Business Law I Final Exam Olivet Nazarene University
Extension Clause
A clause in a time instrument that allows the instrument's date of maturity to be extended in the future.
Installment Contract
A contract that requires or authorizes delivery in two or more separate lots to be accepted and paid for separately.
Unilateral Contract
A contract that results when offer can be accepted only by the offeree's performance.
Valid Contract
A contract that results when the elements necessary for contract formation ( agreement, consideration, legal purpose, and contractual capacity) are present.
Option Contract
A contract under which the offeror cannot revoke the offer for a stipulated time period (because the offer has given consideration for the offer to remain open.)
Covenant not to compete
A contractual promise of one party to refrain from conducting business similar to that of another party for a certain period of time and within a specified geographical area.
Reformation
A court-ordered correction of a written contract so that it reflects the true intentions of the parties.
Hold in Due Course
A holder who acquires a negotiable instrument for value, in good faith, and with notice the the instrument is defective.
Cover
A remedy that allows the buyer or lessee, on the seller's or lessor's breach, to obtain substitute goods for another seller or lessor.
Rescission
A remedy whereby a contract is canceled and the parties are returned to the positions they occupied before the contract was made.
Parol Evidence Rule
A rule of contracts under which a court will not receive into evidence prior to agreements that contradict the terms of the parties' written contract.
Collateral Promise
A secondary promise to a primary transaction, such as a promise made by one person to pay the debts of another if the latter fails to perform. A collateral promise normally must be in writing to be enforceable.
Contract
A set of promises constituting an agreement between parties, giving each a legal duty to the other and also the right to seek a remedy or the breach of the promises or duties.
Indorsement
A signature placed on an instrument for the purpose of transferring one's ownership rights in the instrument.
Negotiable Instruments
A signed writing that contains an unconditional promise or order to pay an exact sum on demand or at a specified future time to a specific person or order, or to bearer.
Nominal Damages
A small Monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered.
Adhesion Contract
A standard-form contract in which the stranger party dictates the terms.
Statute of Frauds
A state statue that requires certain types of contracts to be in writing to be enforceable.
Intended Beneficiary
A third party for whose benefit a contract is formed. An intended beneficiary can sue the promisor if the contract is breached.
Incidental Beneficiary
A third party who benefits for a contract even though the contract was not formed for that purpose. An incidental beneficiary has no rights in the contract and cannot sue to have it enforced.
Implied Warranty of Fitness
A warranty that goods sold or leased are fit for the particular purpose for which the buyer or lessee will use the goods.
Integrated Contract
A written contract that constitutes the final expression of the parties' agreement. Evidence extraneous to the contract the contradicts or alters the meaning of the contract in any way is inadmissible.
Promissory Note
A written promise made by one person to pay a fixed amount of funds to another person on demand or on a specified date.
Impossibility of Performance
AD doctrine under which a party to a contract is relieved of his or her duty to perform when performance becomes objectively impossible or totally impracticable.
Incidental Damages
All costs resulting from a breach of contract, including all reasonable expenses incurred because of the breach.
Past Consideration
An act that takes place before the contract is made and that ordinarily, by itself, cannot be consideration for a later promise to pay for the act.
Replevin
An action that can be used by a buyer or lessee to recover identified goods from a third party, such as a bailee, who is wrongfully withholding them.
Requirement Contract
An agreement in which a buyer agrees to purchase and the seller agrees to sell all or up to a stated amount of what the needs or requires.
Output Contract
An agreement in which a seller agrees to sell and a buyer agrees to buy all or up to a stated amount of what the seller produces.
Release
An agreement in which one party gives up the right to pursue a legal claim against another party.
Lease Agreement
An agreement in which one person agrees to transfer the right to possession and use of property to another person in exchange for rental payment.
Prenuptial Agreement
An agreement made before marriage that defines each partner's ownership rights in the other partner's property. Prenuptial agreements must be in writing to be enforceable.
Formal Contract
An agreement that by law requires a specific form for its validity.
Covenant not to Sue
An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim.
Liquidated Damages
An amount, stipulated in a contract, that the parties to the contract believe to be a reasonable estimation of the damages that will occur in the event of a breach.
Anticipatory Repudiation
An assertion or action by a party indicating that he or she will not perform a contractual obligation.
Lien
An encumbrance on a property to satisfy a debt or protect a claim for payment of a debt.
Specific Performance
An equitable remedy in which a court orders the parties to perform as promised in the contract. This remedy normally is granted only when the legal remedy(monetary damages) is inadequate.
Restitution
An equitable remedy under which a person is restored to his or her original position prior to loss or injury, or placed in the position he or she would have been in had the breach not occurred.
Quasi Contract
An obligation or contract imposed by law (a court), in the absence of an agreement, to prevent the unjust enrichment of one party.
Firm Offer
An offer that is irrevocable without the necessity of consideration for a stated period of time, if no definite period is stated, for a reasonable time(neither period to exceed three months.
