R5 + R6 Flashcards

R5
Terms Definitions
Unilateral contract
1 promise exchanged for performance. A contract is not formed until the performance is completed.
Bilateral contract
2 promises exchanged for a promise. A contract is formed as soon as promises exchanged.
Executed contract
All Duties under the contract have been performed.
Step 1source of contract law - common law
RISE- not sale goods. Involve real estate, insurance, services, and employment are governed by common law. All terms.
Step 1source of contract law - Uniform commercial code (UCC) sales article.
US article 2 governs contracts for the sale of goods (moveable things). Qty.
Creation of a contract
GR: 1). Agreement made up of an offer and an acceptance. 2). Exchange consideration (legal value). 3). A lack of defense (a gun to ur head).
To be an offer:
1)? Was there an intent to contract. 2). Was there definiteness and certainty in the essential terms. 3). Must be communicated.
Intent to make a contract
Must be reasonable. No obvious joke to be an offer.
Advertisement
Not an offer. It's an invitation seeking offers.
Exception advertisement to be an offer
Specifying offeree: the first five customer can buy this coffeemaker for only $1.
3 ways to terminate an offer 1of 3
1) revocation by offeror: change ur mind before acceptance even if u promise to keep the offer open. Direct or indirect (oral or written): conduct sell to someone else or directly call the offeree.
Exception for revocation
1). Option contract: offeree exchange for consideration. 2). Unilateral contracts: counter promise to complete performance. 3). UCV sales.
2 of 3 ways of terminate an offer
1). Express "say no" or counteroffer (offeror is not the offeree). 2). Mere inquiry = bargain is not rejections. 3). Lapse of time: offeree must accept the offer within specific time or if no time specified then with reasonable time. Silence is rejection.
3 of 3 ways to terminate an offer
Death, illegally product, destructive of subject matter (product is destroyed).
Method of acceptance
Express or implied. May be accepted by mail, fax, etc. offeree can only accept it unless its an option contract are assignable.
Mailbox rule -
Offers, rejections, revocations and counteroffers effective when rec'd. However, acceptance is effective when they are "sent".
Exception to mailbox rule
States that the acceptance must be Rec'd to be valid.
Valid Offer and acceptance
Must be supported by legally sufficient consideration: bargain for an exchange, must be a legal value. Offeree (promisee) agree to do something that he/she is not obligated to do. Donation to charity may be enforceable when the donee is relying on it (hospital).
Consideration of valid contract
1). Need not have monetary value = quit smoking for money. 2). Fairness is not required. 3). Preexisting legal duties not sufficient = police or teacher.
Not considered a contract
1). Gift. 2). Past or moral consideration = no contract, saving Tim.
Defense of fraud involved
MAIDS: misrepresentation of material, actual and justifiable reliance by victim, intent to induce reliance, damages, scienter reckless disregard for the truth.
Fraud in the execution - void
1). Illegal act (physical force). 2). Tricking to sign a contract.
Fraud in the inducement - void able
1). Blackmail or embarrass someone. 2). Good guy can void only. 3). Changing the terms or contains materially misrepresented. 4). I'll fire or divorce you if don't sign the contract.
Undue influence
Taking unfair advantage of a relationship: spouse, trustee, doctors, attorney, guardian, accoutant, etc.
Mutual mistake
Void able: both parties are mistaken as to material fact regarding the contract. But not apply to value. Product stolen/destroyed.
Unilateral mistake
Tough, can't get out of a contract after sign and deposit with realtor, must do research before, due diligence.
Exception to unilateral mistake
Material fact is a defense if the other party knew or should known mistake (BiDS for audit)
Promise not to compete
Illegal because it violates antitrust law.
Exception to promise not to compete
Enforceable: sell bus and employment.
Minor may disaffirm contracts
Cancel anytime while a minor or even after becoming an adult within a reasonable time.
Exception to minor disaffirm
Not valid for food, clothing and shelter.
Ratification on reaching a majority
Minor -> adult: keeping the product: failing to disaffirm within reasonable time. Expressly ratifying the entire contract orally or writing. Retaining or accepting the benefits.
Contract - voidable
Made if mentally incompetent, incapable if understanding contract.
Contract - void
Adjudicated mentally incompetent, insanely crazy.
Statue of limitation
4 - 6 yrs measured from date of breach.
Statue of fraud: six contract requiring writing form
MYLEGS: marriage, contract can't perform within a yr, interests in land or lease more than a yr, contracts by executors similar to pay estate debts out of personal funds, sale of goods over $500, surety (pay debt of another).
Destructive of subject matter
Contract maybe avoided due to impossibility.
