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legal aspects > exam 2 chpater 404-420 > Flashcards

exam 2 chpater 404-420 Flashcards

1
Q

most imoprtant and pervasive legal relationships is

A

agency

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2
Q

a relationship between two parties in which one party( the agent) agrees to represent or act for the other

A

agency

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3
Q

in a relationship between two parties, one of the parties is called the

A

agent

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4
Q

the _______has the right to control the agent’s conduct in matters entrusted to the agent

A

principal

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5
Q

defines agency as “the fiduciary relation which results form the manifestation of conesent by one person to antoher that the other shall act in his behalf and subject to his control, and consent by the other so to act

A

section1 restatement of agency

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6
Q

person having a duty created by his or her undertaking to act primarily for another;s benefit in matters connected with the undertaking. as as adjective, a relationship founded on trust and confidence

A

fiduciary

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7
Q

normally all employees who deal with third parties are deemed to be

A

agents

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8
Q

independent contractors are not employess because by deifntion

A

those who hire them have no control over the details of their physical performance

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9
Q

employers are required to pay certain taxes, such as social security and unemployment insurance taxes, for employes but not for

A

independent contractors

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10
Q

1.if an employee can exercise considerable control over the details of the work , this would indicate employee status
2.Does the person do a job or run a business that’s different from what the employer does? If yes, they’re likely seen as an independent contractor, not an employee.
3.Is the work usually done under the employer’s direction or by a specialist without supervision?if yes, then employee

A

determining whether a worker has the status of an employee or an independent contractor

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11
Q

workers may benefit from having employee status

A

for tax purposes

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12
Q

established its own criteria for determining whether a worker is an independent contractor or an employee

A

internal revenue service (IRS)

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13
Q

the IRS established its own rule to see if a worker is independent or employee which is

A

the determination of the degree of control the business exercises over the worker

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14
Q

the IRS closely scrutinize a firm’s classificaiton of its workers because,

A

employers can avoid certain tax liabilities by hiring independent contractors instead of employees

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15
Q

under the copyright act of 1976, any copyrighted work created by an employee within the scope of her or his employment at the request of the employer is a

A

work for hire and the employer owns the copyright to the work

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16
Q

agency relationships are normally considered

A

consensual

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17
Q

agency relationships typically come about by

A

voluntary consent and agreement between the parties

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18
Q

a person must have contractual capacity to be a

A

principal

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19
Q

two reasons where agency agreements must be in writing

A
  1. If the agent is allowed to make a contract that the law says must be written down (like for big deals), then the agent’s authority from the principal also has to be written down. This is called the “equal dignity rule.”
    2.the power of attorney, which conferes authority to an agent, must be in writing
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20
Q

an agency relationship can be created for

A

any legal purpose

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21
Q

most agency relationships are based on

A

expressed or implied agreement that the agent will act for the principal and the principal agrees to have the agent to act

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22
Q

if the principal affirms that contract by word or by action, an agency relationship is created by

A

ratification

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23
Q

ratification involves a

A

question of intent

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24
Q

intent can be expressed by either

A

words or conduct

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25
Q

when a principal causes a third person to believe that another person is his or her agent, the third person deals with the supposed____, the ____ is “estopped to deny” the agency relationship

A

-agent
-principal

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26
Q

once the principal-agent relationship has been created

A

both parties have duties that govern their conduct

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27
Q

in a fiduciary relationship, each party owers the other the

A

duty to act with the utmost good faith

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28
Q

generally, the agent owes the principal five duties

A
  1. performance
    2.notification
    3.loyalty
  2. obedience
    5.accounting
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29
Q

a gratuitous agent cannot be liable for

A

breach of contract, bc there is no contract

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30
Q

gratuitous agent can be liable for

A

tort liability

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31
Q

the duty to act solely for the benefit of his or her principal and not in the interest of the agent or a third party

A

loyalty

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32
Q

principal also owes certain duties to the agent which are

A

compensation, reimbursement, indemnification, cooperation, and safe working conditions

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33
Q

An agent’s authority to act can be either

A

actual or apparent

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34
Q

authority declared in clear, direct, and definite terms

A

express authoirty

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35
Q

rule requiring that an agent’s authority be in writing if the contract to be made on behalf of the principal must be in writing

