1. "EqualDignity Rule"

Indicates that if the law requires a written contract, the Agent's authority from the principal must be in writing to bevalid, except for officer acting for corporation or agent acting in the presence of the principal

2. 2 Elements ofConsideration

Legally Sufficient Value: doing or giving up something that the party has no obligation to doBargained-for-Exchange: The thing of value must be given in exchange for the return promise. This elementdistinguishes a gift from a K

3. A Bell Medical Education Service enters into a contract to employ Chris as an instructor for two years to begin May 1. Onemonth before the term begins, Bell is underbid by a competitor and loses a major client, Delta Hospital Center. Bell nowrefuses to hire Chris. Bell's failure to hire Chris is a. a material breach.b. a minor breach.c. Chris's breach.d. no breach.

4. A Bell Medical Education Service enters into a contract to employ Chris as an instructor for two years to begin May 1. Onemonth before the term begins, Bell is underbid by a competitor and loses a major client, Delta Hospital Center. Bell nowrefuses to hire Chris. With respect to Chris's obligations, Bell's repudiation most likely a. discharges Chris from the contract.b. has no effect on Chris's obligations.c. increases Chris's obligations under the contract.d. suspends Chris's obligation to perform.

5. A Building Restoration, Inc. ("BRI") enters into a contract to refurbish an old train depot for Casual Dining, Inc. to openas Eat Up! Restaurant. BRI completes all but a minor piece of the work promised in the contract. Casual Dining mostlikely is entitled to a. damages for the uncompleted portion.b. nothing.c. reformation.d. specific performance.

6. A Which of the following is not among the types of contracts that are often said to be contrary to public policy?a. a contract for the sale of live farm animals.b. an exculpatory contract.c. an adhesion contract.d. a contract in restraint of trade.

7. A Hillside Homes, Inc. and Idyll Builders, Inc. enter into a construction contract that includes six pages of detailedcalculations. Later Hillside, whose project manager compiled the figures, discovers that some numbers were multipliedincorrectly—a significant, material mistake. Idyll refuses to make changes. A court would most likely

8. A Rally offers to sell Sophie, who is seventeen years of age, a car about which Rally intentionally misrepresents severalmaterial facts. In reliance on the misrepresentation, Sophie buys the car. To prove fraud in this transaction, Sophiewould have to show thata. Rally intentionally deceived Sophie.b. Rally made statements that were obviously exaggerated.c. Sophie does not know anything about cars.d. Sophie is under eighteen years of age

9. A Building Restoration, Inc. ("BRI"), enters into a contract to refurbish an old train depot for Casual Dining, Inc., to openat Eat Up! Restaurant. BRI completes most of the work promised in the contract. If Casual Dining can easily hireanother contractor to complete the work, it is entitled toa. damages.b. nothing.c. reformation.d. specific performance

10. A One of the key advantages of the corporate form of business is: a. the limited liability of shareholders.b. the unlimited liability of shareholders.c. the "double taxation" of the corporate form.d. that no formalities are required to create a corporation

Business LawStudy online at quizlet.com/_72c73

11. A Blue sky laws: a. are state laws regulating intrastate sales of securities.b. are federal laws regulating mutual funds.c. are municipal ordinances outlawing commercial activity on Sundays.d. are interstate laws governing non-securities sales

12. A Build-It-Rite Corporation is a public company that is preparing to issue securities that do not qualify for an exemption fromregistration. This means that Build-It-Rite must:a. file a registration statement with the SEC.b. issue the securities through an online registration site.c. register the securities with a national stock exchange.d. none of the above.

13. A Lilly is a shareholder in Matchless Corporation with preemptive rights. With respect to these rights, Lilly can:a. buy a prorated share of a new issue of stock before other buyers.b. put her shares for purchase by a buyer.c. "preempt" managerial decisions that affect shareholders.d. sell a prorated share of new issue of stock before other sellers

14. A Luke is a director of Motor Parts Corporation. Luke makes decisions with respect to Motor Parts in good faith, in what he believes isthe firm's best interest, and without violating any duties owed to it. If, despite these circumstances, Luke makes a business decisionthat has a negative result for Motor Parts, under the business judgment rule he is:a. immune from liability.b. liable only to the extent that he gained as a result.c. liable only to the extent that Motor Parts suffers as a result.d. wholly liable.

15. A "Piercing the corporate veil" occurs when a court:a. disregards the corporate entity and holds the shareholders personally liable.b. disregards the corporate entity and holds corporate creditors personally liable.c. imposes liability on an alleged corporation as if it were an actual corporation.d. decides that a corporation has de facto status and not de jure status

16. A Brett and Courtney form Delite Day Care, Inc. Ultimate responsibility for policy decisions necessary to the management of corporateaffairs rests with:a. its board of directors.b. its incorporators.c. its officers.d. its shareholders

17. A A key advantage of the LLC is that:a. the liability of members is limited to the amount of their investments.b. the entity is treated as a partnership for liability purposes.c. there are no formalities associated with creating an LLC.d. state statutes limit the flexibility of LLCs.

18. A Home Delivery Corporation and Interstate Transport, Inc. signed an agreement that provides for the payment of "$1,000 by whateverparty commits a material breach of the contract that creates damages difficult to estimate but approximately $1,000." This isa. a liquidated damages clause.b. a mitigation of damages clause.c. a no-damages clause.d. a penalty clause

19. a. A bilateral contract involves theexchange of promises. If all of the otherrequirements for a valid contract aremet, both parties will be obligated toperform their respective promises

A bilateral contract is one in which:a. two promises are exchanged.b. a promise is given in return for an act.c. a third party guarantees the promise of one of the parties.d. a unilateral contract accomplishes an exchange of promises

20. a. Of this list, the insurance company ismost likely to qualify as an accreditedinvestor or "sophisticated" investor.

Which of the following is most likely to be an accredited investor?a. an insurance companyb. an hourly wage shipyard workerc. a family farmer with a small 40 acre farm in rural Georgiad. a recent college graduate from a working class family and with moderate economicmeans

21. a. Sam withdrew or revoked the offerprior to Rhonda accepting Sam's offer

Sam offers to Rhonda Sam's collection of rare books. Before Rhonda even has a chance toaccept Sam's offer, Sam says, "Sorry, I changed my mind, no deal." This is an example of:a. a revocation.b. a rejection.c. a counteroffer.d. a restitution.

22. Affects of Assignments 1. Unconditional assignment -The party making the assignment ("assignor")relinquishes all rights to the person receiving the assignment (the "assignee"), with theassignee having the ability to demand action from the other original party ("obligor"); Theassignee however only has the contractual rights that the assignor had2. Unassignable rights - Certain rights are unassignable: (1) prohibited by contract(subject to exceptions); (2) against statutory law or public policy; (3) materially increaseor alter the risk or duties of the obligor unless agreed; and (4) personal in nature (unlessall that remains is a money payment)

23. Affects of Delegation The transferring party ("delegator") remains liable to the other party if the party to whomthe duty has been delegated ("delegatee") fails to perform the contract obligation

24. Agency A "fiduciary" relationship between a principal and agent, which relationship is based ontrust and confidence

25. Agency Principal The recipient (i.e. the person for whom an agent is acting)

26. Agent for Agency The actor (i.e. the person who is acting on behalf of the principal)

27. Agreement Offer and Acceptance

28. Alternative Dispute Resolution ("ADR") The resolution of disputes in ways other than those involved in the traditional judicialprocess such as the court process and proceedings

29. At Will Employment Employment relationship in which either party can break the relationship withoutliability, provided that there is no express contractual provisions providing otherwise andwhere the employee is not a part of a collective bargaining arrangement (i.e. union)

30. B Riley, an engineer for Shred-Gro Corporation, learns that Shred-Gro has developed a cornhybrid to triple the output of any farm. Riley buys 20,000 shares of Shred-Gro stock. Hetells Tess, who buys 15,000 shares. After the new hybrid is announced publicly, the priceof Shred-Gro stock increases. Riley and Tess sell their shares for a profit. Under theSecurities Exchange Act of 1934, liability may be imposed on:a. Riley only.b. Riley and Tess.c. Riley, Shred-Gro, and Tess.d. none of these parties.

31. B Dependable Appliances, Inc., is a private, for-profit corporation that (a) was formed for the purpose of manufacturing and distributinga newly patented kitchen appliance for a profit; (b) is owned by five shareholders; (c) is subject to double taxation; and (d) has madeno public offering of its shares. Dependable is:a. an S corporation.b. a close corporation.c. a nonprofit corporation.d. a professional corporation

32. B Chip is a director of Diners Restaurants, Inc. Chip would breach his duty of loyalty if he:a. becomes a director of Fluffy Mattresses, Inc., a noncompeting firm.b. buys a controlling interest in Gulpin Foods Corporation, a competing firm.c. votes for Diners to buy a controlling interest in Eateries, Inc., which causes Diners to suffer loss.d. votes against Dinners' purchase of a controlling interest in Eateries, Inc., which causes Diners to suffer a loss

33. B The duty of loyalty that directors and officers owe to the corporation involves:a. the duty of directors and officers to act in their own best interests.b. the duty of directors and officers to subordinate their personal interests to the welfare of the corporation.c. the duty of directors and officers to use available funds to pay themselves before paying the corporation's debts.d. overseeing the activities of employees during their daily work.

