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Voidable Contract

contract capable of being made void

Bilateral Contracts

contract in which both parties exchange promises

Unilateral Contracts

contract in which only one party makes a promise

Implied in Fact Contract

contract in which the agreement of the parties is inferred from their conduct

Executed Contract

contract that has been fully performed by all of the parties

if Horace sells his car to Lily, they both expect to benefit under the contract but neither has a

fiduciary duty to the other and neither controls the other so there is no agency relationship

Elements of Undue Influence

fiduciary or confidential relationship unduly use of influence rescission is relief

Injunction

A remedy at equity that asks the court to enter an order that enforces or suspends a specific portion of the contract

Restitution

A remedy at equity that asks the court to enter an order to return the original consideration given

Remedy of Specific Performance

A remedy at equity that asks the court to grant an order that demands performance

Discharge

Most contractual obligations are discharged by performance according to the terms of a valid contract.

Jamison Well Drilling Inc. v. Pfeifer

Pfeifer contracts Jamison Well Drilling to drill a water well Ohio state law says it must be lined with 25 ft of casing Jamison only used 11 ft The state deemed it was illegal and must be sealed up Pfeifer used storage tank but paid Jamison nothing Jamison sued Court found Pfeifer only had to pay for storage tank as he was still using it

Physical or Non-Physical Harm

Physical torts - Principal is liable for the negligent conduct of an employee that occurs within the scope of employment Nonphysical torts - Principal is liable if the employee if the employee acted with express, implied, or apparent authority

Marriage

Prenuptial agreements written prior to marriage

Formal contract

Requires a special form for creation

Informal contract

Requires no special form for creation

Innocent Misrepresentation

Rescind is only option

Unilateral Mistake

Rescission usually not allowed not enforcement situations (1) party knew unilateral mistake (2) clerical or math error (3) mistake so serious, contract unconscionable:

Trade Barriers

Restrictions on imports

Revocation

Revoke, take back the offer. An offer can be revoked any time before it has been validly accepted

Bailment

Risk shifts to buyer when buyer receives negotiable doc of title bailee acknowledges buyer's right ot possession buyer receives non-negotiable doc of title and has reasonable time to demand goods

Rule: Where the partnership agreement is silent, losses are shared in the same proportion as profits. Choice "c" is correct. Vick was entitled to 30% of the profits and so will be responsible for 30% of the undistributed $30,000 loss, or $9,000. Choices "a", "b", and "d" are incorrect, per the above rule.

Nominal Damages

Remedies that give the minimal sum of money and are awarded upon a technical breech of contract. One cannot get any punitive damages without first getting nominal damages

Reliance Damages

Remedies that put the innocent non-breeching party in the position they would have been in had the contract never been entered into

by law, minors lack the ability to enter into a contract and are able to disaffirm any contract they enter into with certain expectations.

true

certain contracts that are required to be in writing and signed in order to be enforceable are concerned with the statute of frauds.

true

complete performance is 100% completion of the contract.

true

fraud in a contract is voidable by the innocent party.

true

gift promises also called gift contracts, are just transfers of wealth and are unenforceable by the courts.

true

handwritten terms on a contract take precedence over conflicting typed terms.

true

if performance in a contract becomes extremely difficult or costly due to unforeseen circumstances, the contract may be terminated.

true

in order to be the president of kd you must be an initiated member. this is a condition precedent.

true

inferior performance is less than 89% completion of the contract.

true

inferior performance is the same as no performance.

true

kelsey wants to buy hannah's bike at the end of the semester. kelsey asks hannah to paint the bike blue from the current green. hannah agrees to sell kelsey the bike for $200. kelsey paid the $200 but hannah did not pain the bike. hannah can sue for breach of contract.

true

kenny chesney cannot assign eric church to play at his concert in auburn.

true

only the original parties in a contract have rights, obligations, and liabilities under the contract.

true

parties must have the ability to accept or reject an offer.

true

past consideration is not consideration.

true

rebecca who is 17 spends $15,000 on a new car. a month later she i stopped at a light and someone hits her car destroying it. she is able to return it and get her $15,000 back.

true

rights of a life insurance policy may not be assigned because it would materially alter the risk and duties of one of the parties

true

specific performance requires a party to complete the acts promised in a contract.

true

substantial performance is completion of at least 90% of the contract.

true

surety contracts, such as guarantor agreements, must be in writing and signed in order to be enforceable.

true

the cost of something has nothing to do with its value.

true

the creepy frat guys asked you to be his date to formal. you say I will see what I have going on and let you know hoping he will forget. he waits a month for your answer and decided to revoke his offer to take you to formal. his revocation of ht offer is only effective when you receive it.

true

the mailbox rule allows the acceptance of an offer to be valid wen placed in the mailbox, even if the offeror never receives it.

true

the parol evidence rule prevents someone from introducing evidence in court of oral agreements which conflict with the valid written contract already in place between the parties.

true

the transfer of duties is called a delegation

true

the transfer of rights is called an assignment.

true

the willingness of parties to enter into a contract must be voluntary.

true

there must be consideration by both parties of a contract.

true

threat of civil suit is not stress and will not allow the contract to be voidable.

true

void means there is no contract.

true

Compensatory Damages

Remedies that put the innocent non-breeching party in the same position they would have been in had the contract been fully performed

Ellen offers to sell her math textbook to Julia for $50. Julia does not respond. Ellen and Julia do not have a contract because they lack the requirement of

agreement

Agreement

agreement to form a contract includes an offer and an acceptance

what are the elements required for a contract to be enforceable?

agreement, consideration, contractual capacity, and legality

Requirements of a Valid Contract

agreement, consideration, contractual capacity, legality

unenforceable v. void v. voidable

all 3 are different - void: dead, absolute nullity, no legal effect - voidable: one party will have the right to elect whether to annul the transaction or to affirm it - unenforceable: mostly dead, valid contract but court will not enforce

Wilma, who lives in New York, enters into a contract to buy a painting from Fred, who lives in France. The contract includes all the costs of insuring and shipping the painting from France to New York. The agent that made the shipping estimate makes a mistake when adding up the costs and, as a result, the shipping cost listed in the contract is $1,000 less than the shipping actually costs. A court will most likely

allow the parties to rescind the contract.

authorization

an act is within the scope of employment even if expressly forbidden, if it is of the same general nature as that authorized or if it is incidental to the conduct authorized. Ex. Hank is authorized to drive the van but not to speed. However, his speeding is of the same general nature as the authorized act so Jane (the principal) is liable

Wrongful termination

an agency relationship is a personal relationship. Either party always the power to walk out. They many not, however have the right. If one party's departure from the agency relationship violates the agreement and causes harm to the other party, the wrongful party must pay damage. He will be permitted to leave. If someone agrees to work for someone for 2 years but wants to leave after 1 year, he can leave provided he pays the cost of hiring and training a replacement

Duty to provide information

an agent has a duty to provide the principal with all information in her possession that she has reason to believe the principal would want to know. She also has a duty to provide accurate information

Fully disclosed principal

an agent is not liable for any contracts she makes on behalf of a fully disclosed principal. August acts as an agent for Parker when he buys Tracey's prize winning show horse. Augusta and Tracey both grew up in the same town and attended the same school. Tracey does not know Parker but she figures any friend of Traceys is a friend of hers but she is wrong. Parker is a deadbeat. He injures the horse, fails to pay the full contract price and disappears. Tracy demands Augusta make good on Parkers behalf. Unfortunately for Tracy, Parker was a fully disclosed principal - she knew of his existence and his identity. Augusta is not liable.

Principal's liability for torts

an employer is liable for a tort committed by its employee acting within the scope of employment or acting with authority

Condition

an event whose happening or nonhappening affects a duty of performance

SuperBumperCars, Inc. requires all customers to sign a release that contains a clause that releases SuperBumperCars from all liability in the event of an injury occurring during a bumper car ride, no matter who is at fault. This is an example of

an exculpatory clause.

Holiday Sales Company and Global Distributors, Inc., enter into a contract for the delivery of imported specialty goods. Until the goods are delivered and paid for, these parties have

an executory contract.

Livewire Company and McCoy's Candy, Inc., sign a document that states Livewire agrees to design a Web page for McCoy's, which agrees to pay for the service. This is

an express contract.

App Developers, Inc. (ADI), enters into a contract with Carmen, the chief executive officer of SalesCorp, to create an app for the firm. To fulfill the contract, ADI hires Max and ten other student interns. With respect to the contract, Max is

an incidental beneficiary.

Napoleon owns Napoleon's Construction. He agrees to renovate Mrs. Cernan's bathroom. According to Internal Revenue Service (IRS) criteria, Napoleon is likely to be classified as

an independent contractor.

Whitney works at home making unique children's clothes. Liam buys Whitney's clothes to sell in his store. With respect to Whitney's legal relationship to Liam, she is probably

an independent contractor.

termination

an offer may be terminated prior to acceptance by either action of the parties or by operation of law

Gina buys a piece of pottery from Woodward for her principal, Kelvin. If Woodward knows that Gina is buying the pottery on behalf of someone other than herself but does not know the identity of that person, Kelvin is

an unidentified principal.

Guaranty Contract

answer for debt of another - must be in writing Main Purpose Exception - contract treated as ordinary contract, does not have to be in writing to be enforced

what is a formal contract?

any contract required to be in writing

extrinsic evidence

any evidence not contained in the document itself- such as the testimony of parties and witnesses, additional agreements or communications, or other relevant info

Duress

any wrongful or unlawful act or threat that overcomes the free will of a party

Under the_____ authority of an agent, the principal is liable for the agent's actions even though the agent was not authorized. a. gratuitous b. implied c. express d. apparent

apparent

Nonphysical torts

are treated more like contract claim, and the principal is liable if the employee acted with express, implied or apparent authority

In a(n) _____, a trustee acts for the benefit of the beneficiary, always putting the interests of the beneficiary before his own. a. accommodation b. bailment c. fiduciary relationship d. arraignment

fiduciary relationship

contract performance

1. executed 2. executory

Fraud

1. execution/inception/in factum 2. inducement

Consideration

What each party gives up to reach an agreement, the value of an agreement

a condition precedent is the occurrence of an event before a party is obligated to reform a contractual duty.

true

parol evidence

- if there is written contract, no oral/written evidence from before the contract will be admitted - evidence of LATER statements can be admitted - exceptions (where previous evidence will be admitted) 1. to resolve ambiguity 2. to prove fraud

Monetary Damages

$$$ 2 types; compensatory damages, consequential damages

Dondi contracts to buy a custom espresso maker from Caffee Specialties, Inc., for $4,500, but Caffee fails to deliver. Dondi buys the appliance elsewhere for $5,500. Dondi's measure of damages is

$1,000 plus incidental damages.

Clarice pays Damien $10,000 to design an ad campaign for her Sweetwater Coffee Stand chain. The next day, Damien tells Clarice that he has accepted a job in New York and cannot design her campaign. She files a suit against Damien. As compensatory damages, she can recover

$10,000.

Dixie May enters into a contract to buy one hundred pounds of pecans from Margaret. The contract must be in writing if the pecans cost

$500.

Equitable Remedies

- (when allowed) monetary damages alone must be inadequate and person seeking remedy must be acting fairly - Types: orders to act or refrain from an act; orders to change a status - judge decides facts or Court-ordered action that directs parties to do or not to do something

Beneficial Homeowner servie corp v. Steele

- Beneficial looked to sue the Steeles for 91,614.34 in unpaid principal and interest - Stephen Steele sole obligor but never signed mortgage - court concluded that the agreement was unenforceable - because mortgage involves real property, must be in writing

Hosch v. Colonial Pacific Leasing Corp.

- Edward Hosch entered into 4 loan agreements with Citicapital commercial corporation - Citicapital later merged into Citicorp Leasing Inc, then renamed GE capital commercial - GE capital assigned te loans to Colonial Pacific leasing corp - Edward defaulted on the payments and was served by Colonial Pacific - Court found Hosch was liable to pay because a party has right to assign a contractual right to collect payment, including the right to sue - must be in writing, sufficent evidence provided

Pete the painter and Hannah homeowner example

- Hannah agrees to pay Pete to paint his house - Hannah has right to have house painted and a duty to pay - Pete has right to be paid and a duty to paint the house - Pete (assignor) can assign the payment to his Uncle Vito ( assignee) - Pete (delegator) can delegate Paul (delegatee) to paint the house

L&H Construction Co. v. Circle Redmont INC.

- L&H construction, renovating Thomas Edison historic site - contracted Circle Redmont to make a cast-iron staircase - originally agreed to "engineer, fabricate, and install" - during negotiations installation and its costs were cut out - final statement said Redmont would "engineer, fabricate, and install" - L&H sued Redmont and court found it was a mutual mistake - found it was mutual mistake of fact, Redmont won

damages: generally

- infinite variety of contracts - infinite ways can be breached - thus: - no single damage formula - court has flexibility in remedies - court follows general principles and goals to protest non-breaching party

Fazio v. Cypress/GR Houston

- Peter Fazio buys retail property for 7.67 million from Cypress - Garden Ridge is company working in the building - Cypress failed to disclose pertinent information - Garden Ridge claims bankruptcy shortly after Fazio purchasing - Fazio sued after only selling for 3.75 million - court found Cypress engaged in fraudulent behavior and they were liable - claimed they would disclose all info but didn't

accord & satisfaction

- accord = settlement - satisfaction is payment of that settlement - new agreement to replace old - settlement of dispute over old agreement - discharge of duties doesnt happen until agreement performed - if accord not performed can sue on OG or accord

benefit of bargain alternate performance

- after breach, non-breacher finds a cover transaction (another buyer/seller, someone else to do the work) after fail to perform - damages = what it takes for non-breacher to get same deal 1. must be reasonable/comparable - short-term to replace lost contract expectation - actual = damages

destruction of subject matter

- both parties are out

assignment & delegation

- can occur separately or together - can assign/delegate some or all - delegatee must accept to be valid 1. can be verbal 2. only written if statement of frauds - delegator remains responsible

applying benefit of the bargain

- compare values of: 1. what was promised TO what was delivered - cant use benefit of bargain if cant determine the 2 values - example: promised 10,000$ gave 6,000$ - seller must write check for 4,000

mistakes of value 2

- contract for a special item that is NOT the special item but a general item 1. contract for Elvis' cadillac that is not his - not Elvis' cadillac=mutual mistake

3rd party involvement (after formation)

- contract is set of duties and rights - parties can transfer any of these 1. delegate duties: have another perform duty for you 2. assign rights: transfer your rights to another

recession and restitution

- court orders parties to return to the beginning - used where benefit of the bargain doesnt work. - custom sculpture example

Discharge: impossibility

- death of promissor - destruction of subject matter - supervening illegality - death of promisse

liquidated damages

- fixed in advance in contract OK if: - actual amount of harm hard to calculate - not excessive (too little is OK) 1. loss of damages deposit - amount of damages if breached, no further damages 2. loss of earnest money - compensate seller for taking house off market for buyer that backs out 3. new roll of film ok b/c less that amount of accepted damagest

supervening illegality

- future performance is discharged after formation - any work done before must be paid for

limits on assignment

- if prohibited by statute - personal services 1. cant assign away 2. butler example - if significantly increases risk of obligor - contract can prohibit exceptions: 1. right to receive $ 2. if benefits society

parol evidence rule consequences

- if someone says they will do something diff. from contract, then put it into contract - the rule addresses if you can tell story in court, not win

3rd party beneficiaries (at formation)

- intent must be there - calls for another to be benefitted - any intended beneficiary can sue under contract 1. creditor: sub-lease room and 2nd tenant doesnt pay - landlord can sue as intended beneficiary 2. buy special chair for dad - dad can sue if defective chair 3. build McD's (3rd part) by new mall but mall delayed 6 months - parties in contract didnt intend to benefit 3rd party

undue influence

- involves one person taking advantage of a position of power over another person. - victim has trusted perpetrator but merely trusting another party is not enough - must be pre-existing relationship 1. parent trusting child 2. client trusting attorney - contract is voidable

statute of fraud examples

- land 1. partial performance - cannot be performed within 1 yr 1. measure from date contract FORMED 2. lifetime contracts - prenuptial agreement - collateral promises 1. Main purpose exception oral promise to answer is covered unless accepting 2nd liability to secure personal benefit, then must be in writing** -contracts for sale of good more than 500$

execution/inception/in factum

- lie about the document being signed 1. tell someone he's signing maintenance agreement but it is actually a deed

inducement

- lie about the subject matter of the contract 1. a car's mileage - all fraud involves a "bad guy" - contract is voidable by deceived party - overlaps criminal, tort, and contract law

commercial impracticability

- makes it so contract is extremely burdensome to perform - price chance of materials usually not enough - nature of performance changes significantly 1. Nederland example more time, energy, and resources to deliver products - duty to deliver and pay is gone

specific performance

- making the other party do what he was supposed to do - courts dont like supervisory rule - awarded when damages are not adequate 1. buyer of unique item (all real estate) - no piece of land like any other piece of land 2. never for personal services

discharge of duties

- means party has done all that is needed under the contract - most often by complete performance - some cases duties can be discharged even though not fully performed - party performs promise 1. agree to rake leaves but it snows and cant rake under snow

subjective impossibility

- must be due to unforeseeable circumstances - nature of performance changes significantly - commercial impracticability & frustration of purpose

statue of fraud

- must be in writing - certain contacts enforceable only if in writing - OG to prevent courts from being defrauded 1. if oral only, unenforceable - partial performance exception 1. takes contract out of "statute of frauds" = oral contract is ok

discharge by agreement of the parties

- mutual recession 1. both agree to call off the deal - substituted contract 1. "we'll do this instead" - new contract immediately discharges duty of 1st contract - Novation (note card @ the end)

frustration of purpose

- no harder to perform but no longer makes sense - duty to pay and perform are discharged 1. architect and home example: need to move house for road construction - cant perform job promised to do

mitigation (good guys)

- non-breaching party has duty to minimize damages - breaching party should not have to pay more then they need to - duty to act as swiftly

mistakes of value 1

- not really a mistake - contract for general item that is really a special item: no mistake 1. rembrandt at yard sale 2. contract is for a PAINTING, & is in fact a PAINTING

more assignment (notice issues)

- notice issues 1. assignment to assignees - usually 1st assignee gets $ (modern trend) 2. assignee who tells obligor 1st (minority trend) ?? - obligor delivers performance to assignor 1. if know about change in assignee must pay or go to court

Hadley v. Baxendale (p. 341)

- only 1 crankshaft - if broken has to be fixed off-site - takes 8 days - agree to have it fixed by company - company breached contract - lost sales due to breach of contract - delivery company not liable b/c of industry standard to have a backup - not recoverable - foreseeable problems with only 1

Duress

- physical threat forcing agreement - victim's agreement is not voluntary - economic duress can be recognized

benefit of the bargain (expectation damages)

- puts nonbreaching party where they would be if contract had been properly performed - not a return to status quo expectation - actual = damages - return to status quo makes them worse off

3rd party

- someone not a party to OG agreement - can be involved: 1. at contract formation 2. after contract formation

death of promissor

- sometimes - homeowner can pay thtough estate 1. $ survives promissor - agree to paint house but promissor dies 1. if family wants it painted must paint

death of promisse

- sometimes - taxes 1. died on april 10th still have duty to pay taxes 2. other service dont have same rule (massage example)

limits on delegation

- special skills - special trust - obligee will be getting something different - contract can prohibit - can't delegate to someone who will do differently

Damages

- used in 2 ways: 1. what non-breaching party has lost 2. what the breaching party has to pay to compensate the non-breaching party - compensate anything short of full performance

consequential damages

--> damages you can prove occurred because of the failure of one party to meet a contractual obligation - one step removed - to recover, harm must be foreseeable or known to breaching party - examples: boulder theater band, rental car for repair

contract formation

1. bilateral 2. unilateral 3. formal 4. informal 5. express 6. implied

When applicable the ___ and ___ tend to shield foreign nations from jurisdiction of US Courts.

-Act of State Doctrine -Doctrine of Sovereign Immunity

Anti discrimination Laws

-Apply Extraterritorially

Contract Clauses

-Choice of Language -Forum Selection -Choice of Law -Force Majeure

Because international contracts involve greater financial risks, special care should be taken in drafting these contracts to specify both the ___ in which payment is to be made and the ___ of payment

-Currency -Method

Antidumping Duty

-Extra Tariff that may be assessed on the imports -This is to prevent foreign firms from dumping in the US in hopes to undersell US businesses to obtain a larger share of the US market

The US Export-Import Bank provides ____ consisting primarily of _____ given to commercial banks that in turn lend funds to the ____

-Financial Assistance -Credit Guaranties -US Exporting Companies

A foreign state is not immune from the jurisdiction of US Courts in these situations

-Has waived its immunity either explicitly or by implication -Has engaged in commercial activity within the US or in commercial activity outside the US that has a direct effect in the US -Has committed a tort in the US or has violated certain international laws

Laws in the US prohibit discrimination on the basis of

-Race -Gender -Color -National Origin -Religion -Age -Disability

A ___ is usually a percentage of the value of the import but it can also be a ___ per unit

-Tariff -Flat Rate

____ raise the prices of goods causing some consumers to purchase more domestically manufactured goods and fewer ___ goods

-Tariff -Imported

Dumping

-The selling of goods in a foreign country at a price below the price charged for the same goods in the domestic market -The sale of imported goods at "Less than Fair Value"

Most countries restrict exports for these reasons

-To protect national security -To further foreign policy objectives -To prevent the spread of nuclear weapons

International Tort Claims

-US plaintiffs are suing foreign (or US) entities for torts that these entities have allegedly committed overseas -These cases often involve human rights violations by foreign governments

Peerless case

-claimant (shipper) ordered cotton and it was to be shipped on peerless - 2 ships named peerless - one shipped in october & one in december - defendant (purchaser) refused acceptance b/c of breach of contract - court found b/c 2 parties did not agree to the same thing that there was no binding contract

general rule for adequacy of consideration

-courts typically will not consider -law does not protect a person from entering into an unwise contract

illusory promises

-promisor has not definitely promised to do anything (no promise at all -option-to-cancel clauses -requirements and output contracts

preexisting duty exceptions

-unforeseen difficulties -rescission and new contract

Dean is not Paul's agent, but Paul tells Charlie that Dean has always been a good friend and can "handle any of my business affairs." If Dean were to later enter into a contract with Charlie on Paul's behalf, Dean would be acting under an

. apparent authority.

Kris represents Josh in the sale of his house as his real estate agent. Kris is entitled to

. compensation.

CHAPTER 11

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CHAPTER 12

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CHAPTER 13

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CHAPTER 14

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CHAPTER 15

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CHAPTER 16

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CHAPTER 18

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CHAPTER 19

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Ch. 12

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Two kinds of agents

1. employees 2. independent contractors a principal may be liable for the torts of an employee but generally is not liable for the torts of an independent contractor

Unilateral Mistake

1 party makes a mistake. General rule; contract is not effected unless the other party knew or should have known there was a mistake.

1-a principal whose identity is known by the third party at the time the contract is made by the agent. 2-a principal whose identity is not known by the third party. Nevertheless, the third party knows that the agent is or may be acting for a principal at the time the contract is made 3-a principal whose identity is totally unknown by the third party. In addition, the third party has no knowledge that the agent is acting in an agency capacity at the time the contract is made.

1-discolsed prinicapal 2-partially disclosed principal 3- undisclosed principal

Elements not required for an agency relationship

1. A written agreement: an oral understanding is valid except in one circumstance - the equal dignities rule. According to this rule if an agent is empowered to enter into a contract that must be in writing, then the appointment of the agent must also be written. Under the statute of frauds, a contract for the sale of land is unenforceable unless in writing, so the agency agreement to sell land must also be in writing. 2. A formal agreement - they don't have to even say they are principal and agent, as long as they act as agent and principal the law will treat them as such 3. Compensation: a contract is not valid without consideration BUT an agency agreement IS valid EVEN IF THE AGENT IS NOT PAID

example 1: contract for sale of car for 10,000$

1. buyer breaches, seller sells to another for 7,800 - seller could sue OG buyer for 2,220$ + incidental damages (difference from 10,000$ to 7,800$) - incidental damages to (advertising, damages reasonably associated with action, not time) 2. buyer breaches, seller sells to another for 10,000 - can only sue for incidental damages - why ? 3. buyer breaches, seller sells to another for 11,000 - cant sell, better off - incidental damages ?

Sisters of charity wanted to sell some land. hey agreed to sell their land to Linpro for 10 million. Before the deal closed Linpro signed a contract to sell the land to someone else for 34 million. Their lawyer, Berkley, knew about this but didn't tell the sister and brokered the deal with Linpro. What's the strategy?

1. Is there an agency relationship? Yes, the sisters asked them to sell the land and they agreed 2. Is there control? Yes, they told him what to do, sell the land 3. Is there a fiduciary relationship: Yes. The point of of a fiduciary relationship is for one person to benefit another. Berkley was working for the nuns, the agent (Berkley) is not permitted to act for two principals. Berkly has violated his duty of loyalty.

