REG: Business Law2 Flashcards
What is a warranty of merchantability?
An implied warranty that the goods sold are fit for the ordinary purposes for which they are intended
What is a warranty of title?
When the seller has the right to sell the goods free from encumbrance or prior claim as a matter of implied law under Article 2 of the U.C.C.
What is a firm offer?
An offer that will not be withdrawn (not irrevocable) for a period not to exceed 3 months (if there is no consideration). Offer must be made by a merchant and signed in writing.
What is an output contract?
Where the buyer agrees to buy (and the seller agrees to sell) all of the output or production. No quantity or price needs to be mentioned in the contract. Allowed by the U.C.C.
What is a contract for the sale of goods?
It’s a sales contract that must contain names of parties, subject matter, material terms & conditions (this would include quantity, but not price). Must be in writing if > $500.
Title passes from the seller to the buyer only if the goods are identified in the sales contract. True or false.
True
Under a sales contract, neither party can sue unless they offer to perform their part of the contract. True or false.
True.
What is the doctrine of strict liability?
A tort doctrine which imposes liability on professional sellers for a product sold containing a defect causing the product to be dangerous, and resulting in personal injury. Application whether seller knew of defect or not. There is no requirement that the victim purchased the item.
Under the U.C.C., even if a sale is made with a disclaimer of “any and all warranties,” the seller still makes implied warranties relative to title. True or false.
True.
Under U.C.C. Sales Article and injured party may collect any amount of liquidated damages provided for in the contract. True or false.
False. Liquidated damages must be reasonable.
In determining whether the consideration requirement to form a contract has been satisfied, the consideration exchanged by the parties to the contract must be:
Legally sufficient
Substituted contract involve another contract with new terms and a either a
1) New party
2) original parties
Original parties
Can conditions precedent, conditions subsequent, and concurrent conditions affecting performance be validly present in a common-law contract?
Yes
In order to hold a person liable for misrepresentation, the victim must prove that he or she REASONABLY relied on the other party’s assertions. True or false.
True
May a mortgagee assign a mortgage to a third party without the mortgagor’s consent?
Yes
Must a mortgage be signed by both the mortgagor (borrower) and mortgagee (lender)?
No
Must a mortgage contain the actual amount of the underlying debt?
No
Are contracts ordinarily assignable?
Yes
In the case of substantial performance, remedy is limited to the damages caused by the reduced performance. True or False.
True.
What is parol evidence?
Verbal evidence
What is the parol evidence rule?
The parol evidence rule prohibits the parties from attempting to alter the meaning of the written document through the use of prior and contemporaneous oral or written declarations that are not referenced in the document.
In order for a contract to be enforceable, consideration must be mutual. True or false.
True
A promise to pay the police $500 to catch a thief is not an enforceable contract.
Under U.C.C. 7-309, list some exceptions to the common carrier’s liability to goods in transit.
Acts of God, public enemy, public authority, shipper or liability limit contract provided by common carrier.
The whole purpose of lender recording mortgages is to let the world know—or give notice—of a claim against the property by the lender. True or false.
True. The effect is that the lender protects its rights against the claims of subsequent bona fide purchasers for value.
What is a special endorsement?
Specifies the party to whom the instrument is transferred.
List the 4 types of endorsements
Blank, special, qualified, restrictive
A regular check, “pay to the order of …” when signed is 1) order paper or 2) bearer paper.
What type of endorsement is the signature?
Bearer paper (Unsigned is order paper) The endorsement type is blank
Give an example of a special endorsement.
A check made out to you and you sign and add “pay to John Smith” on the back to assign to john smith.
Is a check the is a special endorsement bearer paper or order paper, if unsigned by the assignee?
Order paper.
A restrictive endorsement can be conditional or restrictive. Conditional verbage is on the back of the check and contains “pay if …..” True or false.
True
Give an example of a restrictive endorsement
“For deposit only” + signature
What is a qualified endorsement?
Has the words “without recourse” on the back. Implies the signer bears no liability.
What is a negotiable instrument?
A transferable one
What is a draft?
Involves 3 people. One person orders a second person to pay a third person.
Does a post-dated check contain one or two dates?
One
In a situation where a creditor has repossessed property after default, is it true (or false) that a good faith purchaser for value can take the property free and clear of any subordinate liens?
True.
Bearer instruments are treated like cash. True or false.
True.
According to the UCC, in a shipment contract when does risk of loss pass to the buyer?
When the goods are delivered to the carrier.
According to the UCC, in a delivery contract, when does risk of loss pass to the buyer?
When they are tendered to the buyer at a specific destination.
An insurable interest in the goods must exist (when)?
When any loss occurs.
