R7 Flashcards
What is required for an agency to be formed?
the principal has to have contractual capacity and there needs to be consent (not necessarily consideration) from both parties
T/F: Agency agreements need to be in writing when purchases of land are involved.
true
T/F: An agent owes the principal a duty of loyalty, which includes the duty to act solely in the principal’s interest in matters related to the agency.
true
What should you know about power of attorney?
-two types: general and specific
-contract ends by operation of law on the incapacity or death of the principal
-only the principal needs to sign the power of attorney
T/F: A subagent (appointed by the agent) will owe duty to both the agent and principal.
true
What can a principal do if the agent breaches their fiduciary duty?
-terminate the agency
-receive the remedy of a constructive trust to ensure that the principal can recover secret profits
What is indemnification?
the fact that the principal is required to reimburse the agent for costs and liabilities incurred by the agent as a result of authorized acts on behalf of the principal
T/F: Actual authority is authority the agent reasonably believes that he or she has based on communications from the principal.
true
When is an agency terminated by operation of law?
-death of the principal (this will always automatically terminate an agent’s actual and apparent authority)
-incapacity/incompetency of the principal
-agent’s failure to obtain a necessary business license
T/F: The principal must provide notice of the revocation of an agent’s authority to a third party who relies on that authority.
true
note: the agent does not have authority to enter into contracts when they know the principal is incompetent, and the third party will NOT be held liable
For a company to ratify (make official) a contract with a third party, what must happen?
the company must know of all material facts relating to the contract at the time it is ratified
T/F: The principal does not need to ratify the contract or be disclosed to be held liable. Also, the principal needs to be disclosed before ratification can happen.
true
T/F: An agent generally is not liable on contracts that the agent makes on the principal’s behalf if the principal is disclosed, but the agent is personally liable on contracts the agent makes on behalf of the principal when the principal is undisclosed.
true
T/F: Once an undisclosed principal becomes known to the third party, the third party can elect to hold either the agent or the principal liable for breach of contract.
true
T/F: An employer is liable for torts (wrongful acts; ex. unauthorized misrepresentations) of employees (not independent contractors) committed within the scope of employment.
true
What is the doctrine of respondeat superior?
a principal, including a corporation, can be held liable for an employee’s tort committed within the scope of employment
What is a unilateral contract?
a one-sided contract where the offeror promises to pay once the offeree completes the task given by the offeror
T/F: One of the essential terms to a contract is price. The price needs to be stated prior to services being performed, but this is not the case for a sale of goods since you can look up a reasonable price of the goods on a website.
true
What needs to happen for ads to be an offer?
they need to specify the items and prices along with a promise to perform a very specific act conditioned upon acceptance
T/F: An offer may be terminated by the offeror at any time unless the offeree gave consideration (a valid reason or money) to keep the offer open.
true
note: if the original offeree obtains reliable info that the offer had been revoked (accepted by someone else), this person’s acceptance is invalid
What happens if an offeror dies prior to the offeree’s acceptance?
the contract is automatically terminated since the offeree hadn’t accepted it yet
Under the mailbox rule, if the offeror specified that acceptance had to be received by a specified date/time and through registered or certified mail, what would happen if this wasn’t met?
if the offeree used a different acceptance method (ex. email vs. mail), and the acceptance was received too late, this is technically a counteroffer
note: if either acceptance method or timing isn’t met, it’s not an enforceable contract
T/F: To be effective, consideration must be legally sufficient, which means it needs to be something that the law recognizes as consideration.
true
note: the consideration is not checked for fairness
T/F: Modification of a contract must be supported by consideration for it to be a valid contract.
true
T/F: Past consideration is not accepted as real/current consideration.
true
What does fraud require?
-misrepresentation of material fact
-intent to deceive
note: opinions or statements of value do not constitute misrepresentations of material facts unless made by experts
What renders a contract as void versus voidable?
void:
-duress through physical compulsion
-duress through improper threats that involve physical violence
-not having the right license required to perform a service
-entering into a contract with someone (deemed incompetent by the court) who lacks capacity and has a guardian appointed
-fraud in the execution
voidable:
-duress through improper threats
-undue influence
-mutual mistake
-fraud in the inducement (intent)
What is undue influence?
where a person of trust takes unfair advantage of the relationship
What is the parol evidence rule?
it prohibits evidence of prior (NOT subsequent) or contemporaneous oral or written agreements that seek to contradict the terms of a fully integrated contract
What is duress?
threatening speech or action that actually overcomes a person’s free will and makes his/her apparent consent invalid
the threat to influence does not need to be present
T/F: A mutual mistake of material fact will make a contract voidable at the option of the adversely affected party.
true; both parties need to be mistaken (it would be a unilateral mistake if one of the parties should have known about the mistake)
T/F: A contract can be rescinded (taken back) for unilateral mistake if the nonmistaken party should have known about the mistake.
true
T/F: The common law gives minors the right to disaffirm a contract anytime while they’re still a minor or within a reasonable time after becoming an adult.
true
note: a minor can disaffirm a contract as a minor even if the subject matter was destroyed due to the minor’s negligence
What is the statute of limitations and when does the timeline start?
def: it’s the law that sets the maximum amount of time a person has to file a lawsuit
-it starts at the breach of the contract
T/F: The Statute of Frauds does not actually require an agreement to be signed by any party; instead, it requires written proof of the material items of the agreement to be evidenced by a writing signed by the party being sued.