A

equal dignity rule

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36
Q

the equal dignity rule does not apply when an agent acts in the presence of a

A

prinicple or when the agent’s act of signing is merely automatic

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37
Q

giving an agent a power of attorney confers

A

express authority

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38
Q

authorization for another to act as one’s agent or attorney in either specified circumstances or in all situations

A

power of attorney

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39
Q

a public official authorized to attest to the authenticity of signatures

A

notary public

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40
Q

power of attorney can be

A

special or general

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41
Q

when the principal causes a third party to believe that the agent has authority, even though she or he does not

A

apparent authority

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42
Q

ratification occurs when the principal affirms an agents

A

unauthorized act

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43
Q

principals can be considered three different types of disclosed:

A

disclosed, partially disclosed, or undisclosed

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43
Q

liability for contracts formed by an agent depends on how the

A

principal is classified and whether the actions of the agent were authorized or unauthorized

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44
Q

principal whose identity is known to a third party at the time the agent makes a contract with the third party

A

disclosed principal

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45
Q

Principal whose identity is unknown by a third party, but the third party knows that the agent is or may be acting for a principal at the time the agent and the third party form a contract

A

partially disclosed principal

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46
Q

principal whose identity is unknown by a third party, and that person has no knowledge that the agent is acting for a principal at the time the agent and the third party form a contract.

A

undisclosed principal

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47
Q

agency law is similar to contract law that both an agency and a contract can be termined by

A

an act of the parties or by operation of law

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48
Q

for an agent’s apparent authority to be terminated

A

third persons may also need to be notified that the agency has been teminated

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49
Q

a doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment

A

respondeat superior

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50
Q

indirect liability imposed on a supervisory party for the actions of a subordinate because of the relationship between the two parties

A

vicarious liability

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51
Q

entrepreneurs primary motive for undertaking a business enterprise is to make

A

profits

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52
Q

question faced by anyone who wishes to start a business is

A

what form of business organization to use

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53
Q

three major forms to structure business enterprises:

A

sole proprietorship, the partnership, and corporation

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54
Q

The simplest form of business organization, in which the owner is the business

A

sole proprietorship

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55
Q

more than 2/3 of all US business are

A

sole proprietorships

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56
Q

major advantage of sole proprietorships

A

has right to recieve all profits

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57
Q

arises from an agreement, express or implied, between two or more persons to carry on a business for profit

A

partnership

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58
Q

prove the existence of a partnership:

A

sharing both profits and losses

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59
Q

modern law DOES treat partnership as

A

an aggregate of the individual partners rather than as a separate legal entity in one situation

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60
Q

a business entity that has no tax liability

A

pass-through entity

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61
Q

tax return submitted by a partnership that only reports the business’s income and losses

A

information return

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62
Q

agreements to form a partnerships can be

A

written, oral, or implied by conduct

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63
Q

written agreement that sets forth each partner’s rights and obligations with respect to the partnership

A

articles of partnership

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64
Q

common terms included in a partnership agreement

A

basic structure, capital contributions, sharing of profits and losses, management and control, dissociation and dissolution

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65
Q

partnership liability imposed by a court on persons who have held themselves out to be partners, even though they were not and others have detrimentally relied on their representations

A

partnership by estoppel

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66
Q

the rights of partners in a partnership relate to the following areas

A

management, interest in the partnership, compensation, inspection of book, accounting and property

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67
Q

in a general partnership, all partners have equal rights in

A

managing the partnership

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68
Q

unless the partners agree otherwise, each partner has one vote in management matters regardless of

A

the proportional size of his or her interest in the firm

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69
Q

the majority rule controls decisions in ordinary matters connected with partnership business

A

unless otherwise specified in the agreement

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70
Q

an accounting of partnership assets or profits is required

A

to determine the value of each partners share in the partnership

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71
Q

property acquired by a partnership is the property of the partnership and not of the

A

partners individually

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72
Q

partnership property is owned by the partnership as an entity and not by

A

the individual partners

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73
Q

in a partnership law, an order granted by a court to a judgmenet creditor that entitles the creditor to attach a partner’s interest in the partnership

A

changing order

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74
Q

Duties and liabilites of partners are derived from

A

agency law

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75
Q

each partner is a ____ of the partnership in carrying out the usual business of the firm

