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693 Cards in this Set
- Front
- Back
The civil law system
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A system with comprehensive codes of written laws, or statutes, that apply to all legal questions.
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The common-law system
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The body of law derived from court decisions as opposed to statutes or constitutions.
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Doctrine of stare decisis
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The principle that lower courts must follow precedents set by higher courts.
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Synthesis
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The process of combining the rulings from several legal authorities into a new rule of law that is applied to the new legal problem.
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Threshold cases
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Cases that present new legal questions (for which no precedent exists)
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T or F: Courts must follow precedent.
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False. Courts generally do not follow precedent when the earlier rule of law has lost its usefulness or when the original reasons for the rule no longer exist. Absent those reasons, courts may overrule prior decisions only for sound judicial reasons.
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Paul v. Virginia
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1869, said that insurance is a contract delivered locally and governed by state law rather than federal law. (Modified by South-Eastern Underwriters case in 1944, saying that federal law applies to insurance in some cases.)
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Equity
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Fairness, or a body of principles constituting what is fair and right.
--- Courts of Equity arose in England because of the failure of courts of law to provide adequate remedies in some cases. Equity court decisions are made by judges. |
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Criminal Law
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The branch of law that imposes penalties for wrongs against society
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Civil Law
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A classification of law that applies to legal matters not governed by criminal law and that protects rights and provides remedies for breaches of duties owed to others.
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3 ways to classify U.S. law
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- As either criminal or civil law
- By subject matter - As either substantive or procedural law |
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Felony
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A major crime involving long-term punishment
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Summary offenses
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Crimes that are neither felonies nor misdemeanors under state law; they usually result in fines but not imprisonment
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Civil law vs. civil-law
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Civil law is the classification; civil-law is the system based on comprehensive rules/statutes
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Substantive law
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A classification of law that creates, defines, and regulates parties' rights, duties, and powers
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Procedural law
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A classification of law that prescribes the steps, or processes, for enforcing the rights and duties defined by substantive law.
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Fifth Amendment Due Process Clause
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Guarantees notice and hearing before the federal government can deprive any person of life, liberty, or property
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Fourteenth Amendment Equal Protection Clause (the Equal Protection Clause)
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A part of the Fourteenth Amendment to the U.S. Constitution prohibiting state laws that discriminate unfairly or arbitrarily, and requiring equal treatment to all persons under like circumstances and conditions.
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Constitution Commerce Clause
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Gives Congress teh power to regulate commerce (trade) with foreign nations and among the states (interstate commerce).
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National Association of Insurance Commissioners (NAIC)
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An association of insurance commissioners from the fifty U.S. states, the District of Columbia, and the five U.S> territories and possessions, whose purpose is to coordinate insurance regulation activities among the various state insurance depts.
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Original jurisdiction
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The power of a court in which cases are initiated to hear those cases.
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Diversity jurisdiction
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The authority of federal district courts to hear cases involving parties from different states that involve amounts in controversy over a legal minimum.
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Writ of certiorari
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An appellate court's order directing a lower court to deliver its record in a case for appellate review.
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Conflicts of law
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A body of law that resolves questions when states' laws conflict
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Center of gravity rule
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Applies the law of the state with the most significant relationship to the case.
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Administrative law
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The statutory laws that grant power to administrative agencies to act and the body of law that is created by administrative agencies themselves.
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Conditions needed for legislature to delegate rulemaking power to an administrative agency and for it to be considered constitutional:
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- The legislation carefully defines the scope of the delegated power
- The agency exercises its rulemaking power within the defined scope - The rules are subject to court (judicial) review |
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Allegation
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A claim made in the complaint by the plaintiff specifying what the plaintiff, specifying what the plaintiff expects to prove to obtain a judgment against the defendant
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Complaint
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The allegations made by a plaintiff in a lawsuit
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Pleading
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A formal written statement of the facts and claims of each party to a lawsuit
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Cause of action
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A plaintiff's legal grounds to sue a defendant
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Answer
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A document filed in court by a defendant responding to a plaintiff's complaint and explaining why the plaintiff should not win the case.
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Counterclaim
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A complaint brought by the defendant against the plaintiff
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Motion
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A formal request for the court to take a particular action
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Motion to dismiss
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A request that a court terminate an action because of settlement, voluntary withdrawal, or procedural defect
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Motion for summary judgment
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A pretrial request asking the court to enter a judgment when no material facts are in dispute
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Discovery
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A pretrial exchange of all relevant information between the plaintiff and defendant.
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Deposition
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A pretrial discovery tool involving oral examination of a witness to produce a written verbatim record.
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Interrogatories
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Specific written questions or requests raised by one party to a lawsuit that the opposing party must answer in writing.
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Subpoena
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A legal order to a witness to appear at a certain place and time to testify or to produce documents.
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Direct examination
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Questioning one's own witness during a legal proceeding.
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Cross-examination
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Questioning an opposing party during a legal proceeding to bring out information favorable to the questioner's own position or to challenge the witness's testimony.
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Relevance
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A quality of evidence that suggests the evidence is more or less likely to be true.
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Materiality
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A quality of evidence that tends to establish a particular element of the claim that has legal significance.
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Competence
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A quality of evidence that suggests the source is reliable and the evidence is adequate to justify admission in court
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Hearsay rule
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The rule of evidence that prevents the admission of out-of-court statements not made under oath by a person who is unavailable to testify.
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General verdict
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A kind of verdict that entails a complete finding and a single conclusion by a jury on all issues presented.
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Special verdict
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A kind of verdict reached by a jury that makes findings of fact by answering specific questions posed by the judge. The judge then applies the law to the facts as the jury has found them.
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Res judicata
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(sometimes called claim reclusion)
a doctrine that bars parties to a lawsuit on which final judgment has been rendered from bringing a second lawsuit on the same claim or on related transactions |
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Collateral estoppel
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(sometimes called issue preclusion)
bars parties from relitigating an issue on which a court has already ruled, even if the second lawsuit differs significantly from the first. |
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Alternative dispute resolution (ADR)
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Procedures to help settle disputes without litigation, including arbitration, mediation, and negotiation.
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Mediation
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An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a mutually agreeable settlement. Mediation in nonbinding.
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Rulemaking
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The process by which administrative agencies promulgate rules to implement legislative policies. Adjudication is the process by which agencies decide cases and settle disputes.
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3 steps of the Model State Administrative Procedure Act (MSAPA)
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1. Publish a notice of intent to adopt a regulation
2. Provide opportunity for public comment 3. Publish the final regulation |
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Legislative rule
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A type of substantive administrative agency rule that comes from a statutory delegation of authority and that has the same force as a law enacted by Congress of a legislature
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Interpretative rule
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A type of administrative agency rule that interprets statutes, providing guidance for agency staff or regulated parties, but that lacks the force and effect of law and therefore is not binding on individuals.
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Procedural rule
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A type of administrative agency rule that prescribes procedures for agency operations, legislative rulemaking, and adjudication proceedings.
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Ad testificandum
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A subpoena to compel a witness to testify is a subpoena ad testificandum (command to testify), usually termed, simply, a subpoena.
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Duces tecum
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("bring things with you")
A subpoena to compel production production of documents or records |
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Standing to sue
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A party's right to sue, as one who has suffered or will suffer a legal wrong or an adverse effect from an action.
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Final order
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An administrative agency's final conclusion or disposition of any material private right of a party, terminating an agency proceeding.
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Exhaustion of administrative remedies
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The completion of all possible administrative procedures and appeals in a case; required before a party can appeal an agency action to a court.
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Aggrieved
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A condition in which an order has substantially affected a party's personal rights. (i.e., a federal agency order)
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Contract
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A legally enforceable agreement between two or more parties in which each party makes some promise to the other
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Four elements for a contract to be legally enforceable
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1. Agreement
2. Capacity to contract 3. Consideration 4. Legal purpose |
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Promisee
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The party to a contract to whom a promise is made
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Promisor
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The party to a contract making a promise
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Privity of contract
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The relationship that exists between the parties to a contract
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Third-party beneficiary
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A person who is not a party to a contract but who benefits from it and has a legal right to enforce the contract if it is breached by either of the contracting parties.
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Breach of contract
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The failure, without legal excuse, to fulfill a contractual promise.
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Unilateral contract
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A contract in which only one party makes a promise or undertakes the requested performance.
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Bilateral contract
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A contract in which each party promises a performance.
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Executed contract
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A contract that has been completely performed by both parties.
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Executory contract
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A contract that has not been completely performed by one or both of the parties
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Implied contract
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A contract whose terms and intentions are indicated by the actions of the parties to the contract and the surrounding circumstances.
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Express contract
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A contract whose terms and intentions are explicitly stated.
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Implied-in-fact contract
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A contract that is not express but that the parties presumably intended, either by tacit understanding or by the assumption that it existed.
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Implied-in-law contract
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An obligation that is not an actual contract but that is imposed by law because of the parties' conduct or some special relationship between them or because one of them would otherwise be unjustly enriched.
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Voidable contract
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A contract that one of the parties can reject (avoid) based on some circumstance surrounding its execution (e.g., a contract with a minor, or misrepresentation)
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Void contract
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An agreement that, despite the parties' intentions, never reaches contract status and is therefore not legally enforceable or binding.
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For contract purposes, an offer is valid if it includes these 3 requirements:
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1. Intent to contract
2. Definite terms 3. Communication to the other party |
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Offer
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A promise that requires some action by the intended recipient to make an agreement
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Offeror
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The party to a contract who promises to give something in return for a promise or an act by another party.
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Offeree
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The party to a contract who makes a promise or acts in return for something offered by another party.
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Test of intent
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The test of whether the intent has been shown is based on how a reasonable person would interpret the intent, not the party's actual intent.
A general statement of intention that conveys no promise is not an offer. (see good example, p. 2.5) |
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First element of a contract (and subparts)
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Agreement
1. Offer - Intent to contract - Definite terms - Communication to offeree 2. Acceptance - By offeree - Unconditional and unequivocal - Offeree's communication of acceptance |
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3 parts of an acceptance
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- By offeree
- Unconditional and unequivocal - Offeree's communication of acceptance |
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Factors of duration and termination that help determine whether an offer is binding
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1. Lapse of time
2. Operation of law 3. Offeree's rejection 4. Counteroffers 5. Offeror's revocation |
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Operation of law
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Means that rules of law apply automatically to a situation without any act by the parties.
For example, an offer is terminated if performing a contract becomes illegal after the offer is made. |
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Counteroffer
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A proposal an offeree makes to an offeror that varies in some material way from the original offer, resulting in rejection of the original offer and constituting a new offer.
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T or F: A counteroffer is different from an inquiry/request for more info
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TRUE. A coutneroffer automatically rejects the original offer; an inquiry/request for more info does not.
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T or F: Offerors must revoke offers to the general public through the same means of communication they used in making the original offers.
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TRUE. For example, one who has offered a reward in an advertisement can revoke it only through another advertisement.
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Requirements of a valid acceptance
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1. The presentation of an offer by the offeror
2. An acceptance of that offer by the offeree |
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Acceptance
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The assetn to an offer that occurs when the party to whom an offer has been made either agrees to the proposal or does what has been proposed.
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T or F: An offeree's silence can sometimes count as an acceptance.
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FALSE. An offeree's silence is not an acceptance.
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Forbearance
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The act of giving up or the promise to give up a legal right.
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Substantial performance
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The performance of the primary, necessary terms of an agreement.
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T or F: Preparations for performance of a contract are not substantial performance.
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TRUE. Preparations for performance of a contract are NOT substantial performance of that contract.
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Competent party
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A party to a contract who has the basic or minimal ability to do something and the mental ability to understand problems and make decisions.
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Types of parties who may lack capacity to contract
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- Minors
- Insane persons - Intoxicated persons (under the influence of alcohol or drugs) - Artificial entities (such as insurers) that are restricted by law or corporate charter from entering into certain contracts |
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Restitution
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The return of specific property by court order.
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To avoid a contract, a person claiming insanity but not adjudged insane must prove on of these conditions:
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1. The person did not know that a contract was forming
2. The person did not understand the legal consequences of acts purporting to form the contract |
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T or F: Contracts made by mentally ill people during lucid intervals are NOT binding.
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FALSE. They ARE binding.
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The party to a contract with an insane person can enforce the contract by proving these facts:
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- The sane party lacked knowledge of the insanity
- The contract benefits the insane person |
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Ultra vires contract
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Traditionally, an attempted contract that was not within corporate powers and is thus voidable (means a contract "beyond its power") Most states have abolished the defense of ultra vires, but courts often use the term when discussing corporate concepts in written decisions.
