Business Law 13e by Clarkson, Miller, Cross

Business Law by Clarkson, Miller, Cross (13th edition) is the 13th edition of the Business Law: Text and Cases textbook authored by Kenneth W. Clarkson, University of Miami, Roger LeRoy Miller, Institute for University Studies, Arlington, Texas, Frank B. Cross, Herbert D. Kelleher Centennial Professor in Business Law, University of Texas at Austin, and published by 2012 Cengage Learning in 2015.

Abandoned property. Property with which the owner has voluntarily parted, with no intention of recovering it.
Abandonment. In landlord-tenant law, a tenant's complete departure from leased premises, with no intention of returning before the end of the lease term.
Abatement. A process by which legatees receive reduced benefits if the assets of an estate are insufficient to pay in full all general bequests provided for in the will.
Acceleration clause. (1) A clause in an installment contract that provides for all future payments to become due immediately on the failure to tender timely payments or on the occurrence of a specified event. (2) A clause in a mortgage loan contract that makes the entire loan balance become due if the borrower misses or is late making monthly mortgage payments.
Acceptance. (1) In contract law, the offeree's notification to the offeror that the offeree agrees to be bound by the terms of the offeror's proposal. Although historically the terms of acceptance had to be the mirror image of the terms of the offer, the Uniform Commercial Code provides that even modified terms of the offer in a definite expression of acceptance constitute a contract. (2) In negotiable instruments law, the drawee's signed agreement to pay a draft when presented.
Acceptor. The person (the drawee) who accepts a draft and who agrees to be primarily responsible for its payment.
Accession. Occurs when an individual adds value to personal property by either labor or materials. In some situations, a person may acquire ownership rights in another's property through accession.
Accommodation party. A person who signs an instrument for the purpose of lending his or her name as credit to another party on the instrument.
Accord and satisfaction. An agreement for payment (or other performance) between two parties, one of whom has a right of action against the other. After the payment has been accepted or other performance has been made, the "accord and satisfaction" is complete and the obligation is discharged.
Accredited investors. In the context of securities offerings, "sophisticated" investors, such as banks, insurance companies, investment companies, the issuer's executive officers and directors, and persons whose income or net worth exceeds certain limits.
Acquittal. A certification or declaration following a trial that the individual accused of a crime is innocent, or free from guilt, and is thus absolved of the charges.
Act of state doctrine. A doctrine that provides that the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own territory.
Actionable. Capable of serving as the basis of a lawsuit.
Actual authority. Authority of an agent that is express or implied.
Actual malice. A condition that exists when a person makes a statement with either knowledge of its falsity or a reckless disregard for the truth. In a defamation suit, a statement made about a public figure normally must be made with actual malice for liability to be incurred.
Actus reus (pronounced ak-tus ray-uhs). A guilty (prohibited) act. The commission of a prohibited act is one of the two essential elements required for criminal liability, the other element being the intent to commit a crime.
Adequate protection doctrine. In bankruptcy law, a doctrine that protects secured creditors from losing their security as a result of an automatic stay on legal proceedings by creditors against the debtor once the debtor petitions for bankruptcy relief. In certain circumstances, the bankruptcy court may provide adequate protection by requiring the debtor or trustee to pay the creditor or provide additional guaranties to protect the creditor against the losses suffered by the creditor as a result of the stay.
Adhesion contract. A "standard-form" contract, such as that between a large retailer and a consumer, in which the stronger party dictates the terms.
Adjudication. The process of resolving a dispute by presenting evidence and arguments before a neutral third party decision maker in a court or an administrative law proceeding.
Adjustable-rate mortgage (ARM). A mortgage in which the rate of interest paid by the borrower changes periodically, often with reference to a predetermined government interest rate (the index). Usually, the interest rate for ARMs is initially low and increases over time, but there is a cap on the amount that the rate can increase during any adjustment period.
Administrative agency. A federal, state, or local government agency established to perform a specific function. Administrative agencies are authorized by legislative acts to make and enforce rules to administer and enforce the acts.
Administrative law. The body of law created by administrative agencies (in the form of rules, regulations, orders, and decisions) in order to carry out their duties and responsibilities.
Administrative law judge (ALJ). One who presides over an administrative agency hearing and who has the power to administer oaths, take testimony, rule on questions of evidence, and make determinations of fact.
Administrative process. The procedure used by administrative agencies in the administration of law.
Administrator. One who is appointed by a court to handle the probate (disposition) of a person's estate if that person dies intestate (without a valid will) or if the executor named in the will cannot serve.
Adverse possession. The acquisition of title to real property by occupying it openly, without the consent of the owner, for a period of time specified by a state statute. The occupation must be actual, open, notorious, exclusive, and in opposition to all others, including the owner.
Affidavit. A written or printed voluntary statement of facts, confirmed by the oath or affirmation of the party making it and made before a person having the authority to administer the oath or affirmation.
Affirm. To validate; to give legal force to. See also Ratification
Affirmative action. Job-hiring policies that give special consideration to members of protected classes in an effort to overcome present effects of past discrimination.
Affirmative defense. A response to a plaintiff's claim that does not deny the plaintiff's facts but attacks the plaintiff's legal right to bring an action. An example is the running of the statute of limitations.
After-acquired evidence. A type of evidence submitted in support of an affirmative defense in employment discrimination cases. Evidence that, prior to the employer's discriminatory act, the employee engaged in misconduct sufficient to warrant dismissal had the employer known of it earlier.
After-acquired property. Property of the debtor that is acquired after the execution of a security agreement.
Age of majority. The age at which an individual is considered legally capable of conducting himself or herself responsibly. A person of this age is entitled to the full rights of citizenship, including the right to vote. In contract law, the age at which one is no longer an infant and can no longer disaffirm a contract.
Agency. A relationship between two parties in which one party (the agent) agrees to represent or act for the other (the principal).
Agency by estoppel. An agency that arises when a principal negligently allows an agent to exercise powers not granted to the agent, thus justifying others in believing that the agent possesses the requisite agency authority.
Agency coupled with an interest. An agency relationship in which the agent has some legal right to (an interest in) the property that is the subject of the agency, and thus the agency is created for the agent's benefit instead of the principal's. Because the agent has an additional interest in the property beyond the normal commission for selling it, the agent's position cannot be terminated until the agent's interest ends.
Agent. A person who agrees to represent or act for another, called the principal.
Agreement. A meeting of two or more minds in regard to the terms of a contract; usually broken down into two events -- an offer by one party to form a contract, and an acceptance of the offer by the person to whom the offer is made.
Alien corporation. A designation in the United States for a corporation formed in another country but doing business in the United States.
Alienation. In real property law, the voluntary transfer of property from one person to another (as opposed to a transfer by operation of law).
Allegation. A statement, claim, or assertion.
Allege. To state, recite, assert, or charge.
Alternative dispute resolution (ADR). The resolution of disputes in ways other than those involved in the traditional judicial process. Negotiation, mediation, and arbitration are forms of ADR.
Amend. To change through a formal procedure.
American Arbitration Association (AAA). The major organization offering arbitration services in the United States.
Analogy. In logical reasoning, an assumption that if two things are similar in some respects, they will be similar in other respects also. Often used in legal reasoning to infer the appropriate application of legal principles in a case being decided by referring to previous cases involving different facts but considered to come within the policy underlying the rule.
Annual percentage rate (APR). The cost of credit on a yearly basis, typically expressed as an annual percentage.
Annuity. An insurance policy that pays the insured fixed, periodic payments for life or for a term of years, as stipulated in the policy, after the insured reaches a specified age.
Annul. To cancel or to make void.
Answer. Procedurally, a defendant's response to the plaintiff's complaint.
Antecedent claim. A preexisting claim. In negotiable instruments law, taking an instrument in satisfaction of an antecedent claim is taking the instrument for value -- that is, for valid consideration.
Anticipatory repudiation. An assertion or action by a party indicating that he or she will not perform an obligation that the party is contractually obligated to perform at a future time.
Antilapse provision. A clause in an insurance contract that gives the insured a grace period (usually thirty days) within which to pay an overdue premium.
Antitrust law. The body of federal and state laws and statutes protecting trade and commerce from unlawful restraints, price discrimination, price fixing, and monopolies. The principal federal antitrust statues are the Sherman Act of 1890, the Clayton Act of 1914, and the Federal Trade Commission Act of 1914.
Apparent authority. Authority that is only apparent, not real. In agency law, a person may be deemed to have had the power to act as an agent for another party if the other party's manifestations to a third party led the third party to believe that an agency existed when, in fact, it did not.
Appeal. Resort to a superior court, such as an appellate court, to review the decision of an inferior court, such as a trial court or an administrative agency.
Appellant. The party who takes an appeal from one court to another.
Appellate court. A court having appellate jurisdiction.
Appellate jurisdiction. Courts having appellate jurisdiction act as reviewing courts, or appellate courts. Generally, cases can be brought before appellate courts only on appeal from an order or a judgment of a trial court or other lower court.
Appellee. The party against whom an appeal is taken -- that is, the party who opposes setting aside or reversing the judgment.
Appraisal right. The right of a dissenting shareholder, if he or she objects to an extraordinary transaction of the corporation (such as a merger or consolidation), to have his or her shares appraised and to be paid the fair value of his or her shares by the corporation.
Appraiser. An individual who specializes in determining the value of certain real or personal property.
Appropriation. In tort law, the use by one person of another person's name, likeness, or other identifying characteristic without permission and for the benefit of the user.
Arbitrary and capricious test. A court reviewing an informal administrative agency action applies this test to determine whether or not that action was in clear error. The court gives wide discretion to the expertise of the agency and decides if the agency had sufficient factual information on which to base its action. If no clear error was made, then the agency's action stands.
Arbitration. The settling of a dispute by submitting it to a disinterested third party (other than a court), who renders a decision. The decision may or may not be legally binding.
Arbitration clause. A clause in a contract that provides that, in the event of a dispute, the parties will submit the dispute to arbitration rather than litigate the dispute in court.
Arraignment. A procedure in which an accused person is brought before the court to answer criminal charges. The charge is read to the person, and he or she is asked to enter a plea -- such as "guilty" or "not guilty."
Arson. The malicious burning of another's dwelling. Some statutes have expanded this to include any real property regardless of ownership and the destruction of property by other means -- for example, by explosion.
Articles of incorporation. The document filed with the appropriate governmental agency, usually the secretary of state, when a business is incorporated; state statutes usually prescribe what kind of information must be contained in the articles of incorporation.
Articles of merger. A document, filed with the secretary of state, that sets forth the terms and conditions of the merger.
Articles of organization. The document filed with a designated state official by which a limited liability company is formed.
Articles of partnership. A written agreement that sets forth each partner's rights and obligations with respect to the partnership.
Artisan's lien. A possessory lien given to a person who has made improvements and added value to another person's personal property as security for payment for services performed.
Assault. Any word or action intended to make another person fearful of immediate physical harm; a reasonably believable threat.
Assignee. The person to whom contract rights are assigned.
Assignment. The act of transferring to another all or part of one's rights arising under a contract.
Assignor. The person who assigns contract rights.
Assumption of risk. A defense against negligence that can be used when the plaintiff was aware of a danger and voluntarily assumed the risk of injury from that danger.
Attachment. (1) In the context of secured transactions, the process by which a security interest in the property of another becomes enforceable. (2) In the context of judicial liens, a court-ordered seizure and taking into custody of property prior to the securing of a judgment for a past-due debt.
Attempted monopolization. Any actions by a firm to eliminate competition and gain monopoly power.
Auditor. An accountant qualified to perform audits (systematic inspections) of a business's financial records.
Authenticate. To sign a record, or with the intent to sign a record, to execute or to adopt an electronic sound, symbol, or the like to link with the record. A record is retrievable information inscribed on a tangible medium or stored in an electronic or other medium.
Authority. In agency law, the agent's permission to act on behalf of the principal. An agent's authority may be actual (express or implied) or apparent. See also Actual authority; Apparent authority
Authorization card. A card signed by an employee that gives a union permission to act on his or her behalf in negotiations with management. Unions typically use authorization cards as evidence of employee support during union organization.
Authorized means. In contract law, the means of acceptance authorized by the offeror.
Automatic stay. In bankruptcy proceedings, the suspension of virtually all litigation and other action by creditors against the debtor or the debtor's property; the stay is effective the moment the debtor files a petition in bankruptcy.
Award. In the context of litigation, the amount of money awarded to a plaintiff in a civil lawsuit as damages. In the context of arbitration, the arbitrator's decision.
Bailee. One to whom goods are entrusted by a bailor. Under the Uniform Commercial Code, a party who, by a bill of lading, warehouse receipt, or other document of title, acknowledges possession of goods and contracts.
Bailee's lien. A possessory lien, or claim, that a bailee entitled to compensation can place on the bailed property to ensure that he or she will be paid for the services provided. The lien is effective as long as the bailee retains possession of the bailed goods and has not agreed to extend credit to the bailor. Sometimes referred to as an artisan's lien.
Bailment. A situation in which the personal property of one person (a bailor) is entrusted to another (a bailee), who is obligated to return the bailed property to the bailor or dispose of it as directed.
Bailor. One who entrusts goods to a bailee.
Bait-and-switch advertising. Advertising a product at a very attractive price (the bait) and then informing the consumer, once he or she is in the store, that the advertised product is either not available or is of poor quality; the customer is then urged to purchase (switched to) a more expensive item.
Balloon mortgage. A loan that allows the debtor to make small monthly payments for an initial period, such as eight years, but then requires a large balloon payment for the entire remaining balance of the mortgage loan at the end of that period.
Banker's acceptance. A negotiable instrument that is commonly used in international trade. A banker's acceptance is drawn by a creditor against the debtor, who pays the draft at maturity. The drawer creates a draft without designating a payee. The draft can pass through many parties' hands before a bank (drawee) accepts it, transforming the draft into a banker's acceptance. Acceptances can be purchased and sold in a way similar to securities.
Bankruptcy court. A federal court of limited jurisdiction that handles only bankruptcy proceedings. Bankruptcy proceedings are governed by federal bankruptcy law.
Bankruptcy trustee. A person who is either appointed by the U.S. Department of Justice or by creditors in bankruptcy cases. In all bankruptcies under Chapters 7, 12, or 13, a trustee is appointed by the U.S. Trustee, who is an officer of the Department of Justice. Chapter 11 bankruptcies allow the debtor to continue to manage the property as a "debtor in possession," but this person can be replaced for cause with a bankruptcy trustee.
Bargain. A mutual undertaking, contract, or agreement between two parties; to negotiate over the terms of a purchase or contract.
Basis of the bargain. In contract law, the affirmation of fact or promise on which the sale of goods is predicated, creating an express warranty.
Battery. The unprivileged, intentional touching of another.
Bearer. A person in the possession of an instrument payable to bearer or indorsed in blank.
Bearer instrument. Any instrument that is not payable to a specific person, including instruments payable to the bearer or to "cash."
Beneficiary. One to whom life insurance proceeds are payable or for whose benefit a trust has been established or property under a will has been transferred.
Benefit corporation. A for-profit corporation that seeks to have a material positive impact on society and the environment. This new business form is available by statute in a growing number of states.
Bequest. A gift by will of personal property (from the verb to bequeath).
Beyond a reasonable doubt. The standard used to determine the guilt or innocence of a person criminally charged. To be guilty of a crime, one must be proved guilty "beyond and to the exclusion of every reasonable doubt." A reasonable doubt is one that would cause a prudent person to hesitate before acting in matters important to him or her.
Bilateral contract. A type of contract that arises when a promise is given in exchange for a return promise.
Bill of lading. A document that serves both as evidence of the receipt of goods for shipment and as documentary evidence of title to the goods.
Bill of Rights. The first ten amendments to the U.S. Constitution.
Binder. A written, temporary insurance policy.
Binding authority. Any source of law that a court must follow when deciding a case. Binding authorities include constitutions, statutes, and regulations that govern the issue being decided, as well as court decisions that are controlling precedents within the jurisdiction.
Blank indorsement. An indorsement that specifies no particular indorsee and can consist of a mere signature. An order instrument that is indorsed in blank becomes a bearer instrument.
Blue sky laws. State laws that regulate the offer and sale of securities.
Bona fide Good faith.. A bona fide obligation is one made in good faith -- that is, sincerely and honestly.
Bona fide occupational qualification (BFOQ). Identifiable characteristics reasonably necessary to the normal operation of a particular business. These characteristics can include gender, national origin, and religion, but not race.
Bond. A certificate that evidences a corporate (or government) debt. It is a security that involves no ownership interest in the issuing entity.
Bond indenture. A written agreement between a bond issuer and the bondholders, normally consisting of a specified interest rate, maturity date, and other terms; sometimes simply called an indenture.
Botnet. Short for robot network -- a group of computers that run an application that is controlled and manipulated only by the software source. Although sometimes a legitimate network, usually this term is reserved for a group of computers that have been infected by malicious robot software. In a botnet, each connected computer becomes a zombie, or drone.
Boycott. A concerted refusal to do business with a particular person or entity in order to obtain concessions or to express displeasure with certain acts or practices of that person or business. See also Secondary boycott
Breach. To violate a law, by an act or an omission, or to break a legal obligation that one owes to another person or to society.
Breach of contract. The failure, without legal excuse, of a promisor to perform the obligations of a contract.
Bribery. The offering, giving, receiving, or soliciting of anything of value with the aim of influencing an official action or an official's discharge of a legal or public duty or (with respect to commercial bribery) a business decision.
Bridge loan. A short-term loan that allows a buyer to make a down payment on a new home before selling her or his current home (the current home is used as collateral).
Brief. A formal legal document submitted by the attorney for the appellant -- or the appellee (in answer to the appellant's brief) -- to an appellate court when a case is appealed. The appellant's brief outlines the facts and issues of the case, the judge's rulings or jury's findings that should be reversed or modified, the applicable law, and the arguments on the client's behalf.
Browse-wrap terms. Terms and conditions of use that are presented to an Internet user at the time certain products, such as software, are being downloaded but that need not be agreed to (by clicking "I agree," for example) before being able to install or use the product.
Bureaucracy. A large organization that is structured hierarchically to carry out specific functions.
Burglary. The unlawful entry into a building with the intent to commit a felony. (Some state statutes expand this to include the intent to commit any crime.)
Business ethics. Ethics in a business context; a consensus of what constitutes right or wrong behavior in the world of business and the application of moral principles to situations that arise in a business setting.
Business invitees. Those people, such as customers or clients, who are invited onto business premises by the owner of those premises for business purposes.
Business judgment rule. A rule that immunizes corporate management from liability for actions that result in corporate losses or damages if the actions are undertaken in good faith and are within both the power of the corporation and the authority of management to make.
Business necessity. A defense to allegations of employment discrimination in which the employer demonstrates that an employment practice that discriminates against members of a protected class is related to job performance.
Business plan. A document describing a company, its products, and its anticipated future performance. Creating a business plan is normally the first step in obtaining loans or venture-capital funds for a new business enterprise.
Business tort. Wrongful interference with the business rights of another.
Business trust. A voluntary form of business organization in which investors (trust beneficiaries) transfer cash or property to trustees in exchange for trust certificates that represent their investment shares. Management of the business and trust property is handled by the trustees for the use and benefit of the investors. The certificate holders have limited liability (are not responsible for the debts and obligations incurred by the trust) and share in the trust's profits.
Buyer in the ordinary course of business. A buyer who, in good faith and without knowledge that the sale violates the ownership rights or security interest of a third party in the goods, purchases goods in the ordinary course of business from a person in the business of selling goods of that kind.
