Lecture 6 THE ROLE OF REGULATION 1 Promote competition and foster fair practices a Encourage capitalism providing a level playing field 2 Protect consumers public interests etc a EPA b SEC promote transparent capital markets and investors c CPSC around to protect consumers from products they buy 3 Agencies as service providers SOURCES OF LAW Fed State and Local Legislative make rules Congress House Senate Statutes Create agencies Executive investigate prosecute POTUS decrees More limited law making authority Fed agencies Judicial adjudicate SCOTUS courts Decisions REGULATORY ACTIVITIES Quasi Legislative issue rules and regulations Agencies issue guidelines DON T COUNT AS LAW ROLE OF ADMINISTRATIVE AGENCIES Specify for legislation SEC o Congress doesn t have time Case load for courts Labor disputes Expertise continuity consistency NRC FDA Investigate Enforce Supervise more scientific than political Federal agencies are most important agencies when discussing business activities IRS embodies all three branches Enforce address and interprets tax code Most agencies come from Congress Delegation of quasi legislative authority o Dept of Homeland security Delegation must be DEFINITE and LIMITED limited to a certain area federal aviation system is limited to aviation not transportation or general matters ADMINSTRATIVE LAW Very complex Takes lawyers to navigate Very important to business environment however doesn t affect all businesses January 30 2014 THE PROPERTY SYSTEM Property rights legal right to exclude others from resources that are legitimately possessed Aspects of Property 1 Right to exclude others 2 Resources Possession and Use 3 Legitimate possession acquisition 4 Absolute but not infinite Categories of Property 1 Private 2 Public 3 Common a Sunlight air ocean b Certain property right is owned by multiple owners Being able to divide up a property right is important Property law designed to reward effort important to having a complex economy PROPERTY AND BUSINESS Real property interests land rights to an interest in land Personal property fixtures items of personal property that become real property by o Physically attached to real o Integral to real property that they almost cant be separated Example Manufacturing plant some of the manufacturing equipment would be a fixture real property 1 Carpet fixture 2 Seats fixture 3 Rug NOT fixture AQCUIRING PROPERTY 1 Exchange of resources and contracts 2 Possession Rule of First Possession a First person t get their hands on it is rightful owner b Applies to fugitive resources i Deer duck pheasant hunting wild animals c Applies to water oil gas d Encourages development competition expectation 3 Lost items a Require possession then fulfilling statutory requirements on top of that 4 Adverse possession ONLY applies to LAND a 19th century law abundance of land and scarcity of labor b Efficiency argument why wouldn t you let these squatters use the land c Open and notorious owner usually notices d Has to be actual exclusive continuous wrongful can t be doing it with permission or a lease and the period of time is usually within 10 20 years i Squatter s rights 5 Gifts a Have to have delivery of gift and intent to give object as a gift i Trophy Gives trophy to Julia If you don t actually hand trophy over but promise to give it to her it s just a promise That promise turns into a gift when you have the intent to give trophy away and actually deliver it ii Giving a gift of land 1 Has to be conveyed in writing and signed 2 Can deliver the deed TITLE AND PROPERTY REGISTRATION Title physical representation of ownership rights Ownership Deed transfers ownership of land o Warranty deed deed that promises good title in land no one has claim to this land o Special warranty deed says I have good title except Mortgages create exception to good title o Quitclaim deed make no guarantee except that the transferee promises not to make a claim on the land after he sells it to you Can be very dangerous Easements ONLY apply to PROPERTY o Particular use of land for someone other than the owner Driveways Fishing pond Easement allowing Joe to cross Baker s property Covenant promises rules written into property itself o Positive I will always look both ways before crossing o Negative I will never go downtown on a Tuesday night Usually affects land and what you can do with the land Can be lifted Usually imposed by Homeowner s Association o Examples Negative how high you can build a building lot size architecture landscaping Secured Transactions o Home mortgages o Used widely in business in corporate finance o Creditor sells lends o Debtor giving security interest in collateral o Security interests and secured transactions Collateral Attachment creation of security interest Secure party has to give value Debtor has to actually own collateral Has to have effective secure agreement o Has to be in writing o Signed by debtor o Has to have reasonable description of collateral golf course Perfection can be perfected by going to a courthouse and announce you have a security interest perfect security interest when you go through the security requirements applicable First lean second lean who gets paid first First lean In order to ensure your place in line you perfect your secure interest o Willie needs cash to pay workers Goes to bank Needs 1mil Bank needs security interest in his golf course just in case Bank may not be paid back o o from Willie but has equity in the golf course Bank is secure party Willie is debtor If debtor defaults creditor will repossess collateral Debtor has right in collateral many times second and third lean people do not get paid