Legal and Business Terminology: A Comprehensive Guide, Exams of Business and Labour Law

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D216 Business Law for Accountants Study Material 2024 Update.   14th Amendment - Correct Answers passed in 1868 after the Civil War, provides, in part, that "[n]o State shall . . . deprive any person of life, liberty, or property, without due process of law." action at law - Correct Answers File a complaint, jury or judge, judgement, monetary damages or property action in equity - Correct Answers File a petition, judge, decree, injunction, specific performance, or rescission administrative agency - Correct Answers A federal or state government agency created by the legislature to perform a specific function, such as to make and enforce rules pertaining to the environment. appellant - Correct Answers The party who takes an appeal from one court to another. appellee - Correct Answers The party against whom an appeal is taken— that is, the party who opposes setting aside or reversing the judgment. Bill of Rights - Correct Answers The first ten amendments to the U.S. Constitution. binding authority - Correct Answers Any source of law that a court must follow when deciding a case. breaches - Correct Answers To violate a law, by an act or an omission, or to break a legal obligation that one owes to another person or to society. business ethics - Correct Answers Ethics in a business context; a consensus of what constitutes right or wrong behavior in the world of business and the application of moral principles to situations that arise in a business setting. case law - Correct Answers The rules of law announced in court decisions. Case law interprets statutes, regulations, constitutional provisions, and other case law. categorical imperative - Correct Answers A concept developed by the philosopher Immanuel Kant as an ethical guideline for behavior. In deciding whether an action is right or wrong, or desirable or undesirable, a person should evaluate the action in terms of what would happen if everybody else in the same situation, or category, acted the same way. checks and balances - Correct Answers The system by which each of the three branches of the U.S. national government (executive, legislative, and judicial) exercises checks on the powers of the other branches. Civil law - Correct Answers The branch of law dealing with the definition and enforcement of all private or public rights, as opposed to criminal matters. commerce clause - Correct Answers The provision in Article I, Section 8, of the U.S. Constitution that gives Congress the power to regulate interstate commerce. common law - Correct Answers a body of general rules that applied throughout the entire English realm compelling government interest - Correct Answers A test of constitutionality that requires the government to have compelling reasons for passing any law that restricts fundamental rights, such as free speech, or distinguishes between people based on a suspect trait. concurring opinion - Correct Answers A court opinion by one or more judges or justices who agree with the majority but want to make or emphasize a point that was not made or emphasized in the majority's opinion. Constitutional law - Correct Answers Law that is based on the U.S. Constitution and the constitutions of the various states. federal form of government - Correct Answers A system of government in which the states form a union and the sovereign power is divided between a central government and the member states. Fifth Amendment - Correct Answers Guarantees the rights to indictment (formal accusation) by a grand jury, to due process of law, and to fair payment when private property is taken for public use. The Fifth Amendment also prohibits compulsory self-incrimination and double jeopardy (trial for the same crime twice). Financial Services Modernization Act (Gramm-Leach-Bliley Act) (1999) - Correct Answers Prohibits the disclosure of nonpublic personal information about a consumer to an unaffiliated third party unless strict disclosure and opt-out requirements are met. First Amendment - Correct Answers Guarantees the freedoms of religion, speech, and the press and the rights to assemble peaceably and to petition the government. Four-Part Analysis - Correct Answers When making decisions, a business should evaluate each of the following: The legal implications of each decision. The public relations impact. The safety risks for the consumers and employees. The financial implications. Fourth Amendment - Correct Answers Prohibits unreasonable searches and seizures of persons or property. free exercise clause - Correct Answers The provision in the First Amendment to the U.S. Constitution that prohibits Congress from making any law "prohibiting the free exercise" of religion. Freedom of Information Act (1966) - Correct Answers Provides that individuals have a right to obtain access to information about them collected in government files. full faith and credit clause - Correct Answers A clause in Article IV, Section 1, of the U.S. Constitution that provides that "Full Faith and Credit shall be given in each State to the public Acts, Records, and Judicial