Gale Encyclopedia Of American Law 3Rd Edition Volume 1 P8 ppsx

ACCORD AND SATISFACTION A method of discharging a claim whereby the parties agree to give and accept something in settlement of the claim and perform the agree-ment, the accord being the

loan, promising to repay the amount over a number of years If the company does not consider the person a good credit risk (one who will be able to repay the loan), it will request that someone else sign the note to ensure that the company will be repaid Such a person may

be an accommodation endorser, because he or she endorses the note after it has been completed, or an accommodation maker, be-cause he or she must sign the note with the accommodation party

An accommodation party is liable to the person or business that extended credit to the accommodation party, but not to the accom-modated party The accommodation party is liable for the amount specified on the

ACCOMMODATION PAPER If an accommodation party repays the debt, he or she can seek reimbursement from the accommodated party

ACCOMPANY

To go along with; to go with or to attend as a companion or associate

A motor vehicle statute may require begin-ning drivers or drivers under a certain age to be accompanied by a licensed adult driver when-ever operating an automobile To comply with such a law, the licensed adult must supervise the beginner and be seated in such a way as to be able to render advice and assistance

ACCOMPLICE One who knowingly, voluntarily, and with common intent unites with the principal offender

in the commission of a crime One who is in some way concerned or associated in commission of crime; partaker of guilt; one who aids or assists, or

is an accessory One who is guilty of complicity in crime charged, either by being present and aiding

or abetting in it, or having advised and encour-aged it, though absent from place when it was committed, though mere presence, acquiescence, or silence, in the absence of a duty to act, is not enough, no matter how reprehensible it may be, to constitute one an accomplice One is liable as an accomplice to the crime of another if he or she gave assistance or encouragement or failed to perform a legal duty to prevent it with the intent thereby to promote or facilitate commission of the crime

An ACCOMPLICEmay assist or encourage the principal offender with the intent to have the crime committed, the same as the chief actor

An accomplice may or may not be present when the crime is actually committed How-ever, without sharing the criminal intent, one who is merely present when a crime occurs and stands by silently is not an accomplice, no matter how reprehensible his or her inaction Some crimes are so defined that certain persons cannot be charged as accomplices even when their conduct significantly aids the chief offender For example, a businessperson who yields to theEXTORTION demands of a racketeer

or a parent who pays ransom to a kidnapper may be unwise, but neither is a principal in the commission of the crimes Even a victim may unwittingly create a perfect opportunity for the commission of a crime but cannot be consid-ered an accomplice because he or she lacks a criminal intent

An accomplice may supply money, guns, or supplies In one case, an accomplice provided his own blood to be poured on selective service files The driver of the getaway car, a lookout, or

a person who entices the victim or distracts possibleWITNESSESis an accomplice

An accomplice can be convicted even if the person that he or she aids or encourages is not

He or she is usually subject to the same degree

of punishment as the principal offender In the

1982 decision of Enmund v Florida, 458 U.S

782, 102 S Ct 3368, 73 L Ed 2d 1140, the

SUPREME COURT OF THE UNITED STATES ruled that the deathPENALTYcould not be constitutionally imposed upon an accomplice to a felony-murder, a crime leading to MURDER, if he or she had no intention to, or did not, kill the victim Earl Enmund drove the getaway car from a ROBBERY that resulted in the murder of its victims, an elderly married couple Although Enmund remained in the car during the robbery and consequent killings and the trial record did not establish that he intended to facilitate or participate in a murder, the trial court sentenced him to death, along with the persons who actually killed the victims, upon his conviction for robbery in the first degree In overturning the decision, the Supreme Court reasoned that to condemn such aDEFENDANT to death violated the Eighth and Fourteenth Amendments to the CONSTITUTION, which pro-hibited CRUEL AND UNUSUAL PUNISHMENT in state prosecutions The death penalty was an exces-sive punishment in light of the “criminal culpability” of this accomplice

58 ACCOMPANY

CROSS REFERENCES

Capital Punishment; Criminal Law; Eighth Amendment;

Fourteenth Amendment; Sentencing.