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Consideration
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Something of value or bargained for and exchanged by the parties to a contract.
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Good consideration
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Consideration based on natural love or affection, or on moral duty, that is not sufficient to support a contract.
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Valuable consideration
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The consideration necessary and sufficient to support a valid contract.
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Gratuitous promise
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A promise not supported by valuable consideration and, therefore, not binding
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Most jurisdictions enforce a new promise to pay an existing obligation that has become unenforceable for one of the following 3 reasons:
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1. One of the parties is a minor
2. The promisor is bankrupt 3. The time for payment has ended |
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3 types of consideration that are insufficient for forming a binding contract
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1. Past consideration
2. Promises to perform existing obligations 3. Compromise and release of claims |
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Bona fide
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Good faith
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Contracts without consideration are enforceable when one of these two concepts applies
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- Promissory estoppel
- Charitable subscriptions |
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Accord and satisfaction
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An agreement (accord) to substitute performance other than that required in a contract and the carrying out of that agreement (satisfaction)
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Promissory estoppel
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A legal principle that permits enforcement of a promise made without consideration in order to prevent injustice
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3 elements that need to be proven for promissory estoppel to apply
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- A party has made a promise expecting another party to act, or to forbear from acting, in reliance on that promise
- The other party has justifiably relied on the promise to his or her detriment and acts or forbears from acting - Only enforcement of the promise would achieve justice |
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T or F: Wagering contracts and usury contracts are legal contracts.
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FALSE
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Insurable interest
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An interest in the subject of an insurance policy that is not unduly remote and that would cause the interested party to suffer financial loss if an insured event occurred.
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Usury
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The charging of an illegally high rate of interest on a loan.
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Negligence
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The failure to exercise teh degree of care that a reasonable person in a similar situation would exercise to avoid harming others.
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Exculpatory clause
(exculpatory agreement) |
A contractual provision purporting to excuse a party from liability resulting from negligence or an otherwise wrongful act.
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Noncompete agreement
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An agreement between an employer (the principal) and an employee (the agent) to protect the employer's customers, trade secrets, confidential information, and other items for a specific period after an employee relationship has been terminated
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In pari delicto agreement
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An illegal transaction in which both parties are equally at fault
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Severable contract
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A contract that includes two or more promises, each of which a court can enforce separately
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Genuine assent
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Contracting parties' actual assent to form a contract or their indication of intent to contract by their actions and words.
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Genuine assent may be lacking if a party was induced to enter a contract by any of five factors:
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- Fraud
- Mistake - Duress - Undue influence - Innocent misrepresentation |
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Fraud
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An intentional misrepresentation resulting in harm to a person or an organization.
6 elements for legal definition of fraud: 1. A false representation... 2. Of a material fact... 3. Knowingly made... 4. With intent to deceive... 5. On which the other party has placed justifiable reliance... 6. To his or her detriment. |
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Representation
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A statement of fact or opinion made by the insured when applying for insurance, usually in response to a question from the insurer.
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Material fact
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In insurance, a fact that woudl affect the insurer's decision to provide or maintain insurance or to settle a claim
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Rescission
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A legal action that voids a principal's bid.
If the court rescinds the contract, the plaintiff has no further duties under it and is entitled to reimbursement of all payments made to the defendant. |
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The concealment defense
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To assert the concealment defense, the insurer must prove two things:
- The insured knew that the fact concealed was material. - The insured concealed the fact with the intent to defraud. |
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Mistake
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A perception that does not agree with the facts.
In a contract, it can result in lack of genuine assent. |
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Unilateral mistake
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A perception by one party to a contract that does not agree with the fact.
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Bilateral mistake
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A perception by both parties to a contract that does not agree with the facts.
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A contractor who has made a material mistake in a bid on a public works project can retract the bid if both of these events occur:
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1. The contractor makes the retraction promptly after discovery.
2. The governmental agency involved has done nothing more in reliance on the bid than accept it. |
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Duress
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The use of restraint, violence, or threats of violence to compel a party to act contrary to his or her wishes or interests.
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Undue influence
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The improper use of power or trust to deprive a person of free will and substitute another's objective, resulting in lack of genuine assent to a contract.
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Statute of frauds
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A law to prevent fraud and perjury by requiring that certain contracts by in writing and contain the signature of the party responsible for perming that contract
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Six situations in which contracts must be written to guarantee enforceability:
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1. Sale of land or any interest in land
2. Contract cannot be performed within one year 3. Contracts to pay another's debt 4. Contracts in consideration of marriage 5. Contracts by executors of decendents' estates to pay estate debts from executors' own funds 6. Contracts for the sale of goods for $500 or more |
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Real property (realty)
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Tangible property consisting of land, all structures permanently attached to the land, and whatever is growing on the land.
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Uniform Commercial Code (UCC)
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Legislation for commercial transactions that provides the trade creditor certain rights and legal remedies in a situation in which a buyer defaults.
A model code that has been adopted in whole or in part by each state. Its purpose is to provide a consistent legal basis for business transactions throughout the United States and its territories. Its articles cover the sale and lease of goods; negotiable instruments; banks and banking; funds transfers; letters of credit; bulk transfers and bulk sales; warehouse receipts, bills of lading, and other documents of title; investment securities; and secured transactions. |
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T or F: The UCC provides that a contract for the sale of goods for $300 or more is not enforceable unless it is in writing.
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FALSE. The limit is $500.
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T or F: According to the UCC, no formal written contract is necessary; it may be a simple note or memorandum.
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TRUE. It may be a simple note or memorandum, and does not have to be a formal written contract.
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T or F: Oral insurance policies are not valid and enforceable.
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FALSE. Oral insurance policies are not valid and enforceable.
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3 purposes of the Parol Evidence Rule
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- To carry out the parties' presumed intention
- To achieve certainty and finality as to the parties' rights and duties - To exclude fradulent and perjured claims |
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Oral evidence of prior or contemporaneous agreements is permitted in these situations:
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1. An essential contract term is missing
2. The written contract contains ambiguous language 3. Fraud or illegality taints a transaction 4. To show that a written document that appears to be a contract never became a contract because of failure of some condition precedent to the agreement. (For example, if delivery is a condition required before performance, oral evidence can be used to show that delivery did not occur.) |
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T or F: In interpreting contracts, words are understood in their plain meaning
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TRUE. They are understood in their plain meaning in interpreting contracts.
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T or F: Failure to perform one installment is not failure to perform the entire agreement.
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TRUE. Failure to perform one installment is not failure to perform the entire agreement.
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When the parties to a contract have made typewritten or handwritten changes in a printed contract form, courts apply this system of priorities (order of 3):
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1. Handwriting prevails over typewriting
2. Typewriting prevails over printing 3. Words prevail over figures |
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Parol evidence rule
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A rule of evidence that limits the terms of a contract evidenced by a writing to those expressed in writing
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Ambiguity
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A contractual provision can be reasonably interpreted in mroe than one way, or the meaning of a provision cannot be determined even by application of all the tools of interpretation
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Assignment
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The transfer of rights or property
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Assignor
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The party to a contract who makes an assignment
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Assignee
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The individual or entity to whom property, rights, or interests have been transferred
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Course of dealings
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Refers to interpretations of a contract -- specifically, how similar transactions between the parties have been interpreted before the contract in question.
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Assignor
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The party to a contract who makes an assignment
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Course of performance
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Refers to interpretations of a contract -- specifically, whether the performance of the contract has occurred without either party's objection.
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Assignee
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The individual or entity to whom property, rights, or interests have been transferred
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T or F: To be effective, an assignment requires formality and writing.
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FALSE. An assignment requires neither formality nor writing. Assignments are transfers and need not be contracts.
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Course of dealings
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Refers to interpretations of a contract -- specifically, how similar transactions between the parties have been interpreted before the contract in question.
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Course of performance
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Refers to interpretations of a contract -- specifically, whether the performance of the contract has occurred without either party's objection.
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T or F: To be effective, an assignment requires formality and writing.
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FALSE. An assignment requires neither formality nor writing. Assignments are transfers and need not be contracts.
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Third-party beneficiary contract
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A contract between two parties that benefits a third party
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Creditor beneficiary
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A third-party beneficiary owed a debt that is to be satisfied by performance of a contract.
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Doneee beneficiary
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A third-party beneficiary who receives the benefit of a contract's performance as a gift from the promisee, with the intent of the contracting parties
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Incidental beneficiary
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A third-party beneficiary who has no contractual rights but benefits from a contract even though that is not the intent of the parties to the contract
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Rules that apply to 3rd party beneficiary contracts:
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- A binding contract must exist between the promisor and promisee
- The parties must intend that the third party receive benefits and acquire rights under the contract. - The parties must take care in each case to clarify to whom the performance is due. - The beneficiary is always subject to defenses the promisor might have against the promisee |
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Tender
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An offer to perform one's duties under a contract
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Novation
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The substitution of a third party for one of the original parties to a contract, releasing the original party from rights and obligations under the contract
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Frustration
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The prevention of the attainment of a goal (can make performance of a contract impossible)
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Impracticability
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An excuse for contract nonperformance of which, though possible, would be extremely or unreasonably difficult
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Impossibility
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The condition of not being able to occur, exist or be done, and thus a valid excuse for non-performance of a contractual duty.
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Condition concurrent
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An event that must occur at the same time as another condition in a contract
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Condition subsequent
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An event that, if it occurs, discharges a duty of performance in a contract.
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Repudiation
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A party's refusal to meet obligations under a contract.
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Anticipatory breach
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A party's unequivocal indication before contract performance is due that he or she will not perform when performance is due
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Material breach of contract
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Violation of the agreement that would justify an owner's termination of the contract
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Compensatory damages
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A payment awarded by a court to indemnify a victim for actual harm
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Consequential damages
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A payment awarded by a court to indemnify an injured party for losses that result indirectly from a wrong such as a breach of contract or a tort
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Punitive damages (exemplary damages)
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A payment awarded by a court to punish a defendant for a reckless, malicious, or deceitful act or to deter similar conduct; need not bear any relationship to a party's actual damages
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Bad faith (outrage)
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An intentional or reckless act, extreme or outrageous in nature, causing severe emotional distress that results in physical injury; generally applied in suits for breach of insurance contracts.
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Extracontractual damages
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A payment awarded by a court that exceeds the usual contract damages for a breach of contract.
Can be awarded when there is a breach of the insurer's duty of good faith and fair dealing in insurance contracts; or when there is intentional infliction of emotional distress on the insured by the insurer's extreme and outrageous conduct. |
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Mitigation of damages
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A duty owed by a n injured party to a claim to take reasonable measures to minimize or avoid additional injury or loss caused by the defendant
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Liquidated damages
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A reasonable estimation of actual damages, agreed to by contracting parties and included in the contract, to be paid in the event of a breach or for negligence.
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Specific performance
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A court-ordered equitable remedy requiring a party to perform a certain act, often - but not always - as a result of breach of a contract.
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Injunction
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A court-ordered equitable remedy requiring a party to act or refrain from acting.
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6 other contract elements specific to insurance
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- They are conditional
- They involve fortuitous events and the exchange of unequal amounts - They are contracts of utmost good faith - They are contracts of adhesion - They are contracts of indemnity - They are nontransferable |
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Conditional contract
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A contract that one or more parties must perform only under certain conditions
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Utmost good faith
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An obligation to act in complete honesty and to disclose all relevant facts
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MIsrepresentation
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A false statement of a material fact on which a party relies.
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Incontestable clause
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Clause that states that the insurer cannot contest the policy after it has been in force for a specified period, such as two years, during the insured's lifetime
Note: If the fraud is particularly vicious, a court can permit proof of fraud even after the contestable period has expired and can find the policy was invalid at the outset |
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Contestable period
|
A period during which an insurer can challenge the validity of a life insurance policy.
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Contract of adhesion
|
Any contract in which one party must either accept the agreement as written by the other party or reject it
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Contract of indemnity
|
A contract in which the insurer agrees, in the vent of a covered loss, to pay an amount directly related to the amount of the loss.
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Principle of indemnity
|
The principle that insurance policies should provide a benefit no greater than the loss suffered by an insured
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Valued policy
|
A policy in which the insurer pays a stated amount in the event of a specified loss (usually a total loss), regardless of the actual value of the loss
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Binder
|
A temporary written or oral agreement to provide insurance coverage until a formal written policy is issued
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|
What constitutes unreasonable delay in an insurer's action is a question of fact, not law. A court will consider some important facts:
|
- The distance of the insurer's office from the agent's office at which the applicant submitted the application
- Special difficulties in underwriting the risk - The insurer's seasonal or other workload problems - The type of coverage involved |
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Direct-action statute
|
A law that permits a negligence victim to sue an insurer directly or to sue both the insurer and wrongdoer jointly
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Mortgagor
|
Property buyer who provides (pays) a mortgage (claim against the property)
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Mortgagee
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The lender who receives the mortgage in return for providing the funds to purchase the property
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Mortgage
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Represents a financial claim against property such as real estate.
