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104 Cards in this Set
- Front
- Back
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Consumer Protection |
Federal and State govts regulate product safety, and prohibit unfair and deceptive business practices |
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Areas of Consumer Protection |
Food, Drugs, and Cosmetics |
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FDA |
federal agency that handles regulations and implements federal law for consumer protection |
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FDA Food Regulation |
-prohibits that shipment, sale, or distribution of "adulterated food" -Sets specialized "action levels" for the presence of contaminants -Note required to be 100% pure |
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Truth in Labeling Law |
-requires the disclosure of ingredients, serving size, fat, sugar, etc. content -establishes standard definitions of terms such as "right", "low-fat", "all natural", etc. |
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FDA Drug Regulations |
-has authority to test and license new drugs -investigates applications, research presented, and hold hearing before licensing -can terminate license post-approval |
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FDA Food includes: |
-Food and drinks -supplements/vitamins =subcategory of food |
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FDA Drugs includes: |
drugs, Medical devices, and medical proceedures |
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FDA Cosmetics includes: |
-items for cleansing, and altering one's appearance -ordinary soap is EXCLUDED from FDA regulations |
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FDA Cosmetics Regulations |
focuses on labeling and the disclosure of potentially cancer-causing agents |
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Bankruptcy |
governed by federal law- US Bankruptcy Code and US Bankruptcy Court |
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3 Types of Bankruptcies |
-Chapter 7: Liquidation -Chapter 11: Reorganization -Chapter 13: Adjustment of Debts for Individuals with Regular Income |
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When You File for Bankruptcy, What Automatically Happens? |
it "stays" (stops) certain actions by creditors against debtors for unpaid debts |
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What Do Chapter 7, 11, and 13 Bankruptcies Have in Common? |
seek to grant debtor discharge for some/all unpaid debts |
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Bankruptcy Estate |
all debtors real and personal property, wherever located, is included in bankruptcy estate |
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What is "Exempt Property"? |
-not included in bankruptcy estate -ex. burial plot, certain $ amount of primary residence/jewelry/car/household items |
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Homestead Exemption |
state law usually gives higher exemption for person residence, law passed in 2005 to curtain abuse |
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Chapter 7 Bankruptcy |
-Liquidation (straight bankruptcy) -debtor's non-exempt assets sold for cash and paid to creditors -Unpaid debts are discharged -Future income is NOT affected |
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Median-Income Test |
-became law in 2005 -determines if you can claim Chapter 7, or if you are forced into Chapter 13 |
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Median-Income Test: Qualified |
if debtors median family income is equal to or below state median family income |
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Median-Income Test: Unqualified |
-if debtors median family income is above, means test is applied -has less than $7,000 of disposable income per year = qualified -has more than $11,000 of disposable income/year = not qualified |
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Steps in Chapter 7 |
-Median-Income/means test -Distribution of property -Discharge |
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Distribution of Property: Over-Secured Creditors |
if value of collateral exceeds interest in property, the property is sold, creditor receives amount, and excess is available for other creditors |
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Distribution of Property: Undersecured Creditors |
value of collateral is less than secured interest, property usually awarded to secured creditor |
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Discharge of Chapter 7 |
-all property is sold to pay claims -unpaid debts no longer legal responsibility of debtor -discharge may be denied if evidence of fraud |
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Chapter 13 Bankruptcy |
-Adjustment of debts for individuals with regular income -court supervised repayment plan |
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Steps in Chapter 13 |
-Estate -Plan of Repayment -Discharge |
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Estate in Chapter 13 |
-includes all non-exempt property -debtor remains in possession of property |
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Plan of Repayment in Chapter 13 |
-submitted to creditors for approval -payments made to bankruptcy trustee |
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Discharge in Chapter 13 |
all unpaid, unsecured debt is discharged after payments pursuant to the plan are completed (3-5 years) |
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Chapter 11 Bankruptcy |
-reorganization -reorganizes debtor's financial plan under supervision of bankruptcy trustee |
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Steps in Chapter 11 |
-debtor in possession -court appointments -reorganization plan -approval |
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Debtor in Possession Chapter 11 |
company is left in place to continue operating |
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Court Appointments Chapter 11 |
