Business Law Vocabulary Final

Monetary Damages

A breach of contract entitles the non-breaching party to sue for money damages - four basic types

Temporary Impossibility

A change in circumstances that makes performance temporarily impossible will act to suspend, but not excuse performance

Extension Clause

A clause in a time instrument that allows the instrument's date of maturity to be extended into the future

Acceleration Clause

A clause that allows a payee or other holder of a time instrument to demand payment of the entire amount due, with interest, if a certain event occurs, such as a default in the payment of an installment when due

Insolvent

A condition in which a person cannot pay his or her debts as they become due or ceases to pay debts in the ordinary course of business

Condition Precedent

A condition that must be satisfied before a party's contractual obligation to perform becomes absolute (e.g. Bob promises to hire Terry as a driver as soon as Terry gets his license)

Condition Subsequent

A condition that of which the occurrence or nonoccurence will terminate a party's absolute obligation to perform (e.g. Mary agrees to let Sue stay in May's spare room for as long as Sue remains unmarried)

Employment Contract

A contract between an employer and an employee in which the terms and conditions of employment are stated

Sales Contract

A contract for the sale of goods

Shipment Contract

A contract for the transport of the goods (The liability of goods shifts from seller to buyer at transport)

Implied Contract

A contract formed in whole or in part from the conduct of the parties

Void Contract

A contract having no legal force or binding effect (e.g. a contract entered into for an illegal purpose) - ex. a person has been adjudged mentally incompetent and a guardian and/or conservator has been appointed by the court

Express Contract

A contract in which the terms of the agreement are full and explicitly stated orally or in writing

Valid Contract

A contract satisfying all of the requisites of a contract - agreement, consideration, capacity, legal purpose, assent, and form

Unconscionable Contract

A contract so unfair and one-sided that enforcing it would be unreasonable

Informal Contract

A contract that does not require a specified form or method of formation in order to be valid

Executed Contract

A contract that has been completely performed by both (or all parties)

Executory Contract

A contract that has not yet been fully performed by one or more parties

Formal Contract

A contract that requires a special form or method of formation (creation) in order to be enforceable

Destination Contracts

A contract where seller transports goods to the buyer at the destination specified, tendered at a reasonable hour, and the goods must be held at the buyer's disposal for a reasonable period (liability of goods shift from seller to buyer at delivery)

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

Exculpatory Clauses

A contractual provision that releases a party from liability, regardless of fault

Condition

A contractual qualification, provision, or clause which creates, suspends, or terminates the obligations of one or both parties to the contract, depending on the occurrence or nonoccurrence of some event(s)

Liquidated Debt

A debt whose amount has been ascertained, fixed, agreed on, settled, or exactly determined

Unliquidated Debt

A debt whose amount is in dispute by reasonable person's

Promise

A declaration that binds a person who makes it 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 (HDC) or a holder with the rights of an HDC

Impossibility of Performance

A doctrine which permits a party to be relieved of his or her contractual duties when performance becomes either impossible or totally impracticable through no fault of either party to the contract

Check

A draft ordering a drawee bank and payable on demand

Sight Draft

A draft payable on presentment

Trade Acceptance

A draft that is drawn by a seller of goods ordering the buyer to pay a specified sum of money to the seller, usually at a specified future time. The buyer accepts the draft by signing and returning it to the seller

Acceptor

A drawee that accepts, or promises, to pay, a negotiable instrument when it is presented later for payment

Holder in Due Course

A holder who acquires a negotiable instrument for value, in goods faith, and without notice that the instrument is defective (such as that it is overdue, has been dishonored, is subject to a defense against it or a claim to it, contains unauthorized signatures has been altered, or is so irregular or incomplete as to call its authenticity into question

Negligence

A manufacturer's seller's, or lessor's liability to consumers, users, and by-standers for physical harm or property damage that is caused by the goods.

Unilateral Mistake

A mistake made by one of the contracting parties.

Mutual Mistake

A mistake on the part of both contracting parties.