Four elements of fiduciary duty

1. Outside benefit: an agent may not receive profits unless the principal knows and approves 2. Confidential information: keeping secrets is important in a fiduciary relationship. 3. Competition with the principal: agents are not allowed to compete with their principal in any manner within the scope of the agency business 4. Conflict of interest between two principals: unless otherwise agreed, the agent may not act for two principals whose interests conflict

The principal must indemnify (reimburse) the agent for any expense reasonable incurred. These reimbursable expenses fall into three categories

1. a principal must indemnify an agent for any expenses or damages reasonably incurred in carrying out his agency responsibilities. 2. A principal must indemnify an agent for tort claims brought by a third party if the principal authrorized the agent's behavior and the agent did not realize he was committing a tort. 3. The principal must indemnify the agent for any liability she incurs from third parties as a result of entering into a contract on the principal's behalf, including attorneys fees and reasonable settlements

4 basic requirements for contract formation

1. agreement 2. consideration 3. capacity 4. legality

requirements of a valid contract

1. agreement to form contract (offer & acceptance) 2. consideration: to convince a person to make a deal 3. contractual capacity: the law must recognize both parties entering into the contract to have possessing characteristics that qualify them as competent parties 4. legality: contract's purpose must be legal; not against public policy

termination by operation of law

1. lapse of time 2. destruction of the subject matter before acceptance of offer, then the offer is cancelled 3. death or incompetence of the offeror or offeree automatically terminates offer unless it is an irrevocable offer 4. supervening illegality of the proposed contract- something happens that makes it illegal

elements of consideration

1. legal value- something of legally sufficient value must be given in exchange for a promise. this my consist of a promise, a performance or a forbearance 2. bargained-for-exchange: there must be a bargained-for-exchange

consideration must have

1. legally sufficient value 2. bargained-for-exchange

6 inducement requirements

1. misrepresentation 2. of a MATERIAL fact 3. intent to deceive 4. relied upon 5. reliance was justifiable/reasonable 6. injury to victim - any kind, physical, monetary

bargain-for-exchange

1. must provide basis for bargain 2. something of legal value (a promise or performance) must be exchanged between the parties -if a promise, it must be either be legally detrimental to the promise or legally beneficial to the promisor

3 basic requirements for offer

1. objective intent 2. terms are reasonably definite/certain 3.communication to the offeree

agreements that lack consideration

1. preexisting duty 2. past consideration 3. illusory promises

termination by action of parties

1. revocation 2. irrevocable offers 3. option contract 4. rejection by offeree 5. counteroffer

example 2: contract for sale of car for 10,000$

1. seller breaches, buyer gets similar from another seller for 8,500$ - 0$ + incidentals 2. seller breaches, buyer gets similar from another seller for 10,00$ - 0$ + incidentals 3. seller breaches, buyer gets similar from another seller for 12,000$ - 2,000$ + incidentals 4. doesnt buy car but can prove car was worth 11,500$ - contract price DOESNT = item value - usually need an expert

Even if an agent acts without authority, the principal can decide later to be bound by her actions as long as the 4 requirements are met

1. the agent indicates to the third party that she is acting for a principal 2. the principal knows all the material facts of the transaction 3. the principal accepts the benefit of the whole transaction, not just part 4. the third party does not withdraw from the contract before ratification

contract enforceability

1. valid 2. voidable 3. unenforceable 4. void

objective theory of contracts

1. what the party said when entering into the contract 2. how the party acted or appeared 3. the circumstances surrounding the transaction

`a court will consider a contract to be ambiguous (unclear) in the following situations:

1. when the intent of the parties cannot be determined from the contract's language 2. when the contact lacks a provision on a disputed term 3. when a term is susceptible to more than one interpretation 4. when there is uncertainty about a provision

Reformation

A remedy at equity that asks the court to enter an order that corrects the written contract to reflect the actual intent of the parties

Requirements for a Written Contract

1.) Essential terms- parties, subject matter, time, and consideration 2.) Must be signed by both parties

4 Contracts that Must be in Writing

1.) Transfer of any interest in land 2.) 1 year rule 3.) Collateral promises 4.) Contracts where marriage is the consideration

Agreement

2 elements; offer and acceptance

Legal Value

3 kinds; performance of an act, exchange of promises, and forbearance

Ch. 13

3rd party right and discharge

Terminationation

6 ways an offer can be terminated without acceptance

bilateral mistake

= both parties are mistaken - rule: voidable by either party, both hold same mistaken belief 1. typo on new car window sticker - or: two different beliefs no way to know which is correct 1. peerless case (p.289)

unilateral mistake

= one party has a mistaken impression - rule: mistaken party can't avoid contract if unilateral mistake - exception: if nonmistaken party knows of mistake and takes advantage of it 1. car a/c example 2. subcontractor bidding example 3. target returns

Contracts in Writing (1)

> one year collateral for debt or duty of another (bond) marriage > $500 sale lease with >$1000 real property

. Anker wishes to give Mix power of attorney. In general, the power of attorney A. May limit Mix's authority to specific transactions. B. Must be signed by both Anker and Mix. C. Will be valid only if Mix is a licensed attorney at law. D. May continue in existence after Anker's death.

A principal and agent relationship requires a A. Meeting of the minds and consent to act. B. Specified consideration. C. Written agreement. D. Power of attorney.

A secured creditor wants to file a financing statement to perfect its security interest. Under the UCC Secured Transactions Article, which of the following must be included in the financing statement? A. A listing or description of the collateral. B. An after-acquired property provision. C. The creditor's signature. D. The collateral's location.

United Sales Corporation hires Victor to act as its agent. Uniteds right not to perform a contract entered into by Victor, if Victor breaches their agency agreement, is the right of a. avoidance. b. indemnification. c. nullification. d. termination.

An agency coupled with an interest will be created by a written agreement which provided that a(n) A. Borrower shall pledge securities to a lender which authorizes the lender to sell the securities and apply the proceeds to the loan in the event of default. B. Employee is hired for a period of two years at $40,000 per annum plus 2% of net sales. C. Broker is to receive a 5% sales commission out of the proceeds of the sale of a parcel of land. D. Attorney is to receive 25% of a plaintiff's recovery for personal injuries.

Bren leases an apartment from Cris for one year. After two months, she sublets the premises for the next six months to Dee, without obtaining Cris's con¬sent. Dee pays the rent for only four months. For the last two months of Dee's six-month term, Bren is a. liable for the rent, because Dee defaulted. b. liable for the rent, because the sublease lacked Cris's consent. c. not liable for the rent, because Bren does not own the apartment. d. not liable for the rent, because Bren sublet the premises to Dee.

Bubbly Soda Company hires Carlo to work on Bubblys shipping dock, checking outgoing loads and dispatching Bubblys drivers. With respect to Carlo, Bubbly is most likely a.a constructive trust. b.an agent. c.an independent contractor. d. a principal

Consumer Shops, Inc., signs a lease for a storefront owned by Downtown Building Company. Unlike a purchaser of real property, Consumer Shops a. acquires only temporary possession of the premises. b. enjoys exclusive possession of the premises. c. holds only temporary title to the premises. d. retains temporary, exclusive possession and title to the premises.

Dan, an agent for Eve, signs an agreement with Fred on Eve's behalf but neglects to tell Eve that the agreement requires the payment of a certain tax. The government prosecutes Eve for failing to pay the tax. Eve is a. liable, because Dan's knowledge is imputed to Eve. b. liable, because Fred's knowledge is imputed to Eve. c. not liable, because Dan did not tell Eve about the tax. d. not liable, because Fred did not tell Eve about the tax.

Erin works for a dry-cleaning company that has a contract with the U.S. government. To save on cleaning fluid, her boss orders her to wash some clothes that are supposed to be dry-cleaned in a washing machine. When the courier hired to pick up the cleaned garments arrives, Erin tells him about her boss's actions. Erin tells no one else about what is going on and is later fired. Erin a. is not protected by the whistleblower statute because she failed to inform the proper party of the contract violation. b. is not protected by the state whistleblower statute. It is inapplicable because the contract was with the federal government. c. is protected by the whistleblower statute in her state because she spoke up about her employer's actions. d. will be reinstated to her former job because when she told the courier of the problem she was merely exercising her First Amendment right to free speech.

Genetic Seed Company hires Howie to work on Genetic¡s shipping dock, accepting deliveries and dealing with other companies¡ drivers. With respect to Genetic, Howie is most likely a.an agent. b.an independent contractor. c.a principal. d.a work for hire

Grocer's Choice is the largest employer in the Pacific Northwest. It is covered by numerous federal employment laws. As such, it is required by the Family and Medical Leave Act of 1993 to provide employees with up to a. 12 weeks of unpaid family or medical leave during any 12-month period. b. 24 weeks of unpaid family or medical leave during any 12-month period. c. 5 weeks of unpaid family or medical leave during any 12-month period. d. 10 weeks of unpaid family or medical leave during any 12-month period.

Harris is a purchasing agent for Elkin, a sole proprietor. Harris has the express authority to place purchase orders with Elkin's suppliers. Harris typically conducts business through the mail and has very little contact with Elkin. Elkin was incapacitated by a stroke and was declared incompetent in a judicial proceeding. Subsequently, Harris placed an order with Ajax, Inc. on behalf of Elkin. Neither Ajax nor Harris were aware of Elkin's incapacity. With regard to the contract with Ajax, Elkin (or Elkin's legal representative) will A. Not be liable because Harris was without authority to enter into the contract. B. Not be liable provided that Harris had placed orders with Ajax in the past. C. Be liable because Harris was acting within the scope of Harris' authority. D. Be liable because Ajax was unaware of Elkin's incapacity.

Hart owned a building with a full value of $400,000. The building was covered by a $300,000 fire insurance policy containing an 80% coinsurance clause. What amount would Hart recover if a fire totally destroyed the building? A. $300,000 B. $400,000 C. $240,000 D. $0

Internet Services, Inc., employs Joe as an agent. During the agency, Joe acquires new skills. After the termination of the relationship, Joe uses those skills in a new job. Joe has breached a. no duty. b. the duty of loyalty. c. the duty of notification. d. the duty of performance.

Irma retains Jerry as her authorized agent, unaware that Jerry is a minor. Jerry enters into a contract with Ken on Irmas behalf. The contract is a. binding on Irma. b. binding on Jerry and Ken, but not Irma. c. binding on Ken, but not Irma or Jerry. d. void.

Jamal signs a lease with Kelvin to occupy a house on Leech Lake in Minnesota for the summer. Jamal's tenancy is a. a fixed-term tenancy. b. a periodic tenancy. c. a restrictive covenant. d. a tenancy at will.

Jay holds himself out as possessing special accounting skills. As an agent, he must exercise the degree of skill or care expected of a. a person having those skills. b. an average, unskilled person. c. a reasonable person. d. the principal.

Jewelry, Inc. took out an insurance policy with Insurance Company that covered the stock of jewelry. Insurance agreed to indemnify for losses due to theft of the jewels displayed. The application contained the following provision: "It is hereby warranted that the maximum value of the jewelry displayed shall not exceed $10,000." The insurance policy's coverage was for $8,000. Subsequently, thieves smashed the store window and stole $4,000 worth of jewels when the total value of the display was $12,000. Which of the following is true? A. Jewelry, Inc. will recover nothing. B. Jewelry, Inc. will recover $2,000, the loss less the amount in excess of the $10,000 display limitation. C. Jewelry, Inc. will recover the full $4,000 because attaching the application to the policy is insufficient to make it a part of the policy. D. Jewelry, Inc. will recover the full $4,000 because the warranty will be construed as a mere representation.

KupaJava hires Lola to manage one of KupaJavas seven drive- through coffee stands. KupaJava agrees to pay Lola a salary, plus commission. KupaJava stipulates the standards that should be observed, the goals that should be attained, and the methods that should be used. Lola is most likely KupaJavas a. employee. b. independent contractor. c. principal. d. work for hire.

Lisa works for Joe's Flower Shop. Joe, the owner, placed Lisa in charge of the cash register on a busy Saturday. Lisa became lazy and failed to enter over half of the transactions for the day. Lisa likely violated: A. duty to account. B. duty to compensate. C. duty to reimburse. D. duty to indemnify.

Liz and Molly work as clerks in Nias Dress Shop. Nia withholds federal taxes from their pay, and controls the methods and details of the performance of their work. Liz and Molly are not authorized to modify the prices or other terms of a sale at the shop. Nia hires O'Reilly's Carpet Company to clean the carpets of her shop. Nia gives O'Reilly's instructions as to what needs to be cleaned and when. O'Reilly's is a. an independent contractor. b. Nias employee only. c. Nias employee and agent. d. Nias principal.

Macro Corporation and National Purchasing Company may create an agency agreement a. by conduct, in writing, or orally. b. by conduct or orally only. c. in writing only. d. under no circumstances.

Matt and Chad for an LLC, and Matt later decides to withdraw as a member. They do not have a provision in their operating agreement regarding withdrawal of a member, but they do live in a state that has adopted the ULLCA, which means that a. the LLC must purchase Chad's interest at fair value within 120 days. b. the LLC must dissolve within 120 days. c. Matt must find a new member to purchase Chad's interest at a fair value. d. Matt will lose all of his interest in the LLC.

Napoleon owns Napoleon's Construction. He agrees to renovate Mrs. Cernan's bathroom. According to Internal Revenue Service (IRS) criteria, Napoleon is likely to be classified as a. an independent contractor. b. a disclosed principal. c. an employee. d. a partially disclosed principal.

Orin owns Pilot's Landing Office Park. His ownership rights include the right to sell or give away the property without restriction, as well as the right to com¬mit waste, if she chooses. Orin's ownership interest is a. a fee simple absolute. b. a leasehold estate. c. a life estate. d. the power of eminent domain.

Ozzy is an officer of Prudent Financial Corporation. Ozzy serves in a representative capacity for Prudent Financials owners. With respect to binding Prudent Financial to contracts, Ozzy is a.an agent and has the authority .b.an agent but does not have the authority .c.not an agent and does not have the authority. d.not an agent but does have the authorit

Property Management Corporation (PMC) owns several apartment buildings in two states. Regarding standards for maintenance of the buildings, PMC should consult a. the applicable city ordinances and state statutes. b. the previous owners. c. the long-term tenants. d. the Uniform Landlords' Maintenance Manual.

Quinn employs Roy as his authorized business agent on April 1. Quinns son Stan petitions a court to declare Quinn mentally incompetent. The court grants Stans request on May 1.Roy enters into a contract on Quinns behalf on April 15. After May 1, the contract, which has not been performed, is a. binding on Quinn. b. binding on Roy. c. binding on Stan. d. void.

Regional Investment Corporation (RIC) hires Sam, a real estate agent, to locate investment properties for RIC. Sam learns of a warehouse available for $100,000, buys it himself, and offers it to RIC for $200,000. Most likely, Sam a. breached the agents fiduciary duties to the principal. b. did nothing wrong. c. failed to take advantage of a business opportunity. d. set an unreasonable price based on current market value.

Sela agrees to act on Thoms behalf, subject to Thoms control, and Thom trusts Sela to so act. They set out the terms in a written document, which they both sign. This is a. an agency by agreement. b. an agency by estoppel. c. an agency by ratification. d. not the creation of an agency relationship.

Sun, Inc., manufactures and sells household appliances on credit directly to wholesalers, retailers, and consumers. Sun can perfect its security interest in the appliances without having to file a financing statement or take possession of the appliances if the sale is made by Sun to A. Consumers. B. Wholesalers that sell to buyers in the ordinary course of business. C. Retailers. D. Wholesalers that sell to distributors for resale.

Termination by act of the parties also terminates the agent's: A. express authority. B. confidentiality. C. apparent authority. D. loyalty.

The Smiths are remodeling their kitchen and want to purchase new appliances: a large refrigerator-freezer, microwave oven, dishwasher, garbage disposal, and stove-oven. Z Bank has advertised a special consumer loan rate, and AP Appliances has great discount rates on appliances. The Smiths can only pay AP Appliances 20% of the purchase price. AP Appliances' credit rates are higher than Z Bank's consumer loan rates. The Smiths sign a security agreement putting up the to-be-purchased listed appliances as security, and Z Bank issues a check for the balance payable to AP Appliances and the Smiths. Which of the following statements is correct? A. Z Bank has a purchase money security interest in the appliances and is a perfected secured party without a filing. B. Since Z Bank is not the seller it has a nonpurchase money security interest and must file to be perfected. C. Z Bank has a purchase money security interest but to be perfected must file. D. Z Bank is not a secured party until the listed appliances are purchased, and the serial numbers are added to the security agreement initialed by the Smiths.

To acquire the ownership of a mountain cabin by ad¬verse possession, Cody must occupy the cabin exclusively, continuously, and peaceably for a specified period of time a. in an, open, hostile, and adverse manner. b. until the owner files a suit. c. without the owner's knowledge. d. with the state's permission.

Which duty does an agent owe to his/her principal? A. Duty of loyalty. B. Duty of non-confidentiality. C. Duty not to exercise reasonable care. D. Signing duty.

Which of the following rights is(are) generally given to a lessee of residential property? I. A covenant of quiet enjoyment II. An implied warranty of habitability A. Both I and II. B. II only. C. Neither I nor II. D. I only.

Which of the following statements accurately describes the requirement of insurable interest relating to property insurance? An insurable interest A. Must exist when any loss occurs. B. Is created only when the property is owned by an individual. C. Must exist when the policy is issued and when any loss occurs. D. Is created only when the property is owned in fee simple

ill introduces Kelly to her friends as "my associate." Kelly purports to act as Jills agent in several business transactions with those friends. If Jill is liable for Kellys actions, it will be under a. the doctrine of estoppel. b. the equal dignity rule. c. the fiduciary principle. d. the good faith statute.

Commercial Impracticability

A UCC rule that excuses performance when an unforeseen event causes unjust hardship on one's ability to perform. Does not account for market changes, but rather war, embargoes, crop failures, etc.

Direct Exporting

A US company signs a sales contract with a foreign purchaser that provides the conditions of shipment and payment for the goods

Correspondant Bank

A bank in which another bank has an account and vice versa for the purpose of facilitating fund transfers

Choice of Law Clause

A clause in a contract designating the law (such as the law of a particular state or nation) that will govern the contract

Choice of Language Clause

A clause in a contract designating the official language by which the contract will be interpreted in the event of a future disagreement over the contract's terms

Unenforceable contract

A contract exists but cannot be enforced b/c of a legal defense

Executory contract

A contract not fully performed

exculpatory clauses

A contract provision that relieves one party of liability if damages are caused during the execution of the contract.....a venue may print an exculpatory clause on tickets it sells for a concert indicating that it is not responsible for personal injury caused by employees or others during the show......."disclaimers" generally not valid for essential services.

Reformation

A court-ordered correction of a written contract so that it reflects the true intentions of the parties

Loyalty

A duty held by an agent that says the agent cannot compete against the principal, cannot create a conflict of interest, and must maintain confidentiallity

Duty to Account

A duty held by an agent that says the agent must act for the principal's debts and assets of the agency

Diligence

A duty held by an agent that says the agent must act within the reasonable skill of the agency

Obediance

A duty held by an agent that says the agent must follow all legal instructions of the principal

Duty to Inform

A duty held by an agent that says the agent must inform the principal as to all matters involving the agency

Treaty

A formal written agreement negotiated between two or more nations

Executed contract

A fully performed contract

What is a contract?

A judicially enforceable agreement. Binding agreements that create valid duties and obligations.

Liquidated Damages

A known damage, an amount of cash agreed upon at the time the contract is entered into that represents the entire damage awarded if there is a breech

Operation of Law

A legal effect that will give a party an out of their legal obligations. 3 ways; statute of limitations, bankruptcy, and impossibility

Hamer v. Sidway

A man promised his nephew that if he stopped drinking, smoking, and gambling until he was 21 that he would pay him $5000. When the nephew completed this agreement the uncle told him that he would hold onto the money and let it collect interest. When the uncle died Sidway, the executor to the uncles estate would not pay the money to Hamer - consideration exists because nephew gave up an existing right - benefit has no role - court won't decide better/worse off, just if nephew is entitled

Undisclosed Relationship

A relationship in which the third party does not know there is an agency

Partially Disclosed Relationship

A relationship in which the third party knows there is an agency but not who the principal is

Disclosed Relationship

A relationship in which the third party knows who the agent and principal are

Voluntary consent/ Mutual ascent

A meeting of the minds, you can't be forced or mislead into the creation of a valid contract.

Agreement

A meeting of two or more minds in regard to the terms of a contract; usually broken down into two events an offer by one party to form a contract, and an acceptance of the offer by the person to whom the offer is made.

Contract Rule for Minors

A minor can enter any contract an adult could, however the contract is voidable.

Mistake of Fact

A mistake in the essence of an agreement, is voidable. 2 kinds; unilateral and bilateral

To create an agency contract there must be:

A principal and an agent who mutually consent that the agent will act on behalf of the principal and be subject to the principal's control, thereby creating a fiduciary relationship

Apparent authority

A principal can be liable for the acts of an agent who is not, in fact, acting with authority if the principal's conduct causes a third party reasonably to believe the agent is authorized.

Authority is

A principal is bound by the acts of an agent if the agent has authority There are three types of authority Express - Granted by words or conduct that: Reasonably interpreted, cause the agent to believe the principal desires her to act Implied - Authority to conduct a transaction includes: Authority to do acts that are reasonably necessary to accomplish it Apparent - Principal can be liable for the acts of an agent who is not acting with authority if: Principal's conduct causes a third party reasonably to believe that the agent is authorized

Cynthia tells Darryl that she will deliver his boxes of Paradise Cookies as he directs. A declaration that one will do something in the future is part of the definition of

A promise

Bilateral contract

A promise for a promise

Unilateral contract

A promise for an act

Forum Selection Clause

A provision in a contract designating the court, jurisdiction, or tribunal that will decide any disputes arising under the contract

Force Majeure Clause

A provision in a contract stipulating that certain unforeseen events such as war, political upheavals, or acts of God will excuse a party from liability for nonperformance of contractual obligations

Contractual Conditions

A qualification, the occurrence or nonoccurrence of which may discharge contractual obligation. 3 types; condition precedent, condition subsequent, and concurrent condition

Quota

A set limit on the amount of goods that can be imported

Accord and satisfaction

A settlement based on an accord

Law of Agency

A special relationship between two entities where an agent is authorized to act on behalf of a principle, if the agent acts within the scope of authority, the agent can bind third parties to the principle

Offer

A statement of willingness of the offeror to be bound by the terms of the offer, 3 elements

Tariff

A tax on imported goods

Donee Beneficiary

A third party beneficiary that is intended but is not owed anything and can only enforce a contract against the non-related party

Creditor Beneficiary

A third party beneficiary that is owed something and can enforce a contract against both performing parties

Fair play

A third party is not bound to the contract with an undisclosed principal if 1. the contract specifically provides that the third party is not bound to anyone other than the agent 2. the agent lies about the principal because she knows the third party would refuse to contract with them Suppose a university is buying land near campus. An owner of a house wants to make sure that if he sells to the university he gets a higher prices than if he sells to someone else. When approached by the university the property owner asks for a clause in the contract providing the owner can demand a higher price. If the agent lied, then the owner could rescind.

Third-Party Beneficiaries

A third party who stands to benefit in some way from the performance of another party's contract

Fiduciary relationship

A trustee acts for the benefit of the beneficiary, always putting the interests of the beneficiary before his own. A fiduciary relationship is a special relationship with high standards. The beneficiary places special confidence in a fiduciary who in turn is obligated to act in good faith and candor.

In some relationships there might be a fiduciary duty but no control.

A trustee of a trust must act for the benefit of the beneficiaries but the beneficiaries have no right to control the trustee. Therefore a trustee is not an agent of the beneficiaries. Consent is present in every contractual relationship but that does not mean the two parties are agent and principal.

unenforceable

A valid contract rendered unenforceable by some statute or law. - If the parties perform the agreement, it will be valid, but the court will not compel them if they do not. - legit contract - ex: prostitution in the US

Foreign Exchange Market

A worldwide system in which foreign currencies are bought and sold

Elements not required for an agency relationship include:

A written agreement Equal dignities rule: If an agent is empowered to enter into a contract that must be in writing, then: The appointment of the agent must also be written Formal agreement Compensation

Letter of Credit

A written instrument usually issued by a bank on behalf of a customer or other person, in which the issuer promises to honor drafts or other demands for payment by third parties in accordance with the terms of the instrument

Impossibility

An unforeseeable/unanticipated event that makes action impossible, such as the death/destruction of subject matter or either party (in personal service contracts)

Death or Destruction of the Subject Matter

ALWAYS terminated contract

Unequivocal

Acceptance must be absolute, a definite answer

Actual Express Authority

Actual authority that comes directly from the principal. Power transferred from the principal to the agent

US employees working abroad for US employers are protected under this act in 1967

Age Discrimination in Employment Act

Creating an Agency Relationship

Agency is a relationship in which the agent agrees to perform a task for, and under the control of, the principal To create an agency, there must be: Principal: Person who has someone else acting on him Agent: Person who acts for someone else Who mutually consent that the agent will act on behalf of the principal Be subject to the principal's control Creating a fiduciary relationship

Consent - Principal must ask the agent to do something:

Agent must agree

Agent's Liability For Torts

Agents are always liable for their own torts, even if the principal is also liable Principal and the agent are jointly and severally liable Injured party can sue either one or both

Fiduciary relationship - Trustee acts for the benefit of the beneficiary

Agents have a fiduciary duty to their principals

4 elements to a valid contract

Agreement, consideration, legal capacity, and legal purpose

Public Policy

Agreements, if contrary to public policy, are void

Compensatory Damages

Allows for recovery of the value of a bargain, must be quantifiable.

This act of 1990 which requires employers to accommodate the needs of workers with disabilities also applies to US nationals working abroad for US firms

Americans with Disabilities Act

estoppel

An agency by ___ arises when the principal's actions have created the appearance of an agency that does not in fact exis

Duty of care

An agent has a duty to act with reasonable care. An agent must act as a reasonable person would under the circumstances.

disclosed agency:

An agent is not liable for any contracts she makes on behalf of the Fully Disclosed agency.

Appropriate behavior

An agent may not engage in inappropriate behavior that reflects badly on the principal. This rule applies even to off-duty conduct.

Duty to Obey Instructions

An agent must obey her principals instructions unless the principal directs her to behave illegally or unethically.

Duties of an Agent

An agent must obey the principal's instructions, unless illegal or unethical Agent must act with reasonable care An agent with special skills is held to a higher standard because he/she is expected to use those skills Agent must provide information An agent has a duty to provide the principal with all information in her possession that: She has reason to believe the principal wants to know

Other Duties of an Agent

Liquidated Damages

An agreement between the parties in the even of a fault damages will be paid, spelled out in the contract. Amount must be reasonable and the actual damages must be hard to quantify

Mutual Recision

An agreement in which both parties agree to terminate the ongoing performance obligation

Waiver

An agreement in which one party accepts substantial performance for full performance

Release

An agreement in which one party releases the other side's performance obligation

Novation

An agreement in which the original performing party is substituted and a new party fully performs

Contract

An agreement that can be enforced in court; formed by 2+ parties who agree to perform or to refrain from performing some act now or in the future

Accord and Satisfaction

An agreement to satisfy an unknown debt that allows the substitution of an agreement for a new one (accord). If the accord is satisfied it is treated like satisfying the original performance obligation

Compensation assignment

An assignment in which the assignee pays the assingor for the rights transferred

When a valid contract is entered into by an agent on the principal's behalf, in a non-disclosed principal situation, which of the following statements concerning the principal's liability is correct? The principal may be held liable once disclosed The principal must ratify the contract to be held liable a. Yes Yes b. Yes No c. No Yes d. No No

Answer: The correct answer is B. Once disclosed, an undisclosed principal can be held liable on a contract made on the principal's behalf by an agent if the agent had authority. There is no need to ratify; indeed, an undisclosed principal can never ratify because a principal can ratify only when a person represents that he is an agent acting with authority on the principal's behalf when in fact the person lacks authority. When a principal is undisclosed, there is no representation of agency and so a prerequisite for ratification is missing

With respect to the following matters, which is correct if a general partnership agreement is silent? a. A partnership will continue indefinitely unless a majority of the partners votes to dissolve the partnership. b. Partnership losses are allocated in the same proportion as partnership profits. c. A partner may assign his interest in the partnership but only with the consent of the other partners. d. A partner may sell the goodwill of the partnerships without the consent of the other partners when the sale is in the best interest of the partnership.

Answer: The correct answer is B. As a general principle of partnership law, as well as under the Revised Uniform Partnership Act, in the absence of an agreement otherwise, partnership losses are allocated among partners in the same proportion as partnership profits.

Cobb, Inc., a partner in TLC Partnership, assigns its partnership interest to Bean, who is not made a partner. After the assignment, Bean asserts the rights to I. Participate in the management of TLC. II. Cobb's share of TLC's partnership profits. Bean is correct as to which of these rights? a. I only. b. II only. c. I and II. d. Neither I nor II.

Answer: The correct answer is B. The assignee of a partner's interest in the partnership does not thereby become a partner absent the unanimous consent of the other partners. Thus, the assignee has no right to participate in the management of the partnership and has only a right to receive the assignor's share of the partnership profits.

