Business Law Exam 3 PDF - Legal Concepts & Principles

Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Overview of UCC Article 2 → sales/leases ​ Article 2 Scope: Governs the sale of tangible, movable goods. ​ Applicability: This does not apply to services or real estate. Sale/lease ​ Sa...

Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Overview of UCC Article 2 → sales/leases ​ Article 2 Scope: Governs the sale of tangible, movable goods. ​ Applicability: This does not apply to services or real estate. Sale/lease ​ Sale: The Transfer of the title of goods from the seller to the buyer for a price. ​ Lease: Transfer of the right to possess and use goods for a specified period in exchange for payment. UCC in Transactions ​ Provides a uniform framework to facilitate commercial transactions across different states, overcoming variations in state law. Elements → Lease Agreement → UCC Article 2A 1.​ Parties Involved: ​ Lessor: Owner of the goods. ​ Lessee: Person obtaining the right to use the goods. 2.​ Goods: ​ The goods must be tangible and movable. 3.​ Lease Term: ​ Must specify the duration of the lease period. 4.​ Payment: ​ The lease must stipulate the payment terms, including how and when payments will be made. 5.​ Possession and Use: ​ The lease agreement grants the lessee the right to possess and use the goods during the lease term. 2 terms that make a contract void in the UCC 1.​ Intent to be bound a.​ Mutual Assent 2.​ Quantity of the item Principles for Lease Contracts ​ UCC allows contracts with open terms as long as the parties intended to create a contract and a reasonable basis for a remedy exists. ​ Contracts can be formed even if some terms are left open, as long as key elements are adhered to.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Lease Contract Formation ​ Flexibility in Terms: Parties are free to agree on their specific terms. UCC provides terms where gaps exist. ​ Acceptance can be established through: ○​ A written lease agreement. ○​ Conduct that recognizes the existence of a lease (e.g., taking possession of goods). Modifications to Lease Agreements 🐐 ​ Modifications are made in good faith and do not require new consideration. ​ Changes can be made to: ​ Payment terms. ​ Jake Nardi is the ​ Duration of the lease. ​ Condition of the goods. Additional Considerations for Valid Lease Agreements ​ Nonconforming Goods: If delivered goods do not meet the specifications but are accepted, the lessee must be informed that acceptance is limited to the accommodation. ​ Merchant vs Non-Merchant: Different rules may apply based on whether parties are merchants, impacting how additional or different lease terms are treated. Contracts for the Sale and Lease of Goods ​ Transition from Common Law to Statutory Law: Governed by the Uniform Commercial Code (UCC) adopted by all states except Louisiana (Articles 2 and 2A). Formation of Sales and Lease Contracts ​ General Contract Law: A binding contract is formed when unqualified acceptance meets a definite offer; UCC allows for contracts even if the exact moment of formation is undetermined. Modifications by UCC ​ Articles 2 and 2A modify common law contract rules. Parties are free to establish their terms, and UCC applies when terms are missing or need modification.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Open Terms ​ UCC allows contracts with open terms if: ○​ Parties intended to make a contract. ○​ There is a reasonably certain basis for a remedy. ○​ UCC provides provisions to fill gaps in contracts, with the quantity of goods typically stated. Illusory Promises and Requirements Contracts ​ Illusory Promises: Unenforceable buyer promises that the condition of purchase is based on desire or reserves the right to buy from others. ​ Output Contracts: Seller agrees to sell all or a stated amount of what is produced. ​ Good Faith Limitation: Quantity based on normal production period; cannot be unreasonably disproportionate to prior requirements or output [UCC 2–306(1)]. Firm Offer ​ Requirements for a Firm Offer: Must be in written or electronically recorded form, signed by the offeror. ​ Revocation of Offers: Regular contract principles allow revocation before acceptance; UCC exceptions make firm offers by merchants irrevocable without consideration. Acceptance ​ General Acceptance: Can be made in “any reasonable manner”; UCC permits acceptance by prompt promise to ship or shipment of goods [UCC 2–206(1)(b)]. ​ Nonconforming Goods: Shipment constitutes acceptance and breach of contract unless the seller notifies the buyer of an accommodation. ​ Communication of Acceptance: UCC requires notification of acceptance by performance; failure to notify within a reasonable time allows the offeror to treat the offer as lapsed [UCC 2–206(2), 2A–206(2)]. Additional Terms ​ Mirror Image Rule: UCC allows contracts to form even with additional or different terms; applicability depends on whether parties are merchants [UCC 2–207(1)].  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Jones v. Star Credit Corp. Background The plaintiffs, the Joneses, agreed to purchase a home freezer for $900 from a door-to-door salesperson. After including financing charges and sales tax, the total cost rose to $1,234.80. The Joneses made payments totaling $619.88 before bringing a lawsuit in a New York state court, arguing that the purchase contract was unconscionable under Section 2-302 of the Uniform Commercial Code (UCC). At trial, the freezer’s maximum retail value was determined to be approximately $300, significantly less than the price the plaintiffs had agreed to pay. Legal Issues and Key Statutes ​ Unconscionability (UCC § 2-302): Allows courts to refuse to enforce contracts or contract clauses that are deemed unconscionable at the time they were made. ​ Elements of Unconscionability: Courts consider both procedural and substantive unconscionability, meaning they look at: ○​ Procedural: Whether the weaker party lacked meaningful choice due to power imbalance. ○​ Substantive: Whether the contract terms were excessively one-sided or oppressive. ​ Contract Reformation: Instead of voiding a contract completely, courts may modify it to prevent unfairness. Arguments ​ Plaintiffs (Joneses): ○​ The price was excessive—the freezer was worth only $300 but sold for $900. ○​ The finance charges ($1,439.69 total) exceeded the freezer’s actual value. ○​ They were low-income buyers, and the seller knowingly took advantage of their financial vulnerability. ○​ There was a gross disparity in bargaining power, making the contract unfair. ​ Defendant (Star Credit Corp.): ○​ The Joneses agreed to the contract and should be held to their obligations. ○​ The contract was legally binding, and price alone should not determine unconscionability. ○​ They provided a credit-based transaction, which justified higher costs.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Court's Ruling ​ The court found the contract unconscionable under UCC § 2-302 due to the following: ○​ Excessive price disparity (charging $900 for a $300 freezer). ○​ Unfair financial burden on low-income buyers. ○​ Lack of meaningful choice and bargaining power for the plaintiffs. ​ Decision: ○​ The contract was reformed, meaning the Joneses were not required to make any further payments. ○​ The court limited enforcement to the amount the plaintiffs had already paid ($619.88). Significance and Impact This case set a precedent for evaluating unconscionability in consumer contracts. Courts continue to use UCC § 2-302 to assess whether a contract is grossly unfair due to excessive pricing or unequal bargaining power. This case remains influential in consumer protection law, preventing businesses from exploiting financially vulnerable customers.