R5 - Business Law: Part 1 Flashcards
For Agent Apparent Authority
When principal dies, both the agent’s actual and apparent authority are automatically terminated by LAW
Breach of Contract
Statute of Limitations
Time is computed from the date of the Breach
Unilateral Mistake
When only 1 party is mistaken about a material fact related to the contract
A unilateral mistake does not make a contract voidable unless the non-mistaken party knew or should have known of the mistake.
Mutual Mistake
Both parties are mistaken about a fundamental fact that is ventral to the contract
A mutual mistake of material fact can make the contract voidable by the adversely affected party
Mistake of Fact:
Incorrect belief about a fact at the time the contract was made
It can be either unilateral or mutual
Mistake of Value:
Parties are mistaken about the value of the subject matter
Mistakes of value are generally not grounds for rescinding a contract bc value is considered subjective and a matter of opinion
Impossibility of Performance (that no one can perform)
Discharges a contract by operation of law as opposed to by the action of the parties
Legal Concept - that results in discharge by law
Novation
Involves substituting a new party into the contract with the consent of all original parties from their obligations
This is done by agreement NOT by Operation of Law
Accord and Satisfaction
Process where the parties agree to a new performance that differs from the original obligation
The original duty is discharged once the new terms are fulfilled
This discharge is based on mutual agreement
Voluntary act - not discharged by Law
Anticipatory Repudiation
When 1 party indicates they will not perform their contractual duties before the performance is due
This is considered a breach - but it is a voluntary act by the party, not a discharge by operation of law
There is no right to punitive damages under contract lease in general, even on anticipatory breach
Clause in a contract that provides for liquidated damages
Will be enforceable if the amount of the damages clause bears a reasonable relationship to the probable loss
Consideration to be BINDING
MUST be “Legally Sufficient”
There is no requirement that the terms of a written contract be
Contained in a single writing
SALES ARTICLE OF THE UCC
A Contract will be discharged for impractibility
If it is extremely more burdensome than anticipated bc of the occurrence of an unforeseen event
The Sales Article gives a buyer the right to obtain specific performance
when the goods involved are unique or in other proper circumstances.
The running of the statute of limitations bars access to judicial remedies
i.e., it makes the contract unenforceable, but does not make the contract invalid or void in any way.
A rescission “undoes”
A contract and restores the parties to the positions they would have been in if no contract were made.
Attachment requires that:
(i) the 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,
(ii) the debtor must have rights in the collateral,
AND
(iii) the creditor must give value. There is no requirement that the security agreement be filed.
(Filing is related to perfection.)
Advertisements are generally not offers,
But invitations to negotiate
An advertisement is an offer only if it is a promise to perform a very specific act conditioned upon acceptance.
Parol Evidence Rule
It says that if you have a written contract that is meant to be the complete and final agreement between the parties, you generally can’t use earlier or simultaneous oral or written stmts to change or contradict what’s in that contract
The seller is NOT obligated to deliver the conforming goods to the buyer,
But merely needs to hold them for the buyer’s disposition
Limitations period on most contract claims
Are generally from 4 to 6 years
Under the Statute of Frauds
Contracts for the sale of goods of $500 or more must be evidenced by a writing
To be an Express Waranty
Language must be part of the basis of the bargain
Common Law
Governs Service Contract
Any change to a contract is considered as a new contract
Types of Conditions affecting performance may validly be present in contracts
Conditions Precedent - events or actions that MUST be present before a party is required to perform their part of contract
Conditions Subsequent - If they occur after the contract has started, can end a party’s obligation to perform
Concurrent Conditions - Require both parties to perform their obligations at the same time.
Mechanic Lien
Arises from improvement made on real property
Requires notice before (selling the debtor’s property) to the owner of the property in most states
Artisan’s Lien
Arises from improvements made to personal property
Requires notice before (selling the debtor’s property) to the owner of the property in most states
Under the Sales Article
In regards to Discharged for Impractibility
If it is extremely more burdensome than anticipated bc of the occurrence of an unforeseen event
If services called for under a contract were legal at the time
The contract was formed and then became illegal
The contract would be discharged
A general agent’s apparent authority does not cease unless and until notice is given
If the principal has received a discharge in bankruptcy,
Notice is NOT required to terminate the agent’s apparent authority
Writ of attachment
Is an order by the court to a sheriff to seize a person’s property
Writ can apply to personal and real property
Writ can be used even when a person owns no real property
Garnishment
Is an order to a 3rd person who holds the property of the debtor to turn the property over to a creditor
Most agencies require a writing
Agencies for the sale of land and agencies impossible to complete in 1 year do require a writing
In a sale of approval
Risk of loss passes to the buyer on approval of the goods
Shipment of nonconforming goods constitutes both an
Acceptance and breach unless a notice is sent prior to shipping that the goods are only an accommodation
Consequential Damages are recoverable for breach of contract
Only to the extent they are foreseeable
A non-breaching party has a duty to mitigate damages - a duty to make reasonable efforts to cut down on losses resulting from the breach.
A principal has an implied duty to reimburse
“Indemnification”
The agent for all expenses incurred by the agent in carrying out the agency
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
A PMSI in equipment has priority over a perfected security interest in the same equipment as long as the PMSI is perfected within 20 days of delivery of the collateral to the debtor.
A perfected security interest has priority over an unperfected security interest.
Undue Influence
When a person in a position of trust or confidence takes unfair advantage of the relationship such that the other party’s free will to contract is overcome
Purchase Money Security Interest (PMSI)
It automatically has a secured interest w/o needing to file any paperwork
Means seller’s claim is legally recognized and protected against claims from other creditors
Automatic perfection applies only to consumer goods, which are items bought for personal, family, or household use
Under the Statute of Frauds, contracts involving interests in real property are enforceable
Only if their material terms are set forth in a writing signed by the party sought to be held liable.
The running of the statute of limitations bars access to judicial remedies,
i.e., it makes the contract unenforceable, but does not make the contract invalid or void in any way.
Attachment
Establishes a secured party’s right to take possession of collateral from a debtor when there is a default on a secured transaction
Gratuitous Surety will be released when the creditor
- Commits Fraud
- There is Duress or Breach
- Lacks Capacity
- Goes Bankrupt
- When there is material change (can be extension of time) w/o the surety’s consent
A COMPENSATED SURETY would be released only to the extent harmed.
Punitive Damages are not available in a
Contract action, even if the breach was intentional
In an Auction w/o reserve, the goods must be sold if an offer is mad
If no offer is made within a reasonable time, the goods need not be sold
Doctrine of Respondeat Superior
A principal, including a corporation, can be held liable for an employee’s tort committed within the scope of employment