Proceedings of every other State." The clause ensures that rights established under deeds, wills, contracts, and the like in one state will be honored by the other states and that any judicial decision with respect to such property rights will be honored and enforced in all states. Health Insurance Portability and Accountability Act (1996) - Correct Answers Requires health-care providers and health-care plans to inform patients of their privacy rights and of how their personal medical information may be used. States that medical records may not be used for purposes unrelated to health care or disclosed without permission. independent regulatory agencies - Correct Answers An administrative agency that is not considered part of the government's executive branch and is not subject to the authority of the president. Independent agency officials cannot be removed without cause. IRAC - Correct Answers method of legal reasoning. IRAC is an acronym formed from the first letters of the words Issue, Rule, Application, and Conclusion. laches - Correct Answers The equitable doctrine that bars a party's right to legal action if the party has neglected for an unreasonable length of time to act on his or her rights. legal reasoning - Correct Answers (1) The process of evaluating how various laws apply to a given situation. (2) The process by which a judge harmonizes his or her opinion with the judicial decisions in previous cases. majority opinion - Correct Answers A court opinion that represents the views of the majority (more than half) of the judges or justices deciding the case. moral minimum - Correct Answers The minimum degree of ethical behavior expected of a business firm, which is usually defined as compliance with the law. Ninth Amendment - Correct Answers Establishes that the people have rights in addition to those specified in the Constitution. opinions - Correct Answers A statement by a court expressing the reasons for its decision in a case. ordinances - Correct Answers A law passed by a local governing unit, such as a city or a county. Outcome-based ethics - Correct Answers An ethical philosophy that focuses on the impacts of a decision on society or on key stakeholders. persuasive authorities - Correct Answers Any legal authority or source of law that a court may look to for guidance but need not follow when making its decision. petitioner - Correct Answers In equity practice, a party that initiates a lawsuit. plaintiff - Correct Answers A party that initiates a lawsuit. plurality opinion - Correct Answers A court opinion that is joined by the largest number of the judges or justices hearing the case, but fewer than half of the total number. police powers - Correct Answers Powers possessed by states as part of their inherent sovereignty. These powers may be exercised to protect or promote the public order, health, safety, morals, and general welfare. precedent - Correct Answers A court decision that furnishes an example or authority for deciding subsequent cases involving identical or similar facts. preemption - Correct Answers A doctrine under which certain federal laws preempt, or take precedence over, conflicting state or local laws. principle of rights - Correct Answers The principle that human beings have certain fundamental rights (to life, freedom, and the pursuit of happiness, for example). A key factor in determining whether a business decision is ethical under this theory is how that decision affects the rights of others, such as employees, consumers, suppliers, and the community. Privacy Act (1974) - Correct Answers Protects the privacy of individuals about whom the federal government has information. Regulates agencies' use and disclosure of data, and gives individuals access to and a means to correct inaccuracies. triple bottom line - Correct Answers The idea that investors and others should consider not only corporate profits, but also the corporation's impact on people and on the planet when assessing the firm. (The triple bottom line is people, planet, and profits.) uniform laws - Correct Answers A model law created by the National Conference of Commissioners on Uniform State Laws and/or the American Law Institute for the states to consider adopting. If a state adopts the law, it becomes statutory law in that state. Each state has the option of adopting or rejecting all or part of a uniform law. utilitarianism - Correct Answers An approach to ethical reasoning in which ethically correct behavior is related to an evaluation of the consequences of a given action on those who will be affected by it. In utilitarian reasoning, a "good" decision is one that results in the greatest good for the greatest number of people affected by the decision. trademark - Correct Answers A distinctive mark, motto, device, or implement that a manufacturer stamps, prints, or otherwise affixes to the goods it produces so that they may be identified on the market and their origins made known. Once a trademark is established (under the common law or through registration), the owner is entitled to its exclusive use. Lanham Act of 1946 - Correct Answers The Lanham Act was enacted, in part, to protect manufacturers from losing business