Business Law Exam 2: (Chapter 20, 22, 23, 29, & 30)

Borrower will agree to pay only the interest on the loan for a set period of time

What is a Interest-Only Mortgage?

Always consensual because the agent must agree to act for the principal

An Agency Relationship is always what?

Collective Bargaining Agreement

Example: A contract negotiated by the employer and the labor union that covers all issues related to employment is a(n):?

Vicarious Liability

Example: A porter, working for the government railway services, believing that a passenger is on the wrong train, violently pulls him off, causing injury. The employer, the railway services, is guilty of?

Pledge

Example: A security interest may be perfected when the secured party (creditor) takes possession of the collateral. This possession is called a(n)?

Proprietor

Example: A(n) __________ is a person who hires an independent contractor?

TRUE

Example: An employer is generally not liable for an agent's or employee's crimes, unless the employer did aid or participate in their commission.

Implied contract -An implied contract involves an employment relationship that would have been at-will, had the employer or an agent of the employer not said, done, written, e-mailed, or printed something that created a workplace environment that implies the existence of a contract.

Example: An employment relationship based on a(n) ____________ is an employment relationship that would have been at-will, had the employer not said or done something that insinuated the existence of a contract.

Express -One way that a principal can create an agency relationship is by appointment. This occurs when the principal either orally or in writing creates the agency relationship. The agent's express authority is created at the same time that the principal appoints the agent and creates the agency relationship.

Example: Authority voluntarily and specifically set forth by the principal is known as __________ authority?

A hostile work environment

Example: __________ occurs when misconduct creates an environment that is so offensive that it interferes with the employee's work performance?

Cassie, since there was an agency by necessity -The agent's authority to perform acts that are necessary or customary to carry out expressly authorized duties is referred to as implied authority. It stems from the reasonable effort of an agent to understand the meaning of the principal's words describing what the agent is to do. Implied authority can be described as incidental authority when the acts performed are reasonably necessary to carry out an express authority. For example, an agent might have incidental authority to contract for the repair of the principal's van that broke down while being used to deliver perishable products that theagent had express authority to sell and deliver. Implied authority may be described as customary authority when the agent acts in conformity with the general trade or professional practices of the business.

Example: Cade agrees to "watch" Cassie's house while she backpacks in the Andes. One day a severe hailstorm breaks a number of windows in Cassie's house and Cade contracts with Clear Glass Co. to replace the windows and bill Cassie. Is Cassie required to pay Clear or is Cade?

TRUE

Example: If Linda puts up her land as collateral for a loan from Small Bank, she is the mortgagor. ?

The first mortgagee is paid off in full and the second mortgagee is paid out of the proceeds that remain

Example: Jack constructs a house after negotiating a construction loan. After a few years, he wants to build a swimming pool and outhouse for which he executes a second mortgage on the property. Jack is unable to meet the payments of the two loans. What are the rights of the first and second mortgagee in this situation?

Independent contractor -An independent contractor is a party who agrees to do a job and retains complete control over the methods employed to obtain final completion. The party for which an independent contractor works is often referred to as an employer or a proprietor. Independent contractors are not subject to the control of the proprietor. They maintain all required business licenses and permits and pay all job-related expenses; they are obligated only to get the job done.

Example: Mike calls Beth, asking her to referee a soccer game. Beth is not obligated to work the game. If she accepts the assignment and works the game, she will be told the time of the game, she will be required to wear an approved uniform, and she will be paid a fee. Once on the pitch (field), she is in complete control. Beth is considered a(an)

Mortgage-Backed Securities

Example: Mortgages that are sold together as bonds to big investors are called: ?

Special agent -A special agent is a person who is authorized to conduct only a particular transaction, conduct a series of related transactions, or perform only a specified act for the principal.

Example: Paris is authorized by Mechanical Enterprises Co. to negotiate the purchase of a new dragline by Mechanical Enterprises. Paris is a(an)?

Collateral -The property that is subject to a security interest is called collateral

Example: Ragana purchases a new houseboat. To secure the loan, Ragana uses the house boat as: ?

Apparent authority -An agent is clothed with apparent authority when a principal, by words or actions, leads a third party to believe that a non-agent is an agent.

Example: Repair Garage Company rents tools and stalls to independent auto mechanics to repair cars. Repair Garage allows Joe to print business cards reading "Repair Garage Company—Joe, Certified Mechanic." A customer is unhappy with the repairs Joe made to her car and sues Repair Garage. What legal theory, if any, would allow Repair to be sued by the customer?

