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INDEX 2012 1.01 Evolution of Law 1.02 Ethics and Structure 2.01 Types of Courts 2.02 Civil Law 2.03 Criminal Law 3.00 Offers, Agreements, ETC 3.01 Offers/ Capacity 3.02 Contracts 4.01 Char. Of Contract 4.02 Terminating a contract 5.00 Types of Business 5.01 Financing/ expanding ETC 5.02 Logo 6.01 Negotiable Instruments 6.02 Credit 7.01 Agency Laws 7.02 Regulations 8.01 Marriage 8.02 Insurance 8.03 Health, Disability + Insurance 9.01 Sales contracts, ETC 9.02 Ownership

1.01 Evolution of Law

What is law? are rules of conduct established by the government of a society to maintain stability and justice in that society.

BREAKING NEWS

Lil Boosie Convicted of Murder

Changing Ideas & Diversity

DID YOU KNOW?

influences;- judeo Christians

MORALS

READ MORE ABOUT IT…

Laws are based on morals and religious rules Islam

Hinduism

B U D D H I S

M

Earlier time law systems…

C ode of Hammurabi , 2012

Laws change to meet everyday society Time is incomplete. DID YOU KNOW?

law systems pt. 1 Code of HUMMARAMBI

Circa 1750 BC Oldest known written code of laws Sumerian King Hammurabi Civil and Criminal Laws and Penalties

Judeo-Christian Influences Circa 1200 BC until the 1st century The 10 commandments The Bible Influence American Law

Greek System Circa 620 BC Draco, 4 areas -Tort -Family -Public -Procedural RULE OF LAW, 1st legal system Commerce Laws and property

12 tablets of Roman Civil Laws Circa 450 BC Romans adapted Civil Obligations and Laws

Roman Empire 560 AD

Applied to H. R. E Emperor Justinian Corpus Juris Civilis

The Magna Carta 1215 AD

Established English constitutional liberties Basic human rights

Protection from abuse by government

English common law

Developed in 12th Century England Unwritten law based on local customs

Napoleonic Law Influenced by Roman Civil Law Established by Emperor Napoleon of France Transported to French Colonies

Quebec Province, Canada Louisiana, USA

Modern day Quebec, Canada Modern day Louisiana, USA

Constitution US Constitution (1787) Each state has a constitution

document which spells out the principles by which a government rules and the fundamental laws that govern a society American constitutions

pt. 2

In America there are many Sources of American Law Common Law Law of Precedent Statutory Law Federal and State Constitutions Administrative Law

Common Law Unwritten Laws Based on Customs and Traditions of people in society English Common Law The King’s court of judges traveled in circuits around the countryside deciding cases. Decisions were based on local customs and traditions. The judges shared decisions with other judges so justice was served equally or “ in common” Common Law Colonists brought English Common Law doctrines with them to America.

Primary basis of American legal system Adopted by US legal system Common law developed into a legal system modeled by nations around the world Law of Precedent Judges referred to decisions in previous common law cases. Judges applied that decision to a new but similar cases. Law of Precedent established. “Case Law” Also called the Doctrine of stare decisis Latin for “Let the decision stand” Evolved from sharing common law Judge researches a similar previous court case. Lindsey Lohan, CBS NEWS 2009

Statutory of Law

Common law was eventually written down Legislative bodies adopted common laws Common law became statutes.

Roe v Wade

Statutory law is enacted by a governing body for a specific purpose.

-Federal legislature Creates statutes, acts

- State legislature Creates statutes

-Municipal (city/town) government Creates local ordinances and by-laws

(passed, created, ratified)

All statutes- Are subject to review by judicial system Must be constitutional - cannot conflict with the United States Constitution

DID YOU KNOW? Precedent set by Marbury vs. Madison, 1803, gave court system the right to:

Review Lower Court Decisions Review Statutory laws Review Executive Branch

FUN FACTS. FUN FACTS. FUN FACTS THAT YOU SHOULD KNOW

Constitutional Law The US Constitution is the Supreme Law of land

Any state or local law that conflicts with the US Constitution is unconstitutional. If unconstitutional, then law is null and void.

The Supremacy Law, US Constitution Article VI Who has supremacy? A high court prevails over any lower court decisions. A federal law prevails over state laws. State law prevails over municipal ordinances. Supreme Court determines questions of constitutionality. Rights of Citizens US Constitution guarantees rights to citizens

BOR “ Bill of Rights “ Rights of Representations Arrest Trial Rights Suffrage Rights State Rights Right to amend constitution

Duties of Citizens Duty of Citizens

Numero UNO #1 Allegiance to country Breach of Duty

Treason -disloyalty to country Expatriation- the act of abandoning one’s country

Administrative Law is the regulations, orders, rules and decisions of administrative agencies. Legislatures create an administrative or regulatory agency.

Purpose: is to regulate certain activities for the benefit of the public. Administrative Agencies Have the power to:

-Make Rules -Enforce rules -Investigate Violations -Decide guilt or innocence of violators -Penalize those convicted -Order actions to stop

DO YOU NEED EXPERT KNOWLEDGE Have a limited scope of power Subject to judicial review by the court system

Judicial Review Word Search

appeal capital punishment caution cell community service corporal punishment court EPA

1.02 Ethics and Structure

In America you hear a lot of people talk about ethics.

“WHAT ARE ETHICS?”

Ethics is mainly deciding what is right and wrong. You usually learn ethics while growing up with your family. Like ethics morality involves the values of one’s attitude towards what is right or wrong

Feelings and Opinions The Greatest Good The Golden Rule Consequential Reasoning Rule-based reasoning

Feelings and Opinions How a person feels about a certain situation

Opinions are expressed about certain situations

The Greatest Good The idea is that must people will base their opinion of ethics based on how a certain situation

affects the greatest amount of people More good = More ethical the action taken

More bad = less ethical the action taken

The Golden Rule Do unto others as you would have them do unto you

EMPATHY Empathy: putting yourself in the other person’s position

Consequential Reasoning

Relook at Consequences of the action before making a decision on what way to act Relook at alternative actions and it gives the final outcome of each action

Rule-based Reasoning

Decision based on majority vote Based on U.S. Constitution

US Legal System Judicial: Led by the Supreme Court. The Supreme Court decides if the law being made is constitutionally correct.

Legislative: Led by Congress. Congress is made up of the Senate and the House of Representatives. The Senate consists of two members from every state. The House of Representatives consists of members based on their population.

Executive: Led by the President. Elected by vote of the people

International Legal Systems By: Jill Bell 5/20/2012 3:53 p.m

The Adversarial System (each side to a dispute presents its arguments for and against the issues involved, and victory goes to the party that persuades the judge or jury to their side) is one legal focus of the American people. This system is not shared by other countries. In other countries, many in Western Europe, support the fact-finding approach (victory is the primary objective). In many other countries, the court system is tied in with the legislative and executive branches. Many countries use religion as a basis for the law, such is the case in Saudi Arabia, where Muslim and the law are tied together. Published 2012

Within the DIVIDED court system by: B.Bell 2006

2.01 Types of Courts

Jurisdiction is the right to hear a case or issue. But there is also federal jurisdiction which is actions in which the US is a party and that are cases that raise a federal question

Federal Court System US Supreme Court

Highest court

Has both Original and Appellate Jurisdiction

Original jurisdiction

Ambassadors, public ministers, cases in which the state is a party

Appellate jurisdiction

Vote of four out of nine justices

US Court of Appeals Appellate jurisdiction

Authority of court to review a decision of a lower court or administrative agency

Appellate Courts have a panel of 3 judges that are responsible for making a decision on the cases Appellate courts decide whether the lower courts relevant to the law in the case Hears Case from the US District Court

US District Courts Original Jurisdiction

Power to hear the case in full for the first time Both civil and criminal cases are heard Currently 95 District Courts

Special US Courts Jurisdiction over special cases

Suits by citizens against federal government Suits concerning tax disagreements on imported goods Suits between taxpayers and IRS

State Court System • Each state has its own system

• Local Trial Courts

▫ Limited jurisdiction

Authority of a court to hear only one particular type of case, minor matters

Misdemeanors

Civil actions with small amounts of money

Small claims of property damage

Petty cash crimes

Traffic, police, and municipal courts

Juvenile and family disputes

General Trial Courts

General jurisdiction Authority of a court to hear a wide range of cases Types of courts

County Court Superior Court Court of Common Pleas Circuit Courts Criminal and Civil Cases Court

Special Courts Limited jurisdiction

Authority of a court to hear only one particular type of case Court Cases include:

