Business Law - Final Project Keishauna Gentry

Ethics Ethics: deciding what is a right or wrong

action in a reasoned, impartial manner Morality: involves the values that govern

society’s attitude toward right and wrong Ethics are based around the following basics:

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

Feelings and Opinions Ethics are viewed as how a person feels

about a certain situation Ethics may also be based on what

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

The more good that result, the more ethical the action taken

The more bad the result, the less ethical the action taken

The Golden Rule Do unto others as you would have them

do unto you The heart of the golden rule is empathy Empathy: putting yourself in the other

person’s position

Consequential Reasoning Takes a look at the consequences of the

action before making a decision on what way to act

Looks at alternative actions and it gives the final outcome of each action

Rule-based reasoning Makes a decision based on majority vote Sometimes it is not the most ethical

decision Based around the U.S. Constitution

U.S. Legal Systems The U.S. Legal System is based upon the Constitution,

where laws are created and amended. The basis for the Constitution is to protect human rights.

Our legal system is based upon three levels of government: 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

Sources of American Law Common Law Law of Precedent Statutory Law Federal and State Constitutions Administrative Law

Common Law Adopted by US legal system Common law developed into a legal

system modeled by nations around the world

Colonists brought English Common Law doctrines with them to America.

Primary basis of American legal system

Law of Precedent Evolved from sharing common law Judge researches a similar previous court

case. Judge applies that decision to new case. Also called Case law Also called the Doctrine of stare decisis

– Latin for “Let the decision stand”

Statutory Law Statutory law is enacted (passed,

created, ratified) 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

Constitutional Law

Balance of powers between the three branches Legislative –Article 1 Executive – Article 2 Judicial – Article 3

Administrative Law Administrative law is the regulations,

orders, rules and decisions of administrative agencies.

Legislators create an administrative or regulatory agency.

Purpose is to regulate certain activities for the benefit of the public

4 Punishments for a Crime? Imprisonment Fine Probation Community Service Combination of the above

Types of Crimes Crimes Against People Social Crimes Crimes Against Property Business crimes (White Collar)

Crimes Against People Murder

Malice aforethought? 1st degree—aggravated

(premeditated, cruelty, torture, rape, robbery, kidnapping)

2nd degree—non of the above conditions apply

Manslaughter Voluntary?

Intentional Involuntary

Occurs while committing an unlawful or reckless act

Assault - Attempt (pointing or shooting at someone) Aggravated (Usually

felony)-using deadly weapon with intent

Simple (misdemeanor) Battery

Hitting Kidnapping

Unlawful removal against person’s will

Sex offenses Statutory rape Date rape (acquaintance

rape)

What is a tort? One person’s interference with another

person’s rights, either through intent,

Based on 4 rights: Right to:

Be free of bodily harm Enjoy a good reputation Conduct business without interference Have property free from damage or

trespass

Intentional vs. Unintentional Intentional

know and desire the consequences of your act

Unintentional – lacks the determination of mind.

Requirements of Acceptance Unconditional Acceptance

Mirror Image Rule (IMPORTANT) Acceptance must “mirror” offer • Any

change means there is no acceptance Counteroffer

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 If method is stated in offer, it MUST be used Action=Acceptance Silence cannot be a method of acceptance

Termination of Offer Revocation – Taking back of an offer by

offeror Rejection – Refusal by the offeree Counteroffer – Any change in the terms of

the offer Expiration of Time – If the offer puts a time

limit on the offer and it has passed Death – Offeror dies Insanity – Offeror is declared insane

Capacity to Contract Capacity – legal ability to enter a contract Majority – age of legal adulthood Minor – not yet reached legal age (minority) NC Age of Majority = 18 years old Voidable Contracts – minors may disaffirm or

avoid their contracts if they so choose Infancy = minority = minor = under 18 yrs old

Returning Merchandise – must be returned if disaffirming a contract

Tender – offer to return Misrepresenting Age – fraud

if contract disaffirmed, you may be sued for fraud

Consideration Exchange of benefits and detriments by

the parties to an agreements Benefits

Something that a party was not previously entitled to receive

Detriments Any loss suffered

Types of Detriments Give up or promise to give up something

you are entitled to receive Doing or promising to do something you

have a legal right to do Forbearance

Not doing something you have a legal right to do

6 Elements Genuine Agreement

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

Offer Proposal by one party to

another with intent to create a legal binding agreement

Acceptance an unqualified willingness to

go along with the offer

Consideration Must exchange

something of value in order to create a bond

Legality Must be permitted by

law Courts will not enforce

an illegal contract Capacity

Legal ability to enter into a contract

Ex Minor, mentally ill, drunk, drugs

3 Requirements of an Offer Serious Intent

Must intend to make the offer Advertisements? No serious intent Known as an invitation to negotiate

Definite and Certain Must use definite words

Communicate to the Offeree Phone, fax, Internet, letter, etc

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. Coagents-two ore more agents hired by

the principal.

RELATIONSHIPS ARE CREATED By agreement (contract) By law (circumstantial or specific) By statute (special interest of a state)

AGENCY RELATIONSHIPS 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

Partially Disclosed Agent: principal’s existence but not identity is known to the third party.

Fiduciary: relationship is based on trust.

Actual Authority: real power the principal gives to an agent to act on his or her behalf

Apparent Authority: agency by estoppel

Third Party: must be notified if an agency has been terminated

Consensual: both parties of a principal/agent relationship agree or consent to relationship

TYPES OF 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

AGENT’S DUTIES TO 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

PRINCIPAL’S DUTIES TO AGENT Compensation-payment for services Reimbursement-repayment for own

money spent Indemnification-repayment for amount

lost Cooperation-working together

TERMINATION OF RELATIONSHIP By operation of law

Death of principal or agent

Bankruptcy Impossibility of

performance Agent’s objective

becomes illegal

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.

