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LAW 122 (625)
Chapter 1

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Law and Business
LAW 122
Avi Weisman

Chapter 1 Risk and Management and Sources of LawWhy Study Law y Important to realize that law can hurt and help y A contract is a legal concept that allows people to create enforceable promisedRisk ManagementThe process of identifying evaluating and responding to the possibility of harmful eventsYou need to identify evaluate and respond to the legal risks involved o IDENTIFICATION recognition of legal risks can we be held liable for doing something wrongassessment of legal risks what are the changes of something o EVALUATIONgoing wrong o RESPONSE reaction to legal risks what are we going to do about itThere are potential costs associated with nearly every form of bhvr and that includes doing nothing at allA business probably cannot exist and certainly cannot profit unless its willing to take chances THEREFORE the goal is not to eliminate risks it is to MANAGE themRisk Strategies Risk avoidance some risks are so serious that they should be avoided o altogether Example a car that explodes upon impact should be removed from market o Risk reduction some risks can be reduced to an acceptable level through precautions Example instead of loaning a manufacturer 500000 the bank can protect itself by requiring the business to grant a mortgage over its factory Risk shifting shift risk to another party through contract or through insurance o policy Example company requires temp use of a crane they can rent a crane OR hire and independent contractor to operate it o Risk acceptance sometimes its appropriate for business to accept the risk Example lucrative contract Examples of Risk Management o INSURANCE Insurance is a contract in which one party agrees in exchange for a price to pay certain amount of money if another party suffers a loss 1 liability insurance providesThere are many types of insurance two are a benefit if the purchaser is held liable for doing something wrong 2 Property insurance provides a benefit if the purchasers property is damaged lost or destroyed o EXCLUSIONLIMITATION CLAUSE Contractual terms that excludes liability for certain types of actslosses or that limit the amount of compensation availableExample the entrance to a car park for instance may contain large sign telling customers that they park at their own risk o INCORPORATION
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