BUSE 140 Final Exam: Chapter 10, 14-15, 19, 24, Negligence Case

[Chapter 12 was removed due to loss of time in replacement of Chapter 10, Chapters 13, 20 & 21 are removed as well]

Chapter 10 - UCC Article 3 - Negotiable Instruments: Definitions, Concepts, and Negotiation /

📍Key Terms:

• Commercial Paper: In its broader sense, documents used to facilitate the transfer of money or credit.

  • Documents that acts like cash.

  • Two Types of Commercial Paper:

    • A promise to pay (promissory, certificate of deposit)

    • An order to pay (the draft, the check)

• Negotiable Instrument: A type of commercial paper; a written, signed, unconditional promise or order to pay a fixed amount of money to order or bearer either on demand or at a definite time.

  • Personal checks, paychecks, bonds, certificate of deposit, promissory notes

• Negotiation: The process by which both possession of, and title to, an instrument are transferred from one party to another, with transferee becoming a holder

  • Transfer of negotiable instrument

• Holder: A person who possesses a negotiable instrument issued, drawn, or indorsed to that person or his/her order or to bearer

Elements of Negotiability UCC Section 3-104(a)

To be negotiable, and instrument must . . .

• a.) be written;

• b.) be signed by the marker or drawers

  • Marker: Signed a promissory note; taking on debt

  • Drawer: Wrote the check; paid down the debt

• c.) contain an unconditional promise or order to pay a fixed amount of money, with or without interest or other charges described in the instrument; and no other undertaking or instruction given by the marker or drawer, except as authorized by Article 3

• d.) be payable on demand or at a definite time

  • UCC 3-108(b)

    • fixed date or dates

    • fixed period after acceptance

    • fixed reasonable time

    • prepayments

• e.) and be payable to order or to bearer

  • (UCC 3 - 109(b)) The order includes instruments that state: pay to the order or to an identifiable person and pay to his/her order

  • (UCC 3 - 109 (a)) The bearer includes instruments that do not state a payee and the instruments that are stated are:

    • pay to bearer

    • pay to the order of bearer

    • pay identified person or bearer

    • pay cash or order to cash

If a negotiable instrument comes with conditions, it is not nonnegotiable UCC 3-106(a)

• express condition on payment.

• a statement that the instrument is subject to or governed by another agreement.

• Types of Negotiable Instruments

  • Promissory Note

    • Note that is often called the Promissory Note.

    • Two party instrument in which one person (the maker) makes an unconditional, written promise to pay another person (the payee), or a person specified by the payee, a fixed amount of money either on demand or at a particular time in the future.

    • {Insert Photo of Promissory Note}

  • Draft

    • Three party instrument. The drawer orders the drawee to pay a fixed amount of money to the payee, or another person specified by the payee, either on demand or at a particular time in the future.

    • {Insert Photo of Draft}

  • Check

    • A special type of draft in which the drawee is always a bank and the instrument is payable on demand.

    • {Insert Photo of Check}

    • A check drawn by a bank upon itself is a Cashier’s Check (Most Common Draft)

    • A check in which the financial institution is both the drawer and drawee is a Traveler’s Check.

      • Payee/holder required to sign a specimen signature on the instrument when it is issued and then sign it again when cashing it.

    • Checks that have been “accepted” by the drawee bank, that is, the bank certifies that there is money in the drawer’s account to cover the check are Certified Checks.

Is a $20 USD bill a Negotiable Instrument?

• Is it written?

  • Yes

• Is it signed and by who?

  • Yes, it is signed by representatives of the Federal Reserve

• Does it contain an unconditional promise or order to pay a fixed amount?

  • Yes, it is ordered to pay a fixed amount of $20

• Is it payable on demand?

  • Yes

• Is it payable to order or to bearer?

  • Yes

Holder of a Negotiable Instrument

• A holder possesses an instrument passing to him/her via an unbroken chain of negotiation, if transferred, and

  • 1.) Issued, drawn, or indorsed to him/her or to his/her order or,

  • 2.) Payable to bearer.

To Qualify as a Holder in Due Course

• Holder must have good title to an instrument for which he/she paid value, against which the holder had no choice of any claim or defenses, and which the holder acquired in good faith.

