BUS 207

Cal Poly SLO - Legal Responsabilities of Business

Jurisdiction

Courts authority to resolve disputes and enforce laws within a specific geographic area or over certain types of cases.

In personam

Courts’ ability to adjucate issues to a specific person or entity, rather than a property.

Long-arm Statutes

State laws that allow jurisdiction over non-residents based on certain activities

Minimum Contacts

legal standard for establishing jurisdiction over a non-resident based on their connections to the state.

Threshold Requirements

Standing - outcome directly affects person, Case or controversy - actual dispute happening with parties (prevents hypotheticals"), Ripeness - judege decision is able to rectify issu

Altnerative Dispute Resolution (ADR)

Ways to settle a dispute outside of legal action - Arbitration, Mediation, Negotation, etc

Arbitration

Private, out of court dispute resolution where parties present case to neutral third party

Contract

Legally enforceable agreements between 2 parties with:

• An agreement

• Consideration

• Legal object

• Capacity

Agreement

offeror makes offer to offeree, first step of a contract

Valid offer contains

manifestion of the intent to be bound to the definite and certain terms communicated to offer

Ways an offer can be terminated

• Revocation by offeror

• rejection by the offeree

• death/incapacity of offeror

• destruction or subsequent illegality of the subject matter

• lapse of time

• failure of conditions set by offfer

Elements of acceptance

• Manifestation of intent to be bound is communicated to the offeror by the offeree

• Acceptance of the definite and certain terms

• Communication to the offeror C

Mirror Image Rule

Terms of acceptance must mirror the terms of the offer

Consideration

Value given in exchange for something else of value, mutually bargained exchange

Types of Consideration

• benefit to promisor: gains something of value

• detriment to the promisee: sacrifices something of value

• promise to do something: perform an action

• promise to refrain from doing something: olbigated to not participate in certain activity

Promissory Estoppel

Exception to lack of consideration or a void contract, under the laws of equity, stating:

• legal enforcement of an otherwise unenforceable contract due to the party’s undertsandable AND detrimental reliance on the “contract.”
  

Illusory Promise

Appears to be a promise, but:

• does not create legal obliagtion

• lacks consideration from party

Liquiated Debt

No dispute on fact or amount of $ owed

Unliquidated debt

No dispute on fact of $, only on the amount owed

Accord & Satisfaction

accord = agreement

satisfaction = payment of a reduced amount

• Parties agree that one party can substitute original performance for another performance

• requres unliquiatble debt, approval by creditor, and payment by debtor

Mistakes

Erroneous beliefs about the matierial facts of a contract at the time the agreement is made

Uniltateral Mistakes

One party is mistaken on a material fact, the other is not (rarer occurrence)

• Generally does not void a contract unless:

  • The other party knew of the mistake

  • Is sue to a clerical error

  • The mistake is so severe that the agreement becomes unconscionable

Biltaral Mistake

Both parties are mistaken about matters of fact; either party can rescind the contract, but requires:

• refers to a basic assumption[ton about the subject matter of the contract

• materailly effects the agreement

• creates an adverse effect on a party, they did not agree to bear the risks of

CANNOT be for future expectations, only past/present facts

Misrepresentation

untruthful assertion by one party on a material fact, statements made by a party that influenced the others decision

Innocent vs Fraudulent Misrepresentation

Innocent: party making assertion believes it to be true, lacks “scienter.”

Fraudulent: party knew assertion was incorrect, intented to deceive the innocent party

Concealment

active hiding of the truth of a material fact

Nondisclosure

Failure to relay a pertinent fact/information about the case

Negligence

defendnant would know the statement was false if they had taken the time to investigate /had reasonable care before making the statement

Undue Influence

persuausive effors by a dominant party who uses a special relationship to influence a weaker party into a contract

Duress

One party threatens the other with a wrongful act unless assent is given

• physical harm/extortion

• criminal lawsuit '

• economic duress

The Statute of Frauds

requires certain contracts to be in wiriting and signed

Contracts that require writing under Statute of Frauds

• contracts that will take longer than a year

• consideration given through marriage

• contracts where one party pays the debt of another (cosigners)

• contracts in the interest of land

• UCC: contracts of a sale of a good over $500

Exceptions to the Statute of Frauds

• Admission (of the party that there was an oral contract)

• Partial performance

• Promissory Estoppel

• UCC exceptions (between merchants/customized goods)