Buyout price. The amount payable to a partner on his or her dissociation from a partnership, based on the amount distributable to that partner if the firm were wound up on that date, and offset by any damages for wrongful dissociation.
Buy-sell agreement. In the context of partnerships, an express agreement made at the time of partnership formation for one or more of the partners to buy out the other or others should the situation warrant -- and thus provide for the smooth dissolution of the partnership.
Bylaws. A set of governing rules adopted by a corporation or other association.
Bystander. A spectator, witness, or person who was standing nearby when an event occurred and who did not engage in the business or act leading to the event.
C.I.F. or C.&F.. Cost, insurance, and freight -- or just cost and freight. A pricing term in a contract for the sale of goods requiring, among other things, that the seller place the goods in the possession of a carrier before risk passes to the buyer.
C.O.D.. Cash on delivery. In sales transactions, a term meaning that the buyer will pay for the goods on delivery and before inspecting the goods.
Callable bond. A bond that may be called in and the principal repaid at specified times or under conditions specified in the bond when it is issued.
Cancellation. The act of nullifying, or making void. See also Rescission
Capital. Accumulated goods, possessions, and assets used for the production of profits and wealth; the equity of owners in a business.
Carrier. An individual or organization engaged in transporting passengers or goods for hire. See also Common carrier
Case law. The rules of law announced in court decisions. Case law includes the aggregate of reported cases that interpret judicial precedents, statutes, regulations, and constitutional provisions.
Case on point. A previous case involving factual circumstances and issues that are similar to those in the case before the court.
Cash surrender value. The amount that the insurer has agreed to pay to the insured if a life insurance policy is canceled before the insured's death.
Cashier's check. A check drawn by a bank on itself.
Categorical imperative. A concept developed by the philosopher Immanuel Kant as an ethical guideline for behavior. In deciding whether an action is right or wrong, or desirable or undesirable, a person should evaluate the action in terms of what would happen if everybody else in the same situation, or category, acted the same way.
Causation in fact. An act or omission without ("but for") which an event would not have occurred.
Cause of action. A situation or set of facts sufficient to justify a right to sue.
Cease-and-desist order. An administrative or judicial order prohibiting a person or business firm from conducting activities that an agency or court has deemed illegal.
Certificate of deposit (CD). A note of a bank in which a bank acknowledges a receipt of money from a party and promises to repay the money, with interest, to the party on a certain date.
Certificate of limited partnership. The basic document filed with a designated state official by which a limited partnership is formed.
Certification mark. A mark used by one or more persons, other than the owner, to certify the region, materials, mode of manufacture, quality, or accuracy of the owner's goods or services. When used by members of a cooperative, association, or other organization, such a mark is referred to as a collective mark. Examples of certification marks include the "Good Housekeeping Seal of Approval" and "UL Tested."
Certified check. A check that has been accepted by the bank on which it is drawn. Essentially, the bank, by certifying (accepting) the check, promises to pay the check at the time the check is presented.
Certiorari. See Writ of certiorari
Chain-style business franchise. A franchise that operates under a franchisor's trade name and that is identified as a member of a select group of dealers that engage in the franchisor's business. The franchisee is generally required to follow standardized or prescribed methods of operation. Examples of this type of franchise are McDonald's and most other fast-food chains.
Chancellor. An adviser to the king at the time of the early king's courts of England. Individuals petitioned the king for relief when they could not obtain an adequate remedy in a court of law, and these petitions were decided by the chancellor.
Charging order. In partnership law, an order granted by a court to a judgment creditor that entitles the creditor to attach profits or assets of a partner on dissolution of the partnership.
Charitable trust. A trust in which the property held by a trustee must be used for a charitable purpose, such as the advancement of health, education, or religion.
Chattel. All forms of personal property.
Chattel paper. Any writing or writings that show both a debt and the fact that the debt is secured by personal property. In many instances, chattel paper consists of a negotiable instrument coupled with a security agreement.
Check. A draft drawn by a drawer ordering the drawee bank or financial institution to pay a certain amount of money to the holder on demand.
Checks and balances. The system by which each of the three branches of the national government (executive, legislative, and judicial) exercises checks on the powers of the other branches.
Choice-of-language clause. A clause in a contract designating the official language by which the contract will be interpreted in the event of a future disagreement over the contract's terms.
Choice-of-law clause. A clause in a contract designating the law (such as the law of a particular state or nation) that will govern the contract.
Citation. A reference to a publication in which a legal authority -- such as a statute or a court decision -- or other source can be found.
Civil law. The branch of law dealing with the definition and enforcement of all private or public rights, as opposed to criminal matters.
Civil law system. A system of law derived from that of the Roman Empire and based on a code rather than case law; the predominant system of law in the nations of continental Europe and the nations that were once their colonies. In the United States, Louisiana is the only state that has a civil law system.
Claim. As a verb, to assert or demand. As a noun, a right to payment.
Clearinghouse. A system or place where banks exchange checks and drafts drawn on each other and settle daily balances.
Click-on agreement. An agreement that arises when a buyer, engaging in a transaction on a computer, indicates his or her assent to be bound by the terms of an offer by clicking on a button that says, for example, "I agree"; sometimes referred to as a click-on license or a click-wrap agreement.
Close corporation. A corporation whose shareholders are limited to a small group of persons, often only family members. The rights of shareholders of a close corporation usually are restricted regarding the transfer of shares to others.
Closed shop. A firm that requires union membership by its workers as a condition of employment. The closed shop was made illegal by the Labor-Management Relations Act of 1947.
Closely held corporation. A corporation whose shareholders are limited to a small group of persons, often only family members.
Closing. The final step in the sale of real estate -- also called settlement or closing escrow. The escrow agent coordinates the closing with the recording of deeds, the obtaining of title insurance, and other concurrent closing activities. A number of costs must be paid, in cash, at the time of closing, and they can range from several hundred to several thousand dollars, depending on the amount of the mortgage loan and other conditions of the sale.
Closing argument. An argument made after the plaintiff and defendant have rested their cases. Closing arguments are made prior to the jury charges.
Cloud computing. The delivery to users of ondemand services from third-party servers over a network. Cloud computing is a delivery model. The most widely used cloud computing services are Software as a Service (SaaS), which offers companies a cheaper way to buy and use packaged applications that are no longer run on servers in house.
Codicil. A written supplement or modification to a will. A codicil must be executed with the same formalities as a will.
Coinsurance clause. A clause in an insurance contract that encourages property owners to insure their property for an amount as close to full value as possible. If the owner insures the property up to a specified percentage -- usually 80 percent -- of its value, she or he will recover any loss up to the face amount of the policy.
Collateral. Under Article 9 of the Uniform Commercial Code, the property subject to a security interest.
Collateral promise. A secondary promise that is ancillary (subsidiary) to a principal transaction or primary contractual relationship, such as a promise made by one person to pay the debts of another if the latter fails to perform. A collateral promise normally must be in writing to be enforceable.
Collecting bank. Any bank handling an item for collection, except the payor bank.
Collective bargaining. The process by which labor and management negotiate the terms and conditions of employment, including working hours and workplace conditions.
Collective mark. A mark used by members of a cooperative, association, or other organization to certify the region, materials, mode of manufacture, quality, or accuracy of the specific goods or services. Examples of collective marks include the labor union marks found on tags of certain products and the credits of movies, which indicate the various associations and organizations that participated in the making of the movies.
Comity. A deference by which one nation gives effect to the laws and judicial decrees of another nation. This recognition is based primarily on respect.
Comment period. A period of time following an administrative agency's publication or a notice of a proposed rule during which private parties may comment in writing on the agency proposal in an effort to influence agency policy. The agency takes any comments received into consideration when drafting the final version of the regulation.
Commerce clause. The provision in Article I, Section 8, of the U.S. Constitution that gives Congress the power to regulate interstate commerce.
Commercial impracticability. A doctrine under which a seller may be excused from performing a contract when (1) a contingency occurs, (2) the contingency's occurrence makes performance impracticable, and (3) the nonoccurrence of the contingency was a basic assumption on which the contract was made. Despite the fact that UCC 2–615 expressly frees only sellers under this doctrine, courts have not distinguished between buyers and sellers in applying it.
Commercial paper. See Negotiable instrument
Commercial use. Use of land for business activities only; sometimes called business use.
Commingle. To put funds or goods together into one mass so that the funds or goods are so mixed that they no longer have separate identities. In corporate law, if personal and corporate interests are commingled to the extent that the corporation has no separate identity, a court may "pierce the corporate veil" and expose the shareholders to personal liability.
Common area. In landlord-tenant law, a portion of the premises over which the landlord retains control and maintenance responsibilities. Common areas may include stairs, lobbies, garages, hallways, and other areas in common use.
Common carrier. A carrier that transfers people or goods for hire to the general public.
Common law. That body of law developed from custom or judicial decisions in English and U.S. courts, not attributable to a legislature.
Common stock. Shares of ownership in a corporation that give the owner of the stock a proportionate interest in the corporation with regard to control, earnings, and net assets; shares of common stock are lowest in priority with respect to payment of dividends and distribution of the corporation's assets on dissolution.
Community property. A form of concurrent ownership of property in which each spouse technically owns an undivided one-half interest in property acquired during the marriage. This form of joint ownership occurs in only a minority of states and Puerto Rico.
Comparative negligence. A theory in tort law under which the liability for injuries resulting from negligent acts is shared by all parties who were negligent (including the injured party), on the basis of each person's proportionate negligence.
Compelling government interest. A test of constitutionality that requires the government to have compelling reasons for passing any law that restricts fundamental rights, such as free speech, or distinguishes between people based on a suspect trait.
Compensatory damages. A money award equivalent to the actual value of injuries or damages sustained by the aggrieved party.
Complaint. The pleading made by a plaintiff alleging wrongdoing on the part of the defendant; the document that, when filed with a court, initiates a lawsuit.
Complete performance. Performance of a contract strictly in accordance with the contract's terms.
Composition agreement. See Creditors' composition agreement
Computer crime. Any violation of criminal law that involves knowledge of computer technology for its perpetration, investigation, or prosecution.
Concentrated industry. An industry in which a large percentage of market sales is controlled by either a single firm or a small number of firms.
Concurrent conditions. Conditions in a contract that must occur or be performed at the same time; they are mutually dependent. No obligations arise until these conditions are simultaneously performed.
Concurrent jurisdiction. Jurisdiction that exists when two different courts have the power to hear a case. For example, some cases can be heard in either a federal or a state court.
Concurrent ownership. Joint ownership.
Concurring opinion. A written opinion outlining the views of a judge or justice to make or emphasize a point that was not made or emphasized in the majority opinion.
Condemnation. The process of taking private property for public use through the government's power of eminent domain.
Condition. A possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract.
Condition precedent. A condition in a contract that must be met before a party's promise becomes absolute.
Condition subsequent. A condition in a contract that operates to terminate a party's absolute promise to perform.
Confiscation. A government's taking of privately owned business or personal property without a proper public purpose or an award of just compensation.
Conforming goods. Goods that conform to contract specifications.
Confusion. The mixing together of goods belonging to two or more owners so that the separately owned goods cannot be identified.
Conglomerate merger. A merger between firms that do not compete with each other because they are in different markets (as opposed to horizontal and vertical mergers).
Consent. Voluntary agreement to a proposition or an act of another. A concurrence of wills.
Consequential damages. Special damages that compensate for a loss that is not direct or immediate (for example, lost profits). The special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them.
Consideration. Generally, the value given in return for a promise or a performance. The consideration, which must be present to make the contract legally binding, must be something of legally sufficient value and bargained for.
Consignment. A transaction in which an owner of goods (the consignor) delivers the goods to another (the consignee) for the consignee to sell. The consignee pays the consignor for the goods when they are sold by the consignee.
Consolidation. A contractual and statutory process in which two or more corporations join to become a completely new corporation. The original corporations cease to exist, and the new corporation acquires all their assets and liabilities.
Constitutional law. Law that is based on the U.S. Constitution and the constitutions of the various states.
Construction loan. A loan obtained by the borrower to finance the building of a new home. Construction loans are often set up to release funds at particular stages of the project.
Constructive condition. A condition in a contract that is neither expressed nor implied by the contract but rather is imposed by law for reasons of justice.
Constructive delivery. An act equivalent to the actual, physical delivery of property that cannot be physically delivered because of difficulty or impossibility; for example, the transfer of a key to a safe constructively delivers the contents of the safe.
Constructive discharge. A termination of employment brought about by making an employee's working conditions so intolerable that the employee reasonably feels compelled to leave.
Constructive eviction. A form of eviction that occurs when a landlord fails to perform adequately any of the undertakings (such as providing heat in the winter) required by the lease, thereby making the tenant's further use and enjoyment of the property exceedingly difficult or impossible.
Constructive trust. An equitable trust that is imposed in the interests of fairness and justice when someone wrongfully holds legal title to property. A court may require the owner to hold the property in trust for the person or persons who rightfully should own the property.
Consumer credit. Credit extended primarily for personal or household use.
Consumer-debtor. An individual whose debts are primarily consumer debts (debts for purchases made primarily for personal or household use).
Consumer goods. Goods that are primarily for personal or household use.
Consumer law. The body of statutes, agency rules, and judicial decisions protecting consumers of goods and services from dangerous manufacturing techniques, mislabeling, unfair credit practices, deceptive advertising, and so on. Consumer laws provide remedies and protections that are not ordinarily available to merchants or to businesses.
Contingency fee. An attorney's fee that is based on a percentage of the final award received by his or her client as a result of litigation.
Continuation statement. A statement that, if filed within six months prior to the expiration date of the original financing statement, continues the perfection of the original security interest for another five years. The perfection of a security interest can be continued in the same manner indefinitely.
Contract. An agreement that can be enforced in court; formed by two or more parties, each of whom agrees to perform or to refrain from performing some act now or in the future.
Contract implied in law. See Quasi contract
Contract under seal. A formal agreement in which the seal is a substitute for consideration.
Contractual capacity. The legal ability to enter into contracts. The threshold mental capacity required by law for a party who enters into a contract to be bound by that contract.
Contribution. See Right of contribution
Contributory negligence. A theory in tort law under which a complaining party's own negligence contributed to or caused his or her injuries. Contributory negligence is an absolute bar to recovery in a minority of jurisdictions.
Conversion. The wrongful taking, using, or retaining possession of personal property that belongs to another.
Convertible bond. A bond that can be exchanged for a specified number of shares of common stock under certain conditions.
Conveyance. The transfer of a title to land from one person to another by deed; a document (such as a deed) by which an interest in land is transferred from one person to another.
Conviction. The outcome of a criminal trial in which the defendant has been found guilty of the crime.
Cooling-off laws. A set of federal and state laws designed to protect purchasers and lessees of goods or property. For example, the Federal Trade Commission's cooling-off period is three business days for purchases of goods or services from door-to-door salespersons. Cooling off periods vary for loans, mortgages, leases, etc.
Cooperative. An association that is organized to provide an economic service to its members (or shareholders). An incorporated cooperative is a nonprofit corporation. It will make distributions of dividends, or profits, to its owners on the basis of their transactions with the cooperative rather than on the basis of the amount of capital they contributed. Examples of cooperatives are consumer purchasing cooperatives, credit cooperatives, and farmers' cooperatives.
Co-ownership. Joint ownership.
Copyright. The exclusive right of authors to publish, print, or sell an intellectual production for a statutory period of time. A copyright has the same monopolistic nature as a patent or trademark, but it differs in that it applies exclusively to works of art, literature, and other works of authorship, including computer programs.
Corporate governance. The relationship between a corporation and its shareholders -- specifically, a system that details the distribution of rights and responsibilities of those within the corporation and spells out the rules and procedures for making corporate decisions.
Corporate social responsibility. The concept that corporations can and should act ethically and be accountable to society for their actions.
Corporation. A legal entity formed in compliance with statutory requirements. The entity is distinct from its shareholders-owners.
Cosign. The act of signing a document (such as a note promising to pay another in return for a loan or other benefit) jointly with another person and thereby assuming liability for performing what was promised in the document.
Cost-benefit analysis. A decision-making technique that involves weighing the costs of a given action against the benefits of the action.
Co-surety. A joint surety. One who assumes liability jointly with another surety for the payment of an obligation.
Counteradvertising. New advertising that is undertaken pursuant to a Federal Trade Commission order for the purpose of correcting earlier false claims that were made about a product.
Counterclaim. A claim made by a defendant in a civil lawsuit that in effect sues the plaintiff.
Counteroffer. An offeree's response to an offer in which the offeree rejects the original offer and at the same time makes a new offer.
Course of dealing. Prior conduct between parties to a contract that establishes a common basis for their understanding.
Course of performance. The conduct that occurs under the terms of a particular agreement; such conduct indicates what the parties to an agreement intended it to mean.
Court of equity. A court that decides controversies and administers justice according to the rules, principles, and precedents of equity.
Court of law. A court in which the only remedies that could be granted were things of value, such as money damages. In the early English king's courts, courts of law were distinct from courts of equity.
Covenant against encumbrances. A grantor's assurance that there are no encumbrances on land conveyed -- that is, that no third parties have rights to or interests in the land that would diminish its value to the grantee.
Covenant not to compete. A contractual promise to refrain from competing with another party for a certain period of time and within a certain geographic area. Although covenants not to compete restrain trade, they are commonly found in partnership agreements, business sale agreements, and employment contracts. If they are ancillary to such agreements, covenants not to compete will normally be enforced by the courts unless the time period or geographic area is deemed unreasonable.
Covenant not to sue. An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim.
Covenant of quiet enjoyment. A promise by a grantor (or landlord) that the grantee (or tenant) will not be evicted or disturbed by the grantor or a person having a lien or superior title.
Covenant of the right to convey. A grantor's assurance that he or she has sufficient capacity and title to convey the estate that he or she undertakes to convey by deed.
Covenant running with the land. An executory promise made between a grantor and a grantee to which they and subsequent owners of the land are bound.
Cover. A buyer or lessee's purchase on the open market of goods to substitute for those promised but never delivered by the seller. Under the Uniform Commercial Code, if the cost of cover exceeds the cost of the contract goods, the buyer or lessee can recover the difference, plus incidental and consequential damages.
Cram-down provision. A provision of the Bankruptcy Code that allows a court to confirm a debtor's Chapter 11 reorganization plan even though only one class of creditors has accepted it. To exercise the court's right under this provision, the court must demonstrate that the plan does not discriminate unfairly against any creditors and is fair and equitable.
Creditor. A person to whom a debt is owed by another person (the debtor).
Creditor beneficiary. A third party beneficiary who has rights in a contract made by the debtor and a third person. The terms of the contract obligate the third person to pay the debt owed to the creditor. The creditor beneficiary can enforce the debt against either party.
Creditors' composition agreement. An agreement formed between a debtor and his or her creditors in which the creditors agree to accept a lesser sum than that owed by the debtor in full satisfaction of the debt.
Crime. A wrong against society proclaimed in a statute and punishable by society through fines and/or imprisonment -- or, in some cases, death.
Criminal act. See Actus reus
Criminal intent. See Mens rea
Criminal law. Law that defines and governs actions that constitute crimes. Generally, criminal law has to do with wrongful actions committed against society for which society demands redress.
Cross-border pollution. Pollution across national boundaries; air and water degradation in one nation resulting from pollution-causing activities in a neighboring country.
Cross-collateralization. The use of an asset that is not the subject of a loan to collateralize that loan.
Cross-examination. The questioning of an opposing witness during a trial.
Crowdfunding. A cooperative activity in which people network and pool funds and other resources via the Internet to assist a cause (such as disaster relief) or invest in a venture (business).
