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Pa r t V I Agency Chapter 28 Relationship of Principal and Agent 518 Chapter 29 Relationship with Third Parties 537 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Relationship of Principal and Agent C HAPTER 28 C h a p t e r O u t co m e s Practically all of the world’s business involves agents and in most important transactions, an agent on each side Warren Seavey Handbook on the Law of Agency After reading and studying this chapter, you should be able to: Distinguish among the following relationships: (a) agency, (b) employment, and (c) independent contractor Explain the requirements for creating an agency relationship List and explain the duties owed by an agent to her principal List and explain the duties owed by a principal to his agent Identify the ways in which an agency relationship may be terminated B y using agents, one person (the principal) may enter into any number of business transactions as though he had carried them out personally, thus multiplying and expanding his business activities The law of agency, like the law of contracts, is basic to almost every other branch of business law Practically every type of contract or business transaction can be created or conducted through an agent Therefore, the place and importance of agency in the practical conduct and operation of business cannot be overemphasized, particularly in the case of partnerships, corporations, and other business associations Partnership is founded on the agency of the partners Each partner is an agent of the partnership and as such has the authority to represent and bind the partnership in all usual transactions of the partnership Corporations, in turn, must act through the agency of their officers and employees Limited liability companies act through the actions of their members, managers, or both Thus, practically and legally, agency is an essential part of partnerships, corporations, and other business associations In addition, sole proprietors also may employ agents in the operations of their businesses Business, therefore, is conducted largely by agents or representatives, not by the owners themselves Although some overlap occurs, the law of agency divides broadly into two main parts: the internal and the external An agent functions as an agent by dealing with third persons, thereby establishing legal relationships between her principal and those third persons These relationships are the external part of agency law, which we discuss in the next chapter In this chapter, we consider the nature and function of agency, as well as other topics concerning the internal part of the law of agency Agency is governed primarily by state common law An orderly presentation of this law is found in the Restatement (Second) of the Law of Agency published in 1958 by the American Law Institute (ALI) Regarded as a valuable authoritative reference work, the Restatement is cited extensively and quoted in reported judicial opinions and by legal scholars In 2006, the ALI published the Restatement of the Law Third, Agency, which replaced the ALI’s Restatement Second of Agency This chapter and the next chapter refers to the Third Restatement as the Restatement 518 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it CHAPTER 28 Relationship of Principal and Agent Agency consensual relationship authorizing one party (agent) to act on behalf of the other party (principal) subject to the principal’s control Agent person authorized to act on another’s behalf Principal person who authorizes another to act on her behalf Scope of agency purposes whatever business activity a person may accomplish personally he generally may through an agent 519 Nature of Agency [28-1] Agency is a consensual relationship in which one person (the agent) acts as a representative of, or otherwise acts on behalf of, another person (the principal) with power to affect the legal rights and duties of the principal Moreover, the principal has a right to control the actions of the agent An agent is, therefore, one who represents another, the principal, in business dealings with a third person, and the operation of agency therefore involves three persons: the principal, the agent, and a third person who deals with the agent In dealings with a third person, the agent acts for and in the name and place of the principal, who, along with the third person, is a party to the transaction The result of the agent’s functioning is exactly the same as if the principal had dealt directly with the third person However, if the existence and identity of the principal are disclosed, the agent acts not as a party but simply as an intermediary Within the scope of the authority granted to her by her principal, the agent may negotiate the terms of contracts with others and bind her principal to such contracts Moreover, the negligence of an agent who is an employee in conducting the business of her principal exposes the principal to tort liability for injury and loss suffered by third persons Scope of Agency Purposes [28-1a] As a general rule, a person may through an agent whatever business activity he may accomplish personally Conversely, whatever he cannot legally do, he cannot authorize another to for him In addition, a person may not appoint an agent to perform acts that are so personal that their performance may not be delegated to another, as in the case of a contract for personal services Other Legal Relationships [28-1b] Employment relationship one in which the employer has the right to control the manner and means of the employee’s performance of work Independent contractor person who contracts with another to a particular job and is not subject to the other’s control over the manner and means of conducting the work Practical Advice When appointing an agent, consider structuring the relationship as a principal and independent contractor Two other legal relationships overlap with the agency relationship: employer–employee and principal–independent contractor In the employment relationship, for the purposes of vicarious liability discussed in Chapter 29, an employee is an agent whose principal controls or has the right to control the manner and means of the agent’s performance of work All employees are agents, even those employees not authorized to contract on behalf of the employer or otherwise to conduct business with third parties Thus, an assembly-line worker in a factory is an agent of the company employing her since she is subject to the employer’s control, thereby consenting to act “on behalf ” of the principal, but she does not have the right to bind the principal in contracts with third parties Although all employees are agents, not all agents are employees Agents who are not employees are generally referred to as independent contractors (The Third Restatement does not use this term.) In these cases, although the principal has the right of control over the agent, the principal does not control the manner and means of the agent’s performance For instance, an attorney retained to handle a particular transaction would be an independent contractor–agent regarding that particular transaction because the attorney is hired by the principal to perform a service, but the manner of the attorney’s performance is not controlled by the principal Other examples are auctioneers, brokers, and factors Finally, not all independent contractors are agents because the person hiring the independent contractor has no right of control over the independent contractor For example, a taxicab driver hired to carry a person to the airport is not an agent of that person Likewise, if Pam hires Bill to build a stone wall around her property, Bill is an independent contractor who is not an agent The distinction between employee and independent contractor has a number of important legal consequences For example, as we will discuss in the next chapter, a principal is liable for the torts an employee commits within the scope of her employment but ordinarily is not liable for torts committed by an independent contractor In addition, under numerous federal and state statutes, the obligations of a principal apply only to agents who are employees These statutes cover such matters as labor relations, employment discrimination, disability, employee safety, workers’ compensation, social security, minimum wage, and unemployment compensation We will discuss these and other statutory enactments affecting the employment relationship in Chapter 41 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 520 Part VI Agency Alexander v FedEx Ground Package System, Inc United States Court of Appeals, Ninth Circuit, 2014 765 F.3d 981 Facts FedEx Ground Package System, Inc (“FedEx”), contracts with drivers to deliver packages to its customers FedEx’s Operating Agreement (“OA”) governs its relationship with the drivers The OA requires that the drivers wear FedEx uniforms, drive FedEx-approved vehicles, and groom themselves according to FedEx’s appearance standards FedEx tells its drivers what packages to deliver, on what days, and at what times Drivers must deliver packages every day that FedEx is open for business and must deliver every package they are assigned each day Although drivers may operate multiple delivery routes and hire third parties to help perform their work, they may so only with FedEx’s consent Drivers are compensated according to a somewhat complex formula that includes per-day and per-stop components FedEx trains its drivers on how best to perform their job and to interact with customers The OA requires drivers to conduct themselves “with integrity and honesty, in a professional manner, and with proper decorum at all times.” They must “[f]oster the professional image and good reputation of FedEx.” A driver’s managers may conduct up to four ride-along performance evaluations each year Drivers must follow FedEx’s “Safe Driving Standards.” Drivers enter into the OA for an initial term of one, two, or three years At the end of the initial term, the OA provides for automatic renewal for successive one-year terms if neither party provides notice of their intent not to renew The OA may be terminated for cause, including a breach of any provision of the OA The OA requires drivers to submit claims for wrongful termination to arbitration FedEx requires its drivers to provide their own vehicles, specifically approved by FedEx The OA allows FedEx to dictate the “identifying colors, logos, numbers, marks and insignia” of the vehicles FedEx requires vehicles to have specific dimensions, and all vehicles must also contain shelves with specific dimensions FedEx offers a “Business Support Package,” which provides drivers with uniforms, scanners, and other necessary equipment Purchase of the package is ostensibly optional, but more than 99 percent of drivers purchase it FedEx contends its drivers are independent contractors under California law Plaintiffs, a class of FedEx drivers in California, contend they are employees and filed a class action asserting claims for employment expenses and unpaid wages on the ground that FedEx had improperly classified the drivers as independent contractors The district court granted summary judgment to FedEx on the employment status issue Plaintiffs appealed Decision Summary judgment for FedEx is reversed; case is remanded to the district court with instructions to enter summary judgment for plaintiffs on the question of employment status Opinion California’s right-to-control employment test requires courts to weigh a number of factors: “The principal test of an employment relationship is whether the person to whom service is rendered has the right to control the manner and means of accomplishing the result desired.” California courts also consider “several ‘secondary’ indicia of the nature of a service relationship.” The right to terminate at will, without cause, is “[s]trong evidence in support of an employment relationship.” Additional factors include: (a) whether the one performing services is engaged in a distinct occupation or business; (b) the kind of occupation, with reference to whether, in the locality, the work is usually done under the direction of the principal or by a specialist without supervision; (c) the skill required in the particular occupation; (d) whether the principal or the worker supplies the instrumentalities, tools, and the place of work for the person doing the work; (e) the length of time for which the services are to be performed; (f) the method of payment, whether by the time or by the job; (g) whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee These factors “[g]enerally … cannot be applied mechanically as separate tests; they are intertwined and their weight depends often on particular combinations.” FedEx argues that the OA creates an independent-contractor relationship California law is clear that “[t]he label placed by the parties on their relationship is not dispositive, and subterfuges are not countenanced.” What matters is what the contract allows or requires The OA and FedEx’s policies and procedures unambiguously allow FedEx to exercise a great deal of control over the manner in which its drivers their jobs Therefore, this factor strongly favors plaintiffs First, FedEx can and does control the appearance of its drivers and their vehicles Second, FedEx can and does control the times its drivers can work Third, FedEx can and does control aspects of how and when drivers deliver their packages In light of the powerful evidence of FedEx’s right to control the manner in which drivers perform their work, none of the remaining right-to-control factors sufficiently favors FedEx to allow a holding that plaintiffs are independent contractors The first factor, the right to terminate at will, slightly favors FedEx The OA contains an arbitration clause and does not give FedEx an unqualified right to terminate Under California law, the right to discharge at will is “[s]trong evidence in support of an employment relationship.” The second factor, distinct occupation or business, favors plaintiffs As the California Court of Appeal reasoned, “the work performed by the drivers is wholly integrated into FedEx’s operation The drivers look like FedEx employees, act like FedEx employees, [and] are paid like FedEx employees.” “The customers are FedEx’s customers, not the drivers’ customers.” The third factor, whether the work is performed under the principal’s direction, slightly favors plaintiffs Although drivers retain freedom to determine several aspects of their day-to-day work, FedEx also closely supervises their work through various methods The fourth factor, the skill required in the occupation, also favors plaintiffs FedEx drivers “need no experience to get the job in the first place and [the] only required skill is the ability to drive.” The fifth factor, the provision of tools and equipment, slightly favors FedEx The drivers provide their own vehicles and are not required to get other equipment from FedEx The sixth factor, length of time for performance of services, favors plaintiffs Drivers enter into the OA for a term of one to three years Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it CHAPTER 28 Relationship of Principal and Agent The seventh factor, method of payment, is neutral FedEx pays its drivers according to a complicated scheme that cannot easily be compared to either hourly payment (which favors employee status) or per job payment (which favors independent contractor status) The eighth factor, whether the work is part of the principal’s regular business, favors plaintiffs The work that the drivers perform, the pickup and delivery of packages, is “essential to FedEx’s core business.” The final factor, the parties’ beliefs, slightly favors FedEx The OA’s statement of independent contractor status is evidence that the drivers believed that they were entering such a relationship Ultimately, though, “neither [FedEx]’s nor the drivers’ own perception of their relationship as one of independent contracting” is dispositive Viewing the evidence in the light most favorable to FedEx, the OA grants FedEx a broad right to control the manner in which its drivers perform their work The most important factor of the rightto-control test thus strongly favors employee status Interpretation Because FedEx had the broad right to control the manner in which its drivers perform their work and the other factors not strongly favor either employee status or independent contractor status, the drivers are employees as a matter of law under California’s right-to-control employment test Critical Thinking Question Explain whether there is any way in which FedEx could restructure the Operating Agreement to avoid the conclusions reached by the court in this case? Creation of Agency [28-2] Gratuitous agency an agency created without consideration Agency by estoppel imposed by law when a person (P) causes a third person (T) to believe that another person (A) has authority to act on P’s behalf 521 As stated above, agency is a consensual relationship that the principal and agent may form by contract or agreement The Restatement defines an agency relationship as “the fiduciary relationship that arises when one person (a ‘principal’) manifests assent to another person (an ‘agent’) that the agent shall act on the principal’s behalf and subject to the principal’s control, and the agent manifests assent or otherwise consents so to act.” Thus, the agency relationship involves three basic elements: assent, control by the principal, and the agent’s acting on behalf of the principal A person can manifest assent or intention through written or spoken words or other conduct Thus, whether an agency relationship has been created is determined by an objective test If the principal requests another to act for him with respect to a matter and indicates that the other is to act without further communication, and the other consents to act, the relation of principal and agent exists For example, Paula writes to Austin, a factor whose business is purchasing goods for others, telling him to select described goods and ship them at once to Paula Before answering Paula’s letter, Austin does as directed, charging the goods to Paula He is authorized to this because an agency relationship exists between Paula and Austin The principal has the right to control the conduct of the agent with respect to the matters entrusted to the agent The principal’s right to control continues throughout the duration of the agency relationship The relationship