. Writing: any reduction to tangible form
2. Signed: any symbol executed or adopted with intention to validate a writing
3. Promise or order to pay
4. Unconditional: absolute promise to pay that is not subject to any contingencies
5. Fixed amount: the instrument must contain a determinable minimum principal payment although provisions in the instrument may increase the amount of payment under certain circumstances
6. Payable in Money: Must be paid in accepted currency
7. Contain no other undertaking: a promise or order to do an act in addition to the payment of money destroys negotiability
8. Payable on demand or at a definite time
9. Payable to order or to bearer: a negotiable instrument must contain words indicating that the maker or drawer intends that it pass into the hands of someone other than the payee |
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Term
| Understand the effect of reference to other agreements and the particular fund doctrine |
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Definition
Reference to other agreements does not destroy negotiability unless the recital makes the instrument subject to or governed by the terms of another agreement
The particular fund doctrine: an order or promise to pay only out of a particular fund does not destroy negotiability |
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Term
| Know what a holder in due course is and the effect of that status on enforcement of the instrument |
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Definition
When a negotiable instrument is transferred to a third party the holder becomes a “holder in due course”
A holder in due course may collect from the maker or the drawee without regard to most defenses other than fraud or theft |
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Term
| Know what Chapter 7, 11 and 13 proceedings are; also know what a Chapter 12 proceeding applies to. |
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Definition
Chapter 7: Liquidation; applies to individuals or businesses
Chapter 11: Reorganization; applies to most businesses
Chapter 13: Wage earner plan; applies to individuals
Chapter 12: applies to family farms |
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Term
| Know how a bankruptcy case commences and the difference between voluntary and involuntary petitions |
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Definition
Commencement of the case: the filing of a petition begins jurisdiction in the bankruptcy court
Voluntary petitions: available to any debtor even if solvent; consumer debtor must receive credit counseling before filing
Involuntary petitions: may be filed only under chapter 7 or 11 if the debtor is generally not paying his debts as they become due; debtor may answer the petition |
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Term
| Know what information a petition must contain, and why it is important for the disclosures to be complete and accurate |
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Definition
-Identification of the debtor
-Schedules of assets
-Schedules of debts
-Identification of creditors
Failure to disclose this information may result in no or incomplete relief |
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Term
| Know what an automatic stay is, how creditors are given notice, and what a meeting of creditors (a/k/a Section 341 meeting) is |
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Definition
Automatic stay: upon the filing of a petition and giving notice in other proceedings, it prevents attempts by creditors to recover on claims outside of the bankruptcy court; freezes even pending litigation in state courts
Notice to creditors: if assets exist, creditors given opportunity to file claim
Meeting of creditors: debtor must appear and submit to an examination of her financial situation |
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Term
| Know what the terms creditor, debtor, claim, bankruptcy estate, discharge, and trustee mean |
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Definition
Creditor: any entity that has a claim against the debtor
Claim: a right to payment
Discharge: relief from liability for all debts except those the bankruptcy code specifies as not dischargeable
Estate: when a bankruptcy case is filed, all legal and equitable interests of the debtor in nonexempt property become property of the “estate”
The trustee: a third party that supervises the bankruptcy case and can control disposition of assets |
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Term
| Know what voidable preferences and fraudulent transfers are, and the rules on the same |
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Definition
Voidable preferences: Bankruptcy code invalidates certain preferential transfers made before the date of bankruptcy from the debtor to favored creditors.