Cumulative voting. A method of shareholder voting designed to allow minority shareholders to be represented on the board of directors. With cumulative voting, the number of members of the board to be elected is multiplied by the total number of voting shares held. The result equals the number of votes a shareholder has, and this total can be cast for one or more nominees for director.
Cure. Under the Uniform Commercial Code, the right of a party who tenders nonconforming performance to correct his or her performance within the contract period.
Cyber crime. A crime that occurs online, in the virtual community of the Internet, as opposed to the physical world.
Cyber fraud. Fraud that involves the online theft of credit card information, banking details, and other information for criminal use.
Cyber mark. A trademark in cyberspace.
Cyber tort. A tort committed via the Internet.
Cyberlaw. An informal term used to refer to all laws governing electronic communications and transactions, particularly those conducted via the Internet.
Cybersquatting. The act of registering a domain name that is the same as, or confusingly similar to, the trademark of another and then offering to sell that domain name back to the trademark owner.
Cyberterrorist. A hacker whose purpose is to exploit a target computer for a serious impact, such as the corruption of a program to sabotage a business.
Damages. Money sought as a remedy for a breach of contract or for a tortious act.
Debenture bond. A bond backed only by the general credit rating of the corporation, plus any assets that can be seized if the corporation allows the debentures to go into default.
Debtor. Under Article 9 of the Uniform Commercial Code, any party who owes payment or performance of a secured obligation, whether or not the party actually owns or has rights in the collateral.
Debtor in possession (DIP). In Chapter 11 bankruptcy proceedings, a debtor who is allowed to continue in possession of the estate in property (the business) and to continue business operations.
Deceptive advertising. Advertising that misleads consumers, either by making unjustified claims concerning a product's performance or by omitting a material fact concerning the product's composition or performance.
Declaratory judgment. A court's judgment on a justiciable controversy when the plaintiff is in doubt as to his or her legal rights; a binding adjudication of the rights and status of litigants even though no consequential relief is awarded.
Decree. The judgment of a court of equity.
Deed. A document by which title to property (usually real property) is passed.
Deed in lieu of foreclosure. An alternative to foreclosure in which the mortgagor, rather than fighting to retain possession, voluntarily conveys the property to the lender in satisfaction of the mortgage.
Defalcation. The misuse of funds.
Defamation. Any published or publicly spoken false statement that causes injury to another's good name, reputation, or character.
Default judgment. A judgment entered by a court against a defendant who has failed to appear in court to answer or defend against the plaintiff's claim.
Defendant. One against whom a lawsuit is brought; the accused person in a criminal proceeding.
Defense. Reasons that a defendant offers in an action or suit as to why the plaintiff should not obtain what he or she is seeking.
Deficiency judgment. A judgment against a debtor for the amount of a debt remaining unpaid after collateral has been repossessed and sold.
Delegatee. One to whom contract duties are delegated by another, called the delegator.
Delegation. The transfer of a contractual duty to a third party. The party delegating the duty (the delegator) to the third party (the delegatee) is still obliged to perform on the contract should the delegatee fail to perform.
Delegation doctrine. A doctrine based on Article I, Section 8, of the U.S. Constitution, which has been construed to allow Congress to delegate some of its power to make and implement laws to administrative agencies. The delegation is considered to be proper as long as Congress sets standards outlining the scope of the agency's authority.
Delegator. One who delegates his or her duties under a contract to another, called the delegatee.
Delivery. In contract law, one party's act of placing the subject matter of the contract within the other party's possession or control.
Delivery order. A written order to deliver goods directed to a warehouser, carrier, or other person who, in the ordinary course of business, issues warehouse receipts or bills of lading [UCC 7–102(1)(d)].
Demand deposit. Funds (accepted by a bank) subject to immediate withdrawal, in contrast to a time deposit, which requires that a depositor wait a specific time before withdrawing or pay a penalty for early withdrawal.
De novo. Anew; afresh; a second time. In a hearing de novo, an appellate court hears the case as a court of original jurisdiction -- that is, as if the case had not previously been tried and a decision rendered.
Depositary bank. The first bank to receive a check for payment.
Deposition. The testimony of a party to a lawsuit or a witness taken under oath before a trial.
Destination contract. A contract in which the seller is required to ship the goods by carrier and deliver them at a particular destination. The seller assumes liability for any losses or damage to the goods until they are tendered at the destination specified in the contract.
Devise. To make a gift of real property by will.
Digital cash. Funds contained on computer software, in the form of secure programs stored on microchips and other computer devices.
Dilution. With respect to trademarks, a doctrine under which distinctive or famous trademarks are protected from certain unauthorized uses of the marks regardless of a showing of competition or a likelihood of confusion. Congress created a federal cause of action for dilution in 1995 with the passage of the Federal Trademark Dilution Act.
Direct examination. The examination of a witness by the attorney who calls the witness to the stand to testify on behalf of the attorney's client.
Directed verdict. See Motion for a directed verdict
Disaffirmance. The legal avoidance, or setting aside, of a contractual obligation.
Discharge. The termination of an obligation. (1) In contract law, discharge occurs when the parties have fully performed their contractual obligations or when events, conduct of the parties, or operation of the law releases the parties from performance. (2) In bankruptcy proceedings, the extinction of the debtor's dischargeable debts.
Discharge in bankruptcy. The release of a debtor from all debts that are provable, except those specifically excepted from discharge by statute.
Disclosed principal. A principal whose identity is known to a third party at the time the agent makes a contract with the third party.
Discovery. A phase in the litigation process during which the opposing parties may obtain information from each other and from third parties prior to trial.
Dishonor. To refuse to accept or pay a draft or a promissory note when it is properly presented. An instrument is dishonored when presentment is properly made and acceptance or payment is refused or cannot be obtained within the prescribed time.
Disparagement of property. An economically injurious false statement made about another's product or property. A general term for torts that are more specifically referred to as slander of quality or slander of title.
Disparate-impact discrimination. A form of employment discrimination that results from certain employer practices or procedures that, although not discriminatory on their face, have a discriminatory effect.
Disparate-treatment discrimination. A form of employment discrimination that results when an employer intentionally discriminates against employees who are members of protected classes.
Dissenting opinion. A written opinion by a judge or justice who disagrees with the majority opinion.
Dissociation. The severance of the relationship between a partner and a partnership when the partner ceases to be associated with the carrying on of the partnership business.
Dissolution. The formal disbanding of a partnership or a corporation. It can take place by (1) acts of the partners or, in a corporation, of the shareholders and board of directors; (2) the death of a partner; (3) the expiration of a time period stated in a partnership agreement or a certificate of incorporation; or (4) judicial decree.
Distributed network. A network that can be used by persons located (distributed) around the country or the globe to share computer files.
Distribution agreement. A contract between a seller and a distributor of the seller's products setting out the terms and conditions of the distributorship.
Distributorship. A business arrangement that is established when a manufacturer licenses a dealer to sell its product. An example of a distributorship is an automobile dealership.
Diversity of citizenship. Under Article III, Section 2, of the Constitution, a basis for federal court jurisdiction over a lawsuit between (1) citizens of different states, (2) a foreign country and citizens of a state or of different states, or (3) citizens of a state and citizens or subjects of a foreign country. The amount in controversy must be more than $75,000 before a federal court can take jurisdiction in such cases.
Divestiture. The act of selling one or more of a company's parts, such as a subsidiary or plant; often mandated by the courts in merger or monopolization cases.
Dividend. A distribution to corporate shareholders of corporate profits or income, disbursed in proportion to the number of shares held.
Docket. The list of cases entered on a court's calendar and thus scheduled to be heard by the court.
Document of title. Paper exchanged in the regular course of business that evidences the right to possession of goods (for example, a bill of lading or a warehouse receipt).
Domain name. The series of letters and symbols used to identify site operators on the Internet; Internet "addresses."
Domestic corporation. In a given state, a corporation that does business in, and is organized under the laws of, that state.
Domestic relations court. A court that deals with domestic (household) relationships, such as adoption, divorce, support payments, child custody, and the like.
Dominion. Perfect control in the right of ownership of property; typically implies both title and possession. It requires the complete retention of control over the disposition of property.
Donee beneficiary. A third party beneficiary who has rights under a contract as a direct result of the intention of the contract parties to make a gift to the third party.
Double jeopardy. A situation occurring when a person is tried twice for the same criminal offense; prohibited by the Fifth Amendment to the Constitution.
Double taxation. A feature (and disadvantage) of the corporate form of business. Because a corporation is a separate legal entity, corporate profits are taxed by state and federal governments. Dividends are again taxable as ordinary income to the shareholders receiving them.
Down payment. The part of the purchase price of real property that is paid in cash up front, reducing the amount of the loan or mortgage.
Draft. Any instrument (such as a check) drawn on a drawee (such as a bank) that orders the drawee to pay a certain sum of money, usually to a third party (the payee), on demand or at a definite future time.
Dram shop act. A state statute that imposes liability on the owners of bars and taverns, as well as those who serve alcoholic drinks to the public, for injuries resulting from accidents caused by intoxicated persons when the sellers or servers of alcoholic drinks contributed to the intoxication.
Drawee. The party that is ordered to pay a draft or check. With a check, a financial institution is always the drawee.
Drawer. The party that initiates a draft (writes a check, for example), thereby ordering the drawee to pay.
Due diligence. A required standard of care that certain professionals, such as accountants, must meet to avoid liability for securities violations. Under securities law, an accountant will be deemed to have exercised due diligence if he or she followed generally accepted accounting principles and generally accepted auditing standards and had, "after reasonable investigation, reasonable grounds to believe and did believe, at the time such part of the registration statement became effective, that the statements therein were true and that there was no omission of a material fact required to be stated therein or necessary to make the statements therein not misleading."
Due process clause. The provisions of the Fifth and Fourteenth Amendments to the Constitution that guarantee that no person shall be deprived of life, liberty, or property without due process of law. Similar clauses are found in most state constitutions.
Dumping. The selling of goods in a foreign country at a price below the price charged for the same goods in the domestic market.
Durable power of attorney. A document that authorizes a person to act on behalf of an incompetent person -- write checks, collect insurance proceeds, and otherwise manage the disabled person's affairs, including health care -- when he or she becomes incapacitated. Spouses often give each other durable power of attorney and, if they are advanced in age, may give a second such power of attorney to an older child.
Duress. Unlawful pressure brought to bear on a person, causing the person to perform an act that he or she would not otherwise perform.
Duty-based ethics. An ethical philosophy rooted in the idea that every person has certain duties to others, including both humans and the planet. Those duties may be derived from religious principles or from other philosophical reasoning.
Duty of care. The duty of all persons, as established by tort law, to exercise a reasonable amount of care in their dealings with others. Failure to exercise due care, which is normally determined by the "reasonable person standard," constitutes the tort of negligence.
E-agent. A semiautonomous computer program that is capable of executing specific tasks.
E-commerce. Business transacted in cyberspace.
E-contract. A contract that is entered into in cyberspace and is evidenced only by electronic impulses (such as those that make up a computer's memory), rather than, for example, a typewritten form.
E-evidence. A type of evidence that consists of computergenerated or electronically recorded information, including e-mail, voice mail, spreadsheets, word-processing documents, and other data.
E-money. Prepaid funds recorded on a computer or a card (such as a smart card).
E-signature. As defined by the Uniform Electronic Transactions Act, "an electronic sound, symbol, or process attached to or logically associated with a record and executed or adopted by a person with the intent to sign the record."
Early neutral case evaluation. A form of alternative dispute resolution in which a neutral third party evaluates the strengths and weakness of the disputing parties' positions; the evaluator's opinion forms the basis for negotiating a settlement.
Easement. A nonpossessory right to use another's property in a manner established by either express or implied agreement.
Electronic fund transfer (EFT). A transfer of funds with the use of an electronic terminal, a telephone, a computer, or magnetic tape.
Emancipation. In regard to minors, the act of being freed from parental control; occurs when a child's parent or legal guardian relinquishes the legal right to exercise control over the child. Normally, a minor who leaves home to support himself or herself is considered emancipated.
Embezzlement. The fraudulent appropriation of money or other property by a person to whom the money or property has been entrusted.
Eminent domain. The power of a government to take land for public use from private citizens for just compensation.
Employee. A person who works for an employer for a salary or for wages.
Employer. An individual or business entity that hires employees, pays them salaries or wages, and exercises control over their work.
Employment at will. A common law doctrine under which either party may terminate an employment relationship at any time for any reason, unless a contract specifies otherwise.
Employment discrimination. Treating employees or job applicants unequally on the basis of race, color, national origin, religion, gender, age, or disability; prohibited by federal statutes.
Enabling legislation. A statute enacted by Congress that authorizes the creation of an administrative agency and specifies the name, composition, purpose, and powers of the agency being created.
Encryption. The process by which a message (plaintext) is transformed into something (ciphertext) that the sender and receiver intend third parties not to understand.
Endowment insurance. A type of insurance that combines life insurance with an investment so that if the insured outlives the policy, the face value is paid to him or her; if the insured does not outlive the policy, the face value is paid to his or her beneficiary.
Entrapment. In criminal law, a defense in which the defendant claims that he or she was induced by a public official -- usually an undercover agent or police officer -- to commit a crime that he or she would otherwise not have committed.
Entrepreneur. One who initiates and assumes the financial risks of a new enterprise and who undertakes to provide or control its management.
Entrustment. The transfer of goods to a merchant who deals in goods of that kind and who may transfer those goods and all rights to them to a buyer in the ordinary course of business [UCC 2–403(2)].
Environmental impact statement (EIS). A statement required by the National Environmental Policy Act for any major federal action that will significantly affect the quality of the environment. The statement must analyze the action's impact on the environment and explore alternative actions that might be taken.
Environmental law. The body of statutory, regulatory, and common law relating to the protection of the environment.
Equal dignity rule. In most states, a rule stating that express authority given to an agent must be in writing if the contract to be made on behalf of the principal is required to be in writing.
Equal protection clause. The provision in the Fourteenth Amendment to the Constitution that guarantees that no state will "deny to any person within its jurisdiction the equal protection of the laws." This clause mandates that state governments treat similarly situated individuals in a similar manner.
Equitable maxims. General propositions or principles of law that have to do with fairness (equity).
Equitable right of redemption. The right of a mortgagor who has breached the mortgage agreement to redeem or purchase the property prior to foreclosure proceedings.
Equity of redemption. The right of a mortgagor who has breached the mortgage agreement to redeem or purchase the property prior to foreclosure proceedings.
Equity participation loan. A loan that allows the lender to participate in some percentage of the increase in the equity value of a business or property; any loan that gives the lender the right to obtain an ownership interest in the project being financed.
Escheat. The transfer of property to the state when the owner of the property dies without heirs.
Escrow account. An account that is generally held in the name of the depositor and escrow agent; the funds in the account are paid to a third person only on fulfillment of the escrow condition.
Establishment clause. The provision in the First Amendment to the U.S. Constitution that prohibits Congress from creating any law "respecting an establishment of religion."
Estate. The interest that a person has in real and personal property.
Estate planning. Planning in advance how one's property and obligations should be transferred on one's death. Wills and trusts are two basic devices used in the process of estate planning.
Estop. To bar, impede, or preclude.
Estopped. Barred, impeded, or precluded.
Estoppel. The principle that a party's own acts prevent him or her from claiming a right to the detriment of another who was entitled to and did rely on those acts. See also Agency by estoppel; Promissory estoppel
Estray statute. A statute defining finders' rights in property when the true owners are unknown.
Ethical reasoning. A reasoning process in which an individual links his or her moral convictions or ethical standards to the particular situation at hand.
Ethics. Moral principles and values applied to social behavior.
Eviction. A landlord's act of depriving a tenant of possession of the leased premises.
Evidence. Proof offered at trial -- in the form of testimony, documents, records, exhibits, objects, and so on -- for the purpose of convincing the court or jury of the truth of a contention.
Exclusionary rule. In criminal procedure, a rule under which any evidence that is obtained in violation of the accused's constitutional rights guaranteed by the Fourth, Fifth, and Sixth Amendments, as well as any evidence derived from illegally obtained evidence, will not be admissible in court.
Exclusive agency. An agency in which a principal grants an agent an exclusive territory and does not allow another agent to compete in that territory.
Exclusive distributorship. A distributorship in which the seller and the distributor of the seller's products agree that the distributor has the exclusive right to distribute the seller's products in a certain geographic area.
Exclusive jurisdiction. Jurisdiction that exists when a case can be heard only in a particular court or type of court, such as a federal court or a state court.
Exclusive-dealing contract. An agreement under which a seller forbids a buyer to purchase products from the seller's competitors.
Exculpatory clause. A clause that releases a contractual party from liability in the event of monetary or physical injury, no matter who is at fault.
Executed contract. A contract that has been completely performed by both parties.
Execution. An action to carry into effect the directions in a court decree or judgment.
Executive agency. An administrative agency within the executive branch of government. At the federal level, executive agencies are those within the cabinet departments.
Executor. A person appointed by a testator to see that his or her will is administered appropriately.
Executory contract. A contract that has not as yet been fully performed.
Export. To sell products to buyers located in other countries.
Express authority. Authority expressly given by one party to another. In agency law, an agent has express authority to act for a principal if both parties agree, orally or in writing, that an agency relationship exists in which the agent had the power (authority) to act in the place of, and on behalf of, the principal.
Express contract. A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.
Express warranty. A seller's or lessor's oral or written promise, ancillary to an underlying sales or lease agreement, as to the quality, description, or performance of the goods being sold or leased.
Expropriation. The seizure by a government of privately owned business or personal property for a proper public purpose and with just compensation.
Extension clause. A clause in a time instrument that allows the instrument's date of maturity to be extended into the future.
Extrinsic evidence. Evidence that relates to a contract but is not contained within the document itself, such as the testimony of parties and witnesses, or additional agreements or communications. A court may consider extrinsic evidence only when a contract term is ambiguous and the evidence does not contradict the express terms of the contract.
F.A.S. Free alongside.. A contract term that requires the seller, at his or her own expense and risk, to deliver the goods alongside the ship before risk passes to the buyer.
F.O.B. Free on board.. A contract term that indicates that the selling price of the goods includes transportation costs (and that the seller carries the risk of loss) to the specific F.O.B. place named in the contract. The place can be either the place of initial shipment (for example, the seller's city or place of business) or the place of destination (for example, the buyer's city or place of business).
Family limited liability partnership (FLLP). A limited liability partnership (LLP) in which the majority of the partners are persons related to each other, essentially as spouses, parents, grandparents, siblings, cousins, nephews, or nieces. A person acting in a fiduciary capacity for persons so related could also be a partner. All of the partners must be natural persons or persons acting in a fiduciary capacity for the benefit of natural persons.
Federal form of government. A system of government in which the states form a union and the sovereign power is divided between a central government and the member states.
Federal question. A question that pertains to the U.S. Constitution, acts of Congress, or treaties. A federal question provides a basis for federal jurisdiction.
Federal Reserve System. A network of twelve central banks, located around the country and headed by the Federal Reserve Board of Governors. Most banks in the United States have Federal Reserve accounts.
Federal Rules of Civil Procedure (FRCP). The rules controlling procedural matters in civil trials brought before the federal district courts.
Fee simple absolute. An ownership interest in land in which the owner has the greatest possible aggregation of rights, privileges, and power. The owner can use, possess, or dispose of the property as he or she chooses during his or her lifetime. On death, the interest in the property passes to the owner's heirs.
Felony. A crime -- such as arson, murder, rape, or robbery -- that carries the most severe sanctions, usually ranging from one year in a state or federal prison to the forfeiture of one's life.
Fictitious payee. A payee on a negotiable instrument whom the maker or drawer does not intend to have an interest in the instrument. Indorsements by fictitious payees are not treated as unauthorized under Article 3 of the Uniform Commercial Code.
