Law final #3

Acceleration Clause

(1) A clause in an installment contract that provides for all future payments to become due immediately on the failure to tender timely payments or on the occurrence of a specified event. (2) A clause in a mortgage loan contract that makes the entire loan balance become due if the borrower misses or is late making monthly mortgage payments.

Acceptance

(1) In contract law, the offeree's notification to the offeror that the offeree agrees to be bound by the terms of the offeror's proposal. (2) In negotiable instruments law, the drawee's signed agreement to pay a draft when presented.

acceptance

(1) In contract law, the offeree's notification to the offeror that the offeree agrees to be bound by the terms of the offeror's proposal. (2) In negotiable instruments law, the drawee's signed agreement to pay a draft when presented.

Attachment

(1) In the context of secured transactions, the process by which a security interest in the property of another becomes enforceable. (2) In the context of judicial liens, a court-ordered seizure and taking into custody of property prior to the securing of a judgment for a past-due debt.

duress

(n.) compulsion by threat; forcible confinement

adhesion contracts

A "standard-form" contract, such as that between a large retailer and a consumer, in which the stronger party dictates the terms.

buyer in the ordinary course of business

A buyer who, in good faith and without knowledge that the sale violates the ownership rights or security interest of a third party in the goods, purchases goods in the ordinary course of business from a person in the business of selling goods of that kind.

Cover

A buyer's or lessee's purchase on the open market of goods to substitute for those promised but never delivered by the seller or lessor. Under the Uniform Commercial Code, if the cost of cover exceeds the cost of the contract goods, the buyer or lessee can recover the difference, plus incidental and consequential damages.

Cashier's Check

A check drawn by a bank on itself.

Certified Check

A check that has been accepted by the bank on which it is drawn. Essentially, the bank, by certifying (accepting) the check, promises to pay the check at the time the check is presented.

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.

Perfect tender rule

A common law rule under which a seller was required to deliver to the buyer goods that conformed perfectly to the requirements stipulated in the sales contract. A tender of nonconforming goods would automatically constitute a breach of contract. Under the Uniform Commercial Code, the rule has been greatly modified.

Distribution Agreement

A contract between a seller and a distributor of the seller's products setting out the terms and conditions of the distributorship.

express contract

A contract in which the terms of the agreement are fully and explicitly stated in words, oral or written.

executed contract

A contract that has been completely performed by both parties.

executory contract

A contract that has not yet been fully performed.

liquidated debt

A debt that is due and certain in amount.

latent defects

A defect that is not obvious or cannot readily be ascertained.

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. Personal defenses are also called limited defenses.

Comity

A deference by which one nation gives effect to the laws and judicial decrees of another nation.

Act of State Doctrine

A doctrine that 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.

Commercial Impracticability

A doctrine under which a seller may be excused from performing a contract when (1) a contingency occurs, (2) the contingency's occurrence makes performance impracticable, and (3) the nonoccurrence of the contingency was a basic assumption on which the contract was made.

innocent misrepresentation

A false statement of fact or an act made in good faith that deceives and causes harm or injury to another.

Holder in due course (HDC)

A holder who acquires a negotiable instrument for value; in good faith; and without notice that the instrument is overdue, that it has been dishonored, that any person has a defense against it or a claim to it, or that the instrument contains unauthorized signatures, alterations, or is so irregular or incomplete as to call into question its authenticity.

Co-surety

A joint surety; one who assumes liability jointly with another surety for the payment of an obligation.

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.

bilateral mistake

A mistake that occurs when both parties to a contract are mistaken about the same material fact.

Fictitious payee

A payee on a negotiable instrument whom the maker or drawer does not intend to have an interest in the instrument. Indorsements by fictitious payees are not treated as unauthorized under Article 3 of the Uniform Commercial Code.

Bankruptcy trustee

A person appointed by the court to manage the debtor's funds in a bankruptcy proceeding.

Bearer

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

Indorsee

A person to whom a negotiable instrument is transferred by indorsement.

Agent

A person who agrees to represent or act for another, called the principal.

Accommodation party

A person who signs an instrument for the purpose of lending his or her name as credit to another party on the instrument.

Indorser

A person who transfers an instrument by signing (indorsing) it and delivering it to another person.

Artisan's lien

A possessory lien given to a person who has made improvements and added value to another person's personal property as security for payment for services performed.

condition

A possible future event, the occurrence or nonoccurrence of which will trigger the performance of a legal obligation or terminate an existing obligation under a contract.

Antecedent

A preexisting claim. In negotiable instruments law, taking an instrument in satisfaction of an antecedent claim is taking the instrument for value.

Disclosed principal

A principal whose identity is known to a third party at the time the agent makes a contract with the third party.

force majeure clause

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

Cram-down provision

A provision of the Bankruptcy Code that allows a court to confirm a debtor's Chapter 11 reorganization plan even though only one class of creditors has accepted it.