Probate Cases – cases involving property of deceased persons without a will Adoption Cases Traffic Cases Domestic Relations Cases – cases of abuse between family or household members Juvenile Cases – cases involving delinquent, unruly, abused, or neglected children (Cases are heard in Juvenile Courts)

Civil WHO? Civil Trials? INSIDER

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2.02 Civil Law

Civil Trial Procedures Individual Files

Complaint – Legal document containing a short and plain statement of the plaintiff’s claim against defendant, first pleading filed in civil cases

Civil Trial Pleadings

Plaintiff files complaint Clerk issues summons Defendant must answer within time limit

Answer is a formal written document admitting or denying complaint

Methods of Discovery Bring out facts before a trial Examples:

Deposition, interrogation, request for admission Affidavit - documentary evidence

Criminal Trial Procedures Arrest of a Defendant

Rights of Defendant Miranda - constitutional right Bail - Lose money if you don’t appear

Search and Seizure Must have warrant or permission Allowed limited search (frisk) Police can search or impound property if they have reason to believe (probable cause) that something illegal is in the car

Due Process of a Juvenile Held in a detention facility Separate from criminals Trial by Judge (not jury) Name not released if under 16

UNC Carson Case

2.03 Criminal Law

3.00 Offers, Agreements, ETC

CONTRACT is any agreement enforceable by law

6 Elements of a Contract

1) Proposal by one party to another with intent to create a legal binding agreement

2) an unqualified willingness to go along with the offer

3) if a valid offer is met by a valid acceptance then a genuine agreement exists Can be destroyed by fraud, misrepresentation, duress, or undue influence

4) Legal ability to enter into a contract Ex Minor, mentally ill, drunk, drugs

5) Must exchange something of value in order to create a bond

6) Must be permitted by law Courts will not enforce an illegal contract

All 6 Elements are required in order to have a contract

3.01 Offers/ Capacity

What is a OFFER?

A proposal

- Makes the offer

- Offer made to this person 3 Requirements of an Offer

Must intend to make the offer Advertisements?

No serious intent Known as an invitation to negotiate

Must use definite words

Phone, fax, Internet, letter, etc

Make an offer on Shaq’s ex wives million mansion !

Acceptance Requirements of Acceptance Acceptance must “mirror” offer

Any change means there is no acceptance

Offeree makes an offer Offeror becomes offeree

Methods of Acceptance

Contract accepted when sent, if same method of communication used Contract accepted when received, if different method of communication is used

Action=Acceptance NO SILENCE

Termination of Offer

Taking back of an offer by offeror

Refusal by the offeree

Any change in the terms of the offer

If the offer puts a time limit on the offer and it has passed

Offeror dies

Offeror is declared insane

Genuine Agreement Mistake

-An error on the part of one of the parties Cannot get out of contract Types:

-Nature of the Agreement Signing a contract you don’t understand or have not read This applies to signing a contract in a language you don’t understand

-Identity of a Party Bound by contract with face to face meetings May be able to void a contract made NOT face to face

Bilateral Mistake Both parties are mistaken

Types: Possibility of Performance

Contract is impossible to perform Either party can void contract Subject Matter

Either party can void contract

Deliberate deception for an unfair or unlawful gain

Deliberate: Done with or marked by full consciousness of the nature and effects; intentional

Deception: The fact or state of being deceived Gain: To secure as profit or reward

In order to prove fraud, you must prove the above 3 definitions Proving Fraud

-False Representation of Fact *Must be a material (important) fact *Concealment (nondisclosure) may be considered false representation

Representation Known to be False False Representation Intended to be Relied Upon False Representation Actually Relied Upon Resulting Loss

Innocent Misrepresentation Make an innocent statement of supposed fact that turns out to false Injured party has the right to rescind the offer No rights to damages

Duress Overcoming a person’s will by use of force or by threat of force or bodily harm

Threats to a person’s business or income Actual physical harm will void the contract Threat of physical harm will make contract voidable A threat of exercising one’s legal right is NOT duress Ex Threatening to sue someone and you have right to sue, is NOT duress Undue Influence Unfair and improper persuasive pressure within a relationship of trust

3.02 Contracts

Breach of Contract

Wrongful failure to perform one or more promises of a contract.

What should writing identify:

•Date •Parties •Price •Intent of parties

•Place •Subject Matter •Terms •Signature of both parties

Contradictory Handwritten terms prevails over typed terms Handwritten numbers prevails over figures

Ambiguous Clauses Can be interpreted two different ways Court favors the one who didn’t draft the contract

Have you been a victim of fraud? Requires that certain contracts must be in writing Relates to executor contracts (material unperformed contracts)

Must be in writing -Contracts to pay debts of others -Contracts to pay debts of deceased persons -Contracts requiring more than a year to perform -Contracts to sell real property

(Exception: Equitable Estoppel – must rely on promise.)

-Contracts for sale of goods over $500 -Prenuptial contract (contemplation of marriage)

Parol Evidence Rule

Courts assure ALL terms are written into the agreement.

::::::::CHANGE IT IN WRITING:::::: Read entire document

If you don’t agree with something, then cross it out and both parties initial it

Write in promises Refuse to sign if you don’t agree contract

4.01 Char. Of Contract

*Valid Legally good

*Void No legal force

*Voidable Not void, but may be voided by one party

*Unenforceable Some rule of law can not be enforced by the court.

Express Stated in words

Written or spoken Implied

Based on actions

Bilateral Contains two promises

Unilateral Contains one promise

Oral Spoken words Written

Write out exact terms

4.02 Terminating a contract

DISCHARGE BY PERFORMANCE Complete

All terms have been carried out properly and completely.

Time Court will honor time request, if it is

deemed “of the essence.” If not mentioned in contract, then a

reasonable time will be assumed. Satisfactory

Law requires that services be completed in a satisfactory manner. Reasonable person test

Would a reasonable consider the work to done in satisfactory manner?

Substantial Slightly less than full performance

Must meet the following rules: Acted in Good Faith Completed Major Components of Contract Only Minor Details Incomplete.

Destruction of the Exact Subject Matter If the subject matter is essential to the contract

then it will be discharged. Illegality

Any illegal contract is void.

DISCHARGE BY OPERATION

Wrongful Alteration Any altering or changing of a contract

will discharge parties to the agreement.

Statute of Limitations Individual states have a time limit on

lawsuits to be filed. What is the only crime/tort that

doesn’t have a time limit? (Murder)

Bankruptcy Debtors can be discharged from contracts after filing for bankruptcy.

Transferring or Breach of Contract and Remedies Legally transferring your RIGHTS in a contract.

Assignor – party who transfers the right. Assignee – party to whom the right is transferred.

No consideration needed. Must not change the obligations in the contract. Must be a RIGHT not a DUTY. Assignor is responsible for contract fulfillment. Delegation Transfer a duty. Delegating party is still responsible for the contract being fulfilled. Contracts that CANNOT be delegated:

Promise to perform service personally. Exercise of personal skill or judgment. Contract prohibiting delegation.

Novation Replacing a party to a contract with a new one. The other terms to the contract remain the same.

Third Parties Privity of Contract

Determines who can sue who over a breach of contract. Third-Party Beneficiary

A person who is not a party to a contract but benefits from it. Has the right to sue over breach of contract.

Breach of Contract Wrongful failure to perform one or more promises in a contract. Anticipatory Breach

Notified that a party to the contract will not fulfill their part of the contract prior to the required time of fulfillment. Lawsuit may be filed early in this case. Exception to the rules: Refusal to pay money owed at a future date.

Remedies/Damages Acceptance of Breach

Accept the breach of contract and discharge the other party without asking for damages.

Why? Must show damages in order to win monetary damages. Not worth the party’s time to file lawsuit.

Money Damages Actual – Damages DIRECTLY related to breach. Compensatory – Award only for injuries suffered nothing more. Consequential – Damages that DO NOT flow directly from breach. Incidental – Reasonable expenses that INDIRECTLY from breach of contract. Liquidated – Anticipated damages agreed prior to contract being signed. Nominal – Award to proved legal injury but no actual damages caused. Punitive – Damages in excess of losses suffered in order to punish party for breach. Speculative – Damages awarded not on fact but on expectations from contract fulfillment.

Specific Damages Ask court to order the other party to do what they agreed to do. Subject matter must be unique in nature. Which of the following is unique?

Real Estate Stocks of General Electric ’65 Ford Mustang with 44,000 miles A brand new Ford F-150 Dozen Eggs Injuction

Court order that prevents a party from performing an act. Temporary or Permanent. Violators are in contempt of court.

