Business Law: Part 1

Question 1

What is necessary to create an agency

Answer 1

All you need is consent and a principal with capacity (the agent does not have to have capacity). A writing is only necessary if the agent will enter into land sale contracts

Question 2

Duties of an Agent to Principal (LORA)

Answer 2

Loyalty - no kickbacks
Obedience - obey all reasonable directions
Reasonable care - no negligence
Account correctly - do not combine accounts of principal and agent

Question 3

Duties of principal to agent

Answer 3

• Compensation
• Reimbursement of any reasonable expenses
• Remedies of the agent: any damages due to a breach of contract

Question 4

Agency coupled with an interest (loans)

Answer 4

Exception to the termination power vs right rule. Principal has no power OR right to terminate

Question 5

An agents power to contractually bind a principal arises through

Answer 5

1) a grant of actual authority - expressed vs implied
2) apparent authority - power but no right
3) ratification - power but no right

Question 6

Automatic termination of actual authority, by operation of the law scenarios

Answer 6

1) death of either principal or agent
2) incapacity of the principal
3) discharge in bankruptcy of the principal
4) failure to acquire a necessary license
5) destruction of the subject matter of the agency
6) subsequent illegality of the subject matter

Question 7

Termination of apparent authority

Answer 7

Notice is required! Actual notice is required to all old customers and constructive notice (ex. ad in the newspaper) for all other 3rd parties.

Question 8

Ratification

Answer 8

When a principal chooses to become bound by a previously unauthorized act of his or her agent. Agent must have apparent authority

Question 9

3 requirements of a legally enforceable contract

Answer 9

1) an agreement made up of an offer and an acceptance
2) an exchange of consideration
3) a lack of defenses
* Writing is not required

Question 10

3 ways of terminating an offer

Answer 10

• to create a contract, an offer must be accepted before it is terminated
  1) Revocation - offeror backs out
  2) Rejection - offeree terminates by saying no or counter offering
  3) Termination by Law - either party dies without an option contract in place

Question 11

Option contract

Answer 11

Allows the offeree time to think about the offer. Offeror cannot revoke the offer during the option time period. Also keeps an offer alive if either party dies

Question 12

When is acceptance valid

Answer 12

When SENT (Mailbox rule)

*Revocation, rejections and counteroffers are valid when RECEIVED

Question 13

Common Law Contracts (RISE)

Answer 13

• Real estate
• Insurance
• Services
• Employment

Question 14

Fraud factors (MAIDS)

Answer 14

• Misrepresentation of Material facts
• Actual reliance on the given information
• Intent to Induce reliance
• Damages
• Scienter (intent to deceive)

Question 15

Defenses that make a contract void (A PIE)

Answer 15

• Adjudicated incompetency
• Physical duress
• Illegality
• fraud in the Execution

Question 16

Contracts required to be in writing (MY LEGS)

Answer 16

• Marriage
• cannot be performed within a Year
• Land contracts
• Executor contracts
• sale of Goods for $500 or more (services can be oral regardless a price as long as it can be completed within 1 year)
• Surety contracts

Question 17

Parol Evidence Rule

Answer 17

Prior statements that contradict the writing are inadmissible. Oral or written modifications after the contract has been entered into are admissible

Question 18

UCC Merchants firm offer components

Answer 18

1) seller must be a merchant
2) offer must be in writing
3) offer must give assurance that it will be kept open for a certain time
* Makes contract irrevocable

Question 19

Exceptions to the G in MY LEGS aka when a writing signed by the party being sued is not required when sale of goods is over $500

Answer 19

1) Specially manufactured goods
2) When a written confirmation is sent from merchant to merchant and not responded to in 10 days, its treated as if the confirmation had been accepted

Question 20

When does a PMSI creditor exist

Answer 20

1) the creditor sells the collateral on credit, retaining a security interest or
2) the creditor advances funds used by the debtor to purchase the collateral
* Did the debtor purchase the collateral with the creditors money or creditors credit? If yes then PMSI

Question 21

3 requirements for an attachment

Answer 21

1) Agreement of the parties
2) Value is given by creditor
3) Debtor has rights in the collateral