Fiduciary. As a noun, a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking. As an adjective, a relationship founded on trust and confidence.
Fiduciary duty. The duty, imposed on a fiduciary by virtue of his or her position, to act primarily for another's benefit.
Filtering software. A computer program that includes a pattern through which data are passed. When designed to block access to certain Web sites, the pattern blocks the retrieval of a site whose URL or key words are on a list within the program.
Final order. The final decision of an administrative agency on an issue. If no appeal is taken, or if the case is not reviewed or considered anew by the agency commission, the administrative law judge's initial order becomes the final order of the agency.
Financial institution. An organization authorized to do business under state or federal laws relating to financial institutions. Financial institutions may include banks, savings and loan associations, credit unions, and other business entities that directly or indirectly hold accounts belonging to consumers.
Financing statement. A document prepared by a secured creditor and filed with the appropriate government official to give notice to the public that the creditor claims an interest in collateral belonging to the debtor named in the statement. The financing statement must contain the names and addresses of both the debtor and the creditor, and describe the collateral by type or item.
Firm offer. An offer (by a merchant) that is irrevocable without consideration for a period of time (not longer than three months). A firm offer by a merchant must be in writing and must be signed by the offeror.
Fitness for a particular purpose. See Implied warranty of fitness for a particular purpose
Fixed-rate mortgage. A standard mortgage with a fixed, or unchanging, rate of interest. The loan payments on these mortgages remain the same for the duration of the loan, which ranges between fifteen and forty years.
Fixed-term tenancy. A type of tenancy under which property is leased for a specified period of time, such as a month, a year, or a period of years; also called a tenancy for years.
Fixture. A thing that was once personal property but that has become attached to real property in such a way that it takes on the characteristics of real property and becomes part of that real property.
Floating lien. A security interest in proceeds, after acquired property, or property purchased under a line of credit (or all three); a security interest in collateral that is retained even when the collateral changes in character, classification, or location.
Forbearance. The act of refraining from exercising a legal right. An agreement between the lender and the borrower in which the lender agrees to temporarily cease requiring mortgage payments, to delay foreclosure, or to accept smaller payments than previously scheduled.
Force majeure (pronounced mah-zhure) clause. A provision in a contract stipulating that certain unforeseen events -- such as war, political upheavals, acts of God, or other events -- will excuse a party from liability for nonperformance of contractual obligations.
Foreclosure. A proceeding in which a mortgagee either takes title to or forces the sale of the mortgagor's property in satisfaction of a debt.
Foreign corporation. In a given state, a corporation that does business in the state without being incorporated therein.
Foreseeable risk. In negligence law, the risk of harm or injury to another that a person of ordinary intelligence and prudence should have reasonably anticipated or foreseen when undertaking an action or refraining from undertaking an action.
Forfeiture. The termination of a lease, according to its terms or the terms of a statute, when one of the parties fails to fulfill a condition under the lease and thereby breaches it.
Forgery. The fraudulent making or altering of any writing in a way that changes the legal rights and liabilities of another.
Formal contract. A contract that by law requires a specific form, such as being executed under seal, to be valid.
Forum. A jurisdiction, court, or place in which disputes are litigated and legal remedies are sought.
Forum-selection clause. A provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract.
Franchise. Any arrangement in which the owner of a trademark, trade name, or copyright licenses another to use that trademark, trade name, or copyright, under specified conditions or limitations, in the selling of goods and services.
Franchise tax. A state or local government tax on the right and privilege of carrying on a business in the form of a corporation.
Franchisee. One receiving a license to use another's (the franchisor's) trademark, trade name, or copyright in the sale of goods and services.
Franchisor. One licensing another (the franchisee) to use his or her trademark, trade name, or copyright in the sale of goods or services.
Fraud. Any misrepresentation, either by misstatement or omission of a material fact, knowingly made with the intention of deceiving another and on which a reasonable person would and does rely to his or her detriment.
Fraud in the execution. In the law of negotiable instruments, a type of fraud that occurs when a person is deceived into signing a negotiable instrument, believing that he or she is signing something else (such as a receipt); also called fraud in the inception. Fraud in the execution is a universal defense to payment on a negotiable instrument.
Fraud in the inducement. Ordinary fraud. In the law of negotiable instruments, fraud in the inducement occurs when a person issues a negotiable instrument based on false statements by the other party. The issuing party will be able to avoid payment on that instrument unless the holder is a holder in due course; in other words, fraud in the inducement is a personal defense to payment on a negotiable instrument.
Fraudulent misrepresentation (fraud). Any misrepresentation, either by misstatement or omission of a material fact, knowingly made with the intention of deceiving another and on which a reasonable person would and does rely to his or her detriment.
Free exercise clause. The provision in the First Amendment to the U.S. Constitution that prohibits Congress from making any law "prohibiting the free exercise" of religion.
Free writing prospectus. Any type of written, electronic, or graphic offer of securities that describes the issuing corporation or its securities and includes a legend indicating that the investor may obtain the prospectus at the SEC's Web site.
Frustration of purpose. A court-created doctrine under which a party to a contract will be relieved of his or her duty to perform when the objective purpose for performance no longer exists (due to reasons beyond that party's control).
Full faith and credit clause. A clause in Article IV, Section 1, of the Constitution that provides that "Full Faith and Credit shall be given in each State to the public Acts, Records, and Judicial Proceedings of every other State." The clause ensures that rights established under deeds, wills, contracts, and the like in one state will be honored by the other states and that any judicial decision with respect to such property rights will be honored and enforced in all states.
Full warranty. A warranty as to full performance covering generally both labor and materials.
Fungible goods. Goods that are alike by physical nature, by agreement, or by trade usage. Examples of fungible goods are wheat, oil, and wine that are identical in type and quality.
Garnishment. A legal process used by a creditor to collect a debt by seizing property of the debtor (such as wages) that is being held by a third party (such as the debtor's employer).
General jurisdiction. Exists when a court's subjectmatter jurisdiction is not restricted. A court of general jurisdiction normally can hear any type of case.
General partner. In a limited partnership, a partner who assumes responsibility for the management of the partnership and liability for all partnership debts.
General partnership. See Partnership
Generally accepted accounting principles (GAAP). The conventions, rules, and procedures that define accepted accounting practices at a particular time. The source of the principles is the Financial Accounting Standards Board.
Generally accepted auditing standards (GAAS). Standards concerning an auditor's professional qualities and the judgment exercised by him or her in the performance of an examination and report. The source of the standards is the American Institute of Certified Public Accountants.
Genuineness of assent. Knowing and voluntary assent to the terms of a contract. If a contract is formed as a result of a mistake, misrepresentation, undue influence, or duress, genuineness of assent is lacking, and the contract will be voidable.
Gift. Any voluntary transfer of property made without consideration, past or present.
Gift causa mortis. A gift made in contemplation of death. If the donor does not die of that ailment, the gift is revoked.
Gift inter vivos. A gift made during one's lifetime and not in contemplation of imminent death, in contrast to a gift causa mortis.
Good faith. Under the Uniform Commercial Code, good faith means honesty in fact; with regard to merchants, good faith means honesty in fact and the observance of reasonable commercial standards of fair dealing in the trade.
Good faith purchaser. A purchaser who buys without notice of any circumstance that would put a person of ordinary prudence on inquiry as to whether the seller has valid title to the goods being sold.
Good Samaritan statute. A state statute that provides that persons who rescue or provide emergency services to others in peril -- unless they do so recklessly, thus causing further harm -- cannot be sued for negligence.
Goodwill. In the business context, the valuable reputation of a business viewed as an intangible asset.
Grand jury. A group of citizens called to decide, after hearing the state's evidence, whether a reasonable basis (probable cause) exists for believing that a crime has been committed and whether a trial ought to be held.
Grant deed. A deed that simply recites words of consideration and conveyance. Under statute, a grant deed may impliedly warrant that at least the grantor has not conveyed the property's title to someone else.
Grantee. One to whom a grant (of land or property, for example) is made.
Grantor. A person who makes a grant, such as a transferor of property or the creator of a trust.
Group boycott. The refusal to deal with a particular person or firm by a group of competitors; prohibited by the Sherman Act.
Guarantor. A person who agrees to satisfy the debt of another (the debtor) only after the principal debtor defaults; a guarantor's liability is thus secondary.
Habitability. See Implied warranty of habitability
Hacker. A person who uses one computer to break into another. Professional computer programmers refer to such persons as "crackers."
Health-care power of attorney. A document that designates a person who will have the power to choose what type of and how much medical treatment a person who is unable to make such a choice will receive.
Hearsay. An oral or written statement made out of court that is later offered in court by a witness (not the person who made the statement) to prove the truth of the matter asserted in the statement. Hearsay is generally inadmissible as evidence.
Herfindahl-Hirschman Index (HHI). An index measuring market concentration for purposes of antitrust enforcement; calculated by summing the squares of the percentage market shares held by the respective firms.
Historical school. A school of legal thought that emphasizes the evolutionary process of law and that looks to the past to discover what the principles of contemporary law should be.
Holder. Any person in the possession of an instrument drawn, issued, or indorsed to him or her, to his or her order, to bearer, or in blank.
Holder in due course (HDC). A holder who acquires a negotiable instrument for value; in good faith; and without notice that the instrument is overdue, that it has been dishonored, that any person has a defense against it or a claim to it, or that the instrument contains unauthorized signatures, alterations, or is so irregular or incomplete as to call into question its authenticity.
Holding company. A company whose business activity is holding shares in another company.
Holographic will. A will written entirely in the signer's handwriting and usually not witnessed.
Home equity loan. A loan in which the lender accepts a person's home equity (the portion of the home's value that is paid off) as collateral, which can be seized if the loan is not repaid on time. Borrowers often take out home equity loans to finance the renovation of the property or to pay off debt that carries a higher interest rate, such as credit-card debt.
Homeowners' insurance. Insurance that protects a homeowner's property against damage from storms, fire, and other hazards. Lenders may require that a borrower carry homeowners' insurance on mortgaged property.
Homestead exemption. A law permitting a debtor to retain the family home, either in its entirety or up to a specified dollar amount, free from the claims of unsecured creditors or trustees in bankruptcy.
Horizontal merger. A merger between two firms that are competing in the same market.
Horizontal restraint. Any agreement that in some way restrains competition between rival firms competing in the same market.
Hot-cargo agreement. An agreement in which employers voluntarily agree with unions not to handle, use, or deal in nonunion-produced goods of other employers; a type of secondary boycott explicitly prohibited by the Labor-Management Reporting and Disclosure Act of 1959.
Hybrid (two-step) mortgage. A mortgage that starts as a fixed-rate mortgage and then converts to an adjustable-rate mortgage.
I-551 Alien Registration Receipt. Proof that a noncitizen has obtained permanent residency in the United States; the so-called green card.
I-9 verification. A form from the Department of Homeland Security, U.S. Citizenship and Immigration Services, used for employment eligibility verification; a form that documents that each new employee is authorized to work in the United States
Identification. In a sale of goods, the express designation of the specific goods provided for in the contract.
Identity theft. The act of stealing another's identifying information -- such as a name, date of birth, or Social Security number -- and using that information to access the victim's financial resources.
Illusory promise. A promise made without consideration, which renders the promise unenforceable.
Immunity. A status of being exempt, or free, from certain duties or requirements. In criminal law, the state may grant an accused person immunity from prosecution -- or agree to prosecute for a lesser offense -- if the accused person agrees to give the state information that would assist the state in prosecuting other individuals for crimes. In tort law, freedom from liability for defamatory speech. See also Privilege
Impeach. To challenge the credibility of a person's testimony or attempt to discredit a party or witness.
Implication. A way of creating an easement or profit in real property when it is reasonable to imply its existence from the circumstances surrounding the division of the property.
Implied authority. Authority that is created not by an explicit oral or written agreement but by implication. In agency law, implied authority (of the agent) can be conferred by custom, inferred from the position the agent occupies, or implied by virtue of being reasonably necessary to carry out express authority.
Implied warranty. A warranty that the law derives by implication or inference from the nature of the transaction or the relative situation or circumstances of the parties.
Implied warranty of fitness for a particular purpose. A warranty that goods sold or leased are fit for a particular purpose. The warranty arises when any seller or lessor knows the particular purpose for which a buyer or lessee will use the goods and knows that the buyer or lessee is relying on the skill and judgment of the seller or lessor to select suitable goods.
Implied warranty of habitability. An implied promise by a landlord that rented residential premises are fit for human habitation -- that is, in a condition that is safe and suitable for people to live in.
Implied warranty of merchantability. A warranty that goods being sold or leased are reasonably fit for the ordinary purpose for which they are sold or leased, are properly packaged and labeled, and are of fair quality. The warranty automatically arises in every sale or lease of goods made by a merchant who deals in goods of the kind sold or leased.
Implied contract. A contract formed in whole or in part from the conduct of the parties (as opposed to an express contract). Also known as implied-in-fact contract.
Impossibility of performance. A doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes impossible or totally impracticable (through no fault of either party).
Imposter. One who, by use of the mail, telephone, or personal appearance, induces a maker or drawer to issue an instrument in the name of an impersonated payee. Indorsements by imposters are not treated as unauthorized under Article 3 of the Uniform Commercial Code.
In personam jurisdiction. Court jurisdiction over the "person" involved in a legal action; personal jurisdiction.
In rem jurisdiction. Court jurisdiction over a defendant's property.
Incidental beneficiary. A third party who incidentally benefits from a contract but whose benefit was not the reason the contract was formed; an incidental beneficiary has no rights in a contract and cannot sue to have the contract enforced.
Incontestability clause. A clause within a life or health insurance policy that states that after the policy has been in force for a specified length of time -- most often two or three years -- the insurer cannot contest statements made in the policyholder's application.
Indemnify. To compensate or reimburse another for losses or expenses incurred.
Independent contractor. One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer. An independent contractor is not an employee but may be an agent.
Independent regulatory agency. An administrative agency that is not considered part of the government's executive branch and is not subject to the authority of the president. Independent agency officials cannot be removed without cause.
Indictment (pronounced in-dyte-ment). A charge by a grand jury that a reasonable basis (probable cause) exists for believing that a crime has been committed and that a trial should be held.
Indorsee. A person to whom a negotiable instrument is transferred by indorsement.
Indorsement. A signature placed on an instrument for the purpose of transferring one's ownership rights in the instrument.
Indorser. A person who transfers an instrument by signing (indorsing) it and delivering it to another person.
Industrial use. Land use for light or heavy manufacturing, shipping, or heavy transportation.
Informal contract. A contract that does not require a specified form or formality in order to be valid.
Information. A formal accusation or complaint (without an indictment) issued in certain types of actions (usually criminal actions involving lesser crimes) by a law officer, such as a magistrate.
Information return. A tax return submitted by a partnership that reports the income earned by the business. The partnership as an entity does not pay taxes on the income received by the partnership. A partner's profit from the partnership (whether distributed or not) is taxed as individual income to the individual partner.
Infringement. A violation of another's legally recognized right. The term is commonly used with reference to the invasion by one party of another party's rights in a patent, trademark, or copyright.
Initial order. In the context of administrative law, an agency's disposition in a matter other than a rulemaking. An administrative law judge's initial order becomes final unless it is appealed.
Injunction. A court decree ordering a person to do or refrain from doing a certain act or activity.
Innkeeper. An owner of an inn, hotel, motel, or other lodging.
Innkeeper's lien. A possessory or statutory lien allowing an innkeeper to take the personal property of a guest, brought into the hotel, as security for nonpayment of the guest's bill (debt).
Innocent misrepresentation. A false statement of fact or an act made in good faith that deceives and causes harm or injury to another.
Inside director. A person on the board of directors who is also an officer of the corporation.
Insider. A corporate director or officer, or other employee or agent, with access to confidential information and a duty not to disclose that information in violation of insider-trading laws.
Insider trading. The purchase or sale of securities on the basis of "inside information" (information that has not been made available to the public) in violation of a duty owed to the company whose stock is being traded.
Insolvent. Under the Uniform Commercial Code, a term describing a person who ceases to pay "his debts in the ordinary course of business or cannot pay his debts as they become due or is insolvent within the meaning of federal bankruptcy law" [UCC 1–201(23)].
Installment contract. Under the Uniform Commercial Code, a contract that requires or authorizes delivery in two or more separate lots to be accepted and paid for separately.
Instrument. See Negotiable instrument
Insurable interest. An interest either in a person's life or well-being or in property that is sufficiently substantial that insuring against injury to (or the death of) the person or against damage to the property does not amount to a mere wagering (betting) contract.
Insurance. A contract in which, for a stipulated consideration, one party agrees to compensate the other for loss on a specific subject by a specified peril.
Intangible property. Property that is incapable of being apprehended by the senses (such as by sight or touch); intellectual property is an example of intangible property.
Integrated contract. A written contract that constitutes the final expression of the parties' agreement. If a contract is integrated, evidence extraneous to the contract that contradicts or alters the meaning of the contract in any way is inadmissible.
Intellectual property. Property resulting from intellectual, creative processes. Patents, trademarks, and copyrights are examples of intellectual property.
Intended beneficiary. A third party for whose benefit a contract is formed; an intended beneficiary can sue the promisor if such a contract is breached.
Intentional tort. A wrongful act knowingly committed.
Inter vivos gift. See Gift inter vivos
Inter vivos trust. A trust created by the grantor (settlor) and effective during the grantor's lifetime (that is, a trust not established by a will).
Interest-only mortgage (IO mortgage). A mortgage that gives the borrower the option of paying only the interest portion of the monthly payment and forgoing the payment of principal for a specified period of time, such as five years. After the interest-only payment option is exhausted, the borrower's payment will increase to include payments on the principal.
Intermediary bank. Any bank to which an item is transferred in the course of collection, except the depositary or payor bank.
International Financial Reporting Standards (IFRS). A set of global accounting standards created by the International Accounting Standards Board (IASB) that are being phased in by companies in the United States. The Securities and Exchange Commission is working towards a convergence between the IASB and U.S. accounting standards.
International law. The law that governs relations among nations. International customs and treaties are generally considered to be two of the most important sources of international law.
International organization. In international law, a term that generally refers to an organization composed mainly of nations and usually established by treaty. The United States is a member of more than one hundred multilateral and bilateral organizations, including at least twenty through the United Nations.
Internet service provider (ISP). A business or organization that offers users access to the Internet and related services.
Interpretive rule. An administrative agency rule that simply declares a policy or explains the agency's position and does not establish any legal rights or obligations.
Interrogatories. A series of written questions for which written answers are prepared and then signed under oath by a party to a lawsuit, usually with the assistance of the party's attorney.
Intestacy laws. State statutes that specify how property will be distributed when a person dies intestate (without a valid will); statutes of descent and distribution.
Intestate. As a noun, one who has died without having created a valid will; as an adjective, the state of having died without a will.
Inverse condemnation. The taking of private property by the government without payment of just compensation as required by the U.S. Constitution. The owner must sue the government to recover just compensation.
Investment company. A company that acts on behalf of many smaller shareholder-owners by buying a large portfolio of securities and professionally managing that portfolio.
Investment contract. In securities law, a transaction in which a person invests in a common enterprise reasonably expecting profits that are derived primarily from the efforts of others.
Invitee. A person who, either expressly or impliedly, is privileged to enter onto another's land. The inviter owes the invitee (for example, a customer in a store) the duty to exercise reasonable care to protect the invitee from harm.
Irrevocable offer. An offer that cannot be revoked or recalled by the offeror without liability. A merchant's firm offer is an example of an irrevocable offer.
