Business Law

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bobjr247
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146651
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Business Law
Updated:
2012-04-09 22:48:46
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Business Law
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Business Law
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  1. Judicial
    Court Action
  2. Lean
    Claim against
  3. Reposession (voluntary and specific)
    • 1:Only for secured creditors
    • o Ex: Borrowing money for a car THEN
    • o Default on loan, creditors can
    • repossess
  4. Judicial Collection Techniques
    Bankruptcy:
    • - Federal action (lawsuit). Creditors
    • sometimes force debtors into bankruptcy
  5. - Post Judgment Remedies:
    o Levy on Property:
    Seizing property
  6. - Post Judgment Remedies:
    1. Levy on property
    a. Attachment
    Before Judgment
    Exception
    • § Only PREJUDGMENT remedy given in
    • limited circumstances (recover on accounts receivable).
    • · Cost Factor(excpetion): Post bond to cover damages if claim fails – debtor might flee jurisdiction of court and will be unable to collect.
  7. -Post Judgment Remedies:
    --Levy on Property:
    ---EXECUTION:
    § Seizing property/assets (any property and court ordered) and holding the property to sell it, using the money towards loans.

    AFTER JUDGEMENT
  8. Post Judgement Remedies
    Docketing
    • -Automatic for large claim judgments – LEAN
    • against all real estate owned by debtor. Judgment is recorded and final.
  9. -Post Judgment Remedies:
    Garnishment:
    • o Lawsuit creditor vs. debtor and third
    • party (most often employers). A separate
    • lawsuit with a limit on amount of third party.
  10. -Post Judgement Remedies
    Supplementary Hearing:
    o Hearing with court commissioner after the judgment/examination of defendant as to their assets (find out information on debtor’s assets)
  11. -Post Judgement Remedies
    Contempt Hearing:
    o Happens when defendant doesn’t show up to Supplementary Hearing (find out why) – can fine defendant or give jail time
  12. Post Judgement Remedies
    Body Attachment:
    • o Happens when defendant doesn’t show up to Contempt Hearing – warrant for arrest and then jail (must be given notice)
    • - Body attachement =arrest warrant=jail (must be given notice)
  13. SURETYSHIP
    Guarantees
  14. SURETYSHIP (Guarantees)
    Nature of the Relationship:
    Person is guaranteeing the performance of another individual
  15. SURETYSHIP (Guarantees)
    Contracts
    A
    B
    C
    • - Elements: conisderation, legality, etc
    • - Statute of Frauds: Must be in writing to be void
    • - Capacity: wherewithall to enter contract
  16. SURETYSHIP (Guarantees)
    Primary Liability:
    If debtor defaults, creditor can immediately sue surety
  17. SURETYSHIP (Guarantees)
    Creditor’s Rights and Remedies
    Rights Against Principal Debtor:
    General Rule:
    Exceptions:
    • Creditor’s Rights and Remedies:Can sue for remaining balance
    • o General Rule: Creditor can sue one or both
    • immediately
    • o Exceptions: Bankruptcy/lack of capacity of debtor
    • (statute of limitations)
  18. SURETYSHIP (Guarantees)
    Creditor’s Rights and Remedies
    Rights Against the Surety:
    - Same as the guarantor
  19. SURETYSHIP (Guarantees)
    Creditor’s Rights and Remedies
    Rights Against a Guarantor of Collection:
    - Exception to the general rule.
  20. SURETYSHIP (Guarantees)
    Creditor’s Rights and Remedies
    Rights Against the Collateral:
    - Debtor can be sued for remaining loan, or repossess the collateral – creditor has ultimate choice.
  21. SURETYSHIP (Guarantees)
    Surety’s Rights and Remedies Against the Debtor
    Exoneration:
    • Force the debtor to pay the creditor (not most
    • effective way – debtor may not have any money)
  22. SURETYSHIP (Guarantees)
    Surety’s Rights and Remedies Against the Debtor
    Reimbursement:
    • Owe the money, but don’t have it. Assumes
    • guarantor surety has paid the creditor and is going after debtor for reimbursement of dollar amount.
  23. SURETYSHIP (Guarantees)
    Surety’s Rights and Remedies Against the Debtor
    Subrogation:
    • - Process where surety guarantor is
    • transferred all of creditor’s rights (upon payment).
  24. SURETYSHIP (Guarantees)
    Surety’s Rights and Remedies Against the Debtor
    Surety’s Rights in Collateral:
    - Assumes the surety has paid the creditor – can repossess collateral.
  25. SURETYSHIP (Guarantees)
    Surety’s Defense as to the Creditor
    Defenses Derived from the Debtor:
    • - If debtor doesn’t have to pay, why do I?
    • -OR creditor records screwed up so surety doesnt pay
  26. SURETYSHIP (Guarantees)
    Surety’s Defense as to the Creditor
    Surety’s Contractual Defenses:
    • -Surety has separate contract with creditor (not valid).
