JP Morgan Chase - Elements of a Valid Contract - Essay Example

Discuss how administrative agencies like the Securities and Exchange Commission (SEC) or the Commodities Futures Trading Commission (CFTC) take action in order to be effective in preventing high-risk gambles in securities / banking, a foundation of the economy. The SEC as a regulator, mandates public companies to divulge relevant “financial and other information to the public” so that investors can retrieve the said basic facts and use the same to decide on whether they would “buy, sell, or hold a particular security” (SEC, n.d.). The Commission enforces its authority also by bringing “civil enforcement actions” against those who violate the securities laws (SEC, n.d.). On the other hand, the SEC as an overseer, watches over “the key participants in the securities world,” which include “securities exchanges, securities brokers and dealers, investment advisors, and mutual funds” and heads in advancing “the disclosure of important market-related information, maintaining fair dealing, and protecting against fraud” (SEC, n.d.). The SEC also persistently works with the participants of the major market as well as investors in the securities markets to take note of their concerns and experiences (SEC, n.d.). The primary responsibilities of the Commission include: interpreting and enforcing “federal securities laws”; issuing “new rules and amending existing rules”; overseeing the examination of “securities firms, brokers, investment advisers, and ratings agencies”; overseeing “private regulatory organizations in the securities, accounting, and auditing fields”; and coordinating “U.S. securities regulation with federal, state, and foreign authorities” (SEC, n.d.). The Commodity Futures Trading Commission (CFTC) on the other hand, is mandated “to regulate commodity futures and option markets in the United States” (US CFTC, n.d.). By means of effective oversight, Commission allows “futures markets to serve the important function of providing a means for price discovery and offsetting price risk” (US CFTC, n.d.). The Commission also aims to safeguard “market users and the public from fraud, manipulation, abusive practices and systemic risk related to derivatives” “subject to the Commodity Exchange Act, and to foster open, competitive, and financially sound markets” (US CFTC, n.d.). 2. Determine the elements of a valid contract, and discuss how consumers and banks each have a duty of good faith and fair dealing in the banking relationship. The elements of a valid contract are “parties competent to contract, a proper or lawful subject matter, consideration, mutuality of agreement or assent, and mutuality of obligation” (Henke v. U.S. Dept. of Commerce, 83 F.3d 1445 (D.C. Cir. 1996); Foundation Telecommunications, Inc. v. Moe Studio, Inc., 341 Ark. 231, 16 S.W.3d 531 (2000); Mallory v. City of Detroit, 181 Mich. App. 121, 449 N.W.2d 115 (1989); Rhode Island Five v. Medical Associates of Bristol County, Inc., 668 A.2d 1250 (R.I. 1996). It may also be “offer, acceptance, and consideration” (Gatlin v. Methodist Medical Center, Inc., 772 So. 2d 1023 (Miss. 2000); Sauner v. Public Service Authority of South Carolina, 354 S.C. 397, 581 S.E.2d 161 (2003); Shaw v. Smith, 964 P.2d 428 (Wyo. 1998). In every contract, there is always “an implied covenant of good faith and fair dealing” (Lloyd Noland Foundation, Inc. v. City of Fairfield Healthcare Authority, 837 So. 2d 253 (Ala. 2002); Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 38 P.3d 12 (2002), as corrected, (Apr. 9, 2002)), where “neither party shall do anything” which would destroy or injure “the right of the other party to receive the fruits of the contract” (Diagnostic Laboratory, Inc. v. PBL Consultants, 136 Ariz. 415, 666 P.2d 515 (Ct. App. Div. 2 1983); Okun v. Morton, 203 Cal. App. 3d 805, 250 Cal. Rptr. 220 (2d Dist. 1988); Dunfee v. Baskin-Robbins, Inc., 221 Mont. 447, 720 P.2d 1148 (1986); Spanish Oaks, Inc. v. Hy-Vee, Inc., 265 Neb. 133, 655 N.W.2d 390 (2003); Wade v. Kessler Institute, 172 N.J. 327, 798 A.2d 1251 (2002); 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 746 N.Y.S.2d 131, 773 N.E.2d 496 (2002); Prince v. Bear River Mut. Ins. Co., 2002 UT 68, 56 P.3d 524 (Utah 2002); Scherer Const., LLC v. Hedquist