Business Law: Part 1 Flashcards
what is specific performance?
court order to fulfill the terms of the contract
when an agency is terminated by operation of law, is the principal required to notify the third party that the agent’s authority has been terminated?
NO
what is an agent?
a person authorized to act on another’s behalf
what is the doctrine of respondeat superior?
basically means that an employer is liable for the torts of its EMPLOYEES (not independent contractors)
actual authority arises from communications between which two parties, while apparent authority arises from communications between which two parties?
actual: principal and agent
apparent: principal and third party with whom the agent deals
if the principal is undisclosed, who can be held liable to the third party?
both the principal and agent.
think about it, the third party does not know a principal exists, so they can come after the agent and then the principal once the principal becomes known
what is actual authority?
authority the agent reasonably believes that he/she has based on communications with the principal
if an agent fraudulently breaches a fiduciary duty, what options are available to the principal?
termination of the agency
constructive trust
what are the 3 elements of a contract?
offer, acceptance, consideration
what is the mailbox rule?
if no means of acceptance is specified, the acceptance is effective upon dispatch
when is a unilateral contract formed?
when a promise is exchanged for an act
T or F, an offer may be terminated by the offeror at any time unless the offeree gave consideration to keep the offer open.
T
if consideration is given, it is known as an option contract
are advertisements considered offers?
generally no, they are invitations to negotiate.
to be considered an offer, the advertisement has to be very specific
under the common law of contracts, how is a contract modification treated?
like a new contract and requires consideration
what are the different ways of ratifying a contract entered into by a minor?
impliedly after reaching the age of majority, expressly after reaching the age of majority, failing to disaffirm within a reasonable time after reaching majority
*minors have the right to disaffirm while they are a minor and within a reasonable time after becoming an adult. The adult cannot disaffirm
what is an accord?
an agreement to substitute one contract for another
what is the parol evidence rule?
prohibits the introduction of prior or contemporaneous oral statements that seek to vary the terms of a fully integrated (written) contract.
*introduction of subsequent oral or written agreements is allowed
can a party obtain specific performance and recover compensatory damages?
NO, one or the other
when can a material unilateral mistake be a defense?
if the nonmistaken party either knew or should have known of the mistake
when is a liquidated damages clause not enforceable?
if it constitutes a penalty or it is unreasonable in relation to the actual harm done
duress through physical harm or threat of such harm renders a contract ___.
void
fraud in the execution (void)
v.
fraud in the inducement (voidable)
person did not know that he was signing a contract
person enters into a contract because its terms or the surrounding circumstances are not as represented
what is duress?
threatening speech or action
*for someone to use duress as a defense, that person must show that he/she was ACTUALLY induced
what does fraud require?
misrepresentation of material fact
can a minor disaffirm even if the subject matter of the contract has been destroyed?
YES
what is novation?
third party replaces one of the parties in the original contract, thereby releasing that party from the contract
T or F, a promise to pay the debt of another must be evidenced by some type of writing to be enforceable.
T
what is the Statute of Frauds?
basically means that certain contracts must be in writing to be enforceable
what kinds of contracts must be in writing (Statute of Frauds)?
real estate
promise to pay debt of a third party
contract that is impossible to perform within a year
the sale of goods for $500 or more
*remember that both parties do not have to sign the contract, only the party that is sought to be held liable (the party being sued)
are punitive damages available in a contract action?
NO
to be an express warranty, the language must be…
part of the basis of the bargain (i.e., warranty is created by the seller’s description of the goods)
under the Sales Article of the UCC, what must absolutely be in writing to be an enforceable contract for the sale of goods?
the quantity of goods
is the point at which the title is passed from seller to buyer the point at which the risk of loss is passed from seller to buyer?
no not necessarily.
what is an anticipatory repudiation?
basically it is when one party states that it will not perform, so it is treated as an immediate material breach
which follows the mirror image rule, common law or the UCC?
common law. mirror image means that anything but acceptance of the exact terms of the contract constitutes a counteroffer, which is a new contract
under the UCC, when does the risk of loss pass to the buyer on tender of delivery?
when the seller is a non-merchant who is making the delivery
what is warranty of merchantability?
it is an implied warranty that arises when a merchant who ordinarily sells goods of the kind sold sells goods
T or F, shipment of nonconforming goods constitutes both an acceptance and a breach unless a notice is sent prior to shipping that the goods are only an accommodation.
T
when a principal debtor defaults and a surety pays the creditor the entire obligation, what is the remedy called that allows the surety to collect from the debtor?
subrogation
can creditors garnish federal social security benefits?
NO
what is writ of attachment
court order to seize personal property or real property
T or F, a noncompensated surety will be discharged from liability if the principal debtor and creditor modify the terms of the contract in any way.
T
what is the difference between a guarantor and a cosigner?
creditor will first try to collect from principal, THEN the guarantor
a cosigner (surety) is just as liable for the debt as the principal, so creditor can come after them equally
what does tender of performance mean?
performance is attempted
what must be included in a financing statement?
name and address of debtor and secured party
description of the collateral
authentication by the debtor
*filing a financing statement is a method of perfection
what does perfecting a security interest actually do?
establishes priority
is filing a financing statement required for creating a security interest?
NO
what are the requirements for a security interest to attach to the collateral?
there must be an agreement to create the security interest evidenced by either an authenticated security agreement OR the creditor taking control of the collateral
creditor must give value
debtor must have rights in the collateral
T or F, a PMSI in consumer goods is automatically perfected
T
when does a PMSI in noninventory goods have priority over all other security interests in the same collateral?
when the PMSI is perfected within 20 days of the debtor getting possession
what are the only two ways a PMSI can occur?
creditor sells inventory to debtor on credit and retains a security interest for the purchase price
OR
creditor lends money to debtor so that debtor can purchase the inventory
- either way filing a financing statement is the only way to perfect if debtor has possession (control) of the inventory, which is almost always the case
- remember this is not applicable to PMSI in consumer goods, which is automatically perfected
can there be perfection without attachment?
NO
when there are conflicting perfected security interests in the same collateral, which creditor has priority?
first creditor to file or perfect
*remember that possession is a form of perfection
when a security interest in collateral is perfected and the collateral is subsequently moved to another state, the collateral is temporarily perfected for how many months in the new state?
4 months
what is the only way to perfect a security interest in a negotiable instrument, stocks, bonds?
take possession or control of it
a security interest is temporarily perfected in the new collateral for how many days from the debtor’s receipt of the proceeds
20 days