    • -NOT VALID IF no cosideration or not in writing
  27. SURETYSHIP (Guarantees)
    Surety’s Defense as to the Creditor
    Creditor’s Acts that Affect the Surety’s Performance:
    Release of Debtor:
    o If debtor is no longer liable, neither is the surety.
  28. SURETYSHIP (Guarantees)
    Surety’s Defense as to the Creditor
    Creditor’s Acts that Affect the Surety’s Performance:
    Release of Surety:
    o Practical for large, successful corporations to release surety – debtor has obtained financial stability.
  29. SURETYSHIP (Guarantees)
    Surety’s Defense as to the Creditor
    Creditor’s Acts that Affect the Surety’s Performance:
    Release of Collateral:
    Will release guarantor – changes the risks
  30. SURETYSHIP (Guarantees)
    Surety’s Defense as to the Creditor
    Creditor’s Acts that Affect the Surety’s Performance:
    Material Variance of Surety’s Obligation:
    Extending the due date – lets the surety off the hook.
  31. SURETYSHIP (Guarantees)
    Surety’s Defense as to the Creditor
    Creditor’s Acts that Affect the Surety’s Performance:
    Defenses NOT Available to the Surety (with respect to debtor):
    • o bankruptcy of debtors, statute of
    • limitations, incapacity of debtor
  32. SURETYSHIP(Guarantees)
    Co-Sureties
    Characteristics:
    • - Joint and several liability, different amounts of liability, usually a guarantee
    • EX:guranteor #1 backs $100
    • Guranteor #2 backs $200
    • Guranteor #3 backs 100
  33. SURETYSHIP(Guarantees)
    Co-Sureties
    Liabilities:
    - Same debt at same time (Not always – can do at different times, and for different amounts).
  34. SURETYSHIP(Guarantees)
    Co-Sureties
    Right of Contribution:
    • o Reimbursement: Right by one co-surety to the other
    • o Assumes ONE of the sureties has paid the full amount of the debt.
  35. SURETYSHIP(Guarantees)
    Co-Sureties
    Release of Co-Surety:
    Release of one may not mean release of the other – agreement or covenant not to sue.
  36. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    • - Do NOT have to be insolvent – Liabilities > Assets
    • - Liquidations: Sale of debtor’s assets
    • - Individuals, couples, partnerships, corporations can all file
    • - Individuals are able to discharge sometimes
  37. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    - Filing– Financial Information/Tests:
    Voluntary:
    • § MEANS TEST
    • § Looks at liabilities vs. assets and
    • shows that there is no other solution other than bankruptcy
  38. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    - Filing– Financial Information/Tests:
    Involuntary:
    • = Creditors can force debtor into bankruptcy
    • § If debtor has less than 12 creditors,
    • they only need 1 to force them into bankruptcy
    • § If debtor has more that 12 creditors,
    • they need at least 3 to force them into bankruptcy
    • § Minimum of $13,475
  39. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    Automatic Stay: - Exceptions
    • - Stops all legal preceding (lawsuits, foreclosures, ect.) to debtor.
    • o Exceptions: Foreclosure sale is already pending
  40. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    Trustee: 20-60 days creditors meeting
    • Trustee: An attorney that will take possession of debtors assets that aren’t exempt
    • o Debtor must show up and cooperate at creditor meeting
    • o Trustee protects the general creditors (aka unsecured creditors)
  41. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    Exemptions: Homestead
    -Certain property is exempt (Ex: Can keep house after bankruptcy)
  42. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    Preferences
    1: 90 Days/1year
    2: Fraud - "friend for $1.00"
    • Preference:- Problem for creditors – look at
    • transfers to creditors within 90 days of an overdue debt.
    • -Will NEVER recieve accounts receivable (Creditors)
    • o Paying something as it comes due (like a bill) is NOT a preference.
    • o Life insurance, inheritance, divorce settlements are all included if collected within 6 months of bankruptcy.
  43. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    -Orderof Payment:
    • o Secured creditors get paid FIRST
    • o Unsecured creditors usually don’t get paid
    • o Creditors will not receive accounts
    • receivable
  44. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    Objections to Discharge:
    - Made by creditor for non-cooperation
  45. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    Exceptions to Discharge
    -Intentional torts, outstanding court order, student loans
  46. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    Reaffirmation:
    • o Waives discharge
    • o House/car
    • o Needs to be agreed by judge and attorney, 90 days to change their mind, and cannot reaffirm before discharge –
    • must reaffirm PRIOR
  47. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    Parties in Interest
    • - Debtor, creditor, trustee, creditors
    • committee (not in CH. 7)
  48. BANKRUPTCY
    Chapter 7: Liquidations/Straight
    Pacer
    Electronic filing and info.