Which of the following statements is(are) correct regarding the relationship between an agent and a nondisclosed principal? I. The principal is required to indemnify the agent for any contract entered into by the agent within the scope of the agency agreement. II. The agent has the same actual authority as if the principal had been disclosed. a. I only. b. II only. c. Both I and II. d. Neither I nor II.

Answer: The correct answer is C. A principal owes her agent the duty of indemnification, which is a type of reimbursement for costs and liabilities incurred by the agent as a result of authorized acts on behalf of the principal. Actual authority is the authority that the agent reasonably believes she possesses because of the communications to the agent. The agent has the same actual authority whether the principal is disclosed or undisclosed.

North, Inc. hired Sutter as a purchasing agent. North gave Sutter written authorization to purchase, without limit, electronic appliances. Later, Sutter was told not to purchase more than 300 of each appliance. Sutter contracted with Orr Corp. to purchase 500 tape recorders. Which of the following statements is correct? a. Sutter will be liable to Orr because Sutter's actual authority was exceeded. b. Sutter will not be liable to reimburse North if North is liable to Orr. c. North will be liable to Orr because of Sutter's actual and apparent authority. d. North will not be liable to Orr because Sutter's actual authority was exceeded.

Answer: The correct answer is C. Although Sutter had apparent authority by virtue of the written statement of authority, he had no actual authority because actual authority is that authority which the agent reasonably believes he has, and here North told Sutter that he no longer had authority to make unlimited purchases. There is no requirement that actual authority granted in writing be rescinded in writing. North is liable to purchase from Orr for 300 appliances because of actual authority and for 200 appliances because of apparent authority. Choice A is incorrect. An agent impliedly warrants to third parties with whom he deals that he has the authority that he purports to have. If this warranty is breached, he is liable to the principal for any damages that are caused. Choice B is incorrect. An agent who exceeds his actual authority is liable to his principal for any damages caused by the excess. There is no requirement that actual authority granted in writing be rescinded in writing; the oral limitation on actual authority was valid between North and Sutter. Choice D is incorrect. Although Sutter exceeded his actual authority, North will be liable because of Sutter's apparent authority. Apparent authority arises from a third party's reasonable beliefs of authority based on the principal's holding the agent out. Where the principal has given the agency written authority, the agent has apparent authority consistent with the written authority, even after actual authority is terminated, until the written authority is retrieved.

Anticipatory Breach of Contract

Anticipatory reputation, when one party announces that they can't fulfill their contractual obligations in the time requirement.

Duress

Any force or threat of harm makes an agreement voidable. Extreme (physical) or economic duress.

Minor

Anyone under the age of 18, minors are vulnerable.

Reformation

Asking court to re-write agreement

Recession

Asking the court to cancel agreement. Usually involves restitution of the consideration that has already been paid or made.

Specific Performance

Asking the court to enforce an agreement. Very limited, subject matter must be unique; land, rare coins, expensive unique items, etc.

Injunction

Asking the court to stop performance. Example- noncompete agreement violation

Assignments

Assignor - assigns the rights Assignee - receives the rights The assignee can demand performance from the original contracting party.

Emergency Authority

Authority that an agent has based on their fiduciary duties to the principal. Used in the face of emergency

Apparent Authority

Authority that arises from a third party. The power an agent has created by a third party's reasonable belief as to the scope of the agency

Actual Implied Authority

Authority that is necessary to accomplish the agency objective

. Ace engages Butler to manage Ace's retail business. Butler has the implied authority to do all of the following, except A. Purchase inventory for Ace's business. B. Sell Ace's business fixtures. C. Pay Ace's business debts. D. Hire or discharge Ace's business employees.

. Pell is the principal and Astor is the agent in an agency coupled with an interest. In the absence of a contractual provision relating to the duration of the agency, who has the right to terminate the agency before the interest has expired? A. Pell: Yes; Astor: Yes B. Pell: No; Astor: Yes C. Pell: No; Astor: No D. Pell: Yes; Astor: No

A building was purchased for $350,000 and insured under a $300,000 fire insurance policy containing an 80% coinsurance clause. Several years later, the building, having a value of $500,000, sustained fire damage of $40,000. What is the amount recoverable from the insurer? A. $40,000 B. $30,000 C. $32,000 D. $28,000

A limited liability partnership a. has ownership interest that cannot be transferred b. protects the partners from liability for the debts of the partnership c. must pay taxes on its income d. requires no formal steps for its creation e. permits a limited number of partners

A principal need not compensate his agent if: A. there was no agreement on the amount of compensation the agent was to receive. B. the agent has committed a serious breach of a fiduciary duty. C. there is no market price for the agent's services. D. the agent is a special agent.

A sole proprietorship: a. must file a tax return b. requires no formal steps for its creation c. must register with the secretary of state d. may sell stock e. provides limited liability to the owner

Ann enters into an agency contract with Jan. After a few months, Ann becomes insane. In such circumstances, is it compulsory to give notice of termination to Jan? A. Yes, otherwise she is liable. B. No, it is deemed termination as per law. C. Yes, because agent is dependant on her. D. No, because there is no contract in writing.

Beta Distribution Company grants its agent Cathy an exclusive territory in which to sell Beta products. Beta cannot compete with Cathy in that territory under the principals duty of a. avoidance. b. cooperation. c. indemnification. d. reimbursement.

Bob, a salesperson at a Carpets Galore store, tells Dita, a customer, "Buy your carpet here, and I'll install it for half of what the store would charge." Dita buys the carpet, which Bob installs for half the store's price. Bob keeps the money. Bob has breached a. no duty. b. the duty of loyalty. c. the duty of notification. d. the duty of obedience.

Carl tells Jenny that he will give her a raise if she agrees to have a romantic relationship with him. In legal terms, this is known as a. invidious harassment. b. quid pro quo harassment. c. hostile-environment harassment. d. settled harassment.

Cathy enters into an agency contract with Dilbert. After a few months, Cathy dies in a car crash. Under these circumstances, is it compulsory to give notice of termination to Dilbert? A. Yes, otherwise she is liable. B. No, it is deemed termination as per law. C. Yes, because agent is dependant on her. D. No, because there is no contract in writing.

Delicious Coffee Company hires Elton to sell Delicious's products in a certain area. Delicious agrees to pay Elton a salary, plus commission, for a trial period. They also agree that Elton can sell using any methods and during any hours that seem appropriate. The key factor in whether Elton is Delicious's employee is a. the amount of Eltons salary. b. the control Delicious has over the details of the work. c. the length of the trial period. d. the title that designates Eltons position.

Grey Corp. sells computers to the public. Grey sold and delivered a computer to West on credit. West executed and delivered to Grey a promissory note for the purchase price and a security agreement covering the computer. West purchased the computer for personal use. Grey did not file a financing statement. Is Grey's security interest perfected? A. Yes, because Grey retained ownership of the computer. B. Yes, because it was perfected at the time of attachment. C. No, because the computer was a consumer good. D. No, because Grey failed to file a financing statement.

Hans hired Pablo to work as his agent. They signed a two year employment contract. After one year, Hans attempted to terminate Pablo's employment because business was slow. Pablo had been doing good work until then. In this situation: A. Hans had the power and the right to terminate Pablo's employment. B. Hans had the power but not the right to terminate Pablo's employment. C. Hans had neither the power nor the right to terminate Pablo's employment. D. Hans had the right but not the power to terminate Pablo's employment.

Ian and Jackie take title to a drive-through Koffee Kiosk in such a way that if one dies, the other will be the sole owner. Ian and Jackie own the kiosk as a. co-owners in fee simple. b. joint tenants. c. tenants by the entirety. d. tenants in common.

Janet and Julie work at ABC Interiors. Janet is a designer who works with clients of ABC on interior design projects. ABC closely supervises all of its designers, and dictates their work schedules. Julie works part-time in the evenings cleaning the offices. Janet is ABCs a.employee, agent, and independent contractor. b.employee and agent. c.employee but not agent. d.independent contractor.

Julio lives in an area with a high percentage of Hispanic workers. Many of these workers are legal immigrants who have relatively little college training. If, when Julio applies for his job, he is given an examination designed for a college graduate, and if he and most Hispanic applicants fail to pass the test, the employer a. has almost certainly done nothing wrong. b. might be engaged in disparate-impact discrimination. c. might be engaged in disparate-harm discrimination. d. might have violated the Americans with Disabilities Act (ADA).

Julius, a collector and seller of Egyptian relics, hired Brutus to act as his sales agent. Julius later discovered that Brutus, along with others was embezzling his funds. Julius confronted Brutus and said "You too Brutus? Then you are fired". Anthony, a customer who had dealt with Brutus as Julius' agent before, was not aware that Brutus had been fired. Brutus came to Anthony, and claiming to be acting as Julius' agent sold Anthony an Egyptian relic, accepting full payment of $100,000 in cash and promising to deliver the relic in two weeks. Brutus then disappeared, and now Anthony is demanding that Julius honor the contract because Brutus was his agent. In this situation: A. Julius is bound on this contract because Brutus had implied authority. B. Julius is bound on this contract because Brutus had apparent authority. C. Julius is bound on this contract because Brutus had express authority. D. Julius is bound on this contract because Brutus had direct authority.

Which of the following depends to a significant degree on the third party's reasonable belief that the agent has authority? A. Express authority B. Implied authority C. Apparent authority D. Actual authority

Kurt is 52 years old and has worked for a company covered by the Age Discrimination in Employment Act (ADEA) of 1967. He wants to bring a claim of age discrimination against his employer because he was replaced by a younger, lower-paid worker. To make out a prima facie case of age discrimination, Kurt does not have to establish that he a. was qualified for the job he lost. b. was replaced by someone who was below the age of 40. c. is a member of the protected age group. d. was discharged in a way that creates an inference of discrimination.

Louis, a certified public accountant and an investor, and Maria, an insurance salesperson and a realtor, may create an agency relationship for a. a business purpose only. b. a legal purpose only. c. any purpose. d. no purpose.

Min applies for a job as a receptionist at an accounting firm. If she is denied a job because she is of Asian origin, she may be a victim of a. primary-treatment discrimination. b. disparate-treatment discrimination. c. direct-treatment discrimination. d. disparate-impact discrimination.

National Computer Corporation (NCC) employs Cynthia as an agent. NCC gives her an exclusive territory in which to sell NCC products. NCC cannot compete with her in that territory under the duty of a. compensation. b. cooperation. c. indemnification. d. reimbursement.

Omar is Precise Service Companys chief executive officer. On Precises behalf, Omar solicits business, hires and fires workers, and handles the finances. Precise pays Omar varying amounts, depending on his needs. Omar is most likely a. a principal. b. an employee. c. an employer. d. an independent contractor.

On July 8, Ace, a refrigerator wholesaler, purchased 50 refrigerators. This comprised Ace's entire inventory and was financed under an agreement with Rome Bank that gave Rome a security interest in all refrigerators on Ace's premises, all future acquired refrigerators, and the proceeds of sales. On July 12, Rome filed a financing statement that adequately identified the collateral. On August 15, Ace sold one refrigerator to Cray for personal use and four refrigerators to Zone Co. for its business. Which of the following statements is correct? A. The refrigerators sold to Zone will be subject to Rome's security interest. B. The refrigerator sold to Cray will not be subject to Rome's security interest. C. The security interest does not include the proceeds from the sale of the refrigerators to Zone. D. The security interest may not cover after-acquired property even if the parties agree.

Ritz owned a building on which there was a duly recorded first mortgage held by Lyn and a recorded second mortgage held by Jay. Ritz sold the building to Nunn. Nunn assumed the Jay mortgage and had no actual knowledge of the Lyn mortgage. Nunn defaulted on the payments to Jay. If both Lyn and Jay foreclosed, and the proceeds of the sale were insufficient to pay both Lyn and Jay, A. Nunn would be personally liable to Lyn but not to Jay. B. Jay would be paid after Lyn was fully paid. C. Nunn would be personally liable to Lyn and Jay. D. Jay and Lyn would be paid proportionately.

Rural Holding Company (RHC) possesses farmland. RHC has the right to use the property, including harvesting the crops, for ten years. RHC does not have the right to extract the coal under the land. This is a. a fee simple absolute. b. a leasehold estate. c. a life estate. d. an easement.

The Scooter Store notified its employees at 5pm on Friday that it is laying off two-thirds of its workforce as of today and told them not to come in on Monday. It failed to provided advance notice to anyone and in doing so likely violated a. the Worker Notification Act. b. the Worker Adjustment and Retraining Notification Act. c. the Worker Readjustment Act. d. the Worker Retention Act.

The apparent authority of a general agent for a disclosed principal will terminate without notice to third parties when the A. Principal dismisses the agent. B. Principal or agent dies. C. Purpose of the agency relationship has been fulfilled. D. Time period set forth in the agency agreement has expired

The workers at an auto manufacturing plant are on strike, and they picket the railroad company that delivers parts to the factory. This type of picket is a. legal under First Amendment rights to free speech. b. illegal as a secondary boycott. c. illegal for committing a tort of injuring the railroad's business. d. legal as a primary boycott.

Tri-state Financial Corporation hires Uri, a real estate agent, to locate investment properties for Tri-state. Uri learns of a warehouse available for $100,000, informs Tri-state, and makes an offer of $90,000 on Tri-states instruction. The offer is rejected. Uri a. breached the agents fiduciary duties to the principal. b. did nothing wrong. c. failed to take advantage of a business opportunity. d. made an unreasonable offer based on current market value.

Under the Secured Transactions Article of the UCC, what secured transaction document must be signed by the debtor? A. Statement of Assignment. B. Security agreement. C. Release of collateral. D. Termination statement.

Utility Power Company has the right to run its power lines across Velma's land. This is a. a license. b. an easement. c. a profit. d. a tenancy at sufferance.

Vista is a wholesale seller of microwave ovens. Vista sold 50 microwave ovens to Davis Appliance for $20,000. Davis paid $5,000 down and signed a promissory note for the balance. Davis also executed a security agreement giving Vista a security interest in Davis' inventory, including the ovens. Vista perfected its security interest by properly filing a financing statement in the state of Whiteacre. Six months later, Davis moved its business to the state of Blackacre, taking the ovens. On arriving in Blackacre, Davis secured a loan from Grange Bank and signed a security agreement putting up all inventory (including the ovens) as collateral. Grange perfected its security interest by properly filing a financing statement in the state of Blackacre. Two months after arriving in Blackacre, Davis went into default on both debts. Assuming Vista is a partnership, which of the following statements is correct? A. Grange's security interest is superior because Grange had no actual notice of Vista's security interest. B. Vista's security interest is superior even though at the time of Davis' default Vista had not perfected its security interest in the state of Blackacre. C. Grange's security interest is superior because Vista's time to file a financing statement in Blackacre had expired prior to Grange's filing. D. Vista's security interest is superior provided it repossesses the ovens before Grange does

Wally is blind and would like to work for Dairy Times writing articles on the dairy industry. Wally uses voice-recognition software that allows him to dictate articles to his computer. His computer is specially designed for visually impaired individuals. Dairy Times interviews Wally but offers the job to a sighted person instead. Dairy Times may have violated a. 42 U.S.C. Section 1981. b. the ADA. c. the ADEA. d. the NRA.

Which of the following actions requires an agent for a corporation to have a written agency agreement? A. Purchasing office supplies for the principal's business. B. Purchasing an interest in undeveloped land for the principal. C. Hiring an independent contractor to renovate the principal's office building. D. Retaining an attorney to collect a business debt owed the principal.

Which of the following forms of tenancy will be created if a tenant stays in possession of the leased premises without the landlord's consent, after the tenant's 1-year written lease expires? A. Tenancy from period to period. B. Tenancy at sufferance. C. Tenancy for years. D. Tenancy at will.

Which of the following is least likely to terminate an agency? A. The bankruptcy of the principal. B. The agent's bankruptcy, where the agent is an assembly line employee. C. The principal's revocation of the agency. D. The agent's renunciation of the agency.

Which of the following is not terminated by the principal's death? A. The agent's apparent authority. B. An agency coupled with an interest. C. A gratuitous agency. D. A constructive agency.

Which of the following is the most important factor distinguishing employee from independent contractors? A. Whether the agent is paid. B. Whether the principal has right to control. C. Whether the agent has authority to bind the principal. D. Whether the agent is a special agent or a general agent.

Which of the following requires a filing for perfection? A. A purchase money security interest in consumer goods. B. A purchase money security interest in equipment. C. A security interest in negotiable promissory notes. D. None of the above.

Whitney works at home making unique children's clothes. Liam buys Whitney's clothes to sell in his store. With respect to Whitney's legal relationship to Liam, she is probably a. an employee. b. an independent contractor. c. an agent by operation of law. d. a principal.

Jones lives in Oklahoma and is the owner of a large number of valuable antiques. Treasures Delight, located in Arkansas, is a seller of antiques. Treasures Delight is owned by Sally Delight. Delight offers to purchase all of the antiques owned by Jones paying 60% of the agreed price and, by agreement, signs a security agreement for the balance putting up her entire inventory as security. The security agreement provides for monthly payments. Which of the following is correct? A. Since this is a purchase money security interest, Jones is automatically perfected without a filing. B. Although this is a purchase money security interest, Jones must file to have a perfected security interest. C. There is not a purchase money security interest because being antiques for resell classifies the collateral as inventory. D. If Jones decides to file for perfection of his security interest, Jones would file a financing statement in Oklahoma.

Which of the following factors help(s) determine whether an item of personal property is a fixture? I. Degree of the item's attachment to the property II. Intent of the person who had the item installed A. I only. B. II only. C. Both I and II. D. Neither I nor II.

Fraud/ Fraudulent Misrepresentation

Based on a falsehood; false statements of fact, misrepresentation, intended reliance, actual reliance, and resulting damages. Exception; puffery.

Exchange of Promises

Bilateral contract, no action required yet

International Law

Body of law formed as a result of international customs, treaties, and organizations (such as the United Nations) that governs relations among or between nations

Bilateral Mistake

Both parties are mistaken, talking about two completely different things. No meeting of the minds, established in "The two ships case".

Agreement

Both parties simply agree to walk away

Adhesion and Unconscionability

Both remove voluntary consent and as such make contracts voidable.

Anticipatory Repudiation

Breeching a contract before it's performance is due. This allows for mitigation

A group of lawyers in Plainsville decide to start a law firm together. They use the name of the three lawyers who first decided to create the firm. The law firm of Adams, Bell, and Clyde has the letters P.C. at the end of its name. The letters stand for a. public corporation. All of its members are professionals, and they pay taxes at a lower rate than most corporations. b. public company. None of its members are professionals, and they pay taxes at a higher rate than most corporations. c. professional corporation. All of its members are professionals and are subject to greater liability than most corporate officers. d. professional corporation. All of its members are professionals and are subject to less liability than most corporate officers.

A is an agent of B. They have entered into a contract for 1 year. However before completion of the period, A wants to terminate the contract. B is willing to terminate the contract with A before the completion of the contract period. Identify the correct option from the list below. A. Death of the principal. B. Death of the agent. C. Mutual agreement between them. D. They should wait till the contract period ends.

A principal and agent relationship requires a A. Written agreement. B. Power of Attorney. C. Meeting of the minds and consent to act. D. Specified consideration.

An agent who receives no compensation for his services is known as: A. an adult agent. B. a social agent. C. a gratuitous agent. D. a simple agent.

Assuming all other requirements are met, a corporation may elected to be treated as an S corporation under the IRC if it has: a. both common and preferred stockholders b. a partnership as a stockholder c. seventy five or fewer stockholders d. the consent of a majority of the stockholders

Bronson is a residential tenant with a 10-year written lease. In the absence of specific provisions in the lease to the contrary, which of the following statements is true? A. Bronson may not assign the lease. B. The landlord's death will automatically terminate the lease. C. Bronson's purchase of the property will terminate the lease. D. The premises may not be sublet for less than the full remaining lease term.

Byron works at Stich-Rite Clothing Factory. The company is required to maintain safe working conditions under the a. Hazardous Workplace Act. b. Occupational Health Act. c. Occupational Safety and Health Act. d. Safety and Health Organization Act.

consignment

Consignor (seller) delivers good to consignee (buyer) to sell - consignor paid a fee for selling goods on behalf of the consignor IF they are sold

Camp orally guaranteed payment of a loan Camp's cousin Wilcox had obtained from Camp's friend Main. The loan was to be repaid in 10 monthly payments. After making 6 payments, Wilcox defaulted on the loan and Main demanded that Camp honor the guarantee. Regarding Camp's liability to Main, Camp is A. Liable under the oral surety agreement because the loan would be paid within one year. B. Liable under the oral surety agreement because Camp benefited by maintaining a personal relationship with Main. C. Not liable under the oral surety agreement because Camp's surety agreement must be in writing to be enforceable. D. Not liable under the oral surety agreement because of failure of consideration.

Creditor A agreed to loan Debtor D the money for the purchase of inventory. Debtor D signed a security agreement on October 1. Creditor A filed a financing statement on the goods on October 2. The inventory was shipped FOB place of shipment on October 5. When did the security interest attach? A. October 1. B. October 2. C. October 5. D. The interest has not attached until tender of the goods to D.

Dizzy is not Edwinas agent but enters into a contract with Frida on Edwinas behalf. Edwina later contacts Frida to approve the contract. This is a. an agency by agreement. b. an agency by estoppel. c. an agency by ratification. d. not the creation of an agency relationship.

Eddie and Eric enter into a partnership agreement to sell gourmet dog biscuits. If they do not specify how long the general partnership will last, the partnership will end a. whenever both partners agree to end it. b. in one year plus one day. c. whenever either partner wants to end it. d. in 12 months.

Edwards Corp. lent Lark $200,000. At Edwards' request, Lark entered into an agreement with Owen and Ward for them to act as compensated co-sureties on the loan in the amount of $200,000 each. If Edwards releases Ward without Owen's or Lark's consent, and Lark later defaults, which of the following statements is correct? A. Lark will be released for 50% of the loan balance. B. Owen will be liable for the entire loan balance. C. Owen will be liable for 50% of the loan balance. D. Edwards' release of Ward will have no effect on Lark's and Owen's liability to Edwards.

Elsie and Frida buy a condo near the beach in Gulf Shores, Alabama. On the death of either owner, that owner's interest in the condo passes to her heirs. This is a. a joint tenancy. b. a life estate. c. a tenancy in common. d. ownership in fee simple absolute.

Forest Products is a mill that has always successfully resisted unionization of its workers by offering better pay and benefits than other employers. Nevertheless, Wilson and several others would like to unionize. The first step they will need to take is to a. have the national labor relations board monitor a union election. b. recognize a union. c. have workers sign authorization cards. d. conduct a secondary boycott.

Forming an agent relationship requires that A. The agreement between the principal and agent be supported by consideration. B. The principal and agent not be minors. C. Both the principal and agent consent to the agency. D. The agent's authority be limited to the express grant of authority in the agency agreement.

Generally, an agency relationship is terminated by operation of law in all of the following situations except the A. Principal's death. B. Principal's incapacity. C. Agent's renunciation of the agency. D. Agent's failure to acquire a necessary business license.

Home Development Company employs llya to buy property for a future residential development. Ilya secretly buys some of the property and sells it to Home Development at a profit. Ilya has breached a. no duty. b. the duty of accounting. c. the duty of loyalty. d. the duty of notification.

Janet and Julie work at ABC Interiors. Janet is a designer who works with clients of ABC on interior design projects. ABC closely supervises all of its designers, and dictates their work schedules. Julie works part-time in the evenings cleaning the offices. Julie is ABCs a.agent but not employee. b.employee and agent. c.employee or independent contractor, depending on whether ABC controls the details of her physical performance. d.independent contractor.

Katrina and Shannon form a general partnership to operate a gourmet kitchen business. In most states, if they do not specify their respective management rights a. the partner who invested more capital has a greater voice in management b. one partner manages the business and the other provides the capital c. both partners have equal management rights d. one partner has superior management rights

Lee repairs high-speed looms for Sew Corp., a clothing manufacturer. Which of the following circumstances best indicates that Lee is an employee of Sew and not an independent contractor? A. Lee's work is not supervised by Sew personnel. B. Lee's tools are owned by Lee. C. Lee is paid weekly by Sew. D. Lee's work requires a high degree of technical skill

Liz and Molly work as clerks in Nias Dress Shop. Nia withholds federal taxes from their pay, and controls the methods and details of the performance of their work. Liz and Molly are not authorized to modify the prices or other terms of a sale at the shop. Liz and Molly are a. independent contractors. b. Nias employees only. c.Nias employees and agents. d.Nias principals.

Liz and Molly work as clerks in Nias Dress Shop. Nia withholds federal taxes from their pay, and controls the methods and details of the performance of their work. Liz and Molly are not authorized to modify the prices or other terms of a sale at the shop. Nia authorizes Liz to sell clothes at remote locations at prices that Liz negotiates in those locations. With respect to sales at those locations, Liz is a.an independent contractor .b.Nias employee only. c.Nias employee and agent. d.Nias principal

Mack is an oil executive. He wants to start a new company with different partners to explore some drilling opportunities. His attorney advises him about the various business forms. When discussing the LLC form, his attorney mentions that one of the biggest disadvantages of the LLC form is that a. it is taxed like a partnership, unless the members choose differently. b. its members have limited liability for LLC debts. c. there is no uniform law governing LLCs in the United States. d. LLC members pay no taxes.

Mars, Inc., manufactures and sells VCRs on credit directly to wholesalers, retailers, and consumers. Mars can perfect its security interest in the VCRs it sells without having to file a financing statement or take possession of the VCRs if the sale is made to A. Retailers. B. Wholesalers that sell to distributors for resale. C. Consumers. D. Wholesalers that sell to buyers in the ordinary course of business.

Opal conveys three acres of wetlands to Pristine Places, Inc., with a deed that warrants only that Opal held good title during her ownership of the property. This deed is a. a grant deed. b. a quitclaim deed. c. a special warranty deed. d. a warranty deed.

Orr is an employee of Vick Corp. Vick relies heavily on Orr's ability to market Vick's products and, for that reason, has acquired a $50,000 insurance policy on Orr's life. Half of the face amount of the policy is payable to Vick, and the other half is payable to Orr's spouse. Orr dies shortly after the policy is taken out but after leaving Vick's employ. Which of the following statements is true? A. Orr's spouse does not have an insurable interest because the policy is owned by Vick. B. Orr's spouse will be entitled to all of the proceeds of the policy. C. Vick will be entitled to its share of the proceeds of the policy regardless of whether Orr is employed by Vick at the time of death. D. Vick will not be entitled to any of the proceeds of the policy because Vick is not a creditor or relative of Orr.

Patsy possesses twenty-four acres of remote, rugged land. Patsy has the right to use the property, in¬cluding extracting silver from an existing mine, for life. Patsy also has the right to lease the land for a period not to exceed her life. Patsy's ownership interest is a. a fee simple absolute. b. a leasehold estate. c. a life estate. d. the power of eminent domain.

Preston wants to be his own boss and is considering starting a business. He has to decide which form of business organization to adopt and will most likely consider all of the following except a. the various types of liability to which owners are subject. b. tax issues. c. publicity and public relations. d. his need for start-up capital.

