CLEP Introductory Business Law cheat sheet

Common law originates from English judge-made law based on precedent (stare decisis); equity courts provide remedies like injunctions and specific performance where money damages are inadequate.

Article VI Supremacy Clause: Constitution, federal statutes, and treaties are supreme; state law conflicting with valid federal law is preempted.

Commerce Clause (Art. I, §8): Congress may regulate interstate commerce; under Wickard v. Filburn, even local activity affecting interstate commerce is reachable; Lopez limits to economic activity.

First Amendment protects speech, press, assembly, religion; strict scrutiny for content-based restrictions; intermediate scrutiny for time/place/manner; commercial speech gets intermediate scrutiny under Central Hudson.

Due process: Fifth Amendment (federal) and Fourteenth (states) require notice and hearing before deprivation of life, liberty, or property; substantive due process protects fundamental rights.

Equal protection: strict scrutiny for suspect classes (race, national origin) and fundamental rights; intermediate scrutiny for gender and legitimacy; rational basis for all else.

Sources of law hierarchy: U.S. Constitution > federal statutes/treaties > federal regulations > state constitution > state statutes > state regulations > common law.

State police power allows states to regulate health, safety, morals, general welfare; Dormant Commerce Clause bars discriminatory state laws burdening interstate commerce unless legitimate local purpose and no reasonable alternative.

Bill of Rights initially limited federal government; Fourteenth Amendment incorporation applies most protections to states (except grand jury indictment, civil jury trial, excessive fines).

Subject matter jurisdiction: federal courts have federal question (28 U.S.C. §1331) and diversity jurisdiction (§1332) requiring complete diversity and amount in controversy over $75,000.

Personal jurisdiction requires minimum contacts with forum state consistent with fair play and substantial justice (International Shoe); general jurisdiction where defendant is 'at home' (domicile, principal place of business).

Pleadings: complaint must state claim for relief; defendant responds with answer admitting/denying and asserting affirmative defenses; motion to dismiss for failure to state a claim (12(b)(6)).

Discovery devices: interrogatories, depositions, requests for production, requests for admission, physical/mental exams; scope is relevance to subject matter, not admissibility.

Summary judgment granted if no genuine dispute of material fact and moving party entitled to judgment as a matter of law; viewed in light most favorable to nonmovant.

Trial: plaintiff bears burden of proof by preponderance in civil cases; directed verdict/judgment as a matter of law if no reasonable jury could find for nonmovant; judgment notwithstanding verdict (renewed motion).

Appeals: final judgment rule; appellate courts review questions of law de novo, factual findings for clear error, discretionary rulings for abuse of discretion.

Alternative dispute resolution: negotiation, mediation (third party facilitates, non-binding), arbitration (binding, limited judicial review under FAA); arbitration clauses generally enforceable.

Standing requires injury-in-fact, causation, and redressability; ripeness and mootness are justiciability doctrines.

Common law governs contracts for services, real estate, insurance; UCC Article 2 governs sale of goods (movable, tangible items); mixed contracts use predominant purpose test.

Valid contract requires offer, acceptance, consideration, and no defenses; offer must manifest present intent to be bound, definite terms, and be communicated; acceptance must be unequivocal and mirror offer (common law) or definite and seasonable (UCC).

Consideration is bargained-for exchange; pre-existing duty rule: promise to perform existing legal duty is not consideration; exceptions include UCC good faith modification and third-party promise.

Statute of Frauds requires writing for: marriage, year (cannot be performed within one year), land, executor/administrator, surety, goods over $500 (UCC), and sale of securities; must be signed by party to be charged.

Defenses to formation: duress, undue influence, fraud, misrepresentation, mistake (mutual material), incapacity (minors, intoxicated, mentally incompetent), illegality, unconscionability.

Parol evidence rule bars prior or contemporaneous oral/written statements contradicting integrated written agreement; exceptions: ambiguity, fraud, condition precedent, course of dealing/performance.

Third-party beneficiary: intended beneficiary can enforce contract; incidental beneficiary cannot; assignment of rights and delegation of duties (delegation does not relieve obligor unless novation).

