Legal Environment of Business Final Study Guide

Comprehensive vocabulary flashcards covering the key legal and ethical concepts from Chapters 1-24 as listed in the Final Study Guide.

Precedent

A principle or rule established in a previous legal case that is either binding on or persuasive for a court or other tribunal when deciding subsequent cases with similar issues or facts.

Stare Decisis

A legal doctrine that obligates courts to follow historical cases when making a ruling on a similar case; literally 'to stand by things decided.'

Ethical dilemma

A problem or situation that requires a person or organization to choose between alternatives that must be evaluated as right (ethical) or wrong (unethical).

Public disclosure test

An ethical test that asks how you would feel if your actions were broadcast to the public, such as being featured on television or in the newspaper.

Golden Rule test

An ethical guideline that suggests treating others the way you would want to be treated yourself.

Universalization test

An ethical test that asks what the consequences would be if everyone in society acted in the same way.

WH process

A two-step ethical framework for business decision-making that considers Whom the decision affects and How the decision is achieved.

Social responsibility of business

The concept that a business has obligations to society beyond its economic and legal duties.

In personam (personal) jurisdiction

The power of a court to exercise authority over a particular person or legal entity involved in a lawsuit.

Subject-matter jurisdiction

The authority of a court to hear and decide a particular type of case.

Federal question jurisdiction

Jurisdiction given to federal courts in cases where the plaintiff's cause of action is based on the United States Constitution, a treaty, or a federal statute.

Diversity-of-citizenship jurisdiction

The power of federal courts to hear civil cases where the parties are residents of different states and the amount in controversy exceeds $75,000.

Standing

The legal right of a party to bring a lawsuit to court, requiring that the party has a personal stake in the outcome of the case.

Service of process

The formal procedure by which a party to a lawsuit gives appropriate notice of initial legal action to another party.

Default judgment

A binding judgment in favor of either party based on some failure to take action by the other party, such as failing to file an answer to a complaint.

Interrogatories

A series of written questions used in the discovery process that one party sends to another, which must be answered under oath.

Request to produce documents

A discovery tool that allows one party to request that another party provide specific items or documents for inspection and copying.

Deposition

A witness's sworn out-of-court testimony that is reduced to writing for later use in court or for discovery purposes.

Mediation

A form of alternative dispute resolution where a neutral third party helps the disputing parties reach a voluntary settlement.

Arbitration

A method of alternative dispute resolution where a neutral third party hears both sides and issues a binding decision called an award.

Disparagement

A business tort where false statements are made about a person's property, product, or business reputation, causing economic harm.

Intentional interference with contract

A tort occurring when a third party intentionally causes a contracting party to breach their contract with another.

Fraudulent misrepresentation

A tort involving the intentional concealment or misrepresentation of a material fact to induce another to act to their detriment.

Negligence

Failure to exercise the standard of care that a reasonably prudent person would have exercised in a similar situation.

Proximate cause

A legal concept that limits liability to those consequences that are reasonably foreseeable from the defendant's actions.

Compensatory damages

Money awarded to a plaintiff to reimburse them for actual losses sustained such as medical bills or lost wages.

Punitive damages

Damages awarded beyond compensatory damages to punish the defendant and deter others from similar conduct.

Pure comparative negligence

A defense in negligence cases where the court determines the percentage of fault for each party and reduces the plaintiff's recovery by their own percentage of fault.

Modified comparative negligence

A defense where the plaintiff can recover damages only if their fault is less than a certain threshold, typically $50$ or $51$ percent.

Assumption of the risk

A legal defense in negligence cases where the plaintiff voluntarily and knowingly encountered a risk of harm.

Strict liability

Liability without fault, typically applied in cases involving inherently dangerous activities or defective products.

Fee simple absolute

The highest form of ownership of real property, providing the owner with the most complete set of rights possible.

Life estate

An interest in real property that lasts for the duration of a specified person's life.

Leasehold

A possessory interest in land that is for a fixed period and is created by a contract between the landlord and tenant.

Easement

A non-possessory right to use the land of another for a specific, limited purpose.

Adverse possession

A legal principle by which title to another's real property is acquired without their permission after a specific period of open and notorious use.

Trademark

A distinctive mark, word, design, or symbol used by a manufacturer or merchant to identify their goods and distinguish them from others.

Trade dress

The overall image and appearance of a product or its packaging that identifies its source to consumers.

Copyright

The legal right of a creator to protect their original creative works, such as books, music, and art, from unauthorized use.

Fair use doctrine

A legal exception to copyright law that allows limited use of copyrighted material without permission for purposes like criticism, comment, or education.

Patent

A government grant that gives an inventor exclusive rights to an invention for a set period of time.

Trade secret

Confidential business information, such as a formula or process, that provides a competitive advantage.

Bilateral contract

A contract where a promise is exchanged for another promise (a 'promise for a promise').

Unilateral contract

A contract where a promise is exchanged for the completion of an act (a 'promise for an act').

Option contract

A contract where the offeror agrees to keep an offer open for a specified period of time in exchange for consideration.

Mirror image rule

A common law rule stating that the terms of the acceptance must exactly match the terms of the offer for a contract to be formed.

Mailbox rule

The principle that an acceptance is effective and a contract is formed the moment the acceptance is placed in the mail.

Promissory estoppel

A legal doctrine that allows a court to enforce a promise without consideration if one party reasonably relied on that promise to their detriment.

Illusory promise

A statement that appears to be a promise but does not actually bind the promisor to do anything.