Prospective Enterprises (PE) employs Quinn to buy property for a possible commercial development. Quinn secretly buys some of the property and sells it to PE at a profit. Quinn has breached a. no duty. b. the duty of accounting. c. the duty of loyalty. d. the duty of notification.

Regional Products, Inc., hires Sam to act as its agent. Tina sues Regional for Sams negligent conduct. Regionals right to sue Sam for an equal amount of damages is the right of a. avoidance. b. cooperation. c. indemnification. d. reimbursement.

Selma, an elderly widow, gives her young neighbor, Steven, written power of attorney. This means that Steven now a. has implied authority, but not express authority, to act as Selma's agent. b. is a disclosed principal. c. has express authority to act as Selma's agent. d. is an undisclosed principal.

Simmons, an agent for Jensen, has the express authority to sell Jensen's goods. Simmons also has the express authority to grant discounts of up to 5% of list price. Simmons sold Hemple goods with a list price of $1,000 and granted Hemple a 10% discount. Hemple had not previously dealt with either Simmons or Jensen. Which of the following courses of action may Jensen properly take? A. Seek to void the sale to Hemple. B. Seek recovery of $50 from Hemple only. C. Seek recovery of $50 from Simmons only. D. Seek recovery of $50 from either Hemple or Simmons.

Sisk is a tenant of Met Co. and has 2 years remaining on a 6-year lease executed by Sisk and Met. The lease prohibits subletting but is silent as to Sisk's right to assign the lease. Sisk assigned the lease to Kern Corp., which assumed all of Sisk's obligations under the lease. Met objects to the assignment. Which of the following statements is true? A. With respect to the rent provided for in the lease, Kern is liable to Sisk but not to Met. B. Sisk would have been relieved from liability on the lease with Met if Sisk obtained Met's consent to the assignment. C. Sisk will remain liable to Met for the rent provided for in the lease. D. The assignment to Kern is voidable at Met's option.

Sussex, Inc. had given a first mortgage when it purchased its plant and warehouse. Sussex needed additional working capital. It decided to obtain financing by giving a second mortgage on the plant and warehouse. Which of the following statements is true with respect to the mortgages? A. Default on payment of the second mortgage will constitute default on the first mortgage. B. The second mortgage may not be prepaid without the consent of the first mortgagee. C. If both mortgages are foreclosed, the first mortgage must be fully paid before paying the second mortgage. D. The second mortgagee may not pay off the first mortgage to protect its security.

Under the Secured Transactions Article of the UCC, which of the following security agreements does NOT need to be in writing to be enforceable? A. A security agreement collateralizing a debt of LESS than $500. B. A security agreement where the collateral is highly perishable or subject to wide price fluctuations. C. A security agreement where the collateral is in the possession of the secured party. D. A security agreement involving a purchase money security interest.

Under the UCC Secured Transactions Article, what is the order of priority for the following security interests in store equipment? I. Security interest perfected by filing on April 15, 2004. II. Security interest attached on April 1, 2004. III. Purchase money security interest attached April 11, 2004, and perfected by filing on April 20, 2004. A. I, III, II. B. II, I, III. C. III, I, II. D. III, II, I.

Under the UCC Secured Transactions Article, which of the following events will always prevent a security interest from attaching? A. Failure to have a written security agreement. B. Failure of the creditor to have possession of the collateral. C. Failure of the debtor to have rights in the collateral. D. Failure of the creditor to give present consideration for the security interest.

Which of the following is an agency coupled with an interest? A. A contingent fee arrangement in which a plaintiff's attorney will receive 20% of any recovery she achieves. B. A professional sports contract in which a team owner agrees to pay a player insurance premiums on a policy that compensates the player should he suffer a career-ending injury. C. A loan agreement in which the borrower pledges collateral to the lender and gives the lender the power to take the collateral should the borrower default on the loan. D. A contract in which a sales agent is hired for three years at a salary of $80,000 plus 5% of sales.

Which of the following is most likely to be classed as an independent contractor rather than an employee? A. An assembly line worker. B. A lawyer who works as in-house counsel for a corporation. C. A franchisee of a fast-food fried chicken chain. D. The president of a corporation.

Which of the following statements is the best definition of real property? A. Real property is land and intangible property in realized form. B. Real property is all tangible property including land. C. Real property is land and everything permanently attached to it. D. Real property is only land.

Which of the following warranties is (are) contained in a general warranty deed? I. The grantor has the right to convey the property. II. The grantee will not be disturbed in possession of the property by the grantor or some third party's lawful claim of ownership. A. Neither I nor II. B. I only. C. I and II. D. II only.

Wine purchased a computer using the proceeds of a loan from MJC Finance Company. Wine gave MJC a security interest in the computer. Wine executed a security agreement and financing statement, which was filed by MJC. Wine used the computer to monitor Wine's personal investments. Later, Wine sold the computer to Jacobs for Jacobs' family use. Jacobs was unaware of MJC's security interest. Wine now is in default under the MJC loan. May MJC repossess the computer from Jacobs? A. No, because Jacobs was unaware of the MJC security interest. B. No, because Jacobs intended to use the computer for family or household purposes. C. Yes, because MJC's security interest was perfected before Jacobs' purchase. D. Yes, because Jacob's purchase of the computer made Jacobs personally liable to MJC.

Which of the following forms of business can be formed with only one individual owning the business? Sole Proprietorship-Limited Liability Company- Partnership a. Yes Yes Yes b. Yes Yes No c. Yes No Yes d. No No No

CPA-04633 Explanation Choice "b" is correct. A sole proprietorship and (in most states) a limited liability company can be formed with only one owner. A partnership requires two or more partners. Choices "a", "c", and "d" are incorrect per the explanation above.

Mistake

Can effect voluntary consent and make a contract unenforceable. 2 kinds; mistakes of value and mistakes of fact

Changes in circumstances

Change of Law: if the agent's responsibilities become illegal the agency agreement terminates Loss or destruction of subject matter: if the subject matter of the agency agreement is lost

On dissolution of a general partnership, distributions will be made on account of: I. Partners' capital accounts. II. Amounts owed partners with respect to profits. III. Amounts owed partners for loans to the partnership. In the following order: a. III, I, and II. b. I, II, and III. c. II, III, and I. d. III, II, and I.

Choice "a" is correct. Rule: On dissolution of a general partnership the "order of distribution" would be as follows: III. General partner loans. I. Partners' capital accounts. II. General partners' profits. Choices "b", "c", and "d" are incorrect, per the above rule.

Fil and Breed are 50% partners in F&B Cars, a used-car dealership. F&B maintains an average used-car inventory worth $150,000. On January 5, National Bank obtained a $30,000 judgement against Fil and Fil's child on a loan that Fil had cosigned and on which Fil's child had defaulted. National sued F&B to be allowed to attach $30,000 worth of cars as part of Fil's interest in F&B's inventory. Will National prevail in its suit? a. No, because the judgement was not against the partnership. b. No, because attachment of the cars would dissolve the partnership by operation of law. c. Yes, because National had a valid judgement against Fil. d. Yes, because Fil's interest in the partnership inventory is an asset owned by Fil.

Choice "a" is correct. A partner has no right to possess partnership property except for partnership purposes. Thus, a personal creditor of a partner has no right to attach items of partnership property to satisfy a partner's personal debt. Choice "b" is incorrect. There is no such rule. If the partnership were liable for the individual partner's debt, the cars could be attached and the partnership would not be dissolved. Choice "c" is incorrect. A partner has no right to possess partnership property except for partnership purposes. Thus, a personal creditor of a partner has no right to attach items of partnership property to satisfy a partner's personal debt. Choice "d" is incorrect. A partner has no right to possess partnership property except for partnership purposes. Thus, a personal creditor of a partner has no right to attach items of partnership property to satisfy a partner's personal debt.

Which of the following is not necessary to create an express partnership? a. Execution of a written partnership agreement. b. Agreement to share ownership of the partnership. c. Intention to conduct a business for profit. d. Intention to create a relationship recognized as a partnership.

Choice "a" is correct. A written partnership agreement, while certainly desirable, is not usually necessary to form a valid partnership; partnership agreements are not normally subject to the statute of frauds. Choice "b" is incorrect. A partnership is an association of two or more persons who agree to carry on as co-owners of a business for profit. Thus, an agreement to share ownership of the partnership is a requirement for creating an express partnership. Choice "c" is incorrect. A partnership is an association of two or more persons who agree to carry on as co-owners of a business for profit. Thus, an intent to carry on a business for a profit is a requirement for creating an express partnership. Choice "d" is incorrect. A partnership is an association of two or more persons who agree to carry on as co-owners of a business for profit. The intent to create a business relationship recognized as a partnership is a requirement for creating an express partnership.

Park and Graham entered into a written partnership agreement to operate a retail store. Their agreement was silent as to the duration of the partnership. Park wishes to dissociate from the partnership. Which of the following statements is correct? a. Park may dissociate from the partnership at any time. b. Unless Graham consents to the dissociation, Park must apply to a court and obtain a decree ordering the dissociation. c. Park may not dissociate from the partnership unless Graham consents. d. Park may dissociate from the partnership only after notice of the proposed dissolution is given to all partnership creditors.

Choice "a" is correct. Because the agreement is silent as to duration, it is a partnership at will. A partner may dissociate from a partnership at will at any time. Choice "b" is incorrect. Because the agreement is silent as to duration, it is a partnership at will. A partner may dissociate from a partnership at will at any time. No court order is required. Choice "c" is incorrect. Partnerships are consensual relationships, so any partner has the power to dissociate at any time; he or she need not obtain the consent of the other partners (though absent consent, the partner will be liable for damages if the dissociation is wrongful). Choice "d" is incorrect. There is no requirement of giving partnership creditors a formal notice of intent to dissociate, but it is a good idea to do so to avoid liability on future partnership obligations.

A partner's interest in specific partnership property is: Subject to attachment by the partner's individual creditors Assignable to the partner's individual creditors a. Yes Yes b. Yes No c. No Yes d. No No

Choice "d" is correct. No - No. Rule: A partner's interest in specific partnership property is neither assignable to the partner's individual creditors nor is it subject to attachment by the partner's individual creditors. Choices "a", "b", and "c" are incorrect, per the above rule.

Noll Corp. and Orr Corp. are contemplating entering into an unincorporated joint venture. Such a joint venture: a. Will be treated as a partnership in most important legal respects. b. Must be dissolved upon the completion of a single undertaking. c. Will be treated as an association for federal income tax purposes and taxed at the prevailing corporate rates. d. Must file a certificate of limited partnership with the appropriate state agency.

Choice "a" is correct. The legal requirements, the consequences, the advantages, and disadvantages of forming a joint venture generally are identical to those of a general partnership. Joint ventures are treated as a partnership in most important legal aspects. Choice "b" is incorrect. A joint venture need not be dissolved upon the completion of a single undertaking. Joint ventures may be formed for a single transaction or for a related series of transactions. Choice "c" is incorrect because a joint venture would be taxed like a partnership, not a corporation. Choice "d" is incorrect because a joint venture, like a partnership, may be formed without filing with the state.

Downs, Frey, and Vick formed the DFV general partnership to act as manufacturers' representatives. The partners agreed Downs would receive 40% of any partnership profits and Frey and Vick would each receive 30% of such profits. It was also agreed that the partnership would not terminate for five years. After the fourth year, the partners agreed to terminate the partnership. At that time, the partners' capital accounts were as follows: Downs, $20,000; Frey, $15,000; and Vick, $10,000. There also were undistributed losses of $30,000. Which of the following statements about the form of the DFV partnership agreement is correct? a. It must be in writing because the partnership was to last for longer than one year. b. It must be in writing because partnership profits would not be equally divided. c. It could be oral because the partners had explicitly agreed to do business together. d. It could be oral because the partnership did not deal in real estate.

Choice "a" is correct. Under the statute of frauds, an agreement, which by its terms cannot be performed within a year, must be evidenced by a writing containing the material terms and signed by the parties to be charged. Absent a writing, the partnership will be treated as a partnership at will. Choice "b" is incorrect. There is no requirement that partnership agreements be in writing merely because profits will be divided unequally. Choice "c" is incorrect. The statute of frauds requires contracts that cannot by their terms be performed within one year to be evidenced by a writing containing the material terms and signed by the parties to be charged. Choice "d" is incorrect. Whether or not a partnership is to deal in real estate is irrelevant to whether the partnership agreement must be in writing.

Smith and James were partners in S and J Partnership. The partnership agreement stated that all profits and losses were allocated 60 percent to Smith and 40 percent to James. The partners decided to terminate and wind up the partnership. The following was the balance sheet for S and J on the day of the windup: Cash $40,000 Accounts receivable 12,000 Property and equipment 38,000 Total assets $90,000 Accounts payable $24,000 Smith, capital 30,000 James, capital 36,000 Total liabilities and capital $90,000 Of the total accounts receivable, $10,000 was collected and the remainder was written off as bad debt. All liabilities of S and J were paid by the partnership. The property and equipment are sold for $32,000. Under the Uniform Partnership Act, what amount of cash was distributed to Smith? a. $25,200 b. $26,000 c. $30,000 d. $34,800

Choice "a" is correct. Upon termination of the partnership creditors are paid first. After payment of creditors, each partner is deemed to have an account that is charged or credited an amount equal to the partner's contribution plus or minus the partner's share of any profits or losses. The agreement between Smith and James was that profits and losses would be allocated 60% to Smith and 40% to James. The partnership had $82,000 in assets ($40,000 in cash, $10,000 from accounts receivable, and $32,000 from property and equipment). The partnership had $90,000 in liabilities and capital. Of the $82,000 in assets, $24,000 is paid first to creditors. This leaves a balance of $58,000. Smith contributed $30,000 in capital and James contributed $36,000 in capital. With $66,000 owed in capital and only $58,000 available, there is a deficit of $8,000. By agreement, Smith is responsible for 60% of the $8,000 deficit or $4,800. Smith would be credited an amount equal to his capital ($30,000) minus his share of the loss ($4,800) or $25,200. Only choice "a" reflects this amount. Choices "b", "c", and "d" are incorrect, per the above calculation.

Which of the following requirements must be met to have a valid partnership exist? I. Co-ownership of all property used in a business. II. Co-ownership of a business for profit. a. I only. b. II only. c. Both I and II. d. Neither I nor II.

Choice "b" is correct. Rule: A partnership is defined as an association of two or more persons who agree to carry on as coowners a business for profit. Thus, II is necessary. However, there is no requirement that all property used in the business be co-owned; it may be owned by individual partners. Thus I is not necessary. Choices "a", "c", and "d" are incorrect, per the above rule.

Lewis, Clark, and Beal entered into a written agreement to form a partnership. The agreement required that the partners make the following capital contributions: Lewis, $40,000, Clark, $30,000, and Beal, $10,000. It was also agreed that in the event the partnership experienced losses in excess of available capital, Beal would contribute additional capital to the extent of the losses. The partnership agreement was otherwise silent about division of profits and losses. Which of the following statements is correct? a. Profits are to be divided among the partners in proportion to their relative capital contributions. b. Profits are to be divided equally among the partners. c. Losses will be allocated in a manner different from the allocation of profits because the partners contributed different amounts of capital. d. Beal's obligation to contribute additional capital would have an effect on the allocation of profit or loss to Beal.

Choice "b" is correct. Rule: Regardless of the contributions and obligations of the partners, unless the partnership agreement specifically states otherwise, all partners are entitled to an equal share of the profits. Choices "a", "c", and "d" are incorrect, per the above rule.

Cobb, Inc., a partner in TLC Partnership, assigns its partnership interest to Bean, who is not made a partner. After the assignment, Bean asserts the rights to: I. Participate in the management of TLC. II. Cobb's share of TLC's partnership profits. Bean is correct as to which of these rights? a. I only. b. II only. c. I and II. d. Neither I nor II.

Choice "b" is correct. Rule: The assignee of a partner's interest in the partnership does not thereby become a partner absent the unanimous consent of the other partners. Thus, the assignee has no right to participate in the management of the partnership and has only a right to receive the assignor's share of the partnership profits. Choices "a", "c", and "d" are incorrect, per the above rules.

When a partner in a general partnership lacks actual or apparent authority to contract on behalf of the partnership, and the party contracted with is aware of this fact, the partnership will be bound by the contract if the other partners: I Ratify the partnership agreement II Amend the contract a. Yes Yes b. Yes No c. No Yes d. No No

Choice "b" is correct. "Yes - No Rule: The authority of partners is governed by agency law. Under agency law, a principal is not bound to the third party unless the agent had actual authority or apparent authority. When the agent has no actual authority and no apparent authority, the principal (in this case the partnership) will only be liable if it chooses to adopt the agreement (i.e., ratify). Rule: Amending the partnership agreement (presumably to grant authority) will not cause the partnership to be bound because authority must exist at the time the contract is made or the partnership must ratify the contract. Choices "a", "c", and "d" are incorrect, per the above rules.

Gillie, Taft, and Dall are partners in an architectural firm. The partnership agreement is silent about the payment of salaries and the division of profits and losses. Gillie works full-time in the firm, and Taft and Dall each work half time. Taft invested $120,000 in the firm, and Gillie and Dall invested $60,000 each. Dall is responsible for bringing in 50% of the business, and Gillie and Taft 25% each. How should profits of $120,000 for the year be divided? a. Gillie $60,000, Taft $30,000, Dall $30,000. b. Gillie $40,000, Taft $40,000, Dall $40,000. c. Gillie $30,000, Taft $60,000, Dall $30,000. d. Gillie $30,000, Taft $30,000, Dall $60,000.

Choice "b" is correct. $40,000 − $40,000 − $40,000 (equally). Rule: In the absence of an agreement to the contrary, the profits will be shared equally regardless of investment of money or time. Choices "a", "c", and "d" are incorrect, per the above rule.

Under the Uniform Partnership Act, which of the following statements is(are) correct regarding the effect of the assignment of an interest in a general partnership? I. The assignee is personally responsible for the assigning partner's share of past and future partnership debts. II. The assignee is entitled to the assigning partner's interest in partnership profits and surplus on dissolution of the partnership. a. I only. b. II only. c. Both I and II. d. Neither I nor II.

Choice "b" is correct. A partner may assign his or her interest in the partnership. The effect of such an assignment is to transfer the partner's right to receive the partner's share of profits or surplus only. Such an assignment does not cause dissolution or make the assignee a new partner. The assignor is still regarded as a partner and is liable for past and future partnership debts. The assignee, since he is not a partner, is not liable for past and future partnership debts. Choice "a" is incorrect. The assignee of an interest in a general partnership is not personally responsible for the assigning partner's share of past and future partnership debts but is entitled to the assigning partner's interest in partnership profits and surplus on dissolution of the partnership. Choice "c" is incorrect. The assignee of an interest in a general partnership is entitled to the assigning partner's interest in partnership profits and surplus on dissolution of the partnership but is not personally responsible for the assigning partner's share of past and future partnership debts. Choice "d" is incorrect. The assignee of an interest in a general partnership is entitled to the assigning partner's interest in partnership profits and surplus on dissolution of the partnership but is not personally responsible for the assigning partner's share of past and future partnership debts.

A general partnership must: a. Pay federal income tax. b. Have two or more partners. c. Have written articles of partnership. d. Provide for apportionment of liability for partnership debts

Choice "b" is correct. A partnership is an organization of two or more persons who carry on a business for a profit. Choice "a" is incorrect. Partnerships do not pay federal income taxes; the partners report their shares of the partnership's income on their individual returns. Choice "c" is incorrect. A partnership agreement need not be in writing. Choice "d" is incorrect. If the partnership agreement is silent on the apportionment of liability for partnership debts, state law or the Uniform Partnership Act will cover the omission

A sole proprietorship would be an ideal form of business to select if: a. The individual desired no liability beyond his capital investment. b. The individual wanted to be able sell the business at will. c. The individual wanted the business to be a separate entity from the sole proprietor. d. The individual wanted the business to continue indefinitely.

Choice "b" is correct. A sole proprietor is free to transfer or sell the business at will. Choice "a" is incorrect because a sole proprietor is personally liable for all obligations of the business. Choice "c" is incorrect. A sole proprietorship is not considered an entity separate from the sole proprietor. Choice "d" is incorrect because a sole proprietorship ends with the death of the sole proprietor

Rivers and Lee want to form a partnership. For the partnership agreement to be enforceable, it must be in writing if: a. Rivers and Lee reside in different states. b. The agreement cannot be completed within one year from the date on which it will be entered into. c. Either Rivers or Lee is to contribute more than $500 in capital. d. The partnership intends to buy and sell real estate.

Choice "b" is correct. A transaction which cannot be completed within a year must be in writing to be enforceable. Choice "a" is incorrect. Residence of the prospective partners is not relevant. Choice "c" is incorrect. The statute of frauds $500 threshold applies to the sale of goods only. Choice "d" is incorrect. Transactions in land are within the statute of frauds, but the possibility that a partnership may engage in a real estate transaction is not a transaction in land.

If no provisions are made in an agreement, a general partnership allocates profits and losses based on the: a. Value of actual contributions made by each partner. b. Number of partners. c. Number of hours each partner worked in the partnership during the year. d. Number of years each partner belonged to the partnership.

Choice "b" is correct. Absent an agreement to the contrary, all partners have equal rights to share in the profits of the partnership. Choices "a", "c", and "d" are incorrect, per the above explanation.

Condition Subsequent

Condition extinguishes/ ends contractual obligations. You're employed as long as you do __

With respect to the following matters, which is correct if a general partnership agreement is silent? a. A partnership will continue indefinitely unless a majority of the partners votes to dissolve the partnership. b. Partnership losses are allocated in the same proportion as partnership profits. c. A partner may assign his interest in the partnership but only with the consent of the other partners. d. A partner may sell the goodwill of the partnership without the consent of the other partners when the sale is in the best interest of the partnership.

Choice "b" is correct. As a general principle of partnership law, as well as under the Revised Uniform Partnership Act, in the absence of an agreement otherwise partnership losses are allocated among partners in the same proportion as partnership profits. Choice "a" is incorrect. A partnership will dissolve on the death, bankruptcy, incapacity, or other withdrawal of a partner, unless the partners vote to continue. Choice "c" is incorrect. A partner may assign his interest in the partnership at any time without consent of the partners since such an assignment does not make the assignee a partner; instead it merely gives the assignee the assignor's rights to distributions from the partnership. Choice "d" is incorrect. A sale of partnership good will is an extraordinary transaction that requires consent of the partners. A single partner has no authority to make such a sale on his own accord.

Lark, a partner in DSJ, a general partnership, wishes to withdraw from the partnership and sell Lark's interest to Ward. All of the other partners in DSJ have agreed to admit Ward as a partner and to hold Lark harmless for the past, present, and future liabilities of DSJ. As a result of Lark's withdrawal and Ward's admission to the partnership, Ward: a. Acquired only the right to receive Ward's share of DSJ profits. b. Has the right to participate in DSJ's management. c. Is personally liable for partnership liabilities arising before and after being admitted as a partner. d. Must contribute cash or property to DSJ to be admitted with the same rights as the other partners.

Choice "b" is correct. The general rule is that the mere assignment of a partner's interest does not make the assignee a partner. One may become a partner only with the consent of all other partners. Here, all other partner's consented to Ward's becoming a partner. Thus, Ward is a partner with full rights to participate in management. Choice "a" is incorrect. The general rule is that the mere assignment of a partner's interest does not make the assignee a partner. One may become a partner only with the consent of all other partners. Here, all other partner's consented to Ward's becoming a partner. Thus, Ward is a partner with full partner rights. Choice "c" is incorrect. An incoming partner is not liable for debts that the partnership incurred before admission beyond the incoming partner's contribution, but is fully liable for debts incurred after becoming a partner. Choice "d" is incorrect. A partnership is a consensual relationship; there is no requirement of a contribution to become a partner.

Heather, Erika, and Shelby are members in HES LLC. Heather works 40 hours per week and Erika and Shelby work 20 hours per week. Heather contributed $30,000 to the LLC and Erika and Shelby contributed $60,000 each. Erika and Shelby have each originated 45% of the LLC's business and Heather has originated the other 10%. If HES were a general partnership, who controls management? a. Heather, because she works the most. b. Erika and Shelby equally because they contributed the most. c. Heather, Erika, and Shelby equally because of state law. d. Erika and Shelby, because they originate most of the work.

Choice "c" is correct. Rule: Absent an agreement to the contrary, partners have equal management authority. Choices "a", "b", and "d" are incorrect, per the above rule.

Which of the following statements is correct regarding the division of profits in a general partnership when the written partnership agreement only provides that losses be divided equally among the partners? Profits are to be divided: a. Based on the partners' ratio of contribution to the partnership. b. Based on the partners' participation in day-to-day management. c. Equally among the partners. d. Proportionately among the partners.

Choice "c" is correct. Rule: When the partnership agreement is silent as to how profits are to be divided, they are divided equally. Note also that when the agreement is silent, losses are treated similar to profits, there is no reverse rule that profits are treated like losses. Choices "a", "b", and "d" are incorrect, per the above rule.

Unless the partnership agreement prohibits it, a partner in a general partnership may validly assign rights to: Partnership property Partnership distributions a. Yes Yes b. Yes No c. No Yes d. No No

Choice "c" is correct. Rules: A partner has no right to assign an interest in partnership property because a partner's rights in partnership property are limited to using the property for partnership purposes. However, a partner does have a right to assign her interest in partnership distributions. The assignee does not become a partner, but merely has a right to receive whatever distributions the assignor would have received. Choices "a", "b", and "d" are incorrect, per the above rules.

The partners of College Assoc., a general partnership, decided to dissolve the partnership and agreed that none of the partners would continue to use the partnership name. Under the Revised Uniform Partnership Act, which of the following events will occur on dissolution of the partnership? Each partner's existing liability would be discharged Each partner's apparent authority would continue a. Yes Yes b. Yes No c. No Yes d. No No

Choice "c" is correct. "No - Yes." Rule: Upon the dissolution of the partnership, each of the partners continues to have liability for partnership debts. Upon dissolution of the partnership each of the partners will continue to have apparent authority. The apparent authority of a partner can only be negated upon proper notice to third parties. Choices "a", "b", and "d" are incorrect, per the above rule.

Formation of which of the following types of business does not require the filing of documents with the state? Corporation Limited- Partnership - Sole Proprietorship a. Need not file- Need not file- Need not file b. Need not file- Must file- Need not file c. Must file- Must file- Need not file d. Must file- Need not file- Must file

Choice "c" is correct. A sole proprietorship can be formed without filing with the state. Formation of either a corporation or a limited partnership requires a filing. Choices "a", "b", and "d" are incorrect per the explanation above.

Condition Precedent

Condition happens first, once it happens the performance is necessary. If you do ___, I'll do ___

In a general partnership, the authorization of all partners is required for an individual partner to bind the partnership in a business transaction to: a. Purchase inventory. b. Hire employees. c. Sell goodwill. d. Sign advertising contracts.