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Obligations of the Seller or Lessor ​ Basic Duty ○​ Deliver goods called for under the contract to the buyer or lessee. ○​ Goods must conform to the contract description in every way (conforming goods). Tender of Delivery ​ Definition ○​ Occurs when the seller or lessor makes conforming goods available and notifies the buyer or lessee. ​ Requirements ○​ Must occur at a reasonable hour and in a reasonable manner. ○​ Goods must be tendered in a single delivery unless agreed otherwise. Place of Delivery ​ Agreed Destination ○​ Goods are delivered to a specific destination agreed upon by the buyer and seller. ​ Default Locations ○​ Seller’s place of business. ○​ Seller’s residence if no business location. ○​ Location of the goods, if known to both parties at the time of contracting. Delivery via Carrier ​ Shipment Contracts ○​ The seller must place goods into the hands of the carrier. ○​ Make a reasonable contract for transportation. ○​ Obtain and deliver necessary documents to the buyer. ○​ Notify the buyer of the shipment. ​ Destination Contracts ○​ The seller agrees to deliver goods to a specific destination. ○​ Goods must be tendered at a reasonable hour and held at the buyer’s disposal. Perfect Tender Rule ​ Obligation ○​ Seller must ship or tender conforming goods. ○​ The buyer must accept and pay for the goods according to the contract terms. ​ Rights of the Buyer ○​ If goods fail to conform, the buyer may accept, reject, or accept part and reject part. ○​ If the goods conform, the buyer must accept and pay for them.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Exceptions to the Perfect Tender Rule Agreement of the Parties ​ Exceptions by Agreement ○​ Parties may agree that defective goods or parts will not be rejected if the seller or lessor can repair or replace them within a reasonable period. Cure ​ Definition ○​ The right of the seller or lessor to repair, adjust, or replace defective or nonconforming goods. ​ Conditions for Cure ○​ The delivery is rejected because the goods were nonconforming. ○​ The time for performance has not yet expired. ○​ The seller or lessor provides timely notice of intention to cure. ○​ A cure can be made within the contract time for performance. ​ Reasonable Grounds ○​ The seller or lessor can cure even after the performance time has expired if there were reasonable grounds to believe the nonconforming tender would be acceptable. Limits on the Right to Reject Goods ​ Conditions ○​ Buyer or lessee must inform the seller or lessor of the particular defect. ○​ Buyer or lessee cannot later assert the defect as a defense if it could have been cured. ○​ Buyers and lessees must act in good faith and state specific reasons for refusing to accept goods. Substitution of Carriers ​ Conditions ○​ If the agreed-on manner of delivery becomes impracticable or unavailable, a commercially reasonable substitute must be used. ○​ The seller or lessor is responsible for arranging a substitute carrier and any additional shipping costs. Installment Contracts ​ Definition ○​ A single contract requiring or authorizing delivery in two or more separate lots. ​ Conditions for Rejection ○​ Buyer or lessee can reject an installment only if the nonconformity substantially impairs the value of the installment and cannot be cured. ○​ The entire installment contract is breached only when one or more nonconforming installments substantially impair the value of the whole contract.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Commercial Impracticability and Partial Performance Commercial Impracticability ​ Definition ○​ Unforeseen occurrences that make performance commercially impracticable. ​ Conditions ○​ The seller or lessor must notify the buyer or lessee as soon as practicable about the delay or nondelivery. ○​ Does not extend to foreseeable problems, such as cost increases due to inflation. Partial Performance ​ Definition ○​ When an unforeseen event partially affects the seller's or lessor's capacity to perform. ​ Requirements ○​ The seller or lessor must distribute the remaining goods or deliveries fairly among the parties. ○​ Buyer or lessee must receive notice of the allocation and can accept or reject it. Destruction of Identified Goods ​ Definition ○​ Unexpected events, like a fire, that destroy goods before the risk passes to the buyer or lessee. ​ Conditions ○​ If goods are identified at the time of contract formation, performance is excused. ○​ If partially destroyed, the buyer or lessee can inspect and either void the contract or accept the damaged goods with a price reduction. Example ○​ Atlas Sporting Equipment leases bicycles that are destroyed by fire before delivery. ​ Atlas is not liable, and the contract is void. Assurance and Cooperation ​ Assurance ○​ If one party has reasonable grounds to believe the other will not perform, they can demand adequate assurance in writing. ○​ Performance can be suspended until assurance is received. ○​ Failure to assure within a reasonable time can be treated as a repudiation. ​ Cooperation ○​ If one party's performance depends on the other's cooperation, lack of cooperation can excuse performance or hold the uncooperative party in breach.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico When the Seller or Lessor Refuses to Deliver the Goods Basic Remedies for the Buyer or Lessee ​ Right to Cancel the Contract ○​ The buyer or lessee can cancel the contract if the seller or lessor fails to deliver or repudiates the contract. ​ Relieves the buyer or lessee of further obligations but retains rights to other remedies. ​ Right to Obtain Goods upon Insolvency ○​ If the seller or lessor becomes insolvent within ten days after receiving the first payment, the buyer or lessee can obtain the goods. ​ Goods must be identified in the contract, and the buyer or lessee must pay any unpaid balance. ​ Right to Obtain Specific Performance ○​ Available if the goods are unique or monetary damages are inadequate. ​ Requires the seller or lessor to deliver the specific goods identified in the contract. ​ Right of Cover ​ Buyer or lessee can buy or lease substitute goods if the seller or lessor repudiates or fails to deliver. ○​ Buyer or lessee can recover the difference between the cost of cover and the contract price, incidental damages, and consequential damages. ​ Right to Replevy Goods ○​ Action to recover identified goods unlawfully withheld by the seller or lessor. ​ The buyer or lessee must show they were unable to cover for the goods after making a reasonable effort. ​ Right to Recover Damages ○​ Buyer or lessee can sue for damages if the seller or lessor repudiates or fails to deliver. ​ Recovery includes the difference between contract and market prices, incidental and consequential damages.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Mirror Image Rule (Common Law) Under common law, the mirror image rule states that an acceptance must exactly match the terms of the offer for a valid contract to be created. This means: ​ If the acceptance includes any changes or additional terms, it is considered a counteroffer rather than acceptance. ​ Therefore, no contract is formed unless all terms are identical. UCC Acceptance – No Mirror Image Rule Under the UCC, particularly in Article 2 (which governs the sale of goods), the mirror image rule is not strictly applied. Here’s how it works: 1.​ Acceptance Without Exact Match: ​ An acceptance can still be valid even if it includes different or additional terms, as long as it is definite and unconditional. ​ This allows for greater flexibility in commercial transactions compared to common law. 2.​ Parties Are Merchants: ​ If both parties to the transaction are merchants, then additional terms proposed in the acceptance may automatically become part of the contract unless: ​ The original offer expressly limits acceptance to its terms. ​ The new terms materially alter the agreement (i.e., they would cause hardship or surprise). ​ The other party objects to the new terms within a reasonable time. 3.​ Non-Merchant Situations: ​ If at least one party to the contract is not a merchant, the acceptance acts as a mirror image of the offer; any additional or different terms do not become part of the contract. Mirror image rule Differences ​ Common Law → ○​ Strict adherence to the mirror image rule; any deviation results in a counteroffer. ​ UCC → ○​ Flexibility in acceptance allows for additional or different terms to become part of the contract, depending on the merchant status of the parties involved.