court appoints Creditors' Committee to represent unsecured creditors |
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Reorganization Plan Chapter 11 |
-debtor has 18 months to file a plan of reorganization -includes new financial structure -proposal for payment of certain unsecured debt |
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Approval Chapter 11 |
court confirms plan, creditors must approve |
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Bait and Switch Occurs When: |
(FTC) -a seller refuses to show consumer the advertised merchandise -seller discourages employees from selling low-cost items -seller fails to have adequate qualities of low-cost merchandise available |
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Warranty |
-guarantees of quality -buyers can recover from sellers fro defective product that violate warranties |
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Two Types of Warranties |
-Express Warranties -Implied Warranties |
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Express Warranties |
explicit promises made by seller that the goods will have certain qualities |
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Forms of Express Warranties |
-verbal statement from seller as to quality/characteristics -catalog description of item -if seller shows sample, seller is guaranteeing the rest of quality conforms to sample |
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Implied Warranties |
arise automatically in certain circumstances |
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Types of Implied Warranties |
-Implied warranty of fitness for a particular purpose -implied warranty of merchantability -special warranty of fitness for human consumption |
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Implied Warranty of Fitness for a Particular Purpose |
arises only where seller knows that buyer needs goods for a particular purpose and buyer relied on sellers judgement to select suitable goods |
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Implied Warranty of Merchantability |
goods will be fit for ordinary purposes for which such goods are used if seller regularly sells the goods |
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Special Warranty of Fitness for Human Consumption |
-applies to food and drink in grocery stores, restaurants, fast-food, etc. -provides sale of food or beverage will be of average quality and fit for human consumption |
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Breach of Special Warranty of Fitness for Human Consumption |
-courts distinguish between foreign substances and natural substances in the food -breach: if true foreign item/substance found in food product -no breach: substance is natural to food (bone, shell, etc.) |
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Theories of Recovery for a Defective Product |
-negligence -strict liability |
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Negligence: Defective Product |
-seller negligent or somehow careless in preparation or manufacture of good |
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Negligence Requires: |
-proof of duty -breach -causation -harm -seller has opportunity to assert defense |
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Strict Liability: Defective Product |
-tort available to those injured by distributed defectively designed product -guarantees recovery |
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Gap Fillers |
-certain terms are supplied if not set forth in offer |
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Irrevocable Offers |
-option contract -merchants firm offer -all other offers can be revoked |
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Option Contract |
when a deposit is made to keep the offer open |
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Merchants Firm Offer |
-aka Rain Check -offers by retailers to sell or offer item for sale at a given price until some point in the future (usually 30 days) -protected by Universal Commercial Code |
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Common Law Form of Acceptance |
Mirror Image rule |
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Mirror Image Rule |
acceptance must be the mirror image of the offer, no changes or modifications |
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UCC Acceptance |
-if transaction is between merchants -Battle of the Forms |
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Battle of the Forms |
-if additional terms in acceptance are not material, and no timely objection is made, additional terms become apart of agreement -if additional terms are not material, still have underlying agreement (additional terms = proposals), can be accepted or denied |
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Common Law Statute of Frauds |
-categories of contracts that must be in writing include sale of goods over $500 -must be signed by party being held to terms |
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Negotiable Instruments |
-Governed by Article 3 of UCC -includes commercial paper -necessary in business transactions as money/cash substitute |
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Types of Negotiable Instruments |
-Promissory notes -Draft |
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Promissory Notes |
-Promises to pay -2 party instrument -provides short term financing, function as short term credit -ex. Certificate of Deposit issued by bank |
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Maker |
promises to pay back promissory note |
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Payee |
entitled to payment of promissory note/Draft |
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Draft |
-order to pay directed upon a party -3 party instrument -ex. ordinary check |
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Parties in Promissory Notes |
-maker -payee |
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Parties in Draft |