Choice "c" is correct. All partners have apparent authority to enter into transactions apparently within the regular scope of the partnership business. No such authority exists, however, for transactions outside the regular scope of business. The sale of a business's goodwill is extraordinary and is outside the ordinary scope of business. Thus, a partner must get authorization from all other partners to make the sale. Choice "a" is incorrect. All partners have apparent authority to enter into transactions apparently within the regular scope of the partnership business. Purchasing inventory is within the regular scope of business, so a partner need not get permission from the other partners to bind the partnership. Choice "b" is incorrect. All partners have apparent authority to enter into transactions apparently within the regular scope of the partnership business. Hiring employees is within the regular scope of a business, so a partner need not get permission from the other partners to bind the partnership. Choice "d" is incorrect. All partners have apparent authority to enter into transactions apparently within the regular scope of the partnership business. Entering into advertising contracts is within the regular course of business, and so a partner need not get permission from the other partners to bind the partnership.

Which of the following statements is correct concerning liability when a partner in a general partnership commits a tort while engaged in partnership business? a. The partner committing the tort is the only party liable. b. The partnership is the only party liable. c. Each partner is jointly and severally liable. d. Each partner is liable to pay an equal share of any judgment.

Choice "c" is correct. Each partner is jointly and severally liable for torts committed by any partner while in the course of partnership business. Choice "a" is incorrect. All partners may be held liable for a tort committed by a partner in the course of partnership business. Choice "b" is incorrect. Each partner is liable for torts committed by any partner while in the course of partnership business. Choice "d" is incorrect. Each partner is liable for the full amount of damages incurred as a result of a partner's tort; the partners are not liable only for their pro rata share.

Under the Revised Uniform Partnership Act, which of the following have the right to inspect partnership books and records? a. Employees. b. Former partners. c. Inactive partners d. Transferees of partners' interests.

Choice "c" is correct. Every partner in a partnership - whether active or inactive - has the right to inspect the partnership's books and records. Choice "a" is incorrect. Only a partner has a right to inspect the partnership's books and records; an employee of the partnership has no such right. Choice "b" is incorrect. Only current partners have a right to inspect the partnership's books and records; former partners do not have such a right. Choice "d" is incorrect. Only partners have a right to inspect a partnership's books and records. A transferee of a partner's interest has only the partner's right to distributions.

On February 1, Addison, Bradley, and Carter, physicians, formed ABC Medical Partnership. Dr. Bradley was placed in charge of the partnership's financial books and records. On April 1, Dr. Addison joined the City Hospital Medical Partnership, retaining the partnership interest in ABC. On May 1, ABC received a writ of attachment from the court attaching Dr. Carter's interest in ABC. The writ resulted from Dr. Carter's failure to pay a credit card bill. On June 1, Dr. Addison was adjudicated bankrupt. On July 1, Dr. Bradley was sued by the other partners of ABC for an accounting of ABC's revenues and expenses. Under the Revised Uniform Partnership Act, which of the preceding events resulted in the dissociation of a partner? a. Dr. Addison joining the City Hospital Medical Partnership. b. Dr. Carter's interest in the partnership being attached by the court. c. Dr. Addison being adjudicated bankrupt. d. Dr. Bradley being sued for an accounting by the other partners of ABC.

Choice "c" is correct. The bankruptcy of a partner will result in the dissociation of a partner. Choice "a" is incorrect, because although joining the city hospital medical partnership could be construed as a breach of fiduciary duty owed to the other partners in ABC medical partnership, standing alone, it would not result in a dissociation. Choice "b" is incorrect. All that was attached was the partner's right to distributions, which does not cause dissociation. Choice "d" is incorrect, because although being sued might cause Dr. Bradley to resign, which would cause dissociation, standing alone, being sued by the other partners does not cause dissociation.

Eller, Fort, and Owens do business as Venture Associates, a general partnership. Trent Corp. brought a breach of contract suit against Venture and Eller individually. Trent won the suit and filed a judgment against both Venture and Eller. Trent will generally be able to collect the judgment from: a. Partnership assets only. b. The personal assets of Eller, Fort, and Owens only. c. Eller's personal assets only after partnership assets are exhausted. d. Eller's personal assets only.

Choice "c" is correct. When a judgment is obtained against both a partnership and an individual general partner, the plaintiff must proceed against the partnership assets first and then the assets of any individual general partner. The partnership assets must be exhausted before any general partner's individual assets can be attached. Choices "a", "b", and "d" are incorrect, per the above rule.

Locke and Vorst were general partners in a kitchen equipment business. On behalf of the partnership, Locke contracted to purchase 15 stoves from Gage. Unknown to Gage, Locke was not authorized by the partnership agreement to make such contracts. Vorst refused to allow the partnership to accept delivery of the stoves and Gage sought to enforce the contract. Gage will: a. Lose, because Locke's action was not authorized by the partnership agreement. b. Lose, because Locke was not an agent of the partnership. c. Win, because Locke had express authority to bind the partnership. d. Win, because Locke had apparent authority to bind the partnership.

Choice "d" is correct. Every partner is an agent of the partnership and has apparent authority to bind the partnership to contracts that appear to carry on in the usual way the business of the partnership. It would be usual for a partner in a kitchen equipment business to have authority to purchase stoves. Thus, Gage will win because of Locke's apparent authority. Choice "a" is incorrect. Every partner is an agent for his partnership and has apparent authority to bind the partnership to contracts that appear to carry on in the usual way the business of the partnership. Choice "b" is incorrect. Every partner is an agent of the partnership. Choice "c" is incorrect. Locke did not have express authority to purchase the stoves. The facts state that Locke was not authorized to purchase the stoves and thus lacked express authority.

Berry, Drake, and Flanigan are partners in a general partnership. The partners made capital contributions as follows: Berry, $150,000; Drake, $100,000; and Flanigan, $50,000. Drake made a loan of $50,000 to the partnership. The partnership agreement specifies that Flanigan will receive a 50% share of profits, and Drake and Berry each will receive a 25% share of profits. Under the Revised Uniform Partnership Act and in the absence of any partnership agreement to the contrary, which of the following statements is correct regarding the sharing of losses? a. The partners will share equally in any partnership losses. b. The partners will share in losses on a pro rata basis according to the capital contributions. c. The partners will share in losses on a pro rata basis according to the capital contributions and loans made to the partnership. d. The partners will share in losses according to the allocation of profits specified in the partnership agreement.

Choice "d" is correct. Under the Revised Uniform Partnership Act, unless agreed otherwise, partners share losses in the same manner that they share profits. Choice "a" is incorrect. Under the Revised Uniform Partnership Act, unless agreed otherwise, partners share losses in the same manner that they share profits. Here, the partners agreed to share profits in a 2:1:1 ratio. Thus, losses will be shared in that manner rather than equally. Choice "b" is incorrect. Under the Revised Uniform Partnership Act, unless agreed otherwise, partners share losses in the same manner that they share profits. They are not shared in accordance with the partners' capital contributions. Choice "c" is incorrect. Under the Revised Uniform Partnership Act, unless agreed otherwise, partners share losses in the same manner that they share profits. They are not shared in accordance with the partners' capital contributions or loans.

Source of contract law

Common law, these are common law contracts

Monetary Damages - Types

Compensatory damages consequential damages liquidated damages nominal damages

Types of Performance

Complete Substantial Inferioir

Ch 14.

Contract Breach and remedies

Mistake of Value

Contract is still enforceable if there is simple a mistake of the value of the item/s

Death or Disability of Either Party

Contracts are personal, so in any case of this contracts are immediately terminated

Necessaries

Contracts for the necessities of life; food, clothing, healthcare, etc. Contracts are still voidable, but the minor must pay the reasonable value of services.

Noncompetes

Contracts not to compete, usually in the sale of a business and in employment contracts

Employee or Independent Contractor

Courts consider whether: Principal supervises details of the work Principal supplies the tools and place of work Agents work full time for the principal Agents receive a salary or hourly wages Work is part of regular business of the principal Principal and agents believe they have employer-employee relationship Principal is in business

Pack 2000 Inc. v. Cushman

Cushman transfers two muffler shops to Pack 2000 deal also included leases for real estate deal has very specific conditions for Pack too meet Pack wanted to exercise option to purchase real estate Pack filed a suit when Cushman denied purchase Court favored Cushman as Pack did not met previous conditions

Jody is an agent for Kwik Credit Company (KCC). In the course of Jodys performance for KCC, Jody pays Leo for certain auto maintenance and repair services. Jodys right to obtain the amount of those payments from KCC arises under the principals duty of a. avoidance. b. cooperation. c. indemnification. d. reimbursement.

. Kent Corp. hired Blue as a sales representative for nine months at a salary of $2,000 per month plus 2% of sales. Under the circumstances, A. Kent does not have the power to dismiss Blue during the nine-month period without cause. B. The agreement between Kent and Blue is not enforceable unless it is in writing and signed by Blue. C. The agreement between Kent and Blue formed an agency coupled with an interest. D. Blue is obligated to act solely in Kent's interest in matters concerning Kent's business.

A debtor is in default. The collateral consists of 100 cows described in the security agreement. Thirty cows were stolen through no fault of the debtor. Which of the following statements is correct concerning the secured party's rights due to the debtor's default? A. The secured party must take the peaceful possession of the 70 remaining cows before s/he can pursue any remedies. B. If the secured party takes possession, the secured party cannot keep the cows in full satisfaction of the debt, if the debtor has paid 60% or more of the debt. C. If the secured party takes possession and sells the 70 cows. Proceeds will be applied to expenses incurred in the keeping of the cows. The costs of sale, and any balance, will be applied to the debt. The debt will then be discharged, even if the proceeds are insufficient to cover the costs and the debt. D. Upon default, the secured party can proceed to recover under the Uniform Commercial Code or proceed with any judicial remedy (such as get a judgment and levy on the debtor's non-exempt property).

A joint venture is a(n): a. association limited to no more than two persons in the business for profit b. enterprise of numerous co-owners in a nonprofit undertaking c. corporate enterprise for a single undertaking of limited duration d. association of persons engaged as co-owners in a single undertaking for profit

A limited liability company: a. is regulated by a well-established body of law b. pays taxes on its income c. may issue stock options d. must register with state authorities e. protects the owners from personal liability for their own misdeeds

Acme Co. has just completed the incorporation process and received its articles of incorporation from the state. At the first organizational meeting of the new company, the officers' most important task is to a. create a hiring policy. b. amend the articles of incorporation. c. determine the details of the stock sale. d. adopt bylaws.

Ahmed hired Shlomo to act as Ahmed's sales agent in his jewelry store. Ahmed gave Shlomo actual express authority to sell items of jewelry up to $1,000 without checking with Ahmed; however, if the price was over $1,000 Shlomo was to check with Ahmed before making a sale. One day a customer wanted to buy a necklace for $1,500 and Shlomo sold it to her without first checking with Ahmed. When Ahmed learned of this, he was upset because the price was a mistake; it should have been $3,000. Ahmed wants the customer to return the necklace. Is the customer required to return the necklace in this case? A. Yes, because Shlomo did not have actual express authority to sell that item. B. Yes, because Shlomo did not have actual implied authority to sell that item. C. No, because Shlomo did have apparent authority to sell that item. D. No, because Shlomo did have implied authority to sell that item.

An authority which is created by principal's own words is called: A. direct authority. B. indirect authority. C. apparent authority. D. express authority.

Doug, Frank and Sarah want to form an entity for their new accounting firm, and want to ensure that each avoids personal liability for the malpractice of the other partners, so they should form a. a general partnership. b. a limited partnership c. a joint venture. d. a limited liability partnership.

Elle is an agent for Fine Cosmetics, Inc. Elle owes Fine Cosmetics the duty of a. avoidance. b. compensation. c. indemnification. d. performance.

Elliot is suing Acme, Inc. for a breach of contract, but because it has very little in assets, he asking the court to pierce the corporate veil and hold the officers personally liable. In which of the following situations would the court likely approve Elliot's request? a. The corporation has struggled to make a profit from the beginning. b. The officers loaned money to the corporation in an attempt to delay any adverse actions. c. The officers make their decisions based on information presented to them, but unknown to them is the fact the information is incorrect. d. The corporation was under-capitalized from the beginning, and never had sufficient assets to operate as a viable business.

Glen is an agent for Hi-Flite, Inc. On Hi-Flites behalf and at its request, Glen pays Ian for certain plane maintenance and repair services. Glens right to obtain the amount of those payments from Hi-Flite arises under the principals duty of a. avoidance. b. cooperation. c.indemnification. d. reimbursement.

Jane and John, each of whom owns a one-half interest in certain real property, are tenants in common. Jane's interest A. Is considered a life estate. B. Will pass by operation of law to John on Jane's death. C. May not be transferred during Jane's lifetime without John's consent. D. Will pass on Jane's death to her heirs.

Jim agrees to act on Kits behalf, subject to Kits control, and Kit trusts Jim to so act. This describes a relationship between a a business and its competitors. b.a government and its governed. c.a parent and a child. d.a principal and an agent

Jody and Kent each own one-half of Local Motion, a club, as a tenant in common. Kent sells his interest to Meri, who now owns a. no interest in the firm. b. the firm in fee simple. c. the firm with Jody as joint tenants. d. the firm with Jody as tenants in common.

Lenore is the sole proprietor of Mall Kiosks. With respect to contracting for her own business interests, Lenore is a.an agent and has the authority. b.an agent but does not have the authority. c.not an agent and does not have the authority. d.not an agent but does have the authority

Lucky owns Mud Flats Ranch, which is situated on certain Nevada acreage. The exterior boundaries of the land extend a. 100 feet into the earth and 100 feet into the atmosphere. b. one mile into the earth and one mile into the atmosphere. c. to infinity and beyond. d. to the center of the earth and up to the farthest reaches of the atmosphere.

MNC Corp. bought a building for $300,000. At the same time, MNC purchased a $200,000 fire insurance policy from Building Insurance Co. and a $100,000 fire insurance policy from Property Insurance Co. Each policy contained a standard 80% coinsurance clause. Three years later, when the building had a fair market value of $400,000, the building was totally destroyed in a fire. What amount would MNC recover from the two insurance companies? A. $240,000 B. $320,000 C. $400,000 D. $300,000

Mineral Products Corporation, which owns no land, has a right to mine the copper from Natural Resource Company's land. Mineral's right is a. a leasehold estate. b. a license. c. an easement. d. a profit.

Mona is an agent for Nationwide Restaurant Corporation (NRC). In acting as an agent, Mona follows all of NRCs clearly stated instructions. This responsibility arises under a. no agents duty. b. the agents duty of loyalty. c. the agents duty of notification. d. the agents duty of obedience.

Noninventory goods were purchased and delivered on June 15. Several security interests exist in these goods. Which of the following security interests has priority over the others? A. Security interest in future goods attached June 10. B. Security interest attached June 15. C. Security interest perfected June 20. D. Purchase money security interest perfected June 24.

Oak Grove Residences, Inc., owns apartment buildings. Pedro leases one of Oak Grove's apartments. Pedro's transfer of his interest in the lease to Quito for a period shorter than the lease term is a. an assignment. b. an eviction. c. a right of entry. d. a sublease.

On February 2, Mazo deeded a warehouse to Parko for $450,000. Parko did not record the deed. On February 12, Mazo deeded the same warehouse to Nexis for $430,000. Nexis was aware of the prior conveyance to Parko. Nexis recorded its deed before Parko recorded. Who would prevail under the following recording statutes? Notice Race Race-Notice Statute Statute Statute A. Parko Nexis Nexis B. Parko Parko Nexis C. Nexis Parko Parko D. Parko Nexis Parko

Pam is an agent for Refined Chemicals Corporation. Refined Chemicals owes Pam the duty of a. accounting. b. obedience. c. performance. d. safe working conditions.

Quinn employs Roy as his authorized business agent on April 1. Quinns son Stan petitions a court to declare Quinn mentally incompetent. The court grants Stans request on May 1.Roy enters into a contract on Quinns behalf on May 15, before Roy knows of the courts action. The contract is a. binding on Quinn. b. binding on Roy. c. binding on Stan. d. void.

Rita is appointed as an agent for Superior Sales, Inc. The agency agreement is silent as to the level of sales that Rita is expected to achieve. She must a. achieve nothing because the agreement says nothing on the issue. b. attain the level that Rita achieved with her previous employer. c. maintain the level Superior attained before Rita became an agent. d. use reasonable diligence and skill in selling.

Sally incorporates her business, Sally's Rhinestones, in her home state of Maryland. She wants to expand and sell some of her jewelry in Virginia. In Virginia, her company will be considered a. an alien corporation because her business has been chartered in another state. b. a public corporation, so she will probably not have to obtain a license to do business there. c. an open corporation, so she can do business in any state that allows open corporations to operate. d. a foreign corporation, and she will probably have to obtain a certificate of authority to do business there.

Sid rents an apartment from Town Properties, Inc. The lease, which ends on May 31, does not include an option for re¬newal, and Sid and Town do not discuss whether Sid can stay on at the end of the term. On June 1, Sid has a. an implied option to renew the term. b. a right to remain contingent on notice from Town. c. a right to remain subject to notice to Town. d. no right to remain.

Subagents: A. must be appointed by the principal. B. cannot be employees. C. cannot have authority to bind a principal. D. must be appointed by agent.

The earliest time a purchaser of existing goods will acquire an insurable interest in those goods is when A. The purchaser obtains possession. B. Title passes to the purchaser. C. Performance of the contract has been completed or substantially completed. D. The goods are identified to the contract.

The most important principle of agency, at the time of agent conducting principal's business is: A. not to delegate the powers. B. not to breach the contract. C. not to maintain relations with outsiders. D. not to deal with himself.

Under the Secured Transactions Article of the UCC, all of the following are needed to create enforceable security interest except A. A security agreement must exist. B. The secured party must give value. C. The debtor must have rights in the collateral. D. A financing statement must be filed.

Under the Secured Transactions Article of the UCC, which of the following items can usually be excluded from a filed original financing statement? A. The name of the debtor. B. The address of the debtor. C. A description of the collateral. D. The amount of the obligation secured.

Under the Secured Transactions Article of the UCC, which of the following statements is correct regarding a security interest that has not attached? A. It is effective against the debtor, but not against third parties. B. It is effective against both the debtor and third parties. C. It is effective against third parties with unsecured claims. D. It is not effective against either the debtor or third parties.

Under the Secured Transactions article of the UCC, when does a security interest become enforceable? A. A contract is executed between a debtor and a secured party under which the debtor gives the secured party rights in collateral if the debtor violates any of the terms contained in the contract. B. The debtor and the secured party execute a security agreement describing the transfer of the collateral and, after doing so, the secured party files it with the requisite agency. C. The debtor and the secured party execute a security agreement describing the transfer of collateral from seller to buyer and the secured party retains possession of the agreement. D. The value has been given, the secured party receives a security agreement describing the collateral authenticated by the debtor, and the debtor has rights in the collateral.

Under the UCC Secured Transaction Article, what is the effect of perfecting a security interest by filing a financing statement? A. The secured party can enforce its security interest against the debtor. B. The secured party has permanent priority in the collateral even if the collateral is removed to another state. C. The debtor is protected against all other parties who acquire an interest in the collateral after the filing. D. The secured party has priority in the collateral over most creditors who acquire a security interest in the same collateral after the filing.

Under the UCC Secured Transactions Article, when collateral is in a secured party's possession, which of the following conditions must also be satisfied to have attachment? A. There must be a written security agreement. B. The public must be notified. C. The secured party must receive consideration. D. The debtor must have rights to the collateral.

What is the principal's duty when his agent makes express or implied authorized expenditure while acting on his behalf? A. Duty to compensate B. Duty to take care C. Duty of accounts D. Duty to reimbursement

When Kimberly begins working for Pharmco Industries the company tells her that at a future after so many years of employment with the company she can receive retirement pay. Her rights to receive pay upon retirement would be considered a. inferred. b. accrued. c. sheltered. d. vested.

Which of the following deeds will give a real property purchaser the greatest protection? A. Quitclaim. B. Bargain and sale. C. Special warranty. D. General warranty.

Which of the following statements is the best definition of real property? A. Real property is only land. B. Real property is all tangible property including land. C. Real property is land and intangible property in realized form. D. Real property is land and everything permanently attached to it.

Which of the following transactions would illustrate a secured party perfecting its security interest by taking possession of the collateral? A. A bank receiving a mortgage on real property. B. A wholesaler borrowing to purchase inventory. C. A consumer borrowing to buy a car. D. A pawnbroker lending money.

Wilk bought an apartment building from Ralph Corp. There was a mortgage on the building securing Ralph's promissory note to Xeon Finance Co. Wilk took title subject to Xeon's mortgage. Wilk did not make the payments on the note due to Xeon, and the building was sold at a foreclosure sale. If the proceeds of the foreclosure sale are less than the balance due on the note, which of the following statements is true regarding the deficiency? A. Ralph will not be liable for any of the deficiency because Wilk assumed the note and mortgage. B. Xeon must attempt to collect the deficiency from Wilk before suing Ralph. C. Xeon may collect the deficiency from either Ralph or Wilk. D. Ralph will be liable for the entire deficiency.

Wok Corp. has decided to expand the scope of its business. In this connection, it contemplates engaging several agents. Which of the following agency relationships is within the statute of frauds and thus should be contained in a signed writing? A. A sales agency where the agent normally will sell goods which have a value in excess of $500. B. An irrevocable agency. C. An agency which is of indefinite duration but which is terminable upon one months' notice. D. An agency for the forthcoming calendar year which is entered into in mid-December of the prior year.

What term is used to describe a partnership without a specified duration? a. A perpetual partnership. b. A partnership by estoppel. c. An indefinite partnership. d. A partnership at will.

D duration). Such a partnership can be terminated at any time. Choice "a" is incorrect. A partnership without a specified duration is called a partnership at will, not a perpetual partnership. There is no such thing as a perpetual partnership because a partnership is not perpetual. A partnership may be dissolved after a partner dies or otherwise dissociates from the partnership. Choice "b" is incorrect. A partnership by estoppel is the appearance of a partnership when there is no formal partnership. If parties who are not partners give the appearance to third parties that they are partners, the law may deem the parties to be a partnership by estoppel. The parties will be treated as partners, even though they are not. Choice "c" is incorrect. The legal term for a partnership of indefinite duration is a partnership at will, not an indefinite partnership.

Subagents

Daniel hires Michelle to run his restaurant. She hires a chef, waiters and dishwashers. The people she hired are David's subagents even though he has never met them. Michelle is called an intermediary agent - someone who hires subagents for a principal

Delegation

Delegation is transfer of contractual duties by a party to a contract to a third person

Assent

Determined from circumstances of negotiation and formation Manifested in any manner

Independent contractor

Different from an agent because they can't bind the principal to anything, they use their own material and equipment

Statute of Frauds

Differs in each state. Defines which contracts must be in writing to be enforceable.

Promisoree Estopple

Doctrine of detrimental reliance, one party has relied to thier detriment, 5 elements, established in Hoffman vs Red Owl Grocery

Agreements

Doing something other than performance

Duty of agents to principals

Duty of loyalty Duty to obey instructions Duty of care Duty to provide information

Duty of principals to agents

Duty to compensate as provided by the agreement Duty to reimburse for reasonable expenses Duty to cooperate

Which of the following is a duty of the agent to his principal? a. Duty to reimburse for reasonable expenses. b. Duty to compensate as provided by the agreement. c. Duty to obey instructions and provide information. d. Duty to provide the principal an opportunity to work

Duty to obey instructions and provide information.

Duties of Principal to Agent

Duty to reimburse the agent for reasonable expenses - Three categories Principal must indemnify an agent for expenses reasonably incurred in carrying out his agency responsibilities Principal must indemnify an agent for tort claims brought by a third party if: Principal authorized the agent's behavior and the agent did not realize he was committing a tort

Principal's Liability for Torts

Employer is liable for a tort committed by its employee acting within the scope of employment or acting with the authority Two kinds of agents Employees Independent contractors Principal may be liable for the torts of an employee but generally is not liable for the torts of an independent contractor

Foreign Sovereign Immunities Act (FISA)

Exclusively governs the circumstances in which an action may be brought in the US against a foreign nation, including attempts to attach a foreign nations property

Executed vs Unexecuted

Executed- all actions are complete Unexecuted- actions are incomplete

Paying Bank

Expedites payment under the Letter of Credit

Expressed vs Implied

Expressed- clearly stated all terms, either orally or written Implied- "implied in fact", based on the actions of the parties, 3 elements; one party offers services, the other party accepts those services indicting payment is expected, and the accepting party could have rejected services

As a rule a principal is always liable for all acts of his agent.

FALSE

Because they serve for free, gratuitous agents have no fiduciary duties toward their principals.

FALSE

Joe is the personnel manager for the XYZ Corporation. Joe hires employees for XYZ. Joe hires Suzy as a management trainee. Suzy is XYZ's subagent.

FALSE

The termination of an agency also terminates the agent's express authority, but not his implied authority.

FALSE

When termination is done by principal it is called as renunciation and when it is done by agent it is called as revocation.

FALSE

Breach of contract

Failure to provide complete performance of contractual obligations

True or False. Liability to the extent of her investment for all obligations, arising either before or after she joined the partnership.

False

True or False. No liability for obligations arising from before she joined the partnership and limited liability for those arising afterwards.

False

True or False. No liability for obligations arising from before she joined the partnership and unlimited liability for those arising afterwards.

False

True or False. Unlimited liability for obligations of the partnership, both for those arising before she joined the partnership and those arising after joining.

False

Alien Tort Claims Act (ACTA) adopted in 1789 allows

Foreign citizens to bring civil suits in the US courts for injuries caused by violations of international law or a treaty of the US

Formal vs Informal

Formal- formally prepared, executed, etc Informal- oral agreements or informally written

Implied contract

Formed by the conduct of the parties

Express contract

Formed by words (oral, written or combination)

___ is a well known form of Licensing

Franchising

Performance

Fulfillment of contractual promises as agreed.

Agent's Liability for Contracts

Fully disclosed principal An agent is not liable for any contracts Unidentified principal Third party can recover from either the agent or the principal Undisclosed principal Third party can recover from either the agent or the principal Third party is not bound to the contract with an undisclosed principal if: Contract provides that the third party is not bound to anyone other than the agent Agent lies about the principal because she knows the third party would refuse to contract with him Unauthorized agent The principal is not liable and the agent is

Genuineness of Assent

Genuine missing if (1) mistake (2) fraudulent misrepresentation (3) duress (4) undue influence

Substantial Performance

Giving a party's benefit of the bargain on all of the material terms of a contract. Most performances are in this form

Bribing of Foreign Officials

Giving cash or in kind benefits to foreign government officials to obtain business contracts and other favors is often considered normal practice

Forbearance

Giving up something you have the legal right to do. Established in Hamer vs Sidway; the vices case

Valid

Has all elements and is completely enforceable

Void

Has no legal effect, completely unenforceable

National Law

Law of a particular nation

Passage of Title

ID goods ID can be made in any manner agreed if ID not in contract, UCC establishes

Bankruptcy

If a party files for bankruptcy protection any contractual obligation will be extinguished.

