Business Law

Question 1

Rights and Duties between Principal and Agent

Answer 1

Duty of loyalty: agent must act in principal’s best interest.

Duty of obedience: agent must obey reasonable directions of principal.

Duty of reasonable care: agent should not be negligent.

Duty of account: account for principal’s activities separately.

Subagent: owes duty of care to agent and principal.

Question 2

Principal’s remedies

Answer 2

Tort damages: recover costs from agent, if agent breached.

Contract damages: if agent rec’d compensation, can collect damages. If not compensated, no contract, no damages.

Recovery of secret profits: if agent rec’d secret profit, principal can recover by imposing constructive trust on profit.

Withhold compensation: intentional break, not required to pay agent.

Question 3

Duties of principal to agent

Answer 3

Compensation: implied unless agreed upon.

Reimbursement/indemnification: all expenses incurred.

Remedies of agent: if principal breached, agent can sue for damages. If not contractual, may not seek contract remedy of specific performance. Agent has a duty to mitigate damages.

Question 4

Principal types

Answer 4

Disclosed: agent not liable.

Unidentified and undisclosed: agent liable.

Question 5

Agent types

Answer 5

Express actual authority: includes powers expressly granted.

Implied actual authority: agent reasonably believes necessary to carry out duties.

Apparent authority: principal caused third party to reasonably believe agent has authority.

*minor can be an agent
*consideration is not required to form agency relationship.

Question 6

Attachment requirements

Answer 6

Agreement of the parties

Value given by creditor

Debtor has rights in collateral

Question 7

Two separate sole proprietors merge without filing with the state

Answer 7

General partnership

Question 8

Guarantor vs Surety

Answer 8

Guarantor- liable second to debtor

Surety - primarily liable
(Gratuitous is not compensated, any changes to risk results in obligation result in discharge)
(Compensated may be released with material changes)

Question 9

Statue of Frauds - Sale of goods $500+

Answer 9

SWAP:
Specially manufactured (custom) goods

Written confirmation between merchants

Admission in court

Performance

Question 10

Tort Liability

Answer 10

GR: The principal is not liable for torts (wrongful acts) of an agent.

Exception: An employer can be liable for an employee - Respondeat Superior.

Question 11

Statute of Frauds - Contracts that need to be in writing

Answer 11

MY LEGS:
Marriage
Year (Cannot be performed in a year)
Land
Executors
Goods
Surety

Question 12

Tax return preparer - third party liability

Answer 12

General rule - third party could not sue because no professional relationship.

Minority rule - if the TRP could foresee a third party’s reliance then they could sue.

Question 13

UCC Sale of Goods - Uniform Commercial Code

Answer 13

RISE:
Real estate
Insurance
Services
Employment law

Question 14

Contact Defenses

Answer 14

Lack of agreement, lack of consideration along with:

Duress: Unlawful use of threat of harm

Undue Influence: Abusing a position of trust or confidence

Statute of Limitations: 4-6 years from date of breach

Accord: Agreement to substantiate one contract for another

Novation: New contract substitutes a new party for an old party in existing contract. Old party is released

Parol Evidence Rule: Prohibits prior evidence that contradicts terms. Except to show fraud.

Question 15

Merchant’s Firm Offer

Answer 15

Written promise to keep offer open. Irrevocable for time stated, reasonable time but no longer than 3 months

Question 16

Delivery & ROL of Goods

Answer 16

ROL to pass: goods must be identified. If ROL is not designated;
Non-carrier (seller is not a merchant) - passes to buyer on seller’s tender.
Non-carrier (seller is a merchant) - passes to buyer on delivery.
Carrier (shipment) - passes to buyer when delivered to carrier.
Carrier (destination) - passes to buyer upon delivery.

If seller sends nonconforming goods, ROL remains with seller.

Sale of Approval: ROL on seller until buyer approves.
Sale or Return: ROL passes to buyer when seller delivers.

If buyer rejects: the title revests with seller.

Question 17

Remedies of Buyer & Seller

Answer 17

Anticipatory Repudiation: anticipate they will not be able to perform. The non-breaching party may act in response.

Duty to Mitigate: parties cannot recover for damages they could have avoided.

Question 18

Seller’s remedies

Answer 18

Liquidated damages: if buyer makes a down payment and breaches, seller may keep lesser of $500 or 20%.

Question 19

Buyer’s remedies

Answer 19

Replevin: right to recover goods wrongfully in hands of seller. May be used if goods have been identified and the buyer cannot cover.

Question 20

Power to terminate relationship

Answer 20

Both parties generally have the power but not necessarily the right. May be held liable for damages if termination breaches contract.

Agency coupled with interest: only the agent can terminate, principal cannot.

Question 21

Purchase money security interest (PMSI)

Answer 21

Special type of security interest that has priority over collateral

*Replevin: judicial action seeking the transfer of personal property from debtor to secured party.
*Secured party cannot retain collateral if debtor has paid at least 60%, secured party must sell.

Question 22

General Partnership - Order of Distribution

Answer 22

GP loans
Partner capital accounts
GP profits

Question 23

Revised Model Business Corporation Act

Answer 23

Stock dividend is not defined as a distribution

Question 24

LLC Dissolution

Answer 24

Dissolved upon death, retirement, resignation, bankruptcy, etc of a member

Question 25

Bankruptcy - claimant priority

Answer 25

Secured - priority - general

Priority list:
Support obligations
Admin expenses
Involuntary claims
Wages up to 15100 within 180 days
Employee benefits same as wages
Grain farmers and fishermen-storage up to 7475
Consumer deposits up to 3350
Tax claims
Personal injury claims from intoxication

Question 26

Parol (oral) Evidence Rule

Answer 26

Prior or contemporaneous statements that contradict the writing are inadmissible.

Subsequent modifications are admissible.

Question 27

Sales Article of the UCC

Answer 27

Article II - tangible, movable personal property.

Question 28

Bankruptcy - Types

Answer 28

Ch 7: Liquidation
-Trustee liquidates debtors assets to pay creditors.
-Individual are relieved of debt.
-Corporations are dissolved.

Ch 11: Reorganization
-No trustee required. Debtor retains assets and plans for reorganization. Used by individuals and businesses, business continues.

Ch 13: Adjustments of debt
-Trustee oversees handling of debt repayment over 3-5 years.

Ch 15: Ancillary & Cross-border cases
-Foreign

Question 29

Piercing the Corporate Veil (Disregard of Corporate Entity)

Answer 29

Commingle personal funds.

Inadequately capitalized at formation.

Formed to commit fraud on existing creditors.