Accord and satisfaction and substituted contract
Substitute one contract for another and satisfaction is the execution of the account.
Novation
When a new contract substitutes a new party for an old party in an existing contract. All parties must agree
Parol evidence rule
Read, understand, agree and sign it. Prohibits: oral or written statements made prior to te written contract or oral statements made contemporaneously with the written contract. Seek to vary the terms if the written contract.
Early breach of contract
1). Immediately sue for damages. 2). Await the time for performance then sue if not performed. 3). Cancel the contract.
Compensate damages service contract
The difference between the cost of substitute performance and contract price. Must be reasonable foreseeable as a result of the breach.
Damages for specific performance - real estate
Money would be inadequate remedy. 1). Can't be used for personal service contracts. 2). Specific performance or compensated damages.
Liquidated damages - agreed to in the contract
Must be reasonable to the actual harm done, can't be a penalty.
Creation of a contract - merchant's firm offer under UCC
1). Merchants (dealer). 2). Must be in writing and signed by the merchant. 3). Offer must give assurance it will be open for about 3 months
Acceptance under UCC
Acceptance will be effective even if it states new or different terms unless the changes are material. 2). Promise to ship or prompt shipment.
Exception - notice of accommodation
Counteroffer.
Auctions
1). Bidders are the offeror. 2). Unless otherwise stated "with reserve" seller doesn't have to sell unless an adequate bid is made. 3). "Without reserve" must be sold at the highest bid.
Under UCC consideration
1) qty must be reasonable and it could be unknown. 2). Modification the sale of goods is enforceable as long as its in good faith. 3). Payment for check
Defenses under UCC
1). Fraud (MAIDS). 2). Statue of limitation. 3). Statue of fraud. 4). Impossible and impracticality.
Statue of limitation
4 yrs start on the date of breach of contract.
Statue of fraud - MYLEGS
G: sale of goods over $500 must be in writing. There are 4 exceptions SWAP: specially manufactured (custom or tailored). Written confirmation (10 days to object). Admit in court. Performance has been accepted.
Noncarrier cases - non merchant
Garage sales: buyers @ risk of lost when purchased
Non carrier cases - merchant seller
Seller @ risk of lost. Unless the product is actually delivered to buyer.
Carrier cases - shipment contract
Buyers @ risk of Lost when it gets in the truck.
Carrier - destination contract
Seller @ risk of lost unless seller tendered delivery.
Common shipping terms
1) FAS: free along side 2). CIF cost, insurance and freight. 1,2 buyers risk of lost. 3). FOB seller place, buyer risk when it gets in the truck. 4). Fob buyer destination, seller risk of loss until its rendered delivery.
Sale on approval
Test drive - seller is at risk of loss
Sale or return
Buyer risk of lost until its return.
Insurance interest when goods are identified
Both parties may have insurance on the same goods.
Warranties - general rule
1). Express. 2). Implied warranty title. 3). Inplied warranty merchant ability. 4). Implied warranty of fitness for a particular purpose.
"As is"
Can only disclaim fitness like merchanchability. But can't disclaim express warranty.
Anticipatory repudiation
One party reject performance before performance is due.
Commercial paper
Substitute form of payment
Negotiable instrument
Negotiated to a holder in due course, the holder in due course will take the instrument subject to very few defense (real defense not personal).
Notes - promise to pay
Two party commercial paper.
Drafts
Three party commercial paper. It's an order by one person (drawer) to another person (drawee) demanding that drawee pay money to third party (payee).
Time instrument
Time draft - third party commercial paper payable on a certain time.
Negotiability instrument with article 3
Must be: 1). in writing, 2). signed by maker (note) or drawer (draft), 3). Contain unconditional promise (note) or order (draft) to pay, 4). Be for a fixed amount of money, 5). Payable on demand or definite time, 6). Payable to order or bearer with exception of checks.
Writing signed by maker
Note promissory
Writing signed by drawer
Draft - power of attorney is okay.
Unconditional promise or order
1). No terms. 2). No express condition. 3). Permissible conditions
Fixed amount of money
Money only, interest is ok, discount, collection attorney fees, additional amount.
On demand or at a definite time
Checks do not have to be dated. Demand Can be payable "on demand", "at sight", "on presentation". Definite time: must be dated
If the instrument is not negotiable
Difficult to get pay because no one has the right.
Negotiated instrument
Becoming a holder in due course called "negotiation" and protected by UCC
Holder in due course
A person with good title to the commercial paper.
Endorsement has 3 qualities
1). Special or blank. 2). Restrictive or u restrictive. 3). Qualified or unqualified.
Special endorsement
Specific party - order paper. Payee Must sign to transfer order paper. Doesn't need "to the order of" just the name on the back
Blank endorsement
Simply cash.