ACCOMPLICE WITNESS

A witness to a crime who, either as principal,

accomplice, or accessory, was connected with the

crime by unlawful act or omission on his or her part,

transpiring either before, at time of, or after

commission of the offense, and whether or not he

or she was present and participated in the crime

Generally, there can be no conviction solely

on the basis of what is said by an accomplice

witness; there must be evidence from an

unrelated source to corroborate the witness’s

TESTIMONY

ACCORD

An agreement that settles a dispute, generally

requiring an obligee to accept a compromise or

satisfaction from the obligor with something less

than what was originally demanded Also often

used synonymously with treaty

ACCORD AND SATISFACTION

A method of discharging a claim whereby the

parties agree to give and accept something in

settlement of the claim and perform the

agree-ment, the accord being the agreement and the

satisfaction its execution or performance, and it is

a new contract substituted for an old contract

which is thereby discharged, or for an obligation or

cause of action which is settled, and must have all

of the elements of a valid contract

To constitute an accord and satisfaction,

there must have been a genuine dispute that is

settled by a meeting of the minds with an intent

to compromise Where there is an actual

controversy, an ACCORD and satisfaction may

be used to settle it The controversy may be

founded on contract or tort It can arise from a

collision of motor vehicles, a failure to deliver

oranges ordered and paid for, or a refusal to

finish constructing an office building, etc

In former times, courts recognized an accord

and satisfaction only when the amount of the

controversy was not in dispute Otherwise, the

RESOLUTIONhad to be byCOMPROMISE AND

SETTLE-MENT The technical distinction is no longer made,

however, and a compromise of amount can

properly be part of an accord and satisfaction The

amount, whether disputed or not, is usually monetary, as when a pedestrian claims $10,000 in

DAMAGES from the driver who struck him The amount can be a variety of other things, however,

as when a homeowner claims that she ordered a swimming pool thirty-six feet long rather than thirty-five feet or when an employee insists that he

is entitled to eleven rather than ten days of vacation during the rest of the calendar year

An accord and satisfaction can be made only

by persons who have the legal capacity to enter into a contract A SETTLEMENTis not binding on

an insane person, for example; and an infant may have the right to disaffirm the contract

Therefore, a person, such as a guardian, acting

on behalf of a person incapable of contracting for himself or herself may make an accord and satisfaction for the person committed to his or her charge, but the law may require that the guardian’s actions be supervised by a court An executor or administrator may bind an estate; a

TRUSTEEcan accept an accord and satisfaction for

a trust; and an officer can negotiate a settlement for a corporation

A third person may give something in satisfaction of a party’s debt In such a case, an accord and satisfaction is effected if the creditor accepts the offer and the debtor authorizes, participates in, or later agrees to, the transaction

For example, a widower has an automobile accident but is mentally unable to cope with a lawsuit because his wife has just died He gratefully accepts the offer of a close family friend

to talk to the other driver, who has been threatening a lawsuit The friend convinces the other driver that both drivers are at fault to some extent The friend offers to pay the other driver

$500 in damages in exchange for a written statement that she will not make any claim against the widower for damages resulting from the accident The family friend and the other driver each sign a copy of the statement for the other, and when the payment is made, the accord and satisfaction is complete If the other driver then sues the widower for more money on account of the accident, the widower could show that he agreed to let his friend negotiate an accord and satisfaction, and the court would deny relief

An accord and satisfaction is a contract, and all the essential elements of a contract must be present The agreement must in-clude a definite offer of settlement and an

ACCORD AND SATISFACTION 59

unconditional acceptance of the offer accord-ing to its terms It must be final and definite, closing the matter it covers and leaving nothing unsettled or open to question The agreement may call for full payment or some compromise and it need not be based on an earlier agreement of the parties It does not necessarily have to be in writing unless it comesWITHIN THE STATUTEof frauds

Unless there are matters intentionally left outside the accord and satisfaction, it settles the entire controversy between the parties It extinguishes all the obligations arising out of the underlying contract or tort Where only one of two or more parties on one side settles, this ordinarily operates to discharge all of them

The reason for this is the rule that there should

be only one satisfaction for a single injury or wrong This rule does not apply where the satisfaction is neither given nor accepted with the intention that it settle the entire matter

An accord without satisfaction generally means nothing With a full satisfaction, the accord can be used to defeat any further claims

by either party unless it was reached by FRAUD,

DURESS, orMUTUAL MISTAKE

An accord and satisfaction can be distin-guished from other forms of resolving legal disputes A payment or performance means that the original obligations were met A release is a formal relinquishment of the right to enforce the original obligations and not necessarily a compromise, as in accord and satisfaction An

ARBITRATION is a settlement of the dispute by some outside person whose determination of an award is voluntarily accepted by the parties A

COMPOSITION WITH CREDITORSis very much like an accord but has elements not required for an accord and satisfaction It is used only for disputes between a debtor and a certain number

of his or her creditors, while an accord and satisfaction can be used to settle any kind of controversy—whether arising from contract or tort—and ordinarily involves only two parties Although distinctions have occasionally been drawn between an accord and satisfaction and a compromise and settlement, the two terms are often used interchangeably ANOVATIONis a kind

of accord in which the promise alone, rather than full performance, is satisfaction, and is accepted as a binding resolution of the dispute

FURTHER READINGS Dolson, Andrew J 1995 “Accord and Satisfaction under Article 3A of the UCC: A Trap for the Unwary ” Virginia Bar Association Journal 21 (winter).

