Business Law For Accountants: Agency

Réussis tes devoirs et examens dès maintenant avec Quizwiz!

Usage of Trade

Any practice or method of dealing having such regularity of observance in a place, vocation, or trade as to justify an expectation that it will be observed with respect to the transaction in question

HDC Status Requirements

For Value In Good Faith Without Notice that it is Defective

Fungible Goods

Goods that are alike by physical nature, by agreement, or by trade usage Examples of fungible goods are wheat, oil, and wine that are identical in type and quality.

Conforming Goods

Goods that conform to contract specifications

UCC 2-401

Nearly all subsections of UCC 2-401, the words "unless otherwise explicitly agreed" appear, meaning that any explicit understanding between the buyer and the seller determines when title passes Without an explicit agreement to the contrary, title passes to the buyer at the time and the place the seller performs by delivering the goods

Void Title

No title can be transferred

Point-of-Sale Systems

Online terminals allow consumers to transfer funds to merchants to pay for purchases using a debit card

E-Money

Prepaid funds recorded on a computer or a card (such as a smart card)

Smart Cards

Prepaid funds recorded on a microprocessor chip embedded on a card One type of e-money

Agency By Estoppel

Principal causes a third person to believe that another person is the Principal's Agent, and the third person acts to her detriment in reasonable reliance on that belief

Course of Dealing

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

Expedited Funds Availability Act

Purpose of standardizing hold periods on deposits made to commercial banks and to regulate institutions' use of deposit holds

Incidental Damages

Expenses that are caused directly by a breach of contract, such as those incurred to obtain performance from another source

Payor Bank

The bank on which a check is drawn (the drawee bank)

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

Acceptance

The drawee's written promise to pay the draft when it comes due

Depository Bank

The first bank to receive a check for payment

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

Trade Acceptance

The seller of the goods is both the drawer and the payee

Entrustment Rule

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

Implied Warranty of Fitness 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

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

Tender of Delivery

Under the Uniform Commercial Code, a seller's or lessor's act of placing conforming goods at the disposal of the buyer or lessee and giving the buyer or lessee whatever notification is reasonably necessary to enable the buyer or lessee to take delivery

Implied from Prior Dealings or Trade Custom

Without evidence to the contrary, when both parties to a sales or lease contract have knowledge of a well-recognized trade custom, the courts will infer that both parties intended for that custom to apply to their contract

Restrictive Indorsement

Any indorsement on a negotiable instrument that requires the indorsee to comply with certain instructions regarding the funds involved A restrictive indorsement does not prohibit the further negotiation of the instrument

Bearer Instrument

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

Destination Contract

A contract in which the seller is required to ship the goods by carrier and deliver them at a particular destination The seller assumes liability for any losses or damage to the goods until they are tendered at the destination specified in the contract

Intermediary Bank

Any bank to which an item is transferred in the course of collection, except the depositary or payor bank

Buyer in Ordinary Course

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

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

Traveler's Check

A check that is payable on demand, drawn on or payable through a bank, and designated as a traveler's check

Overdrafts

A check written on a checking account in which there are insufficient funds to cover the amount of the check

Stale Checks

A check, other than a certified check, that is presented for payment more than six months after its date

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

Sales Contracts

A contract for the sale of goods under which the ownership of goods is transferred from a seller to a buyer for a price

Shipment Contract

A contract in which the seller is required to ship the goods by carrier The buyer assumes liability for any losses or damage to the goods after they are delivered to the carrier Generally, all contracts are assumed to be shipment contracts if nothing to the contrary is stated in the contract.

Unconsiable Contract

A contract or clause that is void on the basis of public policy because one party, as a result of his or her disproportionate bargaining power, is forced to accept terms that are unfairly burdensome and that unfairly benefit the dominating party

Check

A draft drawn by a drawer ordering the drawee bank or financial institution to pay a certain amount of money to the holder on demand

Bank's Acceptance

A draft orders the buyer's bank to pay

Holder in Due Course

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

Substitute Checks

A negotiable instrument that is a paper reproduction of the front and back of an original check and contains all of the same information required on checks for automated processing

Order Instrument

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

Certificate of Deposit

A note of a bank in which a bank acknowledges a receipt of money from a party and promises to repay the money, with interest, to the party on a certain date

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

Disclosed Principle

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

Undisclosed Principle

A principal whose identity is unknown by a third person, and the third person has no knowledge that the agent is acting for a principal at the time the agent and the third person form a contract

Partially Disclosed Principle

A principal whose identity is unknown by a third person, but the third person knows that the agent is or may be acting for a principal at the time the agent and the third person form a contract

Notary Public

A public official authorized to attest to the authenticity of signatures

Good Faith Purchaser For Value

A purchaser who buys without notice of any circumstance that would put a person of ordinary prudence on inquiry as to whether the seller has valid title to the goods being sold

No Liens

A second warranty of title protects buyers and lessees who are unaware of any encumbrances (claims, charges, or liabilities—usually called liens) against goods at the time the contract is made

Voidable Title

A seller has a voidable title to goods obtained by fraud, paid for with a check that was later dishonored, purchased from a minor, or purchased on credit when the seller was insolvent

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

Regulation E

A set of rules issued by the Federal Reserve System's Board of Governors under the authority of the Electronic Fund Transfer Act to protect users of electronic fund transfer systems

Parol Evidence

A term that originally meant "oral evidence," but that has come to refer to any negotiations or agreements made prior to a contract or any contemporaneous oral agreements made by the parties

