1
Q
What are key factors in choosing a business structure?
A
Risk management, liability, taxes, profits/losses, regulations, and exit strategy.
2
Q
What is contractual liability?
A
Liability arising from breach of contract between parties.
3
Q
What is the Privity Rule?
A
Only parties in a contract have rights and obligations under it.
4
Q
What is an exclusion clause?
A
A clause limiting or reducing damages or liability in a contract.
5
Q
What is an indemnity clause?
A
Transfers costs from one party to another; to indemnify is to reimburse.
6
Q
What is a limitation clause?
A
Caps the amount of liability rather than eliminating it.
7
Q
What is tort liability?
A
Liability for civil wrongs such as negligence, not requiring a contract.
8
Q
What is the purpose of the CFPOA?
A
To prevent bribery of foreign officials for business advantages.
9
Q
Who counts as a ‘foreign official’ under the CFPOA?
A
Anyone performing public duties for a foreign government or state-owned enterprise.
10
Q
What is extraterritorial jurisdiction under CFPOA?
A
Applies to offenses by Canadians or Canadian corporations abroad.
11
Q
Define a sole proprietorship.
A
A simple business with no legal separation between owner and business; unlimited liability.
12
Q
What are the main disadvantages of a sole proprietorship?
A
Unlimited personal liability and difficulty raising capital.
13
Q
Define a branch business structure.
A
An extension of a parent company located in another region or country.
14
Q
Who is liable for taxes in a branch structure?
A
The parent company may be liable for the branch’s taxes.
15
Q
Define a general partnership.
A
A business jointly owned by two or more parties sharing profits and unlimited liability.
16
Q
What is a limited partnership (LP)?
A
One general partner (unlimited liability) and one limited partner (limited liability).
17
Q
What happens if a limited partner manages the business?
A
They lose their limited liability protection.
18
Q
What is a limited liability partnership (LLP)?
A
All partners have limited liability for others’ actions; common in law/accounting firms.
19
Q
What is a limited liability company (LLC)?
A
A hybrid form with limited liability and flow-through taxation.
20
Q
Define a joint venture (JV).
A
A contractual relationship between parties to pursue a shared business goal.
21
Q
What are reasons for forming a JV?
A
Faster market entry, access to expertise, distribution, or expansion.
22
Q
What is an equitable joint venture (EJV)?
A
A new entity formed in the host state; limited liability; difficult to unwind.
23
Q
What is a contractual joint venture (CJV)?
A
No separate entity; easier to terminate; may be taxed as a partnership.
24
Q
What are common JV clauses?
A
Purpose, capitalization, noncompetition, confidentiality, transfer of ownership.
25
Define a corporation.
A separate legal entity that can contract, sue, and be taxed independently.
26
What is limited liability?
Shareholders are only liable up to the amount of their investment.
27
Define a subsidiary.
A company controlled by another through >50% ownership; separate legal entity.
28
What is 'piercing the corporate veil'?
Courts disregard corporate separation for fraud or abuse of limited liability.
29
List reasons for piercing the corporate veil.
Fraud, undercapitalization, domination, or alter-ego behavior.
30
Define a franchise.
A contractual right to use another’s brand, trademarks, and system.
31
Who bears liability in a franchise?
The franchisee, usually a separate entity.
32
What is a distributor in resale models?
Buys goods to resell to retailers or end users.
33
What is a dealer?
Buys from a distributor and sells to customers.
34
What is an agent?
Acts on behalf of another party; principal is bound by their actions.
35
What are flow-through taxation benefits?
Business profits/losses pass directly to owners, avoiding double taxation.
36
Why are international contracts more complex than domestic ones?
Different legal systems, cultures, and enforcement challenges.
37
How does North America view contracts?
Final and binding agreements.
38
How does Asia view contracts?
Flexible relationships open to change.
39
What is 'freedom to contract'?
Parties are free to negotiate terms, unless restricted by law.
40
What is 'contra proferentem'?
Ambiguous terms are interpreted against the drafter.
41
Why are written contracts preferred internationally?
Many countries require written agreements for enforceability.
42
What is Lex Mercatoria?
The historical 'Law of Merchants' — global trade customs.
43
What does the ICC do?
Creates global trade standards like Incoterms and UCP.
44
What is the CISG?
Convention on Contracts for the International Sale of Goods — harmonizes international sales law.
45
When does the CISG apply?
When both parties are in contracting states or haven’t excluded it.
46
What is promissory estoppel?
Enforces a relied-upon promise to prevent unfair outcomes.
47
What are the conditions for promissory estoppel?
Clear promise, reliance, foreseeable injury, and fairness.
48
What is culpa in contrahendo?
Fault in forming a contract; damages for bad-faith negotiation.
49
What are comfort instruments?
Letters of intent or MOUs used before final contracts.
50
What are lock-out agreements?
Prevent one party from negotiating with others temporarily.
51
What is frustration in contract law?
When unforeseen events make performance impossible or radically different.
52
What are examples of frustration causes?
Impossibility, destruction, illegality, commercial impracticability.
53
What is force majeure?
Clause excusing obligations during extraordinary events.