Issue. The first transfer, or delivery, of an instrument to a holder.
Joint and several liability. In partnership law, a doctrine under which a plaintiff may sue, and collect a judgment from, one or more of the partners separately (severally, or individually) or all of the partners together (jointly). This is true even if one of the partners sued did not participate in, ratify, or know about whatever gave rise to the cause of action.
Joint liability Shared liability.. In partnership law, partners incur joint liability for partnership obligations and debts. For example, if a third party sues a partner on a partnership debt, the partner has the right to insist that the other partners be sued with him or her.
Joint stock company. A hybrid form of business organization that combines characteristics of a corporation (shareholder-owners, management by directors and officers of the company, and perpetual existence) and a partnership (it is formed by agreement, not statute; property is usually held in the names of the members; and the shareholders have personal liability for business debts). Usually, the joint stock company is regarded as a partnership for tax and other legally related purposes.
Joint tenancy. The joint ownership of property by two or more co-owners in which each co-owner owns an undivided portion of the property. On the death of one of the joint tenants, his or her interest automatically passes to the surviving joint tenants.
Joint venture. A joint undertaking of a specific commercial enterprise by an association of persons. A joint venture is normally not a legal entity and is treated like a partnership for federal income tax purposes.
Judgment. The final order or decision resulting from a legal action.
Judgment n.o.v.. See Motion for judgment n.o.v.
Judgment rate of interest. A rate of interest fixed by statute that is applied to a monetary judgment from the moment the judgment is awarded by a court until the judgment is paid or terminated.
Judicial foreclosure. A court-supervised foreclosure proceeding in which the court determines the validity of the debt and, if the borrower is in default, issues a judgment for the lender.
Judicial lien. A lien on property created by a court order.
Judicial process. The procedures relating to, or connected with, the administration of justice through the judicial system.
Judicial review. The process by which courts decide on the constitutionality of legislative enactments and actions of the executive branch.
Junior lienholder. A person or business that holds a lien that is subordinate to one or more other liens on the same property.
Jurisdiction. The authority of a court to hear and decide a specific action.
Jurisprudence. The science or philosophy of law.
Justiciable controversy. A controversy that is not hypothetical or academic but real and substantial. A requirement that must be satisfied before a court will hear a case.
King's court. A medieval English court. The king's courts, or curiae regis, were established by the Norman conquerors of England. The body of law that developed in these courts was common to the entire English realm and thus became known as the common law.
Laches. The equitable doctrine that bars a party's right to legal action if the party has neglected for an unreasonable length of time to act on his or her rights.
Landlord. An owner of land or rental property who leases it to another person, called the tenant.
Larceny. The wrongful taking and carrying away of another person's personal property with the intent to permanently deprive the owner of the property. Some states classify larceny as either grand or petit, depending on the property's value.
Last clear chance. A doctrine under which a plaintiff may recover from a defendant for injuries or damages suffered, notwithstanding the plaintiff's own negligence, when the defendant had an opportunity -- a last clear chance -- to avoid harming the plaintiff through the exercise of reasonable care but failed to do so.
Latent defects. A defect that is not obvious or cannot readily be ascertained.
Law. A body of enforceable rules governing relationships among individuals and between individuals and their society.
Lawsuit. The litigation process. See Litigation
Lease. In real property law, a contract by which the owner of real property (the landlord, or lessor) grants to a person (the tenant, or lessee) an exclusive right to use and possess the property, usually for a specified period of time, in return for rent or some other form of payment.
Lease agreement. In regard to the lease of goods, an agreement in which one person (the lessor) agrees to transfer the right to the possession and use of property to another person (the lessee) in exchange for rental payments.
Leasehold estate. An estate in realty held by a tenant under a lease. In every leasehold estate, the tenant has a qualified right to possess and/or use the land.
Legacy. A gift of personal property under a will.
Legal positivism. A school of legal thought centered on the assumption that there is no law higher than the laws created by a national government. Laws must be obeyed, even if they are unjust, to prevent anarchy.
Legal positivists. Adherents to the positivist school of legal thought who believe that there can be no higher law than a nation's positive law -- law created by a particular society at a particular point in time. In contrast to the natural law school, the positivist school maintains that there are no "natural" rights. Rights come into existence only when there is a sovereign power (government) to confer and enforce those rights.
Legal rate of interest. A rate of interest fixed by statute as either the maximum rate of interest allowed by law or a rate of interest applied when the parties to a contract intend, but do not fix, an interest rate in the contract. In the latter case, the rate is frequently the same as the statutory maximum rate permitted.
Legal realism. A school of legal thought that was popular in the 1920s and 1930s and that challenged many existing jurisprudential assumptions, particularly the assumption that subjective elements play no part in judicial reasoning. Legal realists generally advocated a less abstract and more pragmatic approach to the law, an approach that would take into account customary practices and the circumstances in which transactions take place. The school left a lasting imprint on American jurisprudence.
Legal reasoning. The process of reasoning by which a judge harmonizes his or her decision with the judicial decisions of previous cases.
Legatee. One designated in a will to receive a gift of personal property.
Legislative rule. An administrative agency rule that affects substantive legal rights and carries the same weight as a congressionally enacted statute.
Letter of credit. A written instrument, usually issued by a bank on behalf of a customer or other person, in which the issuer promises to honor drafts or other demands for payment by third persons in accordance with the terms of the instrument.
Leveraged buyout (LBO). A corporate takeover financed by loans secured by the acquired corporation's assets or by the issuance of corporate bonds, resulting in a high debt load for the corporation.
Levy. The obtaining of money by legal process through the seizure and sale of property, usually done after a writ of execution has been issued.
Liability. Any actual or potential legal obligation, duty, debt, or responsibility.
Libel. Defamation in writing or other form (such as in a digital recording) having the quality of permanence.
License. A revocable right or privilege of a person to come on another person's land.
Licensee. One who receives a license to use, or enter onto, another's property.
Lien (pronounced leen). A claim against specific property to satisfy a debt.
Lien creditor. One whose claim is secured by a lien on particular property, as distinguished from a general creditor, who has no such security.
Life estate. An interest in land that exists only for the duration of the life of some person, usually the holder of the estate.
Limited jurisdiction. Exists when a court's subjectmatter jurisdiction is limited. Bankruptcy courts and probate courts are examples of courts with limited jurisdiction.
Limited liability. Exists when the liability of the owners of a business is limited to the amount of their investments in the firm.
Limited liability company (LLC). A hybrid form of business enterprise that offers the limited liability of the corporation but the tax advantages of a partnership.
Limited liability limited partnership (LLLP). A type of limited partnership. The difference between a limited partnership and an LLLP is that the liability of the general partner in an LLLP is the same as the liability of the limited partner. That is, the liability of all partners is limited to the amount of their investments in the firm.
Limited liability partnership (LLP). A form of partnership that allows professionals to enjoy the tax benefits of a partnership while limiting their personal liability for the malpractice of other partners.
Limited partner. In a limited partnership, a partner who contributes capital to the partnership but has no right to participate in the management and operation of the business. The limited partner assumes no liability for partnership debts beyond the capital contributed.
Limited partnership (LP). A partnership consisting of one or more general partners (who manage the business and are liable to the full extent of their personal assets for debts of the partnership) and one or more limited partners (who contribute only assets and are liable only to the extent of their contributions).
Limited-payment life. A type of life insurance for which premiums are payable for a definite period, after which the policy is fully paid.
Limited warranty. A written warranty that fails to meet one or more of the minimum standards for a full warranty.
Liquidated damages. An amount, stipulated in the contract, that the parties to a contract believe to be a reasonable estimation of the damages that will occur in the event of a breach.
Liquidated debt. A debt that is due and certain in amount.
Liquidation. (1) In regard to bankruptcy, the sale of all of the nonexempt assets of a debtor and the distribution of the proceeds to the debtor's creditors. Chapter 7 of the Bankruptcy Code provides for liquidation bankruptcy proceedings. (2) In regard to corporations, the process by which corporate assets are converted into cash and distributed among creditors and shareholders according to specific rules of preference.
Litigant. A party to a lawsuit.
Litigation. The process of resolving a dispute through the court system.
Living trust. A trust created by the grantor (settlor) and effective during his or her lifetime. Also called an inter vivos trust.
Living will. A document that allows a person to control the methods of medical treatment that may be used after a serious accident or illness.
Lockout. Occurs when an employer shuts down to prevent employees from working typically because it cannot reach a collective bargaining agreement with the union.
Long arm statute. A state statute that permits a state to obtain personal jurisdiction over nonresident defendants. A defendant must have "minimum contacts" with that state for the statute to apply.
Lost property. Property with which the owner has involuntarily parted and then cannot find or recover.
Magistrate's court. A court of limited jurisdiction that is presided over by a public official (magistrate) with certain judicial authority, such as the power to set bail.
Mailbox rule. A rule providing that an acceptance of an offer becomes effective on dispatch. Acceptance takes effect, thus completing formation of the contract, at the time the offeree sends or delivers the communication via the mode expressly or impliedly authorized by the offeror.
Main purpose rule. A rule of contract law under which an exception to the Statute of Frauds is made if the main purpose in accepting secondary liability under a contract is to secure a personal benefit. If this situation exists, the contract need not be in writing to be enforceable.
Majority. See Age of majority
Majority opinion. A court's written opinion, outlining the views of the majority of the judges or justices deciding the case.
Maker. One who promises to pay a certain sum to the holder of a promissory note or certificate of deposit (CD).
Malpractice. Professional misconduct or the failure to exercise the requisite degree of skill as a professional. Negligence -- the failure to exercise due care -- on the part of a professional, such as a physician or an attorney, is commonly referred to as malpractice.
Malware. Malicious software programs designed to disrupt or harm a computer, network, smartphone, or other device.
Manufacturing or processing-plant franchise. A franchise that is created when the franchisor transmits to the franchisee the essential ingredients or formula to make a particular product. The franchisee then markets the product either at wholesale or at retail in accordance with the franchisor's standards. Examples of this type of franchise are Coca-Cola and other soft-drink bottling companies.
Mark. See Trademark
Market concentration. A situation that exists when a small number of firms share the market for a particular good or service. For example, if the four largest grocery stores in Chicago accounted for 80 percent of all retail food sales, the market clearly would be concentrated in those four firms.
Market power. The power of a firm to control the market price of its product. A monopoly has the greatest degree of market power.
Marketable title. Title to real estate that is reasonably free from encumbrances, defects in the chain of title, and other matters that affect title, such as adverse possession.
Market-share test. The primary measure of monopoly power. A firm's market share is the percentage of a market that the firm controls.
Marshalling assets. The arrangement or ranking of assets in a certain order toward the payment of debts. In equity, when two creditors have recourse to the same property of the debtor, but one has recourse to other property of the debtor, that creditor must resort first to those assets of the debtor that are not available to the other creditor.
Material alteration. An alteration to a negotiable instrument that changes the contract terms between two parties in any way.
Material fact. A fact to which a reasonable person would attach importance in determining his or her course of action. In regard to tender offers, for example, a fact is material if there is a substantial likelihood that a reasonable shareholder would consider it important in deciding how to vote.
Mechanic's lien. A statutory lien on the real property of another, created to ensure payment for work performed and materials furnished in the repair or improvement of real property, such as a building.
Mediation. A method of settling disputes outside of court by using the services of a neutral third party, called a mediator. The mediator acts as a communicating agent between the parties and suggests ways in which the parties can resolve their dispute.
Member. The term used to designate a person who has an ownership interest in a limited liability company.
Mens rea (pronounced mehns ray-uh). Criminal intent. A wrongful mental state, which is as necessary as a wrongful act, to establish criminal liability. What constitutes a guilty mental state varies according to the wrongful action. Thus, for murder, the mens rea is the intent to take a life. For theft, the mens rea must involve both the knowledge that the property belongs to another and the intent to deprive the owner of it.
Merchant. A person who is engaged in the purchase and sale of goods. Under the Uniform Commercial Code, a person who deals in goods of the kind involved in the sales contract; for further definitions, see UCC 2–104.
Merger. A contractual and statutory process in which one corporation (the surviving corporation) acquires all of the assets and liabilities of another corporation (the merged corporation). The shareholders of the merged corporation receive either payment for their shares or shares in the surviving corporation.
Meta tags. Words inserted into a Web site's key-words field to increase the site's appearance in search engine results.
Metadata. Data that are automatically recorded by electronic devices and provide information about who created a file and when, and who accessed, modified, or transmitted it on their hard drives. Can be described as data about data.
Minimum-contacts requirement. The requirement that before a state court can exercise jurisdiction over a foreign corporation, the foreign corporation must have sufficient contacts with the state. A foreign corporation that has its home office in the state or that has manufacturing plants in the state meets this requirement.
Minimum wage. The lowest wage, either by government regulation or union contract, that an employer may pay an hourly worker.
Mini-trial. A private proceeding in which each party to a dispute argues its position before the other side and vice versa. A neutral third party may be present and act as an adviser if the parties fail to reach an agreement.
Mirror image rule. A common law rule that requires, for a valid contractual agreement, that the terms of the offeree's acceptance adhere exactly to the terms of the offeror's offer.
Misdemeanor. A lesser crime than a felony, punishable by a fine or imprisonment for up to one year in other than a state or federal penitentiary.
Mislaid property. Property with which the owner has voluntarily parted and then cannot find or recover.
Misrepresentation. A false statement of fact or an action that deceives and causes harm or injury to another. See also Fraudulent misrepresentation (fraud); Innocent misrepresentation
Mitigation of damages. A rule requiring a plaintiff to have done whatever was reasonable to minimize the damages caused by the defendant.
Money laundering. Falsely reporting income that has been obtained through criminal activity as income obtained through a legitimate business enterprise -- in effect, "laundering" the "dirty money."
Monopolization. The possession of monopoly power in the relevant market and the willful acquisition or maintenance of that power, as distinguished from growth or development as a consequence of a superior product, business acumen, or historic accident.
Monopoly. A term generally used to describe a market in which there is a single seller or a limited number of sellers.
Monopoly power. The ability of a monopoly to dictate what takes place in a given market.
Moral minimum. The minimum degree of ethical behavior expected of a business firm, which is usually defined as compliance with the law.
Mortgage. A written instrument that gives a creditor (the mortgagee) an interest in, or lien on, the debtor's (mortgagor's) real property as security for a debt. If the debt is not paid, the property can be sold by the creditor and the proceeds used to pay the debt.
Mortgage assignee. An entity that purchases a mortgage from the current mortgage holder and assumes all rights and liabilities of that mortgage, including the right to collect and foreclose.
Mortgage bond. A bond that pledges specific property. If the corporation defaults on the bond, the bondholder can take the property.
Motion. A procedural request or application presented by an attorney to the court on behalf of a client.
Motion for a directed verdict. In a state court, a party's request that the judge enter a judgment in her or his favor before the case is submitted to a jury because the other party has not presented sufficient evidence to support the claim. The federal courts refer to this request as a motion for judgment as a matter of law.
Motion for a new trial. A motion asserting that the trial was so fundamentally flawed (because of error, newly discovered evidence, prejudice, or other reason) that a new trial is necessary to prevent a miscarriage of justice.
Motion for judgment as a matter of law. In a federal court, a party's request that the judge enter a judgment in her or his favor before the case is submitted to a jury because the other party has not presented sufficient evidence to support the claim. The state courts refer to this request as a motion for a directed verdict.
Motion for judgment n.o.v.. A motion requesting the court to grant judgment in favor of the party making the motion on the ground that the jury verdict against him or her was unreasonable and erroneous.
Motion for judgment on the pleadings. A motion by either party to a lawsuit at the close of the pleadings requesting the court to decide the issue solely on the pleadings without proceeding to trial. The motion will be granted only if no facts are in dispute.
Motion for summary judgment. A motion requesting the court to enter a judgment without proceeding to trial. The motion can be based on evidence outside the pleadings and will be granted only if no facts are in dispute.
Motion to dismiss. A pleading in which a defendant asserts that the plaintiff's claim fails to state a cause of action (that is, has no basis in law) or that there are other grounds on which a suit should be dismissed.
Multiple product order. An order issued by the Federal Trade Commission to a firm that has engaged in deceptive advertising by which the firm is required to cease and desist from false advertising not only in regard to the product that was the subject of the action but also in regard to all the firm's other products.
Municipal court. A city or community court with criminal jurisdiction over traffic violations and, less frequently, with civil jurisdiction over other minor matters.
Mutual assent. The element of agreement in the formation of a contract. The manifestation of contract parties' mutual assent to the same bargain is required to establish a contract.
Mutual fund. A specific type of investment company that continually buys or sells to investors shares of ownership in a portfolio.
Mutual rescission. An agreement between the parties to cancel their contract, releasing the parties from further obligations under the contract. The object of the agreement is to restore the parties to the positions they would have occupied had no contract ever been formed. See also Rescission
National law. Law that pertains to a particular nation (as opposed to international law).
Natural law. The belief that government and the legal system should reflect universal moral and ethical principles that are inherent in human nature. The natural law school is the oldest and one of the most significant schools of legal thought.
Necessaries. Necessities required for life, such as food, shelter, clothing, and medical attention; may include whatever is believed to be necessary to maintain a person's standard of living or financial and social status.
Necessity. In criminal law, a defense against liability; under Section 3.02 of the Model Penal Code, this defense is justifiable if "the harm or evil sought to be avoided" by a given action "is greater than that sought to be prevented by the law defining the offense charged."
Negative amortization. Occurs when the payment made by the borrower is less than the interest due on the loan and the difference is added to the principal. The result of negative amortization is that the balance owed on the loan increases rather than decreases over time.
Negligence. The failure to exercise the standard of care that a reasonable person would exercise in similar circumstances.
Negligence per se. An act (or failure to act) in violation of a statutory requirement.
Negligent misrepresentation. Any manifestation through words or conduct that amounts to an untrue statement of fact made in circumstances in which a reasonable and prudent person would not have done (or failed to do) that which led to the misrepresentation. A representation made with an honest belief in its truth may still be negligent due to (1) a lack of reasonable care in ascertaining the facts, (2) the manner of expression, or (3) the absence of the skill or competence required by a particular business or profession.
Negotiable instrument. A signed writing that contains an unconditional promise or order to pay an exact sum of money, on demand or at an exact future time, to a specific person or order, or to bearer.
Negotiation. (1) In regard to dispute settlement, a process in which parties attempt to settle their dispute without going to court, with or without attorneys to represent them. (2) In regard to instruments, the transfer of an instrument in such a way that the transferee (the person to whom the instrument is transferred) becomes a holder.
Nominal damages. A small monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered or when the plaintiff is unable to show such loss with sufficient certainty.
Nonconforming goods. Goods that do not conform to contract specifications.
No-par shares. Corporate shares that have no face value -- that is, no specific dollar amount is printed on their face.
Normal trade relations status (NTR status). A status granted through an international treaty by which each member nation must treat other members at least as well as it treats the country that receives its most favorable treatment. This status was formerly known as most-favored-nation status.
Notary public. A public official authorized to attest to the authenticity of signatures.
Note. A written instrument signed by a maker unconditionally promising to pay a fixed amount of money to a payee or a holder on demand or on a specific date.
Notice-and-comment rulemaking. An administrative rulemaking procedure that involves the publication of a notice of a proposed rulemaking in the Federal Register, a comment period for interested parties to express their views on the proposed rule, and the publication of the agency's final rule in the Federal Register.
Notice of default. A formal notice to a borrower who is behind in making mortgage payments that the borrower is in default and may face foreclosure if the payments are not brought up to date. The notice is filed by the lender in the county where the property is located.