of principal and agent is consensual and not necessarily contractual; therefore, it may exist without consideration Even though the agency relationship is consensual, how the parties label the relationship does not determine whether it is an agency An agency created without an agent’s right to compensation is a gratuitous agency For example, Patti asks her friend Andrew to return for credit goods recently purchased from a store If Andrew consents, a gratuitous agency has been created The power of a gratuitous agent to affect the principal’s relationships with third persons is the same as that of a paid agent, and his liabilities to and rights against third persons are the same as well Nonetheless, agency by contract, the most usual method of creating the relationship, must satisfy all of the requirements of a contract In some circumstances, a person is held liable as a principal, even though no actual agency has been created, to protect third parties who justifiably rely on a reasonable belief that a person is an agent and who act on that belief to their detriment Called agency by estoppel, apparent agency, or ostensible agency, this liability arises when (1) a person (“principal”) intentionally or carelessly causes a third party to believe that another person (the “agent”) has authority to act on the principal’s behalf, (2) the principal has notice of the third party’s belief and does not take reasonable steps to notify the third party, (3) the third party reasonably and in good faith relies on the appearances created by the principal, and (4) the third party justifiably and detrimentally changes her position in reliance on the agent’s apparent authority When these requirements are met, the principal is liable to the third party for the loss the third party suffered by changing her position The doctrine is applicable when the person against whom estoppel is asserted has made no manifestation that an actor has authority as an agent, but is responsible for the third party’s belief that an actor is an agent and the third party has justifiably been induced by that belief to undergo a detrimental change in position Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 522 Part VI Agency Miller v McDonald’s Corporation Court of Appeals of Oregon, 1997 150 Or.App 274, 945 P.2d 1107 Facts Joni Miller seeks damages from defendant McDonald’s Corporation for injuries that she suffered when she bit into a heartshaped sapphire stone while eating a Big Mac sandwich that she had purchased at a McDonald’s restaurant in Tigard McDonald’s claims it is not liable because the 3K Corporation owns the restaurant 3K owned and operated the restaurant under a License Agreement with McDonald’s that required 3K to operate in a manner consistent with the “McDonald’s System.” This system includes proprietary rights in trademarks, “designs and color schemes” for restaurant buildings and signs, and specifications for certain food products as well as other business practices and policies 3K, as the licensee, agreed to adopt and exclusively use the business practices of McDonald’s Despite these detailed instructions, the Agreement provided that 3K was not an agent of McDonald’s for any purpose Rather, it was an independent contractor and was responsible for all obligations and liabilities, including claims based on injury, illness, or death directly or indirectly resulting from the operation of the restaurant Miller was under the assumption that McDonald’s owned, controlled, and managed the restaurant because its appearance and menu were similar to that of other McDonald’s restaurants In short, Miller testified, she went to the Tigard McDonald’s because she relied on defendant’s reputation and because she wanted to obtain the same quality of service, standard of care in food preparation, and general attention to detail that she had previously enjoyed at other McDonald’s restaurants The trial court granted summary judgment to McDonald’s on the ground that it did not own or operate the restaurant; rather, the owner and operator was a nonparty, 3K Restaurants, which held a franchise from McDonald’s Miller appealed Decision Reversed and remanded Opinion Under these facts, 3K would be directly liable for any injuries that Miller suffered as a result of the restaurant’s negligence The issue on summary judgment was whether there is evidence to permit a jury to find McDonald’s vicariously liable for those injuries because of its relationship with 3K Miller asserted two theories of vicarious liability: actual agency and apparent agency Under actual agency, in order for McDonald’s to be vicariously liable for 3K’s negligence, McDonald’s must have the right to control the method by which 3K performed its obligations under the Agreement A number of courts have applied the right to control Formalities usually no particular formality is required in a contract of agency, although appointments of agents for a period of more than one year must be in writing test to a franchise relationship If, in practical effect, the franchise Agreement goes beyond the stage of setting standards and allocates to the franchisor the right to exercise control over the daily operations of the franchise, an agency relationship exists The court decided that a jury could find that McDonald’s retained sufficient control over 3K’s daily operations so that an actual agency relationship existed The Agreement did not simply set standards that 3K had to meet Rather, it required 3K to use the precise methods that McDonald’s established, including the ways in which 3K was to handle and prepare food McDonald’s enforced the use of those methods by regularly sending inspectors and by its retained power to cancel the Agreement That evidence would support a finding that McDonald’s had the right to control the way in which 3K performed at least food handling and preparation Miller next asserted that McDonald’s was vicariously liable for 3K’s alleged negligence because 3K was an apparent agent of McDonald’s The crucial issues were whether the putative principal held the third party out as an agent and whether Miller relied on that holding out McDonald’s did not seriously dispute that a jury could find that it held 3K out as its agent Everything about the appearance and operation of the Tigard McDonald’s identified it with the common image for all McDonald’s restaurants Rather, it argued that there is insufficient evidence that Miller justifiably relied on that holding out In this case, Miller testified that she relied on the general reputation of McDonald’s in patronizing the Tigard restaurant and in her expectation of the quality of the food and service that she would receive Especially in light of McDonald’s efforts to create a public perception of a common McDonald’s system at all McDonald’s restaurants, whoever operated them, a jury could find that Miller’s reliance was objectively reasonable The trial court erred in granting summary judgment on the apparent agency theory Interpretation If a franchisor exercises sufficient control over its franchisee’s operations, actual agency and/or apparent agency can exist and cause the franchisor to be held vicariously liable as a principal for the acts of the franchisee even if their written agreement provides that no agency relationship exists Critical Thinking Question Do you agree that a franchise relationship should under certain circumstances be treated as an agency relationship? Explain Formalities [28-2a] As a general rule, a contract of agency requires no particular formality, and usually the contract either may be oral or may be inferred from the conduct of the principal In some cases, however, the contract must be in writing For example, the appointment of an agent for a period of more than a year comes within the one-year clause of the statute of frauds and thus must be in writing In some states, the authority of an agent to sell land must be set down in a writing signed by the principal Many states have “equal dignity” statutes providing that a principal must grant his agent in a written instrument the authority to enter into any contract required to be in writing See Chapter 15 for a discussion of state and federal legislation giving electronic records and signatures the legal effect of traditional writings and signatures Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it CHAPTER 28 Relationship of Principal and Agent Power of attorney written, formal appointment of an agent who is known as an attorney in fact 523 A power of attorney is an instrument that states an agent’s authority A power of attorney is a formal manifestation from principal to agent, who is known as “an attorney in fact,” as well as to third parties, that evidences the agent’s appointment and the nature or extent of the agent’s authority Under a power of attorney, a principal may, for example, appoint an agent not only to execute a contract for the sale of the principal’s real estate but also to execute the deed conveying title to the real estate to the third party A number of states have created an optional statutory shortform power of attorney based on the Uniform Statutory Form Power of Attorney Act In 2006, a new Uniform Power of Attorney Act (UPOAA) was promulgated to replace the Uniform Statutory Form Power of Attorney Act At least twenty-five states have adopted the 2006 Act (In 2017, two more states introduced legislation to adopt it.) Capacity [28-2b] Capacity of principal if the principal is a minor or an incompetent not under a guardianship, his appointment of another to act as an agent is voidable, as are any resulting contracts with third parties Durable power of attorney a written instrument that expresses the principal’s intention that the agent’s authority will not be affected by the principal’s subsequent incapacity or that the agent’s authority will become effective upon the principal’s subsequent incapacity Capacity of agent any person able to act may act as an agent since the act of the agent is considered the act of the principal The capacity of an individual to be a principal, and thus to act through an agent, depends on the capacity of the principal to the act For example, contracts entered into by a minor or an incompetent not under a guardianship are voidable Consequently, the appointment of an agent by a minor or an incompetent not under a guardianship and any resulting contracts are voidable, regardless of the agent’s contractual capacity The capacity of a person that is not an individual, such as a government or business association, to be a principal is determined by the law governing that entity Almost all of the states have adopted the Uniform Durable Power of Attorney Act providing for a durable power of attorney under which an agent’s power survives or is triggered by the principal’s loss of mental competence (In 2006, the new UPOAA was promulgated to replace the Uniform Durable Power of Attorney Act At least twenty-five states have adopted the 2006 Act A power of attorney created under the UPOAA is durable unless it expressly provides that it is terminated by the incapacity of the principal.) A durable power of attorney is a written instrument that expresses the principal’s intention that the agent’s authority will not be affected by the principal’s subsequent incapacity or that the agent’s authority will become effective upon the principal’s subsequent incapacity On the other hand, because the act of the agent is considered the act of the principal, the incapacity of an agent to bind himself by contract does not disqualify him from making a contract that is binding on the principal Thus, any person able to act, including individuals, corporations, partnerships, and other associations, ordinarily has the capacity to be an agent The agent’s liability, however, depends on the agent’s capacity to contract Therefore, although the contract of agency may be voidable, an authorized contract between the principal and the third person who dealt with the agent is valid An “electronic agent” is a computer program or other automated means used independently to initiate an action or respond to electronic records or performances in whole or in part without review or action by an individual Electronic agents are not persons and, therefore, are not considered agents In 2000 Congress enacted the Electronic Signatures in Global and National Commerce (E-Sign) The Act makes electronic records and signatures valid and enforceable across the United States for many types of transactions in or affecting interstate or foreign commerce The Act validates contracts or other records relating to a transaction in or affecting interstate or foreign commerce formed by electronic agents so long as the action of each electronic agent is legally attributable to the person to be bound E-Sign specifically excludes certain transactions, including (1) wills, codicils, and testamentary trusts; (2) adoptions, divorces, and other matters of family law; and (3) the Uniform Commercial Code other than sales and leases of goods Duties of Agent to Principal [28-3] The duties of the agent to the principal are determined by the express and implied provisions of any contract between the agent and the principal In addition to these contractual duties, the agent is subject to various other duties imposed by law, unless the parties agree otherwise Normally, a principal bases the selection of an agent on the agent’s ability, skill, and integrity Moreover, the principal not only authorizes and empowers the agent to bind her on contracts with third persons but also often places the agent in possession of her money and other property As a result, the agent is in a position to injure the principal, either through negligence or dishonesty Accordingly, an agent, as a fiduciary (a person in a position of trust and confidence), owes her principal the Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 524 Part VI Agency Practical Advice Recognize that even if you agree to serve as an agent without compensation, you owe a fiduciary duty to the principal and are liable to her for your negligence duties of obedience, good conduct, diligence, and loyalty; the duty to inform; and the duty to provide an accounting Moreover, an agent is liable for any loss she causes to the principal through her breach of these duties A gratuitous agent is subject to the same duty of loyalty that is imposed on a paid agent and is equally liable to the principal for the harm he causes by his careless performance Although the lack of consideration usually places a gratuitous agent under no duty to perform for the principal, such an agent may be liable to the principal for failing to perform a promise on which the principal has relied if the agent should have realized that his promise would induce reliance Duty of Obedience [28-3a] Duty of obedience an agent must act in the principal’s affairs only as authorized by the principal and must obey all lawful instructions and directions of the principal The duty of obedience requires the agent to act in the principal’s affairs only as actually authorized by the principal and to obey all lawful instructions and directions of the principal If an agent exceeds her actual authority, she is subject to liability to the principal for loss caused to the principal An agent is also liable to the principal for unauthorized acts that are the result of the agent’s unreasonable interpretations of the principal’s directions An agent is not, however, under a duty to follow orders to perform illegal or tortious acts, such as misrepresenting the quality of his principal’s goods or those of a competitor The agent may be subject to liability to her principal for breach of the duty of obedience (1) if she entered into an unauthorized contract for which her principal is now liable, (2) if she has improperly delegated her authority, or (3) if she has committed a tort for which the principal is now liable Thus, an agent who sells on credit in violation of his principal’s explicit instructions has breached the duty of obedience and is liable to the principal for any amounts the purchaser does not pay Moreover, an agent who violates her duty of obedience materially breaches the agency contract and loses her right to compensation Duty of good conduct within the scope of the agency relationship, an agent must act reasonably and refrain from conduct that is likely to damage the principal’s enterprise Duty of Good Conduct [28-3b] Duty of diligence an agent must act with reasonable care, competence, and diligence in performing the work for which he is employed Duty to inform an agent must use reasonable efforts to give the principal information material to the affairs entrusted to her An agent has a duty, within the scope of the agency relationship, to act reasonably and to avoid conduct that is likely to damage the principal’s interests This duty reflects the fact that the conduct of agents can have a significant effect on the principal’s reputation A breach of this duty makes the agent liable to the principal and subject to rightful discharge or termination Duty of Diligence [28-3c] Subject to any agreement with the principal, an agent has a duty to the principal to act with the care, competence, and diligence normally exercised by agents in similar circumstances Special skills or knowledge possessed by an agent are circumstances to be taken into account in determining whether the agent acted with due care and diligence Moreover, if the agent claims to possess special skill or knowledge, the agent has a duty to act with the care, competence, and diligence normally exercised by agents with such skill or knowledge An agent who does not exercise the required care, competence, and diligence is liable to his principal for any resulting harm For example, Peg appoints Alvin as her agent to sell goods in markets where the highest price can be obtained Although he could have obtained a higher price in a nearby market by carefully obtaining information, Alvin sells goods in a glutted market and obtains a low price Consequently, he is liable to Peg for breach of the duty of diligence A gratuitous agent owes a standard of care that is reasonable to expect under the circumstances, which include the skill and experience that the agent possesses Thus, providing a service gratuitously may subject an agent to duties of competence and diligence to the principal that not differ from the duties owed by a compensated agent Duty to Inform [28-3d] An agent has a duty to use reasonable effort to provide the principal