C713 STUDY PLAN

Before beginning this study plan, it is critical that you have access to the Course of Study and the
Cengage MindTap e-textbook. All WGU assessments are created using these textbooks, so they
will be your primary resources as you move through this work. When you work through this
student plan, type in your answers to the questions below and create a study guide using the key
terms from each section. You may also consider using the key terms to create flash cards that
can be used as you prepare for the exam.

UNIT 1: SOURCES AND TYPES OF LAW

Chapter 1- Introduction to Law

1 What role does law play in our society? Power – Importance – Fascination -
2. What are the origins of our laws?
 Structure from England, Founding Fathers insistence that individual states maintain
control, constitutionally guaranteed rights.
 English “Shire Reeve” – Sheriff mediated disputes – continued as mediation today.
 10 freemen created a “tithing” and collectively responsible for injury outside the tithing
– continued in business partnerships.
 Anglo-Saxon courts parties represented by clergy, noblemen or themselves. Each party
produced “oath helpers” usually 12 – modern jury.
 William the Conqueror claimed all land in 1066 – land became most valuable commodity
in England – law still reflects that.
 1250 Henry de Bracton wrote legal tretise summarizing previous legal ruling – modern
idea of precedent. The accumulation of precedent, based on case after case, makes up
the common law.

3. Describe the sources of law in the United States.

 US Constitution
o 3 divisions of legal authority – legislative, executive, judicial
 Statutes
o Created by Congress
o Can cover any topic so long as no violation of Constitution
 Common Law
o Precedent
o Stare Decisis- “Let the decision stand”
o Binding only on lower courts than the one deciding
 Court Orders
o Binding obligations on specific people or companies
  Administrative Law
o Appointed by the Executive (EPA, SEC, IRS, etc)
o Power to create laws called regulations
 Treaties
o President makes, US Senate ratifies by 2/3 vote.

4. Describe the difference between criminal and civil law.

 Criminal law concerns behavior so threatening that society outlaws it altogether
o Most are statues passed by congress or state leg.
o Gov prosecutes wrongdoer.
o DA paid by gov brings the case to the court.
o Victim not in charge though can be a witness.
o Gov seeks to punish with prison, fine or both. If there is a fine money to the
state.
 The civil law regulates the rights and duties between parties
o Private party brings case, not gov.
o Based on common law.
o Seek equitable relief.
o Prison not a punishment.

Chapter 4- Common Law, Statutory Law, and Administrative Law

1. Define and describe “common law.”
• Judge-made law. Sum total of all cases decided by common law.
• Predominates in tort, contract, and agency law.
• Important in property, employment, and other areas.
2. What is “stare decisis?”
• “Let the decision stand”
• Once a court has decided a particular issue, will general apply same rule to other cases
in future
3. Define and describe “statutory law.”
• Law created by legislation in Congress.
• House of Reps proposes bill, passed by HoR, sent to Senate, passed by Senate, sent to
President, signed into law (if not veto’ed then passed by 2/3 majority).
• Makes up large majority of criminal law
4. Explain how new laws are made.
• House of Reps proposes bill, passed by HoR, sent to Senate, passed by Senate, sent to
President, signed into law (if not veto’ed then passed by 2/3 majority).
• Hearings happen in individual committees, then debate on congress floor
5. Describe “statutory interpretation.”
• Courts called on to interpret a statute
• Plain meaning rule: When a statute’s words have ordinary, everyday
 significance, the courts will apply those words.
• Legislative History and Intent: If the language is unclear, the course will look
at the law’s history to determine intent of the legislature. Examine
committee hearings, reports and floor debates.
• Public Policy: If history is unclear, courts rely on general public policy; e.g.
reducing crime, creating equal opportunity, etc.
6. Define and describe “administrative law.”
• Laws and regulations created by federal agencies
• Some Agencies are subject to the executive branch while others are independent
agencies
• Agencies are created by passing enabling legislation
• To create new rule is to “promulgate” it.
• Congress may require an agency to hold a hearing before promulgating.
• Informal rulemaking may use a simple “notice and comment” method.
• Agencies often interpret what a statutory law means.
• Agencies Investigate, Make Rules, and Adjudicate to do the work assigned to them.

Chapter 6- Alternative Dispute Resolution

1. Describe the difference between litigation and Alternative Dispute Resolution.
• Litigation is lawsuits, the process of filing claims in court, ultimately going to trail
• Alternative Dispute Resolution is any other formal or informal process used to settle
disputes without resorting to trail.
2. Define and explain the differences between Negotiation, Mediation, and Arbitration.
•
3. Briefly describe a typical state court system.
• Typically forms a pyramid
• Supreme
• Appellate
• General Civil
• General Criminal
• Small Claims
• Municipal
• Juvenile
• Probate
• Land
• Domestic Relations
• Almost all start in in trail courts
• Determine if the facts of dispute, apply to those facts the law given by earlier
appellate court decisions
• Jurisdiction – courts power to hear a case
• Subject matter jurisdiction – authority to hear a particular type of case
• Trail courts of limited jurisdiction
 • Small claims – civil suits only up to $5000
• Juvenile court – only involving minors
• Etc
• Trail courts General Jurisdiction
• Can hear very broad range of cases.
• Personal jurisdiction
• Legal authority to require the defendant to stand trial
• Exists if:
• Resident of state in which suit is filed
• Defendant takes formal step to defend a suit
• A summons is served on the defendant
• A long-arm statute applies
• If none of the above, someone commits a
tort, signs a contract or conducts reg biz
activities in the state.
• International Shoe v State of Washington
• Even with just salespeople doing
business there, no
manufacturing, they received the
protection of the state and it’s
laws, therefore they are allowed
to be sued there.
• Appellate Courts
• Accept facts given to them by trial courts
• Review the trial record to see if there were errors of law.
• Court of Appeals
• Party that loses at the trial court may appeal to the intermediate court of
appeals
• Appellant – party filing appeal
• Appellee – party opposing appeal
• State Supreme Court
• Highest court in the state
• Accepts some appeals from the Court of Appeals
• In most states, no absolute right to appeal to the Supreme Court
• If SC regards the issue as important, accepts the case.
• Usually 7 justices