In particular, any payment on an antecedent debt – not made in the ordinary course of business – within 90 days of the filing of the petition is an avoidable preference
Fraudulent transfers: trustee may avoid “fraudulent” transfers made on or within one year before the date of bankruptcy. The 2005 act specifies that a fraudulent transfer includes a payment to an insider under an employment contract that is not in the ordinary course of business |
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Term
| Know generally what a chapter 7 liquidation is, and when it would be used, and by whom |
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Definition
| Liquidation: involves terminating the business of the debtor, distributing his nonexempt assets, and discharging all dischargeable debts |
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Term
| Know generally what a chapter 11 reorganization is, and when it would be used |
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Definition
Purpose of chapter 11: to preserve a distressed entity and its value as a going concern
Debtor usually remains in possession and management of the property of the estate. Debtor usually serves as trustee, under the direction of a committee of creditors |
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Term
| Know generally what a chapter 13 wage-earner plan is, and when it would be used |
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Definition
| Purpose of chapter 13: to permit an individual debtor to file a repayment plan to discharge most debts |
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Term
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Definition
| includes any stock, bond, note, preorganization subscription, and investment contract; however there are many exemptions |
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Term
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Definition
| any investment of money or property made in expectation of receiving a financial return solely from the efforts of others |
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Term
| Basic rule for registration of securities |
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Definition
| for public offerings of non-exempt securities, the issuer must file registration statement disclosing accurate, material information, unless offering is an exempt transaction |
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Term
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Definition
| exempt securities are those not subject to the registration requirements of the 1933 act. These include: short-term commercial paper, municipal bonds, securities of some banks and non-profit organizations and certain insurance policies and annuity contracts. |
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Term
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Definition
| advertisement placed in newspapers by investment bankers in a public offering of securities. It gives basic details about the issue and lists the underwriting group members involved in the offering in alphabetically organized groupings according to the size of their participations. It is not “an offer to sell or a solicitation of an offer to buy,” but rather it calls attention to the prospectus. |
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Term
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Definition
| A first draft registration statement filed by a firm prior to proceeding with an initial public offering of securities. The document, filed with the Securities & Exchange Commission, is intended to provide pertinent information to prospective shareholders about the company's business description, management, strategic initiatives, financial statements and ownership structure. |
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Term
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Definition
-Proxy: a signed writing by a shareholder authorizing a named person to vote her stock at a specified meeting of shareholders
-Proxy Statement: proxy disclosure statements are required when proxies are solicited or an issuer submits a matter to a shareholder vote |
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Term
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Definition
A tender offer is an invitation to shareholders to purchase their shares at a specified price for a specified time
-Disclosure Requirements: a statement disclosing specified information must be filed with the SEC and furnished to each offeree |
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Term
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Definition
| a law that regulates initial sales of new securities to the public |
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Term
| Securities Exchange act of 1934 |
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Definition
a law that regulates resales of securities and public companies
• Registration and periodic reporting requirements: apply to all regulated publicly held companies and include one-time registration as well as annual, quarterly, and monthly reports |
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Term
| Sarbanes Oxley Act of 2002 |
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Definition
a post-Enron law designed to tighten accounting standards
Includes a number of provisions relating to corporate governance, auditing standards, additional disclosure requirements in period reports. Increases importance of outside directors. |
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Term
| Unregistered Sales (liability) |
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Definition
| Section 12 (a)(1) imposes absolute civil liability as there no defenses |
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Term
| False registration Statements (liability) |
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Definition
| Section 11 imposes liability on the issuer, all persons who signed the statement, every director or partner, experts who prepared or certified any part of the statement, and all underwriters; defendants other than issuer may assert the defense of due diligence |
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Term
| Antifraud provisions (liability) |
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Definition
Section 12(a)(2) imposes liability upon the seller to the immediate purchaser, provided the purchaser did not know of the untruth or omission, but the seller is not liable if he did not know and, in the exercise of reasonable care could not have known, of the untrue statement or omission
the difference between Section 11, which applies to false registration statements only, and Section 12(a)(2), which applies to false statements made in the process of selling as well |
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Term
| Misleading statements in reports (liability) |
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Definition
| Section 18 imposes civil liability for any false or misleading statement made in registration or report filed with the SEC |
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Term
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Definition