A

general agent

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76
Q

The diuciary duties a partner owes to the partnership and to the other partners are the

A

duty of care and duty of loyalty

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77
Q

Under the UPA, a partner’s duty of care involves refraining from

A

grossly negligent or reckless conduct, intentional misconduct, or a knowing violation of law

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78
Q

the duty of loyalty required a partner to account to the partnership for any

A

property, profit, or benefit derived by the partner from the partnership’s business or the use of its property

79
Q

the extent of implied authoirty is geneally broader for partners than for

A

ordinary agents

80
Q

third party must sue all of the partners as a group, but each partner can be held liable for the full amount

A

join liability

81
Q

third party has the option of suing all of the partners together or one or more of the partners separately

A

joint and several liability

82
Q

occurs when a partner ceases to be associated in the carrying on of the partnership business

A

dissociation

83
Q

based on the amount that would have been distributed to the partner if the partnership had been wound up on the date of dissociation

A

buyout price

84
Q

termination of a partnership is referred to as

A

dissolution

85
Q

the actual process of collecting, liquidating, and distributing the partnership assets

A

winding up

86
Q

A partnership’s assets are distribued according to the following priorities

A
  1. payment of debts, including those owned to partner and nonpartner creditors
  2. return of capital contributors and distribution of profits or partners
87
Q

hybrid form of business designed mostly for professionals who normally do business as partners in a partnership

A

limited liability partnership

88
Q

LLP is attractive for two cateogires of busienss

A

professional service firms and family businesses

89
Q

partnership consisting of oneor more general partners and one or more limite partners

A

limited partnership

90
Q

assumes management responsbility for the partnership and so has full responsibility for the partnership and for all of its debts

A

general partner

91
Q

contributes cash or other property and owns an interest in the firm but does not undertake any management responsbilites and is not personally liable for partnership debts beyond the amount of his or her investment

A

limited partner

92
Q

not only must a limited partnership have at one one general partner and one limited partner, but partners must also sign a

A

certificate of limited partnership

93
Q

document that must be filed with a designated state official to form a limited partnerhsip

A

certificate of limited partnership

94
Q

a general partner has the power to volunatarily

A

dissociate or withdraw from a limited partnership unless thhe partnership agreement specifies otherwise

95
Q

in limited partnership, general partner’s voluntary dissociation from the firm normally will lead to dissolution unless

A

All partners agree to continue the business

96
Q

bankruptcy of a limited partner, does not dissolve the partnership unless

A

it causes the bankruptcy of the firm

97
Q

limited liability of limited partners is conditional:

A

limited liability exists only so long as the limited partner doe snot participate in management

98
Q

hybrid form of business enterprise that offers the limited liability of a corporation and the tax advantages of a partnership

A

limited liability company

99
Q

a person who has an ownership interest in a limited liability company

A

members

100
Q

the document filed with a designed state official by which a limited liability company is formed

A

articles of organization

101
Q

main disadvantage of the LLC is that

A

state LLC statutes are not uniform

102
Q

Members of an LLC can decide how to operate the various aspects of the business by forming an

A

operating agreement

103
Q

all of the members participate in management, and decisions are made by majority vote

A

member-managed LLC

104
Q

the members designated a group of persons to manage the firm

A

manager-managed LLC

105
Q

corporation is creature of

A

statute

106
Q

codification of modern corporation law that has been influential in the drafting and revision of state corporation stautes

A

model business corporation act

107
Q

legal entity created and recognized by state law.

A

corporation

108
Q

in a corporation, the responsibility for the overall management of the firm is entrusted to a

A

broad of directors, whose members are elected by the shareholders

109
Q

when corporation earns profits, it can either pass them on to its shareholders in the form of

A

dividends or retain them as profits

110
Q

portion of a corporations profits has not been paid out as dividends to shareholders

A

retained earning

111
Q

major disadvantage of the corporate business form is

A

double-taxation feature

112
Q

company whose business activity consists of holding shares in another company

A

holding company

113
Q

in a given state, a corporation that is organized under the law of that state

A

domestic corporation

114
Q

corporation that does business in that sttae but is not incorporated there

A

foreign corporatoin

115
Q

corporation formed in another country but doing business in the US

A

alien corporation

116
Q

public corporation is one formed by the government to meet

A

political or governmental purpose

117
Q

any corporation whose shares are publicly traded in securities markets

A

publicly held corporations

118
Q

corporations formed for purposes other than making profit are called

A

nonprofit or not-for-profit

119
Q

one whose shares are held by members of a family or by relatively few persons

A

close corporation

120
Q

can provide for proportional control when one of the original shareholder dies

A

shareholder agreement

121
Q

close business corporation that has most corporate attributes, including limited liability, but qualifies under the internal revenue code to be taxed as a partnership

