Key Legal Concepts in Business Law

Defamation

A false statement of fact that harms another person's reputation and is communicated to a third party.

Disparagement

False and injurious statements that discredit a person's or business's products or services.

Fraudulent Misrepresentation

Intentional deceit of another person for personal gain, involving a false statement of material fact.

Agency law

Governs the legal relationship in which one party, the agent, acts on behalf of another, the principal.

3 Prong test (ABC test)

Used to determine if a worker is an independent contractor: (A) free from control, (B) performs work outside the usual course of business, and (C) is engaged in an independently established trade.

Express Agency

An agency relationship formed through written or spoken agreement between the principal and agent.

Apparent Agency

Occurs when a principal leads a third party to believe someone is their agent, even if no formal agency exists.

Agency by ratification

An agency relationship that is created when the principal approves an unauthorized act done by someone purporting to be their agent.

Respondeat Superior

A legal doctrine holding employers liable for wrongful acts committed by employees within the scope of employment.

Real Property

Land and anything permanently attached to it, such as buildings.

Personal Property

All property that is not real property; movable objects.

Trade Fixture

An item installed by a commercial tenant for business use that may be removed at the end of the lease.

Easement

The right to use another person's land for a specific purpose without owning it.

Assignment

The transfer of rights or interests from one party to another.

Royalties

Payments made to patent holders for the right to use their inventions.

Trademark

A symbol, word, or phrase that is distinctive and used to identify and distinguish, does not need to be registered but is strengthened when it is.

Patent

A government grant giving an inventor the exclusive right to make, use, or sell an invention, process, or formula for a certain period.

Trade Secret

Confidential business information that gives a competitive edge, such as formulas or practices.

Copyright

Legal protection for original works of authorship such as books, music, and software.

Sole Proprietorship

A business owned and operated by one individual with no legal distinction between owner and business.

Partnership

A business owned by two or more people who share profits, losses, and liability.

Limited Liability Partnership

A partnership where some or all partners have limited liability for the business's debts.

Corporation

A legal entity separate from its owners, offering limited liability to its shareholders. Legal ‘artificial’ person in the eyes of the law.

Limited Liability Company

A hybrid business structure combining features of a corporation and a partnership. Owned by members who have limited liability.

C Corporation

Corporation taxed annually on earnings, and shareholders are taxed on dividends (Double Taxation)

S Corporation

A special type of corporation that avoids double taxation by passing income directly to shareholders.

Publicly Held Corporation

A corporation whose shares are traded on public stock exchanges or OTC.

Closely Held Corporation

A corporation owned by a small group of shareholders with no public market for its stock.

Pierce the Corporate Veil

A legal decision to treat the rights or liabilities of a corporation as the rights or liabilities of its shareholders.

Business Judgement Rule

Protects corporate officers and directors from liability for business decisions made in good faith and with reasonable care.

Insider Trading

Buying or selling of a publicly traded company's stock by someone who has non‑public, material information.

Safe Harbor

Protects publicly held companies when they make financial forecasts, as long as they do not intentionally misrepresent facts.

Sarbanes Oxley Act of 2002

Federal law that sets standards for all U.S. public company boards, management, and public accounting firms. Requires CEOs and CFOs to certify financial reports. Established the Public Company Accounting Oversight Board (PCAOB). Prohibits offering select consulting services. Protects whistle-blowers.

Fair Labor Standards Act

Establishes minimum wage, overtime pay, recordkeeping, and child labor standards.

Family and Medical Leave Act

Entitles eligible employees to take unpaid, job‑protected leave for family and medical reasons.

Workers Compensation

Insurance providing wage replacement and medical benefits to employees injured in the course of employment.

Disparate Treatment

Intentional discrimination against an individual based on a protected characteristic (race, sex, religion, etc.)

Disparate Impact

Practices that are neutral on their face but have a discriminatory effect on a protected group.

Sexual Harassment

Unwelcome sexual advances or conduct in the workplace.

Quid Pro Quo

A form of sexual harassment where job benefits are directly tied to the acceptance of sexual conduct.

Hostile Work Environment

A form of harassment where the workplace is permeated with discriminatory intimidation, ridicule, or insult.

Bona Fide Occupational Qualification

A legal exception that allows discrimination if it is reasonably necessary to the normal operation of a business.

Rule of Reason

Antitrust doctrine stating a practice is illegal only if it unreasonably restrains trade.

Per Se Violations

Antitrust violations that are inherently illegal, regardless of their actual effect on the market.

Horizontal Restraint

Agreements among competitors at the same level of the market structure to restrict competition.

Price Fixing

An agreement among competitors to raise, lower, or stabilize prices.

Horizontal Market Division

Competitors agree to divide markets among themselves, each getting exclusive rights to a region or customer type.

Vertical Restraint

Restrictions imposed by a firm at one level of the market on a firm at another level (e.g., manufacturer to retailer).

Resale Price

The price a manufacturer requires a retailer to sell a product at.

Predatory Pricing

Setting prices low with the intent to drive competitors out of the market.

Bait and Switch Tactic

Advertising a product at a low price to attract customers, then encouraging them to buy a more expensive item.

Puffing/Puffery

Exaggerated or subjective claims that are not meant to be taken literally (e.g., 'best in the world').

Communications Decency Act of 1996

Provides immunity to online platforms from liability for user‑generated content.

Consumer Review Fairness Act

Protects consumers' right to post honest reviews, even if negative.

Malpractice

Professional negligence by act or omission by a professional such as a lawyer or doctor.

Ownership Rights

Legal rights associated with owning land, including the space above, water on/under the land, and mineral resources beneath.

Limited Liability

Owners are not personally liable for the business's debts or liabilities beyond their investment.

Tipper/Tippee Theory

In insider trading, the tipper gives non‑public info, and the tippee trades on it; both can be liable.

Labor Laws

Regulations that guarantee workers the right to form, join, and participate in labor unions.

Collective Bargaining

Negotiation between employers and a group of employees to determine working conditions.

Strike

A work stoppage by employees as a protest against terms or conditions of employment.

Boycott

Refusal to buy or use goods or services as a protest.

Picketing

Protesting outside of a business to draw attention to a labor dispute.

Title VII

Part of the Civil Rights Act of 1964 prohibiting employment discrimination based on race, color, religion, sex, or national origin.

Sex

Interpretation of Title VII that includes LGBTQ+ individuals under the definition of "sex."

Monopoly Power

The ability of a firm to control price and exclude competitors in a given market.

Relevant Market

The market in which a company competes, both in product and geographic terms.

Intent Requirement

In antitrust law, a necessary element to show purposeful conduct to acquire or maintain monopoly power.

Clayton Act

Antitrust law that addresses specific practices like price discrimination, exclusionary practices, mergers, interlocking directorates

Exclusive Dealing Contract

An agreement that restricts a buyer from purchasing a competitor's goods.

Tying Arrangement

Forcing buyers to purchase one product in order to get another product.

Sherman Act

First federal antitrust law prohibiting monopolistic practices and unreasonable restraints on trade.

Deceptive Advertising

Advertising that misleads consumers through false or misleading claims.