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Illustrated by Timothy Adams

July 11 Issue No. 99

REVIEW Magazine

Goal 1.0 – 9.0 Study Guides

July 11 Issue No. 99

Ethics and Structure Ethics: deciding what is a right or wrong action in a reasoned, impartial manner Morality: involves the values that govern society’s attitude toward right and wrong Ethics are based around the following basics: • • • • •

Feelings and Opinions The Greatest Good The Golden Rule Consequential Reasoning Rule-based reasoning

Feelings and opinions • Ethics are viewed as how a person feels about a certain situation • Ethics may also be based on what opinions are expressed about certain situations

The Greatest Good • The idea is that must people will base their opinion of ethics based on how a certain situation affects the greatest amount of people • The more good that result, the more ethical the action taken

• The more bad the result, the less ethical the action taken

The Golden Rule • Do unto others as you would have them do unto you • The heart of the golden rule is empathy • Empathy: putting yourself in the other person’s position

Consequential Reasoning • Takes a look at the consequences of the action before making a decision on what way to act • Looks at alternative actions and it gives the final outcome of each action

Rule-based Reasoning • Makes a decision based on majority vote • Sometimes it is not the most ethical decision • Based around the U.S. Constitution

U.S. Legal Systems The U.S. Legal System is based upon the Constitution, where laws are created and amended. The basis for the Constitution is to protect human rights. Our legal system is based upon three levels of government:

Judicial: Led by the Supreme Court. The Supreme Court decides if the law being made is constitutionally correct. Legislative: Led by Congress. Congress is made up of the Senate and the House of Representatives. The Senate consists of two members from every state. The House of Representatives consists of members based on their population. Executive: Led by the President. Elected by vote of the people

Crime Crime: an act against the public good NOTE: Each statute that defines a crime must specifically explain the conduct that is forbidden by that statute. No act can be considered a crime unless it is prohibited by the law of the place where it is committed and unless the law provides for the punishment of offenders. 4 punishments for a crime: • • • • •

Imprisonment Fine Probation Community Service Combination of the above

Participants of a Trial • Plaintiff? (2) 1. Government 2. Prosecutor • Defendant (1) 1. Person accused of the crime Classifying a crime:

Elements of a crime:

According to Seriousness: • What is the most serious? a) Felony b) Imprisonment or death • What is less serious? a) Misdemeanor b) Fine and/or probation

Criminal Act • Must violate a statute Required state of mind • Depends on crimes definition Motive is NOT required

Types of Crimes • Crimes Against People • Social Crimes • Crimes Against Property • Business crimes (White Collar) Crimes Against People: • Murder  Malice aforethought?  1st degree—aggravated (premeditated, cruelty, torture, rape, robbery, kidnapping)  2nd degree—non of the above conditions apply • Manslaughter  Voluntary?  Intentional  Involuntary  Occurs while committing an unlawful or reckless act

• • •

Crimes Against People (cont.): Assault - Attempt (pointing or shooting at someone)  Aggravated (Usually felony)-using deadly weapon with intent  Simple (misdemeanor) Battery  Hitting Kidnapping  Unlawful removal against person’s will Sex offenses  Statutory rape  Date rape (acquaintance rape) Social Crime

• Federal/State governments have the right to regulate health, safety, welfare, and morals of the people.  Drug Use  illegal and harmful substances  Addiction-inability to function normally  Alcohol Use

Crimes Against Property: • Burglary • Larceny • Embezzlement • Robbery • Arson Crimes Against Businesses • Characteristics of “White Collar Crimes”  Usually involve fraud  Usually non-violent • Larceny by False Pretenses Intended to mislead or defraud  Induce victim to rely on them  Example: con artists • Forgery  False making or changing of a writing with intent to fraud. • Bribery  Giving something of value to influence • Extortion • Computer Crimes

Defenses to a crime • Insanity • Must prove the M’Naughten Rule ―At the time of the crime, was the defendant suffering from a mental disease so serious that he or she did not know what they were doing was wrong‖ • If not guilty, what happens? Must serve time in a mental institution until determined to be stable. • Entrapment • Induced into breaking the law by a law enforcement officer • Self-Defense • Defending yourself from danger • Must retreat, if possible • Defense of Family Members • Person has the right to rescue a family member who is being attacked.