34. B Snow Corporation distributes beverages in the greater Northwest. Snow's board of directors can delegate some of its functions to:a. Snow's incorporators.b. Snow's officers.c. Snow's shareholders.d. Snow's creditors.

35. B Suppose that a corporation formed in Georgia does business in Alabama. In Alabama, that corporation would be referred to as:a. an alien corporation.b. a foreign corporation.c. a certified corporation.d. an ultra virus corporation

36. B Eric holds 1,000 pounds of perishable fruit for Fresh Stuff Corporation which it was suppose to purchase. Fresh Stuff does not pay forthe fruit. Eric sells the fruit to Green Grocers, Inc. This sale representsa. a breach of contract.b. a mitigation of damages.c. rescission and restitution.d. specific performance

37. B Farley and Gregor want to market a new line of fishing gear. To avoid income taxes at the corporate level and anticipate having morethan 150 shareholders, they should form: a. a C corporation.b. an LLC.c. an S corporation.d. none of the above.

38. B A definition of the term contractual capacity would be:a. the ability to enter into a void contract.b. the legal ability to enter into a contractual relationship.c. the ability to physically write a contract.d. none of the above.

39. B A contract for a sale of an apartment complex from Unique Properties, Inc. to Variety Investments Corporation contains an erroneouslegal description, which neither party noticed. Both parties desire to continue with the contract. The most appropriate remedy for theseparties isa. damages.b. reformation.c. rescission.d. specific performance

40. B Riley and Shelia enter into a written contract for the sale of Riley's condominium to Sheila. Sheila transfers her right to be recorded asthe owner of the property to her daughter Tricia. This transfer isa. a delegation.b. an assignment.c. a rescission.d. a negotiation

41. B Gina induces Hu to enter into a contract for the purchase of a condominium about which Gina knowingly misrepresents a number ofmaterial features. When Hu discovers the truth, Hu cana. not rescind the contract.b. rescind the contract on the basis of fraud.c. rescind the contract on the basis of mistake.d. rescind the contract on the basis of undue influence

42. B Rory threatens physical harm to force Susan to sell her business, Toney Tours, Inc., to Rory for a below-market price. This isa. a legitimate business tactic.b. duress.c. fraud.d. undue influence.

43. B Jill and Karl contract for the sale of Jill's horse for $1,000. Unknown to either party, the horse has died. Karl isa. entitled to another horse of equivalent value.b. not required to pay due to the mutual mistake.c. not required to pay due to the unilateral mistake.d. required to pay because he assumed the risk the horse might die

44. B Carol pays Dick $10,000 to design an ad campaign for Carol's Coffee Stand chain. The next day, Dick tells Carol that he has accepteda job in New York and cannot design her campaign. Carol files a suit against Dick. Carol can hire another campaign designer for thesame price without incurring any incidental expenses. As compensatory damages, Carol can recovera. $100,000.b. $10,000.c. $1,000.d. $0.

45. B Elle, a minor acting on her own without her guardian, signs a contract to buy a car. Later, after taking possession of the car, Elledisaffirms the contract. Shea. can keep the car.b. must return the car.c. can sell the car to her twenty-one year old brother.d. none of the above.

46. b. Corporation A defends against a breach-of-contract suit by Company B claiming that the deal for the sale of assets was unfair becausethe consideration for their contract was inadequate.If, as Corporation A claims, the consideration in this problem is inadequate, it may indicate a lack ofa. accord in Corporation A's satisfaction with the value of the deal.b. bargained-for-exchange.c. flexibility on the part of Company B.d. "substance" or "weight" in the terms of the contract

47. b. Sal contracts with Tasty Pizza Company to deliver its products. Later, both parties change their minds and mutually agree to terminatethe contract. After mutually terminating the contract, the next day, Sal again offers to deliver Tasty's products. Tasty is willing to dealwith Sal, but at a new price. Sal and Tastya. can agree to a new contract, but it cannot include a new price.b. can agree to a new contract that includes a new price.c. must perform their original contract.d. Must perform the part of their original contract that is executory.

48. b. A Taco Bell, Chick-fil-a, Burger King, and McDonald's areexamples of a chain-style business operation

A local Taco Bell restaurant is an example of which kind offranchise: a. a manufacturing arrangement franchise.b. a chain-style business operation.c. a distribution franchise.d. a processing-plant arrangement

49. b. Consideration is something of value that a person gives inexchange for a promise of some sort

Consideration may be defined as:a. a socially approved way to provide for the poor.b. something of value given in exchange for a promise.c. an arrangement for transferring and allocating risk.d. a way to promote healthy living

50. b. Contract law gives parties a way to enforce many of thepromises that are made to them

One of the main purposes of contract law is:a. to ensure that one party does not threaten another.b. to ensure that certain types of promises made among privateparties are enforceable.c. to discourage harms against society.d. To discourage misuse of the environment.

51. b. Despite their drinking, boasting, and bragging, the partiescreated a valid contract, which had to be performed. Theparty seeking to void the contract would have to prove thathe/she lacked the mental capacity to comprehend the legalconsequences

The case of Lucy v. Zehmer involves an offer to sell propertyduring an evening of drinking. If the decision turns on theelement of legal contractual capacity, the court mostly likely willhold that:a. because the parties were drinking, there was no valid contract.b. despite the fact that the parties were drinking, there was avalid contract.c. there was no clear acceptance of the contract terms.d. the parties failed to clarify the essential terms of the contractdue to excessive drinking.

52. b. Even though one partner may have contributed moremoney to the partnership than the other, Larsen and Kylehave equal management rights unless they agree otherwise.

Assume that Kyle and Larsen have a general partnership for adog grooming business and did not agree to any specialmanagement rights. In this situation, what rights does eachhave regarding the management of the dog grooming business? a. One partner must be the superior in rights.b. They have equal management rights.c. One partner must conduct the partnership business, while theother provides the capital.d. The partner who put in more money has a bigger voice inmanagement.

53. b. In an operating agreement, the members of the LLC candecide and document how to operate the various aspects ofthe business

In an LLC, the members themselves can decide how to operatethe various aspects of the business by forming: a. nothing.b. an operating agreement.c. the articles of incorporation.d. articles of dissolution.

54. b. Jackson's bankruptcy will cause him to be dissociatedfrom the partnership. He did not withdraw, and thepartnership is not terminated because the other partnersdesire to continue the partnership

After Ross, Jones, and Jackson have been partners for threeyears, Jackson declares bankruptcy. What will happen to thepartnership as a result if Jones and Ross determine to continuethe partnership and the partnership agreement contains aprovision allowing such?a. Nothing. The partnership will continue as always.b. Jackson will be dissociated from the partnership.c. The partnership will terminate due to the bankruptcy.d. The partnership will terminate due to withdrawal of Jackson

55. b. Partners must act consistently with theobligations of good faith and fair dealing.

A partner's fiduciary duty includes which of the following? a. Undue care.b. Duties of loyalty and care.c. Proximate cause.d. That the partner always has to assume a management role.

56. b. Proxy statement because a registration does notneed to contain a proxy statement

The 1933 Securities Act requires that organizations with nonexemptsecurities or transactions must file a registration statement with the SECprior to issuing securities. Which of the following items must the statementcontain?a. a marketing plan for the organizationb. a financial statement certified by an independent public accounting firmc. a tombstone add. a proxy statement applicable for all new shareholders

57. b. Section 10(b) of the 34 Act and SEC Rule 10b-5prohibits insider trading of securities.

One of the major goals of Section 10(b) of the 34 Act and SEC Rule 10b-5is:a. to promote blue sky laws.b. to prevent insider trading.c. to prohibit underwriting.d. to ensure that proxies be used when voting for directors.

58. b. The limited partnership must file a certificate oflimited partnership with a designated state official

In order for a limited partnership to be legally valid, it must? a. File articles of organization.b. File a certificate of limited partnership.c. File amended articles of partnership.d. File a certificate of incorporation.

59. b. The SEC does not issue government bonds; theU.S. Treasury Department makes such issuances

Which of the following is not one of the major responsibilities of the SEC:a. investigating potential insider trading volations.b. issuing government bonds.c. regulating trade in securities.d. investigating securities fraud

60. b. This statement is not a valid offer because theterms of the statement from Yvonne to Zach are notdefinite, and one of the three elements for an offer isdefinitiveness of terms.

Yvonne asks Zach, "Do you want to buy one of my fishing rods?" This isa. a valid offer.b. not a valid offer because the terms are not definite.c. not a valid offer because Yvonne did not state an intent.d. not a valid offer because Zach did not respond.

61. b. You have contractual capacity if you are legallyable to enter into a contractual relationship

A definition of the term contractual capacity is:a. the ability to enter into a void contract.b. the ability to enter into a contractual relationship.c. the ability to mitigate contractual damages.d. the ability to physically with one's hand write a contract.