4. Briefly describe the Federal court system.

• Same pyramid
• Supreme
• US Court of Appeals (12 circuits)
• Trial Courts
 • US District Courts
• US Bankruptcy Courts
• US Tax Courts
• Various Federal Agencies
• US Court of Appeals for the Federal Circuit
• Trial Courts
• US Court of International Trade
• US Claims Courts
• US Patent & Trademark Office
• Claim based on US Constitution, Federal Statute, or Federal Treaty = Federal Question
Case
• If no federal law is at issue diversity jurisdiction when:
• Plaintiff & defendant are citizens of different states and
• Amount in dispute exceeds $75,000
• Trial Courts
• US District Court
• Primary trial court in federal system
• About 94 districts
• States with smaller populations have one district
• States with larger have several
• Bankruptcy Court
• Tax Court
• US Court of International Trade
• Foreign Intelligence Surveillance Court (FISA)
• Judges
• President nominates all federal court judges
• Confirmed by the Senate
• Serve for “life in good behavior”
• Appellate Courts
• 11 numbered circuits
• 12th is only for Washington DC
• 13th known as Federal Circuit – hears appeals from Specialized trial courts
• US Supreme Court
• 9 Justices
• One is chief, other eight are associate
• Chief power is authority to assign opinions to a given justice
• Power to hear appeals in any federal, certain cases that began in state courts
• Generally up to the court whether or not it will accept a case
• Must file a writ of certiorari asking for the court to hear the case
• Four of the nine most vote in favor of hearing a case
• Receives several thousand, usually accepts fewer than 100
•
5. What kinds of civil lawsuits are permitted in Federal court?
• Plaintiff & defendant are citizens of different states and
• Amount in dispute exceeds $75,000
6. What steps are involved in beginning litigation?
• Pleadings – complaint, answer, sometimes reply
7. What are “pleadings?”
• Complaint
• Short, plain statements of the facts alleging and legal claims making
• Service
• When complaint filed, summons is issued, ordering defendant to answer
complaint within 20 days. Sheriff or constable then serves the two papers by
delivering them to the defendant.
• Answer
• Once complaint and summons are served defendant has 20 days to file
answer
• Brief reply to each allegation in complaint
• If answer not delivered in time, plaintiff ask for default judgement.
• Judge accepts every allegation in complaint and renders devision that the
plaintiff wins without a trial
• Counterclaim
• Can be included when giving answer
• If filed, original complainant must file a “reply”. Similar to an answer to the
counterclaim.
• Class Actions
• Complainant may show evidence of many other incidencts
• Complainant then represents entire group of plaintiffs, including those
unaware of the lawsuit
• Judgement on the Pleadings
• A party can ask for judgment based on pleadings themselves by filing a
motion to dismiss.

8. Define and describe “discovery.”

• Opportunity for both sides to examine all evidence the other side will bring to trial
• Interrogatories
• Written questions the opposing party must answer in writing under oath
• Depositions
• One party’s lawyer to question the other party or potential witnesses under
oath
• Lawyers for both parties are present
• Production of Documents and Things
• Each side may ask the other to produce relevant documents for inspection &
copying, to produce physical objects, for permission to enter on land to make
 inspection.
• Physical or Mental Examination
• A party may ask the court to order an examination of the other party
• In Camera Inspection
• Judge views requested documents alone with no lawyers present, decides
whether the other side is entitled to view them
• E-Discovery
•
9. What is a “counterclaim?”
• Counterclaim
• Can be included when giving answer
• If filed, original complainant must file a “reply”. Similar to an answer to the
counterclaim
10. What is “summary judgment?”
• When discovery is completed both sides may consider seeking summary judgement
• Ruling by the court that no trial is necessary on a particular issue because the essential
facts are not in dispute
11. When discussing burden of proof, what is the difference between “preponderance of the evidence”
and “beyond a reasonable doubt?”
• Prep of evidence
• Only in Civil Cases
• Must convince jury (or judge if no jury) that version of facts is at least slightly
more likely than other version.
• 51-49 persuation
• Beyond res doubt
• No questions of innocence
12. Briefly describe the steps in both a plaintiff’s and defendant’s trial case.
• Plaintiff burden of proof first case
• Direct examination
• Cross-examination
• Present what was discovered to jury or judge
13. Define and describe “motion for directed verdict.”
• Motion asking for ruling that the plaintiff entirely failed to prove some aspect of case.
• Done before defendant’s case is presented
• Only if evidence so clearly favors defendant reasonable minds could not disagree
UNIT 2: CONTRACTUAL RELATIONSHIPS

Chapter 11- Formation of Contractual Relationships

1. Define the term “contract.”
 A legally enforceable agreement
2. What are the elements required to create a contract?
 Offer – person proposes a deal
 Acceptance – respond to the offer
 Consideration – there must be an exchange. Both sides must receive some benefit
 Legality – for a lawful purpose
 Capacity – adults of sound mind
 Consent – no trickery or force
 Writing (not always required)
3. Describe the difference between a bilateral and unilateral contract.
 Bilateral – both parties make a promise
 Unilateral – only one party makes a promise. The other party can accept only by actually
doing something.
4. Describe the difference between an executory and executed contract.
 Executory – contract made but one or more parties not fulfilled obligations
 Executed – all parties fulfilled obligations
5. Describe the difference between a valid, unenforceable, voidable and void agreement.
 Valid – Satisfies all the law’s requirements
 Unenforceable – Parties intend to form valid bargain, court declares some rule of law
prevents enforcing it
 Voidable – Law permits one party to terminate agreement
 Void agreement – one neither party can enforce. Usually purpose of deal is illegal or one
of parties had no legal authority to make contract
6. Describe the difference between an express and implied contract.
 Express – Two parties explicitly state all important terms in their agreement
 Implied – Words and conduct of the parties indicated they intended an agreement
7. Define and describe the term “promissory estoppel.”
 In promissory estoppel the defendant made a promise the plaintiff relied on
 Even with no contract, the defendant made extra-contractual promises
 The only way to avoid injustice is to enforce the promise
8. Define and describe the term “quasi-contract.”
 The plaintiff game some benefit to the defendant
 The plaintiff reasonably expected to be paid for the benefit and the defendant knew this
 The defendant would be unjustly enriched if he did not pay
9. What are the sources of contract law?
 Common Law
  Uniform Commercial Code (UCC) 1952
10. Describe the “Uniform Commercial Code.”
 Every state has adopted at least part
 Article 2
i. Governs the sale of goods
1. Goods – anything movable except money, securities and certain legal
rights
 UCC governs contract for sale of goods, common-law govern contract for sales of
services and other
 In a contract for mixture of goods and services, the court must decide the primary
purpose of the contract (goods or services)