5.00 Types of Business

5.01 Financing/ expanding ETC

Characteristics of Sole Proprietorship

Requirements for Organizing - none Legal Status – owner is the business

and it is not a separate entity. Liability - unlimited

Management – owner makes the decisions

PARTNERSHIP Requirements for Organizing –

agreement of the parties. Legal Status – not a separate entity

in many states Liability – unlimited liability

(except limited partnership Management – partners have equal say in management unless otherwise

specified in agreement. 42 AGREEMENTS

Kinds of Partner

Participation in the

Business

Relationship to the Public

Degree of Liability

General Active Known Unlimited

Secret Active Unknown Unlimited

Silent Not active Known Unlimited

Dormant Not active Unknown Unlimited

Limited Not active Known Limited

Parties to the agreement •Specific nature, scope, and limits of the business

•Planned duration of the business •Amount of each partner’s original investment and

procedures for future investments •Provisions regarding salaries, withdrawal of funds, and

the division of profits; and •Terms under which a partner may withdraw from the

partnership.

CORPORATION

Requirements for Organizing – state charter, organizational fees

Legal Status – separate entity from owners Liability – limited liability of shareholders

Management – directors (elected by shareholders) set policy and appoint

officers Dissolution – ends when charter

terminated Ease of Formation – assistance of legal

counsel required Duration – can be perpetual

Ability to attract professional managers - excellent

1) Domestic-chartered in a specific state 2) Foreign-chartered in one state but doing business in another state 3) Alien-chartered in another nation but doing business in a state

8 ELEMENTS OF CORPORATION

1. Name of corporation 2. Duration 3. Purpose for which the corporation is

organized 4. Number and kinds of shares of capital

stock to be authorized for issuance 5. Location of the principal office and

name of its agent

6. Number or names and addresses of initial directors

7. Name and addresses of each incorporator

8. Any other provision consistent with the law

SOME LOCAL CORPS. BY YOU !!!

Corporate Management

Corporate Directors - people elected by the shareholders to make broad policy decisions in the running of a corporation.

Corporate Officers – are people chosen by the directors to run the day-to-day affairs of a corporation

Shareholders

Rights of Shareholders Receive a stock certificate Receive dividends Examine the corporate books and records Transfer all shares

Maintain a proportionate share of stock Exercise a vote for each share of stock

owned Sue

Direct suit Denying his or her rights as a shareholder

Derivative suit Shareholder bring suit to correct an injury to the corporation

Liability of Directors and Officers

Business Judgment Rule -Presumes that the decisions of corporate directors and officers are legal, made in good faith, with due care and in the best interests of the corporation.

Fairness Rule: Directors and officers have a duty and loyalty to their corporation

They must not exploit their positions for personal gain at the expense of the corporation.

Corporate opportunity Doctrine

Directors and officers cannot take advantage of a business opportunity for themselves if they know that the corporation would want to take that opportunity for itself.

Did you know ???? ???? ???? ???? Corporations need to raise money to pay for things like research, marketing, product development, and advertising. They can finance their business activities by selling stocks or bonds.

Stocks are shares of ownership in a corporation sold to investors. Investors, or shareholders, make money depending on how well the company does.

Bonds are notes issued for loans by a corporation. Unlike stocks, bonds earn interest and must be repaid in the future, just like a bank loan

Grow. Grow. Grow. Corporations can expand, or grow,

in several ways:

- mergers and consolidations

- asset acquisition

- stock acquisition

- franchises

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A stock acquisition is when a corporation, or an individual, buys up enough stock of a corporation to take over control of it.

A franchise is a grant to a smaller business to sell its products or services. Familiar franchises are Jiffy Lube®, Supercuts®, and Burger King®.

Voluntary dissolution can come about through a vote of the shareholders or directors.

Involuntary dissolution occurs when the government legally ends a corporation because it was created by fraud, did business illegally, or exceeded its authority.

Regulation Commerce Clause

In Article 1 giving Congress the power to regulate commerce among the states

3 major ways the government regulates commerce Securities Antitrust Corporate takeovers

Security Is a monetary investment that seeks to make a profit solely because of another’s efforts

Securities Act of 1933 Protects investors by making sure they can learn about the securities they buy

Securities and Exchange commission Created by Securities exchange act of 1934 Independent federal agency Regulates Stock Market

Registration requirement SEC requires companies to file a registration statement and prospectus.

Registration statement General description of the securities and the company making the offer

Prospectus Document that contains detailed explanation of the stock offering for potential investors

Sarbanes-Oxley Act Requires all CEO’s and CFO’s to certify company reports filed with the SEC

Antitrust Laws

Sherman Antitrust Act Made monopolies illegal

Clayton Antitrust Act Makes specific business practices illegal

A business cannot sell goods to one company for less than the price it charges another company if it harms competition

Federal Trade Commission Protects businesses from the harmful acts of other businesses

Robinson-Patman Act Amendment to Clayton Act. Cannot sell goods to large purchasers if it does not offer the same discount to other companies

- International Law Commission (ILC)

U.N. Commission on International Trade Law

(UNCITL) World Trade Organization

(WTO)

5.02 Logo

Intellectual Property Defined A product resulting from human creativity, an original work fixed in a tangible medium of expression.

Patents-Inventions Copyrights-Movies, Songs, Plays, Literary Works, Choreography, Paintings, drawings,

Photographs Trademarks-Products and Services Trade Secrets-Formulas, Practice, Process, Patterns Designs-Machines, Building, Products

Origin of Intellectual Property Constitution “To promote the Progress of Science and useful Arts, by securing for limited Time to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.” Article 1, Section 8, Clause 8 5 Types of Intellectual Property Copyrights Patents Trademarks Trade secrets Designs

Copyright law protects the expression of an idea but not the underlying idea itself, i.e. composers, artists, photographers.

Minimum term of life of author plus 70 years 95 years in case of anonymous or pseudonymous works Published and unpublished works

Types of Intellectual Property Patent law provides monopoly protection for inventions.

•Protection much stronger than copyright. •Holder has exclusive rights to produce, use, sell the invention for a 17 year period. •Must be an original idea. •Cannot be renewed.

• •protection under state law against unauthorized use.

• •a distinctive mark, symbol, or slogan or any combination of these used by a business to identify goods and to distinguish them from products sold by others.

•Continuous use good forever •Renew every 10 years. •General trademarks can be lost (Corn flakes and aspirin)

• •the process of originating and developing a plan for a new object (machine, building, product, etc.)

• •a trademark used to identify a service rather than a product (SM)

-The unauthorized copying of software

-illegal copying and selling CD’s.

-refers to the use of another's information, language, or writing, when done without proper acknowledgment of the original source

-is the use of images either copied or physically cut from pre-existing printed works, either books that have entered the public domain.

refers to the doctrine, which provides for the legal, non-licensed citation or incorporation of copyrighted material in another author's work.

-protects individual persons under state law against use of person’s likeness. (Identify theft)

Trade dress law protects the appearance and image of a product or service

•Packaging size •Shape •Color

Examples: décor, such as Outback Steakhouse chain Shape of a classic Coca Cola bottle

6.01 Negotiable Instruments

Draft - An order by one person to another person to pay money to the order of a third person Three parties to a draft: A. – Orders the money to be paid B. – One ordered to pay the money C. – One who is to receive the money

- A drawee who has written “accepted” on the document and signed his/her name Types of Drafts: – A draft payable as soon as it is presented to drawee for payment

– Not payable until the lapse of a particular time period stated on a draft

– Used by a seller of goods to receive payment or to extend credit – Draft drawn on a bank and payable on demand, can be called a demand draft Honor – Pay when due Dishonor – Refuse to pay when due Stop Payment – Instruction for bank not to pay check

Rules Regulating Checking Accounts 1.

a. Check that is more than 6 months old b. Bank may refuse without liability

2. a. Drawer is responsible if negligent in writing check b. Write figures close to $ sign and draw line through spaces not used c. Write close to “Pay to Order of” and draw line through spaces not used d. Figures and written amount should agree e. Sign name last f. Write “Void” on check if mistake is made and in check register

3 a. Check issued against checking account with insufficient funds to cover it b. States have statutes making it a larceny c. Failure of drawer to make check good within certain period of time will serve as a presumption of guilt

4 a. Check signed by someone other than drawer and without authority b. If bank pays and drawer not negligent, bank bears loss c. Drawer has 1 year to discover and report to bank unauthorized signature or alteration on face of check d. Drawer has 3 years to discover and report to bank any unauthorized endorsement on check

5. a. Bank has no right to cash check b. Bank liable if check is cashed c. Oral stop payment good for 14 days d. Written stop payment effective for 6 months e. Holder in due course f. Upon death, bank can cash checks for 10 days for those written prior to

6. a. Should be done as soon as possible after receiving statement b. Balance after writing checks c. Subtract checks written from balance d. Add deposits to balance