with facts that the agent knows, has reason to know, or should know if (1) the agent knows, or has reason to know, that the principal would wish to have the facts or (2) the facts are material to the agent’s duties to the principal However, this duty does not apply to facts if providing them to the principal would violate a superior duty owed by the agent to another person The rule of agency providing that notice to an agent is notice to her principal makes this duty essential An agent who breaches this duty is subject to liability to the principal for loss caused the principal by the agent’s breach and may also be subject to termination of the agency relationship Moreover, if the agent’s breach of this duty Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it CHAPTER 28 Relationship of Principal and Agent 525 constitutes a breach of the contract between the agent and the principal, the agent is also liable for breach of contract Examples of information that an agent is under a duty to communicate may include the following: (1) a customer of the principal has become insolvent, (2) a debtor of the principal has become insolvent, (3) a partner of a firm with which the principal has previously dealt and with which the principal or agent is about to deal has withdrawn from the firm, or (4) property that the principal has authorized the agent to sell at a specified price can be sold at a higher price Duty to account an agent must maintain and provide the principal with an accurate account of money or other property that the agent has received or expended on behalf of the principal; an agent must not mingle the principal’s property with any other person’s property Fiduciary duty an agent owes a duty of utmost loyalty and good faith to the principal Duty to Account [28-3e] Subject to any agreement with the principal, an agent has a duty to keep and render accounts to the principal of money or other property received or paid out on the principal’s account Moreover, the agent may not mingle the principal’s property with any other person’s property and may not deal with the principal’s property so that it appears to be the agent’s property Fiduciary Duty [28-3f] A fiduciary duty, arising out of a relationship of trust and confidence, requires the utmost loyalty and good faith An agent has a fiduciary duty to act loyally for the principal’s benefit in all matters connected with the agency relationship This duty is imposed by law upon the agent and is also owed by an employee to his employer The principal may agree that conduct by an agent that otherwise would constitute a breach of the fiduciary duty shall not constitute a breach of that duty provided that in obtaining the principal’s consent, the agent (1) acts in good faith, (2) discloses all material facts that the agent knows, has reason to know, or should know would reasonably affect the principal’s judgment, and (3) otherwise deals fairly with the principal An agent’s fiduciary duty to a principal generally begins with the formation of the agency relationship and ends with its termination However, as discussed later, an agent may be subject to duties after termination with respect to the agent’s use of the principal’s property and confidential information provided by the principal An agent who violates his fiduciary duty is liable to his principal for breach of contract, in tort for losses caused and possibly punitive damages, and in restitution for profits he made or property received in breach of the fiduciary duty Moreover, he loses the right to compensation The principal may avoid a transaction in which the agent breached his fiduciary duty, even though the principal suffered no loss A breach of fiduciary duty may also constitute just cause for discharge of the agent The 2011 Restatement (Third) of Restitution and Unjust Enrichment provides that benefits derived from an agent’s breach of her fiduciary duty may be recovered from a third party who acquire such benefits with notice of the agent’s breach of her fiduciary duty The fiduciary duty arises most frequently in the following situations involving principals and their agents, although it is by no means limited to these situations Conflicts of Interest An agent has a duty not to deal with the principal as, or on behalf of, an adverse party in a transaction connected with the agency relationship An agent must act solely in the interest of his principal, not in his own interest or in the interest of another In addition, an agent may not represent his principal in any transaction in which the agent has a personal interest Nor may the agent act on behalf of adverse parties to a transaction without both principals’ approval to the dual agency An agent may take a position that conflicts with the interest of his principal only if the principal, with full knowledge of all of the facts, consents For example, A, an agent of P who desires to purchase land, agrees with C, who represents B, a seller of land, that A and C will endeavor to effect a transaction between their principals and will pool their commissions A and C have committed a breach of fiduciary duty to P and B Self-Dealing An agent has a duty not to deal with the principal as an adverse party in a transaction connected with the agency relationship The courts scrutinize transactions between an agent and her principal The agent may not deal at arm’s length with her principal The agent thus owes her principal a duty of full disclosure regarding all relevant facts that affect the transaction Moreover, the transaction must be fair Thus, Penny employs Albert to purchase for her a site suitable for a shopping center Albert owns such a site and sells it to Penny at the fair market value but does not disclose to Penny that he had owned the land Penny may rescind the transaction even Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it 526 Part VI Agency Practical Advice If you are the principal, consider obtaining from your agents a reasonable covenant that they will not compete with you after the agency terminates though Albert did not make a misrepresentation The agent’s loyalty must be undivided, and he must devote his actions exclusively to the representation and promotion of his principal’s interests Duty Not to Compete During the agency relationship, an agent must not compete with his principal or act on behalf or otherwise assist any of the principal’s competitors After the agency terminates without breach by the agent, however, unless otherwise agreed, the agent may compete with his former principal The courts will enforce by injunction a contractual agreement by the agent not to compete after termination if the restriction is reasonable as to time and place and necessary to protect the principal’s legitimate interest Contractual agreements not to compete are discussed in Chapter 13 where it is noted that such noncompetition contracts may be subject to different standards for Internet companies and their employees Misappropriation An agent may not use property of the principal for the agent’s own purposes or for the benefit of a third party Unless the principal consents, an agent who has possession of the principal’s property has a duty to use it only on the principal’s behalf even if the agent’s use of the property does not cause harm to the principal An agent is liable to the principal for any profit the agent made while using the principal’s property or for the value of the agent’s use of the principal’s property An agent’s duties regarding the principal’s property continue after the agency terminates, and a former agent has a duty to return any of the principal’s property she still possesses Confidential Information An agent may not use or disclose confidential information obtained in the course of the agency for her own benefit or the benefit of a third party Confidential information is information that, if disclosed, would harm the principal’s business or that has value because it is not generally known Confidential information includes unique business methods, trade secrets, business plans, personnel, nonpublic financial results, and customer lists An agent, however, may reveal confidential information that the principal is committing, or is about to commit, a crime Many statutes provided protection to employees who “whistle-blow.” Unless otherwise agreed, even after the agency terminates, the agent may not use or disclose to third persons confidential information The agent, however, may use the generally known skills, knowledge, and information she acquired during the agency relationship Practical Advice Do not agree to become an agent if you are not willing or able to fulfill all of the duties an agent owes, unless your agency contract clearly relieves you of those duties you find unacceptable Duty to Account for Financial Benefits Unless otherwise agreed, an agent has a duty not to acquire any financial or other material benefits in connection with transactions conducted on behalf of the principal Such benefits would include bribes, kickbacks, and gifts Moreover, an agent may not make a secret profit from any transaction subject to the agency All material benefits, including secret profits, belong to the principal, to whom the agent must account In addition, the principal may recover any damages caused by the agent’s breach Thus, if an agent who is authorized to sell certain property of her principal for $1,000 sells it for $1,500, she may not secretly pocket the additional $500 Detroit Lions, Inc v Argovitz United States District Court, Eastern District of Michigan, 1984 580 F.Supp 542; affirmed, 767 F.2d 919 Facts Jerry Argovitz was employed as an agent of Billy Sims, a professional football player Early in 1983, Argovitz informed Sims that he was awaiting the approval of his application for a U.S Football League franchise in Houston Sims was unaware, however, of Argovitz’s extensive ownership interest in the new Houston Gamblers organization Meanwhile, during the spring of 1983, Argovitz continued contract negotiations on behalf of Sims with the Detroit Lions of the National Football League By June 22, Argovitz and the Lions were very close to an agreement, although Argovitz represented to Sims that the negotiations were not proceeding well Argovitz then sought an offer for Sims’s services from the Gamblers The Gamblers offered Sims a $3.5 million five-year deal Argovitz told Sims that he thought the Lions would match this figure; however, he did not seek a final offer from the Lions and then present the terms of both packages to Sims Sims, convinced that the Lions were not negotiating in good faith, signed with the Gamblers on July 1, 1983 On December 16, 1983, Sims signed a second contract with the Lions The Lions and Sims brought an action against Argovitz, seeking to invalidate Sims’s contract with the Gamblers on the ground that Argovitz breached his fiduciary duty when negotiating the contract with the Gamblers Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-6 Index Contractual liability (continued) disclaimer of liability by secondary parties, 481 drawers, 480 effect of acceptance, 481 indorsers, 481 signatures, 477–479 authorized, 477 unauthorized, 479 termination of liability, 484–485 Contributions, 612, 746 Contributory infringer, 843 Contributory negligence, 151–152, 156, 393, 398 Controlling the Assault of NonSolicited Pornography and Marketing Act of 2003 (CANSPAM Act), 109 Conventional level, 17 Conversion, 110, 132, 626–627, 709, 768 Convertible bonds, 659 Conway v Cutler Group, Inc., 1013 Cooke v Fresh Express Foods Corporation, Inc., 716–717 Cooperative Centrale RaiffeisenBoerenleenbank B.A v Bailey, 443 Cooperatives, 1004 Coopers & Lybran v Fox, 641–642 Copyrights, 835–838 infringement and remedies, 837–838 international, 841 ownership, 837 protection of, 957 registration, 835 rights, 836 Corporate governance, 19, 675–678 Corporate political speech, 78–79 Corporate powers, 649–650 Corporate veil, piercing, 623, 647–649 Corporation by estoppel, 645 Corporation de facto, 645 Corporation de jure, 645 Corporations, 640–657 benefit, 618 classification of, 636–640 domestic or foreign, 637 professional corporations, 640 profit or nonprofit, 636–637 public or private, 636 publicly held or closely held, 638–640 subchapter S corporations, 640 closely held, 647 consolidated, 709 corporate attributes, 635–636 centralized management, 636 free transferability of shares, 635 legal entity, 635 limited liability, 635 perpetual existence, 635 defective, 645 defective incorporation, 645–646 common law approach, 645 statutory approach, 645–646 definition of, 565 domestic or foreign, 637 financial structure of, 656–672 debt securities, 657–659 dividends and other distributions, 665–671 equity securities, 660–664 formalities of, 643–644 articles of incorporation, 643–644 bylaws, 644 incorporators, 643 organizational meeting, 644 selection of name, 643 formation of, 641–644 fundamental changes of, 704–719 charter amendments, 704–705 combinations, 705–713 dissolution, 714–717 incorporators, 643 liability for torts and crimes, 650 liability of, 106–107 management structure of, 675–700 corporate governance, 675–678 role of directors and officers, 686–699 role of shareholders, 678–686 merged, 708–709 as moral agents, 18 nature of, 635–640 as a citizen, 636 as a person, 636 organizing, 641–643 promoters, 641–642 subscribers, 642–643 parent, 647 piercing the corporate veil, 647 closely held corporations, 647 parent–subsidiary, 647 professional, 640 publicly held or closely held, 638–640 purchase of shares, 707 recognition or disregard of corporateness, 644–649 sources of corporate powers, 649 purpose, 649 statutory powers, 649 subchapter S, 640 subsidiary, 647 surviving, 708 ultra vires acts, 649–650 Corrective advertising, 905 Corruption of public officials, 239 Cost justification, 885 Cost-benefit analysis, 15 Cosureties, 744, 745, 746 Co-tenants, 1002 Council on Environmental Quality (CEQ), 927 Counterclaim, 54 Counterfeit mark, 834 Counteroffer, 185 Course of dealing, 273, 338 Course of performance, 274 Court of Appeals, 45 Court of Appeals for the Federal Circuit, 46 Court-annexed arbitration, 62 Courts, 44–47 appellate, 47 district, 45 dual, 50 federal, 44–46 inferior trial, 47 small claims, 47 special, 46 special trial, 47 state, 46–47 Supreme, 45–46 trial, 47 Cover, 417 Cox Enterprises, Inc v Pension Benefit Guaranty Corporation, 668–669 CPSA See Consumer Product Safety Act (CPSA) CPSC See Consumer Product Safety Commission (CPSC) CPSIA See Consumer Product Safety Improvement Act (CPSIA) CRA See Community Reinvestment Act (CRA) Credit close-ended, 912 final, 495 open-ended, 912 Credit accounts, 912 Credit Card Accountability, Responsibility, and Disclosure Act (CARD), 916–917 Credit Card Bill of Rights, 916–917 Credit Card Fraud Act, 915 Creditor beneficiary, 291 Creditors assignments for benefit of, 782 debt collection practices, 918 defined, 761 lien, 738, 766 meetings of, 761 of partners, 604 partnership, 604 priority of claims, 761–762 proofs of claim, 761 protection of, 626, 717 remedies, 917–918 rights of, 579, 604 rights outside of bankruptcy, 781 secured, 736, 761 subordination of claims, 762 unsecured, 735, 761 Crime See also Criminal law against business, 110–113 bad checks, 113 bribery, 113 burglary, 112–113 embezzlement, 110 extortion, 113 false pretenses, 110 forgery, 113 larceny, 110 robbery, 112 classification of, 106–107 defenses to, 113–115 defense of person or property, 113 duress, 115 entrapment, 115 mistake of fact, 115 defined, 5, 105 essential elements of, 105–106 nature of, 105–106 of partnership, 591–592 white-collar, 107–110 computer crime, 109 Racketeer Influence and Corrupt Organizations Act (RICO), 109–110 Crimes, corporations, 655 Criminal law, 5, 104–119 See also Crime classification of crime, 106–107 criminal procedure Fifth Amendment, 117–118 Fourth Amendment, 117 Sixth Amendment, 118 steps in criminal prosecution, 116–117 defenses, 113 defense of person or property, 113 duress, 115 entrapment, 115 mistake of fact, 115 liability of corporation, 107 nature of crimes, 105–106 vicarious liability, 106 white-collar crime, 107–110 Criminal procedure, 115–118 Fifth Amendment, 117–118 Fourth Amendment, 117 Sixth Amendment, 118 steps in criminal prosecution, 116–117 Criminal prosecution, steps in, 116–117 Criminal sanctions, 806, 822 Cross-examination, 56 Crowdfunding, 799–800 Crowdfunding exemption, 799–800 Cumulative dividends, 663 Cumulative voting, 679–680 Cumulative-to-the-extent-earned shares, 664 Cure, by seller, 355 Cybercrime, 109 D Dahan v Weiss, 268 Damages See also Monetary damages certainty of, 318 compensatory, 314 consequential, 314, 421–422 foreseeability of, 317–318 incidental, 314, 414, 420 limitations on, 317–318, 399, 422 liquidated, 316 liquidation of, 422 for misrepresentation, 326 mitigation of, 318 monetary damages, 314–318 nominal, 315 out-of-pocket, 326 punitive, 122, 315–316 reliance, 315 reselling goods and recovering, 411 Davis v Watson Brothers Plumbing, Inc., 480 Death, 186, 503, 529 Debentures, 658 Debit cards, 432 Debt antecedent, 460, 593 collection practices, 918 discharged in bankruptcy, 222 disputed, 220 settlement of, 220 statute of limitations, 221–222 subsequent, 593 undisputed, 220 Debt securities, 657–659 authority to issue, 657 types of, 657–659 Debtors, 725 defenses of, 747–750 discharge, 763–764 duties, 762 equity receiverships, 783 exemptions, 763 personal defenses of, 747 relief, 781–783 rights in collateral, 728–729 rights outside of bankruptcy, 782–783 Decedent’s estate, 1032–1038 administration of estate, 1038 interstate succession, 1037–1038 wills, 1032–1037 Deception, 904 Decree, Deed of trust, 1015 Deeds, 1013–1014 delivery of, 1014 formal requirements, 1014 recordation, 1014 types of, 1013–1014 quitclaim deed, 1014 special warranty deed, 1014 warranty deed, 1013–1014 Defamation, 80, 126–129 Default, 740–743 acceptance of collateral, 743 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index party in, 322 repossession of collateral, 740–741 sale of collateral, 742 Defective acceptances, 190 Defective condition, 150, 394, 395–396 design defect, 396 failure to warn, 396 manufacturing defect, 396 Defendant, defined, 5, 11 Defense of Marriage Act (DOMA), 80, 81 Defense of person or property, 113 Definiteness of offers, 181, 339–340 Delegable duties, 288 Delegatee, 282, 287–288 Delegation, 288 Delegation of duties, 287–289 defined, 282 delegable duties, 288 duties of the parties, 288–289 Delegator, 282, 287 Demand draft, 481 Demand note, 436, 481 