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Leg Bus Issues > Final > Flashcards

Final Flashcards

1
Q

Good Faith when it comes to contracts

A

required in performance and enforcement of every contract. Also the context for evaluating seller and buyer performance of obligations

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2
Q

In transactions between merchants, the UCC imposes

A

commercial reasonableness standard which is a heightened good faith (Parties operate in keeping with reasonable commercial standards of fair dealing)

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3
Q

A party seeking to enforce a promise under Promisory Estoppel must establish three things:

A

-Party made a promise and either knows or should know the other party will reasonably rely on it

-Other party reasonably relies on the promise and suffers damages

-Only way to avoid injustice is for court to enforce the promise

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4
Q

Estoppel can’t be invoked if

A

the parties have a contract. Aggrieved party could seek recovery under contract, defeating the purpose.

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5
Q

Perfect Tender Rule

A

If goods or tender of delivery fail in any respect to conform to contract specifications, buyer has right to:
-Accept the goods
-Reject entire shipment, or
-Accept part and reject part

(Eliminates material vs. immaterial)

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6
Q

Substantial performance rule

A

Used in common law, meaning immaterial defects do not constitute breach by seller.

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7
Q

Seller has right to repair/replace nonconforming goods, must:

A
  1. Promptly communicate intent to cure and
  2. Complete cure within the contract time for performance.
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8
Q

Both parties are excused from performance when goods that have been identified to the contract are

A

destroyed through no fault of parties before the risk of loss passes to the buyer.

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9
Q

Substantial Impairement

A

Buyers can revoke previous acceptance only if the defect substantially impairs the goods’ value.

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10
Q

Commercial Impracticability Doctrine

A

Delay in delivery or nondelivery does not constitute a breach if an event that was not thought about (Ex. Legislation) at time of contracting occurs that makes performance impracticable

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11
Q

What concept governs the inspection process?

A

Concept of Reasonableness

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12
Q

After inspecting, if goods aren’t in accordance with contract, buyer can

A

accept, partially accept, revise contract, or reject.

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13
Q

After inspecting, if goods are in accordance, buyer can

A

Must accept.

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14
Q

Seller is entitled to presume acceptance if buyer

A

fails to reject goods within a reasonable time.

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15
Q

Buyer can revoke acceptance if

A

the nonconformity substantially impairs the goods’ value, but only if buyer had a legitimate reason for initially accepting.

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16
Q

UCC Policy for rewards on Sale and Lease Contract Breaches

A

No Windfalls for non-breaching party

Contract damages not meant to punish or vindicate social policy.

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17
Q

Lost Profits for the seller are sometimes available, especially if

A

the seller can’t resell the goods in the usual course of business.

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18
Q

Seller UCC Remedies for Buyer Breach:

A

-Cancel contract
-Withhold delivery
-Resell/Dispose of goods
-Sue to get benefit of the bargain
-Claim liquidated damaged under agreement or UCC
-Stop delivery
-Reclaim the goods

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19
Q

Preferred seller remedy when buyer breaches is

A

Seller sells the goods to another buyer and seeks recovery from buyer for any loss.

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20
Q

Least desired remedy for when buyer breaches is

A

Contract cancellation (UCC prioritizes maintaining commercial transactions)

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21
Q

Liquidated Damages

A

Damages specified in contract

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22
Q

Courts when it comes to liquidated damages

A

Courts generally enforce a liquidated damages clause as long as it is reasonable and not punitive

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23
Q

“Liquidated damages” provision

A

Allows non breaching seller to recover from breaching buyer 20 percent of the purchase price or $500, whichever is less, as liquidated damages.

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24
Q

Buyer UCC Remedies for Seller Breach:

A

-Cancel contract
-Buy cover (substitute goods)
-Sue to recover damages
-Recover the goods
-Economic Loss rule
-Obtain specific performance
-Reject nonconforming goods
-Revoke acceptance of nonconforming goods
-Accept nonconforming goods and seek damages

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25
Q

In covering, buyer must:

A

-Demonstrate good faith in obtaining substitute goods
-Pay reasonable price for substitute goods
-Act without unreasonable delay in buying substitute goods
-Buy goods that are reasonable substitutes.