  49. BANKRUPTCY
    Chapter 13: Wage Earner Plan
    • -Use future income (cannot file into CH.13 if you don’t have any income)
    • -INDIVIDUALS
  50. BANKRUPTCY
    Chapter 13: Wage Earner Plan
    Same Automatic Stay
    Stop all litigations (stops filing of legal action)
  51. BANKRUPTCY
    Chapter 13: Wage Earner Plan
    Pay Over 6-8 Years:
    1. Unsecured
    2. Debts – Disposable Income
    3. Some secured debts
    • o Debtor comes up with payment plan
    • o Creditors do not get to vote on payment plan – judge decides
    • o Disposable:Uses future income
    • o cant go into ch 13 without income
  52. BANKRUPTCY
    Chapter 13: Wage Earner Plan
    - Dollar Limits
    $336,900; $1,010,000
  53. BANKRUPTCY
    Chapter 11: Reorganization/Rehabilitation
    • - Usesfuture income
    • - Can stay open and operate
    • - For Corporations only
    • - Bankrupt is Called Debtor in Possession (of assets)
    • - Same Automatic Stay
  54. BANKRUPTCY
    Chapter 11: Reorganization/Rehabilitation
    -Plan and Approval:
    • o Debtor has 120 days to come up with a payment plan
    • o Creditors get to vote
    • o Judge can overrule creditors
    • o Creditor Approval = 50% of all the creditors OR 2/3 of total dollar amount owed
  55. ACCOUNTANT LEGAL LIABILITY
    Common Law Liability
    Liability to Clients:
    Contractual Liability:
    • o YES – Liable for breaking contract.
    • GAAP: Generally Accepted Accounting Principles
  56. ACCOUNTANT LEGAL LIABILITY
    Common Law Liability
    Liability to Clients:
    Negligence:
    : YES – Usually “Failure to Investigate”
  57. ACCOUNTANT LEGAL LIABILITY
    Common Law Liability
    Liability to Clients:
    Liability for Fraud:
    • o YES
    • § FRAUD: Intentional gross negligence in giving opinion (Rather than misrepresentation)
    • § Easier to prove fraud against an attorney than anyone else
  58. ACCOUNTANT LEGAL LIABILITY
    Common Law Liability
    LIABILITY TO THIRD PARTIES
    Sharholder, bank who lent money to client (corporation)
  59. ACCOUNTANT LEGAL LIABILITY
    Common Law Liability
    LIABILITY TO THIRD PARTIES
    Contractual Liability:
    • NO
    • -contract liability by accountants for client (privety of contract)
    • --->GAAS= Generally accepted auditing standard
  60. ACCOUNTANT LEGAL LIABILITY
    Common Law Liability
    LIABILITY TO THIRD PARTIES
    Negligence:
    • NO
    • -not responsible for neglegence to third parties
  61. ACCOUNTANT LEGAL LIABILITY
    Common Law Liability
    LIABILITY TO THIRD PARTIES
    Gross Negligence and Fraud:
    • YES
    • -Responsible for gross negligence and fraud
  62. ACCOUNTANT LEGAL LIABILITY
    STATUTORY LIABILITY
    Securities act of 1933
    1. Scopeof liability
    2. Proof requirements
    3. Defenses
    4. Damages
    • Have to file regulatory statement when selling securities (IPO)
    • -file to SEC
    • -Error/Ommision accountant liable
  63. ACCOUNTANT LEGAL LIABILITY
    STATUTORY LIABILITY
    SECURITIES ACT OF 1934
    1. Scope of liability to shareholder
    2. Proof requirements
    3. Damages
    • 2nd hand sales of securities
    • -prevents insider trading, sabarnes oxely act
  64. Accountant Legal Liability
    Criminal Liability (Willful)
    Preparing false documents/tax returns/willful misconduct
  65. ACCOUNTANT LEGAL LIABILITY
    Other Legal Considerations & Ethics
    Privileged Communications:
    Attorney and client confidentiality
  66. ACCOUNTANT LEGAL LIABILITYOther Legal Considerations & Ethics
    Privileged Communications:
    Common Law:
    Federal Law:
    • Common Law: No
    • Federal Law: Yes
  67. ACCOUNTANT LEGAL LIABILITY
    Other Legal Considerations & Ethics
    Privileged Communications:
    Accountant’sWorking Papers
    Yes you can get
  68. AGENCY
    Definition:
    The fiduciary relationship (high degree of trust) which results from the consent by one person to act for another.
  69. AGENCY
    Terms:
    Principle – Agent:
    • o Principle: Person entering into a contract (on behalf of)
    • o Agent: Facilitates contract between principal and third party (one who is taking action)-->fiduciary duty
  70. AGENCY
    Terms:
    Master Servant:
    Employee/Employer – someone acting on our behalf
  71. AGENCY
    Terms:
    Independent Contractor:
    • - NOT an agency
    • - owner doesnt control physical detail
    • - OWNER NOT LIABLE
  72. AGENCY
    Terms:
    Example:
    • Patching a roof with tar (full control of detail work, providing the materials, employer is responsible for ALL the details of
    • the work if the tar were to fall on neighbor’s Lexus).