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Lien
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A creditor's legal right or interest in another's property, usually lasting until satisfaction of the specific debt or duty that the lien secures.
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Lessor
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Owner of leased proeprty
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Lessee
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Tenant/renter of leased property.
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Life estate
|
An interest in real property for the duration of a person's life. The person having that interest is a life tenant, and the person who has an interest in the property after the life tenant's death has a remainder interest.
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Warranties
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Statements or promises in a policy that, if untrue, would render the policy voidable, whether or not they are material
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|
Three elements are required for a plaintiff insurer to establish false representation:
|
- A statement is made that is false or misleading
- The statement relates to a material fact - The insurer relies on the false or misleading statement in issuing the policy |
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Many states have enacted statutes to permit a materiality defense based on the effect of an alleged misrepresentation. These statutes fall into two groups:
|
- requiring proof of either:
* an increase of the insurer's risk * contribution to the insurer's loss, to prove materiality. |
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Differences b/w warranties and representation
|
- Warranties are part of the final insurance contract / Representations are merely collateral, or indirect, inducements to the contract
- The law presumes warranties to be material, and their breach makes the contract voidable / To constitute a valid defense, representations must be proven to be material - Insurers eithe rwrite warranties in the policy or incorporate them by reference / Representations can be oral, written in the policy, or written on another paper and need not be incorporated by reference expressly - Warranties require strict compliance, but representations require substantial truth only |
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Affirmative warranty
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States that specific facts exist at the time the contract forms
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Continuing (promissory) warranty
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States that the parties will do certain things or that certain conditions will continue to exist during the policy term
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Implied warranty
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An obligation that the courts impose on a seller to warrant certain facts about a product, even though they are not expressly stated by the seller. (Safety is generally an implied warranty for all products.)
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Waiver
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The intentional relinquishment of a known right
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T or F: By definition, an exclusion of a cause of loss cannot be waived.
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TRUE. Waiver applies only to the relinquishment of a right.
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T or F: Once an insurer has knowledge of a condition breach, the insurer must act immediately to avoid a waiver.
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TRUE. It must act immediately to avoid a waiver.
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Estoppel
|
A legal principle that prohibits a party from asserting a claim or right that is inconsistent with that party's past statement or conduct on which another party has detrimentally relied.
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T or F: Even parol evidence is not admissible to prove estoppel.
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FALSE. Parol evidence is admissible to prove estoppel, and it is immaterial whether the words or acts occurred before or after the making of the written contract.
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Election
|
The voluntary act of choosing between two alternative rights or privileges
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Differences b/w waiver and estoppel
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- Waiver is contractual in nature and rests upon agreement between parties / Estoppel is equitable in nature and arises from a false representation
- Waiver gives effect to the waiving party's intention / Estoppel defeats the inequitable intent of the estopped party - The parol evidence rule applies to waiver / The parol evidence rule does NOT apply to estoppel |
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T or F: If an insurer begins an investigation without issuing a reservation of rights letter to the insured, the insurer has still not waived its right to deny coverage on the basis of the insured's failure to fulfill the obligation to report the loss fully.
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FALSE: If an insurer begins an investigation without issuing a reservation of rights letter to the insured, the insurer has waived its right to deny coverage on the basis of the insured's failure to fulfill the obligation to report the loss fully.
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Nonwaiver agreement
|
A signed agreement indicating that during the course of investigation, neither the insurer nor the insured waives rights under the policy
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Reservation of rights letter
|
An insurer's letter that specifies coverage issues and informs the insured that the insurer is handling a claim with the understanding that the insurer may later deny coverage should the facts warrant it
|
|
Which article of the UCC governs the sales of goods
|
Article 2
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Goods
|
Property that is tangible and movable, other than money
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Statutes of fraud
|
A collection of laws that help prevent parties from becoming involved in fraudulently formed contracts
|
|
Two situations in which the UCC provides that oral contracts for the sale of goods for $500 or more are enforceable in two situations:
|
- The buyer accepts and receives part of the goods
- The buyer makes partial or full payment for the goods - A situation in which the goods were manufactured specifically for the buyer: * The goods are not suitable for resale to others in the ordinary course of business * The seller has either has made a substantial beginning in manufacturing the goods or has made commitments to procure them |
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Risk
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The chance of financial loss
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FOB (free on board) place of shipment
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The seller delivers goods to the carrier at the seller's risk and expense, and the ownership then shifts to the buyer
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FOB (free on board) place of destination
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Ownership passes from the seller to the buyer when the carrier delivers the goods to the buyer's premises
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FAS (free alongside) vessel
|
Ownership passes from the seller to the buyer when the seller delivers the goods alongside a vessel for loading onto that vessel
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FOB (free on board) vessel
|
Goods are loaded on board the vessel at the seller's risk and expense, and then ownership passes to the buyer
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CIF (cost-insurance-freight)
|
The seller is obligated to pay for the insurance and freight charges for delivery to the buyer
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CAF (cost and freight)
|
The seller is obligated to pay for the freight charges but not for the insurance for delivery to the buyer.
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COD
|
Collect on delivery. A shipping condition under which the buyer pays when the goods are delivered and has no right to inspect the goods as a condition to acceptance and payment.
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|
An affirmation of fact about the goods is this kind of warranty
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Express warranty
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|
Any description of goods in a contract is what kind of warranty?
|
An express warranty
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|
A contract based on a sample or model constitutes what kind of warranty?
|
Express warranty
|
|
Two categories of implied warranty
|
1. Implied warranty of merchantability
2. Implied warranty of fitness for a particular purpose |
|
Implied warranty of merchantability
|
An implied warranty that a product is fit for the ordinary purpose for which it is used
Goods must meet 5 qualifications: 1. Must pass without objection in the trade under the contract description 2. Fungible goods, like grain, must be indistinguishable and interchangeble and must be of average quality for the kind of goods sold 3. The goods must be fit for the ordinary purpose for which they will be used. 4. All goods in a lot must be approximately like kind and quality. 5. The goods must conform to the specifications, if any, on the container or label |
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Implied warranty of fitness for a particular purpose
|
An implied warranty that a product is fit for a particular purpose; applies if the seller knows about the buyer's purpose for the product
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|
Implied warranty of title
|
An implied promise in a contract for the sale of goods that the seller has legal ownership of goods and has no knowledge of any security interest or other lien on the goods other than those disclosed to the buyer.
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Draft (check)
|
A type of commercial paper containing an unconditional order by the drawer (person making out the draft)
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Certificate of deposit (CD)
|
A document issued by a financial institution acknowledging receipt of money and promising to repay it, with interest, at a specific time
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Promissory note
|
A type of commercial paper containing a written promise to pay money on demand or at a definite future time
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Trade acceptance
|
A two-party draft used when a seller wants cash immediately but when the buyer cannot provide it until the goods are resold.
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|
Primary liability
|
The absolute obligation to pay a negotiable instrument according to its terms
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Secondary liability
|
The obligation to pay a negotiable instrument only if someone else refuses to pay or to accept the instrument
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|
Personal defense
|
A claim to an instrument by any person and any defense that would be effective in a simple contract transaction
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|
Real defense
|
A defense of an obligor of a negotiable instrument that may be asserted even against a holder in due course.
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|
Warehouse receipt
|
A legal document that provides title to the goods in storage and assures delivery to the holder of the receipt
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|
Bill of lading
|
A document acknowledging receipt of goods from the shipper, given by the carrier which includes the terms of the contract of carriage for the goods.
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Carrier
|
A person or organization in the business of transporting property of others.
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|
Bailment
|
The temporary transfer of a property's custody
|
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Bailor
|
The owner of the personal property in a bailment
|
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Bailee
|
The party temporarily possessing the personal property in a bailment.
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|
Warehouse receipt requires nine items of information; the first three are:
|
1. The location of the warehouse where goods are stored
2. Date the receipt is issued to the bailor 3. The receipt number showing a consecutive numbering of all receipts issued by the warehouse operator |
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Consignor
|
The party who is shipping goods
|
|
Consignee
|
The person or organization that receives property being transported by a carrier.
|
|
Collateral
|
Cash, or near cash assets, that a principal pledges to secure credit, a loan, or other obligation.
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|
Security interest
|
An interest in property (Real or personal) that allows the property to be sold on default to satisfy the debt for which the security interest was given
|
|
Pledge
|
A security device by which a borrower guarantees payment by delivering collateral to the lender to hold as security for the debt.
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|
Chattel
|
Tangible, movable personal property
Chattel paper is a document showing that the possessor (holder) is owed money and has a secured interest in goods of value connected to the debt. |
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Perfected security interest
|
A security agreement that has been filed with the appropriate court to provide the surety a priority interest over others who may also have security interests in the property
|
|
Constructive notice
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Knowledge that a person is assumed by law to have because that knowledge could be gained by reasonable observation or inspection.
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Holder in due course
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The person to whom a negotiable instrument has been issued or endorsed and who possesses it for value, in good faith and without notice that it may not be valid, can be claimed by another, is overdue, or was previously dishonored.
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|
Federal Trade Commission (FTC) Act of 1914
|
Prohibits unfair methods of competition and unfair or deceptive acts or practices that affect interstate commerce. Prohibits unfair or deceptive acts that have no relationship to competition. Does not apply to the insurance industry
|
|
Sherman Anti-Trust Act of 1890
|
Prevent companies from acting in ways that would hinder free competition by outlawing practices such as unlawful restraints of trade, price discrimination, price fixing, and unlawful monopolies
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|
Unfair acts
|
Oppressive or bad-faith conduct
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|
Deceptive acts
|
Fraud, deceit, and misrepresentation
|
|
Unfair methods of competition
|
Antitrust violations such as price fixing and group boycotts, for example
|
|
Examples of unfair and deceptive insurance industry acts or practices
|
- Misrepresentation and false advertising of policies
- Defamation of competitors - Boycott, coercion, and intimidation - Creation of false financial statements - Unfair discrimination - Use of rebates - Issuing capital stock, certificates, or securities, or using advisory board or similar contracts, that promise returns or profits as an inducement to purchase insurance (a sophisticated form of rebate) |
|
Magnuson-Moss Warranty Act (1975)
|
Says a producer of goods is not required to provide a warranty; however, if the producer does provide a written warranty, it must conform to certain standards, and must disclose certain things (e.g., how to obtain redress under the warranty, what it will and will not cover, when it expires,e tc.)
|
|
Full warranty
|
(also known as the 'lemon provision') is a promise to remedy a product defect within a reasonable time and without charge and to refund the purchase price or replace the product if the repairs fail
|
|
Limited warranty
|
Contains the required disclosures with some limitations on the consumer's rights
|
|
Consumer Credit Protection Act
|
(aka the Truth in Lending Act); was to ensure that consumers knew the terms and interest rates of their credit transactions.
This act does not replace or preempt state credit disclosure laws unless they are clearly inconsistent with the act, and then only to the extent of the inconsistency. |
|
Fair Credit Billing Act
|
(an amendment to the Truth in Lending Act); a person who is dissatisfied with property or services pruchased with a credit card has the right not to pay the remaining amount due if he or she first tries in good faith to return the property or give the merchant a chance to correct the problem.
|
|
Fair Debt Collection Practices Act
|
(another amendment to the Truth in Lending Act) prohibits unfair and oppressive collection practices by agencies that collect debt for creditors. Collection practices prohibited include using violent or criminal acts, using profane language, calling debtors repeatedly, etc.
|
|
Fair Credit Reporting Act
|
Requires consumer-reporting agencies to exercise their responsibilities with fairness, impartiality, and respect for consumers' rights. It applies only to consumer reporting agencies taht for money or on a cooperative non-profit basis regularly assemble or evaluate consumer credit information or other consumer information into reports furnished to third parties. Improper use of consumer credit reports can result in both criminal and civil liability.
|
|
Equal Credit Opportunity Act
|
Prohibits credit discrimination based on age, race, color, religion, national origin, or receipt of welfare benefits.
|
|
Bankruptcy law
|
The body of federal law that allows debtors who are unable to pay their creditors to divide their assets among their creditors to discharge the debts.
|
|
Priority of claims made by creditors in liquidator proceedings
|
1. Administrative expenses of the bankruptcy proceeding
2. Unsecured business debts 3. A limited amount of wage claims 4. Contributions to employee benefits plans 5. Claims of unsecured individuals 6. Unsecured claims of governmental units |
|
Debts that bankruptcy does NOT discharge include
|
- Certain tax claims
- Money, property, or services obtained by fraud - Claims for willful and malicious injury to people or property - Alimony or support - Most education loans - Debts incurred in court actions arising from drunk driving |
|
Personal property
|
All property that is not real property; it includes both tangible and intangible property
|
|
Real property
|
Land including structures or rights attached to the land. (Includes rights to water, minerals, and things attached to land, such as buildings, tress, and fixtures that have become part of the realty.)
|
|
Three features of ownership
|
1. The right to exclude all others from use and enjoyment of the property owned
2. The right to pass valid ("good") title to the property 3. The obligations of ownership, such as the obligation to pay taxes and to use property so as not to interfere with others' rights |
|
Possession
|
The exercise of custody or control over property and is not, of itself, ownership
|
|
Intellectual property rights
|
The legal entitlement attached to the expressed form of an idea or of other intangible subject matter
|
|
Copyright
|
The legal right granted by the United States government to a person or organization for a period of years to exclusively own and control an original written document, piece of music, software, or other form of expression
|
|
Patent
|
The right granted by the United States government to an inventor or applicant for a limited time period to exclusively own and control a new, useful, and nonobvious invention
|
|
Accession
|
An increase or addition to property
|
|
Confusion
|
In property law, the intermingling of goods belonging to different owners.
