CH 1 Introduction to Law and Legal System

Civil law: In contrast to criminal law, the law that governs noncriminal disputes, such as in lawsuits
(as opposed to prosecutions) over contract disputes and tort claims. In contrast to common law, civil law
is part of the continental European tradition dating back to Roman law. Constitutions: The founding
documents of any nation-states legal system. Criminal law: That body of law in any nationstate that
defines offenses against society as a whole, punishable by fines, forfeitures, or
imprisonment. Jurisprudence: The philosophy of law. There are many philosophies of law and thus many
different jurisprudential views. Legal positivism: A jurisprudence that focuses on the law as it is
the command of the sovereign. Nation-states: The basic entities that comprise the international legal
system. Countries, states, and nations are all roughly synonymous. State can also be used to designate
the basic units of federally united states, such as in the United States of America, which is a
nationstate. Natural law: A jurisprudence that emphasizes a law that transcends positive laws (human
laws) and points to a set of principles that are universal in application. Sovereign: The authority within
any nation-state. Sovereignty is what sovereigns exercise. This usually means the power to make and
enforce laws within the nation-state. Statutes: Legislative directives, having the form of general rules
that are to be followed in the nation-state or its subdivisions. Statutes are controlling over judicial
decisions or common law, but are inferior to (and controlled by) constitutional law. Treaties: Formal
agreements concluded between nation-states.
CH 3 Courts and the legal process
Arbitration: A process agreed to by disputing parties, involving an arbitrator or arbitral panel (usually
three), in which a final and binding award is made, enforceable through the courts if
necessary. Concurrent jurisdiction: When both state and federal courts have subject matter jurisdiction
of a case, there is concurrent jurisdiction. Only one court will hear the case between the parties and
will hear all causes of action, whether based on state or federal law. Directed verdict: At the close of one
partys evidence, the other party may move for a directed verdict, or renew that motion at the close of all
parties evidence. A judge will direct a verdict if there is no real issue of fact for reasonable jurors to
consider and if the law as applied to the facts in evidence clearly favors the party who requests
the directed verdict. Diversity of citizenship jurisdiction: Subject matter jurisdiction in federal court
where the plaintiff is a citizen of one state, no defendant is also a citizen of that state, and the amount in
controversy exceeds $75,000. Federalism: The idea, originating with the Constitutions Founding
Fathers, that the United States legal and political system would be one of governance shared between the
states and the federal government. Federal question jurisdiction: Federal court subject matter
jurisdiction based on a complaint that uses a federal statutory, regulatory, or constitutional law as a cause
of action. Judgement n.o.v.: Judgment notwithstanding the verdict may be awarded after the jury
returns a verdict that the judge believes no rational jury could have come to. Judgment n.o.v. reverses the
verdict and awards judgment to the party against whom the jurys verdict was made. Mediation: A
process where disputing parties agree to bring their differences to an experienced mediator,
knowledgeable about the type of dispute involved, and in which the mediators recommendations may
be accepted or rejected by either or both parties. Motions: Written requests made to a presiding judge.
These include motions to dismiss, motions for summary judgment, motions to direct an opposing party
to divulge more in discovery, motions for a directed verdict, motions for judgment n.o.v., and many
others. Personal jurisdiction: Each court must have subject matter jurisdiction and personal jurisdiction
over at least one named defendant. If the defendant is a nonresident where the lawsuit is filed, there may
be constitutional issues of personal jurisdiction arising from the due process clause of the Fourteenth
Amendment. One state should not claim personal jurisdiction over a nonresident unless various tests are
met, such as minimum contacts and the purposeful availment test. Pleadings: The initial documents
filed by parties in a lawsuit. Removal: The right of a defendant to remove a case from state to federal
court. Res judicata: The matter has been adjudicated. The same case or controversy cannot be
heard and concluded in one court and relitigated in another. The same parties may have different issues
and disputes, but a final judgment in a court that has jurisdiction over the case or controversy
forever settles the matter. Statute of limitations: Each state and the federal government has
legislated certain time periods beyond which plaintiffs are not allowed to file civil lawsuits. (There are
some statutes of limitations for some kinds of criminal offenses, as well.) Subject matter jurisdiction:
Legal authority to hear and decide a case or controversy. Summary judgment: As in a directed verdict,
when a judge grants summary judgment, she has concluded that there are no matters of law or fact on
which reasonable people would disagree. Summary judgment is a final order, and it is appealable. Writ of
certiorari: The writ issued by a higher court that grants review of the decision of a lower court. In the
United States, the Supreme Courts writ of certiorari is highly sought by those who would have the court
review a state Supreme Court judgment or that of a federal circuit court of appeals. Most of the cases
heard by the Supreme Court are through the granting of a petitioners appeal to have the writ issued.

