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90 Cards in this Set
- Front
- Back
What is an agency relationship? |
formed by mutual consent of a principal and an agent |
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Principal |
Party who employs another person to act on his or her behalf |
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Agent |
Party who agrees to act on behalf of another |
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Stipulations of Agency Relationships |
Principal must have capacity to appoint agent (court can give authority to agent on behalf of insane person, etc.)
Agency only created on lawful purpose -- cannot hire an agent to murder someone. |
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Principal-Agent Relationship |
Formed when employer hires employee and gives that employee authority to act and enter into contracts on his or her behalf
(DIFFERENT FROM EMPLOYER-EMPLOYEE RELATIONSHIP) |
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Employer-Employee Relationship |
Employer hires employee to perform work - simple as that - does not give them authority to enter into contracts, etc... therefore is NOT an agent.
Ex: Line supervisor may have authority to purchase materials, line worker does not -- line supervisor is agent, line worker is NOT an agent |
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Independent Contractor |
Hired by principal to perform task on their behalf -- is NOT employee -- they operate their own business or profession.
CAN be given agent authority to enter into contracts on principals behalf |
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Formation of an Agency (4 ways) |
Express: authority is epressly given to agent by principal -- can be either written or oral (unless has to be written under certain circumstances)
Implied: authority is implied from conduct of parties -- industry custom, prior dealing precedent, etc. (Real estate broker fixing house for sale while owner is out of town)
Apparent: authority created when principal leads third party to believe agent has authority
Ratification: Acts of "agent" are committed outside the scope of authority, but the principal then says "ok sounds good actually" |
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Principal's Duties (4) |
1) Duty to Compensate: must pay agreed-upon amount to the agent either upon completion or other mutually agreed upon time
2) Duty to Reimburse: If they were authorized, within scope of agency, and necessary to fulfill agent duties
3) Duty to Indemnify: Must compensate agent for any losses caused by poor principal conduct
4) Duty to Cooperate: Must cooperate with and assist agent in performing their duties |
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Agent's Duties (3) |
1) Duty to Perform: Must complete lawful duties expressed in contract and meet standards of reasonable care, skill, and diligence.
2) Duty to Notify: Must alter principal of important information concerning the agency
3) Duty to Account: Must maintain accurate accounting of all transactions undertaken on principal's behalf |
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Termination of Agency - under what circumstances? (5) |
1) Act of Parties: mutual assent, stated time has lapsed, purpose is achieved, occurence of pre-stated event
2) Change in Circumstances: land being sold for $1m, learns there's oil and worth $5m, original agreement changed
3) Impossibility: destruction of subject matter, loss of reqd qualification, law changes, etc
4) Operation of Law: death of principal or agent, insanity of principal or agent, bankruptcy of principal, war b/w principal and agent countries
5) Wrongful Termination: When principal or agent terminates contract and it's against the contract to do so |
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Notice of Termination |
Principal needs to give DIRECT NOTICE - alerting all third parties with whom agent dealt and CONSTRUCTIVE NOTICE - alerting third parties who know about agency even though haven't had direct contact with agent
If principal fails to give notice to third party about agency termination, agent still has apparent authority to bind principal to contracts |
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Agents Duty of Loyalty (5 breaches) |
Agent must do what's in best interest of principal
1) Self-Dealing: Real estate agent hired to buy real estate can't sell his own property secretly to the principal.