62. Bilateral Contract A promise for a promise, K formed when the offeree makes responsepromise, Most K's are bilateral

63. Business Judgment Rule ("BJR") The principle pursuant to which a director or officer is immunized fromliability from consequences of a business decision that turns negative aslong as the decision was reasonable, informed, made in good faith, and inthe best interest of the corporation.*The courts do not require directors and officers to manager "in hindsight,"so in determining BJR protection courts look at the circumstances at thetime of the decision.

64. C The best definition of a quorum is which of the following: a. a quorum is 51 percent of all shareholders.b. a quorum is 66 percent of all directors.c. a quorum is the minimum number of members of a decision-making body that must be present before business may be transacted.d. a quorum is the number of voters who must agree to a revision before corporate bylaws may be changed or otherwise amended

65. C Flux Corporation is a publicly traded company whose shares are traded in the public securities markets. Under the Sarbanes-Oxley Actof 2002, Flux is subject to the direct corporate governance requirements of:a. any other public company with which Flux exchanges shares.b. any state in which Flux does business.c. the federal government.d. the state in which Flux is incorporated

66. C Clay contracts with Discount City Store to buy an MP3 player for $200 and a pair of stereo speakers for $600 from Discount City Store.Clay also downloads $300 worth of digital music from E-music.com. To be an enforceable contract, the contract that must be inwriting is the purchase ofa. the digital music, the MP3 player, and the speakers.b. the digital music and the speakers only.c. the speakers only.d. none of these items.

67. C The simplest form of business is:a. a partnership.b. a joint venture.c. a sole proprietorship.d. a corporation.

68. C Rusty and Sylvia are shareholders of Tri Hotel Corporation. Tri's directors fail to declare a dividend. Rusty and Sylvia could succeed inasking a court to order the directors to meet and declare a dividend:a. if Tri has sufficient earnings available to pay a dividend.b. if Tri has cash reserves even if earmarked for a different purpose.c. if withholding a dividend is an abuse of the directors' discretion.d. under no circumstances

69. C Generally, the liability of shareholders is:a. unlimited.b. just like that of partners.c. limited to their investment in the stock of the corporation.d. limited to a maximum of $50,000

70. C Rural Utility, Inc. enters into a contract with Shovel Excavation Service to dig up, replace, and rebury Rural's cables in a certainlocation. Rural advances Shovel 10% of its cost. If the parties rescind the contract, Shovel's refund of the payment would bea. a penalty.b. liquidated damages.c. restitution.d. specific performance

71. C Development Associates ("DA") agrees to buy five acres of land from Eastside Properties for $15,000. Eastside fails to go through withthe deal on the agreed date, when the market price of the land is $17,000. If DA cannot recover the land, DA may recover in damagesin the amount of a. $17,000.b. $15,000.c. $2,000.d. $12,000

72. C The bylaws of Retail Sales, Inc.:a. establish the operating name of the corporation.b. establish the value and classes of the corporation stock.c. are adopted at the first organizational meeting or its equivalent written consent.d. are submitted for approval to the public official in charge.

73. C Dora, an accountant, uses undue influence to induce her client, Emily, to invest in Fiery Stocks, Ltd., a business withlittle potential. When Emily learns the truth, she cana. do nothing as she has no defenses.b. enforce the contract but not rescind it.c. enforce the contract or rescind it.d. rescind the contract but not enforce it

74. C Cotton Products Corporation is a publicly traded company whose shares are traded in the public securities markets.The Securities Act of 1933 requires Cotton Products to disclose financial and other significant information concerningits securities in order to:a. increase corporate accountability by imposing responsibility on chief corporate executives.b. prevent insiders from trading among themselves.c. protect investors.d. provide a "safe harbor" for companies that make forward-looking statements

75. C Coast-to-Coast Distribution, Inc. is a direct-mail distribution company. Like most corporations, Coast-to-Coast'semployees include its:a. board of directors.b. incorporators.c. officers.d. shareholders.

76. C Lexy, a salesperson for Fine Corporation, learns that Fine Corporation will increase the dividend that it pays toshareholders. Lexy buys 10,000 shares of Fine Corporation stock. When the price of Fine Corporation's stockincreases due to the increased dividend payment announcement, Lexy sells her Fine Corporation shares for a profit.Lexy would not be liable for insider trading if the information about the dividend was:a. material when she sold the stock.b. public after she bought the stock.c. public before she bought the stock.d. speculative when she bought the stock.

77. C When a corporation suffers a wrong and the corporate directors fail to take action to redress that wrong, one effectiveand appropriate way to obtain redress is through:a. the issuance of preemptive rights.b. the use of stock warrants.c. a shareholder's derivative suit.d. shareholders voting in new officers

78. C Articles of incorporation contain: a. a set of governing rules adopted by a corporation.b. resolutions of the board of directors.c. information about the corporation, including its purpose, organization, and functions.d. the minutes of meetings of the board of directors

79. C Corporation("C-Corp")(FormationandRestrictions)

Formed in compliance with applicable state's statutory requirements, by filing an official document with the applicablestate unit.•The traditional state unit is the Secretary of State.•A legal "person" under state and federal law with rights, as with individual, to due process, equal protection, freespeech, access to courts, and freedom from unreasonable search and seizure. However, has no 5th amendment right toremain silent.*Governing Document: Certificate/Articles of Incorporation, Bylaws, and Shareholders Agreement (if shareholdersand corporation enter into such).

80. C Corporation("C-Corp")(OwnershipReqs)

•Name must include "Corporation," "Company," "Incorporated," "Limited," an abbreviation thereof, or anotherpermitted.•Legal entity separate and distinct from its owners.•Has one or more shareholders, but no restriction on the type of shareholders.•Has no restriction on the type of owners.

81. C Corporation("C-Corp")(Profits)

Distributions must be proportionate to stock ownership

82. c. Not a valid offer because Mary does not seriouslyintend to sell and one of the three elements of an offer iscurrent intent to make an offer which is based on a"reasonable person" standard

Mary tries to start her car with no success. She yells that she will sellthe car to anyone for $10. Nick, a passerby who owns Nick's Pre-owned Autos, hands Mary $10. This isa. a valid acceptance because Mary is seriously frustrated.b. a valid acceptance because Nick is a car dealer.c. not a valid offer because Mary does not seriously intend to sell.d. not a valid acceptance because Nick is a car dealer

83. c. Paul rejected the original offer from NuCell and made acounteroffer because he rejects the original offer andmakes a new offer

NuCell Phone Company offers to buy a laser printer, with a case ofpaper and an extra cartridge, for $200 from Office Products, Inc.("OPI"). Paul, OPI's representative says, "Okay, but no paper and noextra cartridge." Paul hasa. accepted the offer.b. made a counteroffer without rejecting the offer.c. rejected the offer and made a counteroffer.d. rejected the offer without making a counter offer

84. c. QT is not liable because the sale to Speedy for whichRapid has notice prior to Rapid's acceptance of the QToffer revokes the offer to Rapid

QT Transport, Inc. offers to sell a truckload of palettes to RapidDelivery Company. Before accepting the offer, Rapid learns that thepalettes have been sold to Speedy Trucking Corporation. QT isa. Liable to Rapid for breach of contract.b. Liable to Speedy for breach of contract.c. Not liable because the sale revoked the offer to Rapid.d. Not liable if QT offers substitute goods to Rapid

85. c. The 1933 Act focuses on reporting requirements. The Securities Act of 1933 was designed to do which of the following:a. regulate the operations of national stock exchanges.b. oversee and regulate the work of national securities associations.c. prohibit various forms of fraud and stabilize the securities industryby requiring disclosure of all relevant information concerning theissuance of securities to the public.d. promote the effective, efficient, and nonfraudulent use of proxies byshareholders.

