Banking Relationships and Check Types

Banking Relationships

• Banking relationships can be contractual, debtor-creditor, agent-principal, or fiduciary.
• Banks act as agents for depositors by selling securities and collecting checks on their behalf.
• Fiduciary relationships involve complete separation of interests, care, loyalty, disclosure, and confidentiality.

Certified Check

• A certified check is a personal check guaranteed by the bank.
• The bank verifies sufficient funds and sets them aside.
• The bank guarantees enough cash for the holder, when they want to use the check.

Cashier's Check

• An issued check by the bank, drawn from the bank's funds.
• Signed by bank employees.
• Bank draws on its own funds payable to a payee.

Personal Check

• Written by a customer without a bank guarantee.
• The bank is liable for alterations or forgeries.

Postdated Check

• A check dated after its issue date.
• Banks are not obligated to honor postdated checks.

Subrogation

• The right of an insurer to pursue a third party responsible for a loss, after the insurer has paid the insured.

Insurable Interest

• The policyholder must suffer a financial loss if an insured item is damaged or destroyed.
• Insurable interest ensures the insured has a compelling reason to insure the items.
• Also prevents fraud and abuse.

Indemnity

• Insurer restores the insured to their financial position before the loss.
• The insured does not gain financially from the claim beyond the actual losses.

Deductible

• Risk must be contingent for insurance coverage.
• Insurance covers uncertain events, not guaranteed events.

Restrictive Indorsements on Negotiable Instruments

• Limits how an instrument can be used.
• Limits who can receive payment/PMT

Employee Control After Termination

• Non-disparagement: employees cannot speak negatively about the company.
• Non-competition: employees cannot work with competitors or start similar businesses.
• Protecting company information: employees must maintain confidentiality.
• Garden-leave: employees remain on payroll but don't work.

Limited Liability Company (LLC)

• Members risk only the invested money, not personal assets in business dealings.

Joint and Several Liability

• Partners are jointly and severally responsible for the risk.
• Each partner is liable for 100% of risk in dealings.
• Joint venture participants are liable for the project's success or failure (risks).

Legal Persons

• Entities recognized by law with rights and responsibilities.
• Viewed as persons in legal matters.

Condominium Ownership

• Separate ownership of a residential unit, with shared common spaces ownership.

Land Ownership Rights

• Surface rights include rights to fixtures, riparian rights (to water), rights to trees/vegetation.

Leasehold

• Grants tenant temporary use of a building or land.
• It's a possessory interest to use and possess.

Power of Attorney

• A legal document where Alan Johnson authorizes Neal Johnson to sell iPhone.
• Authorization for Neal Johnson to execute a sale of Alan's iPhone.

General Partnership Agreement

• Defines partnership matters.
• Covers expenses, profit/loss distribution, partner roles.
• Explains the managing responsibilities of the partners.

Corporate Entity Disregard

• Court disregards corporate entity based on purpose of the fraud.
• Corporation owners are held liable.

Apparent Authority

• Third parties believe an individual has authority.
• Example includes employee giving discounts as authorized by manager.

Negotiable Contracts

• Written, signed, definite time, fixed amount, and unconditional promise to pay.

Contract Breach, Negligence, & Loss

• Proving negligence requires Duty, violation of duty, resulting loss, and actual loss.

Mitigation of Damages

• Limit financial burdens.
• Prevent unfair losses.

Contract Discharge

• Discharge is the ending of a contract.
• Can be through Performance, agreement, or operation of the law (impossibility, subsequent illegality, bankruptcy).

Agency Contracts

• Agent acts on behalf of principal.
• Agent has authority to enter into contracts.
• Distributors and customers cannot enter into contracts on another party's behalf.
• Independent contractors don't act as agents only providing services.

Option Contracts

• Option holder has the right to buy or sell an asset.
• Other party obligated to keep open during the set period.

Rescission

• Returning parties to initial positions if contract not fulfilled.

Notarization

• Authenticates identities of parties involved in signing a contract.

Damages Limitations

• Foreseeability, certainty, mitigation.
• Fraud/misrepresentation, and reliance with intent to defraud.

Offer Expiration

• Expiration based on stated time period.
• Offer expires after rejection, withdrawal, or counteroffer

Contract Consideration

• Different forms of consideration exist and must be addressed appropriately.

Corporate Board of Directors Duties

• Attend meetings, stay informed, disclose conflicts, avoid self-dealing, and resign if conflicts arise.
• Obligation to be informed and responsible.

Stop Payment Order

• Instruction to bank not to pay a check.
• Must be on time to be effective.

Agency Relationship Creation

• Necessity, law, contract, conduct, ratification.

Insurance Policy

• A contract transferring risks, with compensation if they occur.

Limited Liability Corporations

• A separate legal entity from its owners.

Ordinary Situations where Bank Customer is Creditor

• Customers depositing money in a bank are creditors to that bank.
• Because the bank owes the same amount.

Duress Definition

• Actions depriving free will.

Legal Capacity

• Capacity to enter contracts, must exist to be legally binding.
• Age and mental health can be limiting factors.

Private Wrong (Tort)

• A wrongful act against a fellow citizen causing harm.

Consideration on Contract Formation

• Exchange of something of value is considered valid contract formation.
• Examples include agreement to perform or not to perform actions, money, promises, or even the settlement of a lawsuit.

Limited Liability Company Formation Factors

• Ease, less complexity compared to partnership, minimal liabilities to creditors.
• Lack of shareholder diversification, limited liability protection may affect some creditors.

Businessman Marwan's Affairs

• Separation of owners and entity, ownership transferability without notice, and annual shareholder meetings.
• Establishment of a board of directors to manage the company's assets.

Debit Card

• Immediate deduction from the holder's bank account upon purchase.

Employment Contracts & Covenant Not to Compete

• Contracts including a non-compete clause that is limited in geographic scope are enforceable.

Damages Measure in Tort Cases

• Foreseeable losses resulting from a breach of a contract,
• Not those that were unforeseen.

Intentional Torts

• Intentional violation with physical or other harm.

General Partnership Liabilities

• Partners are liable for the business's liabilities.

Corporate Acquisition

• Acquisition occurs when one corporation purchases stock in another corporation.

Government Taxes on Property

• Taxes on personal property, like luxury goods, can discourage purchases and promote alternative methods.
• Taxes on real property can affect unused land and incentivize property use.

Tort vs. Crime

• Crimes harm the government and torts harm individuals.

Credit Card Transactions Security

• Credit card companies use various methods to ensure security during online transactions.

Sales Tax vs Value Added Tax

• Sales tax is paid once at the sale point by the consumer, while value added tax is paid at each stage of the production/sales process.

Legal Basis of Insurance Compensation

• The legal basis for ensuring compensation for insured losses is known as indemnification.

Offer Expiration

• Silence regarding the time period and expiration,
• Acceptance after expiration invalidates the offer.

Joint and Several Liability

• General partners are jointly and severally liable for partnership debts.
• This means each partner is individually responsible for the entire debt.