Floyd, Michael D 1994 “How Much Satisfaction Should You Expect from an Accord? The U.C.C Section 3-311 Approach.” Loyola Univ of Chicago Law Journal 26 (fall) Veltri, Stephen C., Marina I Adams, and Paul S Turner.

2004 “Payments.” Business Lawyer 59.

ACCOUCHEMENT The act of giving birth to a child

The fact of accouchement may be proved

by the direct TESTIMONY of someone who was present, such as a midwife or a physician, at the time of birth It may be significant in proving parentage; for example, where there is some question about who is entitled to inherit property from an elderly person who died leaving only distant relatives

ACCOUNT

A written list of transactions, noting money owed and money paid; a detailed statement of mutual demands arising out of a contract or a fiduciary relationship

Accouchement: U.S Births and Birthrates

SOURCE: National Center for Health Statistics, National Vital Statistics Report,

vol 57, no 12, March 18, 2009.

0

1

2

3

4

5

0 5 10 15 20 25 30 35

2000 4.06

2007 4.30

1990 4.16

1980

3.61

Births (in millions)

Birthrate (per 1,000)

Year

1940

2.56

1960

4.26

3.73

1970 3.63

1950

ILLUSTRATION BY GGS

CREATIVE RESOURCES.

REPRODUCED BY

PERMISSION OF GALE,

A PART OF CENGAGE

LEARNING.

60 ACCOUCHEMENT

An account can simply list payments, losses,

sales, debits, credits, and other monetary

trans-actions, or it may go further and show a balance

or the results of comparing opposite

transac-tions, like purchases and sales Businesspersons

keep accounts; attorneys may keep escrow

accounts; and executors must keep accounts that

record transactions in administering an estate

ACCOUNT, ACTION ON

A civil lawsuit maintained under the common law

to recover money owed on an account

The action on account was one of the ancient

FORMS OF ACTION Dating back to the thirteenth

century, it offered a remedy for the breach of

obligations owed by fiduciaries Originally, the

action allowed lords to recover money

wrong-fully withheld by the bailiffs of their manors,

whom they appointed to collect fines and rents

Later, statutes extended the right so that

law-suits could be brought against persons who

were required to act primarily for someone

else’s benefit, such as guardians and partners

Eventually, the action withered away because its

procedure was too cumbersome, and fiduciaries

came under the jurisdiction of the special court

of the king, called theCHANCERY

An action on account is different from a

modern-day ACCOUNTING, which is a settling

of accounts or a determination of transactions

affecting two parties, often when one party asks a

court to order the other party to account

ACCOUNT PAYABLE

A debt owed by a business that arises in the

normal course of its dealings, that has not been

replaced by a note from another debtor, and that

is not necessarily due or past due

Bills for materials received or obligations on

anOPEN ACCOUNTmay be accounts payable This

kind ofLIABILITYusually arises from a purchase

of merchandise, materials, or supplies

ACCOUNT RECEIVABLE

A debt owed by a business that arises in the

normal course of dealings and is not supported by

a negotiable instrument

The charge accounts of a department store

are accounts receivable, but income from

investments usually is not Accounts receivable

generally arise from sales or service transactions

They are not necessarily due or past due

Insurance may be purchased to protect against the risk of being unable to collect on accounts receivable if records are damaged or lost

ACCOUNT RENDERED

A statement of transactions made out by a creditor and presented to the debtor

After the debtor has examined the account and accepted it, an account rendered becomes

an ACCOUNT STATED

ACCOUNT STATED

An amount that accurately states money due to a creditor; a debt arising out of transactions between

a debtor and creditor that has been reduced to

a balance due for the items of account

A creditor agrees to accept and a debtor agrees that a specific sum is a true and exact statement of the amount he or she owes The debtor may agree in words to pay the amount,

or it may be understood that the debtor has accepted the account stated by failing to object within a certain period of time

ACCOUNTANT

A person who has the requisite skill and experience

in establishing and maintaining accurate financial records for an individual or a business The duties

of an accountant may include designing and controlling systems of records, auditing books, and preparing financial statements An accountant may give tax advice and prepare tax returns

A public accountant renders ACCOUNTING or auditing services for a number of employees, each of whom pays the accountant a fee for services rendered He or she does more than just

BOOKKEEPING but does not generally have all the qualifications of a certified public accountant