Demand paper, 441, 462 Demurrer, 54 Denney v Reppert, 217–218 Deontology, 15–16 Department of Revenue of Kentucky, et al., v Davis, 74 Depositions, 54 Depository banks, 454 Derivative suits, 684–685 Design defect, 396, 401–402 Design patent, 839 Destination contracts, 353, 371 Destruction of subject matter, 186 Detroit Lions, Inc v Argovitz, 526–527 Different terms, 190–191, 340–341 Digital Millennium Copyright Act (DMCA), 835 DiLorenzo v Valve & Primer Corporation, 223 Direct deposits and withdrawals, 507 Direct examination, 56 Direct export sales, 959 Direct infringer, 843 Direct suits, 684 Directed verdict, 56–57 Directors See Board of directors Directors’ liability, 670 DIRECTV, Inc v Imburgia, 61 Disability law, 857–858 Disaffirmance, 246 Discharge, 301, 763–764 by agreement of parties, 304–305 accord and satisfaction, 304 mutual rescission, 304 novation, 305 substituted contracts, 304 by breach, 301–304 anticipatory repudiation, 303 material breach, 302–303 substantial performance, 303 unauthorized material alteration of written contract, 304 by operation of law, 305–308 availability of restitution, 307 bankruptcy, 307 commercial impracticability, 306 frustration of purpose, 306 impossibility, 305–306 statute of limitations, 307 subsequent illegality, 306 Discharge by agreement of the parties, 304–305 Discharge by breach, 301–304 Discharge by operation of law, 305–308 Discharge by performance, 301 Discharge in insolvency proceedings, 466 Discharge of which the holder has notice, 466 Disclaimers limitations on, 909 of warranties, 398 buyer’s examination or refusal to examine, 392 federal legislation relating to warranties of consumer goods, 392 Disclosed principals, 538, 552–553, 555 Disclosure of information, 99–100 Freedom of Information Act, 99 Government in the Sunshine Act, 99–100 Privacy Act, 99 Disclosure requirements, 502–503 consumer credit transactions adjustable rate mortgages, 913 billing errors, 913 credit accounts, 912 home equity loans, 913 Mortgage Reform and AntiPredatory Lending Act, 914 settlement charges, 914 registration of securities, 794 Securities Exchange Act of 1934, 807–812 Foreign Corrupt Practices Act (FCPA), 812 periodic reporting requirements, 808 proxy solicitations, 809–810 registration requirements for securities, 808 tender offers, 810–811 Discovery, 54 Discrimination, 854 employment, 850, 958 price, 884 proving, 852–853 reverse, 854–855 Dishonor, 462–463, 481–482 notice of, 482–483 wrongful, 500 Disparagement, 133 Disputed debt, settlement of, 220 Dissenting shareholders, 705, 711–713 Dissociation, 594–595 continuation after, 600–601 effects , 595 liability, 602 not causing dissolution, 600 rightful, 594–595 wrongful, 594 Dissolution, 595–600, 714–717 administrative, 715 causes of, 595–596, 603, 617, 624–625 acts of partners, 595 by acts of partners, 603 court order, 603 by court order, 596 operation of law, 596 by operation of law, 603 continuation after, 604 defined, 595 dissociations not causing, 600 distribution of assets, 618 effects of, 598–599, 603 involuntary, 715–716 judicial, 715–716 liquidation, 717 protection of creditors, 717 voluntary, 714 winding up, 599–600, 603–604, 617 Distributions, 665 of assets, 599–600, 603, 618, 626 declaration and payment of, 669–670 defined, 580, 665 of the estate, 769 legal restrictions on, 666–668 liability for improper, 670–671 limited liability companies, 619–620 limited partnership and, 615 right to share in, 580–581 Distributive justice, 16 Distributorships, 959 District courts, 45 Diversity of citizenship, 48 Dividends board of directors’ declaration of, 688 cash, 665 cumulative, 663 effect of declaration of, 670 legal restrictions on, 666–668 liability for improper, 670 liquidating, 665 preferences, 663–664 property, 665 shareholders’ right to compel, 669 types of, 665 Divorce, 1036 Dixon, Laukitis and Downing v Busey Bank, 497–498 DJ Coleman, Inc v Nufarm Americas, Inc., 337–338 DMCA See Digital Millennium Copyright Act (DMCA) Documents, 727 Documents of title, 983–985 defined, 983 due negotiation, 984–985 ineffective, 985 negotiability, 984 types of, 983–984 bill of lading, 983–984 warehouse receipts, 983 warranties, 985 Dodd-Frank Wall Street Reform and Consumer Protection Act, 19, 60, 507, 659, 678, 706, 790, 906, 956, 1015 Dodge v Ford Motor Co., 670 DOMA See Defense of Marriage Act (DOMA) Domestic animals, 155 Domestic corporation, 637 Domestication, 709 Dominant parcel, 1004 Donahue v Rodd Electrotype Co., Inc., 687 Drafts, 435, 437 dishonor of, 481–482 unaccepted, 487 Drake Mfg Co., Inc v Polyflow, Inc., 637–638 Drawee, 435, 477, 479 Drawee bank, 499 Drawer, 435, 480 Drug testing, 863–864 Dual courts, 50 Due diligence defense, 804 Due negotiation, 984–985 Due process, 80–81 procedural, 80–81 substantive, 80 Due Process Clause, 74 Dumping, 952 Dunnam v Burns, 233 Durable power of attorney, 523 Durations of offers, 182–187 counteroffer, 185 death or incompetency of offeror, 186 destruction of subject matter of, 186 lapse of time, 182 I-7 rejection, 185 revocation, 183–185 subsequent illegality of, 186 Duress, 115, 196–197, 749, 1033 improper threats, 196–197 physical, 196 Duties of possessors of land Second Restatement, 145–146 Third Restatement, 146–147 Duty, defined, Duty not to compete agent to principal, 526 loyalty, 697–698 Duty of care breach of, 140–147 collecting banks, 497 in partnerships, 578 Duty of diligence agent to principal, 524 directors and officers, 692–693 Duty of good conduct, agent to principal, 524 Duty of loyalty, 695–698 Duty of obedience agent to principal, 524 directors and officers, 692 in partnerships, 578 Duty to account, 525 for financial benefits, 526 Duty to act, 143–144 Duty to act timely, 497–498 Duty to inform, agent to principal, 524–525 E Earned surplus, 666 Earned surplus test, 667 Easements, 1004–1006 appurtenant, 1004 creation of, 1005 definition of, 1004 in gross, 1004 license, 1005–1006 profits prendre, 1005 types of, 1004 Eastman Kodak Co v Image Technical Services, Inc., 879 Economic Espionage Act of 1996, 828, 829–830 Ed Nowogroski Insurance, Inc v Rucker, 829 EDGAR (Electronic Data Gathering, Analysis, and Retrieval), 791–792, 794, 800–801, 808 Edmonson v Leesville Concrete Company, Inc., 56 EEOC See Equal Employment Opportunity Commission (EEOC) Effective moment, 188 Effluent limitation, 933 EIS See Environmental impact statements (EIS) Election of remedies, 323 Electronic FOIA Amendments, 99 Electronic funds transfer, 505–512 automated teller machines, 505 consumer funds transfer, 507–509 consumer liability, 508–509 definition of, 505 direct deposits and withdrawals, 507 disclosure, 508 documentation and periodic statements, 508 error resolution, 508 liability of financial institution, 509 online banking, 507 pay-by-phone systems, 507 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-8 Index Electronic funds transfer (continued) personal computer (online) banking, 507 point-of-sale systems, 507 preauthorized transfers, 508 types of, 505–507 wholesale, 507, 509–511 Electronic payments, 432 Electronic records, 259–260 Electronic Signatures in Global and National Commerce (E-Sign), 260, 344, 523, 635 Embezzlement, 110 Emergencies, 141 Emerging growth companies (EGCs), 795–796 Eminent domain, 75–76, 1018–1019 just compensation, 1019 public use, 1018 Employee privacy, 863 Employee protection, 861–865 employee privacy, 863–864 employee termination at will, 861–862 Fair Labor Standards Act, 865 Family and Medical Leave Act, 865 Occupational Safety and Health Act, 863 Social Security, 864–865 unemployment insurance, 864–865 Worker Adjustment and Retraining Notification Act, 865 worker’s compensation, 864 Employee termination at will, 861–862 Employment contracts, 234 Employment discrimination, 850, 958 Employment discrimination law, 849–861 Age Discrimination in Employment Act (ADEA), 857 Civil Rights Act of 1964, 850–856 disability law, 857–858 Equal Pay Act, 850 executive order, 856–857 Genetic Information Nondiscrimination Act, 860 Employment law, 847–871 employee protection, 861–865 employee privacy, 863–864 employee termination at will, 861–863 Fair Labor Standards Act, 865 Family and Medical Leave Act, 865 Occupational Safety and Health Act, 863 Social Security and unemployment insurance, 864–865 Worker Adjustment and Retraining Notification Act (WARN), 865 workers’ compensation, 864 employment discrimination law, 849–861 Age Discrimination in Employment Act (ADEA), 857 Civil Rights Act of 1964, 850–856 disability law, 857–858 Equal Pay Act, 850 executive order, 856–857 Genetic Information Nondiscrimination Act, 860 labor law, 847–849 Labor-Management Reporting and Disclosure Act, 849 Labor-Management Relations Act, 848–849 National Labor Relations Act (NLRA), 848 Norris-La Guardia Act, 848 Enabling acts, zoning, 1017 Enea v The Superior Court of Monterey County, 577–578 Enforcement, 58–59, 94 Enforcement rights, 581–582, 682–686 Entrapment, 115 Environmental impact statements (EIS), 927–928 content of, 928 nature of, 928 preparing, 928 requirements, 928 scope of, 928 Environmental law, 925–942 common law actions for environmental damages, 925–927 nuisance, 925–926 problems common to private causes of action, 927 strict liability, 926 trespass to land, 926 federal regulations, 927–941 Clean Air Act, 928–932 Clean Water Act, 932–940 National Environmental Policy Act, 927–928 hazardous substances, 935–940 Federal Insecticide, Fungicide, and Rodenticide Act, 935–936 Resource Conservation and Recovery Act, 937 Superfund, 938 Toxic Substances Control Act, 936–937 international protection of ozone layer, 940–941 problems common to private causes of action, 927 Environmental Protection Agency v EME Homer City Generation, L P., 929–930 Equal Credit Opportunity Act, 911 Equal Employment Opportunity Commission (EEOC), 34, 89, 849 Equal Pay Act, 850, 856 Equal protection, 81–83 intermediate test, 83 rational relationship test, 81 strict scrutiny test, 81–82 Equal Protection Clause, 81–82, 854 Equal work, 850 Equipment, 726 Equity, 7–8 Equity insolvency test, 666 Equity receiverships, 783 Equity securities, 660–664 defined, 660 classes of shares, 663–664 issuance of shares, 660–663 E-Sign See Electronic Signatures in Global and National Commerce (E-Sign) Estate, 765–766 administration of, 1038 decedent’s, 1032–1038 distribution of, 769–771 fraudulent transfers, 767–768 freehold, 993–995 leasehold, 996–1002 statutory liens, 768 trustee as lien creditor, 766 voidable preferences, 766–767 Estate of Countryman v Farmers Co-op Ass’n, 624 Estoppel agency by, 521 corporation by, 645 insurance, 977 partnership by, 591 promissory, 169–171, 185, 222, 270 waiver and, 977 Ethical fundamentalism, 14–15 Ethical relativism, 15 Ethics defined, 13 vs law, 14 European Union, 860, 937, 947–948 Eviction, 998–999 Exclusionary rule, 117 Exclusive dealing arrangement, 882 Exclusive dealing contract, 217 Exclusive federal jurisdiction, 48 Exclusive state jurisdiction, 49–50 Exculpatory clauses, 235 Excusable ignorance, 240 Executed contracts, 169 Executive branch control, 99 Executive order, 10, 856–857 Executor, estate, 263, 1038 Executor-administrator provision, 263 Executory contracts, 169 Executory promise, 458–459 Exempt securities, 796 Exoneration, 746 Expectation interest, 313–314 Expedited Funds Availability Act, 495 Expertise, 20 Export Administration Act of 1979, 952 Export controls, 952 Express assumption of risk, 153, 156, 399 Express conditions, 299–300 Express contract, 167 Express trusts, 1027–1028 Express warranties, 386–387, 390 of assignor, 287 of authority, 552 basis of bargain, 388 creation of, 387 defined, 287, 386 Expropriation, 657, 951 Extortion, 113 Extraordinary bailee, 981 F F Hoffmann-La Roche Ltd v Empagran S.A., 955 FAA See Federal Arbitration Act (FAA) Fact, 201–202 Factual cause, 140, 147–148 Failure to warn, 396, 402 Fair Credit and Charge Card Disclosure Act, 911 Fair Credit Billing Act, 507, 913, 914 Fair Credit Reporting Act (FRCA), 915 Fair Debt Collection Practices Act, 918 Fair Labor Standards Act (FLSA), 865 Fair use, 836 False arrest, 124–125 False imprisonment, 124–125 False light, 130 False pretenses, 110 False registration statements, 803–804 False representation, 200–201 Family and Medical Leave Act (FMLA), 865 Family Entertainment and Copyright Act of 2005, 838 Faragher v City of Boca Raton, 855–856 Farm products, 726 F.A.S port of shipment, 353 FCC v Fox Television Stations, Inc., 98–99 FCCPA See Federal Consumer Credit Protection Act (FCCPA) FCPA See Foreign Corrupt Practices Act (FCPA) FDA See Food and Drug Administration (FDA) Featherbedding, 848 Federal Arbitration Act (FAA), 60 Federal commerce power, 72–73 Federal Consumer Credit Protection Act (FCCPA), 900, 911, 915, 917–918 Federal Copyright Act, 835 Federal courts, 44–46 Court of Appeals, 45 district courts, 45 special courts, 46 Supreme Court, 45–46 Federal Employee Polygraph Protection Act, 864 Federal fiscal powers, 74–76 borrowing and coining money, 75 eminent domain, 75–76 spending power, 75 taxation, 75 Federal Ins Co v Winters, 289 Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA), 935–936 Federal jurisdiction, 48 Federal Organizational Corporate Sentencing Guidelines, 107 Federal preemption, 69 Federal question, 48 Federal Trade Commission Act, 89, 872, 886, 954 Federal Trade Commission (FTC), 89, 180, 285, 470, 873, 886, 903–904, 954 Federal Trademark Dilution Act of 1995, 833, 834 Federalism, 69 Fee estates, 993–994 Fee simple estate, 994 Felony, 106 Ferrell v Mikula, 125–126 Fictitious payee rule, 452 Fidelity bond, 744 Fiduciary, 201 Fiduciary duty, 525–526 confidential information, 526 conflicts of interest, 525 defined, 525 directors and officers, 695 duty not to compete, 526 duty to account for financial benefits, 526 misappropriation, 526 in partnerships, 575–577 promoters, 642 self-dealing, 525–526 Field warehouse, 733 FIFRA See Federal Insecticide, Fungicide, and Rodenticide Act (FIFRA) Fifth Amendment, 75, 115, 117–118 Final credit, 495 Final payment, 499 Finance leases, 333–334 Financing statement duration of filing, 732–733 filing, 732–733 place of filing, 733 subsequent change of debtor’s location, 733 what to file, 732 Fire and property insurance, 973–974 co-insurance clauses, 974 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index multiple insurers, 974 types of fire covered, 973–974 types of polices, 974 Firm offers, 183, 224, 340 First Amendment, 77–80 commercial speech, 79 corporate political speech, 78–79 defamation, 80 free speech, 77 “First inventor to file” provision, 839 First sale doctrine, 836 First State Bank of Sinai v Hyland, 253 Fitness for particular purpose, 389 Fixed amount, 439 Fixtures, 727, 967–968 Flagrant trespassers, 146 Flow of labor, 952 Flow of trade, 951–952 FLSA See Fair Labor Standards Act (FLSA) FMLA See Family and Medical Leave Act (FMLA) F.O.B place of destination, 353 F.O.B place of shipment, 353 FOIA See Freedom of Information Act (FOIA) Food, Drug, and Cosmetic Act, 936 Food and Drug Administration (FDA), 28, 99, 907 Food Quality Protection Act (FQPA), 936 Foreclosure, 579, 1016 Foreign agents, 567, 959 Foreign corporation, 637 Foreign Corrupt Practices Act (FCPA), 114, 812, 958 antibribery provisions, 821 Foreign Sovereign Immunities Act, 949 Foreseeability, 148 Foreseeable damages, 317–318 Forged signatures, 479 Forgery, 113 Formal requirements, 436 deeds, 1014 of indorsements, 455–456 of negotiable instruments, 436–444 of will, 1034 Formal rulemaking, 90 Four unities, 1002 Fourth Amendment, 115, 117, 636 Fox v Mountain West Electric, Inc., 167–168 FQPA See Food Quality Protection Act (FQPA) Frank B Hall & Co., Inc v Buck, 127 Fraud, 199–204 bank, 110 consumer credit card fraud, 915 damages for, 326 in the execution, 199–200 in execution, 466 false representation in, 200–201 in inducement, 200–204 intention to deceive in, 203 justifiable reliance, 203–204 knowledge of falsity in, 203 mail, 110 materiality, 202–203 misrepresentation of facts in, 201–202 securities, 110 tort liability, 893 wire, 110 Fraudulent alteration, 467–468 Fraudulent misrepresentation, 133 FRCA See Fair Credit Reporting Act (FRCA) Free speech, 77 Freedom of contract, 339 Freedom of Information Act (FOIA), 99 Freehold estates, 993–995 Freeman v Quicken Loans, Inc., 915–916 Free-writing prospectus, 795 Friendly fire, 973–974 Frustration of purpose, 306 FTC See Federal Trade Commission (FTC) Full performance, 269–270, 749 Full warranty, 909 Fungible goods, 979 Furlong v Alpha Chi Omega Sorority, 358 Future advances, 731 Future interests, 994–995 G Gaddy v Douglass, 530 Galleon Group, 13 Galler v Galler, 681 Gambling statutes, 232 Garnishment, 58, 781, 917–918 GATT See General Agreement on Tariffs and Trade (GATT) General Agreement on Tariffs and Trade (GATT), 10, 948 General intangibles, 728 General partnerships See also Partnerships continuation after dissolution, 604 right to continue partnership, 604 rights of creditors, 604 contracts of partnership, 588–591 authority to bind partnership, 589–590 partnership by estoppel, 591 definition of, 564 dissociation of, 594–595 dissociation without dissolution, 600–602 continuation after dissociation, 600–601 dissociated partner’s liability to third persons, 602 dissociated partner’s power to bind partnership, 602 dissociations not causing dissolution, 600 dissolution, 595–600, 603 duties among partners, 575–578 entity theory, 568 formation of, 567–575 firm name, 569 partnership agreement, 569 partnership capital and property, 573–574 tests of existence, 569–571 as legal aggregate, 568 as legal entity, 568 liability of incoming partner, 593 nature of, 567–568 notice to partner, 592 operation and dissolution of, 587–605 partner’s interest in partnership, 579 relationships among partners, 575–582 rights among partners, 578–582 enforcement rights, 581–582 legal action, 582 right to choose associates, 581 right to compensation, 581 right to indemnification, 581 right to information and inspection of books, 582 right to participate in management, 581 right to return of capital, 581 right to share in distributions, 580–581 right to share in profits, 580 rights in specific partnership property, 578–579 tests of partnership existence, 569–571 association, 570 business for profit, 570 co-ownership, 570–571 torts and crimes, 591–592 winding up, 603–604 General warranty deed, 1013 Generic name, 832 Genetic Information Nondiscrimination Act, 859, 860 Geographic market, 881 Gifts, 970 acceptance of, 970–971 causa mortis, 971 classification of, 971 definition of, 970 delivery, 970 donee, 970 donor, 970 intent, 