CH 4 Constitutional Law and US Commerce

Commerce clause: Article I, Section 8, of the US Constitution is generally regarded as the legal
authority by which the federal government can make law that governs commerce among the states and
with foreign nations. Dormant commerce clause: Even when the federal government does not act
to make rules to govern matters of interstate commerce, the states may (using their police powers), but
they may not do so in ways that unduly burden or discriminate against interstate commerce. Equal
protection of the laws: A phrase in the Fourteenth Amendment to the United States Constitution
requiring that states guarantee the same rights, privileges, and protections to all citizens. Federalism:
The idea, built into the structure of the Constitution, that states and the federal government have
concurrent powers. In effect, federalism is the concept of shared governance between the states and the
federal government. Judicial review: The power the Supreme Court has to say what the US Constitution
means. Because the Constitution speaks in broad terms, the interpretations of the Supreme Court as to
the meaning of its provisions define what the Constitution means. The Constitution can only be changed
by amendment or by further interpretation by the Supreme Court. Preemption: Based on the supremacy
clause, the preemption doctrine holds that state and federal laws that conflict must yield to the superior
law, which is federal law. Procedural due process: In matters of civil or criminal procedure, the
Constitution requires that both states and the federal government provide fair process (or due process) to
all parties, especially defendants who are accused of a crime or, in a civil case, defendants who
are served with a summons and complaint in a state other than their residence. Separation of power: In
the original design of the Constitution, the executive, legislative, and judicial branches were all given
powers that could modify or limit the powers of the other branches of government. For example, the
president wields a veto power over congressional legislation. Substantive due process: A doctrine of the
Supreme Court that negated numerous laws in the first third of the 20th century. Its use in the past 80
years is greatly diminished, but it survives in terms of protecting substantive liberties not otherwise
enumerated in the Constitution. Takings clause: In the Fifth Amendment, the government is required
to provide compensation to the owner for any taking of private property. The same requirement is
imposed on states through the due process clause of the Fourteenth Amendment (under
selective incorporation).
CH 5 Admin Law
Administrative agencies: Governmental units, either state or federal, that have specialized expertise
and authority over some area of the economy. Administrative law judge: The primary hearing officer
in an administrative agency, who provides the initial ruling of the agency (often called an order) in any
contested proceeding. Administrative procedure act (apa): The federal act that governs all agency
procedures in both hearings and rulemaking. Code of Federal Regulations (cfr): A compilation of all
final agency rules. The CFR has the same legal effect as a bill passed by Congress and signed into law by
the president. Delegation doctrine: As a matter of constitutional law, the delegation doctrine declares
that an agency can only exercise that power delegated to it by a constitutional authority. Enabling act:
The legislative act that establishes an agencys authority in a particular area of the economy. Exhaustion
of administrative remedies: A requirement that anyone wishing to appeal an agency action must wait
until the agency has taken final action. Federal register: The Federal Register is where all proposed
administrative regulations are first published, usually inviting comment from interested parties.