A certified public accountant is one who has earned a license in his or her state that attests to

a high degree of skill, training, and experience

In addition to passing an accounting examina-tion, a candidate must have the proper business experience, education, and moral character in order to qualify for the license The letters CPA

are commonly used and generally recognized to

be the abbreviation for the title Certified Public Accountant

The practice of accounting is a highly skilled and technical profession that affects public

WELFARE It is entirely appropriate for the state

ACCOUNTANT 61

to regulate the profession by means of a licensing system for accountants Some states do not permit anyone to practice accounting except certified public accountants, but other states use the title to recognize the more distinguished skills of a CPA while permitting others to practice as public accountants All states limit the use of the title and the initials to those who are licensed as certified public accountants

All accountants are held to high standards of skill in issuing professional opinions They can

be sued forMALPRACTICEif performance of their duties falls below standards for the profession

ACCOUNTING Accounting is a system of recording or settling accounts in financial transactions and includes methods of determining income and expenses for tax and other financial purposes Accounting is also one of the remedies available for enforcing a right or redressing a wrong asserted in a lawsuit

Various accounting methods may be employed The accrual method shows expenses incurred and income earned for a given period

of time whether or not such expenses and income have been actually paid or received by that time The cash method records income and expenses only when monies have actually been received or paid out The completed contract method reports gains or losses on certain long-term contracts GROSS INCOME and expenses are recognized under this method in the tax year in which the contract is completed The install-ment method of accounting is a method used by regulated utilities to calculate DEPRECIATION for

INCOME TAXpurposes

The cost method of accounting records the value of assets at their actual cost, and the fair value method uses the presentMARKET VALUEfor the recorded value of assets Price level account-ing is a modern method of valuaccount-ing assets in a

FINANCIAL STATEMENT by showing their current value in comparison to the gross national product

Where a court orders an accounting, the party against whom judgment is entered must file a complete statement with the court that accounts for his or her administration of the affairs at issue in the case An accounting is proper for showing how an executor has managed the ESTATE of a deceased person or

for disclosing how a partner has been handling

PARTNERSHIPbusiness

An accounting was one of the ancient English remedies available in courts of equity The regular officers of the CHANCERY, who represented the king in hearing disputes that could not be taken to courts of law, were able to serve as auditors and work through complex accounts when necessary The chancery had the power to discover hidden assets in the hands of the DEFENDANT Later, courts of law began to recognize and enforce regular contract claims,

as actions inASSUMPSIT, and the courts of equity were justified in compelling an accounting only when the courts at law could not give relief A

PLAINTIFFcould ask for an accounting in equity when the complexity of the accounts in the case made it too difficult for a jury to resolve or when a TRUSTEEor other FIDUCIARY was charged with violating a position of trust

In the early twenty-first century, courts in the United States generally have jurisdiction both at law and in equity They have the power to order

an accounting when necessary to determine the relative rights of the parties An accounting may

be appropriate whenever the defendant has violated an obligation to protect the plaintiff’s interests For example, an accounting may be ordered to settle disputes when a partnership is breaking up, when an HEIR believes that the executor of an estate has sold off assets for less than their FAIR MARKET VALUE, or when share-holdersCLAIMthat directors of a corporation have appropriated for themselves a business opportu-nity that should have profited the corporation

An accounting may also be an appropriate remedy against someone who has committed a wrong against the plaintiff and should not be allowed to profit from it For example, a bank teller who embezzles money and makes a huge profit by investing it in mutual funds may be ordered to account for all the money taken and the earnings made from it A businessperson who sells a product as that of a more popular manufacturer might have to account for the entire profit made from it A defendant who plagiarizes another author’s book can be ordered

to give an accounting and pay over all the profits

to the owner of the copyrighted material An accounting forces the wrongdoer to trace all transactions that flowed from the legal injury, because the plaintiff is in no position to identify the profits

62 ACCOUNTING

Arthur Andersen and Other

Accounting Failures

The accounting profession, which is largely

self-regulated, has suffered through a series of

fiascoes since the late 1990s, resulting in a call

for major changes in accounting standards The

Financial Accounting Standards Board (FASB)