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Examples Example of UCC Acceptance (Merchants): ​ Offer: "I will sell you 100 desks for $1,000 each." ​ Acceptance: "I accept, but I want you to include 10 chairs for the same price." ​ Under UCC, this is a valid acceptance, and the additional terms (the chairs) might be incorporated into the contract unless the original offer specifically limited acceptance or the terms materially changed the agreement. Example: “Your RBE business is selling mobile phone covers. You’ll be selling these online to buyers anywhere in the country via an online store. If you choose a shipment contract, what’s your responsibility?” ​ Deliver the goods to a carrier – Once an order is placed, RBE PRODUCT must properly package and hand over the phone covers to a shipping carrier (e.g., USPS, FedEx, UPS). ​ Make a reasonable contract for transportation – The seller must arrange for a reasonable shipping method that ensures the goods reach the buyer in a timely manner. ​ Provide shipment details to the buyer – This includes tracking information and any necessary shipping documentation. ​ Bear the risk of loss only until delivery to the carrier. Once the phone covers are handed over to the carrier, the risk of loss or damage shifts to the buyer. Delivering the goods to a carrier falls under UCC Article 2 (§2-504) because it governs the seller’s obligation in shipment contracts, ensuring goods are properly handed over for transit. This is important because it defines when the seller’s duty is fulfilled. Making a reasonable contract for transportation is covered by UCC Article 2 (§2-504) as it requires the seller to choose an appropriate shipping method. This is important because it protects the buyer from unreasonable delays or inadequate shipping arrangements.​ Providing shipment details to the buyer is under UCC Article 2 (§2-504) as it mandates sellers to notify buyers of the shipment. This is important because it ensures transparency and allows the buyer to track their goods. Bearing the risk of loss only until delivery to the carrier is governed by UCC Article 2 (§2-509(1)(a)), which states that in a shipment contract, risk transfers to the buyer once the carrier receives the goods. This is important because it clarifies liability and prevents disputes over lost or damaged goods.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Use a shipment contract rather than a destination contract for selling phone covers online. Here’s an explanation of both and why a shipment contract is the better choice: Shipment Contract (Preferred Option) ​ Under a shipment contract, the seller’s responsibility ends when the goods are handed over to the carrier (UCC §2-504). ​ The risk of loss transfers to the buyer once the carrier takes possession. ​ The seller is only responsible for making reasonable shipping arrangements and notifying the buyer. Why Choose a Shipment Contract? ​ It is easier and more common for e-commerce businesses since sellers don’t have to ensure actual delivery. ​ It reduces seller liability, as any loss or damage during transit is the buyer’s responsibility. ​ It is more cost-effective as the seller does not have to pay for guaranteed delivery. Destination Contract ​ In a destination contract, the seller is responsible for delivering the goods to the buyer’s specified location (UCC §2-503). ​ The risk of loss remains with the seller until the buyer receives the product. ​ The seller bears additional costs and liabilities associated with ensuring delivery. Why Not a Destination Contract? ​ It increases seller liability since any damage or loss in transit is the seller’s problem. ​ It requires more logistics and cost management, making it less practical for an online business with nationwide shipping. Conclusion: A shipment contract is the better choice because it is more practical and cost-effective and limits liability, making it the standard for e-commerce businesses.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Statute of Frauds Exceptions: Article 2 requires that certain contracts be in writing to be enforceable, particularly: ​ Sale of Goods: Contracts for the sale of goods priced at $500 or more must be in writing. ​ Lease of Goods: Contracts for leases over $1,000 must also be in writing. Exceptions to the Statutory Requirement: ​ Specially Manufactured Goods: If the goods are specially made for the buyer and are not suitable for sale to others, and the manufacturer has begun work on them, then the contract is enforceable without a written agreement. ​ Admissions: If a party admits in court or in a legal proceeding that a contract was made, this admission can make the contract enforceable, even without written proof. ​ Partial Performance: If a party has partially performed the contract (e.g., by delivering some goods), courts may enforce the contract based on the partial performance. Open Terms: UCC Article 2 allows contracts to be enforceable even if some terms are left open or undefined. This applies to: ​ Price Terms: If a contract does not specify a price, the UCC allows for the determination of a reasonable price at the time of delivery. ​ Delivery Terms: If the delivery method is not specified, the UCC implies that the goods must be delivered within a reasonable time and to a sensible place. 3. Modification Without Consideration: Under common law, modifications to contracts typically require fresh consideration (something of value). However, under the UCC: ​ Modifications to a contract for the sale of goods do not require additional consideration but must still be made in good faith. 4. Unconscionability: UCC Article 2 provides that contracts may be found unconscionable if they are extremely one-sided or exploitative. Courts may: ❖​ Refuse to enforce the contract entirely. ​ Modify or sever unconscionable terms to make the contract more balanced.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico 5. Consumer Protections: While not exclusively stated under Article 2, consumer protections may apply to sales governed by UCC: ​ Goods sold must meet certain warranties (e.g., implied warranty of merchantability and fitness for a particular purpose). ​ These warranties can be disclaimed, but disclaimers must be clear and conspicuous. 6. Risk of Loss: The UCC provides guidelines on determining who bears the risk of loss when goods are damaged or destroyed before delivery. Factors that affect this include: ​ Whether the seller is a merchant. ​ The terms of the contract regarding the risk of loss. ​ Whether the goods have been identified for the contract.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Product Liability Law Liability of Maker, Seller, or Lessor ​ Responsible for damages caused by a product to consumers, users, or bystanders​ ​ Three key legal theories:​ ○​ Negligence​ ○​ Misrepresentation​ ○​ Strict Liability Negligence in Product Liability ​ Failure to take reasonable care in:​ ○​ Design​ ○​ Selection of materials​ ○​ Production process​ ○​ Assembly and testing​ ○​ Providing warnings​ ​ Legal principles:​ ○​ No privity of contract needed (liable even if no direct contract with injured party)​ ○​ Plaintiff must prove:​ ​ Injury caused “in fact” (but-for causation)​ ​ Proximate cause (foreseeability)​ Strict Product Liability ​ Liability exists regardless of reasonable care.​ ​ No privity of contract required​ ​ Policy justifications:​ ○​ Protects consumers​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico ○​ Manufacturers & distributors bear the costs of injury.s​ Elements of Strict Product Liability 1.​ The product was defective at the time of sale le.​ 2.​ Defendant is in the business of selling or distributing the product.​ 3.​ The product is unreasonably dangerous.​ 4.​ Plaintiff suffered physical harm.​ 5.​ Defect was the proximate cause of the injury.​ 6.​ The product was not substantially changed from the time of sale.e​ How is a product considered unreasonably dangerous? → 2 parts 1.​ Exceeds ordinary consumer expectations​ 2.​ A safer alternative was available, but the company failed to implement it.​ Types of Product Defects 1.​ Manufacturing Defects​ ○​ Deviation from intended design​ ○​ Physical flaws, damage, or incorrect assembly​ ○​ Importance of quality control​ 2.​ Design Defects​ ○​ Proving design defect:​ ​ A safer alternative design was available.​ ​ The defendant failed to adopt it​ ​ The product was not reasonably safe.fe​ ○​ Tests used:​ ​ Risk-utility analysis: Weighs harm risk vs. product utility​ ​ Consumer-expectation test: Product fails to meet reasonable expectations​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico 3.​ Inadequate Warnings​ ○​ Failure to warn of foreseeable risks​ ○​ Requirements for adequate warnings:​ ​ Must be clear, specific, and conspicuous​ ​ Warn against foreseeable misuse.​ ​ Must provide instructions for safe use​ ○​ Manufacturers must warn about hidden dangers, but not obvious risks.​ Real-World Applications: Products Liability ​ Key legal questions for courts:​ ○​ What are the facts of the case?​ ○​ What theories of recovery apply?