LEB Flash Cards

What is the difference between law and ethics?

Something being a law does mean it’s ethical. Law creates a baseline of rules society agrees to enforce, while ethics involves personal or cultural belief of right and wrong.

Give an example of legal but unethical business conduct.

Technically it's legal to pay an employee the minimum wage of the state they are working in the US but is it ethical to pay a person a wage that isn’t sustainable for living?

What is the purpose of a company’s Code of Ethics or Code of Conduct? 

Code of Ethics and Code of Conduct is to establish clear behavioral standards, deter wrongdoing, and align daily operations with the organization's core values

What is a conflict of interest? Give an example. 

A situation where a person or organization has competing personal or professional interests that could influence their judgment and decisions. Nepotism in the hiring process.

What is Corporate Social Responsibility (CSR)? 

CSR is a corporate responsibility to not only make profit for shareholders but to help the wellbeing of society, environment, and stakeholders. 

How can a company prevent corruption

Creating clear policies and guidelines like a code of conduct, having third-party auditing, employee training, confidential reporting channels.

What is the difference between duty-based and consequence-based ethics? 

Duty-based is being ethical b/c that is what your purpose is while consequence based ethics is being ethical b/c of the effects from your actions.

What is the difference between hard law and soft law? 

hard law is legally binding obligations that can be enforced legally whereas soft law refers to non-binding rules, guidelines, or declarations that influence behavior that can’t be enforced

What are the main functions of law in business?

Provides a framework that governs how companies are formed, how they trade, and how they interact with employees, consumers, and the public. 

Why is the rule of law important for businesses? 

Provides predictability and stability for business decisions. It also allows fair competition and anti-corruption.

How does law create predictability in international business?

Establishes clear, enforceable rules and standardized frameworks that reduce commercial and institutional risks and confusion.

What is misleading advertising? Give an example. 

A practice where a business deceives consumers rather than being truthful, often to maximize profit. For example, greenwashing in advertising by saying their clothes are made with recycled materials when they aren’t.

What is greenwashing? 

The deceptive practice of misleading consumers into believing that a corporation or its products are environmentally sustainable when they are not.

What legal or ethical issues may arise from influencer marketing?

Influencers not disclosing their posts/videos are ads is both a legal and ethical issue. Is it ethical for an  influencer to endorse a product they may not use or like to a susceptible audience? Content ownership could also be a legal issue whether the brand or the influencer owns the video, post, etc.

Why must companies consider data protection in online advertising?

To avoid severe legal penalties, prevent catastrophic brand damage, and maintain consumer trust.

Why does advertising directed at children require special attention?

From a legal standpoint, regulators do not view children as "reasonable consumers." Instead, the law recognizes that children interpret advertisements literally, making them easy targets for exploitation.

What is the difference between an offer and an invitation to treat? 

An offer is a definite proposal that creates a legally binding contract the moment it is accepted while an invitation to treat invites others to negotiate that isn't binding.

What is a counter-offer? Give an example.

A response to an initial offer that rejects it while proposing different terms such as a different price, timeline, or set of conditions.

Can silence or conduct amount to acceptance of an offer? 

No, not without prior terms stating silence is acceptance.

What is the difference between contract formation and validity? 

Contract formation is the process of creating an agreement, while validity means the contract meets the legal requirements to be enforceable.

Can a signed contract be valid but not yet effective? Give an example

Yes, a signed contract can be valid but not yet effective, such as when it states that it will take effect on December 1st and it’s November.

Can an oral contract be legally binding?

Yes, an oral contract can be legally binding unless the law requires it to be in writing.

 What may make a contract invalid or voidable?

A contract may be invalid or voidable because of fraud, duress, mistake, lack of capacity, or illegality.

What is the difference between applicable law and jurisdiction? 

Applicable law determines which country's laws govern the contract, while jurisdiction determines which court can hear the dispute.

What is the purpose of a force majeure clause? 

A force majeure clause protects parties when unexpected events beyond their control prevent or delay them from fulfilling their contractual obligations.