| Rule 10b-5 makes it unlawful to 1) employ any device, scheme or artifice to defraud; 2) make any untrue statement of a material fact; 3) omit to state a material fact or 4) engage in any act that operates as fraud |
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Term
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Definition
| recovery requires 1) a misstatement or omission 2) materiality 3) intentional and knowing conduct (scienter) 4) reliance, and 5) connection with the purchase or sale of a security |
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Term
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Definition
insiders are liable under Rule 10b-5 for failing to disclose material, nonpublic information before trading on the information
-Express insider trading liability: is imposed on any person who sells or buys a security while in possession of inside information |
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Term
| 10b-5 & Misleading Statements: |
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Definition
-Misleading Proxy Statements: any person who distributes a false or misleading proxy statement is liable to injured investors
-Fraudulent Tender offers: section 14(e) imposes civil liability for false and material statements or omissions or fraudulent, deceptive, or manipulative practices in connection with any tender offer |
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Term
| Antibribery provision of the Foreign Corrupt Practices Act |
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Definition
| prohibited bribery can result in fines and imprisonment |
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Term
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Definition
• Section 1: prohibits in broad terms, all contracts, combinations, and conspiracies that restrain trade. In practice, Section 1 only prohibits certain agreements or understandings that materially impact the competiveness of the markets
• Section 1 Tests:
o Rule of Reason: standard that balances the anti-competitive effects against the pro-competitive effects of the restraint
o Per Se violations: conclusively presumed unreasonable and therefor illegal |
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Term
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Definition
• Horizontal restraints: agreements among competitors at the same level of chain of distribution
• Vertical Restraints: agreements among parties at different levels in the chain of distribution |
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Term
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Definition
• Price Fixing: an agreement with the purpose or effect of inhibiting price competition; horizontal agreements are per se illegal, while vertical price fixing is judged by the rule of reason
• Market Allocation: division of markets by customer type, geography, or products; horizontal agreements are per se illegal, while vertical agreements are judged by the rule of reason standard
• Boycott: agreement among competitors to not deal with a supplier or customer; per se illegal
• Tying Arrangement: conditioning a sale of a desired product (tying product) on the buyer’s purchasing a second product (tied product); per se illegal I the seller has considerable power in tying product or affects a non-insubstantantial amount of interstate commerce in the tied product |
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Term
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Definition
• Section 2: prohibit monopolization, attempts to monopolize & conspiracies to monopolize
• Monopolization: requires market power ( ability to control price or exclude others from the market place) plus either unfair attainment of power or abuse of such power
• Attempt to monopolize: specific intent to monopolize, plus a dangerous probability of success
• Conspiracies to monopolize: a group of persons or entities who plan to establish market monopoly |
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Term
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Definition
• Regulated industries: government authorizes a single supplier in an area but controls price and practices to prevent abuse- utilities, transportation
• Intellectual Property: a business may obtain a monopoly in a specific market by virtue of copyright or patent granted by government |
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Term
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Definition
• Mergers: prohibited if it tends to create a monopoly or may substantially lessen competition
• Horizontal merger: one company’s acquisition of a competing company – most carefully reviewed as most likely to be anticompetitive
• Vertical Merger: a company’s acquisition of ones of its suppliers or customers
• Conglomerate merger: the acquisition of a company that is not a competitor, customer or supplier |
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Term
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Definition
| • Robison Patman: “Price discrimination” – prohibits buyers from inducing or sellers from giving different prices to buyers of commodities of similar grade and quality |
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Term
| Federal Trade Commission Act: |
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Definition
• Purpose: to prevent unfair methods of competition and unfair or deceptive practices
• Coverage: the FTC issues many regulations establishing specific standards for purposes of advertising, labeling and selling |
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Term
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Definition
| relationship authorizing one party (the agent) to act for and on behalf of the other party (the principle) |
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Term
| Legal Relationships for Agent |
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Definition
• Employment relationship: one in which the employer has the right to control the physical conduct of the employee
• Independent contractor: a person who contracts with another to do a particular job and who is not subject to full control of the other |
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Term
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Definition
| agency is a consensual relationship that may be formed by a contract or agreement; agency may exist without consideration |
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Term
| Duties of agent to principal |
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Definition
• Duty of Obedience: agent must act in principal’s affairs only as authorized by the principal and must obey all reasonable instructions and directions
• Duty of good Conduct: An agent has a duty act reasonable and to avoid conduct that is likely to damage the principal’s interests or reputation. A breach makes the agent liable to the principal and subject to rightful discharge or termination
• Duty of Diligence: agent must act with reasonable care and skill in performing his work
• Duty to Inform: agent must use reasonable efforts to give the principal information relevant to the affairs entrusted to her
• Duty to Account: agent must maintain and provide the principle with a true and complete account of money or other property that the agent has received or expended on behalf of the principal