​ ○​ What defenses are available?​ ○​ What remedies could be awarded?​ Market Share Liability ​ Used when the plaintiff cannot identify the exact manufacturer​ ​ The court assigns damages based on market share.e​ ​ Some jurisdictions reject it due to a lack of clear causation. on​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Remedies in Product Liability Cases 1.​ Compensatory damages​ ○​ Medical expenses​ ○​ Lost wages​ ○​ Pain and suffering​ 2.​ Injunctive relief (the court orders the company to act or stop acting)​ 3.​ Restitution (return of unfair benefits to a company)​ 4.​ Punitive damages (for intentional or extreme negligence)​ Defenses to Product Liability Claims 1.​ Failure to meet elements – Plaintiff has not proven a key requirement.​ 2.​ Preemption – Federal law overrides state product liability claims​ 3.​ Assumption of Risk – Plaintiff knowingly accepted the risk​ 4.​ Product Misuse – Product was used in an unforeseeable way​ 5.​ Comparative Negligence – Plaintiff’s actions contributed to harm​ 6.​ Commonly Known Dangers – No need to warn against obvious risks​ 7.​ Knowledgeable User – If the danger is known to users, no duty to warn​ 8.​ Statutes of Limitation/Repose – Legal time limits on claims Fiduciary Duty: What Is a Fiduciary? ​ A fiduciary is a person who is legally and ethically required to act in the best interest of another.​ ​ The beneficiary is the person who benefits from the fiduciary’s actions.​ ​ Fiduciaries must prioritize their beneficiaries’ interests over their own.​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico What Is Fiduciary Duty? ​ The term “fiduciary” comes from the Latin word for trust.​ ​ Fiduciary duty requires professionals to act with care, loyalty, honesty, and integrity.​ ​ A breach of fiduciary duty can lead to legal penalties or loss of professional credentials.​ Main Responsibilities of a Fiduciary 1.​ Duty of Loyalty – Act in the beneficiary’s best interest, avoiding conflicts of interest.​ 2.​ Duty of Care – Make informed decisions through research and due diligence.​ 3.​ Duty of Good Faith – Follow the law and act ethically.​ 4.​ Duty of Confidentiality – Keep beneficiary information private.​ 5.​ Duty of Prudence – Use skill and caution when making decisions.​ 6.​ Duty to Disclose – Provide all relevant information to beneficiaries.​ Examples of Fiduciaries ​ Financial Advisors – Manage investments in the best interest of clients.​ ​ Corporate Executives & Directors – Work to increase shareholder value.​ ​ Trustees – Protect and manage trust assets.​ ​ Estate Executors – Carry out the wishes of the deceased.​ ​ Real Estate Agents – Disclose conflicts of interest in property transactions.​ Fiduciary Financial Advisors What Makes a Financial Advisor a Fiduciary? ​ They must act in their clients’ best interest.​ ​ They must offer the best and most cost-effective financial solutions.​ ​ Not all financial advisors are fiduciaries—some operate under a lesser standard.​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Fiduciary vs. Non-Fiduciary Advisors ​ Fiduciary Advisors – Always prioritize client interests.​ ​ Non-Fiduciary Advisors – Follow the suitability standard (advice must be “suitable” but not necessarily the best).​ Types of Financial Advisors Based on Payment Structure 1.​ Commission-Only Advisors – Earn money by selling financial products (may have conflicts of interest).​ 2.​ Fee-Only Advisors – Charge only client fees (lower conflicts of interest, typically fiduciaries).​ 3.​ Fee-Based Advisors – Earn money from both client fees and commissions (may not always act as fiduciaries).​ Why Choose a Fiduciary Financial Advisor? ​ They are legally required to act in your best interest.​ ​ They generally offer lower-cost, higher-value financial solutions.​ ​ They have fewer conflicts of interest than commission-based advisors.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Agency and Employment What Is an Agency Relationship? ​ One person (agent) acts or speaks on behalf of another (principal).​ ​ Employees are typically agents of their employers.​ ​ Independent contractors may be agents, but are not necessarily so.​ Fiduciary Relationship in Agency ​ A relationship of trust and confidence where one represents another.​ ​ Requires consent from both parties.​ ​ A fiduciary is a specific type of agent with added responsibilities.​ How Is an Agency Relationship Formed? 1.​ Agreement – A contract may or may not be involved.​ 2.​ Ratification – A person acts on behalf of a principal, and the principal later approves the act.​ 3.​ Estoppel – If a principal gives the impression that someone is their agent, they are bound by that person’s actions.​ 4.​ Operation of Law – Agency arises due to legal requirements.​ Duties of an Agent ​ Good Faith – Act honestly and in the principal’s best interest.​ ​ Performance – Act reasonably and complete tasks effectively.​ ​ Notification – Keep the principal informed of relevant matters.​ ​ Loyalty – Avoid conflicts of interest and protect the principal’s information.​ ​ Obedience – Follow lawful instructions from the principal.​ ​ Accounting – Maintain records of financial transactions on behalf of the principal.​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Duties of the Principal ​ Compensation – Pay the agent for their work.​ ​ Reimbursement – Cover necessary expenses paid by the agent for the principal’s benefit.​ ​ Cooperation – Support the agent and do not interfere with their work.​ ​ Safe Working Conditions – Provide a safe work environment if the principal has control over it.​ Rights and Remedies for Wrongdoing Agent’s Rights Against the Principal ​ Torts & Contract Remedies – Legal options if the principal breaches the agreement.​ ​ No Right to Specific Performance – The agent cannot force the principal to maintain the agency relationship.​ Principal’s Rights Against the Agent ​ Constructive Trust – Any benefits earned by the agent on behalf of the principal belong to the principal.​ ​ Avoidance – The principal can terminate the agency if the agent breaches duties.​ ​ Indemnification – If the agent violates the agreement and causes harm, the agent is responsible for damages, not the principal.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Employment Law Basics Employee vs. Independent Contractor Employee: ​ Works under the employer’s control, receives benefits, and has taxes withheld.​ ​ Employer provides tools and workspace, and assigns tasks.​ ​ Paid a salary or hourly wage for set hours.​ ​ Protected by wage, safety, and anti-discrimination laws.​ Independent Contractor: ​ Self-employed, free to work for multiple clients.​ ​ Controls how work is done and uses own tools/methods.​ ​ Paid per job or task.​ ​ Not protected by most employment laws.​ Employment Relationship and Termination ​ At-will employment – Can end at any time unless:​ ○​ Violates a contract (individual or collective bargaining agreement).​ ○​ Violates local, state, or federal law (e.g., discrimination laws).​ Employment Laws to Know Wrongful Termination & Retaliation ​ Whistleblower Protections:​ ○​ Illinois Whistleblower Act – Prevents retaliation against employees who report illegal conduct.​ ○​ Illinois False Claims Act – Protects whistleblowers reporting fraud against the state.​ ○​ Worker’s compensation retaliation (e.g., Indiana).​ ​ Unlawful Discrimination – Firing or treating employees unfairly based on protected characteristics.​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Federal Wage & Hour Laws ​ Davis-Bacon Act – Requires construction contractors on federal projects to pay prevailing wages.​ ​ Walsh-Healy Act – Manufacturers/suppliers must pay minimum wage and overtime (1.5x pay).​ ​ Fair Labor Standards Act (FLSA) – Covers wage, hour, and child labor laws.​ FLSA: Child Labor Protections ​ Under 14 – Can only work in family businesses, some agriculture, newspapers, and entertainment.​ ​ Ages 14-15 – Can work non-hazardous jobs with restrictions:​ ○​ 18 hrs/week during school, 40 hrs/week in summer​ ○​ 7 AM - 7 PM (extended to 9 PM in summer)​ ​ Ages 16-17 – No time limits, but no hazardous jobs.​ FLSA: Minimum Wage & Overtime ​ Federal Minimum Wage: $7.25/hour (states may set higher wages).​ ​ Overtime: Non-exempt employees must be paid 1.5x for hours over 40/week.​ ​ Tipped Workers: Minimum wage of $2.13/hour, but must reach full minimum wage with tips.