Business Law Exam

APA

Administrative Procedure Act — the federal law establishing standardized rules for how agencies must operate

Enabling Legislation

The statute passed by Congress that creates an agency and defines its authority

Rulemaking

Formal, informal, or hybrid process agencies use to create binding regulations; must be published in the Federal Register with a public comment period

Federal Register

The official daily publication where agencies publish proposed rules and accept public comments

Judicial Review (Admin)

Courts' power to review and invalidate agency actions that are arbitrary, capricious, or unconstitutional; party must exhaust administrative remedies first

Procedural Rules

Rules governing HOW an agency operates (notice, comment periods, hearings) rather than the substance of policy

SBA

Small Business Administration — example of a legislative/executive agency that administers government programs for small businesses

Three Agency Powers

Rulemaking (draft regulations), Investigation/Enforcement (monitor compliance), Adjudication (hold hearings before ALJs)

Supremacy Clause

Federal law is the supreme law of the land; conflicting state laws are preempted (Article VI)

Commerce Clause

Article I §8 — grants Congress power to regulate interstate commerce and any local activity with a substantial economic effect on interstate commerce

Dormant Commerce Clause

Prohibits states from passing laws that discriminate against or unduly burden interstate commerce

Full Faith and Credit Clause

Each state must recognize the public acts, records, and judicial proceedings of every other state

Lemon Test

Three-part Establishment Clause test: (1) secular purpose, (2) neither advances nor inhibits religion, (3) no excessive entanglement — has been continuously questioned by courts

Political Speech vs. Commercial Speech

Not all corporate speech is political speech; commercial speech receives lesser First Amendment protection and can be restricted if there is a substantial state interest and the restriction is narrowly tailored

Federalism

Division of governing authority between the federal government and individual states

Separation of Powers

Federal power is split among legislative, executive, and judicial branches; balanced by checks and balances

State Junk Food Regulation

States can regulate food sales using police power, but regulations cannot conflict with federal law or unduly burden interstate commerce

Uniform Taxes / Commerce Authority

If an activity is interstate in nature, Congress controls it under the Commerce Clause — states cannot impose discriminatory taxes on interstate commerce

Four Elements of a Valid Contract

(1) Agreement (offer + acceptance), (2) Consideration, (3) Contractual Capacity, (4) Legal Object

Consideration

Bargained-for exchange of value — both parties must give something of legal value

Contractual Capacity

The legal ability to enter a binding contract; minors and those lacking mental capacity generally cannot be fully bound

Legal Object

A contract's purpose must not violate public policy or statutory law

Bilateral Contract

A promise for a promise — both parties make mutual commitments to each other

Unilateral Contract

A promise for an act — the offer is accepted only by completing the requested performance (e.g., reward offers)

Mirror Image Rule

Acceptance must exactly match the terms of the offer; any modification is a counteroffer, not acceptance

Mailbox Rule

Acceptance is legally effective the moment it is dispatched (placed in mail/sent), not when the offeror receives it

UCC (Uniform Commercial Code)

Governs contracts for the SALE OF GOODS in the U.S.; relaxes the Mirror Image Rule for merchants; does not cover services

EU Contract Regulation

The European Union applies its own contract law frameworks (e.g., CISG for international goods), distinct from U.S. common law

Offer Termination

An offer can be terminated by: revocation by offeror, rejection/counteroffer by offeree, expiration of time, or operation of law (death, illegality)

Principal

The party who authorizes another (the agent) to act on their behalf

Agent

The party authorized to act on behalf of the principal; relationship is fiduciary in nature

Actual Authority

Authority explicitly or impliedly granted by the principal to the agent — often called express authority

Implied Authority

Reasonably necessary authority DERIVED from the express authority granted plus customs of the trade; agent can do what is needed to carry out express duties

Apparent Authority

Authority arising from the principal's conduct toward third parties, leading them to reasonably believe an agency relationship exists (estoppel)

Ratification

Principal retroactively approves an agent's unauthorized act, making it binding

Agent's Duties to Principal

Loyalty, obedience, accounting, notification, and performance

Principal's Duties to Agent

Compensation, reimbursement, indemnification, and safe working conditions

Disclosed Principal Liability

If the principal is fully disclosed, only the principal is liable to the third party on the contract

Undisclosed/Partially Disclosed Principal Liability

Both the principal AND the agent can be held personally liable to the third party

Respondeat Superior

Employer/principal is vicariously liable for an employee/agent's torts committed within the scope of employment

Independent Contractor

Principals are generally NOT liable for independent contractors' torts; no day-to-day control over methods

Termination of Agency

Can occur by act of parties (agreement, revocation, renunciation) or operation of law (death, incapacity, bankruptcy, illegality, changed circumstances)

Actual Notice of Termination

Principal must give DIRECT notice to third parties who have previously dealt with the agent; constructive notice (publication) is NOT sufficient for known parties

Deceptive Advertising

Advertising likely to mislead a reasonable consumer about a material fact — regulated by the FTC

Reliance on Deceptive Ads

A CRUCIAL element in establishing liability; the consumer must have seen the ad, believed it, relied on it in their decision, and suffered harm

Corrective Advertising

FTC remedy requiring a company to run ads explicitly stating that formerly advertised claims were untrue

FTC Powers

Issue cease-and-desist orders, mandate corrective advertising, and pursue substantial civil penalties for deceptive practices

Truth in Lending Act (TILA)

Requires lenders to disclose all credit terms, interest rates, and APR in a standardized format — no hidden fees; applies to mortgage-secured loans

Mortgage / Real Estate Loan

A loan secured by real estate is governed by TILA — full disclosure of all terms (including APR) is required before the loan is finalized

Fair Credit Reporting Act (FCRA)

Guarantees consumers the right to view, dispute, and correct information in their personal credit files

Fair Debt Collection Practices Act (FDCPA)

Outlaws abusive, deceptive, and unfair tactics by third-party debt collectors (e.g., late-night harassment, threats)

Consumer Product Safety Commission (CPSC)

Sets safety standards for consumer goods; monitors injury reports; orders mandatory recalls of hazardous or defective products

Tobacco Advertising Regulation

Regulated by the FDA under the Family Smoking Prevention and Tobacco Control Act; includes bans on marketing to minors, required health warnings, and limits on promotions

Consumer Fraud Elements

False statement of material fact + knowledge of falsity + intent to deceive + reasonable reliance + damages