Const., Inc., 2001 WY 23, 18 P.3d 645 (Wyo. 2001). The said “implied duty of good faith and fair dealing” is intrinsic in contracts “even if a contract” involve a statute that does not necessarily grant “a private right of action” (R.J. Gaydos Ins. Agency, Inc. v. National Consumer Ins. Co., 168 N.J. 255, 773 A.2d 1132 (2001)). In relation to this, “banks have an obligation to exercise good faith and fair dealing with its customers” (Bullitt County Bank v. Publishers Printing Co., Inc., 684 S.W.2d 289, 39 U.C.C. Rep. Serv. 232 (Ky. Ct. App. 1984); and First Nat. Bank and Trust Co. of Vinita v. Kissee, 1993 OK 96, 859 P.2d 502 (Okla. 1993)). This good faith and fair dealing also is applied to customers in dealing with banks. 3. Compare and contrast the differences between intentional and negligent tort actions. “Intent and negligence are completely diverse concepts (Dobbs, et. al., 2012). Negligence involves unnecessary risky conduct and underscores the risk recognized “by a reasonable person,” and not based on the defendant's aim or on the sureness essential to demonstrate intent (Dobbs, et. al., 2012). A defendant may produce “risks of harm” without any objective or certainty that damage will be caused (Spivey v. Battaglia, 258 So.2d 815 (Fla. 1972); Frey v. Kouf, 484 N.W.2d 864 (S.D. 1992); Funeral Services by Gregory v. Bluefield Community Hosp., Inc., 186 W.Va. 424, 413 S.E.2d 79 (1991), overruled on other grounds by Courtney v. Courtney, 190 W.Va. 126, 437 S.E.2d 436 (1993)). A “state of mind is not needed in negligence but rather centers “on outward conduct” (Dobbs, et. al., 2012). Although a defendant is aware of the effectual risk and purposely decides to do it without necessarily having an objective or sureness “required for intent,” he would only be liable for negligence and not for an intentional tort (Endres v. Endres, 968 A.2d 336 (Vt. 2008); Doe v. Johnson, 817 F.Supp. 1382 (W.D. Mich. 1993)). Intent and negligence are also mutually exclusive (Dobbs, et. al., 2012). A particular act may either be intentional or negligent, “but it cannot be both” (Dobbs, et. al., 2012). Hence, there is no overlap between the two concepts (Dobbs, et. al., 2012). 4. Discuss the tort action of “Interference with Contractual Relations and Participating in a Breach of Fiduciary duty” and, if the bank you’ve chosen were to behave as JP Morgan did, would you be able to prevail in such a tort action. The elements in a tort of interference with contractual or business relations include: “(1) the existence of a contract, business relationship, or advantageous expectancy; (2) the interferer's knowledge of the relationship or expectancy; (3) reasonable certainty that the claimant would, except for the interference, have continued the relationship or realized the expectancy; (4) intentional interference by a third party with the relationship or expectancy; and (5) damage to the claimant as a result of the interference (Haupt v. International Harvester Co., 582 F. Supp. 545 (N.D. Ill. 1984) (applying Illinois law); Henderson v. Early, 555 So. 2d 130 (Ala. 1989); Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 710 P.2d 1025 (1985); Sorrells v. Garfinckel's, Brooks Bros., Miller & Rhoads, Inc., 565 A.2d 285 (D.C. 1989); Fowler v. Printers II, Inc., 89 Md. App. 448, 598 A.2d 794 (1991); Davenport v. Epperly, 744 P.2d 1110 (Wyo. 1987); 45 Am. Jur. 2d, Interference §§ 37 et seq.). Participating in a Breach of Fiduciary duty requires knowledge of the “violator’s status as a fiduciary” and the violator’s knowledge that his or her conduct disregards fiduciary duty (Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d at 283). If a bank chosen were to behave like JP Morgan, which during the financial crisis breached its own “internal risk limits” and adjusted “its risk models” to the point that it changed its pricing practices to minimize their losses (Morgenson, 2013), a tort action may certainly prevail since all of the elements are present. 