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26
Q

Cover is preferred buyer remedy because

A

It sets up clear and simple measure of damages:

Cover price - contract price - incidental costs

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27
Q

Specific performance as a buyer remedy

A

Under limited circumstances, seller may be required to deliver particular goods identified in the contract.

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28
Q

UCC allows buyer to demand specific performance if:

A

-The goods are unique or
-There is no adequate remedy at law (money damages are inadequate)

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29
Q

Economic Loss

A

A loss resulting from product failure when there is no personal injury or damage to other property

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30
Q

Economic Loss Rule

A

Prevents tort recover for economic loss

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31
Q

Reason behind Economic Loss Rule

A

Contract law, not tort law, provides the appropriate avenue for recovery when there is no personal injury or physical injury to property

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32
Q

What statute of limitations applies to Physical injury consequential of seller breach?

A

UCC Statute of limitations applies to breach of warranty claims even if the plaintiff is seeking to recover physical injury damages.

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33
Q

Warranty

A

Assurance by one party that the other party can rely on its representations of fact

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34
Q

Express Warranty

A

Expressly stated in the contract

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35
Q

Implied Warranty

A

Automatically (by operation of law) applied to contract - title and quality

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36
Q

Where can express warranties be found:

A

-Advertisements/Brochures
-Term in a written contract
-Salesperson’s oral promise or factual statement
-A sample or model

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37
Q

Sales “Puffing”

A

Does not create express warranty
Not a statement of fact, merely a statement of opinion.

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38
Q

Implied Warranty of Title:

A

-Seller has good and valid title to goods
-Seller has right to transfer free and clear of liens, judgements, or infringements of IP rights of which buyer has no knowledge.

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39
Q

Implied Warranty of Merchantability

A

UCC codifies the reasonable expectation of how a good will perform (Goods should perform how a good should perform)

Applies only to sales by merchant

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40
Q

To satisfy the merchantability warranty, goods must:

A

-Be the same as similar goods
-Meet the product’s description
-Be fit for ordinary purposes
-Be produced within the variations permitted by agreement
-Be adequately contained, packaged, and labeled as agreement may require.
-Conform to any promises or affirmations on package/product label.

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41
Q

Implied Warranty of Fitness for Particular Purpose

A

Warranty implied when a buyer relies on the seller to select the goods to fit a specific request

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42
Q

Implied Warranty of Fitness for Particular Purpose arises when seller knows or should know:

A

-Purpose for which buyer is buying goods and
-buyer is relying on seller’s judgement to recommend/select certain product

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43
Q

Implied Warranty of Trade Usage

A

If a certain way of doing business is understood, it is not necessary for the seller to state it will abide by the custom; implied warranty arises from the usage of trade.

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44
Q

Three approaches to the question of extending seller warranties to third parties:

A
  1. Buyer’s household members and guests
  2. Any reasonable and foreseeable user (Most common)
  3. Anyone injured by the good
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45
Q

*Disclaimers of implied warranties must be

A

Clear and conspicuous

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46
Q

Warranties of Fitness for particular purpose must be

A

Written

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47
Q

Warranties for Merchantability must be

A

Written or oral, but some states require disclaimer to expressly mention “merchantability”

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48
Q

Buyer actions that can waive warranty:

A

-Buyer fails or refuses to examine goods when warranty arose from display of sample or model
-Buyer fails or refuses to inspect goods as request by the seller
-Buyer fails to file suit within applicable statute-of-limitations period.

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49
Q

Magnuson-Moss Warranty Act of 1975

A

Federal law enacted to protect consumers by detailing the obligations of warrantors that offer written warranties on consumer products.

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50
Q

“Full” Warranty

A

Warranty doesn’t say it’s limited

Applies to every part

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51
Q

“Limited” Warranty

A

Doesn’t apply to every part (a particular part)

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52
Q

In case of defect, malfunction, or failure to conform with “Full” written warranty, the warrantor

A

-Can remedy the product within a reasonable time at no charge to consumer
-May not impose any limitation on duration of any implied warranty.
-May not exclude or limit consequential damages
-If you try over and over again for an unreasonable amount of times, seller must permit the consumer to elect either a refund or replacement without charge.