Agency

A relationship between two parties in which one party (the agent) agrees to represent or act for the other (the principal).

mitigation of damages

A rule requiring a plaintiff to have done whatever was reasonable to minimize the damages caused by the defendant.

Equal dignity rule

A rule requiring that an agent's authority be in writing if the contract to be made on behalf of the principal must be in writing.

collateral promise

A secondary promise that is ancillary (subsidiary) to a principal transaction or primary contractual relationship, 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.

Express Warranty

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.

E-agent

A semiautonomous computer program that is capable of executing specific tasks.

Indorsement

A signature placed on an instrument for the purpose of transferring ownership rights in the instrument.

Bailment

A situation in which the personal property of one person (a bailor) is entrusted to another (a bailee), who is obligated to return the bailed property to the bailor or dispose of it as directed.

nominal damages

A small monetary award (often one dollar) granted to a plaintiff when no actual damage was suffered or when the plaintiff is unable to show such loss with sufficient certainty.

Check

A special type of draft that is drawn on a bank, ordering the bank to pay a fixed amount of money on demand.

statue of frauds

A state statute under which certain types of contracts must be in writing to be enforceable.

Continuation statement

A statement that, if filed within six months prior to the expiration date of the original financing statement, continues the perfection of the original security interest for another five years. The perfection of a security interest can be continued in the same manner indefinitely.

parole evidence rule

A substantive rule of contracts under which a court will not receive into evidence the parties' prior negotiations, prior agreements, or contemporaneous oral agreements if that evidence contradicts or varies the terms of the parties' written contract.

Civil law system

A system of law derived from that of the Roman Empire and based on a code rather than case law; the predominant system of law in the nations of continental Europe and the nations that were once their colonies. In the United States, Louisiana is the only state that has a civil law system.

Clearinghouse

A system or place where banks exchange checks and drafts drawn on each other and settle daily balances.

bilateral contract

A type of contract that arises when a promise is given in exchange for a promise.

Implied Warranty of Merchantability

A warranty that goods being sold or leased are reasonably fit for the ordinary purpose for which they are sold or leased, are properly packaged and labeled, and are of fair quality. The warranty automatically arises in every sale or lease of goods made by a merchant who deals in goods of the kind sold or leased.

Implied Warranty of Fitness for a Particular Purpose

A warranty that goods sold or leased are fit for a particular purpose. The warranty arises when any seller or lessor knows the particular purpose for which a buyer or lessee will use the goods and knows that the buyer or lessee is relying on the skill and judgment of the seller or lessor to select suitable goods

Implied Warranty

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

Document of title

A writing exchanged in the regular course of business that evidences the right to possession of goods (for example, a bill of lading or a warehouse receipt).

integrated contract

A written contract that constitutes the final expression of the parties' agreement. If a contract is integrated, evidence extraneous to the contract that contradicts or alters the meaning of the contract in any way is inadmissible.

Letter of Credit

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

Exclusive agency

An agency in which a principal grants an agent an exclusive territory and does not allow another agent to compete in that territory.

Agency coupled with an interest

An agency, created for the benefit of the agent, in which the agent has some legal right (interest) in the property that is the subject of the agency.

accord and satisfaction

An agreement for payment (or other performance) between two parties, one of whom has a right of action against the other. After the payment has been accepted or other performance has been made, the "accord and satisfaction" is complete, and the obligation is discharged.

Creditors' composition agreement

An agreement formed between a debtor and his or her creditors in which the creditors agree to accept a lesser sum than that owed by the debtor in full satisfaction of the debt.

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.

click-on agreement

An agreement that arises when a buyer, engaging in a transaction on a computer, indicates his or her 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.

contract

An agreement that can be enforced in court; formed by two or more parties, each of whom agrees to perform or to refrain from performing some act now or in the future.

covenant not to sue

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

anticipatory repudiation

An assertion or action by a party indicating that he or she will not perform an obligation that he or she is contractually obligated to perform at a future time.

Blank indorsement

An indorsement that specifies no particular indorsee and can consist of a mere signature. An order instrument that is indorsed in blank becomes a bearer instrument.

Firm Offer

An offer (by a merchant) that is irrevocable without consideration for a period of time (not longer than three months). A firm offer by a merchant must be in writing and must be signed by the offeror.

counteroffer

An offeree's response to an offer in which the offeree rejects the original offer and at the same time makes a new offer.

Collecting bank

Any bank handling an item for collection, except the payor bank.

Bearer Instrument

Any instrument that is not payable to a specific person, including instruments payable to the bearer or to "cash."

Negligent Misrepresentation

Any manifestation through words or conduct that amounts to an untrue statement of fact made in circumstances in which a reasonable and prudent person would not have done that which led to the misrepresentation. A representation made with an honest belief in its truth may still be negligent due to (1) a lack of reasonable care in ascertaining the facts, (2) the manner of expression, or (3) the absence of the skill or competence required by a particular business or profession.