7. a. Has not cleared the bank b. Must be known in order to reconcile statement c. Find by comparing the bank statement with the d. checkbook register

8.

a. Makes sure the bank’s records agree with your records b. Check for outstanding checks and deposits c. Check the checks, deposits, ATM activity on the bank statement to make sure that your records are correct d. Make adjustments to the bank statement and your records to ensure that you and the bank have the same amount of money e. Reconcile every statement when received

Competitive Banking Act Funds from the following must be available on day after

deposit -Checks drawn on US Treasury, State, or Local ----Government -Bank Drafts -Cashier’s Check -Postal Money Order

Funds from these must be available within 3 business days following deposit

-Checks drawn on banks within same district Funds from checks drawn on banks in different districts must be available within 7 days

EFT – Banking method in which computers and electronic technology are used as a substitute for checks and other paper forms of banking Electronic Funds Transfer Act Provides

Automated Teller Machines (ATM’S) Pay-By-Phone Systems Direct Deposit or Withdrawals Point-of-Sale Transfers Automatic Deposits and Payments

Federal Laws Regulating EFT

No right to stop payment Must receive a receipt each time you use ATM

Periodic statement must be issued 60 days from date a problem or error appears to notify bank

Banks have 10 days to investigate Disputed funds, if returned, must be deposited to your account

within 45 days Must notify bank it card is lost or stolen

Will lose no more than $50 if reported in 2 days If more than 2 days notification, you can lose $500 or

more

Endorsement - Signature on the back of a negotiable instrument - Allow payee to cash, deposit or transfer payment of the check to someone else - Proof that the payee cashed or transferred payment of the check to someone else - Endorser is responsible for payment of the check if the new owner cannot collect payment - Endorse should sign the check the way it is on the front of the check and if the name is misspelled, correct the signature directly up under the first endorsement

BLANK- Signed with endorser’s name only

Can be cashed by anyone who has a check with a blank endorsement

X Jane Doe

DO NOT WRITE BELOW THIS LINE

SPECIAL -Transfer payment to someone else Can make a payment on a debt with this endorsement

Payee signs the check over to another person to receive payment

X Pay to the order of

Jane Doe

John Doe

DO NOT WRITE BELOW THIS LINE

X For Deposit Only

DO NOT WRITE BELOW THIS LINE

Restrictive

6.02 Credit

Sources of Credit

Unsecured form of credit Interest Calculations

•Adjusted Balance – Finance charges added after subtracting payment •Previous Balance – Finance charges are figured as if no payment was made •Average Daily Balance – Finance charges figured by adding balances for each day in billing period and then divide by the number of days in the billing period •Simple Interest = Principal * Rate * Time

– Collateral used to secure loan

– Creditor obtains possession of collateral by written or oral agreement

– Contract where debtor retains possession of collateral under a written contract

– Taking back of items used to secure loan when payment is not made

– No collateral used

Closed end credit – Credit given for a specific amount of money and payments are made. Open end credit – Credit that can be increased by debtor up to a limit set by creditor, a line of credit is given.

Simple Interest Formula Simple Interest Formula: I = PRT

Sally buys a car at 6% interest for $25,000.00 on a 5 year plan. How much interest does she pay? I – Interest = $7500.00 P – Principle = $25,000.00 R – Rate = 6% T – Time = 5 years

I = $25,000.00 * 6% * 60 I = $7500.00

Adjusted Balance Method Adjusted Balance = Previous Balance – Payments Adjusted Balance * Interest = Finance Charge

Michael’s credit card has a balance of $150.00 and he makes a payment of $50.00. The credit card company charges 7.75% interest per month. What is the interest using the adjusted balance method?

Adjusted Balance = $100.00 Previous Balance = $150.00 Payment = $50.00 Interest = 7.75% Finance Charge = $7.75

$150.00-$50=$100.00 $100.00 * 7.75% =$7.75

Previous Balance Method Previous Balance * Interest = Finance Charge

Michael’s credit card has a balance of $150.00 and he makes a payment of $50.00. The credit card company charges 7.75% interest per month. What is the interest using the adjusted balance method?

Previous Balance = $150.00 Interest = 7.75% Finance Charge = $11.63

$150.00 * 7.75% =$11.63

Loans Secured Loan - Creditors obtain an interest in something

of value ▫

– Property that is the subject of the loan

▫ – Helps protect a loan when a

borrower’s credit rating is poor ▫

– Lender or seller who holds secured interest

▫ – Property is returned because of

non-payment Unsecured Loans - Creditors obtain no collateral for loan

▫ No Collateral ▫ Creditors make sure that debtor is

reliable and able to pay back loan ▫ Example (Credit Cards)

Single Payment Loan Debtor pays off loan in one payment

- Written promise to repay with interest

- Paid in regular payments

Truth in Lending Act Regulation Z

Actual cost of finance charge must be known Annual percentage rate Liable for $50 unauthorized credit card purchases made prior to notification

Equal Credit Opportunity Act Applying for credit Granted only on the ability to repay Evaluation of application Cannot discriminate based on gender, age, ethnicity, or religion Acceptance and rejection Based on income, current debts, or poor credit record

Laws protecting Debtors Setting maximum interest rates

Usually apply to loans of money

Some states govern charges imposed on credit purchases of goods/services “on time”

Disclosure of Terms Full disclosure of interest and finance charges

Does not limit percentage amount

True annual percentage rate (APR)

Does not apply to first mortgages Challenging Unconscionable Contracts

Unfair and oppressive

Judge decides if conscionable Refuse to enforce contract Remove unfair clause and enforce contract Limit clause’s application so no longer unfair

Prohibiting Abuse in the Credit System May not refuse due to sex or marital status May not ask marital status if applying for unsecured separate account May not prohibit a married female from opening/maintaining account in maiden name May not request information about birth control practices or intentions Married persons with joint accounts have right to have credit information reported in both names

Prohibits: Harassment of debtors Abusive and profane language Threats of violence Contract with 3rd parties Communication with the debtor at work

Creditors must mail bills at least 14 days before due date Creditors must acknowledge billing inquiries within 30 days Creditors must settle complaints within 90 days Creditors may not send repeated letters demanding payment until disputes over billing are settled Credit cardholders may withhold payment for items defective without being liable for entire amount owed (purchases of $50 or more and 100 miles from home)

Deals with unfavorable credit reports Have right to correct report

Governs companies that help consumers correct credit reports

Bankruptcy

• Liquidation Sale of nonexempt

property for cash

Nonexempt property Bank Accounts Stocks Bonds

Bankruptcy procedure 1. File the following with the court:

a. List of all creditors and amounts owed b. List of all property owned c. Statement about financial affairs d. List of current income and expenses

2. Trustee is selected 3. Assets liquidated 4. Proceeds used to pay creditors 5. Money left over returned to debtor

Bankruptcy Reorganization Business can keep operating

Files plan of reorganization

Court approves plan

▫ Used for Family Farmers wishing to make a debt adjustment to save the business

▫ Debt Ceiling $1.5 million ▫ Debt plan is for 3 years with a possibility of a 2

year extension

Bankruptcy extended payment time plan

Applies to individuals with regular income

Unsecured debts less than $250,000 and/or secured debts of less than $750,000

Submit plan for repayment of debts within three years

May be extended to five years

Creditors cannot file suit

7.01 Agency Laws

Agency-----Relationship in which one person, called an agent, represents another person, called a principal, in some sort of business transaction with a third party. In most cases a binding contractual agreement is formed. Principal -> Agent -> Third Party

Example: You picked up and paid for a pizza ordered by a family member.

Types of agents •General Agent-given authority to perform any act within the scope of a business. •Special Agent-employed to accomplish a specific purpose or to do a particular job. •Subagents-appointed by another agent. •Agent’s Agent-has no power to appoint a subagent but does so anyway. •Co agents-two ore more agents hired by the principal

By agreement (contract) By law (circumstantial or specific)

By statute (special interest of a state)

Gratuitous Agent: agent works for free (no contract)

Master: has the right to control the conduct of his or her servant

Independent Contractor: agent is hired by the other party, but not

controlled

AUTHORITY Actual-real power given to agent

Express-all orders, commands, or directions given to agent when relationship created

Implied-understood acts or powers implied from express terms

PRINCIPAL Obedience-obey reasonable orders

Good faith-deal honestly Loyalty-faithfulness or acting in best interest

Duty to account-accountable for all money entrusted to him/her

By operation of law (Terminate ) •Death of principal or agent •Bankruptcy •Impossibility of performance •Agent’s objective becomes illegal

•Termination of acts •Performance •Mutual agreement •Agent’s withdrawal •Agent’s discharge

•Notice to third parties •Credit has been given to principal. •Cash business has been done. •No notice when third party never heard of agency relationship.