970 inter vivos, 971 personal property, 970 GLB Act See Gramm-Leach-Bliley Financial Modernization Act (GLB Act) Going private transactions, 709–711 Good faith, 182, 336, 372, 460 Good faith purchaser, 372 Good person philosophy, 17 Goods, 726–727 accessions, 727 carriers, 982 consumer, 392, 726, 731, 738 defined, 163, 333, 726 entrusting to merchants, 374 equipment, 726 farm products, 726 fixtures, 727 fungible, 979 held by bailee, 353 identified, 360–361 identifying goods to contract, 411 inventory, 726 no movement of, 371 nondelivery of, 420–421 physical movement of, 371 in possession of bailee, 378 reclaim goods upon buyer’s insolvency, 414 recover damages for nonacceptance or repudiation, 412 recovering, 420 reselling goods to recover damages, 411 sale of, 269 security interest in, 420, 918 specially manufactured, 265 stopping delivery of, 411 void title to, 372–374 voidable title to, 372–374 withholding delivery of, 410 Government in the Sunshine Act, 99–100 Government powers, 72–76 federal commerce power, 72–73 federal fiscal powers, 74–76 borrowing and coining money, 75 eminent domain, 75–76 spending power, 75 taxation, 75 limitations on, 76–83 Contract Clause, 77 due process, 80–81 I-9 equal protection, 81–83 First Amendment, 77–80 state regulation of commerce, 73–74 regulations, 73 taxation, 74 Gramm-Leach-Bliley Financial Modernization Act (GLB Act), 907–908 Gratuitous (gift) promise, 213 Greene v Boddie-Noell Enterprises, Inc., 397–398 Guarantor, 744 Guarantor of collection, 744 Guardianship, 252 H Hadfield v Gilchrist, 979–980 Hadley v Baxendale, 317 Hamilton v Lanning, 778–779 Handicapped person, 857 Harm, 140, 150 Harm to economic interests, 132–135 disparagement, 133 fraudulent misrepresentation, 133–135 interference with contractual relations, 132–133 Harm to person, 124–125 assault, 124 battery, 124 false arrest, 124–125 false imprisonment, 124–125 infliction of emotional distress, 125 recklessness, 125 Harm to property, 131–132 personal property, 131–132 conversion, 132 trespass, 132 real property, 131 nuisance, 131 trespass, 131 Harm to the right of dignity, 126–131 defamation, 126–129 invasion of privacy, 129–130 misuse of legal procedure, 130–131 Harris v Looney, 646 Heinrich v Titus-Will Sales, Inc., 374–375 HELCPA See Home Equity Loan Consumer Protection Act (HELCPA) Herfindal-Hirschman Index (HHI), 884 Heritage Bank v Bruha, 439–440 Herron v Barnard, 968–969 Hessler v Crystal Lake ChryslerPlymouth, Inc., 363–364 HHI See Herfindal-Hirschman Index (HHI) HMDA See Home Mortgage Disclosure Act (HMDA) Hochster v De La Tour, 303 Holder, 458, 500 Holder in due course, 458–471 antecedent debt, 460 executory promise, 458–459 good faith, 460 holder, 458 lack of notice, 462–463 limitations upon rights, 470–471 payee as, 463–464 personal defenses, 468–469 preferred position of, 465–469 real defenses, 465–468 discharge in insolvency proceedings, 466 discharge of which the holder has notice, 466 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-10 Index Holder in due course (continued) fraud in the execution, 466 fraudulent alteration, 467 infancy, 466 unauthorized signature, 466–467 void obligations, 466 requirements of, 458–463 security interest, 460 shelter rule, 464–465 status, 463–465 value, 458–460 without reason to question its authenticity, 463 Holographic wills, 1036 Home Equity Loan Consumer Protection Act (HELCPA), 913 Home equity loans, 913 Home Mortgage Disclosure Act (HMDA), 911 Home Rentals Corp v Curtis, 999–1000 Horizontal mergers, 882–884 Horizontal privity, 393, 398 Horizontal restraint, 875 Hospital Corp of America v FTC, 883 Hostile fire, 973–974 Household Credit Services, Inc v Pfennig, 912–913 Hyatt Corporation v Palm Beach National Bank, 450–451 Hybrid rulemaking, 90 I Identification, 354, 370–371 Illegal bargains, 230–241 effect of illegality, 240 excusable ignorance, 240 partial illegality, 240 party not equally at fault, 240 party protected by statute, 240 party withdrawing before performance, 240 restitution, 240 violations of public policy, 233–239 common law restraint of trade, 233–234 corrupting public officials, 239 exculpatory clauses, 235 tortious conduct, 239 unconscionable contracts, 236–239 violations of statutes, 230–233 gambling statutes, 232 licensing statutes, 230–231 usury statutes, 232–233 Illegal per se, 874 Illegality, effects of, 240 excusable ignorance, 240 partial illegality, 240 party not equally at fault, 240 party protected by statute, 240 party withdrawing before performance, 240 restitution, 240 Illusory promises, 216–217 conditional promise, 217 defined, 216 exclusive dealing contract, 217 output contract, 217 requirements contract, 217 Image replacement document, 435 IMF See International Monetary Fund (IMF) Implied assumption of risk, 153 Implied contract, 167 Implied trusts, 1028–1029 Implied warranties, 388–389 of assignor, 287 of authority, 552 defined, 287 disclaimers of, 909 fitness for particular purpose, 389, 391 of habitality, 1000, 1012 merchantability, 388, 390 Implied-in-fact conditions, 300 Implied-in-law conditions, 300 Import-Export Clause, 74 Impossibility, 305–307 availability of restitution, 307 commercial impracticability, 306 frustration of purpose, 306 objective, 305 subjective, 305 subsequent illegality, 306 Impostor rule, 451–452 Improper threats, 196–197 In personam jurisdiction, 51, 52 In Re Keytronics, 572–573 In Re L.B Trucking, Inc., 389–390 In re Magness, 284 In re The Score Board, Inc., 249 In rem jurisdiction, 51, 52 In the Matter of 1545 Ocean Ave., LLC, 625–626 In the Matter of the Estate of Rowe, 1030 Incapacitation, 141 Incapacity, 529–531 Incidental beneficiary, 290–291, 293 Incidental damages, 314, 414, 420 Income bonds, 659 Incompetency, 186 Incompetent persons, 252 mental illness or defect, 252 person under guardianship, 252 Incompetent principals, 555 Incomplete instruments, 444, 468 Incorporation articles of, 643–644 defective, 645–646 formalities of, 643–644 Incorporators, 643 Indemnification, 528, 698 Indenture, 657 Independent contractors, 519, 549 torts of, 551 Indictment, 116 Indirect infringer, 843 Indispensable paper, 727 chattel paper, 727 documents, 727 instruments, 727 investment property, 727 Indorsements, 449, 453–457 allonge, 455 blank, 453 collecting banks, 498 definition of, 453 for deposit or collection, 454 formal requirements, 455–457 incorrect or misspelled, 456 with ineffective restrictions, 455 place of, 455–456 qualified, 455 restrictive, 454–455 special, 453 in trust, 454–455 unqualified, 455 unrestrictive, 454 Indorsers, 476, 480, 481 Infancy, 466 Inferior trial courts, 47 Infliction of emotional distress, 125 Informal rulemaking, 90 Infringement, 827, 833–834 contributory, 843 copyright, 837–838 defined, 827 direct, 843 indirect, 843 patent, 843 remedies, 837–838 trademark, 833–834 Injunction, 8, 321 Innkeepers, 982 Innocent misrepresentation, 204 Inquisitorial system, defined, Inside directors, 687 Insider trading, 815–816 civil monetary penalties for, 817–819 express, 817 Insiders, 815 Insolvency (bankruptcy), 410 Insolvency (equity), 410 Inspection, 357 Installment contracts, 356 Instruments, 727 See also Negotiable instruments Insurable interest, 371, 976 Insurance definition of, 973 fire and property, 973–974 co-insurance clauses, 974 multiple insurers, 974 types of fire covered, 973–974 types of policies, 974 nature of contracts, 975–977 defenses of insurer, 976–977 insurable interest, 976 offer and acceptance, 975–976 premiums, 976 termination, 977 waiver and estoppel, 977 Intangible property, 967 Intangibles, 727–728 Intellectual property, 827–843 copyrights, 835–838 international, 957 patents, 839–843 trade names, 834–835 trade secrets, 827–830 trade symbols, 830–834 Intended beneficiary, 291–293 creditor beneficiary, 291 defenses against beneficiary, 293 defined, 290 donee beneficiary, 291 rights of intended beneficiary, 292 vesting of rights, 292–293 Intent, 123 offers, 178–181 advertisements, 180 auction sales, 181 preliminary negotiations, 180 Intentional torts, 121–135 harm to economic interests, 132–135 disparagement, 133 fraudulent misrepresentation, 133–135 interference with contractual relations, 132–133 harm to person, 124–125 assault, 124 battery, 124 false arrest, 124–125 false imprisonment, 124–125 infliction of emotional distress, 125 recklessness, 125 harm to property, 131–132 personal property, 131–132 real property, 131 harm to the right of dignity, 126–131 defamation, 126–129 invasion of privacy, 129–130 misuse of legal procedure, 130–131 Inter-Tel Technologies, Inc v Linn Station Properties, LLC, 648–649 Inter vivos gift, 971 Inter vivos trust, 1027 Interest in land, 263 Interest in real property See Real property Interference with contractual relations, 132–133 Intermediary banks, 495, 510 Intermediate test, 77, 83 International Anti-Bribery and Fair Competition Act of 1998, 114, 821, 958 International arbitration, 63 International bribery, 114 International business law, 946–961 international environment, 946–949 International Court of Justice (ICJ), 947 international treaties, 948–949 North American Free Trade Agreement (NAFTA), 948 regional trade communities, 947–948 jurisdiction over actions of foreign governments, 949–951 act of state doctrine, 951 sovereign immunity, 949 taking of foreign investment property, 951 multinational enterprises, 959–960 direct export sales, 959 distributorships, 959 foreign agents, 959 joint ventures, 960 licensing, 959 wholly owned subsidiaries, 960 transacting business abroad, 951–959 antitrust laws, 954 bankruptcy, 959 employment discrimination, 958 flow of capital, 952 flow of labor, 952 flow of trade, 951–952 Foreign Corrupt Practices Act, 958 intellectual property protection, 957–958 international contracts, 952–954 securities regulation, 955–956 International Centre for the Settlement of Investment Disputes, 952 International contracts, 164, 952–954 International Court of Justice, 947 International Emergency Economic Powers Act, 952 International law, 946–947 International Monetary Fund (IMF), 952 International sales, 335 International treaties, 948–949 Interpretation of contract, 274 Interpretative rules, 92 Interstate commerce, regulation of, 72–73 Interstate Land Sales Full Disclosure Act, 910 Intestate succession, 1032, 1037–1038 Intoxicated persons, 252–253 Intrastate issues, 801 Intrusion, 130 Intuitionism, 17 Invasion of privacy, 129–130 appropriation, 129 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index defenses to, 130 false light, 130 intrusion, 130 public disclosure of private facts, 130 Inventory, 726 PMSI, 737 Investment contract, 793 Investment property, 727 foreign, 951 Investor Protection and Securities Reform Act of 2010, 678, 706, 790–791 Investors, accredited, 798–803 Invitee, 145 Involuntary petitions, 760 Irrevocable offer, 340 Irrevocable offer of unilateral contracts, 184 Irrevocable powers, 532 J Jasdip Properties SC, LLC v Estate of Richardson, 172 Jasper v H Nizam, Inc., 862 Jenkins v Eckerd Corporation, 271–272 Jerman v Carlisle, McNellie, Rini, Kramer & Ulrich LPA, 918–919 JLM, Inc., 33–35 JOBS Act See Jumpstart Our Business Startups Act of 2012 (JOBS Act) Joint and several liability, 588 Joint tenancy, 1002 Joint venture, 562–563, 564–565, 875, 960 Judgment notwithstanding verdict, 57 on pleadings, 54 summary, 55 Judicial bonds, 745 Judicial dissolution, 715–716 Judicial law, 6–9 Judicial lien, 761 Judicial limitations, 861–862 Judicial review, 70, 95–98 defined, 6, 95 general requirements, 96 questions of fact, 97–98 questions of law, 97 Jumpstart Our Business Startups Act of 2012 (JOBS Act), 791, 795–796, 798, 799, 800, 803, 806–807, 809 Jurisdiction, 47–53 defined, 47 over parties, 51–53 attachment, 52 in personam, 52 quasi in rem, 52 in rem, 52 venue, 53 subject matter, 48–50 concurrent federal, 48 exclusive federal, 48 exclusive state, 49 federal, 48 Jury instructions, 57 selection, 55 Just compensation, eminent domain, 1019 Justice distributive, 16 law and, Justifiable reliance, 203–204 K Kalas v Cook, 266 Kant, Immanuel, 16 Keeney v Keeney, 1028–1029 Kelo v City of New London, 1018–1019 Kelso v Bayer Corporation, 396–397 Kenco Homes, Inc v Williams, 412–413 Keser v Chagnon, 251 Kimbrell’s of Sanford, Inc v KPS, Inc., 734 King v VeriFone Holdings, Inc., 683–684 Kirtsaeng v John Wiley & Sons, Inc., 836–837 Klein v Pyrodyne Corporation, 154 Knowledge, 141 Kohlberg, Lawrence, 17 Korzenik v Supreme Radio, Inc., 460 Kyoto Protocol, 941 L Labeling requirements, 908–909 Labor, flow of, 952 Labor law, 847–849 Labor-Management Relations Act (LMRA), 848–849 Labor-Management Reporting and Disclosure Act, 849 Land contract provision, 263 Landlord, 996 obligations, 999–1002 fitness for use, 1000 liability for injuries caused by third parties, 1002 quiet enjoyment, 999 repair, 1001–1002 transfer of interests by, 997 Landrum-Griffin Act, 849 Lanham Act, 830–832, 833–835 Lapse of time, 182 Larceny, 110 Law, 2–12 classification of, 4–5 civil, criminal, private, procedural, public,5 substantive, definition of, equity, 7–8 vs ethics, 14 executive orders, 10 functions of, hierarchy of, justice and, legal analysis, 10–12 morals and,3 restatements of, 8–9 sources of, 6–10 administrative, 10 constitutional law, judicial law, 6–9 legislative law, 9–10 treaties, Lead plaintiff, 53 Leahy-Smith America Invents Act, 839 Lease transactions, 336 Leasehold estates, 996–998 creation and duration, 996–997 definite term, 996 periodic tenancy, 996–997 tenancy at sufferance, 997 tenancy at will, 997defined, 996 landlord’s obligations, 999–1002 tenant’s obligations, 998–999 transfer of interests, 997–998 transfers by landlord, 997 transfers by tenant, 997 Leases See also Sales and leases consumer, 333 defined, 333 finance, 333–334 Leegin Creative Leather Products, Inc v PSKS, Inc., 877 Lefkowitz v Great Minneapolis Surplus Store, Inc., 11, 180, 181 Legal aggregate, 568 Legal analysis, 10–12 Legal benefit, 213–215 Legal detriment, 213–215, 217 Legal entity, 568, 635 Legal sufficiency, 213–220 adequacy of consideration, 214 bilateral contract, 214–215 illusory promise, 216–217 preexisting contractual duty, 217–220 unilateral contract, 214Legislative control, 98–99 Legislative law, 9–10 Legislative rules, 89–90 Leibling, P.C v Mellon PSFS (NJ) National Association, 501 Lemon laws, 908, 909 Letters of credit, 362, 496, 953–954 Leveraged buyouts, 711 Liability See also Contract liability; Strict liability; Tort liability antifraud provisions, 805–806 conditions precedent to, 481–483 contractual, 246–248, 476–485, 546–547 for conversion, 483 of corporation, 106–107 criminal sanctions, 806 directors, 670 effects of dissolution, 599 false registration statements, 803–805 of incoming partner, 593 limitation statutes, 698–699 limited partnerships, 628 minors liability for misrepresentation of age, 251 liability for necessaries, 249–250 liability for tort connected with contract, 251–252 liability on contracts, 246–248 for misrepresentation of age, 251 for necessaries, 249–250 primary, 476 of primary parties, 479–480 scope of, 140, 148–150 secondary, 476–477 of secondary parties, 480–483 Securities Act of 1933, 3805 shareholders, 677 strict, 153–156 termination of, 484–485 for tort connected with contract, 251–252 unregistered sales, 803 vicarious, 106 warranties, 485–489 without fault, 106 Liability of parties, 476–489 contractual liability, 476–485 primary parties, 479–480 acceptors, 479–480 makers, 479 secondary parties, 480–483 conditions precedent to, 481–483 disclaimer, 481 drawers, 480 I-11 effect of acceptance, 481 indorsers, 481 liability for conversion, 483 warranties on presentment, 487–489 all other payors, 488–489 drawees of unaccepted drafts, 487 warranties on transfer, 485–486 authentic and authorized signatures, 485 entitlement to enforce, 485 no alteration, 485 no defenses, 486 no knowledge of insolvency, 486 Libel, 127 Libertarians, 16 Liberty, 81 License defined, 230 regulatory, 231 revenue, 231 Licensee, 145 Licensing, defined, 960 Licensing statutes, 230–232 Lie detector tests, 864 Lien, 371, 761 creditors, 738, 739, 766 floating, 731 judicial, 761 statutory, 768 Life estates, 994 Limitations on government, 76–83 Contract Clause, 77 due process, 80–81 equal protection, 81–83 First Amendment, 77–80 Limited liability companies (LLC), 618–627 asset distribution, 626 authority, 626 defined, 565, 618 dissociation, 626 dissolution, 624–626 duties, 622–623 foreign, 619 formation, 618–619 contribution, 619 filing, 619 members, 618 name, 619 operating agreement, 619 liabilities, 623 manager-managed, 623 member-managed, 623 mergers and conversions, 626–627 rights of members, 619–622 assignment of interest, 622 derivative actions, 622 distributions, 619–620 information, 621 management, 620 profit and loss sharing, 619 voting, 621 withdrawal, 620 winding up, 626 Limited liability limited partnerships, 565, 628 Limited liability, of corporations, 628 Limited liability partnerships, 565, 627 defined, 627 designation, 627 liability limitation, 627 Limited offers, 797–799 to accredited investors, 798 not exceeding $5 million, 798 private placements, 797–798 Limited partnerships, 565, 611–618 definition of, 612 dissolution, 617–618 duties, 615 formation, 612–613 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-12 Index Limited partnerships (continued) contributions, 612 defective, 612–613 filing of certificate, 612 foreign, 613 name, 612 liabilities, 616–617 rights, 613–615 assignment of interest, 614–615 choice of associates, 61614 control, 613 derivative actions, 615 distributions, 615 information, 615 loans, 615 profit and loss sharing, 615 voting rights, 614 withdrawal, 614 winding up, 617 Liquidated damages, 316 Liquidating distributions, legal restrictions on, 668 Liquidating dividends, 665 Liquidation, 422, 717, 768–771 See also Bankruptcy conversion, 768 discharge, 771 dismissal, 768–769 distribution of estate, 769 proceedings, 768 Liquidation preferences, 664 Litigation, 53 Living wills, 1037 LLC See Limited liability companies (LLC) LMRA See Labor-Management Relations Act (LMRA) Loans, to directors and officers, 695–696 Long-arm statutes, 52 Loss of power avoidance, 323–325 affirmance, 323–324 delay, 325 rights of third parties, 325 Loss of value, 314 Lost profit, 412 Lost property, 972 Louisiana v Hamed, 114–115 Love v Hardee’s Food Systems, Inc., 146–147 M Maastricht Treaty, 947 Mackay v Four Rivers Packing Co., 264 Madison Square Garden Corp., Ill v Carnera, 321 Madoff, Bernard, 13, 108 Madrid Protocol, 832, 957 Magnuson-Moss Warranty Act, 392, 908, 909 Mail fraud, 109–110 