Fiduciary

As a noun, a person having a duty created by his or her undertaking to act primarily for another's benefit in matters connected with the undertaking; as an adjective, a relationship founded on trust and confidence.

Express authority

Authority expressly given by one party to another. In agency law, an agent has express authority to act for a principal if both parties agree, orally or in writing, that an agency relationship exists in which the agent has the power (authority) to act in the place of, and on behalf of, the principal.

Apparent authority

Authority that is only apparent, not real. An agent's apparent authority arises when the principal causes a third party to believe that the agent has authority, even though she or he does not.

estopped

Barred, impeded, or precluded.

concurrent conditions

Conditions in a contract that must occur or be performed at the same time; they are mutually dependent. No obligations arise until these conditions are simultaneously performed.

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.

Default

Failure to pay a debt when it is due.

consideration

Generally, the value given in return for a promise or a performance. The consideration, which must be present to make the contract legally binding, must be something of legally sufficient value and must be bargained for.

Conforming goods

Goods that conform to contract specifications.

Adequate protection doctrine

In bankruptcy law, a doctrine that protects secured creditors from losing their security as a result of an automatic stay. In certain circumstances, the bankruptcy court may provide adequate protection by requiring the debtor or trustee to pay the creditor or provide additional guaranties to protect the creditor against the losses suffered by the creditor as a result of the stay.

Debtor in possession (DIP)

In Chapter 11 bankruptcy proceedings, a debtor who is allowed to continue in possession of the estate in property (the business) and to continue business operations.

alienation

In real property law, the voluntary transfer of property from one person to another (as opposed to a transfer by operation of law).

emancipations

In regard to minors, the act of being freed from parental control; occurs when a child's parent or legal guardian relinquishes the legal right to exercise control over the child. Normally, a minor who leaves home to support himself or herself is considered emancipated.

delegatee

One to whom contract duties are delegated by another, called the delegator.

Independent Contractor

One who works for, and receives payment from, an employer but whose working conditions and methods are not controlled by the employer. An independent contractor is not an employee but may be an agent.

Imposter

One who, by use of the mail, telephone, or personal appearance, induces a maker or drawer to issue an instrument in the name of an impersonated payee. Indorsements by imposters are not treated as unauthorized under Article 3 of the Uniform Commercial Code.

Consumer-debtor

One whose debts result primarily from the purchase of goods for personal, family, or household use.

course of dealing

Prior conduct between parties to a contract that establishes a common basis for their understanding.

After-acquired property

Property of the debtor that is acquired after the execution of a security agreement.

consequential damages

Special damages that compensate for a loss that is not direct or immediate (for example, lost profits). The special damages must have been reasonably foreseeable at the time the breach or injury occurred in order for the plaintiff to collect them.

browse-wrap terms

Terms and conditions of use that are presented to an Internet user at the time a product, such as software, is downloaded but that need not be agreed to before the product is installed or used.

forbearance

The act of refraining from exercising a legal right; an agreement between a lender and a borrower in which the lender agrees to temporarily cease requiring mortgage payments, to delay foreclosure, or to accept smaller payments than previously scheduled.

assignment

The act of transferring to another all or part of one's rights arising under a contract.

age of majority

The age at which an individual is considered legally capable of conducting himself or herself responsibly and is entitled to vote. In contract law, the age at which one is no longer an infant and can no longer disaffirm a contract.

Course of performance

The conduct that occurs under the terms of a particular agreement. Such conduct indicates what the parties to an agreement intended it to mean.

breach of contract

The failure, without legal excuse, of a promisor to perform the obligations of a contract.

Depositart bank

The first bank to receive a check for payment.

contractual capacity

The legal ability to enter into contracts; the threshold mental capacity required by law for a party who enters into a contract to be bound by that contract.

Down payment

The part of the purchase price of real property that is paid in cash up front, reducing the amount of the loan or mortgage.

Acceptor

The person (the drawee) who accepts a draft and who agrees to be primarily responsible for its payment.

assignee

The person to whom contract rights are assigned.

Dumping

The selling of goods in a foreign country at a price below the price charged for the same goods in the domestic market.

Cross-collateralization

The use of an asset that is not the subject of a loan to collateralize that loan.

Dishonor

To refuse to accept or pay a draft or a promissory note when it is properly presented. An instrument is dishonored when presentment is properly made and acceptance or payment is refused or cannot be obtained within the prescribed time.

Authenticate

To sign or, on an electronic record, to adopt any symbol that verifies the intent to adopt or accept the record.

Collateral

Under Article 9 of the Uniform Commercial Code, the property subject to a security interest.

Installment Contract

Under the Uniform Commercial Code, a contract that requires or authorizes delivery in two or more separate lots to be accepted and paid for separately.

Cure

Under the Uniform Commercial Code, the right of a party who tenders nonconforming performance to correct his or her performance within the contract period.