  73. Agency
    Formation of the relationship
    Agency by Agreement:
    • Separate contract between the principal and the
    • agent (most common)/an agency agreement establishes the contractual terms under which a client appoints an agent to represent him or his work
  74. Agency
    Formation of the relationship
    Agency by Ratification
    Agent has no authority (full disclosure to principal AND no changes)
  75. Agency
    Formation of the relationship
    Agency by Estoppel
    Causing someone to believe you are their agent
  76. Agency
    Formation of the relationship
    Agency by Operation of Law
    - Husband-wife are automatic agents due to marriage (Principal does NOT have fiduciary duty)
  77. Agency
    Formation of the relationship
    Agency Power Coupled with an Interest:
    • When an agent has possession or control of the
    • property of his principal and possesses legal rights against interference by third parties (secured creditors).
  78. Agency
    Formation of the relationship
    Fiduciary:
    Agent has a duty, NOT the principal
  79. Agency
    Formation of the relationship
    Indemnify
    Reimburse
  80. Agency
    Termination of the Agency
    Lapse of Time
    Agency has expiration date or time limit
  81. Agency
    Termination of the Agency -
    Purposen Achieved
    Self explanatory
  82. Agency
    Termination of the Agency
    Mutual Agreement:
    Parties can decide
  83. Agency
    Termination of the Agency
    Termination by One Party:
    - One of the parties terminates or breaks the contract, the other party might have liability for damages.
  84. Agency
    Termination of the Agency
    Termination by Operation of Law
    -Death of either one of the parties, mental incapacity, ect.
  85. Agency
    Termination of the Agency
    Bankruptcy:
    Might make it impossible for one of the parties to perform to the agency.
  86. Agency
    Notice Required
    Notice to Third Parties:
    Notifying them of the assignment of a debt or benefit of a contract (no authority until given notice)
  87. Agency
    Notice Required
    Authority Continues:
    • Apparent Authority: Since under the law of agency the
    • employer (principal) is liable for the acts of his employee (agent), if a person who is not an agent appears to an outsider (customer) to have been given authority by the principal then the principal is stuck for the acts of anyone
    • he allows to appear to have authority.
  88. LIABILITY OF PRINCIPALS AND AGENTS
    - Actual Authority (types)
    o Express

    o Implied
  89. LIABILITY OF PRINCIPALS AND AGENTS
    Apparent Authority:
    • - When actual authority has been ended or limited and no notice has been given to third parties (basis for apparent
    • authority (basis for apparent authority = title, past dealing of the agent with the third party and custom in the particular industry)

    o Purchase Order: Principal IS liable
  90. LIABILITY OF PRINCIPALS AND AGENTS
    Emergency Power:
    The agent in emergency power would have the authority to act for the principal.
  91. LIABILITY OF PRINCIPALS AND AGENTS
    Ratification:
    • - A person with no authority goes and acts as an agent for the principal
    • o Agent does something unauthorized and principal later approves either by expressed statement or implied by conduct.
  92. LIABILITY OF PRINCIPALS AND AGENTS
    Agents Personal Liability for Contracts
    • - Agent has personal liability for thirds parties!
    • - Agent Acts for an Undisclosed Principal
  93. LIABILITY OF PRINCIPALS ANDAGENTS
    Agents Personal Liability for Contracts
    Agent Acts for a Partially Disclosed Principal:
    • - One whose existence is known to the third party, but whose identity is not.
    • o Rules applied to partially disclosed principals are similar to those applied to undisclosed principals
    • o General rule is when agent works for partially disclosed principals, agent is personally liable for contract
  94. LIABILITY OF PRINCIPALS ANDAGENTS
    Agents Personal Liability for Contracts
    - Agent Acts Without Authority
    Self explanatory
  95. LIABILITY OF PRINCIPALS ANDAGENTS
    Agents Personal Liability for Contracts
    Agent Guarantees Performance of the Principal:
    - Needs to be in writing.
  96. PRINCIPALS LIABILITY FOR TORTS OF THE AGENT
    Tort liability for principal and agent?
    Employers liable for employees?
    • YES
    • YES
  97. Principal’s Liability for Torts of the Agent
    Misrepresentation
    YES???
  98. Principal’s Liability for Torts of the Agent
    Negligence
    • o Independent Contractors
    • o Employees – Scope of Employment
  99. Principal’s Liability for Torts of the Agent
    Workers Compensation
    • o No fault – prior defenses
    • o Injury, illness, death (puts a limitation on the employer’s liability)

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