Employment Law Collecting Bargaining :Contract negotiated by the employer and

representative of the labor union. Unions • To certify, must have a unanimous vote (50 %) • If lose certification vote, must wait one year for another vote.

Employment at will • Employment is not for a stated amount of time. • Employer, without being liable for breach of contract, could fire

the employee and pay him or her for services rendered up to the time of the firing (employee can quit).

• Unjust Dismissal ▫ Employees have legal grounds against employers who have

treated them unfairly Grievance • Sets up a series of steps employees must take to appeal an

employer’s decision that they feel violates just cause. • Due Process is a grievance procedure for government employees. Restrictive Covenants • Agreement not compete

▫ Restrict: Type of work prohibited Length of work Extent of geographic area

LAWS Wagner Act (National Labor Relations Act)

First federal law dealing with collective bargaining Encourage collective bargaining, discouraged unfair labor practices

Taft-Hartley Prevents labor union from requiring an employer to retain employees who are no longer need

Fair Labor Standards Act of 1938 Restricted child labor

Landrum-Griffin Act Unions must register with Sec. of Labor and submit year financial reports.

Employment Relationships, Protection and Equal Opportunity • Labor-Management-unions formed to in best

interest of employee.

▫ Collective bargaining agreement-labor agreement between an employer and the union.

▫ Grievance procedure-steps to resolve disputes.

Professional contracts are generated by professional or executives who negotiate their own contracts

Terminate: Employment-at-will occurs with the termination of

the job by the employee or the employer.

LABOR LAWS Fair Labor Standards Act:

• Restricted child labor

• Minimum wage

• Time and a half overtime

Equal Pay Act: equal pay for equal work

•Social Security: contributions by employee and employer

•Work Compensation Laws: provides income if injured on the job

Other::: Civil Rights Act of 1964: Prohibits discrimination Complain to the Equal Employment Opportunity Commission (EEOC) Civil Rights Act of 1991: new law that states in disparate impact cases, the employer has the burden of proving the existence of business necessity. Disparate Treatment: most obvious and direct way to discriminate (employer intentionally discriminates) Tests to determine if employee or independent contract: Pay Workers compensation Unemployment AGENCY> CLOSED> UNION

• Age Discrimination Employment Act: Forbids discrimination against any person age 40 or older in hiring, firing, promoting, or other aspects of employment

• Older Workers’ Benefit Protection Plan: forbids discrimination against older workers in handling their employee benefit and retirement plans

• Americans With Disabilities Act: Forbids discrimination on the basis of a physical or mental disability if disabled individual can perform “essential function” of the job despite the disability.

RIGHTS • Submit worker’s compensation claim

• Engage in legal union activities

• Participate in state or federal military service

• OSHA whistleblower protection

• Answer jury duty call or serve as trial witness

HAZARD • Mining • Manufacturing explosives, brick, or tile • Operating power-driven hoists • Logging and saw milling • Driving motor vehicles or acting as an outside helper on such vehicles (except for incidental, occasional, and

school bus driving)

• Slaughtering or meat packing

• Operating circular saws, band saws, or guillotine shears

• Wrecking or demolishing buildings or ships

• Roofing

• excavating

Federal Energy and Environmental Regulation Agencies and Laws FERC • Manages the wholesale price of natural gas and electricity sold for interstate commerce use. • Answers questions about increase in prices • State Utility agencies regulate prices • Manages transportation of electricity and natural gas • Ensures that regulated energy companies are following guidelines set by the law

------------------------------------------------ • Energy Reorganization Act created the NRC • Controls licensing, constructing, and creation of nuclear reactors • Manages possession, use, transportation, and disposal of nuclear material • Controls all nuclear activities

EPA • Responsible for environmental protection • Implements the Environmental Policy Act • Governs the environmental laws for air, water, solid waste, toxic substances, and noise pollution • Controls executive orders

7.02 Regulations

Federal Energy and Environmental Regulation Agencies and Laws

NEPA •Fights Pollution and cleans the environment •Explains consequences for environmental violation •Prevents or eliminates damage to the environment •Requires federal agencies to integrate environmental values by creating Environmental Impact Statements each week that are posted every Friday on the website

NRC •Consists of a five member commission •One member is appointed by the President •Generates safety policies and regulations for nuclear reactors and materials and allows the Executive Director for Operations (EDO) to handle policies and decisions of the commission •Issues licenses •Handles legal matters •Directs the activities of the program •EDO ensures safety of commercial use of nuclear materials in the US •Offices handle inspections, enforcement of laws, and emergency response programs licensees

Federal Energy and Environmental Regulation Agencies and Laws

CLEAN AIR Established to protect public health and the environment Was created by the US Environmental Protection Agency to authorize the National Ambient Air Quality Standards (NAAQS) to assist in the creations of law to protect the

environment Handles problems such as acid rain, ground-level ozone,

and air toxics

CLEAN WATER Protects water quality

Does not handle ground water Helps to reduce pollution in waterways,

wastewater treatment plants, and control runoff pollution

Protects the fish, shell fish, and wildlife in water

TOXIC SUBSTANCE CONTROL

Tracks industrial chemicals produced and imported into the US Handled by the EPA

Screens, tests, and reports chemicals that pose a threat to the environment

EPA can prohibit the manufacture or import of chemicals thought to be hazardous

ENERGY AND POLLUTION. Oil Pollution Act (OPA)

• Works to prevent drastic oil spills

• Established a trust fund to help clean up spills • Oil facilities must submit detailed reports to the Federal government explaining how they will handle unexpected

spills Pollution Prevention Act

• Works to reduce pollution

• Handles activities such as recycling, source reduction, and sustainable agriculture • Helps to protect conservation issues such as energy, water, and natural resources

Energy Tax Act (ETA)

• Handles unstable energy climate • Established in 1978

• Promotes energy conversion of boilers, coal, solar, and wind technology

National Energy Conservation Policy Act

• Works to helps decrease electricity demand • Regulates utilities for residential consumers electricity

STATE REGULATIONS

North Carolina Inactive Hazardous Sites Response Act

Protects NC from uncontrollable and unregulated harmful wastes

NC Department of Environment and Natural Resources (DENR)

Prevents and protects North Carolina’s natural resources Protects air, water, and publics health DENR helps business, farmers, and local government, and public keep the area safe

North Carolina Division of Waste Management

Controls disposal of solid waste, harmful waste, underground storage tanks, and needed cleanups Works to reduce wastes Consists of a Solid Waste Section, Underground Storage Tank Section, Hazardous Waste Section, Superfund Section (controls waste risks and cleanups

Marriage Contract • The right to support, either emotional or financial, by one’s spouse when necessary

• The right to inheritance from one’s deceased spouse

• The right to property if the marriage fails

• The right to file a joint income tax return

• The right to compensation to continue one’s standard of living, if the marriage ends.

• The right to the division of community property

Duties • The duty of faithfulness to one’s spouse

• The duty to provide support, either emotional or financial, to one’s spouse when necessary

• The duty to refrain from bodily harm to those with whom they live

• The duty to support their children, if there are any

Agreement • A premarital agreement is an agreement between two people considering marriage

• Each party in the agreement must be honest about every aspect of the agreement

• Not every marriage contract includes a premarital agreement

• A premarital agreement must be in writing and signed by each party

• Also called prenuptial agreement

8.01 Marriage

Ceremonial • Ceremonial marriages are typically used to make a marriage official (solemnize) • Ceremonial marriages must be administered by someone who has authority (judge, ordained minister, sea captain, and in

some states notary public)

Common Law • Common Law marriages require no witnesses or ceremony by anyone authorized • Common Law marriages do not require a ceremony but is typically considered when a man and a woman share common

residence for an extended period of time (different by state, typically 10 years) • Under Common Law, a published notice of an upcoming marriage was called a marriage ban

Proxy Marriage • One or both of the parties to a marriage are absent and are represented by an agent who acts on their behalf • Absent due to military duty or serious illness • Historically due to travel and distance issues on arranged marriages

NOT ALLOWED • Prohibited marriages include, in most states, marriage between close relatives, marriage between those related by blood

(consanguinity), or marriages related by marriage (affinity) • The Uniform Marriage and Divorce Act prohibits marriage between parent/grandparent, child/grandchild, brother/sister,

uncle/niece, or aunt/nephew • Bigamy (two spouses at one time) and Polygamy (more than two spouses at one time) are prohibited

• Marriages can end either by: Death

Annulment Divorce

Ending Marriage Death- voids the contract Annulment-Spouse lying Pregnancy Freedom from disease Willingness to have a child Past Marriage Age

Divorce • The grounds for divorce vary from state-to-state but can include:

No-fault (the breakdown of the domestic relationship) Adultery Physical or mental cruelty Desertion Alcoholism or drug addiction Nonsupport Conviction of a felony A few states have allowed for divorce based on incompatibility Impotency

Recent divorce

Division

• The division of marital property during a divorce depends on many standards:

• Age and individual earning power of each spouse

• Length of the marriage

• Contributions of each spouse to the marriage (including the value of homemaking services)

Alimony

• An allowance made to a divorced person by his or her former spouse for support

• Set during the court settlement

• The judgment of the court

Support

• The welfare of the child is the main concern of the courts

• Many factors are considered when determining custody:

• Parents’ wishes

• Childs’ wishes

• Child’s relationship with parents, siblings, and any other person who may affect the child’s welfare

• Child’s adjustment to home, school, and community

• Physical and mental health of all involved • Joint custody may be awarded • If one parent receives custody, the court will then set child support payments for the other parent. • If child support is not paid, a parent locator service is then used to help collect the unpaid child support payments

Insurance • The concept of insurance involves risk pooling or spreading losses over a greater number of people.