to rival companies that used confusingly similar trademarks. The act incorporates the common law of trademarks and provides remedies for owners of trademarks who wish to enforce their claims in federal court. dilution - Correct Answers With respect to trademarks, a doctrine under which distinctive or famous trademarks are protected from certain unauthorized uses regardless of a showing of competition or a likelihood of confusion. Congress created a federal cause of action for dilution in 1995 with the passage of the Federal Trademark Dilution Act. Federal Trademark Dilution Act - Correct Answers In 1995, Congress amended the Lanham Act by passing the Federal Trademark Dilution Act, which allowed trademark owners to bring suits in federal court for trademark dilution Trademark Dilution Revision Act (TDRA) - Correct Answers Under the TDRA, to state a claim for trademark dilution, a plaintiff must prove the following: 1. The plaintiff owns a famous mark that is distinctive. 2. The defendant has begun using a mark in commerce that allegedly is diluting the famous mark. 3. The similarity between the defendant's mark and the famous mark gives rise to an association between the marks. 4. The association is likely to impair the distinctiveness of the famous mark or harm its reputation. service mark - Correct Answers A mark used in the sale or the advertising of services, such as to distinguish the services of one person from the services of others. Titles, character names, and other distinctive features of radio and television programs may be registered as service marks. certification mark - Correct Answers A mark used by one or more persons, other than the owner, to certify the region, materials, mode of manufacture, quality, or accuracy of the owner's goods or services. Examples of certification marks include the "Good Housekeeping Seal of Approval" and "UL Tested." collective mark - Correct Answers A mark used by members of a cooperative, association, or other organization to certify the region, materials, mode of manufacture, quality, or accuracy of the specific goods or services. Examples of collective marks include the labor union marks found on tags of certain products and the credits of movies, which indicate the various associations and organizations that participated in the making of the movies. trade dress - Correct Answers The image and overall appearance of a product—for example, the distinctive decor, menu, layout, and style of service of a particular restaurant. Basically, trade dress is subject to the same protection as trademarks. Stop Counterfeiting in Manufactured Goods Act (SCMGA) - Correct Answers The act makes it a crime to traffic intentionally in or attempt to traffic in counterfeit goods or services, or to knowingly use a counterfeit mark on or in connection with goods or services. trade name - Correct Answers A term that is used to indicate part or all of a business's name and that is directly related to the business's reputation and goodwill. Trade names are protected under the common law (and under trademark law, if the name is the same as the firm's trademark). license - Correct Answers (1) In the context of intellectual property, a contract permitting the use of a trademark, copyright, patent, or trade secret for certain purposes. (2) In the context of real property, a revocable right or privilege of a person to come on another person's land. patent - Correct Answers A government grant that gives an inventor the exclusive right or privilege to make, use, or sell his or her invention for a limited time period. America Invents Act - Correct Answers 2011- the first person to file an application for a patent on a product or process will receive patent protection. In addition, the new law established a nine-month limit for challenging a patent on any ground. copyright - Correct Answers The exclusive right of authors to publish, print, or sell an intellectual production for a statutory period of time. A copyright has the same monopolistic nature as a patent or trademark, but it differs in that it applies exclusively to works of art, literature, and other works of authorship, including computer programs. Copyright Act of 1976 - Correct Answers Works created after January 1, 1978, are automatically given statutory copyright protection for the life of the author plus 70 years. For copyrights owned by publishing houses, the copyright expires 95 years from the date of publication or 120 years from the date of creation, whichever comes first. For works by more than one author, the copyright expires 70 years after the death of the last surviving author. trade secret - Correct Answers Information or a process that gives a business an advantage over competitors who do not know the information or process. contract - Correct Answers An agreement that can be enforced in court, formed by two or more parties, each of whom agrees to perform or to refrain from performing some act now or in the future. Acceptance - Correct Answers In contract law, the offeree's indication to the offeror that the offeree agrees to be bound by the terms of the offeror's proposal. mailbox rule - Correct Answers A rule providing that an acceptance