2) Usurping an Opportunity: land for sale that fits what principal wants -- agent buys it for himself instead of for principal
3) Competing With Principal
4) Misuse of Confidential Info: Ex: can't carry along to new principal trade secrets or client lists from past principal
5) Dual Agency: Cannot represent both parties with conflicting interest -- cannot represent both buyer and seller |
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Tort Liabilities for Principals and Agents (list 6) |
1) Negligence 2) Frolic and Detour 3) Coming and Going 4) Dual-Purpose Mission 5) Intentional Tort 6) Misrepresentation |
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Tort: Negligence |
Principal is liable for Agent's tortious negligence WITHIN SCOPE OF EMPLOYMENT because of the contract the principal has with the agent
EX: cashier who is negligent -- employee , NOT agent |
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Tort: Frolic and Detour |
Agents personally liable for actions if something happens while on personal errand -- ex: stop at home for lunch on way home from sales pitch
MINOR vs. SUBSTANTIAL -- if home is on the way, then minor -- if it's in Cleveland then substantial |
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Tort: Coming and Going |
Principal is generally NOT liable for injuries caused by agents and employees while they are on their way to or from work |
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Tort: Dual-Purpose Mission |
Principal requests employee or agent to run errand for principal while agent is on personal business -- usually both are held liable if something happens |
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Tort: Intential Tort |
Assault, battery, false imprisonment, etc...
Principal liable IF intentional tort is committed within scope of normal employment -- exceptions are motivation test -- if personal vendetta then principal not held liable. |
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Tort: Misrepresentation |
Fraud or Deceit
Agent makes untrue statement, or is fraudulent, etc. or makes an innocent misrepresenation -- either way, principal is held liable
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Independent Contractor Liability |
Generally, Principal is NOT liable for torts of independent contractor
BUT - they are liable for dangerous activities they assign to independent contractors AND for negligent selection of indep contractor
Principals ARE liable for contracts entered into by their indep contractors (b/c they're an agent) |
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Principal Liability for Contracts |
Imposition of contract liability depends on if they are ...
Fully Disclosed Agency - Principal YES Agent MAYBE (if they guarantee)
Partially Disclosed Agency - Principal YES Agent YES
Undisclosed Agency - Principal YES Agent YES
Agent Exceeding Scope of Authority - Principal NO Agent YES |
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Sole Proprietorship
General Partnership |
BOTH are the default in absence of formality
BOTH have unlimited personal liability -- the individual IS the company
BOTH pay taxes from personal income (GP is FLOW-THROUGH TAXATION) |
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Rights of General Partners (5) |
1) Right to Participate in Mngmt 2) Right to Share in Profits 3) Right to Compensation 4) Right to Indemnification 5) Right to Return of Loans 6) Right to Return of Capital 7) Right to Information |
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Duties of General Partners (5) |
1) Duty of Loyalty 2) Duty of Care 3) Duty to Inform 4) Duty of Obedience 5) Right to an Accounting |
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Liability of General Partners --
Joint vs. Joint Several |
Joint = for contracts and debts of partnership
Joint and Several = for Torts and breaches of trust -- each general partner has individual liability as well as the GP overall has liability |
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Dissolution of GP
Wrongful?
Notice?
Distribution? |
Outgoing Gen Partner is not excused from liability
Wrongful -- one partner pulls out when they're not contractually allowed to do so -- they are liable for damages caused by dissolution
Notice -- actual and constructive notice must be given to any and all third parties
Distribution -- Creditors paid first, then creditor-partners, then capital contributions, then profits |
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Limited Partnerships (LP) |
Has both general partner(s) and limited partner(s)
General - invest, manage, liable Limited - invest, NO manage, NO liable beyond capital contribution (only liable if effective formation, participation in management, or personal guarantee) |
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Limited Liability Limited Partnership (LLLP) |
Has both general partners and limited partners where BOTH general and limited partners have limited liability and are not personally liable --- debts and obligations only apply to LLLP |
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Limited Liability Corporation (LLC) |
Creatures of State Law -
LLC is separate legal entity distinct from its members. They are treated as an "individual" and can sue/be sued, be liable, enforce contracts, etc |
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Formation of LLC |
formed by delivering Articles of Organization
can be at-will or term (duration)
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Certificate of Interest --LLC |
Member's ownership interest may be evidenced by a certificate of interest -- equivalent to stock certificate in a corporation |
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Operating Agreement -- LLC |
Regulates affairs of the company and the conduct of its business and governs relationships between members and managers -- may be oral but is usually written |
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Liabilities of LLC --
Members vs. Managers |
