R5 Flashcards
For a Contract
There has to be a :
Agreement: an offer by 1 party and an acceptance of another
Consideration: Legal value that is exchanged between parties
For Consideration to binding it must be “legally sufficient”
Lack of Defenses: Free from any defenses
UCC - Uniform Commercial Code
Non-Confirming Goods - When a seller ships goods that don’t match the order (nonconforming goods), it can be seen as an acceptance and breach.
The seller has to let the buyer know ( before hand ) that the shipment is an accommodation
If they had accepted the order but sent a different order w/o prior notice then - it violates the agreement
Agent
A person authorized to act on another’s behalf
In a Sale or Return
Buyer has title and risk of loss unless and until the goods are returned to the seller
Composition of Creditors
Agreement where the debtor and at least 2 creditors agree that the the creditors will accept less than the full amount owed to them
In return, the debtor is released from the remaining debt
Assignment for the Benefit of Creditors
Debtor transfers some or all their property to a trustee
Trustee then sells the prop and uses the proceeds to pay the creditors.
BUT: this doesn’t release the debtor from any remaining unpaid debts bc the creditors have not agreed to accept less than the full amount owed
Secured Transactions of the UCC
Financing stmt must contain:
The name and mailing address of the debtor and secured party
Indication of the collateral covered by the financing stmt
IF the financing stmt covers collateral related to real prop
AND
A description of that real prop
Surety
A person who agrees to be liable on someone else’s debt
Cosigner of a note is considered a surety
Sureties are NOT released by:
Debtor bankruptcy
NOR
Incapacitation
Anticipatory repudiation
1 Party doesn’t fulfill there end of the bargain
Considered a breach of contract
Non-breaching party can:
Sue
Cancel Contract
Await Performance
Attachment Requires
- Parties agree to create a security interest - evidenced by either an authenticated security agreement or the creditor’s taking possession or control of the collateral
- Debtor must have rights in the collateral
- The creditor MUST give value
When non-conforming goods are shipped
The risk of loss is always on the seller, regardless of shipping terms
FOB Shipping Point
Risk of losses is buyers
FOB Destination
Risk of losses is seller
Where the seller is NOT a merchant
Risk of loss passes to the buyer upon tender of delivery of the goods
Implied Warranty of Title under the UCC
Included in every sale of goods,
Ensuring the seller has the right to sell the goods
That they are free from undisclosed liens or encumbrances.
If the seller is a merchant, it also covers non-infringement on patents or trademarks.
Disclaiming the Warranty
Implied Warranty of Title under the UCC
Specific Language: Must clearly state that no warranty of title is provided.
Circumstances: Such as a judicial sale, where it’s clear no warranty is given.
General Disclaimers: Phrases like “as is” or “with all faults” do not disclaim the warranty of title.
Timing: Must be disclaimed before or at the time of sale; post-sale disclaimers are ineffective.
Under the UCC pertaining to shipment contracts
Title to the goods passes to the buyer when the goods are delivered to a common carrier.
This rule applies even when the goods are nonconforming goods.
ORDER OF PRIORITY FOR DIFFERENT PARTIES
WHO HAVE A SECURITY INTEREST IN THE SAME PROPERTY
ORDER BY RANK
1. Buyer in the Ordinary Course of Business - They take the goods free of any security interests
- PMSI - Purchase Money Security Interest with Notice - PMSI before the debtor takes possession of the goods and notify prior secured creditors.
- Non-PMSI Perfected Security Interest - This is a regular security interest that has been perfected, usually by filing a financing statement. The priority is based on the date of filing.
- PMSI W/O Notice - If a PMSI creditor fails to notify prior secured creditors, they lose the super-priority status.
- Perfected Security Interest (Not a PMSI) - This is another regular perfected security interest, but it was filed later than others.
- Debtor - The debtor has the lowest priority and only has rights to whatever is left after all secured creditors have been satisfied.
Key Rights Associated with Sureties and Co-Sureties:
Exoneration: Compel “P” to pay BEFORE
Subrogation: Surety is the Creditor AFTER
Reimbursement: Compel “P” to pay AFTER
Contribution: Surety gets the other Sureties to pay back what they paid
Sales Article of UCC - good faith requirement
Obligation to be met by both parties of contract
Duty to observe reasonable Commercial Standards
Warranties - that are implied or explicitly stated in the contract
Adherence to Contract Terms: adhere to written terms of the sales contract
Substantial Performance
The key is that the other party still received most of what they were promised
When does a Security Interest becomes enforceable (UCC)
AGREE to create a security interest
Lender must provide something of value, CREDITOR HAS POSSESSION
Debtor’s HAS RIGHTS, borrower must have rights in the collateral, being used as collateral
An employer is liable for torts of employees committed within the scope of employment.
Employers are generally not liable for the torts of independent contractors.
Once disclosed, An Undisclosed principal can be held liable on a contract made on the principal’s behalf by an agent if the agent had authority
The principal is bound on the contract from the time the agent enters it, but its hard to hold someone liable before you know their identity
Contracts that can be RESCINDED (CANCELLED)
Mutual mistakes of Material Fact - both parties are wrong about an important fact
Mutual mistakes of Consideration - both parties being wrong about the value of what is being exchanged
Consideration
Must have Legal Value - benefit to the promisor
Must be part of a bargained-for exchange - each party agrees to give something in return
Fraud on the surety by the principal debtor
IS NOT a defense unless the creditor knew of the fraud
A contract can have conditions
Conditions Precedent - before contract has formed
Conditions Subsequent - after contract has formed
Concurrent Conditions- same time for the contract to be fulfilled
A principal will be bound if an agent acted with actual authority
Actual Authority is authority the agent reasonably believes that he or she has based on communications from the principal
Referring to Sales Article UCC
If the purchase price is $500 or more
A writing may be required to enforce the contract under the Sales Article’s Statute of Frauds
AND
Sales Article covers all sales of goods
A Non-Compensated Surety will be discharged from liability
If the Principal debtor and the creditor modify the terms of the contract in any way
A partial surrender of the debtor’s collateral is a modification that will release a non-compensated surety from liability
A Mutual Mistake of Fact
Will make a contract voidable at the option of the adversely affected party.