true
T/F: A promise to pay the debt of another (guaranteed payment) must be evidenced by some type of writing to be enforceable (even if the debt is expected to be paid within one year).
true
T/F: The Statute of Frauds does not apply to contracts that can be fully performed within one year.
true
T/F: Under the Statue of Frauds, contracts for the sale of goods of $500 or more must be evidenced in writing.
true
What is accord and satisfaction?
both parties agree on new terms that vary from the original contract which discharges the old contract completely
T/F: A clause in a contract that provides for liquidated damages will be enforceable if 1) the amount of the damages clause bears a reasonable relationship to the probable loss
2) the damages in the case of a breach are difficult to assess
3) not a penalty
true
T/F: The Sales Article applies to all contracts for the sale of goods, regardless of price.
true; doesn’t include custom-made items
How long can a merchant’s offer stay irrevocable?
up to 3 months
T/F: Under the UCC (Sales Article), the mirror rule does not apply (anything that looks like an acceptance is an acceptance even if it contains new terms).
true - the offeror doesn’t need to agree to the new terms for it to be a valid contract
T/F: If different items are shipped than what was agreed upon, it wouldn’t be a breach of contract if the seller had notified the buyer that nonconforming goods would be shipped as an accommodation.
true
What is a required item to be mentioned in a Sales Article written contract?
quantity of goods to be sold
What is commercial impracticality?
performance of a contract is excused due to a very large unforeseen event (and the contract would be more burdensome than anticipated)
What is tender?
to unconditionally offer money or performance to meet an obligation
T/F: The risk of loss passes to the buyer on tender of delivery where the seller is a non-merchant who is making the delivery.
true
T/F: In a sale on approval, risk of loss passes to the buyer on approval of the goods.
true
T/F: Once the buyer has rightfully rejected the non-conforming goods, the title to the goods reverts to the seller as opposed to once the goods are returned and received by the seller.
true
What is true of express warranties?
they must be part of the basis of the bargain between the buyer and the seller
T/F: The implied warranty of fitness for a particular purpose arises when the seller knows the purpose for which the buyer will use the goods and that the buyer is relying on the seller to choose suitable goods.
true
When is a seller entitled to receive a full refund of the goods sold to the buyer?
when the goods are destroyed while the risk of loss (as opposed to title) is with the buyer
What rights are available to the buyer when a seller commits an anticipatory breach of contract?
-demand assurance of performance
-cancel the contract
NOT punitive damages
When would a buyer be released of all its obligations?
if the seller refuses to give written assurance when reasonably demanded by the buyer (a form of anticipatory repudiation)
What rights are available to the seller when a buyer commits an anticipatory breach of contract?
-right to resell the goods
-right to stop the carrier from delivering the goods
-right to recover the difference between the contract price and the resale price
What is true of anticipatory repudiation of a contract?
-it’s a material breach of the contract
-it can be retracted/withdrawn before the other party relies on it
T/F: A surety is directly liable to the creditor on a contract.
true
T/F: The creditor must pursue the debtor before the creditor is entitled to recover from the guarantor.
true
T/F: The guaranty must be in writing for it to be valid.
true
What is subrogation?
the right a surety has by which the surety exceeds the creditor’s rights against the principal when the surety pays the principal’s obligations
T/F: The surety does not have the right to compel the creditor to collect from the principal debtor or proceed against the principal debtor’s collateral.
true
T/F: Only a co-surety has the right to contribution (which results in the sharing of liability on a pro-rata basis among co-sureties).
true
_________ completely releases the surety, even a compensated surety.
tender of performance by the principal debtor
T/F: A partial surrender of the debtor’s collateral is a modification that will release a noncompensated surety from liability.
true
What is a surety?
someone liable to pay someone else’s debt
they are not discharged by the principal debtor’s bankruptcy or if the principal debtor became incapacitated
T/F: A security interest is not effective against anyone (including the debtor and third parties) before it attaches to the collateral.
true
What does a security interest attachment require?
- the parties agree to create a security interest (either by an authenticated security agreement or the creditor/secured party taking control of the collateral)
- the debtor must have rights in the collateral
- the creditor must give value
*there is no requirement that the security agreement be filed
What must a financing statement (security agreement) generally contain?
- name and mailing address of the debtor and secured party (creditor)
- description of the collateral covered
- description of the real property, if applicable
*the amount and statement of purpose of the transaction can typically be excluded
T/F: Perfecting a security interest by filing a financing statement will give the creditor priority over most subsequent creditors, but not all.
true; perfection is automatic when selling to consumers
What can the seller do if the debtor defaults on the goods?
- peacefully repossess the goods without judicial process
- reduce the claim to a judgment
- sell the goods and apply the proceeds toward the debt
What is a novation?
a new contract substitutes a new party for an old party in an existing contract where all parties agree on the terms (no new party nor substitution)
When can an offeror revoke an offer per the mailbox rule?
before the offeree mails a note of acceptance
however, the offeror can opt out of this rule and say that acceptance isn’t valid until received (pay attention to the details)
What facts are true that would make a contract within the Statute of Frauds?
sale of goods:
-terms = over 1 year
-$500 or greater
sale of services:
-services should take over 1 year to perform
-no dollar threshold