​ ​ State Minimum Wages (examples):​ ○​ IN: $7.25​ ○​ OH: $10.70​ ○​ MI: $12.48​ ○​ IL: $15 (over 18) / $13 (under 18)​ Worker Adjustment and Retraining Notification (WARN) Act ​ Employers with 100+ workers must provide 60 days’ notice before:​ ○​ Mass layoffs (30 %+ of workforce).​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico ○​ Plant closures affecting 50+ workers.​ Family & Medical Leave Act (FMLA) ​ Applies to:​ ○​ Employers with 50+ employees.​ ○​ Government employers.​ ​ Provides up to 12 weeks of unpaid leave for:​ ○​ Birth, adoption, or foster care of a child.​ ○​ Employee’s or family member’s serious health condition.​ ○​ Military-related caregiver leave (up to 26 weeks).​ ​ Protections:​ ○​ Health coverage continues.​ ○​ Right to job reinstatement. ​ (except top 10% key employees).​ ○​ No retaliation for using FMLA leave.​ ​ FMLA Remedies:​ ○​ Lost wages, benefits, attorney fees, and job reinstatement.​ ○​ Double damages for employer’s bad faith violations.​ Worker Health & Safety: OSHA ​ Occupational Safety & Health Act (OSHA):​ ○​ Covers employers with 11+ workers.​ ○​ Requires safe workplaces, industry-specific safety standards, and incident reporting.​ ○​ Employers must report serious work-related injuries/deaths within 8 hours.​ ○​ Employees cannot be forced to work under unsafe conditions.​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Worker’s Compensation ​ Covers job-related injuries/illnesses.​ ​ Replaces negligence lawsuits against employers, but workers can sue for intentional harm.​ ​ Excluded: ○​ Independent contractors, domestic, agricultural, and temporary workers.​ ​ Claim deadlines: ○​ Typically, → 30 days to notify the employer, 60 days to file the claim.​ Income Security Programs ​ Unemployment Compensation – Employers fund benefits for workers who lose jobs through no fault/cause​ ​ Social Security (OASDI) & Medicare – Funded by employer and employee payroll taxes.​ ​ COBRA – Allows employees to pay for continued health insurance after job loss.​ ​ Affordable Care Act (ACA):​ ○​ Employers with 50+ employees must provide health insurance. ​ Full-time workers ○​ Allows young adults to stay on parents' insurance until age 26. Title VII of the Civil Rights Act ​ Prohibition of Discrimination: Title VII prohibits job discrimination based on race, color, national origin, religion, and gender in all stages of employment.​ ​ Covered Employers: Applies to employers with 15 or more employees, labor unions, employment agencies, and government entities.​ ​ Federal Employment: Prohibits discrimination in most federal government employment.​ ​ Protection for Undocumented Workers: Any employee, including undocumented workers, can file a claim for employment discrimination.​ The Equal Employment Opportunity Commission (EEOC) ​ Enforcement Role: The EEOC monitors compliance and investigates claims.​ ​ Filing a Claim: Employees must file with the EEOC before suing an employer.​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico ​ EEOC Actions: May mediate disputes, sue on behalf of employees, or issue a “right to sue” letter.​ ​ Example Case: Walmart denied insurance benefits to a same-sex spouse, leading to EEOC intervention and a class-action settlement.​ Limitations on Class Actions ​ Supreme Court Ruling: Employees must prove a company-wide discriminatory policy to bring a class-action lawsuit.​ Intentional Discrimination (Disparate Treatment) ​ Definition: Deliberate discrimination against an employee.​ ​ Establishing a Prima Facie Case: Plaintiff must prove they are a protected class member, were qualified, were rejected, and the employer continued hiring.​ ​ Burden-Shifting: Employer must provide a legitimate reason; if proven pretextual, the plaintiff wins.​ Unintentional Discrimination (Disparate Impact) ​ Definition: Neutral practices that disproportionately affect a protected class.​ ​ Proving Disparate Impact:​ ○​ Pool of Applicants: Workforce composition vs. local labor market.​ ○​ Rate of Hiring: Selection rate for protected groups must be at least 80% of the highest group’s rate.​ Discrimination Based on Race, Color, and National Origin ​ Broad Interpretation: Applies to ancestry, ethnic characteristics, and national origin.​ ​ Employer Defense: Must prove that policies are job-related and necessary.​ ​ Case Example: An instructor’s discrimination claim was dismissed because his contract was not renewed due to insubordination, not national origin bias.​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Reverse Discrimination ​ Definition: Discrimination against majority groups (e.g., white males).​ ​ Case Example: A Montana company sued for losing contracts to minority-owned businesses under affirmative action policies. Legal Analysis of Discrimination Cases Race-Based Discrimination (DBE Programs & Section 1981) ​ Race-based classifications are only allowed if they are narrowly tailored to serve compelling government interests (Montana DBE program case).​ ​ A federal appellate court ruled that Montana’s DBE program lacked sufficient evidence to justify racial preferences in state contracts.​ ​ Section 1981 prohibits racial or ethnic discrimination in contract formation or enforcement, including employment relationships. Unlike Title VII, Section 1981 has no cap on damages.​ Religious Discrimination (Title VII) ​ Employers cannot discriminate based on religion or require participation in religious activities.​ ​ Employers must reasonably accommodate employees’ religious beliefs unless it causes an undue hardship to business operations.​ ​ Case Example:​ ○​ A hospital fired an employee who refused a flu vaccine for religious reasons. The court upheld the termination, citing undue hardship to the employer.​ Gender Discrimination (Title VII & Equal Pay Act) ​ Employers cannot base hiring, promotion, or job classification decisions on gender unless it is essential to the job.​ ​ Equal Pay Act:​ ○​ Mandates equal pay for equal work, considering job duties rather than job titles.​ ○​ The Lilly Ledbetter Fair Pay Act ensures wage discrimination claims remain actionable, despite when they started.​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico ​ Transgender Rights:​ ○​ Courts increasingly interpret Title VII to protect transgender employees from discrimination.​ Constructive Discharge ​ Occurs when an employer makes working conditions intolerable, forcing an employee to resign.​ ​ Requires proof that:​ ○​ Conditions were objectively intolerable.​ ○​ The employer was aware of this but failed to correct it.​ ○​ The resignation was a foreseeable result of discrimination.​ Sexual Harassment (Title VII) ​ Two types:​ ○​ Quid pro quo – Job benefits conditioned on sexual favors.​ ○​ Hostile work environment – Severe or pervasive offensive conduct.​ ​ Employers are liable if:​ ○​ A supervisor took a tangible action (e.g., firing, demotion).​ ○​ They failed to prevent or correct harassment (Ellerth/Faragher defense).​ ​ Retaliation Claims:​ ○​ Employees can sue for adverse employment actions taken in response to complaints of discrimination.​ Same-Gender & Third-Party Harassment ​ Same-gender harassment is covered under Title VII (Oncale case).​ ​ Employers can be liable for co-worker harassment if they fail to act after being informed. Discrimination Based on Age Age discrimination is a prevalent form of discrimination, as anyone can be affected regardless of race, color, national origin, or gender. The Age Discrimination in Employment Act (ADEA) prohibits employment discrimination based on age for individuals aged forty and older. It also forbids  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico mandatory retirement for non-managerial workers and protects both federal and private-sector employees from retaliation related to age-related complaints. For the ADEA to apply, an employer must have at least twenty employees, and the business must engage in interstate commerce. The Equal Employment Opportunity Commission (EEOC) enforces the ADEA, but the act also allows private lawsuits against employers for age discrimination. Procedures under the ADEA The burden-shifting procedure under the ADEA differs from that under Title VII. In a Title VII case, if an employee demonstrates that an employer was partially motivated by unlawful discrimination, the burden shifts to the employer to prove a legitimate reason for the action. Under the ADEA, however, the plaintiff must show that age discrimination was the determining factor in the adverse employment decision. This is known as "but-for" causation. To establish a prima facie case of age discrimination, the plaintiff must show: 1.