(Usually arises when fungible goods, such as wheat, belonging to different owners, are mixed so that identification and separation of the goods are impossible.) |
|
Gift
|
The voluntary and gratuitous transfer of property without consideration.
Requires three elements: - Donative intent - Delivery - Acceptance |
|
Three elements of a gift
|
- Donative intent (donor must intend to make a gift in the present; a promise to make a future gift is not enforceable)
- Delivery (can be actual physical transfer or by constructive delivery, which is delivery implied by law) - Acceptance (parties rarely dispute acceptance, except when a donee does not want the burdens of ownership such as having to pay taxes) |
|
Bailment
|
The temporary possession by one party (the bailee) of personal property owned by another party (the bailor) for a specific purpose, such as cleaning or repair
3 elements: - the transfer of possession of personal property without transfer of title - the bailee's acceptance of the bailed property - the bailee's express or implied agreement to redeliver the property to the bailor or to a designated third person |
|
3 elements of a bailment
|
- the transfer of possession of personal property without transfer of title
- the bailee's acceptance of the bailed property - the bailee's express or implied agreement to redeliver the property to the bailor or to a designated third person |
|
Bailee
|
The party that temporarily possesses personal property owned by another party (the bailor)
|
|
Bailor
|
The party that gives away temporary possession of their own personal property to another party (the bailee)
|
|
Possessory lien
|
A bailee's right to retain possession of a bailor's property as security for the payment of a debt or performance of a bailor's property as security for the payment of a debt or performance of some other act.
|
|
Fee simple estate
|
A full ownership interest in property with the unconditional right to dispose of it.
The owner of a fee simple estate can leave the property to heirs and sell, lease, ro use it. The typical owner of a single family home has a fee simple estate. |
|
Life estate
|
An interest in which a person, called a life tenant, is entitled to possession of real property and to all income the land produces for the duration of that person's or someone else's life; the interest terminates on the death of the life tenant (or of the other person during whose life the life tenant possesses the property) and does not pass to his or her estate
|
|
Tenancy
|
A right to possession or ownership, or both, of property
|
|
Joint tenancy
|
A concurrently owned and undivided interest in an estate that transfers to a surviving joint tenant upon the death of the other.
|
|
Tenancy by the entirety
|
A joint tenancy between husband and wife
Differs from joint tenancy in that a sale or contract does not sever the tenancy; individual creditors cannot subject the property to a claim; neithe rparty individually owns a portion that can be mortgaged. |
|
Tenancy in common
|
A concurrent ownership of property, in equal or unequal shares, by two or more joint tenants who lack survivorship rights.
Differs from joint tenancy & tenancy by the entirety in these ways: - Involves no survivorship - Parties can own unequal shares - Parties need not derive their interests in the same deed from the same grantor |
|
Community property
|
Property owned or acquired by both spouses during a marriage by their communal efforts. Each spouse has an undivided one-half interest in the community property.
|
|
Cooperative ownership
|
Ownership, usually of real property such as an apartment building, by a corporation, the stockholders of which receive long-term proprietary leases to a portion of the property and a property and a proportional vote in its affairs based on the number of shares owned.
|
|
Condominium
|
A real estate development consisting of a group of unites, in which the air space within the boundaries of each unit is owned by the unit owner, and all remaining real and personal property is owned jointly by all the unit owners.
|
|
Deed
|
A written instrument that transfers interest in real property.
|
|
Vendee
|
The purchaser of real property
|
|
Vendor
|
The seller of real property
|
|
Grantor
|
One who conveys property to another
|
|
Grantee
|
The buyer of real property after execution of the deed
|
|
General warranty deed
|
Contains the grantor's warranty that the title is free of all encumbrances (prior claims on the property), that the grantor has the title being transferred, and that no one else has a better title.
|
|
Special warranty deed
|
Contains warranties against only those encumbrances and defects in title that might have been created since the grantor took title.
|
|
Bargain-and-sale deed
|
Transfers whatever interest a grantor has in real property to a buyer for valuable consideration but lacks any guarantee from the seller about the validity of the title; it includes no warranties that the title is free from encumbrances
|
|
Quit-claim deed
|
Transfers only the title or interest (if any) the grantor has in the land at the time of transfer. Contains no warranties.
|
|
Mortgagor
|
The person or organization that borrows money from a mortgagee to finance the purchase of real property.
|
|
Mortgagee
|
A lender in a mortgage arrangement, such as a bank or another financing institution.
|
|
Foreclosure
|
A legal proceeding to terminate a mortgagor's interest in property; the mortgagee's remedy when the mortgagor defaults on payments.
|
|
Trust deed (deed of trust or trust indenture)
|
A secured interest in real property that is held by a trustee to protect the lender (beneficiary) until the loan is repaid by the borrower (trustor)
|
|
Mechanic's lien
|
A lien, granted by law to anyone who repairs a specific piece of property, that secures payment for the repairs
|
|
Adverse possession
|
The claim of ownership of land by possession that is exclusive, open, hostile, unpermitted, and continuous for a statutory period
|
|
Lateral support
|
A property owner's right to have land supported by the land adjacent to it
|
|
Subjacent support
|
A property owner's right to have land supported by the earth below it.
|
|
Trade fixtures
|
Fixtures and equipment that may be attached to a building during a tenant's occupancy, with the intention that they be removed when the tenant leaves
|
|
Improvements and betterments
|
Alterations or additions made to the building at the expense of an insured who does not own the building and who cannot legally remove them
|
|
Incorporeal interest
|
A nonmaterial interest in real property
|
|
Easement
|
A nonpossessory right to use another person's real property for a particular purpose
(e.g., to access a road) |
|
Profits a prendre
|
A right or privilege to enter another's land and take away something of value from its soil or from the products of its soil
|
|
License
|
The permission to use real property for a particular purpose
|
|
Zoning
|
A government's regulation of building construction and occupancy and of land use according to a comprehensive plan
|
|
Exclusionary zoning
|
The act of restricting land use either by prohibiting additional building or by requiring high standards
|
|
Spot zoning
|
A provision in a general zoning plan that assigns a different use for a small area of land than that of the surrounding area
|
|
Special exception
|
A land use explicitly permitted by a zoning ordinance but subject to certain limitations
|
|
Variance
|
An exception to the strict application of a zoning ordinance to permit a use that is not permitted otherwise
|
|
Hardship variance
|
An exception to the application of a zoning ordinance for lots that, because of size, topography, or other physical limitations, do not conform to the ordinance requirements for the zone
|
|
Use variance
|
An exception to the application of a zoning ordinance to permit an otherwise prohibited use within the zone.
|
|
Nonconforming use
|
A land use that is impermissible under current zoning restrictions but that is allowed because the use was lawful before the restrictions took effect
|
|
Building codes
|
Local ordinances or state statutes that regulate the construction of buildings within a municipality, county, or state
|
|
Eminent domain
|
The right of a a government to seize private property for public use
|
|
Condemnation proceeding
|
A legal procedure by which a government body seeks a court's permission to seize private property by eminent domain
|
|
Estate for years
|
A landlord-tenant estate created for a definite period
|
|
Tenancy at will
|
A landlord-tenant estate in which the tenant has permission to occupy a premises as a landlord desires
|
|
Periodic tenancy
|
A landlord-tenant estate with no fixed termination date and automatic renewal until one of the parties gives notice of intent to terminate
|
|
Holdover tenant
|
A tenant who has a lease for a number of years and, at the expiration of the lease, continues to occupy the premises
|
|
Tort
|
A wrongful act or an omission, other than a crime or a breach of contract, that invades a legally protected right
|
|
Tortfeasor
|
A person or organization that has committed a tort
|
|
Defendant
|
The party in a lawsuit against whom a complaint is filed
|
|
Plaintiff
|
The person or entity who files a lawsuit and is named as a party
|
|
Legal duty
|
An obligation imposed by law for the preservation of the legally protected rights of others.
|
|
Statute
|
A written law passed by a legislative body, at either the federal or state level.
|
|
Common law (case law)
|
Laws that develop out of court decisions in particular cases and establish precedents for future cases
|
|
Reasonable person test
|
A standard for the degree of care exercised in a situation that is measured by what a reasonably cautious person would or would not do under similar circumstances
|
|
Common carriers
|
Airlines, railroads, or trucking companies that furnish transportation to any member of the public seeking their offered services
|
|
Proximate cause
|
A cause that, in a natural and continuous sequence unbroken by any new and independent cause, produces an event and without which the event would not have happened
|
|
A high degree of care legally necessary in two situations:
|
1. Common carriers (e.g., bus operators) must exercise the utmost caution
2. People who handle or store dangerous materials, such as explosives, must exercise care commensurate with the risk associated with the materials' dangerous character |
|
Scott v. Shepherd
|
the "lighted squib" case; found that the one who commits a wrongful act is responsible for the ordinary consequences that can foreseeably flow from the act. The person is not liable for results that could not have been reasonably foreseen.
(the defendant, Shepherd, threw a lighted squib (a type of firecracker) into a crowd. It feel near Y, who picked it up and threw it near Z, who in turn threw it near Scott, where it exploded, injuring Scott.) |
|
But for rule
|
A rule used to determine if a defendant's act was the proximate cause of a plaintiff's harm based on the determination that the plaintiff's harm could not have occurred but for the defendant's act
|
|
Substantial factor rule
|
A rule used to determine proximate cause when two parties' acts coincide to cause a loss by determining which act is the substantial factor in causing the harm
|
|
Proof of defendant's responsibility
|
An injured person cannot succeed in a lawsuit merely by proving that harm resulted from another person's act. The plaintiff still must prove by a preponderance of the evidence that the defendant caused the harm.
|
|
Foreseeability rule
|
A rule used to determine proximate cause when a plaintiff's harm is the natural and probable consequence of the defendant's wrongful act and when an ordinarily reasonable person would have foreseen the harm.
|
|
Intervening act
|
An act, independent of an original act and not readily foreseeable, that breaks the chain of causation and sets a new chain of events in motion that cause harm
|
|
Concurrent causation (concurrent causation doctrine)
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A legal doctrine stating that if a loss can be attributed to two or more independent concurrent causes - one or more excluded by the policy and one covered - then the policy covers the loss.
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Negligence per se
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An act that is considered inherently negligent because of a violation of a law or ordinance.
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Res ipsa loquitur
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A legal doctrine that provides that, in some circumstances, negligence is inferred simply by an accident occurring.