of an offer becomes effective on dispatch. Consideration - Correct Answers Generally, the value given in return for a promise or a performance. The consideration, which must be present to make the contract legally binding, must be something of legally sufficient value and must be bargained for. forbearance - Correct Answers (1) The act of refraining from exercising a legal right. (2) An agreement between a lender and a borrower in which the lender agrees to temporarily cease requiring mortgage payments, to delay foreclosure, or to accept smaller payments than previously scheduled. Rescission - Correct Answers (pronounced rih-sih-zhen) A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made; may be effected through the mutual consent of the parties, by their conduct, or by court decree. past consideration - Correct Answers Something given or some act done in the past, which cannot ordinarily be consideration for a later bargain. illusory - Correct Answers without consideration and unenforceable accord and satisfaction - Correct Answers An agreement for payment (or other performance) between two parties, one of whom has a right of action against the other. After the payment has been accepted or other performance has been made, the "accord and satisfaction" is complete, and the obligation is discharged. liquidated debt - Correct Answers A debt that is due and certain in amount. unliquidated debt - Correct Answers A debt that is uncertain in amount. release - Correct Answers A contract in which one party forfeits the right to pursue a legal claim against the other party. covenant not to sue - Correct Answers An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim. promissory estoppel - Correct Answers A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies. Such a promise is binding if justice will be better served by the enforcement of the promise. estopped - Correct Answers Barred, impeded, or precluded. contractual capacity - Correct Answers The legal ability to enter into contracts; the threshold mental capacity required by law for a party who enters into a contract to be bound by that contract. disaffirmance - Correct Answers The legal avoidance, or setting aside, of a contractual obligation. usury - Correct Answers Charging an illegal rate of interest. contrary to public policy - Correct Answers Some contracts that involve private parties are not enforceable because of the negative impact they would have on society covenant not to compete - Correct Answers A contractual promise to refrain from competing with another party for a certain period of time and within a certain geographic area. Although covenants not to compete restrain trade, they are commonly found in partnership agreements, business sale agreements, and employment contracts. If they are ancillary to such agreements, covenants not to compete will normally be enforced by the courts unless the time period or geographic area is deemed unreasonable. reformation - Correct Answers A court-ordered correction of a written contract so that it reflects the true intentions of the parties. unconscionable - Correct Answers Describes a contract or clause that is void on the basis of public policy because one party is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party. exculpatory clauses - Correct Answers A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault. Statute of Frauds - Correct Answers A state statute under which certain types of contracts must be in writing to be enforceable. privity of contract - Correct Answers A principle that says a contract is a private agreement between the parties who have entered into it, and traditionally these parties alone have rights and liabilities under the contract. assignment - Correct Answers The act of transferring to another all or part of one's rights arising under a contract. delegation - Correct Answers The transfer of a contractual duty to a third party. The party delegating the duty (the delegator) to the third party (the delegatee) is still obliged to perform on the contract should the delegatee fail to perform. third party beneficiary - Correct Answers One for whose benefit a promise is made in a contract but who is not a party to the contract. intended beneficiary - Correct Answers A third party for whose benefit a contract is formed; an intended beneficiary can sue the promisor if such a contract is breached. incidental beneficiary - Correct Answers A third person who receives a benefit from a contract even though that person's benefit is not the reason the contract was made. sales contracts - Correct Answers A contract for the sale of goods under which the ownership of goods is transferred from a seller to a buyer for a price. absolute promises - Correct Answers They must be performed, or the parties promising the acts will be in breach of contract. accord - Correct Answers a contract to perform some act to satisfy an existing contractual duty that is not yet discharged adequate protection doctrine - Correct Answers In bankruptcy law, a doctrine that protects secured creditors from losing their security as a result of an automatic stay. In certain circumstances, the bankruptcy court may provide