has served since 1973 as one of the

organiza-tions responsible for establishing standards of

financial accounting and reporting Although

the FASB is a private organization, its standards

are recognized as authoritative by theSECURITIES

AND EXCHANGE COMMISSION(SEC) and the

Ameri-can Institute of Certified Public Accountants In

the late 1990s and early 2000s, debacles

involving major accounting firms required the

FASB and the SEC, as well as other regulatory

organizations, to consider new rules designed to

improve financial reporting Between 1996 and

2002, investors lost an estimated $200 billion in

earnings restatements and stock meltdowns

following failures in auditing processes A

number of high-profile auditing failures

de-creased confidence in the accounting profession

Among these failures were incidents involving

such companies as Bausch and Lomb, Rite Aid,

Cendant, Sunbeam, Waste Management,

Super-ior Bank, and Dollar General

One of the most highly publicized

account-ing failures early in the new millennium

involved Houston-based Enron Corporation

and its ACCOUNTANT, Arthur Andersen, L.L.P

Enron suffered a collapse in the third quarter of

2001 that resulted in the largestBANKRUPTCY in

U.S history to date and numerous lawsuits

alleging violations of federal securities laws

Thousands of Enron employees lost 401(k)

retirement plans that held company stock

Enron reported annual revenues of about $101

billion between 1985 and 2000 On December

18, 2000, Enron’s stock sold for $84.87 per

share Stock prices fell throughout 2001,

however, and on October 16, 2001, the

company reported losses of $638 million in

the third quarter alone During the next six

weeks, company stock continued to fall, and by

December 2, 2001, Enron stock dropped to

below $1 per share after the largest single day

trading volume for any stock listed on either the

New York Stock Exchange or the NASDAQ

Initial allegations focused on the role of

Arthur Andersen The company was one of the

so-called Big Five accounting firms in the United

States, and it had served as Enron’s auditor for 16

years Arthur Andersen also served as a consul-tant to Enron, thus raising serious questions regarding conflicts of interests between the two companies According to court documents, Enron and Arthur Andersen had improperly categorized hundreds of millions of dollars as increases in shareholder equity, thereby mis-representing the true value of the corporation

Arthur Andersen also did not follow GENERALLY ACCEPTED ACCOUNTING PRINCIPLES(GAAP) when it considered Enron’s dealings with related part-nerships These dealings, in part, allowed Enron

to conceal some of its losses

Arthur Andersen was also ACCUSED of destroying thousands of Enron documents that included not only physical documents but also computer files and e-mail files After investiga-tion by the U.S.JUSTICE DEPARTMENT, the firm was indicted on OBSTRUCTION OF JUSTICE charges in March 2002 The government also charged the company with violating federal law, which criminalized the knowing and corrupt persua-sion of others to withhold or alter documents

After a six-week trial, Arthur Andersen was found guilty in June 2002 The company was placed on PROBATION for five years and was required to pay a $500,000 fine Some analysts also questioned whether the company could survive after this series of incidents However, the U.S

Supreme Court, in an unanimous opinion, later reversed the criminal conviction on the basis of faulty and improper jury instructions (Arthur Andersen v United States, 544 U.S 696 [2005])

The high court found nothing inherently corrupt about Arthur Andersen (the company) having ordered employees to destroy documents The Court held that a conviction could be found only

if prosecutors proved that company officials were aware that their conduct (in persuading the destruction of documents) was corrupt

CivilFRAUDcharges (relating to accounting and auditing) were also filed in a related CLASS ACTIONlawsuit by Enron stockholders (includ-ingPENSIONadministrators for the University of California, the named plaintiffs) against several Wall Street investment banks, including Credit Suisse, Merrill Lynch, and JPMorgan Chase

The lawsuit charged that the banks essentially colluded with and assisted Enron officials with

FRAUDULENTpartnerships and transactions, ma-nipulating the true status of Enron’s financial health This activity resulted in company officials presenting allegedly deceptive business

ACCOUNTING 63

reports to investors In 2007 the Fifth Circuit Court of Appeals reversed the order certifying

a class action (uniting plaintiff investors), finding that the defendants were under no fiduciary or other duty to disclose the nature of Enron transactions to investors Therefore, there could not be a class-wide presumption of reliance on defendants by investors (an essential element to prove fraud or misrepresentation) (Regents of the Univ of Cal v Credit Suisse First Boston, 482 F.3d 372 [5th Cir 2007]) In January

2008, the U.S Supreme Court denied review of the case (No 06-1341, 2008 WL 169504, U.S

LEXIS1120, 76 U.S.L.W 3392)

The accounting issues in the Enron case extended beyond Enron and Arthur Andersen In the wake of these and other major accounting/

auditing scandals, Congress passed the anti-fraud

SARBANES-OXLEY ACT OF 2002, P.L 107-204, 116 Stat 745 (codified in various chapters and sections of the U.S.CODE) Among other things, the act created a Public Company Accounting Oversight Board (PCAOB), to be paid for by fees collected on publicly traded companies, according

to their size The Board replaced the accounting industry’s own internal regulators and had independentSUBPOENApower to facilitate its own regulation, oversight, and discipline of accoun-tants and accounting firms The Sarbanes-Oxley Act also provided for the SEC to appoint the chairman and four directors of the PCAOB

