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BUSINESS LAW PRINCIPLES.
Term Paper ID:18195
Essay Subject:
Contracts, agency relationships, partnerships, corps., property, sales, negotiable instruments, secured transactions.... More...
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Paper Abstract:
Contracts, agency relationships, partnerships, corps., property, sales, negotiable instruments, secured transactions.
Paper Introduction:
The purpose of this paper is to discuss business law principles. The focus is on several distinct areas of law that are pertinent to conducting business, such as contracts, agency relationships, partnerships, corporations, property, sales, negotiable instruments, and secured transactions. This paper does not claim to address the wide-ranging body of knowledge that encompasses business law but, instead, defines the terms, summarizes the rules and, where appropriate, notes the remedies.
Contracts
Contracts are legally binding agreements that are formed when an offer is made, followed by an acceptance, and supported by consideration.1 The offer is an expressed willingness to make a binding agreement on certain terms. The acceptance is an unqualified and unconditional assent to the offer. The
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Ibid.7. Discussed by Michael G. Anderson, et al, 1987.9. Qualifying mask works and the semiconductor chip products inwhich they are embodied are protected from piracy by the Semiconductor ChipProtection Act for a period of ten years.36 The remedy most commonly used by property owners for violations ofproperty rights is an action for money damages when the property isnegligently or willfully harmed, taken, or destroyed by the act of another. Thecollateral assures that the creditor will recover in the even of default.For instance, in real estate loans the security used is a mortgage; upondefault the realty can be sold to pay off the debt. Irwin, Inc., 198 .14. The details of an express contract include identification of theitem to be purchased or sold, the date of purchase or sell, and the priceand terms of the offer. Trachtman, 1987.28. The Law for Small Businesses, Seattle:Madrona Publishers. Defined by John R. For example, airplanes flying atreasonable heights do not violate the rights of landowners; however, if anairplane flies low enough to interfere with the landowner's use of the land(such as take off or landing patterns), then a violation of air rights mayoccur.26 Buildings and fixtures refer to any structure or personal propertythat has been attached as part of the real property. The property inwhich the interest is held is called the collateral and the party holdingthe interest is called the secured party. Trachtman, Michael G. Anderson, et al, 1987. Upon default a securedparty may repossess the collateral from the buyer if this can be donewithout a breach of the peace.45 Endnotes1. Living Inc. Defined by Leonard D. Homewood, IL: Richard D. An agent differs from an employeein that the employee is hired only to work under the control theemployer.1 The agency relationship usually involves contractual liability. Realproperty means land and things permanently affixed to land. An expresscontract is one in which all the details are spelled out, whether oral orwritten. The law defines goods as all things that are movable at the time of making the contract except for the money used as payment. Substantial protection and assurance of payment are given toany person to whom the instrument might be transferred.41 In order to be legally negotiable, an instrument must be (a) inwriting and (b) signed by the maker or drawer; it must contain (c) apromise or order (d) of an unconditional character (e) to pay in money (f)a certain sum; (9) it must be payable on demand or at a definite time; (h)it must be payable to order or bearer; and (i) a party who is a drawee mustbe identified with reasonable certainty.42 If any uncertainty exists as towhether a paper is negotiable, it is deemed nonnegotiable and governed bythe rules of contract law.43Secured Transactions Secured transactions are debtor-creditor relationships whereby thedebtor provides some type of collateral in exchange for credit. All rights in a particularobject of property can be held by one individual, in which case it is saidto be held in severalty; or ownership right may be held concurrently by twoor more individuals, in which case it is said to be held in cotenancy.There are limitations on ownership in that property is subject to thegovernment's powers to tax, to regulate under the police power, and to takeby eminent domain. Reference Copyright Basics, Circulars R1, R15a, R38a, Washington D.C.: Copyright Office, Library of Congress.35. For instance, the income of acorporation is often taxed twice, once under the federal income tax lawsand a second time by way of distribution of dividends to shareholders.However, double taxation can be alleviated through establishing SubchapterS corporations in which a corporation pays no income tax but, instead, eachshareholder's portion is taxed as personal income.2 A corporation may expand its operations. Remedies of theseller may include (1) a lien on the goods until the seller is paid; (2)the right