CH 7 Introduction to tort law
Actual cause (causation in fact): The actual cause of negligence is sometimes called the but for event
that is a breach of duty on the part of the defendant. Assumption of risk: A defense to a plaintiffs
action in tort where the plaintiff has knowingly and voluntarily entered into a risky activity that results in
injury. Breach of the duty of due care: Any act that fails to meet a standard of the persons duty of due
care toward others. The standard is usually described as the standard of behavior that is expected of a
hypothetical reasonable person under the circumstances. Certain professionals, however, may be held
to a higher standard than the ordinary person. Circumstantial evidence: Evidence that is not direct but
that provides judges and juries with facts that tend to show legal liability. Comparative negligence: In
most states, the negligence of the plaintiff is weighed against the negligence of the defendant, and where
the defendants negligence outweighs the plaintiffs, the plaintiff can recover against the defendant even
though the plaintiff has caused some of his or her own injuries. Compensatory damages: An award of
money damages to make the plaintiff whole, as opposed to additional damages (punitive) that punish
the defendant or make an example of defendant. Contributory negligence: Actions of a plaintiff
that contribute to his or her own injuries. In a few states, comparative negligence is a complete bar to the
plaintiffs recovery. Negligence: A breach of the duty of due care. Negligence per se: An act of the
defendant that violates a statute regulation or ordinance can be used to establish a breach of the duty of

due care. Proximate cause: Sometimes known as legal cause, proximate cause must be shown as well as
actual cause, so that an act of the defendant will not result in liability if the consequences of the
negligent act are too remote or unforeseeable. Public figure: Based on the First Amendment of the US
Constitution, a public figure cannot recover in a defamation case unless the plaintiffs defamation was
done with actual malice. Punitive damages: Punitive damages are awarded in cases where the conduct
of the defendant is deemed to be so outrageous that justice is only served by adding a penalty over and
above compensatory damages. Res ipsa loquitur: Literally, the thing speaks for itself. In tort cases, res
ipsa loquitur creates a presumption that the defendant was negligent because he or she was in exclusive
control of the situation and that the plaintiff would not have suffered injury but for someones
negligence. Res ipsa loquitur shifts the burden to the defendant to prove that he or she was
not negligent. Strict liability: Liability without fault. This may arise when the defendant engages in
ultrahazardous activities or where defective product creates an unreasonable risk of injury to consumers
or others.
CH 6 Criminal Law
Arson: The intentional setting of a fire to any building, whether commercial or residential, and whether
or not for the purpose of collecting insurance proceeds. Assult: An attempt to commit a battery, or the
deliberate placing of another in fear of receiving an immediate battery. Battery: The unlawful application
of force to another person. The force need not be violent. Beyond a reasonable doubt: The prosecutor
must prove how each element of the offense charged is beyond a reasonable doubt. Burglary: The
crime of breaking and entering the dwelling place of another with intent to commit a felony
therein. Computer crime: Any crime (usually theft of some sort, or sabotage) committed with the aid of
a computer. Double jeopardy: a procedural defence that forbids a defendant from being tried again on
the same (or similar) charges following a legitimate acquittal or conviction. Embezzlement: A form of
larceny in which a person entrusted with someone elses property wrongfully takes sole possession or has
the intent to take sole possession. Entrapment: When a police officer or other government agent
entices people to commit crimes they were not disposed to commit without the government agents
suggestions and inducements. Exclusionary rule: Evidence obtained in violation of constitutional rights
from the Fourth, Fifth, and Sixth Amendments are generally not admissible at trial. Extortion: The
wrongful collection of money or something else of value by anyone by means of a threat. False pretense:
A form of larceny in which the rightful owner is tricked into giving up title to his or her property. Felony:
A serious kind of crime, usually involving potential imprisonment of six months or more. Forgery: False
writing of a document of legal significance (or apparent legal significance) with intent to defraud. Grand
jury: A group of citizens that hear the states evidence and determine whether a reasonable basis
(probable cause) exists for believing that a crime has been committed and thus that a
criminal proceeding should be brought against a defendant. Homicide: The killing of one person
by another without legal excuse. Information: A formal charge that a less serious crime has
been committed. Indictment: A formal charge that a serious crime has been committed; where a grand
jury is convened, an indictment may issue if probable cause is found. Justifiable homicide: When the law
permits one person to kill another. Larceny: The wrongful taking and carrying away of the
personal property of another with intent to steal the same. Mens rea: the intention or knowledge of
wrongdoing that constitutes part of a crime, as opposed to the action or conduct of the
accused. Misdemeanors: Crimes that are less serious than a felony, usually involving punishment of six
months in prison or less. Perjury: The crime of giving a false oath, either orally or in writing, in a judicial
or other official proceeding. Plea bargaining: A defendants plea of guilty, given in exchange for
a recommendation from the prosecutor to the judge for a limited or lesser sentence for the
defendant. Receiving stolen property: Depending on the value of the property, if you receive property
from another person, knowing that it has been stolen, you have committed either a misdemeanor or
a felony. Robbery: Larceny from a person by means of violence or intimidation. White-collar crime: Any
number of crimes, usually involving a business context; any illegal act committed by nonviolent means to
obtain a personal or business advantage.