Another important provision in the act created greater financial disclosure mandates and in-creased the criminal penalties for securities fraud

Later, the act itself came under criticism and

CONSTITUTIONAL scrutiny when pro-business, anti-tax/fee plaintiffs brought suit alleging that the creation of the PCAOB violated the appoint-ments clause of the U.S.CONSTITUTION(Article II, section 2, cl 2) as well as the constitutionally mandatedSEPARATION OF POWERS A federal district court upheld the constitutionality of the act and the PCAOB, and its decision was affirmed by the U.S District Court of Appeals for the D.C

Circuit in 2008 (Free Enterprise Fund v Public Company Accounting Oversight Board 537 F.3d

667 [D.C Cir 2008]) (In May 2009 the U.S

Supreme Court granted review of that decision for its 2009–2010 term, 77 U.S.L.W 3431.) Despite these safeguards, one of the largest accounting and auditing frauds on record

unfold-ed in 2008, when securities investment BROKER

Bernard (Bernie) Madoff was formally charged in federal court in Manhattan, New York City, with SEC violations that cost investors at least $50 billion in false or nonexistent investments In March 2009 Madoff pleaded guilty to creating false investment accounts and privately pocketing funds received from investors, periodically paying returns to some of them with money received from other prospective investors under a giant Ponzi scheme In June 2009 he was sentenced to

150 years in prison In connection with this case, the accounting firm of Friehling & Horowitz and partner David G Friehling, C.P.A were also charged with fraud and various SEC violations for falsely representing that they had conducted legitimate company audits of Madoff’s invest-ment firm over the years, when in fact they had not (Securities and Exchange Commission v David G Friehling, C.P.A and Friehling & Horowitz, CPAs, P.C [S.D.N.Y Civ 09 CV 2467])

FURTHER READINGS Atvedlund, Erin 2009 Too Good to Be True: The Rise and Fall of Bernie Madoff New York: Portfolio Hardcover.

Meyer, Charles H 2002 Accounting and Finance for Lawyers

in a Nutshell 2d ed St Paul, Minn.: West Group Rachlin, Robert, and Allen Sweeny 1996 Accounting and Financial Fundamentals for Nonfinancial Executives New York: AMACON.

SEC 2009 “SEC Charges Madoff Auditors with Fraud.” Press Release, March 18 Litigation Release No 20959 CROSS REFERENCES

Accrual Basis; Cash Basis; Income Tax.

ACCREDIT

To give official authorization or status To recognize

as having sufficient academic standards to qualify graduates for higher education or for professional practice In international law: (1) To acknowledge;

to receive as an envoy and give that person credit and rank accordingly (2) To send with credentials as an envoy This latter use is now the accepted one

ACCREDITED LAW SCHOOL

A law school that has been approved by the state and the Association of American Law Schools (AALS), the American Bar Association (ABA), or both

In certain states—for example, California—

it is acceptable for a law school to be accredited

by the state and not by either the AALS or the ABA In most states, however, only graduates

64 ACCREDIT

of AALS or ABA accredited law schools are

permitted to take the stateBAR EXAMINATION

CROSS REFERENCE

Legal Education.

ACCRETION

The growth of the value of a particular item given

to a person as a specific bequest under the

provisions of a will between the time the will

was written and the time of death of the testator—

the person who wrote the will

Accretion of land is of two types: (1) by

alluvion, the washing up of sand or soil so as to

form firm ground; and (2) by dereliction, as

when the sea shrinks below the usual watermark

The terms alluvion and accretion are often used

interchangeably, but alluvion refers to the deposit

itself while accretion denotes the act Land

uncovered by a gradual subsidence of water is

not an accretion; it is a reliction

ACCRUAL BASIS

A method of accounting that reflects expenses

incurred and income earned for income tax

purposes for any one year

Taxpayers who use the accrual method must

include in theirTAXABLE INCOMEany money that

they have the right to receive as payment

for services, once it has been earned Any

expenses that they may take as deductions

when computing taxable income must be due at

the time the deduction is taken For example,

suppose a surgeon performed a tonsillectomy

in October 2003, and on December 31, 2003,

he received a bill for carpeting installed in

the waiting room of his office He was paid

the surgical fee on January 3, 2004, the same day

he paid for the carpeting The surgical fee will

be included in his taxable income for 2003, the

year in which he earned it, regardless of the fact

that he was not paid until the following year

His expenses for the carpeting can be

deducted from his 2003 income because once

he received the bill, he was bound to pay it The

fact that he did not pay for the carpeting until

the following year does not prevent him from

taking the deduction in 2003

The accrual method of ACCOUNTING differs

from theCASH BASISmethod, which treats income

as only that which is actually received, and

expense as only that which is actually paid out

If the cash method were used in the above

example, the payment of the surgical fee would be included as income for the 2004 tax year, the year

in which it was received by the surgeon The surgeon could deduct the cost of the carpeting only when he actually paid for it in 2004, although

it had been installed in 2003

Unearned income, such as interest or rent,

is generally taxed in the year in which it is received, regardless of the accounting method that the taxpayer uses