Members NOT personally liable beyond capital contributions
Managers NOT personally liable for debts, obligations, liabilities of the LLC they manage |
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Limited Liability Partnership (LLP) |
All partners are limited liability, no general partners
Lawyers, doctors, etc -- all are liable for their own malpractice -- not other partners in the firm |
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Corporations
Nature of Corporations |
Fictitious legal entity that is owned by shareholders
- separate legal person - free transferability of shares - perpetual existence - centralized mngmt -- board selects officers
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Domestic Corp
Foreign
Alien |
D - in state
F - out of state or other jurisdiction
A - in other country |
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Difference between LLC and Corp |
LLC - Operating Agreement - Articles of Organization
Corp - Bylaws - Articles of Incorporation |
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S Corp |
No fed tax for income tax purposes
- must be domestic - cannot be member of group of corps - <100 shareholders and US citizens - One class of stock |
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Debt Vs Equity |
Equity - common vs preferred
Debt -
Debenture - long-term (unsecured) Bond - long-term (secured) Note - short-term (either) |
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Dissolution of Corp |
Voluntary
Admin
Judicial |
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Corp Gov and Sarbanes-Oxley |
improve governance, prevent fraud, add transparency |
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Voting Rights |
Shareholders get vote per share typically -- can vote by proxy if they're not at the meeting
Straight voting vs Cumulative voting
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Quorum? |
If majority of shares entitled to vote are present, a quorum is there to hold the meeting |
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Derivative Lawsuits
reqmts |
shareholder brings suit against offending party on behalf of corporation when corporation fails to bring the lawsuit
- was shareholder at time of act - fairly represents interests of corp - made written demand |
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Piercing Corporate Veil |
if shareholder dominates corp and uses it for improper purposes, court can disregard corp entity and hold shareholder personally liable for corp's debts |
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Board of Directors |
elected by shareholders
formulate policy decisions
paid annual retainer - inside director (also officer) - outside director (not officer of that corp) |
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Board Meetings |
Quorum required to hold board meeting or transact business |
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Corporate Officers |
Appointed by the board
Manage day to day ops of the org
They are AGENTS -- have authority |
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Duties of Directors & Officers |
1) Duty of Obedience - have to act within authority and within bounds set by governing documents (bylaws, articles of incorporation)
2) Duty of Care - Use care and diligence when acting on corporation's behalf (BUSINESS JUDGEMENT RULE)
3) Duty of Loyalty - Cannot do anything with adverse effect on corporation
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Ways to breach Duty of Loyalty |
1) Usurping corporate opportunity 2) Self-dealing 3) Competing with corporation 4) Making secret profit |
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Business Judgement Rule |
Directors and Officers not liable for honest mistakes of judgement (example: poor business strategy, roll out bad product...etc) |
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Sarbanes-Oxley Act |
1) CEO/CFO certification of financials 2) Reimbursement of bonuses and incentive pay when there are errors 3) Prohibition on personal loans to directors/officers 4) Penalties for tampering w/ evidence - up to 20 yrs in prison 5) Bar from acting as officer or director forever if fraud is committed |
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Unsecured Debt
Secured Debt |
U - credit that does not require any collateral to protect payment of debt
S - credit that requires collateral to secure payment of debt |
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Mortgage |
Owner of real property borrows money from lender and pledges the real property as collateral to secure loan |
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Mortgagor
Mortgagee |
Mortgagor = debtor (home owner)
Mortgagee = lender (bank) |
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Recording Statues
Purpose? Effect of not recording or recording later? |
Requires that mortgage be recorded in county office
- if not recorded then potential issues -- subsequent purchaser issues other mortgagees who have no notice of prior morgages |
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Foreclosure Sale |
Secured creditor (lender) causes judicial sale of property to pay loan |
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Deficiency Judgement |
permits lender to recover other property or income from defaulting debtor if collateral (foreclosure sale price) doesn't fully repay loan |
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Right of Redemption |
allows debtor to redeem property if they pay full amount of debt after default and before foreclosure |
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Mechanic's Lien |
contractor's, laborer's lien that makes property they've worked on the security for payment for the services they've provided. |
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Surety vs Guaranty |
Surety - third party promises to be primarily liable (can be sued right away)
Guaranty - third party promises to be secondarily liable (have to sue the other person first) |
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Collection Remedies |