to resell goods; (3) the right to cancel the sales contract; and(4) the right to bring an action for damages or for the purchase price.Remedies of the buyer may include (1) rejection of nonconforming goods; (2)revocation of acceptance; (3) an action for damages; (4) an action forbreach of warranty; (5) cancellation of the sales contract; (6) the rightto resell the goods; and (7) the right to bring an action to recover thegoods.4 Negotiable Instruments Negotiable instruments provide a substitute for money and can be usedas a means of credit. There are limitations as to establishing Subchapter S corporations. Anderson, et al, 1987.22. Goodwin, 198 .31. Inc. That is, partners hold joint title topartnership property. Property is also subject to the creditors of the owner. Reference Atari Inc. See Article 3 of the Uniform Commercial Code.42. It also includes warranties, the obligationof the seller with respect to goods sold; and products liability, theliability of sellers and manufacturers of goods. Ibid.1 . Thefocus is on several distinct areas of law that are pertinent to conductingbusiness, such as contracts, agency relationships, partnerships,corporations, property, sales, negotiable instruments, and securedtransactions. Corley, et al, 1986.41. (1989) and Black and Decker Corp. Ibid.5. (1987).Business Law, Cincinnati: South-Western Publishing Company. The directors employ officers to overseethe daily operation of the business.16 The word incorporation refers to the procedural mechanics of forminga corporation, which are designated in the statutes of each state. Shedd, and Eric M. Personal property consists of (a) rights in tangible and movableobjects, such as furniture and books; (b) claims and debts; and (c)intangible proprietary rights, such as trademarks, patents, andcopyrights.28 In general, personal property may be acquired by purchase orby production.29 Acquisition and protection of personal property aregoverned by the law of sales, where the property is purchased, or byfederal statutes, where the property is produced, such as intangibleproprietary rights.3 Intangible proprietary rights are property rights in trademarks,patents, and copyrights. Corley, Robert N., Peter J. In fact, the corporation enjoysmany of the same rights and privileges under the Constitution that aregranted to individuals.18 Conversely, the corporation itself may beprosecuted for crimes and is subject to fines if convicted. Trachtman, 1987.19. The consideration means that each of the contracting partiesmust exchange something of value with the other.2 In addition, acontractual agreement must be between competent parties and made for alawful objective. Shedd, and Eric M. DuBoff, 1987.34. Twomey. Redinger, (Tex.Civ.App.) 667 SW2d 846 (1984).11. Ibid.18. References Anderson, Ronald A., Ivan Fox, and David P. In the ordinary credit sale ofconsumer goods, no filing in any state or government office is required inorder to establish the secured party's interest. Business Law: Principles, Documents, andCases. Goodwin, 198 .26. Discussed by Robert N. Computer programs may be protected under theComputer Software Copyright Act, patent law, trade secrecy law, andcontract law. Trachtman, 1987.6. Where parent corporationsform or acquire subsidiary corporations, the parent and subsidiary areconsidered separate entities even if the parent owns most of thesubsidiary's stock and if the directors and officers are the same.21 A corporation may be dissolved or terminated by agreement,reorganization proceedings, or forfeiture of its charter. Unless the partnershipagreement provides otherwise, all partners have equal rights in the conductand management of the partnership, regardless of the amount of capitalcontributions or services rendered. Personalproperty includes all other property.24 Real property includes land, buildings, fixtures, and rights in theland of another such as easements. Ibid.23. See Article 2 of the Uniform Commercial Code.39. At the end of17 years the patent expires and cannot be renewed.33 A copyright is the exclusive right given to the creator of a literaryor artistic work to use, reproduce, or display the work during the life ofthe creator and 5 years after the creator's death. Anderson, et al, 1987.29. (198 ). Land refers to the surface of the earthas well as all things of a permanent nature affixed to the ground, such asherbs, grass, trees, and other growing, natural products.25 It alsoincludes waters upon the ground and things embedded beneath the surfacesuch as gemstones and minerals. This may be aconsolidation with a new corporation established, or a merger where onecorporation absorbs the other.22 Property includes the rights of any person to possess, use, enjoy,and dispose of a thing or object of value. The best practice is to put thecontract in writing, as a written contract functions not only as proof butalso to clarify the understanding of the parties regarding the agreementand the terms of the agreement.6 A contract should be written in simple language that both parties canunderstand and that clearly spells out the terms of the agreement. Anderson, et al, 1987.24. Dissolution ends the partnership and is followed by the distributionof assets. What Every Executive Better KnowAbout the Law, New York: Simon and Schuster.