Becoming a holder in due course
1). For value. 2). In good faith. 3). Without notice of any defenses or claim of ownership on the instrument.
Shelter doctrine
Holder through an HDC. Pam gift Ned example
HDC rule
If a negotiable instrument is negotiated to an HDC, the HDC takes free from personal defenses and claims and is subject to real defense.
Real defenses
FAIDS: fraud and forgery. Adjudicated insanity and alteration if the instrent ($ changes). Infancy and illegality. Duress and discharge (physical threat). Surety ship and statue of limitation.
Personal defenses
If its not relate to FAIDS
Liability of the parties - note/cd
1). Maker. 2). Endorser
Liability of the parties - draft/check
1). Drawee if the accept. 2). If not accept drawer and endorser.
Five transfer warranties if those transferring for consideration
1). Transferor is entitled to enforce the instrument. 2). All signature are genuine or authorized. 3). Instrument has not been materially altered. 4). No defense. 5). No knowledge of any insolvency.
Purchase money security interest (PMSI)
1). Creditor sells the collateral to debtor on credit, retain interest for the purchase price. Or 2). Creditor (bank) advances funds used by debtor to purchase collateral.
Consumer goods
Goods used for personal, family or household purpose.
Inventory
Goods held for sale or lease
Equipment
Goods used for primarily in business.
Under article 9 types of collateral
1). Goods: inventory, consumer goods, equipment. 2). Intangible collateral accounts: goods, services, real property or cc. 3). Investment property: stocks, bonds, mutual funds or broker acct. 4). Proceeds: sales, exchange, collection or disposition of collateral.
Duties of secured party
Pawn shop owe a reasonable care of the collateral.
Step 1 to security interest evidence
1). Agreement must be in writing. Or. 2). Have possession of the collateral.
Step 2 of security interest evidence
Secure priority in the collateral over Third parties (another creditor): 1). Filling. 2). Taking possession of collateral. 3). Control. 4). Auto perfection. 5). Temporary perfection. Must be attached to the collateral before the 5 steps.
Attachment requirement
1). Creditor must take possession or control of collateral or obtain records of agreements. 2). Approved by debtor. 3). Debtor must have ownership to collateral 4). Financing Not req
Perfection by filing
File with Secretary of State for 5 yrs and can be renewed.
Perfection by taking possession
Muse be tangible (car, jewelry, furniture, etc). Oral agreement is ok here.
Perfection by control
Control of any investment bonds or securities, certificates.
Automatic perfection
PMSI in consumer goods (personal use), few accounts receivable.
Temporary perfection.
20 days period for proceeds (exchange items). 4 months for moving out of stAte.
Under article 9 - priority with superior interest
1). Buyer in the ordinary course of business (merchant) of inventory that seeves as collateral for agreement HDC. 2). PMSI. 3). Holder of perfected security interest or judicial lien that attached to collateral. 4). Holder unperfected interest. 5). Debtor.
Properly perfected PMSI
2nd highest priority. Automatic PMSI consumer goods should file anyways because of the garage sale rule.
PMSI inventory
1). Filing must be filed before deliver to debtor. 2). Any secured party who has filed a security interest in the same collateral is given notice of the PMSI before debtor receives the inventory.
Noninventory PMSI -
20 days grace period. 1). If perfected within 20 says, perfection relates back to the day of debtor got possession. 2). No require that secured party notify other secured parties like inventory.
Perfected security interest
Non PMSI. First to file or perfected wins.
Unperfected security interest
Never perfected buy only attached is after PMSI 4th in line.
Replevin action
The secured party may always take Possession of collateral by reflevy from judicial action.
Rights on default - sale
Public auction or private sale. Make sure the property has superior interest.
Proceeds of default order
1). Pay the expenses of repossession and sale. 2). Pay creditor with security interest in the order of priority. 3). Surplus is paid to the debtor.
Surety
Directly liable. Must be in writing n signed by surety to be enforceable.
Guarantor
Secondary responsible after debtor. Must be in writing.
Exoneration
Suit to compel payment before surety pays creditor. But it will not impair creditors right to proceed against a surety.
Subrogation
Enforcement of creditors right against principal. After payment then sue debtor for payment.
Pro rata
Determine by the number of solvent surgeries.
Defense of surety
Creditor is the bad guy! 1). Defrauded principal. 2). Duress upon principal. 3) illegality. 4). Discharge of principal obligation. 5). Suretys incapacity or bankruptcy.
FDCPA
Fair debt collection practice act curbs abuses by collection agencies.
To be holder of order paper
Must have all necessary signature and possession of the instrument must have transferred.
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