Counteroffer
An offeree's response to an offer in which the offer rejects the original offer and at the same time makes a new offer.
Tender
An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so.
Restrictive Indorsement
Any indorsement on a negotiable instrument that requires the indorse to comply with certain instructions requiring the funds involved. A restrictive indorsement does not prohibit the further negotiation of the instrument.
Usage of Trade
Any practice or method of dealing that is so regularly observed in a place, vocation, or trade that parties justifiably expect it will be observed in their transactions.
Signature
Any symbol with intent to authenticate a writing
Estopped
Barred, impeded, or precluded.
Usury
Charging an illegal rate of interest.
Concurrent Condition
Conditions that must occur or be performed at the same time - they are mutually dependent. No obligations arise until these conditions are simultaneously performed.
Universal Defenses
Defenses that are valid against all holders of a negotiable instrument, including HDC and holders have rights of HDC
Transfer Warranty
Five implied warranties made by any person who transfers a instrument for consideration to the transferee and, if the transfer is by indorsement, to all subsequent transferees and holders who take the instrument in good faith.
Emancipation
In regard to minors, the act of being freed for parental control.
Maker
One who promises to pay a fixed amount of funds to the holder of a promissory note or a certificate of deposit (CD)
Imposter
One who, by use of the mails, internet, or telephone induces a maker or drawer to issue an instrument in the name of an impersonated payee
Contractual Capacity
The capacity required by the law for a party who enters into a contract to be bound by that contract.
Course of Performance
The conduct that occurs under the terms of a particular agreement, which indicates what the parties to that agreement intended it to mean.
Breach of Contract
The failure, without legal excuse, of a promisor to perform the obligations of a contract.
Performance
The fulfillment of one's duties under a contract - the normal way of discharging one's contractual obligations.
Disaffirmance
The legal avoidance, or setting aside, of a contractual obligation.
Product Liability
The legal liability of manufacturers, sellers, and lessors of goods for injuries or damage caused by the goods to consumers, users, or bystanders.
Alienation
The of transfer of land out of one's possession.
Drawer
The party that initiates a draft (such as a check), thereby ordering the drawee to pay.
Sale
The passing of title to property from the seller to the buyer for a price.
Indorsee
The person to whom the check is indorsed and delivered.
Shelter Principle
The principle that the holder of a negotiable instrument who cannot qualify as a holder is due course but who derives bas or her title through an HDC acquires the rights of an HDC.
Privity of Contract
The relationship that exists between the promisor and the promisee of a contract.
Mitigation of Damages
The requirement that a plaintiff do whatever is reasonable to minimize the damages caused by the defendant.
Novation
The substation, by agreement, of a new contract for an old one, with the rights under the old one being terminated.
Negotiation
The transfer of an instrument in such form that the transferee becomes the holder.
Assignment
The transfer to another of all or part of one's rights arising under a contract.
Consideration
The value given in return for a promise or performance in a contractual agreement.
Revocation
The withdrawal of a contract offer by the offeror. Unless an offer is irrevocable, it can be revoked at any time prior to acceptance without liability.
Accommodation Party
is a person who signs negotiable instruments or commercial paper or agreement for the purpose of being a surety for another party. As credit on the instrument
Trade Acceptance
is a type of draft that is commonly used in the sale of goods.
Obligor
One who owes an obligation to another.
Voidable Contract
A contract that may be legally voided at the option of one or both of the parties.
Acceptor
A drawee that accepts, or promises to pay, an instrument when it is presented later for payment.
Indorser
A person who transfers an instrument by signing (indorsing) it and delivering it to another person.
Trust Indorsement
A blank is for the benefit of the indorser or a third person results in legal title .... to the original....
Statute of Repose
A blank that is not dependent on the happening of a cause of action.
Mailbox Rule
A common law rule that acceptance takes effect, and thus completes formation of the contract, at the time the offer sends or delivers the acceptance via the communication mode expressly or impliedly authorized by the offeror.
Mirror Image Rule
A common law rule that requires that the terms of the offer's acceptance adhere exactly to the terms to of the offeror's offer for a valid contract to be formed.
Accord & Satisfaction
A common means of settling a disputed claim, whereby a debtor offered to pay a lesser amount than the creditor purports to be owed.
Condition Precedent
A condition in a contract that must be met before a party's promise becomes absolute.
Condition Subsequent
A condition in a contract that, if it occurs, operates to terminate a party's absolute promise to perform.
Employment Contract
A contract between an employer and an employee in which the terms and conditions of employment are stated.
Penalty
A contract clause that specifies a certain amount to be paid in the event of a default or breach of contract but is unenforceable because it is designed to punish the breaching party rather than to provide a reasonable estimate of damages.
Sales Contract
A contract for the sale of goods.
Void Contract
A contract having no legal force or binding effect.
Express Contract
A contract in which the terms of the agreement are stated in words, oral or written.
Unconscionable Contract
A contract or clause that is void on the basis of public policy because one party was forced to accept terms that are unfairly burdensome and that unfairly benefit the stronger party.