Does force majeure automatically release a party from all contractual obligations?

No, because the consequences depend on the contract and applicable law.

What remedies may be available for breach of contract?

Remedies for breach of contract may include compensation, contract termination, or restitution.

What is the main purpose of compensatory damages?

The main purpose of compensatory damages is to financially compensate the injured party for losses caused by the breach.

What are the main obligations of a seller and buyer? 

The seller must deliver goods that meet the contract requirements, while the buyer must pay for the goods and accept delivery.

What is the CISG, and when can it apply? 

A standardized legal framework providing rules for international commercial sales contracts between businesses located in different contracting states.

What can a buyer do when delivered goods do not conform to the contract?

A buyer can request repair or replacement, demand a price reduction, claim damages, or terminate the contract when legally permitted.

What do Incoterms regulate? 

Incoterms regulate the responsibilities of buyers and sellers for delivery, transportation costs, risk transfer, and certain customs formalities.

Does paying for transportation necessarily mean bearing the risk of loss? 

No, paying for transportation does not necessarily mean bearing the risk of loss because risk transfers according to the agreed Incoterm.

 What are the main functions of a bill of lading? 

A bill of lading serves as a receipt for goods, evidence of the contract of carriage, and, in many cases, a document of title.

Name two international payment methods and explain the difference. 

A wire transfer sends money directly from the buyer's bank to the seller's account, while an open account is where the goods are shipped and delivered before payment is due. Payment terms are typically set to 30, 60, or 90 days.

What does a bank examine under a documentary letter of credit? 

The bank examines the submitted documents to check whether they comply with the letter of credit's requirements.

Who is the creditor when a seller delivers goods before receiving payment? 

The seller is the creditor because the buyer owes payment for the goods already delivered.

What is the purpose of security or a guarantee in a business transaction? 

Security or a guarantee helps protect a party against financial loss if the other party fails to meet its obligations.

What is the main difference between a general partnership and a limited liability company?

In a general partnership, partners have unlimited liability for business debts, while an LLC protects its owners' personal assets from company liabilities.

What does separate legal personality mean? 

Separate legal personality means a company is legally distinct from its owners and can own property, enter contracts, and sue or be sued in its own name.

What is limited liability, and what does it protect against? 

Limited liability protects owners' personal assets from company debts beyond the amount they have invested

What is the corporate veil, and what does ‘piercing the veil’ mean? 

The corporate veil separates a company from its owners, while piercing the veil means a court holds owners personally liable for company obligations in exceptional circumstances.

What is the difference between shareholders and directors? 

Shareholders own shares in the company, while directors manage the company and make business decisions.

What are the main legal duties of company directors? 

Company directors must generally act in good faith, exercise reasonable care and skill, avoid conflicts of interest, and act in the company's best interests.

Does an unsuccessful business decision automatically mean a director breached a duty?

No, an unsuccessful business decision does not automatically mean a director breached a duty if the decision was made responsibly and in good faith.

What is the difference between constitutional documents and a shareholders’ agreement?

Constitutional documents establish the company's legal structure and governance rules, while a shareholders' agreement is a private contract regulating shareholders' rights and relationships.

Why is company registration important? 

Company registration legally establishes the company and provides official records of its existence, ownership structure, and other required information.

What is due diligence, and why is it important? 

Due diligence is the process of investigating a business, transaction, or partner to identify risks and verify important information before making a decision.

Why may competition authorities review a merger or acquisition?

Competition authorities may review a merger or acquisition to determine whether it could reduce competition, create a monopoly, or harm consumers.

What is the difference between dissolution, liquidation and insolvency? 

Dissolution is the process of ending a company's legal existence, liquidation involves settling its affairs and distributing assets, and insolvency means it cannot pay its debts when due or meet the applicable legal insolvency test.

What is the difference between secured and unsecured creditors? 

Secured creditors have a claim backed by specific collateral, while unsecured creditors have no specific collateral securing their debts.