Business_Law_Dictionary.pdf

BUSINESS

Business Law

Dictionary

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Business Law Dictionary

act of God An unusual and unexpected natural event (e.g., hurricane,

earthquake, sudden death), which may be a defense against liability for

injuries or damages , or for not fulfilling a contract . Under the law of contracts,

an act of God often serves as a valid excuse if one of the parties to the

contract is unable to fulfill his or her duties, such as completing a construction

project on time.

act of nature see Act of God .

ADA see Americans with Disabilities Act .

ADEA see Age Discrimination in Employment Act .

abandonment In trademark law, a situation in which the owner of a

trademark or service mark does not use the mark for a long time or does

not object to the unauthorized use of the mark by others. An owner who

abandons a trademark loses his or her exclusive rights to it.

acceptance In contracts , agreeing verbally or in writing to the terms. This

is one of the requirements for making a valid contract (i.e., an offer , an

acceptance of that offer, and a consideration ). A written offer can be accepted

only in writing.

accord and satisfaction An agreement to accept less than is legally due

in order to conclude a dispute. The new agreement (i.e., the accord) and the

payment (i.e., the satisfaction, when made) replace the original obligation.

See novation .

account stated A statement between a creditor and a debtor that a stated

amount is owed as of a stated date. The statement may be a bill, invoice or

summary of invoices that the debtor may agree to pay either in whole or in

part.

accounts payable The bills or invoices that are owed by a business.

accounts receivable The bills or amounts that are due or owed to a

business by customers. In general, this term refers to the total amount owed

and is used in calculating the value of a business or the likelihood of the

business being able to pay its own debts. Calculating receivables involves

evaluating each customer’s payment history and the age of the debt.

accrue Growing or adding to, such as accumulating interest on a debt. Also,

the circumstances that allow the bringing of a lawsuit. For example, the right

to sue on a contract accrues only if the other party breaches or repudiates it.

adhesion contract A contract (often a signed preprinted form) that

is so much in one party’s favor that there is every appearance of its not

having been bargained freely. Also called a contract of adhesion. See

unconscionability .

ADR see American Depository Receipt .

advance A prepayment made in anticipation of services, such as a shipment

being made or a book written. An advance is normally set against a final bill,

a sales commission or an author’s royalty .

affirmative action In employment or admission to programs: a business,

institution or governmental agency giving preference in hiring or advancement

to ethnic minorities to make up for past discrimination . Affirmative action has

been at the center of several lawsuits arguing reverse discrimination, but it

has usually been upheld.

age discrimination Unfair treatment, especially in the hiring or laying off

of current or potential employees aged 40 to 70 years, which is illegal under

the Age Discrimination Employment Act (ADEA) . The main challenge by the

claimant is to prove age discrimination. See wrongful termination .

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Age Discrimination in Employment Act (ADEA) A federal law

prohibiting discrimination against workers older than 40 years of age in

employment decisions, especially those regarding which workers should be

laid off. Under the law, no worker can be forced to retire. See Older Workers

Benefit Protection Act .

agent A person who, by mutual consent, is authorized to act for the benefit

of and under the direction of another person when dealing with third parties.

The person who appoints the agent is the principal . The agent is in a fiduciary

relationship with the principal, can enter into binding agreements on behalf of

the principal, and could potentially create liability for her or him. See apparent

authority ; ostensible agent .

agent for acceptance of service In corporations , a named individual

who is authorized to accept service of lawsuits or claims against the

corporation. The person is usually named in the articles of incorporation or

similar documents filed with each state’s Secretary of State, and is often a

professional agent representing many corporations.

Americans with Disabilities Act (ADA) A federal law prohibiting

discrimination against people with physical or mental disabilities in

employment, public services, and places accommodating the public (e.g.,

restaurants, hotels, theaters).

annual meeting In corporations , a general meeting of shareholders or

directors . Shareholders’ meetings are held to elect directors or to vote on

major changes to the corporation, such as amendments to the articles of

incorporation or the merging of the business with another. A meeting of

directors might consider raising funds by borrowing and other financial

decisions, buying property, and hiring or replacing key staff.

anticipation In patent law, a situation in which an invention is too similar

to an existing invention to be considered novel —it has been anticipated.

Novelty is one of the requirements for a patent, so anticipated inventions

cannot be patented. See prior art .

anticipatory breach The repudiation of obligations by one party to a

contract before the obligations have been fully performed. This releases

the other party from his or her contractual obligations; one party cannot

simultaneously repudiate obligations and demand that the other party

perform. See breach of contract .

agreement An understanding between two or more parties about a

particular issue, covering their obligations, duties and rights. The term can

also mean contract (i.e., a legally binding agreement), but it has a broader

application and extends to understandings that are not legally binding.

alter ego An entity set up as a legal shield for the person actually

controlling the operation. Proving that such an entity is an alter ego involves

having to prove complete control by an individual. See piercing the veil .

American Depository Receipt (ADR) A receipt issued by U.S. banks to

U.S. citizens as a substitute for the outright ownership of foreign shares. ADRs

can be readily traded on American stock exchanges, avoiding the need to

trade the actual foreign shares.

antitrust laws Acts of Congress (starting with the Sherman Antitrust Act

of 1890) that forbid or restrict business practices that are deemed to be

monopolistic, that restrain interstate commerce , or that are anticompetitive.