Informal Contract
A contract that does not require a specific form or method of creation to be valid.
Executed Contract
A contract that has been fully performed by both parties.
Executory Contract
A contract that has not yet been fully performed.
Promise
A declaration that binds a person who makes it (the promisor) to do or not to do a certain act.
Personal Defense
A defense that can be used to avoid payment to an ordinary holder of a negotiable instrument but not a holder in due course or a holder with the rights of an HDC.
Promissory Estoppel
A doctrine that can be used to enforce a promise when the promise has justifiably relied on it and when justice will be better served by enforcing the promise.
Order instrument
A negotiable instrument that is payable to the order of an identified person or to an identified person or order.
Delegatee
A party to whom contractual obligations are transferred, or delegated.
Assignee
A party to whom the rights under a contract are transferred, or assigned.
Assignor
A party who transfers (assigns) his or her rights under a contract to another party (called assignee)
Delegator
A party who transfers (delegates) her or his obligations under a contract to another party (called the delegatee)
Acceptance
In negotiable instrument law, a drawee's signed agreement to pay a draft when it is presented.
Fictitious Payee
A payee on a negotiable instrument whom the maker or drawer did not intend to have an interest in the instrument. Indorsement by fictitious payees are treated as authorized indorsements under article 3
Bearer
A person is possession of an instrument payable to bearer or indorsed in blank.
Promisee
A person to whom a promise is made.
Offeree
A person to whom an offer is made.
Lessee
A person who acquires the right to the possession and use of another's goods in exchange for rental payments.
Principal
A person who agrees to have an agent act on his or her behalf.
Agent
A person who agrees to represent or act for a principal.
Promisor
A person who makes a promise.
Offeror
A person who makes an offer.
Lessor
A person who transfers the right to the possession and use of goods to another in exchange for rental payment.
Unreasonably Dangerous
A product that is so defective that it is dangerous beyond the expectation of an ordinary consumer or a product for which a less dangerous alternative was feasible but failed to produce it
Offer
A promise or commitment to perform or refrain from performing some specified act in the future.
Express Warranty
A promise that is included in a contract concerning the quality, condition, description, or performance of the goods being sold or leased.
Condition
A qualification, provision, or clause in a contractual agreement, the occurrence or nonoccurence of which creates, suspends, or terminates the obligations of the contracting parties.
Bilateral Contract
A type of contract that arises when a promise is given in exchange for a return promise.
Unenforceable Contract
A valid contract rendered unenforceable by some statute or law.
Implied Warranty
A warranty that arises by low because of the circumstances of a sales rather than by the seller's express promise.
Implied Warranty of Merch
A warranty that good being sold or leased are reasonably fit for the general purpose for which they are sold or leased, are properly packaged and labeled, and are of proper quality.
Qualified Indorsement
An indorsement on a negotiable instrument in which the endorser disclaims any contract liability on the instrument. The notation with resource is commonly used to create a qualified indorsement
Special Indorsement
An indorsement on an instrument that identifies the specific person to whom the endorser intends to make the instrument payable. Thus, it names the indorsee.
Blank Indorsement
An indorsement that specifies no particular indorsee and can consist of a mere signature. An order instrument that is endorsed in blank becomes a bearer instrument.
Draft
Any instrument drawn on a drawee that order the drawee to pay a certain amount of funds, usually to a third party, on demand or at a definite future time.
Bearer Instrument
Any instrument that is not payable to a specific person, including instruments payable to the bearer or to cash.
Holder
Any person in possession of an instrument drawn, issued or endorsed to him or her, to his or her order, to bearer, or in blank.
Consequential Damages
Foreseeable damages that result from a party's breach of contract but are caused by special circumstances beyond the contract itself.
Scienter
Knowledge by a misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive.
Necessaries
Necessaries required for life, such as food, shelter, clothing, and medical attention.
Third Party Beneficiary
One of whose benefit a promise is made in a contract but who is not a party to the contract.
Obligee
One to whom an obligation is owed.
Course of Dealing
Prior conduct between the parties to a contract that establishes a common basis for their understanding.
Intangible Property
Property that cannot be seen or touched exists only conceptually, such as corporate stocks. Property governed by article 2
Tangible Property
Property that has physical existence and can be distinguished by the senses of touch and sight.
Ratification
The acceptance or confirmation of an act or agreement that gives legal force to an obligation that previously was not enforceable.
Presentment
The act of presenting an instrument to the party liable on the instrument in order to collect payment. Presentation also occurs when a person presents an instrument to a drawee for a required acceptance.
Forbearance
The act of refraining from an action that one has a legal right to undertake.
Acceptance
The act of voluntarily agreeing, through words or conduct, to the terms of an offer, thereby creating a contract.
Merchant
Under the UCC a person who deals in goods of the kind involved in the sales contract or who hold herself or himself out as having skill or knowledge peculiar to the practices or goods being purchased or sold.
Seasonably
Within a specified time period or, if no period is specified, within a reasonable time.