Chapter 15- Voidable Contracts: Capacity and Consent

1. Define and describe “capacity” as it pertains to contracts.
• Person of mentaly capable of performing the contract
2. What type of contract is created with a minor? What options are available to the minor?
• Voidable
• Disaffirm rescind
3. What are the exceptions to contracts with minors?
• Necessaries – something essential to the minor’s life (food, clothing, housing, etc)
• Minor must pay full value of benefit received
• Misrepresntation of Age
4. What type of contract is created with a mentally impaired person?
• Voidable
5. Under what circumstances will a contract with a mentally impaired person be void? Voidable?
• Void if the person has ben adjucated incompetent
6. What three things must a party show to rescind a contract based on fraud or misrepresentation?
• Defendant knew statement was false
• False statement was material
• Injured party relied on the statement
7. What are the plaintiff’s remedies?
• Rescind the contract
• Sue for damages
8. Define and describe the difference between “innocent” and “fraudulent” misrepresentation.
• Innocent the defendant reasonably expected it to be true (most states allow rescission
but not damages)
• Fraudulent, defendant knew it to be false
9. Explain the special problem of “silence.”
• Usually not illegal
• Illegal when
• Disclosure is necessary to correct a previous assertion
 • Would correct a basic mistake assumption the other party is relying on
• Would correct the other party’s mistaken understanding about a writing
• There is a relationship of trust between the two parties
10. Define and explain the difference between a unilateral mistake and mutual mistake.
• Unilateral – one party makes a mistaken assumption
• Mutual – both parties same mistake
11. Define and describe the term “duress”
• One party makes an improper threat that causes the victim to enter the contract
12. Define and describe the term “undue influence”
• A relationship between the two parties of trust or domination and
• Improper persuasion by the stronger party

Chapter 18- Performance, Breach, and Discharge

1. Define and describe “Express” and “Implied” conditions.
2. Describe the difference between a “condition precedent,” “condition subsequent,” and a
“concurrent condition.”
a. Precedent – condition must happen before duty arises
b. Subsequent – after duty is performed
c. Concurrent – conditions must happen together
3. Define and differentiate between “strict performance” and “substantial performance.”
a. Must do EXACTLY what the contract demands. Courts dislike
b. Substantial – Fulfilled most of obligations though imperfect. Party receives full contract
price minus value of defects.
4. Define and describe “time of the essence” clauses.
a. Make contract deadlines strictly enforceable
b. Merely including a date for performance is not enough.
c. If parties do not CLEARLY state that prompt performance is essential, both are entitled
to reasonable delays.
5. Define and differentiate between “material breach” and “anticipatory breach.”
a. Material – Substantially harms the innocent party and for which it would be hard to
compensate without discharging the contract
b. Anticipatory – one party makes it unmistakably clear that it will not honor the contract
6. What is “Statute of Limitations?”
a. Time limits on filing lawsuits

Chapter 19- Remedies

1. Define and differentiate between expectation, reliance, restitution, and equitable interests.
a. Expectation – Injured party reasonably thought would get from contract. Goal is to put
position would have been if both parties fully performed obligations
b. Reliance – If had no expectation, can still recover damages if proves spent money on
reliance on agreement and should receive compensation
c. Restitution – Injured party had no expectation int or reliance but conferred a benefit on
 other party. Objective is to restore the benefit provided.
d. Equitable – When more than money is needed (e.g party promised to sell land and
refuses, court may order specific performance).
2. What are “direct,” “consequential,” and “incidental” damages?
a. Direct = Harm that flowed directly from the contract’s breach
b. Consequential = harm caused by the injured party’s unique situation
c. Incidental = minor costs (storing, returning defective goods, advertising for alternative,
etc).
3. Describe the remedies available to a seller.
a. UCC Governs
i. Difference between original contract price and price on open market
ii. Not entitled to consequential damages
4. Describe the remedies available to a buyer.
a. UCC Governs
i. Difference between contract price and market price
ii. IS entitled to consequential damages
5. Explain “reliance” interest and “promissory estoppel.”
a. Reliance = The time and money spent on performing one party’s part of the agreement
b. Promissory Estoppel = Courts generally award reliance damages in these cases
6. Define and describe “restitution” interest as it applies to a contract breach, voidable contract, and
quasi-contract.
a. Restitution – Return to the injured party a benefit conferred to the other party (give the
money back)
b.
7. Define and describe the remedies of specific performance, injunction, and reformation.
a. Specific performance is not damages, the court orders the breaching party to simply
perform the contract (cases involving sale of land or other asset that is considered
unique). Always available in real estate contracts.
b. Injunction
i. Preliminary – order issued during the course of the lawsuit
ii. Permanent – permanent order
c. Reformation – court partially rewrites a contract
8. Define and describe mitigation of damages, nominal damages, and liquidated damages.
a. Mitigation – injured party is expected to keep damages as low as reasonable
b. Nominal – token sum – demonstrates breach but not serious injury. Moral victory.
c. Liquidated – Provision in the contract stating how much must be paid if breach.
i. At time of contract creation damages are difficult to estimate
ii. Amount is reasonable

Chapter 22- Warranties

1. What is a warranty?
2. Define and differentiate between express and implied warranties.
 3. Explain warranty disclaimers of oral express warranties and written express warranties.
4. Describe remedy limitations.
5. Describe consequential damages.
6. Define and describe “privity.”
7. What factors will limit the seller’s responsibility?