CH 8 Contracts
Expicitness: degree to which the agreement is manifest to those not party to it Mutuality: Mutuality
takes into account whether promises are given by two parties or only one. Enforceability: the degree to
which a given contract is binding Completion: whether the contract is yet to be performed or whether
the obligations have been fully discharged by one or both parties Express contract: A contract in words,
orally or in writing. Quasi-contract: A contract imposed on a party when there was none, to avoid unjust
enrichment. Bilateral contract: A contract where each party makes a promise to the other. Unilateral
contracts: A contract that is accepted by the performance of the requested action, not by
a promise. Void: An agreement that never was a contract. Voidible contract: A contract that can

be annulled. Unenforceable contract: A contract for which the nonbreaching party has not remedy for its
breach. Executory: A contract that has yet to be completed. Partially executed: A contract in which one
party has performed, or partly performed, and the other has not. Executed: A contract that has
been completed. Acceptance: A manifestation of the willingness to be bound by the terms of the
offer. Consideration: The surrender of any legal right in return for the promise of some benefit; the
price paid for what is received. Promisor: The one who makes a promise. Promisee: The one to whom
a promise is made. Legal detriment: The giving up by a person of that which she had a right
to retain. Promissory estoppel: To be prohibited from denying a promise when another has subsequently
relied upon it. Capacity: The mental state of mind birthday. sufficient to understand that a contract is
made and its consequences. Disaffirm: To legally disavow or avoid a contract. Consequential damages:
Money paid by one party to another to discharge a liability. Nominal: A token amount of money
paid when the breach has caused no loss. Incidental damages: Money paid to the nonbreaching party in
an attempt to avoid further loss on account of the breach. Punitive damages: Money awarded to the
nonbreaching party in excess of any loss suffered to punish the breaching party. Remit: A judicial
reduction in the amount of a damage award (the noun is remission). Specific performance: An order
directing a person to deliver the exact property (real or personal) that she contracted to sell to the
buyer. Restitution: To restore to one party what was delivered to the other.
CH 9 Product liability
Negligence: The legal theory imposing liability on a person for the proximate consequences of
her carelessness. Strict product liability: Liability imposed on a merchant-seller of defective goods
without fault. Warranty: A guarantee Express warranty: Any manifestation of the nature or quality of
goods that becomes a basis of the bargain. Full warranty: Under the Magnuson-Moss Act, a complete
promise of satisfaction limited only in duration. Horizontal privity: The relationship between the original
supplier of a product and an ultimate user or a bystander affected by it. Implied warranty of fitness for
particular purpose: A sellers implied warranty that the goods will be suitable for the buyers expressed
need. Implied warranty of merchantability: Merchant-sellers implied warranty that goods are suitable
for the goods normal uses. Limited warranty: Under the Magnuson-Moss Act, a less-than-full
warranty. Implied warranty: A warranty imposed by law that comes along with a product
automatically. Privity: The relationship between two contracting parties. Vertical privity: Privity between
parties (manufacturer and retailer) occupying adjoining levels in product distribution
systems. Preemption: The theory that a federal law supersedes any inconsistent state law or
regulation. Statue of repose: A statute limiting the time that a product manufacturer can be liable for its
defects.