adequate protection by requiring the debtor or trustee to pay the creditor or provide additional guaranties to protect the creditor against the losses suffered by the creditor as a result of the stay. alien corporation - Correct Answers A corporation formed in another country but doing business in the United States. anticipatory repudiation - Correct Answers An assertion or action by a party indicating that he or she will not perform an obligation that he or she is contractually obligated to perform at a future time. articles of incorporation - Correct Answers The document that is filed with the appropriate state official, usually the secretary of state, when a business is incorporated and that contains basic information about the corporation. articles of organization - Correct Answers The document that is filed with the appropriate state official, usually the secretary of state, when a limited liability company is formed. articles of partnership - Correct Answers A written agreement that sets forth each partner's rights and obligations with respect to the partnership. artisan's lien - Correct Answers A possessory lien given to a person who has made improvements and added value to another person's personal property as security for payment for services performed. attachment - Correct Answers In the context of judicial liens, a court- ordered seizure and taking into custody of property prior to the securing of a judgment for a past-due debt. automatic stay - Correct Answers In bankruptcy proceedings, the suspension of almost all litigation and other action by creditors against the debtor or the debtor's property. The stay is effective the moment the debtor files a petition in bankruptcy. bankruptcy trustee - Correct Answers A person appointed by the court to manage the debtor's funds in a bankruptcy proceeding. benefit corporation - Correct Answers A type of for-profit corporation, available by statute in a number of states, that seeks to have a material positive impact on society and the environment. bilateral mistake - Correct Answers A mistake that occurs when both parties to a contract are mistaken about the same material fact. Bonds - Correct Answers A security that evidences a corporate (or government) debt. breach of contract - Correct Answers The failure, without legal excuse, of a promisor to perform the obligations of a contract. business judgment rule - Correct Answers A rule under which courts will not hold corporate officers and directors liable for honest mistakes of judgment and bad business decisions that were made in good faith. buyout price - Correct Answers The amount payable to a partner on his or her dissociation from a partnership, based on the amount distributable to that partner if the firm were wound up on that date, and offset by any damages for wrongful dissociation. buy-sell agreement - Correct Answers In the context of partnerships, an express agreement made at the time of partnership formation for one or more of the partners to buy out the other or others should the situation warrant. certificate of limited partnership - Correct Answers The document that must be filed with a designated state official to form a limited partnership. charging order - Correct Answers In partnership law, an order granted by a court to a judgment creditor that entitles the creditor to attach a partner's interest in the partnership. close corporation - Correct Answers A corporation whose shareholders are limited to a small group of persons, often family members. commercial impracticability - Correct Answers A doctrine under which a seller may be excused from performing a contract when (1) a contingency occurs, (2) the contingency's occurrence makes performance impracticable, and (3) the nonoccurrence of the contingency was a basic assumption on which the contract was made. commingled - Correct Answers To put funds or goods together into one mass so that they are mixed to such a degree that they no longer have separate identities. common stock - Correct Answers A security that evidences ownership in a corporation. A share of common stock gives the owner a proportionate interest in the corporation with regard to control, earnings, and net assets. Common stock is lowest in priority with respect to payment of dividends and distribution of the corporation's assets on dissolution. condition - Correct Answers A possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract. condition precedent - Correct Answers A condition in a contract that must be met before a party's promise becomes absolute. conforming goods - Correct Answers Goods that conform to contract specifications. consequential damages - Correct Answers Special damages that compensate for a loss that is not direct or immediate (for example, lost profits). The special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them. garnishment - Correct Answers A legal process used by a creditor to collect a debt by seizing property of the debtor (such as wages) that is being held by a third party (such as the debtor's employer). general partner - Correct Answers In a limited partnership, a partner who assumes responsibility for the management of the partnership and has