ACCRUE

To increase; to augment; to come to by way of increase; to be added as an increase, profit, or damage Acquired; falling due; made or executed;

matured; occurred; received; vested; was created;

was incurred

To attach itself to, as a subordinate or accessory claim or demand arises out of, and is joined to, its principal

The term is also used of independent or original demands, meaning to arise, to happen, to come into force or existence; to vest, as in the sentence, “The right of action did not accrue within six years.” To become a present right or demand; to come to pass

Interest on money that a depositor has in a bank savings account accrues, so that after a certain time the amount will be increased by the amount of interest it has earned

ACAUSE OF ACTION, the facts that give a person a right to judicial relief, usually accrues on the date that the injury to thePLAINTIFFis sustained When the injury is not readily discoverable, the cause of action accrues when the plaintiff in fact discovers the injury This occurs frequently in cases of fraud

or MALPRACTICE A woman, for example, has an appendectomy Three years after the surgery, she still experiences dull pain on her right side She is examined by another physician who discovers a piece of surgical sponge near the area of the operation Although the injury had occurred at the time of surgery three years earlier, in this case the cause of action for MEDICAL MALPRACTICE

accrues on the date that the sponge is discovered

by the second doctor This distinction is impor-tant for purposes of the running of theSTATUTE OF LIMITATIONS, the time set by law within which a lawsuit must be commenced after a cause of action accrues In cases involving injuries that cannot be readily discovered, it would be unfair to bar a plaintiff from bringing a lawsuit because he

or she does not start the suit within the required time from the date of injury

ACCRUE 65

ACCUMULATED EARNINGS TAX

A special tax imposed on corporations that accumulate (rather than distribute via dividends) their earnings beyond the reasonable needs of the business The accumulated earnings tax is imposed

on accumulated taxable income in addition to the corporate income tax

ACCUMULATION TRUST

An arrangement whereby property is transferred

by its owner—the settlor—with the intention that

it be administered by someone else—a trustee—

for another person’s benefit, with the direction that the trustee gather, rather than distribute, the income of the trust and any profits made from the sale of any of the property making up the trust until the time specified in the document that created the trust

Many states have laws governing the time over which accumulations may be made

ACCUMULATIVE JUDGMENT

A second or additional judgment against a person who has already been convicted and sentenced for another crime; the execution of the second judgment is postponed until the person’s first sentence has been completed

ACCUMULATIVE SENTENCE

A sentence—a court’s formal pronouncement of the legal consequences of a person’s conviction

of a crime—additional to others, imposed on a defendant who has been convicted upon an indictment containing several counts, each charg-ing a distinct offense, or who is under conviction at the same time for several distinct offenses; each sentence is to run consecutively, beginning at the expiration of the previous sentence

A person must finish one sentence before being allowed to start the next one Another name for ACCUMULATIVE SENTENCE is cumulative

or consecutive sentence

The opposite of an accumulative sentence is

a CONCURRENT sentence—two or more prison sentences that are to be served simultaneously,

so that the prisoner is entitled to be released at the end of the longest sentence

ACCUSATION

A formal criminal charge against a person alleged

to have committed an offense punishable by law,

which is presented before a court or a magistrate having jurisdiction to inquire into the alleged crime The SIXTH AMENDMENT to the CONSTITUTION

provides in part that a personACCUSEDof a crime has the right“to be informed of the nature and cause of the accusation.” Thus in any federal criminal prosecution, the statute setting forth the crime in theACCUSATIONmust define the offense in sufficiently clear terms so that an average person will be informed of the acts that come within its scope The charge must also inform the accused in clear and unambiguous language of the offense with which he or she is being charged under the statute An accused has the same rights when charged with violating stateCRIMINAL LAWbecause the Due Process Clause of the FOURTEENTH AMENDMENT applies the guarantees of the Sixth Amendment to the states The paper in which the accusation is set forth—such as an INDICTMENT, information, or a complaint—is called an accusa-tory instrument

Most state constitutions contain language similar to that in the Sixth Amendment In many state rules of CRIMINAL PROCEDURE, the accusatory instrument serves to protect the state

CONSTITUTIONAL rights of the accused In Louisiana, for example, the purpose of a bill

of information is to inform aDEFENDANT of the nature and cause of the accusation against him

or her as required by the Louisiana State Constitution (State v Stevenson, 2003 WL

183998[La App 2003])

In order to QUASH a bill of information or other accusatory instrument, the accused must present DIRECT EVIDENCE not established by the record, showing the bill was insufficient The accused generally has the BURDEN OF PROOF to demonstrate that the accusatory instrument was insufficient The rules of evidence in a particular jurisdiction apply to the evidentiary determination

of the sufficiency of the accusatory instrument

CROSS REFERENCE Criminal Law.

