Exam 3- Ch. 7.8 16 17 & 18

These flashcards encompass key legal terms and definitions related to tort law and relevant court cases discussed in the lecture notes.

Defamation

A false statement that harms someone's reputation.

Slander

Verbal defamation; spoken false statements.

Libel

Written defamation; false statements in written form.

Tortfeasor

The person at fault in a tort suit.

Negligence

Unintentional tort arising from a failure to exercise reasonable care.

Assault

The threat of immediate harmful or offensive contact.

Battery

Unauthorized physical contact that is harmful or offensive.

Intentional Infliction of Emotional Distress

Extreme or outrageous conduct that causes severe emotional distress.

Invasion of Privacy

Unauthorized intrusion into someone's personal affairs.

Trespass

Unauthorized entry onto another person’s property.

Fraudulent Misrepresentation

Deliberate deception to secure unfair or unlawful gain.

Duty of Care

The legal obligation to act in the best interest of others.

Reasonable Person Standard

A legal standard determining how a reasonable person would act in similar circumstances.

Good Samaritan Statutes

Laws that protect individuals from liability when providing emergency aid.

Comparative Negligence

A legal standard where a plaintiff's damages are reduced by their percentage of fault.

Contributory Negligence

An older rule preventing a plaintiff from recovering damages if they were at all negligent.

Res Ipsa Loquitur

A doctrine meaning 'the thing speaks for itself', indicating negligence without direct evidence.

Danger Invites Rescue Doctrine

A legal principle that may hold a negligent party liable for injuries occurring when rescuers are injured.

Blake v. Giustibelli

whether false online reviews are protected under the First Amendment or constitute defmamation

Revell v. Guido

dispute: fradulent misrepresentation in a real estate sale due to non-disclosure of sewage issues

ruling: seller was found liable for fraud for misrepresenting the property’s condition

Taylor v. Baseball Club of Seattle

whether the baseball team owed a duty of care to protect Taylor form being hit by a baseball

outcome: the court ruled that taylor assumed the risk of injury by attending the game and the team was not liable

Four Requirmeents of negligence

1. Duty of care owed to the plaintiff

2. Breach of duty

3. Legally recogniziable injury suffered

4. Breach caused the injury

Two types of Torts

1. Intentional

2. Unintentional (Negligent) torts

Valid defense to defmation

Truth of Statement

Wrong interference with a contractual relationship

a third party intentionally causing one party to breach a contract

Three categories of people landowners owe duties

Trespasers, licensees, and initees

Dram shop acts

laws holding bars and alcohol vendors liable for serving intoxicated persons who cause harm

Assumption of risk

when a plantiff knowingly and voluntarily takes on a known risk

Superceding cause

an unforeseeable event that interrupts the chain of causation, absolving teh defendant

Strict Liability

No proof of negligence needed

Abnormally Dangerous Activities

Activities so dangerous that strict liability applies (e.g., using dynamite, keeping wild animals)

Product Liability

Manufacturer or seller held liable for defective product that causes harm

Negligent Product Liability

Manufacturer is negligent in production or design, leading to harm

Strict Product Liability

Manufacturer is liable even without negligence if the product harms someone (see six elements on page 309)

Manufacturing Defect

A defect in one or a few items out of many manufactured (e.g., 1 in 100,000)

Design Defect

A flaw in the product design that makes all manufactured items defective

Assumption of Risk (Defense to Product Liability)

Plaintiff knowingly accepted the risk (e.g., getting hit by a fly ball at a baseball game)

Product Misuse (Defense to Product Liability)

Plaintiff used the product in an unforeseeable and improper way (e.g., immersing a hair dryer in water)

Commonly Known Dangers (Defense to Product Liability)

Some dangers are obvious, so the manufacturer is not liable (e.g., eating McDonald’s for five years and suing for obesity)

What was the product defect in the Arctic Cat case?

The reverse alarm did not sound continuously, making it hard for operators to determine if they were in reverse.

Why did the court submit this case to a jury?

The defect made it foreseeable that an operator could misjudge the snowmobile’s direction, leading to harm.

What was the key legal issue in Bruesewitz v. Wyeth?

Whether vaccine manufacturers can be held liable for injuries caused by vaccines with unavoidable side effects.

What did the court decide in Bruesewitz v. Wyeth?

The court ruled that NCVIA protects vaccine manufacturers from liability for unavoidable side effects.

Why was Mitsubishi not held liable in the forklift case?

The forklift was substantially changed after sale, breaking the chain of product liability.

What are the 5 main factors in choosing a type of business association?

1. Ease of formation 2. Taxation 3. External liability 4. Management and control 5. Continuity

What are the advantages of a sole proprietorship?

Keep all profits Easy to form Easy management decision making

What are the disadvantages of a sole proprietorship?

Have all the liability

No limits on liability

No continuity in case of death

Fewer ways to raise capital

What are the key characteristics of a general partnership?

Default business type for multiple people

Can be formed by default or written agreement

Partners can bind others for daily purchases

All partners can examine partnership books

What are the three main types of franchises?