full liability for all partnership debts. guarantor - Correct Answers A person who agrees to satisfy the debt of another (the debtor) only after the principal debtor defaults. A guarantor's liability is thus secondary. holding company - Correct Answers A company whose business activity is holding shares in another company. Homeowner's insurance - Correct Answers A form of property insurance that protects the home of the insured person and its contents against losses. homestead exemption - Correct Answers A law permitting a debtor to retain the family home, either in its entirety or up to a specified dollar amount, free from the claims of unsecured creditors or trustees in bankruptcy. implied warranty - Correct Answers A warranty that the law derives by implication or inference from the nature of the transaction or the relative situation or circumstances of the parties. implied warranty of fitness for a particular purpose - Correct Answers A warranty that goods sold or leased are fit for a particular purpose. The warranty arises when any seller or lessor knows the particular purpose for which a buyer or lessee will use the goods and knows that the buyer or lessee is relying on the skill and judgment of the seller or lessor to select suitable goods. implied warranty of merchantability - Correct Answers A warranty that goods being sold or leased are reasonably fit for the ordinary purpose for which they are sold or leased, are properly packaged and labeled, and are of fair quality. The warranty automatically arises in every sale or lease of goods made by a merchant who deals in goods of the kind sold or leased. impossibility of performance - Correct Answers A doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes impossible or totally impracticable (through no fault of either party). incidental damages - Correct Answers Damages that compensate for expenses directly incurred because of a breach of contract, such as those incurred to obtain performance from another source. information return - Correct Answers A tax return submitted by a partnership that reports the business's income and losses. The partnership itself does not pay taxes on the income, but each partner's share of the profit (whether distributed or not) is taxed as individual income to that partner. inside director - Correct Answers A person on a corporation's board of directors who is also an officer of the corporation. insider - Correct Answers (1) A corporate director or officer, or other employee or agent, with access to confidential information and a duty not to disclose that information in violation of insider-trading laws. (2) In bankruptcy proceedings, an individual, partner, partnership, corporation, or officer or director of a corporation (or a relative of one of these) who has a close relationship with the debtor. Joint and several liability - Correct Answers In partnership law, a doctrine under which a plaintiff may sue all of the partners together (jointly) or one or more of the partners separately (severally, or individually). Joint liability - Correct Answers In partnership law, a doctrine under which a plaintiff must sue all of the partners as a group, but each partner can be held liable for the full amount. lien - Correct Answers A claim against specific property to satisfy a debt. limited liability company (LLC) - Correct Answers A hybrid form of business enterprise that offers the limited liability of a corporation and the tax advantages of a partnership. limited liability limited partnership (LLLP) - Correct Answers A type of limited partnership in which the liability of the general partner is the same as the liability of the limited partners—that is, the liability of all partners is limited to the amount of their investments in the firm. limited partners - Correct Answers In a limited partnership, a partner who contributes capital to the partnership but has no right to participate in its management and has no liability for partnership debts beyond the amount of her or his investment. limited partnership (LP) - Correct Answers A partnership consisting of one or more general partners and one or more limited partners. liquidated damages - Correct Answers An amount, stipulated in the contract, that the parties to a contract believe to be a reasonable estimation of the damages that will occur in the event of a breach. liquidation - Correct Answers The sale of the nonexempt assets of a debtor and the distribution of the funds received to creditors. mechanic's lien - Correct Answers A statutory lien on the real property of another, created to ensure payment for work performed and materials furnished in the repair or improvement of real property, such as a building. members - Correct Answers A person who has an ownership interest in a limited liability company. merger clause - Correct Answers a contract clause stating that the contract embodies the entire agreement between the parties mortgage - Correct Answers A written instrument that gives a creditor (the mortgagee) an interest in, or lien on, the debtor's (mortgagor's) real property as security for a debt. If the debt is not paid, the property can be sold by the creditor and the proceeds used