CH 16 Employment Law
Employment at will: The common-law doctrine that allows employers to discharge an employee at any
time and for any reason or for no reason. Courts have created exceptions for bad reasons. Employment
discrimination: Treating employees or job applicants unequally on the basis of race, color,
national origin, religion, sex (gender), age, or disability; prohibited by federal statutes and many
state statutes. Disparate treatment: A form of employment discrimination that results when an
employer intentionally discriminates against employees who are members of protected classes. Disparate
impact: A form of employment discrimination resulting from employer practices that appear to be
neutral but that have a discriminatory impact on protected classes. Sexual harassment: Demands for
sexual favors in return for job promotions or other benefits, or language or conduct so sexually
offensive that it creates a hostile work environment, disadvantaging the employee on the basis
of sex. Bona fide occupational qualifications (bfoqs): Employers may require that employees be of a
certain religion, sex, or national origin where that requirement is made in good faith and goes to the
essence of the business. Race and color cannot be BFOQs. Affirmative action: Actions by an employer,
either court-ordered or voluntary, that are designed to make up for past discrimination by hiring or
promoting previously disadvantaged classes of workers.
CH 17 Labor-management relations
Unfair labor practices: Acts that violate the Labor Relations Act, such as failing to bargain in good
faith. Unfair labor practices can be committed by employers and by unions. Closed shop: A firm where
potential employees must belong to a union before being hired and must remain a member
during employment. Exclusive right to bargain: After a union election, the union will be, by law,
the exclusive bargaining agent for a group of employees. Collective bargaining agreement: The contract
between the union and the employer. Lockout: A management tactic designed to gain bargaining
advantage for the company by refusing to allow union members to work (and thus depriving them of their
pay). Compulsory unionism: Employers must not discriminate where there is a closed shop, a union

shop, maintenance-of-membership agreements, or preferential hiring agreements. Union shop: This

exists where the bargaining unit and the employer have agreed that the employer can hire either
labor union members or nonmembers but that all nonunion employees must become union members
within a specified period of time. Economic strike: Employees go on strike to force an employer to give in
to workers demands. Secondary boycotts: Employees go on strike to force an employer to give in
to workers demands.
CH 33 International Law
Failing state: A nation-state where substantial parts of the geographic territory in that nation are no
longer effectively controlled by the central government. Treaty: An agreement between two or more
nation-states. In US law, a treaty has the same standing as a federal statute. Nation-state: Under
international law, the common term for a country or a nation. Conventions: Multilateral treaties that
are sponsored by an international agency or institution (e.g., the United Nations). Forum-selection clause:
In a contract, national or international, the parties may specify the court where any disputes between the
parties will be settled. See the Bremen case. Customary international law: Rules of law derived from
the consistent conduct of nationstates acting out of the belief that the law required them to act that
way. Sovereign immunity: A long-standing doctrine under customary international law that recognizes a
nation-states immunity from legal claims. Although absolute sovereign immunity was widely
held through the greater part of the twentieth century, a more restrictive doctrine began to take hold
after World War II, one that denied sovereign immunity for a sovereigns commercial or private
acts. Territorial principle: A nation-state has the power to make and enforce laws with regard to events
taking place within its political/geographic territory. Nationality jurisdiction: Under customary
international law, nation-states may exercise jurisdiction over their citizens (nationals) even when
the citizens actions in question take place beyond their borders. Objective territoriality: Under
customary international law, nation-states may exercise jurisdiction over noncitizens when the actions of
those noncitizens have a direct and foreseeable impact on the nation-state claiming jurisdiction. Forum
non conveniens: A common-law doctrine used in cases where two different federal court systems
have both subject matter jurisdiction and personal jurisdiction over the parties. Using forum non
conveniens, a court may refuse to hear a case if there is an alternative forum that is available and
adequate and if public and private interest factors point to the other nations legal system as the proper
venue. Act-of-state doctrine: A US judicial doctrine that avoids making any determination on the merits
of the case if doing so would cause the court to sit in judgment of the legal validity of public acts by a
foreign sovereign.