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53
Q

Three legal bases for product liability recovery:

A

-Negligence
-Strict Liability
-Breach of Warranty

(Can claim multiple)

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54
Q

Product may be defective due to:

A

-Manufacturing defect
-Design defect
-Inadequate warnings/instructions

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55
Q

To establish defendant’s liability of a negligence-based product defect theory, the plaintiff must show:

A

-Defendant manufacturer/seller owed duty of care to plaintiff
-Defendant breached duty of care by supplying defective product
-Defendant’s breach of duty caused plaintiff’s injury
-Plaintiff suffered actual injury

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56
Q

Factors in evaluating whether failure to warn was negligent:

A

-Likelihood of injury
-Seriousness of injury
-Ease of warning

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57
Q

Damages recoverable for Negligence-Based Product Liability Issues AND Strict-Liability-Based Product Liability Issues:

A

-Compensatory damages for personal injuries and property damage
-Punitive damages

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58
Q

Defenses available for Negligence-Based Product Liability Issues:

A

-Assumption of the risk
-Contributory/comparative/modified comparative negligence
-Product misuse
-State-of-the-art defense (how the word was back than)
-Preemption- compliance with federal laws

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59
Q

*To establish defendant liability on a strict-liability-based product liability claim, the plaintiff must show:

A

-Product was defective when sold
-Product was so defective that it was UNREASONABLY DANGEROUS
-Product caused plaintiff’s injury

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60
Q

For strict-liability-based product liability claims, plaintiffs usually rely on

A

Expert testimony (assists the jury)

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61
Q

Who can sue and who is liable in Negligence-Based Product Liability Issues AND Strict-Liability-Based Product Liability Issues:

A

Sue: Any reasonably foreseeable injured party

Liable: Any commercial supplier in distribution chain

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62
Q

Defenses available for Strict-Liability-Based Product Liability Issues:

A

-Product misuse
-Assumption of the risk
-Lapse of time - statute of limitations; statute of repose

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63
Q

To establish defendant’s liability on a warranty-based product liability claim, plaintiff must show:

A

-Representation by manufacturer/seller was basis of the bargain
-Breach of representation (Doesn’t need to prove it was defendant’s fault)

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64
Q

Damages recoverable under Warranty-based product liability issues:

A

-Economic damages (difference between value of goods as warranted and value of goods as delivered)
-Consequential personal or property damages

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65
Q

Defenses available under Warranty-based product liability issues:

A

-Assumption of the risk
-Product misuse
-Disclaimer

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66
Q
A
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67
Q

To establish liability based on breach implied warranty of fitness for a particular purpose, plaintiff must prove:

A

-The seller has knowledge of the customer’s specific purpose for the good
-The buyer relied on the seller’s skill and judgement in selecting the good

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68
Q

Market Share Liability

A

Assigning responsibility of liability to a number of manufacturers

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69
Q

To invoke market share liability, plaintiffs must prove:

A

-All defendants made product with same defects.
-Allegedly harmful products made by the different defendants are identical and share same defective qualities
-Plaintiffs are unable to identify which defendant caused injury - through no fault of the plaintiffs
-Manufacturers of substantially all the defective products in relevant area and during relevant timeframe are named as defendants.

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70
Q

Things that affect insurance considerations for product liability risks:

A

-Business’s maturity and safety track record
-The product’s nature and purpose

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71
Q

Secured Interest

A

Interest in personal property/fixtures that secures payment/performance of obligation

72
Q

Secured Party

A

Person/party that holds interest in secured property

73
Q

Debtor

A

Person/party that has obligation to secured party

74
Q

Security Agreement

A

Agreement in which debtor gives secured interest to secured party

75
Q

Collateral

A

Property subject to security interest

76
Q

Collateral under UCC can include:

A

-Goods
-Indispensable paper
-Intangibles
-Proceeds

77
Q

Creation of a security interest requires:

A
  1. Written Agreement that describes collateral and is signed by debtor
  2. Item of value given from creditor to debtor
  3. Debtor must have rights in the collateral
78
Q

Purchase-money security interest (PMSI)

A

Interest formed when debtor uses borrowed money from secured party to buy collateral

79
Q

Security Interest Perfection

A

The process by which a secured party legally protects its claim to collateral

80
Q

Methods of perfection:

A

-Filing financial statement
-Possessing the goods
-Automatic perfection of PMSI (WHEN RETAILER SELLS CONSUMER GOOD)
-Notation on certificate of title of motor vehicle or boat - under state motor vehicle laws

81
Q

Movable Collateral

A

When debtor moves collateral to another state, secured party must reperfect in new state.