86. c. The franchisee typically controls the day-to-dayoperations of a franchise

Who typically controls the day-to-day operations of a franchise? a. The management of the franchisor.b. The employees of the franchisor.c. The franchisee.d. The shareholders of the franchisor

87. c. This statement is a statement of future intent and thusnot an offer. Because intent has to be current

Nate tells Opal, "I might sell the skis that I bought last fall since Ihaven't used them and the skiing season is almost over." This isa. an acceptance of an offer.b. an offer.c. not an offer.d. a firm offer

88. c. To be valid, an agreement must include an offer andacceptance

An agreement to form a contract must include:a. a fair bargainb. a fair pricec. an offer and an acceptance.d. a physical sample of the good for sale

89. Communication of offer to offeree (element of a contract) The offer must be communicated to the offeree, which communicationgives the offeree the power to transfer the offer to a binding, legalobligation with acceptance

90. Compensatory Damages To cover direct losses and costs to the nonbreaching party,compensating the nonbreaching party for loss of thebargain/agreement. Damages actually occurred and proved to arisedirectly from the breach of K. REMEMBER Privity of K

91. Conditions ofPerformance

A qualification, provision, or clause in a K, the occurrence or nonoccurrence of which creates, suspends, orterminates the obligations of the contracting parties

92. ConditionsPrecedent

In contrast to an absolute promise, the condition in a K that must be met before a party's promise of performancebecomes absolute. If the condition(s) precedent is not met or does not occur, the parties are discharged. With anabsolute promise, nonperformance results in a breach of contract by the nonperforming party

93. Consequential (orSpecial) Damages

To cover indirect and foreseeable losses, caused by special circumstances that does not directly or immediatelyresult from the breach, such as lost profits

94. Consideration Legally sufficient and bargained-for value received or promised to entice the offeree to make the arrangement

95. ConstructiveDischarge

A termination of employment that occurs by making the EE's working conditions so intolerable that the EEreasonably feels compelled to quit

96. Contract LawPurposes

1. Represents a reflection of social values, interests, policy, and expectations at a given point in time. (i.e. whatpromises should be upheld and acceptable excuses to society for breaking promises)2. Sets a framework for enforcing the promises that society views should be upheld and allowing for excuses thatsociety views as acceptable3. Provides stability, predictability, and certainty for buyers and sellers and other contracting parties in themarketplace4. Serves as a backup to moral obligations, protecting promises or giving relief

97. ContractsRequiring aWriting (MYLEG)

►Promise made in consideration of marriage►Agreements that cannot by their terms be performed within one year from the date after the date of formation►Agreements for an interest in land►Promise made by an executor of an estate to pay debt personally (or promise to answer the debt of another)(e.g. executor or surety contracts)►Agreements for the sale of goods at $500 (some states $5,000) or more - U.C.C

98. ContractualCapacity

The legal ability to enter into a contractual relationshipReasons not to enter in CC: minors, intoxication, mental incompetency

99. ContractualEmployment

Employment arrangement pursuant to a formal agreement, specifying the terms of such employmentarrangement

100. Control Where the principal authorizes the agent to act (i.e. client - attorney; client - real estate agent) or by status theagent is authorized to act on behalf of the principal (i.e. corporation - CEO); Control over the time, manner, andmethod of executing the work

101. Corporation Types Domestic Corporation - A corporation within its home state (i.e. the state of its incorporation).Foreign Corporation - A corporation in any state outside of the home state.Alien Corporation - A corporation formed outside of the United States but does business in the United States.Public Corporation - A corporation that offers securities (stocks/shares or bonds/loans) for sale to the generalpublic, typically through a stock exchange.Private Corporation - A corporation that does not offer or trade its company's securities to the general public onthrough a stock exchange or over the counter market, but rather the company's securities are offered, owned,and traded or exchanged privately.Close Corporation - A "small" corporation whose shares are held by family or relatively few persons. There is notrading market for shareholders. Shareholders are generally officers and board members.Privately-owned Corporation - A government-owned corporation. Nonprofit Corporation - A corporation that typically uses surplus profits to achieve its mission rather thandistribute them as a dividend or use for shareholder value maximizing purposes. In the U.S., many nonprofitshave the IRS designation 501(c).

102. Current Intentionto make an offer(element of acontract)

Intent is determined by the "reasonable person standard"►Future intent ≠ an offer.►Invitations negotiations (i.e. price lists) and RFPs ≠ an offer.►Preliminary agreement (with all essential and no disputed terms) = offer►Preliminary agreement (open essential terms but agreement to negotiate later) = offer

103. D Roy and Sheila are parties to a contract. They subsequently agree that Tony should take Roy's place and assume all of his rights andduties under the contract. This isa. a consideration.b. a modification.c. an accord and satisfaction.d. a novation.

104. D Brad is a shareholder of Concert Promotion Corporation. As a shareholder, Brad can:a. authorize major corporate policy decisions.b. declare dividends.c. select and remove corporate officers.d. vote to amend the articles if incorporation or bylaws.

105. D Denise, Ervin, and Flem occupy the positions of directors on the board of Gallery Corporation. As directors, they may not:a. authorize major corporate policy decisions.b. decide to issue bonds and declare dividends.c. select and remove corporate officers.d. support businesses that directly compete with Gallery.

106. D Ira orally agrees to buy a unique collection of sports memorabilia for $1,000 from Jane and sends her $250 as a down payment.When Ira sends Jane the rest of the purchase price, Jane refuses to ship Ira the collection. Ira should seeka. damages.b. reformation.c. rescission.d. specific performance

107. D Noni, a seventeen-year-old (in a state were the age of majority is eighteen), signs a contract to sell her car to OK Used Cars. The nextday, Noni tells OK that she's decided not to sell the car. Noni isa. liable to OK and must sell it a car of comparable value.b. liable to OK and must sell it her car.c. liable to OK for the amount of its profit on the deal.d. not liable to OK.

108. D Lena acts as the incorporator for NuGame Corporation. After the first board of directors is chosen, subsequent directors are elected bya majority vote of NuGame's:a. board of directors.b. incorporators.c. officers.d. shareholders

109. D A corporation is a legal entity that is:a. created by the local government.b. created and recognized by an entrepreneurial agency.c. managed internally by the federal government.d. created and recognized by state law in most case

110. D Sal is chairman of the board of Tasty Foods Corporation. Tina, a consumer, falls sick after eating a Tasty product. Tina sues Tasteand Sal, individually. Tasty may pay Sal's legal fees:a. only if Sal wins the suit.b. only if Tasty wins the suit.c. only if Tina wins the suit.d. in most cases regardless of the outcome

111. D Which of the following is a major power held by shareholders: a. the power to appoint corporate officers.b. the power to manage and supervise daily operations of the corporation.c. the power to declare dividends.d. the power to elect the board of directors

112. D Readmore Bookstore Corporation files a registration statement with theSEC and provides a prospectus describing the securities to investors. Theseitems are intended to provide sufficient information so that the financialrisks involved can be evaluated by:a. market professionals to explain to all investors.b. government regulators to disclose to the general public.c. sophisticated investors only.d. unsophisticated investors.

113. D Paul, Prince, and Peter are shareholders in Rite Corporation, each owning20% of Rite's shares. Before a shareholders' meeting, they agree in writingto vote their shares together in a certain manner. Usually, suchagreements are held to be:a. invalid and unenforceable.b. oppressive and irresponsible.c. suspect and voidable.d. valid and enforceable

114. D Quality Contractors contracts to build a warehouse for Retail StorageCompany. Quality completely performs pursuant to the contract. RetailStorage is entitled toa. damages.b. rescission.c. specific performance.d. nothing more.

115. D Building Restoration, Inc. ("BRI") enters into a contract to refurbish anold train depot for Casual Dining, Inc. to open as Eat Up! Restaurant. BRIcompletes all but a minor piece of the work promised in the contract. BRI'sperformance is a. absolute.b. complete.c. material.d. substantial.

116. d. Once an acceptance is dispatched (sent,communicated) in an authorized way, it is effective

The mailbox rule states that:a. an offer is valid only if mailed.b. an acceptance is valid only if mailed.c. an offer is valid once it is deposited in a mailbox.d. an acceptance is effective upon dispatch by an authorized means ofacceptance

117. d. SEC Rule 10b-5 is applicable to virtually all casesconcerning the trading of securities, whether inorganized exchanges, in over-the-counter markets,or in private transactions.

SEC Rule 10b-5 is applicable: a. only when securities are traded in over-the-counter markets.b. only when securities are traded in organized exchanges.c. only to private securities transactions.d. in virtually all cases concerning the trading of securities.

118. d. The court will most likely evaluate the adequacy ofconsideration if there is a gross disparity in thevalue of the consideration exchanged

Corporation A defends against a breach-of-contract suit by Company Bclaiming that the deal for the sale of assets was unfair because theconsideration for their contract was inadequate.A court is most likely to evaluate the adequacy of consideration ifa. a thing exchanged has no intangible value to one of the parties.b. something exchanged is not of direct economic or financial value.c. the items exchanged were of unequal value.d. there is a gross disparity in the value of the consideration exchanged

119. d. These are thecharacteristics of alimited liabilitycompany

The key characteristics of a limited liability company ("LLC") are?a. The tax characteristics of a corporation plus the liability of directors.b. The tax characteristics of a partnership plus the liability of partners.c. The tax characteristics of a corporation plus the liability of a partnership.d. The tax characteristics of a partnership plus the liability of a corporation.

120. Definiteness ofOffer (element of acontract)

The offer must have reasonably definite terms, including the following terms: (1) parties (WHO); (2) object or subject matter of, or work performance for the K (WHAT); (3) consideration (HOW); and (4) time of payment, delivery, or performance (WHEN)

121. Director or OfficerLiability

The director's / officer's failure to meet the duty of care and duty of loyalty obligation subjects it to personalliability

122. Discharge The termination or completion of or release from a contractual obligation

123. Disclosure ofConflicts of Interest

A corporation can enter into a transaction in which a director or officer has a conflict of interest, but theconflicting director or officer must fully disclose the conflict and abstain from voting on the proposed matter

124. Disparate-ImpactDiscrimination

The result to a protected class of persons who are adversely affected by an ER's practices and procedures, eventhough they may not appear to be discriminatory (i.e. unintentional discrimination; discrimination in effect)

125. Disparate-TreatmentDiscrimination

Intentional discrimination by an ER of persons in a protected class

126. Dissociation The occurrence when an owner ceases to be associated in the continuation of the business.

127. Dissolution The formal disbanding of an organization.

128. Double Taxation The taxation of profits at the corporate tax level, then again when shareholders receive dividends

129. Duress ►Use of threats, blackmail, or extortion to force / induce a party to enter into a K.►Duress is both a defense to a K (i.e. allow K to be voidable by the innocent party) and allows rescission of the Kby the innocent party.►The threat to take legal action against someone ordinarily is not duress.