Parol Evidenc Rule

Oral evidence is inadmissible if a written contract is final and complete (intergrated contract)

Exceptions to the Parol Evidence Rule

• contract that are subsequently modified

• contracts conditioned on orally-agreed terms

• contracts with ambiguous terms

• contract is both oral/written

• contract is incomplete

• typographic errors

• void/voidable contracts

• evidence of prior dealings/trade

Parties involved in contracts

Obligor/obligee

Assignors/assignees

Delegators/delegees

Assignments

Assignment of rights by assignor to assignees, where the assignee assumes rights of contracts and assignor relinquishes rights

Delegations

Where a delegator transfers duties under contract to a third party, the delegee, however, they still retain rights and are liable under the contract (ex: subcontracting)

Intended beneficiary

Contracting parties intend to directly benefit third party from contract

Creditor beneficiary

Third party who benefits from contract where the promisor agrees to pay promisees debt

Donee beneficiary

Third party who benefots from contatct where promisor agrees to give a gift

Vest:

maturation of rights that a party can legally act upon

Incidental beneficiary

Third party who benefits from the contract, but contracting parties never inetded to provide benefit

Discharge by conditions

• Condition precedent: a particular event must happen for the party’s duty to arise

• Condition subsequent: a future event that terminates the party’s duty when it arises

Covenant

a bidning promise to act or refrain from acting

Discharge by performance

• Complete: every aspect of the contract is complete

• Subsequent: contract mostly met under an honest effort/attempt

• Material Breach: serious violation/failure to meet the conditions

• Anticipatory reputation: contracting party decides not to complete contract

Discharge by operations of law

• alteration of the contract

• bankrupcy

• toppling of the statute of limitations

• impossibility of performance

• commercial impracticability

• frustration of purpose

Legal Remedies

Compensatory damages:

• Damages: what the plaintiff lost from the contract

• Incidental Damages: damages as a result of breach of contract (looking for job)

• Consequential Damages: foreseeable damages/arising from outside of the contract

• Punitive damages: punish defendant, deter engagement in similair behavior in future

• Liquidated damages: fixed amount placed in contract

Equitable remedies

• Restitution: contract termination

• Recession: all property returned to the owner

• Specific performance: force party to complete contract

• Injunction: enforce or prevent a party from doing something

• Reformation: reform the contract due to inconsistency

• Recovery due to Quasi-contract: enforcement of quasi-contract (promissory estoppel)

Sole proprietorship

Going into business on your own, sole liability

Partnership

split control/profits, co-own business, both assume liability

Corporations

Legal entities formed by stocks to investors

• limited liability to shareholders

• double taxation

LLC

Limited Liability Company

• built of members

• limited liability for debts

• member-managed or manager-managed

• business location = where members live

Characteristics of corporations

• recognized as its own legal entity with rights

• Corporations assume liability

• centralized management → board of directors/offers

Fudiciary Duties

• Duty of care: act with care for the corporation

• Duty of loyalty: put corporate interest first

• Duty to disclose conflicts of interest: disclose when a trasnaction will benefit you (director/officer)

LP

Limited Partnership: general partner assumes personal liability, limited partner does not

LLP

Limited Liability Partnership: personal assets protected, partners still ahve control of business

Franchise

Fanchisor: owner of trademark

Franchisee: person who sells goods udner trademark

Joint Ventures

relationship between two or more parties/corporations

De jure vs de facto corporations

De jure: lawful corporations, formed properly/meet requirements

De Facto: recognized, but doesnt meet requirements/serious mistake during formation

C-Corp - Shareholders

Owners, vote on major decisions, no management role

C-Corp - Board of Directors

Hire Officers, oversight of the corporation, full fudiciary dutues

C-Corp - Officers

Management, run day-to-day operations, full fudiciary duties

Alter Ego

entities operating as a single enterprise

• commingling of funds

• shared offices/staff/accounts

• failure to maintain serpate records

• undercapitalization

• funds used interchangeably between entity and owner

Inequity

Recognizing separate existence would sanction fraud or injustice

• standard: use of corporate form must have caused unfairness to the plaintiff

• distinction: wasn’t just informally managed, used as a tool to insulate assets from legitimate claim

Business Judgement Rule

if actions done with good faith, reasonable info, rational purpose, proetcts the outcome/removes liability