Chapter 4: Commercial Law Flashcards
Sales Contracts
Types of sales contracts:
- Unilateral/Bilateral
- Sale on approval
- Sale to a customer who wants to try the goods before buying them
- Sale on return
- Sale to a person who intends to resell the goods but who has the right to return them if they do not sell
- Auction sales
- Public offering of goods for sale
Formation of Sales Contracts
- Offer
- Acceptance
- Consideration
Excuses for Nonperformance
- Loss of identified goods
- Substituted performance
- Failure of a presupposed condition
Negotiable Instruments
Must meet four requirements:
- Must be signed by the maker, or drawer
- Must contain an unconditional promise to pay a certain sum of money
- Must be payable on demand or at a definite time
- Must be payable to order or to a bearer
Types of Commercial Paper
- Draft (check)
- Certificate of Deposit (COD)
- Promissory note
- Trade acceptance
Endorsements
Major types of endorsements:
- Special endorsement
- Blank endorsement (general endorsement)
- Restrictive, or collection endorsement
- Qualified endorsement
- Unqualified endorsement
Documents of Title
Bill of Lading: Historically, the written document acknowledging receipt of goods on a ship for transport.
Documents of Title
Bill of lading serves these purposes:
- As a contract for the transportation of goods
- As a receipt of the goods by the carrier for delivery
- Under certain circumstances, as the title to the goods
- To identify the terms of agreement
Secured Transactions
Five elements:
- Debtor
- Secured creditor
- Collateral
- Security agreement
- Security interest
Forms of Secured Transactions
- Pledge
- Chattel mortgage
- Conditional sale
Forms of Collateral
- Consumer goods
- Equipment
- Farm products
- Inventory
- Property on paper
Attatchment
Three requirements:
- A consensual security agreement between the debtor and creditor
- The creditor must give value
- The debtor must have rights in the collateral
Perfecting a Security Interest
A valid financing statement has three elements;
- Names and addresses of the debtor and creditor
- The debtor’ signature
- A general description of the collateral property
Default
Creditors’ rights:
- Right to sue in the underlying debt
- Right to strict foreclosure
- Right to regain possession
- Right to sell the collateral
- Right to dispose of the collateral as desired
Consumer Protection Laws
State laws generally prohibit one or more of the following:
- Unfair acts
- Deceptive acts
- Unfair methods of competition
Consumer Protection Laws
Magnuson-Moss Warranty Act
- How to obtain redress under the warranty
- What it will and will not cover
- To whom it applies
- What the warrantor will do if a malfunction occurs
- What service and parts are free
Consumer Protection Laws
- Federal Trade Commission Act
- Magnuson-Moss Warranty Act
- Truth in Lending Act
- Electronic Fund Transfer Act
- Fair Credit Reporting Act
- Equal Credit Opportunity Act
Bankruptcy
Bankruptcy matters are governed by federal law, not state law
Federal Bankruptcy Act
Parties to a federal bankruptcy proceeding:
- The debtor
- The creditors
- A trustee
- A bankruptcy judge
- Attorneys for any or all of the parties
Chapter 7 Liquidation Proceedings
Six types of creditors’ claims:
- Administrative expenses of the bankruptcy proceeding
- Unsecured business debt
- A limited amount of wage claim
- Contributions to employee benefits plan
- Claims of unsecured individuals
- Unsecured claim of governmental units
Liquidation Proceedings
Bankruptcy does not discharge the following debts:
- Certain tax claims
- Money, property, or services obtained by fraud
- Claims for willful and malicious injury to people or property
- Alimony or support
- Most education loans
- Debts incurred in court actions arising from drunk driving