Under the Negotiable Instruments Article of the U.C.C., for an instrument to be negotiable it must:
Be payable to the order or bearer Be signed by the maker or drawer Fixed amount of money is stated Be in writing (2 more)
Does a contract governed by the U.C.C have to involve the sale of goods for a price of $500 or more?
No
If the subject matter of the contract involves the sale of goods for a price of $____ or more, then the contract must be in writing.
$500
What are the 3 things required for a commercial sales contract?
Offer, acceptance, consideration
Who can make a firm offer?
A merchant
What is a warranty of fitness?
When goods are selected by the seller to fit a certain request made by the buyer.
All checks are drafts. Are all drafts checks?
No
What sort of instrument looks like a check but is payable in the future (says 30 days after date pay to the order of …)
Negotiable time draft.
This is not a post-dated check (which has one date).
When are checks payable?
On demand
If a commercial paper has another promise is stated in addition to the promise to pay, is it still negotiable?
No.
What forms can a contract take?
Written, oral, implied
What is respondeat superior?
A legal doctrine, most commonly used in tort, that holds an employer or principal legally responsible for the wrongful acts of an employee or agent, if such acts occur within the scope of the employment or agency
Specific performance involves a contract. True or False?
True
An offer to sell something to someone at a certain price may be terminated when the offerer sells the subject matter to someone else instead, even if the offerer specifies a time frame during which the offer is valid. True or False.
True
To prevail in a common-law action for innocent misrepresentation, the plaintiff must prove:
The misrepresentations concerned material facts falsely and intentionally made.
In contract law, if the misrepresentation is innocent and not made with the intent to deceive, the injured party can obtain damages for the tort of deceit. True or false.
False. They can only rescind the contract.
What is an accord and satisfaction?
A purchase from a release of a debt obligation. The accord is the agreement to discharge debt. The satisfaction is the consideration which binds the agreement. Ex. I’ll give you my guitar instead of paying back the $500. Other person agrees.
An offer may be terminated by a counteroffer. True or False.
True. A counteroffer is a rejection of the 1st offer combined with a new second offer.
Is a promise to donate money to a charity on which the charity relied in incurring large expenditures legally binding without consideration?
Yes.
What is fraud in the inducement?
False representation of (or failure to disclose) a material fact, that was knowingly made or omitted, and justifiably relied upon in the making of the contract, and resulting in injury. Note: the misrepresentation may even be innocent.
Minors are considered to have compromised contractual capacity. True or False.
True.
To disaffirm a contract one day after a minor reaches the age of majority, he/she must disaffirm in writing. True or False.
False. The minor is generally required to return any goods that may have been involved, unless the minor can’t or the goods are damaged.
What 2 concepts affect the amount of monetary damages recoverable by the nonbreaching party when a contract is breached?
Foreseeability and mitigation of damages
In assigning a contract to a third party for a consideration, is the assignor required to notify the other party on the contract in order for the contract to remain valid?
No
Insurance contracts cannot be assigned. True or False.
True. Because it may result in a different amount of risk for the insurer.
One of the criteria for a valid assignment of a sales contract to a third party is that the assignment must:
Not materially increase the other party’s risk or duty (not the assignee, but the other party the assignor has a contract with). Generally this may occur without consent unless the above happens.
When will a court enforce liquidated damage provisions in a contract? When are liquidated damages used?
If they are a reasonable estimate of the probable loss when made and are not a penalty used to prevent a breach. They are used in situations when an estimate of compensatory damages is hard to determine. They are agreed upon in advance.
When are liquidated damages considered to be a penalty?
When the charges are excessive. In which case they are not enforceable, and the courts will make the party prove compensatory damages.
To cancel a contract and to restore the parties to their original positions before the contract, the parties should execute a:
Rescission
Under an assignment of a contract, the assignor is liable to an assignee to make sure that the assignee receives the rights under performance of the contract. True or False.
True. Only in the situation where the assignee releases the assignor is the assignor no longer liable.
To prevail in common-law action for fraud in the inducement, a plaintiff must prove:
Defendant made the misrepresentations with knowledge of their falsity and with an intention to deceive. It is the plaintiff’s responsibility to prove.
What is constructive eviction?
Where a landlord either does something or fails to do something that the landlord has a legal duty to provide, rendering the property uninhabitable.
What is specific performance?
The performance of the contract, as ordered in cases where damages would not be adequate remedy.
Fraud in the execution is 1) void 2) voidable
Void
Didn’t know they were signing a contract
Fraud in the inducement is
1) void 2) voidable
Voidable
They know they were signing a contract but didn’t understand what they were signing.
Which contracts have to be in writing?
Real estate contracts
Contracts that can’t be completed in one year
Contracts Involving over $500