-drawer -drawee -payee |
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Drawer |
makes/directs the order to pay draft |
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Drawee |
receives the order of draft |
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Requirements of Negotiable Instruments |
-Writing -Signed by maker/drawer -unconditional promise/order to pay -sum certain -in money -payable on demand or at a definite time -payable to order or bearer |
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Writing:Negotiable Instruments |
can be typed, handwritten, printed, or combination |
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Signed by Maker or Drawer: Negotiable Instruments |
can be whole name, initials, or combination |
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Unconditional Promise/ Order to Pay: Negotiable Instruments |
not conditioned on a event |
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Sum Certain: Negotiable Instruments |
-amount must be able to be calculated -can include interest rate |
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In Money: Negotiable Instruments |
US currency or established currency of foreign govt |
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Payable on Demand or at a Definite Time: Negotiable Instruments |
-checks payable on demand: when payee requests payment -definite time: promissory notes |
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Payable to Order or Bearer: Negotiable Instruments |
-"Magic words of negotiability" -order instrument -bearer paper |
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Magic Words of Negotiability |
allows instrument to be negotiated or transfered |
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Order Instrument |
directed at a person for their further direction |
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Bearer Instrument |
payable to a person physically holding the instrument |
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Negotiation |
-the process by which commercial paper is properly transferred -determined by whether it's order or bearer paper |
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"Adulterated Food" |
exceeds "action levels" |
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Unfair and Deceptive Business Practices |
-governed by FTC -false advertising -bait and switch |
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FTC |
-Federal Trade Commission -implements the Federal Trade Commission Act -can order investigation of any business practice that is alleged to be unfair or deceptive -can order business to cease/desist any practice in violation |
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False Advertising |
-advertising deemed false if it contains misinformation or omits important info necessary to make an ad not misleading -advertising makes unsubstantial claims -businesses must maintain file of studies, surveys, etc. that are the basis of claims |
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Standard: False Advertising |
what is likely to mislead a reasonable consumer |
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Bait and Switch |
deceptive advertising that occurs when seller advertises availability of a low cost item and pressures consumer into purchasing more expensive item |
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Sale of Goods (Contracts) |
governed by article 2 of UCC |
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UCC |
-Uniform Commercial Code
-provides uniformity in transactions and the laws governing transactions -simplifies contracts by easing rules -adopted by most states |
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Goods |
-tangible personal property -do not include investment securities, insurance policies, real property |
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Sale |
-a transaction involving the transfer of title of goods between a willing buys and a wiling seller for a price -does not include gifts, bailments, contracts for services |
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What Happens When a Service Contract Includes a Provision of Goods? |
-must determine which is the dominant element -goods are incidental: happy regular contract law -goods are primary: apply UCC |
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Steps in Formation of Sales Contract Under UCC |
-Offer -Acceptance -Statute of Frauds |
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Types of Gap Fillers |
-Price -Quantity -Duration |
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Gap Filler: Price |
-if no price stated, price is a "reasonable" price, Fair Market Value -billed at price on date of delivery -ex. heating oil |
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Gap Filler: Quantity |
-requirements contract- all that buyer requires -ex. residents oil needs vary due to outside temperature |
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Gap Filler: Duration |
if no duration is stated, contract will continue for a reasonable time |
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UCC Statute of Frauds |
-writing signed by one party can be binding on non-signing party if not objected within 10 days of the receipt |
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Proper Negotiation of Bearer Instrument |
-delivery/transfer of instrument is proper negotiation -no endorsement required -ex. check payable to cash |
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Proper Negotiation of Order Instrument |
-delivery and proper endorsement required |
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Two Types of Endorsements |
-Bank endorsement -restrictive endorsement |
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Bank Endorsement |
signature of payee only- converts order paper to bearer paper |
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Restrictive Endorsement |
-"For deposit only" and Account # -restricts use of paper |