130. Duties of Agents toPrincipals

1. Duty of Loyalty- The obligation to act solely for the benefit of the principal and not in the agent's or a 3rdparty's interest. Confidentiality is part of the duty of loyalty2. Duty of Care- The obligation to exercise good business judgment and to use ordinary care in meeting theagency obligation

131. Duties of Principalto Agent

1. Compensation- Agreed upon in advance in writing to avoid legal disputes2. Reimbursement3. Indemnification- Subject to the terms of the agency agreement, the Principal is obligated to "make whole" theAgent for liabilities incurred because of performing authorized and lawful actions and transactions on behalf ofthe Principal4. Cooperation and Safe Working Conditions

132. Duty of Care The obligation to act in good faith and the best interest of the corporation, which includes: Making aninformed and reasonable decision (i.e. perform due diligence before making a decision); Ifexpertise is needed, engage and rely on competent consultants and experts; and *Exercise reasonablesupervision over officers.**Director Dissent: A dissenting director that has his/her dissent recorded in the minutes/consent is rarely heldliable for breach of duty of care on that applicable action.

133. Duty of Loyalty The obligation to subordinate personal interests to the welfare of the corporation, which includes: Nocompetition with the corporation; No engaging in conflict of interest transactions or matters(unless a majority of the disinterested directors approve the transaction after full disclosure from theinterested director); No insider trading; No taking advantage of corporate opportunities; and *Notransaction that is detrimental to the minority shareholders.**Two prong test: (1) whether the opportunity was reasonably related to the corporation's line ofbusiness and (2) whether the corporation was financially able to undertake the opportunity.

134. Elements for Ratification 1- Agent acts on behalf of principal2- Principal must affirm the the entire deal/ matter (if 3rd party, before the 3rd party withdraws fromdeal/matter)3- Principal and 3rd party must have legal capacity to contract when agent made the deal/matter and theprincipal's legal capacity also must be at ratification4- Principal must know all the material facts in the deal/matter

135. Elements of an Agency Principal, Agent, Mutual consent from the principal that the agent will act on the principal's behalf,Agent is subject to the principal's control, Fiduciary duty - legal relationship of confidence or trust, Legalpurpose and cannot be contrary to public policy (No consideration from the principal to the agent isrequired for an agency relationship; The principal but not the agent needs contractual capacity)

136. Employee vs IndependentContractor

-In an EE, the ER is liable for their actions in the scope of the agency (liable for taxes too like SS,protected under employment laws-IC needs a "work for hire" agreement from ER

137. EmploymentDiscrimination

Treating employees or job applicants unequally based on race, color, national origin, religion, gender,age, or disability

138. Enforceable Contract A valid K that can be enforced because there are no legal defenses

139. Equitable Remedies--Purpose

Exist because damages are an inadequate remedy at law, so to seek justice or prevent unjust enrichment,the nonbreaching party may ask the court for an equitable remedy or seek it through the contractprovisions

140. Exceptions toProhibitions to theAssignment of Contracts

(1) the receipt of money; (2) complete rights in real estate - (reason: against public policy for restraints on alienation); **aprovision for the right of first refusal with respect to real property is permissible. (3) negotiable instruments, including checks and promissory notes (reason: encourage the free flow ofmoney and credit);(4) in a contract for the sale of goods, the right to receive damages for breach of K or payment of anaccount owed.

141. Executed Contract Both parties have fully performed the contract; If one party has fully performed and the other party hasnot fully performed the contact, the completed portion is executed and the uncompleted portion isexecutory

142. Executory Contract Neither party has fully performed the contract

143. Executory, Bilateral,Express Contract(becomes executed afterGloria completes actingand receives the finalpayment)

Identify types of Contract:Producer says to Gloria, "I'll pay you $2 million to star in a my new romantic comedy, A Promise for aPromise, which we are shooting three months from now in Santa Fe." Gloria says, "It's a deal."

144. ExemptSecuritiesand ExemptTransactions(Generally)of SecuritiesRegistration

◘Importance: Enables an issuer to avoid the time, complicated procedures, and high costs associated with registeringsecurities.◘Exempt Securities: Certain types of securities exempt from SEC registration. Example: Government issued securities;bank and financial institution securities, which are regulated by banking authorities; short-term notes and drafts suchas negotiable instruments with a maturity date 9 months or less; securities of nonprofit, education, and charitableorganizations; securities issued by common carriers (railroads and trucking companies); an insurance, endowment, orannuity contract issued by a state-regulated insurance company; securities issued in a corporate reorganization inwhich one security is exchanged for another or in a bankruptcy proceeding; securities issued in stock dividends andstock splits.◘Exempt Transactions: Certain types of securities transaction offerings exempt from SEC registration subject to certainnotifications and other requirements.

145. ExpressContract

K where the terms are stated, whether an oral or written K

146. Features ofFranchise

*Licensor and Licensee Relationship exists.*License Fee: Ordinarily requires the franchise purchaser ("franchisee") to pay a price for the franchise license.*Geographical Restriction: Franchise agreement specifies the territory the franchisee firm can serve.*Supply Purchases: The franchise agreement may require that the franchisee purchase certain supplies from thefranchisor at an established price.*Marketing: The franchise agreement may require that the franchisor's marketing platform applies to the franchisefirm.*Revenues: The franchise agreement may require that the franchisee pays a certain percentage of revenues from thefranchise firm to the franchiser.*Standards: The franchise agreement may require that the franchisee abide by certain quality standards relating to theproduct or service offered.*Termination: The franchise agreement typically covers the duration and termination components, but state and federallaw protects franchisees regarding good faith and fair dealings by the franchiser.

147. Fiduciary The agent must put her own needs second to the principal's interest

148. Flow-through TaxTreatment

The tax treatment for entities where the income "flows through" to the investors/owners (i.e. the income of theorganization is treated as the income of the investors/owners)

149. Form agencyby agreement(actualauthority)

written agreement or oral agreement

150. Form agencyby estoppel(apparentauthority)

By the principal's actions or the environment (i.e. inferred by custom), (1) a third party believes that another person isthe principal's agent and (2) the third party acts to his detriment in reasonable reliance on that belief

151. Form agencyby operationof law(apparentauthority)

The agent acting outside of the scope of his duty because of necessity or emergencies

152. Form agencybyratification(apparentauthority)

Principal by act or agreement, ratifies conduct of a person who at the time of acting was not the principal's agent or didnot have acting authority

153. FormalContract

Requires a special form for creation (i.e. international sales contracts)

154. Franchise Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark,trade name, or copyright, under specified conditions or limitations, in the selling of goods and services

155. GeneralPartnership(Admission)

Admission only by agreement of the then existing partners

156. GeneralPartnership(Dissolution)

The general partnership terminated pursuant to the terms of the agreement, by the death of one or more of thepartners or by the withdrawal of a partner

157. GeneralPartnership(Formation andRestrictions)

•Created by express or implied agreement of the parties ("partners").•Courts usually look for the following essential elements if a dispute on the existence of a partnership: (1) Asharing of profits and losses. (2) A joint ownership of the business. (3) An equal right to be involved in themanagement of the business.*Governing Documents: Partnership Agreement.

158. GeneralPartnership(Liability)

Unlimited liability as the partners jointly and severally liable for the losses of the business no matter when enterthe partnership

159. GeneralPartnership(Management)

•Unless otherwise agreed, the partners have equal management rights.•Decisions that significantly affect the nature of the partnership or that are not for ordinary course of businessrequire unanimous consent (e.g. admission of new partners, amendment of articles of partnership or partnershipagreement, engage in a new business, or undertake an act that would make conduct of the partnershipimpossible).

160. GeneralPartnership(OwnershipReqs.)

•Not a separate entity in most states. The owner is the partners. However, under the Uniform Partnership Act thepartnership is treated as an entity.

161. GeneralPartnership(Profits)

Partners share the profits from the business. The partners share profits based on the Partnership Agreementarrangement and if it silent they share profits equally with losses being shared in the same manner.

162. Goals andProvisions ofSOX

Goals: ◘Make Reporting Company management responsible for financial reporting.◘Provide additional means ofinvestor transparency.◘Increase the internal controls and corporate auditing standards.Provisions:◘Requires CEOs and CFOs to take responsibility for accuracy of financial statements filed with theSEC. ◘Requires independent auditor report except for certain small companies (companies of less than $75million market capitalization).