A

s corporation

122
Q

for-profit corporation that seeks to have a materiall positive impact on society and the environment

A

benefit corporation

123
Q

The primary document to incorporate a business is called the

A

articles of incorporation

124
Q

the internal rules of management adopted by a corporation at its first organizational meeting

A

bylaws

125
Q

if a corporation has substantially complied with all requiremetns for incorporation, the corporation is said to have

A

de jure existence

126
Q

If someone else ends up in a legal dispute with this group, the group can’t suddenly say they’re not a corporation to avoid responsibility

A

this is called an estoppel

127
Q

when a corporation is created, the express and implied powers necessary to achieve its purpose

A

also comes into existence

128
Q

the following order of priority is used when conflicts arise among documents involving corporations

A
  1. us constitution
  2. state constitution
    3.state statutes
  3. the articles of incorporation
  4. bylaws
  5. resolutions of the board of directors
129
Q

a corporate officer does not have the authority to bind the corporation to an action that wil

A

greatly affect the corporate purpose or undertaking

130
Q

this means beyond the powers

A

ultra vires

131
Q

the action of a court to disregard the corporate entity and hold the shareholders personally liable for corporate debts and obligations

A

piercing the corporate veil

132
Q

to put funds or goods together into one mass so that they are mixed to such a degree that they are no longer have separate identities, as when personal and corporate interests are mixed together to the extent that the corporation has no separate identity

A

commingled

133
Q

part of the process of corporate formation involves

A

corporate financing

134
Q

corporations are normally financed by the issuance and sale of

A

corporate securities

135
Q

stocks, bonds, or other items that represent an ownership interest in a corporation or a promise of repayment of debt by a corporation

A

securities

136
Q

represent the purchase of ownership in the business firm

A

stocks or equity securities

137
Q

an ownership interest in a corporation, measure in units of shares

A

stocks

138
Q

a security that evidence a corporate debt

A

bonds

139
Q

represents the borrowing of funds by firms

A

bonds or debt securities

140
Q

stocks represent____ and bonds represent___-

A

owernship, debt

141
Q

bonds are issued by business firms and by governments at all levels as evidence of the

A

funds they are borrowing from investors

142
Q

stocks do not have a

A

fixed dividend rate

143
Q

interest on bonds must always be paid whether or not any

A

profit is earned

144
Q

stockholders can elect the board of directors

A

which controls the corporation

145
Q

bondholders usually have no voice in, or control over

A

management of the corporation

146
Q

stocks do not have a maturity date, the corporaiton usually does not

A

repay the stockholderbo

147
Q

bonds have a maturity date, when the corporation is to repay the bonholder

A

the face value of the bond

148
Q

all corporations issue or offer to sell stocks, this is the usual definition of a

A

corporation

149
Q

corporations do not necessarily issue

A

bonds

150
Q

stockholders have a claim against the property and income of a corporation after all creditors

A

claims have been met

151
Q

bondholers have a claim against the property and income of a corporation that must be met

A

before the claims of stockholders

152
Q

bonds are issued by business firms and by governments at all levels as evidence of the funds they are borrowing from

A

investors

153
Q

bonds normally have a

A

designated maturity date

154
Q

another way corporations can obtain financing

A

issuing stocks

155
Q

true ownership of a corporation is represented by

A

common stock

156
Q

common stock provides a proportionate interest in the corporation with regard to

A
  1. control (voting rights),
  2. earnings and
  3. net assets
157
Q

stock with preferences

A

preferred stock

158
Q

corporations traditionally obtain financing thorugh

A

issuing and selling securities in the capital market

159
Q

financing provided by professional, outside investors to new business ventures

A

venture capital

160
Q

private equity firms obtain their capital from

A

wealthy investors in private markets

161
Q

Funds invested by a private equity firm in an existing corporation, usually to purchase and reorganize it