Past consideration

An act done before the contract is made, which cannot be used as consideration for a current promise.

Preexisting duty

The rule that a promise to do something one is already legally obligated to do is not valid consideration.

Liquidated debt

A debt for which there is no dispute regarding the existence or the amount of the money owed.

Accord and satisfaction

An agreement (accord) to settle a dispute by accepting less than the full amount owed, followed by the performance (satisfaction) of that agreement.

Ratification of voidable Contract

The act of accepting and giving legal force to an obligation that was previously voidable, such as a minor continuing a contract after reaching the age of majority.

Procedural unconscionability

Unfairness in the formation of a contract, often involving a lack of meaningful choice or hidden terms.

Substantive unconscionability

Unfairness in the terms of the contract itself, where the terms are overly harsh or one-sided.

Adhesion contract

A standard-form contract drafted by one party and presented to another on a 'take-it-or-leave-it' basis.

Exculpatory clause

A contract provision that attempts to release one party from liability in the event of monetary or physical injury, regardless of fault.

Severable contract

A contract that can be divided into independent parts, where the failure of one part does not necessarily void the entire agreement.

Unilateral mistake

An error made by only one party to a contract regarding a material fact; generally, it does not provide grounds for rescission.

Mutual mistake

An error made by both parties to a contract regarding the same material fact, which often allows either party to rescind.

Innocent misrepresentation

A false statement of material fact made by a person who believed the statement to be true.

Negligent misrepresentation

A false statement made by a person who failed to exercise reasonable care in uncovering or disclosing the facts.

Duress

Wrongful coercion, such as physical threats or economic pressure, used to force a person to enter into a contract.

Undue influence

A situation where one person takes advantage of a relationship of trust to unfairly persuade another to enter into a contract.

Statute of frauds

A legal requirement that certain types of contracts must be in writing to be enforceable.

MYLEGS

An acronym for contracts subject to the Statute of Frauds: Marriage, Year (cannot be performed in one), Land, Executor (paying debt with own funds), Goods sold for over $500$, and Suretyship (guaranty).

Parol evidence rule

A rule that prohibits the introduction of oral or written evidence made prior to or contemporaneously with a written contract that contradicts the terms of the final written agreement.

Assignment

The transfer of contractual rights to a third party.

Delegation

The transfer of contractual duties to a third party.

Condition precedent

A condition that must be met before a party's duty to perform arises.

Condition subsequent

A future event that terminates an existing duty to perform.

Substantial performance

Performance that is slightly less than complete but does not vary greatly from what was promised, generally entitling the party to payment minus damages for the minor deviation.

Material breach

A failure of performance so significant that it destroys the value of the contract and excuses the non-breaching party from their obligations.

Anticipatory repudiation

A situation where one party clearly indicates before the performance is due that they will not fulfill their contractual obligations.

Novation

The substitution of a new contract in place of an old one, typically replacing one of the parties with a third party.

Commercial impracticability

A doctrine that excuses performance when an unforeseen event makes performance excessively difficult or expensive.

Consequential damages

Foreseeable damages that result from special circumstances outside the contract itself, such as lost profits.

Specific performance

An equitable remedy where the court orders a party to fulfill their contractual obligations, used when monetary damages are inadequate.

Fiduciary

A person who has a legal and ethical duty to act in the best interests of another party.

Agency by estoppel

An agency relationship created when a principal's actions lead a third party to reasonably believe that another person is the principal's agent.

Constructive trust

An equitable remedy where the court imposes a trust over property that was wrongfully obtained by an agent.

Apparent authority

The power of an agent to act on behalf of a principal that exists when the principal's conduct leads a third party to believe the agent has authority.

Disclosed principal

A principal whose identity is known by the third party at the time of the contract.

Partially disclosed principal

A principal whose existence is known by the third party, but whose specific identity is unknown.

Undisclosed principal

A principal whose existence and identity are both unknown to the third party.

Respondeat superior

A legal doctrine holding an employer or principal liable for the torts committed by an employee acting within the scope of their employment.

Frolic and detour

A distinction in agency law where 'detour' is a minor departure from duties (employer liable) and 'frolic' is a major departure for personal reasons (employer not liable).

Sole Proprietorship

A business owned and operated by one person, where the owner has total control and unlimited personal liability.

General Partnership

A business structure where two or more people share in the management, profits, and unlimited personal liability of the business.

Corporation

A legal entity separate from its owners, providing limited liability for shareholders but subject to double taxation.

S Corporation

A type of corporation that meets specific requirements to be taxed like a partnership, avoiding double taxation.

Limited Liability Company (LLC)

A business organization that combines the limited liability of a corporation with the tax advantages of a partnership.

Employment at will

A legal doctrine stating that an employer can fire an employee for any reason, or no reason, as long as it is not an illegal reason.

Title VII of the Civil Rights Act of $1964$

A federal law that prohibits employment discrimination based on race, color, religion, sex, or national origin.

Bona fide occupational qualification

A defense to a discrimination claim where an employer shows that a particular trait is an absolute necessity for doing the job.

Disparate treatment

Intentional discrimination against an individual based on their membership in a protected class.

Disparate impact

Unintentional discrimination that occurs when an employer's neutral policy or practice has a disproportionately adverse effect on a protected class.

Fair Labor Standards Act

A federal law that establishes minimum wage, overtime pay eligibility, and child labor standards.

Wagner Act

The National Labor Relations Act of $1935$, which protects the rights of employees to organize and bargain collectively through unions.