Order Instrument

A negotiable instrument that is payable "to the order of an identified person" or "to an identified person or order"

Election of Remedies

A non-breaching party must choose one remedy from those available to prevent double recovery or a windfall

Certificate of Deposit

A note issued by a bank in which the bank acknowledges the receipt of funds from a party and promises to repay that amount, with interest, to the party on a certain date

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

Fraudulent Misrepresentation

A party unknowingly consents to a contract with fraudulent terms (contract is void)

Delegator

A party who tranfers (delegates) her or his oblications under a contract to another party (called delegatee)

Assignor

A party who transfers (assigns) his or her rights under a contract to another party (called the assignee)

Material Breach of Contract

A party's failure, without legal excuse, to substantially perform the obligations he or she has promised to perform

Bearer

A person in possession of an instrument payable to bearer or indorsed in blank

Payee

A person to whom a negotiable instrument is made payable

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

Merchant

A person who deals in goods that are the kind involved in the contract, holds himself or herself out as having knowledge and skill peculiar to the practice or use of the goods involved in the contract

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 payments

Unreasonably Dangerous Product

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 the manufacturer failed to produce it

Bilateral Contract

A promise is given in exchange for a promise in return (e.g. money in exchange for a car). The parties are both promisors and promisees

Offer

A promise or commitment to perform or refrain from performing some specified future act made by the offeror

Insurable Interest

A property interest in goods being sold or leased that is sufficiently substantial to permit a party to insure against damage to the goods

Counteroffer

A rejection by the offeree of the original offer, coupled with an offer made by the original offeree to the original offeror

Reformation

A remedy allowing the contract to be re-written to reflect the true intent of the parties, typically limited to cases of fraud or mutual mistake

Quasi Contract

A remedy available to prevent one party from being unjustly enriched at the other party's expense

Cover

A remedy that allows the buyer or lessee, on the seller's or lessor's breach, to obtain substitute goods from another seller or lessor

Express Warranties

A seller's or lessor's oral or written promise, ancillary to an underlying sales or lease agreement, as to the quality, description, or performance of the goods being sold or leased

Indorsement

A signature, with or without additional words or statements (e.g., "for deposit only", "payable to Jane Smith", "payable from acct. #000001", etc.), made by the drawer in order to transfer his or her rights to the payee

Adhesion Contract

A standard-form contract in which the stronger party dictates the terms

Statute of Frauds

A stature, which requires certain types of contracts to be in writing in order to be enforceable

Statute of Limitations

A statute which limits the time period for initiating a lawsuit to recover damages for a breach of contract

Parol Evidence Rule

A substantive rule of contract law under which a court will not admit evidence of the parties' prior negotiations, prior oral or written agreements, or contemporaneous oral agreements if the evidence contradicts or varies the terms of a written contract

Predominant-Factor Test

A test courts use to determine whether a contract is primarily for the sale of goods or for the sale of services

Intended Beneficiary

A third party for whose benefit a contract is formed

Donee Beneficiary

A third party for whose benefit a contract was made whereby the promisor promised the promisee to make a gift to the third-party beneficiary

Creditor Beneficiary

A third party that benefits from a contract in which the promisor promises to pay a debt owed by the promisee to the third-party beneficiary

Incidental Beneficiary

A third party that benefits from the performance of contract, but whose benefit was not the reason the contract was formed

Third-Party Beneficiary

A third party, X, who is intended, by the terms of the contract between Y and Z, to benefit from Y's and Z's performance of the contract

Assignment (of Rights)

A transaction whereby a party to the contract (the assignor) transfers his or her rights to some third party (the assignee). As a consequence, the assignee may demand performance of the contract by the obligor, and the assignor's contract rights are extinguished

Delegation (of Duties)

A transaction whereby a party to the contract (the delegator) frees himself or herself from his or her duties by having some third party (the delegatee_ perform those duites. Unlike the assignor, whose contract right are extinguished by the assignment, the delegator remains liable for his or her contract duties if the delegatee fails to perform

Acceptance

A voluntary act by the offeree - either in the form of words or of conduct - which indicates agreement to the terms of the offer

Limited Warranty

A warranty that does not meet all of the requisites for a full warranty

Implied Warranty of Merchantability

A warranty that goods 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

Implies Warranty of Fitness for a Particular Purpose

A warranty that the goods being sold or leased are fit for the particular purpose for which the buyer/lessee wishes to use the goods, which is imposed on any seller who knows that the buyer/lessee is relying on the seller/lessor's skill and judgment to select suitable goods.