Ch 2 Corporate Social Responsibility and Business Ethics

Conscious capitalism: Companies that practice conscious capitalism embrace the idea that profit and prosperity can and
must go hand in hand with social justice and environmental stewardship. Core values: Values that are
generally recognized as positive ethical characteristics of an individual or a business organization. People may have strong
views about other kinds of ethical values, but core values are more widely accepted. Deontology: A theory that judges
the morality of choices not by results (or goods) but by adherence to moral norms. The duty to act in accord with
these norms is one that bears no relation to the expected consequences of the action. Public goods: Goods that are useful
to society (parks, education, national defense, highways) that would ordinarily not be produced by private enterprise.
Public goods require public revenues (taxes) and political support to be adequately maintained. Social contact: The idea
that people in a civil society have voluntarily given up some of their freedoms to have ordered liberty with the assistance
of a government that will support that liberty. Hobbes and Locke are generally regarded as the preeminent social
contract theorists. Stakeholder Theory: The view that all stakeholders to a corporate decision deserve some kind of
moral consideration and that corporations that keep all stakeholders in mind will, over the long term, deliver
superior results to shareholders. Utilitarianism: The theory that the right moral act is the one that produces the greatest
good for society. Virtue ethics: Aristotles perspective on finding happiness through the application of reason in
human affairs advises continual practice to develop habits of virtuous moral character. In a modern setting, deliberating on
core values and their application to individual and corporate ethical dilemmas and adhering to the recommendations of
core values analysis would provide similar practice.
Ch 18 Partnerships: General Characteristics and formation
Partnership: Two or more persons carrying on a business as co-owners for profit. Entity theory: The concept of a
business firm as a legal person, with existence and accountability separate from its owners. Aggregate theory: The theory
that a business firm is not an entity but rather a collection of individual owners who bind themselves together to share
profits. Express partnership: A partnership intentionally created and recognized, orally or in writing. Implied partnership:
A partnership that arises where parties behavior objectively manifests an intention to create a relationship that the
law recognizes as a partnership. Partnership by estoppel: Partnership arising when in fact none exists, where one allows
himself or herself to be represented as a partner, thus incurring partnership liability.
Ch 19 Partnership Operation and Termination
Fiduciary duty: The highest duty of good faith and trust, imposed on partners as to each other and the firm. Delectus
personae: The theory that a new partner can only be admitted to a firm with the unanimous consent of all. Tenants in
partnership: Under UPA, how partnership property is held by the partners: jointly. Charging order: A court order
directing a partnership to pay a partners judgment creditor the distribution that the partner would normally receive.
Statement of partnership authority: A public filing setting out or limiting partners authority. Statement of denial: A public
filing that a partner has no authority to perform some act(s) on the firms behalf or that a person is not a partner. Statement
of dissociation: A public filing that a partner is withdrawing from the firm. Conduit theory: The theory that a
business entity does not itself owe taxes on income; it only acts as a pass-through for its members to receive income.
Dissolution: A legal severance or breaking up; under UPA the change in relations caused by a partners withdrawal from
the firm. Dissociation: Under RUPA, the withdrawal of a partner from the firm. At-will partnership: A partnership with no
stated term of continuation or existence. Term partnership: A partnership with a time period for its duration expressed.
Winding up: Finishing business at hand,settling accounts, and terminating a firm.
Chapter 20 Hybrid Business Forms
Limited partnership: A partnership formed by two or more persons under state law and having one or more general
partners and one or more limited partners. Certificate of limited partnership: The document filed with the appropriate state
authority that, when approved, marks the legal existence of the limited partnership. Limited partners: A member of a
limited partnership who is not involved in running the firm but rather stands as a passive investor. Limited liability
company: An unincorporated organization of one or more persons or entities established in accordance with
applicable state laws and whose members may actively participate in the organization without being personally liable for
the debts, obligations, or liabilities of the organization. S corporation: A corporation whose owners elect to have it treated
as a partnership for tax purposes. Limited liability partnership: A partnership in which some or all partners (depending on
the jurisdiction) have limited liability. Limited liability limited partnership: A limited partnership that has chosen to limit
the liability of the general partnership under state law. Moral hazard: The lack of incentive to guard against a risk when a
person is protected against it, as by being afforded limited liability.