Notice of Proposed Rulemaking. A notice published (in the Federal Register) by an administrative agency describing a proposed rule. The notice must include information on when and where agency proceedings on the proposed rule will be held, a description of the nature of the proceedings, the legal authority for the proceedings (which usually is the agency's enabling legislation), and the terms or the subject matter of the proposed rule.
Notice of sale. A formal notice to a borrower who is in default on a mortgage that the mortgaged property will be sold in a foreclosure proceeding. The notice is sent to the borrower by the lender and is also typically recorded with the county, posted on the property, and published in a newspaper.
Novation. The substitution, by agreement, of a new contract for an old one, with the rights under the old one being terminated. Typically, there is a substitution of a new person who is responsible for the contract and the removal of an original party's rights and duties under the contract.
Nuisance. A common law doctrine under which persons may be held liable for using their property in a manner that unreasonably interferes with others' rights to use or enjoy their own property.
Nuncupative will. An oral will (often called a deathbed will) made before witnesses; usually limited to transfers of personal property.
Objective theory of contracts. A theory under which the intent to form a contract will be judged by outward, objective facts (what the party said when entering into the contract, how the party acted or appeared, and the circumstances surrounding the transaction) as interpreted by a reasonable person, rather than by the party's own secret, subjective intentions.
Obligee. One to whom an obligation is owed.
Obligor. One who owes an obligation to another.
Offer. A promise or commitment to perform or refrain from performing some specified act in the future.
Offeree. A person to whom an offer is made.
Offeror. A person who makes an offer.
Omnibus clause. A provision in an automobile insurance policy that protects the vehicle owner who has taken out the insurance policy and anyone who drives the vehicle with the owner's permission.
Online dispute resolution (ODR). The resolution of disputes with the assistance of organizations that offer dispute-resolution services via the Internet.
Opening statement. A statement made to the jury at the beginning of a trial by a party's attorney, prior to the presentation of evidence. The attorney briefly outlines the evidence that will be offered and the legal theory that will be pursued.
Operating agreement. In a limited liability company, an agreement in which the members set forth the details of how the business will be managed and operated.
Opinion. A statement by the court expressing the reasons for its decision in a case.
Option contract. A contract under which the offeror cannot revoke his or her offer for a stipulated time period and the offeree can accept or reject the offer during this period without fear that the offer will be made to another person. The offeree must give consideration for the option (the irrevocable offer) to be enforceable.
Order for relief. A court's grant of assistance to a complainant. In bankruptcy proceedings, the order relieves the debtor of the immediate obligation to pay the debts listed in the bankruptcy petition.
Order instrument. A negotiable instrument that is payable "to the order of an identified person" or "to an identified person or order."
Ordinance. A law passed by a local governing unit, such as a municipality or a county.
Original jurisdiction. Courts having original jurisdiction are courts of the first instance, or trial courts -- that is, courts in which lawsuits begin, trials take place, and evidence is presented.
Outcome-based ethics. An ethical philosophy that focuses on the impacts of a decision on society or on key stakeholders.
Output contract. An agreement in which a seller agrees to sell and a buyer agrees to buy all or up to a stated amount of what the seller produces.
Outside director. A person on the board of directors who does not hold a management position at the corporation.
Overdraft. A check written on a checking account in which there are insufficient funds to cover the amount of the check.
Parent corporation. A corporation that owns all of the shares of another corporation (known as its subsidiary).
Parent-subsidiary merger. A merger of companies in which one company (the parent corporation) owns most of the stock of the other (the subsidiary corporation). A parent-subsidiary merger (short-form merger) can use a simplified procedure when the parent corporation owns at least 90 percent of the outstanding shares of each class of stock of the subsidiary corporation.
Parol evidence. A term that originally meant "oral evidence," but that has come to refer to any negotiations or agreements made prior to a contract or any contemporaneous oral agreements made by the parties.
Parol evidence rule. A substantive rule of contracts under which a court will not receive into evidence the parties' prior negotiations, prior agreements, or contemporaneous oral agreements if that evidence contradicts or varies the terms of the parties' written contract.
Partially disclosed principal. A principal whose identity is unknown by a third person, but the third person knows that the agent is or may be acting for a principal at the time the agent and the third person form a contract.
Participation loan. A loan that gives the lender some equity rights in the property, such as the right to receive a percentage of revenue, rental income, or resale income. Also called an equity participation loan.
Partner. A co-owner of a partnership.
Partnering agreement. An agreement between a seller and a buyer who frequently do business with each other on the terms and conditions that will apply to all subsequently formed electronic contracts.
Partnership. An agreement by two or more persons to carry on, as co-owners, a business for profit.
Partnership by estoppel. A judicially created partnership that may, at the court's discretion, be imposed for purposes of fairness. The court can prevent those who present themselves as partners (but who are not) from escaping liability if a third person relies on an alleged partnership in good faith and is harmed as a result.
Par-value shares. Corporate shares that have a specific face value, or formal cash-in value, written on them, such as one dollar.
Pass-through entity. Any entity that does not have its income taxed at the level of that entity; examples are partnerships, S corporations, and limited liability companies.
Past consideration. Something given or some act done in the past, which cannot ordinarily be consideration for a later bargain.
Patent. A government grant that gives an inventor the exclusive right or privilege to make, use, or sell his or her invention for a limited time period. The word patent usually refers to some invention and designates either the instrument by which patent rights are evidenced or the patent itself.
Payee. A person to whom an instrument is made payable.
Payor bank. The bank on which a check is drawn (the drawee bank).
Peer-to-peer (P2P) networking. The sharing of resources (such as files, hard drives, and processing styles) among multiple computers without necessarily requiring a central network server.
Penalty. A sum inserted into a contract, not as a measure of compensation for its breach but rather as punishment for a default. The agreement as to the amount will not be enforced, and recovery will be limited to actual damages.
Per capita. A Latin term meaning "per person." In the law governing estate distribution, a method of distributing the property of an intestate's estate in which each heir in a certain class (such as grandchildren) receives an equal share.
Per curiam. By the whole court; a court opinion written by the court as a whole instead of being authored by a judge or justice.
Per se. A Latin term meaning "in itself" or "by itself."
Per se violation. A type of anticompetitive agreement -- such as a horizontal price-fixing agreement -- that is considered to be so injurious to the public that there is no need to determine whether it actually injures market competition; rather, it is in itself (per se) a violation of the Sherman Act.
Per stirpes. A Latin term meaning "by the roots." In the law governing estate distribution, a method of distributing an intestate's estate in which each heir in a certain class (such as grandchildren) takes the share to which his or her deceased ancestor (such as a mother or father) would have been entitled.
Perfect tender rule. A common law rule under which a seller was required to deliver to the buyer goods that conformed perfectly to the requirements stipulated in the sales contract. A tender of nonconforming goods would automatically constitute a breach of contract. Under the Uniform Commercial Code, the rule has been greatly modified.
Perfection. The legal process by which secured parties protect themselves against the claims of third parties who may wish to have their debts satisfied out of the same collateral; usually accomplished by the filing of a financing statement with the appropriate government official.
Performance. In contract law, the fulfillment of one's duties arising under a contract with another; the normal way of discharging one's contractual obligations.
Periodic tenancy. A lease interest in land for an indefinite period involving payment of rent at fixed intervals, such as week to week, month to month, or year to year.
Personal defense. A defense that can be used to avoid payment to an ordinary holder of a negotiable instrument but not a holder in due course (HDC) or a holder with the rights of an HDC.
Personal identification number (PIN). A number given to the holder of an access card (debit card, credit card, ATM card, or the like) that is used to conduct financial transactions electronically. Typically, the card will not provide access to a system without the number, which is meant to be kept secret to inhibit unauthorized use of the card.
Personal jurisdiction See. In personam jurisdiction
Personal property. Property that is movable; any property that is not real property.
Personalty. Personal property.
Persuasive authority. Any legal authority or source of law that a court may look to for guidance but need not follow when making its decision.
Petition in bankruptcy. The document that is filed with a bankruptcy court to initiate bankruptcy proceedings. The official forms required for a petition in bankruptcy must be completed accurately, sworn to under oath, and signed by the debtor.
Petitioner. In equity practice, a party that initiates a lawsuit.
Petty offense. In criminal law, the least serious kind of criminal offense, such as a traffic or building-code violation.
Phishing. Online fraud in which criminals pretend to be legitimate companies by using e-mails or malicious Web sites that trick individuals and companies into providing useful information, such as bank account numbers, Social Security numbers, and credit card numbers.
Pierce the corporate veil. To disregard the corporate entity, which limits the liability of shareholders, and hold the shareholders personally liable for a corporate obligation.
Plaintiff. One who initiates a lawsuit.
Plea. In criminal law, a defendant's allegation, in response to the charges brought against him or her, of guilt or innocence.
Plea bargaining. The process by which a criminal defendant and the prosecutor in a criminal case work out a mutually satisfactory disposition of the case, subject to court approval; usually involves the defendant's pleading guilty to a lesser offense in return for a lighter sentence.
Pleadings. Statements made by the plaintiff and the defendant in a lawsuit that detail the facts, charges, and defenses involved in the litigation; the complaint and answer are part of the pleadings.
Pledge. A common law security device (retained in Article 9 of the Uniform Commercial Code) in which personal property is turned over to a creditor as security for the payment of a debt and retained by the creditor until the debt is paid.
Plurality opinion. A court opinion that is joined by the largest number of the judges or justices hearing the case, but less than half of the total number.
Police powers. Powers possessed by states as part of their inherent sovereignty. These powers may be exercised to protect or promote the public order, health, safety, morals, and general welfare.
Policy. In insurance law, a contract between the insurer and the insured in which, for a stipulated consideration, the insurer agrees to compensate the insured for loss on a specific subject by a specified peril.
Positive law. The body of conventional, or written, law of a particular society at a particular point in time.
Positivist school. A school of legal thought whose adherents believe that there can be no higher law than a nation's positive law -- the body of conventional, or written, law of a particular society at a particular time.
Possessory lien. A lien that allows one person to retain possession of another's property as security for a debt or obligation owed by the owner of the property to the lienholder. An example of a possessory lien is an artisan's lien.
Potentially responsible party (PRP). A potentially liable party under the Comprehensive Environmental Response, Compensation and Liability Act (CERCLA). Any person who generated the hazardous waste, transported the waste, owned or operated the site at the time of disposal, or currently owns or operates the site may be responsible for some or all of the cleanup costs involved.
Power of attorney. A written document, which is usually notarized, authorizing another to act as one's agent; can be special (permitting the agent to do specified acts only) or general (permitting the agent to transact all business for the principal).
Power of sale foreclosure. A foreclosure procedure that is not court supervised; available only in some states.
Preauthorized transfer. A transfer of funds authorized in advance to recur at substantially regular intervals. The terms and procedures for preauthorized electronic fund transfers through certain financial institutions are subject to the Electronic Fund Transfer Act.
Precedent. A court decision that furnishes an example or authority for deciding subsequent cases involving identical or similar facts.
Predatory pricing. The pricing of a product below cost with the intent to drive competitors out of the market.
Predominant-factor test. A test courts use to determine whether a contract is primarily for the sale of goods or for the sale of services.
Preemption. A doctrine under which certain federal laws preempt, or take precedence over, conflicting state or local laws.
Preemptive rights. Rights held by shareholders that entitle them to purchase newly issued shares of a corporation's stock, equal in percentage to shares presently held, before the stock is offered to any outside buyers. Preemptive rights enable shareholders to maintain their proportionate ownership and voice in the corporation.
Preference. In bankruptcy proceedings, property transfers or payments made by the debtor that favor (give preference to) one creditor over others. The bankruptcy trustee is allowed to recover payments made both voluntarily and involuntarily to one creditor in preference over another.
Preferred creditor. One who has received a preferential transfer from a debtor.
Preferred stock. Classes of stock that have priority over common stock as to payment of dividends and distribution of assets on the corporation's dissolution.
Prejudgment interest. Interest that accrues on the amount of a court judgment from the time of the filing of a lawsuit to the court's issuance of a judgment.
Preliminary hearing. An initial hearing used in many felony cases to establish whether it is proper to detain the defendant. A magistrate reviews the evidence and decides if there is probable cause to believe that the defendant committed the crime with which he or she has been charged.
Premium. In insurance law, the price paid by the insured for insurance protection for a specified period of time.
Prenuptial agreement. An agreement made before marriage that defines each partner's ownership rights in the other partner's property. Prenuptial agreements must be in writing to be enforceable.
Prepayment penalty. A provision in a mortgage loan contract that requires the borrower to pay a penalty if the mortgage is repaid in full within a certain period.
Preponderance of the evidence. A standard in civil law cases under which the plaintiff must convince the court that, based on the evidence presented by both parties, it is more likely than not that the plaintiff's allegation is true.
Prescription. A way of creating an easement or profit in real property by openly using the property, without the true owner's consent, for the required period of time (similar to adverse possession).
Presentment. The act of presenting an instrument to the party liable on the instrument to collect payment; presentment also occurs when a person presents an instrument to a drawee for acceptance.
Presentment warranties. Implied warranties made by any person who presents an instrument for payment or acceptance that (1) he or she is entitled to enforce the instrument or authorized to obtain payment or acceptance on behalf of a person who is entitled, (2) the instrument has not been altered, and (3) he or she has no knowledge that the signature of the drawer is unauthorized.
Pretrial conference. A conference, scheduled before the trial begins, between the judge and the attorneys litigating the suit. The parties may settle the dispute, clarify the issues, schedule discovery, and so on during the conference.
Pretrial motion. A written or oral application to a court for a ruling or order, made before trial.
Price discrimination. Setting prices in such a way that two competing buyers pay two different prices for an identical product or service.
Price-fixing agreement. An agreement between competitors in which the competitors agree to fix the prices of products or services at a certain level; prohibited by the Sherman Act.
Prima facie case. A case in which the plaintiff has produced sufficient evidence of his or her conclusion that the case can go to a jury; a case in which the evidence compels the plaintiff's conclusion if the defendant produces no evidence to disprove it.
Primary liability. In negotiable instruments law, absolute responsibility for paying a negotiable instrument. Makers and acceptors are primarily liable.
Prime offer rate. An interest rate that banks historically charged their most reliable customers. Today, it serves as a basis for pricing other commercial and residential loans.
Principal. In agency law, a person who agrees to have another, called the agent, act on his or her behalf.
Principle of rights. The principle that human beings have certain fundamental rights (to life, freedom, and the pursuit of happiness, for example). Those who adhere to this "rights theory" believe that a key factor in determining whether a business decision is ethical is how that decision affects the rights of others. These others include the firm's owners, its employees, the consumers of its products or services, its suppliers, the community in which it does business, and society as a whole.
Private equity capital. Equity capital that is not quoted on a public exchange. Funds invested in a private company in exchange for an ownership interest in that company. Capital for private equity is raised from retail and institutional investors, and can be used to fund new technologies, expand working capital within an owned company, make acquisitions, or to strengthen a balance sheet.
Privilege. In tort law, the ability to act contrary to another person's right without that person's having legal redress for such acts. Privilege may be raised as a defense to defamation.
Privileges and immunities clause. Article IV, Section 2, of the Constitution requires states not to discriminate against one another's citizens. A resident of one state cannot be treated as an alien when in another state; he or she may not be denied such privileges and immunities as legal protection, access to courts, travel rights, and property rights.
Privity of contract. The relationship that exists between the promisor and the promisee of a contract.
Pro rata. Proportionately; in proportion.
Probable cause. Reasonable grounds to believe the existence of facts warranting certain actions, such as the search or arrest of a person.
Probate. The process of proving and validating a will and the settling of all matters pertaining to administration, guardianship, and the like.
Probate court. A state court of limited jurisdiction that conducts proceedings relating to the settlement of a deceased person's estate.
Procedural due process. The requirement that any government decision to take life, liberty, or property must be made fairly. For example, fair procedures must be used in determining whether a person will be subjected to punishment or have some burden imposed on him or her.
Procedural law. Rules that define the manner in which the rights and duties of individuals may be enforced.
Procedural unconscionability. Occurs when one contractual party lacks knowledge or understanding of the contract terms, often due to inconspicuous print or the lack of an opportunity to read the contract or to ask questions about its meaning. Procedural unconscionability often involves an adhesion contract, which is a contract drafted by the dominant party and then presented to the other -- the adhering party -- on a takeit-or-leave-it basis.
Proceeds. Under Article 9 of the Uniform Commercial Code, whatever is received when the collateral is sold or otherwise disposed of, such as by exchange.
Product liability. The legal liability of manufacturers, sellers, and lessors of goods to consumers, users, and bystanders for injuries or damages that are caused by the goods.
Product misuse. A defense against product liability that may be raised when the plaintiff used a product in a manner not intended by the manufacturer. If the misuse is reasonably foreseeable, the seller will not escape liability unless measures were taken to guard against the harm that could result from the misuse.
Professional corporation. A corporation formed by professional persons, such as physicians, lawyers, dentists, or accountants, to gain tax benefits. Subject to certain exceptions (when a court may treat a professional corporation as a partnership for liability purposes), the shareholders of a professional corporation have the limited liability characteristic of the corporate form of business.
Profit. In real property law, the right to enter onto and remove things from the property of another (for example, the right to enter onto a person's land and remove sand and gravel therefrom).
Promise. A person's assurance that he or she will or will not do something.
Promisee. A person to whom a promise is made.
Promisor. A person who makes a promise.
Promissory estoppel. A doctrine that applies when a promisor makes a clear and definite promise on which the promisee justifiably relies; such a promise is binding if justice will be better served by the enforcement of the promise. See also Estoppel
Promissory note. A written promise made by one person (the maker) to pay a fixed sum of money to another person (the payee or a subsequent holder) on demand or on a specified date.
Promoter. A person who takes the preliminary steps in organizing a corporation, including (usually) issuing a prospectus, procuring stock subscriptions, making contract purchases, securing a corporate charter, and the like.
Property. Legally protected rights and interests in anything with an ascertainable value that is subject to ownership.
Prospectus. A document required by federal or state securities laws that describes the financial operations of a corporation, thus allowing investors to make informed decisions.
Protected class. A class of persons with identifiable characteristics who historically have been victimized by discriminatory treatment for certain purposes. Depending on the context, these characteristics include age, color, gender, national origin, race, and religion.
Proximate cause. Legal cause; exists when the connection between an act and an injury is strong enough to justify imposing liability.
Proxy. In corporation law, a written agreement between a stockholder and another under which the stockholder authorizes the other to vote the stockholder's shares in a certain manner.
Proxy fight. A conflict between an individual, group, or firm attempting to take control of a corporation and the corporation's management for the votes of the shareholders.
Public corporation. A corporation owned by a federal, state, or municipal government -- not to be confused with a publicly held corporation.
Public figures. Individuals who are thrust into the public limelight. Public figures include government officials and politicians, movie stars, well-known businesspersons, and generally anybody who becomes known to the public because of his or her position or activities.
Public policy. A government policy based on widely held societal values and (usually) expressed or implied in laws or regulations.
Public prosecutor. An individual, acting as a trial lawyer, who initiates and conducts criminal cases in the government's name and on behalf of the people.
Publicly held corporation. A corporation for which shares of stock have been sold to the public.
Puffery. A salesperson's exaggerated claims concerning the quality of goods offered for sale. Such claims involve opinions rather than facts and are not considered to be legally binding promises or warranties.
Punitive damages. Money damages that may be awarded to a plaintiff to punish the defendant and deter future similar conduct.
Purchase-money security interest (PMSI). A security interest that arises when a seller or lender extends credit for part or all of the purchase price of goods purchased by a buyer.