• Fiduciary Duty (Loyalty): agents owes a duty of utmost loyalty and good faith to the principal |
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Term
| Duties of principal to agent |
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Definition
• Compensation: a principal must compensate the agent as specified in the contract, or for the reasonable value of the services provided if no amount is specified
• Reimbursement: the principal must pay back to the agent authorized payments the agent has made on the principals behalf
• Indemnification: the principal must pay the agent for losses incurred while acting as directed by the principal
• Tort Duties: include the duty to provide an employee with reasonably safe conditions and to warn employees of any unreasonable risk involved in the employment |
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Term
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Definition
• Lapse of time: when agency is for a set period of time
• Mutual Agreement of the parties
• Revocation of authority: there can be limitations on the ability of the principal to revoke
• Renunciation by the agent
• Operation of Law: the death or incapacity of either the principal or the agent usually terminates the agency, unless the agent has durable power attorney for an incapacitated principal
• Irrevocable powers: in limited circumstances, such as when the agent has a security interest in the subject matter of the agency, the agency is irrevocable |
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Term
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Definition
• Disclosed principal: principal whose existence and identity are known
• Unidentified principal: principal whose existence is known, but whose identity is not known
• Undisclosed principal: principal whose existence and identity are not known |
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Term
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Definition
• Actual Authority: power conferred upon agent by actual consent given by principal
o Actual Express Authority: derived from written or spoken words of the principal
o Actual Implied Authority: inferred by agent from words or conduct of the principal
• Apparent authority: power conferred upon the agent by acts or conduct of the principal that reasonable lead a third party to believe that the agent has such power, even if it doesn’t |
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Term
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Definition
| affirmation by one person of a prior unauthorized act that another has done as her agent or purported agent |
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Term
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Definition
| ends actual authority, but not necessarily apparent authority |
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Term
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Definition
• Termination of actual authority does not by itself end any apparent authority held by an agent;
• Apparent authority ends when it is no longer reasonable for the the third party with whom an agent deals to believe that the agent continues act with actual authority |
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Term
| Rules of contractual liability |
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Definition
| is contractually bound with the third party if the agent acts within her actual or apparent authority in making the contract |
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Term
| Direct Tort Liability of Principal |
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Definition
• Acts of principal: a principal is liable for his own tortious conduct involving the use of agents
• Authorized acts of agents: a principal is liable for torts she authorizes another to commit or that she ratifies
• Unauthorized acts of agents: a principal is liable for failing to exercise reasonable care in employing agents whose unauthorized acts cause harm, even if not is scope of employment |
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Term
| Vicarious Liability of principal for unauthorized acts of Agents: |
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Definition
• Respondeat Superior: an employer is liable for unauthorized torts committed by an employee in the scope of his employment
• Agents acts with apparent authority: a principal is liable for torts committed by an agent in dealing with third parties while acting within the agent’s apparent authority
• Independent contractor: a principal is usually not liable for the unauthorized torts of an independent contractor |
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Term
| Criminal Liability of Principal |
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Definition
• Authorized Acts: the principal is liable if he directed, participated in, or approved the criminal acts of his agents
• Unauthorized acts: the principal may be liable either for a criminal act of a managerial person or under liability without fault statutes |
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Term
| Contract liability of Agent: |
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Definition
• Disclosed Principal: the agent is not normally a party to the contract she makes with a third party if she is authorized or if the principal ratifies an unauthorized contract
o Unauthorized contracts: if an agent exceeds her actual and apparent authority, the principal is not bound but the agent may be liable for breach of warranty or for misrepresentation
o Agent assumes liability: an agent may agree to become liable on a contract between the principal and the third party |
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Term
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Definition
• Authorized Acts: the agent is liable to the third party for his on torts, but may be entitled to indemnity from principal
• Unauthorized Acts: the agent is liable to the third party for his own torts |
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Term
Bound
Reimbursement
Indemnity
Liability |
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Definition
Bound: the principle is legally bound to the third party
Reimbursement: the principle owes a duty to repay the agent for reasonable expenses incurred in the agency
Indemnity: a party owes a duty to compensate another for expenses the other incurred due to its actions
Liability: the party is liable to another |
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Term
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Definition
• information that derives commercial value from being not generally known
• The uniform trade secret act: allows the owner of a trade secret to obtain damages or injunctive relief when the secret is misappropriated (wrongfully used) by an employee or competitor |
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Term
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Definition
• Trademark (manufacturer): distinctive symbol, word, or design used to identify the manufacturer or product ™
• Service Mark (service) – distinctive symbol, word, or design that is used to identify a provider’s service ®