5. With the advent of mobile banking, discuss how banks have protected the software that allows for online transaction to occur through automation. Efforts to raise consciousness of “cybercrimes and online security” as well as enhancing security features and filing legal actions to regain losses (Ena, 2008), are just some of the activities that banks and financial companies are doing to protect online transactions. However, there is still a lack in “a centralised data protection framework” in the U.S. but only relies on the data security provided under “section 5 of the Federal Trade Commission (FTC) Act for deceptive and unfair practices” (Vamialis, 2013). Reliance on “the potential liability of online service providers for safeguarding personal data,” cannot always be the case as such liability usually happens when there is “actual data breach” (Vamialis, 2013). There is a need for a law which contains complete provisions to prevent security attacks (Vamialis, 2013). Reference List American Jurisprudence, volume 45, 2d, Interference §§ 37 et seq. Bullitt County Bank v. Publishers Printing Co., Inc., 684 S.W.2d 289, 39 U.C.C. Rep. Serv. 232 (Ky. Ct. App. 1984). Davenport v. Epperly, 744 P.2d 1110 (Wyo. 1987). Diagnostic Laboratory, Inc. v. PBL Consultants, 136 Ariz. 415, 666 P.2d 515 (Ct. App. Div. 2 1983). Diduck v. Kaszycki & Sons Contractors, Inc., 974 F.2d at 283). Dobbs, D. B., Hayden, P. T. and Bublick, E. M. (2012). The Law of Torts. § 31 (2nd ed). Doe v. Johnson, 817 F.Supp. 1382 (W.D. Mich. 1993). Dunfee v. Baskin-Robbins, Inc., 221 Mont. 447, 720 P.2d 1148 (1986). Ena, M. (2008). Securing Online Transactions: Crime Prevention Is The Key. Fordham Urban Law Journal, volume 35, page 147. Endres v. Endres, 968 A.2d 336 (Vt. 2008). First Nat. Bank and Trust Co. of Vinita v. Kissee, 1993 OK 96, 859 P.2d 502 (Okla. 1993). Foundation Telecommunications, Inc. v. Moe Studio, Inc., 341 Ark. 231, 16 S.W.3d 531 (2000). Fowler v. Printers II, Inc., 89 Md. App. 448, 598 A.2d 794 (1991). Frey v. Kouf, 484 N.W.2d 864 (S.D. 1992). Funeral Services by Gregory v. Bluefield Community Hosp., Inc., 186 W.Va. 424, 413 S.E.2d 79 (1991), overruled on other grounds by Courtney v. Courtney, 190 W.Va. 126, 437 S.E.2d 436 (1993). Gatlin v. Methodist Medical Center, Inc., 772 So. 2d 1023 (Miss. 2000). Haupt v. International Harvester Co., 582 F. Supp. 545 (N.D. Ill. 1984) (applying Illinois law). Henderson v. Early, 555 So. 2d 130 (Ala. 1989). Henke v. U.S. Dept. of Commerce, 83 F.3d 1445 (D.C. Cir. 1996). Lloyd Noland Foundation, Inc. v. City of Fairfield Healthcare Authority, 837 So. 2d 253 (Ala. 2002). Mallory v. City of Detroit, 181 Mich. App. 121, 449 N.W.2d 115 (1989). Morgenson, G. (2013). JP Morgan’s Follies, For All to See. The New York Times. Retrieved from http://www.nytimes.com/2013/03/17/business/jpmorgans-follies-for-all-to-see-in-a-senate-report.html?pagewanted=all&_r=0 Okun v. Morton, 203 Cal. App. 3d 805, 250 Cal. Rptr. 220 (2d Dist. 1988). Prince v. Bear River Mut. Ins. Co., 2002 UT 68, 56 P.3d 524 (Utah 2002). Rhode Island Five v. Medical Associates of Bristol County, Inc., 668 A.2d 1250 (R.I. 1996). R.J. Gaydos Ins. Agency, Inc. v. National Consumer Ins. Co., 168 N.J. 255, 773 A.2d 1132 (2001). Sauner v. Public Service Authority of South Carolina, 354 S.C. 397, 581 S.E.2d 161 (2003). Scherer Const., LLC v. Hedquist Const., Inc., 2001 WY 23, 18 P.3d 645 (Wyo. 2001). Shaw v. Smith, 964 P.2d 428 (Wyo. 1998). Sorrells v. Garfinckel's, Brooks Bros., Miller & Rhoads, Inc., 565 A.2d 285 (D.C. 1989). Spanish Oaks, Inc. v. Hy-Vee, Inc., 265 Neb. 133, 655 N.W.2d 390 (2003). Spivey v. Battaglia, 258 So.2d 815 (Fla. 1972). U.S. Commodity Futures Trading Commission (n.d.). Mission and Responsibilities. US CFTC. Retrieved from http://www.cftc.gov/about/missionresponsibilities/index.htm. U.S. Securities and Exchange Commission (n.d.). The Investor's Advocate: How the SEC Protects Investors, Maintains Market Integrity, and Facilitates Capital Formation. SEC. Retrieved from http://www.sec.gov/about/whatwedo.shtml. Vamialis, A. (2013). Online Service Providers And Liability For Data Security Breaches. Journal of Internet Law, volume 6 no. 11, page 23. Wade v. Kessler Institute, 172 N.J. 327, 798 A.2d 1251 (2002). Wagenseller v. Scottsdale Memorial Hosp., 147 Ariz. 370, 710 P.2d 1025 (1985). Wells Fargo Bank v. Arizona Laborers, Teamsters and Cement Masons Local No. 395 Pension Trust Fund, 201 Ariz. 474, 38 P.3d 12 (2002), as corrected, (Apr. 9, 2002). 511 West 232nd Owners Corp. v. Jennifer Realty Co., 98 N.Y.2d 144, 746 N.Y.S.2d 131, 773 N.E.2d 496 (2002). Read More