Acceptance Acceptance - Unqualified willingness to go along with the offer Requirements of Acceptance • Unconditional Acceptance – Mirror Image Rule (IMPORTANT) • Acceptance must “mirror” offer • Any change means there is no acceptance – Counteroffer • Offeree makes an offer • Offeror becomes offeree

Methods of Acceptance • Contract accepted when sent, if same method of communication used • Contract accepted when received, if different method of communication is used • If method is stated in offer, it MUST be used • Action=Acceptance • Silence cannot be a method of acceptance

Consideration Gratuitous Contracts • The law does not enforce any contracts that are gratuitous • Gratuitous contracts are free agreements Consideration • Exchange of benefits and detriments by the parties to an agreements • Benefits • Something that a party was not previously entitled to receive • Detriments • Any loss suffered Types of Detriments • Give up or promise to give up something you are entitled to receive • Doing or promising to do something you have a legal right to do • Forbearance • Not doing something you have a legal right to do

Capacity • Capacity – legal ability to enter a contract • Majority – age of legal adulthood • Minor – not yet reached legal age (minority) • NC Age of Majority = 18 years old • Voidable Contracts – minors may disaffirm or avoid their contracts if they so choose • Infancy = minority = minor = under 18 yrs old

Characteristics of a contract • Valid – Legally good • Void – No legal force • Voidable – Not void, but may be voided by one party • Unenforceable – Some rule of law can not be enforced by the court.

Express VS Implied • Express – Stated in words – Written or spoken • Implied – Based on actions (not words) Bilateral VS Unilateral • Bilateral – Contains two promises • Unilateral – Contains one promise Oral VS Written • Oral – Spoken words • Written – Write out exact terms

Methods to terminate a contract Discharge by Performance : • Complete • All terms have been carried out properly and completely. • Time • Court will honor time request, if it is deemed “of the essence.” • If not mentioned in contract, then a reasonable time will be assumed. • Satisfactory • Law requires that services be completed in a satisfactory manner. • Reasonable person test • Would a reasonable consider the work to done in satisfactory manner? • Substantial • Slightly less than full performance • Must meet the following rules: • • •

Acted in Good Faith Completed Major Components of Contract Only Minor Details Incomplete.

• Tender of Performance • Tender – Offer to Perform • Must make tender even if you know the other party will not perform their part of the contact. Discharge by Agreement : • Mutual Release • Each side releases the other side from the contract. • Accord and Satisfaction • Substitute one contract for another. Discharge By Impossibility of Performance : • Death or Illness in a Personal Service Contract • Only allowed in Personal service contracts. • What is personal service? • Photographer • Artist • Any other contract must be completed. • Destruction of the Exact Subject Matter • If the subject matter is essential to the contract then it will be discharged. • Illegality • Any illegal contract is void.

Principal Form of Business OrganizationSole Proprietorship • • • • • • • •

Characteristics of Sole Proprietorship Requirements for Organizing - none Legal Status – owner is the business and it is not a separate entity. Liability - unlimited Management – owner makes the decisions Dissolution – owner decides and the business terminates upon the owner‟s death Ease of formation – just do it! Duration – death or disinterest of owner Ability to attract professional managers - poor

Endorsements • •

• • •

• •

Endorsements Signature on the back of a negotiable instrument Allow payee to cash, deposit or transfer payment of the check to someone else Proof that the payee cashed or transferred payment of the check to someone else Endorser is responsible for payment of the check if the new owner cannot collect payment Endorse should sign the check the way it is on the front of the check and if the name is misspelled, correct the signature directly up under the first endorsement Blank Endorsements Signed with endorser’s name only Can be cashed by anyone who has a check with a blank endorsement

• • • • • • •

Special Or Full Endorsements Transfer payment to someone else Can make a payment on a debt with this endorsement Payee signs the check over to another person to receive payment Restrictive Endorsements Limits use of check Safest type of endorsement Can not be cashed by someone who has stolen the check Safest way to send a check through the mail

Negotiable Instruments Draft - An order by one person to another person to pay money to the order of a third person • Three parties to a draft: A. Drawer – Orders the money to be paid B. Drawee – One ordered to pay the money C. Payee – One who is to receive the money • Acceptor - A drawee who has written “accepted” on the document and signed his/her name