Both Sam and Fred are liable -If the court determines that a master-servant relationship exists, it will turn to the next question, that is, "Did the servant act within the scope of employment?" The scope of employment involves the range of activities for which the servant is engaged. For the doctrine of respondeat superior to apply, a tort must be committed while the worker was performing a task for which he or she was hired, or at least one that he or she was authorized to perform by his or her employer

Example: Sam is a full-time driver for Fred's Appliance Store and delivers appliances to customers. One day, Sam negligently secures a washer and dryer in the back of his truck and, while driving, the washer falls out of the truck. Jan, driving behind the truck, sees the appliance flying at her and swerves into a telephone pole. Which of the following is correct?

Master-Servant Relationship -To apply the doctrine of respondeat superior in a tort case, the alleged tortfeasor must be a servant of the principal or master, and the servant's action must have been within the scope of employment.

Example: The principal may be held liable for a tort committed by an agent when a(n) __________ relationship exists between the agent and principle?

Disclaimer

Example: To be an effective attempt to preserve employment-at-will, a ____________ also must be written in clear, unequivocal language?

Makes the entire amount of the debt due for immediate payment -Frequently, mortgagees will include a term in the mortgage agreement allowing an acceleration of the debt if the mortgagor fails to meet an installment payment.

Example: What is an acceleration of the debt: ?

It holds that there is an implied promise in any employment relationship that the employer and the employee will be fair and honest with each other -The final wrongful discharge exception, implied covenant, holds that there is an implied promise in any employment relationship that the employer and the employee will be fair and honest with each other. Therefore, neither party will unfairly or dishonestly cheat the other out of anything due to the other party because of the employment relationship.

Example: Which of the following statements holds true for the concept of implied covenant under the theory of wrongful discharge by an employer?

Dismissal of an employee due to a failure to comply with directives that are in violation of the law -In states that adhere to the employment-at-will doctrine, an employee who can prove that his or her discharge somehow violated public policy may recover damages in tort. If an employee is fired for refusing to violate the law, such a discharge would violate public policy. For example, if an employee refuses to dump toxic waste into a river and is then fired for insubordination, that employee would have public policy grounds for a wrongful discharge lawsuit.

Example: Which of the following would be considered wrongful discharge with regard to an employment-at-will arrangement?

Vicarious -Vicarious liability is based on the principle of respondeat superior (let the master, or the superior, respond).

Example: __________ liability is based on the principle of respondeat superior?

Property discarded by the owner without the intent to reclaim ownership of it, *Courts require clear & convincing evidence of both the desertion of the periphery by the owner as well as the owner's intent not to return to it before determining that property was indeed abandoned EX: Free sign by furniture *can be kept by anyone who finds it; and the finder obtains good titan to it, even as against the original owner

Explain Abandoned Property?

Property that is acquired by the personal efforts of either spouse during marriage belongs to both spouses equally, except for gifts & inheritance

Explain Community Property that is recognized in some states?

Finders of lost property have a legal responsibility, usually fixed by statute, to make an effort to learn the identity of the owner & return the property

Explain Lost Property?

Must be placed with the proprietor of the place where the property is found to be held for the owner *When property is found & turned over to state officials, without any claim registered by the finder, the property becomes property of the state after a period of time set by statute

Explain Misplaced Property?

Unauthorized actions do not bind the principal unless the actions can be reasonably assumed by a 3rd party to be within the scope of the agent's authority

Explain Unauthorized Actions?

An undisclosed Principal can be held liable for the acts of the agent once the identity of the Principal is disclosed, and a 3rd party may sue either the Principal or the Agent

Explain liability of a Undisclosed Principal?

The principal is liable on ALL contracts that a general or special agent may enter into with 3rd parties, as long as the agent acts within the authority conferred by the principal

Explain liability of the Principal?

The agent can be made personally liable

Explain liability when the Agent exceeds the authority conferred by the Principal?

The agent can be held liable as a Principal

Explain liability when the Agent is not known to be an agent and is acting as a Principal?

Each covenant's share of the property passes on death to the surviving joint tenants

Explain owning property as Joint Tenants?

Each cotenant's share of the property passes to his or her heirs upon death

Explain owning property as Tenants in Common?

*Effective Jan 1, 2008, certain unearned income of children & students will be taxed at the parent's income tax rate *The Uniform Transfer to Minors Act establishes a procedure for gifts to be made to minors

Explain the problems that may arise when gifts are made to Minors?

Are perfected by filing a financing statement with the registry of deeds where the land is located

How can Security Interest on Fixtures be perfected?

Are perfected by making a note of the lien on the certificate of title issued by the state government

How can Security Interest on Motor Vehicles be perfected?

Most kinds of personal property are perfected by filing a financing statement in a public office

How can Security Interest on Personal Property be perfected?

Some acts, such as making a will, must be performed in person

What acts cannot be delegated to an Agent?

-Wrongful Discharge -Promissory Estoppel -Implied Contract

What are 3 wats to sue an Employer?

-Collective bargaining agreement -Grievance procedure

What are Contractual Exceptions?