Qualified indorsement. An indorsement on a negotiable instrument in which the indorser disclaims any contract liability on the instrument; the notation "without recourse" is commonly used to create a qualified indorsement.
Quantum meruit (pronounced kwahn-tuhm mehr-oowuht). Literally, "as much as he deserves" -- an expression describing the extent of liability on a contract implied in law (quasi contract). An equitable doctrine based on the concept that one who benefits from another's labor and materials should not be unjustly enriched thereby but should be required to pay a reasonable amount for the benefits received, even absent a contract.
Quasi contract. A fictional contract imposed on parties by a court in the interests of fairness and justice; usually, quasi contracts are imposed to avoid the unjust enrichment of one party at the expense of another.
Question of fact. In a lawsuit, an issue involving a factual dispute that can only be decided by a judge (or, in a jury trial, a jury).
Question of law. In a lawsuit, an issue involving the application or interpretation of a law; therefore, the judge, and not the jury, decides the issue.
Quiet enjoyment. See Covenant of quiet enjoyment
Quitclaim deed. A deed intended to pass any title, interest, or claim that the grantor may have in the property but not warranting that such title is valid. A quitclaim deed offers the least amount of protection against defects in the title.
Quorum. The number of members of a decisionmaking body that must be present before business may be transacted.
Quota. An assigned import limit on goods.
Ratification. The act of accepting and giving legal force to an obligation that previously was not enforceable.
Reaffirmation agreement. An agreement between a debtor and a creditor in which the debtor reaffirms, or promises to pay, a debt dischargeable in bankruptcy. To be enforceable, the agreement must be made prior to the discharge of the debt by the bankruptcy court.
Real property. Land and everything attached to it, such as foliage and buildings.
Reamortize. Restart the amortization schedule (a table of the periodic payments the borrower makes to pay off a debt), changing the way the payments are configured.
Reasonable care. The degree of care that a person of ordinary prudence would exercise in the same or similar circumstances.
Reasonable doubt. See Beyond a reasonable doubt
Reasonable person standard. The standard of behavior expected of a hypothetical "reasonable person." The standard against which negligence is measured and that must be observed to avoid liability for negligence.
Rebuttal. The refutation of evidence introduced by an adverse party's attorney.
Receiver. In a corporate dissolution, a court-appointed person who winds up corporate affairs and liquidates corporate assets.
Record. According to the Uniform Electronic Transactions Act, information that is either inscribed on a tangible medium or stored in an electronic or other medium and that is retrievable. The Uniform Computer Information Transactions Act uses the term record instead of writing.
Recording statutes. Statutes that allow deeds, mortgages, and other real property transactions to be recorded so as to provide notice to future purchasers or creditors of an existing claim on the property.
Red herring prospectus. A preliminary prospectus that can be distributed to potential investors after the registration statement (for a securities offering) has been filed with the Securities and Exchange Commission. The name derives from the red legend printed across the prospectus stating that the registration has been filed but has not become effective.
Redemption. A repurchase, or buying back. In secured transactions law, a debtor's repurchase of collateral securing a debt after a creditor has taken title to the collateral due to the debtor's default but before the secured party disposes of the collateral.
Reformation. A court-ordered correction of a written contract so that it reflects the true intentions of the parties.
Regulation E. A set of rules issued by the Federal
Reserve System's. Board of Governors under the authority of the Electronic Fund Transfer Act to protect users of electronic fund transfer systems.
Regulation Z. A set of rules promulgated by the Federal Reserve Board to implement the provisions of the Truth-in-Lending Act.
Rejection. In contract law, an offeree's express or implied manifestation not to accept an offer. In the law governing contracts for the sale of goods, a buyer's manifest refusal to accept goods on the ground that they do not conform to contract specifications.
Rejoinder. The defendant's answer to the plaintiff's rebuttal.
Release. A contract in which one party forfeits the right to pursue a legal claim against the other party.
Relevant evidence. Evidence tending to make a fact at issue in the case more or less probable than it would be without the evidence. Only relevant evidence is admissible in court.
Remainder. A future interest in property held by a person other than the original owner.
Remanded. Sent back. If an appellate court disagrees with a lower court's judgment, the case may be remanded to the lower court for further proceedings in which the lower court's decision should be consistent with the appellate court's opinion on the matter.
Remedy. The relief given to an innocent party to enforce a right or compensate for the violation of a right.
Remedy at law. A remedy available in a court of law. Money damages are awarded as a remedy at law.
Remedy in equity. A remedy allowed by courts in situations where remedies at law are not appropriate. Remedies in equity are based on settled rules of fairness, justice, and honesty, and include injunction, specific performance, rescission and restitution, and reformation.
Remitter. A person who sends money, or remits payment.
Rent. The consideration paid for the use or enjoyment of another's property. In landlord-tenant relationships, the payment made by the tenant to the landlord for the right to possess the premises.
Rent escalation clause. A clause providing for an increase in rent during a lease term.
Repair-and-deduct statutes. Statutes providing that a tenant may pay for repairs and deduct the cost of the repairs from the rent, as a remedy for a landlord's failure to maintain leased premises.
Replevin (pronounced rih-pleh-vin). An action to recover specific goods in the hands of a party who is wrongfully withholding them from the other party.
Reply. Procedurally, a plaintiff's response to a defendant's answer.
Reporter. A publication in which court cases are published, or reported.
Repudiation. The renunciation of a right or duty; the act of a buyer or seller in rejecting a contract either partially or totally. See also Anticipatory repudiation
Requirements contract. An agreement in which a buyer agrees to purchase and the seller agrees to sell all or up to a stated amount of what the buyer needs or requires.
Res ipsa loquitur (pronounced rehs ehp-suh lowquuh-tuhr). A doctrine under which negligence may be inferred simply because an event occurred, if it is the type of event that would not occur in the absence of negligence. Literally, the term means "the facts speak for themselves."
Resale price maintenance agreement. An agreement between a manufacturer and a retailer in which the manufacturer specifies the minimum retail price of its products. Resale price maintenance agreements are illegal per se under the Sherman Act.
Rescind (pronounced rih-sihnd). To cancel. See also Rescission
Rescission (pronounced rih-sih-zhen). A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made; may be effected through the mutual consent of the parties, by their conduct, or by court decree.
Residential use. Use of land for construction of buildings for human habitation only.
Residuary. The surplus of a testator's estate remaining after all of the debts and particular legacies have been discharged.
Respondeat superior (pronounced ree-spahn-dee-uht soo-peer-ee-your). In Latin, "Let the master respond." A doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment.
Respondent. In equity practice, the party who answers a bill or other proceeding.
Restitution. An equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been in had the breach not occurred.
Restraint of trade. Any contract or combination that tends to eliminate or reduce competition, effect a monopoly, artificially maintain prices, or otherwise hamper the course of trade and commerce as it would be carried on if left to the control of natural economic forces.
Restrictive covenant. A private restriction on the use of land. If its benefit or obligation passes with the land's ownership, it is said to "run with the land."
Restrictive indorsement. Any indorsement on a negotiable instrument that requires the indorsee to comply with certain instructions regarding the funds involved. A restrictive indorsement does not prohibit the further negotiation of the instrument.
Resulting trust. An implied trust arising from the conduct of the parties. A trust in which a party holds the actual legal title to another's property but only for that person's benefit.
Retained earnings. The portion of a corporation's profits that has not been paid out as dividends to shareholders.
Retainer. An advance payment made by a client to a law firm to cover part of the legal fees and/or costs that will be incurred on that client's behalf.
Retaliatory eviction. The eviction of a tenant because of the tenant's complaints, participation in a tenant's union, or similar activity with which the landlord does not agree.
Reverse. To reject or overrule a court's judgment. An appellate court, for example, might reverse a lower court's judgment on an issue if it feels that the lower court committed an error during the trial or that the jury was improperly instructed.
Reverse discrimination. Discrimination against majority groups, such as white males, that results from affirmative action programs, in which preferences are given to minority members and women.
Reverse mortgage. A loan product typically provided to older homeowners that allows them to extract cash (in either a lump sum or multiple payments) for the equity in their home. The mortgage does not need to be repaid until the home is sold or the owner leaves or dies.
Reversible error. An error by a lower court that is sufficiently substantial to justify an appellate court's reversal of the lower court's decision.
Revocation. In contract law, the withdrawal of an offer by an offeror. Unless an offer is irrevocable, it can be revoked at any time prior to acceptance without liability.
Right of contribution. The right of a co-surety who pays more than his or her proportionate share on a debtor's default to recover the excess paid from other co-sureties.
Right of entry. The right to peaceably take or resume possession of real property.
Right of first refusal. The right to purchase personal or real property -- such as corporate shares or real estate -- before the property is offered for sale to others.
Right of redemption. The right of a defaulting borrower to redeem property before a foreclosure sale by paying the full amount of the debt, plus any interest and costs that have accrued.
Right of reimbursement. The legal right of a person to be restored, repaid, or indemnified for costs, expenses, or losses incurred or expended on behalf of another.
Right of subrogation. The right of a person to stand in the place of (be substituted for) another, giving the substituted party the same legal rights that the original party had.
Right-to-work law. A state law providing that employees are not to be required to join a union as a condition of obtaining or retaining employment.
Risk. A prediction concerning potential loss based on known and unknown factors.
Risk management. Planning that is undertaken to protect one's interest should some event threaten to undermine its security. In the context of insurance, risk management involves transferring certain risks from the insured to the insurance company.
Robbery. The act of forcefully and unlawfully taking personal property of any value from another; force or intimidation is usually necessary for an act of theft to be considered a robbery.
Rule of four. A rule of the United States Supreme Court under which the Court will not issue a writ of certiorari unless at least four justices approve of the decision to issue the writ.
Rule of reason. A test by which a court balances the positive effects (such as economic efficiency) of an agreement against its potentially anticompetitive effects. In antitrust litigation, many practices are analyzed under the rule of reason.
Rule 10b-5. See SEC Rule 10b-5
Rulemaking. The process undertaken by an administrative agency when formally adopting a new regulation or amending an old one. Rulemaking involves notifying the public of a proposed rule or change and receiving and considering the public's comments.
Rules of evidence. Rules governing the admissibility of evidence in trial courts.
S corporation. A close business corporation that has met certain requirements as set out by the Internal Revenue Code and thus qualifies for special income tax treatment. Essentially, an S corporation is taxed the same as a partnership, but its owners enjoy the privilege of limited liability.
Sale. The passing of title (evidence of ownership rights) from the seller to the buyer for a price.
Sale on approval. A type of conditional sale in which the buyer may take the goods on a trial basis. The sale becomes absolute only when the buyer approves of (or is satisfied with) the goods being sold.
Sale or return. A type of conditional sale in which title and possession pass from the seller to the buyer; however, the buyer retains the option to return the goods during a specified period even though the goods conform to the contract.
Sales contract. A contract for the sale of goods under which the ownership of goods is transferred from a seller to a buyer for a price.
Satisfaction. See Accord and satisfaction
Scienter (pronounced sy-en-ter). Knowledge by the misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive.
Search warrant. An order granted by a public authority, such as a judge, that authorizes law enforcement personnel to search particular premises or property.
Seasonably. Within a specified time period. If no period is specified, within a reasonable time.
SEC Rule 10b-5. A rule of the Securities and Exchange Commission that makes it unlawful, in connection with the purchase or sale of any security, to make any untrue statement of a material fact or to omit a material fact if such omission causes the statement to be misleading.
Secondary boycott. A union's refusal to work for, purchase from, or handle the products of a secondary employer, with whom the union has no dispute, for the purpose of forcing that employer to stop doing business with the primary employer, with whom the union has a labor dispute.
Secondary liability. In negotiable instruments law, the contingent liability of drawers and indorsers. A secondarily liable party becomes liable on an instrument only if the party that is primarily liable on the instrument dishonors it or, in regard to drafts and checks, the drawee fails to pay or to accept the instrument, whichever is required.
Secured party. A lender, seller, or any other person in whose favor there is a security interest, including a person to whom accounts or chattel paper has been sold.
Secured transaction. Any transaction in which the payment of a debt is guaranteed, or secured, by personal property owned by the debtor or in which the debtor has a legal interest.
Securities. Generally, corporate stocks and bonds. A security may also be a note, debenture, stock warrant, or any document given as evidence of an ownership interest in a corporation or as a promise of repayment by a corporation.
Security agreement. An agreement that creates or provides for a security interest between the debtor and a secured party.
Security interest. Any interest "in personal property or fixtures which secures payment or performance of an obligation" [UCC 1–201(37)].
Self-defense. The legally recognized privilege to protect one's self or property against injury by another. The privilege of self-defense protects only acts that are reasonably necessary to protect one's self or property.
Seniority system. In regard to employment relationships, a system in which those who have worked longest for the company are first in line for promotions, salary increases, and other benefits; they are also the last to be laid off if the workforce must be reduced.
Service mark. A mark used in the sale or the advertising of services, such as to distinguish the services of one person from the services of others. Titles, character names, and other distinctive features of radio and television programs may be registered as service marks.
Service of process. The delivery of the complaint and summons to a defendant.
Settlor. One creating a trust; also called a grantor.
Severance pay. A payment by an employer to an employee that exceeds the employee's wages due on termination.
Sexual harassment. In the employment context, the granting of job promotions or other benefits in return for sexual favors or conduct that is so sexually offensive that it creates a hostile working environment.
Share. A unit of stock. See also Stock
Share exchange. In a share exchange, some or all of the shares of one corporation are exchanged for some or all of the shares of another corporation, but both corporations continue to exist. Share exchanges are often used to create holding companies (companies that own part or all of other companies' stock).
Shareholder. One who purchases shares of a corporation's stock, thus acquiring an equity interest in the corporation.
Shareholder's derivative suit. A suit brought by a shareholder to enforce a corporate cause of action against a third person.
Sharia. Civil law principles of some Middle Eastern countries that are based on the Islamic directives that follow the teachings of the prophet Muhammad.
Shelter principle. The principle that the holder of a negotiable instrument who cannot qualify as a holder in due course (HDC), but who derives his or her title through an HDC, acquires the rights of an HDC.
Sheriff's deed. The deed given to the purchaser of property at a sheriff's sale as part of the foreclosure process against the owner of the property.
Shipment contract. A contract in which the seller is required to ship the goods by carrier. The buyer assumes liability for any losses or damage to the goods after they are delivered to the carrier. Generally, all contracts are assumed to be shipment contracts if nothing to the contrary is stated in the contract.
Short-form merger. A merger between a subsidiary corporation and a parent corporation that owns at least 90 percent of the outstanding shares of each class of stock issued by the subsidiary corporation. Short-form mergers can be accomplished without the approval of the shareholders of either corporation.
Short sale. A sale of real property for an amount that is less than the balance owed on the mortgage loan, usually due to financial hardship. Both the lender and the borrower must consent to a short sale. Following a short sale, the borrower still owes the balance of the mortgage debt (after the sale proceeds are applied) to the lender unless the lender agrees to forgive the remaining debt.
Short-swing profits. Profits made by officers, directors, and certain large stockholders resulting from the use of nonpublic (inside) information about their companies; prohibited by Section 12 of the 1934 Securities Exchange Act.
Shrink-wrap agreement. An agreement whose terms are expressed in a document located inside a box in which goods (usually software) are packaged; sometimes called a shrink-wrap license.
Sight draft. In negotiable instruments law, a draft payable on sight -- that is, when it is presented for payment.
Signature. Under the Uniform Commercial Code, "any symbol executed or adopted by a party with a present intention to authenticate a writing."
Slander. Defamation in oral form.
Slander of quality. The publication of false information about another's product, alleging that it is not what its seller claims.
Slander of title. The publication of a statement that denies or casts doubt on another's legal ownership of any property, causing financial loss to that property's owner. Also called trade libel.
Small claims courts. Special courts in which parties may litigate small claims (usually, claims involving $2,500 or less). Attorneys are not required in small claims courts, and in many states attorneys are not allowed to represent the parties.
Smart card. Prepaid funds recorded on a microprocessor chip embedded on a card. One type of e-money.
Social media. The means by which people can create, share, and exchange ideas and comments via the Internet.
Sociological school. A school of legal thought that views the law as a tool for promoting justice in society.
Sole proprietorship. The simplest form of business, in which the owner is the business; the owner reports business income on his or her personal income tax return and is legally responsible for all debts and obligations incurred by the business.
Sovereign immunity. A doctrine that immunizes foreign nations from the jurisdiction of U.S. courts when certain conditions are satisfied.
Sovereignty. The quality of having independent authority over a geographic area. For instance, state governments have the authority to regulate affairs within their border.
Spam. Bulk, unsolicited (junk) e-mail.
Special indorsement. An indorsement on an instrument that indicates the specific person to whom the indorser intends to make the instrument payable; that is, it names the indorsee.
Special-use permit. A permit that allows for a specific exemption to zoning regulations for a particular piece of land in a location that has a particular zoning characteristic. Local zoning authorities grant specialuse permits.
Special warranty deed. A deed that warrants that the grantor or seller held good title during his or her ownership of the property. This deed (sometimes called a limited warranty deed) does not warrant against defects of title when the property was held by previous owners.
Specific performance. An equitable remedy requiring the breaching party to perform as promised under the contract; usually granted only when money damages would be an inadequate remedy and the subject matter of the contract is unique (for example, real property).
Spendthrift trust. A trust created to prevent the beneficiary from spending all the money to which he or she is entitled. Only a certain portion of the total amount is given to the beneficiary at any one time, and most states prohibit creditors from attaching assets of the trust.
Spot zoning. A zoning classification granted to a parcel of land that is different from the classification given to other land in the immediate area.
Stakeholders. Groups, other than the company's shareholders, that are affected by corporate decisions. Stakeholders include employees, customers, creditors, suppliers, and the community in which the corporation operates.
Stale check. A check, other than a certified check, that is presented for payment more than six months after its date.
Standing to sue. The requirement that an individual must have a sufficient stake in a controversy before he or she can bring a lawsuit. The plaintiff must demonstrate that he or she either has been injured or threatened with injury.
Stare decisis (pronounced ster-ay dih-si-ses). A common law doctrine under which judges are obligated to follow the precedents established in prior decisions.
Statute of Frauds. A state statute under which certain types of contracts must be in writing to be enforceable.
Statute of limitations. A federal or state statute setting the maximum time period during which a certain action can be brought or certain rights enforced.
Statute of repose. Basically, a statute of limitations that is not dependent on the happening of a cause of action. Statutes of repose generally begin to run at an earlier date and run for a longer period of time than statutes of limitations.
Statutory law. The body of law enacted by legislative bodies (as opposed to constitutional law, administrative law, or case law).
Statutory lien. A lien created by statute.
Statutory period of redemption. A time period (usually set by state statute) during which the property subject to a defaulted mortgage, land contract, or other contract can be redeemed by the debtor after foreclosure or judicial sale.
Statutory right of redemption. A right provided by statute in some states under which mortgagors can redeem or purchase their property back after a judicial foreclosure for a limited period of time, such as one year.
Stock. An equity (ownership) interest in a corporation, measured in units of shares.
Stock buyback. Sometimes, publicly held companies use funds from their own treasuries to repurchase their own stock. The result is that the price of the stock usually goes up.
Stock certificate. A certificate issued by a corporation evidencing the ownership of a specified number of shares in the corporation.
Stock option. See Stock warrant
Stock warrant. A certificate that grants the owner the option to buy a given number of shares of stock, usually within a set time period.
Stockholder. See Shareholder
Stop-payment order. An order by a bank customer to his or her bank not to pay or certify a certain check.
Strict liability. Liability regardless of fault. In tort law, strict liability may be imposed on defendants in cases involving abnormally dangerous activities, dangerous animals, or defective products.