Ch 21 Corporation: General Characteristics and Formation

Concession theory: Incorporation was a concession given by royal grant of a sovereign. Joint-stock companies:
Companies in which stock or company funds are held jointly. Foreign corporations: A company incorporated outside the
state in which it is doing business. Publicly held corporation: A firm that is traded publicly through the sale of
stock subscriptions, has many shareholders and widely dispersed ownership, and in which shareholders have little control.
Closely held corporation: A corporation with few shareholders, so that separation of ownership and control may be
less pronounced than in a publicly held corporation or even nonexistent. Transfer of interest: Transferring an ownership all
partners must consent to the transfer. interest through the sale of stock from one person to the next. Corporation is a
person: When corporations are granted the same rights as natural persons. Piercing the corporate well: The protection of
the corporation (the veil) is set aside for litigation purposes, and liability can be imposed on individual shareholders
or entities that exist behind the corporation. Personal liability: A failure to follow corporate formalitiesfor
example, inadequate capitalization or commingling of assetscan subject stockholders to personal liability. Nonprofit
corporation: A corporation in which no part of the income is distributable to its members, directors, or officers. Municipal
corporation: A governmental entity; also called a public corporation. Professional corporation: A corporation of
lawyers, doctor, accountants, or other professionals who enjoy the same benefits in corporate form as do other
corporations. Business corporation: In contrast to public (municipal), professional, or nonprofit corporations, business
corporations are of two types: publicly held and closely held, referring to how the stock is held within the corporation.
Corporate charter: The basic document of incorporation filed in the appropriate public office, also referred to as articles
of incorporation. Promoters: An individual who takes the initial steps needed to form a corporation. Preincorporation
stock subscriptions: Offers by would-be investors to purchase stock in a corporation that is not as yet formed. De jure
corporation: A corporation that exists in law, having met all of the necessary legal requirements. De facto corporation: A
corporation that exists in fact, though it has not met all of the necessary legal requirements. Corporation by estoppel: Use
of the equitable principle of estoppel by a court to treat a business as a corporation.
Ch 23 Corporate Powers and Management
Express powers: Powers granted to a corporation through statute and its articles of incorporation. Implied powers:
Corporate powers that extend beyond those powers explicitly defined as express powers. Ultra vires doctrine: A doctrine
holding that certain legal consequences attach to an attempt by a corporation to carry out acts that are outside its lawful
powers. Regular voting: The principle of one share, one vote. Also called statutory voting. Shareholder quorum: Minimum
number of shareholders needed to have a valid vote. Also, when a simple majority of the shares entitled to vote is
sufficient to effectuate a meeting. Cumulative voting: Shareholder voting method permitting the holder to distribute his
total votes in any manner that he choosesall for one candidate or several shares for different candidates. Proxy: A
method whereby a shareholder elects a representative, commonly another individual or a written document, through which
the shareholder casts his vote at the annual meeting. Voting agreement: An agreement made in advance among
shareholders to vote in a particular manner. Also called shareholder agreement. Voting trust: A trust created
among shareholders where the shareholders elect a trust agreement, the provisions of which are effectuated by a voting
trustee. Preemptive rights: The rights of shareholders to protect dilution of their percentage of share ownership. Derivative
action: Lawsuit brought on behalf of the corporation by a shareholder when the directors refuse to act. Disinterested
director: A director who has no interest in the disputed transaction. Fiduciary: A person to whom power is entrusted for
the benefit of another. Duty of loyalty: Fiduciary obligation requiring loyalty of directors and officers to the corporation
and its shareholders. Direct interlock: A situation where one person sits on the board of directors of two different
companies. Indirect interlock: A situation where directors of two different companies serve jointly on the board of a
third company. Duty of care: Fiduciary obligation upon directors and officers to act with the care an ordinarily prudent
person in a like position would exercise under similar circumstances. Business judgement rule: Presumption given by
the courts to corporate directors that their actions were informed and done with good faith and with an honest belief that
the actions were in the best interests of the corporation. Duty of good faith: Fiduciary duty to act honestly and avoid
violations of corporate norms and business practices. Constituency statutes: Statues that permit corporation directors to
take into account interests other than maximizing shareholder value. Indemnification: A method of protecting directors
and officers whereby the corporation agrees to pay legal expenses incurred by the directors or officers.