Implied Warranties

A warranty that the law derives by implication or inference from the nature of the transaction or the relative bargaining positions or circumstances of the parties

Integrated Contract

A written contract that constitutes the final expression of the parties' agreement. Evidence extraneous to the contract that 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 sum of money to another person on demand or at a specified future time

Firm Offer

A written, signed offer that is irrevocable for the stated period or if not stated time, then for a reasonable period of time, up to three months, without the payment of consideration

Ratification

Accepting and giving legal force to an obligation that previously was not enforeable and/or voidable - may be either express or implied

Licensing Statutes

All states require those members of certain professions - attorneys, doctors, and architects, to name a few - be licensed by the state. Any contract with an unlicensed individual is illegal and may be unenforceable

Mailbox Rule

An acceptance becomes effective upon being placed in the mailbox by the offeree

Anticipatory Repudiation

An action by a party to a contract that indicates that he or she will not perform a contractual obligation due to be performed in the future

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

Accord and Satisfaction

An agreement between an obligor (debtor) and obligee (creditor), by which the obligor agrees to pay the obligee some amount owed under the contract (generally less than the amount in dispute) in exchange for a discharge of all obligations owed by the obligor to the obligee

Contract

An agreement between two or more parties to perform or to refrain from some act now or in the future

Output Contract

An agreement by which the buyer agrees to purchase and the seller agrees to sell all or up to a stated amount of what the seller produces

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 buyer needs or requires

Covenant Not to Sue

An agreement to substitute a contractual obligation for some other type of legal action based on a valid claim

Release

An agreement whereby one party forfeits its rights to pursue a legal claim against another party (binding if they are: given in good faith, stated in writing, and accompanied by consideration)

Special Indorsement:

An indorsement that indicates the specific person to whom the indorser intends to make the instrument payable - i.e., the indorsee.

Blank Indorsement

An indorsement that specifies no particular indorsee and can consist of a mere signature.

Trust Indorsement

An indorsement to a person who is to hold or use funds for the benefit of the indorser or a third person. It is also known as an agency indorsement

Qualified Indorsement:

An indorsement which disclaims any contract liability on the instrument (e.g., "without recourse").

Unilateral Contract

An offer can be accepted only by the offeree's performance (e.g. X offers Y $15 to mow X's yard); the offeror cannot revoke the offer for a reasonable period of time

Common-Law Acceptance

An offeror can specify a particular method of acceptance; that method of communicating acceptance is effective as long as it is received before the offeror's deadline

Unenforceable Contract

An otherwise valid contract rendered unenforceable by some statute or law (e.g. an oral contract for the transfer of an interest in real estate)

Voidable Contract

An otherwise valid contract that may be legally avoided, cancelled, or annulled at the option of one of the parties (e.g. a contract entered into under duress or under false pretenses) - ex. a person not previously adjudged mentally incompetent enters into a contract and is not able to comprehend the nature, purpose and consequences of the contract

Tender

An unconditional offer to perform an obligation by a person who is ready, willing, and able to do so

Draft

An unconditional order to pay

Infringements

Any copyright, trademark, or patent claims by a third party

Lien

Any encumbrance on the goods or other property to satisfy a debt or protect a claim for payment of a debt

Restrictive Indorsement:

Any indorsement on a negotiable instrument that requires the indorsee to comply with certain instructions regarding the funds involved

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 indorsed to him or her, to his or her order, to bearer, or in blank

Usage of Trade

Any practice or method of dealing having such regularity of observance in a place, vocation, or trade that it is reasonably expected to be observed by the transaction in question

Undue Influence

Arises from relationships in which one party can influence another party to the point of overcoming the influenced party's free will (parent-child, doctor-patient, etc.)