----------------------- 16 No particular requirements need be followed to createan agency; however, the appointment of an agent must be in writing when theagent is to negotiate a contract required to be in writing under thestatute of frauds.11 In the agency relationship, although the agent negotiates with thethird party, the principal is substituted for the agent in the contractwith the third party. Anderson, et al, 1987.37. However, directors and executiveofficers who are the primary decision makers are liable for the acts oftheir corporations.19 A corporation may take various forms. v. See Trademark Clarification Act of 1984, PL 98-62 , 98 Stat 333.33. To formally appoint an agent, the written document used is called a power of attorney.12. A creditor of a partner cannot proceed againstpartnership property, but must obtain a legal order to obtain the debtor-partner's share of the profits. Holmes in Principles of Business Law, Englewood Cliffs: Prentice-Hall, 1986.13. Most importantly, the property may not be used in a way that willunreasonably injure others.23 Property is classified as real property or personal property. First, any contract whichabsolutely cannot be completed in less than one year must be in writing.Second, any contract that involves the sale of goods for more than $5 must be in writing. Corley, et al, 1986.16. Anderson, et al, 1987.15. By internationaltreaties, copyrights given under the laws of one nation are generallyrecognized in another.34 A copyright does not prevent the copying of anidea but only the copying of the way the idea is expressed.35 That is, thecopyright is violated when there is a duplication of the words or thepictures of the creator, but not when there is merely a copying of theidea. Corley, et al, 1986.38. After the firm's liabilities to nonpartners have been paid, theassets are distributed among the partners as (1) refund of advances, (2)return of contributions to capital, and (3) remaining assets are divided inaccordance with the partnership agreement or, if no agreement is expressed,the net assets are divided equally among the partners.15Corporations A corporation is a business entity created and governed by theauthority of state agency law. A patent gives the inventor an exclusive right for 17 yearsto make, use, and sell an invention which is new and useful and not obviousto those in the business to which the invention is related. If the property is taken under circumstances that would constitutelarceny, then the owner may sue and recover either the money value of theproperty or the property itself.37Sales A sale of goods is a transfer of title of movable personal propertyfor a price. DuBoff, 1987.8. This paper does not claim to address the wide-ranging bodyof knowledge that encompasses business law but, instead, defines the terms,summarizes the rules and, where appropriate, notes the remedies.Contracts Contracts are legally binding agreements that are formed when anoffer is made, followed by an acceptance, and supported by consideration.1The offer is an expressed willingness to make a binding agreement oncertain terms. v. DuBoff in The Law for Small Businesses, Seattle: Madrona Publishers, 1987.4. In case of breach, the injured party may bring an action fordamages, rescind the contract, bring a suit in equity to obtain specificperformance, or commence a proceeding to obtain relief from anadministrative agency of the government.8Agency relationships The term agency ordinarily describes a relationship in which twoparties agree that one (the agent) will act as a representative of theother (the principal) in negotiating and transacting business.9 An agentdiffers from an independent contractor in that the principal, who controlsthe acts of an agent, does not have control over the details of performanceof work by the independent contractor. Thecontract should include (1) the date of the agreement; (2) theidentification of the two parties (e.g., the buyer and seller); (3) adescription of the goods or services; (4) the price or other consideration;and (5) the signatures for the parties involved. Goodwin, 198 .4 . The purpose of this paper is to discuss business law principles. Shareholdersare not personally liable for business obligations because the corporationis recognized as a legal entity with separate, independent existence, andwith its own rights and liabilities. Theprincipal and agent are liable to each other based on an expressed orimplied agreement. However, the sharing of gross returns,co-ownership, contribution of property, and fixed payments alone are notnecessarily legal evidence of a partnership.14 A partnership is formed by either express or implied agreement, andminimal statutory requirements must be met. Personal property may also be acquired by gift, by accession, by finding lost property, and by occupation.3 . Goodwin, John R. A mark may be challenged within five yearsof registration; but after five years, the rights of the owner areincontestable. It is owned by shareholders and managed byits elected board of directors. (1986).Principles of Business Law, Englewood Cliffs, NJ: Prentice-Hall, 13th ed. Corley, et al, 1986.27. As noted by Ronald A. General partners