UNIT 3: BUSINESS LIABILITY

Chapter 8- Intentional Torts

1. What is a tort?
• A violation of duty imposed by the civil law
• When one of those duties is violated AND injures another
2. What is an intentional tort?
• Harm caused by deliberate action
• The deliberation is in the action, not the harm
3. Define and explain the torts of defamation, false imprisonment, and the intentional infliction of
emotional distress.
• Defamation can be written or spoken
• Written = Libel
• Spoken = Slander
• Must include
• Defamatory Statement
• Falsity (defendant knew it was false)
• Communicated (to at least one person other than the plaintiff)
• Injury
• 4 categories amount to slander per se or libel per se
(law is willing to assume injury without requiring proof)
• Sexual behavior
• Crimes
• Contagious Diseases
• Professional Abilities
• Absolute privilege = Defendant can say anything at all in
courtroom or legislative hearing and not be sued for defamation.
Deliberately false testimony would be perjury, but not slander.
• False imprisonment = Detaining someone against their will (some reasonable exceptions
exist for suspected crimes)
• Intentional Infliction of Emotional Distress
• Extreme and outrageous conduct that causes serious emotional harm.
4. Define and explain the difference between assault and battery.
• Battery = Intentional touching of another person in a way that is harmful or offensive
• A reasonable person would be offended by it
 • Assault
• Some act that makes the plaintiff fear an imminent battery.
• Does not matter whether battery ever occurs
5. Define and explain the difference between trespass, conversion, and fraud.
• Trespass = Intentionally entering land that belongs to someone else or remaining on
after being asked to leave
• Conversion = Taking someone’s personal property without consent (essentially a private
suit for theft)
• Fraud = Injuring another person by deliberate deception
6. Define and explain the difference between compensatory damages and punitive damages.
• Compensatory = Amount the court believes will restore to position before the conduct
caused injury (this includes pain and suffering)
• Punitive = Indented to punish the defendant for conduct that is extreme and outrageous
• Relatively few cases have this award
• Must be reasonable
• Reprehensibility of the defendant’s conduct
• Ratio between harm suffered and the award
• Difference between punitive and any civil penalties used in similar
cases
7. Define and explain tort reform.
• The discussion on how punitive damages should be assessed and award
8. Define and explain the different types of tortious interference intentional torts.
• Interference with a contract
• Plaintiff can establish
• There was a contract between plaintiff & third party
• Defendant knew of the contract
• Defendant improperly induced the 3 rd party to breach the contract
or made performance of the contract impossible
• There was injury
• Defendant may try “Justification”
• Actin to protect existing economic interest (its own contract with
3rd party)
• Acting in public interest
• Existing contract could be terminated at will by either party (was
voidable)
• Interference with a Prospective Advantage
• Plaintiff claims outside interference with an expected economic relationship.
• Definite and reasonable expectation of obtaining economic
advantage

9. Define and explain the Lanham Act, including what elements a plaintiff must prove.
• Protection against false statements intended to hurt another business
 • Plaintiff must prove
• Defendant made false or misleading fact statements about plaintiff’s
business
• Defendant used the statements in commercial advertising or promotion
• Statements created the likelihood of harm to the plaintiff

Chapter 9- Unintentional Torts

1. Define negligence.
• Harm that arises by accident
2. What elements must a plaintiff prove to win a negligence case?
• 5 elements
• Duty of due care
• Breach
• Factual Cause (conduct actually caused the injury)
• Proximate cause (it was foreseeable the conduct might cause this type of
harm)
• Damages
3. Define and explain “duty of care.”
• Duty to behave as a reasonable person would under the circumstances
4. What special rules exist for landowners? Professionals?
• Landowners
• Lowest liability – Tresspassing adults
• Mid-level liability – trespassing children
• Higher liability – Licensee – On the land for own purposes but with owner’s
permission (social guest). Must have actual knowledge of specific danger to be
liable.
• Highest liability – Invitee (customer), user of public place or biz open to public.
No requirement to knowledge of danger.
• Professionals
• Must act as a reasonable person in that profession.
5. Define and explain “breach of duty” and “negligence per se.”
• Breach of Duty
• Show a legal duty exists
• Show the defendant did not act as a reasonable person would and meet that
duty
• Negligence per se
• Courts not able to decide what a reasonable person would do because state
leg has decided for them
• State leg sets minimum standard in order to protect certain group
• Violation of statute injures a member of that group
 • Defendant has committed negligence per se
• Plaintiff need not prove breach of duty
6. Define and differentiate between factual cause, proximate cause, and res ipsa loquitur.
• Factual Cause
• Defendants breach led to ultimate harm
• Proximate cause
• Type of harm must have been reasonably foreseeable
• Res Ipsa Loquitur
• The thing speaks for itself
• The facts imply that the defendants negligence caused the accident
• Defendant try to come with evidence establishing that it did not cause the
harm
• Burden of proof shifted from plaintiff to defendant
• Defendant had exclusive control of thing that caused harm
• Harm normally would not have occurred without negligence
• Plaintiff had no role in causing harm
7. Explain the damages a plaintiff can recover for negligence.
• Must persuade court suffered harm that is genuine not speculative
8. Define and explain “assumption of risk.”
• A person who voluntarily enters a situation that has an obvious danger cannot complain
if injured
9. Define and differentiate between contributory and comparative negligence.
• Contributory
• If Plaintiff is even slightly negligent recovers nothing
• Comparative
• Plaintiff may recover even if partially responsible
• Jury asked to assess the relative negligence between the two
• Most states have adopted some form of comparative negligence.
10. Define and explain strict liability, including ultrahazardous activity.
• Strict liability = Higher burden on activities naturally dangerous
• Ultrahazardous activity
• Using harmful chemicals
• Operating explosives
• Keeping wild animals
• Bringing dangerous substances onto property
• Defective products
• Reasonable person rule is irrelevant in strict liability
11. Define and explain product liability, including negligence and strict liability for defective products.
• Negligent design
• Negligent manufacture
• Failure to warn
12. Describe some of current trends in negligence law.
 • Consumer expectation
• Risk-utility test
• Value of product
• Gravity of the danger
• Likelihood danger will occur
• Mechanical feasibility of safer alternative design
• Adverse consequences of an alternative design