• An insurance company collects and pools premiums from many individuals or businesses for the payment of future claims.

Risk (Transfer, Retain, Abstain) • All people take risks every day. • Risk management is the process of managing one’s exposure to risk.

▫ Examples Using a seat belt Installing smoke detectors Driving a vehicle Playing sports Purchasing an insurance policy

Adhesion • Policyholder (buyer) cannot usually change:

▫ Policy language ▫ Perils covered

• Policyholder can change: ▫ The dollar limit of coverage

Example- $200,000 coverage on homeowner’s structure ▫ Specific items to be covered

Example- 1 carat diamond ring, valued at $3000 • Some adhesions contracts are found by courts to be unconscionable if they take advantage of one

party

8.02 Insurance

Insurance • Planned protection provided by sharing economic losses • Insurance does NOT stop the loss from happening • Insurance companies provide a risk management service to consumers • Insurance does indemnify or financially repay the insured a portion of the loss • All insurance policies have a specified limit of coverage • Insurance is a highly regulated business activity governed by the laws of each state • NC Department of Insurance (NCDOI) handles:

▫ Consumer complaints ▫ Fraud investigations and prosecution ▫ Approval of requested rate increases/decreases ▫ Regulation of agent licensing requirements ▫ Censuring unethical/illegal actions of agents

• Head of NCDOI is the insurance commissioner

Premium • The amount of money the policyholder must pay for insurance coverage • An insurance underwriter determines the cost of the policy using risk factors and statistical data • An agent represents the company to the consumer • Equals consideration in the insurance contract NO Payment • If the premium is not paid, the policy may lapse or cancel, voiding the contract • If claims are made after a lapse, the claim is denied • Some policies have a grace period

▫ Late premiums are received and ▫ Policies are reinstated

Claims, Deductibles, Exclusions, Fraud Claims • The request for payment from an insurance company to cover the financial losses • Examples:

▫ Automobile-car accident ▫ Medical-doctor’s appointment ▫ Life-covered person dies ▫ Disability-out of work for health reasons ▫ Unemployment-laid off from job Deductibles

• Most policies have a self-insured portion of the cost of the claim that is paid by the insured. ▫ The insured chooses the amount of risk retained by choosing the deductible amount ▫ Deductible

On auto coverage, the amount the insured pays before the insurer pays collision or comprehensive damage claims

On health coverage, the amount the patient pays before the insurance company pays any covered medical expenses

▫ The higher the deductible chosen by the insured, the lower the premium for the coverage. ▫ 100% self insurance = 100% risk retention

means no insurance is purchased Exclusions ▫ Limitations to policy coverage's Fraud

• False claims made to an insurance company

• Federal prosecution is frequent under mail and wire fraud schemes because the USPS is involved

Auto Claims • The at fault driver of a vehicle that damages other property or injures other people is liable for the cost of repairs. • North Carolina financial responsibility laws mandate that drivers carry bodily injury and property liability

insurance coverage. ▫ Bodily Injury Liability protects the insured person from liability claims for injury to:

People in other cars Passengers riding with the insured person

▫ DOES NOT cover the insured person (driver) ▫ Property Damage Liability protects the insured person from liability claims for damage to property of

others, such as: Personal property including vehicles, animals Business property including telephone poles and other utility structures Government property such as bridges and other road structures Real property

▫ Does NOT cover the insured person’s property • Collision: Protects the vehicle owner against damage from a collision with another object or the vehicle turning

over • Covers the cost of:

▫ Repair to insured’s vehicle • Charges points to insurance if claim filed • Points make premiums increase. • Does NOT cover injuries to people

• Collision: Insurance company may pay either the ▫ Cost to repair insured vehicle less deductible, or ▫ Actual cash value, market value or NADA Bluebook value of a total loss vehicle less deductible

• The insurance company does not consider the loan balance when settling a claim! The loan balance is an issue for the owner. Loan balance may be more than a vehicle’s value!

Auto coverage Comprehensive

• Protects the insured vehicle against damage from almost all damages except collision

▫ Fire

▫ Theft

▫ Vandalism

▫ Hail

▫ Windstorm

▫ Windshield damages

▫ Collision with wild animal including fowls

• Does NOT charge points when claim is filed

Uninsured

• Protects policyholder against drivers

▫ Without insurance to cover the loss suffered

▫ Without enough insurance to cover the loss suffered

Other • Medical payments - Covers anyone in vehicle

or hurt by vehicle, even if not moving ▫ Ex: Broken finger by closing finger in door

or trunk, pedestrians • Towing Expense - Pays tow fees • Rental Reimbursement - Covers cost of rental

when vehicle being repaired due to accident

No Fault •The insurer of each party involved in accident pays the insured loss regardless of fault •Not required to prove fault of one party over the other

•Reduces time delays for claim settlement especially in bodily injury lawsuit cases •Reduces money spent to resolve the claim

•NC is NOT a no fault insurance state. Cost Insurance companies legally discriminate by using:

Relevant statistical data and Risk factors related to the insurance type

Underwriters at companies “rate” to determine the premium cost for the coverage requested.

Standard premiums may be rated up for hazards

Points for tickets or accidents on auto insurance

Health issues on life/health insurance Affecting Cost •Type of coverage •$ Limit of coverage •Risk retention -Deductible amount •Experience rating – how long driver has been licensed (AGE IS NOT A FACTOR!!) •At fault Accidents (Points) •Tickets (Points) •Type of Vehicle - Value, reparability, engine size, style •Geographic area- Urban, suburban, rural •Use of Vehicle - Distance driven and purpose •Company

Life insurance • Provides income to dependents or other named beneficiaries in the

event of the insured person’s death.

• Face value- the amount of protection stated in the policy

▫ Example: Marla buys a $100,000 face value life insurance policy.

Marla dies. Marla’ s beneficiaries will get $100,000 in proceeds. Beneficiary • The policyholder names a beneficiary • Can be an individual or business • Beneficiary receives proceeds from a life insurance claim. • Proceeds is the money paid to a survivor by a life insurance policy. • Contingent beneficiaries named in the policy are second in line if the beneficiary is deceased.

Good Stuff

• Face amount is paid as proceeds to beneficiary

• Proceeds are NOT taxable by income, estate or inheritance tax laws.

• Proceeds are paid direct to beneficiaries.

• Proceeds avoid probate • Term life is temporary insurance.

▫ Only pays if insured dies during policy period ▫ Purchased for a specific term (one year or multiple years) ▫ Usually renewable for another term ▫ Least expensive premium for most coverage ▫ Pure insurance, no savings add up

Whole Life Insurance Permanent insurance for lifetime of insured. Premium is more. Excess premium creates savings called cash value. Cash value can be:

•Withdrawn by policyholder as loan •Used to buy more paid up insurance

Used to pay current Other •pay life - stop paying after a specified # of years without lapse •Universal life - blend of term and whole •Endowment - lump sum paid in advance •Variable life - cash value builds in investment chosen by policyholder •Accidental death & dismemberment - for deaths due to accident or loss of limb •Cost Factors •Type of insurance •Age of insured •Health of insured •Gender (sex) of insured •Face amount – Dollar amount of coverage provided by the life policy •Company

Property and casualty • Types of policies :

▫ Fire policies ▫ Renter’s policies ▫ Homeowner’s policies ▫ *Supplemental - marine insurance

• Covers both individual and business property such as: ▫ Real Property: Houses, apartments, condos, office buildings and other

structures ▫ Personal property: Jewelry, furniture, clothing, equipment, artwork and

other valuables FIRE • A very basic policy covering loss resulting directly or proximately from an

unfriendly fire. ▫ Unfriendly or hostile fire is uncontrollable or has escaped from the place

where it should be. ▫ A friendly fire is a bonfire, furnace fire, fire in a fireplace unless it gets out

of control. RENTERS • Covered under Homeowner’s 4 Form • Person who rents real estate from another but has personal contents on

premise carries renter’s insurance to insure: ▫ personal contents ▫ against liability risk

• Insurable Interest law applies. A person can only insure his own property, not another’s property.