​ They are part of the protected age group (40 or older). 2.​ They were qualified for the position. 3.​ They were discharged because of age discrimination. If these criteria are met, the employer must provide a legitimate, nondiscriminatory reason for the adverse action. If the employer does so, the plaintiff must then demonstrate that the stated reason is a pretext and that age was the true motivation. Case in Point: Jerry Stever, a 68-year-old financial adviser, sued U.S. Bancorp for age discrimination after being terminated for "deficient performance." However, the court ruled in favor of the employer as there was no evidence that Stever was discharged due to age. The court found that younger employees who were treated differently were not "similarly situated" to Stever in terms of revenue generation and seniority. Replacing Older Workers with Younger Workers Many age discrimination cases arise when employers replace older, higher-paid employees with younger, lower-paid workers. The key issue in such cases is whether the termination was motivated by age bias or a legitimate business decision. A plaintiff does not need to show that they were replaced by someone outside the protected age group (under 40); they only need to prove that the replacement worker was younger. The greater the age difference, the stronger the discrimination case. State Employees Not Covered by the ADEA State employers generally have immunity from lawsuits filed by private individuals under the ADEA due to the Eleventh Amendment. While Congress has the power to override this immunity in cases involving fundamental rights, the Supreme Court has ruled that state employees cannot typically sue under the ADEA.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Discrimination Based on Disability The Americans with Disabilities Act (ADA) prohibits workplace discrimination against individuals with disabilities in organizations with fifteen or more employees. However, state government employers are generally immune under the Eleventh Amendment. Employers must provide "reasonable accommodations" unless doing so would cause "undue hardship." Procedures of ADA To prevail in an ADA claim, a plaintiff must show: 1.​ They have a disability. 2.​ They are qualified for the job. 3.​ They were excluded due to the disability. Before suing, the plaintiff must file a claim with the EEOC. If the EEOC does not take action, the employee may proceed with a lawsuit. Remedies under the ADA include reinstatement, back pay, compensatory and punitive damages, and fines up to $100,000 for repeat violations. What Is a Disability? A disability under the ADA includes: 1.​ A physical or mental impairment that substantially limits major life activities. 2.​ A record of such an impairment. 3.​ Being regarded as having such an impairment. Conditions such as AIDS, cancer, diabetes, and severe obesity may qualify as disabilities. Employers also cannot discriminate against individuals based on associations with disabled persons. Case in Point: A federal appellate court ruled in favor of Larry Rohr, a worker with diabetes who was denied job accommodations. The court found that diabetes, which significantly restricted his diet, qualified as a disability under the ADA. Reasonable Accommodation Employers must make reasonable accommodations for employees with disabilities, such as modifying job assignments or installing wheelchair ramps, unless doing so would cause undue hardship. Example: A company may be required to pay for an employee’s larger parking space if their disability prevents them from using standard-sized spaces. Employers must also ensure their hiring processes are accessible, refrain from requesting medical exams unless required for all applicants, and provide equal access to health insurance coverage for disabled employees. Courts determine whether an accommodation imposes undue hardship on a case-by-case basis.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Discrimination Based on Military Status USERRA ​ USERRA = Uniformed Services Employment and Reemployment Rights Act​ ​ Protects people who serve in the military from job discrimination.​ ​ Makes military service a protected class, giving service members the right to sue employers for violations.​ USERRA Apply To? ​ Applies to ALL employers – public or private, large or small (even with just 1 employee).​ ​ Also applies to U.S. employers abroad.​ ​ Employees (like supervisors) acting on behalf of the employer can be personally sued.​ ​ No time limit to file a lawsuit.​ ​ Employers can only fire veterans "for cause" and must list what behaviors could lead to termination.​ How to Prove Discrimination (Prima Facie Case) To win a USERRA discrimination case, a person must show: 1.​ An adverse job action happened (e.g., denial of leave, demotion).​ 2.​ The action was connected to military service (membership, application, or helping someone else with a military claim).​ 3.​ Others in similar jobs not connected to the military were treated better.​ Example Case: Baldo Bello ​ Bello was a Marine Reserve and a police officer.​ ​ He requested military leave for training, but his employer started denying it.​ ​ He sued, and the court said he had a right to a trial because he may have been treated unfairly compared to other employees.​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Promotions and Reemployment Rights ​ Returning military members should get the job they would have had if they hadn't left for service.​ ​ This includes possible promotions, pay raises, and benefits.​ ​ If the employer violates USERRA, the employee may get damages, their job back, and a promotion.​ Employer Defenses to Discrimination Employers can defend themselves by: 1.​ Saying the plaintiff didn’t prove discrimination happened.​ 2.​ Offering a valid reason for the practice (like business need or seniority).​ Business Necessity ​ Employers can claim a rule is essential for business.​ Example: EarthFix, Inc. ​ Requires applicants to speak two languages.​ ​ Even if this affects some groups more than others, it’s okay if it’s necessary for the job.​ Bona Fide Occupational Qualification (BFOQ) ​ Employers can hire based on traits like gender or religion only if truly necessary for the job.​ ​ Race, color, and national origin can never be BFOQs.​ Example: ​ A women’s clothing store may hire only women for jobs involving helping customers in dressing rooms. Seniority Systems ​ Employers can use seniority (how long someone has worked) to justify differences in pay or promotions.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico After-Acquired Evidence of Misconduct ​ If an employer finds out an employee did something wrong after being sued, it can reduce the employer’s liability.​ Example: ​ Lucy is fired and sues for discrimination.​ ​ The employer later finds she lied on her job application.​ ​ They can’t avoid the lawsuit completely, but may pay less in damages. What are some strategies for making sure the workplace complies with employment discrimination law? Develop and Enforce Clear Anti-Discrimination Policies: ​ Establish and communicate a written anti-discrimination policy that prohibits discrimination based on race, color, religion, sex, national origin, age, disability, and other protected characteristics.​ ​ Ensure this policy is regularly reviewed and updated to reflect changes in local, state, or federal laws. Accommodate Employees with Disabilities: ​ Be proactive in providing reasonable accommodations to employees with disabilities, as required under the Americans with Disabilities Act (ADA).​ ​ Ensure that accommodations are handled in a way that supports employees without discrimination. Provide Regular Training: ​ Offer training for employees, managers, and HR professionals on employment discrimination laws, unconscious bias, and how to identify and handle discrimination complaints.​ ​ Conduct training on diversity and inclusion to create a workplace culture where all employees feel respected. Encourage an Inclusive Work Environment: ​ Promote a culture of inclusivity where diversity is valued. This includes addressing issues such as racial, gender, and cultural diversity.​ ​ Make sure that the workplace is free from harassment and that employees are aware of their rights.