UNIT 4: LEGAL CONSIDERATIONS IN BUSINESS ORGANIZATIONS

Chapter 28- Agency Law

1. How is an agency relationship created? What requirements must be met?
• Principal – person for whom someone is acting
• Agent – Person acts for someone else
• Mutual Consent
• Subject to principal control
• Create Fiduciary Relationship
2. Describe the duties an agent has to a principal.
• Fiduciary duty
• Loyalty – put principal first strive to accomplish principals goals
• Outside benefits – may not receive profits unless the principal knows and
approves
• Confidential Information – cannot disclose or use for own benefit any
confidential info acquired during agency
• Competition with principal – Not allowed to compete with principal in any
matter within the scope of the agency
• Conflict of interest between two principals – Unless otherwise agreed, may
not act for two principals for whom interests conflict
• Secretly Dealing with the Principal – May not become party to a to Principal’s
transaction without principal’s permission.
• Appropriate behavior – May not engage in inappropriate behavior that
reflects badly on the principal
• Obey Instructions – unless illegal or unethical
• Duty of Care – act with reasonal care
• Provide Information – provide info in possession that has reason to believe the principal
wants to know. Also duty to provide accurate info.
3. Describe the remedies available to a principal when an agent breaches their duty.
• Damages
• Prifits
• Rescission
4. Describe the duties a principal has to an agent.
• Indemnify – Reimburse for any expenses
• Cooperate – opportunity to work, not interfere with ability to accomplish task, perform
principal’s part of the contract
5. Explain how an agency relationship can be terminated.
• Term agreement
• Time
• Achieving Purpose
• Mutual Agreement
• At Will
• Wrongful Termination – Both have the power, not always the right.
6. Describe a principal’s liability for contracts.
• Liable for acts and statements if
• Agent had authority
• Principal ratified the acts of the agent
7. Differentiate between express, implied, and apparent authority.
8. Define estoppel and ratification.
9. Describe an agent’s liability for contracts.
• Fully disclosed – Agent not liable
• Unidentified – Known existence, not identity – Agent liable, principal liable
• Undisclosed – Unknown existence, agent liable, principal liable
• Unauthorized agent – Agent liable, principal not liable
10. What are the exceptions to the rule on undisclosed principals?
• Contract states third party not bound to anyone other than agent
• Agent lies about principal, knowing third party refuses contract with principal
11. Describe a principal’s liability for torts.
• Liable for physical tort when within scope of employment
• Liable for nonphysical tort within scope of authority
12. Differentiate between an employee (servant) and an independent contractor.
• Principal is liable for physical torts of employee, not liable for independent contractor
13. Describe negligent hiring.
• Principal liable for physical torts of independent contractor if principal has been
negligent in hiring or supervising
14. Under what circumstances will an employee be deemed to be acting within the scope of
employment?
• Act is one employees are generally responsible for
• Takes place during hours employee is employed
• Part of principals biz
• Similar to one principal authorized
 • Principal supplied tools
• Not seriously criminal
15. Describe a master’s liability for negligent and intentional torts.
16. Describe an agent’s liability for torts.
• Always liable for their own

Chapter 31- Business Organizations

1. Define and describe a sole proprietorship, including advantages and disadvantages.
• Ease if formation
• Taxes – just personal income tax no business taxes filed
• Liability – owner fully personally liable
• Limited capital – no stocks, no memberships, just debt
2. Define and describe a corporation, including advantages and disadvantages.
• Limited liability – no personal liability for the debts of the corp
• Transferability of interests – stock can be bought and sold easily
• Duration – corp has perpetual existence
• Logistics – substantial expense and effort to create
• Taxes - much more complicated
3. Differentiate between an S corporation and a Close corporation.
• S corps offer tax breaks – shareholders have the limited liability of a corp with the tax
status of a flow-through entity
• Only one class of stock
• No more than 100 shareholders
• Shareholders cannot be partnerships or corps
• Must be citizens, not nonresident alients
• ALL Shareholders agree the company should be an s corp
• Close corp
• Small number of shareholders (fewer than 50)
• Not publicly traded
• Shareholders active role in management of the enterprise
• Shareholders are very hard to push out, sell, buy stock, etc.
4. Define and describe a limited liability company, including advantages and disadvantages.
• Liability of a corp, tax status of a flow-through
• Easy to form. Only required doc is a charter
• Should have an operating agreement that sets out rights and obligations of members.
• Can have members that are corps, partnerships or nonresident aliens.
5. Define and describe social enterprises.
• Pledge to behave in a socially responsible manner, even as they pursue profits
• People, planet, profits
• 2/3 shareholders must approve
• Company must measure social benefit by standard set objective 3 rd party
 • Website must assess and report regularly on societal and environmental impact
6. Define and describe a general partnership, including advantages and disadvantages, and
dissociation.
• Unincorporated association of 2 or more co-owners
• Flow-through entity – no biz income tax, profits to partners
• Each partner is personally liable for debts
• Easy to form
• All partners have equal share of management
• No shares
7. Define and describe a limited liability partnership.
• A lot like an LLC
• Some states don’t allow lawyers and accountants to operate an LLC. The LLP is their only
option other than a general partnership.
8. Define and describe a professional corporation.
• Much like a C Corp in taxes and liability
• All shareholders must be members of the same profession
• Tax issues can be complicated
• Mostly a legacy institution

UNIT 5: GOVERNMENT REGULATIONS OF BUSINESS

Chapter 27- Accountant’s Liability

1. Describe and explain the purpose and function of the Sarbanes-Oxley Act of 2002.
• Restore investor confidence
• Established the Public Company Accounting Oversight Board (PCAOB)
• Ensure investors receive accurate and complete financial info
• Regulate accounting firms
• All accounting firms that audit public companies must register with board
• Reports to Audit Committee
• Auditors must report to the audit committee not senior mgmt.
• Consulting Services prohibited in most cases
• Conflicts of interest
• Cannot audit a company if clients top officers has worked for accounting firm
within 1 year
• Term Limits on Audit Partners
• 5 years on 5 years off
2. Why are audits of such concern to accountants?
• Accountants are liable
• Vouching – choose a transaction in books and check backward to make sure data
supports
 • Tracing – choose transaction and trace forward check properly recorded
• Must follow
• Generally Accepted Accounting Principles (GAAP)
• Generally Accepted Auditing Standards (GAAS)
3. Describe the proposed changes to audits.
• Required to discuss Critical Audit Matters
• Allow US Companies to use International Financial Reporting Standards instead of GAAP
4. Define and describe the function of an accountant’s “opinion,” including unqualified, qualified,
adverse, and disclaimer opinions.
• Unqualified – most favorable an auditor can give. Statements fairly present the financial
condition
• Qualified – statements are generally accurate, there is an outstanding unresolved issue
• Adverse – Statements do not accurately reflect financial position. Company is lying.
• Disclaimer – auditor does not have enough info to form an opinion
5. Describe an accountant’s liability to clients, as it relates to their contract and to negligence.
• To show liability client must prove
• Acct breached duty to client by failing to exercise the skill and competence
that an ordinary prudent acct would under the circumstances
• Failure to follow GAAP or GAAS
• Violation of duty caused harm to client
6. Define and describe common-law fraud.
• False statement of material fact
• Knows is not true or reckless disregard for truth
• Justifiably relies on statement
• Reliance results in damages
7. Define and describe breach of trust.
• Client information must be confidential
• Use client info only for the benefit of the client
8. Explain an accountant’s liability to third parties, including the Ultramares Doctrine, the Foreseeable
Doctrine, and the Restatement Doctrine.
• Ultramares – Accts are liable if they know that the 3 rd party will
• See their work product
• Rely on the work product
• Know the identity of the 3rd party
• Foreseeable – liable to 3rd party if
• It was foreseeable the 3rd party would receive financial statements from the
client
• 3rd party relies on these statements
• Restatement – liable to
• Anyone they knew would rely on the information
• Anyone else in the same class
9. Describe the Securities Act of 1933.
 • Issuer must register securities before offering them for sale to the public
• Files registration statement with the SEC
• Under §11 auditors are liable for any material misstatement or omission in the
statements they prepare for registration
• Plaintiff must prove
• Registration contained mat misstate or omission
• Lost money
10. Describe the Securities Exchange Act of 1934, including aiding and abetting, whistleblowing, and
joint & several liability.
• Company must file an annual report to the SEC containing audited financial statements
and quarterly reports with unaudited financials
11. Under what circumstances might an accountant face criminal liability?
• Willful violations of 1933 or 1934 act
• Violations of security laws
• IRS imposes criminal penalties on accountants for wrongdoing in tax prep