1. Donor must intend to make a gift 2. The gift must be delivered to the donee 3. The donee must accept the gift

What are the 3 requirements for a gift to be completed?

*In writing and *Delivered to the recorder's office in the county where the property is located If the mortgage is not recorded & a later mortgage is given on the same property, the new mortgage is superior to the first

What are the Requirements of a Mortgage?

1. Unrestricted right to sell, assign, or transfer the mortgage to a 3rd party 2. Right to receive each installment payment as it falls due 3. Frequently, mortgagees will include a term in the mortgage agreement allowing an acceleration of the debt if the mortgagor fails to meet an installment payment 4. If the mortgagor has defaulted or has failed to perform some other agreement in the mortgage, the mortgagee has the right to apply to a court to have the property sold 5. Cannot lose their interest in property without due process of law 6. Both state & federal legislation prohibits lenders from discriminating against borrowers because of race, creed, color, sex, or ethic background.

What are the Rights & Duties of the Mortgagee?

1. Right to possess the property 2. Right to any income produced by the property 3. Right to use the property for a 2nd or 3rd mortgage 4. The mortgagor has the equity of redemption, which is the right to pay off the mortgage in full, including interest, and to thus discharge the debt total 5. Has the duty to make payments on time 6. Must preserve & maintain the mortgaged property for the benefit of the mortgagee's interest & security 7. The mortgagor is often required to insure the property for the benefit of the mortgagee to the amount of the mortgaged debt 8. Must pay all taxes & assessments that may be levied against the property

What are the Rights & Duties of the Mortgagor?

-Express -Implied -Apparent

What are the types of authority that can be granted to an agent?

Rely on the agent's personal skill & integrity, & they do not ordinarily give agents the power to delegate to someone else the job they have agreed to do

What do the Principal's rely on?

To preserve the right to first claim on the collateral, creditors must "perfect" their interest

What does "Perfection" mean?

A gift between the living

What does Gift Inter Vivos means?

Personal property owned by more than one person

What does owned in Cotenancy mean?

Personal property owned solely by one person

What does owned in Severalty mean?

May become personally liable

What happens if an agent exceeds their delegated authority?

The Mortgagor will still owe the balance

What happens if the sale of the Mortgaged property does not satisfy a debt?

Occurs when a principal, by virtue of words or actions, leads a 3rd party to believe that an agent has authority even though no such authority was intended -Is authority created by something that the principal says or does in relation to a third party

What is Apparent Authority?

A contract negotiated by the employer & the labor union that covers all issued related to employment

What is Collective Bargaining Agreement?

*Employers engage in conduct that adversely affects the employee's working conditions without actually terminating the employment relationship itself *(Whistleblower cases) *For example, the employee may be relocated to less than desirable jobs at the workplace: -be denied raises -lose seniority -be stripped of promotions -lose vacation ime -be reassigned to difficult & inconvenient hours *Thus, the employee continues to come to work and to draw a paycheck, but in conditions that slowly oeteriote, making the situation at work and on the Jon unbearably difficult for that employee

What is Constructive Discharge?

If a debtor defaults by failing to make payments when due, the secured party may satisfy the debt by takin possession of the collateral

What is Default?

*States that an employer can dismiss an employee at any time for any reason *Allows BOTH parties to end an unsatisfactory relationship or take advantage of new opportunities *The rule that says that an employer can discharge an employee at any time for any reason or for no reason is also limited by civil rights legislation

What is Employment-at-Will?

Employees have the right to appeal any employer's decision that they think violated just cause

What is Grievance Procedure?

Described as customary authority when the agent acts in conformity with the general trade or professional practices of the business -The agent's authority to perform acts that are necessary or customary to carry out expressly authorized duties is referred to as implied authority.

What is Implied Authority?

Involves an employment relationship that would have been at-will, had the employer not said, done, written, or printed something that created a workplace environment that implies the existence of a contract

What is Implied Contract?

Property that is not perceptible to the senses and cannot be touched examples: stock certificates & accounts receivables

What is Intangible Property?

An employee may attempt to recover damages if the conduct of the employer in the discharge of the employee caused serious mental and emotional suffering *The Plaintiff Must Prove That: -the employer's conduct was extreme -the employer knew the conduct was extreme & would result in emotional distress -the conduct was the proximate cause of serious mental & emotional suffering

What is Intentional Infliction of Emotional Distress (Tort Law)?

Is everything that can be owned other than real estate *Divided into tangible & intangible property

What is Personal Property?

A security interest may be perfected when the secured party (creditor) takes possession of the collateral

What is Possession with Security Interest?

Is a legal relationship in which one party, the agent, is authorized to transact business for & under the control of the second, the principal *The principal MUST indicate that the agent is authorized to act for the principal

What is Principal-Agent Relationship Agency?