• Certification Mark (certify specific characteristics) – distinctive symbol, word, or design used with goods or services to certify specific characteristics
• Collective Mark (membership)– distinctive symbol used to indicate membership in an organization |
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Term
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Definition
• Registration: to be registered and this protected by the Lanham Act, a mark must be distinctive and not immoral, deceptive, or scandalous
• Infringement: occurs when a person without authorization uses a substantially indistinguishable mark that is likely to cause confusion, mistake or deception |
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Term
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Definition
| any name used to identify a business, vocation, or occupation |
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Term
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Definition
• Exclusive rights, usually for the author’s life plus 70 years, to original works
• How obtained:
o An original work of authorship becomes copyrightable when “fixed in any tangible medium of expression”
o Notice of copyright designation must be placed or provided no later than the time of first publication or performance ©
o Ownership: the author is usually the owner of the copyright, which may be transferred in whole or in part
o Procedure: registration is not required but provides additional remedies for infringement
• Rights held by copyright owner 1) Reproduce the copyrighted work 2) prepare derivative works based on the work 3) distribute copies of the work 4) perform or display the work publicly
• Limits to protection:
o Copyrighted works are subject to compulsory licenses and fair use
Compulsory licenses permit certain uses of a work upon payment of royalties
Fair use includes use for purposes of criticism, comment, news reporting, teaching (including multiple copies for classroom use), scholarship, or research
Infringement occurs when someone exercises the copyright owner’s rights without authorization, including copying the work or publishing a substantially similar work, unless a limitation applies |
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Term
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Definition
• The exclusive right to an invention for twenty years from the date of application for utility and plant patent; fourteen years from grant for design patents
• Patentability: a patentable invention must be 1) novel, 2) useful, and 3) not obvious
• Procedure: patents are issued upon application to and after examination by the U.S patent and trademark office; valid only in the US. Must apply for protection in other countries
• Infringement: occurs when anyone without permission makes, uses, or sells a patented invention |
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Term
| National Labor Relations Act |
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Definition
• Right to unionize: establishes a federally protected right of employees to unionize and to bargain collectively
• Prohibits unfair employer practices: the act identifies five unfair labor practices by an employer
• National labor relations Board: created to administer these rights by rules and enforcement |
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Term
| Labor-Management Relations Act: |
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Definition
• Prohibits Unfair Union Practices: identifies 7 unfair labor practices by unions
• Prohibits closed shops: which are agreements that mandate that employers can only hire union members
• Allows Union Shops: employer can hire nonunion members, but the employee must join the union if so required by state law
• Right-to-work states: prohibit union shops |
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Term
| Fair Labor Standards act: |
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Definition
• Establishes federal minimum wage for most industries (7.25)
• Current florida minimum wage is $7.31
• Maximum hours that can be worked without overtime compensation
• Establishes exemptions from minimum wage and overtime
• Establishes child labor limitations |
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Term
| Family and medical Leave act of 1993: |
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Definition
| grants employees leave for serious health conditions of the worker or family member or for family leave (birth or adoption) |
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Term
| Titile VII, Civil Rights Act of 1964 |
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Definition
| Prohibits employment discrimination on the basis of race, color, gender, religion, or national origin, in “terms and conditions of employment”; includes hiring, firing, promotion, compensation among others |
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Term
| Age discrimination in employment act of 1967 |
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Definition
| prohibits discrimination on the basis of age in hiring, firing, or compensation; does not apply when favoring an older employee over a younger one |
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Term
| Americans with disabilities act |
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Definition
| prohibits discrimination on account of disability, and requires accommodation in some cases |
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Term
| Discrimination is prohibited and includes |
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Definition
• Intentionally treating people in protected classes less favorably
• Using neutral policies that have a disparate impact (non-intentional discrimination)
• Harassment: a form of discrimination in which individuals are mistreated because of some protected characteristic; generally must be severe to create liability
• Sexual Harassment: an illegal form of sexual discrimination that includes unwelcome sexual advances, requests for sexual favors, and other verbal or physical conduct of a sexual nature |
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Term
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Definition
prohibits an employer from discriminating between employees on the basis of gender by paying unequal wages for equivalent work
• There are 4 defenses, including seniority system; merit systems; productivity systems; or other factors other than sex |
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Term
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Definition
| awarded to an employee injured in the course of employment |
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Term
| Unemployment compensation |
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Definition
| awarded to workers who have lost their jobs and cannot find other employment |
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Term
| Know what “employment at will” means |
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Definition
| Under common law a contract of employment for other than a definite term is terminable at will by either party |
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