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Exclusive control
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The control of only one person or entity; in tort law the control by the defendant alone of an instrument that caused harm (e.g., an exploding carbonated beverage bottle when only the bottler had control of it ahead of time)
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Contributory negligence
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A common-law principle that prevents a person who has been harmed from recovering damages if that person's own negligence contributed in any way to the harm
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Comparative negligence
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A common-law principle that requires both parties to a loss to share the financial burden of the bodily injury or property damage according to their respective degrees of fault
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Last clear chance doctrine
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A defense to negligence that holds the party who has the last clear chance to avoid harm and fails to do so solely responsible for the harm
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Assumption-of-risk defense
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A defense to negligence that bars a plaintiff's recovery for harm caused by the defendant's negligence if the plaintiff voluntarily incurred the risk of harm
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Pure comparative negligence rule
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A comparative negligence rule that permits a plaintiff to recover damages discounted by his or her own percentage of negligence, as long as the plaintiff is not 100 percent at fault
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50 percent comparative negligence rule
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A comparative negligence rule that permits a plaintiff to recover reduced damages so long as the plaintiff's negligence is not greater than 50 percent of the total negligence leading to harm
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49 percent comparative negligence rule
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A comparative negligence rule that permits a plaintiff to recover reduced damages so long as the plaintiff's negligence is less than the other party's negligence
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Slight versus gross rule
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A rule fo comparative negligence that permits the plaintiff to recover only when the plaintiff's negligence is slight in comparison with the gross negligence of the other party
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Release
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A legally binding contract between the parties to a dispute that embodies their agreement, obligates each to fulfill the agreement, and releases both parties from further obligation to one another that relates to the dispute
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Situations in which a court will uphold an exculpatory clause
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- The exculpatory clause is not adverse to a public interest and is not against public policy
- IF the party excused from liability is not under a duty to perform, as is a public utility or common carrier, for example - If the contract does not arise from the parties' unequal bargaining power or is not otherwise unconscionable |
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Gross negligence
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An act or omission that completely disregards the safety or rights of others and is exaggerated or aggravated in nature
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Immunity
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A defense that, in certain instances, shields organizations or persons from liability
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Sovereign immunity (governmental immunity)
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A defense to negligence that protects the government against lawsuits for tort without its consent
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Proprietary function
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A local government's act that is not considered part of the business of government and that could be performed by a private enterprise
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Governmental function
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An act that can be performed only by government
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Four possible major classes of immunities that may be available as defenses
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- Sovereign, or governmental, immunity
- Public official immunity - Charitable immunity - Intrafamilial immunity |
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Federal Tort Claims Act (FTCA) of 1946
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Provides a limited waiver of governmental immunity for claims against the federal government. This law provides the only means for suing for damages and collecting them from the United States government in any cause in which the government, if it were a private person, would be liable.
Many local jurisdictions have enacted similar tort claim acts. |
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Administrative act (discretionary act)
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An act, a decision, a recommendation, or an omission made by a government official or agency within the authority of that office or agency.
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Ministerial act
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An act that is directed by law or other authority and that requires no individual judgment or discretion about whether or how to perform it.
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T or F: A majority of states have accepted the doctrine of charitable immunity, particularly as applied to hospitals.
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FALSE. A majority of states have REJECTED the doctrine of charitable immunity, particularly as applied to hospitals.
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Interspousal immunity
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A defense to negligence that grants immunity to one spouse from the other spouse's lawsuit for torts committed before, during, and after the marriage.
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Parent-child immunity
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A defense to negligence that grants immunity to parents from their children's lawsuits for torts.
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Statute of limitations
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A statute that requires a plaintiff to file a lawsuit within a specific time period after teh cause of action has accrued, which is often when the injury occurred or was discovered
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Statute of repose
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A statute that requires a plaintiff to file a lawsuit within a specific time period after a wrongful act by a defendant, such as improper construction of a building, regardless of when the injury occurred or was discovered
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Trespasser
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A person who intentionally enters onto the property of another without permission or any legal right to do so
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Nuisance
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Anything interfering with another person's use or enjoyment of property
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Attractive nuisance doctrine
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A doctrine treating a child as a licensee, or guest, rather than a trespasser on land containing an artificial and harmful condition that is certain to attract children
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Invitee
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Person who enters a premises for the financial benefit of the owner or occupant
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Licensee
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A person who has permission to enter onto another's property for his or her own purposes
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Express license
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The oral or written permission to enter onto another's land to do a certain act, but not the granting of any interest in the land itself
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Implied license
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The permission to enter onto another's land arising out of a relationship between the party who enters the land and the owner
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Public invitee
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A person invited to enter onto land as a member of the general public for a purpose for which the land is open to the public
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Business invitee
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An individual who has express or implied permission to be on the property of another for the purpose of doing business
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Intentional tort
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A tort committed by a person who foresees (or should be able to foresee) that his or her act will harm another person
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Battery
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Intentional harmful or offensive physical contact with another person without legal justification
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Assault
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The threat of force against another person that creates a well-founded fear of imminent harmful or offensive contact
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False imprisonment
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The restraint or confinement of a person without consent or legal authority
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False arrest
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The seizure or forcible restraint of a person without legal authority
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Intentional infliction of emotional distress
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An intentional act causing mental anguish that results in physical injury.
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Negligent infliction of emotional distress
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An unintentional act causing mental anguish that results in physical injury
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Libel
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A written or printed untrue statement that damages a person's reputation
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Slander
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A defamatory statement expressed by speech
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Defamation
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A false written or oral statement that harms another's reputation
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Publication
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In tort law, the communication of a defamatory statement to another person
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Sullivan v. NYT
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Public officials suing news media for libel must prove that the statement was false and, further, that the defendant made it with knowledge of its falsity or with reckless disregard for its truth or falsity.
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Defenses for slander & libel
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- The statement was the truth
- The defendant made or printed a retraction (can reduce damages) - The statement had absolute, conditional, or qualified privilege |
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Absolute privilege
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Applies to statements made in judicial and legislative proceedings, executive officers' communications, and spousal communications, and when consent was given by the injured party
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Conditional or qualified privilege
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Statements made without malice as a matter of public interest, in petitions concerning appointments, in common interest communications, as fair comment on matters of public concern, and by credit reporting agencies
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Product disparagement, or trade libel
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An intentional false and misleading statement about the quality of a plaintiff's product, resulting financial damage to the plaintiff
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Invasion of privacy
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An encroachment on another person's right to be left alone
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Placing a hidden microphone, eavesdropping, tapping of telephone lines, using telephoto lenses, and using similar types of surveillance can constitute unlawful invasion if the intrusion would be ___________?
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If the intrusion would be highly offensive to a reasonable person.
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Public disclosure of private facts
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Tort involving gossip columns or similar dissemination of stories about a plaintiff's private life. A right to sue depends on the plaintiff's public prominence; an entertainer or politician, for example, is not entitled to privacy to the same degree as an ordinary citizen
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Publicity placing plaintiff in a false light
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Tort involving the use of a statement that has been taken out of context or which is based on information that is not true.
The defendant has presented the publicity in such a way that the plaintiff has good cause to be offended, even if the plaintiff's reputation is not damaged. |
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Unauthorized release of confidential information
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Sometimes courts treat unauthorized release of confidential information as a tort separate from invasion of the right of privacy, although it contains many of the same elements
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Appropriation of plaintiff's name or likeness
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Tort based on one's rights to one's own name and likeness. Anyone who makes unauthorized use of another's name or likeness for publicity or commercial gain may be liable, but most courts base the tort on the defendant's commercial benefit.
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Defenses to invasion of privacy
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- Plaintiff previously published the info
- Plaintiff consented to publication - Plaintiff is a public figure, or the information is public knowledge - The info was part of a news event - The publication would not offend an individual of ordinary sensibility - Matters were disclosed in judicial proceedings - The info is of public interest, such as the public's right to know |
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Bad faith
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A breach of the duty of good faith and fair dealing
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Injurious falsehood
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A group of torts involving disparagement that causes harm to any kind of legally protected intangible property right.
Differs from defamation primarily in that the plaintiff must prove botht the falsity of the statement and the actual damage or loss, while defamation might not result in actual damages |
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Interference with relationships between others
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A category of intentional tort, which can refer to either personal or business relationships of other parties.
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Malicious interference with prospective economic advantage
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A tort involving intentional interference with another's business, ro with another's expected economic advantage.
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Malice
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The intent to do a wrongful act without justification or excuse.
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Unfair competition
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Use of wrongful or fraudulent practices by a business to gain an unfair advantage over competitors
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Interference with employment
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An unjustified intentional act that interferes with another's valid or expected business relationship
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Alienation of affection
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A third party's interference with the husband-wife relationship. A spouse has a right to sue a person who persuades the other spouse to leave the marriage. (Some states have eliminated this action.)
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Personal injury (interference with family relationships)
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A spouse, or both spouses together, can sue a third person for causing personal physical injury to one spouse.
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Loss of consortium (interference with family relationships)
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Loss of husband-wife services, companionship, and comfort. The amount of damages is based on the spouses' existing relationship.
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Examples of other intentional torts
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- Interference with copyright, patent, or trademark
- Interference with right to use one's own name in business - Misuse of legal process |
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Wrongful-life action
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A lawsuit by or on behalf of a child with birth defects, alleging that, but for the doctor-defendant's negligent advice, the parents would not have conceived the child or would have terminated the pregnancy so as to avoid the pain and suffering resulting from the child's defects
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Wrongful-pregnancy action (wrongful-conception action)
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A lawsuit by a parent for damages resulting from a pregnancy following a failed sterilization
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Malicious prosecution
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The improper institution of legal proceedings against another
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Probable cause
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The grounds that would lead a reasonable person to believe that the plaintiff committed the act for which the defendant is suing
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Malicious abuse of process
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The use of civil or criminal procedures for a purpose for which they were not designed
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Trespass
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Unauthorized entry to another person's real property or forcible interference with another person's personal property.
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Private nuisance
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An unreasonable and unlawful interference with another's use or enjoyment of his or her real property
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Public nuisance
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An act, occupation, or structure that affects the public at large or a substantial segment of the public, interfering with public enjoyment or rights regarding property
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Intentional nuisance
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Purposeful interference with another party's enjoyment of his or her property
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Nuisance per se
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An act, occupation, or structure that is a nuisance at all times and under any conditions, regardless of location or surroundings
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Conversion
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The unlawful exercise of control over another person's personal property to the detriment of the owner
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Strict liability (absolute liability)
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Liability imposed by a court or by a statute in the absence of fault when harm results from activities or conditions that are extremely dangerous, unnatural, ultrahazardous, extraordinary, abnormal, o rinappropriate
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Ultrahazardous activity (abnormally dangerous activity)
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An activity that cannot be performed safely even if performed with reasonable care; if harm results, the performer may be held strictly liable
- It has a high degree of risk of serious harm - It cannot be performed without the high degree of risk - It does not normally occur in the area in which it is conducted |
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Environmental law
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The body of law that deals with the environment's maintenance and protection
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Toxic tort
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A civil wrong arising from exposure to a toxic substance
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Products liability
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A manufacturer's or seller's liability for harm suffered by a buyer, user, or bystander as a result of a product that has a dangerous manufacturing defect or design defect or that is not accompanied by a warning of an inherent hidden danger
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In a products liability lawsuit based on strict liability, the plaintiff must prove five elements:
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- The seller was in the business of selling products
- The product had a defect that made it unreasonably dangerous, meaning dangerous to an extent beyond that which would be contemplated by the ordinary user who has common knowledge about the product. (Not all courts require this element.) - The product was dangerously defective when it lef tthe manufacturer's or seller's custody or control - The defect was the proximate cause of the plaintiff's injury - The product was expected to and did reach the consumer without substantial change in condition |
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Three major types of product defects can lead to liability suits
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- Defect in manufacture or assembly
- Defect in design - Failure to warn |
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Defect in manufacture or assembly
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When a product does not correspond to the original design (product defect that can lead to liability suits)
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Defect in design
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When a product corresponds to the design, and the manufacturer built the product exactly as intended, but the design itself is faulty, and the injury has resulted from the design defect (product defect that can lead to liability suits)
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Failure to warn
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The product is defective in neither design nor manufacture, but it poses some inherent danger about which the manufacturer has failed to provide adequate warning (product defect that can lead to liability suits)
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State of the art defense
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Defense in products liability lawsuits. The defendant claims that its product was safe according to the state of the art at the time the product was made.
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Active negligence
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A plaintiff's voluntary use of a defective product with knowledge of the potential danger resulting from the defect
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Assumption of risk
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A defense to negligence that bars a plaintiff's recovery for harm caused by the defendant's negligence if the plaintiff voluntarily incurred the risk of harm.
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Passive negligence
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A plaintiff's failure to discover a product defect or to guard against a possible defect.
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Plantiff's knowledge defense
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If the person who uses the product has knowledge of the product that is equal to the manufacturer's knowledge, the manufacturer has no duty to warn
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Special damages
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A form of compensatory damages that awards a sum of money for specific, identifiable expenses associated with the injured person's loss, such as medical expenses or lost wages
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Loss of wages and earnings
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The compensatory damages to compensate a plaintiff for any loss of income directly related to a tort.
