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REG > R7 - Business Law: Part 1 > Flashcards

R7 - Business Law: Part 1 Flashcards

1
Q

Agency: What is available to principal when fiduciary duty is broken fraudulent?

A

-Termination of agency

-Constructive Trust
-To ensure principal can
recover secret profits

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2
Q

Agency: Agent Relationship is terminated when?

A

-Principal is declared “incompetent”

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3
Q

Agency: When does a contract have to be in writing?

A
  • ONLY HAS TO BE SIGNED BY PRINCIPAL!!
  • If it cannot be performed within one year. If it can then it doesn’t have to be in writing.
  • If the agent is to purchase interest in land.
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4
Q

Agency: Termination of relationship by principal

A

Can be terminated at any time but may be liable for damages if its a breach of contract.

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5
Q

Agency: When is the “agent” liable?

A
  • Undisclosed principal

- Typically the agent isn’t liable when their is a disclosed principal

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6
Q

Agency: When is the principal liable for the agent?

A
  • When they are employees

- Not typically liable for sub-contractors

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7
Q

Agency: Apparent Authority

A
  • Third parties reasonable belief that an agent has the Actual authority even when they may not.
  • Agent can buy up to 300 tv’s, but buys 500 tvs. Principal will still be liable to third party if the third party was at one time told the agent had the authority to buy 500.
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8
Q

Agency: Third Party Withdrawal

A

Can withdrawal at any time when entered into a contract

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9
Q

Agency: When does an Agent breach their duty to the principal?

A

When they have interest that are adverse to the principal.

-Take unauthorized money
from them.

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10
Q

Agency: Undisclosed Principal NOTE

A

After third party finds out who principal is, they can either continue or end agreement with agent and principal

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11
Q

Agency: Respondeat Superior

A

When an employer is liable for their employee’s negligent acts during the normal course of business

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12
Q

Agency: What is need to create an Agency Agreement

A
  • Contractual capacity
  • Consent

NOT NEEDED:

  • Writing (unless land)
  • Consideration
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13
Q

Agency: If principal violates duty owed the agent, what remedies does the agent have?

A
  • Withhold further performance
  • Recovery of future damages
  • Recovery for past services

CAN’T:
-Demand specific performance from principal

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14
Q

Contracts: Consideration

A

“price of contracting”
-2 things must be given:

-Something of legal value:
-“Detriment to the
promise or benefit to
the promisor”
-Has to be something
the promisor isn’t
already obligated to
do

-Bargained for exchange:
-Need not me monetary
-Need not flow to party
-Courts will not inquire
into adequacy of
consideration
-Contract price terms
cannot be modified
unless new
consideration is given
for changes

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15
Q

Contracts: Advertisements

A

“ARE NOT OFFERS!”

-Only promise to negotiate

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16
Q

Contracts: Keeping an Offer Open

A

-One must give consideration in order to keep an offer open, even if seller states the offer is valid to a certain point in time. If the seller doesn’t receive consideration, they may revoke the offer and sell the product to someone else.

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17
Q

Contracts: NOTE

A

Offer from seller must create a reasonable expectation in the offeree that the offeror intends to sell the product.

-Selling a computer for $1 doesn’t do this.

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18
Q

Contracts: Option Contract

A

Oral promise (consideration) given not buy another similar product in order for the seller to keep an offer open for a longer period of time.

  • Seller offers to sell computer for $500, buyer asks to keep offer open until next day and seller makes him promise not to buy another computer until that time.
  • Valid consideration given
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19
Q

Contracts: Unilateral Contract

A

-When a promise is made in exchange for an act. Contract not formed until act is done (bilateral = promise in exchange for another promise. Contract formed once promises are made)

Offering to pay for a friend’s dog to get groomed out of pity and the friend actually taking it to be done.

-Valid consideration

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20
Q

Contracts: Offeror’s Death

A

Contract will terminate prior to acceptance by buyer but not after acceptance between a contract would be formed and enforceable

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21
Q

Contracts: ACCEPTANCE

A 
The Acceptance: 
 -Who can accept: who was 
  offered
 -Method: any reasonable 
  method "unless" specified 
  method in contract
 -Unequivocal: Mirror Image 
  rule (acceptance must 
  mirror offer), any change in 
  acceptance constitutes a 
  "counteroffer" 
 -Acceptances are effective 
  "WHEN DISPATCHED" 
  (MAILBOX RULE!!!)
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22
Q

Contracts: MAILBOX RULE

A 
-Specified Method: offeror 
 required acceptance by a 
 specific method - 
 "acceptance is effective 
 WHEN SENT if correct 
 method is used"

-No method specified: any
reasonable one can be used
and is effective upon
dispatch

-Offeror May opt out: stating
in offer that acceptance
must be received to be
effective

Only makes ACCEPTANCES valid upon dispatch (revocations, counteroffers and rejections are only valid upon receipt).