The employee must demonstrate that the employer promised the employee job security despite the apparent at-will nature of the employment relationship

What is Promissory Estoppel?

Occurs when the principal approves of an unauthorized act performed by an agent or by one who has no authority to act as an agent and the following conditions are satisfied

What is Ratification?

Collateral may be repossessed without going through the court if it can be done without causing a disturbance; otherwise, the creditor must use legal processes *After repossessing the goods, the secured party may sell them at a public auction or private sale

What is Repossession?

The right to use collateral to recover a debt

What is Security Interest?

The assurance that a creditor will be paid back for any money loaned or for credit extended to a debtor

What is Security?

Property that has substance & can be touched *Is movable & includes crops and animals -also called goods or chattels examples: book, pair of jeans, tv set, corn, cattle

What is Tangible Property?

Gives employees legal grounds for a lawsuit against employers who have dismissed them unfairly *also referred to as Unjust Dismissal

What is Wrongful Discharge?

- Has comparatively low fixed payments during the life of the mortgage, followed by ONE large final (balloon) payment - The mortgage has a fixed interest rate, but it is written for a short period of time, such as 5 years

What is a Balloon-Payment Mortgage?

The property that is subject to the security interest

What is a Collateral?

- Involves no government backing by either insurance or guarantee - Interest rates stay the same during the life of the mortgage - Loan is made by private lenders, & the risks of loss are borne exclusively by them

What is a Conventional Mortgage?

Is one whose identity is known by 3rd parties dealing with that principal's agent

What is a Disclosed Principal?

Is a person who is given broad authority to act on behalf of the Principal in conducting the bulk of the principal's business activity on a daily basis

What is a General Agent?

- Has a fixed interest rate during the life of the mortgage - However, the monthly payments made by the Mortgagor increase over the term of the loan

What is a Graduated-Payment Mortgage?

An outright loan or a line of credit made available to homeowners based on the value of the property over & above any existing mortgages - This is an example of a junior mortgage

What is a Home Equity Loan?

A mortgage subject to a prior mortgage - Also called a "second mortgage" - Takes advantage of the equity that has built up in home over a period of time - If all the mortgages are recorded, the holders of the 2nd.. etc. mortgages may exercise their rights against the property only after prior mortgages have been paid off

What is a Junior Mortgage?

A transfer of an interest property for the purposes of creating a security for debt

What is a Mortgage?

*The perfection of a security interest by possession, as in a Pledge, is better than other types of perfection

What is a Pledge?

*Independent Contractors are NOT subject to the control of the Proprietor *Independent Contractors are NOT employees; however, they may be agents *An Independent Contractor may be an agent if the Independent Contractor has the right to enter a contract on behalf of the Proprietor

What is a Proprietor-Independent Contractor Relationship?

The party for which an independent contractor works

What is a Proprietor?

Allows older home owners to convert some of the equity in their home into cash with the loan being repaid when the property is sold or on the occurrence of some other specified event

What is a Reverse Mortgage?

One in which creditors have something of value from which they can be paid if the debtor does not pay

What is a Secured Loan?

The lender or sell who hold the security interest

What is a Secured Party?

An agreement that creates a security interest *Must be in writing, be signed by the debtor, & contain a description of the collateral that is used for security

What is a Security Agreement?

Is a person who is authorized to conduct only a particular transaction, to conduct a series of related transactions, or to perform only a specified for the principal

What is a Special Agent?

- Borrowers have been disqualified from conventional loan because of a bad credit history or because of low debt-to-income ratio - These loans generally have a much higher default rate than most of the conventional

What is a Subprime Mortgage?

When an agent does not reveal the existence of an agency relationship but appears to act in his or her own behalf rather than for another

What is a Undisclosed Principal?

- Has a rate of interest that changes according to fluctuations in the index to which it is tied - Must include a maximum rate that cannot be exceeded

What is a Variable or Flexible or Adjustable Rate Mortgage (ARM)?

The legal principles governing the relationship of principal & agent & of employer & employee are basically the same *Agent-employees have the authority to usually do deal with 3rd parties on behalf of the principal

What is an Employer-Employee Relationship?

Is a party who contracts to do a job & retain complete control over the methods employed until final completion

What is an Independent Contractor?

Master: is a person who has the right to control the activities of another person Servant: the person whose activities are controlled The terms master & servant are used instead of employer & employee in a legal setting when questions of tort liability arise

What is an Master-Servant Relationship?

One in which creditors have nothing of value that they can repossess and sell to recover the money owed to them by the debtor

What is an Unsecured Loan?

Notifies any third party who may be interested in purchasing the property or in lending money to the owner than the mortgage has an interest in the real property covered by the mortgage *Failure to record may result in a later mortgage being given priority

What is the Recording of a Mortgage?