Chapter 37- Securities Regulation

1. Describe the purpose and function of the Securities and Exchange Commission (SEC).
• Enforces securities laws
• Bring C&D orders, levy fines, confiscate profits
• Cannot bring criminal action
2. What is a security?
• Stock, bonds, treasury stock, notes, debentures, evidence of indebtness, certs of
interest or participation in any profit-sharing agreement.
• Any transaction in which a buyer
• Invests money in a common enterprise
• Expects to earn a profit predominately from the efforts of others
3. Describe the purpose and function of the Securities Act of 1933.
• Regulate the issuance of new securities
• Issuer must register the securities with the SEC unless they qualify for an exemption
4. What types of securities are exempt from this act?
• Inherently low-risk
• Regulated by other statutes
• Not really investments
• Expemptions include
• Gov Securities
• Bank Securities
• Short-term notes (due within 9 months)
• Nonprofit issues
• Insurance policies and annuity contracts (governed my insurance regs)
5. What types of transactions are exempt?
 • Transactions by an issuer not involving any public offering
• Private offering
• Modest amount of money
• Exempt securities are always exempt
6. Describe Regulations D.
• Most popular route for private offerings
• Accredited investors (institutions like banks and insurance companies or wealthy
people). More than 1 million net worth or $200,000 annual income.
• Sophisticated investors – people who can assess the risk of an offering themselves
• Restricted stock – securities must be purchased for investment purposes
7. Define and describe Direct Public Offerings, including advantages and disadvantages.
• A Do-it-yourself IPO
• Company trying to raise capital for the first time
• Cheaper and faster than using an underwriter
• Can be used for marketing
• Lower limit how much a company can raise
• Each investor must receive written info about the company.
8. Define and describe Public Offerings, including an IPO, underwriting, and “going effective.”
• Raising Capital for the first time
• Higher and Unerwriter
• Usually a bank
• Firm commitment – bank buys the stock and assumes risk
• Best efforts – bank assumes no risk
• Registration Statement – Letter to the SEC
• Prospectus – what buyers are given instead of the registration statement
• Going Effective – SEC sends a comment letter listing changes to reg statement. After
final approval from SEC underwriter and issuer agree on price for stock and go effective,
begin sale
9. Define and describe emerging growth companies.
• Issuer of stock with annual gross revenues of less than 1 billion
• Only has to include 2 years of audited financials
• Can require SEC to keep reg secret until 21 days before going effective
• Almost all IPS are EGC
10. Explain the sale of restricted securities, including Rule 144.
• Rule 144 limits resale of 2 types of securities
• Control
• Held by any shareholder who owns more than 10% of stock, or
any officer or director of the company
• Restricted
• Purchased in a private offering (like a Reg D). Cannot be sold for
one year. Once public, cannot be sold for 6 months.
11. Describe the liability under the Securities Act of 1933, including fraud, registration statement, and
 criminal liability.
• Purchaser can demand rescission plus interest or if holds no stock, damages.
• Fraud – seller is liable for making any material misstatement or omission oral or written
• Under section 24, can be prosecuted as criminal
• Reg statement – purchaser can recover from everyone who signed the reg statement if
12. Describe the purpose and function of the Securities Exchange Act of 1934.
• Maintain integrity in the secondary market (after IPOs)
• Must register with SEC if
• Completes IPO under 1933 at
• Securities are traded on national exchange
• Has at least 2000 shareholders AND total assets exceed 10 million
13. Describe the liability under Section 18 of the Securities Exchange Act of 1934
• Liable to buyers if makes false or misleading statement in filing under SEC act 1934
• Buyers who – acted in reliance, can prove that the price was affected by the false filing
14. Define and describe “Insider Trading,” sections 16 and 10(b).
• 10(b) says liable for false public statements or writings. Whether or not security is
registered under the 1934 act.
• Section 16 – officers, directors, shareholders with more than 10% controlling stock
• Report – anyone who becomes insider must report status to the SEC. must
then report any trades in company stock within 10 days. Both SEC and
company required to post them on respective websites within 1 business day
after report is made.
• Disgorge – Insiders must turn over to the corp any profits made from
purchase or sale or sale and purchase of company securities in a 6-month
period
• 10(b) – any insider (see above) who
• With material, non-public information
• Breaches fiduciary duty to his company
• By trading on the information is guilty of insider trading
15. Define and describe “Blue Sky” laws, including exemptions and compliance.
• Stocks not worth more than the clear blue sky
• States cannot regulated stocks that are
• Traded on national exchange
• Exempt under rule 506 or
• Sold to qualified purchasers (accredited investor)
•