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Employment Discrimination Laws Law What It Prohibits Employer Size Covered Title VII Race, color, religion, sex, pregnancy, 15+ employees sexual harassment ADEA (Age Age (40+) 20+ employees Discrimination) ADA Disabilities (physical/mental) 15+ employees USERRA Military service All employers (even 1 employee)  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Personal Property vs. Real Property Definition and Differences ​ Real Property (Realty/Real Estate):​ ○​ Includes land and anything permanently attached (e.g., buildings, fixtures).​ ○​ Immovable.​ ​ Personal Property (Personalty/Chattel):​ ○​ Everything not classified as real property.​ ○​ Movable.​ Types of Personal Property ​ Tangible Personal Property:​ ○​ Has physical substance (e.g., TV, car, machinery).​ ​ Intangible Personal Property:​ ○​ No physical form; consists of rights and interests (e.g., stocks, bonds, patents, copyrights, digital assets).​ Ownership ​ Can be owned by individuals or entities.​ ​ Concurrent Ownership: Exists when two or more people share ownership (covered in real property section).​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Taxation ​ Real Property:​ ○​ Subject to property taxes based on market value and location.​ ○​ Local taxes may fund public services (e.g., schools, roads).​ ​ Personal Property:​ ○​ Businesses pay taxes on used/owned/leased personal property.​ ○​ Sales tax applies to individual purchases, but annual taxes typically don’t unless they are business-related.​ Acquisition and Transfer ​ Personal Property:​ ○​ Easy to transfer (e.g., gifting an iPad).​ ​ Real Property:​ ○​ Requires formal process (e.g., written contract, deed, recording with the state).​ Conversion Between Property Types Real to Personal Property ​ Real property becomes personal when detached:​ ○​ Examples:​ ​ Trees cut down = timber (personal property).​ ​ Picked fruit = personal property.​ ​ Extracted minerals = personal property.​ Personal to Real Property ​ Personal property becomes real when permanently attached:​ ○​ Known as a fixture (e.g., tile installed in a home).  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Trademark Definition ​ A famous, distinctive mark, logo, motto, or symbol identifying goods and their origin.​ Purpose ​ Prevents confusion in the marketplace regarding product sources.​ Legal Protection ​ Common Law (unwritten law from judicial decisions)​ ​ Lanham Act (Federal Statute)​ ​ State Laws​ ​ International Treaties (for protection abroad)​ Trademark Dilution Definition ​ Unauthorized use of a famous mark that diminishes its value or reputation.​ Laws Protecting Against Dilution ​ Federal Trademark Dilution Act (1995)​ ​ Trademark Dilution Revision Act (2006)​ Plaintiff Must Prove 1.​ Ownership of a famous, distinctive mark​ 2.​ The defendant used a similar mark in business.​ 3.​ Use creates an association between the mark.s​ 4.​ This harms the distinctiveness or reputation of the famous ma.rk​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Trademark Registration Filed With ​ U.S. Patent and Trademark Office (USPTO)​ Requirements ​ Mark must be:​ ○​ In current use, or​ ○​ Intended for use within 6 months​ Renewal ​ Between 5th–6th years after registration​ ​ Every 10 years thereafter​ Benefits ​ Right to use ® symbol.​ ​ Public notice of ownership​ Trademark Infringement Occurs When ​ A similar mark is used without authorization, causing consumer confusion.​ Proof Required ​ Likelihood of confusion about the source of goods/services.​ Remedies ​ Injunction​ ​ Damages + profits from infringement​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico ​ Destruction of infringing goods​ ​ Attorney’s fees (in some cases)​ Types of Marks ​ Fanciful – Invented words (e.g., “Kodak”)​ ​ Arbitrary – Common words used uniquely (e.g., “Apple” for computers)​ ​ Suggestive – Hints at product features (e.g., “Jaguar”)​ ​ Secondary Meaning – Descriptive or geographic terms that acquire brand association (e.g., “Calvin Klein”)​ ​ Service Mark – Distinguishes services (e.g., FedEx delivery)​ ​ Certification Mark – Certifies quality/region/materials (e.g., “UL Certified”)​ ​ Collective Mark – Used by group members (e.g., “CPA” for certified accountants)​ Counterfeit Goods Definition ​ Imitation of trademarked goods without authorization.​ Criminal Offense ​ Crime to trafficking or the use of counterfeit marks​ ​ Includes packaging/labels even if detached​ Penalties ​ Up to $2 million in fines​ ​ Up to 10+ years in prison​ ​ Forfeiture of goods​ ​ Restitution to the trademark owner​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Trade Dress Definition ​ Image and overall appearance of a product (e.g., packaging, store layout)​ Legal Protection ​ Same as trademarks if appearance causes consumer confusion.​ Trade Names Definitions ​ Trademark: Applies to products​ ​ Trade Name: Identifies a business (e.g., “Coca-Cola” as both)​ Protection ​ Under common law, if distinctive or widely recognized.​ Licensing Definition ​ Legal agreement allowing use of intellectual property for certain purposes.​ Parties ​ Licensor: Owner of IP​ ​ Licensee: User of IP (typically pays royalties)​ Patent Law Definition ​ Government grant of exclusive rights to an inventor.​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Duration ​ 20 years for utility patents​ ​ 14 years for design patents​ Requirements ​ Novel, Useful, and Non-obvious​ ​ Not natural laws, phenomena, or abstract ideas​ Law ​ America Invents Act: Patent goes to the first to file​ ​ Can challenge a patent only within 9 months of issue​ Infringement Remedies ​ Injunction​ ​ Damages or royalties​ ​ Treble damages for willful infringement​ ​ Attorney’s fees in certain cases​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Copyright Law Protection ​ For original works fixed in a tangible medium​ Examples of Protected Works ​ Literary, musical, dramatic, choreographic, visual, audiovisual, architectural, and computer software​ Not Protected ​ Facts or ideas that are widely known or not original​ Infringement ​ Unauthorized use of a substantial part of a protected work​ ​ Fair Use is an exception (e.g., commentary, criticism, education)​ Right of Publicity Definition ​ Right to control the commercial use of one’s name, image, or likeness​ Limitation ​ Does not apply to newsworthy or public interest uses  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Trademark Distinctive mark, motto, device, or implement that a manufacturer stamps, prints, or otherwise affixes to the goods it produces so that they are identified on the market and their origins made known​ Source identifier seeking to avoid confusion in the marketplace​ What kinds of laws protect trademark rights?​ Common law protected trademarks​ Codified (made into law by statute) by the Lanham Act​ States protect trademark as well​ International treaties protect intellectual property abroad Trademark Dilution​ Prohibits the use of a famous mark from unauthorized use by others​ Laws:​ Federal Trademark Dilution Act of 1995​ Trademark Dilution Revision Act of 2006​ Plaintiff must prove:​ Plaintiff owns a famous, distinctive mark​ Defendant doesn’t own the mark but has begun using a mark or a very similar mark in business​ Similarity between the defendant’s mark and the famous mark wrongfully gives rise to an association between the two marks​ Association is likely to impair the distinctiveness of the famous mark or harm its reputation Trademark Registration​ Must apply with the U.S. Patent and Trademark Office (USPTO)​ Mark may be registered​ If currently in commerce​ Applicant intends to put it into commerce within six months​ Registration postponed until used, but the applicant can protect the mark against a third party​ Renewable 5th–6th years and every 10 years thereafter​ Registration gives notice that the mark belongs to the registrant​ Registrant allowed to use symbol ® Trademark Infringement​ If someone else uses the mark to a substantial degree without authorization, intentionally or unintentionally, the mark has been infringed​ To win a trademark infringement case, the owner of the trademark must show that the defendant’s use of the mark created a likelihood of confusion about the origin of the defendant’s goods or services Remedies?​ Injunction​ Damages + profits from infringement​ Destruction of goods bearing an infringed mark​ Potentially, attorney fees Strong types of marks​ A trademark must be distinctive. These types of marks are typically strong.