Ch 26 Antitrust Law
Monopoly: A company has a monopoly where it has a large enough percentage of a given market segment to exercise
monopoly power in a manner that would adversely affect competition. Monopoly Power: The ability of a monopoly
to dictate prices and other characteristics in a given market segment. Divestiture: A remedy, occasionally used, to break up
a firm into smaller, independent units, where the firm has exercised its monopoly power in ways that harm competition.
For example, the breakup of AT&T was a divestiture. Consent decree: A judicial order entered into by defendants in lieu
of litigating, in which they admit their guilt but agree to not carry on certain activities complained of. Failure to comply

with the terms will result in fines. Similar to an injunction or a cease and desist order. Treble damages: For private
lawsuits, successful plaintiffs may collect three times the amount of damages actually suffered. Rule of reason: A judicial
test balancing the positive effects of an agreement against its potentially anticompetitive effects. Per se Illegal: Unlawful
on its face. Applies to acts that by their very nature are regarded as impairing competition. For example, price-fixing is
said to be per se illegal under the Sherman Act. Price-fixing: Agreements, usually among competitors, that directly
set prices, exchange price information, control output, or regulate competitive benefits. Horizontal restraint of trade: An
agreement that in some way restrains competition between rival firms competing in the same market. Vertical restraint of
trade: Any restraint on trade created by agreements between firms at different levels in the manufacturing and distribution
process. Territorial allocation: Horizontal allocations of territory are per se illegal under Section 1 of the Sherman Act. But
producers may wish to assign dealers an exclusive area within which to sell their products. For these vertical allocations
of territory, the rule of reason is followed. Resale price maintenance: An agreement between a manufacturer and a retailer
in which the manufacturer specifies what the retail prices of its products must be. Exclusive dealing agreement: A contract
as between buyer and sellerwhere the parties agree only to deal with each other. Trying contract: A form of exclusive
dealing, prohibited under Section 3 of the Clayton Act, forcing you to take an additional product in order to get the
product you really want. Primary-line injury: Price discrimination under the Robinson-Patman Act that directly injures a
competitor, in violation of Section 2(a). Secondary-time injury: Price discrimination under the Robinson-Patman act
that injures a competitor of a buyer, in violation of Section 2(a). Relevant market: For a court to determine if a firm has a
dominant market share, it must first define the relevant market, which consists of two elements: a relevant product market
and a relevant geographic market. Relevant product market: The market that includes all products that have
identical attributes or are reasonably interchangeable. If customers treat different products as acceptable substitutes for
one another, the products are reasonably interchangeable. Horizontal merger: A merger between competitorsfor
example, between two bread manufacturers or two grocery chains competing in the same locale. Vertical merger: A
merger between a supplier and a customer. If the customer acquires the supplier, it is backward vertical integration; if the
supplier acquires the customer, it is forward vertical integration. Conglomerate merger: A merger between
companies whose businesses are not directly related. Relevant geographic market: The market that is the territory or
territories within which a company markets its products or services. Concentrated Industry: An industry in which a
large percentage of market sales is controlled by either a single firm or a small number of firms.
Ch 27 Unfair Trade Practices and the Federal Trade Commission
Trade regulation rules: Made by the FTC, these rules have the same force and effect as a federal statute. Each rule must
pass through a long process, including publication of the proposed rule in the Federal Register, hearings or written
comments, and final publication in the Code of Federal Regulations. Bait and switch: A sales pitch where the
retailer baits the prospective customer by dangling a very attractive offer, which disappears or is disparaged once the
customer arrives in the store. Product disparagement: Saying defamatory things about a competitors product. It is a tort of
defamation under common law but is actionable under Section 5 of the FTC Act where any specific untrue statement is
made about a competitors product. Corrective advertising: A rarely used power of the FTC to require a company
to correct previously misleading advertising. It does so by requiring the company to pay for further advertising that admits
to the deception and makes corrected statements that are not misleading.