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General damages
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A monetary award to compensate a victim for losses, such as pain and suffering, that do not involve specific measurable expenses
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Pain and suffering
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Compensable injuries that are difficult to measure, such as physical and mental distress and inconvenience associated with a physical injury
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Emotional distress
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A highly unpleasant mental reaction resulting from another person's conduct, for which a court can award damages
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Wrongful death action
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A legal cause of action that exists for the survivor of the deceased
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Survival statute
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A statute that preserves the right of a person's estate to recover damages that person sustained between the time of injury and death
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Joint tortfeasors
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Two or more parties who commit a tort together in circumstances that can make it difficult to distinguish the fault or harm caused by one wrongdoer from the caused by another.
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Contribution
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The right of a tortfeasor who has paid more than his or her proportionate share of the damages to collect from other tortfeasors responsible for the same tort
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Uniform Contribution Among Joint Tortfeasors Act (UCAJTFA)
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Provides that, when two or more persons become jointly or severally liable in tort for the same injury or damage, or for the same wrongful death, they have a right of contribution among them even though the plaintiff has not recovered judgment against all or any of them.
The act creates rights in favor of tortfeasors wh ohave paid more than their pro rata share of their joint liability for the amount of the excess. It provides that, in assessing pro rata liability, the relative degree of fault is not a consideration. |
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Enterprise liability (industry-wide liability)
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An expanded liability concept requiring each member of an industry responsible for manufacturing a harmful or defective product to share liability, when a manufacturer at fault cannot be identified
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Alternative liability
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An expanded liability concept that shifts the burden of proof to each of several defendants in a tort case when there is uncertainty regarding which defendant's action was the proximate cause of the harm
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Market share liability
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An expanded liability concept that applies when a product that has harmed a consumer cannot be traced to a single manufacturer; all manufacturers responsible for a substantial share of the market are named in the lawsuit and are liable for their proportional share of the judgment
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Concert of action
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An expanded liability concept that applies when all defendants acted together or cooperatively
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Conspiracy
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An expanded liability concept that applies when two or more parties worked together to commit an unlawful act
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Joint venture
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A business association formed by an express or implied agreement of two or more persons (including corporations) to accomplish a particular project, such as the construction of a building
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Vicarious liability
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A legal responsibility that occurs when one party is held liable for the actions of a subordinate or associate because of the relationship between the two parties
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Negligent entrustment
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The act of leaving a dangerous article with a person who the lender knows, or should know, is likely to use it in an unreasonably risky manner
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Negligent supervision
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A parent's failure to exercise reasonable control and supervision over his or her child to prevent harm to others
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Family purpose doctrine
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A liability concept that holds the owner of an automobile kept for the family's use vicariously liable for damages incurred by a family member while using the automobile
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Good Samaritan law
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A statute providing that a person will not be liable for civil damages as a result of rendering aid to an injured person, without compensation, at the scene of an accident
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Class action (class action lawsuit)
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A lawsuit in which one person or a small group of people represent the interests of an entire class of people in litigation
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Mass tort litigation
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A class-action suit based on tort law rather than on contract law
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T or F: A contract is essential to form an agency
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FALSE. A contract is NOT essential to form an agency
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An agency relationship can be established in three ways:
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- By appointment
- By estoppel - By ratification |
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Fiduciary relationship
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Relationship b/w agent + principal, referring to the position of trust the agent holds relative to the principal
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Principal
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The party in an agency relationship that authorizes the agent to act on that party's behalf
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Agent
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The party that is authorized by the principal to act on the principal's behalf
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Agency
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A legal, consensual relationship that exists when one party, the agent, acts on behalf of another party, the principal
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Power of attorney
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A written document that authorizes one person to act as another person's agent or attorney-in-fact
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Agency by estoppel
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An agency relationship created by a principal's words or conduct that cause a third party to reasonably believe that an agency exists.
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Ratification
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Creation of an agency relationship resulting when a principal adopts the act of another who has purported to act for the principal and has neither power nor authority to perform the act for the principal
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Difference b/w ratification and estoppel
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Ratification establishes the agency relationship. In contrast, an estoppel does not create an agency relationship but only protects the third person from a loss that would result if the agency were denied
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Actual authority
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Authority (express or implied) conferred by the principal on an agent under an agency contract
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Express authority
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The authority that the principal specifically grants to the agent
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Implied authority
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The authority implicitly conferred on an agent by custom, usage, or a principal's conduct indicating intention to confer such authority
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Apparent authority
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A third party's reasonable belief that an agent has authority to act on the principal's behalf
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Agent's duties to a principal
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- Loyalty
- Obedience - Reasonable care - Accounting - Information |
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Principal's duties to an agent
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- Agreed-on period of employment
- Compensation - Reimbursement for expenses - Indemnity for losses |
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Ministerial duties
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The routine or mechanical tasks performed by agents; an agent can delegate the performance of these tasks to someone else.
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Agency termination can be accomplished in one of several ways (7):
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- Just cause
- Lapse of time - Accomplishment of purpose - Revocation - Renunciation - Death or incapacity - Changed circumstances |
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Death or incapacity can terminate an agency in three ways:
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- The death of either principal or agent terminates the agency
- The incapacity of the principal terminates the agency - The principal has the right to terminate the agency upon learning of the agent's incapacity |
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Disclosed principal
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A principal whose existence and identity are known to the third party dealing with the agent
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Partially disclosed principal
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A principal whose existence is known, but whose identity is not known, to the third party dealing with the agent
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T or F: A third party cannot sue the principal for nonpayment under a contract if the principal has made a good-faith settlement of the account with the agent.
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TRUE. A third party CANNOT sue the principal for nonpayment under a contract if the principal has made a good-faith settlement of the account with the agent.
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T or F: A third party can sue the principal if, having learned of both the principal's existence and the principal's identity, the third party expresses the intention to hold the agent liable for the contract.
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FALSE. A third party CANNOT sue the principal if, having learned of both the principal's existence and the principal's identity, the third party expresses the intention to hold the agent liable for the contract.
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Employee
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A person hired to perform service for another under the direction and control of the other party, called the employer
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Independent contractor
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A person (or organization) hired to perform services without being subject to the hirer's direction and control regarding work details
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Respondeat superior
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"let the master answer"
The legal principal under which an employer is vicariously liable for the torts of an employee acting within the course and scope of employment |
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Joint and several liability
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The liability of multiple defendants either collectively or individually for the entire amount of damages sought by the plaintiff regardless of their relative degree of responsibility.
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T or F: A principal who commits a tort against a third party is directly liable to that party for any resulting harm.
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TRUE. A principal who commits a tort against a third party IS directly liable to that party for any resulting harm.
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T or F: Agents are generally laible for their own torts.
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TRUE. Agents generally ARE liable for their own torts. (some exceptions)
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Generally, an agent is not liable to a third party under a contract made on a disclosed principal's behalf. Except in six situations:
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- The agent warrants by implication that he or she has actual authority to act on the principal's behalf
- The agent acts on behalf of a minor/mentally incompetent person - The agent purported to act personally and not for a principal - Third party asks agent to agree to personally guarantee the contract - Third party pays money to an agent who has no authority to collect it and the agent does not turn over the money to the principal - Agent is liable for fraudulent or malicious acts that harm a third party |
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Generally, a principal is not liable for the torts of agents that are independent contractors. 3 exceptions:
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- A principal who negligently enters into an agency with an independent contractor that is unsuitable or incompetent can be held liable for resulting harm to third parties
- Certain duties are considered so important that responsibility for them cannot be delegated to another party - A principal who hires an independent contractor to perform highly dangerous activities, for example building demolition, must ensure that the contractor takes appropriate safety precautions |
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When an agent makes a material misrepresentation to a third party in a transaction, the third party can rescind (avoid) that transaction. A third party can also elect to recover in tort for any harm resulting from the misrepresentation. A principal may be liable to a third party for misrepresentations by an agent in two situations:
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- A principal intended that an agent make a misrepresentation
- When an agent has actual or apparent authority to make true statements about a particular subject, the principal is vicariously liable for any misrepresentations made by the agent even if the principal did not direct or condone the misrepresentation |
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Insurance producer
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Any of several kinds of insurance personnel who place insurance business with insurers and who represent either insurers or insureds, or both
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Insurance agent
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A legal representative of one or more insurers for which the representative has a contractual agreement to sell insurance
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General agent
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An agent that transacts all of a principal's business of a particular kind or in a particular place
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Special agent
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A person or an entity that is employed to act for the principal in a specific transaction or only for a particular purpose or class of work
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Soliciting agent
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An insurance producer whose authority is limited by contract with an insurer to soliciting applications for insurance and performing other acts directly incident to those activities
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Broker
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An independent producer who represents insurance customers
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T or F: A broker can be both an agent and an insured's representative
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TRUE. There are two such instances. First, through apparent authority, the broker is legally the insurer's agent if the insurer allows the broker to act in a manner leading a reasonable third party to believe that the broker is the insurer's agent. Second, some state statutes provide that, for some specific purposes, a broker is the insurer's agent.
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A court might not bind an insurer by a producer's knowledge in these circumstances:
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- When no actual agency relationship exists between the producer and insurer
- When the agent has supplied false information |
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Oral contracts must contain sufficient agreement on essential terms, such as these:
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- Subject matter of the insurance
- Loss exposures insured - Premium - Insurance contract duration - Coverage amount - Identity of parties |
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T or F: If the evidence does not reveal that the producer selected an insurer before the loss, the contract does not bind any insurer.
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TRUE. The insured has no coverage but can sue the agent for errors and omissions and seek damages equivalent to the loss.
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Duties owed by produces to their customers
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- Follow instructions
- Procure insurance - Maintain coverage - Place insurance with a solvent insurer - Advise |
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Producers' defenses to liability in a claim that the producer failed in his/her responsibility and caused damage to the customer (5):
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- The producer assumed no duty to the customer
- The producer did not breach a duty to the customer - The insruance customer was partly at fault - The insurance customer failed to read the policy - Insurance was not available to the customer |
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Producer has 4 duties to the insurer
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- Disclose risks
- Follow instructions - Loyalty and accounting - Transmit information properly |
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T or F: If a producer binds coverage contrary to explicit insurer instructions, the insurer must provide coverage but can sue the producer for the amount of the loss.
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TRUE. If a producer binds coverage contrary to explicit insurer instructions, the insurer must provide coverage but can sue the producer for the amount of the loss.
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Four exceptions to the employment-at-will doctrine
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- Public policy exception
- Implied-contract exception - Covenant-of-good-faith exception - Statutory exception |
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Employment at will
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A legal doctrine under which an employer may terminate any employee at any time for any reason or for no reason.
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Wrongful discharge
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A cause of action an employee may have against an employer for illegal termination of employment
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Examples of grounds for firing that fall under the public policy exception to employment-at-will
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- Refusing to commit perjury at the request of the employer
- Filing a workers compensation claim after being injured on the job - Applying for medical leave specifically provided under state or federal law - Refusing to participate in illegal price-fixing - Refusing to violate another employee's or a customer's privacy without permission |
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Common-law system
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A legal system in which the body of law is derived more from court decisions as opposed to statutes or constitutions
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Bona fide occupational qualification (BFOQ)
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The minimum qualification, under federal antidiscrimination laws, that an employee needs in order to be able to perform the duties of a particular job
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Age Discrimination in Employment Act of 1967
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Prohibits discrimination, on the basis of age, against persons age forty or older. Extends to all aspects of employment. Applies to employers with twenty or more employees in an industry affecting interstate commerce.
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Older Workers Benefit Protection Act (OWBPA)
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Amends the ADEA; prohibits age discrimination in the offering of benefits, but allows employers to reduce benefits to older workers when such "age-based reductions in employee benefit plans are justified by significant cost considerations"
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Civil Rights Act of 1866
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Also known as Section 1981; gave "all people within the U.S> jurisdiction for the same rights as white citizens". Applied to all aspects of employment. Allows for recovery of compensatory and punitive damages in a potentially unlimited amount.
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Civil Rights Act of 1871
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Established the right to bring suit for monetary damages for a violation of civil rights by individuals acting under state or federal authority. The law is very rarely applied to private employers.
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Civil Rights Act of 1964
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(amended in 1991) Extended the basis for protection against discrimination to include religion and sex. Title VII of the Act (titled "Equal Employment Opportunity") governs most employment discrimination actions.
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T or F: Title VII applies to the U.S. government and to any corporation wholly owned by the U.S. Likewise, it applies to any religious group regarding employment of individuals of a particular religion to perform work connected with the group's activities, including educational institutions associated with it.
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FALSE. Title VII DOES NOT apply to the U.S. government or to any corporation wholly owned by the U.S. Likewise, it DOES NOT apply to any religious group regarding employment of individuals of a particular religion to perform work connected with the group's activities, including educational institutions associated with it.