82
Q

Financing statements for perfection must:

A

-Be signed by debtor
-Include debtor’s and secured party’s correct name and address
-Be filed correctly under the debtor’s name
-Identify the collateral accurately and reasonably definitely

83
Q

Termination Statement

A

Must be filed by the secured party when the debtor pays off the debt, terminating the security interest.

84
Q

Termination Statement Requirements:

A

-Must be filed in filing office
-Secured party has up to one month after debt is paid to file it
-If debtor asks creditor in writing to file it, creditor than has 20 days

85
Q

What happens if creditor doesn’t file termination statement?

A

Debtor may recover $500 from creditor

86
Q

*If buyer buys goods in ordinary course of business without knowing it is collateral,

A

he or she has right to that good

87
Q

***If PMSI creditor has filed a financing statement before the debtor resells a consumer good,

A

Creditor may REPO the consumer good from the buyer

88
Q

If buyer does not know consumer good is collateral,

A

buyer takes the good free from security interest

89
Q

If buyer purchases chattel paper and instruments, he or she is

A

free from security interest

90
Q

If debtor defaults, creditor can:

A

-Sell, lease, or transfer collateral
-May choose to keep collateral as payment of debt.
-Sue debtor for entire amount instead of dealing with collateral (most likely if debtor is more useful keeping the collateral)

91
Q

Creditor can repo through

A

Judicial Process or without it as long as it does so “without breach of the peace”

92
Q

Lien

A

Claim to property (or proceeds of property sale)

93
Q

Lienholder

A

A person who holds a lien

94
Q

Three types of Liens:

A

Consensual- Secured interest in property created by parties’ agreement
Statutory- Arise as a matter of state statues
Judicial- Court ordered

95
Q

Mechanic’s lien

A

Claim on real property based on work/materials provided to improve the real property

96
Q

Artisan’s lien

A

Claim on personal property based on work/materials used in repairing/improving the property

97
Q

Both Artisan’s and Mechanic’s liens have

A

priority over other types of liens

98
Q

Attachment

A

Court order permitting local court officer to seize debtor’s property while underlying collection case proceeds

99
Q

Writ of execution

A

Authorizes law officer to seize debtor’s NONEXEMPT property after the creditor wins the underlying collection case

Exempt property are things like family home

100
Q

Garnishment

A

Order that satisfies debt by seizing debtor’s property or wages being held by third party - commonly bank or employer

101
Q

Attorney’s lien

A

Attorney’s right of attorney to keep client’s money/possessions until client pays debt

102
Q

Tax Lien

A

Government claim on real or personal property for unpaid taxes

103
Q

Landlord’s Lien

A

Claim on furniture and personal property in apartment by landlord

104
Q

Medicare Lien

A

Medicare has claim on any personal injury lawsuit recovery by covered person

105
Q

Inkeeper’s Lien

A

Claim on baggage and belongings of guests who stay at inn and are unable to pay bill

106
Q

Creditors’ Composition Agreement

A

Contract between creditors and a debtor in which creditors agree to accept a lesser amount to discharge remaining debt.

107
Q

If debtor does not pay under the composition agreement, creditor may collect

A

on the original debt

108
Q

Suretyship Contract

A

Contract between creditor and third party (“Surety”) who agrees to pay another person’s debt

109
Q

*Surety is _______ liable for debt

A

Primarily

110
Q

Guaranty Contract

A

Third party (“Guarantor”) must pay debt if debtor defaults

111
Q

Defenses surety/guarantor can raise when creditor sues surety/guarantor to collect:

A

-Statute-of-frauds writing requirement
-Discharge from debt
-Bankruptcy (of the surety/guarantor)
-Debtor’s fraud

112
Q

Subrogation

A

Surety/guarantor has all rights credit has against debtor

113
Q

Reimbursement

A

Surety/guarantor can recover from debtor actual amount of debt it pays to creditor, plus legal expenses against debtor