Remedies: expectation damages (benefit of bargain), reliance, restitution; consequential damages if foreseeable (Hadley v. Baxendale); liquidated damages enforceable if reasonable; specific performance for unique goods/land.

UCC perfect tender rule: buyer may reject nonconforming goods unless seller cures within time; acceptance after reasonable opportunity to inspect; revocation of acceptance for substantial impairment.

Administrative agencies: rulemaking under Administrative Procedure Act (notice-and-comment for legislative rules); adjudication; judicial review for arbitrary/capricious, ultra vires, or procedural violations.

Antitrust: Sherman Act §1 prohibits contracts/combinations in restraint of trade (rule of reason or per se for price fixing, bid rigging, market allocation); §2 monopolization requires possession of monopoly power plus willful acquisition/maintenance.

Clayton Act prohibits price discrimination (Robinson-Patman), tying, exclusive dealing, mergers substantially lessening competition; Hart-Scott-Rodino premerger notification.

Consumer protection: FTC Act §5 prohibits unfair/deceptive acts; Truth in Lending Act disclosure; Fair Debt Collection Practices Act; Magnuson-Moss Warranty Act.

Environmental law: Clean Air Act, Clean Water Act, RCRA (hazardous waste), CERCLA (Superfund liability for past disposal); NEPA requires environmental impact statements for major federal actions.

Employment law: Title VII prohibits discrimination based on race, color, religion, sex, national origin; ADEA age 40+; ADA disability; FMLA leave; workers' compensation no-fault system.

Securities law: Securities Act of 1933 regulates primary offerings (registration, prospectus); Securities Exchange Act of 1934 regulates secondary trading, reporting, insider trading (Rule 10b-5).

Intellectual property: patent (20 years, novel, useful, nonobvious), copyright (life+70, original expression fixed), trademark (distinctiveness, renewal), trade secret (reasonable measures, economic value).

Bankruptcy: Chapter 7 liquidation (exemptions, discharge); Chapter 11 reorganization; Chapter 13 wage earner plan; automatic stay; discharge exceptions (fraud, student loans, willful injury).

Intentional torts: battery (harmful/offensive contact), assault (apprehension of imminent contact), false imprisonment (confinement within boundaries), trespass (land/chattels), conversion (substantial interference), defamation (defamatory statement, publication, damages).

Defenses to intentional torts: consent, self-defense/defense of others, defense of property (reasonable force, no deadly force), necessity (public/private).

Negligence elements: duty, breach, causation (actual and proximate), damages; duty owed to foreseeable plaintiffs (Palsgraf); standard of care reasonable person; professionals ordinary skill; children reasonable child of same age/intelligence (exception adult activities).

Negligence per se: statute designed to protect class including plaintiff and prevent type of harm; breach of statute establishes duty/breach.

Causation: actual cause (but-for or substantial factor); proximate cause limits liability to foreseeable harms; intervening causes supersede only if unforeseeable.

Defenses to negligence: contributory negligence (complete bar, minority), comparative negligence (pure or modified), assumption of risk (voluntary, knowing).

Strict liability: abnormally dangerous activities (blasting, hazardous chemicals) and defective products; products liability theories: negligence, strict liability, breach of warranty; defect types: manufacturing, design, failure to warn.

Defamation: libel (written) and slander (spoken); public figures must prove actual malice (New York Times v. Sullivan); private plaintiffs need negligence for matters of public concern.

Nuisance: private nuisance substantial unreasonable interference with use/enjoyment of land; public nuisance unreasonable interference with right common to public; remedies damages/injunction.

Property: estates in land (fee simple absolute, life estate, fee tail), future interests (remainder, reversion), concurrent ownership (joint tenancy with right of survivorship, tenancy in common, tenancy by entirety).

Landlord-tenant: leasehold estates (term of years, periodic tenancy, tenancy at will); implied warranty of habitability; constructive eviction; security deposit rules.