See price fixing ; restraint of trade .

apparent authority Appearing to be the agent of another (i.e., the

employer or principal ) with the power to act for her or him. Under the law

of agency, the principal is liable for the acts (e.g., damage caused, contracts

signed) of her or his employee (i.e., agent), and this applies to someone who

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only appears (to a customer, supplier or other member of the public) to have

been given authority. Providing someone who is not a proper agent with,

for example, stationery, forms, a company truck or an office desk could be

considered granting them apparent authority, leaving the employer liable. See

ostensible agent .

appraisal An estimate of the fair market value of something (e.g., real

estate , valuables, shares ). A professional appraiser (a neutral expert) makes

an estimate by studying the property and comparing the initial purchase price

with recent sales of similar property. Appraisals are often ordered by courts in

probate, bankruptcy and other proceedings in which market values need to

be established. Banks and mortgage companies use appraisals before making

loans, and insurance companies use damage appraisals before settling claims.

appraiser A professional expert who is hired to determine the current

market value or full cash value of real estate or other property.

appreciation An increase in value, particularly of property that has risen in

value since it was acquired.

arm’s length The nature of an agreement when it has been made by two

parties freely and independently of each other. If the parties are relatives

or have a prior contract that puts one under the control of the other, the

new agreement may not have been made at arm’s length and may not be

enforceable.

arrears Money owed and due, but not yet paid; often the total of a series of

unpaid amounts.

articles of incorporation The basic (and usually founding) charter of a

corporation , setting out the name, type of business, directors , and amount and

types of shares that may be issued. Each state has its own approval system

and requirements for registering names and issuing shares, as well as its

own criteria for registering nonprofit corporations . Articles of incorporation

are usually filed for approval with a state’s Secretary of State or Corporations

Commissioner.

as is Provision in a sales contract by which the buyer waives the right to

complain if the property being sold is faulty: the buyer takes it “as is.” The

buyer must have the right to inspect the purchase and spot deficiencies. If the

seller intentionally conceals defects, the contract can be cancelled. See caveat

emptor ; latent defect .

assets In business, items of property that have monetary value and are

shown in the company balance sheets . Such items include current assets (e.g.,

accounts receivable ), fixed assets (e.g., equipment, supplies), and business

goodwill and copyrights .

assignment Transferring an interest in a property, contract or other right

from one person or company to another. In copyright law, the unconditional

transfer of all rights in a copyright from the owner to another person or entity.

assignment for benefit of creditors A method of scheduling debt

repayment by which a trustee receives directly a portion of a debtor’s income

and uses it to pay the debtor’s bills. Compare garnishment .

audit An examination by a trained accountant of the financial records of

a person or business, including notation of improper or careless practices,

recommendations for improvements in keeping proper records, and a

balancing of the books. An “internal audit” is done by an employee, whereas

an “independent audit” is done by an outside accountant. Auditors who have

not been able to examine all the supporting documents will note that the

audit was based on limited information and will not guarantee the accuracy

of the information provided.

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author In terms of copyright protection, a person who creates a work; a

person or business that pays another to create a work as part of her or his

employment; or a person or business that commissions a work under a work

made for hire contract. For example, a technical writer may produce a manual,

but if she or he is employed by a company to do so, the company is the

author of the manual for copyright purposes.

bad debt A debt that is considered uncollectible because of bankruptcy or

the passage of time.

bad faith An intentional dishonest act involving the nonfulfillment of

contractual obligations, misleading of another, or entrance into an agreement

without the intention or means to fulfill it.

bankruptcy Proceedings under federal law whereby a debtor can discharge

(i.e., wipe out) his or her debts or have protection from creditors while trying

to repay them. Liquidation bankruptcy ( Chapter 7 ) involves discharging debts

by the surrender of assets. Reorganization bankruptcy ( Chapter 13 ) involves

providing the court with a plan for repaying the debts. Reorganization

bankruptcy for businesses and for consumers with very large debts is called

Chapter 11 .

bankruptcy court The specialized federal court that deals with bankruptcy

matters as detailed in the Federal Bankruptcy Act. Each state also has a

number of such courts, usually covering several counties.

bankruptcy trustee A court-appointed individual who oversees the case of

a person or business that has filed for bankruptcy. In a consumer Chapter 7

case, the trustee gathers the debtor’s nonexempt property , liquidates it, and

distributes it proportionally to the creditors. In a Chapter 13 case, the trustee

receives the debtor’s monthly payments and distributes them proportionally to

the creditors.

bait and switch A dishonest sales practice in which a business attracts

customers by advertising a bargain price for an item and then claims that the

advertised item is no longer available, attempting to switch the prospective

customer to a more expensive product. Such tactics often apply to retail items

(e.g., stereos, televisions), but there are also loan interest rates and other

financial products that turn out to be available for very specific circumstances

only. Such practices can make a business a target for a class action .

balance due The amount of a debt still owed on an account or the principal

owed on a promissory note . With a promissory note, the balance due is not

the sum of the remaining installments, because that amount includes interest

payments, but may be the principal due without further interest.

bearer Someone who holds a negotiable instrument , such as a check ,

promissory note , bank draft or bond . If the document states that it is “payable

to bearer,” the bearer can receive the funds due on it.

beneficial interest An individual’s right to some profit, distribution or

benefit from a contract or trust. Such an interest is different from the rights of

a trustee, who has responsibility for certain assets, but who does not directly

share in the benefits.

benefit In contracts , any profit or acquired right. In workers’ compensation ,

“benefit” is the insurance payment for a fatal accident on the job

(“compensation” is for nonfatal injuries). “Fringe benefits” may be part of

employment compensation other than salary or wages (e.g., health insurance).

balance sheet A statement that shows the financial position of a company

in terms of its assets and liabilities at particular times (current and past); an

indicator of the overall condition of the business. This differs from a profit and

loss statement , which is concerned with the current operational activity of the

business.

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