54
What is anticipatory repudiation?
When a party shows intent not to perform their obligations.
55
Why include governing law clauses?
To determine which country’s law applies to disputes.
56
What is a limitation period?
Time limit for filing legal claims after a breach.
57
What are boilerplate clauses?
Standardized contract clauses for consistency and clarity.
58
What is 'commercial impracticability'?
Performance becomes unreasonably difficult or expensive.
59
What is a pre-contractual instrument?
Document expressing intent before a contract, may or may not be binding.
60
Example of a case on pre-contractual issues?
Texaco v. Pennzoil – preliminary MOU led to massive damages.
61
What is anticipatory breach?
Party indicates they will not perform future obligations.
62
What does the duty of good faith mean?
Act honestly and not mislead other parties during negotiation.
63
What is the role of ICC in dispute resolution?
Provides arbitration and international business rules.
64
Why include forum selection clauses?
To determine where disputes will be resolved.
65
What is the Limitation Convention?
UN treaty on time limits for international claims.
66
What is the core problem in international trade?
Seller fears non-payment; buyer fears non-delivery.
67
List four payment methods in international trade.
Advance payment, letter of credit, documentary collection, open account.
68
Which payment method favors sellers?
Advance payment.
69
Which payment method favors buyers?
Open account.
70
What is a letter of credit?
Bank guarantees payment by buyer to seller upon document presentation.
71
What is a bill of exchange?
Written order to pay a fixed amount of money on demand or at future date.
72
What makes a bill of exchange valid?
Unconditional order, written, signed, amount certain, payable on demand/date.
73
What is a sight draft?
Payable immediately upon presentation.
74
What is a time draft?
Payable at a specific future date.
75
What is acceptance in finance?
Agreement by drawee to pay, making draft binding.
76
What is a banker’s acceptance?
Bank accepts liability to pay seller; low risk.
77
What is a trader’s acceptance?
Buyer accepts liability to pay seller; higher risk.
78
What is a negotiable instrument?
Transferable document promising payment to bearer or order.
79
Difference between 'made to order' and 'made to bearer'?
'Made to order' payable to named party; 'made to bearer' payable to holder.
80
What is a promissory note?
Promise by maker to pay a specific sum to payee.
81
What is the independent principle of LC?
Letter of credit is separate from the sales contract.
82
What are benefits of a letter of credit?
Seller guaranteed payment; buyer assured delivery.
83
List key LC parties.
Buyer, issuing bank, seller, advising/confirming bank.
84
Difference between confirmed and unconfirmed LC?
Confirmed adds another bank’s guarantee; unconfirmed does not.
85
Difference between revocable and irrevocable LC?
Revocable can be cancelled; irrevocable needs all parties’ consent.
86
What is a standby letter of credit?
Guarantees performance if something goes wrong.
87
What is a revolving LC?
Reusable for multiple transactions.
88
What is a back-to-back LC?
Used as collateral for another LC.
89
What is strict compliance in LC?
Banks must reject documents for any discrepancy.
90
What is the 21-day rule?
Documents must be submitted within 21 days of shipment.
91
What is facial compliance?
Banks check only documents, not goods themselves.
92
What are common LC discrepancies?
Late documents, wrong data, missing invoices, shipment errors.
93
What is a performance bond?
Guarantees completion of a contract.
94
What is a bid bond?
Ensures a contractor will enter a contract if awarded.
95
What is credit surety?
Third-party guarantees payment if one party defaults.
96
What is a retention fund?
Payment withheld until project completion.
97
What is a demand guarantee?
Automatic payment if performance fails.
98
What is factoring?
Selling receivables to a third party for immediate cash.
99
What is forfaiting?
Long-term version of factoring, prearranged before contract.
100
Define countertrade.
Exchange of goods/services instead of money.
101
List types of countertrade.
Barter, buyback, counterpurchase, offset, tolling, swap, product sharing.
102
What is a barter transaction?
Direct exchange of goods/services without cash.
103
What is a buyback?
Exporter builds facility and gets paid through product output.
104
What is counterpurchase?
Two parties agree to buy each other’s goods.
105
What is an offset agreement?
Seller buys products from buyer’s country to balance trade.
106
What is tolling?
Supplier hires factory to process raw materials into finished goods.
107
What is a swap or switch trade?
Company sells purchase obligation to another firm.
108
What is product sharing?
Government and private company split extracted resources.
109
What are the main methods of dispute resolution in international business?
Mediation, arbitration, and litigation.
110
Why are international disputes more complex than domestic ones?
Because of insolvency risk, language barriers, cultural differences, and enforcement challenges.
111
What does ADR stand for?
Alternative Dispute Resolution.
112
What are the two main types of ADR?
Mediation and arbitration.
113
Why do parties often choose ADR?
It is faster, cheaper, and preserves business relationships.
114
What is mediation?
A non-binding negotiation process facilitated by a neutral third party (mediator).
115
What are advantages of mediation?
Quick, inexpensive, preserves relationships, confidential.
116
What are disadvantages of mediation?
Non-binding, possible power imbalance, no guaranteed settlement.
117
Is mediation binding?