Holder V. Holder in Due Course

• A holder is not necessarily the “owner” of an instrument. Can obtain payment on an instrument. Unless the opposing party proves a defense to payment

• A Holder in Due Course takes possession and title free of most personal defenses that could be raised against the HIDC’s transferor.

  • Payee can be a HIDC

Holder in Due Course (HIDC): One who takes possession and title free of most personal defenses that could be raised against the HIDC’s transferor.

How was it Acquired? [Requirements for a HIDC]:

• a.) Is it legally written to the person stated on the instrument?

• b.) Is it exchanged for something w/ consideration?

• c.) Is it accepted w/ good faith? Did the holder act in honesty & accepted the instrument believing the genuineness of it? [Taken for Value & Good Faith]

• d.) Is it taken w/o notice of alternation or claims against it? [Absence of Notice]

  • Change the value of the money from $10k to $100k.

Bearer Paper v. Order Paper

• Bearer paper are checks make out to “cash” or indorsed in blank.

  • Can be negotiated merely by a change in possession.

• Order paper negotiation not only requires delivery, but also the proper indorsement(s).

📍Key Terms:

• Bankruptcy: A legal proceeding initiated when a person or business cannot repay outstanding debts or obligations.

  • Offers a fresh start for people who can no longer afford to pay their bills.

• Secured Transactions: An agreement between two parties in which one of the parties gives property (Assets) as collateral, or security, for a loan. (Security Interest)

  • Unsecured Transactions include credit cards.

Protection for Debtors: Both State and Federal Laws provide certain measures of protection for debtors.

• Exemption Statutes

  • Homestead Exemption: When a home is sold to pay a judgement, a specific amount may be retained by the debtor, free of the judgement debt.

    • Generally means to provide the debtor with sufficient funds to protect his/her family and find another home.

    • Covers personal property like clothes, furniture, personal possessions, motor vehicles, pets, and veterans’ pension

  • Limits of Garnishments

    • Consumer Credit Protection Act (Truth - in - Leading Act) bars employers from terminating an employee because of garnishment for any single debt.

    • 1.) 25% of your disposable earnings or

    • 2.) The amount by which that week’s disposable earnings exceed 30 times the federal minimum hourly wage.

Chapter 7, 11. and 13 of the Bankruptcy Code

• Chapter 7 (Liquidation)

  • Individuals only, Businesses entities like Corporations and partnerships are still liable for their debts.

  • Bankruptcy court appoints a trustee to take charge of the estate. Trustee sells the debtor’s nonexempt property. The proceeds are then distributed to the creditors according to their priorities under law

  • Discharge covers debt, including judgments, arising before bankruptcy order granting discharge. This discharge permanently prevents most creditors from trying to collect their debts.

• Chapter 11 (Business Reorganization)

  • Intended for allowing ongoing businesses to restructure their debts

  • Before restructuring occurs:

    • A court-appointed trustee or examiner conducts an investigation, files reports with the court, and may submit a reorganization plan (if the debtor did not) or (instead) recommend conversion to a Chapter 7 Liquidation.

  • The plan must be accepted by the bankruptcy judge and passed by two-thirds in amount and more than half in number, of the claims in any particular class of creditors.

• Chapter 13 (Adjustment to an Individual’s Debt)

  • Debtor must file a financial statement (income and expenses) and must list assets, creditors (with addresses and amounts owed), and exempt property.

  • Under Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), an attorney representing the debtor in bankruptcy must conduct a thorough investigation to determine whether the information provided in the debtor’s petition and schedules (statements about the debtor’s financial position) is accurate.

    • Attorney provides a certification, under penalty of perjury, for the information in the petition and can be fined and otherwise penalized for any discrepancies.

Chapter 14 - Agency

📍Key Terms:

• Agency: A legal relationship whereby one person acts for another

• Agent: A person authorized to act for another (principal)

• Principal: The people for whom an agent acts and from whom the agent derives authority

• Independent Contractor: A person hired to undertake a contractually defined result (not an employee and usually not an agent)

Agency Law

• Consists of all the rules, recognized and enforced by society, whereby one person acts for another

• Is State Common Law

Attorney

• a representative or agent

Attorney - At - Law

• A legal representative, employed to represent a client in lawsuits and other legal matters.

