R5 Business Law: Part 1 Flashcards
Contracts for the Sale of Goods for $500 or more must be evidenced in writing signed by the party being sued
S - W - A - P
S: Specifically manufactured goods
W: Written confirmations
-Where a merchant sends another merchant a written confirmation of a contract that is sufficient to bind the sender, it will also bind the recipient if he/she does not object within 10 days
A: Admitted oral contracts
P: Performed oral contracts
Constructive fraud - not require intent.
Constructive fraud requires RECKLESS disregard for truth or falsity
Actual fraud, requires intent in making a material misstatement, upon which the plaintiff justifiably relies (and that the plaintiff suffers damages).
Negligence penalty IF understatement of tax
Is an Accuracy-based penalty for negligence
OR
For disregard of tax rules and regulations.
If the principal is undisclosed,
3RD party with whom the agent dealt can hold the agent liable on the contract.
A buyer may reject goods if they do not conform to the contract in any way. This is known as the perfect tender doctrine.
However, the mere fact that the goods do not meet the buyer’s needs at the time of tender or delivery is not a GROUND for rejection if the goods conform to the contract.
TO FORM A CONTRACT,
THERE MUST BE
Offer
an Acceptance,
and
Consideration
A general agent’s apparent authority does not STOP unless and until notice is given
However, if the principal has received a discharge in bankruptcy, notice is NOT required to terminate the agent’s apparent authority.
Risk of Loss Rules
Risk of loss passes to the buyer on tender of delivery where the seller is a non-merchant who is making the delivery.
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.
The goal of Contract Damages
is to put the non-breaching party in the position he or she would have been in had there been no breach.
The UCC Sales Article
does not provide for punitive damages.
Generally, under the mailbox rule,
acceptance is effective when sent
However, an offeror may opt out of the mailbox rule by stating that the acceptance must be received by a certain date to be effective.
Employers is liable for torts of employees committed within the scope of employment.
Employers are generally not liable for the torts of independent contractors.
Generally, a principal is not liable for an agent’s torts.
However,
An employer can be held vicariously liable for the torts of an employee that occur within the scope of agency/employment.
Common Law of Contracts
Contract modification is treated like a separate contract and requires consideration
Good’s statement constituted an anticipatory repudiation (i.e., an unequivocal statement that the party would not perform).
Anticipatory repudiation is an immediate breach, and it gives the nonbreaching party several options, including the option to treat the contract as being breached, reselling the goods, and recovering the difference between the contract price and the resale price.
Upon reaching the age of majority,
A person can become bound on contracts entered into as a minor through ratification by retaining the benefits of the contract.
If the services called for under a contract were legal at the time the contract was formed and then subsequently became illegal,
the contract would be discharged.
Guarantor
Provides a “guaranty” which is a promise to answer for the debt or duty of another person
BUT
Only if that person fails to pay or perform their obligations
Collect from principal first, if principal fails the debtor goes to Guarantor
Surety
Provides “surety” which is an agreement to be liable for the debt or obligation of another in the first instance
Primary and immediate upon the default of the principal debtor
Creditor can demand performance from Surety without first having to go to Principal
Subrogation
Is the right a surety has for the principal to pay the surety back when the surety has paid or performed the obligations
The contract defense of impossibility is true
The impossibility defense can be raised when an event occurs after a contract is formed that will make performance of the contract objectively impossible (i.e., no one can perform).
If a contract specifies the source of the subject matter and that source is destroyed after the contract is formed, performance is objectively impossible because the specified source no longer exists.
Compensatory Damages
Enough money as though the transaction never happened.
Liquidated Damages Clause
Enforceable if at the time of contracting it appears that the amount of damages in case of breach would be difficult to assess and the amount is a reasonable approximation of damages and not a penalty
Risk of Loss (Non-Carrier Case)
Paying for it at the seller’s place does not pass the risk
Neither does the seller’s using its own vehicle to deliver the goods
Apparent Authority
Principal creates appearance of authority
One of several co-sureties becomes bankrupt
The other co-sureties are liable on the debt to the extent each agreed and
Are liable in contribution to each other in proportion to the amount each agreed to pay.
Once an undisclosed principal becomes known to the third party,
The 3rd party can elect to hold either the agent or the principal liable for breach of contract.
