BUS Law & Ethics Test 2

Operating Agreement

Document used to define how a company works ( uses transfer restrictions, who gets profit? who gets control?)

Shareholders

• Bottom tier

• they elect board of directors

The Board

• Middle tier

• Decides when to sell stocks

• Mergers/ acquisitions start with board

• Boards hire managers/ officers

Managers/ Executives

• Top tier

• Make the final decisions

Corporate Opportunity Doctrine

Board members CANNOT take an opportunity for themselves that belongs to the company

(no selfish actions)

Business Judgement Rule

Board members CANNOT be sued by shareholders for an HONEST mistake of business judgement.

What is a contract?

Legally enforceable promise

Bilateral Contract

Promises made in exchange for other promises

(ex. buy a house —> you give them money)

Unilateral Contract

Promises made in exchange for performance

(ex. a lost pet reward)

The elements of a contract

1. The offer- must be DEFINITE

2. Acceptance- must be UNCONDITIONAL

3. Consideration- must be MUTUAL (everyone gives/ gets something)

4. Meeting of the Minds- AKA genuine assent

What is genuine assent?

Checking to see if any problems with the circumstances

EX. 1. fraud

2. Duress

3. Mutual mistake / genuine misunderstandings

4. Undue influence ( unbalanced relationships)

5. Capacity (is the person in the right state of mind to consent)

6. Legality

Doctrine of necessaries

Contracts with minors ARE enforceable if needed for their survival

EX. from class- the home alone analogy

Statue of Frauds

Requirement that some contracts MUST be in writing

The 5 subjects of Statue of Frauds

1. sale of land

2. sale of goods > 500

3. contracts last > 1 year

4. contracts to pay the debt of another

5. marriage

Parole Evidence Rule

If the contract is WRITTEN, all ORAL side agreements are disregarded

Legal Contract remedy

• Compensatory damaged (lost profit)

• Liquidated damages ( states damages if contract is breached)

Equitable Contract remedy

• Equitable injunction

• Injunction (court order to stop doing something)

• Specific Performance (if money isn’t a fix)

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Property Law

Law of owning things, all property falls under 2 categories

Real property

Land / Realty

Personal Property

• Tangible and intangible law

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Deed

document that transfers ownership of land

Bundle of Sticks

Series of rights relative to other people

EX. ( HOAs, renter agreements, zoning rules) - all of these are limitations or “sticks” that you give up.

Easement

Limited right to use someone elses land

When more than 1 person owns 1 piece of land…

Tenants in Common - DEFAULT - each person owns a % of land, each can use ALL of the property. Also, any owner can choose to sell

Tenants by the Entirety- ONLY for MARRIED couples- legal loophole to preserve marital homes. - each spouse owns 100% of land. if one dies other gets it, BOTH must agree to sell

Adverse Possesion

When someone uses land long enough, they now own it.

EX. if you build a fence but leave a foot uncovered on your neighbors fence line and they begin to maintain it, over time it becomes theirs since you have not kept up with it.

Accord + Satisfaction

Way of resolving disputed debts

EX: if you send a check lower than asked amount, but mark it “PAID IN FULL” and they ACCEPT it, they can no longer pursue you for more money. The deal is done.

TEST QUESTION- How to mark payment for accord + satisfaction

Answer: PAID IN FULL

Conditions Precedent

Something that has to happen before a duty is owed

EX: you reach a goal —> you get a bonus

Conditions Subsequent

Clause in contract that if something happens, the deal is OFF

EX: a company has the right to fire you if you embarrass the business

TEST QUESTION: What to do if someone were to reveal trade secrets, breaking a contract?

You would need to file an injunction or use liquidated damages clause.