R7

Question 1

What is required for an agency to be formed?

Answer 1

the principal has to have contractual capacity and there needs to be consent (not necessarily consideration) from both parties

Question 2

T/F: Agency agreements need to be in writing when purchases of land are involved.

Answer 2

true

Question 3

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.

Answer 3

true

Question 4

What should you know about power of attorney?

Answer 4

-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

Question 5

T/F: A subagent (appointed by the agent) will owe duty to both the agent and principal.

Answer 5

true

Question 6

What can a principal do if the agent breaches their fiduciary duty?

Answer 6

-terminate the agency
-receive the remedy of a constructive trust to ensure that the principal can recover secret profits

Question 7

What is indemnification?

Answer 7

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

Question 8

T/F: Actual authority is authority the agent reasonably believes that he or she has based on communications from the principal.

Answer 8

true

Question 9

When is an agency terminated by operation of law?

Answer 9

-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

Question 10

T/F: The principal must provide notice of the revocation of an agent’s authority to a third party who relies on that authority.

Answer 10

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

Question 11

For a company to ratify (make official) a contract with a third party, what must happen?

Answer 11

the company must know of all material facts relating to the contract at the time it is ratified

Question 12

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.

Answer 12

true

Question 13

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.

Answer 13

true

Question 14

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.

Answer 14

true

Question 15

T/F: An employer is liable for torts (wrongful acts; ex. unauthorized misrepresentations) of employees (not independent contractors) committed within the scope of employment.

Answer 15

true

Question 16

What is the doctrine of respondeat superior?

Answer 16

a principal, including a corporation, can be held liable for an employee’s tort committed within the scope of employment

Question 17

What is a unilateral contract?

Answer 17

a one-sided contract where the offeror promises to pay once the offeree completes the task given by the offeror

Question 18

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.

Answer 18

true

Question 19

What needs to happen for ads to be an offer?

Answer 19

they need to specify the items and prices along with a promise to perform a very specific act conditioned upon acceptance

Question 20

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.

Answer 20

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

Question 21

What happens if an offeror dies prior to the offeree’s acceptance?

Answer 21

the contract is automatically terminated since the offeree hadn’t accepted it yet

Question 22

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?

Answer 22

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

Question 23

T/F: To be effective, consideration must be legally sufficient, which means it needs to be something that the law recognizes as consideration.

Answer 23

true

note: the consideration is not checked for fairness

Question 24

T/F: Modification of a contract must be supported by consideration for it to be a valid contract.

Answer 24

true

Question 25

T/F: Past consideration is not accepted as real/current consideration.

Answer 25

true

Question 26

What does fraud require?

Answer 26

-misrepresentation of material fact -intent to deceive note: opinions or statements of value do not constitute misrepresentations of material facts unless made by experts

Question 27

What renders a contract as void versus voidable?

Answer 27

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)

Question 28

What is undue influence?

Answer 28

where a person of trust takes unfair advantage of the relationship

Question 29

What is the parol evidence rule?

Answer 29

it prohibits evidence of prior (NOT subsequent) or contemporaneous oral or written agreements that seek to contradict the terms of a fully integrated contract

Question 30

What is duress?

Answer 30

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

Question 31

T/F: A mutual mistake of material fact will make a contract voidable at the option of the adversely affected party.

Answer 31

true; both parties need to be mistaken (it would be a unilateral mistake if one of the parties should have known about the mistake)

Question 32

T/F: A contract can be rescinded (taken back) for unilateral mistake if the nonmistaken party should have known about the mistake.

Answer 32

true

Question 33

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.

Answer 33

true note: a minor can disaffirm a contract as a minor even if the subject matter was destroyed due to the minor's negligence

Question 34

What is the statute of limitations and when does the timeline start?

Answer 34

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

Question 35

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.

Answer 35

true

Question 36

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).

Answer 36

true

Question 37

T/F: The Statute of Frauds does not apply to contracts that can be fully performed within one year.

Answer 37

true

Question 38

T/F: Under the Statue of Frauds, contracts for the sale of goods of $500 or more must be evidenced in writing.