Main purpose doctrine, 261–262 Makers, 479 Mala in se, 106 Mala prohibita, 106 Malicious prosecution, 130 Management, centralized, 636 Management buyout, 711 Management compensation, 688–689 Manifest system, 937 Manufacturing defect, 396, 401 Mark Line Industries, Inc v Murillo Modular Group, Ltd., 477–478 Market allocations, 878 Market price differential, 412 Market share, 880 Marketable title, 1012 Maroun v Wyreless Systems, Inc., 202Marriage, 1036 Marriage provision, 263 Martin v Melland’s Inc., 379 Massachusetts trust, 566 Massachusetts v Environmental Protection Agency, 932 Material breach, 301, 302–303 Materiality, 202–203 Matrixx Initiatives, Inc v Siracusano, 814–815 Maxims, Mayo Foundation for Medical Education and Research v United States, 91–92 MBCA See Model Business Corporation Act (MBCA) McCarran-Ferguson Act, 973 McDowell Welding & Pipefitting, Inc v United States Gypsum Co., 304–305 Means, Gardiner, 19 Mediation, 62–63 Mens rea, 105 Mental disability, 141 Mental illness or defect, 252 Mentally incompetent, 252 Merchant sellers, 395 Merchantability, 388 implied warranty of, 390–391 Merchants, 338, 378, 395 Merged corporation, 708–709 Mergers, 626–627, 708–709, 882–884 conglomerate, 882–883 horizontal, 882 short-form, 709 vertical, 882 Merritt v Craig, 324–325 Metropolitan Life Insurance Company v RJR Nabisco, Inc., 658 Michael Silvestri v Optus Software, Inc., 299–300 Midnight deadline, 497 Midwest Hatchery v Doorenbos Poultry, 413, 420, 423–424 MIGA See Multilateral Investment Guarantee Agency (MIGA) Miller v McDonald’s Corporation, 522 Mims v Arrow Financial Services, LLC, 49 Mini-trial, 59, 63 Minors, 245–252 contractual capacity of, 246–252 definition of, 245 liability for misrepresentation of age, 251 liability for necessaries, 249–250 liability for tort connected with contract, 251–252 liability on contracts, 246–248 disaffirmance, 246 ratification, 248 restitution, 246–247 Mirror image rule, 190, 340 Mirvish v Mott, 971–972 Misappropriation, 526 Misdemeanor, 106 Mislaid property, 972 Misrepresentation, 200–204 of age, 251 fact, 201–202 false representation, 200–201 fraud, 318 fraudulent, 133–135, 323–324 innocent, 204 insurer, 976 justifiable reliance, 203–204 knowledge of falsity/intention to deceive, 203–204 materiality, 202–203 negligent, 204 nonfraudulent, 204 remedies, 325–326 Mistake, 204–207 assumption of risk of, 206–207 definition of, 204 effect of fault upon, 207 in meaning of terms, 207 mutual, 205 unilateral, 205–206 Mistake of fact, 115 Misuse of legal procedure, 130–131 Mitigation of damages, 318 MNEs See Multinational enterprises (MNEs) Model Business Corporation Act (MBCA), 9, 634, 635, 661, 676, 681 Model Penal Code, 9, 105, 107 Modified comparative negligence, 152 Modify, defined, 45 Monetary damages, 314–319 compensatory damages, 314 limitations on damages, 317–318 liquidated damages, 316 nominal damages, 315 punitive damages, 315–316 reliance damages, 315 Money, 440 borrowing and coining, 75 Monopolies, 880–881 attempt to monopolize, 881 monopolization, 880–881 Monopolization, 880–881 Monopoly power, 880 Monsanto Co v Spray-Rite Service Corporation, 875 Montana Food, LLC v Todosijevic, 620–621 Montreal Protocol, 940–941 Moore v Kitsmiller, 152–153 Moral development, stages of, 17 Moral obligation, 222 Morals, and law, Morrison v National Australia Bank Ltd., 955, 956–957 Mortgage bonds, 659 Mortgage Reform and Anti-Predatory Lending Act of 2010, 914, 1015 Mortgagee, 1015 Mortgages defined, 1015 foreclosure and, 1016 form of, 1015 regulation of, 1015–1016 rights and duties of parties to, 1015 transfer of interests under, 1016 Mortgagor, 1015 Most favored nation provision, 948 Moulton Cavity & Mold Inc v LynFlex Ind., 354 Mountain Peaks Financial Services, Inc v Roth-Steffen, 286 Multilateral Investment Guarantee Agency (MIGA), 951 Multinational enterprises (MNEs), 567, 959–960 defined, 959 direct export sales, 959 distributorships, 959 foreign agents, 959 joint ventures, 960 licensing, 959 wholly owned subsidiaries, 960 Multiple insurers, 974 Multiple product orders, 905 Mutual assent, 165, 177–191 acceptance of offer authorized means, 188 code, 190–191 communication of, 187–190 defective acceptances, 190 effective moment, 188–190 following prior rejection, 190 general rule, 187silence as, 187–188 unauthorized means, 190 variant acceptances, 190–191 essentials of an offer, 178–182 communication, 178 definiteness of, 181–182 intent, 178–181 duration of offers, 182–187 counteroffer, 185 death or incompetency, 186 destruction of subject matter, 186 lapse of time, 182 rejection, 185 revocation, 183–185 subsequent illegality, 186 overview, 177 sales and leases, 339–343 auctions, 343 definiteness of offer, 339–340 manner of acceptance, 343 variant acceptances, 340–342 Mutual mistake, 205 Mutual rescission, 304 Mykon Pharmaceuticals, Inc., 26–30 N NAAG See National Association of Attorneys General (NAAG) NAAQS See National ambient air quality standards (NAAQS) NAFTA See North American Free Trade Agreement (NAFTA) Named plaintiff, 53 National ambient air quality standards (NAAQS), 930 National Association of Attorneys General (NAAG), 884, 903 National Conference of Commissioners on Uniform State Laws (NCCUSL), 9, 60, 259, 567, 910 National Contingency Plan (NCP), 938 National Environmental Policy Act (NEPA), 927–928 National Highway Traffic Safety Administration (NHTSA), 907 National Labor Relations Act (NLRA), 848 National Pollutant Discharge Elimination System (NPDES), 933 National Securities Markets Improvement Act of 1996, 792 NationsBank of Virginia, N.A v Barnes, 441 NCCUSL See National Conference of Commissioners on Uniform State Laws (NCCUSL) NCP See National Contingency Plan (NCP) Necessaries defined, 249 liability for, 249–50 Negligence, 140–153 assumption of risk, 153 breach of duty of care, 140–147 duties of possessors of land, 145–146 duty to act, 1433–144 reasonable person standard, 140–142 res ipsa loquitur, 147 comparative, 151–152, 156, 398–399 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index contributory, 152, 156, 393, 398 defenses to, 150–153 defined, 140 elements of, 140 factual cause, 147–148 harm, 150 per se, 141–142 scope of liability (proximate cause), 148–150 foreseeability, 148 superseding cause, 149 Negligent hiring, 548 Negligent misrepresentation, 204 Negotiability, 433–434, 984 assignment compared with negotiation, 434 definition of, 433 development of law, 433–434 Negotiable instruments, 432 ambiguous instruments, 444 certificates of deposit, 436 checks, 435–436 dating of instrument, 446 development of law of, 433–434 drafts, 435 formal requirements of, 436–444 fixed amount, 439 money, 440 no other undertaking or instruction, 440–441 payable on demand or at a definite time, 441–442 payable to order or to bearer, 442–443 promise or order to pay, 438 signed requirements, 437 terms and omissions, 444 unconditional, 438–439 writing, 437 holder in due course, 458–470 limitations upon rights, 470 preferred position of, 465–469 requirements, 458–463 status, 463–465 incomplete instruments, 444 indorsements, 453–457 blank, 453 for deposit or collection, 454 formal requirements, 455–457 with ineffective restrictions, 455 qualified, 455 restrictive, 454 special, 453 in trust, 454–455 unqualified, 455 notes, 436 transfer of, 448–456 types of, 434–436 certificates of deposit, 436 checks, 435–436 drafts, 435 notes, 436 unconditional requirement, 438–439 particular fund doctrine, 439 reference to other agreements, 438–439 Negotiation, 63, 448–452 assignment vs., 434 of bearer paper, 449 defined, 449 fictitious payee rule, 452 impostor rule, 451–452 of order paper, 449–452 subject to rescission, 452 NEPA See National Environmental Policy Act (NEPA) NET Act See No Electronic Theft Act (NET Act) Net assets, 666 Net assets test, 667 Neugebauer v Neugebauer, 198–199 New England Rock Services, Inc v Empire Paving, Inc., 218–219 New vehicles, 932 NHTSA See National Highway Traffic Safety Administration (NHTSA) NLRA See National Labor Relations Act (NLRA) No Electronic Theft Act (NET Act), 838 No par value stock, 661 Nominal damages, 315 Nonacceptance of goods, 412 Nonattainment areas, 931 Nonconforming uses, 1017 Noncumulative stock, 664 Nondelivery of goods, 418–419 Nonexistent principals, 555 Nonfraudulent misrepresentation, 204322, 323, 326 Nonhappening of presupposed conditions, 362 Nonpoint source pollution, 935 Nonpossessory interests, 1004–1006 Nonprofit organizations, 570, 636–637 Nonreporting issuers, 795, 802 Nontariff barriers, 952 Nontrespassing animals, 155 Norris-La Guardia Act, 848 North American Free Trade Agreement (NAFTA), 948 Northern Corporation v Chugach Electrical Association, 307 Notes, 436 demand, 481 dishonor of, 483 makers, 481 Notice, 286, 462 of breach of warranty, 393 claim or defense, 463 disclaimers and, 398 of dishonor, 482–483 instrument has been dishonored, 462–463 instrument is overdue, 462 lack of, 462–463 to partner, 592 Notice states, 1014 Notice-race states, 1014 Novation, 288, 305 Nozick, Robert, 16 NPDES See National Pollutant Discharge Elimination System (NPDES) Nuisance, 131, 925–926 Nuncupative wills, 1036 O Objective fault, 105 Objective impossibility, 305 Objective satisfaction, 299 Obligation of both parties anticipatory repudiation, 363 casualty to identified goods, 360–361 failure of presupposed conditions, 361–362 right to adequate assurance of performance, 363 right to cooperation, 363 substituted performance, 362 Obligation of payment, 360 Obligations both parties, 360–363 anticipatory repudiation, 363 casualty to identified goods, 360–361 failure of presupposed conditions, 361–362 right to adequate assurance of, 363 right to cooperation, 363 substituted performance, 362 landlord’s, 999–1002 promises to perform prior unenforceable, 221–222 public, preexisting, 217–220 tenant’s, 998–999 void, 466 Obligee, 281–282, 287 Obligor, 281, 725 Occupational Safety and Health Act, 863 Occupational Safety and Health Administration (OSHA), 863 OECD Convention, 821, 958 OFCCP See Office of Federal Contract Compliance Programs (OFCCP) Offer of proof, 56 Offeree, 178 Offeror, 178 Offers, 178–182 communication, 178 defined, 178 definiteness of, 181–182, 339–340 duration of, 182–187 counteroffer, 185 death or incompetency of offeror, 186 destruction of subject matter of, 186 lapse of time, 182 rejection, 185 revocation, 183–185 subsequent illegality of, 186 firm, 224, 340 firm, under the Code, 183 intent, 178–181 advertisements, 180 auction sales, 181 preliminary negotiations, 180 irrevocable, 184, 340 statutory irrevocability of, 183 stipulated provisions in, 188 Office of Federal Contract Compliance Programs (OFCCP), 857 Officers actual express authority, 692 actual implied authority, 692 apparent authority, 692 authority of, 691–692 conflict of interests, 695 corporate opportunity, 696 duties of, 692–698 duty not to compete, 697–698 indemnification of, 698 loans to, 695–696 liability limitation statutes, 698 ratification, 692 role of, 691 selection and removal of, 691 transactions in shares, 697 Official bonds, 745 Oliver Winery, Inc., 31–32 O’Neil v Crane Co., 395 One-year provision, 263–265 computation of time, 265 full performance by one party, 265 possibility test, 264 Online banking, 507 Open policy, 974 Open price, 339 Open quantity, 339–340 Open terms, 181–182 I-13 Open-ended credit, 912 Opening statement, 56 OPIC See Overseas Private Investment Corporation (OPIC) Opinion, 201 Option contracts, 183 Options, defined, 340 Oral argument, 58 Oral contract, 258, 263 Order, defined, 94 Order paper, negotiation of, 449–452 Order to pay, 438 Ordinary bailee, 981 Organizational meeting, 644 Original promise, 261 Originator, wholesale funds transfer, 510 Originator’s bank, 510 OSHA See Occupational Safety and Health Administration (OSHA) Osprey L.L.C v Kelly-Moore Paint Co., Inc., 188–189 Out-of-pocket damages, 326 Output contract, 182, 217 Outside directors, 687–688 Overseas Private Investment Corporation (OPIC), 951 P Palsgraf v Long Island Railroad Co., 149 Palumbo v Nikirk, 155 Par value stock, 661 Parent corporations, 647 Parker v Twentieth Century-Fox Film Corp., 55, 318–319 Parlato v Equitable Life Assurance Society of the United States, 544 Parol evidence, 345 Parol evidence rule, 270–274 Partial assignment, 283 Partial illegality, 240 Participating bonds, 659 Participating preferred shares, 664 Particular fund doctrine, 439 Parties jurisdiction over, 51–53 attachment, 52 in personam, 52 quasi in rem, 52 in rem, 52 venue, 53 liability of, 476–489 See also Liability of parties obligations of both, 360–363 anticipatory repudiation, 363 casualty to identified goods, 360–361 failure of presupposed conditions, 361–362 right to adequate assurance of, 363 right to cooperation, 363 substituted performance, 362 primary, 479–480 secondary, 480–483 third, 281–293 Partition, 1002 Partners creditors, 600 Partner’s transferable interest, 579 Partnership capital, 573–574 Partnership by estoppels, 591 Partnership property, 574, 578–579 Partnerships contracts of, 588–591 creditors, 600, 604 creditors’ rights, 579 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-14 Index Partnerships (continued) definition of, 568 dissociation, 594–595, 600–602 dissolution, 595–600, 602–604 duties among partners, 575–578 duty of care, 578 duty of obedience, 578 fiduciary duty, 575–577 entity theory, 568 formation of, 568–574 firm name, 569 partnership agreement, 569 partnership capital and property, 573–574 tests of existence, 569–571 general, 564 as legal aggregate, 568 as legal entity, 568 limited liability limited partnerships, 565, 628 limited liability partnerships, 565, 627 limited partnerships, 565, 611–618 definition of, 612 dissolution, 617–618 duties, 615–617 formation, 612–613 rights, 613–615 nature of, 567–568 partner’s interest in, 579 relationship of partners with third parties, 587–593 relationships among partners, 575–582 right to continue, 604 rights among partners, 578–582 enforcement rights, 581–582 legal action, 582 partner’s interest in partnership, 579 right to choose associates, 581 right to compensation, 581 right to indemnification, 581 right to information and inspection of books, 582 right to participate in management, 581 right to return of capital, 581 right to share in distributions, 580 right to share in profits, 580 rights in specific partnership property, 578–579 tests of partnership existence, 569–571 association, 570 business for profit, 570 co-ownership, 570–571 torts and crimes of, 591–592 Party in default, 322 Party injured by breach, 322 Past consideration, 221 Patent and Trademark Office, 46, 832, 842 Patent Cooperation Treaty, 842, 843, 957 Patent exhaustion doctrine, 839 Patents, 839–843, 957 defined, 839 design, 839 infringement, 843 international, 957 issuance of, 842–843 patentability, 839 plant, 839 remedies, 843 utility, 839 Patient Protection and Affordable Care Act (PPACA), 74, 76, 91 Payable to bearer, 443 Payable to order, 442–443 Pay-by-phone systems, 507 Payee defined, 435 fictitious, 452 holder in due course, 463–464 Payment order, 510 definition of, 510 erroneous execution of, 511 stop, 501 unauthorized, 511 Payments, 484 acceptance and, 266 obligation of, 360 recovering, 417 tender of, 484 termination of liability, 484 Payor banks, 499 customer’s death or incompetence, 503 customer’s duties, 503–504 disclosure requirements, 502–503 payment of items, 500 relationship with customers, 500–504 stop payment orders, 501 subrogation on improper payment, 502 substitute check, 500–501 Payroll Advance, Inc v Yates, 234–235 Perez v Mortgage Bankers Ass’n., 92 Perfect tender rule, 303, 353–356 agreement between parties, 355 cure by seller, 355 instalment contracts, 356 Perfection of security interest, 731–734 automatic perfection, 733–734 by control, 734 defined, 731 filing financing statement, 732–733 possession, 733 temporary, 734 Performance, 351–360 buyer, 356–360 acceptance, 358–359 inspection, 357 obligation of payment, 360 rejection, 357 revocation of acceptance, 359 conditions, 298–301 concurrent, 301 condition precedent, 301 condition subsequent, 301 express, 299–300 implied-in-fact, 300 implied-in-law, 301 defined, 351 discharge by agreement of parties accord and satisfaction, 304 mutual rescission, 304 novation, 305 substituted contracts, 304 discharge by breach, 301–304 anticipatory repudiation, 303 material breach, 302–303 substantial performance, 303 unauthorized material alteration of written contract, 304 discharge by operation of law, 305–308 availability of restitution, 307 bankruptcy, 307 commercial impracticability, 306 frustration of purpose, 306 impossibility, 305–306 statute of limitations, 3107 subsequent illegality, 306 discharge by performance, 301 full, 269–270 full, by one party, 265 obligation of both parties, 360–363 anticipatory repudiation, 363 casualty to identified goods, 360–361 failure of presupposed conditions, 361–362 right to adequate assurance of, 363 right to cooperation, 363 substituted performance, 362 party withdrawing before, 240 prevention of, 302 seller, 351–356 perfect tender rule, 353–356 place of tender, 352–353 time of tender, 352 specific, 319–320, 419 substantial, 303 substituted, 362 Performance bond, 744–745 Periodic tenancy, 996–997 Perpetual existence, 635 Personal computer (online) banking, 507 Personal defenses, 468–469 of principal debtor, 747 of surety, 747–749 Personal property bailments, 978–982 conversion, 132 defined, 131, 967 transfer of title to, 970–973 by accession, 972 by confusion, 972 by gift, 970–971 by possession, 972–973 by sale, 970 by will or descent, 972 secured transactions in, 725–726 trespass, 132 Uniform Commercial Code, 163 Personal rights, 284 Petition of Kinsman Transit Co., 149–150 Pharmakon Drug Company, 24–26 Philip Morris USA v Williams, 122 Physical compulsion, 196 Physical disability, 141 Physical duress, 196 Pittsley v Houser, 335 Plaintiff, 51 conduct, 393, 398 defined, lead, 53 named, 53 Plant patent, 839 Pleadings, 53–54 judgment on, 54 Pledge(s), 730, 982 PMSI See Purchase money security interest (PMSI) Point sources, 932, 933–935 Point-of-sale systems, 507 Ponzi schemes, 13 Possession, 733 by bailee, 978 for determinable time, 979 restoration to bailor, 979 transfer of personal property by, 972 Possessors of land, duties of, 145–147 Possibility of reverter, 995 Possibility test, 264 Postconventional level, 17 Postincorporation subscription, 643 Postjudgment remedies, 781 Power of attorney, 523 Power of avoidance, loss of, 323–325 Powers delegation of board, 690–691 given as security, 532 irrevocable, 