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Business Law Project
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Final Project By: Terrell Johnson
Ethics and Structures
• Ethics is based on Feelings and Opinions, The Greatest Good, The Golden Rule, Consequential Reasoning and Rule-based reasoning.
• Feelings and opinions are viewed on how a person feels about a certain situation or disagreement.
• It may also be based on what opinions are expressed about certain situations.
• The Greatest Good is the idea that must people will base their opinion of ethics based on how a certain situation affects the greatest amount of people.
• The Golden Rule - Do unto others as you would have them do unto you.
• Consequential Reasoning - Looks at alternative actions and it gives the final outcome of each action.
• Rule-based Reasoning - Makes a decision based on majority vote.
Ethics and Structures Pt. 2
• U.S. Legal Systems
• The U.S. Legal System is based upon the Constitution, where laws are created and amended. The basis for the Constitution is to protect human rights.
• International Legal Systems
• In many other countries, the court system is tied in with the legislative and executive branches. Many countries use religion as a basis for the law, such is the case in Saudi Arabia, where Muslim and the law are tied together.
Criminal Law
• Each statute that defines a 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 Crime
• Imprisonment
• Fine
• Probation
• Community Service
• Combination of the above
Criminal Law Pt. 2
• Participants of a Trial • Plaintiff (2) • Government • Prosecutor • Defendant (1) • Person accused of the
crime • Classifying a Crime • According to Seriousness • What is the most serious? • Felony • Imprisonment or death • What is less serious? • Misdemeanor • Fine and/or probation
Criminal Law Pt. 3
• 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.
Criminal Law Pt. 4
• Defenses to a Crime
• Insanity
• Must prove the M’Naughten Rule
• At the time of the crime, was the defendant
• suffering from a mental disease so serious that
• he or she did not know what they were doing
• was wrong‖
• If not guilty, what happens?
• Must serve time in a mental institution until
• determined to be stable.
Acceptance
• Meaning - Unqualified willingness to go along with the offer • Requirements of Acceptance • Unconditional Acceptance • – Mirror Image Rule • Acceptance must “mirror” offer • Any change means there is no acceptance • – Counteroffer • Offeree makes an offer • Offeror becomes offeree • 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
Methods to Terminate 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.
Methods to Terminate Contract Pt. 2
• 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.
• Destruction of the Exact Subject Matter
• If the subject matter is essential to the contract then it will be
• discharged.
• Illegality
• Any illegal contract is void.
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?
• Bankruptcy
• Debtors can be discharged from contracts after filing for
• bankruptcy.
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
• 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
Types of Loans and Procedures for Borrowing Money • Types of Loans
• Collateral – Property that is the subject of the loan
• Cosigner – Helps protect a loan when a borrower’s
• credit rating is poor
• Secured Party – Lender or seller who holds
• secured interest
• Repossession – Property is returned because of
• non-payment
• No Collateral
• Creditors make sure that debtor is reliable and able
• to pay back loan
• Example (Credit Cards)
Types of Loan Regulations
• Actual cost of finance charge must be known
• Annual percentage rate
• Liable for $50 unauthorized credit card purchases
• made prior to notification
• Applying for credit
• Granted only on the ability to repay
• Evaluation of application
• Cannot discriminate based on gender, age,
• ethnicity, or religion
• Acceptance and rejection
Procedures for Borrowing Money • Loan Application
• Consideration
• Reputation for paying bills
• Source of regular income
• Competency
• Number of dependants
• Use of loan and for how long
• Rules
• Cannot ask sex, race, national origin, or religion
• Cannot refuse on basis of sex or marital status
• Marital status may/may not be asked
• Do not have to disclose income from alimony or
• child support unless relying on income
• May not be prohibited from using given names (birth)
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
Renter’s Insurance
• Covered under Homeowner’s 4 Form
• Person who rents real estate from another but has personal contents on premise carries renter’s insurance to insure:
• - personal contents
• - against liability risk
• Insurable Interest law applies. A person can only insure his own property, not another’s property.
• Protection includes:
• - Personal contents of tenant in an apartment, condo, mobile home or house
• Personal liability if others sue tenant for injuries
Homeowner’s Policy
• Provides coverage for: • - Home - Primary structure • - Personal property - Contents • - Related structures – Outbuildings, if any • - Loss of Use - Living expenses if insured can not live there due to
covered damage • - Premise personal liability – for injuries to others who were on your
property • Riders may extend policy for additional coverage for items such as: • • Boats • • Jewelry • • Furs • • Artworks • • Antiques • • And other special collectibles owned by a homeowner
Co-Insurance
• Homeowners policies require the insured to carry a minimum of 80% of the value of the home (called co-insurance) to get full reimbursement for a claim made.
• - Most claims are partial losses leading policyholders to insure a home for less than value since risk of total loss is low.
• Cost Factors of Property Insurance
• • Limit of coverage for property
• • Location of property – fire district, city, county, state
• • Structural material - brick, block, frame
• • Previous claims filed
• • Company
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.
• Bodily Injury Liability Coverage
• - Bodily Injury Liability protects the insured person from liability claims for injury to:
• • People in other cars
• • Passengers riding with the insured person
• - DOES NOT cover the insured person (driver)
Property Damage
• - 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 property
Uninsured/Underinsured Motorist Coverage • • Protects policyholder against drivers • - Without insurance insurance to cover the loss suffered • - Without enough insurance to cover the loss suffered • Examples: • - Hit and run drivers • - Drivers who let insurance policy lapse • - Drivers involved in serious accidents who carry low $ liability limits of
coverage • Other Auto Coverage • Medical payments - Covers anyone in • vehicle or hurt by vehicle, even if not • moving • – Ex: Broken finger by closing finger in door or • trunk, pedestrians • • Towing Expense - Pays tow fees • • Rental Reimbursement - Covers cost of • rental when vehicle being repaired due to accident
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
Bailment by Necessity
• Implied by law, a customer must give up possession of property.