Pre-Dominate Factor Test

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

No Infringements

A third type of warranty of title arises automatically when the seller or lessor is a merchant A merchant-seller or lessor warrants that the buyer or lessee takes the goods free of infringements from any copyright, trademark, or patent claims of a third person

Eletronic Fund Transfer

A transfer of funds with the use of an electronic terminal, a telephone, a computer, or magnetic tape

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

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

Fully Integrated Contract

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

Power of Attorney

A written document, which is usually notarized, authorizing another to act as one's agent; can be special (permitting the agent to do specified acts only) or general (permitting the agent to transact all business for the principal)

Promissory Note

A written promise made by one person (the maker) to pay a fixed sum of money to another person (the payee or a subsequent holder) on demand or on a specified date

FTC Rule 433

Abolishes the holder in due course doctrine in consumer credit transactions The rule applies to consumers who purchase goods or services for personal, family, or household use using a consumer credit contract

Primary Liability

Absolute liability to pay a negotiable instrument, subject to certain universal (real) defenses Maker of a promissory note and Drawee are primarily liable

Agency By Operation of Law

Agency based on social duty is formed in certain situations when the agent is unable to contact the principal: Necessaries, Emergencies.

Liquidated Damages Clause

An amount, stipulated in the contract, that the parties to a 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 an obligation that the party is contractually obligated to perform at a future time

Trust Indorsements

An indorsement for the benefit of the indorser or a third person; also known as an agency indorsement The indorsement results in legal title vesting in the original indorsee

Qualified Indorsement

An indorsement on a negotiable instrument in which the indorser disclaims any contract liability on the instrument; the notation "without recourse" is commonly used to create a qualified indorsement

Special Indorsement

An indorsement on an instrument that indicates the specific person to whom the indorser intends to make the instrument payable; that is, 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 indorsed in blank becomes a bearer instrument

Insurable Interest

An interest either in a person's life or well-being or in property that is sufficiently substantial that insuring against injury to (or the death of) the person or against damage to the property does not amount to a mere wagering (betting) contract

Stop-Payment Order

An order by a bank customer to his or her bank not to pay or certify a certain check

Draft

An unconditional written order that involves three parties The party creating the draft (the drawer) orders another party (the drawee) to pay money, usually to a third party (the payee)

Collecting Bank

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

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 had the power (authority) to act in the place of, and on behalf of, the principal

Implied Authority

Authority that is created not by an explicit oral or written agreement but by implication In agency law, implied authority (of the agent) can be conferred by custom, inferred from the position the agent occupies, or implied by virtue of being reasonably necessary to carry out express authority

Apparent Authority

Authority that is only apparent, not real In agency law, a person may be deemed to have had the power to act as an agent for another party if the other party's manifestations to a third party led the third party to believe that an agency existed when, in fact, it did not

Requirements for Negotiability

Be in writing Be signed by the maker or the drawer Be an unconditional promise or order to pay State a fixed amount of money Be payable on demand or at a definite time Be payable to order or to bearer

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 HDC Forgery of a signature on the instrument Fraud in the execution Material alteration Discharge in bankruptcy Minority Illegality, mental incapacity, and extreme duress

Personal Defenses

Defenses valid against holders of negotiable notes but not against holders in due course Breach of contract or breach of warranty Lack or failure of consideration Fraud in the inducement (ordinary fraud) Illegality Mental incompetence Ordinary duress or undue influence rendering the contract voidable Discharge by previous payment or cancellation Unauthorized completion of an incomplete instrument Nondelivery of the instrument

Magnuson-Moss Warranty Act

Designed to prevent deception in warranties by making them easier to understand

Respondeat Superior

In Latin, "Let the master respond A doctrine under which a principal or an employer is held liable for the wrongful acts committed by agents or employees while acting within the course and scope of their agency or employment

Equal Dignity Rule

In most states, a rule stating that express authority given to an agent must be in writing if the contract to be made on behalf of the principal is required to be in writing

Lease Agreement

In regard to the lease of goods, an agreement in which one person (the lessor) agrees to transfer the right to the possession and use of property to another person (the lessee) in exchange for rental payments

Lemon Laws

Laws that protect consumers from the consequences of buying a defective car

Vicarious Liability

Legal responsibility placed on one person for the acts of another

Secondary Liability

Liability on a negotiable instrument that is imposed on a party only when the party primarily liable on the instrument defaults and fails to pay the instrument when due Drawers and Indorsers are secondarily liable

Risk of Loss

Like risk of loss, the risk of liability that arises from the goods does not necessarily require the passage of title And like risk of loss, when this risk passes from a seller to a buyer is generally determined by the contract between the parties

Uniform Commercial Code

Recognized as the most important statute in business law, it includes provisions which regulate certain sales of goods and negotiable instruments

Locations to Unspecified Delivery Destinations

Seller's Business Seller's Residence Goods' Location

Good Title

Sellers warrant that they have good and valid title to the goods sold and that the transfer of the title is rightful

Automated Teller Machine

Technology that allows a bank customer to make deposits and withdrawals electronically 24 hours a day from his or her bank account

Ratification

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


Ensembles d'études connexes

Genesis 1-2:4 First Story of Creation worksheet

View Set

L4. Single Gene Inheritance Self Study

View Set

Ch 13 Hardening and Update Management

View Set

Ch. 2 Early Globalization: The Atlantic World, 1492-1650

View Set

Chapter 5: Activity-based costing and activity-based management

View Set

Social Psychology Exam 1 (Ch.1-3)

View Set