• Types of Drafts: Sight Draft – A draft payable as soon as it is presented to drawee for payment Time Draft – Not payable until the lapse of a particular time period stated on a draft Trade Acceptance – Used by a seller of goods to receive payment or to extend credit Check – Draft drawn on a bank and payable on demand, can be called a demand draft • Honor – Pay when due • Dishonor – Refuse to pay when due • Stop Payment – Instruction for bank not to pay check

• Types of Checks Certified Check – A personal check that has been accepted by a bank before payment Cashier’s Check – A check the bank draws on itself Money Order – Draft issued by a post office, bank, express company, or telegraph company for use in paying or transferring funds for the purchaser Traveler’s Checks – Draft drawn by a well-known financial institution on itself or its agent, used when traveling

Teller’s Check – Draft drawn by a bank on funds that it has on deposit at another bank

Sources of Credit

• Credit Cards and Charge Accounts • Unsecured form of credit • Interest Calculations • Adjusted Balance – Finance charges added after subtracting payment • Previous Balance – Finance charges are figured as if no payment was made • Average Daily Balance – Finance charges figured by adding balances for each day in billing period and then divide by the number of days in the billing period • Simple Interest = Principal * Rate * Time

• Installment Plans • Secured – Collateral used to secure loan • Pledge – Creditor obtains possession of collateral by written or oral agreement • Security agreement – Contract where debtor retains possession of collateral under a written contract • Repossession – Taking back of items used to secure loan when payment is not made • Unsecured – No collateral used • Closed end credit – Credit given for a specific amount of money and payments are made. • Open end credit – Credit that can be increased by debtor up to a limit set by creditor, a line of credit is given.

Simple Interest Formula • Simple Interest Formula: I = PRT • I – Interest = $7500.00 • P – Principle = $25,000.00 • R – Rate = 6% • T – Time = 5 years I = $25,000.00 * 6% * 60 • I = $7500.00

Types of Loans Secured Loans Creditors obtain an interest in something of value 1. Collateral – Property that is the subject of the loan 2. Cosigner – Helps protect a loan when a borrower’s credit rating is poor 3. Secured Party – Lender or seller who holds secured interest 4. Repossession – Property is returned because of non-payment Unsecured Loans Creditors obtain no collateral for loan 1. No Collateral 2. Creditors make sure that debtor is reliable and able to pay back loan 3. Example (Credit Cards)

Single Payment Loan Debtor pays off loan in one payment 1. Promissory Note - Written promise to repay with interest Installment 2. Loan - Paid in regular payments Types of Loan Regulations Regulation Z 1. Actual cost of finance charge must be known 2. Annual percentage rate 3. Liable for $50 unauthorized credit card purchases made prior to notification Equal Credit Opportunity Act 1. Applying for credit 2. Granted only on the ability to repay 3. Evaluation of application 4. Cannot discriminate based on gender, age, ethnicity, or religion 5. Acceptance and rejection

Agency Law Agency • Relationship in which one person, called an agent, represents another person, called a principal, in some sort of business transaction with a third party. In most cases a binding contractual agreement is formed. • Principal -> Agent -> Third Party – Example: You picked up and paid for a pizza ordered by a family member. Types of Agency • General Agent-given authority to perform any act within the scope of a business. • Special Agent-employed to accomplish a specific purpose or to do a particular job. • Subagents-appointed by another agent. • Agent’s Agent-has no power to appoint a subagent but does so anyway. • Coagents-two ore more agents hired by the principal.

Employment Law Collective Bargaining • Contract negotiated by the employer and representative of the labor union. Unions • To certify, must have a unanimous vote (50 %) • If lose certification vote, must wait one year for another vote. Employment at Will • Employment is not for a stated amount of time. • Employer, without being liable for breach of contract, could fire the employee and pay him or her for services rendered up to the time of the firing (employee can quit). • Unjust Dismissal • Employees have legal grounds against employers who have treated them unfairly. Grievance Procedure • Sets up a series of steps employees must take to appeal an employer’s decision that they feel violates just cause. • Due Process is a grievance procedure for government employees.

INTRODUCTION TO INSURANCE Nature of Insurance • The concept of insurance involves risk pooling or spreading losses over a greater number of people. • An insurance company collects and pools premiums from many individuals or businesses for the payment of future claims. Risk Management • All people take risks every day. • Risk management is the process of managing one’s exposure to risk. – Examples • Using a seat belt • Installing smoke detectors • Driving a vehicle • Playing sports • Purchasing an insurance policy

• Options for people to manage risk include – Transfer part of risk of financial loss to an insurance company • Auto, life, health, disability, property insurances – Retain (keep) the risk of financial loss using high deductible – Abstain or choose not to participate in risky activities • Do not drive car, buy home, play sports • People make decisions about insurance based on their individual situation and risk tolerance.