Attorney In Fact

• May represent another person as an agent for general or special purposes other than legal ones

• Named as a representative or agent in Power of Attorney

Power of Attorney

• A written document setting out the appointment of the attorney

• The appointment may for board agency purposes for named and limited purposes.

  • “to do any act for me”

  • “to sell my real estate known as ‘Blackarce’”

Legal Concepts

1.) Agency may include employment

• Depends whether the agent meets this definition of “employee”: under the control and supervision of his/her employer, who determines not only what is to be done, but also how it is to be done and other details of performance

• Certain types of employees have no power to represent the employer and thus are not agents.

2.) Agency includes and may be created by a power of attorney

3.) Agency generally does not include independent contractors

4.) Personal service obligations cannot be performed by an agent

• These nondelegable obligations require the special skill of a designated person who cannot a representative (agent) to act in his/her place.

5.) Distinguish between employees (who are agents) and independent contractors

Creation of an Agency

• By Express Contract or Consensual Agreement [refer to Contracts]

  • Written, Contract, or Oral

• By the Conduct of the Parties

  • Implied contracts

• By Ratification of an Unauthorized Act

  • 1.) Party was in existence when the “agent” acted

  • 2.) Had full knowledge of all material facts before it ratified

  • 3.) Ratified the entire act of a would-be agent, not simply the favorable parts.

• By Estoppel

  • a legal principle that prevents someone from arguing something or asserting a right that contradicts what they previously said or agreed to by law

• By Necessity

  • Contract must be reasonable, and the provider of the service will be liable to the Principal for failure to perform the contract with proper care

    • Parent and child with special care

Duties of The Agent to the Principal

• Act as a Fiduciary

• No Comingling

• 1.) Duty to Obey Instructions

  • Self Evident

• 2.) Duty to Act with Skill

  • Must be Competent

• 3.) Duty to Avoid Conflict of Interest

  • Agent cannot act for his/her personal interest

• 4.) Duty to Protect Confidential Information

  • Agent must protect this property from the general public, third persons, and the principal's competitors

• 5.) Duty to Notify

  • Agent is some extension of the principal and must notify all information that is or may be useful to make further choices with respect.

• 6.) Duty to Account

  • Agents must maintain an “open book” for the principal so that the principal may assess the progress of the work.

  • Upon termination of the agency, all property must be accounted for and all income turned over to the principal in accord with the agency agreement

Fiduciary

• Someone who manages money or property for someone else

Commingling

• Fiduciary mixes Clients funds with their personal funds

  • Breach of Agency Contract

  • Criminal Act of Embezzlement, larceny after trust

Duties of the Principal to the Agent

• Duty to Follow the Contract of the Agency

  • Governed by contract of agency

• Duty to Compensate the Agent

  • Primary Duty is to compensate the agent for his/her services

    • If implied, the agents fee is generally understood

    • No express or implied, agent is entitled to compensation in quasi contract calculated at the reasonable value of the services

    • However, if the agent agreed to perform at the agency gratuitously, no compensation is due.

    • If the agent is an employee, he/she is entitled to a place to work and to the equipment supplies, and accessories necessary to perform the employment.

• Duty to Pay all Expenses Incurred by the Agent

  • The principal must pay all expenses the agent reasonably incurred in furtherance of the principals business.

• Duty to Inform the Agent of Dangerous Risks

  • Inform the agent of dangerous risks and the principal has reason to know exist.

Liability of the Principal/Agent Third Parties

• Since an Agent is an extension of the Principal, when the agent is acting within the authority granted by the Principal, he/she can bind the Principal to the deal; otherwise representatives would serve no purpose

• The Principal is bound contractually if the agent has either actual authority to make a contract for the Principal or has the apparent authority to do so

Actual Authority

• Express or Implied Authority

Apparent Authority

• Third Party judges the actions or conducts whether to believe that the Agent has the authority to make contracts for the Principal

Chapter 15 - Types of Business Organizations; Partnerships; Franchises

📍Key Terms:

• Sole Proprietorship: The simplest form of business, in which a sole owner and his/her business are not legally distinct entities, the owner being personally liable for business debts

• Partnership: The association of two or more persons who have expressly or implicitly agreed to carry on, as co-owners, a business for profit

  • General Partnership: A partnership in which there are no limited partners, and each partner has managerial power and unlimited liability for the partnership.