Strike. An extreme action undertaken by unionized workers when collective bargaining fails; the workers leave their jobs, refuse to work, and (typically) picket the employer's workplace.
Subject-matter jurisdiction. Jurisdiction over the subject matter of a lawsuit.
Sublease. A lease executed by the lessee of real estate to a third person, conveying the same interest that the lessee enjoys but for a shorter term than that held by the lessee.
Subpoena. A document commanding a person to appear at a certain time and place or give testimony concerning a certain matter.
Subprime mortgage. A high-risk loan made to a borrower who does not qualify for a standard mortgage because of his or her poor credit rating or high debt-toincome ratio. Lenders typically charge a higher interest rate on subprime mortgages.
Subrogation. See Right of subrogation
Subscriber. An investor who agrees, in a subscription agreement, to purchase capital stock in a corporation.
Subsidiary corporation. A corporation that wholly owned by another corporate entity (the parent corporation).
Substantial performance. Performance that does not vary greatly from the performance promised in a contract; the performance must create substantially the same benefits as those promised in the contract.
Substantive due process. A requirement that focuses on the content, or substance, of legislation. If a law or other governmental action limits a fundamental right, such as the right to travel or to vote, it will be held to violate substantive due process unless it promotes a compelling or overriding state interest.
Substantive law. Law that defines the rights and duties of individuals with respect to each other, as opposed to procedural law, which defines the manner in which these rights and duties may be enforced.
Substantive unconscionability. Occurs when contracts, or portions of contracts, are oppressive or overly harsh. Courts generally focus on provisions that deprive one party of the benefits of the agreement or leave that party without remedy for nonperformance by the other. An example of substantive unconscionability is the agreement by a welfare recipient with a fourth-grade education to purchase a refrigerator for $2,000 under an installment contract.
Substitute check. A negotiable instrument that is a paper reproduction of the front and back of an original check and contains all of the same information required on checks for automated processing.
Suit. See Lawsuit; Litigation
Summary judgment. See Motion for summary judgment
Summary jury trial (SJT). A method of settling disputes in which a trial is held, but the jury's verdict is not binding. The verdict acts only as a guide to both sides in reaching an agreement during the mandatory negotiations that immediately follow the summary jury trial.
Summons. A document informing a defendant that a legal action has been commenced against him or her and that the defendant must appear in court on a certain date to answer the plaintiff's complaint. The document is delivered by a sheriff or any other person so authorized.
Superseding cause. An intervening force or event that breaks the connection between a wrongful act and an injury to another; in negligence law, a defense to liability.
Supremacy clause. The provision in Article VI of the Constitution that provides that the Constitution, laws, and treaties of the United States are "the supreme Law of the Land." Under this clause, state and local laws that directly conflict with federal law will be rendered invalid.
Surety. A person, such as a cosigner on a note, who agrees to be primarily responsible for the debt of another.
Suretyship. An express contract in which a third party to a debtor-creditor relationship (the surety) promises to be primarily responsible for the debtor's obligation.
Surviving corporation. The remaining, or continuing, corporation following a merger. The surviving corporation is vested with the merged corporation's legal rights and obligations.
Syllogism. A form of deductive reasoning consisting of a major premise, a minor premise, and a conclusion.
Symbolic speech. Nonverbal conduct that expresses opinions or thoughts about a subject. Symbolic speech is protected under the First Amendment's guarantee of freedom of speech.
Syndicate. An investment group of persons or firms brought together for the purpose of financing a project that they would not or could not undertake independently.
Tag. In the context of the World Wide Web, a code in an HTML document. See Meta tags.
Takeover. The acquisition of control over a corporation through the purchase of a substantial number of the voting shares of the corporation.
Taking. The taking of private property by the government for public use. Under the Fifth Amendment to the Constitution, the government may not take private property for public use without "just compensation."
Tangible employment action. A significant change in employment status, such as firing or failing to promote an employee, reassigning the employee to a position with significantly different responsibilities, or effecting a significant change in employment benefits.
Tangible property. Property that has physical existence and can be distinguished by the senses of touch, sight, and so on. A car is tangible property; a patent right is intangible property.
Target corporation. The corporation to be acquired in a corporate takeover; a corporation to whose shareholders a tender offer is submitted.
Tariff. A tax on imported goods.
Technology licensing. Allowing another to use and profit from intellectual property (patents, copyrights, trademarks, innovative products or processes, and so on) for consideration. In the context of international business transactions, technology licensing is sometimes an attractive alternative to the establishment of foreign production facilities.
Tenancy at sufferance. A type of tenancy under which one who, after rightfully being in possession of leased premises, continues (wrongfully) to occupy the property after the lease has been terminated. The tenant has no rights to possess the property and occupies it only because the person entitled to evict the tenant has not done so.
Tenancy at will. A type of tenancy under which either party can terminate the tenancy without notice; usually arises when a tenant who has been under a tenancy for years retains possession, with the landlord's consent, after the tenancy for years has terminated.
Tenancy by the entirety. The joint ownership of property by a husband and wife. Neither party can transfer his or her interest in the property without the consent of the other.
Tenancy in common. Co-ownership of property in which each party owns an undivided interest that passes to his or her heirs at death.
Tenant. One who has the temporary use and occupation of real property owned by another person, called the landlord; the duration and terms of the tenancy are usually established by a lease.
Tender. An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so.
Tender of delivery. Under the Uniform Commercial Code, a seller's or lessor's act of placing conforming goods at the disposal of the buyer or lessee and giving the buyer or lessee whatever notification is reasonably necessary to enable the buyer or lessee to take delivery.
Tender offer. An offer to purchase made by one company directly to the shareholders of another (target) company; often referred to as a "takeover bid."
Term insurance. A type of life insurance policy for which premiums are paid for a specified term. Payment on the policy is due only if death occurs within the term period. Premiums are less expensive than for whole life or limited-payment life, and there is usually no cash surrender value.
Testamentary trust. A trust that is created by will and therefore does not take effect until the death of the testator.
Testate. The condition of having died with a valid will.
Testator. One who makes and executes a will.
Third party beneficiary. One for whose benefit a promise is made in a contract but who is not a party to the contract.
Time draft. A draft that is payable at a definite future time.
Tippee. A person who receives inside information.
Title insurance. Insurance commonly purchased by a purchaser of real property to protect against loss in the event that the title to the property is not free from liens or superior ownership claims.
Tolling. Temporary suspension of the running of a prescribed period (such as a statute of limitations). For instance, a statute of limitations may be tolled until the party suffering an injury has discovered it or should have discovered it.
Tombstone ad. An advertisement, historically in a format resembling a tombstone, of a securities offering. The ad informs potential investors of where and how they may obtain a prospectus.
Tort. A civil wrong not arising from a breach of contract. A breach of a legal duty that proximately causes harm or injury to another.
Tortfeasor. One who commits a tort.
Totten trust. A trust created by the deposit of a person's own money in his or her own name as a trustee for another. It is a tentative trust, revocable at will until the depositor dies or completes the gift in his or her lifetime by some unequivocal act or declaration.
Toxic tort. A personal injury caused by exposure to a toxic substance, such as asbestos or hazardous waste. Victims can sue for medical expenses, lost wages, and pain and suffering.
Trade acceptance. A draft that is drawn by a seller of goods ordering the buyer to pay a specified sum of money to the seller, usually at a stated time in the future. The buyer accepts the draft by signing the face of the draft, thus creating an enforceable obligation to pay the draft when it comes due. On a trade acceptance, the seller is both the drawer and the payee.
Trade dress. The image and overall appearance of a product -- for example, the distinctive decor, menu, layout, and style of service of a particular restaurant. Basically, trade dress is subject to the same protection as trademarks.
Trade fixture. The personal property of a commercial tenant that has been installed or affixed to real property for a business purpose. When the lease ends, the tenant can remove the fixture but must repair any damage to the real property caused by the fixture's removal.
Trade libel. The publication of false information about another's product, alleging it is not what its seller claims; also referred to as slander of quality.
Trade name. A term that is used to indicate part or all of a business's name and that is directly related to the business's reputation and goodwill. Trade names are protected under the common law (and under trademark law, if the name is the same as the firm's trademark).
Trade secret. Information or a process that gives a business an advantage over competitors who do not know the information or process.
Trademark. A distinctive mark, motto, device, or implement that a manufacturer stamps, prints, or otherwise affixes to the goods it produces so that they may be identified on the market and their origins made known. Once a trademark is established (under the common law or through registration), the owner is entitled to its exclusive use.
Transfer warranties. Implied warranties, made by any person who transfers an instrument for consideration to subsequent transferees and holders who take the instrument in good faith, that (1) the transferor is entitled to enforce the instrument, (2) all signatures are authentic and authorized, (3) the instrument has not been altered, (4) the instrument is not subject to a defense or claim of any party that can be asserted against the transferor, and (5) the transferor has no knowledge of any insolvency proceedings against the maker, the acceptor, or the drawer of the instrument.
Transferee. In negotiable instruments law, one to whom a negotiable instrument is transferred (delivered).
Transferor. In negotiable instruments law, one who transfers (delivers) a negotiable instrument to another.
Traveler's check. A check that is payable on demand, drawn on or payable through a bank, and designated as a traveler's check.
Treasure trove. Cash or coin, gold, silver, or bullion found hidden in the earth or other private place, the owner of which is unknown; literally, treasure found.
Treasury securities. Government debt issued by the U.S. Department of the Treasury. The interest rate on Treasury securities is often used as a baseline for measuring the rate on loan products with higher interest rates.
Treasury shares. Corporate shares that are authorized by the corporation but that have not been issued.
Treaty. An agreement formed between two or more independent nations.
Treble damages. Damages consisting of three times the amount of damages determined by a jury in certain cases as required by statute.
Trespass to land. The entry onto, above, or below the surface of land owned by another without the owner's permission or legal authorization.
Trespass to personal property. The unlawful taking or harming of another's personal property; interference with another's right to the exclusive possession of his or her personal property.
Trespasser. One who commits the tort of trespass in one of its forms.
Trial court. A court in which trials are held and testimony taken.
Triple bottom line. The idea that investors and others should consider not only corporate profits, but also the corporation's impact on people and on the planet in assessing the firm. (The bottom line is people, planet, and profits.)
Trust. An arrangement in which title to property is held by one person (a trustee) for the benefit of another (a beneficiary).
Trust indorsement. An indorsement for the benefit of the indorser or a third person; also known as an agency indorsement. The indorsement results in legal title vesting in the original indorsee.
Tying arrangement. An agreement between a buyer and a seller in which the buyer of a specific product or service becomes obligated to purchase additional products or services from the seller.
Typosquatting. A form of cybersquatting that relies on mistakes, such as typographical errors, made by Internet users when inputting information into a Web browser.
U.S. trustee. A government official who performs certain administrative tasks that a bankruptcy judge would otherwise have to perform.
Ultra vires (pronounced uhl-trah vye-reez). A Latin term meaning "beyond the powers"; in corporate law, acts of a corporation that are beyond its express and implied powers to undertake.
Unanimous opinion. A court opinion in which all of the judges or justices of the court agree to the court's decision.
Unconscionable (pronounced un-kon-shun-uh-bul) contract or clause. A contract or clause that is void on the basis of public policy because one party, as a result of his or her disproportionate bargaining power, is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party. See also Procedural unconscionability; Substantive unconscionability
Underwriter. In insurance law, the insurer, or the one assuming a risk in return for the payment of a premium.
Undisclosed principal. A principal whose identity is unknown by a third person, and the third person has no knowledge that the agent is acting for a principal at the time the agent and the third person form a contract.
Unenforceable contract. A valid contract rendered unenforceable by some statute or law.
Uniform law. A model law created by the National Conference of Commissioners on Uniform State Laws and/or the American Law Institute for the states to consider adopting. If the state adopts the law, it becomes statutory law in that state. Each state has the option of adopting or rejecting all or part of a uniform law.
Unilateral contract. A contract that results when an offer can only be accepted by the offeree's performance.
Union shop. A place of employment in which all workers, once employed, must become union members within a specified period of time as a condition of their continued employment.
Universal defense. A defense that is valid against all holders of a negotiable instrument, including holders in due course (HDCs) and holders with the rights of HDCs. Universal defenses are also called real defenses.
Universal life. A type of insurance that combines some aspects of term insurance with some aspects of whole life insurance.
Unlawful detainer. The unjustifiable retention of the possession of real property by one whose right to possession has terminated -- as when a tenant holds over after the end of the lease term in spite of the landlord's demand for possession.
Unliquidated debt. A debt that is uncertain in amount.
Unreasonably dangerous product. In product liability, a product that is defective to the point of threatening a consumer's health and safety. A product will be considered unreasonably dangerous if it is dangerous beyond the expectation of the ordinary consumer or if a less dangerous alternative was economically feasible for the manufacturer, but the manufacturer failed to produce it.
Usage of trade. Any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question.
Usurpation. In corporation law, the taking advantage of a corporate opportunity by a corporate officer or director for his or her personal gain and in violation of his or her fiduciary duties.
Usury. Charging an illegal rate of interest.
Utilitarianism. An approach to ethical reasoning in which ethically correct behavior is related to an evaluation of the consequences of a given action on those who will be affected by it. In utilitarian reasoning, a "good" decision is one that results in the greatest good for the greatest number of people affected by the decision.
Valid contract. A contract that results when elements necessary for contract formation (agreement, consideration, legal purpose, and contractual capacity) are present.
Validation notice. An initial notice to a debtor from a collection agency informing the debtor that he or she has thirty days to challenge the debt and request verification.
Variance. A form of relief or exception from zoning and other laws that is granted to a property owner.
Vendee. One who purchases property from another, called the vendor.
Vendor. One who sells property to another, called the vendee.
Venture capital. Capital (funds and other assets) provided by professional, outside investors (venture capitalists, usually groups of wealthy investors and investment banks) to start new business ventures.
Venture capitalist. A person or entity that seeks out promising entrepreneurial ventures and funds them in exchange for equity stakes.
Venue (pronounced ven-yoo). The geographical district in which an action is tried and from which the jury is selected.
Verdict. A formal decision made by a jury.
Vertical merger. The acquisition by a company at one stage of production of a company at a higher or lower stage of production (such as its supplier or retailer).
Vertical restraint. Any restraint on trade created by agreements between firms at different levels in the manufacturing and distribution process.
Vertically integrated firm. A firm that carries out two or more functional phases -- such as manufacture, distribution, retailing -- of a product.
Vesting. Under the Employee Retirement Income Security Act of 1974, a pension plan becomes vested when an employee has a legal right to the benefits purchased with the employer's contributions, even if the employee is no longer working for this employer.
Vicarious liability. Legal responsibility placed on one person for the acts of another.
Virtual courtroom. A courtroom that is conceptual and not physical. In the context of cyberspace, a virtual courtroom could be a location on the Internet at which judicial proceedings take place.
Virtual property. Property that exists in cyberspace and thus is conceptual, as opposed to physical. Intellectual property that exists on the Internet is virtual property.
Virus. A type of malware that is transmitted between computers and attempts to do deliberate damage to systems and data.
Vishing. The voice counterpart of phishing; vishers use an e-mail or a notice on a Web site that encourage persons to make a phone call which then triggers a voice response system that asks for valuable personal information such as credit card numbers.
Void contract. A contract having no legal force or binding effect.
Voidable contract. A contract that may be legally avoided (canceled, or annulled) at the option of one of the parties.
Voidable preference. In bankruptcy law, a preference that may be avoided, or set aside, by the trustee.
Voir dire (pronounced vwahr deehr). A French phrase meaning, literally, "to see, to speak." In jury trials, the phrase refers to the process in which the attorneys question prospective jurors to determine whether they are biased or have any connection with a party to the action or with a prospective witness.
Voting trust. An agreement (trust contract) under which legal title to shares of corporate stock is transferred to a trustee who is authorized by the shareholders to vote the shares on their behalf.
Waiver. An intentional, knowing relinquishment of a legal right.
Warehouse receipt. A document of title issued by a bailee-warehouser to cover the goods stored in the warehouse.
Warehouser. One in the business of operating a warehouse.
Warranty. A promise that certain facts are truly as they are represented to be.
Warranty deed. A deed in which the grantor guarantees to the grantee that the grantor has title to the property conveyed in the deed, that there are no encumbrances on the property other than what the grantor has represented, and that the grantee will enjoy quiet possession of the property; a deed that provides the greatest amount of protection for the grantee.
Warranty disclaimer. A seller's or lessor's negation or qualification of a warranty.
Warranty of fitness. See Implied warranty of fitness for a particular purpose.
Warranty of merchantability. See Implied warranty of merchantability.
Warranty of title. An implied warranty made by a seller that the seller has good and valid title to the goods sold and that the transfer of the title is rightful.
Waste. The abuse or destructive use of real property by one who is in rightful possession of the property but who does not have title to it. Waste does not include ordinary depreciation due to age and normal use.
Watered stock. Shares of stock issued by a corporation for which the corporation receives, as payment, less than the fair market value of the shares.
Wetlands. Areas of land designated by government agencies (such as the Army Corps of Engineers or the Environmental Protection Agency) as protected areas that support wildlife and that therefore cannot be filled in or dredged by private contractors or parties.
Whistleblowing. An employee's disclosure to government, the press, or upper-management authorities that the employer is engaged in unsafe or illegal activities.
White-collar crime. Nonviolent crime committed by individuals or corporations to obtain a personal or business advantage.
Whole life. A life insurance policy in which the insured pays a level premium for his or her entire life and in which there is a constantly accumulating cash value that can be withdrawn or borrowed against by the borrower. Sometimes referred to as straight life insurance.
Will. An instrument directing what is to be done with the testator's property on his or her death, made by the testator and revocable during his or her lifetime. No interests in the testator's property pass until the testator dies. Willful Intentional.
Winding up. The second of two stages involved in the termination of a partnership or corporation. Once the firm is dissolved, it continues to exist legally until the process of winding up all business affairs (collecting and distributing the firm's assets) is complete.
Workers' compensation laws. State statutes establishing an administrative procedure for compensating workers' injuries that arise out of -- or in the course of -- their employment, regardless of fault.
Working papers. The various documents used and developed by an accountant during an audit. Working papers include notes, computations, memoranda, copies, and other papers that make up the work product of an accountant's services to a client.
Workout agreement. A formal contract between a debtor and his or her creditors in which the parties agree to negotiate a payment plan for the amount due on the loan instead of proceeding to foreclosure.
Worm. A type of malware that is designed to copy itself from one computer to another without human interaction. A worm can copy itself automatically and can replicate in great volume and with great speed. Worms, for example, can send out copies of themselves to every contact in your e-mail address book.
Writ of attachment. A court's order, prior to a trial to collect a debt, directing the sheriff or other officer to seize nonexempt property of the debtor; if the creditor prevails at trial, the seized property can be sold to satisfy the judgment.
Writ of certiorari (pronounced sur-shee-uh-rahree). A writ from a higher court asking the lower court for the record of a case.
Writ of execution. A court's order, after a judgment has been entered against the debtor, directing the sheriff to seize (levy) and sell any of the debtor's nonexempt real or personal property. The proceeds of the sale are used to pay off the judgment, accrued interest, and costs of the sale; any surplus is paid to the debtor.
Wrongful discharge. An employer's termination of an employee's employment in violation of an employment contract or laws that protect employees.
Zoning. The division of a city by legislative regulation into districts and the application in each district of regulations having to do with structural and architectural designs of buildings and prescribing the use to which buildings within designated districts may be put.
Zoning laws. The rules and regulations that collectively manage the development and use of land.

Business Law 13e by Clarkson, Miller, Cross

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