163. Governance ofFranchises

Governed by contract law, agency law, and federal and state regulatory laws

164. Immigration Actof 1990

Places caps on the number of visas (entry permits) that can be issued to immigrants each year by a U.S. business

165. ImmigrationReform andControl Act of1986 ("IRCA")

Makes it illegal to hire, recruit, or refer for a fee someone not authorized to work in the United States

166. Implied Contract K formed, in whole or in part, by the parties' conduct

167. IncidentalBeneficiary

A third party who incidentally benefits from a K but whose benefit was not the reason the K was formed. Thus,such party has no rights in a K (i.e. no privity of K) and cannot sue to have the K enforced

168. IncreasingMinorityShareholdersVoting Power

►Cumulative Voting: A voting method that improves minority SHs' chances of naming representatives to the board.As opposed to in regular or statutory voting, where shareholders apportion their votes equally among directorcandidates (one vote per candidate), cumulative voting allows SHs to cast all their votes for one candidate.►Shareholder Voting Agreement (aka "Pooling Agreement"): An agreement in which two or more SHs agree to votetogether as a unit on certain or all matters subject to SH vote.-"Specific SH Voting" Agreement: Resolution in the agreement on how the SHs will vote. Example: SH1 and SH2,each owners 30% of XYZ Corp. which has three shareholders, sign a SH voting agreement in which SH1 and SH2each agree to vote for each other as directors for so long as the SH voting agreement lasts.-"Agreement-to-Agree" SH Voting Agreement: Parties merely commit to vote together without specifying which wayto vote as the parties will agree to such in the future. Example: SH1 and SH2, each own 30% of XYZ Corp. whichhas three shareholders, sign a SH voting agreement in which SH1 and SH2 each promises that as to any matter onwhich a SH vote is required to confer with each other and vote together as a unit.►Voting Trust: Pursuant to a voting trust, the SHs trying to increase their minority interest power create a votingtrust. Such SHs transfer the legal title to their shares to the voting trust, and pursuant to the voting trust agreement,the trust votes the transferred shares.Beneficial ownership - stays with the transferring SH. Voting Rights -transfer to the Voting Trust.►Concentrated Voting Through Proxies

169. InformalContract

Requires no special form for creation, other than certain Ks must be in writing

170. Insider Trading(34 Act Related)

The purchase and sell of securities on the basis of inside information, meaning information that has not beenmade available to the public. Liability exists to the provider of the inside information and the person takingadvantage of the inside information with knowledge that the information is inside information.◘Tipper: A person who provides inside information. ◘Tippee: A person who is given inside information

171. IntendedBeneficiary

A third party for whose benefit a K is formed, who can sue the promisor if such a K is breached (i.e. privity of Kexists between the promisor and the intended beneficiary)

172. Joint and SeveralLiability

A doctrine under which the owners (typically in a partnership arrangement) are liable regardless of hisparticipation and for any and all of the liability. Thus, in a lawsuit, the 3rd party can sue all partners together orone or more partners separately to collect

173. LegalContractualCapacity

Characteristics recognized by law for one having the "quality" to engage in contractual activities

174. Legality (elementof agreement)

An agreement to do something prohibited by statute or contrary to public policy= void agreement (i.e. K neverexisted)

175. Limited Liability The principle that liability is limited to an investor's capital contribution

176. Limited LiabilityCompany("LLC")(Admission)

LLC interest can be transferred, but the transferee member does not have full ownership rights of a member untiladmitted into the LLC by the other members (i.e. transferee member will have rights to the profits and distributionallocations)

177. Limited LiabilityCompany("LLC")(Dissolution)

•Unless otherwise provided in the organizational documents or a single-member LLC, perpetual existence exists•Members have a right to their share of assets upon dissolution based upon their LLC capital accounts

178. Limited LiabilityCompany("LLC")(Formation andRestrictions)

•Formed under state law by filing an official document with the applicable state unit.•The traditional state unit is the Secretary of State.•The typical official filing document is the Articles of Organization or Certificate of Organization.*Governing Documents: Limited Liability Company/Operating Agreement.

179. Limited LiabilityCompany("LLC")(Liability)

Limited liability as the owners ("members") have limited liability in that they are not liable for the LLC'sdebts/losses except to the individual member's capital contributions

180. Limited Liability Company("LLC") (Management)

•Members participate in management of the LLC via the operating agreement (also called limitedliability company agreement or membership agreement).•Management can be Member-Managed or Manager-Managed, with a presumption for Member-Managed. If Manager-Managed, there can be a formal "Board of Managers."•Managers can (but need not to) designate officers to run the LLC's day-to-day operations.

181. Limited Liability Company("LLC") (Ownership Reqs)

•Name must include "Limited Liability Company" or "LLC," as such denotes to the public theorganization is a limited liability company.•Legal entity separate and distinct from its owners.•Can be a single member LLC, but most states require at least 2 owners. However, must have 2 or moremembers to be taxed as a partnership.•There is no restriction on the number of members. Thus, in addition to individuals, members may becorporations, LLCs, or partnerships.•Members may be residents of other countries.•Permissible to classify membership interests into different classes.

182. Limited Liability Company("LLC") (Profits)

Distributions can be specified in the LLC Agreement. Otherwise they are based on capital contributionproportion

183. Limited Partnership ("LP")(Admission)

LP interest can be transferred by a partner, but to become a member the transferee partner needs theconsent of the other partners and the Certificate of Limited Partnership has to be amended to reflect thetransfer.

184. Limited Partnership ("LP")(Dissolution)

The LP terminated(1) pursuant to the terms of the LP agreement;(2) by termination of the last General Partner (whether by death, withdrawal or otherwise); or(3) by termination of the last Limited Partner (whether by death, withdrawal or otherwise)

185. Limited Partnership ("LP")(Formation andRestrictions)

•Formed under state law by filing an official document with the applicable state unit.•The traditional state unit is the Secretary of State.Created by express agreement to carry on business for a profit, with a Certificate of Limited Partnershipfiled with the applicable state agency.•At least one party must be a general partner and the others limited partners.*Governing Documents: Limited Partnership Agreement.

186. Limited Partnership ("LP")(Liability)

Unlimited liability of all general partners, but limited liability for all limited partners beyond theircapital contributions.

187. Limited Partnership ("LP")(Management)

Unless otherwise agreed to in the LP agreement, each General Partner has a direct and equal voice inthe management of the LP. A Limited Partner may not retain limited liability if it participates in themanagement

188. Limited Partnership ("LP")(Ownership Reqs.)

•Name must include "Limited Partnership" or "LP". •Legal entity separate and distinct from its owners.•Has two or more partners one of which has to be a General Partner and the other a Limited Partner.•Has no restriction on the type of owners.

189. Limited Partnership ("LP")(Profits)

Distributions can be specified in the LP Agreement. Otherwise they are based on ownership interests

190. Liquidated Damages To establish a predetermined damage amount

191. Mailbox Rule Used by a majority of courts, the acceptance occurs at the time the offeree sends or delivers theacceptance communication by the agreed upon delivery mode

192. Mutual Consent Agreement between the principal and the agent.

193. Nominal Damages To recognize wrongdoing when no monetary loss is shown

194. Obligations that cannot bedelegated

*Personal skills of the obligor contracted for*Prohibited by contract*Special trust placed on obligor*When performance by a third party will vary materially from that expected by the obligee under the K

195. Operation Of Law 1. Death or Insanity2. Impossibility- due to the loss of the item or because of the law3. Changed Circumstance4. War or Other Political Prohibition- similar to the "force majeure" provision in a contract(bankruptcy or Insolvency or the Inability to pay debts when due - Does not necessarily terminate the agencyrelationship)

196. Parole EvidenceRule

When two parties make an integrated contract - intent to be final expression of agreement - neither party can useoutside provisions to contradict, vary, or add to the written contract terms

197. Performance The fulfillment of a contracting party's obligation arising under a K, and the typical way of discharging one'scontractual responsibilities

198. Piercing theCorporate Veil

Occurs when a court, in the interest of justice or fairness, holds shareholders personally liable for corporate acts.

199. Preemptive Rights The preference for existing shareholders to purchase a prorated share of newly issued stock within a certainperiod of time, which provision is typically set forth in the Articles/Certificate of Incorporation.►Significance: A mechanism to prevent the dilution of equity ownership in the corporation and thus the loss ofcontrol.