532 separation of, 70 of trustee, 1031 Powers of government, 72–76 federal commerce power, 72–73 federal fiscal powers, 74–76 borrowing and coining money, 75 eminent domain, 75–76 spending power, 75 limitations on Contract Clause, 77 due process, 80–81 equal protection, 81–83 First Amendment, 77–80 state regulation of commerce, 73–74 regulations, 73 taxation, 74 PPACA See Patient Protection and Affordable Care Act (PPACA) Preconventional level, 17 Prediction, 201 Preemptive rights, 660–661 Preexisting contractual duty, 217 Preexisting public obligations, 217–220 Preferential transfer, avoidance of, 739 Preferred stock, 663–664 Pregnancy Discrimination Act, 851 Preincorporation subscription, 642–643 Prejudgment remedies, 781 Preliminary hearing, 116 Premiums, 976 Prepayment, 442 Presale disclosures, 908 Presentment, 481 Prestenbach v Collins, 320–321 Pretrial conference, 54 Pretrial motions, 54 Pretrial procedure, 54–55 Prevention of significant deterioration (PSD), 931 Price discrimination, 884 Price fixing, 876 Prices open, 339 recovering, 413–414 Primary liability, 476 Primary parties, liability of, 479–480 Primary-line injury, 885 Principal debtor, 261 Principals See also Agents agents act with apparent authority, 551 contract liability of, 538–547 contractual duties, 527–528 contractual liability of, 546–547 criminal liability of, 551 disclosed, 538, 552 duties of agent to, 523–526 duties to agent, 527–528 incapacity of, 529–530 nonexistent or incompetent, 555 tort and other duties, 528 tort liability of, 547–551 torts of independent contractor, 551 undisclosed, 538, 553–554 unidentified, 538, 553 vicarious liability of, 549–551 Prine v Blanton, 1033–1034 Privacy, invasion of, 129–130 Privacy Act, 99 Private carrier, 982 Private corporation, 636 Private law, defined, Private nuisance, 926 Private placements, 797–798 Private Securities Litigation Reform Act of 1995, 791, 898 Privilege, 128 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index absolute, 128 conditional, 128 constitutional, 128 Privity of contract, 392–393, 892 Probable cause, 117 Probate, estate, 1038 Procedural due process, 80–81 Procedural law, defined, Procedural rules, 93 Procedural unconscionability, 237, 336 Proceeds, 728 Product liability See also Strict liability; Warranties overview, 385 strict product liability in tort, 393–402 warranties, 386–393 Product market, 880 Products, misuse or abuse of, 399 Products liability, 401–402 design defect, 401–402 failure to warn, 402 manufacturing defects, 401 Professional corporations, 640 Profit corporation, 636–637 Profitability, 19 Profits, short-swing, 813 Profits prendre, 993, 1004, 1005 Promise to pay, 438 Promisee, 168 Promises collateral, 261 conditional, 217 enforceable by statute, 223–224 illusory, 216 made to debtor, 262 original, 261 pay debt barred by statute of limitations, 221–222 pay debt discharged in bankruptcy, 222 voidable, 222 Promisor, 168 Promissory estoppel, 169–170, 185, 222, 270 Promoters, 641–642 contracts, 641 defined, 641 fiduciary duty, 642 Property, 81, 967–974 See also Intellectual property; Personal property; Real property bailments, 978–985 defense of, 113 definition of, 966–967 documents of title, 983–985 harm to, 131–132 insurance, 973–977 kinds of, 967–968 fixtures, 967–968 real and personal, 967 tangible and intangible, 967 partnership, 574, 578–579 Property dividends, 665 Property insurance, 973–977 co-insurance clauses, 974 multiple insurers, 974 nature of contracts, 975–977 types of fire covered, 973–974 types of polices, 974 Prosecute, defined, Prospectus, 656 Proxies, 680–681, 809 Proxy solicitations, 809–810 Proxy statements, 809 misleading, 819 PSD See Prevention of significant deterioration (PSD) Public corporation, 636 Public disclosure of private facts, 130 Public duty, 217 Public invitee, 145 Public law, defined, Public nuisance, 926 Public obligations, preexisting, 217–220 Public officials, corruption of, 239 Public policy violations, 233–239 common law restraint of trade, 233–234 corrupting public officials, 239 exculpatory clauses, 235 tortious conduct, 239 unconscionable contracts, 236–239 Public use, 1018 Publicly held corporation, 19, 638 Puffing, 201 Punitive damages, 122, 315–316 Purchase money security interest (PMSI), 725, 733–734 Pure comparative negligence, 151–152 Q Qualified fee estate, 994 Qualified indorsements, 455 Quasi contracts, 171 Quasi in rem jurisdiction, 52 Quiet enjoyment, 999 Quitclaim deed, 1014 Quorum, 679 R Race states, 1014 Racketeer Influence and Corrupt Organizations Act (RICO), 109–110 Radlax Gateway Hotel, LLC v Amalgamated Bank, 775 Rajaratnam, Raj, 13 Ratification, 246, 248, 545–546, 692 effects, 545–546 requirements, 545 of unauthorized signature, 479 Rational relationship test, 76–77, 81 Rawls, John, 16 Ray v Alad Corporation, 706 RCRA See Resource Conservation and Recovery Act (RCRA) REACH See Registration, Evaluation, and Authorization and Restriction of Chemicals (REACH) Real defenses, 465–468 defined, 465 discharge in insolvency proceedings, 466 discharge of which the holder has notice, 466 fraud in the execution, 466 fraudulent alteration, 467–468 infancy, 466 unauthorized signature, 466–467 void obligations, 466 Real Estate Settlement Procedures Act (RESPA), 914 Real property, 993–1006 concurrent ownership, 1002–1004 community property, 1003 condominiums, 1003 cooperatives, 1004 joint tenancy, 1002 tenancy by the entireties, 1003 tenancy in common, 1002 contracts, 164 defined, 131, 967 freehold estates, 993–995 fee estates, 993–994 future interests, 994–995 life estates, 994 leasehold estates, 996–1002 creation and duration, 996–997 landlord’s obligations, 999–1002 tenant’s obligations, 998–999 transfer of interests, 997 nonpossessory interests, 1004–1006 nuisance, 131 public and private controls, 1016–1020 eminent domain, 1018–1019 private restrictions on land use, 1020 zoning, 1017–1018 transfer of, 1011–1016 adverse possession, 1016 contract of sale, 1012 deeds, 1013–1014 secured transactions, 1014–1016 trespass, 131 Real Property Electronic Recording Act, 1014 Realty, 967 See also Real Property Reasonable person standard, 140–142 children, 140–141 mental disability, 141 physical disability, 141 standard for emergencies, 141 superior skill or knowledge, 141 violation of statutes, 141–142 Receiving bank, 510 Recklessness, 125 Recordation, 1014 Redemption, mortgages, 1015 Redlining, 911 Reed v King, 203 Reformation, 8, 319 Registration, Evaluation, and Authorization Chemicals (REACH), 937 Regulation A, securities regulation, 797, 800–801, 803 Regulation B, consumer protection, 911 Regulation D, securities regulation, 797–798, 801 Regulation FD, securities regulation, 816 Regulation Z, 911, 913–914 Regulations See also specific regulations of business, 18–19 government, 21 state, Commerce Clause, 73 Regulatory license, 231 Rehabilitation Act, 857 Reimbursement, 528, 746 Rejection, of offer, 185, 357 Reliance damages, 315 Reliance interest, 313 Remainders, 995 Remand, defined, 45 Remedies See also Contract remedies; Sales remedies buyer, 415–421 contractual provisions affecting, 421–423 modification or limitation of remedy by agreement, 423 seller, 410–414 Remedies in equity, 319–321 injunction, 321 specific performance, 319–320 Renunciations, 224, 485 by agent, 529 by surviving spouse, 1036 Reorganization, 772–776 See also Bankruptcy I-15 acceptance of plan, 774 confirmation of plan, 774 conversion or dismissal, 773 effect of confirmation, 776 plan of, 773–774 proceedings, 772–773 Repair, landlord’s obligations, 1001–1002 Replevin, 419 Reporting issuers, 803 Repudiation, 412, 418–419 anticipatory, 303, 363 Request for admissions, 54 Requirements contract, 182, 217 Res ipsa loquitur, 147 Rescission, 8, 909–910 of contracts within the statue of frauds, 266–267 mutual, 304 negotiations subject to, 452 Resource Conservation and Recovery Act (RCRA), 935, 937 RESPA See Real Estate Settlement Procedures Act (RESPA) Respondeat superior, 549–550 Restatements, 8–9, 123 Restitution, 171, 240, 246–247, 270, 321–323 contractual duties discharge, 307 party in default, 322 party injured by breach, 322 statute of frauds, 322 voidable contracts, 322 Restitution interest, 313 Restraint of trade, 233–234, 874–878 boycotts, 878 concerted action, 875 defined, 233 employment contracts, 234 horizontal restraint, 875 market allocations, 878 price fixing, 876 sale of business, 233–234 standards, 874 tying arrangements, 878 vertical restraint, 875 Restricted securities, 797 Restrictive covenants, 1020 covenants running with the land, 1020 defined, 1020 in subdivisions, 1020 termination, 1020 validity, 1020 Restrictive indorsements, 454–455 Resulting trusts, 1029 Revenue license, 231 Reverse, defined, 45 Reverse discrimination, 854–855 Reversions, 994–995 Revised Model Business Corporation Act (RMBCA), 634–635, 645, 646, 681 Revised Uniform Partnership Act (RUPA), 567, 587, 627 Revised Uniform Principal and Income Act, 1031 Revised Uniform Securities Act of 1985, 792 Revised Uniform Unincorporated Nonprofit Association Act (UUNAA), 570 Revised United Limited Partnership Act (RULPA), 611–613, 615, 617, 628 Revocation, offer, 183–185 Revocation of acceptance, 359 Ricci v Destefano, 853–854 RICO See Racketeer Influence and Corrupt Organizations Act (RICO) Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-16 Index Right of rescission, 909–910 Right to adequate assurance, 363 Right to cooperation, 363 Rightful dissociation, 594–595 Rights among partners choosing associates, 581 compensation, 581 enforcement, 581–582 indemnification, 581 information and inspection of books, 582 legal action, 582 management, 581 partner’s interest in the partnership, 579 return of capital, 581 share in distributions, 580–581 share in profits, 580 specific partnership property, 578–579 assignment of, 281–287 of bailor and bailee, 979–981 of intended beneficiary, 292 defined, limited liability company members, 619–622 assignment of interest, 622 derivative actions, 622 distributions, 619–620 information, 621 management, 620 profit and loss sharing, 619 voting, 621 withdrawal, 620 limited partnerships, 613–615 assignment of interest, 614–615 choice of associates, 614 control, 613 derivative actions, 615 distributions, 615 information, 615 loans, 615 profit and loss sharing, 615 voting rights, 614 withdrawal, 614 of sureties, 746 contribution, 746 exoneration, 746 reimbursement, 746 subrogation, 746 Risk of loss, 375–378 in absence of breach, 376–378 agreement of parties, 376 all other sales, 378 contracts involving carriers, 377 goods in possession of bailee, 378 trial sales, 376–377 breach by buyer, 376 breach by seller, 375–376 Risks assumption of, 153, 156 of mistake, 206–207 voluntary assumption of, 399 RMBCA See Revised Model Business Corporation Act (RMBCA) RNR Investments Limited Partnership v Peoples First Community Bank, 590 Road show, 796 Robbery, 112 Robertson v Jacobs Cattle Co., 596–597 Robinson v Durham, 373 Robinson-Patman Act, 884–886 cost justification, 885 meeting competition, 885 secondary-line injury, 885 tertiary-line injury, 885 Rosewood Care Center, Inc., v Caterpillar, Inc., 262 Rubin v Yellow Cab Company, 550 Rule 10b-5, 805, 813 Rule 144, 802–803 Rule 147, 801 Rule 506, 797–798 Rule making, informal, 90 Rule of reason standard, 874 Rule utilitarianism, 15 Rulemaking defined, 89 formal, 90 hybrid, 90 Rules defined, 89 interpretative, 92 legislative, 89–90 procedural, 93 RULPA See Revised United Limited Partnership Act (RULPA) RUPA See Revised Uniform Partnership Act (RUPA) Ryan v Friesenhahn, 142–143 S Sackett v Environmental Protection Agency, 96 Safe deposit boxes, 982 Sale of business, 233–234 Sale of goods, 265–266 admission, 265 compliance with statute of frauds, 269 defined, 265 delivery or payment and acceptance, 266 specially manufactured goods, 265 Sale on approval, 376 Sale or return, 376 Sales, defined, 163, 333 Sales and leases, 332–346 Article and 2A, Uniform Commercial Code, 336–339 expansion of commercial practices, 338 freedom of contract, 339 good faith, 336 liberal administration of remedies, 338–339 sales by and between merchants, 338 unconscionability, 336–337 validation and preservation of sales contracts, 339 bulk sales, 379–380 consideration, 343 consumer leases, 333 definitions, 333–336 goods, 333 lease, 333–334 sale, 333 finance leases, 333–334 form of contract, 344–345 parol evidence, 345 statute of frauds, 344–345 governing law, 334–336 international sales, 335 manifestation of mutual assent, 339–343 auctions, 343 definiteness of offer, 339–340 manner of acceptance, 343 variant acceptances, 340–342 personal property, 970 real property, 1012 trial sales, 376–377 Sales remedies, 409–424 buyers, 415–421 cancel the contract, 417 cover, 417 enforce security interest in goods, 420 recover consequential damages, 420–421 recover damages for breach in regard to accepted goods, 419 recover damages for nondelivery or repudiation, 418–419 recover identified goods on seller’s insolvency, 420 recover incidental damages, 420 recover payments, 417 sue for replevin, 419 sue for specific performance, 419 contractual provisions affecting, 421–424 seller, 410–414 cancel the contract, 414 identify goods to contract, 411 reclaim goods upon buyer’s insolvency, 414 recover damages for nonacceptance or repudiation, 412 recover incidental damages, 414 recover the price, 413–414 resell goods to recover damages, 411 stop delivery of goods, 411 withhold delivery of goods, 410 Sales transactions, 334 Salman v United States, 816–817 Sarbanes-Oxley Act (SOX), 19, 108, 677, 688, 689, 691, 791, 808, 897 Satisfaction, 304 accord and, 304 of contracting party, 299 defined, 299 of third party, 300 Saudi Arabia v Nelson, 950 Schoenberger v Chicago Transit Authority, 541, 546 Schreiber v Burlington Northern, Inc., 819–820 Scienter, 203, 813, 895 Scope of liability (proximate cause), 148–150 foreseeability, 148 superseding cause, 149 Seasoned issuers, 794–795 SEC See Securities and Exchange Commission (SEC) Second Restatement, 145–146 Secondary liability, 476–477 Secondary obligor, 725, 743–744 Secondary parties, liability of, 480–483 Secondary-line injury, 885 Section 12(a)(2), 805 Section 17(a), 805–806 Section 402A, 393–399, 401 Secured bonds, 659 Secured claim, 761 Secured creditors, 736–737 Secured party, 725, 726 Secured transactions, 724–743 See also Suretyship attachment, 728–731 collateral, 726–728 default, 740–743 essentials of, 725–726 perfection, 731–734 in personal property, 725–743 priorities among competing interests, 735–739 against buyers, 737–738 against lien creditors, 738 against other secured creditors, 736–737 against trustee in bankruptcy, 739 against unsecured creditors, 735 Securities debt See Debt securities definition of, 792–793 equity See Equity securities exempt, 796 registration requirements, 808 restricted, 797 Securities Act of 1933, 792–806 definition of security, 792–793 exempt securities, 796 exempt transactions for issuers, 796–801 crowdfunding exemption, 799–800 intrastate issues, 801 limited offers, 797–798 Regulation A, 800–801 exempt transactions for nonissuers, 801–803 Regulation A, 803 Rule 144, 802–803 liability, 803–806 antifraud provisions, 805–806 criminal sanctions, 806 false registration statements, 803–804 unregistered sales, 803 registration of securities, 794–796 communications, 795 disclosure requirements, 794 emerging growth company, 795–796 integrated disclosure, 794–795 shelf registrations, 795 Securities and Exchange Commission (SEC), 19, 35, 89, 656, 681, 790 See also Securities and Exchange Commission v Edwards, 793 Securities Enforcement Remedies ad Penny Stock Reform Act of 1990, 791 Securities Exchange Act of 1934, 680, 806–822 disclosure, 807–812 periodic reporting requirements, 808 proxy solicitations, 809–810 registration requirements, 808 tender offers, 810–812 liability, 812–822 antibribery provision of FCPA, 821 antifraud provisions, 813–816 civil monetary penalties for insider trading, 817–819 criminal sanctions, 822 express insider trading liability, 817 fraudulent tender offers, 819 insider trading, 815–816 misleading proxy statements, 819 misleading statements in reports, 813 requisites of Rule 10b-5, 813 short-swing profits, 813 Securities Litigation Uniform Standards Act of 1998, 791–792 Securities regulation, 790–820, 955–956 Securities Act of 1933, 792–806 See also Securities Act of 1933 Securities Exchange Act of 1934, 806–820 See also Securities Exchange Act of 1934 Security agreement, 725, 730–731 after-acquired property, 731 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index authenticating record, 730–731 consumer goods, 731 defined, 730 future advances, 731 pledge, 730 Security entitlement, 727 Security interest, 371, 420, 725 against buyers, 737–738 in goods, 420, 918 holder in due course, 460 against lien creditors, 738 against other secured creditors, 736–737 perfection of, 731–734 priorities among competing interests, 735–739 against trustee in bankruptcy, 739 against unsecured creditors, 735 Seigel v Merrill Lynch, Pierce, Fenner & Smith, Inc., 502 Self-dealing, 525–526 Sellers breach by, 375–376 cure by, 355 default of, 415 insolvency of, 419 merchant, 395 performance, 351–356 perfect tender rule, 353–356 place of tender, 352–353 time of tender, 353 sales remedies, 410–414 cancel the contract, 414 identify goods to contract, 411 reclaim goods upon buyer’s insolvency, 414 recover damages for nonacceptance or repudiation, 412 recover incidental damages, 414 recover the price, 413–414 resell goods to recover damages, 411 stop delivery of goods, 411 withhold delivery of goods, 410 Semiconductor Chip Protection Act of 1984, 835 Sender, defined, 510 Separation of powers, 70 Service mark, 831 Servient parcel, 1004 Setoff, 285 Settlement charges, 914 Settlor, 1026–1029 Sexual harassment, 855 Shareholders, 675 approval of charter amendments, 705 declaration and payment of distributions, 669 dissenting, 705, 711–713 enforcement rights of, 682–686 right to dissent, 686 right to inspect books and records, 682–683 suits, 684 liability, 670 proposals, 809–810 role of, 678–686 sale of control, 707–708 tender offer, 708 voting agreements, 681 voting rights of, 678–682 approval of fundamental changes, 680 concentrations of voting power, 680–681 election of directors, 679–680 meetings, 678 quorum and voting, 679 removal of directors, 680 restrictions on transfer of shares, 682 Shareholders’ liability, 670 Shares/stock acquisition of, 665, 668 amount of consideration for, 661–662 authority to issue, 660 classes of, 663–664 compulsory