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REG CPA EXAM > Part 2: Business Law > Flashcards

Part 2: Business Law Flashcards

1
Q

Bilateral Contract

A

A promise for a promise

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2
Q

Unilateral Contract

A

A promise for an act

“I promise to give you $15 if you mow the lawn” the acceptance of the agreement is the performance of the act

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3
Q

Void Contract

A

Not enforceable against either party i.e. not a legal contract

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4
Q

Voidable Contract

A

A legal contract wherein one or both of the parties has the right to disaffirm or rescind the contract

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5
Q

Consideration

A

Anything of legal value promised to another party when making a contract; must be mutually bargained

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6
Q

Parol Evidence Rule

A

Evidence (oral or written) developed PRIOR to or during the writing of a contract that contradicts the written contract is INADMISSIBLE in court

Subsequent agreements (oral or written) are admissible

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7
Q

Material Breach

A

A material breach by one side of a contract releases the other side from performing; the nonbreaching party did not receive the “substantial performance” of the bargain

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8
Q

Anticipatory Breach

A

Occurs when one party, before the time of performance, indicate they will not perform

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9
Q

Mutual Rescission

A

BOTH parties agree to release each other from further obligations under the existing contract

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10
Q

Novation

A

The parties agree to replace an obligation to perform with a new obligation, add an obligation to perform, or replace a party in the contract with a new party

  • Will release the original debtor from the liability
  • Rights under the old contract will be terminated

~Substitution

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11
Q

Accord and Satisfaction

A

The contracting parties agree to change a contract where some different performance will replace the original performance

-Discharges the contractual obligation

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12
Q

Anticipatory Repudiation

A

When either the buyer or seller states they will not perform prior to the performance time

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13
Q

A contract for $500 or more MUST contain

A

Writing specifying a quantity; does NOT have to include price

Exception - No writing to specify quantity IF

  1. Seller has specially manufactured goods for the buyer
  2. Partial or full payment of goods OR receipt of goods
  3. Party admits in court that the contract was made
  4. Merchants confirming letter: between merchants if there is no objection in 10 days to the writing confirming an oral contract; both of the merchants are bound
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14
Q

If a BUYER breaches, the seller can

A

Sue for all the damages they suffer as a result

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15
Q

If a SELLER breaches, the buyer can

A
  • Reject all non-conforming goods,
  • Accept goods and sue the seller for all costs they incur to correct the goods, OR
  • Ask for specific performance
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16
Q

Secured Transaction

A

Debt secured with collateral: goods, financial instruments, or intangibles (accounts receivable)

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17
Q

Attachment

A

Creditor’s security interest that is valid and enforceable against the debtor

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18
Q

What are the three requirements for attachment?

A
  1. MUST be a security agreement (oral or written) between the debtor and the secured party
  2. The secured party must give value
  3. The debtor must have rights in the collateral

*“RAV”
R: Rights
A: Agreement
V: Value

If you “rav” about someone, you are attached

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19
Q

Perfection

A

Method by which the creditor ensures the security interest is valid against most subsequent third parties

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20
Q

What are the three methods of perfection?

A
  1. Attachment alone - PMSI in consumer goods is perfected by attachment alone
  2. Possession - Common law/UCC filing is not required if the creditor has possession
  3. Filing a Financing Statement - Gives public notice to third parties of creditors’ security interests in collateral

*“PAF”
P: Possession
A: Attachment alone (PMSI)
F: Financing Statement

21
Q

Actual authority

A

The principal conveys to the agent the right and power to act on the principal’s behalf with third parties.

May be expressed or implied.