to pay the debt. mortgage insurance - Correct Answers Insurance that compensates a lender for losses due to a borrower's default on a mortgage loan. mutual rescission - Correct Answers An agreement between the parties to cancel their contract, releasing the parties from further obligations under private equity capital - Correct Answers Capital funds invested by a private equity firm in an existing corporation, usually to purchase and reorganize it. proxy - Correct Answers Authorization to represent a corporate shareholder to serve as his or her agent and vote his or her shares in a certain manner. public corporation - Correct Answers A corporation owned by a federal, state, or municipal government—not to be confused with a publicly held corporation. publicly held corporation - Correct Answers A corporation whose shares are publicly traded in securities markets, such as the New York Stock Exchange or the NASDAQ. quorum - Correct Answers The number of members of a decision-making body that must be present before business may be transacted. reaffirmation agreement - Correct Answers An agreement between a debtor and a creditor in which the debtor voluntarily agrees to pay a debt dischargeable in bankruptcy. Replevin - Correct Answers An action to recover specific goods in the hands of a party who is wrongfully withholding them from the other party. retained earnings - Correct Answers The portion of a corporation's profits that has not been paid out as dividends to shareholders. right of contribution - Correct Answers The right of a co-surety who pays more than his or her proportionate share on a debtor's default to recover the excess paid from other co-sureties. right of reimbursement - Correct Answers The legal right of a person to be restored, repaid, or indemnified for costs, expenses, or losses incurred or expended on behalf of another. right of subrogation - Correct Answers The right of a person to stand in the place of (be substituted for) another, giving the substituted party the same legal rights that the original party had. S corporation - Correct Answers A close business corporation that has most of the attributes of a corporation, including limited liability, but qualifies under the Internal Revenue Code to be taxed as a partnership. satisfaction - Correct Answers the performance of the accord agreement scienter - Correct Answers Knowledge by the misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive. Securities - Correct Answers Generally, stocks, bonds, or other items that represent an ownership interest in a corporation or a promise of repayment of debt by a corporation. shareholder agreement - Correct Answers An agreement between shareholders that restricts the transferability of shares, often entered into for the purpose of maintaining proportionate control of a close corporation. shareholder's derivative suit - Correct Answers A suit brought by a shareholder to enforce a corporate cause of action against a third person. short sale - Correct Answers A sale of real property for an amount that is less than the balance owed on the mortgage loan, usually due to financial hardship. sole proprietorship - Correct Answers The simplest form of business organization, in which the owner is the business. The owner reports business income on his or her personal income tax return and is legally responsible for all debts and obligations incurred by the business. stock certificates - Correct Answers A certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation. Stock warrants - Correct Answers A certificate that grants the owner the option to buy a given number of shares of stock, usually within a set time period. Stocks - Correct Answers An ownership (equity) interest in a corporation, measured in units of shares. surety - Correct Answers A person, such as a cosigner on a note, who agrees to be primarily responsible for the debt of another. suretyship - Correct Answers An express contract in which a third party to a debtor-creditor relationship (the surety) promises to be primarily responsible for the debtor's obligation. Tender - Correct Answers An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so. Tender of delivery - Correct Answers Under the Uniform Commercial Code, a seller's or lessor's act of placing conforming goods at the disposal of the buyer or lessee and giving the buyer or lessee whatever notification is reasonably necessary to enable the buyer or lessee to take delivery. U.S. trustee - Correct Answers A government official who performs certain administrative tasks that a bankruptcy judge would otherwise have to perform. Undue influence - Correct Answers Persuasion that is less than actual force but more than advice and that induces a person to act according to the will or purposes of the dominating party. unilateral mistake - Correct Answers A mistake that occurs when one party to a contract is mistaken as to a material fact. Venture capital - Correct Answers Financing provided to new business ventures by professional, outside investors—that is, venture capitalists, usually groups of wealthy investors and securities firms. voluntary consent - Correct Answers Knowing and voluntary agreement to the