exchange, 708 issuance of, 660–663 liability for, 663 no par value, 661 par value, 661 payment for, 662–663 preemptive rights, 660–661 purchase of, 707–708 redemption of, 665, 668 restrictions on transfer of, 682 treasury, 661–662 valuation of consideration, 662–663 Shaw v United States, 108 Shawnee Telecom Resources, Inc v Brown, 712–713 Shelf registrations, 795 Shelter rule, 449 Sherman Antitrust Act, 106, 872–878 Sherrod v Kidd, 182–183 Shipment contracts, 353, 371 Short-form merger, 709 Short-swing profits, 813 Short-term commercial paper, 796 Sight draft, 435 Signatures, 477–479 authorized, 477, 485 drawer’s, 487 forged, 479 unauthorized, 466–467, 479 warranties, 485 will and, 1034 SIP See State implementation plan (SIP) Situational ethics, 15 Sixth Amendment, 115, 118 Skills, described, 141 Slander, 127 Small Business Liability Relief and Brownfields Revitalization Act, 938 Small claims court, 47 Smith, Adam, 18 Social contract, 20–21 Social egalitarians, 16 Social ethics theories, 16–17 Social responsibility, 19–21 Social Security, 864–865 Soldano v O’Daniels, 144 Soldiers’ and sailors’ wills, 1036 Sole proprietorship, 564 Sonny Bono Copyright Extension Act, 836 South Florida Water Management District v Miccosukee Tribe of Indians, 933–934 Sovereign immunity, 949 Spam, 109 Special courts, 46 Special indorsements, 453 Special meetings, 678 Special trial courts, 47 Special warranty deed, 1014 Specific performance, 8, 319–320, 419 Speelman v Pascal, 282 Spendthrift trusts, 1027 Stakeholder model, 21 Stare decisis, 8, 50 State action, 72 State courts, 46–47 appellate, 47 inferior trial, 47 small claims, 47 special trial courts, 47 trial, 47 State implementation plan (SIP), 930–931 State lemon laws, 902, 909 State of Qatar v First American Bank of Virginia, 454 State of South Dakota v Morse, 111–112 State of the art, defined, 396 State v Jones, 11 Stated capital, 661, 666 Statute of frauds, 258–270 See also Contracts in writing compliance with, 267–269 contracts within, 259–267 electronic records, 259–260 executor-administrator provision, 263 land contract provision, 263 marriage provision, 263 modification or rescission, 266–267 one-year provision, 263–265 sale of goods, 265–266 suretyship provision, 261–263 exceptions, 345 form of contract, 344–345 modification of contracts, 344 noncompliance effects, 269–270 full performance, 269–270 promissory estoppel, 270 restitution, 270 partnerships, 569 restitution, 322 writing(s) or record, 344–345 Statute of limitations, 221, 307 Statute of repose, 399 Statutes gambling, 232 licensing, 230–231 long-arm, 52 usury, 232–233 violations of, 141–142, 230–233 Statutory Close Corporation Supplement, 639, 644, 647, 679, 714 Statutory irrevocability, 183 Statutory liens, 768 Statutory limitations, 861 Statutory powers, 649 Steinberg v Chicago Medical School, 166–167 Stewart, Martha, 13 Stine v Stewart, 292 Stipulated provisions, offer, 188 Stock common, 663 preferred, 663 Stock options, 664 Stop payment orders, 501 Stop Trading on Congressional Knowledge Act of 2012, 816 Straight voting, 679 Strict liability, 153–156 abnormally dangerous activities, 926 activities giving rise to, 153–155 abnormally dangerous activities, 154 keeping of animals, 154–155 defenses to, 156 defined, 153 in tort, 394–397 defective condition, 395–396 merchant sellers, 395 requirements, 394–397 unreasonably dangerous product, 397 I-17 Strict scrutiny test, 77, 81–82 Strougo v Bassini, 685–686 Subchapter S corporations, 640 Subject matter jurisdiction, 48–50 concurrent federal, 48 exclusive federal, 48 exclusive state, 49 federal, 48 stare decisis in dual court system, 50 Subjective fault, 105 Subjective impossibility, 305 Subjective satisfaction, 299 Sublease, 997 Subrogation, 746 Subscribers, 642–643 Subsequent alteration, 399 Subsequent debt, 593 Subsequent illegality, 186, 306 Subsequent will, 1035 Subsidiary corporations, 647 Substantial evidence test, 97 Substantial performance, 303 Substantive due process, 80 Substantive law, defined, Substantive unconscionability, 237, 337 Substitute check, 435, 500–501 Substituted contracts, 220, 304 Substituted performance, 362 Successive assignments of same right, 287 Sue, defined, Summary judgment, 55 Summary jury trial, 63 Summons, 54 Superfund, 938 Supermajority provision, 679 Superseding cause, 149 Supplemental evidence, 273–274 Supremacy Clause, 69 Supreme Court, 45–46 Supreme law, Sureties, 261, 743–750 defenses of, 747–750 duties of, 745 formation of, 745 personal defenses of, 747–749 rights of, 746 contribution, 746 exoneration, 746 reimbursement, 746 subrogation, 746 types of, 744–745 Suretyship, 743–750 See also Secured transactions defenses of surety and principal debtor, 747–750 duties of surety, 745 nature and formation, 743–745 particular kinds of, 744–745 rights of surety, 746 Suretyship provision, 261–263 defined, 261 main purpose doctrine, 261–262 original promise, 261 promise made to debtor, 262 Surplus, 666 See also specific types Surplus test, 667 Surviving corporation, 708–709 Survivorship, right of, 1002 Sword Technology, Inc., 35–38 T Takings Clause, 75–76 Tangible property, 967 Tariff, 952 TARP See Troubled Asset Relief Program (TARP) Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it I-18 Index Tax Court, U.S., 45 Taxation of business associations, 563 federal fiscal powers, 75 state regulation of commerce, 74 Television Test, 17 Tenancy at sufferance, 997 Tenancy at will, 997 Tenancy by the entireties, 1003 Tenancy in common, 1002 Tenants, 996 obligations, 998–999 abandonment, 999 destruction of premises, 998 eviction, 998–999 transfer of interests by, 997 Tender, 371 defined, 301 place of, 352–353 destination contracts, 353 goods held by bailee, 353 shipment contracts, 353 time of, 352 Tender of delivery, 352 Tender offers, 708, 810–811 defensive tactics, 811 defined, 810 disclosure requirements, 810 fraudulent, 819–820 required practices, 810 state regulation, 811 Term partnership, 594 Tertiary-line injury, 885 Testament See Wills Testamentary trust, 1027 Texaco, Inc v Pennzoil, Co., 132–133 Third parties, 221, 281–293 agency’s rights against, 555 assignment of rights, 281–287 assignable rights, 283 express warranties of assignor, 287 implied warranties of assignor, 287 nonassignable rights, 283–285 prohibited by law, 285 requirements of, 282–283 rights of assignee, 285–286 successive assignments of same right, 287 contract liability of agent, 552–555 contract liability of principal, 538–547 criminal liability of principal, 551–552 delegation of duties, 287–289 dissociated partner’s liability to, 602 relationship with agents, 552–555 relationship with partners, 587–593 relationship with principals, 537–551 rights of, 325 rights of agent against, 555 satisfaction of, 300 third-party beneficiary contracts, 290–293 creditor beneficiary, 291 defenses against beneficiary, 293 donee beneficiary, 291 incidental beneficiary, 290, 293 intended beneficiary, 290, 291–293 rights of intended beneficiary, 293 vesting of rights, 292–293 tort liability of agent, 555 tort liability of principal, 547–551 Third Restatement, 123, 125, 139–140, 145, 146, 151–155, 200–204, 326, 543–544, 554 Third-party beneficiary contracts, 290–293 creditor beneficiary, 291 defenses against beneficiary, 293 defined, 290 donee beneficiary, 291 incidental beneficiary, 290, 293 intended beneficiary, 290, 291–293 rights of intended beneficiary, 292 vesting of rights, 292–293 Thomas v Lloyd, 574–575 Thor Properties v Willspring Holdings LLC, 185–186 TILA See Truth-in-Lending Act (TILA) Time draft, 435, 481 Time note, 436, 481 Time paper, 441 Title passage of, 371 power to transfer, 371–374 void, 372 voidable, 372 warranty of, 386, 390 Title insurance, 1012 Tort liability of agents, 555 corporations, 650 of principals, 547–551 Tortious conduct, 239 Torts See also Intentional torts defined, 121 of independent contractors, 551 liability for, 650 crimes of partnership and, 591–592 strict liability in, 393–399 defective condition, 395–396 merchant sellers, 395 unreasonably dangerous product, 397 Totten trusts, 1027–1028 Toxic Substances Control Act (TSCA), 935, 936–937 Trade dress, 831 Trade names, 834–835 Trade secrets, 827–830 civil remedies, 830 criminal penalties, 829–830 definition of, 828 misappropriation, 828 remedies, 828 state protection, 828 Trade symbols, 830–834 infringement, 833–834 registration, 831–832 remedies, 834 types of, 830 Trademark Cyberpiracy Prevention Act of 1999, 834 Trademarks, 831 international, 957 Transfer of title, 370–374 identification, 370–371 insurable interest, 371 security interest, 371 passage of title, 371 no movement of goods, 371 physical movement of goods, 371 power to transfer, 371–374 entrusting goods to merchants, 374 void and voidable title to goods, 372–374 power to transfer title, 371–374 Travelers Indemnity Co v Stedman, 488 Treasure trove, 973 Treasury stock, 661–662 Treaties, international, 948–949 Treble damages, 873 Trespass personal property, 132 real property, 131 Trespass to land, 926 Trespasser, 145 Trespassing animals, 155 Trial, 55 conduct of, 56–57 enforcement, 58 jury instructions, 57 jury selection, 55 motions challenging verdict, 57 verdict, 57 Trial courts, 47 Trial sales, 376–377 Triffin v Cigna Insurance Co., 465 Troubled Asset Relief Program (TARP), 911 Trustees, 1029–1031 allocation of principal and income, 1031 bankruptcy, 760–761 defined, 1029 duties of, 1029–1030 as lien creditor, 766 powers of, 1031 Trusts, 1026–1031 beneficiary, 1031 business, 566 creation of, 1029–1031 settlor, 1029 subject matter, 1029 trustee, 1029–1031 defined, 1026 express, 1027 charitable trusts, 1027 express trusts, 1027 inter vivos trust, 1027 spendthrift trusts, 1027 testamentary trust, 1027 totten trusts, 1027–1028 implied, 1028–1029 implied trusts, 1028 resulting trusts, 1029 indorsements in, 454–455 termination of, 1031 types of, 1026–1029 Truth in Savings Act, 502 Truth-in-Lending Act (TILA), 911 TSCA See Toxic Substances Control Act (TSCA) Tucker v Hayford, 1001–1002 Tying arrangements, 878 U UAA See Uniform Arbitration Act (UAA) UCC See Uniform Commercial Code (UCC) UCCC See Uniform Consumer Credit Code (UCCC) UETA See Uniform Electronic Transactions Act (UETA) ULC See Uniform Law Commission (ULC) ULLCA See Uniform Limited Liability Company Act (ULLCA) ULPA See United Limited Partnership Act (ULPA) Ultra vires acts, 649–650 Unaccepted draft, 480, 481 drawees of, 487 Unaffiliated directors, 687 Unauthorized contracts, 552–553 Unauthorized criminal acts, 551 Unauthorized signature, 466–467, 479 Uncertificated security, 727 UNCITRAL See Unite Nations Commission on International Trade Law (UNCITRAL) UNCITRAL Model Law on Electronic Commerce, 953 UNCITRAL Model Law on Electronic Signatures, 953 UNCLOS See United Nations Convention on the Law of the Sea (UNCLOS) Unconscionability, 237, 336–337 procedural, 237, 336 substantive, 237, 337 Unconscionable contracts, 236–239 Undisclosed principals, 538, 545, 553–554 Undisputed debt, settlement of, 220 Undue influence, 198 Unemployment insurance, 864–865 Unenforceable contracts, 169 Unenforceable obligations, 221–222 Unfair conduct, 881 Unfair employer practices, 848 Unfair labor practices, 848 Unfairness, 20, 903 UNFCCC See United Nations Framework Convention on Climate Change (UNFCCC) Unidentified principals, 538, 541, 553 Uniform Arbitration Act (UAA), 60 Uniform Commercial Code (UCC), 9, 163 Uniform Consumer Credit Code (UCCC), 910 Uniform Durable Power of Attorney Act, 523, 529, 530, 543, 544 Uniform Electronic Transactions Act (UETA), 259–260, 344, 635 Uniform Law Commission (ULC), 9, 60, 62, 379, 433, 509, 567, 611, 705, 792, 910, 953, 996, 1032 Uniform Limited Liability Company Act (ULLCA), 618 Uniform Limited Partnership Act (ULPA), 611–612 Uniform Partnership Act, 9, 567, 588, 612 Uniform Power of Attorney Act, 523, 543 Uniform Securities Act of 1956, 792 Uniform Statutory Form Power of Attorney Act, 523 Uniform Unincorporated Nonprofit Association Act (UUNAA), 570 Unilateral contracts, 169, 177, 214 irrevocable offers of, 184 Unilateral mistake, 205–206 Union Planters Bank, National Association v Rogers, 504–505 Union shop contract, 848 United Nations, 947 United Nations Commission on International Trade Law (UNCITRAL), 953, 959 United Nations Convention on the Law of the Sea (UNCLOS), 949 United Nations Framework Convention on Climate Change (UNFCCC), 941 United States v Bestfoods, 938–939 United States v E.I du Pont de Nemours & Co., 880 United States v O’Hagan, 815, 819 Unlimited personal liability, 587, 592 Unqualified indorsements, 455 Unreasonably dangerous product, 397 Unregistered sales, 803 Unseasoned issuers, 794 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Index Unsecured bonds, 658 Unsecured claim, 761 Unsecured creditors, 735 U.S Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, 758 Usage of trade, 273, 338 Usury statutes, 232–233 Utilitarianism, 15 Utility patents, 839 UUNAA See Revised Uniform Unincorporated Nonprofit Association Act (UUNAA); Uniform Unincorporated Nonprofit Association Act (UUNAA) V Valid contracts, 169 Value defined, 728 for negotiable instruments, 458 Valued policy, 974 Vance v Ball State University, 851–852 Vanegas v American Energy Services, 216 Variance, zoning, 1017 Variant acceptances, 190, 340–342 Venue, 53 Verdict, 57 directed, 56 judgment notwithstanding, 57 motions challenging, 57 Vertical mergers, 883 Vertical privity, 393, 398 Vertical restraint, 875 Vested remainder, 995 Vicarious liability defined, 106 of principal for unauthorized, 549–551 Vietnam Veterans Readjustment Act, 858 Void contracts, 169 Void obligations, 466 Void title, 372 Voidable contracts, 322–323 Voidable promises, 222 Voidable title, 372 Voluntary dissolution, 714 Voluntary petitions, 759–760 Voting power, 680–681 Voting rights, of shareholders, 678–682 approval of fundamental changes, 680 concentrations of voting power, 680–681 election of directors, 679–680 meetings, 678 quorum and voting, 679 removal of directors, 680 restrictions on transfer of shares, 682 Voting trust, 681 Vulcan, Inc., 38–41 W Waddell v L.V.R.V Inc., 359–360 Wage assignment, 917–918 Wagner Act, 848 Waiver, 977 Wal-Mart Stores, Inc v Samara Brothers, Inc., 832–833 Warehouse receipts, 983 Warehousing, 982 WARN See Worker Adjustment and Retraining Notification Act (WARN) Warnick v Warnick, 581, 601–602 Warranties, 386–393 See also Strict liability breach of, 393, 977 collecting banks, 498–499 defined, 908 disclaimers of, 390–392, 398 buyer’s examination or refusal to examine, 392 express exclusions, 390–391 federal legislation relating to warranties of consumer goods, 392 documents of title, 985 express, 386–388 express exclusions, 390–391 federal warranty protection, 908–909 full, 909 implied, 388–389, 1000, 1012 labeling requirements, 908–909 limitation or modification of, 392 notice of breach, 393 obstacles to actions, 390–393 obstacles to recovery, 398–399 disclaimers and notice, 398 limitations on damages, 399 plaintiff ’s conduct, 398–399 privity, 398 statute of repose, 399 subsequent alteration, 399 plaintiff ’s conduct, 393, 398–399 on presentment, 487–489 all other payors, 488 drawees of unaccepted drafts, 487 no alteration, 487 privity of contract, 392–393 on transfer, 485–486 authentic and authorized signatures, 485 entitlement to enforce, 485 no alteration, 485 no defenses, 486 no knowledge of insolvency, 486 types of, 386–389 warranty of title, 386, 390 written, 908 Warranty deed, 1013–1016 Warranty liability, defined, 476 Watson Coatings, Inc v American Express Travel Related Services, Inc., 460, 464 Wealth of Nations, The (Smith), 18 Well-known seasoned issuers, 794 White v Samsung Electronics, 129–130 White-collar crime, 107–110 Wholesale electronic funds transfer, 507 Wholesale funds transfer, 509–511 acceptance, 511 erroneous execution of payment orders, 511 excluded transactions, 511 parties, 510 payment order, 510 scope of Article 4A, 509–510 unauthorized payment orders, 511 Wholly owned subsidiaries, 960 Wild animals, defined, 155 Williamson v Mazda Motor of America, Inc., 69–70 Wills, 1032–1037 defined, 1032 formal requirements, 1034 attestation, 1034 signature, 1034 writing, 1034 mental capacity, 1032 conduct invalidating a will, 1033 testamentary capacity, 1032 revocation of, 1034–1036 codicils, 1036 destruction or alteration, 1034–1035 operation of law, 1036 subsequent will, 1035 special types, 1036–1037 holographic wills, 1036 living wills, 1037 I-19 nuncupative wills, 1036 soldiers’ and sailors’ wills, 1036 transfer of personal property by, 972 Winding up, 599–600, 603–604, 626 limited partnerships, 617 Windows, Inc v Jordan Panel Systems Corp., 377–378 WIPO See World Intellectual Property Organization (WIPO) Wire fraud, 110 Without reserve, auction sale, 181 Womco, Inc v Navistar International Corporation, 391–392 Wood v Pavlin, 1003 Worker Adjustment and Retraining Notification Act (WARN), 865 Workers’ compensation, 864 World Intellectual Property Organization (WIPO), 835, 957 World Trade Organization (WTO), 948 World-Wide Volkswagen Corp v Woodson, 51 Writ of certiorari, 46 Writ of execution, 58 Written contracts, material alteration of, 304 Written interrogatories, 54 Written warranties, 908 Wrongful civil proceedings, 130 Wrongful dissociation, 594 WTO See World Trade Organization (WTO) Wyler v Feuer, 616 Y Young v United Parcel Service, Inc., 858–859 Z Zelnick v Adams, 250–251 Zoning, 1017–1018 defined, 1017 enabling acts, 1017 judicial review of, 1017 nonconforming uses, 1017 ordinances, 1017 subdivision master plans, 1017–1018 variance, 1017 Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it Copyright 2019 Cengage Learning All Rights Reserved May not be copied, scanned, or duplicated, in whole or in part Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s) Editorial review has deemed that any suppressed content does not materially affect the overall learning experience Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it ... Principal and Agent 529 Acts of the Parties [28 -5a] Termination by the acts of the parties may occur by the provisions of the original agreement, by the subsequent acts of both principal and agent,... trusts; (2) adoptions, divorces, and other matters of family law; and (3) the Uniform Commercial Code other than sales and leases of goods Duties of Agent to Principal [28 -3] The duties of the agent... whether or not the work is a part of the regular business of the principal; and (h) whether or not the parties believe they are creating the relationship of employer-employee These factors “[g]enerally