1) Writ of Attachment - permits property seizure while lawsuit is pending
2) Writ of Execution - permits property seizure that is in possession of debtor
3) Writ of Garnishment - permits seizure of property in possession of third parties
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Bankruptcy types |
Chapter 7 - Liquidation Chapter 11 - Reorganization Chapter 12 - Adjustment of Debts - Farmer Chapter 13 - Adjustment of Debts - Individual |
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Bankruptcy Petition Types |
Voluntary Petition - filed by debtor
Involuntary Petition - filed by creditor(s) |
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Attorney Certification |
Attorneys have to sign off that everything is accurate in the bankruptcy details -- subject to fines and sanctions if issues exist |
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Counseling -- Bankruptcy |
Prepetition
Postpetition |
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Bankruptcy Schedules |
list of secured unsecured creditors list of all property owned statement of financial affairs of debtor statement of debtor's monthly income current expenses federal income tax return
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Meeting of the Creditors |
judge cannot attend - debtor attends and is submitted to questioning by creditors |
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Bankruptcy Trustee |
Legal representative of debtor's estate
must be appointed in Chp 7, chp 12/13
potentially chp 11 if fraud exists |
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Automatic Stay |
Filing of bankruptcy automatically STAYS (suspends) actions by creditors to collect debtor's property |
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Discharge of Debts |
Court says you don't have to pay them back even though bankruptcy proceedings didn't pay them back |
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Chapter 7 Bankruptcy |
Liquidation
debtor's nonexempt property is sold for cash, the cash is distributed to the creditors, and any unpaid debts are discharged |
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Chapter 7 Exempt Property |
Long list --
21k equity in residence 3,4k in vehicle 550 per item -- clothes, books, appliances, animals, instruments -- aggregate up to 11,5k 1,4k Jewelry lots of other stuff |
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Barred Discharge |
Normally dischargeable debts are NOT discharged --- If debtor made false representation about finances or destroyed records or failed to account for assets or failed to answer questions...etc |
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Chp 13 Bankruptcy |
Rehabilitation form of Bankruptcy that lets debtor plan for payment of unpaid debts in installments -- supervised by bankruptcy court |
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Chp 11 Bankruptcy |
Reorganizes debtor's financial affairs under supervision of bankruptcy court |
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Federalism
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U.S. Form of Govt -- federal govt and state govts share powers
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Delegated Powers
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enumerated powers delegated to federal govt when stats ratified the constitution
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Separation of Powers
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Legislative - Congress - makes laws
Executive - President - enforces laws Judicial - Judicial - interpret laws |
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Checks and Balances
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built into constitution to ensure no one branch of govt becomes too powerful
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Supremacy Clause
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Clause of constitution that establishes constitution, federal treaties/laws/regulations are the supreme law of the land
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Commerce Clause
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Grants congress power to regulate commerce with foreign nations and among several states
- Foreign commerce - INTERstate commerce - Native American Tribes |
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Bill of Rights/Amendments
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BOR - 1st ten amendments added in 1791
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First Amendment
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Speech
- Fully protected - cannot be prohibited or regulated by govt - Limited - may not prohibit but time, place, manner are - Unprotected - NOT protected and forbidden (fire in open theatre) |
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First Amendment - Freedom of Religion
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Establishment Clause
Free Exercise Clause |
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Establishment Clause
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prohibits govt from establishing a state religion or promoting one religion over another
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Free Exercise Clause
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prohibits govt from interfering with free exercise of religion in US
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14th Amendment
Standards of Review |
Equal Protection under the law
1) Strict scrutiny test 2) Intermediate scrutiny test 3) Rational basis test |
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Due Process
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no person deprived of life, liberty, property without due process of law
Substantive - requires that statues, ordinances, regulations are clear and not too broad Procedural - requires that government give proper notice of legal action before that person is deprived of life, liberty, property |