HOME OWNERS • Provides coverage for:

▫ Home - Primary structure ▫ Personal property - Contents ▫ Related structures – Outbuildings, if any ▫ Loss of Use - Living expenses if insured can not live there due to covered

damage ▫ Premise personal liability – for injuries to others who were on your

property

•HO-1 Basic - covers limited perils •HO-2 Broad – covers extended perils •HO-3 Special - covers most perils with specified exclusions •HO-6 Condominium Owners – coverage like an HO-3, but for homes with common walls

COST • Limit of coverage for property • Location of property – fire district, city, county, state • Structural material - brick, block, frame • Previous claims filed • Company FLOOD AND EARTHQUAKE • NOT COVERED UNDER HO POLICY

▫ Must buy separate flood insurance coverage ▫ Must buy separate earthquake coverage

Co insurance • In property insurance, there is a high probability of a partial loss

claim. The insurance policy requires actual value of property be insured.

• Co-insurance requires an insured to cover a minimum of 80% of the value of the property

• If less than 80%, the claim amount is reduced at the time of payment.

Marine • Covers property exposed to perils of sea transport:

▫ The vessel ▫ The cargo ▫ Other property ▫ Liability for the vessel

• One of first types of insurance covering ancient traders in the Mediterranean Sea.

• The term “underwriter” coined from the process of insuring the ships and cargo.

INLAND MARINE Covers personal property that is being transport over land Transportation methods include:

•TRUCK •TRAIN •AIRPLANE

Also covers property such as jewelry, furs, fine arts, musical instrument etc wherever located and during their transport FIDELITY An insurance policy against a financial loss due to dishonesty

Pays the employer money in the case of theft by employees Guarantees the honesty of employees who:

Handle large sums of money Have access to customers money or as LLYODS OF LONDON An insurance company that covers unique property and liability risks that are difficult to insure

Healthcare • Make smart health care decisions

Research different health care providers Be honest on applications Be certain you understand all exclusions and

conditions Be aware of expiration dates, cancellation

terms, and renewal policies Power of attorney: court document naming

someone who has permission to act on the person’s behalf in case of illness or inability to perform their normal duties

• Types of consent General consent: permission given for tests

and treatments, the moment the patient enters the hospital

Informed consent: procedure which requires physicians to tell patients in advance of any risks involved in forthcoming treatment; must be in writing

• A broad medical policy covering ▫ Inpatient and outpatient hospital care ▫ Long term hospitalization ▫ Home nursing care ▫ Prescription drugs ▫ Physician visits ▫ Surgery ▫ Laboratory tests

8.03 Health, Disability + Insurance May require patient to pay :

Annual deductible before insurer pays anything A flat co-pay for doctor visits A %(10-30%) of the remaining balance due A maximum out of pocket expense each plan year COST FACTORS •Type of policy •Limits and exclusions of coverage •Deductible/Co-pays •Group or individual plan •Age •Health •Company SUPPLEMENTAL

•Vision •coverage for care of eyes

•Dental •coverage for care of teeth

•Cancer •coverage for treatment of cancer

•Hospital Indemnity •pays insured when in hospital

Medicare: Provides health coverage for most people over age 65 and some disabled persons, provides medical and hospital insurance Medicaid: Covers certain individuals who need public assistance

Disability • The Americans with Disabilities Act

Employers cannot discriminate against individuals with disabilities The ADA defines a disabled individual as an individual who has a physical or mental impairment that substantially

limits one or more of the major life activities Indirect discrimination: includes using a qualification for hiring that is not related to job performance, but is used to

exclude the disabled individual Direct discrimination: includes not hiring an individual simply due to their disability

Purpose: To protect the individual against risk of losing income from regular occupation due to illness or injury causing disability.

Insured may buy a policy from a private company. • Indemnifies for wages lost

▫ Proceeds (benefits paid) are not taxable ▫ Proceeds are 65% of normal wage ▫ Elimination period or waiting period is the number of days or weeks that the insured waits before the

insurer pays disability claim ▫ Form of risk retention ▫ Comparable to a deductible ▫ Cause and effect similar to a deductible:

• Longer elimination period=lower premium • Shorter elimination period=higher premium AFFECT COST

▫ Elimination period or waiting period is the number of days or weeks that the insured waits before the insurer pays disability claim

▫ Form of risk retention ▫ Comparable to a deductible ▫ Cause and effect similar to a deductible:

• Longer elimination period=lower premium • Shorter elimination period=higher premium

Retirement: Private, Gov., Indiv. Private • Benefits by an employer to provide retirement funds to their employees

▫ Examples: 401K, SEP, Profit Sharing • Offered as a benefit, not required by law • Employers have the option to fund the plan by themselves or require the employee to contribute • Vesting

▫ act of giving a worker a guaranteed right to receive a future pension • Portability • ability to transfer pension benefits from one job to another Government • Can receive a percentage of social security by age 62, but the individual can receive full benefits at either

age 65 or 67. • A person can receive social security benefits if their spouse dies. • Disability is considered a social security benefit. • Medicare is also considered a social security benefit • Railroad pensions • Military pensions • Civil service pensions Unemployment • Social Security Act provides for joint federal and state unemployment system

• Federal Unemployment Tax Act (FUTA) • State Unemployment Tax Act (SUTA)

Wills • Will - Document drawn up and signed by persons during their lifetime to provide for distribution of their property

upon their death • Decedent - Deceased person • Heirs - Persons who inherit by right of relationship • A man who makes a will is called a testator, a woman is called a testatrix • The testator/testatrix must have capacity to create a will

Intestacy

• A person who dies without making a will is said to have died intestate.

• The estate is handled in the same way as if there was a will.

• Instead of an executor/executrix, there is an administrator/ administratrive to look after the estate Trust • Trust: transfer of property from one party to another with instructions on how it is to be managed for the benefit

of the transferor or a third party • Trusts may be created during the lifetime of the settlor (creator), known as inter vivos trust • Trusts may also be created after the death of the settlor in correspondence with his or her will, known as a

testamentary trust • A charitable trust is created for the fulfillment of humane purposes • A private trust is created for a private purpose

• What is a sale?

•

▫ A contract by which ownership of goods is transferred by the seller to the buyer for a consideration called price

*Sales Contract must have all required elements.

•

▫ tangible (touchable) personal property that can be physically weighed, measured, and moved

•

▫ the purchaser or vendee

• Services are not covered in law of sales

• Is the seller a merchant or casual seller?

• Seller (Vendor)

▫

a seller who deals regularly in a particular type of goods or who claims special knowledge in a certain type of sales transaction

Why is a merchant held to a higher standard of accountability than a casual seller?

▫ Casual Seller

any seller who does not meet the definition of a merchant

• Price

• Consideration in sales contract.

9.01 Sales contracts, ETC

COD-Collect on Delivery • Goods are shipped to buyer • Carrier is the transportation company • Carrier transmits the funds to the seller • When price is paid at delivery:

▫ Risk transfers to new owner ▫ Ownership transfers to new owner

• Until goods are delivered and price is paid, no transfer of risk or ownership. • Sales on Credit-Consumer • A sale that by agreement of the parties, calls for payment of the goods at a later date.

Sales on Credit – Commercial / Business • A business uses trade accounts to buy goods from another business with an agreement to pay for them at a later

date the statement of a due date of payment and any allowable discounts or late fees charged

• ▫ the time the payment is due to the invoicing company

• ▫ a % reduction on the invoice price if the bill is paid within a specified time

• ▫ when 100% of an invoice is due, no discounting allowed

• ▫ a % add on to the invoice price if not paid on time

•

Discounts

• Purchaser may take a 2% discount on the cost of invoice if paid within 10 days, • Purchaser will pay net (full 100% of invoice), if paying after 10 days but before 30 days • Example: Invoice billed on July 1st for $1,000 with terms 2/10, n30. If paid by July

10, buyer can take discount of $20 (2% x 1000), and pay $980. If bill is paid July 11 - July 31 amount will be net or $1000.

