REG Flashcards
Realistic Possibility vs. Reasonable Basis vs. Tax Shelters
Realistic Possibility 33%, Reasonable Basis 20 – 33% (PCAOB)
40%, 50% - Tax Shelters (IRS)
Privity of Contract - Ultramares vs. Touche
liable to those with privity of contract (client and known third parties)
Privity of Contract - Restatement
liable only to those in a limited class
Privity of Contract - Reasonably Foreseeable
liable to anyone reasonably foreseeable to rely on F/S’s
Common Law Contracts
of the majority of states for contract issues. Applies to service and real estate contracts.
UCC
form of codified commercial law to create a system of consistent contract principles. Applies to contracts that involve the sale of goods.
Statute of Frauds & Records
must be in writing: guaranty of debt contracts, land, contracts not performed within one year, sale of goods over $500
Common Law - Acceptance
mirror image rule; absolute, unequivocal, and unconditional
UCC - Acceptance
expression of acceptance with or without additional terms; depends on merchant vs. non-merchant transaction
Risk of Loss - Delivery by Shipment
Delivery Terms: Ship, FOB origin or seller’s place of business – FAS, CIF, C&F
Law: Title and risk of loss pass to buyer upon carrier’s possession of conforming goods
Risk of Loss - Delivery to Destination
Delivery Terms: Deliver, FOB buyer’s place of business – Delivery ex-ship
Law: Title and risk of loss pass to buyer upon tender of conforming goods to the buyer
Risk of Loss - Delivery w/o document of title, no physical movement of goods
Title passes to buyer upon formation of the contract. Risk of loss passes to the buyer (a.) upon the buyer’s receipt of the goods if the seller is a merchant or (b.) upon the seller’s tender of the goods if the seller is a nonmerchant.
Risk of Loss - Delivery with a document of title – Nonnegotiable document, no physical movement of goods
Title passes upon buyer’s receipt of the document. Risk of loss passes to buyer after buyer receives the document and a reasonable time has lapsed.
Risk of Loss - Delivery with a document of title – Negotiable document
Title and risk of loss pass upon buyers receipt of the document
Seller’s Remedies under Article 2
(1) Stop Delivery (2) Recover Resale Price (3) Recover Market Price (4) Action for Price -specifically manufactured goods (5) Lost Profit
Buyer’s Remedies under Article 2
(1) Specific Performance (2) Cover Price (3) Market Price
Requirements for Negotiability
- In writing, 2. Signed by maker/drawer, 3. Unconditional promise or order to pay, 4. Pay on demand/definite time, 5. Sum certain in money, 6. Words of Negotiability
Order to Pay vs. Promise to Pay
Order to Pay – Drafts & Checks, Includes 3rd party (Drawer, Drawee, & Payee)
Promises to Pay – Notes & Certificates of Deposit, Includes only 2 parties (Maker & Payee)
Order Paper vs. Bearer Paper
Order – “Pay to the Order of”; Bearer – “Pay to the bearer of” includes person or bearer, cash, no specific party named
Requirements for Holder in Due Course (HDC)
Must be a 1. Holder, 2. Take the instrument for value, 3. In good faith and 4. Without notice that the instrument in overdue, previously dishonored, or of any claim or defense on the part of any person.
Primary vs. Secondary Party Liability - Negotiable Instruments
Primary Party Liability – Makers of CDs and notes, Drawees of drafts or checks
Secondary Party Liability – Drawers of an ordinary check or draft, endorsers (unqualified)
Security Interest Attaches when ….?
- In writing – signed and describe the collateral (unless in possession of secured party), 2. Give the debtor something of value, 3. Debtor must have rights in the collateral
Rights of creditor w/ security interest attached
- Right to repossess, 2. Right to sell repossessed items, 3. Priority over unsecured creditors, 4. Priority in Bankruptcy, 5. Right to perfect the security interest
Requirements for Perfection
Financing Statement – can be filed (perfected) before security agreement is made or security interest attaches, debtor authorization is required.
Security Interest- perfected upon communication of a financing statement and filing fee to officer OR acceptance of the financing statement by the officer