Secretly dealing with the principal

If a principal hires an agent to arrange a transaction, the agent may not become a party to the transaction without the principals permission.

equal dignities rule

If an agent is empowered to enter into a contract that must be in writing, then the appointment of the agent must also be written.

Abuse by Contract

If free will compromised, so is mutual assent

Indirect Exporting

If sufficient business develops in a foreign country a US corporation may set up a specialized marketing organization in that foreign market by appointing a foreign agent or a foreign distributor

employee

If the employer exercises considerable control over the details of the work and the day-to-day activities of a worker, this indicates ___ status.

Law of Assurance

If the innocent non-breeching party is objectively insecure then they can ask for assurances as to performance. The assurance must be clear, express, and unequivocal. If there is an adequate assurance by the breeching party then the innocent party can assume an assurance and begin to mitigate

independent contractors

If the worker is engaged in an occupation or business distinct from that of the employer, this indicates ___ status.

Formality of the Writing

Law only requires a writing containing the essential terms of parties' agreement require signature fo party against whom enforcement is sought integration of several documents

Charitable Subscription

If your charitable subscription, promise, is to a general fund it is not enforceable, but if it is to a specific cause, building campaign or equipment, it is enforceable.

Express and Implied Contracts

Implied in Fact Contract, Express Contract

Force Majeure in French means

Impossible or Irresistible Force

Principal

In an agency relationship, the person for whom an agent is acting

Agent

In an agency relationship, the person who is acting on behalf of a princpal

PARTIALLY DISCLOSED AGENCY:

In the case of a Partially disclosed agency, the third Party can recover from either Agent or the Principal. NOTE: P is partially disclosed if TP knew of his Existence but Not his Identity.

What happens if the principal is completely insane at the time of the agency's formation? What happens if the principal is sane at the time the agency is formed, but goes completely insane some time later?

In the first case, the agency is voidable at the principal's option. In the second, the agency is terminated by operation of law.

Foreign State

Includes both a political subdivision of a foreign state and and instrumentality of a foreign state

A letter of Credit is ___ of the underlying contract between the buyer and the seller

Independent

Fraud

Intentional Misrepresentation Four elements: (1) false material fact (2) intended to deceive (3) innocent party justifiably relied (4) innocent party injured as a result

Under the Export Trading Company Act of 1982 US banks are encouraged to ____ in export trading companies, which are formed when exporting firms join together to export a line of goods.

Invest

Leonardo contracts to install automatic watering troughs in Kendall's dairy barn. Leonardo then becomes seriously ill and contracts with Jake to install the troughs. Jake is unreliable and never shows up to install the troughs. Kendall can sue

Jake or Leonardo.

The Principle of Comity Example

Karen's husband was killed in a terrorist bombing in Israel. She filed a lawsuit in New York against Switzerland. Even though she filed a lawsuit for a country she is not in, the same law applies at the end of the day.

Kobe pushes LeBron into some chairs under the basket. Kobe's team is liable for his actions because he was motivated by a desire to help the team. But if Kobe hits Lebron in the parking lot after the game

Kobe's team is NOT liable because he was no longer motivated to help the team

A US Firm can obtain revenues from abroad by ____ a foreign manufacturing company to us its copyrighted, patented, or trademarked intellectual property or trade secrets

Licensing

Statute of Limitations

Life time of a contract, no longer than 3 years. After the 3 years a party can no longer seek restitution from the breaching party.

Ordinary Value

Money, property, or services

Substantive Unconscionability

Looks at facts and circumstances. Agreements that are so unfair it shocks the conscious of the court. Smith vs. Williams Walker Furniture Company

Procedural Unconscionability

Looks at the form of an agreement, usually contested agreements are just printed, date and sign contracts. No room for bargaining. Case of Cambell's carrots

Lou and Mira want to rescind their contract under which Lou sold an MP3 player to Mira for $50. To rescind the contract

Lou must return the $50 and Mira must return the player.

what are the types of contracts that must be in writing under statute of fraud?

MY LEGS; marriage, over a year, land, executor, good over $500, guarantor

Peter borrowed the SUV to drive to work. While at work Peter and Teddy went out to buy pizza. Peter hit a curb and the airbag deployed, breaking Teddy's nose. Mac had to take the car to the repair shop. Who is liable?

Mac is clearly not liable because Peter was not acting as his agent (he was not getting pizza for Mac).

James borrowed Mac's SUV to drive a friend to the airport. On his way home he rear ends a mini cooper. The mini cooper is totaled but the SUV was fine. is Mac liable?

Mac is liable only if James was acting as his agent. James was not doing Mac any favors, so he was not his agent. If James had agreed to pick up food for Mac on his way home then he would be acting as Mac's agent and Mac would then be liable.

Counter Offer

Made when there is ANY change to the terms of the offer. Immediately terminates the original offer and creates a new one. Common in real estate

Duty of loyalty - The agent:

Must act for the benefit of the principal May not receive outside benefits without approval of the principal Can neither disclose nor use for her own benefit any confidential information Is not allowed to compete with his principal within the scope of the agency business May not act for two principals whose interests conflict May not become a party to a transaction without the principal's permission May not engage in inappropriate behavior that reflects badly on the principal

Unconscionability

Must be between parties with unequal bargaining positions. A court will not get involved if the bargaining positions are equal.

Requirements for a Noncompete

Must be reasonable geographically and a reasonable amount of time (usually 2 years, no more than 3)

Definite and certain

Must contain the essential terms; who, what, consideration, and when

Licensing Statutes

Must have a license to raise revenue. Licenses are also required for regulatory purposes- to ensure qualification.

Consequential Damages

Must have been foreseeable, the breaching party must have had notice that these damages were possible

Offer requirements

Must have present day intent, be definite and certain, and must be communicated

Mutt and Jeff work 40 hours a week at Swansong Media preparing food for the company dining room. They earn a weekly salary. Swansong provides all the equipment to prepare the food. Swansong decides to have a big party and hires FiFi Labelle to prepare special food, she buys the food, cooks it at her own place and delivers it

Mutt and Jeff are employees Fifi Labellee is an independent contractor

Voluntary Consent

Mutual assent, a meeting of the minds during the formation of a contract. Contract is unenforceable if this is not present.

Void contract

No contract exists or there is a contract without legal obligations

Gifts

No mutual consideration, unenforceable

Andrew appoints an agent Matthew for a period of 2 years. After 6 months, Andrew met with an accident in which he permanently losses his capacity to understand things going on around him. This terminates the contract automatically. But, Matthew is demanding damages for breach of contract. Is Andrew liable to pay damages?

No, Andrew is not liable to pay. As per the law, it is clearly stated that principal's permanent loss of capacity after creation of contract terminates the contract and saves him from liability. As parties are not liable for termination in such cases, so Matthew cannot claim damages from Andrew.

Interpreting Words

Ordinary words - dictionary meaning Technical words - technical meaning Specific terms - qualify general term Trade usage - incorporated in contract handwritten > typed > handwritten

Breach of Contract

Occurs when a party fails to perform according to the terms of the agreement.

effective times

Offer --> when received acceptance --> when sent - Mailbox rule rejection --> when received revocation --> when received

Tender

Offer to perform an obligation.

Effect of termination

Once an agency relationship ends, the agent no longer has the authority to act for the principal. If they continue to act, they are liable to the principal for any damages incurred as a result

Voidable contract

One party has the option of avoiding or enforcing the contractual obligation

Elements of Quasi contracts

One party receives benefit, has knowledge of the benefit, and acceptance of the benefit makes it unjust not to require payment.

Concurrent

One party's performance is conditioned on the other party's performance

Proper form

Oral agreements are enforceable unless the Statue of Frauds applies

Unenforceable

Otherwise valid, but theres a legal defense; no voluntary consent , fraud, emotional duress, or it should be in writing

Voidable

Otherwise valid, however circumstances surrounding the execution, gives one of the parties the power to avoid its duties and obligations

Fiduciary Duty

Owing someone the utmost loyalty and good faith, a duty held by an agent

Franchisor

Owner of the trademark, trade name, or copyright and licenses another to use it

Undue Influence

Parties in unequal bargaining positions. One party has given up the ability to make decisions in reliance on another party.

Things that aren't assignable

Personal or unique rights, things restricted by law, rights that substantially increase the burden on the obligor

Intentional Torts

Principal is not liable for the intentional torts of an employee unless: Employee is intended to serve some purpose of the employer Employer was negligent in hiring or supervising this employee

Duty to cooperate

Principal must furnish the agent with the opportunity to work Principal cannot reasonably interfere with the agent's ability to accomplish his task Principal must perform his/her part of the contract

Duty to reimburse the agent for reasonable expenses - Three categories

Principal must indemnify the agent for any liability she incurs from third parties as a result of: Entering into a contract on the principal's behalf, including attorney's fees and reasonable settlements

Control

Principals are liable for the acts of their agents because they exercise control over the agents. If principals direct their agents to commit an act, it is fair to hold the principal liable when the agent causes harm

Scope of Employment

Principals are liable only for torts that an employee commits An employee is acting within the scope of employment if the act: Is one that employees are responsible for Takes place during hours that employee is employed Is part of the principal's business Is similar to the one the principal authorized Is one for which the principal supplied the tools Is not seriously criminal Authorization An act is within the scope of employment if: Expressly forbidden It is of the same general nature as that authorized It is incidental to the conduct authorized Abandonment The principal is liable: For the actions of the employee that occur while the employee is at work Not for actions that occur after the employee has abandoned the principal's business

Scope of employment

Principals are only liable for torts that an employee commits within the scope of employment. Scope = is one that employees are generally responsible for takes place during hours the employee is generally employed is part of the principals business is similar to the one the principal authorized is one for which the principal supplies the tools and is not seriously criminal

Elements to Promisoree Estopple

Promise lacks consideration, promisor should reasonable expect the promisee to rely on the promise, actual reliance on the promise, resulting in the detriment of the promisee, the only way to avoid injustice is to enforce the promise

Forbearance

Promise to refrain from doing something

Parties to an agreement

Promisor and promisee

2 Absolute Exceptions to the Requirement of Consideration

Promisoree Estopple and Charitable Subscriptions

Bill of Lading

Proof that the shipment has been made

The Act of State Doctrine

Provides that the judicial branch of one country will not examine the validity of public acts committed by a recognized foreign government within its own territory

Intoxication

Purely based on facts and circumstances. Voidable contracts, but the rule of necessities applies

Parol Evidence Rule

Purpose is to bring finality to written agreements. Excludes all oral evidence against a written contract

Quasi Contract

Quasi- "as if", implied in law contracts

Subject matter of Contract Law

R.I.S.E. Realestate, insurance, services, and employment

Ratification and Subagents

Ratification If a person accepts the benefit of an unauthorized transaction or fails to repudiate it, then: He is as bound by the act as if he had originally authorized it Subagents Intermediary agent - Someone who hires subagents for the principal When an agent is authorized to hire a subagent: Principal is as liable for the acts of subagent as he is for the acts of regular agent

Punitive Damages

Remedies designed to punish for the breech of a contract. They are typically seen if a party is grossly negligent in performance or if there is a malicious breech in full performance

Consequential Damages

Remedies that are additional cash damages to compensatory damages that were made reasonably foreseeable at the time the contract was entered into

Conditional Sales

Sale on approval - goods delivered before payment (trial period)

Risk of Loss - Breach

Seller in breach - nonconforming goods buyer breach - refuse to delivery of conforming goods

Shipment Contract

Seller required to make proper shipping arrangements titles passes when goods delivered to shipping carrier

Silence

Silence is NOT a valid acceptance

Rejection

Simply rejecting the offer

Concurrent Condition

Simultaneous transaction, performance happens at the same time.

Subsequent

Some event occurs that terminates the ongoing performance obligations

Precedent

Something occurs before performance is due

Moral Obligation

Something that you should do, is the right thing to do, unenforceable

3 Protected Classes

Status (minor), mental incompetence, and intoxication

Title VII of the Civil Rights Act of 1964 applies extraterritorially to all US employees working for US employers abroad, US employers must abide by the US discrimination laws unless to do so would violate the laws of the country where their workplaces are located. This "foreign law exception" prevents employers from being _____

Subjected to Conflicting Laws

Scienter

Subjective thinking Objective evidence determines subjective intent

The exchange are is set by the forces of____

Supply and Demand

Agency is a two-party relationship, in which the agent is authorized to act only under the control of the principal.

TRUE

An agency coupled with an interest cannot be terminated by the principal's revocation of the agency

TRUE

An agent has a duty to obey the principal's reasonable instructions. However, a principal who instructs an agent to perform an unethical act will likely have no recourse against an agent who refuses to perform.

TRUE

An agent who files bankruptcy will likely terminate the agency relationship.

TRUE

In her years with the XYZ Corporation, Ginny learned a lot about computer programming. She applied that knowledge to good effect after she left XYZ and went to work for the ABC Corporation. Then XYZ sues Ginny for violating an agent's duty of loyalty. XYZ will probably lose.

TRUE

Legally, a principal is not a fiduciary of the agent.

TRUE

The agency relationship may be formed even if the parties do not subjectively intend to create it.

TRUE

The president of a corporation is much more likely to be classed as an employee than as an independent contractor.

TRUE

The principal's death normally terminates an agency

TRUE

The principal's death terminates an agent's apparent authority.

TRUE

a condition subsequent is the occurrence of an event after the initiation of a contractual duty and before a predetermined time.

true

Taylor left for a 5 week vacation, he hired an agent to rent his vacation house. The agent never got around to listing his house on the multiple listing service used by all the area brokers. She did show the property to someone who wanted to rent it for a lower price than Taylor had instructed. She text messaged the offer to Taylor but he never received it. Did Angie violate any of the duties that agents owe to their principal?

Taylor instructed Angie to CALL him if the people rejected the offer. Angie failed to do so so she violated her duty to obey instructions.

Terminating an Agency Relationship

Termination by agent or principal Three choices in terminating the relationship Term agreement, Time, Achieving a purpose Mutual agreement, Agency at will Wrongful termination, Principal or agent can no longer perform required duties Failure to obtain license, Bankruptcy Death or incapacity of the principal or agent, Disloyalty of agent, Change in circumstances Change of law, Loss or destruction of subject matter Termination of the agency ends the agent's power to act on behalf of the principal, Principal's duty to reimburse expenses of the agent ends with the end of the agency, Confidential information remains confidential and unusable, even after the end of the agency

Legal Capacity

The ability to understand that you are entering a contract and the general nature of the contract. Does not require knowing everything about the contract

Mirror Image Rule

The acceptance must mirror exactly the terms of the offer

Ratification

The act of accepting and giving legal force to an obligation that previously was not enforceable.

Acceptance

The assent of the offeree to the terms of the offer, 2 requirements

Law of Assignments

The assignor hands off the contract's obligations and benefits to another party (the assignee)

Discharge

The cancellation of the obligations imposed by a contract.

Valid contract

The contract has the necessary contractual elements: agreement (offer & acceptance), consideration, legal capacity of the parties, & legal purpose

The apparent authority of a partner to bind the partnership in dealing with third parties A. Will be effectively limited by a formal resolution of the partners of which third parties are aware. B. Will be effectively limited by a formal resolution of the partners of which third parties are unaware. C. Does not permit a partner to execute an instrument in the partnership name. D. Must be derived from the express powers and purposes contained in the partnership agreement.

The correct answer is A. Each agent in a general partnership is an agent of the partnership. The partners may not limit partnership liability to third parties by agreement between the partners alone. But apparent authority is effectively limited to the extent a third party knows of limitations imposed on a partner's authority. Answer B is incorrect because the scope of apparent authority is limited by communications by the principal (the partnership) of which the third party is deemed to be aware. Answers C and D are incorrect because a partner's act, such as execution of an instrument in the partnership name, for apparently carrying on in the ordinary course the partnership business, or business of the kind carried on by the partnership, is binding unless the partner lacked actual authority and the other party knew or had notice of such lack of authority

Skip & Trip decide to start a boutique selling preppy clothing. They sign a partnership agreement providing that Skip will contribute $6,000 toward the necessary $10,000 in start-up capital, and Trip will contribute $4,000. If the agreement is silent as to management and profits, Skip should receive A. 60% of the profits and share management equally with Trip. B. 60% of the profits and control 60% of the management functions. C. 50% of the profits and share management equally with Trip. D. 50% of the profits and control 60% of the management functions.

The correct answer is C. Absent a contrary agreement, partners have equal rights in the management and conduct of the partnership business. In addition, absent an agreement to the contrary, each partner has the right to share equally in partnership profits even if their contributions are unequal. Skip and Trip had no such contrary agreement. Answers A and B are incorrect because Trip is entitled to an equal share of the profits and equal rights in the management of the business. Answer D is incorrect because Trip is also entitled to equal rights in the management of the business.

Which of the following rights will a third party be entitled to after validly contracting with an agent representing an undisclosed principal? A. Disclosure of the principal by the agent. B. Ratification of the contract by the principal. C. Performance of the contract by the agent. D. Election to void the contract after disclosure of the principal.

The correct answer is C. An agent contracting for an undisclosed principal is liable on any contracts entered into. Choice A is incorrect because the agent is not obligated to disclose the principal. Choice B is incorrect because so long as the contract is within the agent's authority, the principal is always liable on contracts made by the agent, thus ratification is meaningless here. The facts of the question state that the contract was validly entered into. Choice D is incorrect because a third party cannot void a contract merely because it was entered into by an agent.

An agent will usually be liable under a contract made with a third party when the agent is acting on behalf of a(an) Disclosed principal Undisclosed principal a. Yes Yes b. Yes No c. No Yes d. No No

The correct answer is C. An agent will usually be liable under a contract made with a third party when the agent is acting on behalf of an undisclosed principal. An agent will usually not be liable under a contract made with a third party when the principal is disclosed.

Deb buys a song through eSongs, an online music vendor. Before completing the purchase and downloading the song, Deb must agree to a provision stating that she will not make and sell copies of the song. This provision is

a click-on agreement.

Bolt Corp. dismissed Ace as its general sales agent and notified all of Ace's known customers by letter. Young Corp., a retail outlet located outside of Ace's previously assigned sales territory, had never dealt with Ace. Young knew of Ace as a result of various business contacts. After his dismissal, Ace sold Young goods, to be delivered by Bolt, and received from Young a cash deposit for 20% of the purchase price. It was not unusual for an agent in Ace's previous position to receive cash deposits. In an action by Young against Bolt on the sales contract, Young will a. Lose, because Ace lacked any implied authority to make the contract. b. Lose, because Ace lacked any express authority to make the contract. c. Win, because Bolt's notice was inadequate to terminate Ace's apparent authority. d. Win, because a principal is an insurer of an agent's acts.

The correct answer is C. While employed, Ace had express authority from the terms of his employment and perhaps apparent authority because of the position given to him by the principal, Bolt. Upon his termination, the express authority ended immediately. But he continued to have apparent authority after his termination. Bolt should have published a notice in trade journals or other appropriate places to terminate this apparent authority. Note that the reasons given in answer choices A and B are correct statements (Ace and neither express nor implied authority), although the conclusion that Young loses is incorrect.

Noll gives Carr a written power of attorney. Which of the following statements is correct regarding this power of attorney? a. It must be signed by both Noll and Carr. b. It must be for a definite period of time. c. It may continue in existence after Noll's death. d. It may limit Carr's authority to specific transactions.

The correct answer is D. A general power of attorney grants broad powers, but a principal can also execute a special power of attorney granting limited powers. Choice A is incorrect because only the principal must sign. Choice C is incorrect because a power of attorney ceases at death.

Partners have a fiduciary relationship with each other. Accordingly, a partner A. May engage in a business that competes with the partnership if it is operated with his or her own resources. B. May take advantage of a business opportunity within the scope of the partnership enterprise if the partnership agreement will terminate before the benefit will be received. C. Must exercise a degree of care and skill as a professional. D. May not earn a secret profit in dealings with the partnership or partners.

The correct answer is D. A partner is an agent of the partnership and the other partners and thus owes fiduciary duties of loyalty and due care. A partner also has an obligation of good faith and fair dealing. In dealings with the partnership or other partners, a partner may not earn a secret profit. She must account to the partnership and hold as trustee for it any benefit derived in the conduct or winding up of the partnership business or from use of partnership property (including appropriation of a partnership opportunity). Answers A and B are incorrect because a partner's duty of loyalty precludes competition with the partnership. Answer C is incorrect because a partner's duty of care to the partnership is limited to refraining from gross negligence, reckless conduct, intentional misconduct, or knowing violation of the law. She is not liable for ordinary negligence to fellow partners if her honest errors of judgment are not intended and do not result in personal benefit.

Which of the following statements best describes the effect of the assignment of an interest in a general partnership? a. The assignee becomes a partner. b. The assignee is responsible for a proportionate share of past and future partnership debts. c. The assignment automatically dissolves the partnership. d. The assignment transfers the assignor's interest in partnership profits and surplus.

The correct answer is D. The assignee of an interest in a partnership receives the assignor's rights to profits and surplus

Privity

The direct relationship between the contracting parties

Steven James had 4 to 6 beers. After leaving the bar he struck and killed someone in a parked car. His lawyer took him to a hospital for a blood test which confirmed Steven was drunk. The lawyer argued the blood test was protected by client-attorney privilege because the hospital had been his agent adn therefore a member of the defense team. How does the judge rule?

The judge disagreed, the hospital employee was not an agent for the lawyer because they had not consented to the job

Result of Anticipatory Breach of Contract

The law allows the innocent party to treat the contract as if it was breached.

Legal Purpose

The legality of a contract. Contracts can not be created if the purpose is illegal. If in its creation or performance it commits a torte, crime, or if it is unconscionable

Mitigation

The lessening of one's own damges

Firms or individuals that own property overseas generally have little legal protection against government actions in the countries where they operate. True/False

True

Past Consideration

The performance has already been given, the promise to pay follows the act. Unenforceable

Franchisee

The person who pays the owner a percentage of profits to use the trademark, trade name, or copyright

Principal's Remedies when the Agent Breaches a Duty

The principal can recover damages caused by the agent's breach The agent must refund any profits made from the agency, if he breaches his duty of loyalty The principal may rescind a transaction with a disloyal agent

Principals remedies when the agent breaches a duty

The principal can recover from the agent any damages the breach has caused. If an agent breaches the duty of loyalty, he must turn over to the principal any profits he has earned as a result of his wrongdoing If the agent has violated her duty of loyalty, the principal must rescind the transaction

Principal's Liability for Contracts

The principal is bound by the acts of an agent if: The agent had authority The principal ratifies the acts of the agent

Principal's liability for contracts

The principal is liable for the acts of an agent if 1. the agent had authority or 2. the principal ratifies the acts of the agent

Negligent Hiring is

The principal is liable for the torts of an independent contractor if the principal has been negligent in hiring or supervising her

Which of the following is true of a contract involving an unauthorized agent? a. The principal is liable if the contract was created out of ordinary negligence. b. The agent is not liable to the contract. c. The principal is never liable to such a contract. d. The principal is only liable if he or she is a fully disclosed principal.

The principal is never liable to such a contract.

Duty to cooperate

The principal must furnish the agent with the opportunity to work The principal cannot unreasonably interfere with the agent's ability to accomplish his task The principal must perform her part of the contract

Which of the following is true about a principal's duty to cooperate with his agent? a. The principal must furnish the agent with the opportunity to work. b. The principal must pay the agent only if he wants the agent to perform on his next task. c. The principal can unreasonably interfere with an agent's ability to accomplish his task. d. The principal need not perform his part of the contract.

The principal must furnish the agent with the opportunity to work.

Remedy

The relief that is proved for the non breaching party, after the contract is breached.

Mac's car is in the shop. While the car was there overnight, one of the mechanics got drunk, took the car out for ride and got in an accident. Who is liable?

The repair shop owner is liable even though the drunk worker was clearly violating company policy. He was on duty at the time and it is the garage owner's fault for hiring such an unreliable worker.

disaffirmance

The right to renounce a contract and thereby void any legal obligations resulting from the contract. minor can avoid the contract - contract is voidable by minor - only minor can avoid - minor is returned to status quo adults deal w/ minors "at their peril"

Objective theory of contracts

The theory courts use to decide which contracts are enforceable from the outside looking in from the perspective of a reasonable person.

Delegations

The transfer of a contractual duty. The delegator transfers the duty to the delegatee

Two duties conflict in the situation, where an attorney acquires confidential information about a client. However, he discovers that this information is important for the affairs of a second client. He is thus in a dilemma. What are these two conflicting duties? How does agency law resolve the conflict?

The two conflicting duties are: (1) the duty not to disclose confidential information (one aspect of the duty of loyalty), and (2) the duty to notify the principal about all information relevant to the agency business. The conflict is resolved as follows: if the agent cannot properly represent the second client without revealing the information, he should refuse to represent that client any further.

Terminating an agency relationship

The two parties have 3 choices in terminating their relationship 1. Term agreement: if the principal and agent agree in advance how long their relationship will last then they have a term agreement (ex. a period of time, or when the job is accomplished) 2. Mutual agreement: they can change their mind at any time 3. Agency at will: if they make no agreement in advance about the term of the agreement, either principal or agent can terminate at any time

Bargain for Exchange

There must be an exchange of value, separates a contract from a gift.

Why do US firms establish manufacturing plants abroad?

They believe that doing so will reduce their costs for labor, shipping and raw materials and enable them to compete more effectively in foreign markets

Control - Principals are liable for the acts of their agents

They exercise control over the agents

Intentional Interferece

Third party induces breach

True or False. Liability to the extent of her investment for obligations from before joining the partnership, and unlimited liability for those arising afterwards.

True

Mental Incompetence

True mental illness or incompetence. Can have a valid contract, but they can be voidable

Consent

To establish consent the principal must ask the agent to do something and the agent must agree

Lapse of Time

To much time has passed within the constraints of the contract, if no term states, it is the reasonable amount of time.

Trademark dilution

Trademark is used without authorization in a way that diminished the distinctive quality of the mark. Products don't need to be similar

Assignments

Transferring rights to another

Advising Bank

Transmits Information

A deal that is between a US company and a company in a foreign country usually has how many languages?

Two

4 Promises that Lack Consideration

Unenforceable; Gifts, pre-existing legal obligation, past consideration, and moral obligations

Mistake

Unilateral - Rescission usually not allowed Mutual - both parties have erroneous belief Rescission - action to undo contract

Performance of an Act

Unilateral contract, a promise and you want an action

Unilateral vs Bilateral

Unilateral- a contract that requires performance, contract is completed when action is taken Bilateral- complete when promises are exchanged

Hi-Lite Manufacturing, Inc., orders supplies online from Indigo Parts Company. To complete the order, the buyer is required to click on a button that says, in reference to certain terms, "I agree." This is

a click-on agreement.

Remedy

What a party gets if the other party fails to perform in a valid contract

Mitigation of Damages

Used to lessen damages, shifts some of the duty to the non-breaching party

Misrepresentation of Age

Used to not effect a minor's ability to void a contract, but new laws are changing that

Fair Value

Usually determined by the price of those goods in the exporting country

2 Elements of Consideration

Value and a bargain for exchange

Recovery from Quasi contracts

What you recover is valid payment for the service rendered

What is the effect in the Merchant?