Chapter 39- Consumer Protection

1. Describe the function of the Federal Trade Commission (FTC).
a. Regulates business activities that affect consumers
b. Can impose fine, or file suit in federal court on behalf of consumer
2. Describe the function of the Consumer Financial Protection Bureau (CFPB).
 a. Regulate consumer financial products and services (mortgages, credit cards, checking
accts)
b. Consumers file complaints with CFPB, CFPB sends complaints to companies which have 15
days to respond, 60 days to resolve issues.
3. How does the FTC protect against deceptive acts or practices?
a. Section 5
b. Important misrepresentation that is likely to mislead a reasonable consumer
4. Describe the types of acts the Commission will consider unfair, including the three tests used.
a. It causes substantial consumer injury
b. The harm of the injury outweighs any counter benefit
c. Consumer could not reasonably avoid the injury
d. If it does not meet these three tests, may be unfair simply because it violates public policy
5. Describe the types of acts the CFPB considers abusive.
a. Unreasonable advantage of, a lack of understanding on the part of the consumer of the
risks, costs, or conditions of the product or service.
6. Define and describe “bait and switch.”
a. Advertise a product, then disparage or make it unavailable in an effort to sell a different
more expensive item.
7. Describe the rules the FTC has established regarding merchandise bought by mail, telephone, or
online.
a. Must ship within the time stated or if no time stated, within 30 days after receipt of the
order.
b. If cannot ship when promised must send the customer a notice of new date and
opportunity to cancel
c. If not by second date, must send a notice and if customer doesn’t respond to notice, must
cancel
8. Explain what consumers can do when they receive unordered merchandise.
a. Treat it as a gift
9. Explain how the FTC regulates door-to-door sales.
a. Salesperson must notify the buyer of the right to cancel transaction at any time before
midnight of the 3rd business day thereafter, both orally and in writing. Cancelation must be
in writing.
10. Define and describe “payday loans.”
a. Exorbitantly high interest rate loans made to consumers to cover until next paycheck
11. Define and describe the Truth in Lending Act (TILA).
a. Passed to ensure consumers were adequately informed about credit terms before entering
into a loan. Doesn’t regulate interest rates or terms, just that they are disclosed.
12. According to TILA, what facts must be disclosed regarding loans?
a. Amount financed
b. Total payments
c. Finance charge
d. APR
13. Describe how TILA protects consumers with home mortgage loans.
a. Lenders must
i. Make good faith, reasonable effort to determine if a borrower can afford to repay
the loan
ii. Not coerce or bribe appraiser into misstating home’s falue
iii. Cannot charge prepayment penalties on adjustable rate mortgages
iv. Can only give Qualified Mortgages (QMs)
1. All of borrowers debt (not just mortgage) to 43% of income
2. Limit up-front fees to 3%
3. Prohibit harmful features
a. Interest only periods
b. Balloon payments
c. Negative amortization (principal grows instead of being paid
down)
14. Describe how TILA protects consumers with home equity loans.
a. IF a home equity installment loan:
i. Has an APR that is more than 10 points higher than treasury securities or
ii. Cosumer must pay fees and points at closing that are higher than 8 percent
iii. At least 3 days before the loan closing lender must notify consumer that
1. Does not have to go through with the load
2. Could lose house if fails to make payments
iv. Loans less than 5 years may not contain balloon payments
15. Explain how TILA protects consumers regarding credit card fees, debit and ATM fees, and Prepaid
Debit cards.
a. Due dates must be disclosed, set same time each moth and occur at end of business day
b. Bill must be mailed 21 days ahead
c. Increases in rates are not allowed on charges already occurred, only permitted for future
purchases if provided 45 days notice and permits cancellation
d. Late payment fees are limited to $25 first and $35 after
e. Payment applied to whichever debt on card has highest interest rate
f. Under 21 cannot obtain card unless have income or co-signer
16. What is a consumer’s liability for the theft of a credit or debit card?
a. First $50 in charges before notify credit card company
b. If thief steals number but not card, not liable for any charges
c. Debit
i. Report loss before anyone uses, not liable for any unauthorized withdrawals
ii. Report theft within 2 days, bank liable for all above $50
iii. After 2 days, bank only replace funds above $500
iv. More than 60, not responsible for any losses
v. Just number, not card, not liable for anything if reported within 60 days
17. Explain what occurs when there is a dispute with a merchant.
a. Credit Card company reimburse if
 i. If customer makes good faith effort to resolve dispute
ii. Dispute is more than $50
iii. Merchant is in same state where customer lives or 100 miles
18. Define and describe the Fair Credit Billing Act.
a. Protects card holders from card companies
b. If holder has complaint about bill and writes to company within 60 days of bill, company
must acknowledge complaint and within 2 billing cycles investigate complaint and respond
19. Define and describe the Fair Credit Reporting Act, including consumers’ rights to access their
reports and scores.
a. A Consumer report can only be used for legitimate business needs
b. Con rep cannot report obsolete info
i. Ordinary after 7 years, bankrupt 10 years. If $150,000 or more, or a job that pays
more than 75,000/yr there is no limit.
ii. Investigative reports (character, rep, lifestyle) only 3 months
c. Cannot report medical info without consumer permission
d. Employer cannot request report w/out employee permission
e. If make adverse decision against consumer, ust reveal name/address of reporting agency
f. Upon request from consumer, agency must disclose all information in file
g. If consumer tells agency some info is wrong, agency must investigate and forward data to
info provider
20. Describe debt collection under the Fair Debt Collection Practices Act (FDCPA)
a. Can’t be a cunt
21. Describe the purpose of the Equal Credit Opportunity Act (ECOA).
a. No discrimination on race, color, religion, national origin, sex, marital status, age, or
because receiving welfare.