No, it is a non-binding process.
118
What is the mediator’s role?
To help parties reach a mutually acceptable agreement.
119
What is arbitration?
A binding dispute resolution method decided by one or more arbitrators.
120
Is arbitration binding?
Yes, arbitration decisions are binding and enforceable.
121
What is 'consent' in arbitration?
Both parties must expressly agree to submit to arbitration.
122
What is 'neutrality' in arbitration?
Neither party should have an advantage; includes neutral venue and arbitrators.
123
What is 'confidentiality' in arbitration?
The process and outcome remain private.
124
What is 'finality' in arbitration?
Decisions are binding and usually cannot be appealed.
125
What are the advantages of arbitration?
Neutrality, confidentiality, expertise, enforceability, faster than litigation.
126
What are disadvantages of arbitration?
Can be costly, limited appeal rights.
127
What is a tribunal in arbitration?
A panel of one or three arbitrators who hear and decide the dispute.
128
Why are three-member tribunals preferred?
To avoid bias and prevent deadlock.
129
What is the 'seat of arbitration'?
The legal place where arbitration occurs, determining procedural law.
130
What is ad hoc arbitration?
Arbitration organized by the parties without an institution.
131
What is institutional arbitration?
Arbitration under established rules and bodies like ICC or LCIA.
132
Why include arbitration clauses in contracts?
To prevent uncertainty about dispute resolution methods.
133
What is the New York Convention (1959)?
An international treaty ensuring recognition and enforcement of arbitral awards across contracting states.
134
When can enforcement under the New York Convention be refused?
If a party lacked capacity, wasn’t notified, or enforcement violates public policy.
135
What is litigation?
A formal court process where disputes are resolved by a judge or jury.
136
What are advantages of litigation?
Court powers to compel evidence, enforce local judgments, legal precedent.
137
What are disadvantages of litigation?
Expensive, public, slower, and unfamiliar foreign courts.
138
What does 'zero-sum' mean in litigation?
One party wins, the other loses; adversarial system.
139
What determines which laws apply in litigation?
The governing law clause in the contract.
140
What is jurisdiction?
The authority of a court to hear and decide a case.
141
What is a 'competent court'?
A court that has legal authority to hear a specific matter.
142
What are the three ways express consent to jurisdiction can be given?
Appearing in court, appointing an agent, agreeing in a contract clause.
143
What is territorial jurisdiction?
Jurisdiction based on where the matter occurred.
144
What is in rem jurisdiction?
Jurisdiction over property involved in a dispute.
145
What is subject matter jurisdiction?
Authority to hear cases of a specific legal topic (e.g. criminal, bankruptcy).
146
What is in personam jurisdiction?
Jurisdiction over a person, based on their connections to the court's area.
147
What is the 'minimum contacts' test?
Court can claim jurisdiction if the defendant has sufficient ties to the area.
148
Examples of 'minimum contacts'?
Doing business, advertising, or having a website accessible in that state.
149
How many court levels does the U.S. have?
Two levels: Federal and State Courts.
150
How many court levels does Canada have?
Three levels: Federal, Provincial, and Superior Courts.
151
What is 'inherent jurisdiction'?
Power of superior courts to hear any type of case unless restricted by statute.
152
If a company is sued in a foreign jurisdiction, what is the first step?
Check if the contract specifies governing law or forum.
153
What should a company do if the governing law clause favors the foreign country?
Defend the lawsuit there.
154
What if there’s no reciprocal enforcement treaty?
You may not need to defend if assets are safe in home country.
155
Why might a company still defend in a foreign court?
To protect reputation and maintain business relations.
156
What is a governing law clause?
Clause stating which country's laws govern contract interpretation and enforcement.
157
What is a choice of forum clause?
Specifies which court or tribunal will hear disputes.
158
What are the three main categories of forum selection clauses?
Particular court, dispute resolution process, combination of both.
159
What is an exclusive jurisdiction clause?
Only one jurisdiction can hear the dispute.
160
What is a non-exclusive jurisdiction clause?
One preferred forum, but others still possible.
161
What is a concurrent jurisdiction clause?
Dispute can be heard in multiple forums.
162
What is 'forum shopping'?
Choosing the court most favorable to your case.
163
What is 'venue'?
The geographical location where a case is heard.
164
What is forum non conveniens?
Doctrine allowing courts to refuse a case if another forum is more appropriate.
165
Why do defendants prefer their home jurisdiction?
Home advantage, familiarity, less cost, convenience.
166
What are private factors in forum non conveniens?
Access to evidence, witness cost, location of events.
167
What are public factors in forum non conveniens?
Court congestion, community interest, foreign law application.
168
When might courts reject governing law clauses?
If neither party has ties to that law or if unfair advantage results.
169
What is a conflict of laws?
When multiple legal systems could apply to a dispute.
170
Examples of conflicts of laws?
Cross-border contracts, torts, property, or marriage/divorce cases.
171
What does 'lex fori' mean?
Law of the forum; the local law used for procedural matters.
172
How do courts resolve conflicts of laws?
By applying the law with the greatest connection to the issue.
B LAW 201
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