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Disparate impact theory
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A legal basis for an employment discrimination complaint requiring the plaintiff to establish that an apparently neutral employment practice or criterion, applied equally to all individuals, operated to exclude a disproportionate number of the protected class.
(distinct from disparate impact theory) |
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Disparate treatment theory
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A legal basis for an employment discrimination complaint requiring the plaintiff to establish the employer's practice of intentionally treating individuals differently solely because of their sex, race, color, religion, or national origin
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Quid pro quo sexual harassment
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A practice whereby an employer demands or expects sexual favors in exchange for continued employment, workplace advancement, or other job-related benefits
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Hostile work environment
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An environment that exists when an employee is subjected to harassment that is so severe or pervasive that it alters the conditions of his or her employment and creates an abusive working environment.
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Civil Rights Act of 1991
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- Persons alleging unlawful intentional discrimination can now recover potentially unlimited compensatory and punitive damages
- Plaintiffs can recover compensatory and punitive damages in suits alleging intentional discrimination - Made it easier for plaintiffs to prove their case (by adjusting the burden of proof) - Allowed for jury trials in compensatory damages cases |
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Affirmative action plan
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A written plan that the federal government requires of employers with federal contracts, detailing how the employer will meet hiring goals for groups the law protects from discrimination.
Comes from Executive Order 11246 |
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Equal Pay Act
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Prohibits employers from paying lower wages to employees of one sex than it pays to those of the other sex for work requiring equal skill, effort, and responsibility and performed under similar working conditions.
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Immigration Reform and Control Act of 1986
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Prohibits employers and employee-referral services from hiring, employing, or referring aliens not authorized to work in the U.S.
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Rehabilitation Act of 1973
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Prohibits employers with federal government contracts exceeding $2500 from discriminating against disabled persons who are otherwise qualified to fulfill the contract.
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Americans with Disabilities Act
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Prohibits discrimination against qualified individuals with disabilities. Applies to all aspects of the employment process. Applies to all employers with fifteen or more employees and engaged in a business affecting interstate commerce, governments and government agencies, employment agencies, and labor organizations.
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Uniformed Services Employment and Reemployment Rights Act of 1994
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Ensures that persons who serve or have served in the Armed Forces, Reserves, National Guard, or other "uniformed services" do not experience a disadvantage in their civilian jobs upon return from active duty, and are not discriminated against in employment based on their military service
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Jury Systems Improvement Act
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An employer may not discharge, threaten to discharge, intimidate, or coerce any employee who misses work due to jury duty
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The Consumer Credit Protection Act
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Prohibits termination due to an order of garnishment of any employee's wages
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Norris-LaGuardia Act of 1932
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Prohibited any federal district court from issuing an injunction in a labor dispute until all efforts to resolve the issue through negotiation were exhausted.
The act also prohibits employers from requiring an employee, as a condition of employment, to promise not to join a union. |
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National Labor Relations Act (NLRA) of 1935
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(aka Wagner Act) was the first law to require recognition of labor unions and protected employees from economic retaliation based on union membership.
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Collective bargaining
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A process by which employees, represented collectively by a union, negotiate (bargain) with the employer on a labor contract dealing with wages, hours, and working conditions.
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If a union exists, you MUST collectively bargain for the following aspects of employment:
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- Wages
- Hours - Other terms of employment By contrast, the following are examples of bad faith in collective bargaining: - Refusal by either side to enter into negotiations on mandatory issues - A take-it-or-leave it approach by the employer from the time of the first bargaining conference - Participation in a lengthy series of bargaining conferences with no intention to enter into an agreement |
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Arbitration
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An alternative dispute resolution (ADR) method by which disputing parties use a neutral outside party to examine the issues and develop a settlement, which can be final and binding.
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Primary boycott
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Occurs when customers or vendors are encouraged to stop doing business with the employer in support of the union's position. A boycott is often enforced by picketing as union members stand or protest outside the employer's premises.
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Secondary boycott
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Occurs when unionized employees apply a boycott against one employer to pressure that employer to stop doing business with another. Under a secondary boycott, the employees refuse to work on or with materials coming from or going to the second employer. Made illegal by the Taft-Hartley Act of 1947 and strengthened by the Landrum-Griffin Act of 1959.
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Occupational Safety and Health Act of 1970 (OSH Act)
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An act passed by Congress in 1970 to ensure every employee a safe place to work by setting safety standards for employers and imposing penalties for violation of the standards.
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OSH Act General Duty Clause
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Each employer:
- shall furnish to each of his employees employment and a place of employment which are free from recognized hazards that are causing or are likely to cause death or serious physical harm to his employees - shall comply with occupational safety and health standards promulgated under this Act |
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Fair Labor Standards Act (FLSA)
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Establishes requirements relating to minimum wage, overtime compensation, child labor, and equal pay for men and women. States may also establish laws regarding wages and work hours, provided the requirements meet or exceed federal laws.
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Nonexempt employee
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An employee who is paid by the hour and who receives hourly overtime pay
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Exempt employee
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An employee who is paid a salary and who does not receive overtime pay
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Family Medical Leave Act
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Requires employers to provide employees with unpaid leave time for circumstances covered under the act. Employers must offer eligible employees up to 12 weeks of unpaid leave in a 12-month period, with no loss of any employment benefits accrued prior to leave.
Covered absences include parental leave following a birth or an adoption; an employee's serious health condition; or a serious health condition of the employee's spouse, child, or parent. Employers bear the responsibility to decide whether an absence qualifies for FMLA |
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Employee Retirement Income Security Act (ERISA)
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Intended to safeguard employee pensions
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COBRA
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Consolidated Omnibus Budget Reconciliation Act; ensures that terminated employees may still have access to health insurance benefits
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Health Care and Education Reconciliation Act of 2010
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Places requirements on emloyers for the purpose of expanding the availability and affordability of healthcare coverage
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Drug-Free Workplace Act of 1988
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Requires federal contractors with contracts of $100K or more and all federal grantees to establish drug-prevention programs and to maintain a drug-free workplace in compliance with the act.
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Employee Polygraph Protection Act of 1988
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Prohibits most private-sector employees from requiring or even requesting employees or applicants to submit to lie detector tests, or from inquiring about or considering the results of any such test
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Title III of the Omnibus Crime Control and Safe Streets Act of 1968 and the Electronics Communications Privacy Act of 1986 combine to prohibit this act:
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intercepting any wire or oral communication in a place of business engaged in interstate commerce.
Interception of communication is permissible, however, if one of the parties to a conversation has consented to monitoring |
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Emotional sanctum
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Intrusion into an employee's private affairs -- may create privacy exposures
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Primary advantage of incorporation
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It limits the owners' liability for the corporation's contracts and torts
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Other advantages, other than limited liability, of incorporating:
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- Possible tax advantages
- Easier to sell or transfer ownership - Easier to raise capital - Perpetuity beyond the death of owners |
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Pierce the corporate veil
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A court act of imposing personal liability on corporate officers, directors, and stockholders for the corporation's wrongful acts
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Long-arm statutes
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Statutes that some states have enacted that allow residents to sue, in their own state's courts, people or entities (including corporations) who are not physically present in the state but who have minimum contacts there.
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Bond
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A long-term debt instrument that requires the issuer to pay a set annual rate of interest and to repay the borrowed sum on a specified date.
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Common stock
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An ownership interest in a corporation that gives stockowners certain rights and privileges, such as the right to vote on important corporate matters and to receive dividends
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Preferred stock
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Stock that is generally nonvoting but that has priority over common stock, usually regarding dividends and capital distribution if the corporation ends its existence
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Par value
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An arbitrary dollar value that an organization assigns to its shares
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Stock rights
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Short-term options to purchase corporate shares.
Often given to current stockholders to encourage purchase of a proportional quantity of new stock, often at less than market prices |
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Stock warrants
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Similar to stock rights, but evidenced by a negotiable instrument, typically issued with preferred stocks or bonds.
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Stock options
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Typically used to provide deferred compensation for corporate executives, they permit executives to purchase a certain number of shares at a stated price, relative to status or salary.
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Preemptive rights
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Rights, when given, of existing stockholders to purchase the portions of a new issue of stock relative to an individual stockholders to purchase the portions of a new issue of stock relative to an individual stockholder's total outstanding share of the same class of stock
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Treasury stock
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A corporate stock issued as fully paid to a stockholder and subsequently reacquired by the corporation to use for business purposes
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T or F: A corporation may reacquire issued securities by repurchasing them. This reacquisition is known as redemption.
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TRUE: A corporation may reacquire issued securities by repurchasing them. This reacquisition is known as redemption.
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Sarbanes-Oxley Act
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2002; intended to ensure the credibility of financial requirements and include these provisions:
- Created the Public Company Accounting Oversight Board to establish and oversee standards for auditors of public companies - Indpendence of the audit committee of a public company's board of directors - Certification of corporate financial reports by the company's chief executive and chief financial officers - Rapid, current, and transparent reporting |
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T or F: Board decisions that would change the terms of the contract between the corporation and its stockholders do not require stockholder approval.
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FALSE. Board decisions that would change the terms of the contract between the corporation and its stockholders DO require stockholder approval. Examples include:
- Amendments to the articles of incorporation - Mergers or consolidation - Dissolution of the corporation |
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Inside director
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A corporate officer that serves on the corporation's board of directors
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Outside director
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A member of a corporation's board of directors who is a corporate officer and who may not necessarily be connected with the corporation
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Ultra vires
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An act of a corporation that exceeds its chartered powers.
Under corporate law, a contracted entered into ultra vires is illegal. Also, if the corporation loses money in an ultra vires activity, the directors who authorized the activity are personally liable for the loss. Today, the doctrine of ultra vires is rarely an issue for private corporations. |
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Typical items included in the Articles of Incorporation
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- Corporate name
- Duration (usually perpetual) - Purpose (usually broadly stated) - Number, classes, and par (face) value of shares - Provisions, if any, for the stockholders' right to purchase a proportionate share of newly issued stock - Provisions, if any, restricting the transferability of shares - Registered office or place of business and registered agent - Number, names, and addresses of the initial board of directors - Names and addresses of incorporators |
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Duties of directors and officers under ERISA
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- Act solely in the plan participants' interest
- Exercise the care and skill of a reasonable person conducting a similar enterprise - Diversify investments unless it is clearly unreasonable to do so - Act in accordance with the plan documents |
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Insider Trading Sanctions Act of 1984
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Imposes a civil penalty on anyone who deals in securities based on "material, nonpublic" information
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Stockholder decisions
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- Electing board members and, in many states, removing them without cause
- Approving changes to the articles of incorporation - Making or amending bylaws - Approving loans to the corporation's directors, officers, or agents - Ratifying (approving) board actions - Suing directors for mismanagement |
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Shareholder derivative suit
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A lawsuit brought by one or more shareholders in the name of the corporation
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Class actions
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When a transaction damages many people, one or more damaged persons can file a representative suit on behalf of all (thus avoiding multiple suits on the same factual and legal questions)
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Direct actions
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A stockholder might file suit to seek remedy for direct harm.
FOr example, a stockholder might file a direct action for harm sustained while engaged in company business. |
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Dividends
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Shares of corporate profits paid to stockholders
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3 ways corporations may cease to exist
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Merger
Dissolution Reorganization |
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Share exchange merger
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When a corporation acquires all of another corporation's outstanding shares in return for shares of the acquiring corporation.
A share exchange plan must be adopted by the board of directors of the "disappearing" corporation and approved by the stockholders of teh corporation whose shares are being acquired, but it does not have to be approved by the stockholders of the acquiring corporation. |
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Takeover
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The assumption of control by one corporation over another through merger, acquisition, or some other type of transaction
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Tender offer
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A purchase offer made directly to the shareholders of the target, typically at an offer price greater than the current market price
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Conglomerate merger
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A merger of two orgs that are not competitors or linked as customer and supplier
(i.e, a merger b/w a paint retailer and a carpeting retailer) |
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2 differences b/w insurance company mergers and other corporation mergers
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- Regulated corporations, such as insurance companies, can engage in only one type of business; insurers can merge only with companies in the same business
- State departments of insurance must approve insurance company mergers |
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The Revised Model Business Corporation Act (RMBCA) provides that stockholders can file suits to dissolve a corporation on these grounds
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- The directors are deadlocked, the stockholders cannot break the deadlock, and irreparable injury to the corporation either has occurred or might occur
- The directors' or officers' acts are illegal, oppressive, or fraudulent - The stockholders are deadlocked in voting power and have failed to elect directors for two successive meetings - The corporate assets are being wasted or misapplied |
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Chapter 11 of the Bankruptcy Reform Act of 1978
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Allows a corporation to be placed under federal bankruptcy court supervision for reorganization purposes. May be voluntary or involuntary. May result in restructured org or termination through bankruptcy liquidation.
