Thorough Business Enterprises Outline

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1. Business Law – General

a. Nexus of Contract Theory

i. Business entities are a nexus of contracts where parties indirectly contract with each other by contracting with the fictitious legal entity

1. Advantages of using business entities

a. Simplification of formation and management of contractual relationships

b. Reduced transaction costs

2. Parties involved

a. Suppliers of physical capital (build
ings, land, etc.)

b. Suppliers of financial capital (creditors)

c. Suppliers of labor (employees)

d. Suppliers of goods and services (inputs)

e. Customers of goods and services

f. Directors / Managers

g. Residu0al Claimants

3. Business enterprises are primarily governed by contract law and specific contract provisions

a. K law governs formation, enforceability, remedies for breach, gap filling

b. Nexus of contract theory supports freedom of K (default rules)

4. Other Applicable Law (either supreme or as gap fillers)

a. Sources

i. Agency law

1. Applies where there are principal / agent relationships

ii. Partnership law

1. Superimposed on obligations contained in the contract

iii. Statutes

1. Vary depending on type of business entity

2. Regarding internal governance, liability, tax

iv. Regulatory law

1. Including federal and state securities law

v. Tort law

vi. Environmental law

vii. Labor / employment law

viii. Criminal law

b. Default v. Mandatory rules

i. Most statues are default rules which can be changed by S/H agreement

ii. However, some rules are mandatory (usury laws, minimum wage, etc.)

5. Side contracts may also be formed which do not go through the business entity nexus

2. Contract Law Principles

a. Contract Law Issues in Business

i. Contract Formation – was a K formed?

1. Letter of Intent – contract or preliminary negotiations

2. Battle of Forms – UCC 2-207

ii. Enforceability

1. Fraud

a. False assertion by another party

b. Fraudulent (Scienter)

i. Consciously false or reckless disregard for the truth

c. Reliance

d. Justified reliance

2. Misrepresentation (as an alternative to fraud, no scienter requirement)

a. False assertion

b. Material

c. Reliance

d. Justified reliance

3. Statute of Frauds

4. Statute of Limitation

iii. Performance & Breach

1. Terms of the Contract

a. Gap Filling

i. Hypothetical bargain approach

b. Fiduciary Duties

i. Imposed as a matter of law – duty of care and loyalty

2. Justified Non-Performance

a. Doctrine of condition – strict compliance, waiver, divisibility, anticipatory repudiation, assurance of future performance, forfeiture

3. Excused Non-Performance

a. Impracticability

b. Impossibility...
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