Termination of acts Performance Mutual agreement Agent’s withdrawal

Agent’s discharge

North Carolina Regulations and Laws

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

Unions To certify, must have a unanimous vote

(50 %) If lose certification vote, must wait one

year for another vote.

Collective Bargaining Contract negotiated by the employer

and representative of the labor union.

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 Procedure 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 Employment 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.

Relationships between Employer-Employee Professional contracts are generated by

professional or executives who negotiate their own contracts

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.

Terminating the Relationship 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 (employer bears cost of compensation)

Civil Rights Acts 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. (employee eligible for unemployment if discharged not for a “cause”)

Types of Shops Agency- receive union benefits without

belonging to union Closed- must join prior to employment Union- must join with 1 year of

employment

Employment Acts 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.

Statutory Rights of Employees 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

Rights Relating to the 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 Relating to the Marriage Contract 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

Premarital Agreements 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

Ceremonial Marriages 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 Marriages 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 band

Proxy Marriages 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

Prohibited Marriages 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

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

Support and Custody of Children 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

Nature of 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 Management 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

Bodily Injury Liability 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 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 Claim Payments 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!

No Fault Insurance 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 of Insurance 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

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.

Beneficiaries 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.

Life Insurance Advantages 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 Insurance 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 premium

Other Types of Life Insurance Supplemental Information Limited 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 for Life Insurance 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/Casualty Insurance Types of policies :

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

Property and Casualty 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 Policy 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.

Owner of property rented to others protects investment in structure with a fire policy. Owner has insurable interest in the property, but not in tenant’s property.

Examples: – Apartment – Condo – Office building

Renter’s Insurance 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.

Protection includes: Personal contents of tenant

in an apartment, condo, mobile home or house

Personal liability if others sue tenant for injuries

Examples: Lightning strikes and

damages TV owned by tenant

Neighbor breaks leg when he steps on child’s skate left on steps and sues tenant for negligence

Homeowner’s Policy 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

Must own home to carry policy forms: 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

Peril – a cause of loss

Co-insurance Homeowners policies require the insured

to carry a minimum of 80% of the value of the home (called co-insurance) to get full reimbursement for a claim made. Most claims are partial losses leading

policyholders to insure a home for less than value since risk of total loss is low.

Cost Factors of Property Insurance Limit of coverage for property Location of property – fire district, city,

county, state Structural material - brick, block, frame Previous claims filed Company

FLOOD & EARTHQUAKE NOT COVERED UNDER HO POLICY

Must buy separate flood insurance coverage

Must buy separate earthquake coverage

Co-Insurance Clause * Supplemental* 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.

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.

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

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

Examples of Bailments

Leather jacket left at a dry cleaners Vehicle delivered to parking valet Goods transported by common

carrier Truck taken to dealership for service

check Diamond ring taken to jeweler for

cleaning or repair Leaving your clothes in dressing

room while trying on new sweater Goods delivered to a consignment

shop

Mutual Benefit 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

Other Bailments Gratuitous Bailment

Free of charge (lend something to a friend). Only one party benefits

Extraordinary bailment A common carrier or hotel is strictly liable for

damage to bailed goods

Rights and Duties of Bailee Rights:

To hold a Mechanic’s Lien -the right to retain property of another, if not paid for service rendered

To expect payment for services rendered Duties:

Of reasonable care and protection of goods while in custody of bailee

To comply with terms of bailment

Rights and Duties of Bailor Rights

to have goods protected to receive service as agreed upon to have goods returned in timely manner

Duties to pay for service provided to warn of dangers or special care required

to pick up goods in a reasonable time

Tortious Bailee 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

Examples: Student who finds necklace and knows who it

belongs to but does not return it to the rightful owner

Parking valet who takes your hot car on a joy ride Dry cleaner’s employee who wears your leather

jacket

Real Property Land and anything permanently

attached, including: Buildings, structures, fixtures Water, water rights Minerals on and below the surface of the

earth. Trees & crops Air space above the surface

Personal Property Anything other than real property, including:

Clothing, jewelry, furniture, appliances in a home

Automobiles, ATVs, lawnmowers Equipment & machinery used in business Copyrights, patents, trademarks Software, stocks, loans, mutual funds Must be delivered in order to transfer ownership. 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 Is an original work fixed in a tangible medium

of expression. 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

Methods to Acquire Property Purchase contract – earn money and use it to

buy Gift – includes intent, delivery and

acceptance Intellectual labor – creation of property Inheritance – wills and trusts Accession – farm animals naturally increase Found property – lost or mislaid Occupancy – possession of property that

belongs to no one else

Real Property Transfers Grantor - conveys a deed to real property Grantee – receives the deed

Types of Deed Quitclaim

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

General Warranty Deed Warrants the title Most desirable for the buyer

Bargain and Sale Deed Transfers title to property without giving

warranties

Personal Property Transfers Transfer of title (ownership) to property Not all transfers require written titles

Purchases of goods from a retail store Certain transfers have formal titles-Vehicles

Are registered with the state MUST BE NOTARIZED 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 Eminant domain Deed restrictions Easements

Rights and Duties: Covenants of the Contract Covenant = Promise • Affect both the landlord and the tenant • May be express or implied • Number and type vary depending on

type of property