A

private equity capital

162
Q

cooperative activity in which people network and pool funds and other resources via the internet to assit a cause or invest in a venture

A

crowdfunding

163
Q

a corporation typically extends it operations by

A

combining with another corporation through a merger, a consolidation, share exchange, purchase of assets, or purchase of controlling asset

164
Q

consolidation generally is used as a generic term to refer to

A

all types of combinations, including mergers and acquisitions

165
Q

involves the legal combination of two or more corporations in such a way tjhat

A

only one of the corporations continues to exist

166
Q

two or more corporations combine in such a way that each corporation ceases to exist and a new one emerges

A

consolidation

167
Q

some or all of the shares of one corporation are exchanged for some or all of the shares of another corporation

A

share exchange

168
Q

a merger that can be accomplished without the approval of the shareholders of either corporation because one company owns at least 90% of the outstanding shares of each class of stock of the other corporaion

A

short-form merger

169
Q

what if a shareholder disapproves of a merger or a consolidation but is outvoted by the other shareholders

A

the law recognizes that a dissenting shareholder should not be foreced to become an unwilling shareholder in a corproation that is new or different from the one in which the shareholder originally invested

170
Q

the right of a dissenting shareholder, who objects to a merger or consolidation of the corporation

A

appraisal right

171
Q

appraisal rights normally extend to

A

regular mergers, consolidations, share exchanges, short-form mergers, and sales of sustainability all of the corporate assets not in the ordinary course of business

172
Q

shareholders may lose their appraisal rights if

A

they do not adhere precisely to the procedures prescribed by statute

173
Q

the corporation that is selling all of its assets is substantially changing its business position and

A

its ability to carry out its corporate purposes

174
Q

the acquisition of control over a corporation through the purchase of a substantial number of the voting shares of the corporation

A

takeover

175
Q

an offer made by one company directly to the shareholders of another company to purchase their shares of stocks

A

tender offer

176
Q

to resist a takeover, a target company can make a

A

self-tender

177
Q

when threatened with a takeover, management makes the company less attractive to the raider by selling the companys most valuable asset to a third party

A

crown jewel

178
Q

when takeover is successful, top management usually is changed, company may establish sepcial termination or retirement benefits that must be paid to top managers if theyy are “retired”.

A

golden parachute

179
Q

the target corporation issues to its stockholders rights to purchase additional shares at low prices when ther eis a takeover attempt

A

poison pill

180
Q

the target corporation solicits a merger with a third party, which then makes a better tender offer to the targets shareholders

A

white knight

181
Q

Termination of a corporations existence has two phases

A

dissolution and winding

182
Q

the legal death of the artificial “person” of the corporation

A

dissolution

183
Q

dissolution can be brought about by the following

A
  1. an act of the state
  2. an agreement of the shareholders and the board of directors
  3. expiration of a time period stated in the certificate of incorporation
  4. court order
184
Q

the process by which corporate assets are liquidated, or converted into cash and distributed among creditors and shareholders

A

winding up

185
Q

dissolution can be either

A

voluntary or involuntarywi

186
Q

Winding up may differ to some extent based on whether

A

voluntary or involuntary dissolution has occured

187
Q

two possible methods to voluntarily dissolve a corporation

A
  1. by the shareholders unanimous vote to initiate dissolution proceedings
  2. by a proposal of the board of directors that is submitted to the shareholders at a shareholder’s meeting
188
Q

when a corporation is dissolved voluntarily , the corporation must file

A

articles of dissolution with the state and notify its creditors of the dissolution

189
Q

the court may dissolve the corporation if the controlling shareholders or directors have engaged in

A

fraudulent, illegal, or oppressive conduct

190
Q

When the dissolution is involuntary, the court will appoint

A

a receiver to wind up the corporate affairs and liquidate corporate assets

191
Q

legal entity formed in compliance with statutory requirements that is distinct from its shareholer owners

A

corporation

192
Q

distribution of corporate profits to the corporations shareholderes in proportion to the number o shares held

A

Dividend

193
Q

legal combination of two or more corporations in such a way that only one corporation continues to exist

A

merger

194
Q

in corporate dissolution, a court-appointed person who winds up corporate affairs and liquidates corporate assets

A

receiver

195
Q
A

legal aspects (18 decks)

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