• - Example: When you rent skates and leave your own shoes while you skate
• - Example: When you leave your clothes temporarily in the dressing room while you try on a new outfit
• Other Bailments
• • Gratuitous Bailment
• - Free of charge (lend something to a friend).
• - Only one party benefits
• • Extraordinary bailment
• – A common carrier or hotel is strictly liable for damage to bailed goods
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 and Personal Property
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
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 warranties
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)
Foreclosure
• • Right of mortgage holder to seize property
• for payment of debt that is past due
• • Comparable to repossession of personal
• Property
• 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?
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
• 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 court.
Gratuitous Contracts
• The law does not enforce any contracts that are gratuitous
• Gratuitous contracts are free agreements
• Consideration
• Exchange of benefits and detriments by the parties to an agreements
• Benefits
• Something that a party was not previously entitled to receive
• Detriments
• Any loss suffered
• Types of Detriments
• Give up or promise to give up something you are entitled to receive
• Doing or promising to do something you have a legal right to do
• Forbearance
• Not doing something you have a legal right to do
Agreements without Consideration • Promise to make a gift
• Gifts have no consideration
• Cannot be enforced
• Gift that has been given?
• Doesn’t have to be returned
• Donor – Gives the gift
• Donee – Accepts the gift
• Promise to obey the law
• No detriment
• You are obligated to obey the law
• Preexisting Duty
• If a person is already under legal duty to do something, a promise to do that same thing does not furnish consideration
Adequacy of Consideration
• Courts don’t look at adequacy or value of an agreement unless it is unconscionable
• Unconscionable?
• So lopsided that the average person would not agree to terms
• Special Applications
• Partial Payment of Debt
• Must have new consideration in order to relieve entire debt
• Settlement of Disputed Claims
• Examples: Fixing your car or visit the doctor
• Extension of Time
• To extend time, one party must offer new consideration
Promises Enforceable Without Consideration • Pledges and subscriptions
• Promissory Estoppel
• Rely on what a person said
• Elements:
• Promise must bring action or forbearance
• One who gave no consideration must have relied on the promise
• Injustice can be avoided only enforcing the promise
Intentional vs. Unintentional
• Intentional
• Know and desire the consequences of your act
• Unintentional
• lacks the determination of mind.
• Types of Torts
• Negligence
• Failure to exercise a degree of care that a reasonable person would have exercised in those circumstances
• Required elements:
• Duty of Care – Defendant owed the plaintiff a duty of care (based on the concept of their rights - stated previously).
• Breach of Duty – Did the defendant exercise the same degree of care that a reasonable person would have.
Elements continued
• Proximate Cause – something that produces a result, without it the result would no have occurred. – Foreseeability Test
• Was the injury to the plaintiff foreseeable at the time the defendant engaged in the unreasonable conduct?
• Actual Harm
• – must show harm.
• Defenses to Negligence
• Contributory:
• – Negligence on the part of the plaintiff assisted in causing his or her injuries.
• Comparative:
• Determine % at fault and pay that %
• Assumption of Risk:
• Plaintiff knew the risk and still participated in the activity.
Strict Liability
• Ultra hazardous activities are so dangerous that the laws of negligence do NOT apply to them.
• Examples:
• Wild Animals
• Toxic Chemicals
• Explosives
• Remedies
• Compensation
• Money
• Injunction
• – Ordering a person to do or not to do something.
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
Sources of Credit
• Credit Cards and Charge Accounts
• Unsecured form of credit
• Interest Calculations
• Adjusted Balance – Finance charges added after subtracting
• payment
• Previous Balance – Finance charges are figured as if no payment
• was made
• Average Daily Balance – Finance charges figured by adding
• balances for each day in billing period and then divide by the
• number of days in the billing period
• Simple Interest = Principal * Rate * Time
Sources of Credit Pt. 2
• Installment Plans
• Secured – Collateral used to secure loan
• Pledge – Creditor obtains possession of collateral by
• written or oral agreement
• Security agreement – Contract where debtor retains
• possession of collateral under a written contract
• Repossession – Taking back of items used to secure
• loan when payment is not made
• Unsecured – No collateral used
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 years 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 fruad
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
• Special Statutory Rules – minors have
• capacity to buy car/life insurance
• - married = adult
• - limited capacity if you own a business - renting apartment is a necessity
Other Contractual Capacity Rules • Mentally impaired persons – if declared insane:
• Prior to guardian being appointed – Contract is
• voidable
• After guardian appointed - all contracts are void
• Intoxicated person – must not understand the
• purpose, nature, or effect of the transaction
• - fair value of necessities
• Convicts have certain limitations
• Aliens – people who live in U.S. but own
• allegiance to a different country
• - limited capacity
• ex: war
Agreements Contrary to Public Policy • Outright contracts not to compete - seller of a business may
sign a restrictive covenant which would be upheld by the court. Restrictive covenant - agreement not to compete in a region for a period of time *Only legal for a short period of time and small geographic region
• Price Fixing - competitors agree on certain price ranges within which they will sell their on prices competitors may agree to sell a product at a particular price manufacturers may set a price at which a product must be sold price fixing is NOT enforced by the court.
• Effect of Illegality
• If the legal part can be separated from illegal part, the court will separate. If the legal part can’t be separated from illegal part, the contract is void