114
Q

Contribution

A

Other sureties/guarantors must pay their equal shares

115
Q

Agency

A

Relationship between principal and agent

116
Q

Agent

A

One authorized to act for or on behalf of principal

117
Q

Principal

A

Person who hired agent to represent him or her

118
Q

*Fiduciary

A

One with duty to act primarily for another person’s benefit

119
Q

Four Forms of Authority to Create Agency Relationship:

A

-Expressed Agency
-Agency by implied authority
-Agency by estoppel
-Agency by ratification

120
Q

Power of Attorney

A

Document that grants agent authority to sign legal documents on principal’s behalf

121
Q

Durable power of attorney

A

Power of attorney that remains effect after principal becomes incapacitated and/or that springs into effect upon principal becoming incapacitated

122
Q

Agency Relationship

A

Fiduciary relationship (relationship of trust) in which agent acts on principal’s behalf

123
Q

Principal-agent relationship

A

Employer hires employee to enter into contracts on employer’s behalf; parties agree agent has power to bind principal in contracts

124
Q

Employer-Employee Relationship

A

Employer hires employee to perform certain tasks; employer has right to control employees’ conduct

125
Q

Employer-independent contractor relationship

A

Employer retains or hires persons (other than an employee) to carry out some task; employer has no control over the details of the independent contractor’s work

126
Q

*Contractor vs employee in agency relationship

A

Employer can control employee conduct, has no control over the independent contractor’s work

127
Q

Principal’s Duties to Agent:

A

-Compensation
-Reimbursement/Idemnification
-Cooperation
-Safe Working Conditions

128
Q

Principal has no duty of _______ to agent

A

loyalty

129
Q

Agent’s Duties to Principal:

A

-Loyalty
-Notification
-Performance
-Obedience
-Accounting

130
Q

Principal’s rights and remedies against agent:

A

-Constructive trust
-Avoidance
-Idemnification

131
Q

Agent’s rights and remedies against principal:

A

-Tort and contract remedies
-Demand for an accounting
-Specific performance

132
Q

Special Power of attorney

A

Grants agent express authority over specifically outlined acts

133
Q

General Power of attorney

A

Allows agent to conduct all business for principal

134
Q

Authorized Acts

A

Agent acts that are within scope of agent’s authority

135
Q

Disclosed Principal

A

A principal whose identity is known to a third party. The third party is aware that the agent is making an agreement on behalf of the principal. Agent not liable, principal liable

136
Q

Partially disclosed principal

A

A principal whose identity is not known by a third party, although the third party is aware that the agent is making an agreement on behalf of a principal. Also called unidentified principal. Agent presumptively liable, principal liable

137
Q

Undisclosed Principal

A

A principal whose existence is not known by a third party. That is, the third party does not know that an agent is acting on behalf of a principal. Agent liable, principal liable

138
Q

*In disclosed, partially disclosed, and undisclosed principals,

A

Principal is liable in all three scenarios

139
Q

Principal directly responsible for tortious conduct by agent in two situations:

A

-Principal directs agent to commit tortious act (or ratifies the agent’s unlawful act)
-Principal fails to give agent proper instruments, tools, or adequate instructions

140
Q

Respondeat superior/vicarious liability

A

Principal/employer liable if employee, acting in scope of employment, wrongfully injured third party (on theory principal negligently hired agent)

141
Q

Agent misrepresentation

A

If agent misrepresents himself or herself to third party, principal may be liable in tort for agent’s misrepresentation.

142
Q

*Individual who hires independent contractor not liable for independent contractor’s tortious actions under doctrine of

A

Respondeat superior

143
Q

*If agent commits crime,

A

agent is liable for crime

144
Q

*If agent commits crime in scope of employment without authorization of principal,

A

principal not liable for agent’s crime

145
Q

*If principal authorized agent’s criminal act,

A

principal liable for agent’s crime

146
Q

Antitrust Laws

A

Promote fair competition and aim to prevent unfair business practices that jeopardize these benefits.