22
Q

Express authority

A

Principal expressly tells the agent that they have authority

23
Q

Implied authority

A

The agent’s authority is inferred from the principal’s conduct (i.e. agent has implied authority to do what is needed to accomplish assigned tasks)

24
Q

Apparent Authority or Agency by Estoppel

A

The principal gives the appearance to third parties that an agent is authorized

25
Q

What is the liability of an agent when the principal is
A. Disclosed
B. Partially disclosed
C. Undisclosed

A

A. Principal disclosed - Agent not liable
B. Principal partially disclosed - Agent liable; once the principal’s identity is discovered, the third party could also sue the principal but cannot recover from both
C. Principal undisclosed - Agent liable

26
Q

A principal is liable on a contract if the agent

A
  1. Had actual (express or implied) authority
  2. Had apparent authority
  3. Did not have authority but the act was later ratified by the principal
27
Q

Doctrine of Respondeat Superior

A

A principal is liable for all torts committed by an agent, if the agent was acting within the scope of the agency

28
Q

Promissory Estoppel

A

Equitable legal doctrine applied to contracts designed to prevent injury to a party from reliance on a promise made - consideration is not necessary

Ex: An individual promises a charity $100,000 to repair a roof. The charity repairs the roof but the individual changes their mind and does not give the money.

29
Q

Fraud in the inducement

A

A false representation of material fact, intentionally made, justifiable relied upon, and results in injury

*MIRR 
M: Material fact
I: Intentional
R: Relied upon
R: Resulting injury
30
Q

Chapter 7 Voluntary Bankruptcy

A

The debtor voluntarily files for liquidation

  • Trustee appointed
  • Automatic order of relief when filed
31
Q

Chapter 7 Involuntary Bankruptcy

A

Creditors file to force a liquidation

  • If 12 or more creditors: 3 or more creditors must file and their unsecured claims are at least $16,750
  • If less than 12 creditors: 1 or more need to file and their unsecured claims are at least $16,750

-Trustee appointed

32
Q

Chapter 9 Bankruptcy

A
  • Only available to municipalities
  • Must be voluntary
  • NO trustee appointed
33
Q

Chapter 11 Bankruptcy

A

Restructures the debtor’s debts so they may continue to operate the business; no liquidation occurs

-Trustee may or may not be appointed

34
Q

Chapter 13 Bankruptcy

A

Applies only to an individual with regular income who owes unsecured debts of less than $419,375 and secured debts of less than $1,257,850

35
Q

Preferential Transfer

A

Transfers that benefit one creditor over another creditor

  • Payment of antecedent debt within 90 days BEFORE filing
  • Payment made when debtor was insolvent
36
Q

Suretyship

A

Surety promise to be responsible and equally liable for the debt

-Creditors can demand payment from the surety and need NOT to collect from the debtor first

37
Q

Subrogation

A

Surety remedy - Once a surety pays the creditor in FULL, they get all of the creditor’s rights

38
Q

Exoneration

A

The right of a surety to get a court order that the debtor pay prior to default

39
Q

Surety

A

Promise to do the same thing the debtor promises

-Surety is primarily liable

“I will pay if the debtor does not”

40
Q

Guarantor

A

Promise to perform if the debtor cannot perform

-Guarantor is secondarily liable

“I will pay if the debtor cannot pay”

41
Q

Cosuretors

A

Two or more sureties of the same debt even if unaware of each other

Jointly and severally liable to the creditor

42
Q

Writ of Attachment

A

Places a lien on the debtor’s property so the property will be available to satisfy a judgement

43
Q

Writ of Execution

A

Issued by a court to a creditor upon obtaining judgement, served by a sheriff on the debtor demanding payment of the judgement

Also includes a sheriff taking possession of property owned by a debtor

44
Q

Garnishment

A

Court order permitting the creditor to collect money from a debtor’s wages or bank accounts

45
Q

Fair Debt Collection Practices Act

A

Makes illegal abusive, deceptive, and unfair debt collection by collection agencies (only covers collection agencies, not the original creditor)

46
Q

Under the UCC, if a debtor is in default under a payment obligation secured by goods, the secured party has the right to

A
  1. Peacefully repossess the goods without judicial process
  2. Reduce the claim to a judgment
  3. Sell the goods and apply the proceeds toward the debt
47
Q

To file a voluntary petition for bankruptcy under Chapter 7, the debtor

A
  • Need NOT be insolvent
  • Needs only to show that they have debts
  • Does NOT have to have a specific amount of creditors or total debt
48
Q

What four elements MUST be present to form a contract?

A
  • Agreement
  • Consideration
  • Competent parties
  • Legal purpose

“ACCL”

REG CPA EXAM (7 decks)

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