UNIT 6: LABOR AND EMPLOYMENT LAW

Chapter 29- Labor Law

1. What is meant by the term “employment at will?”
• Can be fired for a good reason, bad reason, or no reason at all.
2. Describe the function and purpose of the Family and Medical Leave Act (FMLA).
• Guarantees men and women up to 12 weeks of unpaid leave each year after childbirth,
adoption or a serious health condition in their own or immediate family
3. Define and explain what constitutes a “wrongful discharge.”
• Fired for reason that violates fundamental social rights, duties or responsibilities
• Refusing to violate the law
• Performing a legal duty (jury)
• Exercising a legal right (filing for workers comp, etc)
• Supporting societal values (helping a robbery victim, etc)
4. Explain how contract law effects employment, including truth in hiring, employee handbooks, and
 covenants of good faith.
• Employee handbook creates a contract
5. Define and describe “defamation,” including a “qualified privilege.”
6. Define and describe “intentional infliction of emotional distress.”
7. Define and describe “whistleblowing,” including the False Claims Act, the Civil Service Reform Act,
and Sarbanes Oxley.
• False claims act – permits lawsuits against anyone who defrauds the government.
Recovery is shared between gov and whistleblower
• Civil Service Reform Act –
• Sarbanes Oxley – Protects employees of pub traded comp who provide evidence of
fraud to investers.
8. Explain why, or why not, an employee can be fired for off-duty conduct.
• EEOC prohibits testing for prescription drugs unless a worker seems impaired
9. How does the National Labor Relations Act protect free speech in the workplace?
• Engage in collective activity
• In connection with work conditions
• Not supervisors
• Workers have the right to discuss work conditions whether that discussion takes place in
the lunchroom online, or anywhere else.
10. What rights do employers and employees have regarding guns at the workplace?
• Can prohibit in workplace, but most states allow parking lot.
11. Describe the function and purpose of the Occupational Safety and Health Act (OSHA).
• Ensure safe working conditions
12. Describe the function and purpose of the Fair Labor Standards Act, including minimum wage,
overtime, and child labor.
• Regulates wages and limits child labor
• Hourly wage must be at least 7.25 + 1.5x for any hours over 40 in a week.
• Under 14 may only work in agriculture, entertainment, family biz, babysitting, or
newspaper delivery.
• 14-15 limited hours, nonhazardous jobs (retail)
• 16-17 unlimited hours, nonhazardous jobs
13. Describe the function and purpose of Workers’ Compensation statutes.
• Receive payment for injuries at work
14. Describe the function and purpose of Social Security.
15. Describe the function and purpose of the Employee Retirement Income Security Act (ERISA).
• Protect workers covered by private pension plans
16. Describe the function and purpose of the Patient Protection, the Affordable Care Act, and COBRA.
17. Explain the term “collective bargaining,” including the purpose of the Norris-LaGuardia Act.
• Noris-LaGuardia Act – Prohibited federal court injunctions in nonviolent labor disputes
18. Describe the function and purpose of the National Labor Relations Act, including Sections 7, 8, and
9.
• Wagner Act – National Labor Relations Act – ensures right of workers to form unions
 and encourages management and unions to bargain collectively and productively.
• Section 7 – Guarantees employees right to organize and join unions, bargain
collectively through reps of their choosing, engage in other concerted
activities.
• Section 8 – Prohibits employers from engaging in the following unfair labor
practices
• Interfering with union organizing efforts
• Dominating or interfering with any union
• Discriminating against a union member
• Refusing to bargain collectively with a union
• NRLA established the National Labor Relations Board - adjudicate labor cases
19. Describe the function and purpose of the Electronic Communications Privacy Act.
20. Explain the procedures for organizing a union.
21. Define and describe picketing, including boycotts and lockouts.

Chapter 30- Employment Law

1. What protections are provided by the Fifth Amendment? The Fourteenth Amendment?
a. 14th STATES MUST GIVE equal protection under the law and right to due process
b. 5th prohibits FEDERAL GOV from depriving due process
c. Civil Rights Act of 1964 – Title VII – prohibits employment discrimination
2. What was the purpose of the Civil Rights Act of 1866?
a. Provide freed slaves with the same rights as whites. Does not apply to federal gov.
3. Describe the function and purpose of the Equal Pay Act of 1963.
a. Prevents sex discrimination in pay
4. Describe the function and purpose of the Civil Rights Act of 1964, including prohibited activities.
a. Under Title VII – illegal for employers with 15 or more employees to discriminate based
on race, color, religion, sex or national origin
5. Differentiate between Disparate Treatment and Disparate Impact.
a. Disparate Treatment – treated less favorably because of sex, race, color, religion, nat org
b. Disparate Impact – A rule that, on its face, is not discriminatory, but in practice excludes
too many people in a protected category
6. Define “Hostile Work Environment.”
a. Hostile Environment that affects ability to work of protected category.
7. Define and describe Sexual Harassment, including quid pro quo.
a. Unwelcome sexual advances, requests for sexual favors, sexual conduct that interferes
with ability to work.
b. Quid Pro Quo – any aspect of a job is made contingent upon sexual activity
c. Hostile – talk and activity are so pervasive interfere with ability to work
8. Describe retaliation as it pertains to Title VII of the Civil Rights Act.
a. Adverse action in retaliation to filing a discrimination charge under title VII
9. How are religion and sex protected under the Civil Rights Act of 1964?
a. They are
10. What are the defenses to charges of discrimination?
a. Merit – not liable if shows the person favored was the most qualified
b. Seniority – not liable if using a seniority system. Only violates if was designed with
intention to discriminate. Legal even if it perpetuates past discrimination.
11. Define and describe a “bona fide occupational qualification” (BFOQ).
a. Permitted discriminatory job reqs if they are essential to position in question.
i. Safety – If it would be safer for one gender or another
ii. Privacy – (work in bathrooms, etc)
iii. Authenticity (roles in movies, etc)
12. Explain “affirmative action.”
a. Remedy effects of past discrimination
b. Not required nor prohibited by title VII
c. Courts can order it
d. Some contracts require it
13. Describe the purpose of the Pregnancy Discrimination Act.
a. Can’t fire, refuse to hire, fail to promote woman because pregnant.
14. Describe the purpose and function of the Age Discrimination in Employment Act.
a. With 20 or more workers, can’t discriminate against older than 40
15. Describe the purpose and function of the Rehabilitation Act of 1973.
a. Can’t discriminate on disability by exec branch, fed gov, fed contractors, receiving
federal funds.
16. Describe the purpose and function of the Americans with Disabilities Act, including
accommodations an employer is expected to make and medical questions that can be asked.
a. With 15 or more workers, can’t discriminate on disability
17. Describe the purpose and function of the Genetic Information Nondiscrimination Act.
a. With 15 or more workers may not require geneti testing, use info about genetic makeup
or family medical history as a factor in employment
18. Describe how the Civil Rights Act of 1866 and The Rehabilitation Act of 1973 can be enforced.
a. People can file suit
b. 4 year statute of limitations under 1866. 1 year under title VII
c. Unlimited compensatory and punitive dmg
d. Applies to ALL employers (no matter how many employees)
e. Not enforced by the EEOC
f. Rehab act of 1973 IS enforced by the EEOC, the Dept of Labor, and the Dept of Justice.
19. Describe other statutory claims that can be made.
a. Before bringing suit a plaintiff must file complaint with EEOC