are those who are publicly and actively engagedin the transactions of the business. Rights in the land ofanother includes easements, for example, the right to cross another's landand the right to take resources from another's land.27 All other propertyis considered personal property. Limited partners are investors whocontribute capital and share in the profits of the partnership, but do notexercise management power and are not liable to partnership creditors.13 When the partnership agreement is not in writing, proof of theexistence of a partnership may be found from the presence of anindividual's actual control in business operations, and the fact that theparties share profits and losses. North American Philips Consumer Electronics Corporation, (CA 7 Ill) 672 F2d 6 7 (1982).36. Anderson, et al in Business Law, Cincinnati: South-Western Publishing Company, 1987.2. Anderson, et al, 1987.32. To supplement thesebasics, the agreement should include other terms that might be applicablesuch as pricing arrangements, payment schedules, insurance coverage,consignment details, and the like.7 Where a contract has been established, if one of the parties fails toperform in accordance with the agreement, then a breach of contract mayoccur. (1987). Contracts may be valid or voidable, express or implied, oral orwritten.3 Valid contracts are binding and enforceable, while voidablecontracts may be rejected at the option of one of the parties. The owner of such proprietary rights may obtainprotection from its use by others by registering the property in accordancewith federal law. Personal property also includes trade secrets and computer programs.Trade secrets which give an owner an advantage over competitors areprotected under state law for an unlimited period, providing that the tradesecrets are not made public. Where personalproperty is involved, a security interest is given in personal property,often the item purchased with the loan.44 A security interest is an interest in personal property or fixturesthat secures payment or performance of an obligation. Homewood: Richard D. Implied contracts are usually oral. (1988).2 . Goodwin, 198 .44. The critical requirement is that the propertydistinguish the goods or service of the owner from those of others.31 A mark32 is any word, symbol, design, or combination of these used toidentify a product or service. When the agent is acting for the principal, theagent ordinarily incurs no personal responsibility to third parties unlessthe agent acted irresponsibly.12Partnerships A partnership is a business entity formed by a contract among two ormore persons who agree to share profits and losses in a predeterminedmanner. Secured transactions involve security interests and addressed under Article 9 of the Uniform Commercial Code.45. An assignee of a partner's interest doesnot become a partner without the consent of the other partner, and isentitled only to a share of the profits and the assignor's interest upondissolution. Holmes. Two or morecorporations may be combined to form a new enterprise. For example,if an order is made without an express statement that the recipient willpay for the order, then the promise to pay is implied in the order and isenforceable when the order is delivered.4 Two types of contracts must be in writing to be legally enforceable,as sanctioned by the Statute of Frauds. Goodwin, 198 .17. (1987). Goodwin in Business Law: Principles Documents and Cases. Ibid.43. Corley, Peter J. Uponissuance of a certificate of incorporation, a corporation has implied powerto make any contract needed to conduct its business and to accomplish itscorporate goals.17 The corporation, as a legal entity, can own property,make contracts, bring litigation, and generally perform all normalfunctions that an individual can perform. DuBoff, Leonard D. The sale of goods may notinclude negotiable instruments or real property.38 The sale of goods is ruled under the authority of contract law,except where counteroffers are made.39 Remedies for the breach of a salescontract are subject to a four-year statute of limitations, if the remedysought is based on Uniform Commercial Code (UCC) theories. v. Trachtman, 1987.25. v. Land also includes air space above thesurface, with some limitations. Oral contractsmay not be enforceable, since a great deal of detail is often lost in thecourse of remembering a conversation. They were developed to facilitate commercialtransactions and are readily acceptable and readily transferable in tradeor commerce. Irwin, Inc., 3rd ed. An oral contract for a term greater than one year or aprice greater than $5 does not void the agreement or render it illegal,but if one party refuses to perform, then the other will be unable tolegally enforce the agreement.5 Contracts are enforceable only if they can be proven. Trachtman in What Every Executive Better Know About the Law, New York: Simon and Schuster, 1987.3. See recent legal cases, such as Paramount Communications. It may include things which are attached to the land, if theyare to be removed or severed. America Standard Inc. The acceptance is an unqualified and unconditional assentto the offer. Time, Inc. See DuBoff, 1987.21.
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