  • Limited Partnership: A partnership conforming to statutory requirements and having one or more general partners and one or more limited partners.

• Corporation: An artificial being created by operation of law, with an existence distinct from the shareholders who own it.

• Limited Liability Company (LLC): A business format that is a hybrid of the corporation and the partnership; it is taxed as a partnership but has the limited liability of a corporation

Types of Business Organization

• 1.) Sole Proprietorship

• 2.) Partnership

  • General & Limited

• 3.) Corporation

• Subtypes:

  • Limited Partnerships, General Partnerships, S Corporations, Close Corporations, Professional Corporations, Nonprofit Corporations, and General Corporations

Comparison Chart

Chapter 19 - Crimes and Torts

📍Key Terms:

• Crime: A public wrong, committed with intent or by negligence, for which the law provides punishment or recompense to society

• Tort: A private wrong against a person or his/her property. Aside from certain limited circumstances, all torts arise from either an intentional, wrongful action or from a negligent action.

• Burden of Proof: The degree of proof necessary for a criminal conviction (beyond a reasonable doubt) or for a successful civil suit (preponderance of evidence)

Important Facts about Crimes

• American criminal law is primarily codified law that is based on statutes and regulations rather than past judicial decisions.

• Crime may be under both federal law and state (civil) law

  • Depending on which category the crime falls into, it may be prosecuted in separate criminal cases in each of the two court systems [state & federal]

The U.S. Constitution and American Criminal Law

• Fourth Amendment: Protects against unreasonable searches and seizures and requires probable cause before a search warrant or arrest warrant is issued.

  • Exceptions to this are: “hot pursuit” of a suspect, evidence in plain view or about to be destroyed, searches of arrested persons, and good faith police behavior

  • When an arrest for a serious offense is supported by probable cause, the suspect’s being required to furnish a DNA sample - fingerprints & photography - constitutional.

• Fifth Amendment: Prohibits compulsory self-incrimination

  • “I plead the fifth” rather than testify

  • Prohibition against double jeopardy (trying someone again for the same crime once he/she has been acquitted of that crime)

  • Due Process with the Fourteenth Amendment

    • Constitutional basis for our presumption of a criminal defendant’s innocence

• Sixth Amendment: Outlines the criminal defendant’s rights - the right to counsel, to a speedy trial and public trial, to confront witnesses, and to a jury trial

• Miranda v. Arizona, 384 U.S. 436 (1966): The Miranda Rights

  • Right to remain silent

  • Anything you say can and will be used as evidence against you

  • Right to an attorney and will be provided one from the state for free if you cannot afford one

Classification of Crimes:

• Treason - Rarely Charged: Crime against the United States; the only crime defined.

• Felonies - Most Serious; punishable by imprisonment:

  • Murder

  • Manslaughter

  • Aggravated assault

    • attempt to murder, rob, kill, rape, or assault with deadly or dangerous weapons

  • Arson

  • Bribery

  • Burglary

  • Embezzlement [Stealing from employee’s payroll]

  • Forgery

  • Grand Larceny [taking and keeping from robbing a bank]

  • Kidnapping

  • Price Fixing

  • Rape

  • Robbery

  • Tax Evasion

• Misdemeanors - Generally Punishable:

  • Only by Fines or, at most, a brief stay in the local jail

  • Simple assault [physical harm - attempt or hit; Karen slapping you across the face type of deal]

  • Disorderly conduct [disrupting public peace]

  • gambling

  • petty larceny [in-store theft like clothing and food]

  • prostitution

  • trespassing private property

• Infractions or Violations - Too petty to be labeled as crimes

  • Violations of city ordinances

  • Traffic Regulations

Criminal Intent and Causation

• Actus Reus: Criminal Act

  • Doing vs Thinking

  • Party A thinks about hurting Party B, but does nothing about it; No Actus Reus because no crime actually happened

• Mens Rea: Criminal Intent

  • Thinking vs Accident

  • Party A’s Car Collides with Party B and kills them, no crime because Party A does not know Part B nor had any malicious intent.