terms of a contract. If voluntary consent is lacking, the contract will be voidable. voting trust - Correct Answers An agreement (trust contract) under which legal title to shares of corporate stock is transferred to a trustee who is authorized by the shareholders to vote the shares on their behalf. cease-and-desist order - Correct Answers Requiring the company to stop the challenged advertising. multiple product order - Correct Answers An order requiring a firm that has engaged in deceptive advertising to cease and desist from false advertising in regard to all the firm's products. counteradvertising - Correct Answers New advertising that is undertaken to correct earlier false claims that were made about a product. Telephone Consumer Protection Act (TCPA) - Correct Answers prohibits telephone solicitation using an automatic telephone dialing system or a prerecorded voice Telemarketing and Consumer Fraud and Abuse Prevention Act - Correct Answers directed the FTC to establish rules governing telemarketing and to bring actions against fraudulent telemarketers FTC's Telemarketing Sales Rule (TSR) - Correct Answers requires a telemarketer to identify the seller's name, describe the product being sold, and disclose all material facts related to the sale (such as the total cost) "cooling-off" laws - Correct Answers Laws that allow buyers of goods sold in certain transactions to cancel their contracts within three business days. FTC Mail, Internet, or Telephone Order Merchandise Rule - Correct Answers protects consumers who purchase goods via mail, Internet, phone, or fax Truth-in-Lending Act (TILA) - Correct Answers Name commonly given to Title I of the Consumer Credit Protection Act, as amended. Requires sellers and lenders to disclose credit terms and loan terms so that individuals can shop around for the best financing arrangements. Regulation Z - Correct Answers A set of rules issued by the Federal Reserve Board of Governors to implement the provisions of the Truthin- Lending Act. Equal Credit Opportunity Act (ECOA) - Correct Answers Prohibits the denial of credit solely on the basis of race, religion, national origin, color, gender, marital status, or age. The act also prohibits credit discrimination on the basis of whether an individual receives certain forms of income, such as public-assistance benefits. Fair Credit Reporting Act (FCRA) - Correct Answers Protects consumers against inaccurate credit reporting and requires that lenders and other creditors report correct, relevant, and up-to-date information. Fair and Accurate Credit Transactions Act (FACTA) - Correct Answers The act amended the TILA and established a national fraud alert system. Fair Debt Collection Practices Act (FDCPA) - Correct Answers Attempts to curb perceived abuses by collection agencies. The act applies only to specialized debt-collection agencies and attorneys who regularly attempt to collect debts on behalf of someone else, usually for a percentage of the amount owed. validation notice - Correct Answers An initial notice to a debtor from a collection agency informing the debtor that he or she has thirty days to challenge the debt and request verification. investment contract - Correct Answers In securities law, a transaction in which a person invests in a common enterprise reasonably expecting profits that are derived primarily from the efforts of others. prospectus - Correct Answers A written document required by securities laws when a security is being sold. The prospectus describes the security, the financial operations of the issuing corporation, and the risk attaching to the security. free-writing prospectus - Correct Answers A written, electronic, or graphic communication associated with the offer to sell a security and used during the waiting period to supplement other information about the security. accredited investor - Correct Answers In the context of securities offerings, sophisticated investors, such as banks, insurance companies, investment companies, the issuer's executive officers and directors, and persons whose income or net worth exceeds certain limits. investment company - Correct Answers A company that acts on the behalf of many smaller shareholders/owners by buying a large portfolio of securities and professionally managing that portfolio. mutual fund - Correct Answers A specific type of investment company that continually buys or sells to investors shares of ownership in a portfolio. SEC Rule 10b-5 - Correct Answers A rule of the Securities and Exchange Commission that prohibits the commission of fraud in connection with the purchase or sale of any security. insider trading - Correct Answers The purchase or sale of securities on the basis of information that has not been made available to the public. tippees - Correct Answers A person who receives inside information. short-swing profits - Correct Answers Profits earned by a purchase and sale, or sale and purchase, of the same security within a six-month period. Corporate governance - Correct Answers A set of policies specifying the rights and responsibilities of the various participants in a corporation and spelling out the rules and procedures for making corporate decisions.