​ Fanciful – Invented words, like Google, Xerox​ Arbitrary – Uncommonly use common words, not describing the product, like “Apple”​ Suggestive – Indicate something about a product’s characteristics without specifically describing the product, like “Jaguar”​  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Secondary meaning – Descriptive terms, geographic terms, or names not usually trademarks, unless many people associate such a term with a specific brand, like Calvin Klein or Patagonia. Implications? Counterfeit Goods​ Copy or otherwise imitate trademarked goods​ Stop Counterfeiting in Manufactured Goods Act​ Crime to intentionally traffic or attempt to traffic counterfeit goods or services​ Crime to knowingly use a counterfeit mark in connection with goods or services​ Applies to labels, stickers, packaging, regardless of whether attached to goods​ Penalties​ $2 M​ Imprisoned up to 10 years+​ Must give up counterfeited products, which are then destroyed​ Defendant must pay restitution to trademark holder or victim​ Hard to stop international counterfeiters, can shut down websites/domain names Service Mark​ Trademark used to distinguish services of a person or company from another. Titles and character names in radio and television are usually registered as service marks. Certification Mark​ Certification mark – Used by one or more persons, other than the owner, to certify the region, materials, mode of manufacture, quality, or other characteristic of specific goods or services.​ ​ Examples: “Made in the USA,” “UL Certified” Collective Marks​ Members of a cooperative, association, or other organization use it to distinguish something they made/did or something their members make/do. Trade Dress​ Image and overall appearance of a product​ Subject to same protection as trademarks​ If a product’s trade dress is so similar to an existing product’s trade dress that consumers are confused about which is which, the new product is likely infringing. Trade Names​ Trademark applies to products​ Trade name refers to part or all of a business’s name, regardless of form​ Related to a business and its goodwill​ May be a trademark if the same name as the company’s product (Coca Cola)​ Protected under common law if unusual or fancifully used Licensing​ May use another’s trademark with a license​ Agreement permitting use of a trademark, copyright, patent, or trade secret for certain purposes​ Owner of IP is licensor, allowing licensee to use IP for royalties​ Grants only those rights in the agreement  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Patent Law​ Grant from the government to an inventor of the sole and exclusive right to make, use, or sell an invention for a limited period of time (usually 20 years)​ Can obtain a patent for a design for a manufactured item’s ornamental features​ Applies to a new and useful process, manufacture, machine, composition of matter, or any new and useful improvement thereof​ America Invents Act – Patent goes to the first to file, and challenges to another’s patent must be made within 9 months​ To be eligible for protection, an invention must be:​ - Novel (new)​ - Useful​ - Not obvious​ - Not a law of nature, natural phenomenon, or abstract idea​ To determine if your idea is patentable, search a patent database, such as the U.S. Patent & Trademark Office (USPTO) Patent Infringement​ Occurs when someone uses a patented design, product, or process without a license or permission​ Remedies may include:​ - Injunctions, stopping the infringer from continuing to use​ - Damages for royalties or lost profits​ - Treble damages (3x) for willful infringement​ - Attorneys’ fees and legal costs in certain cases Copyright Law​ Legal protection for an original expression fixed in a tangible medium of expression​ Made by a creator or author​ Covers a wide range of creative works, including:​ - Literary works (e.g., articles, manuals, catalogues, brochures, ads)​ - Musical works and accompanying words (e.g., jingles)​ - Dramatic works and accompanying music​ - Pantomimes and choreographic works (e.g., ballets, dances)​ - Pictorial, graphic, and sculptural works (e.g., cartoons, maps, statues, stuffed animals)​ - Motion pictures and other audiovisual works (e.g., multimedia)​ - Sound recordings​ - Architectural works​ - Computer programs/software​ Does not protect facts widely known to the public Copyright Infringement​ Occurs when one’s creative work is copied in substantial part​ The copy does not have to be identical​ Exception: Fair Use Doctrine: Allows limited use of copyrighted material without permission for purposes such as criticism, commentary, news reporting, teaching, scholarship, or research Determined by factors like purpose, nature, amount used, and effect on market value  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Transfer of Personal Property Purchase → Trade of consideration for an item​ You buy something in exchange for money or value. Will or inheritance → Item left to an heir via a donative instrument or intestacy​ Ownership passes upon someone's death via a will or default laws. Possession → Having an item with no other owner.​ Claiming something unowned gives you rights to it. Production → Creating something.g​ You own what you make. Gift → Acceptance of an item delivered by a donor with donative intent​ A gift is transferred with clear intent and acceptance. Accession → Improvement of an item owned gives the right to the added value.e​ You gain rights to the added value when you enhance something. Confusion → Accidental comingling of fungible goods, yields ownership of interest in the total amount. nt​ Mixing similar goods results in shared proportional ownership. Q: Which of the following best describes your interest in the land and home?​ Answer: Fee simple absolute​ It's the most complete form of ownership with no limitations. Q: How was ownership of your home likely transferred to you?​ Answer: Contract + deed​ A home is typically bought via a purchase contract and a deed. Q: What can you typically expect to get as part of your purchase?​ Answer: All of the above​ Home sales usually include land, structures, fixtures, air, and subsurface rights. Q: Is it reasonable to assume the bar comes with the house?​ Answer: Yes, it’s a fixture, and that means it’s real estate property.​ Fixtures are attached and considered part of the real estate. Q: If there's a dispute about the bar, how will a court decide?​ Answer: Yes, it’s a fixture, and that means it’s real estate property.​ Courts look at intent, attachment, and adaptation; bolted-in bars are likely fixtures. Q: What if the bar was installed by a business tenant?​ Answer: No, it’s personal property of the prior owner.​ Tenants can often remove trade fixtures, even if attached. Q: What type of encumbrance does the power company have?​ Answer: Easement in gross​ It benefits the company (not another property) and stays with the land.  Exam 3: Wednesday → Apr 16, 2025 9:30 AM EDT leonard-v-pepsico Lessor (Landlord): CIB – Capital Improvement Board of Managers of Marion County, Indiana ​ The CIB owns or controls the stadium.​ ​ They are responsible for maintaining the facility, providing certain services (like security and municipal support), and granting rights to use the space.​ ​ They receive payments from the Club for use of suites, signage, parking, etc.​ ​ They sometimes pay the Club (e.g., for game-day expenses or revenue-sharing). Lessee (Tenant): The Club – likely the Indianapolis Colts (or another NFL team) ​ The Club is granted exclusive use rights to the stadium for home games, events, and related operations.​ ​ They control ticket sales, media, and game-day production.​ ​ Responsible for some maintenance, security, and operational costs.​ ​ They pay rent or other forms of payments to the CIB as part of the lease. Payment ​ Annual rent: $250,000 per Club Season. ​ Payment schedule: Two payments of $125,000—due Nov 15 and 30 days after the season ends.​ ​ Reduction clause: $25,000 deduction per missed home game if due to CIB’s breach.​ ​ Right of offset: Club can deduct unpaid amounts owed by CIB.​ ​ Interest on late payments: 6% for the first 30 days, then up to 18% annually.​ Eminent Domain ​ The government can take private property.​ ​ It must be for a public purpose (like highways, schools, or stadiums).​ ​ The owner must be justly compensated (fair market value).​ Unreasonably Dangerous — meaning the product posed a danger beyond what an ordinary consumer would expect when used as intended or in a reasonably foreseeable way.