When a minor avoids a contract the merchant must return ALL consideration. Doesn't matter if subject matter was damaged.

Material Breech of Contract

When a party does not receive the benefit of their bargain and there is no full or substantial performance

Agency Relationship

When the US deires to limit its involvement in an international market it will establish this, with a foreign firm. The foreign firm then acts as the US's firm agent and can enter into contracts in the foreign location on behalf of the principle (the US company)

Full Performance

When the parties fill all duties they said they would in a contract. This is rare in the real world

When is an agency relationship terminated? a. When the principal employs two agents whose interests conflict. b. When the agents avoid competing with their principals. c. When the principal's goal has been achieved.

When the principal's goal has been achieved.

Contracts in Writing (2)

Will pay debts that are barred services in purchase of business Finder's fee Agents' contracts

Exceptions to the Parol Evidence Rule

Wouldn't know about these things without oral testimony; 1.) Unconscionability 2.) Duress 3.) Mistakes 4.) Undue Influence 5.) Fraud 6.) Ambiguity- a phrase has more than one meaning

what is the definition of voidable?

a contract can be rescinded by the parties

An International Contract should be in ___

Writing

Can a Minor Avoid a Contract?

Yes, any time while they're a minor and for a reasonable time after reaching the age of majority.

Larry works for Shannon as a salesperson. Shannon gave Larry a credit card with Larry's name on it in order that Larry would be able to charge necessary business expenses to Shannon's business account. Larry charged $1,000 in personal expenses, wholly unrelated to Larry's employment. Does apparent authority exist? Discuss.

Yes. In order for apparent authority to exist, the principal must empower the agent to be able to represent to the third party that he or she has the actual authority to bind the principal. In this case, Shannon gave Larry a credit card, thus enabling him to cause third persons to reasonably believe Larry is authorized to use the card.

Pre-existing Obligations

You go to a person and ask for more after you've already established a contract. Called the "hold-up" position. Unenforceable

You ask your neighbor to walk your dog and your neighbor agrees.

You have established consent

Election of remedies doctrine

You have the right to be fully compensated, but can only recover once

e-contract

a contract that is formed electronically

Liquidated damages

agree in advance for avail damages if breach penalty if actual damages are determinable in advance or if liquidated damages are excessive or unconscionable - is unenforceable

Lucy v. Zehmer

Zehmer owned a piece of property that Lucy wanted to buy. One night at Zehmer's bar, Lucy made an offer which Zehmer allegedly accepted. He and Lucy both signed a napkin which had specific details concerning the price and title of the land. Zehmer also had his wife sign it. Zehmer later contended that he was joking and that he didn't really want to sell. - signing napkin doesnt change validity - valid contract b/c Lucy didnt know it was a joke

Barnacle Company plans to make a registered offering of its preferred shares pursuant to the Securities Act of 1933. After filing a registration statement with the Securities and Exchange Commission but prior to its effective date, which of the following will violate section 5 of the Securities Act of 1933? A. Sending a letter to a prospective investor noting that projected earnings are up 15%, which letter is accompanied by a preliminary prospectus. B. An oral offer at a sales meeting attended by 37 prospective investors and lasting for four hours, after which the investors have no questions. C. An oral offer to sell the shares made by telephone. D. An in-person oral offer to sell the shares.

Rice, Inc. is a reporting company under the Securities Exchange Act of 1934. The only security it has issued is its voting common stock. Which one of the following statements is correct? A. Any person who owns more than 5% of Rice's common stock must file a report with the SEC. B. Rice need not file its proxy statements with the SEC because it has only one class of stock outstanding. C. It is unnecessary for the required annual report (Form 10-K) to include audited financial statements. D. Because Rice is a reporting company, it is not required to file a registration statement under the Securities Act of 1933 for any future offerings of its common stock.

SEC guidelines permit a company to maintain the secrecy of merger negotiations if all the following conditions are met, except: A. disclosure would mislead investors as to the likelihood of consummation of the merger. B. the company has not made any prior disclosures about the merger negotiations. C. disclosure is not compelled by other SEC rules. D. management determines that disclosure would threaten the completion of the merger.

Under Section 11 of the Securities Act of 1933, a defendant (other than the issuer) may establish a defense to liability if the defendant can prove that he/she acted: A. with due diligence. B. with scienter. C. without scienter. D. without due diligence.

Which of the following instrument is not considered as security? A. Mortgage notes B. Treasury stock C. Certificate of interest D. Investment contract

Which of the following is least likely to be considered a security under the Securities Act of 1933? A. General partnership interests. B. Limited partnership interests. C. Stock options. D. Warrants.

Which of the following issuers is not required to file periodic reports under the 1934 Act? A. An issuer with assets worth $8 million and 600 holders of its debentures. B. An issuer with preferred shares traded on the American Stock Exchange. C. An issuer who made a registered offering of its 4 million common shares under the 1933 Act and has 520 holders of those shares. D. An issuer with common shares traded on the New York Stock Exchange.

Mistake

a belief that is not in accord with the facts. Where the mistaken facts relate to the basis of the parties agreement

Clear Creek Corporation enters into a contract with Brightside Management Associates to manage and maintain Clear Creek's apartment complex. Their contract provides that neither party can recover damages for a non-fraudulent or unintentional breach. This is

a limitation-of-liability clause.

novation

a party entitled to receive performance under a contract may release the other party from the duty of performance and accept a substitute party

Authority

a principal is bound by the acts of an agent if the agent has authority

Intentional torts

a principal is not liable for the intentional torts of an employee unless 1. the employee intended to serve some purpose of the employer or 2. the employer was negligent in hiring or supervisign this employee

offer

a promise or commitment to perform or refrain from performing some specified act in the future

SealCoat Paving enters into a contract with Royal Golf & Tennis Club to provide surface material for Royal's tennis courts by April 1 for a tournament to begin May 1. The contract specifies an amount to be paid if the contract is breached. This is a liquidated damages clause if the amount is

a reasonable estimate of the loss on a breach.

Offeree's options

accept: forms contract - neither party can later back out reject: kills offer - offeree cant later accept counteroffer: treated as a rejection with a new offer > kills old offer, creates a NEW offer ignore: offer expires per terms or after "reasonable time" has passed

mailbox rule

acceptance effective, (if properly addressed + proper postage) even if lost, when dropped in mailbox - offeror has uncertain period to revoke - offeror can modify in offer

what is an accord and satisfaction?

accord- new agreement to resolve a disputer satisfaction- occurs when agreement/accord is completed

Dara gives her agent, Marla, money to purchase a new commercial oven. Marla takes the money and deposits it into her personal checking account. Marla then accidentally spends some of Dara's money. Marla has violated his duty of

accounting

cyber-squatting

act of registering a domain name that is the same as or confusingly similar to the trademark of another and then offering to sell that domain name back to the trademark owner

Undue Influence

advantage via another's mental, emotional, or physical weakness

special offers

advertisement: generally not an offer - invitation to deal - traditional contract law: no need to honor ad price, some states require it - very specific ads ARE offers - car ad with "dealer stock numbers" is an offer, but for only one car

Marco and Fred enter into a contract for the sale of Marco's apartment for which Fred agrees to pay him $100,000. Marco cannot prohibit Fred from transferring his right to the ownership of the apartment because such a prohibition is

against public policy.

If a person accepts the benefit of an unauthorized transaction or fails to repudiate it, then he is as bound by the act as if he had originally authorized it. This is referred to as _____. a. apparent agency b. agency by ratification c. express agency d. implied agency

agency by ratification

an agency relationship terminates upon the death or incapacity of either the principal or the agent

agency is personal relationship and when the principal dies the agent cannot act on behalf of a nonexistent person. The same is true if the agent dies.

If the agent violates her duty of loyalty, the agency agreement automatically terminates

agents are appointed to represent the principal's interest; if they fail to do so there is no point to the relationship

a contract is voidable if the party entering the contract does not know they are entering a contract of the effects of entering the contract.

true

A plaintiff wishes to recover damages from the issuer for losses resulting from material misstatements, in a securities registration statement. In order to be successful, one of the elements the plaintiff must prove is that the A. Plaintiff was in privity of contract with the issuer or that the issuer knew of the plaintiff. B. Plaintiff acquired the securities. C. Issuer acted negligently. D. Issuer acted fraudulently.

Cartman Company wants to make an offering of securities exempt from registration under Rule 505 of the Securities Act of 1933. In order to do this, Cartman: A. may sell to any number of unaccredited purchasers. B. may sell to any number of accredited purchasers. C. may only sell to purchasers who are sophisticated purchasers. D. cannot restrict resale of securities.

In a due diligence meeting officers and experts confer with each other for the purpose of: A. increasing corporate transparency. B. obtaining assurances and demand proof from each other that the registration statement contains no misstatements or omissions. C. creating strategies for public issue of securities. D. issuing a proxy solicitation document.

Section 404 of the SOX ACT 2002, is considered controversial because: A. sensitive corporate information has to be published which may cause adverse consequences for the company. B. the company has to significantly increase its budget for complying with Section 404. C. the procedure for complying with Section 404 is lengthy and complicated. D. Section 404 decreases rather than increasing the corporate responsibility of the CEO of the company.

The Howey test as to whether something is a security requires an investment of money in a common enterprise and what other element? A. A stock or bond. B. Expectation of profit solely from the efforts of others. C. A certificate of deposit. D. An investment contract.

The Uniform Securities Act permits an issuer to register by coordination which means: A. an issuer can file the same statement filed under the 1933 Act under the state securities registration law. B. the issuer becomes exempt from registration under state securities registration law. C. the issuer need to file under the state securities registration law only and not the 1933 Act. D. the issuer need not register securities statement once he has registered under the 1933 Act.

Under Section 10b of the Securities Act of 1934, a plaintiff has the burden of proof to establish that: A. the defendant acted with negligence. B. the defendant acted with scienter. C. the defendant acted with malice. D. the defendant acted in concert with others.

Which of the following is incorrect concerning the Williams Act (the federal tender offer statute) and the corresponding SEC rules thereunder? A. When a bidder increases the offering price during the term of a tender offer, all tendering shareholders must be paid the higher price, even if they tendered at a lower price. B. An investor may withdraw his tendered shares when a competing bid is announced, even if the term of the first bidder's offer has expired. C. The bidder must pro rate its purchases among all tenderers if more shares are tendered than the bidder seeks to buy. D. The management of the subject company must inform its shareholders of its position on the tender offer within 10 days after the offer has been made.

Jared downloads some video games from the Internet. There is a page indicating the terms of use, but nothing that requires Jared to affirmatively indicate his consent before downloading the games. These terms are

browse-wrap terms.

implied in fact contract classification

based on conduct and reasonable expectations - restaurant and self-serve gas

void v. voidable

based on existence - void: not binding, not real - voidable: legit/binding, but court deems able to exit out of > valid act that may be avoided by one party

executed v. executory

based on timing - executory: in process - executed: completed

contract characteristics

bilateral v. unilateral - addresses how contract is formed - what does or seek from ee in order to form contract affects when contract comes into existance

bilateral v. unilateral: when contract formed

bilateral: contract is formed upon the return promise - once formed both obligated - seeks promise - ex: promise to drive friend to work on M and W in exchange that he drives you T and TH unilateral: contract is not formed until the action is done - no obligation until act is done - once done, offeror is obligated - seeks action only

Jason instructs his agent Miguel to obtain a piece of artwork from Martina by threatening to beat her if she refuses to sell the artwork. Miguel follows Jason's instruction and beats Martina when she refuses to sell the item. In this situation,

both Jason and Miguel are liable for Martina's injuries.

Jonathon promises to pay child support and alimony to his ex-wife every month after their divorce. Jonathon has

both a legal and a moral obligation to keep his promise.

Charlie tells Jamal that Marisol has agreed to allow him to sell her racing bicycle. Marisol is present at the time, hears the conversation, and says nothing. Jamal wants to buy a bicycle like Marisol's, so he agrees with Charlie to buy Marisol's bike. Marisol then refuses to sell the bicycle. Marisol claims that she is not bound by the agreement formed by Charlie and Jamal because Charlie is not her agent. Marisol is

bound by the contract, under a theory of agency by estoppel

Internet service provider (ISP)

business or organization that offers users access to the internet and related services

Delivery without moving

buyer required to pick up if title required, passes when seller delivers the doc, if no doc, title passes at contract

An agency relationship can arise in four ways:

by agreement of the parties, by ratification, by estoppel, and by operation of law.

Easton Company wants to make an offering of securities exempt from registration under Rule 504 of the Securities Act of 1933. Which of the following is a requirement of Rule 504? A. Easton may sell to no more than 35 unaccredited purchasers. B. Easton must sell only to investors who are able to protect themselves by making informed investment decisions. C. Easton must be a nonpublic issuer under the Securities Exchange Act. D. Easton may not make any general solicitations of investors.

Mel is a securities broker who holds shares in Beanbag Inc. Mel does not disclose this to his customer Kim, whom he advises to buy Beanbag shares. Mel hopes that by not disclosing his conflict of interest, he will influence Kim to buy the shares. Kim, believing the information on Beanbag shares is given from Mel's disinterested point of view, declares that buying Beanbag shares "sounds like an excellent idea" and purchases the shares. Which of the following statements is most accurate? A. Kim does not have a cause of action against Mel because Mel did not make a misstatement of material fact. B. Kim will have to prove that Mel acted negligently in order to prove a Rule 10b-5 violation. C. Kim will most likely be able to make a successful claim against Mel under Rule 10b-5. D. Mel did not have a duty to disclose his conflict of interest to Kim.

North company is a small issuer who wishes to solicit investors to buy its securities during the pre-filing period. As the advertising budget of the Company is not large, North has decided to advertise during the pre-filing period by using a website. This solicitation of shares is: A. allowed as per the 1933 Act. B. permitted as North is a small company and the Internet has strong potential for attracting investors. C. any offer made to potential investors by small issuers may be held as offensive under Rule 505 and Rule 506 of Regulation D. D. permitted if North takes permission of the SEC.

The "fraud on the market theory" used in some cases to establish liability under Section 10b of the Securities Act of 1934 is an indirect way of establishing what element of proof? A. The defendant acted with negligence. B. The defendant acted with scienter. C. The plaintiff's reliance. D. The plaintiff's due diligence.

The principal purpose of the registration requirements of the Securities Act of 1933 is to A. Prevent public offerings of securities in which management fraud or unethical conduct is suspected. B. Provide the SEC with the information necessary to determine the accuracy of the facts presented in the financial statements. C. Assure that investors have adequate information upon which to base investment decisions. D. Provide the SEC with the information necessary to evaluate the financial merits of the securities being offered.

Which of the following concerning state securities law is incorrect? A. Registration by coordination allows an issuer to file a 1933 Act registration statement with the state securities administrator to satisfy the registration requirements of state law. B. All of the states have securities statutes that protect investors. C. All of the states have statutes that require merit registrations of securities. D. Most states have an exemption similar to 1933 Act Rule 506.

a counteroffer is the rejection of the original offer and the simultaneous making of a new offer.

true

elements of consideration

consideration is the value given in exchange for a promise. a contract cannot be formed without sufficient consideration. consideration is often broken down into two elements

Beth is a minor. She buys a set of sessions with a personal trainer, and a water bottle and some weights from a fitness store. Later, Beth decides that she does not want the water bottle or weights. In most states, Beth

can only disaffirm the contract if she returns all the goods.

ratification

can ratify expressly (after turning 18) - failure to disaffirm w/ in reasonable time after 18 = ratification - attempted ratification while < 18 is not binding - promise as minor not to disaffirm is NOT binding

Richard is an adult. He enters into a contract to sell sixteen-year-old Jane his car for $3,000. The next day Richard receives an offer of $4,000 for his car from twenty-year-old Bill. Richard

cannot disaffirm his contract with Jane because he is an adult.

Consequential damages

circumstances outside contract special damages if forseeable

Compensatory damages

compensate for loss of bargain ex: sale of goods, construction, employment

The principal also has certain duties to the agent. These duties relate to...

compensation, reimbursement and indemnification, cooperation, and safe working conditions.

Fraud by concealment

concealing a material fact to victim

a covenant not to compete is enforceable for up to 2 years, 75 miles in geographic area, and the same type of business.

true

public policy

considered illegal, though no statue is violated - court has broad discretion - used where court doesn't want to enforce contract even if not illegal, court can say it is "against public policy" then treat contract as if it is illegal - ex: court case involving head shops, closely involved w/ drugs so judge deems illegal - void, no contract

Objective theory of contracts

contract existance depends on wheater a reasonable person would have understood the outward actions and statements of the other party to indicate an intent to enter into a legally binding contract

release

contract in which one party forfeits the right to pursue a legal claim against the other party. it bars any further recovery beyond the terms stated in the release.

what is the definition of enforceable?

contract will be upheld

what is the definition of unenforceable?

contract will not be upheld

quasi contract

contracts implied in law; equitable remedy created by courts, and imposed on parties in the interest of fairness and justice

Writ of Attachment

court order Gov't seize property of breacher sell it to satisfy judgement (personal or real property)

Writ of Garnishment

court order non-breacher can seize property of breacher held by third persons (wages, Bank accounts, other debts)

"plain meaning" rule

courts will not admit "extrinsic" (external) testimony or evidence if meaning of contract terms are clear and unambiguous; however if terms are unclear or ambiguous court may admit "extrinsic" (external) evidence

why are illegal contracts void?

courts will not facilitate illegal contracts

express contract classification

created by words - can be oral or written - most contracts are created this way

As per Section 4(2) of the 1993 Act, registration is not required for: A. transactions which are done by non-charitable organizations. B. transactions by agricultural corporations. C. interstate securities transactions. D. transactions by an issuer which does not involve a public offering.

a fiduciary contract is one with special trust and confidence.

true

To be successful in a civil action under Section 11 of the Securities Act of 1933 concerning liability for a misleading registration statement, the plaintiff must prove A. Defendant's intent to deceive: Yes; Plaintiff's reliance on the registration statement: Yes B. Defendant's intent to deceive: Yes; Plaintiff's reliance on the registration statement: No C. Defendant's intent to deceive: No; Plaintiff's reliance on the registration statement: Yes D. Defendant's intent to deceive: No; Plaintiff's reliance on the registration statement: No

To prove her due diligence defense under Securities Act section 11 with regard to audited financial statements, an officer of the issuer must prove which of the following? A. The officer made a reasonable investigation into the accuracy of the audited financial statements. B. The officer believed the financial statements did not omit or misstate a material fact. C. The officer had no intent to misstate or omit a material fact in the audited financial statements. D. The officer had no reason to believe the financial statements omitted or misstated a material fact.

Under the Securities Act of 1933, the registration of securities which are offered to the public in interstate commerce is A. Directed toward preventing the marketing of securities which pose serious financial risks to the prospective investor. B. Not required unless the issuer is a corporation. C. Mandatory unless the cost to the issuer is "prohibitive" as defined in the SEC regulations. D. Required unless there is an applicable exemption.

Which of the following is incorrect concerning the Foreign Corrupt Practices Act? A. The FCPA prohibits payments used for the purpose of influencing a governmental decision. B. The FCPA requires the keeping of accounts that accurately reflect the dispositions of the issuer's assets. C. The FCPA bribery provisions apply to all American firms, not merely firms with equity securities registered under the 1934 Act. D. The FCPA prohibits facilitating or grease payments.

With regard to an offering of common stock requiring registration under the Securities Act of 1933, A. The SEC will attempt to pass on the investment value of the common stock before approving the offering. B. The registration statement is automatically effective when filed with the SEC. C. The issuer may make sales 10 days after filing the registration statement. D. The issuer would act unlawfully if it were to sell the common stock without providing the investor with a prospectus.

Fanny and John each own and manage their own companies. Fanny's business is manufacturing freight boxes of all types, and John's business is selling freight boxes to different industries. They decide to combine their expertise and knowledge to produce and sell freight boxes specifically designed for the new airline company that just formed in their city. Which of the following best describes the business formed by the parties? a. A general partnership. b. A limited liability partnership. c. A sole proprietorship. d. A joint venture

d. designing freight containers to be sold specifically to one company. Each company coming together in this joint venture has its own business outside of this one endeavor. Choice "a" is incorrect. A general partnership is more broad in its business purpose than a joint venture is. Choice "b" is incorrect. A limited liability partnership is primarily designed for professionals who want to work as partners but with limited personal liability. Choice "c" is incorrect. Sole proprietorships have only one person in the business.

Red's Plumbing Service substantially performs its contract with Shady Grove Condominiums, Inc. Shady Grove is entitled to

damages.

Will owes Jenny $1,000. Brad owes Will $1,000. Will unconditionally assigns his rights to Jenny. Will's right to the $1,000 is then

extinguished.

Lily is a farmer. When bad weather destroys her crop, her obligation to deliver it under an outstanding contract with Macro Food Corporation is

discharged.

Olivia, a minor, signs a contract to buy a bike from Phil, the owner of SuperCycles Bike Store. Olivia's right to disaffirm the contract

does not change the fact that Phil is bound by the contract.

a minor cannot enter into a contract.

true

Consideration

each party must have something at stake in arrangement 1. each party must suffer a "legal detriment" (be worse off in some way) - take on new legal duty or give up an existing right 2. "bargained for exchange" - agreed on product/service must be exchanged

Injury

economic injury Damages = benefit of the bargain Victim's 2 options (1) rescind the contract and get restitution (2) enforce contract, sue for damages

Jacqi tells Kenneth, who does not know how to perform comedy, that she will tutor him in the subject for $500. As an offer, this is

effective.

Under the respondeat superior, the principal is liable for the torts committed by _____. a. employees b. independent contrators c. unidentified agents d. unauthorized agents

employees

If either the agent or the principal fails to obtain (or keep) a license necessary to perform duties under the agency agreement, the agreement

ends

Promissory Estoppel

enforce oral contract that should have been written 3 conditions: (1) promise induces action or forbearance of by another (2) reliance n oral promise foreseeable (3) injustice can be avoided only by enforcing

Byron agrees to sell to Charity, for $1,500, a remote parcel of land. They believe the land to be worthless, but beneath it is a gold mine. A court would

enforce the contract.

Kathleen sells Richard a racehorse for $1,000. Both Kathleen and Richard think that the horse is too slow to win any races. Richard then enters the horse in a race, and it wins easily. He enters it in more races, and the horse soon wins more than $1 million. Kathleen tries to rescind the contract to sell the horse, claiming that it was worth more than $1,000. A court will

enforce the contract.

Colleen is intoxicated, but still mentally capable of understanding the consequences of her actions when she signs a contract to sell the rights to her latest phone app design to Addie. The contract is

enforceable even if Colleen attempts to disaffirm it.

The state of Illinois enacts a usury statute. The purpose is to

establish a maximum rate of interest that may be charged for loans.

Clutch Auto Parts enters into a contract with Bio Health Club for discounted memberships for Clutch's employees. Bio breaches the contract and Clutch enters into a contract with Apex Fitness for the same service at a lower price. Clutch might be awarded nominal damages to

establish, as a matter of principle, that Bio acted wrongfully.

a person having a duty created by his or her undertaking to act primarily for another's benefit. the relationship involves trust and confidence.

fiduciary

What is a contract?

exchange of promises/an agreement pvt. law voluntary creation of obligations where none existed before enforceable by court - can never go to jail for

other characteristics

executed v. executory, void v. voidable, unenforceable

is authority declared in clear, direct, and definite terms. can be given orally or in writing.

express authority

contract classifications

express, implied in fact, and implied in law

Promissory estoppel

fairness: promise w/ out consideration will be enforced IF: - promise - justifiable reliance - reliance substantial - unjust if promise not enforced - what they missed out on Example : A creditor unofficially informs a debtor that the creditor forgives the debt between them. Even if such forgiveness is not formally documented, the creditor may be estopped from changing its mind and seeking to collect the debt, because that change would be unfair.

a bilateral contract is a promise from a performance

false

a contract is judged by what the parties think about the contract.

false

a mistake of fact does not allow a contract to be rescinded.

false

according to the US government, i am required to pay taxes to the IRS. this is an example of an implied to fact contract.

false

consideration is the value that courts assign to a contract.

false

contracts concerning land do to have to be in writing to be enforceable.

false

courts generally consider the adequacy of consideration in a contract.

false

dr. cochran is sick and must cancel class, but he feels the material is too important for him to skip and decides to allow his teaching assistant to teach the classes that week. dr. cochran is allowed to do this.

false

e signatures and electronic agreements are not valid acceptances of a contract.

false

if any part of the contract is illegal, the entire contract is void.

false

joe who is 16 buys a new car for $10,000 on his birthday. a week later while he is driving he does cocaine and drag races. he loses control and totals his car and it is now worth $500. joe is able to return the car back and get his $10,000 back.

false

mike agrees to mow chases lawn and chase agrees to wash mike's truck. since they don't have any paper available they write the agreement on a napkin. this contract is unenforceable because its not on paper.

false

silence can operate as the acceptance of an offer without prior dealings between parties.

false

the consideration in a contract must be equal between the parties.

false

tim intends to purchase a new tv and but the one katherine is selling when she graduates. katherine posted the ad for $100. tim offers katherine $100. she rejected his offer. tim can sure for breach of contract.

false

you hire a tutor to help you and he reviews all the material on the final. you make an 87.5. you can claim his tutoring was inferior performance.

false

you sublease your apartment for the summer because you got a job in chicago. she assigns all rights and obligations to her srat sister. if she doesn't pay you will have to.

false

your brother is an exceptional accountant in atlanta. you ask him to file your taxes and assume you will have to pay him for his performance even tho there is no concerning payment. this is an example of implied by law contract

false

Misrepresentation

false statement innocent party must (1) rely on misrepresentation (2) act on it Misrep. can be (1) innocent (2) negligent (3) intentional (fraudulent)

you hire a contractor to build you a house. the contractor lays the foundation and installs the framework. this is considered substantial performance.

fasle

a preexisting duty is an agreements to perform already in place between the parties.

true

The purpose of a fiduciary relationship is

for one person to benefit another. Agents have a fiduciary duty to their principals. All three elements: consent, control and a fiduciary duty are necessary to create an agency relationship.

what is an express contract?

formed by words, in writing or in oral

Andy knows nothing about horses. Peter, an expert horse trainer, knows that a certain horse has no talent and is not likely to win any competitions. Peter convinces Andy to buy the horse for $500,000 by assuring him that it has great talent. The horse turns out to have no talent and never wins any competitions. Andy can most likely recover damages based on

fraud.

Beau sells a car to Cody without disclosing that the odometer, which reads 40,000 miles, was disconnected 80,000 miles ago. Beau is liable for

fraud.

FAS

free alongside seller responsible til delivered alongside vessel or at a dock

FOB

free on Board Pt of shipment - seller responsible til received by common carrier Pt of destination - seller responsible til arrive at destination

An agent is not liable for any contracts she makes on behalf of a(n) _____ principal. a. fully disclosed b. implied c. undisclosed d. gratutious

fully disclosed

(n) _____ agent is held to a lower standard because he is not trained and is doing his principal a favor. a. competitive b. gratuitous c. communications d. unidentified

gratuitious

Gratuitous agents are liable if they commit _____. a. ordinary negligence b. ballot negligence c. competitive negligence d. gross negligence

gross negligence

Selma, an elderly widow, gives her young neighbor, Steven, written power of attorney. This means that Steven now

has express authority to act as Selma's agent.