1. Chain style (e.g., McDonald's, Arby's, KFC)

2. Distributorship (product territory)

3. Manufacturing/Processing Plant Arrangement

What was the legal issue in Gadley Enterprises Inc. v. Department of Labor and Industry?

Whether workers were independent contractors or employees for unemployment tax purposes.

What was the court’s ruling in Gadley Enterprises Inc.?

The court ruled that the workers were employees, requiring the company to pay unemployment taxes.

Why is the Gadley Enterprises case significant?

It reinforced the criteria for distinguishing employees from independent contractors.

What was the key legal principle in Meinhard v. Salmon?

Fiduciary duty between business partners.

What did Salmon fail to do in the case?

He did not inform his partner, Meinhard, about a lease renewal opportunity.

What was the court's decision in Meinhard v. Salmon?

The court ruled that Salmon breached his fiduciary duty, favoring Meinhard.

What was the main issue in Holiday Inn Franchising Inc. v. Hotel Associates Inc.?

Whether Holiday Inn misrepresented its intentions to Hotel Associates Inc.

What was the ruling in Holiday Inn Franchising Inc. v. Hotel Associates Inc.?

The court found that Holiday Inn engaged in fraudulent misrepresentation.

What is the significance of Holiday Inn Franchising Inc. v. Hotel Associates Inc.?

It highlights the duty of good faith in franchise agreements and the consequences of fraudulent business practices.

LLC Advantages

Flexible management structure

Flexible taxation options

Limited liability protection

LLC Disadvantages

• State laws vary, creating potential complications

Operating Agreement

Most important document for an LLC

Member-Managed

Owners run the business

Manager-Managed

Owners appoint managers to run the business

Limited Liability Partnerships (LLPs)

• Used by professionals (doctors, lawyers, accountants)

• Liability protection does not excuse personal negligence

Limited Partnerships (LPs)

• Limited Partner: Strictly an investor, no management role

• General Partner: Fully responsible for debts & liabilities

Case 17.1: Hodge v. Strong Built International LLC

Topic: Product Liability & LLC Responsibility
📌 Hodge was injured due to a faulty hunting tree stand
📌 The court examined whether LLC members could be held personally liable
📌 Key Lesson: LLC status does not always shield members from liability

Case 17.2: Reese v. Newman

Topic: LLC Operating Agreement Dispute
📌 Reese claimed Newman acted against the company’s best interests
📌 The case emphasized the importance of a well-written operating agreement
📌 Key Lesson: Clearly define roles & responsibilities in an LLC agreement

Case 17.3: DeWine v. Valley View Enterprises Inc.

Topic: Limited Partnership & Financial Mismanagement
📌 Valley View Enterprises was accused of misusing funds
📌 The case demonstrated that general partners can be held accountable
📌 Key Lesson: General partners must act in the best financial interests of the partnership

Limited Shareholder Liability

Shareholders can only lose what they invest.

Creature of the State

Corporations are formed at the state level in the U.S.

Perpetual Existence

A corporation can exist indefinitely based on the incorporator’s decision.

Centralized Management

Shareholders elect a Board of Directors, who elect officers.

Domestic Corporations

Incorporated in the same state where it operates.

Foreign Corporations

Incorporated in one state but operates in another.

Alien Corporations

Incorporated in another country but does business in the U.S.

Profit

Generates income for shareholders.

Non-Profit

Operates for charitable, educational, or public service purposes.

Publicly Held

Stocks are available to the public.

Closely Held

Stocks are limited to a few people (family, friends, etc.).

Subchapter S Corporation

• Shareholders must be individuals (not companies).

• Limited to 100 shareholders.

• Pass-through taxation (profits taxed on personal tax returns).

Forming a Corporation

• Consider which state to incorporate in.

• File Articles of Incorporation, including:

  • Name

  • Purpose

  • Duration

  • Authorized shares

  • Registered office & agent

  • Initial directors

Initial Meeting of Board of Directors

Appoint officers, adopt bylaws, authorize shares.

Piercing the Corporate Veil

Personal assets of shareholders can be at risk if:

1. Corporate formalities are not followed.

2. The corporation is undercapitalized.

3. The corporation is used for fraud.

4. Personal and corporate funds are comingled.

Duty of Care:

Act in the best interest of the company.

Duty of Loyalty

Avoid conflicts of interest.

Business Judgment Rule

• Directors are not personally liable for decisions made:

  • Informed basis

  • In good faith

  • Honest belief that it benefits the company

Drake Manufacturing Co. v. Polyflow- Issue

Piercing the corporate veil

Drake Manufacturing Co. v. Polyflow- Holding

The court ruled that the corporate veil could be pierced due to failure to follow corporate formalities and undercapitalization.

Pantano v. Newmark Museum-Issue

Duty of Care & Duty of Loyalty

Pantano v. Newmark Museum- Holdings

A director’s actions were found to be a breach of duty because of a conflict of interest and failure to act in good faith.

Guth v. Loft Inc.- Issue

Corporate Opportunity Doctrine (Duty of Loyalty)

Guth v. Loft Inc-Holdings

A director improperly took a business opportunity meant for the corporation, violating fiduciary duty.