Answer 38

true

Question 39

What is accord and satisfaction?

Answer 39

both parties agree on new terms that vary from the original contract which discharges the old contract completely

Question 40

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

Answer 40

true

Question 41

T/F: The Sales Article applies to all contracts for the sale of goods, regardless of price.

Answer 41

true; doesn't include custom-made items

Question 42

How long can a merchant's offer stay irrevocable?

Answer 42

up to 3 months

Question 43

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).

Answer 43

true - the offeror doesn't need to agree to the new terms for it to be a valid contract

Question 44

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.

Answer 44

true

Question 45

What is a required item to be mentioned in a Sales Article written contract?

Answer 45

quantity of goods to be sold

Question 46

What is commercial impracticality?

Answer 46

performance of a contract is excused due to a very large unforeseen event (and the contract would be more burdensome than anticipated)

Question 47

What is tender?

Answer 47

to unconditionally offer money or performance to meet an obligation

Question 48

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.

Answer 48

true

Question 49

T/F: In a sale on approval, risk of loss passes to the buyer on approval of the goods.

Answer 49

true

Question 50

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.

Answer 50

true

Question 51

What is true of express warranties?

Answer 51

they must be part of the basis of the bargain between the buyer and the seller

Question 52

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.

Answer 52

true

Question 53

When is a seller entitled to receive a full refund of the goods sold to the buyer?

Answer 53

when the goods are destroyed while the risk of loss (as opposed to title) is with the buyer

Question 54

What rights are available to the buyer when a seller commits an anticipatory breach of contract?

Answer 54

-demand assurance of performance -cancel the contract NOT punitive damages

Question 55

When would a buyer be released of all its obligations?

Answer 55

if the seller refuses to give written assurance when reasonably demanded by the buyer (a form of anticipatory repudiation)

Question 56

What rights are available to the seller when a buyer commits an anticipatory breach of contract?

Answer 56

-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

Question 57

What is true of anticipatory repudiation of a contract?

Answer 57

-it's a material breach of the contract -it can be retracted/withdrawn before the other party relies on it

Question 58

T/F: A surety is directly liable to the creditor on a contract.

Answer 58

true

Question 59

T/F: The creditor must pursue the debtor before the creditor is entitled to recover from the guarantor.

Answer 59

true

Question 60

T/F: The guaranty must be in writing for it to be valid.

Answer 60

true

Question 61

What is subrogation?

Answer 61

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

Question 62

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.

Answer 62

true

Question 63

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).

Answer 63

true

Question 64

_________ completely releases the surety, even a compensated surety.

Answer 64

tender of performance by the principal debtor

Question 65

T/F: A partial surrender of the debtor's collateral is a modification that will release a noncompensated surety from liability.

Answer 65

true

Question 66

What is a surety?

Answer 66

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

Question 67

T/F: A security interest is not effective against anyone (including the debtor and third parties) before it attaches to the collateral.

Answer 67

true

Question 68

What does a security interest attachment require?

Answer 68

1. the parties agree to create a security interest (either by an authenticated security agreement or the creditor/secured party taking control of the collateral) 2. the debtor must have rights in the collateral 3. the creditor must give value *there is no requirement that the security agreement be filed

Question 69

What must a financing statement (security agreement) generally contain?

Answer 69

1. name and mailing address of the debtor and secured party (creditor) 2. description of the collateral covered 3. description of the real property, if applicable *the amount and statement of purpose of the transaction can typically be excluded

Question 70

T/F: Perfecting a security interest by filing a financing statement will give the creditor priority over most subsequent creditors, but not all.

Answer 70

true; perfection is automatic when selling to consumers

Question 71

What can the seller do if the debtor defaults on the goods?

Answer 71

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

Question 72

What is a novation?

Answer 72

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)

Question 73

When can an offeror revoke an offer per the mailbox rule?

Answer 73

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)

Question 74

What facts are true that would make a contract within the Statute of Frauds?

Answer 74

sale of goods: -terms = over 1 year -$500 or greater sale of services: -services should take over 1 year to perform -no dollar threshold