Criminal Procedures

• Probable Cause: Reasonable grounds - something more than mere suspicion, to believe that a particular person committed the crime, that person can be arrested

  • Warrant for arrest is necessary unless the pressure of time requires immediate action (before the suspect flees)

  • Concealing weapons or contraband

  • Being look out for others to commit a crime

  • Using a retail store as a cover to commit crimes in a location [Hidden drug dealing basement]

  • Witness description matching the suspect

• Indictment: A grand jury or magistrate or police officer, not a persecutor, has filed criminal charges against you based on probable cause

Burden of Proof

• Crucial difference between Criminal and Civil cases in the level of proof required.

• Absolute proof is not mandatory; just needs reasonable doubts

• A verdict ending in “not guilty” doesn’t necessarily mean that the judge or jury believes the defendant to be innocent.

  • Simply finding that there was insufficient evidence to prove guilt beyond a reasonable doubt.

Important Facts About Torts

• Torts: A private wrong, a trespass against a person or his/her property, for which a damages award or other judicial remedy may be sought.

  • Either intentional, wrongful action, or negligent action

  • Also constitutes crimes so a single action may result in two trials; a criminal trial and a tort (civil) trial

• Classification of Torts

  • Intentional Torts: Defendant’s act must be expressly or implicitly intended or reasonably foreseeable

    • Examples: Assault & Battery, false imprisonment, slander [only if it brings financial harm], invasion of privacy

  • Negligence

    • Duty: Standard of Care by Reasonable Person

    • Breach: Violation of Rule to Duty

    • Causation (Cause in Fact) (Actual Cause) (of the wrong/injury)

      • Must be proven in fact

    • Proximate Cause - The legal cause of the wrong/injury

      • Involves foreseeability

    • • Plaintiff’s damages natural and probable consequences [that are closely related or connected to] of the defendants unreasonable acts

    • Damages

      • Bodily

      • Property

      • Mental & Emotional

  • Other Tort Theories

    • Negligence Per See: Violation, by itself, proves duty and breach

    • Res Ipsa Loquitur: When a certain type of accident occurs ordinarily because of negligence and the defendant had EXCLUSIVE CONTROL of the instrument causing the injury [e.g. surgeon leaving a rag inside a patient]

  • Strict Liability

    • Defendant is liable for the plaintiff’s injuries despite the absence of negligence or intentional wrongful acts. [Engaged in abnormally dangerous activities like demolition with explosives]

Chapter 24 - Employment Law

📍Key Terms

• Title VII: Statute in the federal Civil Rights Act of 1964 prohibits discrimination in the hiring, firing, promotion, compensation, or any other aspect of employment because of a person’s race, color, religion, sex, or national origin

  • TL;DR - Protects employees and job applicants from employment discrimination based on race, color, religion, sex and national origin.

• Worker’s Compensation: a law found, in all states, requiring employees to relinquish their right to sue their employers for accidental death, injury, or disease arising from or during the course of their employment; in exchange, the employees gain the right to receive financial benefits (according to a statutory schedule of benefits) regardless of fault

  • TL;DR - insurance that provides cash benefits and/or medical care for workers who are injured or become ill as a direct result of their job

The purpose of employment legislation is to protect workers’ health and safety, provide workers with a minimum level of economic support, and - overall - foster a workplace free from both discrimination and disruptive labor/management “wars”

Health and Safety Legislation

• Why do we have Worker’s Compensation?

  • Is a direct result of public awareness and outrage at the poor and often dangerous working conditions people were forced to labor under in order to make a living, and the financially devastating effects of a work-related injury or illness on the worker and the worker's dependents.

  • TL;DR - The more dangerous the working conditions are, the more the employer is liable for any work-related injuries, death, or illnesses

• Occupational Safety and Health Act (OSHA) 1970

  • Sets and enforces standards to ensure safe and healthy working conditions, complied by both employer and employee.

  • Doesn’t have to be anything majorly dangerous/fatal, all unsafe incidents, accidents, lost workdays, job transfers and terminations, medical treatments, and restrictions on work must be documents and reported