Open Payment Term

As a general rule, if the parties do not specify otherwise, payment is due at the time and the place that the buyer receives the goods. Moreover, the buyer can tender payment using any commercially acceptable means. However, if the seller demands payment in cash, the buyer must be given a reasonable time to obtain it

Open Delivery Term

As a general rule, if the parties do not specify: the place of delivery, the buyer will take delivery at the seller's place of business, or (if non exists) at the seller's residence and/or the time of delivery, the seller will deliver within a reasonable period of time

Open Price Term

As a general rule, if the parties have not agreed on a price, the court will determine a reasonable price at the time of delivery

Privity of Contract

As a general rule, only the parties to a contract - the promisor(s) and the promisee(s) - owe any duties and enjoy any rights arising from the contract

Contractual Capacity

Both parties must be competent to enter into the agreement; the minimum mental capacity required by law for a party who enters into a contractual agreement to be bound by it. Common law recognizes two classes of persons who are generally not considered to have sufficient capacity to be bound by their contracts - minors and mentally impaired or incompetenet

Objective Impossibility

Excuses performance (e.g. death of incapacitation, destruction of the subject matter, change in applicable law)

Open Quantity Term

Failure to specify the quantity of goods to be bought and sold is fatal at common law and under Article 2

Necessaries

Food, shelter, clothing, medical attention, etc.

Duress

Forcing a party to enter into a contract because of the fear created by threats

Emancipation

Minor is treated as adult

Third-Party Beneficiaries

Only intended beneficiaries acquire actionable legal rights in a contract

Sale

Passing of titles to property from the seller to the buyer for a price

Specifically Performed

Performed according to the precise terms of the contract

Course of Dealing

Prior conduct between the parties to the contract that establishes a common basis for their understand

Mirror Image Rule

Prior to the adoption of the Uniform Commercial Code, an offeree's acceptance was required to match the offeror's offer exactly. If the offeree's acceptance materially changed, added to, or deleted any terms in the original offer, the offeree's acts were deemed to constitute a counteroffer, not an acceptance

Mistake

The parties entered into a contract with different understandings of one or more material fact(s) relating to the subject matter of the contract

Contractual Limitations on Remedies

The parties may contractually agree to expand or limit the remedies provided by the U.C.C. The parties may also limit or exclude consequential damages as long as the limitation or exclusion is not unconscionable, given the relative bargaining strength of the parties

Drawer

The party that initiates a draft (such as a check), thereby ordering the drawee to pay

Drawee

The party that is ordered to pay a draft or check with a check, a bank or a financial institution

Shelter Principle

The principle that the holder of a negotiable instrument who cannot qualify as a holder in due course (HDC), but who derives his or her title through an HDC, acquires the rights of an HDC

Design Defect

The product, even if manufactured perfectly, is unreasonably dangerous as designed - often because an economically feasible, less dangerous alternative was available to the manufacturer

Cure

The rights of a party who tenders nonconforming performance to correct his or her performance within the contract period

Entrustment Rule

The rule that entrusting goods to a merchant who deals in goods of that kind gives that merchant the power to transfer those goods and all rights to them to a buyer in the ordinary course of business

Discharge

The termination of a party's obligations arising under a contract

Negotiation

The transfer of an instrument in such form that the tranferee (the person to whom the instrument is transfered) becomes a holder

Alienation

The transfer of land out of one's possession

Delegation of Duties

The transfer to another of all or part of one's duties arising under a contract

Objective Theory of Contracts

The view that contracting parties shall only be bound by terms that can objectively be inferred from promises made

Revocation

The withdrawal of an offer by the offeror, communicated to the offeree prior to the offeree's acceptance

Dishonor

To refuse to pay or accept a negotiable instrument, whichever is required, even though the instrument is presented in a timely and proper manner