• Late Fees • Frequently vendors state a separate amount of interest due on accounts that are past due. • Example: “1.5 % per month on all unpaid past due accounts” • Consignment Sales • Goods are sent by a manufacturer to a retailer • Retailer generally does not make payment for the goods unless goods are sold to consumer. • If goods do not sell, retailer has right to return unsold goods to manufacturer. • Sale or Return • A completed sale in which the merchant-buyer has the option of returning the goods. • The merchant-buyer gains ownership and risk of loss upon delivery. • If goods are returned within the agreed upon time, or a reasonable time, ownership and

risk return to seller. • Sale on Approval • A sale in which goods are delivered to the buyer in an “on trial” or “on satisfaction” basis. • Ownership and risk of A public sale to the highest bidder. • Risk of loss passes when auctioneer gives buyer right to possess .

Bulk Transfer • A transfer, generally by sale, of all or a major part of the goods of a business

in one unit at one time. • To protect creditors, requires merchants to give creditors written notice of

bulk transfers so the merchant cannot sell all inventory and leave without payment to creditors.

• Transfer of Ownership • People who own goods have title to the goods. Title is the right of ownership

of goods . Can a voidable title be transferred? • When goods can be returned and the money paid for them is refunded.

Minors have voidable titles. Victims of fraud who purchase goods have voidable titles.

• Identified goods

▫ goods that have been specifically designated as the subject matter of a particular sales contract

▫ Once goods are identified, title passes to buyer when seller meets contract requirements.

Seller transfers goods to a carrier for delivery to buyer. ▫ Title and risk of loss pass to buyer when seller turns over goods to

carrier. ▫ Seller has no responsibility once goods reach carrier. ▫ Invoice designation is f.o.b. (free on board) shipping point. This means

the buyer is responsible for freight cost (and risk) once seller delivers goods to carrier or to the shipping point.

▫ Contract requires seller to deliver goods to a specific destination. ▫ Title and risk of loss retained by seller until delivered to the destination

point. ▫ Invoice designation is f.o.b. (free on board) destination. This means

the seller is responsible for goods until they have been delivered.

Warranties and Guarantees • Implied warranty – A guarantee of quality imposed by law but not in writing

▫ Implied warranty deals with sale of goods

▫ Regulated by UCC

▫ Given by all sellers Sale of stolen goods • If stolen goods are sold to an innocent purchaser, the true owner is entitled to return of the goods

• The buyer can pursue remedy against the seller for breach of warranty of title

Usage of Trade

An implied warranty that is a well established custom or practice among people in specific trades or businesses

Express Warranty

• Guaranteed satisfaction or your money back”

• “Lifetime guarantee”

• The promise or assurance of the quality or life of a product

Limited Warranty

• A limited warranty provides a restricted guarantee.

• Must state “Limited” Warranty

• Be sure to read and understand the limits of the warranty before purchasing…caveat emptor!

Caveat Warranty

• Latin for “Seller Beware”

▫ Warning: It is the duty of the seller to make informed decisions.

Contd.

Lemon Law • To protect consumers against chronically defective or “LEMON” products

• Commonly relates to vehicles, but can be other products

• Can be either federal or state law

• Buyer can get replacement of part or reimbursement of purchase price

Magnuson-Moss Act (1975) • Expands the FTC ‘s authority over written warranties

• Regulates the advertisement of warranties and enforces guidelines

• Requires written warranties to be in clear and understandable language

Breach Warranty • Requirements:

▫ Buyer should give notification to seller

within a reasonable time

▫ Seller may refund $ or make restitution or offer to replace defective goods

▫ Buyer may claim damages

Sales Regulation • Uniform Sales Act of 1906

▫ Revised to become the current Uniform Commercial Code

• Uniform Commercial Code (UCC) 1952

▫ Article 2 regulates sales

▫ Article 3 regulates negotiable Instruments

• PURPOSE Combine laws of trade from all states

Simplify, clarify and modernize laws

Expand and encourage commerce across state lines

Enable consumers to apply a uniform sales law when they travel across state lines** except Louisiana

• Applies to :

▫ Sale of goods valued over $500

• Requires:

▫ Contract be in writing

▫ Contract meet all requirements of writing ▫ Article 2, Section 8, [3]

▫ Federal government derives its power to regulate business from the Commerce Clause ▫ Congress has the power to regulate commerce “among the several states”

▫ Federal government regulates any business that affects “interstate commerce”

▫ - ICC –FTC –US POSTAL –ANTITRUST AND MORE !

CONSUMER PROTECTION

• Purpose: ▫ To assist consumers in judging the quality of a product and its

advantages or disadvantages, and ▫ To create an equal field with the sellers in an affluent and

technology oriented marketplace • Legislation passed at local, state and federal levels. • Federal Trade Act is a broad consumer law enforced by the Federal

Trade Commission (FTC). • Unfair and Deceptive Trade Practices is any practice that misleads

(or has the potential to mislead) a consumer.

Real Property

▫ Buildings, structures, fixtures ▫ Water, water rights ▫ Minerals on and below the surface of the earth. ▫ Trees & crops ▫ Air space above the surface

• Personal Property • :

▫ Clothing, jewelry, furniture, appliances in a home ▫ Automobiles, ATVs, lawnmowers ▫ Equipment & machinery used in business ▫ Copyrights, patents, trademarks ▫ Software, stocks, loans, mutual funds

• . • May be tangible or intangible. • Rights of Ownership • Possess, use and enjoy the property • Dispose of, sell, consume, modify, insure or destroy the property • Give the property away by will after death • Lease the property to a tenant • Intellectual Property • Includes copyrights, patents, trademarks and trade secrets • . • Examples: literature, computer software, musical scores and lyrics, choreography, dramatic works, unique product or

process, symbols or word that identify a product, commercially valuable information that is kept secret

9.02 Ownership

DEEDS Types of Deeds

▫ Transfers a seller’s interest in a property but doesn’t warrant that the seller owns any interest

▫ Warrants the title

▫ Most desirable for the buyer

▫ Require odometer reading disclosure statements

▫ Require damage disclosure statements

Limits on Use of Property

• Police powers by government

• Nuisance ordinances enacted by cities

• Zoning ordinances enacted by cities to regulate

• Health and public safety issues

• Certain physical rights

Physical rights apply to:

▫ Surface (the right to occupy the land, and develop it with buildings, etc.)

▫ Subterranean Minerals or Water (rights to remove or conserve)

▫ Air (right extends into upper atmosphere-but cannot exclude aircraft from flying over property)

Eminent Domain Right to make private property into public if it is for the public

good. When highways are widened, private property is taken by

eminent domain. Owners are paid the fair market value of the property, but they

cannot refuse to release property.

Bailment • An agreement created by the temporary delivery of personal property by the owner to someone who is not

the owner for a specific purpose.

• Both parties agree that the property will be returned to the bailor.

▫ has in their temporary possession property that belongs to someone else.

▫ owner of property who gives up possession to someone else temporarily.

Mutual Benefits Bailments • Invokes the duty of ordinary care on the bailee

• Results from a contract (for service, repair, storage, rental) with consideration exchanged

• Both bailor and bailee receive benefit

• A pledge as security for a loan is also a mutual benefit bailment

• Most bailments are mutual benefit

• Bailment by Necessity

• Implied by law, a customer must give up possession of property.

▫ Example: When you rent skates and leave your own shoes while you skate

▫ Example: When you leave your clothes temporarily in the dressing room while you try on a new outfit

What is a tortious bailee? A party who wrongfully retains lost property or stolen property A party who wrongfully uses a bailed article for a purpose other than that agreed upon by the parties

Renting and Leasing RELATIONSHIP BETWEEN LANDLORDS AND TENANTS

• Parties to the contract to lease or rent

▫ Lessor/Landlord

▫ Lessee/Tenant

▫ Wants possession and occupancy free from interference or annoyance

▫ Wants rent money and property in good condition at the end of rental term

• Rights and Duties: Covenants of the Contract

• Covenant = Promise

Tenants have a right to:

▫ expect the undisturbed possession of the property called quiet enjoyment.

▫ expect exclusive use of the property free from interference or annoyances.

• State laws vary and the landlord may or may not have the right to enter the premise without prior notice.

▫ Add covenant to lease to address entry issue

• Implied Covenants

• Implied warranty of habitability by landlord

▫ May be enforced by city housing codes

▫ Health and safety of citizens is considered

▫ Duty of landlord to provide property free of defective conditions

•

▫ The landlord expects reasonable wear and tear by tenant, but unreasonable damage is called waste and tenant can be required to pay the cost to repair waste.

Bibliography:

• Business Law Textbook • Quia • Online Goal Notes