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23
Q

Contracts: Statue of Limitations

A

Period of time in which a case must be filed.

  • Commences on the date of breach of contract
  • The “running” of the statue of limitations means the
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24
Q

Contracts: Merchant to Merchant

A

Counteroffer’s become part of the contract and don’t void it. Unless it is a material change to the contract.

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25
Q

Contracts: Statue of Frauds

A

Mainly applies to the sale of goods (contracts for services too if they can be completed in one year, these must be in writing as well)

  • Only relates to contracts for the sale of goods of $500 or more (these must be in writing), $500 or less can be verbal
  • Terms can be stated on more than one document (this is really the only part that has to be in writing)
  • Only signature needed is the one being sued
  • When selling land, both parties must sign the contract for it to be enforceable to both of them
  • Service related contracts don’t apply this statue
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26
Q

Contracts: Novation

A

A defense to a party who has been released from a contract.

-Occurs when new contract subs a new party for an old party in an existing contract. All parties must agree to the release.

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27
Q

Contracts: Substituted Contracts

A

Both parties are released from old contract but are bound by a new one.

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28
Q

Contracts: Consequential Damages

A

Are only recoverable to the extent they are foreseeable. The non-breaching party is obligated to mitigate the damages though.

29
Q

Contracts: Mistakes

A 
Uni-Lateral: 
 - Defense if the non-
   mistaken party knew or 
   should have known of the 
   mistake
    -Subcontractor bidding a 
     materially wrong bid and 
     it getting accepted

Mutual:
- Voidable if a mutual
mistake of “value”

30
Q

Contracts: Parol Evidence Rule

A

Prohibits introduction of prior (contemporaneous) written statements to vary the terms of a contract.

-Does not bar the introduction of subsequent oral agreements

31
Q

Contracts: Conditions

A

Precedent: must occur “before” the other party must perform

Concurrent: must occur simultaneously, perform at the same time. Monetary exchange for goods

Subsequent: must occur after a party’s duty to perform has arisen and will cut off that duty

32
Q

Contracts: What will discharge a party from a contract?

A

-Accord and Satisfaction
-Accord: sub one contract
for another
-Satisfaction: execution of
accord

-Prevention of performance

33
Q

Contracts: Common Law and Construction Contracts

A

Minor breaches (different light bulbs installed that are very similar) do not constitute rescission but limit the non-breaching party to recovery of damages

34
Q

Contracts: Minors

A
  • May typically dis-affirm a contract anytime while a minor.
  • They may become bound to the contract by ratifying it, this can be done by:
  -Failing to dis-affirm in a 
   reasonable amount of time
  -Expressly ratifying the 
   entire contract
  -Retaining or accepting the 
   benefits (implied 
   ratification)
35
Q

Contracts: Liquidation Damages

A

Enforceable if damages would be difficult to assess and do appear to be because of the breach and not just a penalty.

36
Q

Contracts: Fraud Defense

A 
Must Prove: 
 -Misrepresentation of 
  material fact 
 -Scienter (intent to deceive)
 -Intent to induce reliance
 -Reasonable reliance
 -Damages
37
Q

Contracts: Rescission

A

“Undoes” a contract and restores the parties to their positions before the contract

38
Q

Contracts: Sale of Real Property is breached

A

Recovery can include either:

-Compensatory damages (compensate for the breach)

OR

-Specific performance (forced performance)

39
Q

Contracts: Duress

A

When one party overcomes the will of another through wrongful force or threats of imminent force.

-Economic duress is not typically a defense

40
Q

Contracts: Specific Performance NOTE

A

Only available in contracts for unique or rare property like:
-Patent
-Contract breach of sale of
real property

41
Q

Contracts: Paying the debt of another

A

Must be in writing somewhere to be enforceable.

42
Q

Contracts: Statue of Frauds 6 Contracts Requiring a Writing

A

M: Marriage

Y: CANNOT be done in one
year

L: Land

E: Executors paying estate
debts out of personal
income

G: sale of goods

S: Surety (pay the debt of
another)

43
Q

Contracts: Renders a Contract “Void”

A

Physical compulsion (harm done to someone)

-This is VOID not just voidable

44
Q

Contracts: Fraud “Inducement vs Execution”

A 
Inducement: 
 - defrauded into a contract 
   because it's terms are not 
   accurate to the real 
   situation (contract is 
   "voidable")

Execution:
- didn’t know you were
signing a contract
(contract is “void”)

45
Q

Surety and Guarantor:

A

Surety: directly liable on his contract and is distinguished from a guarantor, who is liable to the creditor only if the debtor does not perform his duty

46
Q

Surety: Defenses

A

If a creditor changes anything about a contract, the surety is released of their obligation.