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Partnership
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A for-profit business entity jointly owned by two or more persons who share ownership and profits (or losses), although not necessarily on an equal basis
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Joint venture
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An unincorporated association of two or more persons (legally defined as individuals, groups, companies, or corporation) established to conduct a single transaction or a series of related transactions (as compared with an ongoing business involving many diverse transactions)
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Common name statute
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A law that permits service of process on a partnership by serving any one of the partners
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A partnership by estoppel results if three elements are present
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- A person who is not a partner purports to be a partner or permits others to think he or she is a partner
- The third party deals with the entity in justifiable reliance on a belief that it is a partnership or that the person who purports to be a partner is actually a partner - The third party changes his or her legal position because of reliance on that belief, for example, entering into a contract |
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Examples of wrongful dissolutions (in which the innocent partners can choose to either wind up the business and hold the at-fault partner liable for breach of contract damages or continue the business for the remainder of the partnership term):
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- A partner becomes bankrupt
- A partner is guilty of conduct that harms the operation of the business, such as competing with the partnership, embezzlement, or breach of the fiduciary relationship. - A partner willfully or persistently breaches the partnership agreement |
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Limited partnership
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A form of partnership made up of one or more general partners, who have unlimited liability, and one or more limited partners, whose liability is limited to the amount of capital they have contributed to the partnership
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Order a partnership's assets are distributed upon dissolution:
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1. Partnership creditors
2. Partners' advances 3. Each partner's capital (if partnership assets are insufficient, the loss of capital is deducted from each partner's capital contribution according to each partner's share of the profits) 4. Surplus to the partners, divided in the same proportion as profits |
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Limited partnership
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A form of partnership made up of one or more general partners, who have unlimited liability, and one or more limited partners, whose liability is limited to the amount of capital they have contributed to the partnership.
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Limited liability partnership
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A partnership limiting each partner's personal liability for acts or omissions of other partners.
Differs from a limited partnership in that it limits liability for each partner. However, this limitation does not apply in situations such as individual acts of negligence or wrongful acts by a withdrawing partner. |
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Limited liability company (LLC)
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A form of business entity that provides its owners the limited liability of a corporation and the tax advantages of a partnership
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Unincorporated association
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A voluntary association of individuals acting together under a common name to accomplish a lawful purpose
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Associations differ from partnerships in several ways (4)
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- An association cannot usually hold title to real property or execute a lease in the association's name
- A member's withdrawal does not cause dissolution - Any expense-sharing or profit-sharing in an association is frequently other than per capita - An association's individual members do not have authority to participate directly in its day-to-day management |
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Volunteer Protection Act
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Those who provide voluntary services are immune from liability in many instances
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Ways an association can be dissolved:
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- By members' vote
- By the death or withdrawal of a majority of the members - By court action on application of creditors or members, or for illegal conduct - By the expiration of a period stated in the articles |
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Liabilities of unincorporated associations
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Individual members can be liable for both torts and contracts arising form the association's activities. Association members are jointly and severally liable for torts for torts committed by the association's agents and employees acting within the scope of their employment
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Ownership of assets of unincorporated associations
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Individual members have rights in the association assets
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Foreign trade
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The importing and exporting of a product from one country to another.
(It is the most common method used to participate in international business, and, compared with other methods, is the one that requires the lowest level of investment and entails the least amount of business risk). |
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Business risk
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Risk that is inherent in the operation of a particular organization, including the possibility of loss, no loss, or gain
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T or F: Most exports do not require a license and are sent to other countries under the No License Required (NLR) designation
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TRUE. Most exports DO NOT require a license and are sent to other countries under the No License Required (NLR) designation
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Tariffs
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A tax, or duty, assessed on goods imported into the U.S.
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Ad valorem
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A percentage of the price, added to the sales price of the goods (applies to tariffs)
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Quotas
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Limits on the amount of a good that may be imported into the U.S>
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Licensing
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A method of controlling imports, which is granted by a country's government. By requiring a license to conduct business, the government ensures that a good will be imported into the country on more favorable terms than if domestic companies competed for the goods for use or resale
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Prohibited imports
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Goods that are illegal to be imported and sold in the U.S. (Marijuana, cocaine, etc.)
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Force majeure
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(superior force); often international sales contracts will include this type of clause, which frees all parties from obligation when an extraordinary even tor circumstance beyond the control of the parties (such as war, strike, riot, earthquake, or volcanic eruption) prevents one or both parties from fulfilling their obligations under the contract
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Cash in advance
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Funds deposited prior to receipt of the goods.
This is a double disadvantage to the buyer. |
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Open account
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A rotating charge account under which the buyer settles the account at determined intervals.
An open account is usually established only if there is a long-term relationship between buyer and seller. |
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Draft
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A written order by a first party, called the "drawer" (the seller, to the second party, called the "drawee" (the buyer), to pay funds to a third party, called the "payee" or to the bearer of the draft.
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Letter of credit (LOC)
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The buyer establishes credit with a local bank, which then contacts a bank in the seller's country, establishing a credit in favor of the seller. The seller then receives a letter of credit in confirmation of the credit.
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Types of foreign contractual relationships
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- Product licensing
- Franchising (In comparison with foreign trade) these relationships increase business risk and resource commitment. |
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Product licensing
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A permission granted by one company to another to manufacture its product or to use its distribution facilities or technology
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Franchising
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Occurs when one company assigns to another the right to supply its products or services within a market. A franchise is a contract entered into for a specific time period.
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Foreign direct investment
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Occurs when a company in one country acquires control over assets located in another country
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Foreign portfolio investment
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Occurs when a company purchases foreign stocks, bonds, or other financial instruments
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Joint venture (international trade)
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In the international trade context, a joint venture involves shared ownership and control of a foreign operation. Joint ventures allow a company to enter either a geographic or product market and to acquire technology or revenue that would not otherwise be within reach
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Resource seekers
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Companies that enter a foreign market seeking that country's resources, such as oil reserves, lower-cost labor, or technology
(a category of company seeking direct foreign investment) |
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Market seekers
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Companies that enter a foreign market to acquire new customers outside their own countries' boundaries
(a category of company seeking direct foreign investment) |
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Market followers
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Companies that follow their customers into foreign countries, a common trend in service industries such as insurance and banking
(a category of company seeking direct foreign investment) |
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Civil law (or Roman-Germanic law)
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Uses comprehensive codes and statutes to form the backbone of a legal system. This system relies heavily on legal scholars to develop and interpret the law. In the civil-law system, a judge is a civil servant whose function is to find the correct legislative provision within a written code of statutes and apply it to the facts presented in a case
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Preliminary stage
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Involves submission of pleadings and appointment of a hearing judge
(first stage in a civil-law case) |
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Evidence stage
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A hearing judge takes evidence and prepares a written summary of the proceedings
(second stage in a civil-law case) |
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Decision stage
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The presiding judge decides the case based on the record provided by the hearing judge, the counsels' briefs, and arguments
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Public international law
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A law that concerns the interrelation of nation states, and that is governed by treaties and other international agreements
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Private international law
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A law that involves disputes between individuals or corporations in different countries; is also referred to as 'conflicts of law'
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In any legal dispute arising between parties from different countries, these two issues must be considered:
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- Whether a court in one country will recognize the decision of another country's court
- Whether a court has the right to hear the legal dispute |
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Comity
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The practice by which one country recognizes, within its own territory or in its courts, another country's institutions
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|
Two things that courts in international cases must determine:
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- Whether they have jurisdiction over the person or entity (in personam jurisdiction) and over the subject matter (in res jurisdiction)
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In personam jurisdiction
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Jurisdiction over the person or entity
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In res jurisdiction
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Jurisdiction over the subject matter
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Functions and powers of the UN General Assembly
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- Consider and make recommendations on the principles of cooperation
- Initiate studies and make recommendations to promote international political cooperation - Elect, jointly with the Security Council, the judges of the International Court of Justice - Appoint the secretary-general (on recommendation of the Security Council) |
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UN Security Council
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Primary responsibility is to maintain international peace and security
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UN Economic and Social Council
|
Responsible for promoting higher standards of living, full employment, and economic and social progress through many other UN agencies
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International Court of Justice
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UN body; comprises fifteen judges elected to 9 year terms
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|
Three ways the International Court of Justice can hear disputes when a concerned country has accepted jurisdiction:
|
- By the conclusion of a special agreement between parties to submit the dispute to the ICJ
- By virtue of a jurisdictional clause, typically, when the countries in question are parties to a treaty - Through the reciprocal efforts of declarations the countries have made under a law providing that each has accepted the jurisdiction of the ICJ as compulsory in the event of a dispute with another country that has made a similar declaration. |
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The World Trade Organization
|
Deals with trade rules among nations. The WTO's existence depends on agreements that most of the world's trading nations have negotiated and ratified. The WTO's goal is to help producers of goods and services, exporters, and importers conduct their business.
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Dumping
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The act of selling a large quantity of goods at less than fair value, including selling goods abroad at less than the market price at home.
WTO has taken actions against dumping. |
|
General Agreement on Tariffs and Trade (GATT)
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The WTO's umbrella agreement for trade in all goods. It has annexed dealings with specific sectors, such as agriculture and textiles. It has also annexed dealings with specific issues, such as state trading, product standards, subsidies, and actions taken against dumping.
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General Agreement on Trade in Services (GATS)
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WTO agreement; sets forth the principles that allow service providers (banks, insurers, etc.) wanting to do business abroad to enjoy the same principles of free and fair trade that originally applied to trade in goods.
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Agreement on Trade-related Aspects of Intellectual Property Rights (TRIPS)
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WTO's intellectual property agreement which sets forth rules for trade and investment in ideas and creative work.
States how all intellectual property should be protected in international business and trade. |
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Common Market
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The European Union's member countries' single, unified market in which goods, services, people, and capital can move freely across borders
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Repatriation of earnings
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The process by which a U.S. parent company moves earnings from its foreign-based affiliates back to the U.S. to the parent company or to its stockholders
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Foreign Corrupt Practices Act (FCPA)
|
IN general, the FCPA prohibits payments to foreign officials to obtain or keep business
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Pegged currency
|
A currency based on the fixed exchange rate of another country's currency
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Expropriation
|
Means a government's lawful acquisition of property without the owner's consent.
(Usually refers to a government's takeover of private property, often without fair compensation, but usually with a legal assertion that the government has a right to do so.) |
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Tax holiday
|
A partial or total exemption from corporate income tax, or an exemption for a number of years.
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|
Border tax adjustments
|
Rebates on exports and taxes on imports.
These are instruments governments use to establish a 'tax-neutral' setting for international trade and investment. |
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Inversion
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aka expatriation or reincorporation. The process by which a corporate entity established in a low-tax country purchases the shares and/or assets of a domestic corporation. Allows the domestic company to change its legal location and become a foreign-based corporation
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Transfer price
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The price one part of a company charges for products and services it provides to another part of the same company.
Under transfer pricing laws, companies are required to charge another affiliate or division the same price it would demand in an arm's length transaction -- that is, a transaction between two unrelated entities. Many experts believe transfer pricing is the most important international tax issue facing multinational corporations. |
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Tax haven
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A country whose regulations offer financial and business incentives encouraging organizations from other countries to do business there.
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Bearer share
|
A corporate share that is owned by the holder of the share certificate and is not registered; therefore, ownership remains private
|
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Registered share
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A corporate share on which records are kept indicating the share's owner and its selling and buying price
|
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Democratic rule
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A form of government by the people through elected representatives
|
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Nonparty democracy
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A form of government in which elected representatives have no political party affiliation
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Parliamentary democracy
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A form of government involving rule by a prime minister and an elected parliament
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Presidential democracy
|
A form of government in which the citizens directly elect a president
|
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Multiparty democracy
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A form of government in which representatives may be elected from several or many political parties
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Junta
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A form of government by a group of military officers governing a country after seizing power
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Martial law
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The assumption of control of a country by the military
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Monarchy
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A form of government led by a hereditary chief of state with powers varying from absolute to ceremonial
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Absolute monarchy
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A form of government led by a single ruler who selects advisers for assistance
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Constitutional monarchy
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A form of government with a parliament, or a democratic legislative body, but with a monarch as a formal or ceremonial head of state
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Single-party government
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A form of government that constitutionally permits only one specific political party
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Theocratic government
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A form of government based on a religious doctrine and often led by religious leaders
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Transitional government
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A temporary form of government used when a country is rebuilding its government, usually as a result of war
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