200. Privity of Contract Traditionally only the parties to the K have rights and liabilities under the K

201. Prospectus A written document that describes the (1) security being sold, (2) financial operations of the issuing corporation,and (3) investment risk attaching to the security. It is an abridged version of the Registration Statement.Purposes of Registration Statement and Prospectus: To supply sufficient information to enable unsophisticatedinvestors to evaluate the financial risk involved with the opportunity

202. Protected Class A group of persons protected by specific laws because of the group's defining characteristics (e.g. race, color,religion, national origin, gender, age, and disability)

203. Punitive Damages(rare)

To punish and deter wrongdoing

204. Purposes andGoals of ADR

•Reduce Parties' Cost: To reduce the cost of resolving disputes, as litigation is an expensive process.•Preserve Parties' Time: To expedite the resolution process since litigation is a time-consuming process. Forexample, it may take years for a case to be tried give case backlog in many courts. •Enable Taxpayer Savings: To reduce the caseload of traditional courts and thus the costs to the public of payingfor certain expenses of the court system.•Give Parties' Flexibility: Given the various methods of resolving disputes and their processes, flexibility exists forthe disputing parties in resolving disputes.•Preserve Relationships: With litigation, the goal/environment is win/lose, "doing battle," and emphasizing howthe parties' positions differ. With ADR, the goal is win/win, a mutual satisfactory resolution, trying to preservethe relationship, and emphasizing the common ground of the parties

205. Purposes andGoals of Damages

•Compensatory: Compensates the nonbreaching party for the loss of the bargain of the deal and for the harmsuffered as a result of the other party's wrongful act.•Fairness: Place the nonbreaching party in the position it would have been in if the K was fully performed.•Economic: Relieve the nonbreaching party for loss of profits (present or future).•Deterrence: Punish the breaching party with the goal of deterring future bad behavior of that party and others.•Predictability: Certain damages, such as liquidated damages or indemnification provisions, make the outlay andrecovery of damages expectant for the parties

206. Quorum The minimum number of parties within a group (e.g. directors or shareholders) that must be present to conductofficial organizational business, which minimum number usually is a majority

207. Reasons thatCourt may Piercethe Corporate Veil

►The court concludes that the shareholder(s) used the corporation as a "shield" for illegal activity.►Statutory formalities of the corporation structure are not followed.►Corporation was not set up to make a profit, remains insolvent, or is under capitalized.►The corporation serves as the "alter ego" of the majority shareholder and personal and corporate interests arecommingled such that the corporation has no separate identity.►With respect to shareholder and other insider loans, arms-length loans are not made. Courts carefully scrutinize"insider loans"/"interested party" loans.

208. Reformation Advantages: The parties' true intentions are reflected in the reformed agreement. The parties do not have to enterinto a new K.Disadvantages: There may be inadequate information to demonstrate the true intentions of the parties. The courthas a large amount of control/discretion

209. RegistrationProcess(Generally) ofSecuritiesRegistration

◘Pre-filing period: Securities cannot be offered or sold.◘Filing of Registration Statement with SEC.◘Waiting Period: Because the Registration Statement must be approved by the SEC, securities can be offered butnot sold. All issuers can distribute a red herring prospectus, advertise with a tombstone ad, and a free-writingprospectus.-Red herring prospectus: The prospectus that is given to potential investors in a new security issue before theselling price has been set and before the issuer's registration statement has been approved by the SEC for accuracyand completeness. Name comes from the statement in red that says "the issue has not yet been approved by theSEC."-Tombstone ad: An advertisement for a securities issue, which lists the security with some specificity and a list ofmembers of the syndicate selling the issue.◘Post-effective Period: Issuer must provide a final prospectus (or link to download) to the parties that received apreliminary or free-writing prospectus. Securities can now be sold.◘Registration Process Relaxation: In 2005, the SEC revised the registration process to relax it and create newcategories of issuers to assist Well-Known Seasoned Issuers. Well-Known Seasoned Issuers have issued $1billion in securities during the last 3 years or have $700 million outstanding stock with the public.

210. RegistrationStatement (FormS-1)

A document filed with the SEC by the issuer of securities that contains detailed information about the firm thatplans to sellthe securities to the public, which issuance is not exempt from registration.Contents of Registration Statement:◘The securities being offered for sale, including their relationship to the registrant's other capital securities.◘The corporation's properties and business (including a financial statement certified by an independentaccounting firm).◘Management of the corporation, including managerial compensation and other benefits and any interests ofdirectors or officers in any materials transactions.◘How the corporation intends to use the proceeds of the sale.◘Any pending lawsuits or special risk factors.

211. Rejection (way toterminate an offer)

If the offeree rejects the offer, the original offer is terminated, effective when the offeror or the offeror's agentreceives the rejection1. Counteroffer: An offeree's response to a original offer, where the offeree rejects the original offer and issues anew offer2. Mirror Image Rule: Requires the acceptance of an offer for the same terms as the offer, otherwise a counterofferexists

212. Rescission andRestitution

Advantages: The parties are returned to their position prior to the K. There are no court obligationsDisadvantages: Not all contractual arrangements can be rescinded. If one party has performed a portion of the K,the other party has to compensate for value received - restitution. Under SOF, original contracts requiring awriting require a writing for rescission. The contracting parties have to make another K.

213. Responsibilities /Liabilities ofShareholders

►Duty: Shareholders have a duty to act in the best interests of the corporation and the shareholders as a whole.►Stock Subscription Completion: Stock subscriptions are written irrevocable contracts of the shareholder topurchase capital stock of the corporation prior to the corporation's incorporation, and a failure to sell or buy thesubscribed shares is a breach of contract.►Watered Stock: When a corporation issues shares to a shareholder for less than the FMV of the shares, theshares are "watered stock," and the shareholder is liable to the corporation for the difference between the FMVand the lesser amount paid for the stock.►Illegal Dividends: If the shareholders knew of the illegal nature of the dividend payment, the shareholders mustreturn the dividend.►Piercing of Corporate Veil

214. RetaliatoryDischarge

The firing of an employee in response to taking negative action against the Employer

215. Revocation (way toterminate an offer)

Unless the offer was made irrevocable, with notification to the offeree or offeree's agent (via express statement oraction), the offeror can revoke an offer prior to the offeree's acceptance

216. Rights of Directors *Right to participate in the corporation's strategic and major policy decisions and to inspect the corporatebooks and records.*Right to Compensation.*Right to indemnification. If a director is sued for acts as a director, the corporation typically guaranteesindemnification (i.e. reimbursement) or purchases liability insurance to protect the directors from personalliability for director acts.

217. S and C Corporation •Shareholders elect directors, who set policy/strategy for the management of the S/C-Corp and hire officers.•The board of directors may designate certain of its decision making to committees.•Officers run the day-to-day business of the S/C-Corp.•Certain major decisions need shareholder approval (e.g. amendment of bylaws or article/certificate ofincorporation; merger; sale of all or substantially all of assets - "Big Ticket Items")

218. S and C Corporation Unless otherwise provided for in an organizational document or shareholders agreement, shares are freelytransferable and the transferee shareholder has full rights

219. S and C Corporation(Dissolution)

•Can have perpetual existence or formed for a specific period of time.•Unless otherwise provided in the organizational documents, shareholders have the right to a pro-ratashare of assets upon dissolution.

220. S and C Corporation(Liability)

•Limited liability of shareholders typically exists, meaning that shareholders normally are not personallyliable for the debts of the corporation beyond the shareholders capital investment.•Tort liability exists meaning that the corporation is liable for the torts committed by its officers or agentswithin the course and scope of their employment (i.e. respondeat superior).•Criminal liability sometimes can be transferred from the employees/agents of the corporation to thecorporation.

221. S Corporation ("S-Corp") (Formation andRestrictions)

•Formed in compliance with applicable state's statutory requirements, by filing an official document withthe applicable state unit.•The traditional state unit is the Secretary of State.•S-Corp must be a U.S. corporation.•A legal "person" under state and federal law with rights, as with individual, to due process, equalprotection, free speech, access to courts, and freedom from unreasonable search and seizure. However, hasno 5th amendment right to remain silent.•Must make a timely S-corporation election with the IRS on Form 2553 done no more than two months andfifteen days after the beginning of the tax year in which the election is to take effect.*Governing Document: Certificate/Articles of Incorporation, Bylaws, and Shareholders Agreement (ifshareholders and corporation enter into such).

222. S Corporation ("S-Corp") (OwnershipReqs)

•Name must include "Corporation," "Company," "Incorporated," "Limited," an abbreviation thereof, oranother permitted.•Legal entity separate and distinct from its owners.•Shareholders can only be only individuals, estates,or certain trusts.•Cannot be a member of an affiliated group of corporations.•Must have 100 or fewer shareholders.•Must have only one class of stock, but shareholders in the one class of stock can have different votingrights.•Shareholders must be U.S. citizens or residents. *S-Corp automatically converts to a C-Corp if it does not meet the formation requirements.

223. S Corporation ("S-Corp") (Profits)

Distributions must be proportionate to stock ownership

224. Sarbanes-Oxley Act of2002

Attempts to increase corporate accountability by imposing stricter disclosure requirements and harshpenalties for violations in an effort to restore investor confidence in the U.S. capital markets. Applies to allpublicly-traded companies

225. Securities Act of1933 ("33 Act")

►Purpose: One-time disclosure law - Requires full disclosure regarding material information in security sales andtransfers.►Functions:(1) Regulates solicitation and buying and selling of securities. (2) Designed to prohibit fraud and stabilize the securities industry. ►Violations of the 33 Act: Such violation provides for criminal penalties and civil sanctions.◘Intentional or negligent defrauding of investors by misrepresenting or omitting material information in theregistration statement or prospectus. Defenses: *The statement omitted was not material.*Plaintiff knew about the misrepresentation and purchased the stock anyway.*Registrant believed the statements were true.◘Selling securities before the effective date of the registration statement or under an exemption for which thesecurities do not quality.