ACCUSATORY BODY Body such as a grand jury whose duty it is to hear evidence to determine whether a person should

be accused of (charged with) a crime; to be distinguished from a traverse or petit jury, which

is charged with the duty of determining guilt or innocence

66 ACCUMULATED EARNINGS TAX

The generic name for the defendant in a criminal

case A person becomes accused within the meaning

of a guarantee of speedy trial only at the point at

which either formal indictment or information has

been returned against him or her, or when he or she

becomes subject to actual restraints on liberty

imposed by arrest, whichever occurs first

ACKNOWLEDGMENT

To acknowledge is to admit, affirm, declare,

testify, avow, confess, or own as genuine

Admis-sion or affirmation of obligation or responsibility

Most states have adopted the Uniform

Acknowl-edgment Act

The partial payment of a debt, for example,

is considered an acknowledgment of it for

purposes of tolling the statute of limitations—

the time set by law for bringing a lawsuit—

based on a person’s failure to repay a debtor

State law usually gives a creditor six years from

the date a debt is due, according to the

creditor’s contract with the debtor, to SUE for

nonpayment If, on the last day of the fifth year,

the debtor repays any part of the loan, the

STATUTE OF LIMITATIONS is tolled or suspended

The creditor then has another six years from the

date of partial payment to sue the debtor for

the balance of the loan The debtor’s partial

payment indicates ACCEPTANCE of responsibility

to pay the loan If the debtor had not paid

anything, he or she would have escapedLIABILITY

six years after the date the loan was due

An acknowledgment of PATERNITY means

recognition of parental duties—such as

finan-cial support of an illegitimate child—by written

agreement, verbal declaration, or conduct of the

father toward the mother and child that clearly

demonstrates recognition of paternity

The requirement for acknowledgments on

certain documents—such as deeds transferring

the ownership of real property, wills giving the

ownership of property to a decedent’s heirs after

death, or DOCUMENTARY EVIDENCE that is to be

admitted in a legal proceeding—is established

by state law If such documents do not contain

acknowledgments, they are ineffective and

cannot be used in anyLEGAL PROCEEDINGS

Any or all of the parties to a document may

be required to acknowledge it Only those

persons specified by law, a NOTARY PUBLIC,

for example, may take an acknowledgment

Usually, a person making an acknowledgment does not have to explain the contents of the document to the person taking the acknowl-edgment A person who ordinarily takes an acknowledgment might be disqualified from doing so if that person stands to gain some benefit from or has a financial interest in the outcome of the transaction For example, state law requires a person making a will, aTESTATOR,

to make an acknowledgment to a certain number

of WITNESSESthat the document is the genuine expression of how that person wants his or her property disposed of upon his or her death

Suppose the state requires two witnesses If the people selected as witnesses have financial interests in the person’s will, they will be disqualified for purposes of acknowledgment

This is done to deter dishonest people from fabricating a document that is beneficial to them Such a will is legally ineffective; once the testator dies, his or her property will be transferred according to the laws ofDESCENT AND DISTRIBUTION

A certificate of acknowledgment, sometimes referred to as the acknowledgment, is evidence that the acknowledgment has been done properly Although its contents may vary from state to state, the certificate must recite: (1) that acknowledgment before the proper officer was made by the person who completed the document; (2) the place where the acknowledg-ment took place; and (3) the name and authority of the officer The certificate may be

on the document itself or may be attached to it

as a separate instrument

ACQUIESCENCE Conduct recognizing the existence of a transaction and intended to permit the transaction to be carried into effect; a tacit agreement; consent inferred from silence

For example, a new beer company is concerned that the proposed label for its beer might infringe on the trademark of its competi-tor It submits the label to its competitor’s general counsel, who does not object to its use

The new company files an application in the

PATENT AND TRADEMARK OFFICEto register the label

as its trademark and starts to use the label on the market The competitor does not file any objection in the PATENT Office Several years later, the competitor sues the new company for infringing on its trademark and demands an

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