Deeds: must be in writing, signed by grantor, identify parties and land, words of grant; delivery and acceptance required; recording statutes (race, notice, race-notice) determine priority.

Wills and trusts: testator must have testamentary capacity and intent; will requires witnesses (typically two); intestate succession statutes; trust requires trustee, beneficiary, trust property.

Family law: prenuptial agreements enforceable if fair and voluntary; child custody best interests of child; no-fault divorce.

Criminal law: mens rea and actus reus; crimes against persons (murder, manslaughter, battery), property (larceny, embezzlement, robbery, burglary); defenses (insanity, self-defense, duress).

Constitutional criminal procedure: Fourth Amendment search/seizure requires warrant or exception (consent, plain view, exigent); Fifth Amendment self-incrimination and double jeopardy; Sixth Amendment right to counsel and speedy trial.

Insurance law: indemnity principle, insurable interest, duty to defend, exclusions, subrogation; bad faith claims.

Professional responsibility: attorney-client privilege, confidentiality, conflicts of interest, duty of competence, fees.

Agency relationship: principal grants agent authority to act on principal's behalf subject to control; fiduciary duties of agent (loyalty, obedience, care, accounting); principal's duties (compensation, indemnification).

Authority: actual (express/implied), apparent (principal's manifestations to third party), ratification; undisclosed principal liability; agent's liability to third parties.

Partnership: general partnership formed by association of two or more persons to carry on business for profit; joint and several liability for partners; fiduciary duties; dissociation and dissolution.

Limited partnership: at least one general partner (liable) and one limited partner (liability limited to investment, no control); limited liability partnership (LLP) shields partners from malpractice liability.

Corporation: separate legal entity, perpetual existence, limited liability for shareholders, centralized management by board; formation by articles of incorporation filed with state; bylaws internal.

Corporate governance: shareholders elect directors, approve fundamental changes; directors owe duty of care and loyalty (business judgment rule); officers manage day-to-day.

Securities issuance: common stock, preferred stock, bonds; dividends declared by board; shareholder derivative suits and direct suits; piercing corporate veil for fraud, alter ego, undercapitalization.

Limited liability company (LLC): hybrid of partnership and corporation; members have limited liability and flexible management; articles of organization; operating agreement.

Termination of agency: act of parties (revocation, renunciation), operation of law (death, incapacity, bankruptcy); irrevocable agency coupled with interest.

UCC Article 2 applies to transactions in goods; goods are movable tangible items; merchants are dealers in goods of the kind or hold themselves out as having knowledge; firm offer by merchant in signed writing is irrevocable for up to three months without consideration.

Offer and acceptance: UCC allows acceptance by any reasonable manner and medium; additional or different terms in acceptance: between merchants, additional terms become part of contract unless materially alter, objected to, or offer limited; different terms may cancel.

Statute of Frauds: sale of goods over $500 requires writing sufficient to indicate contract, signed by party to be charged; exceptions: specially manufactured goods, admission, payment and acceptance, merchant confirmation.

Parol evidence: UCC allows course of performance, course of dealing, usage of trade to explain or supplement even integrated writing; express terms prevail over course of performance, which prevails over course of dealing, which prevails over usage of trade.

Risk of loss: if no breach, risk passes according to delivery terms (shipment contract: risk passes to carrier; destination contract: risk passes at destination); if breach, risk passes to breaching party to extent of deficiency.

Warranties: express (affirmation, description, sample); implied warranty of merchantability (merchant seller, goods fit for ordinary purpose); implied warranty of fitness for particular purpose (seller knows buyer's purpose and buyer relies); disclaimer must be conspicuous (merchantability) or in writing (fitness).

Buyer's remedies: cover (difference between cost of cover and contract price), market price damages, incidental and consequential damages; seller's remedies: resale, market price, lost profits, price action.

Acceptance, rejection, revocation: buyer must inspect and accept or reject; perfect tender rule; revocation for substantial impairment; seller's right to cure.

Lessor and lessee, finance leases under Article 2A; unconscionability and good faith apply to all UCC contracts.