226. SecuritiesExchange Act of1934 ("34 Act")

►Purpose: Continuous disclosures law - Requires periodic information disclosure to investors by publicly tradedcompanies with $10 million in assets and 500 or more shareholders. Also applies to brokers and dealers.►Functions: (1) Provides authority over proxy solicitation and registration of organized securities exchanges.(2) Sets disclosure requirements for securities in the secondary market.(3) Regulates insider trading. ►Violations of the 34 Act - Section 10(b) and Rule 10b-5: Such violation provides for criminal penalties and civil sanctions.◘Section 10(b) - The violator had scienter, meaning the intent to defraud by using false statements or wrongfullyfailing to disclose material facts.

227. SecuritiesRegistration (33Act Related)

►Unless exempt, an offering of securities must be registered before offered to the "public" generally.►The issuing corporation must file a registration statement and prospectus with the SEC, with the prospectusbeing later distributed to investors (i.e. the "investor disclosure document").

228. Security Instruments evidencing interest in a business organization or a promise of the repayment of indebtedness of abusiness organization, which instruments of interest include the following categories:◘Stock (common stock, preferred stock, treasury stock).◘Debt Instruments (bonds, debentures, notes, certificates of deposit, or other evidence of indebtedness)◘Future Interests in Securities (stock options, warrant, puts, calls, or other rights to purchase security)◘Investment Contracts (interest in land, investment schemes)►The "Howery" Test: U.S. Supreme Court case where the Court held that a "security" exists in any transaction inwhich a person invests in a common enterprise reasonably expecting profits derived primarily from others'management or entrepreneurial efforts.

229. ShareholderDerivative Suits

Shareholders' ability to sue a 3rd party on behalf of the corporation if the corporation's directors fail or refuse tocorrect the wrong or injury after demand from the shareholders, with any damages recovered in the shareholderderivative suit going to the corporation

230. ShareholderRights(Generally)

►Generally no management rights.►Approval of "Big Ticket Items" (i.e. fundamental / functional changes to the corporation - amendments to articles ofincorporation and certain bylaw provisions; approval of mergers and acquisitions and dissolution). These changesoften are subject first to director approval and recommendation to the shareholders.►Elect and remove directors.►May enter into a shareholders' agreement.►Shareholder meetings must occur at least annually, unless otherwise provided for. A quorum must be present atshareholder meetings. In lieu of certain meetings, shareholder written consent generally is acceptable (but usuallywith unanimous written consent). Special meetings require notice, indicating the time, place and the reason for themeeting, which meeting can only deal with that matter.►Typically, common shareholders are entitled to one vote per share and preferred shareholders typically have novoting rights. The governing document(s) will specify the voting rights.►Typically, shareholder approval is majority approval, but "Big Ticket Items" may require supermajorityapproval/consent.►Receive dividends (if applicable).►Inspect corporate records.►Transfer sharers subject to exceptions.►Receive a proportionate share of corporate assets upon dissolution.

231. SoleProprietorship(Admission)

No admission options

232. SoleProprietorship(Dissolution)

Duration of the sole proprietorship determined by the owner, and the sole proprietorship automatically dissolved onowner's death

233. SoleProprietorship(FormationandRestrictions)

No formation exists so used by one who does not want to create an organization

234. SoleProprietorship(Liability)

Unlimited liability as the business proprietor is personally liable for all business debts

235. SoleProprietorship(Management)

Business proprietor has sole management rights

236. SoleProprietorship(OwnershipRequirements)

•Simplest form of business.•No separate entity. The owner is the business proprietor

237. SoleProprietorship(Profits)

Business proprietor personally owns all profits.

238. Sources ofContract Law

-Common Law: Governs all contracts except those that have been modified or replaced by statutory law, such as theUniform Commercial Code (UCC), or administrative agency regulations-UCC: Governs contracts regarding the sale and lease of goods (to the extent the UCC modified the common law)

239. SpecificPerformance

Advantages: Attractive to nonbreaching party because it calls for the exact bargained for promise. Avoids problem ofsuing for damages, collecting the judgment and arranging another contract. For certain Ks, such as unique products,the actual performance is more valuable than the monetary damagesDisadvantages: Limited use as typically available only when monetary damages are inadequate. Not available forpersonal services Ks

240. Statute ofFrauds

A state by state statute that specifies what types of contracts must be in writing and signed by the defending party to beenforceable

241. Terminate anAgencyRelationship

1. Lapse of Time2. Mutual Agreement3. Terminate Provision- either party or both parties terminate the agreement after a reasonable time as provided in theagreement4. Purpose Achieved5. Occurrence of "Trigger Event"

242. Third PartyBeneficiary

One for whose benefit a promise is made in a K but who is not a party to the K

243. Third PartyRights - ThirdPartyBeneficiariesRights

Intended Beneficiary: As the intended beneficiary of the K, the 3rd party has legal rights and can sue the promisordirectly for a breach of K.Incidental Beneficiary: An incidental beneficiary cannot sue to enforce the K(Most contracts will have language stating that there are no third party beneficiaries to the K. One reason that most Ksdo not contain 3rd party beneficiaries is that the contracting parties want to make sure that the rights and obligationsby K flow to the contracting parties)

244. Third PartyRights--Assignments

Meaning of Assignments: A party to the contract assigns his contractual rights to a third party

245. Third PartyRights--Delegations

The transfer of a contractual duty to a 3rd party

246. Types of ADR ►Negotiation: Negotiation is the simplest and least expensive form of ADR. It is where the parties come together, with or withouttheir attorneys and try to reach a settlement without the involvement of a third party. As the attorneys are advocates fortheir clients, they must put their clients' interests first in the negotiation process.►Mediation:Mediation is a form of ADR in which the parties select a neutral third party, the mediator, who helps the parties try tofacilitate a resolution to the matter. The mediator lacks the power to resolve the matter for the parties, but may providesuggestions for resolution. In most cases, the mediation decision is final and non-appealable.►Arbitration:The form of ADR where a neutral third party expert or a panel of experts ("arbitrator" or "arbitrators") hear a disputeand imposes an often binding resolution on the parties.

247. Types ofEquitableRemedies andSample KSituations

*Rescission and Restitution - Undo or cancel a K, returning the nonbreaching party to pre-transaction state andrequiring the parties to return the goods, property, or funds previously conveyed.*Specific Performance - Performance of the act called for in the K typically granted when monetary damages areinadequate. Sale of land and unique goods; personal services no because against public policy.*Reformation - The situation where an agreement has been entered into, but the K or other memorializing instrument,in its written form, does not express the intent of the parties so the court could order the K be modified to reflect theintentions, agreement, and understanding of the parties. The courts role is to utilize the evidence and determine theintent of the parties in order to correct the K language. However, the court's role is not to develop a new K. Ks wherefraud or a mutual mistake or CNCs in blue pencil states are most often when courts reform contracts.

248. Types ofFranchises

Distributorship: The manufacturer governs how the retailer distributes its product by granting the franchisee theauthority to distribute the manufacturer's goods using the manufacturer's name and trademark. The franchiseetypically pays a fee or purchases a minimum inventory for these rights. Example: Automobile dealerships.Chain-style operations: The franchisor provides the franchisee a license to make and sell its products or distributeservices to the public from a retail outlet serving an exclusive territory. Example: Fast-food chains.Manufacturing/processing plant arrangement: A franchise that provides an organization with the right to produce ormanufacture a product and sell it to the public, using the franchisor's name and trademark. Example: found mostly infood and beverage industry (i.e. soft-drink bottling companies)

249. UndueInfluence

The situation in which the innocent party lacks free will in entering into the K, which makes the K voidable by theinnocent party

250. UnenforceableContract

A valid K that cannot be enforced because of a legal defense (i.e. K requiring writing and no writing). The court willnot enforce the contract

251. Unilateral Contract Producer says to Theo, "I'll pay you $200 to be the set photographer on next Saturday for my new romanticcomedy, A Promise for a Promise." Theo says nothing in response, but shows up to the set on Saturday andstarts taking photographs.

252. Unilateral Contract A promise for an act, K formed when offeree acts; K cannot be modified once Offeree starts performing, and Kcannot be revoked upon substantial performance by the Offeree, unless terms specify otherwise

253. Valid Contract K with the necessary elements for K formation (agreement, consideration, legal contractual capacity of theparties, and legal purpose)

254. Void Agreement No contract exists. Possible reasons: Purpose of "K" is illegal or a party does not have legal contractualcapacity (i.e. was not competent)

255. Voidable Contract A valid K where one or both parties have the option to avoid / RESCIND the K (i.e. K with a minor); If the K isvoided, both parties are released, and if the K is ratified both parties are legally obligated

256. Ways to terminatean offer by operationof law

(1) lapse of time;**time starts counting when offer received**midnight of the day specified in the offer(2) death or incapacity of the offeror or offeree; (3) subject matter destruction; and (4) the K purpose has become illegal