Pre-Existing Legal Duty

Under most circumstances, a promise to do (or refrain from doing) what one already has a legal duty to do (or refrain from doing) does not constitute legally sufficient consideration

Usury Statutes

Virtually every state has a statute that sets the maximum rate of interest that can legally be charged for different types of transactions, including ordinary loans

The Plain Meaning Rule

When a contract is clear and unequivocal, a court will enforce it according to its plain terms, set forth on the face of the instrument, and there is no need for the court either to consider extrinsic evidence or to interpret the language of the contract

Substantial Performance

When a party fails to completely perform his or her contractual duties, the party's performance must not vary greatly from that promised in the contract, and it must create substantially the same benefits as those promised in the contract

Promissory Estoppel

When a promisor makes a clear and definite promise on which the promisee justifiably relies, the promisor is bound by the promise, even if it was insufficient to form the basis of a balid, legally binding contract

Payment Term

When goods are sold on credit, the buyer's obligation to pay is conditioned on the credit terms provided in the contract, not when the goods are delivered

Commercial Impracticability

When occurrences, unforeseen by either party at the time the contract was made (e.g. destruction of goods)

Justifiable Ignorance

When one of the parties to an illegal contract has no knowledge or any reason to know that the contract is illegal, that party will be entitled to be restored to its pre-contractual situation

U.C.C. Acceptance

When the offeror does not specify a method, acceptance may be communicated by any method that is reasonable under the circumstances

Installment Contract

Where a contract requires or authorizes delivery in two or more separate lots, to be accepted and paid for separately

Seasonably

Within a specified time period or, if no period is specified, within a reasonable time

Negotiable Instrument

Written instrument; 2) Signed by the maker or drawer of the instrument; 3) That contains an unconditional promise or order to pay; 4) An exact sum of money (with or without interest in a specified amount or at a specified rate); 5)On demand or at an exact future time; 6) To a specific person, or to order, or to its bearer.

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

Manufacturing Flaw

The manufacturer fails to exercise due care in the manufacture, assembly, and/or testing of the product;

Liquidated Damages

Many contracts contain provisions specifying a sum certain of money to be paid by the breaching party in the event that he or she fails to perform as required by the contract.

Rescission

Canceling an existing contract, and returning the parties to their pre-contract states

C.O.D. Shipments

Cash on delivery (buyer has a right to reject because it does not permit the buyer to inspect prior to making payment)

Usury

Charging an illegal rate of interest

Unconscionable Contracts

Contracts that require one party, as a consequence of disproportionate bargaining power, to accept terms that are unfairly burdensome to that party and unfairly beneficial to the party with greater bargaining power, are generally unenforceable

Contracts in Restraint of Trade

Contracts that tend to reduce competition for the provision of goods or services in one or more market(s) (e.g. covenants not to compete) are illegal

Nominal Damages

Damages awarded to the non-breaching party when only a "technical" injury occurred resulting in no actual damages (e.g. one dollar)

Punitive Damages

Damages designed to punish a wrongdoer and to deter similar conduct in the future. Such damages are generally not recoverable in breach of contract actions, unless the breaching party's actions give rise to a separate tort claim

Consequential Damages

Damages resulting indirectly from the breach which were reasonably foreseeable to the breaching party at the time the breach occurred

Incidental Damages

Damages that compensate for expenses directly incurred because of a breach of contract, such as those incurred to obtain performance from another source

Compensatory Damages

Damages which compensate the non-breaching party for the injuries or losses actually sustained as a result of the breach

Universal Defenses

Defenses that are valid against all holders of a negotiable instrument, including holders in due course (HDCs) and holders with the rights of HDCs

Consistent Additional Terms

Terms which do not contradict and which help explain the writing

Performance

Fulfiling one's contractual duties

Conforming Goods

Goods that conform to contract specifications

Partial Performance

If a buyer has taken partial possession of real or personal property and paid that part of the contract price attributable to the property received, and if the parties cannot be returned to their pre-contract, an oral contract is enforceable to the extent that the seller has accepted paymentor the buyer has accepted delivery of the goods covered by the oral contract