147
Q

Sherman Antitrust Act (1890)

A

Applied to business practices that restrain trade or commerce

148
Q

Sherman Act Section 1

A

Agreements between competitors that reduce competition. Prohibits Horizontal & Vertical Agreements to Restrain Trade

149
Q

Horizontal Restraint of trade

A

Two competitors in the same market make an agreement to restrain trade

150
Q

Price-fixing

A

Two or more competitors agree to set product/service prices

151
Q

Market Allocation

A

Agreement between competitors to divide market among themselves by geography, customers, or products

152
Q

Vertical Agreement restraint of trade

A

Two parties at different levels in manufacturing and distribution process make an agreement that restrains trade.

153
Q

Sherman Act Section 2

A

Prohibits Actual and Attempted Monopolization

154
Q

Clayton Act (1914) Sections 2 and 3

A
  1. Prohibits Price Discrimination.
  2. Prohibits Exclusionary practices.
155
Q

*Clayton Act Section 7

A

Prohibits Anticompetitive meters and acquisitions

156
Q

Federal Trade Commission Act

A

Prohibits unfair and deceptive methods of competition. Makes any anticompetitive behavior not prohibited by Sherman/Clayton to be potentially illegal.

157
Q

Robinson-Patman Act (1936)

A

Made to limit buyers’ power and prohibit certain types of price discrimination

158
Q

Beyonce-Taylor Article

A

-Beyonce and Taylor were connected through Ye, but both praise each other and don’t drop near one another.
-Back in the day it was good to drop on the same day since your record would be spotted in a store.
-Kanye-50 Cent, Barbie-Oppenheimer

159
Q

Once collateral is sold, proceeds must be paid in the following order:

A
  1. Paying the reasonable expenses of retaking and disposing of the collateral (including attorney’s fees)
  2. Satisfying the debt of the secured party
  3. Satisfying remaining holders of junior security interests
160
Q

Sellers are liable for warranties through

A

Warrant of merchantibility

161
Q

Can agency relationships terminate by lapse of time?

A

NO

162
Q

The perfect tender rule’s rigidity has been reduced by

A

Exceptions created by courts and UCC drafters

163
Q

A defendant may attempt to argue that compliance with deferral laws I a defense to state tier law because the state tort law is

A

preempted by a federal statue designed to ensure the safety of a particular class of products.

164
Q

If the debtor objects to the secured party’s retention of the collateral,

A

The secured party must sell of dispose of the collateral

165
Q

Insolvency, the inability to pay debts does or doesn’t always result in the termination of the agency relationship

A

doesn’t

166
Q

Which warranties can buyers waive?

A

Both express and implied warranties

167
Q

Levista v. Ranbaxy Pharmaceuticals Case

A

Trade Usage

Case dismissed for failure to state cause of action

168
Q

Dejesus v. Cat Auto Group Case

A

Inspection

Ruled for Jesus because Cat Auto Group failed to inspect goods

169
Q

SCM Group v. Custom Designs Inc.

A

Presume acceptance

CDM has to pay the cost because they failed to notify SCM of their decision to reject.

170
Q

Detroit Radiant vs BSH home appliance

A

Breach Damages

Detroit Radiant was entitled to lost profits in addition to the value of the unsellable inventory.

171
Q

Almetals vs Wickeder

A

Specific Performance as Remedy

Wickeder tries to stop selling metal to Almetals because of how successful they’ve become.

172
Q

Des Moins Flying Servs. vs. Aerial Servs.

A

Economic Loss Rule

Des Moins Flying can’t sue for tort for the broken windshield because it only resulted in economic loss.

173
Q

Mortenson vs. Timberline

A

Modifications/Limitations to Remedies

Timberline software costs Mortenson a lot of money. Upheld the limitation on consequential damages.

174
Q

Cannon v. Bodensteiner

A

Sales Puffing

Summary judgement for Bodensteiner cancelled because the salesperson was not sales puffing.

175
Q

Albion College v. Stockade Buildings

A

Third Party under warranties

Leaky Roof, Albion College’s third party beneficiary denied because no contract to act to benefit the third party

176
Q

Nobles v. Akinwande

A

Warranty Disclaimers/Waivers

Defendant sells broken motorcycle but didn’t do so with malicious intent, made no warranties.

177
Q

Rancher’s Legacy Meat Company

A

Perfection by Filing Statement

Guy didn’t know that they changed name, unperfected, bankruptcy.

Leg Bus Issues (2 decks)

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