Bailments Bailment • An agreement created by the temporary delivery of personal property by the owner to someone who is not the owner for a specific purpose. • Both parties agree that the property will be returned to the bailor. • Bailee - has in their temporary possession property that belongs to someone else. • Bailor – owner of property who gives up possession to someone else policy Examples of Bailments • Leather jacket left at a dry cleaners • Vehicle delivered to parking valet • Goods transported by common carrier • Truck taken to dealership for service check • Diamond ring taken to jeweler for cleaning or repair • Leaving your clothes in dressing room while trying on new sweater • Goods delivered to a consignment shop

Real and Personal Property Real Property • Land and anything permanently attached, including: – Buildings, structures, fixtures – Water, water rights – Minerals on and below the surface of the earth. – Trees & crops – Air space above the surface Personal Property • Anything other than real property, including: – Clothing, jewelry, furniture, appliances in a home – Automobiles, ATVs, lawnmowers – Equipment & machinery used in business – Copyrights, patents, trademarks – Software, stocks, loans, mutual funds • Must be delivered in order to transfer ownership. • May be tangible or intangible.

Rights of Ownership • Possess, use and enjoy the property • Dispose of, sell, consume, modify, insure or destroy the property • Give the property away by will after death • Lease the property to a tenant Intellectual Property • Includes copyrights, patents, trademarks and trade secrets • Is an original work fixed in a tangible medium of expression. • Examples: literature, computer software, musical scores and lyrics, choreography, dramatic works, unique product or process, symbols or word that identify a product, commercially valuable information that is kept secret Methods to Acquire Property • Purchase contract – earn money and use it to buy • Gift – includes intent, delivery and acceptance • Intellectual labor – creation of property

• Inheritance – wills and trusts • Accession – farm animals naturally increase • Found property – lost or mislaid • Occupancy – possession of property that belongs to no one else Real Property Transfers • Grantor - conveys a deed to real property • Grantee – receives the deed Types of Deed • Quitclaim – Transfers a seller’s interest in a property but doesn’t warrant that the seller owns any interest • General Warranty Deed – Warrants the title – Most desirable for the buyer • Bargain and Sale Deed – Transfers title to property without giving warranties

Personal Property Transfers • Transfer of title (ownership) to property • Not all transfers require written titles – Purchases of goods from a retail store • Certain transfers have formal titles-Vehicles – Are registered with the state – MUST BE NOTARIZED – Require odometer reading disclosure statements – Require damage disclosure statements Limits on Use of Property • Police powers by government • Nuisance ordinances enacted by cities • Zoning ordinances enacted by cities to regulate • Health and public safety issues • Certain physical rights • Eminant domain • Deed restrictions • Easements

Property Rights • Physical rights apply to: – Surface (the right to occupy the land, and develop it with buildings, etc.) – Subterranean Minerals or Water (rights to remove or conserve) – Air (right extends into upper atmosphere-but cannot exclude aircraft from flying over property) Eminent Domain • Right to make private property into public if it is for the public good. • When highways are widened, private property is taken by eminent domain. • Owners are paid the fair market value of the property, but they cannot refuse to release property.

Limits on Use of Property • Restrictive Covenants – Deed restrictions – Example- a homeowners association restricts parking cars in the street • Easements for limited use – Example- Gas lines end at my driveway but a neighbor wants to build a new home on an adjacent lot. I can sign an easement release so the utility company can continue the line to his new home by crossing my property. Why Buy A Home? • Rent = Zero Ownership • Home = Equity • Equity = Value of Home - Principle of Loan, or • Equity = Market Value - Debt in Property • Home = Personal Asset Accumulation Why Rent An Apartment? • No large down payment required • No long term commitment to location • No upkeep to grounds and property • Not ready to own • Bad credit, cannot get a loan • More freedom to move • NEGATIVE: NO ASSET ACCUMULATION

How to Increase Equity • Options: – Pay off or reduce loan amount – Increase value of home • Your home is not only a place to live but also a major investment and asset for the family.

Foreclosure • Right of mortgage holder to seize property for payment of debt that is past due • Comparable to repossession of personal property

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