Perfect Tender

If the goods delivered or the tender of delivery fail in any respect to conform with the terms of the contract, the buyer has the right to accept the goods, reject the entire shipment, or accept part and reject part

Assorted Goods

If the terms fail to specify what mixture of goods are to be delivered, the buyer may specify the assortment

Illusory Promises

If the terms of a contract call for performance in such uncertain terms that the promisor has not definitely promised to do (or refrain from doing) anything, the promise is unenforceable for lack of sufficient consideration

Identification

In a sale of goods, the express designation of the goods provided for in the contract

Mitigation of Damages

In most situations, when a breach of contract occurs, the non-breaching party has a duty to take whatever action is reasonable to minimize the damages caused by the breach

Disaffirmance

In order for a minor to avoid a contract, he or she has need only manifest an intention not to be bound by it

Scienter

Knowledge by a misrepresenting party that material facts have been falsely represented or omitted with an intent to deceive

Concurrent Conditions

Mutually dependent conditions that must occur or be performed at the same time in order to give rise to any absolute obligation to perform (e.g. Mikki offers to pay Tina $100 in exchange for Tina's class ring)

Open Duration Term

Occurs if a contract does not indicate how long the parties are to deal with one another. In such a case, either party may terminate with reasonable notification

Option Contracts

Offeror cannot revoke his or her offer for a stipulated time period during which the offeree has the sole right of acceptance

Notice of Assignment

Once a valid assignment of rights has been made to a third party, the third party (the assignee) should notify the obligor of the assignment

Agreement

One party must objectively intend to make an offer to enter into a contract, and the other party must accept the terms of the offer; a meeting of two or more minds in regard to the terms of a contract

Obligee

One to whom an obligation is owed

Obligor

One who owes an obligation to another

Maker

One who promises to pay a fixed amount of funds to the holder of a promissory note or a certificate of deposit

Past Consideration

Promises made in return for acts or events that have already taken place are unenforceable for lack of sufficient consideration

Intangible Property

Property that cannot be seen or touched but exists only conceptually, such as corporate stocks

Tangible Property

Property that has physical existence and can be distinguished by the senses of touch and sight

Novation

Replacing an existing contract with a new, superseding contract between the same parties

Restitution

Returning good, property, or money previously transferred in order to restore the non-breaching party to his or her pre-contract position

Tender of Delivery

Seller must have and hold conforming goods at the disposal of the buyer, and give the buyer reasonable notice to enable the buyer to take delivery

Blue Laws

Some states and localities prohibit engaging in certain business activities on Sunday

Consideration

Something of value received or promised, to convince a party to agree to the deal

Penalties

Specifies sum certain of money, bearing no reasonable relationship to the value of performance, to be paid by the breaching party in the event of default or breach

Blue Sky Laws

State laws that regulate the offering and sale of securities for the protection of the public

Presentment

The act of presenting an instrument to the party liable on the instrument in order to collect payment. It 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

Right of Inspection

The buyer is given an opportunity to inspect the identified goods as a condition precedent to the seller's or lessor's right to enforce payment under the contract under the U.C.C

Course of Performance

The conduct of the parties to the agreement under the terms of the agreement (this evidence is particularly helpful in determining what the parties intended the agreement to mean)

Bargained-For Exchange

The consideration given by the promisor must induce the promisee to incur a legal detriment and/or provide a legal benefit to the promisor, either or both of which are sufficient to induce the promisor to make the promise

Integration

The determination of whether parol evidence will be considered revolves around the court's determination of whether the written contract constitutes the final expression of the parties' agreement

The "Majority" Rule

The first assignment made takes priority over subsequent assignment

The "English" Rule

The first assignment recorded or otherwise made known to the obligor takes priority - even over an assignment made before it

Contract Alteration

The innocent party may elect to be discharged under a contract when the other party has unknowingly materially altered a written contract