47
Q

Surety: Liens - Judicial

A
  • If someone hasn’t paid their debt the government will issue a lien on property and if need be a “writ of attachment” to seize the property.
  • Their is a “homestead exemption” that allows certain property to not be seized
  • IRS can put these on your personal property for not paying federal taxes

Garnishment:
-Writ of garnishment can be sought to force person
holding debtor’s property to hand it over.
-Certain things like “social security can’t be garnished
and employee wages is limited as well.

48
Q

Surety: Liens - Mechanical and Materialman’s

A

Applies to people that work on cars or contractors. They have a possessory lien until they are paid for the services provided.

49
Q

Surety: When is surety released from obligation?

A

Principal debtor pays off debt (performs obligation)

50
Q

Surety: When Surety has to pay creditor off - Defenses Against Debtor to pay back

A

Exoneration:
- suit to compel payment from debtor (surety doesn’t
pay)

Subrogation:
- Surety forces creditor to give him the same benefits
offered to the debtor when he pays off the debt

Reimbursement:
-Surety pays debt to creditor and wants
“indemnification” from debtor (pay him back)

51
Q

Surety: Fraud

A

From by the debtor to the surety isn’t a defense unless the creditor knew about it.

52
Q

Surety: Debtor and Creditor NOTE

A

Creditor Composition:
- New creditors are added, and each agree to take a
lesser amount from debtor

Assignment for Benefit of Creditors:
- Debtor transfers property to trustee who then pays of
creditor

53
Q

Surety: Co-Sureties

A

If one surety is released from the debt, the remaining surety is still only liable for their percentage of the debt (not the one released as well)

54
Q

Surety: Fraud by Debtor (when Creditor tries to satisfy a judgment)

A
  • Remaining in possession after conveyance
  • Secret conveyance
  • Retain a benefit in property after conveyance
55
Q

Surety: Homestead Exemption NOTE

A
  • Doesn’t relate to lien on:
  • Home mortgages
  • IRS taxes paid
56
Q

Surety: Statue of Frauds

A

Surety agreements must be in writing!!

57
Q

Surety: Co-Surety

A

-Two or more with the same obligation (jointly liable)

Defenses: 
 -Exoneration (one surety 
   dips)
 -Contribution
   -If one surety pays the debt 
    off, he has the right to the 
    pro-rata share of the other 
    sureties
58
Q

Surety: Fair Debt Collections Practices Act (FDCPA)

A

Prohibited acts:

  • Contacting at inconvenient times
  • Contacting debtor directly if their is an attorney
  • Using harassing or abusive language
  • Making false of misleading claims
  • Contacting at place of employment if employer objects
59
Q

Secured Transactions: Requirements for Interest Attachment

A
  • Debtor has rights in collateral
  • Value given by the creditor
  • Parties agree to create interest
60
Q

Secured Transactions: Perfecting Interest In Collateral and its moved

A

If perfected collateral is moved to another state, it is perfected in the other state for a period of 4 months

61
Q

Secured Transactions: When does a security interest attach?

A
  • When a Security Agreement is created
  • Debtor has interest in collateral
  • Creditor gives value
62
Q

Secured Transactions: Seller Retaining a Security Interest for the sales price of the good

A

Automatically perfects the interest

63
Q

Secured Transactions: Purchase Monty Security Interest (PMSI)

A
  • Arises from creditor selling the collateral to the debtor on credit or advances the funds used to purchase the collateral
  • Has priority over all other security interests in the same collateral if the PMSI is filled within 20 days of the debtor getting possession.
64
Q

Secured Transactions: Perfecting an interest for manufactures/retailers

A

Their interest is automatically perfected when selling to consumers on credit. This creates a PMSI.

65
Q

Secured Transactions: Included vs Excluded

A 
Included:
 - Contractual security 
   interests in personal 
   property or fixtures
 - Outright sale of A/R
Excluded: 
 - Security interests in land 
   (mortgages)
 - Wage claims
 -  Statutory liens (mechanic)
66
Q

Secured Transactions: Filing Financial Statements

A
  • Period of effectiveness is 5 years but can be indefinite if continuation statements are filed
  • Timing, can be done before all steps of attachment are complete. Priority will date back to filing date.
67
Q

Secured Transactions: PMSI

A

Can only be perfected in consumer goods without the creditor taking possession. Thus having to file financial statements.

68
Q

Secured Transactions: Financing Statements Must Include

A
  • Name and mailing address of debtor and secured party
  • Indication of collateral covered
  • description of the type of collateral (property)
  • debtor must authorize filing using an “authenticated record”

REG (8 decks)

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