Gratuitous agent (ie, is not being paid)

has the power and the right to quit any time he wants regardless of the agency agreement. If someone does a job as a favor he will not owe when he stops work

Breach of Covenant of Good Faith and Fair Dealing

held to express terms required to act in good fiath breach = tort

a release from a contract prevents all further recovery beyond the terms stated in the release.

true

Ratification

if a person accepts the benefit of an unauthorized transaction or fails to repudiate it, then he is as bound by the act as if he had originally authorized it. He has ratified the act.

Ruthie, a minor, charges the cost of an expensive leather jacket at a Girl's Trend store. Two nights later, Ruthie loses the jacket at Minors Only Club. She disaffirms the jacket's purchase. Ruthie owes Girl's Trend the reasonable value of the jacket

if it is deemed a "necessary."

Executory Contracts

if not in writing, unenforceable

Dave's uncle tells Dave that if "he feels that Dave deserves it," he will give Dave $1,000 when Dave graduates from college. Dave's uncle's promise is

illusory.

do what is reasonably necessary to carry out express authority and accomplish the objectives of the agency.

implied authority

what is a quasi contract?

implied by the law, but not actual contract exists, but one is imposed to parties in the interest of fairness and justice

difference between implied in fact and implied in law

in fact has an understood/unspoken contract based upon the conduct in law there is no contract at all, until the court creates one

what is the difference between implied in fact and implied in law contracts?

in law- legal assumption exists in fact- assumption exists

Unidentified principal

in the case of an unidentified principal, the third party can recover from either the agent or the principal. If Augusta told Tracy, I have a friend who wants to buy your horse. Parker is unidentified because Tracy only knows he exists but does not know his identity. Both Augusta and Peter are liable to Tracey. She can only collect the total owed, she can recover from one or both but she cannot recover more than the total owed.

incidental vs intended beneficiary

incidental = benefits from contract but benefit was not the reason for contract. Has no rights, cant sue intended = designated as beneficiary in contract and can sue to enforce

a unilateral mistake in a contract is unable to rescind the contract.

true

an accord is a new agreement to resolve a dispute.

true

Reliance

innocent party relies on msrep

intoxication

intoxicated person can avoid if so intoxicated that could not comprehend nature of transaction WHEN IT WAS ENTERED INTO

invisible files that computers, smartphones, and other mobile devices create to track a user's web browsing activities

Eli and Marilyn ask Gracie to be the administrator of their will and the guardian of their children if they pass away before their children reach the age of majority. Gracie agrees. Fiduciary relationships such as this one

involve a high degree of trust and confidence

describe agency by ratification

involves a question of intent, and intent can be expressed by either words or conduct

an agreement means an offer and acceptance.

true

Kingston promises to pay Melina $500 to install a sump pump in his warehouse. Melina completes the installation. The act of installing the pump

is the consideration that creates Kingston's obligation to pay Melina.

Fraud in inducement

knows what is being signed, fraudulently induced into contract

why are gift contracts unenforceable?

lack consideration on all parties, there is no exchange

what is consideration?

legally sufficient value and bargained for exchange

Sam goes out shopping, and using his wife Juanita's credit card, he buys $221.00 worth of groceries. Under agency law, Juanita will probably be deemed

liable for the purchase, based on the creation of an agency by operation of law.

Gratuitous agents are liable if they commit gross negligence but not

ordinary negligence.

offeror

makes the offer to the offeree

Mutual Mistake of Material Fact

material fact important to subject matter i. e. ambiguity

social media

means by which people can create, share, and exchange ideas and comments via internet

time to disaffirm

minor can disaffirm: - while still a minor - w/ in a reasonable time after reaching adulthood -1-2 months is common - all depends on facts and circumstances

necessaries

minor obligated only for fair value - protects minor from overpaying - what qualifies as necessary for minor depends on situation - item provided for by parents is not a necessary - ex: no kid in manhattan NEEDS a car, kid living w/ parents doesnt NEED an apartment

an assignment of all rights is the assignment of rights and a delegation of duties under a contract.

true

damages

monetary award to compensate for the loss caused by a tort

Misrepresentation of Material Fact

must be significant factor in inducing innocent party to contract

2 acceptance requirements

must be unequivocal - has to be clear and definite - not "sounds like a good offer" must be identical to offer - mirror image rule - any change in terms = no acceptance > counteroffer or rejection >acceptance must be same as offer

Intent:

must show there is intent of contact, use objective test: would a reasonable person see intent under those circumstances

Juan and Isidro enter into a contract to buy, restore, and reopen the Coastal Park Carousel. Before either party begins to perform, they agree to cancel their deal. This is

mutual rescission.

Minors (capacity)

need protection from: - overreaching adults and themselves (youthful folly) - law will presume above and provide broad protections

implied in law contract classification (quasi contract)

no actual contract, but court implies one in order to prevent unjust enrichment

past consideration

no consideration because bargain-for-exchange is missing since something that has already taken place

Void Contract

no contract at all; without legal effects

what is the definition of void?

no contract exists

Nominal Damages

no financial loss from breach

Jolie signs a contract with Keaton, an unlicensed physician, to perform a medical procedure. This contract is enforceable by

no one.

Office Accounting, Inc., hires Perry to repair a computer on site for $400, but Perry does not show up as agreed. Office Accounting hires Raul to do the job for $350. Office Accounting may recover from Perry

nominal damages.

Mitigation of Damages

non-breaching duty to avoid or reduce damages caused by breach

Anticipatory Breach

non-breaching party immediately discharged may sue immediately must not wait until performance is due

an assignment of rights is the assignment of rights under a contract.

true

Regarding a principal's liability for torts, _____ torts are treated more like a contract claim, and the principal is liable if the employee acted with express, implied, or apparent authority. a. unidentified torts b. physical torts c. undisclosed torts d. nonphysical torts

nonphysical torts

online defamation

normal tort laws apply; often implicated in online bullying situations; ISPs are generally not responsible for torts of their users

Peter and Ray are riding their horses together. Peter jokingly tells Ray that Ray's horse is too slow. Ray laughs and jokingly responds, "Yes, he is too slow! I would sell him for $5!" Peter hands Ray $5. This is

not a valid acceptance because Ray's offer was made in jest.

Brasilia, a real estate broker licensed only in Connecticut, concludes a land sale in Delaware. She can

not collect the commission, keep it, or foreclose on the property.

Genovese Contracting, Inc., agrees to build a warehouse for Hawthorne Distributors. Genovese runs into the types of difficulties that contractors ordinarily confront, and Hawthorne agrees to pay extra compensation to overcome them. Regarding the agreement to pay more, a court would likely

not enforce it.

Doug agrees with Elinor to sell methamphetamine to patrons of Elinor's nightclub Garden of Eden for 25 percent of the take. Doug sells the drugs but keeps all of the money. Elinor can

not enforce the deal.

Maureen knows that her friend Kramer collects duck memorabilia. One day, she spots a carved wooden duck she is sure he will love. She tells the shop owner that Kramer will pay her for the duck as soon as he sees it, and she takes the duck with her to show it to Kramer. Kramer is

not liable

Mariah promises to pay her assistant Nadine $10,000 in consideration of the services she provided over the years. Mariah never pays Nadine. Mariah is

not liable, because the consideration is in the past.

Beth goes to Dr. Carlton for surgery. Carlton says that Beth should be fully healed within a week. Beth is not healed within a week. With respect to breach of contract, Carlton is

not liable, because the statement was an opinion.

Sparky offers Teodora $1,000 for her collection of rare coins. She accepts. If a dispute arises, a court would likely

not question the adequacy of the consideration.

No Arrival = no Sale

not reach buyer, seller under no obligation to replace

what is the definition of valid?

nothing is wrong with the contract

Mutual Mistake of Value

object known, both mistake value contract enforceable by either party

offer requirement # 1

objective intent - does offeror intent to be bound - requirement not met if reasonable person would perceive it as: jest, anger, exploratory question

agreement

offer + acceptance

irrevocable

offer cannot be revoked

offer requirement # 3

offer must be communicated to offeree - not effective until offeree recevies offer - reward not due if finder didnt know of reward - only specific offeree(s) can accept

lapse of time

offer terminates by law when the period of time specified in the offer has passed; if no time period for acceptance is specified, the offer terminates at the end of a reasonable period of time

How can an offer die ?

offere rejects or counteroffers offeror revokes lapse of time - stated or not stated, a reasonable time subject matter destruction death or incompetency - no inconsistent conduct - if 3rd party knows of talk, breaches contract supervening illegality - if illegal action, offer not legit - if offer made and law changes, offer not valid

contract parties

offeror and offeree

offeree

one who receives an offer - can accept, reject, counteroffer, or ignore - or does something to ee

This may occur in family relationships, such as when one spouse purchases certain basic necessaries and charges them to the other spouse's account. The courts often rule that a spouse is liable for payment for the necessaries because of either a social policy or a legal duty to supply necessaries to family members.

operation of law

Parol Evidence

oral or written words outside written contract alter, amend, contradict written contract inadmissible

Stored Communications Act (SCA)

part of the Electronic Communications Privacy Act; prohibits intentional and unauthorized access to stored electronic communications and sets forth criminal and civil sanctions for violators

Insuring against Risk of Loss

party with insurable interest in goods may purchase insurance to reimburse loss.

Sarah has to move from the East Coast to the West Coast for her job. Elmo agrees to act as Sarah's agent to sell her New York condo. As her agent, Elmo owes Sarah all of the following duties except loyalty. b. payment. c. notification. d. performance

payment

Impossibility

performance of contract cannot be done

Generally, the agent owes the principal five duties

performance, notification, loyalty, obedience, and accounting.

Dylan enters into a contract to manage the operations of Cash's accounting office for one year, renewable for subsequent one-year terms. If this contract is discharged like most contracts, it will be

performed.

mental incompetency

persons adjudged (by a court) to be insane have no capacity to contract, thus attempts to do so are VOID - other persons can avoid if they couldnt comprehend contract WHEN ENTERED INTO

consideration issues

pre-exiting duty: party was already obligated - due to job - due to contract past consideration: violates "bargained for" requirement - second promise is a gift promise - legal detriments must be exchanged for each other illusory promises: hold the illusion of a contract, must be real promise accord and satisfaction: for legitimate disputes, agree to change terms to settle dispute release: ex: accepting insurance settlement check - dont do till you talk to a lawyer

A(n) _____ is a party who employs another to act on his or her behalf. a. independent contractor b. principal c. agent d. employee

principal

Physical torts

principal is liable for the negligent conduct of an employee that occurs within the scope of his employment

Principals duty to indemnify agent

principal must reimburse agent for expenses incurred before the agency ended. An agent is not entitled to use confidential information even after the relationship terminates

Sarah asks Sergio to mow her law. Sergio, who is overloaded with work, contracts with Dan to do the work for him as an independent contractor. As Dan is mowing, Sarah walks out of her house and the lawnmower throws a rock and hits Sarah, causing serious injuries. In this situation, Sergio is

probably not liable for Sarah's injuries.

an executors contract such as a person's last will and testament must be in writing for the contract to be valid and enforceable.

true

Quality Sales Corporation enters into contracts over the Internet. Quality can protect itself against disputes involving these contracts by making important terms

reasonably clear.

Pat, a world famous musician and composer, agrees to give ten piano lessons to Quinn in exchange for $1,000. Pat's attempt to delegate his contract to Ruth, an inexperienced pianist, will probably be

prohibited because Pat and Ruth have very different skill levels.

preexisting duty

promise to do what one already has a legal duty to do does not constitute legally sufficient consideration

option contract

promise to hold an offer open for a specified period of time

legal sufficient value

promise, performance or forbearance (agree not to do something)

Intent to Deceive Evidence

prove either misrep made with knowledge that it was false (scienter) misrep made without sufficient knowledge of the truth

when the principal affirms, or accepts responsibility for, an agent's unauthorized act. When this occurs, the principal is bound to the agent's act, and the act is treated as if it had been authorized by the principal from the outset.

ratification

Katie buys a car when she is seventeen. When she is twenty-five, Katie tries to disaffirm the contract and recover all her car payments. A court will likely find that the contract was

ratified and Katie cannot recover her payments.

licensing statutes

regulatory: - require formal authorization/license to engage in certain trades, professions, or businesses - validity of contract is based upon having license - ex: lawyers, insurance, revenue-raising: any one can get - contracts w/out license are binding

rejection of the offer by the offeree

rejection by the offeree (expressed or implied) terminates the offer, effective only when it is received by the offeror or offeror's agent

adequacy of consideration

relates to how much consideration is given and whether a fair bargain was reached. courts will inquire into the adequacy of consideration (if the consideration is legally sufficient) only when fraud, undue influences, duress, or the lack of a bargained-for-exchange may be involved

any agreement made in the consideration of marriage must be in wiring in order to be enforceable.

true

under this doctrine a principal may also be liable for harm that his or her agent causes to a third party. This doctrine imposes vicarious liability, or indirect liability, on an employer that is similar to strict liability in that both are imposed regardless of fault. Under this doctrine, the employer is liable for torts committed by an employee acting within the course or scope of employment

respondeat superior (a Latin term meaning "let the master respond), -vicarious liability

Rural Utility, Inc., enters into a contract with Shovel Excavation Service to dig up, replace, and rebury Rural's cables in a certain location. Rural advances Shovel 10 percent of its cost. If the parties rescind the contract, Shovel's refund of the payment would be

restitution.

upon disaffirmance there is:

restitution: duty of adult to return minor to status quo - return of consideration received or reasonable substitute restoration: duty of minor to return WHAT IS LEFT of consideration to adult - trend is to require more than minimum restoration

any agreements to purchase goods over $500 must be in writing.

true

Finance Lease (Risk of Loss)

risk of loss passes to lessee

Nonconforming goods (Risk of Loss)

risk of loss remains with lessor or supplier til cure or acceptance

Ordinary Lease (Risk of Loss)

risk of loss retained by lessor

noncompete agreements

sale of business or employment must be reasonable - time - line of business - geography

avoidable means a contract is able to be rescinded

true

Ex-ship

seller bears expense and risk til unloaded at location

CIF

seller responsible for cost, insurance, and freight

domain name

series of letters and symbols used to identify site operators on the internet, Internet addresses

usury (illegal contract)

sets limit on amount of interest on a loan - called landsharking (sets rate higher then legal limit) - some states will not charge @ 0% rate, and just require principal is paid back - some states enforce at rate that legal limit states (charges 30%, state only allows 25%, pay @ 25%)

An agent with special skills is held to a higher standard because

she is expected to use those skills

Parol Evidence exceptions

shows that contract is void or voidable explains ambiguous language concerns prior course of dealing or performance fills in gaps in contract correct obvious clerical or typographical error

Selena signs a power of attorney appointing Kim only for the purpose of signing on her behalf relating to the sale of her house. The power of attorney will terminate based on

the purpose being achieved

Equitable Remedies (types)

specific performance - requires perform when subject matter is unique reformation - rewrites contract to express true intentions injunction - injunction to prohibit party from doing an act

Sonny agrees to buy a unique collection of Olympics memorabilia for $7,000 from Jana and sends $1,500 as a down payment. When Sonny sends Jana the rest of the price, she refuses to ship the collection. Sonny should seek

specific performance.

what is the purpose of the objective theory of contracts?

states that is there is a dispute then we look at the contract and make sure it is straight forward. if there are still conflicts a reasonable person will read the contract and what they take it as is what it is.

Valley Tack Shop signs a contract with Gary's Boots and Saddles for delivery of five saddles that cost $200 each. To be enforceable under the Statute of Frauds, the written contract must designate

the quality of saddles.

Novation

substitution of a new contract for an old one with the rights of the old one being terminated requirements: 1. existence of previous, valid obligation 2. agreement by all parties 3. discharge of prior party 4. new, valid contract

Robert attempts to avoid paying Andrew a commission check on the sale of his house to a buyer procured by Andrew by waiting until after the listing agreement has expired. Andrew finds out about this after Robert sells his house. Andrew can

sue Robert for breach of contract

breach of contract is not criminal nor a tort.

true

f the principal and the agent agree in advance how long their relationship will last, they have a(n) _____. a. ballot agreement b. term agreement c. agency at will d. involuntary agreement

term agreement

If the principal or agent is unable to perform the duties required under the agency agreement, the agreement

terminates

The bankruptcy of the agent or the principal

terminates an agency relationship only if it affects their ability to perform. A bankrupt principal may be unable to pay the agent or honor contracts that the agent enters into on his behalf.

offer requirement # 2

terms must be reasonably definite/certain - can't be too vague - OK if some details missing, need essentials - ex: "...for a good price", "...I'll do some painting for you"

in a principal-agent relationship, the parties have agreed that....

the agent will act on behalf and instead of the principal in negotiating and transacting business with third parties.

Legality

the contract's purpose must be to accomplish some goal that is legal and not against public policy

Beachside Pools, Inc., agrees to build a swimming pool for Candy, but fails to build it according to the contract specifications. Candy hires Do-We Fix-It Company to finish the project. Candy may recover from Beachside

the costs needed to complete construction.

Handy Hardware Store agrees to hire Ilsa for one year at a salary of $500 per week. When Handy cancels the contract, Ilsa spends $100 to obtain a similar job that pays $450 per week for a year. Ilsa is entitled to recover

the difference between the wages at the two jobs plus $100.

Rolf is an emergency medical technician. Medical personnel such as Rolf are prohibited by state statute from working more than a certain number of consecutive hours. One month, Rolf works more than the legal limit. Rolf can recover for

the hours up to the statutory maximum and the extra hours.

Bobbie claims that Carly breached their contract. Carly responds that she never intended to enter into a contract with Bobbie. The intent to enter into a contract is determined with reference to

the objective theory of contracts.

revocation

the offeror's act of withdrawing (revoking) an offer

Capacity

the parties to a contract must have contractual capacity

Satisfaction

the performance of an accord.

Abandonment

the principal is liable for the actions of the employee that occurs when the employee is at work, but not for actions that occur after the employee has abandoned the principals business.

Negligent hiring

the principal is liable for the torts of an independent contract IF the principal has been negligent in hiring or supervising her

Employee or independent contractor?

the principal supervises details of the work the principal supplies the tools and place of work the agents work full time for the principal the agents receive slaary or hourly wages, not a fixed price for a job the work is part of the regular business of the principal the principal and agents believe they have an employer-employee relationship the principal is in business

why are penalties not allowed to be in contracts?

they discourage completion or formation of the contract

why can a minor disaffirm any contract they enter?

they lack contractual capacity

Duress

threat of physical injury (extortion) or threat of non-physical harm

Destination ctonract

title passes when seller delivers goods to the destination

Purpose of Quasi contracts

to avoid unjust enrichment

Minor's duty (Current trend)

traditional rule: minor is entitled to full refund (restoration) - rule in most states modern rule (trend): deduct from minor's refund an amount for either: - minor's use/benefit from item - decline in fair market value

Real property

transfer of land ownership soil, plants, minerals, crops, timber, fixtures

a condition concurrent is the occurrence of an event that must be done simultaneously with a contractual obligation.

true

you hired a landscaper to redesign your front yard. they want to charge you $1,000 just for the design even though you never agreed to any kind of payment nor signed any formal contract. you agree to pay $100. the satisfaction occurs when you sign the check.

true

you may not delegate duties to someone not as expiernced, qualified, or as capable as you are to perform your obligations under a contract.

true

you plan on taking summer classes so you can graduate early. you drop one of the classes on the first ay because dr. cochran is the professor and decide to sublease your apartment. the sublease is considered a novation.

true

you sublease your apartment in the summer. the new third party is assigned the rights under the contract. if they don't pay, you will have to.

true

you want a lease for an apartment when you are in college. the lease begins in august and ends next august. because the contract lasts one year it must be in writing to be enforceable.

true

your frat hires moon taxi to play for $20,000 for 3 hours. when they get on stage they are drunk and can barley stand on their own and their performance only lasted 1 hour. they want full payment, but you don't want to pay them anything. you eventually agree to pay them $5,000 because they were funny. this would be an example of an accord.

true

your friend offers you $50 to be his designated driver for the night. instead you have a test to study for. you rejection is only effective when your friend receives it.

true

n the case of a(n) _____ principal, the third party can recover from either the agent or the principal. a. acknowledged b. gratuitous c. fully disclosed d. unidentified

unidentified

Wilson buys a lottery ticket at his local gas station. Wilson has accepted an offer for a(n)

unilateral contract.

recission

unmaking of a contract so as to return the parties to the positions they occupied before the contract was made

Betty is selling her used clothing shop on Main Street. In the sale agreement, there is a covenant not to compete that prohibits Betty from opening another used clothing shop within 300 miles of the shop she is selling. A court will most likely conclude that this restriction on competition is

unreasonable and may reform the covenant.

"It is virtually impossible to run a business without using agents. But

using an agent dramatically increases the risk of liability.

statutory illegal contracts

usury and licensing statutes

oral contracts

valid and enforceable - hard to prove/enforce - can be brought to court by other party - be aware*

Fraud in Inception (factum)

victim deceived to nature of act (not know what is being signed)

illegal contracts

void - court leaves parties where they are - statutory violations

acceptance

voluntary act (expressed or implied) by the offeree that shows agreement to the terms of the offer 1. unequivocal acceptance: "mirror image" rule 2. silence as acceptance 3. communication as acceptance: bilateral and/or unilateral 4. mode and timeliness: general rule, mailbox rule

Fresh Fast Service, Inc., offers to deliver produce to Growers' Market's customers for a certain price. Fresh's intent to extend a serious offer to Growers' Market is determined by reference to

what a reasonable person in Growers' position would conclude Fresh's words and actions meant.

describe agency by estoppel

when the principal's actions have created the appearance of an agency that does not in fact exist.

describe apparant authority

when the principal, by either word or action, causes a third party reasonably to believe that the agent has authority to act, even though the agent has no express or implied authority. usually comes into existence through a principal's pattern of conduct over time.

UNDISCLOSED AGENT:

with an undisclosed Agency, the TP can recover from either Agent or the Principal. Both P and Agent liable. If P fails to perform, Agent can be liable. TP unaware of either existence of an agency OR P's identify.

-Intent:

would a reasonable person conclude that offeree had intent on entering a contract

Legal Remedies

- required avenue where monetary compensation is sufficient - right to have a jury trial (jury decides facts) or Expectation and reliance interest money damages became known as legal remedies

The Doctrine of Sovereign Immunity

-Immunizes foreign nations from the jurisdiction of US courts when certain conditions are satisfied -Protects foreign nations from the jurisdiction of US Courts

_____ with a foreign based firm calls for a payment of ____ on some basis such as so many cents per _____ or on a certain percentage of profits from ____in a particular geographic territory.

-Licensing Agreement -Royalties -Unit Produced -Units Sold

Advantages of Exporting

-Lower Labor Costs -Fewer Government Regulations -Lower Taxes

Distribution Agreement Examples

-Price -Currency of Payment -Availability of Supplies -Method of Payment

Comity

-The principle by which one nation defers to and gives the effect to the laws and judicial decrees of another nation as long as they are consistent with the law and public policy of the accommodating nation -This recognition is based primarily on respect

contract formation

1. trilateral 2. unilateral3. formal4. informa5.express 6. implied

contract enforceability

1. valid2. voidable3. unenforceable4. void

Distribution Agreement

A contract between a seller and a distributor of the seller's products setting out the terms and conditions of the distributorship

Commercial Activity

A regular course of commercial con dust, transaction, or act that is carried out by a foreign state within the US

Accord

An agreement whereby the parties agree to accept something different in satisfaction of the original contract.

US Constitution provides in Article 1, Section 9 that "No Tax or Duty shall be laid on Articles ____ from any state"

Exported

Exportation

Government seizes privately owned goods/business or personal property for a proper public purpose and awards JUST COMPENSATION

Confiscation

Government taking of a privately owned business or personal property without a proper public purpose (illegal) and WITHOUT COMPENSATION

Statute of Frauds

Law stating that certain agreements are not enforceable in court unless they are evidenced by a signed writing

Franchise Agreement

The owner of the trademark, trade name, or copyright licenses another to use the trademark, trade name, or copyright under certain conditions or limitations in the selling of goods or services. In return the seller pays a fee to the owner which is usually based on a percentage of gross profit or net sales

Accord and satisfaction

The parties agree to settle a contract dispute. The satisfaction of the accord discharges the original contract.

Export

The sale of goods and services by domestic firms to buyers located in other countries

peer-to-peer networking

The sharing of resources (such as files, hard drives, and processing styles) among multiple computers without necessarily requiring a central network server.

SPAM

Unsolicited "junk" emails, ads, solicitations, etc.

Requirements

a promise made under circumstances that should lead the promisor reasonably to expect that the promise would induce the promise to take definite and substantial action, and the promise does take such action

Contract

a promise or a set of promises for the breach of which the law gives a remedy, or the performance of which the law in some way recognizes as a duty

Novation

a substituted contract involving a new third-party promisor or promisee

browse-wrap term

a term or condition of use that is presented to an internet user at the time certain products, such as software, are being downloaded but that need not be agreed to (by clicking "I agree," for example) before the user is able to install or use the product

Electronic Communications Privacy Act (ECPA)

amended federal wiretapping law to cover electronic forms of communication (through social media); prohibits the intentional interception of any wire, oral, or electronic communication, as well as the intentional disclosure or use of the information obtained by the interception

click-on agreement

an agreement that arises when a buyer, engaging in a transaction on a computer, indicates assent to be bound by the terms of an offer by clicking on a button that says, for example "I agree"; sometimes referred to as a click-on license or a click-wrap agreement

Express Contract

an agreement that is stated in words either orally or in writing

Undisclosed principal

in the case of an undisclosed principal, the third party can recover from either the agent or the principal. In some ways the concept of undisclosed principal violates principles of contract law. Suppose Augusta says she wants to buy the horse herself without mentioning she is buying the horse for Parker. Parker is an undisclosed principal because Tracey does not know that Augusta is acting for someone else. Parker and Augusta are jointly and severally liable. The principal is always liable but the agent is not unless the principals identity is a mystery.

respondeeat superior

let the superior (employer) respond; an employer is laible for unathorized torts commited by an employee in the scope of employment

True Impossibility

something has happened making it literally impossible to do what the promisor said he would do

Consideration

something of legal value given in exchange for a promise

express authority

the principal grants express authority by words or conduct that reasonably interpreted cause the agent to believe the principal desires to act on the principals account. In other words, the principal asks the agent to do something and the agent does it

Implied authority

unless otherwise agreed, authority to conduct a transaction includes authority to do acts that are reasonably necessary to accomplish it. The principal does not have to micromanage the agent. Ex. David inherits a house from his grandmother. He hires Nell to auction off the house and its contents. She rents a tent, hires an auctioneer, advertises the event, etc. to make sure the auction is successful. She deducts her fee and sends the profits to David. David say he never told her to hire an auctioneer and never gave permission for the expenses. David is wrong. A principal almost never gives an agent absolutely complete instructions.

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